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TMI Blog2023 (1) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... that the total receipts of the assessee amounted to Rs.8,54,99,826/-. The first receipt, not offered for taxation, that the AO espoused for consideration is a sum of Rs.38,16,447/-, which was from its two Associated Enterprises (AEs) in India, namely, Alfa Laval India Private Limited and Alfa Laval Support Services India Private Limited. On being called upon to explain as to why it should not be considered as FTS and included in the total income, the assessee submitted that the same was not chargeable to tax in the light of Article 12 of India-Sweden Double Taxation Avoidance Agreement (`the DTAA') read with the Protocol for importing Article 12 of the DTAA between India and Portuguese, as an OECD member nation, having more restricted scope of FTS. The assessee contended that since it rendered Managerial and Training services to its two Indian AEs, the amount of Rs.38.16 lakh did not fall within the ambit of FTS under the DTAA read with DTAA between India and Portuguese. The AO refused to accept the assessee's contention of the applicability of India-Portuguese DTAA on the ground that the same was not separately notified. He, therefore, treated the amount as FTS. The AO went a ste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s' under the DTAA. Relevant part of Article 12 of the DTAA with Sweden is as under : "1. Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. Notwithstanding the provisions of paragraph (1) such royalties and fees for technical services may also be taxed in the Contracting State in which they arise, and according to the laws of that State, but if the recipient is the beneficial owner of the royalties or fees for technical services, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties or fees for technical services. 3. (a) The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience. (b) The term "fees for technical services" means payment of any kind in consideration for the rendering of any managerial, technical or consultan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the person acquiring the services to apply the technology contained therein.' 10. A careful circumspection of the relevant part of the definition of the expression 'fees for included services' in Article 12 of the DTAA with Portuguese divulges that any consideration, to qualify as fees for included services, must necessarily result into making available technical knowledge, experience or skill etc. to the recipient of the service. The term 'make available' has been widely interpreted by the Hon'ble Karnataka High Court in CIT Vs. De Beers India Minerals Pvt. Ltd. (2012) 346 ITR 467 (Kar.) holding that the payer of the services should be able to utilize the acquired knowledge or know-how at his own in future without the aid of its provider. The Authority for Advance Ruling in Production resources group, in Re (2018) 401 ITR 56 AAR has also held that "make available" connotes something which results in transmitting the technical knowledge so that the recipient could derive an enduring benefit and utilize the same in future on his own without the aid and assistance of the provider. On going through the above judicial interpretation, it becomes palpable that in order to `make avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eiterated that the details furnished by the assessee did not satisfy the claim of reimbursement. This resulted in treating Rs.20.84 lakh as FTS thereby swelling the assessee's income pro tanto. 14. We have heard the rival sides and gone through the relevant material on record. The splitting-up of Rs.20.84 lakh is as under :- Particulars Amount (in INR) Alfa Laval India Private Limited Recovery of advertising material and brochures 27,860 Recovery of corporate travel insurance 1,393,575 Recovery of officer's conference expenses 260,269 Alfa Laval Support Services India Private Limited Recovery of Miscellaneous expenses 400,994 Total Receipts 2,084,698 15. From the above details, it can be seen that the assessee claimed to have recovered advertising material and brochures cost, corporate travel insurance cost and officer's conference expenses along with miscellaneous expenses from its Indian Associated Enterprises. The AO has noted that the assessee failed to establish any correlation between the amount reimbursed from the AEs with the expenses incurred by the third parties. In order to fall within the purview of reimbursement, it is sine qua non that primarily, it sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount was offered to tax in India by such employees. 20. Explanation 2 to section 9(1)(vii) provides that FTS includes any consideration for rendering managerial consultancy services etc., but does not include consideration `which would become income of the recipient chargeable under the head "Salaries"'. A perusal of the mandate of the above provision clearly ingrains that any amount paid as a consideration which is income of the recipient chargeable to tax under the head "Salaries", cannot constitute FTS. Though the assessee has been arguing before the authorities below that the said amount of Rs.64.19 lakh was offered by the employees for taxation in India as their salary, but did not furnish any conclusive evidence to prove the same. It can be seen from the impugned order that the assessee filed certain details of the salaries paid by the employees but did not establish any correlation between the amount under consideration and the amount offered for taxation as `Salary' by such employees. Under these circumstances, we are of the considered opinion that it would be in the fitness of the things if the impugned order on this score is set-aside and the matter is remitted to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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