TMI Blog2009 (10) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... directing the Assessing Officer (not) to tax the fees for technical services received by the head office amounting to Rs. 50,59,019 separately from the other income of the PE (permanent establishment) as payment to self." 2. The assessee before us is a company incorporated in the Republic of France and it has a PE, by way of a branch office, in India. The activities carried out by the assessee in India, at the material point of time, included marine services and certification services. The marine services include inspection, testing and survey of ships as to ensure that these ships comply with the regulations as also international safety management codes and classify them appropriately. As regards certification services, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther noted that "if the contention of the assessee is to be accepted, then the amount of Rs. 50,59,019 represents the fees for technical services and on crediting the head office account with this amount, no tax has been deducted" and "therefore, the same is added to total income of the assessee as per section 40( a )( i ) of the Income-tax Act, 1961". In addition to this disallowance of Rs. 50,59,019 in computation of profits of the PE, the Assessing Officer also held that the said sum of Rs. 50,59,019 is taxable as fees for technical services separately in terms of the provisions of the India France DTAA. He further noted that in taking the above stand, he "draws strength from CBDT Circular No. 740 [[1996] 132 CTR (St) 5] and also a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment by the branch to the head office is a payment from self to self. Reliance was also placed on the Special Bench decision in the case of ABN Amro Bank NV v. Asstt. DIT [2005] 98 TTJ (Kol.)(SB) 295 1 : in support of the proposition that nobody can trade with himself. Without prejudice to this line of reasoning, it was also stated that disallowance is to be confirmed in view of provisions of article 7(3)( b ) of Indo-French tax treaty. He, however, deleted the addition of the said amount of Rs. 50,59,019 in the hands of the assessee as income as fees for technical services on the ground that, as a corollary to the disallowance having been made in the computation of profits of the PE, "taxation of the same amount of Rs. 50,59,019 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of an income, in terms of the provisions of the applicable DTAA, any taxability in respect thereof cannot arise on account of provisions of the Income-tax Act either. In terms of the provisions of article 7 of the Indo-French tax treaty, a French enterprise is taxable in India in respect of its business profits only to the extent of the profits attributable to its PE in India. Of course, in addition to such taxability of profits attributable to the PE, such other incomes, as may be taxable under other provisions of the said treaty, may also be taxable in India. One such income is income on account of royalties, fees for technical service and payments for use of equipment covered by article 13 of Indo-French tax treaty. The connotations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopment and transfer of technical plan or design, such payments cannot be taxed in the hands of the recipient in terms of the provisions of the Indo-French tax treaty. Generally speaking, technical services are treated as having been made available when recipient of such technical services is enabled to perform such services without recourse to the service provider. As to what are the connotations of "make available", a reference may be made to the decision of this Tribunal in the case of Raymond Ltd. v. Dy. CIT [2003] 86 TTJ (Mum.). In the said case, a Coordinate Bench has made following observations with which we are in most respectful agreement and which aptly sum-up the prevailing legal position in this regard : "We hold that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l services, which is sought to be brought to tax in the hands of the assessee, is in the nature of reimbursement of technical expenses to the head office. In para 3 of the assessment order, the Assessing Officer has observed that "the head office expenditure allocated to the Indian division in the nature of technical and administrative expenses was Rs. 50,59,019....". It is thus clear that this amount of Rs. 50,59,019 is not on account of any specific technical services having been "made available", in the sense in which this expression is employed in the tax treaties and which has been elaborated upon at length in a series of orders passed by this Tribunal beginning with Raymond s case ( supra ), to the assessee. It is not even the case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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