TMI Blog2016 (10) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... d., a company incorporated in Singapore we find that the Consultant was required to render consultancy services on different issues by applying his technical know-how and whatever services are rendered, advisories were issued to the assessee, the Consultant shall immediately assign and transfer the rights in that consultancy services to the assessee and the assessee would be able to use that services for its enduring benefit in the succeeding years without any assistance of the Consultant. Though it has not been spelt out the specific nature of the consultancy services rendered by the Consultant, but from a careful perusal of this agreement and documents available on record, it appears that whatever consultancy services were rendered by the Consultant, it was made available to the assessee for its enduring benefit and the same consultancy advisories, opinions or services received by the assessee can be used by the assessee for its business purposes in the succeeding years without any aid and assistance of the Consultant. Therefore, in the light of these facts, we are of the view that the consultancy services having been made available to the assessee, the Revenue has rightly held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to M/s. MJR CONSULTANCY PTE LTD., Singapore, was not in the nature of fees for technical services since, there was no technical service rendered by the said company and the payments so made by the appellant could only be regarded as business profits of the said company in terms of Article 7 of the DTAA since, there was no such income was chargeable to tax in India in the hands of the said company, which is a resident of Singapore having no permanent establishment in India and therefore, there was no requirement to deduct tax at source. 3.2 Without prejudice to the above, the learned ClT [A] failed to appreciate that even if the payments made to M/s. MJR CONSULTANCY PTE LTD., Singapore, were regarded as fees for technical services, the same was not taxable in India as the payments made could. not be regarded as fees for technical services within the meaning of Article 12 of the DTAA and thus, there was no requirement to deduct tax at source before making the payment since, there was no income chargeable to tax and thus, the demand raised on the appellant is misconceived and on erroneous appreciation of the position of law and facts. 4. Without prejudice to the above, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. MJR Consultancy Pte Ltd., Singapore towards consultancy charges for the above financial years should not be treated as fees for technical services as per the provisions of section 9(1)(vii) of the Act. It was also asked to furnish full details of payments and in response thereto, the assessee has filed the complete details. Having examined the details furnished by the assessee and the Singapore treaty, the AO was not convinced with the contentions of the assessee and has held the assessee to be in default in respect of tax not deducted at source in respect of fees for technical services payable to M/s. MJR Consultancy Pte Ltd., Singapore for the AYs 2007-08 to 2009-10. The relevant observations of the AO are extracted hereunder for the sake of reference:- From the above discussion, it has been proved that the payments made by the assessee to MJR Consultancy Pte. Ltd., Singapore during the F.Y.s 2006-07, 2007-08 and 2008-09 in terms of the Consultancy Agreement entered into between the two parties constitute fees for technical services both under Sec.9(1)(vi) of the Income Tax Act, 1961, and under the Double Taxation Avoidance Agreement between India and Singapore and is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f reference:- 6. I have considered the facts and circumstances of the case, it is clear from the agreement that the services rendered are in the capacity of a consultant who has skill, knowledge expertise and is a professional in the concerned field. Passing on knowledge, expertise and skill in matter of strategic and operational importance as well as any other issues, connected with the business of the assessee company is certainly of technical nature. As per the agreement, it is' the duty of the consultant to use the skill and knowledge in its possession to provide professional services being technical in nature to the assessee company. Moreover such technical expertise passed on is retained by the assessee, even after the agreement expires. After considering various decisions as reproduced above, I find that the reasoning of all apply to the assessee's case and that the assessee's case is very similar on facts to the case decided by the Authority of Advance Rulings in Intertek Testing Services (supra). In fact on perusal of a report filed by Mr. M.J, Raycraft, Director of the Singapore Consultant, which is placed on record, it is evident that he has provided a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right to continue the practice put into effect and adopted under the service agreement on its expiry. 6.1 Thus, it is held that the Singapore company as a consultant made available to the assessee company technical knowledge in the form of expertise in operation of business which was in its possession along with experience, skill and know-how. In the agreement, this has been classified as professional services. It is not open to the assessee to take refuge behind cryptic clauses of the agreement to establish that there is no transfer of technical knowledge, skill, experience, etc. 7. Aggrieved, the assessee has preferred appeals in all the three years before the Tribunal. Besides assailing the orders on merit, the assessee has also raised a new ground that the order passed by the AO is barred by limitation and requires to be cancelled. 