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TMI Blog2006 (2) TMI 648X X X X Extracts X X X X X X X X Extracts X X X X ..... l and financial aspects of the business. 3.1 The appellant has deducted tax at source in respect of payment for services provided under category A but has not deducted tax at source in respect of payments for services under Category B. It was submitted that services under category 8 can be considered as technical service but Indo-Mauritius treaty does not cover technical service. It was further argued that services were performed outside India and hence T.D.S. is not to be made as per Circular No. 23 dated 23-7-1969 and Circular No. 786. The Assessing Officer obtained the copy of invoice and details of payments on which tax was not deducted at source were described as under : (a) Liaison with legal and financial advisors and negotiations with vendors and financial institutions for extension of the vendor loans and indication of long term project finance at Rs. 2.5 lakh per month. (b) Providing continuous support in connection with developing sales distribution channels, promoting brand awareness, customer care programme, formulating marketing strategy, monitoring pricing strategies, billing systems and credit controls to improve operational efficiency and profitability at Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate, but the tax so charged shall not exceed 15 per cent of the gross amount of royalties. Royalty as defined in this article includes consideration for the use of information concerning industrial commercial or scientific experience. Since payments represented consideration for information imparted by the non-resident company concerning its commercial experience relating to the project though the services rendered by it pertaining to this field. (e) Since payments are held as royalty hence are taxable in contracting state as per article 12(2) of DTAA. 4. During the course of proceedings before us, the learned A.R. has filed paper book containing 38 pages and brief summary of contends in 7 pages. The brief contentions are as under : (i) The payments for 'advice and assistance', the payments for services. Such payments are distinct from payment for know-how and intellectual property rights. (ii) Payments for services may be taxable either as - (a) business income. (b) Professional income. (c) Royalty income. (d) Fees for technical services. (iii) Business and professional income of a non-resident company is taxable in India, if it has a permanent establishment in In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The submissions in brief are as under : (i) Technical and operating services as defined in agreement means the transfer of Distacom know-how, the grant of a non-exclusive, non-transferable licence to use the Distacom Intellectual Property rights in India and the provision of certain advice and assistance, more fully described in Schedule 1, required for construction, installation, management, operation, maintenance, marketing, accounting and finance of mobile cellular telecommunication networks in India. (ii) Schedule 1 included the following services - (a) Implanting system followed by Distacom world wide like production, planning, commercial, finance and customer services. (b)stablishing a corporate culture consisting with Distacoms world wide policies both in terms of quality and service. (c) Controlling and improving the operating and transmission cost and service reliability. (d) Providing high customer value and quality service. (e) Developing and growing the subscriber base. (f) Providing a wide range of value added service. (g) Developing brand name awareness and marketing strategy including advertising and promotion, etc. (iii) Services mentioned in Sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and operating agreement. The title of the agreement shows that the agreement was to get technical services as well as services for operating the system. Under the agreement, the appellant got right to use. Distacom know-how and Distacom Intellectual Property Rights and also got right for advice and assistance as set out in Schedule 1 of the agreement. To carry out all the activities as mentioned in the licence agreement, the appellant company required to expertise in technical field as well as in administrative, accounting and finance field. Expertise in technical field is not gained through experience only but is also attained through research and invention. However, expertise in administrative, field, accounting field and finance field is gained through experience. Such experience gained can be utilised for giving advice or assistance. 6.1 Contract of know-how and services have been distinguished as under in OECD Model Tax Convention. 6.2 In the know-how contract, one of the parties agrees to impart to the other, so that he can use them for his own account, his special knowledge and experience which remain unrevealed to the public. It is recognised that the grantor is not requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substance of the matter of a payment is something other than what, by a clever device of drafting it is made to appear." Hence we should ascertain the character of payment in view of the legal meaning of know-how and just because in the agreement some information or advice is categorized as know-how. The same should not be concluded as know-how. Every information based on experience cannot be know-how. The learned M.P. High Court in the case of CIT v. HEG Ltd. [2003] 263 ITR 230 observed : "That apart, we have already indicated that every information would not have the status of royalty. There are various kinds of categories of information. Solely because an entry is of commercial nature would not make a royalty." 6.7 This bench in the cases of payments of softwares has held that such payments are for procurement, of information, i.e., data but these payments are not royalty. Now when we consider item - Liaison with legal and financial advisors; it is clear that such payment is purely for services. Since payment for technical services is not covered under DTAA, hence no TDS is required as provisions of DTAA will prevail as per decision of Supreme Court in the case of Union of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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