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TMI Blog2024 (8) TMI 1425X X X X Extracts X X X X X X X X Extracts X X X X ..... iver Laboratories Inc. utility of the services available in the form of a report, though highly technical in nature, comes to an end, little thereafter, if not immediately, after its rendition. The Support that the Indian entity seeks after the report is delivered is to understand the report from the assessee. The elements necessary for make available is absent in the services rendered by the assessee to its Indian customers/clients, inasmuch as even for the said reports, the customers have to continuously refer to the assessee and the same is not freely r made available to the Indian customers. Thus, technical services rendered by the affiliates do not make available technical knowledge, experience, skill, know-how or process while preparing these reports for their, Indian customers/clients. In light of the aforementioned judicial decisions, we are of the considered view that the service recipient of the assessee is unable to make use of the said technology only by itself in its business or for its own benefit without recourse to the assessee year after year The clients of the assessee, on receiving the report may use it for commercial or technical knowledge to evaluate the produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. Nil/was filed by assessee which was selected for scrutiny on the basis of CASS for following reasons; 2.2 During the assessment proceedings, AO found that the assessee has received revenue receipt amounting to Rs. 4,28,68,986/- However no revenue was offered for taxation for the year under consideration. Accordingly, a show- cause notice was issued and served to the assessee dated 19.09.2021 which is reproduced as under:- On the perusal of form 26AS for the year under consideration, it is found that you have not disclosed whole amount of revenue received in the ITR filed by you for the year under consideration. Accordingly, you are requested to show cause as to why the difference between revenue receipt as per form 26AS and the revenue offered for taxation as per ITR filed by you for F.Y. 2018-19 relevant A.Y. 2019-20 should not be added back to the total income and taxed accordingly. 2.3 As no reply was filed by the assessee in response to the above mentioned show-cause, the revenue receipt amounting to Rs. 4,28,68,896/- were disallowed and proposed to be added to the total income of the assessee treating it as FIS/FTS for the year under consideration and accordingly the dra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd [2012] 346 ITR 467, the Karnataka HC held that where a Dutch company rendered technical services to the assessee, without making available any technical expertise so as to enable assessee to use those services independently in future, payment made for services in question could not be termed as 'fee for technical services', in the context of the India- Netherlands tax treaty. Karnataka HC has also interpreted the meaning of the term make available and observed that: The service should be aimed at and result in transmitting technical knowledge etc., so that the payer of the service could derive an enduring benefit and utilize the knowledge or know how on his own in future without the aid of the service provider. In other words, to fit into the terminology making available , the technical knowledge, skills etc must remain with the person receiving the services even after the particular contract comes to an end. It is not enough that the services offered are the product of intense technological effort and a lot of technical knowledge and experience of the service provider have gone into it. The technical knowledge or skills of the provider should be imparted to and absorb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing technical knowledge available at the same time are satisfied in accordance with provisions of Article 12 of the Treaty. In view of above, the Company humbly submits with your goodself that the preclinical laboratory services only provide a generic protocol of the test procedure and does not transfer any knowledge/ skill on use of proprietary equipment for carrying out testing process. Therefore, such report cannot be used for testing different sets of samples. Hence, the said services do not satisfy the make available test such that the receiver can deploy similar technology or techniques in the future without depending upon the service provider. Accordingly, the services rendered would not be liable to be taxed in India in accordance with the beneficial provisions of the Treaty, since preclinical laboratory services does not qualify as either royalty or FIS under the Treaty. Accordingly, the fees received by the Company for pre-clinical services shall not be taxable in India. 2.5 The AO was not satisfied and on examination of the sample contractual agreement and sample test reports provided by the assessee, AO concluded that the assessee is providing a technical and specialize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 05.02.2016 (Foster Wheeler France SA-ITAT, Chennai [TS-62-ITAT-2016(CHNY)] (iii) US Technology Resources Private Limited vs. ACIT(TS-511- ITAT-2013) 3. The assessee is in appeal before this Tribunal raising following grounds:- On the facts and circumstances of the case and in law, the learned Assistant Commissioner of Income Tax, International Taxation, - Circle 1 (2)(1), New Delhi ( the learned AO ), has erred in assessing the total income of the Appellant in the assessment order passed under section 143(3) read with section 144C of the Income Tax Act, 1961 ( the Act ) for the captioned Assessment Year ( AY ). Each of the ground is referred to separately, which may be kindly considered independent of each other. 1. Ground 1: Income earned by the Appellant erroneously characterized to be in the nature of Fees for Technical Services/ Fees for Included Services under the Act and the India - Canada Tax Treaty ( Tax treaty ) and is consequently subject to tax in India 1.1 On the facts and in the circumstances of the case, and in law, the learned AO erred in holding that the income earned by CRL Montreal from its customers in India is in the nature of Fees for Included Services ( FI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the study and any other relevant matters which shall be part of the agreement. Further, the agreement provide that what study material is to be provided by the sponsor and sufficient and comprehensive data concerning the suitability of the study material, storage and safety requirements has to be provided by the sponsor. The agreement further provides that the assessee was to conduct the study as specified by the sponsor as per the protocol. This kind of raw data and specimen of each study excluding the frozen/refrigerated samples for which sponsor had required a quality assurance were supposed to be kept by the assessee for a period of one year after the submission of the draft report and if beyond its detention period sponsor wanted to keep the material stored, the assessee was to charge further. The agreement shows that the sponsor derived an exclusive title, ownership and proprietary rights on the data, know-how, methodology, generated pursuant to the study agreement and same would vest in the sponsor as intellectual property and all the aspects of data processing and management systems which include hardware, software, written materials manifested in programmes, documentat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, skills, etc., must remain with the person receiving the services even after the particular contract comes to an end. It is not enough that the services offered are the product of intense technological effort and a lot of technical knowledge and experience of the service provider have gone The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. Technology will be considered 'made available' when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service that may require technical edge, skills, etc., does not mean that technology is made available to the person purchasing the service within the meaning of paragraph (4)(b). Similarly, the use of a product which embodies technology shall not pe1 se be considered to make the technology available. In other words, payment o consideration would be regarded as 'fee for technical/included services' only if the twin test of rendering services and making technical knowledge available at the same time is satisfied. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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