2017 (6) TMI 1174 - ITAT BANGALORE

Taxability in India - Fees charged by the assessee for rendering the managerial and consultancy services - falls within the purview of 'royalty' - Indo -UAE DTAA benefit - permanent establishment - Held that:- A resident alone under Article 4 of DTAA can avail the benefit of DTAA. Since the certificate issued by the UAE authorities, was issued only for one year from 01.04.2012, whereas the assessment years under consideration are 2009-10 and 2010-11. The returns of income for these years were filed on 09.09.2010 and 27.02.2011 respectively; therefore this certificate would not help the assessee as this is not relevant for the years under considerations. Thus it is amply clear that the assessee was not a resident of UAE at the filing of returns of income within the meaning of Article 4 of DTAA. Further the assessee has not placed any evidence showing that the assessee was wholly managed and controlled in UAE and is a tax entity in UAE. Accordingly, the assessee is not entitled to any benefits of DTAA. In view thereof, appeal of the assessee deserves to be dismissed on this ground alone.

In our view the information's provided by the assessees were in the nature of expert knowledge and experience acquired by parent company of the assessee company related to industrial and commercial. During the course of argument it was submitted by the ld Senior advocate that the assessee do not own any IPRs in its name and this secrecy clause is a standard form contract to bound the employees.

In our view no clause in 'the agreement' can be said to innocuous, reasonable , literal and meaningful interpretation is required to be given to said clause. Our reading of the clause make it abundantly clear that 1) this clause was kept in the agreement to protect secret, confidential and IPRS of the assessee as well as of the parent company 2) the assessee is rendering services as regional Hub for for the benefit of ABB legal entities in India, Middle East and Africa on behalf of its parent company in Zurich and therefore it is duty-bound to protect the interest of parent company as well 3) All the employees of the assessee and ABB Ltd are bound to adhere to the policies of ABB global.

Therefore the information provided by the assessee to ABB Ltd were in the nature of know-how contract, given by assessee to ABB Ltd, so that such know-how can used ABB Ltd, for its commercial and industrial purposes and further this special knowledge and experience would remain unrevealed to the public. These information were not already existing and were supplied by the assessee after its development or creation to ABB Ltd and there also exist specific provisions concerning the confidentiality of these information (clause 9) . Moreover the assessee has done very little after giving access to these information to ABB Ltd . thus the information provided of the assessee given to ABB Ltd with the right to use and exploit commercially were concerning industrial, 'commercial or scientific experience activities would fall under Royalty of DTAA.' As we had held that the activities under consideration of the assessee falls under Royalty Clause 12 of DTAA and not under residual clause, therefore the assessee is liable to be taxed within India in accordance with Article 12 of DTAA, section 5 read with section 9 of Income Tax Act. - Decided against assessee.