TMI Blog2020 (2) TMI 1678X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals for A.Ys 2002-03 to AY 2007-08. Thus we uphold the same and dismiss this ground of the revenue for all the Assessment Years. Taxability of charge back of receipts - assessee had received an amount on account of charges from TIL/Timken Engineering and Research India Private Limited (TERI). These receipts were reimbursements of payments made by the assessee to third parties towards, provision of various services to TERI, TIMPL and TIL - HELD THAT:- As decided in assessee own case [ 2017 (12) TMI 299 - ITAT KOLKATA] the sums received by the appellant in question are pure reimbursements on actual with no mark up and the appellant is not the ultimate beneficiary of the sum in question. The appellant has not rendered any service to TIL and there is no basis on which the sum in question can be considered as FTS in the hands of the appellant. Further, even assuming it is FTS, the services rendered does not make available any technical skill, knowledge, etc. to the service recipient. - ITA No. 1274/Kol/2018, ITA No. 1275/Kol/2018, ITA No. 1276/Kol/2018 & ITA No. 1277/Kol/2018 - - - Dated:- 19-2-2020 - Sri J. Sudhakar Reddy, Accountant Member And Sri S.S. Godara, Judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d below:- 18. We have already set out the nature of services to be rendered by the assessee to TIL. A perusal of the clauses of Agreement dated 2.8.2000 between the assessee and TIL clearly shows that they are purely in the nature of advisory services. Nothing is made available to TIL by the assessee. As to whether or not giving advisory services can be considered to be making available included services, example No. 7 given in the MOU between India and USA on the DTAA throws some more light on the understanding of the Government s of India and the USA on the subject. This example is as follows :- Facts : the India vegetable oil manufacturing firm has mastered the science of producing cholesterol free oil and wishes to market this product worldwide. It hires an American Marketing consultancy firm to do computer simulation of the world market for such oil and to advise it on marketing strategies. Are the fees paid to the US company for included services ? Analysis : the fees would not be for included services. The American company is providing a consultancy which involves the use of substantial technical skill and expertise. It is, however, making available to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there would be no income and there would be no income chargeable to tax in the hands of the Assessee. On the above submission, the learned DR's plea was that the decision of the Hon'ble Calcutta High Court has not attained finality and further no such examination regarding absence of mark up on the charges levied by the Assessee on TIL has been undertaken by the revenue authorities. We are of the view that this plea of the AR is only academic, in view of our conclusion in paragraph 20 that the receipt in question is not FTS and cannot be charged to tax in the hands of the Assessee. Nevertheless, we are of the view that it would be just and appropriate to direct the AO to examine the claim of the Assessee in this regard and if the claim of the Assessee is found to be correct, then the receipt in question cannot be taxed as FTS. We hold and direct accordingly. Thus the relevant grounds of Cross objections by the Assessee are allowed. 4. Thus, the Hon ble Kolkata ITAT has held that the agreement between the appellant and TIL was purely advisory services and such advisory services rendered cannot be treated as fees for included services under Article 12(4)(b) since there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As rightly contended on behalf of the Assessee, the Assessee not the ultimate beneficiary of the sum in question nor did it render any service to TIL. There is no basis on which the AO came to the conclusion that the sum in question was FTS in the hands of the Assessee. Even assuming that the sum in question is in the nature of FTS, under Article 12(4)(b) of the DTAA it is only when technical or consultancy services rendered by the Assessee makes available technical knowledge, experience or skill that the sum in question can be taxed in the hands of the Assessee. There is no evidence brought on record to show that the technical skill, knowledge etc., were made available to TIL by the Assessee. At best the sum in question is taxable only in the hands of the persons who provided the services to TIL and not in the hands of the Assessee. The Transfer Pricing Officer scrutinized the details of reimbursements while examining the international transaction of reimbursement by TIL to the Assessee u/s.92 of the Act and found that the Assessee made no profit on such reimbursements and that the reimbursements were at Arm's Length. All these circumstances are sufficient to conclude that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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