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TMI Blog2013 (10) TMI 751X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant qualify as 'fees for technical services' under article 12 paragraph (4) sub-clause (c) of the Double Taxation Avoidance Agreement entered between India and Singapore and as such, these payments are liable to taxation in India. 4. That, on the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has grossly erred in concluding that testing services provided by the appellant consist of development and transfer of a technical plan to its Indian customers. 5. That on the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has grossly erred in concluding that testing services provided by the appellant qualify as 'fees for technical services' under Indo-Singapore Double Taxation Avoidance Agreement on the basis of judgment of the jurisdictional Tribunal in the case of SNC-Lavalin International Inc. v. Deputy DIT [2008] 26 SOT 155 (Delhi) without appreciating that the aforesaid judicial precedent was delivered in the context of India-Canada Double Taxation Avoidance Agreement whose clause of 'fees for technical services' is different from that of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the food which can contaminate it and make food hazardous for use. For testing purposes, Effem India P. Ltd. sent samples to the laboratory of the appellant located in Singapore. After testing, the test reports are sent to Effem India P. Ltd. located in India and the assessee received service fee for the same. The assessee claims that these receipts were its business income. The assessee is not having any person/permanent establishment in India. This income is not taxable in India. While pleading on behalf of the assessee, the learned authorised representative submitted that the payments received by the assessee are not taxable as fees for technical services within the meaning of article 12(4) of the Indo-Singapore tax treaty. The learned authorised representative also submitted that the prerequisite of applying article 12(4)(b)(c) of tax treaty is that the services should be provided in a manner to make available technical knowledge to the recipient of services which enable the person acquiring the services to apply the technology contained therein. The learned authorised representative also submitted that in the facts of the assessee's case, the Effem India receives test re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd to any individual for independent personal services mentioned in article 15, in consideration for services of a managerial, technical or consultancy nature. (4). For purposes of this article, "fees for included services" means payments of any kind to any person in consideration for the rendering of any technical or con sultancy services (including through the provision of ser-vices of technical or other personnel) if such services : (a) . . . (b) make available technical knowledge, experience, skill, know-how, or pro-cesses, or consist of the development and transfer of a technical plan or technical design The term "fees for technical services" as used in this article means payments of any kind to any person in consideration for services of a managerial, technical or consultancy nature (including the provision of such services through technical or other personnel) if such services : (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received ; or (b) make available technical knowledge, experience, skill, know-how or processes, which enables the person acquiri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to appellant for detection of such toxins prior to the utilisation of these items in the manufacturing process. The expression "make available" has been examined by various courts. Some the decisions are as below: The Authority for Advance Rulings in the case of Anapharm Inc. In re [2008] 305 ITR 394 (AAR) has held as under (headnote) : "The applicant, a company incorporated in Canada, was a contract research organisation providing clinical and bio-analytical services to assist pharmaceutical companies around the world in the development of new drugs or generic copies of drugs already being marketed. It evaluated on behalf of its clients the bio-equivalence and/or comparative bio-availability of the new generic drug vis-a-vis the reference drug which was already available in the market by devising various methods/protocols in conformity with international regulations. The reports produced by the applicant were acceptable to the regulatory authorities. Neither the methods/protocols developed, which were product specific, nor the specimens, were given to the clients. Only the final reports/conclusions of the evaluation were given to the clients. The client seeking approval of regul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with Sandoz/Ranbaxy which would entitle them to know the details of the analytical methods and the procedures employed by the applicant. Handing over the tested samples and test compound could not be equated with making technology, know-how, etc., available to the clients. Therefore, clause (b) of article 12(4) did not come into play and the services could not be considered to be 'fees for included services'. (iii) That the fees could not be considered 'royalty income' under article 12. Information concerning scientific or commercial experience of the applicant or relating to the method, procedure or protocol used in conducting bio-equivalence tests was not imparted to the pharmaceutical companies and the consideration was not paid for that purpose and the fees received by the applicant had to be treated as 'business income' and not 'royalty income'. Since the applicant was in the business of providing bio-analytical services to pharmaceutical companies the consideration received from them would be business income. In view of article 7 read with article 5 of the Double Taxation Avoidance Agreement such income could be taxed in India only if the appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices'. At pages 46 and 47 of the same book by Wren and Martin, it is stated as under : 'Note.-The relative pronouns 'who' and 'which' can be used- (i) to restrict, limit, or define more clearly the antecedent ; . . . (ii) to give some additional information about the antecedent ;' 92. We hold that the 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 information 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 our understanding, is that a mere rendering of services is not roped in unless the person utilising the services is able to make use of the 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 utilising the services even a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticular purpose. A modified computer software programme is supplied by the US company to the Indian company. It is therefore held that there is a transfer of a technical plan (i.e., computer software) which the US company has developed and made available to the Indian company. The fees are chargeable. These examples affirm the position taken by the assessee-company before us as to the interpretation of the words "make available" 95. Article 12.4(b) of the Double Taxation Avoidance Agreement with Singapore was relied on by both sides-by Mr. Dastur to show that the words used therein, viz. 'if such services make available technical knowledge, experience, skill, know-how or processes, which enables the person acquiring the services to apply the technology contained therein . . .' merely make it explicit what is meant by 'make available' while Mr. Kapila contended that these words being absent in the Double Taxation Avoidance Agreement with the UK, it indicates that the assessee-company need not be in a position to apply the technology for its own use in future without recourse to the person rendering the services. On a careful consideration of the matter, we are of op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been satisfied inasmuch as no technical knowledge, experience, skill, know-how, processes, have been made available by the assessee to the insurance companies operating in India. It also does not consist of the development and transfer of any technical plan or technical design. The Tribunal examined the evidence available on record in order to return a finding on the issue as to whether the payments received by the assessee from the insurance companies operating in India would fall within the expression 'fees for technical services' as appearing in article 13(4)(c) of the DTAA read with section 9(1)(vii) of the said Act. While doing so the Tribunal, inter alia, found that the assessee-company was an international reinsurance intermediary (broker) and was a tax resident of the United Kingdom. Further, that it was a recognized broker by the financial services authority of the United Kingdom. It was also an admitted position that the assessee did not maintain any office in India and that it had a referral relationship with J. B. Boda reinsurance (Broker) Pvt. Ltd. of Mumbai and that J. B. Boda was duly licensed by the Insurance Regulatory and Development Authority to tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm(s) of reinsurance broker(s) like the assessee for competitive proposals from the international reinsurer. Then, the international reinsurance brokers like the assessee would contact other primary brokers and various syndicates in the Lloyds market for competitive proposals. Based on the various offers or proposals given by the international reinsurance brokers, like the assessee, to J. B. Boda, the latter would present various options to the originating insurer in India, which would take a final decision in the matter. Based on the decision of the originating insurer in India, the policy terms would then be agreed upon and the risk would be placed with the international reinsurer. It was also pointed out that as per the normal industry practice, the reinsurance premium net of brokerage of 10 per cent. as per the policy contract is remitted to the assessee, i.e., reinsurance brokers, for onward transmission to international reinsurers. The intermediation fee which is another word for brokerage is paid separately by the originating insurance in India to J.B. Boda, the international reinsurance brokers like the assessee and other intermediaries, based on a mutually agreed ratio wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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