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TMI Blog2025 (1) TMI 1553X X X X Extracts X X X X X X X X Extracts X X X X ..... services amounting to INR 43,26,520/- as Fees for Technical Services ('FTS') as per Section 9(1)(vii) of the Act and Article 13 of India-UK Double Taxation Avoidance Agreement ('DTAA). 2. Ground No. II - Taxability of amount received as management fees & cost recharge as both Royalty and Fees for technical services (FTS). 2.1 On the facts and in the circumstances of the case and in law, the learned DRP ('Dispute Resolution Panel') and DCIT have erred in considering management fees & common cost recharge amounting to INR 6,31,27,797/- as both Royalty and Fees for Technical Services ('FTS') as per Section 9(1)(vi) and 9(1)(vii) of the Act and Article 13 of India-UK Double Taxation Avoidance Agreement ('DTAA'). 3. Ground No. III - Erroneous rate of tax applied while computing tax payable. 3.1 Without prejudice to the above grounds, on the facts and in the circumstances of the case and in law, the learned DCIT has erroneously applied a tax rate of 15% as per India-UK DTAA instead of applying a beneficial rate of 10.608% under the Act while computing the amount of tax payable by the Appellant. 4. Ground No. IV - Erroneous levy of consequenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficial, they will apply to the assessee in terms with section 90(2) of the Act. From the assessment stage itself, the assessee has pleaded that since the supply of technical design/ drawings/plans by it to the Indian entity does not make available any technical knowledge, knowhow, process, etc., it cannot be treated as fees for technical services under Article-13(4)(c) India-UK tax treaty. Whereas, the Assessing Officer has rebutted such contention of the assessee on the reasoning that as per the second limb of Article-13(4)(c) of the India-UK tax treaty, amount received towards development and transfer of a technical plan or technical design, by itself, is in the nature of fees for technical services and there is no necessity of fulfilling the condition of "make available". The learned Commissioner (Appeals) while agreeing with the aforesaid reasoning of the Assessing Officer has further supplemented it by observing that through the provision of technical drawing and design and consultancy services provided through personnel at the site, the assessee has made available technical knowledge, experience, skill, knowhow or processes to the Indian entity, hence, the amount received is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available technical knowledge, experience, skill know-how or processes, or consist of the development and transfer of a technical plan or technical design." 18. Since, the conditions of Article-13(5) of the India-UK tax treaty are not applicable in the present case, it is not relevant for our purpose. Undisputedly, both the departmental authorities and the assessee are in agreement that if, at all, the amount received by the assessee is treated as fees for technical services, it will come within Article-13(4)(c) of the India-UK tax treaty. Therefore, the following two issues arise for our consideration viz., (i) Whether development and transfer of a technical plan or technical design simplicitor without making available technical knowledge, experience, skill, knowhow or processes, etc., would be in the nature of fees for technical services; and (ii) In the event, it is held that development and transfer of a technical plan or a technical design also requires making available technical knowledge, experience, skill, knowhow or processes, etc., whether in the present case such condition is satisfied." 19. Undisputedly, in the present case, the amount received by the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dge, experience, skill, knowhow or processes while developing and supplying the technical drawings/designs/plans has to be accepted. If the Department is of the view that through development and supply of technical designs/drawings/plans the assessee has made available technical knowledge, experience, skill, knowhow or processes, it is for the Department to establish such fact through proper evidence. The assessee certainly cannot be asked to prove the negative. It is worth mentioning, while deciding a dispute of identical nature concerning fees for technical services as per India- USA tax treaty under which definition of fess for included services as per Article-12(4)(b) is identically worded like Article 13(4)(c) of the India-UK tax treaty, the Tribunal, Pune Bench, in Gera Developments Pvt. Ltd. v/s DCIT, [2016] 160 ITD 439 (Pune), has held that mere passing off project specific architectural, drawings and designs with measurements does not amount to making available technical knowledge, experience, skill, knowhow or processes. The Tribunal held that unless there is transfer of technical expertise skill or knowledge along with drawings and designs and if the assessee cannot