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TMI Blog2023 (7) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... dently in the future without the assistance of the service provider. The fact that the provision of the service may require technical/consultancy input by the person providing the service does not per se mean that technical knowledge, skills etc. are made available to the person availing the service. There has to be a transfer of the technical knowledge, experience, skill, know-how or processes or a technical plan or technical design from the service provider to the service recipient and the same should remain with the service recipient even after rendering of the services has come to an end. The e-publishing work in the nature of editorial services comprising of page composition, language polishing, indexing, correcting faulty grammar and punctuation etc. sub-contracted to the assessee involves technical expertise, however, such expertise is not transferred by the assessee which can be independently applied by SPi India in future on its own without recourse to the assessee. The impugned payment is not in relation to any services which make available any technical skill or know-how etc. to SPi India. Thus we are of the view that the sub-contracting charges received by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are taxable under FIS mentioned in Article 12(4) of the India-USA DTAA. 1.6. The Hon ble DRP failed to appreciate that the DRP in earlier years in the case of Laser words US, a group company allowed the same issue on similar facts, i.e., the DRP had concluded that receipt of sub-contracting charges is not taxable as Fees for Included Service s under India-US Tax Treaty. 1.7. The lower authorities erred in concluding that the receipts from SPi India constitute FIS by misapplying the ruling of the Hon ble Chennai ITAT in the case of a group company, M/s. Laser words US Inc dated September 28, 2018 without appreciating that the issue before the Hon ble ITAT was on allowance of Marketing fee and not sub-contracting fee. 3. Briefly stated the facts are that SPi Global US Inc., the assessee is a tax resident of USA and it assists its Associated Enterprise ( AE ) in India i.e. SPi Technologies India Private Ltd. ( SPi India ) in provision of epublishing services. The said services include i) editorial services including page composition service, language polishing service, indexing service, correcting faulty grammar and punctuation etc. ii) enforcing a consistent style a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee involves technical expertise, the expertise is not transferred by the assessee which can be independently applied by SPi India. The services rendered by the assessee are in the form of deliverables to be provided to the end clients or SPi India and do not make available any technical information/data to SPi India, which would enable SPi India to subsequently perform such functions on its own. The considerations received by the assessee are not towards a one-time service that equips the service recipient (SPi India) to perform such services which the assessee has performed. 5.1 The Ld. AR placed reliance on the following decisions wherein it has been held that technology could be considered as made available only if the recipient is enabled to apply the technology independently in future without recourse or assistance of the service provider: i) Guy Carpenter Co Ltd. High Court, Delhi 346 1TR 504 ii) De Beers India Minerals (P) Ltd. High Court, Karnataka 346 ITR 467 iii) US Technology Resources (P.) Ltd. High Court, Kerala 407 ITR 327 iv) Everest Global Inc. Tribunal, Delhi 194 ITD 729 v) Inter Continental Hotels Group (Asia Pacific) (Pte.) Ltd. Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee had provided services to SPI India. In the absence of such a contract, the unexplained receipts of the assessee have been treated to be in the nature of Other Income by the AO. 5. As seen from the order of DRP, during the DRP proceedings, the assessee had provided a document Statement of Work entered into between the assessee and the SPI India However the said document was unsigned and has no date of execution. (Page 38-39 of paper book dated April 17, 2023 filed by assessee) 6 The assessee couldn t produce any other documentary evidence before the DRP proceedings regarding the services provided. The assessee could produce certain invoices, the nature of services areas mentioned below: a. Full service project coordination b. Content assembly c. Editorial services: proof reading d. All text writing including evaluation and categorization The assessee admitted that the above services are in nature of technical services but claimed that they are not taxable as FIS under Article 12(4)(b) of India-USA DTAA since the make-available clause is not satisfied. 7. However the assessee had not furnished any agreement executed apart from undate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocuments the contract deliverables to be provided by the assessee to SPi India (at page 38 and 39 of Paper Book). The overview of work as contained in the said statement of work is as under:- OVERVIEW OF WORK Vendor will provide the e-publishing services for titles specified by SPI Technologies India Private Limited (Formerly Lambda Content India Private Limited) using specialized software. This will include updating content, graphics, art and providing page composition services including copy editing services, all corrections and creation of Table of Cases and Table of Statutes, culminating in a final deliverable of high resolution PDF files for print, and updated MS V Word files for future revision. Further the clause on Term states as under:- This Agreement shall be effective on the date hereof and shall remain in effect until terminated by the parties in writing. 7.2 The statement of work though not titled as an agreement clearly sets out the obligation of both the parties, overview of the work to be performed by the assessee and the effective date to be 1st January, 2018. In view of the above the contention of the lower authorities that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... punctuation etc. sub-contracted to the assessee involves technical expertise, however, such expertise is not transferred by the assessee which can be independently applied by SPi India in future on its own without recourse to the assessee. 7.6 The impugned payment is not in relation to any services which make available any technical skill or know-how etc. to SPi India. In Outotec India P Ltd. Vs CIT (2015) 41 ITR (Trib) 449 (Delhi), Delhi Bench of the Tribunal pointed out that the expression make available in the context of fees for technical services contemplates that the technical services should be of such a nature, that the payer comes to possess the technical knowledge so provided which enables it to utilize the same thenceforward. If the services are consumed without leaving anything tangible with the payer for use in future, it will not be make available of the technical services notwithstanding the fact that its benefit flowed directly to the payer. In Mahindra and Mahindra Ltd. vs. Dy. CIT (2009) 313 ITR (AT) 263 (Mumbai) (SB) it has been held that where the payer only obtained the benefit from the services, but did not get any technical knowledge experience or sk ..... X X X X Extracts X X X X X X X X Extracts X X X X
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