TMI Blog2016 (11) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... s’ ) also do not satisfy the ‘make available’ test as no technology , knowhow, skills etc were transferred to the recipient. We also hold that the repair and supervision services provided to few other Indian parties do not satisfy the make available test as these are routine repairs and supervisory services and there is no transfer of technology or skill or experience at the time of provision of such services by the assessee. The amounts received by the assessee from Outotec India Pvt Ltd does not qualify as FTS as per the DTAA. - Decided in favour of assessee - I.T.A Nos. 558/Kol/2014, I.T.A Nos. 462/Kol/2015 - - - Dated:- 14-10-2016 - Shri N. V. Vasudevan, JM And Shri M. Balaganesh, AM For the Appellant : Shri K.M. Gupta, Advocate Shri S. Roy Choudhury, FCA For the Respondent : Shri G. Mallikarjuna, CIT, DR ORDER Per Shri M. Balaganesh, AM Both these appeals by assessee are arising out of separate orders of Dispute Resolution Panel, Kolkata dated 23.12.2013 and 30.12.2014 u/s. 144C(5) r.w.s. 144C(8) of the Income-tax Act, 1961 (hereinafter referred to as the Act . Since issues are identical and facts are common, we dispose of both these appeals by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices (viii) Legal services (ix) Business development services (x) Business intelligence services (xi) Marketing development services (xii) IT Infrastructure services (xiii) IT Infrastructure special services (xiv) IT Application services (xv) Research and technology services (xvi) After sales services 4.1. The ld DRP observed that the invoices furnished indicated that services have been provided by the assessee to its group company for IT Services, setting up of IT Infra and also other services which have been simply described as service fee . The ld DRP observed that the absence of specific nature of service fee in the invoices can lead to assumption that all the nature of services have been rendered by the assessee. The wide gamut of services includes creating correspondence letters, training the group companies editors to use the publishing tools so that the group companies can create own content on the global intranet, writing articles of the projects and technologies of the group companies for the web site and trade press, preparing company presentations for the group companies to be used for marketing purposes, consultancy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances of the case and in law, Ld. AO/ DRP failed to appreciate that the services rendered by the appellant are pre-dominantly 'managerial' in nature and that the term managerial has specifically been excluded from the purview of the definition of FTS under Article 13 of the DTAA 2(c) On the facts and in the circumstances of the case and in law, Ld. AO/ DRP failed to appreciate that the services rendered by the appellant do not make available any technical knowledge, experience, skill, know-how or processes, based on the incorrect understanding of the nature of the services provided by the appellant. 2(d) On the facts and in the circumstances of the case and in law, Ld AO/ DRP erred in holding that the meaning of the term make available under the DTAA cannot be drawn from the protocol to the Double Taxation Avoidance Agreement entered into between India and United States of America. 2(e) On the facts and in the circumstances of the case and in law Ld. AO/DRP erred in holding that various judgments relied on by the appellant are distinguishable on facts and thus not applicable in the case of the appellant. Similar Grounds were raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Kol ITAT) (TM ) . The ld AR also placed reliance on the following decisions in support of this argument :- (a) Intertek Testing Services India (P) Ltd reported in (2008) 175 Taxman 375 (AAR-New Delhi) in A.A.R. No. 751 of 2007 dated 7.11.2008 (b) Raymond Limited vs DCIT reported in (2003) 86 ITD 791 (Mumb ITAT) He argued that the make available test as stated in Article 13 of India Finland DTAA is not satisfied in the instant case. He also placed reliance on the expression make available being explained by way of examples in the Protocol to India USA DTAA which has a similar provision in support of his contentions. He also placed reliance on the decision of the co-ordinate bench of this tribunal in the case of Batlivala Karani Securities (India) (P) Ltd vs DCIT reported in (2016) 71 taxmann.com 142 (Kolkata-Trib) dated 8.7.2016. 7. In response to this, the ld DR argued that the meaning of make available given by way of various examples in Protocol to Indo-US treaty should not be imported in the India- Finland Treaty. In support of which, he placed reliance on the decision of the Authority of Advance Rulings in the case of Perfettie Van Melle Holding B.V. r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y will definitely be a technical and consultancy service. This observation is made because according to ld DRP, when marketing information, web content, customized software specific to the group concerns available through WAN consideration for these payments will definitely be fees for technical services and the information made available to the Indian group concern is clearly capable of replicating the services through its own personnel. Accordingly, the ld DRP concluded that the make available clause is satisfied in the instant case. 8.2. At this juncture, it would be pertinent to get into the definition of FTS as per the India Finland Treaty which is reproduced hereunder:- Article 13 Royalties and Fees for Technical Services 4. For the purposes of paragraph 2 of this Article, and subject to paragraph 5, the term fees for technical services means payments of any kind of any person in consideration for the rendering of any technical or consultancy services (including the provision of services of technical or other personnel) which; (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment describ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had held as under:- 12.1. We find that the