TMI Blog2008 (8) TMI 395X X X X Extracts X X X X X X X X Extracts X X X X ..... g of fees for technical services as defined in Expln. 2 below s. 9(1)(vii) of the Act. The second limb in cl. (b) of sub-art. (4) of art. 12 of DTAA can be invoked when the amount is paid in consideration for rendering of any technical or consultancy services and if such services consist of the development and transfer of a technical plan or a technical design also. In a way, the condition of making available technical knowledge is not, sine qua non for considering the question as to whether the amount is fees for included services or not particularly when the payment is only where the technical or consultancy services consist of development and transfer of a technical plan or technical design only. This will be considered as fees for included services within the meaning of art. 12(4) of the Act (sic-DTAA) and hence, in terms of art. 12(2), tax rate should be charged. The Tribunal, in the case of Gentex Merchants (P) Ltd. [ 2005 (2) TMI 450 - ITAT CALCUTTA-A] interpreting art. 12 of DTAA between India and USA (which is identically worded in Indo-Canada treaty) held that ''The term transfer as used in art. 12(4) does not refer to the absolute transfer of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B. In that view of the situation, the conclusion arrived at by ld CIT(A) is just. We, therefore, uphold the order of learned CIT(A). In the result, the appeal of assessee is allowed and that of Revenue is dismissed. - Deepak R. Shah Accountant Member And George Mathan Judicial Member For the Appellant : Vidur Puri For the Respondent : Devender Shankar ORDER DEEPAK R. SHAH, ACCOUNTANT MEMBER. 1. These cross appeals by assessee and by revenue are directed against the order of learned CIT(A)-XXIX, New Delhi dated 3-4-2004. 2. The issue in appeal by assessee is against the rate of tax applicable in respect of fees received by assessee from National Highway Authority of India. The assessee offered the income as fees for technical services as per section 9(1)(vii) of the Act, but submitted that since such fees are to be treated as fees for included services as provided in Article 12 of Double Taxation Avoidance Treaty between India and Canada and since the rate of tax prescribed in Article 12 is 15 per cent, such fees can be taxed at the rate of 15 per cent and not 20 per cent as applied by the Assessing Officer in terms of section 115A of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act which is much wider in scope than the phrase fees for included services and hence, in terms of section 115A, the receipt is liable to tax at the rate of 20 per cent as against 15 per cent offered by the assessee. The Assessing Officer also charged interest under section 234B. 4. Learned CIT(A) concurred with the finding of Assessing Officer to the extent of rate applicable in respect of fees received by the assessee. As regards interest under section 234B, learned CIT(A) held that since the entire income received by assessee was subject to deduction of tax at source, the assessee was not required to pay any advance tax and hence, interest under section 234B is not leviable. The assessee as well as revenue are in further appeal before us. 5. Learned counsel for assessee Shri Vidur Puri invited our attention to the terms of agreement. The scope of services defined in the agreement, inter alia, provided as under : 3.1 The Detailed Project Report would inter alia cover, detailed design for rehabilitation/strengthening of the existing carriageways including structures thereon and design of new carriageways and required structures. It would include design of bridges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding through the provision of services of technical or other personnel) if such services: (a)are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or (b)make available technical knowledge, experience, skill, know-how or processes or consist of the development and transfer of a technical plan or technical design. Reading the above paragraph, he submitted that the amount can be considered as fees for included services where the payment is made for rendering any technical or consultancy service. If such services either make available technical knowledge experience, skilled know-how or process or it consists of the development and transfer of a technical plan or technical design. Accordingly, the payment received by the assessee being for rendering technical or consultancy services and is consists of the development and transfer of a technical plan or technical design, even though the technology was not made available, still it will fall under Article 12 of the DTAA and hence, taxable only at the rate of 15 per cent. He also submitted that Article 12(4) as operating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 12(4)(b) is narrower than the scope as envisaged in Explanation 2 to section 9(1)(vii) of the Income-tax Act. Thus, though the amount received by assessee can be considered as fees for technical services within the meaning of section 9(1)(vii) of the Act, yet the same cannot be considered as fees for included services'' as the assessee non-resident has not made available technical knowledge. Thus, since there was no transfer of technology, the same cannot be considered as fees for included services within the meaning of Article 12(4)(b) of the DTAA. He also submitted that the interpretation as given in the treaty between India and USA cannot be applied while interpreting the treaty between India and USA cannot be applied while interpreting the treaty between India and Canada. The DTAA are strictly bilateral agreement and have to be read as per plain language. The examples as contained in Indo-US treaty which are not part of even the original protocol between India and USA and which are not part of Indo-Canadian treaty, the examples given therein cannot be applied. He accordingly pleaded that the order of CIT(A) be upheld. 7. We have carefully considered relevant facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, know-how or process etc. but do not go with constraints of the development and transfer of a technical plan or a technical design . The second limb in clause (b) of sub-article (4) of article 12 of DTAA can be invoked when the amount is paid in consideration for rendering of any technical or consultancy services and if such services consists of the development and transfer of a technical plan or a technical design also. By the way, the condition of making available technical knowledge is not sine qua non for considering the question as to whether the amount is fees for included services or not particularly when the payment is only where the technical or consultancy services consists of development and transfer of a technical plan or technical design only. This will be considered as fees for included services within the meaning of Article 12(4) of the Act and hence, in terms of Article 12(2) tax rate should be charged. The ITAT, Calcutta Bench in the case of Gentex Merchants (P.) Ltd. (supra) interpreting Article 12 of DTAA between India and USA (which is identical worded in Indo-Canada treaty) held as under: For deciding the issue under article 12(4) it is not material as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mitsui Engineering Shipbuilding Co. Ltd. v. Asstt. CIT [2001] 79 ITD 481. 9. Learned DR Shri Devender Shankar submitted that as per section 191 of the Act, where tax has not been deducted in accordance with the provisions of Chapter XVII. Income-tax is payable by the assessee directly. This means that if any assessee receives an income without deduction of tax at source though the tax was deductible but has not been deducted and the assessee receives full amount, in terms of section 191, the tax becomes payable by the recipient of income and same can be collected from the assessee. In sections 207 and 208, a liability is cast upon the assessee to pay advance tax. Hence, if tax is not deducted at source, and if advance tax is not paid, the liability to pay interest under section 234B will arise. Though in section 209(1)(d), the words used are tax deductible at source , yet in section 234B the words used are tax deducted at source and not tax deductible at source . He submitted that Hon'ble Uttaranchal High Court, which is the jurisdictional High Court in this case, have held in the case of CIT v. Halliburton Offshore Services Inc. [2004] 271 ITR 395 that section 191 doe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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