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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 ..... e 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 fruits of the services should remain available to the person utilising the services in some concrete shape such as technical knowledge, experience, skills, etc. In the present case, assessee provided testing services and issued test reports. These reports cannot be said to make available any technical knowledge, experience, skill, know-how or processes which enabled the Indian company to acquire the services to apply the technology contained therein. Therefore, these receipts cannot partake the fees for technical services as defined in the Double Taxation Avoidance Agreement with Singapore. The samples were sent by Indian company, M/s. Effem India for testing in Singapore. These samples were comprising of broken rice, maize, pet food, wheat gluten sodium caseinate, poultry meal, soya protein isolate, copra press cake, etc. These samples were tested to detect the presence of mycotoxin - No substantial question of law arises for our consideration, particularly, because Revenue was unable to point out any perversity in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Income-tax (Appeals) erred in upholding taxability of payments received by the appellant for services rendered outside India as per the Supreme Court's judgment in the case of Ishikawajima-harima Heavy Industries Ltd. v. DIT [2007] 288 ITR 408 (SC). 7. That, on facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in upholding levy of interest under sections 234A, 234B and 234C of the Income- tax Act, 1961. The only issue involved in these grounds is regarding taxability of ₹ 28,76,271 which the assessee received for services provided to the Indian company. The Revenue authorities treated this amount as fees for technical services under article 12(4) of the Double Taxation Avoidance Agreement (hereinafter referred to as the DTAA) entered between India and Singapore. The Revenue authorities held that testing services provided by assessee consisted of development and transfer of a technical plan to its Indian customers. The brief facts of the case are that the return of income was filed declaring income at nil on October 29, 2005. The same was processed under section 143(1). The assessment under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it can produce test report independent of the services of the appellant. The learned authorised representative also submitted that legal position has been upheld in number of cases and he relied on the following decisions : (i) Raymond Ltd. v. Deputy CIT [2003] 86 ITD 791 (Mum) ; (ii) Anapharm Inc. In re [2008] 305 ITR 394 (AAR) ; (iii) ITO (International Taxation) v. De Beers India Minerals P. Ltd. [2008] 297 ITR (AT) 176 (Bang) ; (iv) Diamond Services International P. Ltd. v. Union of India [2008] 304 ITR 201 (Bom) ; (v) NQA Quality Systems Registrar Ltd. v. Deputy CIT [2005] 92 TTJ (Delhi) 946 ; (vi) Mahindra and Mahindra Ltd. v. Deputy CIT [2009] 313 ITR (AT) 263 (Mum); (vii) Asst. CIT v. Paradigm Geophysical Pty. Ltd. [2010] 1 ITR (Trib) 178 (Delhi); and (ix) DIT v. Guy Carpenter and Co. Ltd. [2012] 346 ITR 504 (Delhi). The learned authorised representative also submitted that the definition of the royalty under the Indo-Singapore tax treaty is at variance from the definition of fees for technical services as per the Indian Income-tax Act, 1961 and definition of fee for technical services under the Indo-France tax treaty and also definition of roya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, know-how or processes, which enables the person acquiring the services to apply the technology contained therein ; or (c) consist of the development and transfer of a technical plan or technical design, but excludes any service that does not enable the person acquiring the service to apply the technology contained therein. On the other hand, the learned Departmental representative relied on the orders of the authorities below : We have heard both sides on the issue. We have also considered the case laws relied upon by both the sides. The term fees for technical services is defined under article 12(4) of the Double Taxation Avoidance Agreement between the India and Singapore as under (page 14 of 209 ITR (St.)): (4) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s/conclusions of the evaluation were given to the clients. The client seeking approval of regulatory authorities for marketing of new generic drug would enclose the test report provided by the applicant along with its application. The applicant entered into agreements with Indian pharmaceutical companies, viz., Sandoz and Ranbaxy, for rendering such services. The clients paid a fee to the applicant for these services. On these facts, the applicant sought ruling of the Authority on the question whether the fee was taxable in India. The Authority ruled : (i) There is some difference between section 9 of the Income-tax Act, 1961 and article 12 of the Agreement for the Avoidance of the Double Taxation between India and Canada in the definition of 'fee for technical/included services', inasmuch as the requirement of paragraph 4(b) of article 12 of the Double Taxation Avoidance Agreement was absent in section 9. Article 12 required that technical knowledge, experience, etc., should be made available to the recipient, but it did not define that expression. Notwithstanding this, mere provision of technical services was not enough to attract article 12(4)(b). It additionally requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cle 5 of the Double Taxation Avoidance Agreement such income could be taxed in India only if the applicant had a permanent establishment in India. Since the applicant denied that it had a permanent establishment in India, and there was nothing on record to indicate the