TMI Blog2011 (5) TMI 351X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and mail, print management, online services, digital photography, colour services. It also provides high end support services to customers identified by its associated enterprises. It further provides data capture and processing services, transcription services, online transaction processing, shared accounting and financial transaction services, health care, insurance, advertising and call centre services. 2. The applicant has entered into a data processing services agreement with R. R. Donnelley Global Document Solutions Group Limited (RRD, UK) effective from November 14, 2006, for efficient discharge of its services to customers. RRD, UK is a foreign company and is a tax resident of the UK. It is engaged in the business of communications management-delivering creative and presentation services, pre-media, print management, transactional print and mail, warehousing, logistics and distribution and data processing. 3. The services to be rendered by RRD, UK are specified in schedule I to the agreement with which we will deal in subsequent paragraphs. As per article 2.2(a) of the agreement, RRD India shall pay to RRD, UK consideration for such services (collectively, the "f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hard copy applications for basic completeness of details. To return the applications to the client which are badly damaged and that cannot be processed further. To securely destroy blank documents. To scan the unidentifiable applications. Such scanned files to be sent to the client for identification of requisite information. To create batch file comprising 25 applications (other than mentioned above) in each batch (created by application type. To allocate each batch with a batch number. To scan each batch of applications using document scanner to produce document images. To ensure the clarity of the scanned documents through a quality control check. To transmit the scanned documents to RRD India for further processing in India. To create batch files of the completion information. The batch file is loaded in a compact disc and sent to the client as per the client's specifications. 7. The learned counsel for the applicant argues that the question is whether the payment given to RRD, UK for such services is for technical and managerial service and chargeable to tax in India. According to the learned counsel, the payment given is not for technical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r information concerning industrial, commercial or scientific experience ; and (b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial or scientific equipment, other than income derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic. (4) For the purposes of paragraph (2) of this article, and subject to paragraph (5) of this article, the term 'fees for technical services' means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including the provision of services of a technical or other personnel) which : (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph (3)(a) of this article is received ; or (b) are ancillary and subsidiary to the enjoyment of the property for which a payment described in paragraph (3)(b) of this article is received ; or (c) make available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (8) Where, owing to a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties or fees for technical services paid exceeds for whatever reason the amount which would have been paid in the absence of such relationship, the provisions of this article shall apply only to the last-mentioned amount. In that case, the excess part of the payments shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Convention. (9) The provisions of this article shall not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the rights in respect of which the royalties or fees for technical services are paid, to take advantage of this article by means of that creation or assignment." 8. The Revenue in its written submission has admitted that the applicant is an Indian company and it has entered into a data processing services agreement with RRD, UK. According to it, the personnel of RRD, UK visit India for rendering managerial and technical services periodically do not stay for m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of the service provider. By making available the technical skills or know-how, the recipient of the service will get equipped with that knowledge or expertise and be able to make use of it in future, independent of the service provider. In other words, to fit into terminology 'make available', the technical knowledge, skills, etc. must remain with the person receiving the services even after the particular contract comes to an end . . . At this juncture, it is apposite to quote some of the passages in Anapharm Inc., In re [2008] 305 ITR 394 (AAR), 405 : 'It is, thus fairly clear that mere provision of technical services is not enough to attract article 12(4)(b). It additionally requires that the service provider should also make his technical knowledge, experience, skill, know-how, etc., known to the recipient of the service so as to equip him to independently perform the technical function himself in future, without the help of the service provider, in other words, payment of consideration would be regarded as "fee for technical/included services" only if the twin test of rendering services and making technical knowledge available at the same time is satisfied'." 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 408 (SC) held that services rendered outside India will not be taxable in India. All these cases support the stand of the applicant. 12. Now, whether the consideration paid towards managerial and technical or consultancy services attracts the domestic law for imposing tax. Explanation 2 to clause (vii) of section 9(1) of the Act is already mentioned supra. Now, we are to examine the nature of services undertaken by RRD, UK. In the instant case, pursuant to the agreement, the following services are undertaken : (i) RRD, UK will receive the hard copy applications from the client and sort the applications as per the client's requirements. (ii) To review the hard copy applications for basic completeness of details. (iii) To return the applications to the client which are badly damaged and that cannot be processed further. (iv) To securely destroy blank documents. (v) To scan the unidentifiable applications. Such scanned files to be sent to the client for identification of requisite information. (vi) To create batch file comprising 25 applications in each batch. To allocate each batch with a batch number. (vii) To scan each batch of applications usin ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