moot question to be decided in this appeal is as to whether the payments made by the assessee to its foreign subsidiaries would fall under the ambit of fees for technical services as per the DTAA. We find from the Article 12 of Singapore Treaty and Article 13 of the UK Treaty defining the term fees for technical services , the consideration paid for rendering of managerial, technical or consultancy services would be covered under the said definition only if such services make available any technical knowledge, experience, knowhow, or processes. The nature of services rendered by the subsidiaries to the assessee were in respect of simple marketing services of introducing foreign institutional investors to invest in the capital markets in India so that the assessee would improve its business and income in India. We find that no technical service is being made available to the assessee by its subsidiaries and as a result, the payments made to subsidiaries would not fall within the definition of fees for technical services as admittedly no technical knowledge was made available to the assessee by the subsidiaries. 12.2. Article 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices may, for examples, relate to any of the following areas : 1. Bio-technical services ; 2. Food processing ; 3. Environmental and ecological services ; 4. Communication through satellite or otherwise ; 5. Energy conservation ; 6. Exploration or exploitation of mineral oil or natural gas ; 7. Geological surveys ; 8. Scientific services ; and 9. Technical training. The following examples indicate the scope of the conditions in paragraph 4(b) : Example 3 Facts : A U.S. manufacturer has experience in the use of a process for manufacturing wallboard for interior walls of houses which is more durable than the standard products of its type. An Indian builder wishes to produce this product for its own use. It rents a plant and contracts with the U.S. company to send experts to India to show engineers in the Indian company how to produce the extra-strong wallboard. The U.S. contractors work with the technicians in the Indian firm for a few months. Are the payments to the U.S. firm considered to be payments for included services ? Analysis : The payments would be fees for included services. The services are of a t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees are for included services. The services are technical, and the technical knowledge is made available to the Indian company. Example 7 Facts : The Indian vegetable oil manufacturing firm has mastered the science of producing cholesterol-free oil and wishes to market the product world wide. It hires an American marketing consulting firm to do a computer simulation of the world market for such oil and to adverse it on marketing strategies. Are the fees paid to the U.S. company for included services ? Analysis : The fees would not be for included services. The American company is providing a consultancy service which involves the use of substantial technical skill and expertise. It is not, however, making available to the Indian company any technical experience, knowledge or skill, etc., nor is it transferring a technical plan or design. What is transferred to the Indian company through the service contract is commercial information. The fact that technical skills were required by the performer of the service in order to perform the commercial information service does not make the service a technical service within the meaning of paragraph 4(b). Paragr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and grammatical meaning of the language employed, in our understanding, is that a mere rendering of services is not roped in unless the person utilizing the services is able to make use of the technical knowledge etc. by himself in his business or for his own benefit and without recourse to the performer of the services in future. The technical knowledge, experience, skill etc. must remain with the person utilizing the services even after the rendering of the services has come to an end. A transmission of the technical knowledge, experience, skills etc. from the person rendering the services to the person utilizing the same is contemplated by the article. Some sort of durability or permanency of the result of the rendering of services is envisaged which will remain at the disposal of the person utilizing the services. The fruits of the services should remain available to the person utilizing the services in some concrete shape such as technical knowledge, experience, skills etc. 12.3. Applying the definition of FTS in the Treaty to the facts of the present case in the light of the various decisions referred to above, it cannot be said that the rendering of services by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided to few other Indian parties do not satisfy the make available test as these are routine repairs and supervisory services and there is no transfer of technology or skill or experience at the time of provision of such services by the assessee. 8.6. We find that the reliance placed by the ld DR on the decision of Chennai Tribunal in the case of Foster Wheeler France S.A. vs DDIT reported in (2016) 67 taxmann.com 120 (Chennai Trib) dated 5.2.2016 is factually distinguishable from the facts of the instant case. In the facts of the case before the Chennai Tribunal, the foreign company reviewed the execution plans, emphasized on key milestones, provided the best practices available in the form of written procedures and specifications and details. When the procedures and specifications are provided to the assessee, which is also a specialized company in engineering and execution of construction, it is a case of providing specifications and details, execution of engineering and construction contract. These specifications and procedures made available to the assessee by foreign company can very well be used by the assessee-company for execution of other projects also. Moreover, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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