contrary, the applicant was not taxable under the Act in India. In the case of Raymond Ltd. v. Deputy CIT [2003] 86 ITD 791 (Mum), the Income-tax Appellate Tribunal, Mumbai, has analysed the word make available and has decided the issue in its order at paragraphs 91 to 95, which are reproduced as under : 91. Now we have to see if the meaning ascribed to the words 'make available' by Mr. Dastur is acceptable or reasonable. Whereas section 9(1)(vii) stops with the 'rendering' of technical services, the Double Taxation Avoidance Agreement goes further and qualifies such rendering of services with words to the effect that the services should also make available technical knowledge, experience, skills, etc. to the person utilising the services. These words are 'which make available'. The meaning ascribed by Mr. Kapila for the Department is that these words merely mean 'to allow somebo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... future. The technical knowledge, experience, skill etc. must remain with the person utilising the services even after the rendering of the services has come to an end. A transmission of the technical knowledge, experience, skills, etc. from the person rendering the services to the person utilising the same is contemplated by the article. Some sort of durability or permanency of the result of the 'rendering of services' is envisaged which will remain at the disposal of the person utilising the services. The fruits of the services should remain available to the person utilising the services in some concrete shape such as technical knowledge, experience, skills, etc. 93. In the present case, as Mr. Dastur pertinently pointed out, after the services of the managers (Merrill Lynch and other co-managers) came to an end, the assessee-company is left with no technical knowledge, experience, skill, etc., and still continues to manufacture cement, suitings etc. as in the past. 94. The memorandum of understanding appended to the Double Taxation Avoidance Agreement with the USA and Singapore Double Taxation Avoidance Agreement can be looked into as aids to the construction of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in future without recourse to the person rendering the services. On a careful consideration of the matter, we are of opinion that the addition of these words in the Singapore Double Taxation Avoidance Agreement merely make it explicit what is embedded in the words 'make available' appearing in the Double Taxation Avoidance Agreement with UK and U.S.A. The memorandum of understanding under the US Double Taxation Avoidance Agreement and the examples given thereunder, to which we have already referred, make it clear. The meaning of those words were expressly incorporated in the Singapore agreement by adding the necessary words. What would be the use of coining the words make available' if it is not intended, as contended by Mr. Kapila, that the person utilising the services should be in a position to apply the technology for his own use in his business in future without recourse to the person rendering the services ? Would it not be a contradiction in terms to say that though the technical knowledge, etc. are 'made available', the person to whom they are made available cannot apply the same for his benefit ? The treaties, in our opinion, could not have intended suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oker) Pvt. Ltd. of Mumbai and that J. B. Boda was duly licensed by the Insurance Regulatory and Development Authority to transact reinsurance business in India. The Tribunal also observed as under Guy Carpenter and Co. Ltd. (No. 1) v. Additional Director of Income-tax (International Taxation) [2012] 18 ITR (Trib) 333 (Delhi) (page 354) : '27. In the illustrative transaction, New India Insurance Co. Ltd. in India has entered into an agreement to reinsure on an excess loss basis the catastrophe risk arising from its primary insurance cover in conjunction with J. B. Boda and Alsford Page and Gems Ltd. (the reinsurance brokers). The terms of the agreement specifies that the assessee in conjunction with J. B. Boda are recognized as intermediary, through whom all communications relating to this agreement shall pass. The terms of the agreement further provides that the assessee will provide all the details of the agreed endorsements to the reinsurers by e-mail or facsimile and shall submit the slip policy to XIS (Lloyd's processing market) for signing. The assessee will act as a claim administrator and will submit claims advices to relevant market systems. For the services r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to J.B. Boda, the international reinsurance brokers like the assessee and other intermediaries, based on a mutually agreed ratio which accounts for their relative contribution in the reinsurance process. Based on this manner of transacting, the Tribunal came to a conclusion that the payment received by the assessee could not be regarded as 'fees for technical services'. Furthermore, the Tribunal also held that such receipts would not amount to fees for technical services as the 'make available' clause contained in article 13(4)(c) had not been satisfied in the facts and circumstances of the present case. In our view, the Tribunal has arrived at these conclusions purely on assessing the factual matrix of the case at hand. The findings are in the nature of factual findings and, therefore, according to us, no substantial question of law arises for our consideration, particularly, because the learned counsel for the Revenue was unable to point out any perversity in the recording of such findings. As such no substantial question of law arises for our consideration. The appeal is dismissed. There shall be no order as to costs. Considering the facts of the assessee&# ..... X X X X Extracts X X X X X X X X Extracts X X X X
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