TMI Blog2014 (7) TMI 765X X X X Extracts X X X X X X X X Extracts X X X X ..... r BSP link services rendered by ADP-GSI France is not in the nature of fees for included services chargeable to tax in India – Decided against Revenue. - I.T.A. No.1149/Mum/2010 - - - Dated:- 11-6-2014 - P.M. JAGTAP AND VIVEK VARMA, JJ. For the Appellant : Smt. Neeraja Pradhan. For the Respondent : S.E. Dastur. ORDER:- PER : P.M. JAGTAP This appeal is preferred by the Revenue against the order of ld. CIT(A) -10, Mumbai dated 18-11-2009 and in the solitary ground raised therein, the Revenue has challenged the decision of the ld. CIT(A) holding that the amount paid by the assessee to IATA, Canada is not taxable in India being not in the nature of fees for technical services and the assessee therefore is not required to deduct tax at source from the payment of the said amount. 2. The assessee in the present case is a company which is a branch office of IATA, Canada. The said branch office is established in India as per the permission given by the RBI vide letter dated 25-11-1995 for the purpose of undertaking certain commercial activities on no profit basis. In pursuance of an agreement entered into by IATA Canada through its administrative office in Ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. 3. Against the order passed by the A.O. u/s 195(2) of the Act, appeal was preferred by the assessee before the ld. CIT(A) contending that Geneva Office of IATA, Canada was not rendering any service in connection with the DSP link. It was also contended that the provisions of section 195 dealing with the deduction of tax at source pre-suppose the existence of two distinct and separate entities which was absent in the case of the assessee. It was argued that the arrangement was similar to the cost sharing arrangement whereby Geneva office of IATA, Canada was only recovering its cost through the assessee company. Without prejudice, a new argument was also raised on behalf of the assessee before the ld. CIT(A) by submitting that the amount in question paid by the assessee was not in the nature of fee for technical services as envisaged in Article 13 of the DTAA between India and France read with clause 7 of the Protocol thereto. It was contended that as per the said clause 7 of the Protocol, which is an integral part of the treaty, either the services should make available technical knowledge, experience, skill, know-how or processes or there should be development and tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refund, billing statement and all the information relating to tickets are carried out electronically by BSP Link System for agents as well as for Airlines who have participated in the BSP Link. Therefore the services rendered by the ADP-GSI France to the airlines and agents are in the nature of fees for technical services. 3.1 However, the Ld. A.R. has also submitted that as per Article 13 of DTAA between India and France read with clause 7 of protocol tax treaty dated 19.9.1989 the restricted definition of fees for technical services would be applicable as provided in OECD countries like USA and U.K. As per article 12.4(b) of tax treaty with India and USA fees for included services means payment of any kind to any person in consideration for the rendering of any technical or consultancy services (including the provision of services of technical or other personnel) if such services made available technical knowledge, experience, skill, know/how or processes or consist of the development and transfer of a technical plan or technical design. Therefore, the payment under consideration would be examined if it falls under Article 13 r.w. protocol dtd.17.9.89 of India - France T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing available the technology to the Air lines and agents. He pointed out that even training was to be imparted by French service provider to the tickets agents in India which sufficiently indicate that it was a case of technology being made available by the service provider to the tickets agents. In support of this contention, she relied on the decision of Authority for Advance Rulings in the case of Cargo Community Network PTE Ltd. IN RE reported in 289 ITR 355 (AAR) and submitted that a similar payment made in the said case was held to be in the nature of royalty chargeable to tax in India. He relied on the decision of Hon'ble Supreme Court in the case of Hukumchand Mills Ltd. v. CIT [1967] 63 ITR 232 (SC) to contend that the Tribunal has jurisdiction to entertain the new plea raised on behalf of the Revenue that the amount in question payable to ASP-GSI is in the nature of royalty. He also relied on the decision of Authority for Advance Rulings in the case of ABC, IN RE reported in 238 ITR 296 (AAR) wherein the charges levied by the American Company from the Indian company for allowing access to and use if CPU at USA was held to be in the nature of royalty chargeable to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to use the said system for their own purpose. 