TMI Blog2023 (7) TMI 850X X X X Extracts X X X X X X X X Extracts X X X X ..... cordingly, we allow the ground of appeal raised by the assessee in both the AYs. - ITA No. 7683/Del/2017 And ITA No. 6007/Del/2018 - - - Dated:- 18-7-2023 - Shri G.S. Pannu, Hon ble President And Ms. Astha Chandra, Judicial Member For the Assessee : Shri Niraj Seth, Advocate And Ms. Bansi Patel, CA For the Department : Shri Sanjay Kumar, Sr. DR ORDER PER ASTHA CHANDRA, JM The appeals filed by the assessee are directed against the orders dated 11.10.2017 and 27.07.2018 of the Ld. Assessing Officer ( AO ) passed under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (the Act ) pertaining to Assessment Year ( AY ) 2014-15 and AY 2015-16 respectively. Since the issue involved in both the appeals is common, the same were heard together and are being disposed of by this common order. 2. The assessee has raised the following grounds of appeal:- AY 2014-15 1. The Assessing Officer ( AO )/Dispute Resolution Panel ( DRP ) grossly erred in holding Rs. 4,67,60,000/- to be Fees for included services ( FIS ) under Article 12(4)(b) of the India-US DTAA. AY 2015-16 1. The Assessing Officer ( AO )/Dispute Resolution Panel ( DRP ) gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he jurisdiction can be raised for the first time before the Tribunal. Following the principle of law enunciated in the decisions (supra) we have admitted the additional ground taken by the assessee before us. 6. Briefly stated, the facts are that the assessee is a privately held multifaceted and multi-discipline firm headquartered in Princeton, New Jersey, USA. The firm provides design services for its clients all over the world including India. The assessee is a tax resident in USA. During AYs 2014-15 and 2015-16 the assessee provided certain specified services to one of its clients in India, AOP (formed by Turner Project Management India Pvt. Ltd., Meinhardt India Pvt. Ltd., Michael Graves Associates Inc.) under an agreement executed on 19.08.2013. The assessee received Rs. 4,67,60,000/- in AY 2014-15 and Rs. 57,12,000/- in AY 2015-16 in consideration of rendering services to AOP. The scope of services contained in the agreement between the assessee and AOP is as under:- NO. ACTIVITY A. PRE-DESIGN PHASE / ADMISTRATION A.l Assist SVPRET in selecting Mas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notice contending that the make available clause is not satisfied and therefore income of the assessee from the services rendered by the assessee to the AOP should not be treated as FIS in terms of Article 12(4)(b) of the India-USA DTAA as well as MOU between India and USA. The contentions of the assessee were considered but not found tenable by the Ld. Assessing Officer ( AO ) who concluded that the assistance provided by the assessee makes available the technology to the clients and thus consideration received by the assessee is to be treated as FIS for the reasons recorded by him in para 3.2 to 3.5 of his draft assessment order dated 26.12.2016 for AY 2014-15 and 07.12.2017 for AY 2015-16. For the sake of clarity, the findings of the Ld. AO are reproduced below:- 3.2 The assessee has also relied on the Memorandum of Understanding signed between government of India and U.S.A to elaborate on the ^make available clause, which is reproduced as below: Attention is also invited to the Memorandum of Understanding signed between Government of India and United State of America wherein the concept of make available clause has been further elaborated. Relevant paragraphs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the services provided by it do not fall under the make available clause are not acceptable in view of the provisions of the treaty and also in view of further clarifications by way of Moll between India and US. The MoU very clearly states that the services which are in the nature of Architectural services are to be treated as included services as they make available the technology. The relevant portion of the MoU is as follows: Typical categories of services that generally involve either the development and transfer of technical plans or technical designs, or making technology available as described in paragraph 4(b), include: (1) engineering services (including the subcategories of bioengineering and aeronautical, agricultural, ceramics, chemical, civil, electrical, mechanical, metallurgical, and industrial engineering); (2) architectural services: and (3) computer software development. 3.4 The perusal of the agreement between the assessee and the AOP, clearly, shows that the assessee provides services in the form of drawings, designs, Master plans which are purely technical and architectural in nature. The agreement also mentions that the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal and the only ground of appeal raised in both the AYs relate thereto. 8. The Ld. AR submitted that common issues are involved in both the AYs under consideration and the order of the lower authorities are identical too for both the AYs. The Ld. AR reiterated the submissions made before the Ld. AO/DRP. He submitted that income of the assessee cannot be assessed as FIS in terms of Article 12(4)(b) of the India-USA DTAA since the make available clause is not satisfied. He contended that the services rendered by the assessee are project specific which can never satisfy the requirements of the make available clause as envisaged under Article 12(4)(b) of the India- USA DTAA. In rebuttal to the findings of the Ld. AO/DRP, the Ld. AR drew our attention to the scope of services provided under agreement between the assessee and the AOP and submitted that it is merely a conceptual design that is being provided by the assessee from USA and does not lead to transfer of any technical design/technology to AOP. There is no technical design contained within the drawings provided to AOP and that the technical designs are prepared by the EPC and not the assessee. The