TaxTMI 
TaxTMI 
2017 (6) TMI 1174
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.... facts in holding and the learned Dispute Resolution Panel ('DRP') erred in law and facts confirming the fees received by the appellant amounting to INR 17,842.635 for services rendered as 'royalty' under the Act and the DTAA and taxing the fees under section 115A of the Act. 2. Holding that where there is no specific Article for taxability of particular payment in the DTAA, the provisions of the Act would be applicable (a) On the facts and in the circumstances of the case, the learned AO erred in law in holding and the learned DRP erred in law in confirming, that where- there is no specific Article for taxability of a particular payment in the DTAA, the provisions of the Act would be applicable. (b) On the facts and in the circumstances of the case, the learned AO erred in law in taxing the fees received by the appellant under section 115A of the Act irrespective of there being no Article in the DTAA for taxation or fees for technical services and the appellant not having permanent Establishment (PB) in India, 3. Levy of interest under section 234B of the Act On the facts and the circumstances of the case, the learned AO has erred in levying interes....
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....ons of the Act would be applicable. (b) On the facts and in the circumstances of the case, the learned AO erred in law in holding that the fees received (i.e. FTS) as taxable under the Act, irrespective of there being, no Article in the DTAA for taxation of FTS. 3. Penalty proceedings under section 271(1)(c) The learned AO has erred in initiating penalty proceedings under section 275(:l)(c) of the Act. 4. Relief (a) The appellant prays that directions be given to grant all such relief arising; from the above grounds and also all relief consequential thereto. (b) The appellant craves leave to add to or alter, by deletion, substitution,, modification or otherwise, the above grounds of appeal, cither before or during the hearing of the appeal . (c) Further, the appellant prays that all above adjustments / additions /' disallowances made by the learned AO and upheld by the learned DRP are had in law and liable to be deleted. 4. Brief facts of the case are as follows. 4.1 The assessee is a non-resident company incorporated in United Arab Emirates. It claims to be engaged in the business of providing regional service activities for the benefit of ABB legal entities in....
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....ssed in the earlier paragraphs the sums paid to ABB FZ-LLC are covered by the definition of FTS as per Explanation 2 to Section 9(1)(vii) of the Act. Where there are specific provisions to the contrary, a treaty enacted under Section 90 (which itself is a part of the Act) would override the other provision of the Act with an additional advantage of applying more beneficial provision of the Act, Hence, so far as chargeability to tax and computation of income are concerned, where the tax treaty provides for a particular mode of computation on income, the same should be followed irrespective of the provision in the Act. However, where there is no specific provisions in the treaty, the provision of the Act will govern taxation of income. Thus, if treaty is silent as regard taxability of particular category of income, its taxability has to be ascertained as per domestic law. " Case laws taken in support are : 1. CIT v. Hindusthan Paper Corpn. Ltd. [1994] 77 Taxman 450 (Cal). . 2. CIT v. Davy Ashmore India Ltd. [1991] 190 ITR 626 (Cal.) 3. CESC Ltd. v.Dy. CIT [2003] 87 ITD 653 (Kol.) 4. PILCOM v. ITO [2001] 77 ITD 218 (Cal.) 5. A.P. Moller Maersk Agency India (P) Ltd., v. Dy. ....
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....the provision in the DTAA to tax Fees for Technical Sendees the same would be taxed as per the Article 7 of the DTAA applicable for business profit and in the absence of PE in India, the said income is not chargeable to tax in India, Accordingly, we set aside the orders of the authorities below and delete the addition made by the Assessing Officer. Further In support of this argument, the ld. AR relied on the decision of the coordinate bench of this Tribunal in IBM India (P.) Ltd v. Dy. DIT (International Taxation) [IT (IT) Appeal Nos.489 to 498 (Bang.) of 2013, dated 24-1-2014], for the A.Ys. 2007-08 to 2011-12. In para 6 of the order it was held by the Tribunal as under : "6. In the Ground'at S:'No.2, .-the assessee contends that the payments made .to IBM- Philippines for services rendered cannot be regarded as 'Managerial', 'Technical' or Consultancy' and consequently the said payments do not constitute 'FTS' u/s.9(l)(vii) of the Act. The learned Authorised Representative argued that the said payments to IBM - Philippines are not chargeable to tax under the India - Philippines DTAA. It was submitted by the learned Authorised Representative ....
