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TMI Blog2023 (7) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... Such services have to be specifically identified keeping in view the definition of FTS under Article 13(4) of India-UK DTAA. In the facts of the present case, the departmental authorities have not carried out that exercise before concluding that the entire variety of services rendered by the assessee comes within the sweep of technical or consultancy services. This, in our view, is unsustainable. Though, the departmental authorities have alleged that the make available condition stands satisfied, however, no material has been brought on record to support such finding. As discussed earlier, the burden is entirely on the Revenue to prove that rendition of services by the assessee has made available technical knowledge, knowhow, skill etc. to the service recipient so as to enable the service recipient to utilize such technical knowledge, knowhow, skill etc. independently in future without the aid and assistance of the assessee. Thus, in our view, the Revenue having failed to demonstrate the aforesaid aspect through cogent evidence, it has to be held that the make available condition under Article 13(4)(c) of India-UK treaty is not fulfilled. Thus we hold that the amount received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tancy, however, protocol to India-France DTAA provides that after 01.09.1989, if India signs any DTAA with a third State, which is a member of OECD and in terms of that treaty India limits its taxation at source to a rate lower or scope more restricted than the rate or scope provided in India-France DTAA, then such restricted rate or scope provided in the treaty with third State will apply to India-France DTAA. Thus taking shelter under such Most Favoured Nation (MFN) clause provided in the protocol, the assessee submitted that as per India- United Kingdom(UK) DTAA, the term FTS under Article 13(4) is more restricted in its scope, as it only includes technical or consultancy services and further imposes make available condition. Thus, the assessee submitted, since the assessee has provided managerial services, the fee received does not fall within the definition of FTS as provided under Article 13(4) of India-UK DTAA. Without prejudice, the assessee submitted, even assuming that the services are in the nature of technical or consultancy, however, since, while rendering such services, the assessee has not made available the technical knowledge, knowhow, skill etc. to the recipie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... training and employee development support, benefit support. Drawing our attention to the correspondences with the Indian subsidiary through email, learned counsel emphasised that the nature of services rendered are neither technical nor consultancy. He submitted, even, assuming that there is some element of technical or consultancy services, however, the make available condition as per Article 13(4)(c) of India- UK DTAA is not satisfied. He submitted, the departmental authorities have not brought any material on record to demonstrate that while rendering such services, the assessee has made available any technical knowledge, experience, knowhow, skill etc. to the recipient of services so as to enable the recipient to utilize the technical knowledge, skill, knowhow etc. independently in future. Thus, he submitted, the amount received does not qualify as FTS under Article 13(4) of India-UK DTAA. In support of such contention, learned counsel relied upon the following decisions : (i). DIT v. Guy Carpenter Co. Ltd. (2012) 346 ITR 504 (Delhi) (ii). Dee Beers India Minerals (P) Ltd. (2012), 346 ITR 467 (Kar.) (iii). Steria (India) Ltd. v. CIT (2016) 386 ITR 30 (Del). (iv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ian subsidiary- whether FTS or not, has to be determined with reference to Article 13(4) of India-UK DTAA. 11. On a reading of Article 13(4) of India-UK treaty as a whole, it is understood that the receipts from rendition of services of technical or consultancy nature qualifies as FTS. However, clause (c) to Article 13(4) of India-UK DTAA carves out an exception by providing that the receipts cannot be treated as FTS unless, while rendering services, the technical knowledge, experience, skill, knowhow etc. is made available to the service recipient. The expression make available has been judicially interpreted to mean that it will enable the recipient of such services to independently apply such technical knowledge, knowhow, skill etc., acquired from service provider, in future, without the aid and assistance of the service provider. Keeping in view the aforesaid legal position, if we examine the facts on record, it is to be seen that the assessee provided the following category of services : (i). Payroll support, staffing and recruiting support, training and employee development support, benefits support - These services broadly fall under human resources function. (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment activities in connection with short term cash management etc. (viii). Routine information and Technology (IT) support : These services include supporting computer systems, including those used in connection with operations, accounting, manufacturing, customer service, human resources, payroll and email, formulating guidelines with respect to the use of IT systems, maintenance and repairs of IT systems etc. 12. Thus, on scanning through various services rendered by the assessee to the Indian subsidiary, it appears that most of the services rendered are routine management support services. However, some of the services like implementation of ERP patches, identify indirect tax issue that could arise on sourcing from India for a global project, guidance sought by Indian subsidiary on the terms and conditions to be proposed to one of its customer and preparation of global guidelines for use of power conversion entities, advice regarding increase the use of software in regular activities to increase the productivity, assistance given in opening the supplier code in their SAP etc., may fall within the ambit of either technical or consultancy services. However, such services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for the rendering of any technical or consultancy services (including the provision of services of a technical or other personnel) which: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph -3(a) of this article is received; or (b) are ancillary and subsidiary to the enjoyment of the property for which a payment described in paragraph 3(b) of this Article is received; or (c) make available technical knowledge, experience, skill knowhow or processes, or consist of the development and transfer of a technical plan or technical design. 20. A perusal of the above Article show that the term FTS has a more restrictive scope in so far as the absence of the term managerial and further existence of the make available condition are embedded therein. 21. In our understanding under the India UK tax treaty for a payment to quality as FTS both the following conditions need to be cumulative satisfied : (i) The services need to be technical or consultancy in nature. (ii) The services need to make available technical knowledge, experience, skill, know-how or processes, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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