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TMI Blog2022 (8) TMI 1556X X X X Extracts X X X X X X X X Extracts X X X X ..... tracting expenses amounting to Rs.7,93,11,624/- which it claimed as a deduction in the assessment year under consideration. In the subsequent year, the same was reversed and offered to tax. However, the AO disallowed the same holding it to be mere provision. The Ld. DRP affirmed the disallowances made on the ground that it is an unascertained liability and the assessee had not deducted tax at sources. The contention of the Ld. A.R. is that the expenses claimed in this assessment year is reversed in the subsequent year and offered to tax and therefore no disallowance is warranted in the year under consideration. 3.2. The Ld. D.R. relied on the order of the lower authorities. 3.3. We have heard the rival submissions and perused the materials available on record. The assessee in this assessment year following the mercantile system of accounting made provisions for expenses on which there was no deduction of TDS. The assessee was liable for deduction of tax, since the assessee not deducted TDS, the said expenditure cannot be allowed as a deduction in the assessment year under consideration. The liability of the assessee to deduct TDS arises on making the provisions even on debiting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Reliance in this regard is placed on the following decisions: Lloyds Register Industrial Services (India) (P.) Ltd. v. ACIT (reported in [2010] 36 SOT 293 (Mum.)- and Sandvik AB v. DCIT (Order dated 06.01.2021 passed by the Pune Bench of the Hon'ble Tribunal in ITA No. 2524/Pun/2017)- 4.3. The Ld. D.R. relied on the order of lower authorities. 4.4. We have heard the rival submissions and perused the materials available on record. In our opinion, in this case, AO treated the payment of professional charges to Home Plus Company Ltd. as fees for technical services. In the present case, the payment has been made towards training services and the training services cannot be treated as technical, managerial or consultancy in nature, in terms of DTAA between India and Korea. The order of coordinate Mumbai Bench of Tribunal in the case of Lyods Registered Industrial Services (India) Pvt. Ltd. Vs. ACIT 36 SOT 293 (Mum), is directly on the issue, wherein held that: 14. We have considered the rival submissions carefully in the light of the relevant material on record as well as the decision cited by the parties. After careful perusal f various authorities relied on either si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sultancy charges paid to Tesco Stores Ltd. 5.1 Ld. A.R. submitted that during the year under consideration, the Appellant had paid Rs. 93,86,896/- to Tesco Stores Ltd. ("Tesco Stores"), in consideration for the said entity providing the following services: (i) international finance; (ii) international human resources; (iii) international treasury; and (iv) international corporate affairs and corporate secretariat. Since no income chargeable to tax in India accrued/arose to Tesco Stores in India, the Appellant did not deduct tax at source. The Assessing Officer made a disallowance under Section 40(a)(ia) of the Act by merely holding that the submissions made by the Appellant is not satisfactory. The DRP upheld the disallowance made. 5.2 In this regard, Ld. A.R. submitted that in terms of Article 13(4)(c) of the India-UK DTAA, in order for a payment to be in the nature of fees for technical services, the services ought to 'make available' technical knowledge, experience, skill, know-how or processes, or consists of the development and transfer of a technical plan or technical design. Technology will be considered 'make available' when the person acquiring the service is enabled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consultancy Services, the liability to tax is attracted. In the case on hand it is not in dispute that the nature of services rendered is technical in nature. Therefore, it is liable to tax. But this ability arises under the Double Taxation Avoidance Agreement. Section 90 which deals With the Double Taxation relief provides that the provisions of the DTAA override the *visions of the Income-tax Act in the matter of ascertainment of chargeability to lncome-tax and ascertainment of total Income-tax. [Para 12] Under the Act if the consideration paid for rendering technical services constitutes income by way of fees for technical services, it is taxable. However, article 12 of the India Netherlands Treaty defines fees for technical services. As per article 12 of DTAA also fees for technical services means the payment of any amount to any person in consideration for rendering of any technical services only, if such services make available technical knoWledge, expertise, skill, know-how or processes. If the technical knowledge expertise, skill, know how or process is not made available by the service provider, who has rendered technical service for the purpose of Article 12 of DTAA i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he recipient of the service in further conduct of his business. Merely because his business is dependent on the technical service which he receives from the service provider, it does not follow that he is making use of the technology which the service provider utilizes for rendering technical services. The crux of the matter is after rendering of such technical services by the service provider, whether the recipient is enabled to use the technology which the service provider had used. Therefore, unless the service provider makes available his technical knowledge, experience, skill, know-how or process to the recipient of the technical service, in view of the clauses in the DTAA, the liability to tax is not attracted. [Para 14] From