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TMI Blog2017 (3) TMI 1514X X X X Extracts X X X X X X X X Extracts X X X X ..... es for included services under article 12.4, it is only elementary that such on standalone basis a taxability can arise only when these services “make available” technical knowledge, experience, skill, Know-how or process etc, in the sense that recipient of services is enabled to perform such services, in future, on his own and without any recourse to service provider. It is not, however, the case of the revenue and rightly so, that such a condition is satisfied on the facts of the present case. Learned Departmental Representative fairly accepts that it is not even the case of the authorities below that ‘make available’ clause is satisfied. Thus we uphold the grievance of the assessee. The impugned demand raised under Section 201 r.w.s. 195, accordingly, stand quashed. - Decided in favour of assessee - ITA No. 203/Ahd/2014 - - - Dated:- 28-3-2017 - Pramod Kumar AM and Mahavir Prasad JM For The Appellant : SN Divatia For The Respondent : Dileep Kumar ORDER Per Pramod Kumar AM: 1. By way of this appeal, the assessee appellant has called into question correctness of learned CIT(A) s order dated 04.10.2013, in the matter of tax withholding demands raised un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meters needs to be satisfied: The knowledge must a propriety knowledge of the person to whom payment is made; There must be some intellectual values assigned to the information received. Now adverting to the facts of the instant case. The scope of services to be given by MPL to the appellant is mentioned in Paragraphs 1 to 4 of the agreement. The sum and substance of these services is summarized as follows : (a) Business Promotion; (b) Marketing; (c) Publicity; and (d) Financial advisory. The information parted by MPL is one which is gained by its own experience in the field of pharmaceutical industry. The role of MPL, to the extent applicable, was to understand MARCK management's philosophy and priorities: working closely with the senior management of MARCK, becoming an extension of the management term, providing a perspective Indian pharmaceutical market and assisting MARCK in identifying potential corporate partners, licensing opportunities or acquisition targets; assisting in devising optimal approaches to establishing contact with selected prospective corporate partners or acquisition targets; evaluating and recommending finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t apply only to the extent such provisions are more favourable to the assessee. In other words, in a situation in which an entity fiscally domiciled in the United States is not taxable in India, under the provisions of the applicable DTAA, it is not taxable in India at all. It is in this backdrop that let us begin by looking at relevant provisions in the Indo US DTAA, which have been relied upon by the revenue authorities, as follows:- ARTICLE 12 ROYALTIES AND FEES FOR INCLUDED SERVICES 1. Royalties and fees for included services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such royalties and fees for included services may also be taxed in the Contracting State in which they arise and according to the laws of that State; but if the beneficial owner of the royalties or fees for included services is a resident of the other Contracting State, the tax so charged shall not exceed : (a) in the case of royalties referred to in sub-paragraph (a) of paragraph 3 and fees for included services as defined in this Article [other than services described in subparagraph (b) of this pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design. 5. Notwithstanding paragraph 4, fees for included services does not include amounts paid : (a) for services that are ancillary and subsidiary, as well as inextricably and essentially linked, to the sale of property other than a sale described in paragraph 3(a) ; (b) for services that are ancillary and subsidiary to the rental of ships, aircraft, containers or other equipment used in connection with the operation of ships or aircraft in international traffic ; (c) for teaching in or by educational institutions ; (d) for services for the personal use of the individual or individuals making the payments ; or (e) to an employee of the person making the payments or to any individual or firm of individuals (other than a company) for professional services as defined in Article 15 (Independent Personal Services). 6. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or fees for included services, being a resident of a Contracting State, carries on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f services by the US entity amounts to parting with the information concerning industrial, commercial and scientific experience gained by the US entity over a period of time. 8. As we have seen a little while earlier, from the extracts reproduced from learned CIT(A) s order, the sum and substance of these services is....... (a) business promotion; (b) marketing; (c) publicity; and (d) financial advisory . These services, under the agreement, are termed as Strategic and Financial Counselling Services . The payments made by the assessee are thus for rendition of these services and not for use of any information concerning industrial, commercial or scientific information . While characterizing nature of payment what is to be seen is the activity triggering in consideration of which the payment is made. That activity, in the present case, is rendition of services. The fact that in the process of availing these services, the assessee benefits from rich experience of the service provider is wholly irrelevant in the present context. The payment is for rendition of services and not for right to use any information concerning industrial, commercial or scientific experience, in posses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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