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....ion was parted with shared by the assessee with its counterpart. In this regard, DR drew our attention to the following clauses of the agreement entered between the assessee and its counterpart in India. I. Under Regional Occupational Health and Safety (OHS) services : 1. Development of regional OHS strategies in line with ABB strategies -The strategies belong to the assessee and is transferred and developed to the requirement of Service Recipient (SR) in India, constitutes Royalty. 2. Provision of information about strategies, goals, targets and instruction in the field of OHS. 3. Coaching and Monitoring the OHS advisors of the SR in implementing and developing OHS plan and strategies. 4. Acting as a contact point between the Group Safety Advisor and the SR. 5. Development and maintenance of OHS management systems 6. Assisting in adopting OHS legislation, 7. Organising and carrying out of personal training within the OHS area 8. Implementation and provision of control programs and safety inspections for activities carried out by the SR. 9. Provision of advice, training and coaching in hazard controls, methods, procedures and processes to eliminate and reduce h....
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....ponsorship for selected EPC projects. 3. Organisation and carrying out of capture training, 4. Setting up of target and follow-up of achievements. Etc.. .etc. VI. Under Regional Project Risk Management Services : 1. Supply of information of best practices, lessons learnt, benchmarking information and internal audit reports. Etc... VII. Under Regional market development services ; 1. Monitoring of the implementation of the IMA Region strategic initiatives, including quarterly reviews, and support work.. 2. Organizing and carrying out business development workshops 3. Developing business plans for and provide implementation support. 4. Preparation of weekly market updates for regional management team 5. Support with market, customer and competitor analysis. Etc.. (iv) On the basis of above terms of agreement Id DR submitted that it is evident from the above that ABB FZ LLC has reeeived payment from ABB Limited as a consideration of providing of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill and has rendered services in connection with such activities and would essentially constitute a know-how contract ....
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....cquired by the assessee company over a period of time which is also considered' by' the assessee company as, secret information, . Such information partakes the character of IPR which is to remain with the assessee. It is thus evident 'that clause 9 of 'the agreement also supports the contention of the AO that there was a consideration paid for transfer of rights of information which included IPR. (ix) Thus, it is concluded that the terms and conditions of the agreement show.- a stipulation on transfer of industrial, scientific, commercial experience by the assessee for a payment which is therefore to be characterized as royalty. (x) It was submitted that assessee has shared information concerning industrial, commercial or scientific experience which is in the nature of know-how which is undivulged and arising from previous experience. Case laws wherein it has been held that know-how could be imparted through : (a) Documentation (ITO v Munak Galva Sheets Ltd. [1990] 35 ITD 304 (Delhi). (b) Discussion of technical problems in working committee set up by the licensee of the know-how (Daimler Benz AG West Germany's case (supra) . (c) Licensee's repres....
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....rected by the bench to submit the tax residency certificate in accordance with the provision of section 90 of Act and also in terms of Article 4 of DTAA. 9. The assessee in compliance of the direction of the bench had filled the certificate issue by UAE authorities and also filled further submission dated 18.05.2017. 10. The revenue had also filled the written submissions in response to submissions of assessee to the following effect: "4. One more important aspect which needs to be considered now is - the assessee has filed 'Tax Residency Certificate' issued by the UAE authorities on 27.10.2014, It is also clearly mentioned in the certificate that the certificate is valid for one year from 01.04.2012. This certificate is clearly not applicable to the case on hand for the subject assessment years for the reason that the assessee filed, its returns of income for A, Ys.2010-11 and 2011-12 on 09.09.2010 and 27.07.2011 respectively and it is very clear that the assessee was not eligible to claim the benefit of DTAA for the abovesaid assessment years. 5. Mere tax residency certificate also is not enough because, as per definition of 'residence company' under DTAA,....
