TMI Blog2023 (1) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... PTAI is not a subject domain expert in the area in which the assessee operates. It only collects data from various entities engaged in similar business and makes benchmarking study report which indicates the percentile in which the assessee operates in terms of various facets of its operations. MOU to the India US DTAA elaborates on the concept of make available , which specifies that technology will be considered made available when the person acquiring the service is able to apply the technology. The fact that the provision of the service may require technical input by the person providing the service does not per se mean that technical knowledge, skills, etc. are made available to the person 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. Thus, the services rendered by PTAI are neither ancillary nor subsidiary to the application or enjoyment of any right, property or information and therefore, same are not covered under Article 12(4)(a). Merely providing commercial information through a benchmarking study does not in any manner makes available any technical kn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has made payment for providing services by PTAI as fees, net of taxes. The total expected payment to be made in FY 2017-18 under the said work order was Rs. 4.50 crores approx. The assessee also filed the tax residency certificate of PTAI which was tax resident of USA and it was also stated that PTAI did not had permanent establishment in India, therefore, it was in the nature of business income of PTAI and hence not taxable in India. The payment was purely commercial in nature and there was no technical element or FTS involved in such Benchmarking services. 3. Ld. AO on perusal of the work order agreement noted the following nature and description of services to be rendered by PTAI to the assessee which are as under:- Job Description: Benchmarking Services of Site Personnel Index (SPI) for five Petrochemical sites (Patalganga, Nagothane, Hazira, Dahej, Vadodara) and the refinery site at Jamnagar -DTA including RTF and solids dispatch area. This Agreement for Services (this Agreement ) is entered into between Phillip Townsend Associates Inc. ( PTAI ) and Reliance Industries Limited ( owner ), and constitutes owner's agreement to participate in the mul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which consists of:- Identify areas for manpower efficiency improvements between 25% to 50% on total hours worked in manufacturing facilities Guide your decisions on personnel levels before or following restructuring Harmonize your organizational structures Communicate best practices and benchmarks to highlight key drivers Build networks within your company Set baseline targets, start pacesetter improvement programs and monitor changes in manpower efficiency year to year Drive a step change in manpower efficiency performance Design staffing levels for new facilities. 5. Ld. AO deduced that it satisfies the conditions of Article 12(4)(b) of Agreement for Avoidance of DTAA between India and US of make available of technical service . Thus, he hold that payments to be made by the assessee company would clarified as fees for included services (FIS) as per Article 12(4)(b) of Indo-US DTAA and directed the assessee company to deduct the TDS @ 10% (plus applicable surcharge and education cess) as per the rate provided in Article 12 of the DTAA Act. 6. Ld. CIT (A) after considering the entir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch services: a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph (3) of that Article is received; or b) make available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design 4.3.9. On perusal of the terms of the Agreement, it is clear that the payment/ credit made by the Appellant under the Agreement between PTAI and the Appellant is essentially towards benchmarking services, which are not ancillary or subsidiary to the application or enjoyment of any right, property or information and, therefore, the same are not covered by the said Article 12(4)(a). Further, the services rendered by PTAI do not make available technical knowledge, experience, skill, know-how or processes, nor consist of the development and transfer of a technical plan or technical design and, therefore the same are not covered by the said Article 12(4)(b) of the DTAA. Thus, services of PTAI are not covered by Article 12 as not being in the nature of fees for included services . 7. We have heard both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in India. 10. From the perusal of the agreement as well as nature of services rendered by the non-resident company PTAT, we find that the payment is purely towards benchmarking of the services of SPI and such benchmarking study merely enables the clients to undertake further course of action to improve its qualitative capacity of personnel which has been stated to be as under:- Identify areas for manpower efficiency improvements between 25% to 50% on total hours worked in manufacturing facilities. Guide your decisions on personnel levels before or following restructuring. Harmonize your organizational structures. Communicate best practices and benchmarks to highlight key drivers. Build networks within your company. Set baseline targets, start pacesetter improvement programs and monitor changes in manpower efficiency year to year. Drive a step change in manpower efficiency performance. Design staffing levels for new facilities. 11. Ergo, from the above it can be deduced that PTAI does not provide any know how or technical knowledge, albeit prompt its clients to take corrective action in the above ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
