TaxTMI 
TaxTMI 
2016 (1) TMI 792
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....d at 5% of the base prices from the suppliers. 2. The applicant has requested for ruling on the following questions:- 1) Based on the facts and circumstances of the case, whether the supply management service fees received by Cummins Limited, UK from Cummins Technologies India Limited (hereinafter referred to as 'CTIL') pursuant to Material Suppliers Management Service Agreement dated 7 December 2010 between Cummins Limited and CTIL, is in the nature of "Fees for Technical Services" or "royalties" within the meaning of the term in Article 13 of the India-UK double tax avoidance agreement ('India-UK treaty')? 2) Based on the answer to Question (1) above, and in view of the fact that Cummins Limited does not have a permanent establishment ('PE') in India in terms of Article 5 of the India-UK treaty, whether the payments received by Cummins Limited are chargeable to income-tax in India? 3) Based on the answer to Question (1) to (2) above, and in view of the facts and circumstances of the case, if the supply management service fees received by the Cummins Limited from CTIL are not liable to income-tax in India, then whether the provisions of Section 92 to Section 92F of the Ac....
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....ent services do not qualify either as Fees for Technical Services (FTS) under Article 13(4) of India-UK Treaty or Royalty under Article 13(3) of India-UK Treaty. 5. Article 13(4) of the India-UK treaty defines FTS as: ".....the term 'fees for technical services' means payments of any kind of any person in consideration for the rendering of any technical or consultancy services (including the provision of services of a technical or other personnel) which: (a) are ancillary and subsidiary of 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 knowhow or processes, or consist of the development and transfer of a technical plan or technical design." Paragraph 3(a) and 3(b) of Article 13 defining royalty are reproduced below: "3. For the purposes of this Article, the term "royalties" mean: (a) payments of any kind received as a consideration for the use of, or the right to u....
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.... Invensys Systems Inc (317 ITR 438) * Measurement Technologies Limited (AAR No.966 of 2010) 9. The Revenue has objected to the reliance by the applicant on MOU to the India-US Treaty saying that MOU is intended to give guidance to the tax payers and tax authorities in interpretation and is not applicable in the case of the applicant where India-UK Treaty applies. The Revenue has relied on the ruling of the AAR in the case of Perfetti Van Melle Holding BV and Steria India Limited 45 Taxman.com 281. 10. As regards the nature of services the Revenue has mentioned that turbocharger is a technical industrial product and for rendering supply management services for purchase of components of turbocharger the applicant has to use its technical knowledge and expertise. According to the Revenue the applicant is imparting its technical knowledge and experience to CTIL. In this respect the Revenue has relied on the ruling given by this authority in the case of Shell India Markets Private Limited (2012) 18 Taxman.com 46. The Revenue has analyzed services rendered as per agreement and has concluded that the technical services were made available to CTIL. The Revenue has mentioned that as per....
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....hat in this case the authority was faced with a different question in deciding whether a mere restrictive definition of the FTS clause entered into with another country could be imported into the India-France Treaty by virtue of the most favoured nations clause which was present in the said tax treaty. 13. We have carefully considered the submission of the applicant and the Revenue. The objection of the Revenue that the agreement entered into by the applicant with CTIL is a scheme for tax avoidance is without any merits. To say that the applicant has entered into contract with Indian company with the main purpose to take advantage of India-UK Treaty is factually incorrect. The facts as stated by the applicant in the application show that the applicant maintains Global Cummins contract supply agreement with suppliers and is responsible for finalization of supplier prices to Cummins Turbo Technologies worldwide, including CTIL , from UK and US suppliers. There is no mandate for CTIL to source the components from the approved suppliers only and if CTIL finds a better pricing from an alternate supplier, it shall be free to source the component from them. It is incorrect to say that su....
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.... 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 use of a product which embodies technology shall not per se be considered to make the technology available. In other words, payment of consideration would be regarded as "fee for technology/included services" only if the twin test of rendering services and making technical knowledge available at the same time is satisfied. 15. We had also recently analyzed the concept of 'make available' in the case of Measurement Technologies Ltd. and concluded that the services in the nature of procurement services can never be classified as technical or consulting in nature and surely are not making available any technical knowledge, experience, know-how etc. The facts of this case are also similar and there is no reason to take a different view. It is also relevant to point out that the services rendered in this case are managerial in nature and managerial services was taken out from the ambit of FTS from India-UK Treaty w.e.f. 11th February 1994 and a clause relating to 'make available' was inserted. ....