TaxTMI 
TaxTMI 
2017 (1) TMI 780
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....Technical Services (FTS). 4. So far as this grievance of the assessee is concerned, the relevant material facts are like this. The assessee before us is a wholly owned subsidiary of Bombardier Transportation (Holdings) Singapore Pte Ltd, a part of Bombardier Group, and is engaged in the business of manufacturing and supply of rail transportation system, which includes traction, auxiliary converters, vacuum circuit breakers, control electronics, signaling equipment, coaches and bogies for metro trains. During the course of scrutiny of TDS returns, the Assessing Officer noticed that the assessee has made payments, aggregating to Rs. 9,19,96,649 to Bombardier Transportation Canada Inc (BTCI, in short). The details of these payments are as follows:- Service Units Text (USD) (INR) TDS Nature of service Finance System - Maneja 48,711 2,647,306 NO ERP application used at Maneja site of the company by employees in Finance department to do accounting and reporting of all financial transactions HR Connect 45,321 2,463,072 NO Common standard HR platform used throughout BT, which enables employees and managers to modify their personnel data throu....
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....nagement tool / database used by employees in the Mainline Division, of the company vi/.. as and when any claim is filed by any customer against the company, employees working in project management function of the mainline division have to record and enter the details of that claim in this database. Maximo - DB MAXPPC 28,511 1,549,481 NO It is a Enterprise Asset Managem ent solution that has unique industry solutions for various business processes. This flexible solution provides a single platform to deliver asset lifecycle and maintenance management from end-to-end across the enterprise.. Consisting of six core modules -- Materials, Procurement, Asset, Work, Service and Contract, Maximo Asset Management-provides a comprehensive answer for asset management Other global adjustments 40 2,154 PPC Serialisation 54 2,940 Bar Coding application used to check and control the inventory PPRS 25,955 1,410,564 NO Project Management application, used to keep and archieve all records and database separately for each customer project/ contract pertaining to all divisions of the company other than RCS. All records an....
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....material, finished goods, etc. at the site. It is an efficient way to keep a check and control on the inventory in the site. Payroll System - India 14,323 778,400 NO HR Payroll System for India - containing data base of all employees of the company .and used to prepare the monthly payroll of all Indian employees PRO BT Global 22,773 1,237,637 NO MS Project Server 2010 and project professional managed by GPM MS Project Server 2010 and project professional Visual Factory India 21,624 1,175,186 NO Tool to supervise manufacturing operations at Savli Site Office Support 2,244 121,931 NO Office support viz. PDF writer etc. EB PPC Vaesteras 10,059 546,661 NO Database for Mainline division of the company used for storing engineering related documents between the divisions Depreciation - 2011- 8947 Segregation of 477 25,929 NO Depreciation of Project management application Depreciation - 2012- 4062 EPPM Template F 55 3,002 NO Depreciation of Project management application PDM Metaphase 11,603 630,593 NO • Product Data Management (PDM) tool PDM enhancements & bug ....
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....Canada Double Taxation Avoidance Agreement (Indo Canadian tax treaty, in short; (1998) 229 ITR (St) 44]. He was of the view that the impugned payments are in covered by the consideration for "use or right to use any industrial, commercial or scientific equipment" which was taxable under section 9(1)(vi) read with Explanation 2(iva) as also article 12(3)(b) of the Indo Canada tax treaty. The Assessing Officer, after a detailed analysis of the payments, was of the view that a major portion of the payment is for the use or right to use industrial, commercial or scientific equipment, while remaining cover the use of various processes for which access has been granted by the assessee company". He thus held that the assesse ought to have withheld tax at source @10% from these payments. Accordingly, a demand under section 201(1) r.w.s. 195 was raised on the assessee. Aggrieved, assessee carried the matter in appeal before the CIT(A) who upheld the plea of the assessee and deleted the impugned tax withholding demand. While doing so, in a very well reasoned order, learned CIT(A), inter alia, observed as follows: 2.10.13 I have carefully considered the facts of the case, the submiss....
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.... (a) payment of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic, or scientific work including cinematograph films or work on film tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right or property which are contingent on the productivity, use, or disposition thereof; and b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial, or scientific equipment, other than payments derived by an enterprise described in paragraph 1 of Article 8 from activities described in paragraph 3(c) or 4 of Article 8. The software application/services such as e-mail database, control tools, bar coding solutions, HR Payroll System, finance reporting, applications for recording time & attendance etc. used by the appellant are primarily in the nature of applications for data processing or warehousing wherein the appe....
