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TMI Blog2017 (3) TMI 572X X X X Extracts X X X X X X X X Extracts X X X X ..... outside India. We find that the assessing officer failed to prove that the Belgium non-resident parties have made available any technical knowledge or know-how to the assessee. The assessing officer has not accepted assessee’s submission and stated remittance to the professional firm/company were chargeable for tax deduction as technical consultancy services as per section 9(i)(vii) of the act as well as Article 12 of the tax treaty with Belgium. We noticed that the assessee has contended that it was entitled to the benefit of the Most Favoured Nation (MFN) clause of the DTAA with Belgium. We also noticed that the services provided by two Belgium parties cannot be considered as technical services as there was no making available of technology by the said two non-resident parties. We have also considered the findings of the Ld. CIT(A) that because of the MFN clause, the scope of fees for technical services under the India- Canada DTAA and the India-USA DTAA was more restricted than that under India-Belgium DTAA, therefore, the language of article 12 of the aforesaid two treaties shall apply to the DTAA between India and Belgium. Thus we justify the findings of the Ld. CIT(A) that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing officer had passed order under section 201(1)(1) and 201(1A) r.w.s. 195 dated 28/03/2012 stating that payments made by the assessee to B.A Research International L.P USA, B.A. Research company Canada, linklaters LLP, Brussels and Pricewaterhouse Coopers, Belgium were in the nature of fees for technical services within the meaning of section 9 (1)(vii) of the act. The assessing officer observed that the payment made to the foreign parties were taxable in India within the language of the DTAA with USA and Canada as the services were made available in the form of report on analytical study as per the agreements. He further stated that the services provided by the Belgian parties were fees for technical services as per article 12(3)(b) of the Belgian DTAA. Therefore, the assessing officer concluded that assessee was liable to pay tax u/s. 201(1) after grossing up u/s. 195A as the entire amount had been remitted without tax being deducted at source. Aggrieved against the order of the assessing officer, the assessee preferred appear before the ld. CIT(A). The ld. CIT(A) held that that the services provided to the assessee by the above stated non-resident parties did not fall w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit out of the said services in USA and assessee was only getting a report in respect of field study on its behalf, which would help it in getting registered with the Regulatory Authority. Since there is no making available of technical skill, knowledge or expertise or plans or designs in the present case, the amounts paid by the assessee do not fall under Article 12, but come within the purview of Article 7 of the DTAA. Therefore, the amounts paid are to be 'considered as business receipts of the said CROs and since they do not have any PE in India on which aspect there is no dispute, there is no need to deduct tax at source. Similar issue was analysed and considered by the AAR in the case of Anapharm Inc. (supra), which is one of the recipients in the assessee's case also." Therefore, the services provided to the appellant by the nonresident parties did not fall within the purview of 'included services' / 'technical services' under Article 12(4)(b) and hence there was no liability on the appellant to deduct TDS u/s. 195, while making payment for such bio analytical services rendered to it. Moreover, the ratio of the Authority for Advance Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note that *he AO, has in his order u/s. 201(1), held the above payment to be also taxable within the meaning of Sec. 9(1)(vii) of the IT. Act. However, as per the provisions of Section 90(2), where there is a DTAA between India and any country outside India, the more favourable of the two provisions, viz., under the DTAA or under the IT. Act, which are in favour of the assessee, are to be applied. In view of the same, even if the payment to the non-resident is held to be taxable u/s. 9(1)(vii), by virtue of the overriding provisions of Sec. 90(2), the appellant deserves to succeed in respect of the demand raised u/s. 201(1). Therefore, the ground of appeal on the: issue of chargeability of tax under the provisions of Sec. 201(1) is decided in favour of the appellant." 4. During the course of appellate proceedings before us, the ld. departmental representative supported the order of the assessing officer and contended that the CIT(A) is not correct in allowing the relief to the assessee. On the other hand, ld. counsel supported the order of the CIT(A) and also submitted paper book containing judicial pronouncements and the order of Co-ordinate Bench of ITAT, Ahmedabad in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows: The technical or consultancy service rendered should be of such a nature that it "makes available" to the recipient technical knowledge, know-how 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 aid of the service provider. In other words, to fit into the terminology "making available", the technical knowledge, skill?, etc., must remain with the person receiving the services even after the particular contract comes to an end. It is not enough that the services offered are the product of intense technological effort and a lot of technical knowledge and experience of the gone into it. The 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 the future without depending upon the provider. 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 that may r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction with the proposed acquisition outside India. The services were rendered outside India and utilized outside India. We find that the assessing officer failed to prove that the Belgium non-resident parties have made available any technical knowledge or know-how to the assessee. The assessing officer has not accepted assessee's submission and stated remittance to the professional firm/company were chargeable for tax deduction as technical consultancy services as per section 9(i)(vii) of the act as well as Article 12 of the tax treaty with Belgium. We noticed that the assessee has contended that it was entitled to the benefit of the Most Favoured Nation (MFN) clause of the DTAA with Belgium. We also noticed that the services provided by two Belgium parties cannot be considered as technical services as there was no making available of technology by the said two non-resident parties. We have also considered the findings of the Ld. CIT(A) that because of the MFN clause, the scope of fees for technical services under the India- Canada DTAA and the India-USA DTAA was more restricted than that under India-Belgium DTAA, therefore, the language of article 12 of the aforesaid two treaties ..... X X X X Extracts X X X X X X X X Extracts X X X X
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