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2015 (11) TMI 1292 - ITAT MUMBAI

2015 (11) TMI 1292 - ITAT MUMBAI - TMI - TDS u/s 195 - taxability of payment made to M/s Liftech Consultants Inc., USA in India - CIT(A) treating assessee as assessee in default u/s 201 - Held that:- Going through the agreement for engineering services for procurement and other aspects as appearing in the assessment order, we find that the service to be performed by M/s Liftech Consultant Inc., USA was more of a reviewing the design. The power of review is something more than the power of superv .....

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t the lower authorities have not examined as to whether the suggestions given by M/s Liftech Consultant Inc., USA would amount to major change or improvisation of the design or were limited to just pointing out the shortcomings or defects, whatever it may be, in the already settled and agreed design of the product. Further, we do not find any record to suggest that whether M/s Liftech Consultant Inc., USA not only given these suggestions but were also physically active and present to implement t .....

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ave improvised the design or brought any major change in the design, then such suggestions would amount to transfer of technical services and design, which would be more than the power of review and would attract Article 12 of the India-US DTAA Treaty. - Decided in favour of assessee for statistical purposes. - I.T.A. No. 7877/Mum/2010 - Dated:- 31-8-2015 - SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER For The Appellant : Shri Sunil Motilala For The Respondent : .....

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ructing, operating and maintaining the port in Gujarat. The assessee had entered into a contract for purchase of cranes from M/s ZPMC, China. These cranes were supposed to be manufactured in China itself and on completion, ought to be imported in India. The assessee engaged M/s Liftech Consultants Inc., a company registered in USA, USA tax resident for review of design of the cranes which were to be supplied by the Chinese concern M/s ZPMC. The assessee had allowed credit to both the parties dur .....

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tants Inc., USA was taxable for the following reasons:- i) Services constitute fees for included service under Article 12 of the India-US DTAA Treaty as the said services were allegedly for development and transfer of technical plan or design under Article 12(4) of the Treaty alternatively, ii) The said services are managerial, technical or consultancy services which make available technical knowledge , experience, skill, know-how under Article 12(4) of the Treaty, iii) The said services amounts .....

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nsultants Inc., USA was appointed by the assessee purely to review the pre-existing design and construction audit cranes and monitor that the cranes meet the pre-determined set standards, which were already agreed to between the assessee and ZPMC. Since the assessee did not possess requisite technical expertise to closely monitor the adherence of set standards by ZPMC during manufacturing of the cranes, the assessee appointed Liftech Consultants Inc., USA to carry out the said task so that it ca .....

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efore the ld. CIT(A). The ld. CIT(A) upheld the findings of the A.O. and stated in his order that the payment made by the assessee were the nature of fees for included services and the same were covered under Article 12(4)(b) of India-US DTAA as these services consisted of the development and transfer of a technical plan of a technical design. Aggrieved, the assessee is now further appeal before us against the order of the ld. CIT(A). 4. The ld. Counsel for the assessee has strongly submitted th .....

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submitted that the professional service fee which is for consultancy and not for supply of scientific, technical, industrial or commercial knowledge or information cannot be considered as royalty. On this point, he has placed reliance on the decision in the case of Diamond Services International (P) Ltd. vs. Union of India, (2008) 304 ITR 201 (Bom), DDIT vs. Preroy A.G. (2010) 39 SOT 187 (Mum) and various other related judgments. 5. The ld. D.R., on the other hand, has strongly supported the or .....

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at there is a power to review, essentially it implies also the power to make suggestions, advice on the concerned topic and area but if there is something more than the suggestion given i.e. if there is a transfer of some development or design and the person reviewing it monitor such transfer of design and development, then it cannot be a simple power of reviewing. The fact on record, the A.O. had found copies of report forwarded by M/s Liftech Consultant Inc., USA, letters dated 15.12.2006, 12. .....

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