2019 (1) TMI 743 - AT - Income Tax

TDS u/s 195 - fees for technical services u/s 9 (1) (vii) and fees for included services under Article 12 of the DTAA between India and USA - non deduction of tds - proceedings barred by limitation - Held that - Facts of the case in hand are in parity with the facts of Bharti Airtel 2016 (12) TMI 1601 - DELHI HIGH COURT , respectfully following the findings of the Hon ble Jurisdictional High Court (supra) we hold that the order dated 28.03.2013 for A. Y. 2006-07, 2007-08 and 2008-09 are barred by limitation wherein held that the court was conscious of the absence of any limitation period in respect of payments to non-residents, for the purpose of Section 195 read with Section 201. Yet, it was held that proceedings could be initiated within reasonable time. Payments made by the assessee to GX Technology of America - On perusal of the Master Geophysical Data-Use License between M/s. GX Technology Corporation (Licensor) and the assessee (Licensee) show that GXT has agreed to grant to the assessee to use certain data from time to time. And data means geophysical and geological the information, derivatives. It is specifically mentioned that the ownership lies with a licensor. As can be seen from the mentioned clauses what is provided by the licensor is the data relating to the geophysical and geological information about the coast of India and is not responsible for the accuracy or usefulness of such data. Thus it is clear that licensor have only made available the data acquired by them and available with them but are not making available technology available for use of such data by the assessee. It has to be understood that 3D seismic is an exploration technique use in the search for oil and gas underground structure. This technique is analogues to ultrasound technology used in the medical field. The maps / designs are nothing but a way to interpret the data and cannot be equated to development and transfer of technical maps and designs as contemplated by the Assessing Officer / CIT (A). The revenue could not prove that there was transfer of Technology to the assessee nor it has been proved that the impugned transactions have made available technical expertise skill or knowledge by processing the data provided by the assessee. Nor it has been proved that the assessee can apply independently and without assistance and undertake such survey independently in future. Assuming that Licensor, rendered services as defined u/s. 9(l)(vii) Explanation 2 of the Act, yet it does not satisfy tire requirement of technical services as contained in India-UK DTAA. We set aside the findings of the Id. CIT(A) and direct the A.O to delete the impugned addition - decided in favour of assessee

Summary

Issues Involved:
1. Whether the proceedings are barred by limitation.
2. Whether the payments made by the assessee are in the nature of fees for technical services under section 9(1)(vii) of the Income Tax Act and fees for included services under Article 12 of the DTAA between India and the USA.

Issue-wise Detailed Analysis:

1. Limitation of Proceedings:
The first common grievance raised by the assessee was that the proceedings were barred by limitation. The orders framed under sections 201(1) and 201(1A) were dated 28.03.2013 for the assessment years 2006-07, 2007-08, and 2008-09. The assessee argued that these orders were barred by limitation. The relevant provisions of the Act and the amendment were considered, particularly the case of Bharti Airtel Limited by the Hon'ble High Court of Delhi. The court held that the order dated 28.03.2013 for the assessment years 2006-07, 2007-08, and 2008-09 were barred by limitation, following the precedent set in Bharti Airtel Limited.

2. Nature of Payments:
The second issue was whether the payments made by the assessee to GX Technology of America were in the nature of fees for technical services under section 9(1)(vii) of the Income Tax Act and fees for included services under Article 12 of the DTAA between India and the USA. The facts showed that the assessee made payments to NRC, i.e., GXT, without deducting tax at source as per the TDS provisions. The assessee argued that GXT was a tax resident of the USA and eligible for relief under the Indo-US DTAA, stating that the sale of geophysical and geological data was not covered under royalties or fees for included services. The Assessing Officer, however, treated the payments as royalty and taxable under section 115A(AA) of the Act.

Upon appeal, the CIT(A) held that the payments were not in the nature of royalty but were fees for included services. The CIT(A) relied on the Memorandum of Understanding concerning Fees for Included Services appended to the India-USA DTAA, which included geological surveys and exploration as examples of services where technology could be made available. The CIT(A) concluded that the payments were taxable as fees for technical services under section 9(1)(vii) and Article 12 of the DTAA.

However, the Tribunal analyzed the 'Master Geophysical Data-Use License' between GX Technology Corporation and the assessee, noting that the data provided was geophysical and geological information without transferring the technology for its use. The Tribunal referred to similar cases, such as Adani Welspun Exploration Ltd. v. ITO and De Beers India Minerals (P.) Ltd., where it was held that merely providing data without transferring the technology did not constitute fees for technical services. The Tribunal concluded that the payments made by the assessee did not make available the technical knowledge or expertise to the assessee, and therefore, were not fees for technical services under the DTAA.

Conclusion:
The Tribunal held that the orders dated 28.03.2013 for the assessment years 2006-07, 2007-08, and 2008-09 were barred by limitation. Additionally, it was determined that the payments made by the assessee to GX Technology of America were not in the nature of fees for technical services under section 9(1)(vii) of the Income Tax Act or fees for included services under Article 12 of the DTAA between India and the USA. The appeals filed by the assessee were partly allowed.