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TMI Blog2023 (10) TMI 458X X X X Extracts X X X X X X X X Extracts X X X X ..... s installation of multiple plants and machineries. It involves on-site planning and supervision of erection and installation of not only civil work but also the plant and machinery. There cannot be any dispute that the installation/erection process has to be taken up as per the flowsheets, equipments, specifications, drawings, layouts, operating manuals, procedures etc., without which, the installation process cannot be carried out. Therefore, in our view, the service rendered by the assessee is in connection with installation/erection of plant and machinery involved in mining of natural resources. Moreover, scope of Article 5(2)(g) of India Portugal DTAA is not merely limited to mining or extraction of natural resources but also covers installation or structure used for exploration and exploitation of nature resources. Therefore, in our considered view, the amounts received would fall within the exceptions provided under Article 12(5)(f) and 12(5)(g) of India Portugal DTAA, hence, not taxable at the hands of the assessee. Balance amount out of the engineering package fee, it is observed from the facts on record that they are not part of the TLA, but in pursuance to two independent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Das, Sr. DR ORDER Captioned appeals by the assessee arise out of separate orders of learned Commissioner of Income Tax (Appeals), New Delhi, for the assessment years 2010-11 and 2011-12. 2. At the outset, we must observe, appeals in ITA Nos. 9483/Del/2019 and 9484/Del/2019 are delayed by 45 days. After considering the submissions of the parties and perusing the materials on record, we are satisfied that the delay in filing the appeals was due to genuine cause. Accordingly, we condone the delay and admit the appeals for adjudication on merits. ITA No.9483/Del/2019 AY: 2010-11 3. This appeal arises out of order dated 24.07.2019 passed by learned Commissioner (Appeals) under section 154 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'). 4. Briefly the facts are, the assessee is a non-resident corporate entity incorporated in France and a tax resident of that country. As stated, assessee owns certain right, know-how, designs, and processes required to design, build and implement integrated aluminium production plants. The assessee is also a leader in primary metals and their by-products and also provides a variety of technical and related services that includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee submitted, the assessee had entered into Technology Licencing Agreement (TLA) with Hindalco Industries Ltd. ('HIL') on 19.09.2007. Whereunder, the assessee provided licence to HIL to use its technology. He submitted, similar agreement was also entered into with National Aluminium Company Ltd. ('Nalco'). He submitted, the amount received by the assessee towards licence fee has been offered as royalty income, and there is no dispute between the parties with regard to that. He submitted, in addition, the assessee received and amount of ₹ 15,94,34,150/- towards engineering package fee. He submitted, in the return of income, the assessee by mistake had offered the amount as income by treating it as FTS. He submitted, the disputed amount was received from HIL in connection with certain services relating to their plant in Orissa. The break-up of such service is as under: Nature of Services (1) -• Installations or Structures in connection with services rendered (2) Eligible Exclusion under Article 12(5)(f) &(g) (3) Hindalco paid for technical documentation in the form of an Engineering Package made, based on an agreed Basic Site Data List that included flow s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined therein. He submitted, even otherwise also, the receipts cannot be treated as FTS under Article 12(4) of India - Portugal, as it falls within the exceptions provided under Article 12(5)(f) read with Article 5(2)(g) of India - Portugal DTAA. Proceeding further, he submitted, the contracts with Nalco and HIL are for rendering services in connection with plants used for extraction or exploitation of aluminium, which is a natural resource. He submitted, aluminium is drawn from Bauxite, which is an ore extracted from mines. He submitted, aluminium extraction/exploitation involves various steps, such as, (i) taking bauxite out of the mines; (ii) refining of bauxite in a refinery to produce alumina, a white powder, and (iii) smelting of alumina in a smelter to produce ingots, an usable raw material for the industry. 8. He submitted, learned first appellate authority has erroneously concluded that the amounts received by the assessee towards basic site data list, including flow sheets, specifications, drawings, layouts, and operating procedures under TLA as FTS falling under Article 12(4)(a) of India - Portugal DTAA. He submitted, the observations of the first appellate authority tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xite is of no use, unless converted to aluminium. Therefore, the interpretation given by learned Commissioner (Appeals) to Article 12(5)(f) cannot be accepted. He submitted, the treaty nowhere stipulates that an installation or structure eligible for exclusion must be at the place of mine, oil, or gas-well, quarry, or place of taking out bauxite. Therefore, the reasoning of the first appellate authority that the refinery and smelting plants are not the places of extraction or exploitation of natural resources, cannot be accepted. 