TMI Blog2012 (2) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... rmanent Establishment (PE) in India in terms of Article 5 of DTAC, we rule that the applicant is under obligation to withhold tax u/s 195 of the Act. - AAR No. 833 of 2009 - - - Dated:- 17-1-2012 - P.K. Balasubramanyan, V.K. Shridhar, JJ. RULING V.K. Shridhar, Member Applicant, Shell India Marketing Private Ltd (SIMPL) is an Indian company. It has a network of retail fuel stations in India. Shell International Petroleum Company Ltd (SIPCL) is a Shell Group Company incorporated in UK. It is in the business of providing consultancy services to various Shell operating companies. The applicant has entered into Cost Contribution Agreement (CCA) on 1.4.2008 with SIPCL for the provision of Business Support Services. Applicant submits that General Business Support Services (General BSS) under clause 4 of CCA are described in Appendix 2 to CCA. These are primarily in the nature of management support services. Any research and development, technical advice and services may be provided by a separate arrangement. The Specific BSS are provided on a specific request and are not subject matter of the questions raised in the present application. 2. According to the applicant, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the affirmative, whether the payments made by the Applicant to SIPCL for availing General BSS under the terms of the CCA would be in the nature of Fees for Technical Services ("FTS") within the meaning of the term in Article 13 of 'Convention between the Government of the Republic of India and the Government of the Republic of India and the Government of United Kingdom of Great Britain and Northern Ireland for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains' ("the India-UK Tax Treaty")? iii. Whether the payments made by the Applicant to SIPCL for availing General BSS under the terms of the CCA would be in the nature of "royalty" within the meaning of the term in Explanation 2 to clause (vi) of Section 9(1) of the Act? iv. Whether the payments made by the Applicant to SIPCL for availing General BSS under the terms of the CCA would be in the nature of "royalty" within the meaning of the term in Article 13 of the India-UK Tax Treaty? v. Based on the answers to Questions (1) to (4) above, and in view of the facts as stated in Attachment III, and also in light of the declaration provided by SIPCL that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financing and refinancing structures; and above all, tax policies and guidelines. Legal Advice would be on specific projects or business proposals, tax advice. The advice on information technology will include identifying opportunities for the Applicant to successfully utilize cost advantaged locations and resources for application development. Thus, the services are of a highly specialized nature and involve special knowledge of the Applicant's business and industry. 7. In the case of Intertek Testing Services Pvt. Ltd (supra), the following has been held by this Authority "advisory services which merely involve discussion and advice of routine nature or exchange of information cannot appropriately be classified as 'Consultancy services' under the Article. An element of expertise or special knowledge on the part of the consultant is implicit in the consultancy services." In International Hotel Licensing Co, In Re [2007]158 Taxman 231 (AAR), this Authority has also held that services for marketing and promotion are consultancy services. Further, in the case of Commissioner of Income Tax v. Bharti Cellular Ltd., [2009] 3 19 ITR 139 (Delhi) the Court while relying on the definiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s come as a bundle and cannot be segregated. In our view, the nature of General BSS, viewed as such, is of Consultancy Services. 10. For the purpose of Article 13.4 (c) of the DTAC, "fees for technical services" means payments of any kind to any person in consideration for the rendering of any "technical or consultancy services" if such services: (a) make available technical knowledge, experience, skill, know- how or processes, or (b) consist of the development and transfer of a technical plan or technical design. In Perfetti Van Melle Holding B.V AAR/869/2010 this Authority held the view that "the expression 'make available' only means that the recipient of the service should be in a position to derive an enduring benefit and be in a position to utilize the knowledge or know-how in future on his own". Here, industry specific expertise is provided to the Indian entity which is applied in running its business and the employees of the Indian entity get equipped to carry on that business model or service model on their own without reference to the service provider, when the service agreement comes to an end. It is not as if for making available, the recipient must also be co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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