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TMI Blog2011 (11) TMI 507X X X X Extracts X X X X X X X X Extracts X X X X ..... on was a reimbursement of expenses and was not in the nature of FTS as contended by the revenue. The law is well settled that in respect of reimbursement of expenses there is no obligation to deduct tax at source. Since the remittances by the assessee are not chargeable to tax in the hands of the Non- resident. Consequently the assessment of the sum in question in the hands of the assessee as agent of non-resident is held to be not correct - in favor of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... y LDV on the assessee gives following description: "Research Project cost as agreed by Sr.Project Manager Mr. Saravjit Singh and Tony Grove of LDV" The assessee made remittance of 14,939 Pound Sterling to LDV. No tax was deducted at source as according to the certificate of the Chartered Accountant and the undertaking of the Managing Director of the assessee the remittance in question was on account of the assessee's share of market research cost and the same being in the nature of reimbursement of expenses does not constitute fees for technical services within the meaning of Explanation - 2 to Section 9(1)(vii) of the Act and is also not "Fees for Technical Services" (FTS) under Article 13 of the DTAA between India and UK (hereinafter referred to as DTAA). It was also further submitted that LDV did not have a Permanent Establishment in India within the meaning of Article 5 of the DTAA between India and UK. Since remittances are not taxable under the Act in the hands of LDV there was no question of deduction of tax at sources. 4. The AO was however of the view that presence of technically trained personnel was necessary and since LDV personnel were technically trained they can o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to apply the technology. The fact that the provision of the service may require technical input by the person providing the services does not per se mean that technical knowledge, skills, etc., are made available to the person purchasing the service. Similarly, the use of a product which embodies technology shall not per se considered to make the technology available." In support of the validity of this interpretation of "made available" being applicable in relation to the D.T.A.A. between India and U.K., the Assessee invited attention to the decision of the Income Tax Appellate Tribunal C-Bench, Mumbai in the case of Raymond Ltd. v. Dy. CIT, [2003] 86 ITD 791 (Mum.) wherein it was held as follows: "92. We hold that word "which" occurring in the article after the word "services" and before the words "make available" not only describes or defines more clearly the antecedent noun ("services") but also gives additional in formation about the same in the sense that it requires that the services should result in making available to the user technical knowledge, experience, skill, etc. Thus, the normal, plain and grammatical meaning of the language employed, in out understanding, is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... phasized that the services for which cost was shared by the Assessee with the aforesaid U.K. company constituted commercial services by way of market research and did not partake of the character of technical services within the meaning, of the term as mentioned in the D.T.A.A. between India and U.K. 4.1 The CIT(A) however made a reference to a note dated 23/7/1996 by Executive Vice President of the assessee one Mr. J.P.Banerjee. In the said note there was a reference to the fact that LDV was having core competence in Body Building and the assessee could tie up with them. The note further describe that a joint market survey could be done with LDV to assess the acceptability and possible market for LDV products to take advantage of LDV's core competence in body building and also learn from LDV about development and manufacturing of Niche Products. The note also discusses about developments of marketing plan of some of its existing products. There was also reference to business plan of using some of LDV's Convoy Van side panels on existing products of the assessee after proper engineering design input, change in assembly and painting process, tools assembling fixtures and welding eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 7. We have considered the rival submissions. In our view the conclusion of the revenue authorities cannot be sustained. In our view the understanding between LDV and the assessee in the letter dated 22/5/96 referred to by the CIT(A) does not contradict each other. The note runs in consonance with the letter dated 22/5/96. There was only a reference to the use of some of the aspects of LDV's product in the existing product of the assessee subject to certain change. This was only a business plan. The content of the note refers to market research and market research on acceptability of possible market for LDV products. Thus what was done was only market research. In fact the research report was discussed in LDV's office at UK on 24/10/96 and it was found that there was availability of Niche market for high Mini Buses and Vans in India. We are of the view that this was the whole purpose of the agreement in the form of a letter dated 22/5/96 between LDV and the assessee. We fail to see how the CIT(A) based on the note referred to in his order can conclude that LDV provided technical assistance in improving the quality of Assessee's mini bus and move fully engineered minibus. In our v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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