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TMI Blog2013 (8) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... r plants, decommissioning consulting, project solutions and other engineering based services. In the previous year relevant to the assessment year under consideration, the assessee received a sum of Rs.2,22,16,154/- from L&T Limited for rendering consulting and engineering services in relation to Ultra Mega Power projects in Mundra and Sesan. The assessee appended the following note in the computation of total income, filed along with its return of income: "Fees for consulting and engineering services of USD 499,106.66: During the year, S& L has also received USD 499,106.66 as fees for consulting and engineering services from Larsen & Toubro Ltd. The same is not taxable as the services do not make available technical knowledge, experience, skill or know how within the meaning of FIS as per Article 12(4) of the DTAA between India & USA. Further, since the S& L does not have a PE in India, the said sum if not taxable as business income in India." 4. The assessee was called upon to explain as to why the amount received from L&T should not be treated as `fees for technical services and taxed accordingly. The assessee submitted that the same did not fall within the scope of 'fees for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered into between the assessee and L&T. Two agreements with similar terms and conditions were entered into in respect of two different projects. As admittedly the terms and conditions of both the Agreements are similar, we are, therefore, taking up the Agreement dated 07.08.2006 (hereinafter called `the Agreement'). The preamble of this agreement is as under:- "Sargent & Lundy, L.L.C. (an Illinois limited company hereinafter "S&L"), proposes to provide consulting and engineering services required by Larsen & Toubro, Limited (hereinafter "L &T") in the preparation of technical design bases for the two of the Ultra Mega Power Projects known as Mundra and Sasan. These services will be provided in conjunction with services provided to under a separate agreement by Larson & Toubro - Sargent & Lundy (L&T-S&L)." 8. From the above preamble it is apparent that the assessee agreed to provide 'consulting and engineering services' required by L&T "in the preparation of technical designs" for Ultra Mega Power Projects. It is true that the mere nomenclature of `consulting and engineering services' cannot be determinative of the real character of the services. The true nature of services can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle defines this expression as : " .......payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services: ....... b. make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design." It is not the case of the assessee that the payment is covered by para 5 of the Article 12, which states that "fees for included services" does not include amounts paid in respect of certain items enumerated therein. A brief resume of the services provided by the assessee to L&T as noticed above makes it abundantly clear that these are in the nature of `technical or consultancy services' as per the main part of para 4 of the DTAA. To this extent the definition of `fees for included services' given under the DTAA matches with that given in Explanation to section 9(1)(vii), which provides that : "fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edge so provided which enables it to utilize the same in future. Recently, the Hon'ble Karnatka High Court in the case of CIT & Ors. Vs. De Beers India Minerals Pvt. Ltd. [2012 (346 ITR 467) (Karn)] dealt with the concept of 'make available' in the context of fees for technical services. It has been held 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 utilise the knowledge or know-how in future on his own. By making available the technical skills or know- how, the recipient of the same will get equipped with that knowledge or expertise and be able to make use of it in future, independent of the service provider .......". 13. From the above enunciation of law by the Hon'ble AP High Court, it is palpable that the technical knowledge will be considered as `made available' when the person acquiring such knowledge is possessed of the same enabling him to apply it in future at his own. If the payee uses all the technical services at his end, albeit the benefit of that directly and solely flows to the payer of the services, that cannot be characterized as the making availabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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