the aforesaid discussion it is clear that test is whether the recipient of the service is equipped to carry on his business without reference to the service provider. If he is able to carry on his business in future without the technical service of the service provider in respect of services rendered then, it would be said that technical knowledge is made available. [Para 18] It is in this background one has to look at the facts of this case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en to ensure the highest possible data quality and to meet or exceed the specifications described in the agreement. It is the responsibility of the Fugro to take the appropriate action to maintain the level of data quality. Survey areas are also mentioned in the agreement. The contract provides that all helicopter charges for the entire survey will be the responsibility and cost of the assessee. [Para 23] The Fugro air borne services provide four varieties of applications of advanced geophysical mapping technologies. They are Electromagnetic, Aeromagnetic, Airborne Gamma-Ray Spectrometry, Airborne Gravity. In the instant case, Fugro air borne surveys helicopter borne time-domain EM system known as DIGHEM was adopted to carry out the survey. A copy of the survey report is also placed on record. The said report discloses that survey was conducted in 8 blocks. The particulars are clearly set out. It also sets out that the air borne data acquisition system utilized on the project consists of the subsystems which are set out therein. A Bell 206L helicopter registration VT-DAK was used for the survey. The helicopter pilots and aircraft engineers were contracted from Deccan Aviation Pv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made available the technical knowledge with which they rendered technical service. There is no transmission of technical knowledge, expertise, skill, etc., from Fugnpalong with technical services rendered by them. The assessees are completely kept in dark about the process and the technologies which the Fugro adopted in arriving at the information/data which is passed on to the assessees as technical service. The assessee is unable to make use of the said technical knowledge by itself in its business or for its own benefit without recourse to Fugro. In fact, the question whether along with rendering technical services, whether the technical knowledge with which that services was rendered was also made available to the assessees/customers is purely a question of fact which is to be gathered from the terms of the contract, the nature of services undertaken and what is transmitted in the end after rendering technical services. If along with technical services rendered, if the service provider also makes available the technology which they used in rendering services, then it falls with the definition of fee for technical services as contained in DTAA. However, if the technology is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red into between the assessees and the Fugro, makes it clear that the information and data to any site on which any work services are performed under the agreement shall belong exclusively to the assessees and its assigns and the Fugro shall keep such information strictly confidential. Therefore, the technical plan or design always belong to the ownership of the assessees. It never vested with Fugro. Under the terms of the agreement, the data collected is kept confidential under the supervision of the Government of India. Under the terms of the agreement, the ownership of the data collected or other documents vest with the assessees only and not with Fugro. Therefore, the Fugro was never the owner of the said data and, hence, the question of transfer of such data does not arise. It is because the assessee was given the licence for prospecting under the provisions of Mines & Minerals (Development and Regulation) Act, 1957. By virtue of the aforesaid licence, the assessees were given the right to undertake reconnaissance, prospecting or mining operations in any area except under and in accordance with the terms and conditions of reconnaissance permit or of a prospecting licence as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rve the integrity of all information. [Para 30] Therefore, the assessee not being possessed with the technical know how to conduct this prospecting operations and reconnaissance operations, engaged the services of Fugro which is expert in the field. By way of technical services Fugro delivered to the assessee the data and information after such operations. The said data is certainly made use of by the assessee. Not only the said data and information was furnished in the digital form, it is also provided to the assessee in the form of maps and photographs. These maps and photographs which were made available to the assessee cannot be construed as technology made available. Fugro has not devised any technical plan or technical design. Therefore, the question of Fugro transferring any technical plan or technical design did not arise in the facts of these cases. The maps which are delivered are not of kind of any developmental activity. As such, earlier the information which is furnished to the assessee by way of technical services in the digital form is also given in the form of maps. Therefore, the case on hand do not fall in the second part of the aforesaid clause dealing with de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P.) Ltd. (reported in [2020] 122 taxmann.com 174 (Karnataka) - Flipkart Internet Pvt. Ltd. v. DCIT and Ors. (Order dated 24.01.2022 passed by the Hon'ble High Court of Karnataka in W.P. No. 3619/2021) paras 37 and 38; - Toyota Boshoku Automotive India Pvt. Ltd. v. DCIT (Order dated 13.04.2022 passed by this Hon'ble Tribunal in IT(TP)A No. 1646/Bang/2017) - Goldman Sachs Services Pvt. Ltd. v. DCIT (Order dated 29.04.2022 passed by this Hon'ble Tribunal in IT(IT)A No. 362/Bang/2020 and Ors.). 