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TMI Blog2024 (11) TMI 1385X X X X Extracts X X X X X X X X Extracts X X X X ..... cturer of the equipment supplied to customers in India, and the agreement between the Assessee and Ciena, US, is essential to ensure that the support services are provided to the customers in India. Revenue s contention that Ciena, US directly provides knowledge, technology, skill and experience to the Assessee for it to render services is not supported by the plain language of the Agreement dated 01.04.2010. Thus, the contention that consideration paid by the Assessee was fees for included services as defined under paragraph 4(b) of Article 12 of the DTAA, is not merited. As noted-above, the findings of the learned ITAT regarding the nature of services rendered by Ciena, US are the findings of the fact. It is also important to note that no question regarding whether the said findings are perverse has been projected by the Revenue in this case. Decided against revenue. - HON'BLE MR. JUSTICE VIBHU BAKHRU AND HON'BLE MS. JUSTICE SWARANA KANTA SHARMA For the Appellant Through: Mr. Vipul Agarwal, Advocate. versus For the Respondent Through: Mr. Vishal Kalra, Mr. S.S. Tomar, Mr. Ankit Sahani, Advocates. VIBHU BAKHRU, J. (ORAL) 1. The Revenue has filed the present appeals impug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een found that the services received by the assessee do make available knowledge, experience, know - how to the recipient and this clearly visible when one examines the nature of the services rendered and the consequential enduring benefits obtained by the recipient. Any technical service can be provided only when the provider possesses the expertise, skill, knowledge or know how etc., in the relevant field and once it is so, the further act of providing such services to the recipient enables the recipient in many ways including enabling it to apply such technology on its own. Having established the facts of this case as above, it will be appropriate if further analysis of the scope of phrase technical services and Make Available is made keeping in view the explanations offered by the assessee on these phrases in its replies. Technical Services It was held in Intertek Testing Services, in (2008) (307 ITR 418 ) by Authority of Advance Ruling (AAR) that the expression technical services cannot be construed in narrow sense. It has been observed therein that the term technical ought not to be confined only to technology relating to engineering, manufacturing or other applied sciences. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement, French Company has undertaken to provide assessee with services in nature of assistance, professional and administrative consultation and training. Various clauses of service agreement contain provisions for services which relate to overall management and direction, marketing and managing accounts and financial operations of assessee. s also apparent that advice and assistance provided by French Company on business strategy, on general management, on marketing and commercial matters, on financial control and accounting matters, and on purchase and sales, environment and safety and giving of training to optimize sales techniques to employees of assessee, are all capable of being put to use by assessee in future on its own and, thus, consultancy services are also made available to assessee. tinder these facts, the AAR held that the payments by assessee to French company towards advisory services is fees for technical services' and, therefore, assessee is required to deduct tax at source under section 195 (1) while making payments for aforesaid services. Thus, the term make available is not limited to services of technical nature but also includes the consultancy services. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r fees for included services as defined in this Article, where the payer of the royalties or fees is the Government of that Contracting State, a political sub-division or a public sector company ; and (b) 20 per cent of the gross amount of the royalties or fees for included services in all other cases ; and (ii) during the subsequent years, 15 per cent of the gross amount of royalties or fees for included services ; and (b) in the case of royalties referred to in sub-paragraph (b) of paragraph 3 and fees for included services as defined in this Article that are ancillary and subsidiary to the enjoyment of the property for which payment is received under paragraph 3(b) of this Article, 10 per cent of the gross amount of the royalties or fees for included services. 3. The term royalties as used in this Article means : (a) payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic, or scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e royalties or fees for included services are attributable to such permanent establishment or fixed base. In such case the provisions of Article 7 (Business Profits) or Article 15 (Independent Personal Services), as the case may be shall apply. 7. (a) Royalties and fees for included services shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub-division, a local authority, or a resident of that State. Where, however, the person paying the royalties or fees for included services, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties or fees for included services was incurred, and such royalties or fees for included services are borne by such permanent establishment or fixed base, then such royalties or fees for included services shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated. (b) Where under sub-paragraph (a) royalties or fees for included services do not arise in one of the Contracting States, and the royalties relate to the use of, or the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... echnical services , to determine taxability of income received by AE for services rendered in India, the services rendered should satisfy the requirements under Article 12 (4), which requires technical knowledge, experience, skill etc., to be made available to the recipient of such services. 10. In the aforesaid context, the Revenue has projected the following question for consideration of this Court: A. Whether the Ld. ITAT erred in deleting the addition of Rs. 8,09,63,299/- on account of non-deduction of TDS u/s 40 (a) (i) of the Act, even though the assessee company was under obligation to deduct tax at source or withhold the tax u/s 195 of the Act read with Article 12 of the India USA DTAA for the FTS paid by it to the foreign entity? 11. It is apparent that the above question is premised on the basis that the Assessee had an obligation to withhold tax under Section 195 of the Act read with Article 12 of the DTAA. However, the facts as set out by the learned ITAT in its order indicate that the services rendered by Ciena, US did not contain an element of making available technology, knowledge and experience to the Assessee. The Revenue does not challenge the findings of the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es where the equipment develops any defect and requires repair, the same has to be shipped overseas to Ciena, US for the repairs. It is also relevant to note that Ciena, US is the manufacturer of the equipment supplied to customers in India, and the agreement between the Assessee and Ciena, US, is essential to ensure that the support services are provided to the customers in India. 16. The Revenue s contention that Ciena, US directly provides knowledge, technology, skill and experience to the Assessee for it to render services is not supported by the plain language of the Agreement dated 01.04.2010. Thus, the contention that consideration paid by the Assessee was fees for included services as defined under paragraph 4(b) of Article 12 of the DTAA, is not merited. 17. As noted-above, the findings of the learned ITAT regarding the nature of services rendered by Ciena, US are the findings of the fact. It is also important to note that no question regarding whether the said findings are perverse has been projected by the Revenue in this case. 18. In view of the above, we do not find that any substantial question of law arises in the present appeals. 19. The appeals are accordingly dism ..... X X X X Extracts X X X X X X X X Extracts X X X X
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