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TMI Blog2022 (12) TMI 1558X X X X Extracts X X X X X X X X Extracts X X X X ..... the person acquiring the services to apply the technology contained therein. Mere incidental advantage to the recipient of services is not enough. The real test is the transfer of technology and on the given facts of the case, there is no transfer of technology and what has been appreciated by the AO/CIT (A) is the incidental benefit to the assessee which has been considered to be of enduring advantage. In our understanding, in order to invoke make available clauses, technical knowledge and skill must remain with the person receiving the services even after the particular contract comes to an end and 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. 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 receipts of the assessee on account of provision of information technology and other administrative services to its affiliate in India are not i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AE and such technical knowledge, experience, skill, know-how etc. were made available by the assessee to the Indian affiliate and, therefore, they are in the nature of FTS being taxable @ 10% under the provisions of the DTAA. 7. Objections were raised before the DRP but were of no avail and in line with the DRP directions. 8. Before us, the ld. counsel for the assessee vehemently stated that the assessee had rendered information technology and certain other administrative services to its Indian affiliate pursuant to the Service Agreement. The ld. counsel for the assessee submitted that the Bio-Rad Group operates globally and has a number of manufacturing and trading companies in various countries and in order to provide certain general administrative services to the group and its affiliates, it has set up two tier service level companies (a) a company that services the requirements of entire group companies all over the world and (b) a company that services the requirements of specific continent i.e. Asia-Pacific region. It was explained that the assessee is a service provider of the Asia-Pacific region provides general administrative services to the group companies situated ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operations; assessment of computer and other automated data processing system requirements, their acquisition, and the proper functioning of such systems; and other information technology services. 2. Sales and Marketing Services. Services related to sales of products, customer technical support, warranty, and non-warranty services, including but not limited to assistance with the development of local business plans, sales promotion planning, providing sales promotion materials, package design, advice concerning advertising production costs, and advertising research. 3. Finance and Accounting Services. Assistance with Finance and Accounting, including the provision of business management systems; assistance in creating procedures and policies for accounting purposes; assistance in budgeting, financial forecasting and planning, general accounting, cost control and other similar related finance services. 4. Human Resources. Assistance with personnel recruitment; performance management and improvement systems; organization development; -employee relations; company-wide committee facilitation; company employee and community communication; employee benefit plan obligations; com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n paragraph 3 is received; or (b) make available technical knowledge, experience, skill knowhow or processes, which enables the person acquiring the services to apply the technology contained therein;" 17. A perusal of the aforementioned provision shows that in order to qualify as FTS, the services rendered ought to satisfy the 'make available' test. Therefore, in our considered opinion, in order to bring the alleged managerial services within the ambit of FTS under the India-Singapore DTAA, the services would have to satisfy the 'make available' test and such services should enable the person acquiring the services to apply the technology contained therein. 18. As mentioned elsewhere, the agreement is effective from 01.01.2010 and we are in Assessment Years 2018-19 and 2019-120. In our considered opinion, if the assessee had enabled the service recipient to apply the technology on its own, then why would the service recipient require such service year after year every year since 2010? 19. This undisputed fact in itself demolishes the action of the Assessing Officer/DRP. Facts on record show that the recipient of the services is not enabled to provide the same service withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct one or more international firm(s) of reinsurance broker(s) like the assessee for competitive proposals from the international reinsurer. Then, the international reinsurance brokers like the assessee would contact other primary brokers and various syndicates in the Lloyds market for competitive proposals. Based on the various offers or proposals given by the international reinsurance brokers, like the assessee, to J.B. Boda, the latter would present various options to the originating insurer in India, which would take a final decision in the matter. Based on the decision of the originating insurer in India, the policy terms would then be agreed upon and the risk would be placed with the international reinsurer. It was also pointed out that as per the normal industry practice, the reinsurance premium net of brokerage of 10% as per the policy contract is remitted to the assessee, i.e., reinsurance brokers, for onward transmission to international reinsurers. The intermediation fee which is another word for brokerage is paid separately by the originating insurance in India to J.B. Boda, the international reinsurance brokers like the assessee and other intermediaries, based on a mutu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xability aspect is concerned. When the technical service is provided, that technical service is to be made use of by the 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 technic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arkets (P.) Ltd.(342 ITR 223. This decision was also used in the case of Linklaters LLP vs Deputy Commissioner of Income tax [2017] 79 taxmann.com 12 and while deciding the appeal of Linklaters LLP(supra), the co-ordinate bench at Mumbai has observed as under: "14 Similarly reliance placed by AO on another judgement of AAR in the case of Perfetti Ben case (supra) is misconceived since this ruling has been set aside by Hon'ble Delhi High Court in the judgement reported at 52 Taxmann.com 161. Similarly, reliance on the judgement of Shell India Markets (P.) Ltd., In re [2012] 342 ITR 223/205 Taxman 288/18 taxmann.com 46 (AAR - New Delhi) is also of no use since in this case also earlier ruling in the case of Perfetti was followed which has been set aside by Hon'ble Delhi High Court. Thus, impliedly, the said judgment gets overruled by the judgement of Hon'ble Delhi High Court. Similarly, decision in Dy. DIT (IT) v. Tata Iron &Steel Co Ltd. [2009] 34 SOT 83 (Mum.) was in context of provisions of section 9(i)(vii) of the Act and does not deal with the provisions of DTAA. Further it was given on altogether different facts." 26. Further, the Assessing Officer has also reli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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