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TMI Blog2016 (1) TMI 792X X X X Extracts X X X X X X X X Extracts X X X X ..... ment has been done with the main purpose to avoid tax. Therefore, the objection of the Revenue on this count fails. As regards services being royalty and covered under Article 13(3), it must be said that the nature of services related to identification of products and competitive pricing cannot qualify as royalties under the provisions of Article 13 under India-UK Tax Treaty because it is not related with the use of, or the right to use any copyright, patent, trademark, design or modal, plan, secret formula or process etc. The Supply Management Services fees received by the applicant is not in the nature of FTS or royalties under the India-UK Tax Treaty. In view of the fact that the applicant has no PE in India, the fees received are not taxable in India. CTIL is not required to withhold tax under section 195 of the Indian Income-tax Act. - A.A.R. No. 1152 of 2011 - - - Dated:- 12-1-2016 - Justice Mr V.S. Sirpurkar (Chairman), Mr. A.K. Tewary, Member (Revenue) and Mr. R.S. Shukla, Member(Law) For The Applicant : Mr. Rajan R Vora, CA, Mr. Ronak Sethi, CA, Mr. Arvind M Gaggar For The Department : Ms Sukhvinder Khanna,CITDR(AAR),ND, Mr. S.S Negi, JCIT-DR (AAR) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.1 CTT, UK will lead and maintain global Cummins Direct Supply agreement with suppliers and make sure suppliers will follow the agreement. 4.2 CIT, UK is responsible for finalization of supply annual price to Cummins Turbo Technologies worldwide including CTT, India from UK and US supply base and communicating to CTT, India. 4.3 Product pricing will be applicable for whether the Products are supplied for original equipment or aftermarket production and sales. 4.4 CTI, UK will be responsible for getting supplier agreement revised on the basis of agreed annual cost reduction by the supplier. 4.5 CTT, India will work closely with CTT, UK to ensure market competitive pricing from suppliers. If alternative suppliers for the product(s) which offer more competitive pricing, CTT, UK will work with suppliers to match or counter the competing offer for the applicable products. If Suppliers is unable to meet the competitive threat, CTT, India shall have the right to terminate, in whole or in part, at the earlier of the end of the 60 day period or an acknowledgement by Supplier that it cannot match or counter the competing offer. A partial termination under this S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce; and (b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial or scientific equipment, other than income derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic. 6. The applicant has explained that under the agreement it is responsible for the following: Finalization of supplier prices from UK and US suppliers and ensuring market- competitive pricing from suppliers; Ensuring that the approved suppliers have the necessary manufacturing capacities and infrastructure to provide for the raw material requirements; Assisting in ensuring on-time delivery of components by the suppliers to Cummins India as well as resolution of delivery performance issues with suppliers, if any; Ensuring that suppliers maintain strict compliance with the standards, procedures and processes and support in obtaining response from supplier to any quality control violation issue; and Performance review of the supplier will be held by Cummins UK at least annually wherein Cummins UK will perform the regular product and process audits to check that the supplier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the I.T. Act, the FTS means any consideration (including lump sum consideration) for rendering managerial, technical or consultancy services. The phrase Managerial Services is not expressly included in the DTAAs with the Canada, Portugal, UK USA only. Similarly, the concept of make available has been included in DTAA with country like Australia, Canada, Cyprus, Malta, Netherlands, Singapore, UK US. According to the Revenue these provisions shows that the applicant has with an intention to take benefits of provisions of DTAA between India and UK entered into a contract with Indian Company with an intention to avoid tax. The Revenue contends that the provision of limitations of benefits as per Article 28C of the protocol in respect of DTAA with UK is squarely applicable in the applicant s case. Article 28 C of the protocol provides as under: Benefits of this Convention shall not be available to a resident of a Contracting State, or with respect to any transaction undertaken by such a resident, if the main purpose or one of the main purposes of the creation or existence of such a resident or of the transaction undertaken by him, was to obtain benefits under this Convention. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e any technical knowledge, experience, skill know-how or processes to the Indian company. The agreement shows that the CTIL is working with the applicant only to ensure market competitive pricing from the suppliers. The applicant maintains contract supply agreement with suppliers after identifying the products availability, capacity to produce and competitive pricing. The applicant is not imparting its technical knowledge and expertise to the Indian company based on which the Indian company will acquire such skills and will be able to make use of it in future. Therefore, the make available clause under India-UK Treaty is not satisfied. The meaning of make available was clarified in the case of De Beers India Limited by Hon ble Karnataka High Court as under:- What is the meaning of make available . The technical or consultancy service rendered should be of such a nature that it makes available to the recipient technical knowledge, knowhow and the like. The service should be aimed at and result in transmitting technical knowledge, etc., so that the payer of the service could derive an enduring benefit and utilize the knowledge or know-how on his own in future without the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting Services India (P) Ltd. as under: By making available the technical skills or know-how, the recipient of service will get equipped with that knowledge or expertise and be able to make use of it in future, independent of the service provider. In other words, to fit into the terminology make available , the technical knowledge, skills etc must remain with the person receiving the services even after the particular contract comes to an end. The services offered may be the product of intense technological effort and lot of technical knowledge and experience of the service provider would have gone into it. But, that is not enough to fall within the description of services which make available the technical knowledge, etc. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in future without depending on the provider. Taking some examples, the training given to a commercial aircraft pilot or training the staff in particular skills such as software development would fall within the ambit of the said expression in clause (c). Supposing, a prescription and advice is g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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