8. The ld. counsel for the assessee has submitted on the point of limitation that the order u/s. 201(1) was not passed in reasonable time prescribed under the Act. In support of his contention, he has placed reliance upon sub-section (3) of section 201(1) of the Act with the submission that the legislature has fixed the time frame within w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een The Nilgiri Dairy Farm Private Limited ( NILGIRIS ), a company incorporated in India with its registered office at 171, Brigade Road, Bangalore - 560025, India, and MJR CONSULTANCY PTE. LTD, a company incorporated in Singapore, having offices at 73A, Kheam Hock Road, Singapore 298850 ( CONSULTANT ), The above parties desire to set forth the terms and conditions upon which NILGIRIS may from time to time obtain CONSULTANT's services, and the parties agree as follows: 1) Services. While this Agreement is in effect and as requested by NILGIRIS, CONSULTANT, through its personnel shall provide professional services (the Services ) as more described below: a) Attending Board meetings of NILGIRIS in Bangalore and spending time with the NILGIRIS management; b) Advising the CEO of NILGIRIS on various matters of strategic and operational importance; c) Advising the management of NILGIRIS on any other issues in connection with the business of NILGIRIS. 2) Acceptance of the Work. Acceptance of the work ( Acceptance ) shall be based on NILGIRIS' reasonable satisfaction with the Services performed. 3) Term. This Agreement shall be effective from October 1, 2006 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipt by NILGIRIS. c) CONSULTANT agrees that no compensation will be due from NILGIRIS beyond what has been expressly outlined herein. 5. Taxes, Benefits and Licenses. CONSULTANT agrees that CONSULTANT is solely responsible for the following: a) the payment of all federal, state, and local taxes and all appropriate deductions or withholdings, unless otherwise provided for in Exhibit A to this Agreement; b) the payment or provision of any unemployment insurance benefits, state disability benefits, vacation, overtime or holiday pay, health, medical, dental or group insurance or any pension or profit sharing; c) obtaining any applicable business or other commercial licenses; and d) the hiring, supervising, conclusion of employment and payment of compensation or other benefits to any agent, independent contractor, employee or assistant engaged by CONSULTANT (with the approval of NILGIRIS' Project Manager / Managing Director) to perform any Work. 6) Status of Parties, Insurance. CONSULTANT shall be, and at all times during this Agreement shall remain independent visa- vis NILGIRIS, including employees of the CONSULTANT, if any. Contract of agency employment is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s by the Consultant and therefore it cannot be held that fees for technical services were paid by the assessee; but the ld. DR invited our attention to various clauses with the submissions that whatever consultancy services were required under different field and whatever consultancy input was given to the assessee, it was used by the assessee even after the termination of the contract and assessee has the privity of all the information, consultancy or opinions received in respect of the operation and business management, etc. 13. During the course of hearing, our attention was invited to the following judicial pronouncements:- i) CIT v. De Beers India Minerals P. Ltd., 346 ITR 467 (Karn) ii) DIT v. Guy Carpenter and Co. Ltd., 346 ITR 504 (Delhi) iii) DCIT v. Boston Consulting Group P. Ltd., 280 ITR (AT) 1 (Mumbai) iv) DCIT v. Anadaman Sea Food Pvt. Ltd., ITA No.1412/Kol/2011 dated 19.6.2012. v) ACIT v. Viceroy Hotels Ltd., ITA No.401/Hyd/2007 Ors. dated 27.05.2011. 14. In all these judgments, we find that emphasis was made on an issue as to whether technical know-how was made available to the assessee. In the case of De Beers India Minerals P. Ltd. (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he services offered are the product of intense technological effort and a lot of technical knowledge and experience of the service provider have gone into it. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. Technology will be considered made available when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service that may require technical knowledge, skills, etc., does not mean that 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 technical/included services only if the twin test of rendering services and making technical knowledge available at the same time is satisfied. 15. The Hon ble Delhi High Court in the case of DIT v. Guy Carpenter and Co. Ltd., 346 ITR 504 (Delhi) has also expressed similar views. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness of NILGIRIS. 4) Under the head Duties , the Consultant s duty shall include, as applicable, the use of skill and knowledge in completing the services referred to earlier and reasonable documentation as shall be required by NILGIRIS. 5) Under the head Intellectual Property , the Consultant shall immediately assign, transfer and set over to NILGIRIS all right, title and interest of Consultant in and to any product, improvement, or process which may directly or indirectly be utilized in connection therewith, which Consultant may contribute to or develop during performance of work on NILGIRIS s time or at the expense of NILGIRIS and Consultant shall do all documentation necessary in this connection. 18. From a careful reading of this agreement, we find that the Consultant was required to render consultancy services on different issues by applying his technical know-how and whatever services are rendered, advisories were issued to the assessee, the Consultant shall immediately assign and transfer the rights in that consultancy services to the assessee and the assessee would be able to use that services for its enduring benefit in the succeeding years without any assis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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