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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 ..... ed towards Indian customers in the pharmaceutical, medical device and biotechnology industries. The Indian customers provide samples prior to undertaking human clinical trials which is tested by the Assessee. By way of rendering such preclinical laboratory services, the Assessee also provides a report to its customers containing a generic protocol of the test procedure and results to conclude the preclinical phase of testing. It is the case of assessee that in rendering the above services, no technology / know-how / knowledge is transferred to the customers nor any right to access/ use of such property is granted. 2.1 On hearing both the sides it comes up that the return of income of 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 foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to which assessee's reply was:- "Article 12(4) of the Treaty, defines FIS to mean payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of a technical or other personnel) if such services, makes available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design. The term 'make available' has not been defined under the Treaty. Hence, reliance can be placed upon the following judicial precedents to ascertain satisfaction of 'make available' test: In the case of CIT v. De Beers India Minerals Pvt 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: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enable faster content delivery of the customer's website, etc. to the end users. They do not provide the customers/end users with any technological knowledge, skill, etc. which enable them to apply it on their own in future to enjoy faster content delivery without recourse to the Applicant. Hence, we hold that the consideration received by the Applicant from Akamai India cannot be considered to be in the nature of fees for technical services as referred to in Article 12 of the India-US DTAA." (emphasis supplied). Further, in the case of Anapharm Inc., In re (A.A.R. NO. 746 OF 2007) held that payment of consideration would be regarded as fee for technical/included services only if the twin tests of rendering services and making 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded to the clients by the assessee as and when required in accordance to the contractual agreement. This suggest that the services provided are not automated and there is human knowledge and know-how involved in it. Further, this knowledge and know-how equips the client to use it in the future. Thus the AO concluded that the receipts in the hands of the assessee are in the nature of Fees for technical services. AO also concluded "Further, the services are being "Made available" to the client by the assessee in accordance with the Article 12(4) of the India-Canada DTAA. The AO relied following decisions, to support aforesaid conclusions:- (i) Mahindra and Mahindra Ltd. v DCIT (Mumbai) (SB) 313 ITR 263 (AT); (ii) The Chennai bench decision dated 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 tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f services provided by the assessee, we find that at page 244 to 266, a copy of a master service agreement between the assessee and Dr. Reddy's Laboratories Ltd. is provided. Similarly, at page 271- 280, master service agreement between the assessee and Vyome Biosciences Pvt. Ltd. is provided. A perusal of these two master service agreement show that what the assessee provides is conduct of a study on a non-exclusive basis. The study has to be conducted not on a continuous basis, but the specific details of each study agreement has to be separately negotiated and specified in writing. The study has to be as per the protocol which will be provided by the sponsor. The protocol will specify study, design, purpose, desired information, experimental procedures, estimated duration 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in case of the assessee relied the judgement of the Hon'ble Karnataka High Court in the case of CIT vs. De Beers India Minerals (P) Ltd. (2012) 21 taxmann.com 214 for the meaning of the phrase 'make available' as follows:- "22. What is the meaning of 'make available'. The technical or consultancy service rendered ""should be of such a nature that it 'makes available' to the recipient technical knowledge, know-how and the like. 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 The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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