TMI Blog2006 (2) TMI 648X X X X Extracts X X X X X X X X Extracts X X X X ..... pany is providing support on the basis of facts and information collected by appellant and thereby suggesting ways and means with the aim of providing support to develop specified areas relevant to marketing and financial areas, then - consideration paid may not be termed as royalty. Hence on the deduction of tax at source in respect of payment for following item the matter Is restored back on the file of learned ITO (TDS). In the result the appeal is treated as partly allowed. - SHRI GOPAL CHOWDHURY, JUDICIAL MEMBER AND SHRI N.L. KALRA, ACCOUNTANT MEMBER For the Appellant: Padamchand Kincha For the Respondent: Ajit Korde ORDER N.L. Kalra, Accountant Member. 1. The assessee has filed the appeal against the order of learned Commissioner of Income-tax (Appeals) - V, Bangalore dated 28-2-2002. 2. The grievance of the appellant is that learned CIT(A) has erred in confirming the order of ITO (TDS) by holding that payments made to non-resident companies were either royalty or fee for technical service as against payments for advice and assistance as contended by the appellant and hence such payments were liable for deduction of tax at source. 3. The assessee, contended before the ITO t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xable in India as per section 9(1)(vii) of the Income-tax Act. 3.3 Royalty is defined In DTAA and as per this definition, payments received for services rendered can be termed as royalty. It was therefore, held that appellant was required to deduct tax at source and accordingly demand was created under section 201(1) and 201(1A) of the Income-tax Act. 3.4 Learned CIT(A) upheld the finding of the Assessing Officer and gave the following reasons for concluding that the appellant should have deducted tax at source. (a) The payments made for advice and assistance will represent fees for technical services as per provisions of section 9(1)(vii) and royalty as per section 9(1)(vi) in terms of definition of know-how contained in the agreement itself. (b) The description of services rendered are included in the definition of Distacom know-how as provided in agreement. (c) Royalty as defined in clause (iv) of Explanation to 9(1)(vi) includes the consideration paid for the imparting of any information, concerning technical, industrial commercial or scientific knowledge, experience and skill. The payments in this case relate to imparting of information concerning, knowledge, experience and sk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intrinsic property value - Kirloskar Oil Engines Ltd. v. Dy. CIT [2002] 83 ITD 436 (Pune). Experience may constitute royalty if it is one s own experience in the realm of industrial, commercial and scientific and not a compilation of somebody else experience - Wipro Ltd. v. ITO [2005] 94 ITD 9 (Bang.). In the present case payment is not for experience mentioned above. (viii) Payments are for services of a very routine nature and hence cannot be considered as fees for technical services. Reliance placed on decisions in Linde A.G. v. ITO [1997] 62 ITD 330 (Mum.), Asstt. CIT v. P.N. Writer Co. [2005] 94 ITD 446 (Mum.) and CIT v. Heg. Ltd. [2003] 263 ITR 230 (MP). Even if it is assumed that it is fees for technical services then treaty between India and Mauritius does not have a specific article dealing with Fees for technical Services. Under such circumstances payments will be governed under clause 7 of the agreement dealing with business income. Reference to decision of AAR in Tenkiskil (Sendirian Berhard) v. CIT [1996] 222 ITR 551 (New Delhi). Know-how as defined in the agreement cannot be equated with the definition of know-how as defined and understood in law. Reference made to CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f know-how as given in Explanation (iv) above. (vi) Know-how can take the form of advice and assistance. In respect of lump sum paid it is for the making available the imparting of the know-how both as recorded in the drawings and other data and as conveyed by direct instruction, advice or information. (vii) Payments made for the services rendered for developing sales and marketing network, financial systems and control, for availing long term loans by negotiating with financial institutions, etc. These works can only be executed by person having industrial and commercial experience and skill in mobile communication field. Assessee has acquired this experience from Distacom in form of services and also in form of advice and assistance. (viii) Appellant has paid for the information concerning industrial and commercial skill and experience of Distacom. The ratio laid down by this bench in Wipro Ltd. s case (supra) is not applicable. 6. We have heard both the parties. The appellant company executed licence agreement with Department of Telecommunication, Government of India to design, construct, instal, operate, manage and maintain mobile cellular telecommunications systems to provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d syndication of the long term project finance. (b) Providing continuous support in connection with developing sales distribution channels, promoting brand awareness, customer care, programs, formulating marketing strategies, monitoring pricing, strategies, billing systems and credit controls to improve operational efficiency and profitability. Since the Assessing Officer has not attempted to obtain the gist of actual advice and assistance obtained from the description given above, it is clear that for providing the information or services billed as above, the appellant needed continuous assistance and advice from the supplier. In respect of technical fields, the appellant only needed the transfer know-how and knowledge. 6.6 As per the agreement, the amount was to be paid as Base fee plus bonus, if any. The bifurcation for different activities is as per invoice. The revenue is mainly relying on the definition of know-how as mentioned in the agreement. The learned A.R. has drawn our attention to the following observation of the Supreme Court in the case of Union of India v. Gosalia Shipping (P.) Ltd. [1978] 113 ITR 307 at page 311 - It is true that one cannot place over reliance on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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