TMI Blog2017 (1) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... t clear that no “make available” articles in respect to fee for technical service is used in Indo- Swiss DTAA or Protocol. The said protocol only postulates that India and Swiss shall enter into negotiation to this effect if former State enters into a DTAA with a member of OECD State either reducing rate of tax or restricting the scope of specified categories of income hereinabove. Revival of section 201(1) and 201(1A) demands pertains to TDS not deducted upon assessee’s canadian and american remittances hereinabove. There is no dispute that India and these countries have entered into DTAAs and same contain “make available” stipulation with respect to the impugned services to be involved in corresponding Article 12(4)(b) in both cases. The Revenue fails to take us through any evidence that assessee’s payees in question based in Canada or USA have made it available their expertise and technical knowhow thereby enabling it to use the same independently without their assistance. It transpires that these payees have merely rendered consultancy services without imparting any knowledge. We find that no reason to interfere with the ld.CIT(A) observation extracted hereinabove quoting v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofessional services Article 7 of DTAA with USA 4. The Assessing Officer passed section 201 and 201(1A) order in question dated 12.3.2010 raising impugned demand after holding that the above remittances were in fact in the nature of fee for royalty/technical services covered by deeming fiction under section 9(1)(vi) and (vii) of the Act. He rejected assessee s contention placing reliance on respective Double Taxation Avoidance Agreements ( DTAA for short) and its plea that payees in question had not made available any technical knowhow as well. All this resulted in impugned demand of ₹ 20,92,072/-. 5. Assessee preferred appeal. Ld.CIT(A) noted that it did not dispute AO s finding treating impugned payment to have been made for availing technical services liable to be treated as fees for technical services . He considered assessee s pleadings seeking to invoke specific clause pertained to taxation of income arising from technical services in respective DTAA. Ld.CIT(A) rejects assessee s argument regarding its Swiss remittances as follows: 5.1.2 I have gone through the facts of the case, the AO's observations and the submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make any difference. Therefore, the payment made to the Swiss company is of the nature of 'fees for technical services', is deemed to be income accrued in India u/s 9(l)(vii), is also taxable in India as per India-Switzerland DTA Agreement. The appellant has failed to deduct TDS while making the payment and has been correctly treated as assessee in default and is liable for tax u/s 201(1 interest u/s 201(1A) of their Act. 6. We proceed further to notice that ld.CIT(A) thereafter holds that assessee was not liable to deduct TDS of its canadian remittances as under: 5.2.3 I have gone through the order of the AO and the submissions of the assessee. The ground of appeal against demand raised u/s.20l(l) requires consideration of the following 3 issues: a) Whether the payments made to the non residents are income deemed to accrue or arise in India under the provisions of section 9(l)(vii) as being 'fees for technical services'. b) Whether the income even if deemed to accrue or arise in India under section 9(l)(vii) is of the nature which is exempt from taxation in India under the DTA Agreements with Canada. c) Whether the tax has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions cited by the Appellant it can be concluded that service, which is technical in nature can be said to be fees for included services only when it make available technical knowledge or skills to the recipient of services i.e. only when recipient of services can apply the same on his own. In this connection observations made by the Authority for Advance Ruling (AAR) as laid down in the case of Anapharm Inc. (2008) 305ITR 394 squarely applies to the facts of the appellant's case, since it related to rendering of Bio-Anlytical services by the non-resident applicant and under the framework of the same language of Article 12(4)(b) of the Canada-India DTAA, which is pari-materia with the U.S.-India DTAA as well: 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. In the present case, the applicant renders Bio-analytical services which, no doubt, are very sophisticated in nature, but the applicant does not reveal to its clients as to how it conducts those tests or the inputs that have gone into it, so as to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aphs: 5.4.3 I have gone through the facts of the case, the AO's order, the submissions and the India-USA DTA Agreement. I do not agree with the appellant when he says that the source of income is outside India just because the sales which would be made benefiting from these professional services would be made outside India. The income accrues in India in view of sec.9(l)(vii) as Tees for technical services' as defined in Explanation 2 to this sub-section. Sales are made outside India but are to be made from India of goods manufactured in India. More importantly, even this issue has been acceded in the grounds of appeal (refer ground no.4) by the appellant and does not arise from the grounds raised. However, these services are of the nature of fees for included services' as per Article 12(4) of the DTAA but do not 'make available' the knowledge, experience etc. Further, there is no PE of the US concern in India and therefore, it is not taxable under Article 7 as business profits, also. Following the detailed discussion in para.5.2.3 in the case of Anapharm; it is held that the income of the non-resident from the payments was not taxable in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idance Agreement in respect of any country, provisions of the Act apply to the extent they are more beneficial to such an assessee and not otherwise. The assessee in the instant case refers to Indo-Portuguese DTAA containing make available condition to be applied in case of its Swiss remittances as per Indo-Swiss DTAA Protocol on the ground that although such a make available condition in respect of technical services is not explicitly contained in latter DTAA, same is deemed to have been applicable by virtue of Indo-Portuguese DTAA Protocol specified hereinabove involving a specific condition to this effect. This plea fails to impress upon us. We make it clear that no make available articles in respect to fee for technical service is used in Indo- Swiss DTAA or Protocol. The said protocol only postulates that India and Swiss shall enter into negotiation to this effect if former State enters into a DTAA with a member of OECD State either reducing rate of tax or restricting the scope of specified categories of income hereinabove. We notice that assessee s reliance on the case law (supra) involving similar clause in Indo-Sweden DTAA is also misplaced since the said DTAA contain ..... X X X X Extracts X X X X X X X X Extracts X X X X
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