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TMI Blog2017 (1) TMI 554X X X X Extracts X X X X X X X X Extracts X X X X ..... es to the contrary. 3. So far as this grievance of the Assessing Officer is concerned, the relevant material facts are like this. During the course of proceedings before the Assessing Officer, it was noticed that the assessee has made following payments to the non residents entities based in USA, Canada and UK: Sr. No. Name of the Payee Country of residence Nature of remittance Date Amount (Rs.) Nature of services 1 ALGORITHME PHARMA INC USA FTS 04.09.2009 11,35,398 Bioequivalence study 18.09.2009 11,35,398 2 ANAPHARM INC Now PHARMANET CANADA INC CANADA FTS 12.02.2010 24,46,032 Bio analysis 3 BIO RELIANCE UK FTS 15.10.2009 17,77,161 Bio analysis 23.12.2009 22,74,601 4 GATEWAY MEDICAL RESEARCH INC USA FTS 24.12.2009 12,55,400 Bio analysis and bio availability 5 MDS PHARMA SERVICES, USA USA FTS 22.03.2010 32,53,036 Bio analysis 6 AAIPHARMA INC, USA USA FTS 11.09.2009 16,52,877 Bioequivalence study 4. The Assessing Officer was of the view that the services so rendered by the non resident entities are highly technical in nature and are required to be taxed as such in the hands of the recipie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India under the provisions of Sec. 195 of the Income-tax Act. 8. With reference to the payments made by the appellant to the six nonresident parties viz. Algorithms Pharma Inc., Anapharm Inc., Bio Reliance U.K., Gateway Medical Research, MDS Pharma Services and AAI Pharma Services, the AR has contended that the same were not in the nature of 'fees for technical services.' The AR stated that Article 12 of the DTAAs with USA and Canada and Article 13 of the DTAA with U.K. is not applicable since the non-resident parties did not 'make available' any technical knowledge, skill, experience, know-how or process. 9. It is a matter of record that even the AO has not disputed the fact that none of the non-resident parties have any PE in India. Considering the facts of the case and the submissions and decisions as relied upon by the appellant, I am of the view that the services rendered in this case, although technical in nature, can be said to be 'fees for included services', only if they "make available" technical knowledge or skill to the recipient of the service or where the recipient can apply the same on its own in future, without recourse to the service provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces can apply the same on his own. We are in full agreement of the above view of the Id.CIT(A). In the present case, the assessee had sent samples to the experts outside India and those experts submitted their report. There is nothing on record suggesting that the services rendered to the assessee were made available to the assessee and also the assessee was able to apply the same of his own. In the absence of the same, such service would not fall within the ambit of the included service in the light of decision of the Authority for Advance Rulings (Income-tax), New Delhi in the case of Anapharm Inc., In re (supra), the decision of the Coordinate Bench in the case of Wockhardt Ltd. vs. ACIT (supra) and the decision of Hon'ble High Court of Karnataka in the case of CIT vs. De Beers India Minerals (P.) Ltd. (supra). The Revenue has not placed any material on record to rebut the findings of the Id. CIT(A) that the services were actually made available to the assessee and would be taxable. Under these facts, we do not see any reason to interfere with the findings of the Id.CIT(A), same is hereby upheld. Thus, ground raised by the Revenue is rejected." 11. Considering the above, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is a DTAA between India and any country outside India, the more favourable of the two provisions, viz., under the DTAA or under the I.T. Act, are to be applied in case of the assessee. However, in my view, the point as to whether the payments are in the nature of fees for technical services as per the provisions of section 9(1)(vii), does not require adjudication, since the appellant is in any case entitled to the benefit of the relevant articles as per the DTAAs, as discussed hereinbefore." 5. Aggrieved by the relief so granted by the CIT(A), the Assessing Officer is in appeal before us. 6. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal positon. 7. We find that the relevant provisions in the relevant tax treaties, which govern the taxability of fees for technical services, are as follows: India UK tax treaty Article 13: Royalty and fees for included services 4. For the purposes of paragraph 2 of this Article, and subject to paragraph 5, of this Article, the term "fees for technical services" means payments of any kind of any person in consideration for the rendering of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to do the same thing next time without recourse to the service provider. The services provided by non residents did not involve any transfer of technology. It is not even the case of the Assessing Officer that the services were such that the recipient of service was enabled to perform these services on its own without any further recourse to the service provider. It is in this context that we have to examine the scope of expression 'make available'. 9. As for the connotations of make available clause in the treaty, this issue is no longer res integra. There are at least two non-jurisdictional High Court decisions, namely Honble Delhi High Court in the case of DIT Vs Guy Carpenter & Co Ltd ([(2012) 346 ITR 504 (Del)] and Honble Karnataka High Court in the case of CIT Vs De Beers India Pvt Ltd [(2012) 346 ITR 467 (Kar)] in favour of the assessee, and there is no contrary decision by Honble jurisdictional High Court or by Honble Supreme Court. In De Beers case (supra), Their Lordships posed the question, as to "what is meaning of make available", to themselves, and proceeded to deal with it as follows: The technical or consultancy service rendered should be of such a nature that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red, in favour of the assessee, by the order dated 30th November 2015 passed by a coordinate bench. In view of these discussions, and as we concur with the well reasoned findings of the learned CIT(A), we approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter on this count as well. The order of the CIT(A) stands confirmed. 11. Ground no. 1 is thus dismissed. 12. In ground no. 2, the Assessing Officer has raised the following grievance: The Id. CIT(A) has erred in law and on facts in holding that the payment made to Non-Resident, viz. Chemical Abstract Services USA, for online access to the database system "SciFinder" was not 'Royalty' as envisaged by article 12 of Indo US DTAA, in spite of the fact that the AO has demonstrated how the license granted by the non resident amounts to use of, or the right to use the copyright embedded in the software. The Id. CIT(A) has ignored High Court decisions in favour of revenue, on identical facts. 13. So far as this ground of appeal is concerned, the relevant material facts are as follows. During the course of proceedings before the Assessing Officer, it was noticed that the assessee has ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered the reasoning of the AO and the contentions of the appellant, I am of the view that the ratio of the decisions as relied upon by the appellant is squarely applicable to the facts of the appellant's case. Payment made for access to online publication/database cannot be considered as being in the nature of royalty, liable to withholding tax, either under the Income-tax Act or under the DTAA with USA. Therefore, I hold that the payment made to Chemical Abstract Service USA was not liable to TDS under the provisions of Sec. 195 and accordingly, the appellant could not be held liable to pay tax as an assessee in default u/s. 201(1)." 14. Aggrieved by the relief so granted by the CIT(A), the Assessing Officer is in appeal before us. 15. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal positon 16. We find that under article 12(3) of the Indo US tax treaty, 'royalty' has been define as follows 3. The term 'royalties' as used in this Article means : (a) payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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