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TMI Blog2024 (9) TMI 1712X X X X Extracts X X X X X X X X Extracts X X X X ..... to allow the grounds of appeal raised by the assessee. Appeal filed by the assessee is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ive (ld. AR for short) for the assessee submitted that the additional ground raised by the assessee is not pressed and requires no adjudication as to the legal ground raised by it. The ld. AR contended that during the year under consideration, the assessee has received the impugned amount as per the Cost Contribution Agreement (CCA in short) entered into with Shell India Markets Pvt. Ltd. (SIMPL) for BSS. The ld. AR further contended that the said amount was received by way of cost recharge for general BSS which are in the nature of management support, development and provision of support and business tools, provision of marketing support, promotion of professional competence, legal services, etc. which are not liable to be taxed in India and would not be categorized as 'income of the assesse' as per section 2(24) of the Act. Further, the ld. AR contended that the services are not been made available to the Indian entity and would not be categorized as 'fees for technical services' as per India-UK DTAA. The ld. AR iterated that the lower authorities have relied on the decision of Hon'ble Authority for Advance Ruling (Hon'ble AAR for short) in the case of Shell India Market Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lishment has not been raised by both the sides, the Tribunal ought not to get into the said issue as per the ratio laid down in the decision of Indira Balakrishna, Manager of Estate of Balakrishna Purshottam Purani (supra). The ld. AR contended that only the issues for which specific grounds of appeal has been raised, has to be adjudicated. 10. We have heard the rival submissions and perused the materials available on record. It is observed that the assessee has entered into a Cost Contribution Agreement dated 01.04.2008 with SIMPL for general BSS which are in the nature of management support, development and provision of support and business tools, provision of marketing support, promotion of professional competence, legal services, development, communication and audit of standards of performance, contracting and procurement services, taxation advice and services, general financial advice and services, employee relations and public affairs/media advice and other business support services. The assessee contends that the cost incurred by the assessee is to be allocated amongst Shell operating companies based on cost allocation keys as per the terms of CCA and further the said costs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the said ruling SIMPL had filed a Writ Petition before the Hon'ble Jurisdictional High Court challenging the validity and legality of the order passed by the Hon'ble AAR and the Hon'ble High Court (in Writ Petition No. 10788 of 2012 vide order dated 01.03.2024), quashed the order of the Hon'ble AAR as being not sustainable by law and by holding that the payment received by the assessee from SIMPL is not in the nature of 'fee for technical service' and further held that the services are in the nature of managerial service and not technical service which are made available. The relevant extract of the said decision is cited herein under for ease of reference: 15. Be that as it may, the crux of the matter lies in ascertaining whether the finding of the AAR that services availed by Petitioner from SIPCL or payments made by Petitioner to SIPCL are of/for 'technical/'consultation' services and secondly, whether such services are 'made available' to Petitioner. Article 13 of DTAA reads as under: "ARTICLE 13 ROYALTIES AND FEES FOR TECHNICAL SERVICES 1. Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contractin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of technical or other personnel) which: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph (3)(a) of this Article is received; or (b) are ancillary and subsidiary to the enjoyment of the property for which a payment described in paragraph (3)(b) of this Article is received; or (c) make available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design." 16. From the bare words of the Article, it is clear that income of Shivgan SIPCL will be chargeable to tax in India only if the payment by Petitioner is towards fees for 'technical services'. Under Article 13(4), the term 'fees for technical services' means payments of any kind in consideration for the rendering of any technical or consultancy services. Sub-para (c) to Article 13(4) further restricts the meaning of the term to only that which makes available technical knowledge, experience, skill, know-how or processes, or consists of the development or transfer of a technical plan or technical design. 17. The principle of noscitur a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those which make available technical knowledge or consist of development and transfer of a technical plan or technical design. Thus, a harmonious reading of the provision of Article 13 in its entirety, clearly establishes the intent of the DTAA in making income chargeable to tax only if the services availed pertain to technical services or consultancy services. Technical services in this context mean services requiring expertise in a technology. By Consultancy Services, in this context, would mean advisory services. The categories of technical and consultancy services are to some extent, overlapping. Under paragraph 4, technical and consultancy services are considered included services only to the following extent: (1) as described in paragraph 4(a), if they are ancillary and subsidiary to the application or enjoyment of a right, property or information for which a payment described in paragraph (3)(a) of Article 13 is received; (2) are ancillary and subsidiary to the enjoyment of the property for which a payment described in paragraph (3)(b) of Article 13 is received; or (3) as described in paragraph 4(c), if they make available technical knowledge, experience, skill, know-how, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It cannot on that ground be said that the taxi driver who controls the vehicle, and monitors its movement is rendering a technical service to the person who uses the automobile. Similarly, when a person travels by train or in an aeroplane, it cannot be said that the railways or airlines is rendering a technical service to the passenger and, therefore, the passenger is under an obligation to deduct tax at source on the payments made to the railway or the airline for having used it for travelling from one destination to another. When a person travels by bus, it cannot be said that the undertaking which owns the bus service is rendering technical service to the passenger and, therefore, the passenger must deduct tax at source on the payment made to the bus service provider, for having used the bus. The electricity supplied to a consumer cannot, on the ground that generators are used to generate electricity, transmission lines to carry the power, transformers to regulate the flow of current, meters to measure the consumption, be regarded as amounting to provision of technical services to the consumer resulting in the consumer having to deduct tax at source on the payment made for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 "make available", the technical knowledge, skill?, 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 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 knowledge, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the incidental benefit to the assessee which has been considered to be of enduring advantage. 21. 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. " [Emphasis is ours] 15. We tend to agree with the analysis and conclusion arrived at by the Tribunal." (emphasis supplied) 23. Therefore, even if it is fees for technical or consultancy services, it can be only where fees are paid in consideration for making available technical knowledge, experience etc. Thus the view of the AAR that SIPCL works closely and advises the employees of Petitioner and hence makes available the services is not correct. This view in fact suffers from fallacy since the agreement continues to operate till date. If the view of AAR is to be held as correct then the contract must stand concluded as once the services and the know how, skill e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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