inde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 13/07/2023, under similar facts and circumstances, took the decision, following the decision of co-ordinate Bench for A.Y. 2012-13 observed as under : "2. The assessee has raised the following grounds of appeal before us:- Ground No. I- Taxability of amount received for Consulting and Engineering services as Fees for technical services (FTS) 1.1. On the facts and in the circumstances of the case and in law the learned DRP (Dispute Resolution Panel) and DCIT have erred in considering income from consulting and engineering services amounting to INR 15 18 250/- as Fees for technical services (FTS) as per Article 13 of India-UK Double Taxation Avoidance Agreement (DTAA) 2. Ground No. II- Taxability of amount received as management fees & common cost recharge as Royalty and Fees for technical services (FTS) 2.1 On the facts and in the circumstances of the case and in law, the learned DRP (Dispute Resolution Panel) and DCIT have erred in considering management fees & common cost recharge amounting to INR 5,67 33.937/-as Royalty and Fees for technical services (FTS) as per Article 13 of India-UK Double Taxation Avoidance Agreement (DTAA) 3. Ground No. III-Erroneous rate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided by assessee to Buro India does not make available any technical knowledge or skill etc and accordingly the services would not qualify as fees for technical services under the India-UK Tax Treaty (DTAA In short) and the same should be characterized as Business Income falling under Article 7 of the DTAA. Such business income shall not be taxable in India in the absence of Permanent Establishment (PE) of the assessee in India. The assessee also submitted that similar issue was decided in assessee's favour for the AY 2012-13 by this tribunal. The Id. AO observed that the decision of this tribunal in AY 2012-13 has not been accepted by the revenue and an appeal against the same could not be preferred before the Hon'ble High Court due to low tax effect. Accordingly, the Id. AO observed that the amount of Rs 15,18,250/- received by the assessee is in the nature of Fee for Technical Services (FTS) and brought to tax the same as per Article 13(2)(a)(ii) of the India UK DTAA in the hands of the assessee. b) Management Fees & Common Cost recharge Rs. 5,67,33,937/- This is the amount charged to Buro India towards various costs incurred. The same has not been offered to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gerial services. However, we would like to highlight that Article 13 of India-UK DTAA covers only technical and consultancy services and hence the above services would be qualified as business income and in the absence of Permanent Establishment (PE) of the assessee in India, the said income shall not be considered as taxable in India as per India-UK DTAA Further, even where it considered that few of the services may be considered as technical or consultancy services, the same would still be not taxable under Article 13(4)(c) of the India-UK DTAA as these services does not make available any technical knowledge, experience, skill knowhow or processes, etc. to the recipient of the service. The said position is also confirmed by the Hon'ble ITAT in Assessee's own case during AY 2012-13" The Id. AO concluded that the payment received under the head 'Cost Recharge' would be Royalty as per the Act as well as per India UK DTAA as it is received as consideration for the use of, or the right to use the trademark or brand name 'Buro Happold' owned by it. He also observed that description of the services under all heads as per the agreement mentioned earlier clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn of income itself. Hence we hold that the decision of this tribunal for AY 2014-15 and 2015-16 would not be applicable here and the decision of this tribunal for AY 2012-13 dated 15/02/2019 would be applicable here in view of same facts. Hence respectfully following the decision of this tribunal in AY 2012-13 referred supra, the Ground Nos. 1 and 2 raised by the assessee are allowed. 7. In view of our decision rendered hereinabove for Ground Nos. 1 & 2, the adjudication of Ground No. 3 would become infructuous as it only pertains to the rate of tax if the aforesaid receipts were treated as income of the assessee. Hence the Ground No. 3 is hereby dismissed as infructuous. 8. The Ground No. 4 is challenging the levy of interest u/s 234B of the Act which is consequential in nature and does not require any specific adjudication. 9. In the result, the appeal of the assessee is partly allowed." 7. Since the issues are exactly similar and grounds as well as the facts are also identical, respectfully following the above decision in assessee's own case for the A.Y. 2019-20 and A.Y. 2012-13 and also following the principle of consistency, we allow the appeal filed by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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