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TMI Blog2012 (3) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... ices are generally performed either at the load port or discharge port of a product or activity and are based on scientific and internationally accepted techniques and as per the clients‟ requirements. Verification Services are used to evaluate whether the product services are system compliant with given regulations, specifications or condition. Testing Services are used to determine the quality of the product or services as per the customer‟s requirements and are carried out in laboratories owned by respective X entities which are accredited to international bodies. Certification Services refers to the confirmation of regulations, standards or contractual specifications of a product or organization or training. 3. The applicant then states that the IVTC Services are provided to the Indian Customer outside India if there is a direct arrangement between the customer and the applicant and the payment is made on the invoice raised by the applicant. But when the arrangement is not direct and is through the X India, then the invoice is raised either on X India or the Indian customer. Explaining it by an example, the applicant states that where a customer approaches X India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utlined in Annexure I. 5. The learned counsel argued that the applicant merely provides analysis reports to X India / Indian customers. By doing so, technical knowledge, experience, skill, know-how or process are not transferred. X India / Indian customers have to approach the applicant again if they require the services in future as the expertise rests with the applicant and the expertise in performing the services is not made available to the X India / customer. The customers are not allowed to use applicant‟s trademark. The applicant uses its own technical, industrial, commercial or scientific knowledge, experience or skill in providing the report. In the report, facts are stated by applying a benchmark of international standard through its personnel. Thus, the report does not impart any information in the nature of royalty as defined under section 9(1)(vi) of the Act. It is argued that the IVTC Services provided by the applicant outside India to its customers are in the nature of routine commercial services rather than technical services. Rendering services by using technical knowledge or skill is different from charging fee for technical services. Providing report by co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he control over the procedures is by the parent company. The affiliates need industrial, commercial and scientific experience to share with the 3rd parties. The 3rd parties who use such experience do not start doing themselves as they are not a brand like X. The experience is periodically updated and standardized. These are professional services with technical inputs and are made available to the customer to enable him to decide whether to buy or not, apply in its business or not. Any work beyond a territory is to be subcontracted to other. X India cannot render any of the services in other territory assigned to a X. It is thus an international support service. The work is performed in the country having expertise. 6.1 It is argued that IVTC services are called „X Services‟ and are not specific to X India or any other X. These are executed as per the general procedures which are set by its own set of procedures developed over the years. The employees are trained. The sharing of scientific experience in determining the residual life of a machine, its efficiency, safety and emission norms are not routine services, as claimed. Without acquiring technical knowledge, these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngaged in a business carried on outside India or earns any income from any source outside India, makes a payment by way of a fee falling under the definition of FTS, then such a payment despite being in the nature of FTS, would be out of the purview of charge to tax in India. In the present case, if a resident of India buys and sells or buys a product for his business carried on outside India and in that process pays a fee falling under FTS for X Services utilized outside India, then such a payment would not be taxable in India. Likewise, if the source of income of a resident in India is outside India, the fees falling under FTS for X Services payable to earn the income from that source will be out of the purview of charge to tax in India. However, if the fee falling under FTS for X Services is paid for services utilized by a resident of India in its business carried on by it in India, irrespective of the place where the services are rendered, the amount of fee would be deemed to accrue and arise in India. Likewise, if the source of income of a resident in India is in India, the fee falling under FTS for X Services payable to earn the income from that source would be deemed to accr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach tank, ullage and volume is prepared. Bunker Report showing volume and density at various temperatures at loading port from the Chief Engineer upon arrival and departure of the ship is taken on the basis of which invoice for „loading supervision‟ services is prepared. 8.1 When IVTC Services relate to machinery inspection, an X Inspector is appointed to carry out the services as required by the customer. The scope of inspection of a used „Injection Mould for foldable crate base‟ of Australian make, apart from visual inspection, includes expressing opinion on residual life of the mould, and findings on estimation of efficiency and its present value. In the inspection report of Tomography Scanner, its stated that the market value recommendation is based in a documentary price comparison / verification, considering the estimated useful life, average residual life, comparison with the similar equipment value inspected in the past and available in the market, enquiry with original manufacturer, reconditioning / refurbishing if any. In another case inspection report advised replacement of certain parts for Asian MMC Instrument. 8.2 When the IVTC Services relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivities. The purpose for which the report is prepared is not diluted or perish soon after evaluating the quality and quantity of the cargo / product, but is useful to evaluate contracts to secure maximum commercial value for each deal, post deal reconciliation, demurrage calculation and negotiations. The reports are cargo/activity specific for which fee for IVTC Services is arrived at/calculated after negotiations. These are admittedly customized services and not routine commercial services. Thus, the technical services provided to the customers/X India for which a fee is charged is covered under the term "fee for technical services" under section 9(1)(vii) of the Act. The expenses incurred, whether in the form of reimbursement or sharing administrative cost, are in connection with the provision of IVTC Services. For example, the invoice issued by X Thailand to PQR India Pvt. Ltd. for certification / inspection fee for "Injection Mould for foldable crate base" includes expenditure incurred on travelling, hard copy of the certificate and for additional copy of the report / certificate provided to the customer. These are the kind of expenses referred in Question no.2 and 3 raised be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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