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TMI Blog2022 (3) TMI 833X X X X Extracts X X X X X X X X Extracts X X X X ..... entific experience. The grading report are not make available for the reasons that assessee, whose utilising the services will not be able to make use of technical knowledge, by itself in its business without recourse to GIA INC USA in future. The technical knowledge, experience skill etc will not remain with the assessee after rendering the services has come to an end. We find that coordinate bench of Delhi Tribunal in a recent decision Delhi Tribunal in GE Energy Management Services Inc. [ 2021 (11) TMI 1033 - ITAT DELHI] while considering term make available and the Article 12 of India US DTAA held that when the assessee-foreign company entered into an agreement to provide offshore maintenance and support services to Power Grid Corporation of India Ltd. (PGCIL) - assessee's offshore maintenance and support services to PGCIL were not geared towards making available any technical knowledge, experience, skills, know-how, or processes to PGCIL. Further, the term of the agreement was for five years and services provided by the assessee were repetitive and ongoing. It means that PGCIL could not apply the technical or skills used by the assessee for rendering such service. G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia and USA cannot be invoked. iv) The Ld. CIT(A)-13, Ahmedabad has erred in facts and in law in allowing the appeal of the assessee despite the fact that as per very disclosure on the official website of the M/s. GIA Inc. USA, the currency of payment for diamond testing and certification has to be made in the currency of the laboratory where the item is submitted for testing and articles were shipped to Hong Kong and payment was made in Hong Kong Dollars. v) The Ld. CIT(A)-13, Ahmedabad has erred in facts and in law in holding that there is no element of make available in the services rendered despite the fact that this was not the ground of disallowance by the AO. vi) That the department craves leave to add or alter any further grounds of appeal. 2. Brief facts of the case are that assessee is a partnership firm and engaged in the business of cutting and polishing of diamond and export of diamonds. The specific diamonds are certified by Gemmological Institute of America (GIA) and all exported piece by piece. During the period under consideration, the assessing officer (AO), on perusal of Form-15CA/15CB filed by assessee regarding remittance to GIA Hong Kong La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices rendered by GIA Hong Kong. The payments were merely made to GIA, Inc, America even though all services were rendered by GIA Hong Kong Laboratory at Hong Kong, thus, GIA Hong Kong Laboratory is the rightful owner of such payment which merely routed through GIA, Inc, America. The state of source is not obliged to give up the taxing rights over the passive income in the nature of Fees for Technical Services (FTS) merely because the income was paid direct to recipient of a state which with the state of source had concluded/executed DTAA. On the aforesaid observation, the AO concluded that assessee was required deduct tax on sum chargeable to tax at the rate in force. The assessee was required to deduct tax @40.024%. The assessee failed to do so, accordingly, the assessee was treated as assessee in default under section 201(1) with respect to tax amount of ₹ 3.30 crore. In addition, the assessee was also held liable to pay interest @1% per month under section 201(1A) of the Act of ₹ 1.31 crore up to the passing of order thereby the AO created a demand of ₹ 4.43 crore vide his order dated 23.08.2017. 4. Aggrieved by the order passed under section 201(1)/201(1A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has made remittances qua diamond testing certification services to GIA. The payment has been made to the offshore bank account of GIA US in Hong Kong. The invoices are raised by the GIA USA instructing assessee to make payment to offshore bank accounts of GIA USA in Hong Kong. In case of non-payment of segregation fees, GIA US has the legal right for the production from the assessee has all the risks and rewards of the agreement are between the assessee and GIA US. The assessee has no direct relationship with GIA Hong Kong. 6. The assessing officer invoked the provisions of section 201(1) r.w.s 201(1A) of the Income tax Act by taking view that India USA DTAA benefit is not granted as payment is made to GIA Hong Kong and there is no tax treaty with Hong Kong, the payment is deemed to be income chargeable to tax in India under section 9 of Indian Income tax Act, although the three has no PE in India and Diamond certification charges have been taken the nature of 'fees for technical services'. The assessee explained that in the present case, India USA tax treaty in perfectly relevant tax treaty since the service arguments of the assessing with GIA USA and the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tains to business outside India. The assessee also relied on certain case laws. 7. The assessee further explained that due to clerical error while filling the name of beneficiary of remittance is wrongly mentioned as GIA Hong Kong laboratory Ltd instead of GIA United State of America Inc . Due to which foreign outward limit is advice also in the name of GIA Hong Kong laboratory Ltd., was mentioned, but in fact the assessee is neither entered into transaction with GIA Hong Kong laboratory nor has any remittance been made to it. The claim of assessee is evident from the invoices issued by GIA Inc of USA and certified copy of the bank's statement of GIA Inc reflecting payments received was filed. Thus, the rightful owner of the remittances made in GIA Inc of USA and in connection with the same counts under the law India USA tax treaty. On the aforesaid submission the assessee prayed for deleting the demand created consequence of order passed by assessing officer. 