TMI Blog2011 (11) TMI 507X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of reimbursement of expenses there is no obligation to deduct tax at source. Since the remittances by the assessee are not chargeable to tax in the hands of the Non- resident. Consequently the assessment of the sum in question in the hands of the assessee as agent of non-resident is held to be not correct - in favor of assessee. - IT APPEAL NOs. 7021 (MUM.) OF 2002 and 2811 (MUM.) OF 2003 - - - Dated:- 28-11-2011 - R.S. SYAL, N.V. VASUDEVAN, JJ. Santosh Parab for the Appellant. G. Guruswami for the Respondent. ORDER N.V.Vasudevan, Judicial Member ITA No.2811/M/03 is an appeal by the assessee against the order dated 17/2/2003 of CIT(A)-XXXI, Mumbai relating to assessment year 1998-99. ITA No.7021/M/02 is an appeal by the assessee against order dated 4/10/02 of CIT(A) XXXI, Mumbai relating to assessment year1998-99. 2. ITA No.7021/M/02 is an appeal arising out of proceedings under section 163 of the Income Tax Act, 1961 (the Act), whereby the assessee was treated as an agent of a non-resident M/s. LDV Ltd., U.K.(LDV) . ITA No.2811/M/03 arises out of proceedings whereby assessment of income of LDV was made in the hands of the assessee as the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be the share of the assessee payable for conducting of such market research. The assessee agreed for the aforesaid proposal. According to the assessee the market research had been carried out and the invoice raised by the LDV on the assessee towards the share of market research was only some Pound Sterling 14,939. The invoice dated 9/7/97 raised by LDV on the assessee gives following description: "Research Project cost as agreed by Sr.Project Manager Mr. Saravjit Singh and Tony Grove of LDV" The assessee made remittance of 14,939 Pound Sterling to LDV. No tax was deducted at source as according to the certificate of the Chartered Accountant and the undertaking of the Managing Director of the assessee the remittance in question was on account of the assessee's share of market research cost and the same being in the nature of reimbursement of expenses does not constitute fees for technical services within the meaning of Explanation - 2 to Section 9(1)(vii) of the Act and is also not "Fees for Technical Services" (FTS) under Article 13 of the DTAA between India and UK (hereinafter referred to as DTAA). It was also further submitted that LDV did not have a Permanent Establishme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e D.T.A.A. between India and U.S.A., although it used the expression "Fees for included services" is pari materia with Article 13(4) of the D.T.A.A. between India and U.K. It was pointed out that the said Memorandum explains the term as follows: "Generally speaking, technology will be considered "made available" with the person acquiring the service is enabled to apply the technology. The fact that the provision of the service may require technical input by the person providing the services does not per se mean that technical knowledge, skills, etc., are made available to the person purchasing the service. Similarly, the use of a product which embodies technology shall not per se considered to make the technology available." In support of the validity of this interpretation of "made available" being applicable in relation to the D.T.A.A. between India and U.K., the Assessee invited attention to the decision of the Income Tax Appellate Tribunal C-Bench, Mumbai in the case of Raymond Ltd. v. Dy. CIT, [2003] 86 ITD 791 (Mum.) wherein it was held as follows: "92. We hold that word "which" occurring in the article after the word "services" and before the words "make available" not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to enable LDV to take a decision as to their undertaking the manufacture of their products for marketing in India. It was also submitted that even in common parlance also, the market, research for gauging the prospects of marketing certain goods in India could never be visualized as making available any technical knowledge, experience, skill, know-how, etc. It was emphasized that the services for which cost was shared by the Assessee with the aforesaid U.K. company constituted commercial services by way of market research and did not partake of the character of technical services within the meaning, of the term as mentioned in the D.T.A.A. between India and U.K. 4.1 The CIT(A) however made a reference to a note dated 23/7/1996 by Executive Vice President of the assessee one Mr. J.P.Banerjee. In the said note there was a reference to the fact that LDV was having core competence in Body Building and the assessee could tie up with them. The note further describe that a joint market survey could be done with LDV to assess the acceptability and possible market for LDV products to take advantage of LDV's core competence in body building and also learn from LDV about development and man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices" and the appellants' grounds of appeal fail." 5.1 Aggrieved by the order of CIT(A) the assessee has preferred ITA No.2811/M/03 before the Tribunal. 6. We have heard the submissions of the ld. Counsel for the assessee, who reiterated the stand of the assessee as was put forth before the revenue authorities. The ld. D.R relied on the order of the revenue authorities. 7. We have considered the rival submissions. In our view the conclusion of the revenue authorities cannot be sustained. In our view the understanding between LDV and the assessee in the letter dated 22/5/96 referred to by the CIT(A) does not contradict each other. The note runs in consonance with the letter dated 22/5/96. There was only a reference to the use of some of the aspects of LDV's product in the existing product of the assessee subject to certain change. This was only a business plan. The content of the note refers to market research and market research on acceptability of possible market for LDV products. Thus what was done was only market research. In fact the research report was discussed in LDV's office at UK on 24/10/96 and it was found that there was availability of Niche market for high Mini ..... X X X X Extracts X X X X X X X X Extracts X X X X
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