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TMI Blog2019 (4) TMI 2018X X X X Extracts X X X X X X X X Extracts X X X X ..... holding that the amount of Rs. 2,07,63,486, received by the assessee from rendering services in India is not in the nature of fees for technical services. 3. Brief facts are, the assessee is a company incorporated in Netherland. The assessee has entered into an agreement with its Indian subsidiary Hyva India Pvt. Ltd. (HIPL) for rendering certain services. During the year under consideration, the assessee received an amount of Rs. 2,07,63,486, from HIPL for rendering services under the agreement. The assessee filed its return of income for the impugned assessment year on 29th March 2014, declaring nil income. In the course of assessment proceedings, the Assessing Officer, after perusing the service agreement and other material on record c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rland Tax Treaty. Further, he observed, while rendering such services, the assessee has made available technical knowledge, experience, knowhow, skill, etc., to HIPL as it is involved in capacity building of HIPL. Thus, ultimately, he concluded that the payment received by the assessee from HIPL is in the nature of fees for technical services under Article-12 of India-Netherland Tax Treaty, hence, has to be taxed on gross basis @ 10%, as provided under the treaty. Accordingly, he brought to tax the amount of Rs. 2,07,63,486, at the hands of the assessee. Being aggrieved with the aforesaid decision of the Assessing Officer, the assessee preferred appeal before the first appellate authority. 4. After considering the submissions made by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is not only confined to managerial services but also extend to technical and consultancy services. He submitted, the invoices raised by the assessee also do not describe in detail the services rendered by the assessee. He submitted, without properly examining and analyzing the facts including the nature of services rendered under the service agreement it cannot be said that services rendered are purely in the nature of managerial services, hence, the amount received is not fees for technical services. Thus, he submitted, the issue may be restored back to the Assessing Officer for examining the nature of service rendered by the assessee. 6. The learned Authorised Representative drawing our attention to the service agreement between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an 81 (AAR); iii) AAR v/s Ernst & Young Pvt. Ltd., In re., [2010] 189 Taxman 409 (AAR); iv) AAR v/s Bharati AXA General Insurance Co. Ltd., In re., [2010] 194 Taxman 1 (AAR); v) Outotec Oyj v/s DDIT, [2016] 76 taxmann.com 33 (Kol.); vi) DCIT v/s Sun Pharmaceutical Laboratories Ltd., [2018] 96 taxmann.com 105 (Ahd. Trib.); and vii) Steria (India) Ltd. v/s CIT, [2016] 72 taxmann.com 1 (Del.). 7. We have considered rival submissions and perused material on record. We have also applied our mind to the decisions relied upon. In our view, two issues arise before us to resolve the dispute between the parties. Firstly, whether the services rendered by the assessee to HIPL under the management service agreement is purely managerial in nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... experience, skill, knowhow or process or consist of development and transfer of a technical plan or technical design." 9. Thus, as could be seen from the aforesaid definition of fees for technical services under the tax treaty, managerial service is not included under the definition of fees for technical services. Therefore, though some services rendered by the assessee may have the trappings of technical or consultancy service, however, the core activity of the assessee under the agreement is, providing managerial services. That being the case, the amount received by the assessee from HIPL cannot be treated as fees for technical services under Article-12(5) of the India-Netherland Tax Treaty. More so, when the Assessing Officer has not d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal, the Assessing Officer has failed to demonstrate through any material brought on record that while rendering services to HIPL, the assessee has made available any technical knowledge, experience, knowhow, skill, etc., enabling HIPL to apply such technology independently. Rather the facts on record if considered vis-a-vis the service agreement would clearly reveal that while rendering services, the assessee has not made available any technical knowledge, experience, knowhow, skill, etc., to HIPL for its independent use. In view of the aforesaid, we do not find any infirmity in the order of the learned Commissioner (Appeals) in holding that the amount received by the assessee from HIPL is not in the nature of fees for technical service ..... X X X X Extracts X X X X X X X X Extracts X X X X
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