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TMI Blog2023 (7) TMI 1573X X X X Extracts X X X X X X X X Extracts X X X X ..... nt (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 8.85,47,006/- 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 tax applied while computing tax payable 3.1 Without prejudice to the above grounds, on facts and 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. Ground No. IV-Erroneous levy of consequential interest under section 234B 4.1 On facts and circumstances of the case and in law, the learned DCIT has erred in levying consequential interest under Section 234B of the Act, amounting to Rs 16,10,425/-." 3. At the outset, Ld. Counsel for the assessee brought to our notice t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 in the nature of fees for technical services. 16. For a better understanding of the dispute, it is necessary to look into the scope of work to be undertaken by the assessee under the relevant agreements. On a perusal of the sample copies of the agreements, it is noticed that the assessee was entrusted the work of providing consulting services for a twin city project by the Pune Municipality as well as other building projects in Mumbai. Further, on perusal of the sample copies of the agreement filed in the paper book, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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, which has been treated as fees for technical services is towards supply of technical drawings/designs/plans. On a careful reading of Article-13(4)(c) of the India-UK tax treaty it becomes clear that the words "or consists of the development and transfer of a technical plan or technical design", appearing in the second limb has to be read in conjunction with "make available technical knowledge, experience, skill, knowhow or processes". The reasoning of the Assessing Officer that the second limb of Article-13(4)(c) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 independently use the drawings and designs in any manner whatsoever for commercial purpose, the payment received cannot be treated as fees for technical services. Though, we have taken note of other decisions cited by the learned Authorised Representative we do not intend to deliberate further on them. As regards the decisions cited by the learned Departmental Representative, we find them to factually distinguishable, hence, not applicable to the present appeal. In any case of the matter, the Department has failed to establis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 tax applied while computing tax payable 3.1. Without prejudice to the above grounds on facts and 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 92% under the Act while computing the amount of tax payable by the Appellant. 4. Ground No. IV-Erroneous levy of consequential interest under section 234B. 4.1. On facts and circumstances of the case and in law, the learned DCIT has erred in levying consequential interest under Section 234B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. 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 ld. 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 by the assessee on the contention that these being management cost recharges does not make available any knowledge, skill, process, know-how and experience to Buro India as per the terms of the India UK DTAA. The assessee made the following submissions before the ld. AO :- The Assessee has incurred certain common expenses in relation to Information Technology Business Development, Finance, Human Resource Management etc. for the Buro Group entities and the cost for the same is charged to various Buro Group entities based on a predetermined cost allocati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese 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 ld. 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 clearly shows that the assessee is charging Buro India for the use of, or the right to use the information concerning industrial, commercial or scientific experience. Therefore, the amount of Rs 5,67,33,937/- received by the assessee under the head 'Cost Recharge' was treated by the ld. AO as Royalty u/s 9(1)(vi) of the Act as well as under Article 13 of India UK DTAA. The ld. AO also held the said receipt to be Fee for Technical Services taxable u/s 9(1)(vii) of the Act as well as under Article 13 of India UK DTAA as consultancy services. 4. The ld. DRP relied on the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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