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TMI Blog2014 (7) TMI 765X X X X Extracts X X X X X X X X Extracts X X X X ..... poration incorporated in France developed the system as per the specific need of the Air lines and agents. The said system called BSP link is the one whereby the manual operations such as issue of debit notes/credit notes, issue of refund, billing statement and all the information relating to tickets are carried out electronically for agents as well as Air lines who participate in the BSP Link. These BSP Link services were provided among others to the agents and Air lines operating in India for which invoices were initially raised by ADP-GSI on Geneva Office of IATA, Canada who in turn raised the invoices on IATA, India. The payment against the said invoices thus was liable to be made by the assessee company to Geneva office of IATA, Canada. An application u/s 195(2) therefore was filed by the assessee before the A.O. seeking permission to remit the said amounts to Geneva office of IATA, Canada without deduction of tax at source on the ground that the Geneva office of IATA, Canada was not rendering any service to IATA, India and it was only collecting the funds from various IATA offices including IATA, India for making payments to ADP-GSI. It was also claimed that the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chnical design so as to constitute the said services as "fees for included services". It was contended that the services can be considered as "made available" only when the person acquiring the services will enable to apply the technology contained therein. It was contended that the BSP link services provided by ADP-GSI did not make available to Air lines/agents any technical knowledge, skill, experience, know-how or processes which would enable the Air lines/agents to apply technology contained therein and therefore the amount paid for the said services could not constitute "fees for technical services" as envisaged in Article 13 of the DTAA between India and France read with clause 7 of the Protocol thereto. 4. After considering the submissions made on behalf of the assessee as well as material available on record, the ld. CIT(A) rejected the contention of the assessee that in absence of two distinct and separate entities involved in the impugned transactions, the provisions of section 195 were not applicable. In this regard, he relied on the CBDT Circular No. 740 dtd. 17-4-1996 wherein it was clarified that the branch of a foreign company/concern in India is separate entity for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. It is seen that ADP-GSI has provided BSP link services to carry out manual operations such as issue of debit note/credit notes, issue of refund, billing statement relating to tickets and information relating to tickets carried out electronically by BSP link system for agents as well as for airlines who have participated in the BSP Link. But this BSP link services does not make available the technology to the airlines and agents to enable them to make use of their own. It may be seen that these beneficiaries could not have experience technical know-how and are not able to use in future as their own. As per memorandum the services As per memorandum, the services can be considered as "made available "only when the person acquiring the services enable to apply the technology contained therein. Therefore the payment made to ADP-GSI does not amount to be fees for included services. Within the meaning of Article 12(4)(b) of India-US Tax Treaty read with Article 13 of Protocol of India-France Tax Treaty. The case laws cited by assessee also supports his view." 5. For the reasons given above, the ld. CIT(A) held that the amount in question paid by the assessee company to Geneva office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Article 12(3)(a) of DTAA between India and USA. 7. The ld. Counsel for the assessee, on the other hand, invited our attention to para 3.0 of the impugned order of the ld. CIT(A) and pointed out that a specific reference was made by the ld. CIT(A) to the agreement entered into between IATA, Canada and ADP-GSI, France for developing and providing DSP link services. He contended that after making a reference to the said agreement, a finding was also recorded by the ld. CIT(A) in para 3.0 of his impugned order that the services rendered by the ADP-GSI, France to the Air lines/agents were in the nature of fees for technical services. He contended that it cannot be therefore be said that the issue relating to the payment in question being not in the nature of "fees for included services" was decided by the ld. CIT(A) without referring to the said agreement or to the relevant terms and conditions thereof as sought to be contended by the ld. D.R. 8. The ld. Counsel for the assessee submitted that after treating the services rendered by ADP-GSI, France to the Air lines/agents as in the nature of technical services in para 3.0 of his impugned order, the ld. CIT(A) further proceeded to exam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, this restrictive meaning is also applicable under the DTAA between India and France and it is therefore necessary to ascertain whether technology is made available by ADP-GSI, France to the agents and Air lines while providing services of DSP link services. He also referred to Article 12(4) of the Indo Portuguese Treaty entered into on 11-9-1998 which has further restricted the scope of "fees for technical services" to include only such services which enable the person to apply the technology on their part. Relying on the decision of Hon'ble Karnataka High Court in the case of CIT v. De Beers India Minerals (P.) Ltd. 346 ITR 467 (Kar) as well as the decision of Kolkata Bench of ITAT in the case of DCIT v. ITC Ltd. [2002] 82 ITD 239 (Kol.), he contended that the concept of "make available" the technology has been explained in greater detail and going by the said explanation, the services rendered by ADP-GSI, France in the present case did not make the technology available to the agents/Air lines in India so as to say that the payment made for such services was in the nature of fees for included services chargeable to tax in India in the hands of the French service providers. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 (interest) and 13 (Royalties, fees for technical services and payments for the use of equipment), if under any Convention, Agreement or protocol signed after 1-9-1989, between India and a third state which is a member of the OECD, India limits its taxation at source on dividends, interest, royalties, fees for technical services or payments for the use of equipment to a rate lower or a scope more restricted than the rate of scope provided for in this Convention on the said items of income, the same rate or scope as provided for in that Convention, Agreement or Protocol on the said items income shall also apply under this Convention, with effect from the date on which the present Convention or the relevant Indian Convention, Agreement or Protocol enters into force, whichever enters into force later." 13. As provided in clause 7 of the Protocol of DTAA between India and France, if under any convention, agreement or Protocol signed after 1-9-1989 between India and a third state which is a member of the OECD, India limits its taxation at source inter alia on fees for technical services or payments for the use of equipment to a rate lower or a scope more restricted than the rate or sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P-GSI hereby accepts the appointment to provide the Services in accordance with the terms and conditions of this Agreement. 3.3 IATA agrees that for so long as the exclusive appointment has not been withdrawn pursuant to Clause 27.2, not to by itself or through third parties, directly or indirectly, fulfill the Services. 8. DEVELOPMENT Development Services and Testing 0.1 ADP-GSI will further develop the EMP and the Parties will each use their best endeavors to jointly agree the same on or before the end of October 2000. 8.2 ADP-GSI will perform the Development Services in accordance with the Base Specification and/or the Specification in accordance with the dates set out in the FMF. ADP-GSI agrees that it will deliver a first release of EARS to IATA for Acceptance Test(s) by October 2000. ADP-GSI agrees that it will develop a second phase of Software concurrently with the first phase. 8.3 ADP-GSI will perform the Acceptance Test(s) for the Development Services a accordance with the Acceptance Test Requirements and on the dates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ize the same for their own use. The decision of Hon'ble Karnataka High Court in the case of De Beers India Minerals (P.) Ltd. (supra) and that of Kolkata Bench of ITAT in the case of DCIT v. ITC Ltd. (supra) explaining the concept of "technology being made available" fully supports this view. On the other hand, the decisions of Authority for Advance Rulings in the case of Cargo Community Network PTE Ltd., IN RE (supra) and ABC, IN RE (supra) relied upon by the ld. D.R. in support of the Revenue's case involved different facts as rightly pointed out by the ld. Counsel for the assessee and the same cited by the ld. D.R. in support of the new plea of payment in question being royalty, in any case, cannot be relied upon as it was not even the case of the A.O. and the ground raised by the Revenue in the present appeal also claims the payment in question to be in the nature of fees for technical services and not royalty. We therefore find no infirmity in the impugned order of the ld. CIT(A) holding that the payment in question made for BSP link services rendered by ADP-GSI France is not in the nature of fees for included services chargeable to tax in India and upholding the same, ..... 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