TMI Blog2017 (1) TMI 554X X X X Extracts X X X X X X X X Extracts X X X X ..... 012 (9) TMI 409 - DELHI HIGH COURT ]. In this case all that the assessee gets right is to access the copyrighted material and there is no dispute about. As a matter of fact, the AO righty noted that ‘royalty’ has been defined as “payment of any kind received as a consideration for the use of, or right to use of, any copyright of literary, artistic or scientific work” and that the expression “literary work”, under section 2(o) of the Copyright Act, includes ‘literary database’ but then he fell in error of reasoning inasmuch as the payment was not for use of copyright of literary database but only for access to the literary database under limited non exclusive and non transferable licence. Even during the course of hearing before us, learned Departmental Representative could not demonstrate as to how there was use of copyright. In our considered view, it was simply a case of copyrighted material and therefore the impugned payments cannot be treated as royalty payments. - ITA No.486/Ahd/2016 - - - Dated:- 3-1-2017 - Pramod Kumar AM and S S Godara JM For The Appellant : K. Madhusudan and Albinus Tirkey For The Respondent : Jigar M. Patel ORDER Per Pramod Kumar A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FTS 22.03.2010 32,53,036 Bio analysis 6 AAIPHARMA INC, USA USA FTS 11.09.2009 16,52,877 Bioequivalence study 4. The Assessing Officer was of the view that the services so rendered by the non resident entities are highly technical in nature and are required to be taxed as such in the hands of the recipients of these payments. The Assessing Officer took note of the assessee s stand that in all the related tax treaties (i.e. with UK, USA and Canada), there is make available clause in the provision for taxability of fees for technical services, and that mere provision of technical services is not enough to attract the taxability as it additionally requires that the service provider should also make available his technical knowledge, experience, skill, know how etc, known to the recipient of the service as to equip him to independently perform the technical function himself in future, without the help of service provider . However, this plea was not and rejected. The Assessing Officer analyzed the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that none of the non-resident parties have any PE in India. Considering the facts of the case and the submissions and decisions as relied upon by the appellant, I am of the view that the services rendered in this case, although technical in nature, can be said to be 'fees for included services , only if they make available technical knowledge or skill to the recipient of the service or where the recipient can apply the same on its own in future, without recourse to the service provider. In this connection, the ratio as laid down by the ITAT Hyderabad in the case of Dr. Reddy's Laboratories Ltd. 35 taxmann.com 339 squarely applies to the facts of the appellant's case, since it relates to rendering of Bio-Analytical services by the non-resident party and under the framework of the same language of Article 12(4)(b) of the India-USA and India-Canada DTAAs: In this case, as rightly considered by the learned CIT(A), the assessee was conducting clinical trials through the CROs in USA to comply with the regulations therein and the CROs who are experts in this field were only conducting studies and submitting the reports in relation thereto. They are neither transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. ACIT (supra) and the decision of Hon'ble High Court of Karnataka in the case of CIT vs. De Beers India Minerals (P.) Ltd. (supra). The Revenue has not placed any material on record to rebut the findings of the Id. CIT(A) that the services were actually made available to the assessee and would be taxable. Under these facts, we do not see any reason to interfere with the findings of the Id.CIT(A), same is hereby upheld. Thus, ground raised by the Revenue is rejected. 11. Considering the above, the issue under consideration has been elaborately dealt with, I see no reason to take a different view in the matter. Accordingly, I hold that the payments made to non-resident parties are not liable to TDS u/s. 195 of the I.T. Act, since they are not in the nature of fees for technical services as per the relevant articles of the DTAAs with USA, U.K. and Canada. 12. Another contention raised by the AO in her Order is that since the Memorandum to the DTAA with USA makes reference to certain services, which may make technical knowledge etc. available to the recipient and includes bio-technical services as one of them, technical knowledge etc. has been made available to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record and duly considered facts of the case in the light of the applicable legal positon. 7. We find that the relevant provisions in the relevant tax treaties, which govern the taxability of fees for technical services, are as follows: India UK tax treaty Article 13: Royalty and fees for included services 4. For the purposes of paragraph 2 of this Article, and subject to paragraph 5, of this Article, 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 a 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 described in paragraph 3(a) of this article is received; or (b) are ancillary and subsidiary to the enjoyment of the property for which a payment described in paragraph 3(b) of this Article is received; or (c) make available technical knowledge, experience, skill know-how or processes, or consist of the development and transfer of a technical plan or technical design. India Canada tax treaty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court decisions, namely Honble Delhi High Court in the case of DIT Vs Guy Carpenter Co Ltd ([(2012) 346 ITR 504 (Del)] and Honble Karnataka High Court in the case of CIT Vs De Beers India Pvt Ltd [(2012) 346 ITR 467 (Kar)] in favour of the assessee, and there is no contrary decision by Honble jurisdictional High Court or by Honble Supreme Court. In De Beers case (supra), Their Lordships posed the question, as to what is meaning of make available , to themselves, and proceeded to deal with it as follows: The technical or consultancy service rendered should be of such a nature that it makes available to the recipient technical knowledge, know-how and the like. The service should be aimed at and result in transmitting technical knowledge, etc., so that the payer of the service could derive an enduring benefit and utilize the knowledge or know-how on his own in future without the aid of the service provider. In other words, to fit into the terminology making available , the technical knowledge, skill?, etc., must remain with the person receiving the services even after the particular contract comes to an end. It is not enough that the services offered are the product of inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Abstract Services USA, for online access to the database system SciFinder was not 'Royalty' as envisaged by article 12 of Indo US DTAA, in spite of the fact that the AO has demonstrated how the license granted by the non resident amounts to use of, or the right to use the copyright embedded in the software. The Id. CIT(A) has ignored High Court decisions in favour of revenue, on identical facts. 13. So far as this ground of appeal is concerned, the relevant material facts are as follows. During the course of proceedings before the Assessing Officer, it was noticed that the assessee has made a payment of ₹ 16,30,690 to a US based entity by the name of Chemical Abstract Service for access to database. The Assessing Officer was of the view that this payment is for exploitation of copyrighted database, through licence, and, accordingly, taxable as royalty. It was noted that royalty has been defined as payment of any kind received as a consideration for the use of, or right to use of, any copyright of literary, artistic or scientific work and that the expression literary work , under section 2(o) of the Copyright Act, includes literary database . It was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt could not be held liable to pay tax as an assessee in default u/s. 201(1). 14. Aggrieved by the relief so granted by the CIT(A), the Assessing Officer is in appeal before us. 15. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal positon 16. We find that under article 12(3) of the Indo US tax treaty, royalty has been define as follows 3. The term royalties' as used in this Article means : (a) payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic, or scientific work , including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right or property which are contingent on the productivity, use, or disposition thereof; and (b) payment of any kind received as consideration for the use of, or the right to ..... 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