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TMI Blog2016 (11) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-12 also as the issue involved therein is identical except with variance in figures. 3. The brief facts of this issue is that the assessee company is a tax resident of Finland and is engaged inter alia in the business of providing innovative and environmentally sound solutions for a wide variety of customers in metals and mineral processing industries. The assessee filed a NIL return for the Asst Year 2010-11 on 28.3.2012. During the year under consideration, the assessee earned revenue from management support and other services. These services are provided to its group company Outotec India Pvt Ltd and the revenue earned was Rs. 82,22,381/-. The ld AO proposed to bring this amount to tax as 'Fee for Technical Services (FTS)' . The assessee contended before the ld AO that the services provided by it are managerial services and these services fall outside the definition of FTS under India -Finland DTAA. The assessee also contended that no services have been made available so as to tax the amount as FTS. 4. The ld AO did not accept the contentions of the assessee and held that these services constituted FTS and passed the draft assessment order, against which the assessee preferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oup companies, making market area reports for the group companies quarterly etc. It observed that the above nature of services clearly indicate that :- (a) These services fall under the category of consultancy services. (b) The services with regard to IT Infra set up fall under the category of technical services which was also admitted by the assessee. (c) The reports on marketing, HR services are definitely useful for the Indian group company which definitely can use on its own later which satisfy the make available clause. (d) The training services amount to provision of manpower services and the citus of manpower provision is not relevant. 4.2. Accordingly, it held that the services rendered by the assessee company to be FTS and accordingly upheld the action of the ld AO in taxing the same in the sums of Rs. 82,22,381/- and Rs. 1,66,45,061/- for the Asst Years 2010-11 and 2011-12 respectively. 5. Aggrieved, the assessee is in appeals before us on the following grounds:- "1. On the facts and in the circumstances of the case and in law, final assessment order passed in pursuance to the directions issued by the Learned Dispute Resolution Panel ('Ld DRP') is a vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de managerial services, the same has been expressly provided, such as India-Singapore DTAA, India -France DTAA etc. In the amended India -Finland DTAA which has come into force w.e.f. 1.4.2011, the word 'managerial' has been included under the definition of FTS, which itself proves that under the old DTAA , such services were not included. Secondly, the services rendered to Outotec India Pvt Ltd and other Indian parties for Asst Year 2010-11 do not 'make available' technical know-how, skills to the recipients. The meaning of word 'make available' has not been defined in India -Finland DTAA and hence the ld AR placed reliance on the Protocol to the India -USA DTAA which has a similar provision to determine the meaning of 'make available'. He argued that the ld AO contended that the meaning of 'make available' from India-US treaty cannot be drawn into India -Finland treaty by relying on the decision of Authority of Advance Rulings (AAR) in the case of Perfettie Van Melle Holding B.V. reported in (2012- 342 ITR 0200 -AAR) wherein it was held that the Protocol to Indo-US treaty cannot be imported into India - Netherland treaty to understand the meaning of 'make available'. The ld AR ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ources (P.) Ltd. v. Asstt. CIT reported in (2013) 39 taxmann.com 23 (Cochin Trib) in support of his arguments. 8. We have heard the rival submissions and perused the materials available on record. We find that the essence of the arguments of the assessee before the lower authorities and by ld AR before us are two fold:- (i) The services under the agreement are not technical or consultancy in nature and (ii) The services are not made available by the assessee The arguments of the ld DRP and ld DR before us could be briefly summarized as under:- (i) The services rendered by the assessee are technical in nature and make available technical knowledge, skill, process etc since the services are capable of being replicated by Outotec India Pvt Ltd through its own personnel (ii) The meaning of the term 'make available' cannot be drawn from the India - US protocol as treaty with one country cannot be interpreted in the light of the treaty with another country. 8.1. We find that the services rendered by the assessee squarely falls within the definition of 'Fee for Technical Services' as per the provisions of the Act, on which point there is no dispute by both the sides. The only d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces should be of technical in nature but such as to result in making the technology available to the person receiving the technical services. We also agree that merely because the provision of the service may require technical input by the person providing the service, it cannot be said that technical knowledge, skills, etc are made available to the person purchasing the service. As to what are the connotations of 'making the technology available to the recipient of technical services' , as is appropriately summed up in protocol to Indo -US DTAA , "generally speaking, technology will be considered 'made available' when the person acquiring the service is enabled to apply the technology". Reliance in this regard has been rightly placed by the ld AR on the third member decision of the co-ordinate bench of this tribunal in the case of CESC Ltd vs DCIT reported in 87 ITD 653. It has been held by various judicial forums that the principle of parallel treaty interpretation is permissible where language of the two treaties is similarly worded and one treaty clarifies meaning of the terms (or language) used . Reliance is placed on the following decisions in