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TMI Blog2020 (10) TMI 1205X X X X Extracts X X X X X X X X Extracts X X X X ..... hasing the service. In our considered view, payment of consideration would be regarded as fee for technical/included services only if the twin test of rendering services and making technical knowledge available at the same time is satisfied. For this, we derive support from the decision of De Beers India Minerals Private Limited [ 2012 (5) TMI 191 - KARNATAKA HIGH COURT ] Intermediary services rendered by the appellant do not make available any technical knowledge, skill etc to BTIN and BTIN is not a equipped to apply technology contained in services rendered by the appellant. Therefore, the intermediary services provided by the appellant to BTIN do not tantamount to FTS and accordingly, shall not be taxable in India. Accordingly, Ground Nos. is 4 to 6 taken together, are allowed. Existence of Permanent Establishment [PE] - DRP has enhanced the income of the appellant on account of PE in India - HELD THAT:- The undisputed fact is that the supplies made under the BS-02 agreement were off shore supplies - In the case of Ishikawajima Harima Heavy Industries Ltd [ 2007 (1) TMI 91 - SUPREME COURT ] has categorically held that only such part of the income as is attributable to the operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature and need no separate adjudication. 3. Ground No. 3 is on existence of Association of Persons. 4. In his written submissions, the ld. counsel for the assessee has categorically mentioned that this ground is academic in nature. On such concession, we do not find it necessary to adjudicate upon this ground for academic interest. Ground No. 3 stands dismissed. 5. Grounds No. 4 to 6 relate to taxation of intermediary services. 6. The assessee is aggrieved by the treatment of ₹ 1,16,81,407/- received on account of intermediary services as being a taxable as 'fees for technical services'. 7. Representatives of both the sides were heard at length. Case records carefully perused. 8. Facts emanating from the assessment record show that during the year under consideration, the appellant had rendered intermediaries services like marketing, sales, business development, project management, customer services etc. to Bombardier Transportation India Ltd [BTIN] and received fees for intermediary services amounting to ₹ 1,16,81,407/. At this stage, it would be pertinent to mention that the appellant company is registered and incorporated under the laws of Sweden and is a non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not only technical knowledge or skill that must be made available, but even common place 'experience', 'know-how' or 'processes' if made available can result in taxability of FTS. The Assessing Officer was of the firm belief that even development and transfer of technical plan or technical design may result in FTS becoming taxable. 15. Drawing support from the decision of the Tribunal of Bangalore Bench in the case of Bovis Land Lease [India[ Private Limited, the Assessing Officer held that the revenue earned by the assessee from intermediary services rendered to BTIN are taxable in India. 16. Objections were raised before the DRP but were of no avail. 17. Before us, the ld. counsel for the assessee reiterated what has been argued before the lower authorities. 18. It is the say of the ld. counsel for the assessee that on identical set of facts, in assessee's own case for A.Y 2010-11, the CIT(A) vide order dated 07.06.2016 and further in A.Y 2012-13, vide order dated 31.03.2018, has categorically observed that the said intermediary services rendered by the appellant to BTIN does not satisfy the 'Make Available' clause and does not amount to FTS. The ld. counsel for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endered 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. 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 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. 25. The fact that the provision of the service that may require technical knowledge, skills, etc., does not mean that technology is made available to the person purchasing the service. In our considered view, payment of consideration would be regarded as 'fee for technical/included services' only if the twin test of rendering services and making technical knowledge available at the same time is satisfied. For this, we derive support from the decision of the Hon'ble Karnataka High Court in the case of De Beers India Minerals Private Limited 346 ITR 467. 26. In consideration of totality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd for this proposition, reliance was placed on the decision of the Hon'ble Supreme Court in the case of Formula One World Championship Ltd 80 Taxmann.com 347. 33. Per contra, the ld. DR strongly supported the findings of the DRP. It is the say of the ld. DR that since it is composite contract, therefore, there has to be attribution. The ld. DR pointed out that as per the contract, liability was fastened jointly and severally and the same profit has to be attributed for supply made to India by the appellant. 34. Referring to the findings of the DRP at Pages 18 & 19 of its order, the ld. DR pointed out that the seconded employee of Bombardier Transportation Sweden who has been seconded to Bombardier India and is overall responsible for entire delivery including mechanical and electrical equipment and commissioning of the train and ensuring BT standard in all testing activities prior delivery of train in connection with the contract with DMRC. The ld. DR rested his submissions on the following findings of the DRP: "1. There is a Expat employee who is being paid a very high salary of ₹ 7,35,26,751. This shows that his job is of paramount importance for the contract with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have given thoughtful consideration to the rival contentions and have carefully perused the relevant documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules. The undisputed fact is that the supplies made under the BS-02 agreement were off shore supplies. The Hon'ble Supreme Court in the case of Ishikawajima HarimaHeavy Industries Ltd 158 Taxman 259 has categorically held that only such part of the income as is attributable to the operations carried out in India can be taxed in India. Same view was taken by the Hon'ble High Court of Delhi in the case of Nortel Networks India International Inc & Ors 386 ITR 0353. 36. We have also considered the agreement between the appellant and BTIN. We find that as per this MOU, scope of work between eh appellant and BTIN are clearly bifurcated. The relevant part reads as under: "WHEREAS BT Sweden, BT India and their subsidiaries/affiliates as a fully integrated group are desirous and possess full capability to effectively execute the Project. WHEREAS in view of the prescribed 'eligibility criteria as detailed in Clause A 5.2 (b) of Instructions to Tenderers('ITT) of DMRC Tender B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the joint and several liability towards DMRC for any default by any party, the party not responsible for the respective default will have the right to be indemnified by the other party, 3. Co-operation Principles . - 3.1 It is clarified that the proposed arrangements between ~_ scope shall be on 'principal to principal' basis. 3.2 The co-operation defined in this MoU is on an exclusive basis and shall be subject to BT internal policies and guidelines. 3.3 In the event of contract, this MoU will be further elaborated for detailed clarity of scope split In meeting the overall project requirement 3.4 3.5 The detailed interfaces and scope of supply & services is defined after taking into consideration each entities' experience ond capabilities while considering the requirement of the tender document of DMRC and in particular the need to involve suitable local partners. 14. The date of letter of acceptance is 17-09-2007 while the MoU is dated 11-10-2007. Thus, the MoU between B T Sweden and BUN has been signed after the contract has been accepted 37. As mentioned elsewhere, the appellant does not have any place of business in India and all business activities with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as taxable. Therefore, it cannot be said that the appellant has not shown any income from the entire transactions in India. 43. Though the ld. DR has strongly objected to this computation of income stating that since the return was filed electronically, this computation was not before the Assessing Officer. In our view, this objection of the ld. DR is without any basis, in as much as, once the return of income is selected for scrutiny assessment the Assessing Officer calls for hard copy of the return along with computation of income. In our view no Assessing Officer could proceed in another assessment proceeding without looking into the returned income qua its computation. 44. Considering the facts in totality, and also the fact that the TPO has examined the international transactions and has accepted the same to be at ALP, we do not find any merit the additions made by the DRP. We accordingly, direct the Assessing Officer to delete the addition of income attributable to PE amounting to ₹ 60,99,630/-. Grounds Nos. 7 to 14 taken together are allowed. 45. In the result the appeal filed by the assessee in ITA No. 859/DEL/2016 is allowed. The order is pronounced in the ope ..... X X X X Extracts X X X X X X X X Extracts X X X X
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