9911796707
TMI Blog2005 (6) TMI 484X X X X Extracts X X X X X X X X Extracts X X X X ..... that the credit rating fees paid by the appellant to S P would also fall within the purview of the term royalty as defined in Article 12 of the Indo-Australian Double Taxation Avoidance Agreement. 1.4 The appellant submits that considering the facts and circumstances of it s case and the law on the subject the payment made by it to S P is not in the nature of fees for technical services nor in the nature of royalty as defined in article 12 of the Indo-Australian Double Taxation Avoidance Agreement and hence not taxable in India and the CIT(A) ought to have directed the Assessing Officer to hold the same. 1.5 The appellant further submits that considering the facts and circumstances of it s case the services rendered by S P is a part of it s (S P) normal business activities and operations and the payment so made would fall within the purview and scope of it s (S P) business income and the same is not taxable in India. 1.6 The appellant submits that the Assessing Officer be directed to hold that the payment made by it to S P is not taxable in India. 1.7 Without prejudice to the foregoing the appellant submits that in case the payment made by it to S P is consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the case laws cited by the assessee and provisions of Act and of DTAA held that such services were in the nature of services prescribed under article 12 of the DTAA; and accordingly, upheld the decision of the Assessing Officer. 5. Learned Authorised Representative of the assessee, besides reiterating the submissions made before the lower authorities, contended that the credit rating was given by S P to the assessee based upon the information supplied by the assessee and hence, cannot be construed as technical services or consultancy services within the meaning of section 9(1)( vii ) read with Explanation thereto of the Act. He further contended that the assessee obtained only opinion from S P, which does not fall within the definition of Royalty as per article 12 of DTAA. In support of his contention, he referred to the decision of the Tribunal in the matter of Raymond Ltd. v. Dy. CIT [2003] 86 ITD 791 (Mum.), wherein the issue involved was the interpretation of scope of technical services as per article 13 of DTAA between India and UK and the Tribunal held that the word make available implies a status where the user had all rights to use technical knowledge, exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f agreement between the assessee and S P. S P is world recognized credit rating institution and they have developed certain models based upon the empirical research done by them. S P s rating is greatly recognized in the global financial markets and on the basis of rating category the company s resource raising capacity is affected on the one hand and the cost of such resources is also affected on the other hand. Once, a credit rating certificate is issued by S P they themselves disseminate and circulate the same amongst the capable and desiring investors. The company as well can utilize that credit rating certificate in raising resources independently. As per the agreement the company is required to pay annual surveillance fee to S P because such rating certificate is issued by S P for a specified period and during that period S P keeps a track of all developments happening in that company and based upon such developments S P reviews the credit rating assigned by S P to the company. If S P finds it necessary, S P can withdraw or downgrade or upgrade the credit rating depending upon such developments subject to a prior information and dialogue with the client company. 8. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation or not and if it is held to be so, then the impugned payment would be covered under sub-paragraph ( d ). The word commercial information has not been defined in the treaty and therefore it has to be interpreted as it is understood in general sense. In general, the term information means the act or process of informing, communication or reception of knowledge and any information which has got a commercial value for the user can be termed as commercial information . It is not necessary that such commercial information by itself should be a immediate source of earning for the user. What is important is that the user of such information should derive some commercial benefit therefrom. The assessee has contended that services rendered by S P are in the nature of professional services because credit rating exercise requires specialized knowledge and expertise. We do not dispute this but we have to consider the end result of such service and if the end result of this service is in the shape of supply of commercial information for the user then the transaction as a whole would be of supply of commercial information and not merely of rendering of professional services. In a given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment made by the company to the firm of Chartered Accountants for preparation of such report would be payment for the supply of commercial information irrespective of the fact professional skills and expertise are used by them in the preparation of research report. To sum up, for the purpose of determining the taxability of such transaction, the nature of transaction should be analysed and considered in totality having regard to facts and circumstances of each case. In the present case, no material has been placed that on record that obtaining of credit rating was required under some statute and payment was made to statutorily authorized organisation, and therefore such services, being taken for commercial objectives are in the nature of services for the supply of commercial information. 10. The assessee has also contended that it has taken only opinion from S P for the purposes of raising of resources for its business form international markets. This aspect also supports our view that credit rating certificate is a commercial information because the assessee wants to inform the prospective investors through such certificate, its financial status, capability and other cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fruits of the services should remain available to the person utilizing the services in some concrete shape such as technical knowledge, experience, skill, etc." 11. On the basis of above, it was contended by the learned Counsel for the assessee that the assessee was not engaged in the profession of credit rating activities, therefore no technical experience, expertise, know-how was made available to assessee for which could be used by assessee in future without having recourse to the performer of services in future. We find no force in this contention of the assessee as Tribunal, in that matter, was concerned, with the Article 13(4)( c ) of treaty between India UK in different context. The said article reads as under : "Make available technical knowledge, experience, skill, know-how or process or consist of the development and transfer of a technical plan or technical design." 12. From the bare perusal of above it is clear that this is worded in an entirely different manner as compared to Article 12(3) of Indo Australian Treaty, therefore, is not relevant for the issue on hand. Secondly, if phrase making available is treated as similar to phrase the supply of thereb ..... X X X X Extracts X X X X X X X X Extracts X X X X
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