this regard:- (a) National Org ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Article 12(4)(b) refers to technical or consultancy services that make available to the person acquiring the services, technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plant or technical design to such person. The Memorandum explains category of services referred to Article 12(4)(b) as narrower than the category described in paragraph 4(a) because it excludes any service that does not make technology available to the person acquiring the service. It further explains that generally speaking, technology will be considered made available when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service may require technical input by the person providing the service does not per se mean that technical knowledge, skills, etc., are made available to the person purchasing the service, within the meaning of paragraph 4(b). Similarly, the use of a product which embodies technology shall not per se be considered to make the technology available. The Memorandum further explains with examples as to how Article 12(4)(b) has to be understood as follows: "Typical cat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices. Although the U.S. company is clearly performing a technical service, no technical knowledge, skill, etc., are made available to the Indian company, nor is there any development and transfer of a technical plant or design. The U.S. company is merely performing a contract manufacturing service. Example 5 Facts : An Indian firm owns inventory control software for use in its chain of retail outlets throughout India. It expands its sales operation by employing a team of travelling salesmen to travel around the countryside selling the companys wares. The company wants to modify its software to permit the salesmen to assess the companys central computers for information on what products are available in inventory and when they can be delivered. The Indian firm hires a U.S. computer programming firm to modify its software for this purpose. Are the fees which the Indian firm pays treated as fees for included services ? Analysis : The fees are for included services. The U.S. company clearly performs a technical service for the Indian company, and it transfers to the Indian company the technical plan (i.e., the computer programme) which it has developed. Example 6 Facts : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e what meaning India and Singapore / UK (as the case may be) would have contemplated in the treaty. The law is settled that a DTAA with one country can be compared with the DTAA with another country in case of ambiguity and in order to understand the true scope and meaning of the concerned DTAA. The Hon'ble Karnataka High Court in the case of A.E.G. Telefunken v. CIT [1998] 231 ITR 129 compared the DTAA with German Democratic Republic with the DTAA with Finland towards this end. 12.2.2. The Mumbai Bench of the Tribunal in the case of Raymond Ltd. Vs. DCIT 86 ITD 791 (Mum) had to deal with a case of payment of commission by an Indian company to a non resident in connection with Public Issue of Global Depository Receipts (GDR) for services rendered outside India. The question before the Tribunal was whether the commission so paid can be said to be "Fees for included services" i.e., Fees for Technical Services under Article 13(4)(c) of the Indo-UK DTAA which is the same as that of Article 12(4)(b) of the treaty between India and Singapore. After considering Article 12(4)(b) of the Indo-US DTAA (which are similar to Article 12(4) and 13(4) of the treaty between India and Singapore / ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Furgo has not made available the technical knowledge with which they rendered technical service - Though Furgo rendered technical services as defined under section 9(1)(vii) Explanation 2, it does not satisfy the requirement of technical services as contained in DTAA - Liability of tax is not attracted - The case on hand does not fall in the second part of the 'Fee for technical services' clause in DTAA dealing with development and transfer of plans and designs - Both the substantial questions of law answered in favour of the assessee and against the revenue - Appeal dismissed. 8.5. We find in the instant case , from the nature of services rendered by the assessee to the Indian group company, there is no technology or technical knowhow, skills etc that were made available by the assessee in order to enable the Indian group company to function on its own without the dependence of the assessee. It is not in dispute that the agreement entered between Outotec Oyj and Outotec India Pvt Ltd is for an indefinite period and such services are provided on recurring basis by the assessee to Outotec India Pvt Ltd. We find lot of force in the argument of the ld AR that had the technical knowho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble with the assessee- company and it can be used in execution of the engineering and contract with other clients. In the instant case before us, as already stated , what was rendered was only managerial services without any transfer of technology, knowhow, skills etc and it is a recurring service year after year. Hence the case relied upon by the ld DR is not applicable to the facts of the instant case. 8.7. Similarly the decision of Cochin Tribunal in the case of US Technology Resources (P.) Ltd. v. Asstt. CIT reported in (2013) 39 taxmann.com 23 (Cochin Trib) relied upon by ld DR is factually distinguishable in as much as in that case, the information, expertise and training provided by US Technology Resources had been absorbed by the taxpayer in its decision making process and utilized for the purpose of business and therefore it was held that the expertise and technology was made available by US entity and accordingly held as FTS within the meaning of Article 12(4)(b) of tax treaty. In the instant case before us, the services rendered are only managerial in nature and there is no transfer of any technology, knowhow, skills , processes etc so as to fall under the ambit of 'mak ..... X X X X Extracts X X X X X X X X Extracts X X X X
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