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....these items are clearly licensed softwares and applications, the cost of which has been incurred by BT-Canada and later recouped from the appellant. The Hon'ble Delhi High Court in Director of Income-tax vs. Infrasoft Ltd. [2013] 264 CTR 329 and Nokia Networks Oyj [2013] 358 ITR 259 has unequivocally held that payment towards software for self-use is nothing but consideration towards a copyrighted article but not towards right to use the embedded copyright. Strictly speaking, use of a copyright in a software for the purpose of commercial exploitation in terms of reproduction, sub-lisence etc. only would tantamount to royalties. Further, none of the payments have also been made towards use of any industrial, commercial, or scientific equipment. In view of discussion above, I am of the considered view that the payment made by the Appellant for the provision of IT support services cannot be taxed as 'Royalties' under the beneficial provisions of Article 12 of the India- Canada DTAA. Further, as stated in the earlier ground of appeal in the light of the Apex Court decision in GE India Technology Centre Pvt. Ltd. [2010] 327 ITR 456 (SC) wherein it has been held that....
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.... to say beyond placing reliance on the stand of the Assessing Officer. We also find that this issue is also covered, in favour of the assessee, by a coordinate bench decision of this Tribunal which has, in the case of Kotak Mahindra Primus Ltd vs DDIT [(2007) 11 SOT 578 (Mum)] wherein it was observed by the bench that "The Indian company does not have any control over, or physical access to, the mainframe computer in Australia. There cannot, therefore, be any question of payment for use of the mainframe computer. It is indeed true that the use of mainframe computer is integral to the data processing but what is important to bear in mind is the fact that the payment is not for the use of mainframe computer per se, that the Indian company does not have any control over the mainframe computer or physical access to the mainframe computer, and that the payment is for act of specialized data processing by the Australian company. Use of mainframe computer in the course of processing of data is one of the important aspects of the whole activity but that is not the purpose of, and consideration for, the impugned payment being made to Australian company. The payment, as we have observed earl....
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....port (g) HR back office; (h) legal, (i) corporate office fees, (j) supply management, (k) communication, (l) bids, (m) intellectual property (n) six sigma and (j) others. There is no dispute, however, about the nature of services inasmuch as all these services are in the nature of management support and advisory services. On these facts, the Assessing Officer was of the view that these services result in "passing on suitable knowledge, skill and experience during the course of execution of these services" which itself "makes available experience and skill of the non resident to the assessee which gets hit by the mischief of definition of fees for technical services in the DTAA". The Assessing Officer was also of the view that "the service of technical input, advice, expertise etc rendered by the non resident company are technical in nature as provided for definition in the DTAA and not merely a standard service". All along in the discussions, the Assessing Officer emphasized on the technical inputs and benefits to the assessee which leads to the services being technical in nature and making available benefits of these services to the assessee. It was thus held, without giving any f....
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....vices have been availed by the appellant regularly year on year, there is no scope of appellant being equipped enough to carry out such services/functions on its own. More importantly, there is no training involved under the agreement neither has there been any material evidence to prove so. Merely because the appellant benefits out of the services being provided by BT-Canada which is common for the Bombardier Group as a whole, would not automatically bring these services within the purview of 'making available' any technology to the employees of the appellant for them to further apply this technology in their routine business operations. The case laws referred by the appellant buttress the argument put forward by the appellant that the services rendered by BT-Canada are in effect towards the proper functioning of the appellant's business operations and alignment with the Bombardier group's global best practices. Such arrangements are not uncommon among various multi-national enterprises and have also been favourably considered by the following decisions: * Bharti AXA General Insurance Co. Ltd (234 CTR 62) * Bovis Lend Lease (India) Pvt. Ltd. vs. I....
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.... technology and fees for same was not taxable as fees for technical services as per article 13 of India-UK DTAA. The law is settled so far as the connotations of 'make available' clause in the definition of fees for technical services in the contemporary tax treaties are concerned. It is held to be a condition precedent for invoking this clause that the services should enable the person acquiring the services to apply technology contained therein. The Tribunal observed that there are two non-jurisdictional High Court decisions, namely Delhi High Court in the case of DIT v. Guy Carpenter & Co. Ltd. [2012] 346 ITR 504/207 Taxman 121/20 taxmann.com 807 and Karnataka High Court in the case of CIT v. De Beers India (P.) Ltd. [2012] 346 ITR 467/208 Taxman 406/21taxmann.com 214 in support of this proposition, and there is no contrary decision by the jurisdictional High Court or by the Supreme Court. Therefore, unless there is a transfer of technology involved in technical services extended by the UK based company, the 'make available' clause is not satisfied and, accordingly, the consideration for such services cannot be taxed under article 13 (4) (c) of India-UK tax treat....
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.... provides that, "The term "fees for technical included services" as used in this Article means payments of any kind to any person in consideration for services of a managerial, technical or consultancy nature (including the provision of such services through technical or other personnel) if such services : (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received ; or (b) make available technical knowledge, experience, skill, know-how or processes, which enables the person acquiring the services to apply the technology contained therein". In order to invoke article 12(4)(a) it is necessary that such services should "make available" technical knowledge, experience, skill, know-how, or processes or consist of the development and transfer of a technical plan or technical design The services provided by BT Canada were simply management support or consultancy services which did not involve any transfer of technology. It is not even the case of the Assessing Officer that the services were such that the recipient of service was enabled to perform these services on its own without any furt....