9. The ld. Counsel for the assessee invited our attention to clause 7 of the Protocol forming an integral part of the DTAA between India and France and submitted that as provided therein, if under any agreement or protocol signed after 1-9-1989 between India and a third state, which is member of the OECD, India limits its taxation at source, inter alia, on fees for technical services or a scope more restricted, the scope as provided for in that agreement shall also apply under the DTAA between India and France. He submitted that the DTAA between India and USA, which is a member of the OECD, has been entered into on 12-9-89 and as per Article 12(4)(b), fees for included services means payment of any kind to any person in consideration for the rendering of any technical or consultancy services if such services make available technical knowledge, experience, skill, know-how or processes or consist of the development and transfer of a technical plan or technical design. He contended that the restrictive meaning is thus given to the term fees for technical services in DTAA between India and USA and the same having been entered into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipments such as Central processing unit and consolidated datas and the same therefore was treated as in the nature of royalty. 12. We have considered the rival submissions and also perused the relevant material available on record. It is observed that the payment made to ADP-GSI France for providing BSP link services to the Agents/Air lines was treated by the A.O. as in the nature of fees for technical services as per Article 13 of the treaty between India and France chargeable to tax in India @10%. As per Article 13(1), Royalty, fees for technical services and payments for lease of equipments arising in India and paid to resident of France may be taxed in France. However, as provided in Article 13(2), such royalty fees and payments may also be taxed in India at the maximum rate of 10% of the gross amount of such royalty, fees and payments. Before the ld. CIT(A), reliance was placed by the assessee on clause 7 of the Protocol of the DTAA between India and France to contend that the payment made to ADP-GSI France for providing BSP link services was not in the nature of fees for technical services. The said clause reads as under:- In respect of articles 11 (Dividends), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chnical design which enables the person acquiring the services to apply the technology contained therein. This restricted scope provided in India-US DTAA and India-Portuguese DTAA thus is applicable even under India-France DTAA as per clause 7 of the protocol and going by this restricted scope, we agree with the conclusion drawn by the ld. CIT(A) on perusal of the relevant agreement that the BSP link services provided by ADP-GSI France did not make available to the agents/Air lines any technical knowledge, experience, skill, know-how, or processes so as to enable them to apply the technology. 14. At the time of hearing before us, the ld. D.R. has relied on clause 3,8 9 of the relevant agreement in support of his contention that it was a case of technology being made available by the service provider to Air lines/agents. The said clause of the agreement relied upon by the ld. D.R. are reproduced hereunder:- 3. APPOINTMENT 3.1 IATA hereby appoints ADP-GSI on an exclusive basis, subject to Clause 27.2, to provide the Services for the Term in accordance with the terms and conditions of this Agreement. 3.2 ADP-GSI hereby accepts the appointment to provide t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 ADP-GSI agrees that, following development, testing and acceptance of each new release of the Software. It will notify and make the accepted new release available to any User Group previously connected in accordance with this Clause 9. 15. On perusal of the above clauses of the agreement relied upon by the ld. D.R., we find ourselves in agreement with the contention of the ld. Counsel for the assessee that there is nothing to show that the services provided by BSP link services provided by ADP-GSI France actually made available to the agents/Air lines any technical knowledge, experience, skill, know-how or processes so as to enable them to apply the said technology. The services envisaged in clause 4, 8 9 of the agreement related to development services, testing and other facilities were provided to the agents/Air lines just to enable them to operate and implement BSP link services in order to utilize the same for their own use. The decision of Hon'ble Karnataka High Court in the case of De Beers India Minerals (P.) Ltd. (supra) and that of Kolkata Bench of ITAT in the case of DCIT v. ITC Ltd. (supra) explaining the concept of technology being made available fully sup ..... X X X X Extracts X X X X X X X X Extracts X X X X
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