TaxTMI 
TaxTMI 
TaxTMI 
2016 (9) TMI 503
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....yed that the order of the learned CIT(A) may be cancelled and that of the Assessing Officer may be restored to the above extent. iv. Any other ground that may be urged at the time of hearing. 2. Briefly stated, the relevant material facts are as follows. The assessee before us is an individual fiscally domiciled in, and carrying on business in the name of his sole proprietorship concern by the name of 'Transforme', in the USA. During the relevant previous year, the assessee has provided certain services to Fuse+Media Pvt Ltd (FMPL, in short), a business entity based in India. As to the nature of services rendered by the assessee, these are stated to be as follows: Transforme has been requested to provide a software development service to design, build and maintain a complete video streaming website and all of its administrative applications. This system is called Fuse+Media Web Application (FMWA). Tranforme will be responsible for the works that include database architecture design and implementation, virtual server management, SDN supports, website development, video technology ingestion, and continuous improvement and sites maintenance. 3. During the course of scrutiny ass....
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....services" and that the make available condition was fulfilled on the facts of this case inasmuch as "the mere fact that such a service has enabled the user of the service in applying the technology (not owning it) is sufficient to demonstrate that the technical knowledge has been made available". The Assessing Officer thus concluded that the income of the assessee is taxable in India, though on gross basis @10% under section 115A of the Act, and that the education cess@ 2% and secondary education cess @1% was also payable on the tax so charged. Aggrieved, assessee carried the matter in appeal before the CIT(A). Learned CIT(A) held that "article 15 of India US tax treaty specifically covers the services provided by independent engineers", that "the provisions of article 12(6) specifically state that in case the services provided by an individual which are in the nature as dealt with in article 15, then the provisions of article 15 would prevail over article 12", that "it is also apparent from the facts of this case that the appellant has rendered engineering services to its customer, namely FMPL" and that "therefore, in my view, the provisions of Article 15 would be applicable". He ....
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....be taxed in the Contracting State in which they arise and according to the laws of that State; but if the beneficial owner of the royalties or fees for included services is a resident of the other Contracting State, the tax so charged shall not exceed : (a) in the case of royalties referred to in sub-paragraph (a) of paragraph 3 and fees for included services as defined in this Article (other than services described in subparagraph (b) of this paragraph ): (i) during the first five taxable years for which this Convention has effect, (A) 15 per cent of the gross amount of the royalties or fees for included services as defined in this Article, where the payer of the royalties or fees is the Government of that Contracting State, a political sub-division or a public sector company; and (B) 20 per cent of the gross amount of the royalties or fees for included services in all other cases; and (ii) during the subsequent years, 15 per cent of the gross amount of royalties or fees for included services; and (b) in the case of royalties referred to in sub-paragraph (b) of paragraph 3 and fees for included services as defined in this Article that are ancillary and subsidiary to the enj....
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.... firm of individuals (other than a company) for professional services as defined in Article 15 (Independent personal services). 6. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or fees for included services, being a resident of a Contracting State, carries on business in the other Contracting State, in which the royalties or fees for included services arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the royalties or fees for included services are attributable to such permanent establishment or fixed base. In such case the provisions of Article 7 (Business profits) or Article 15 (Independent personal services), as the case may be, shall apply. 7. (a) Royalties and fees for included services shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub-division, a local authority, or a resident of that State. Where, however, the person paying the royalties or fees for included services, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establ....
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....of physicians, surgeons, lawyers, engineers, architects, dentists and accountants. 6. A careful look at the above treaty provisions would show that in the event of our coming to the conclusion that the services rendered by the assessee are in the nature of independent personal services under article 15, it is wholly academic whether or not these services are covered by article 12 and satisfy the make available clause. It is so for the reason that (a) it is uncontroverted claim of the assessee that the conditions precedents for taxability under section 15 are not satisfied inasmuch as neither the assessee had any fixed base available to him in India nor the assessee visited India for more than 90 days in the relevant previous year, and (b) under article 12(5), which states that "fees for included services will not include amounts paid.....(e) to an employee of the person making the payments or to any individual or firm of individuals (other than a company) for professional services as defined in Article 15 (Independent personal services)", once an amount is found to be of such a nature as can be covered, in an appropriate case, by article 15, the same shall stand excluded from the ....
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....ion or sale of commodities" is incidentally the same as assigned by Scrutton, LJ in IRC vs. Maxse (1919) 1 KB 647 referred to in L.B. Curzon's Law Dictionary. Referring to Hon'ble Bombay High Court's judgment in the case of Sakharam Naryan Kherdekar vs. City of Nagpur Corporation AIR 1964 Bom 200, at p. 210, the Law Lexicon further states that 'an activity to be profession must be one carried on by an individual by his personal skill, intelligence and dependent on individual characteristics'. Black's Law Dictionary (5th Edition) defines profession as 'a vocation or occupation requiring special, usually advanced, education and skill e.g. in law and medicine' and observes that 'the labour and skill involved in a profession is predominantly mental or intellectual, rather than physical or manual'. The school of thought thus emerging from these deliberations is that, broadly speaking, a profession will imply any vocation carried on by an individual, or group of individuals, requiring predominantly intellectual skills, dependent on individual characteristics of the person(s) pursing that vocation, requiring specialized and advanced education or expertise. [Emphasis, by under....
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....y to an individual for his performance of activity in an independent capacity was subject to the provisions of art. 14. Payments to an enterprise in respect of the furnishing by that enterprise of the activities of employees or other personnel are subject to arts. 5 and 7. The remuneration paid by the enterprise to the individual who performed the activities is subject either to art. 14 (if he is an independent contractor engaged by the enterprise to perform the activities) or art. 15 (if he is an employee of the enterprise). If the parties believe that further clarification of the relationship between art. 14 and arts. 5 and 7 is needed, they may make such clarification in the course of negotiations." (Emphasis, by underlining, supplied by us) 106. We are in considered agreement with this analysis in the UN Model Convention Commentary. We are thus of the considered view that, in a situation like the one that we are in seisin of, i.e. in which specific provisions for professional services or independent personal services or included services exist under art. 15, when services are rendered by the enterprise, art. 5(2)(k) will come into play, and when services are rendered by an in....