TMI Blog2015 (8) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... uled in the case of Invensys Systems (2009 (8) TMI 6 - AUTHORITY FOR ADVANCE RULINGS ) that even though some of the services may have the trappings of technical or consultancy service, looking at the nature and the predominant nature of the services, they primarily fall under the category of managerial services. Similar is the case in respect of services provided by GD. Moreover, by providing such services he is not making available any technical knowledge of enduring benefit in nature which would enable employees of MTL India to apply them on their own in future. Also analyzing the procurement services provided through agreement No.2, procurement team travels to different countries to visit suppliers and distributors to determine the best price that would be available to entire MTL Group including MTL India. These types of services can never be classified as technical or consultancy in nature and surely are not making available any technical knowledge, experience, know-how etc. The reliance of the Revenue on the rulings in the case of Intertek Testing Services (2008 (11) TMI 9 - AUTHORITY FOR ADVANCE RULINGS) and GVK Industries (supra) is misconceived and out of place. As re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with MTL India for providing certain services. The applicant has sought ruling on the following questions arising in respect of these two service agreements:- (1) On the facts and in the circumstance of the case, whether the amount received/receivable by Measurement Technology Limited (hereinafter referred to as Applicant or MTL UK from MTL Instruments Private Limited ( MTL India ), for services rendered, as per Schedule 2 to MTL Instruments Intra-Group Agreement for Products and Services effective April 1, 2005 [subsequently substituted by MTL Instruments Intra-Group Agreement for Products and Services effective April 1, 2005 (hereinafter collectively referred to as Agreement#1 ), is chargeable to tax in India as per the provisions of Double Taxation Avoidance Treaty entered into between India and United Kingdom ( India UK Tax Treaty )? (2) In case of Ruling of the Hon ble AAR to Question (1) above is yes, what is the rate of tax applicable for computing the amount of income tax chargeable in manner and respect of aforesaid amount received/receivable by the Applicant? (3) On the facts and in the circumstances of the case, whether the amount received/receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id duplication of procurement efforts within MTL Group. As per the agreement, the applicant has constituted a procurement team in the UK to look into the global sourcing requirements of raw materials within MTL Group including MTL India. The Procurement team travels to different countries to visit suppliers and distributors to determine the best price that would be available to MTL group. Their services include setting up material supply chain, logistics support and providing support to resolve technical issues with supplies from global sources. It would set up communications channel and link MTL s Group Companies with the selected vendors. The procurement team thus attempts to consolidate the purchase requirements and their efforts result in cost savings on material purchases to the individual entities in the MTL Group. MTL UK is compensated for the aforesaid Procurement Services on cost to cost basis (without any mark-up) and for this purpose only 30% of cost of the procurement term is allocated to MTL India. Therefore, MTL UK is compensated for providing Procurement Services at 30% of the cost of procurement team only. 6. The stand of the applicant in respect of agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services PE has been introduced in the post amendment Treaty and the Managerial Services will now be taxable provided the same are physically rendered in India for more than 90 days in case the service recipient is unrelated and more than 30 days in case the service recipient is a related concern. 8. It has been explained by the applicant that under agreement No.1, the applicant provides day to day managerial services through GD from the UK to MTL India through either telephone or e-mails and such services include review and general guidance, monitoring, financial and operational progress, human resource matters including hiring new personnel, setting up individual targets and performance appraisal etc. Such functions of GD do not require his physical presence in India for long duration and it has been confirmed that the number of day s presence of GD in any year is less than 30 days. The applicant has furnished sample e-mails from GD to MTL India to show that the e-mails generally pertain to issues like review of salary, targets, post controls, fund management, quality reviews, design review and human resource and administrative review. Based on the role of GD it has been con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t technology is made available to the person purchasing the service, within the meaning of paragraph (4)(b). Similarly, the use of a product which embodies technology shall not per se be considered to make the technology available. In other words, payment of consideration would be regarded as fee for technology/included services only if the twin test of rendering services and making technical knowledge available at the same time is satisfied. 9. Besides this for the same view on the concept of make available the applicant had relied on the following judgements:- Guy Carpenter Co Ltd 346 ITR 504 (Der) Endemol India Private Limited [2014] 361 ITR 340 (AAR New Delhi) Worley Parsons Services Pvt Ltd 313 ITR 74 (AAR) Shell Technology India Private Limited [(2012) 345 ITR 206(AAR)] DIT vs WNS Global Services (UK) Ltd [ITA No. 1130 of 2012, Mumbai HC] Wokhardt Ltd vs ACIT [(2011) 10 Taxmann.com 208 (Mum ITAT)] Sandvik Australia Pty Ltd vs DDCIT [ITA No.93/PNB/2011 (Pune ITAT)] RR Donnelley India Outsource Private Limited [AAR No.883 of 2010] Joint Accreditation System o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of global standardization to MTL India, Revenue is of the view that such professional services imbued with expertise would be regarded as technical service. Revenue has relied on the ruling given in Intertek Testing Services, in Re (2008) (307 ITR 418) where it was held that the term technical ought not to be confined only to technology relating to engineering, manufacturing or other applied sciences. Revenue has further relied upon GVK Industries (228 ITR 564) wherein it was held that the advice given by financial consultancy firm on the modalities of procuring loans shall be regarded as technical and consulting services. As regards applicability of make available clause, the Revenue has stated that the applicant renders the consultancy services by analyzing the project and submitting a detailed report thereon which contain technical details and plans which are made available to MTL India. 14. As regards PE, the Revenue has offered no comments saying that it is a question of facts and such facts can be ascertained only during the course of assessment proceedings. 15. Without prejudice of the stand taken in respect of FTS as mentioned above, the Revenue has also mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly for short duration having aggregate number of days of visit in a year never exceeding 30 days. The applicant has provided sample e-mails sent by GD to MTL India which show that his services generally related to human resource matters, cost control, fund management, quality and design reviews etc. These are routine managerial activities and cannot be classified as technical or consultancy services. This authority had ruled in the case of Invensys Systems (supra) that even though some of the services may have the trappings of technical or consultancy service, looking at the nature and the predominant nature of the services, they primarily fall under the category of managerial services. Similar is the case in respect of services provided by GD. Moreover, by providing such services he is not making available any technical knowledge of enduring benefit in nature which would enable employees of MTL India to apply them on their own in future. 17. We have also analyzed the procurement services provided through agreement No.2. The procurement team travels to different countries to visit suppliers and distributors to determine the best price that would be available to entire MTL Group ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