main job of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the records. The fact of the case is that Sardar Vallabhbhai Patel Rashtriya Ekta Trust was created by the Govt. of Gujarat to construct a statue of Sardar Patel. The AOP was appointed as a project manager by the Trust for the execution of the project. The AOP entered into an agreement with the assessee for providing project management services for construction of the Statute of Unity in Gujarat. The scope of work of the assessee mainly included the assessee to provide architectural design and drawings and master plan for the entire project which the assessee claimed to have done from USA. During the relevant AYs, the assessee undertook to perform as consultant for supply of architectural designs and drawings which required the use of special knowledge, skill and expertise possessed by the assessee. The drawings and specifications were required to be developed and concluded by EPC contractor. The drawings and designs such concluded by EPC contractor were to be utilised by Sardar Vallabhbhai Patel Rashtriya Ekta Trust for the purposes of construction of Statue of Liberty . Perusal of the agreement outlining the scope of services (referred to in para 6 above) supported by the inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ign and execution of the project. The assessee provided only conceptual design services for the appearance of the project and it was the EPC contractor who was responsible for the final design and the technical development thereof. In doing so, the assessee did not develop a technical design or transferred a technical plan rather it only presented general conceptual designs and description to help others visualise the project. The assessee provided consultancy on aesthetic charactertics of the Statue which involved advising AOP on aesthetic design attributes without regard to technical design. The documents and designs produced by the assessee was only a concept not a design that could be executed. The EPC contractor designed the building the way they are going to be constructed including the aesthetic and the technical design. 13. The Revenue has raised an objection that the ownership of the drawings and designs etc. are passed on to the AOP. Hence the same could be utilised by the AOP for the purposes of its business in future. The relevant clause of the agreement on Ownership reads as under:- 14.0 Ownership 14.1 Title to all written material, originated and prep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as FTS, if, in course of providing managerial/technical or consultancy services, technical knowledge, experience, skill, know-how or processes is made available which enables the person acquiring such services to apply the technology contained therein. It further provides, if the services consist of development and transfer of a technical plan or technical design, but excludes any services that does not enable the person acquiring the service to apply the technology ITA 5804/Mum/2018 contained therein would not qualify as FTS. In the facts of the present appeal, the payments made and the nature of services rendered are as under:- Sr.No. Name of the party Country Amount (Rs.) Nature of services 1. Arc Studio Architecture + Urbanism Pte Ltd Singapore 2,85,35,269/- Architectural drawing/ design in relation to BKC project. 2. Web Structures Pte Ltd Singapore 68,57,342/- GFC drawing / design in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. Though, the Assessing Officer has generally observed that in course of providing services to the assessee, the non-resident entities have made available technical knowledge, know-how, processes to the assessee. However, no substantive material has been brought on record by him to back such conclusion. Even, before us, learned departmental representative has not brought any material to demonstrate that conditions of article 12(4) have been fulfilled in the facts of the present case. In view of the aforesaid we do not find any valid reasons to interfere with the decision of learned Commissioner (Appeals). Accordingly, we uphold the order of learned Commissioner (Appeals) on the issue by dismissing ground raised. 15. In Gera Development (P.) Ltd. (supra), the Pune Bench of the Tribunal considered the issue whether payments made by the assessee, an Indian company, engaged in the business of property development to US company for architectural design and drawings of different building and facilities in respect of its commercial project IQ Business Park are taxable as FIS under Article 12(4)(b) of the India-USA DTAA. The Tribunal held that mere passing of project specific arch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /or Data for information and reference in connection with Clients use and occupancy of the completed project. 5.3 Client agrees to indemnify and hold Gensler harmless from and against any and all claims, liabilities suits, demands, losses, damages, costs, and expenses (including reasonable attorneys' fees and costs o defense) together with interest thereon, accruing or resulting to any persons, firms, or other legal entities, on account of any damages or losses to property or persons, including death of economic loss arising out of the unauthorized use, re-use, transfer or modification of the Documents and/or Data. 26. The facts that have emerged from the analysis of material available on record and the submissions of the rival sides are: (1) The assessee is not having any Permanent Establishment in India; (2) The services were rendered by Gensler from its office in San Francisco, USA, (3) There was no transfer of any technology or technical know-how^ (4) There is no transfer of any copyrighted scientific work (5) The designs, drawings and layouts are project specific; (6) The ownership on eth drawings, specifications and documents have n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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