TaxTMI 
TaxTMI 
2001 (8) TMI 1397
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....nt is that it is resident in the United States of America. It was incorporated in the State of Oklahoma, United States of America on 25-6-1969 under the name of Pro-Quip Inc. The said corporation filed the Amended and Restated Certificate of Incorporation dated 3-6-1999, which was recorded by the office of the Secretary of State of Oklahoma on 14-6-1999. The name of the applicant was changed to the Pro-Quip Corporation. 3. One of the objects for which the company was incorporated was to engage in general engineering business and in general practice of engineering in all its branches, and in that capacity to make conduct, and supervise research, surveys, design and investigations into all matters and things in the field of science and technology provided this work is accomplished under direct supervision of a person who is registered as a professional engineer under the applicable statutes of the State of Oklahoma. 4. Linde Process Technologies (India) Ltd., (LPT) is a company incorporated in India having its registered office at 806 Meghdoot, 96, Nehru Place, New Delhi, India. The said company is engaged in the business of executing the turnkey projects in India, more particu....
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....without deduction of tax at source, giving detailed reasons for the same. The said Assessing Officer vide his certificate dated 12-8-1999 granted the no-objection to LPT for remittance of the said amount, without deduction of tax at source. Therefore, the amounts of US $ 28,875 and US $ 1,15,500 was remitted to the applicant by LPT without deduction of the tax at source. Balance amount of US $ 1,73,250 was not remitted till the date of this application and will be remitted without deduction of tax at source in accordance with the no-objection certificate issued by the Income-tax Department. 9. The case of the applicant is that it did not have any income from any source in India, other than the income described above and other transactions involving sale of machineries or equipments. In view of the said fact, the applicant was never required to file any return of income in India. 10. The transaction in question is purchase of engineering, drawings and designs. The consideration has been fixed for supply of the engineering, drawings and designs. 11. The contract for the supply of the engineering, drawings and designs having been completed during the previous year ending o....
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....ched by the negotiators to the India-US treaty indicating how the provisions of the article are to be understood by the authorities and taxpayers of both the States. This memorandum discusses situations where technology could be said to have been made available. The principle which emerges from an analysis of situation illustrated in the memorandum on this aspect, is that technology would be considered made available when the person acquiring the service is enabled to apply the technology embedded in the services provided to him. The mere fact that the provisions of the service may require technical input by the person providing the service would not per se mean that technology has been made available. Similarly, the use of a product, which embodies technology, shall not per se constitute technology being made available. 16. Training services, which envisage transfer of technical know-how or expertise to the recipient of service and enable application of such know-how independently, are, therefore, covered within the scope of 'make available' Development and transfer of a technical plan/design Services that involve development of technical plants, designs, drawings (as per....
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....ideration for supply of goods as described in the purchase order placed by LPT and Nirma Ltd. Hydro-Chem agreed to carry out the engineering according to the general standard of engineering profession to enable LPT's customer (Nirma Ltd.) to achieve the performance guarantee. In carrying out this engineering Hydro-Chem had to exercise maximum care and diligence. If there were any deficiencies in engineering, Hydro-Chem had to correct and/or complete such engineering at its own cost so that the LPT's customer (Nirma Ltd.) could reach the minimum performance guarantee. 21. The basic principle underlying article 12 appears to be that the licensor's State of residence is entitled to tax royalties received by it. Some difficulty is created in cases where technical assistance is provided by the licensor apart from the property licensed. To get over this difficulty article 12 of the Indo-US Agreement provides : "Article 12 : Royalties and fees for included services.-(1) Royalties and fees for included services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. (2) However, such royalties and fees for included ser....
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....his article, 'fees for included services' means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provisions of services of technical or to other personnel) if such services : (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a royalty payment within the meaning of the tax treaty is made, or (b) make available technical knowledge, experience, skill, know-how or processes or consist of the development and transfer of a technical plan or technical design." (5) Notwithstanding paragraph 4, 'fees for included services' does not include amounts paid : (a) for services that are ancillary and subsidiary, as well as inextricably and essentially linked, to the sale of property other than a sale described in paragraph 3(a); (b) for services that are ancillary and subsidiary to the rental of ships, aircraft, containers or other equipment used in connection with the operation of ships or aircraft in international traffic; (c) for teaching in or by educational institutions; (d)to an employee of the person making the payments or t....
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.... included service' payments which are received for making available technical knowledge, skill, know-how or processes or consists of the development and transfer of a technical plan or technical design. It can be argued that the American company has made available to LPT its technical knowledge, experience, skill, know-how, processes all have developed and transfer technical plant or technical design as contemplated in paragraph (4). But paragraph (5) has specifically excluded from the ambit of paragraph (4) amounts paid for services that are ancillary and subsidiary linked to the sale of property other than a sale described in paragraph (3)(a). But if, as in this case, there is an out and out sale without any contingent clause then even if such sale included rendering of engineering services, those services cannot be anything other than "services that are ancillary and subsidiary as well as inextricably and essentially linked to the sale of property" in paragraph (5). Therefore, such services will clearly fall within the exclusionary clause of paragraph (5). 26. The illustration given in memorandum of understanding on which reliance has been placed is not apposite. In that exam....
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....f the computer." 28. The example is in two parts. Firstly, it deals with the purchase of a computer from US computer manufacturer. The second part relates to updating the operating system and training personnel for the purpose of application of the updated technology over a period of ten years. 29. We are not concerned, in this case, with any long-term contract for up-dating technology. But the first part of the example squarely applies to the facts of this case. In that example an Indian company purchased a computer from an US manufacturing company. In the case before us, drawings and designs have been purchased from a German company. Engineering service has also been given in connection thereof. 30. The facts of this case are very similar to the facts of the first part of Example (8). The engineering services were being rendered as a part of the purchase agreement as a composite whole. This service was essentially linked with the sale of drawings and designs. It is not an agreement for long-term service to be rendered after the sale of the machinery. 31. It has also to be borne in mind that drawings and designs which constitute know-how and are fundamental to an asses....