6.5 Ld. A.R. submitted that in any event, taxes under Section 192 of the Act were deducted and remitted (page 56 of the DRP's directions) and therefore Section 40(a)(i) of the Act at the threshold has no application. Reliance in this regard is placed on the decision of this Hon'ble Tribunal in ACIT v. Aon Specialist Services (P.) Ltd. (reported in [2020] 116 taxmann.com 368 (Bangalore-Trib.). 6.6 The Ld. D.R. relied on the orders of the lower authorities. 6.7 We have heard the rival submissions and perused the material available on record. After hearing both the parties, we are of the opinion that similar issue came for consideration before this Tribunal in the case of Abbey Bus Ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Hon'ble Supreme Court in the case of CIT v. HCL Technologies Ltd. (reported in [2018] 93 taxmann.com 33 (SC)), the expenses ought to be reduced from both the export turnover as well as the total turnover. Further any enhancement to total income, in so far as it relates to the income of the eligible unit, should be eligible for deduction under Section 10AA of the Act as per decision of the Hon'ble High Court of Karnataka in CIT and Anr. v. Mpact Technology Services Pvt. Ltd. (Order dated 11.07.2018 passed in ITA No. 228.2013). 7.2 Ld. D.R. relied on the orders of the lower authorities. 7.3 We have heard the rival submissions and perused the materials available on record. After hearing both the parties, we are of the opinion that this is squarely covered by the judgement of Hon'ble Supreme Court in the case of CIT Vs. HCL Technologies Ltd. reported in 404 ITR 719 wherein held as follows: "Neither section 10A nor section 2 of the Income tax Act, 1961 defines the term "total turnover". The term "total turnover" is defined in clause (ba) of the Explanation to section 80HHC of the Act. Explanation 2(iv) to section 10A of the Act defines "export turnover" to mean the consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2015-16 Ground No.2 (a) to (d) in this appeal are reproduced as under:- a) The Ld. AO erred in concluding that the assets worth INR 1,64,92,752, received from Tesco Stores Limited on a Free of Cost basis is 'benefit arising from the business' of the Appellant and chargeable to tax under Section 28(iv) of the Income-tax Act, 1961 ['the Act'] b) The Ld. AO erred in making allegations which are based on speculations, conjectures and surmises. c) The Ld. AO erred in relying on the decisions of Priyanka Chopra (2018) 89 taxmann.com 287 (Mumbai Tribunal) and Serval' Engineering Works (2016) 75 taxmann.com 82 (Chennai Tribunal), which are completely distinguishable on facts. d) Without prejudice to above, in case the above is considered as income under section 28(iv) of the Act, the Appellant should be eligible to claim depreciation under section 32 of the Act 11.1 Facts of the case are that during the year under consideration, the Appellant received certain capital goods such as computers, scanners, hard disks, etc. from its Associated Enterprise on free of cost basis. The assets were received for usage in rendering services to the AE. The Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report, for the purpose of the business. The expenditure incurred does not give rise to any enduring benefit. Reliance in this regard is placed on the following decisions: - Hindusthan Aluminium Corpn. Ltd. v. CIT (reported in [1986] 26 Taxman 475 (Calcutta))- and - DCIT v. Assam Asbestos Ltd. (reported in [2003] 132 Taxman 808 (Gauhati))-. 12.3 Moreover, it is further submitted by the Ld. A.R. that the project was later shelved by the Appellant, and therefore no benefit can arise (refer Indo Rama Synthetics (I) Ltd. v. CIT ([2009] 185 Taxman 277 (Delhi)). 12.4 The Ld. D.R. relied on the order of the lower authorities. 12.5 We have heard the rival submissions and perused the materials available on record. There is no dispute that the project for which feasibility report obtained for establishment of setting up of new project, which said to be Abdon project. If the project was not taken up and it was incurred for the conducting feasibility of that project and that expenditure to be allowed as a revenue expenditure as the assessee has not derived any enduring benefit on incurring of this expenditure. Accordingly, this issue is remitted to the file of AO to verify whether a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a disallowance under Section 40(a)(ia) of the Act. The DRP upheld the disallowance made. 14.2 Ld. A.R. submitted that in order for the payments to be in the nature of fees for technical services, in terms of Article 12(3)(b) of the India-Korea DTAA, the payments ought to be in consideration for technical, managerial or consultancy services (please see page 13 of the caselaw compilation). In this regard, it is submitted that undisputedly, the payments made are towards training services. The training services are not technical, managerial or consultancy in nature, and therefore, the payments made are not taxable under the DTAA or the Act. Reliance in this regard is placed on the following decisions: Lloyds Register Industrial Services (India) (P.) Ltd. v. ACIT (reported in [2010] 36 SOT 293 (Mum.)- para 14; and Sandvik AB v. DCIT (Order dated 06.01.2021 passed by the Pune Bench of the Hon'ble Tribunal in ITA No. 2524/Pun/2017)- paras 12-16. 14.3 Ld. D.R. relied on the order of the lower authorities. 14.4 We have heard the rival submissions and perused the materials available on record. As discussed in in ground No.10, in earlier assessment year for AY 2014-15 in ITA No.289 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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