10. Without prejudice, he submitted, out of the disputed receipts, amounts of Rs. 1,62,25,201/- were received by the assessee under two separate purchase orders: Nature of Services (1) Installations or Structures in connection with services rendered (2) Eligible Exclusion under Article 12(5)(f) &(g) (3) For getting Main Drawings to enable Hindalco to Study and comment on the Solios Proposal i.e., Process specifications, equipment lists for Paste Plant and Anode Recycling Shops of Green Anode based on RHODAX Technology. Aditya Smelter at Lapanga, Distt. Sambalpur Odisha under Purchase Order No. 8183 dated 22/01/2009 X49,42,601 For getting Paste Pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on specifications for anode recycling shop, and process specification and flow diagram along with equipment list for the fines handling based on RHODAX Technology. He submitted, these were again created for a plant-based around RHODAX technology but did not contain the technology. He submitted, the assessee did not supply any machine diagram or codes to build an RHODAX crusher under site-specific conditions. He submitted, the services rendered did not tantamount to transfer of technical plan or design that enabled HIL to apply the technology contained therein independently in future at any site without the aid and assistance of the assessee. He submitted, the job of getting site and project-specific drawings/layouts/plans/designs cannot be termed as FTS. In support of such contention, he relied upon the following decisions: i. CIT Vs. De Beers India Minerals Ltd. (2012) 346 ITR 467 (Kar.) ii. Raymond Vs. Dy.CIT (2003) 86 ITD 791 (Mumbai) iii. DCIT Vs. ITC Ltd. (2002) 82 ITD 239 (ITAT-Kol) iv. DIT Vs. Guy Carpenter & Co. Ltd. (2012) 346 ITR 504 (Del.) v. Intertek Testing Services India Pvt. Ltd. (2008) 307 ITR 418 AAR vi. Steria (India) Ltd. Vs. CIT (2016) 72 taxmann.com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S as provided under Article 12(4) of India - Portugal DTAA. It is a fact on record that learned first appellate authority has accepted assessee's claim of benefit under India - Portugal DTAA. Therefore, we have to examine whether the aforesaid amounts would qualify as FTS under Article 12(4) read with Article 12(5) of India - Portugal DTAA. 16. Insofar as engineering package fee of Rs. 15,94,34,150/- is concerned, the break-up of the same has been provided elsewhere in the order. In the written submission dated 27.04.2022 furnished before us, learned counsel for the assessee has accepted the position that the receipts of Rs. 10,35,94,783/- received from HIL under the TLA and Rs. 3,96,34,166/- received from Nalco would qualify as FTS under Article 12(4)(a) of India - Portugal DTAA. However, it is the claim of the assessee that the aforesaid two amounts would not qualify as FTS due to exceptions provided under Article 12(5)(f) and 12(5)(g) of India - Portugal DTAA. Obviously, learned Commissioner (Appeals) has rejected the aforesaid claim of the assessee by observing that the services rendered by the assessee are in respect of intangible in the form of technology process/solution, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g), Articles 5(2)(g) and 5(3) would make it clear that fees received towards services in connection with a mine, an oil or gas well, quarry or any other place of extraction of natural resources, including an installation or structure used for the exploration or exploitation of nature resources, a building site a construction, installation or assembly project, including supervisory activities in connection therewith would fall within the exceptions provided under Article 12(5)(f) & 12(5)(g). 19. On perusing the relevant agreements and other facts and materials on record, it is observed that the amount of Rs. 10,35,94,783/- was received by the assessee for providing basic site data lists, which included flow sheets, specifications, drawings, layouts, operating manuals, procedures to build/construct/install/assemble these smelter plants. It is not a simple case of loading a technology solution/software as observed by learned Commissioner (Appeals). The smelter plant certainly requires installation of multiple plants and machineries. It involves on-site planning and supervision of erection and installation of not only civil work but also the plant and machinery. There cannot be any di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d drawings was for the appraisal of the contractee. It does not per se mean transfer of technology. There is nothing on record to suggest that the assessee is also the owner of RHODEX Technology. There is no evidence brought on record by the Revenue to establish that the drawings, designs etc. provided by the assessee has enabled the recipients to apply the technology contained therein independently. Thus, in our considered opinion, the amount of Rs. 1,62,25,201 included in the engineering package services would not qualify as FTS under Article 12(4)(b) of India - Portugal DTAA. 22. Insofar as on-site man-day fee of Rs. 1,39,90,735/- is concerned, though, it is in pursuance to TLA and may qualify for FTS under Article 12(4)(a), however, in our view, the receipts fall within the exceptions provided under Article 12(5)(f) and 12(5)(g) of India - Portugal DTAA, hence, would not qualify as FTS. Thus, we hold that the receipts in dispute are not taxable as FTS at the hands of the assessee. Grounds are allowed. 23. In the result, the appeal is allowed. ITA No. 3410/Del/2016 AY: 2010-11 24. In view of our decision in ITA No. 9483/Del/2019 for assessment year 2010-11, this appeal has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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