8. After considering the submission of the assessee, the ld. CIT(A) deleted/set-aside the order under section 201(1)/201(1A) of the Act. The ld. CIT(A) held that the assessee partnership firm and in the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to GIA Inc. The assessee entered in agreement with GIA Inc USA, on perusal of which it can be seen that the term of agreement clearly describes the status of GIA Laboratory in Hong Kong. Further, it is clear from the agreement that Honk Hong, Dubai and Israel are the take in window where articles are delivered but the services agreement is between the assessee and GIA USA. Copy of grading certificate is also issued by GIA USA, but due to clerical mistake the beneficiary of the remittance was erroneously specified as GIA Honk Kong Laboratory. The assessee has furnished confirmation letter from HSBC Bank, confirming that the payments were made by assessee to GIA Inc USA in Bank Account No. 801-045451-001, owned by GIA Inc USA. The ld. CIT(A) held that the assessing officer tried to establish that the nature of services rendered by the non-resident is 'fee for technical services', however, the services rendered are not disputed by the assessee. The ld. CIT(A) pin point the dispute and held that the dispute is whether the services rendered by GIA are 'fee for technical services' under tax treaty by virtue of make available clause under Article 12 of India USA DTAA. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny concrete shape such as technical knowledge, experience; skill etc. There is no transfer of either technical knowledge or skill and experience or know-how or process to the assessee. The learned CIT(A) further held that GIA Inc USA does not provide any training to the employee of the assessee nor it does share any technique or expertise connected with performance of its services or imparted any skill to the assessee. As the services is question are not make available in nature and consequently do not qualified for fees for technical services under tax treaty between India and USA and allowed the grounds of appeal raised by assessee. Aggrieved, from the order of ld. CIT(A), the Revenue has filed this appeal before Tribunal. 11. We have heard the submissions of Sh. Saurabh Soparkar learned Senior Advocate (ld Senior Counsel) assisted by Ms Urvashi Shodhan Advocate for assessee and Sh. H.P. Meena learned Commissioner of income tax-departmental representative (CIT-DR) for the revenue and have gone through the order of the lower authorities carefully. The ld. Senior Counsel for the assessee submits that during the relevant assessment year under consideration the assessee has made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y technical knowledge know-how to the assessee company. Thus, the payment made by the assessee-company would not assume the character of business profit US resident company under Article 7 of India US tax treaty, which would be taxable in India only if the same is attributable to permanent establishment of US resident company in India. In absence of any permanent establishment of US resident company in India, the amount paid by the assessee would not be taxable in India and in business profit. The ld. CIT(A) appreciated the facts of the case and granted relief to the assessee. To support his submissions the ld. Senior Counsel for the assessee relied on the following decision; * Alabra Shipping Pte Ltd. Vs ITO (Inter.tax.) [2015] 62 taxmann.com 185 (Rajkot Tribunal), * M. T Maersk Mikage Vs DIT (Inter.tax) [2016] 72 taxmann.com 359 (Gujarat), * CIT Vs De Beers India Minerals (P) ltd [2012] 21 taxmann.com 214 (Kar). 13. The assessee has filed following documents on record; (i) Written submissions filed before CIT(A), (ii) Tax residency certificate and PE Certificate of GIA Inc, USA, (iii) Form No. 10F, (iv) Sample invoices raised by GIA, USA, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... routed through GIA, Inc, America. The state of source is not obliged to give up the taxing rights over the passive income in the nature of Fees for Technical Services (FTS) merely because the income was paid direct to recipient of a state which with the state of source had concluded/executed DTAA. As recorded above that before the ld. CIT(A) the assessee filed detailed written synopsis and relied on certain case laws. It was also contended that the entry on Form-15CA/15CB were wrongly filled up and that the payment of certification charges were infact made to GIA Inc USA and furnished certificate of HSBC Bank that the bank account wherein the remittance were made owned by GIA Inc USA. The ld. CIT(A) on appreciation of facts held that There is no dispute about the services rendered by GIA to assessee. Further the diamonds certification is issued by GIA Inc USA. Certification issued by GIA USA is considered as standard benchmark by the trade as well as by the customers and all intellectual property rights in the certification belongs to GIA Inc USA. The assessee had agreement with GIA Inc USA, on perusal of which it can be seen that the term of agreement clearly describes the status ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to be imparting of information by the person who possesses such information. On considering the definition of ' fee for included services' under Article 12, it was observed that there is no parting of rendering of technical services either of military, technical consultancy services or industrial commercial or scientific experience. The grading report are not make available for the reasons that assessee, whose utilising the services will not be able to make use of technical knowledge, by itself in its business without recourse to GIA INC USA in future. The technical knowledge, experience skill etc will not remain with the assessee after rendering the services has come to an end. 18. We find that coordinate bench of Delhi Tribunal in a recent decision Delhi Tribunal in GE Energy Management Services Inc. v. ADIT - [2022] 135 taxmann.com 173 (Delhi - Trib.), while considering term make available and the Article 12 of India US DTAA held that when the assessee-foreign company entered into an agreement to provide offshore maintenance and support services to Power Grid Corporation of India Ltd. (PGCIL). The assessee from outside India performed the entire services for s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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