TMI Blog2013 (2) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... out of foreground IP'. In these circumstances, the view of FAA is to be agreed that the transaction was not for sale of printer only & it included the technology also. When a particular technology was made available to the assessee by Xennia exclusively, it cannot be said that the agreement was only for sale of printer. Therefore, upholding the order of the FAA, effective Ground of appeal i.e. Ground No.1 decided against the assessee. @ 15% or 10% as prescribed in section 115A(1)(b)(BB)- Perusing the provisions of the Act to be covered u/s. 115A(1)(b)(BB) as per the said provisions, tax on dividends, royalty and technical service fees in case of foreign companies has to be computed in a particular manner, if it is entered in to after a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduct tax at source on fees for technical services @ 15% against the correct rate of 10% as prescribed in section 115A(1)(b)(BB)." 2. Assessee-company, engaged in the business of manufacturing of two and three wheelers, filed an application dated 04-02-2008 u/s.195 of the Income-tax Act,1961 (Act) requesting the Assessing Officer (AO) to issue a no objection certificate for making payment of 25,000 British Sterling Pound to Xennia Technology Limited (Xennia), a company based in United Kingdom, without any deduction of tax. As per the material available on the file the assessee had entered into an agreement dated 25.11.2007 with Xennia for developing inkjet printers and four specific inks for the purpose of printing directly on two opposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (intellectual right over the design of the printer) was owned by the assessee, that the contract was not only for purchase of machinery and it was also for acquiring the technology from Xennia by the assessee. Considering the above he finally held that the agreement was for using the technical know-how of Xennia, that it was for services of a technical nature consisting of the development and transfer of a technical design, that the payment came under the purview of royalty/fees for technical services as contemplated u/s. 9(1)(vi) read with Explanation 2(i)(ii) (vi) to section 9(1)(vi) and 9(1 )(vii) of the Act and Article 13(4)(c) of the India-UK Treaty. With regard to the cases relied upon by the appellant-company [1. CIT v. Neyveli Lign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the supplier to the assessee, that the revised agreement proved that product specified by the assessee was prepared by the supplier, that it was not a purchase simplicitor, that technical knowledge was made available to the assessee, that it was 'proprietary' information, that termination clause proved that assessee had exclusive right over the product of the assessee. With reference to additional ground, DR submitted that same was not applicable, that the transaction was covered by Article 13 of the Indo-UK Treaty and not by 115A of the Act. 4-5. We have heard the rival submissions and perused the material before us. The basic question to be answered by us is whether the agreement entered into by the assessee and Xennia was about pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .9 Xennia warrants that it shall not undertake any assignment from any India Company engaged in manufacture and sale of two wheelers, three wheelers or four wheelers for a period of 36 months from the date of completion of services covered by this Contract." 5.1 In our opinion, above referred terms of the agreement clearly prove that Xennia had supplied the technology to the assessee. Not only the assessee was using it, it had the right over the Intellectual Property also. Agreement entered in to by the assessee-company allowed it 'to file patent application, design application or any such application for intellectual property rights arising out of foreground IP'. In these circumstances, we agree with the FAA that the transaction was not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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