9911796707
TMI Blog2011 (11) TMI 507X X X X Extracts X X X X X X X X Extracts X X X X ..... ucts in India. LDV is a resident of UK and is also in the business of manufacture of automobiles in UK. The assessee and LDV had proposals for joint venture in the area of automobile manufacture. As a precursor, LDV wanted to do market research to find out the potential market for different types of vehicles and consumer preferences. LDV by its letter dated 22/5/96 proposed to the assesee for the conduct of market research and sharing of costs between the assessee and LDV in respect of the proposed market research. In terms of the said letter LDV proposed engaging two marketing research agencies namely Research International, Bombay and MARG Mumbai. The cost of conducting market research was proposed as follows:- Van Research Project, India : Summer 1996 Vehicle Cost Depreciation allowance : - Convoy minibus - Convoy Luton or Hi-loader LDV cost - Pilot Van Shipping cost: - Freight (UK to Bombay, Bombay to UK) 10,250 - Insurance 300 Land Transport: - UK 500 - India Mahindra & Mahindra Preparation/refurbishment : - UK 750 - India 300 Clinic driving: - Fuel - Insurance Mahindra & Mahindra Total Vehicle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between India and UK will prevail over the definition of FTS as given in Explanation -2 to Section 9(1)(vii) of the Act. The assessee pointed out that as per Article 13(4) of the DTAA defines the terms 'Fees for Technical Services' to mean "payment of any kind to any person in consideration for the rendering of any technical or consultancy services (including the provision of service of technical or other personnel) which: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3(a) of this Article is received; or (b) are ancillary and subsidiary to the enjoyment of the property for which a payment described in paragraph 3(b) of this Article is received; or (c) make available technical knowledge, experience, skill know-how or processes, or consist of the development and transfer of a technical plan or technical design." The Assessee pointed out that in the case of market research there was no question of any services being rendered in the course of conducting market research as being ancillary and subsidiary either to the application or enjoyment of any right, property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technical knowledge etc. by himself in his business or for his own benefit and without recourse to the performer of the services in future. The technical knowledge, experience, skill etc. must remain with the person utilizing the services even after the rendering of the services has come to an end. A transmission of the technical knowledge, experience, skill, etc. from the person rendering the services to the person utilizing the same is contemplated by the article. Some sort of durability of permanency of the result of the "rendering of services" is envisaged which will remain at the disposal of the person utilizing the services. The fruits of the services should remain available to the person utilizing the services in some concrete shape such as technical knowledge, experience, skills etc. "94. The memorandum of Understanding appended to the DTA with USA and the Singapore DTA can be looked into as aids to the construction of the UK DTA. They deal with the same subject (fees for technical services, referred to in the US agreement as "fees for included services"). As noted earlier, it cannot be said that different meanings should be assigned to the US agreements merely because of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erring to the above note held as follows: "It is clear from the above note that M&M has got a different understanding with LDV, not confined only to doing some market survey but to provide the technical assistance in improving the quality of their Minibus and to move towards fully engineered Minibus. As noted by the Executive Vice President in his note, the strategic fit between M&M and LDV is planned to "learn from LDV about development and Manufacturing of niche products". The Senior Project Manager Mr. Sarvajit Singh has admitted the utility of the Market Research Report towards this end, as is evident from the following extract of his letter dated 4th November, 1996. "Research findings based on the above clinic were presented to us at LDV Limited HO at Birmingham, UK, on 24th October, 1996. Complete marketing research report was also given to us at this instance and has been found to be very useful, as it has revealed the availability of a niche market for high value mm-buses and vans which we can exploit". 5.4 Thus, from seeing things in totality in the aforesaid context, the position clearly emerges that the impugned payment of GBP 14,939 by M&M to LDV is part of-fees for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue. The law is well settled that in respect of reimbursement of expenses there is no obligation to deduct tax at source as held in the following decisions. 1. CIT v. Siemens Aktiongesellschaft, [2009] 310 ITR 320/177 Taxman 81 (Bom.) 2. ABB Ltd., Inre [2010] 322 ITR 564/189 Taxman 422 (AAR - New Delhi) 3. ITO (Intl. Taxation) v. Prasad Production Ltd. [2010] 125 ITD 263 (Chennai) (SB) We also notice that while holding that the payment in question was fees for technical services, the CIT(A) has not answered the arguments raised on behalf of the assessee that even assuming that the payment in question was FTS nothing was "made available to the assessee" as understood in several decided cases including the decision of the Mumbai Bench of ITAT in the case of Raymond Ltd. (supra). We are of the view that this aspect will not be required to be considered because of our conclusion that remittance in question is reimbursement expenses incurred by LDV on behalf of the assessee. Even otherwise we are of the view that the sum in question cannot be treated as FTS because nothing was made available to the assessee. For the reasons stated above we hold ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