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....or in the agreement referred to in sub-section (1) shall, unless the context otherwise requires, and is not inconsistent with the provisions of this Act or the agreement, have the same meaning as assigned to it in the notification issued by the Central Government in the Official Gazette in this behalf. Explanation 1,- For the removal of doubts, it is hereby declared that the charge of tax in respect of a foreign company at a rate higher than the rate at which a domestic company is chargeable, shall not be regarded as less favourable charge or levy of tax in respect of such foreign company. Explanation 2,- For the purposes of this section, "specified territory" means any area outside India which may be notified as such by the Central Government." 13. Section 9 of the Act deals with income deemed to accrue or arise in India, which reads as under: 9. (1) The following incomes shall be deemed to accrue or arise in India:- (i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of Income in India, or through the transfer of a capital ass....
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....tion, model, design, secret formula or process or trademark or similar property; (iii) the use of any patent, invention, model, design, secret formula or process or trademark or similar property; (iv) the imparting of any information concerning technical, industrial commercial or scientific knowledge experience or skill; [(iva) the use or right to use any industrial, commercial or scientific equipment but not including the amounts referred to in section 44BB,] (v) the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or videotapes for use in connection with- television or tapes for use in connection with radio broadcasting,-'but not including 'consideration for the sale, distribution or exhibition of cinematographic films; or (vi) the rendering of any services in connection with the activities referred to in sub-clauses (i) to [(iv), (iva) and] (v). (vii) income by way of fees for technical services payable by- (a) the Government; or (b) a person who is a resident, except where the fees are payable in respect of services utilised in a business or profession c....
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....ation 2--For the removal of doubts, it is hereby declared that income which has been included in the total income of a person on the basis that it has accrued10- or arisen10-- or is deemed to have accrued10 or arisen10- to him shall not again be so included on the basis that it is received or deemed to be received by him in India. 16. The Articles dealing with resident, permanent establishment, business profit, royalty . any other income , residual clause etc (DTAA Articles 1,3, 4, 5, 7, 12, 22, 25 & 29 ) in DTAA agreements entered into with foreign country namely UAE reads as under ARTICLE 1 PERSONAL SCOPE This Agreement shall apply to persons who are residents of one or both of the Contracting States. ARTICLE 3 GENERA'L DEFINITIONS 1. In this Agreement, unless the context otherwise requires : (a) the term "India" means the territory of India and includes the territorial sea and air space above it. as well as any other maritime zone in which India has sovereign rights, other rights and jurisdictions, according to the Indian law and in accordance with international law ; (b) the term "U.A.E," means the United Arab Emirates and when used in a geographical sense, means....
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....or their authorised representative. 2. As regards the application of the Agreement by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the laws of that State concerning the taxes to which the Agreement applies. ARTICLE 4 RESIDENT 1. For the purposes of this Agreement the term 'resident of a Contracting State' means: (a) in the case of India: any person who, under the laws of India, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. This term, however, does not include any person who is liable to tax in India in respect only of income from sources in India; and (b) in the case of the United Arab Emirates: an individual who is present in the UAE for a period or periods totalling in the aggregate at least 183 days in the calendar year concerned, and a company which is incorporated in the UAE and which is managed and. controlled wholly in UAE. 2. For the purposes of paragraph 1: (a) The Republic of India, its political sub-divisions or local authority thereof shal1 be deemed to be resident of the Republic of In....
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....shment" includes especially : (a) a place of management; (b) a branch ; (c) an office ; (d) a factory ; (e) a workshop; (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources; (g) a farm or plantation ; (h) a building site or construction or assembly project or supervisory activities in connection therewith, but only where such site, project or activity continues for a period of more than 9 months ; (i) the furnishing of services including consultancy services by an enterprise of a Contracting State through employees or other personnel in the other Contracting State, provided that 'such activities continue for. the same project or connected project for a period or periods aggregating more than 9 months within any twelve-month period. 3. Notwithstanding the preceding provisions of this Article, the term "permanent establishment" shall be deemed not to include : (a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise ; (b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display....
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....re a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment. 3. In determining the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the business of the permanent establishment, including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere, in accordance with the provisions of and subject to the limitations of the tax laws of that State.) 4. Insofar as it has been, customary in a Contracting State to determine the profits'to be attributed to a permanent establishment on the basis of an apportionment of the' total profits of the enterprise to its various parts/nothing in paragraph (2) shall preclude that Contracting State from, determining the profits to be taxed by such an apportionment as may be customary ; the methods of apportionment adopted shall, however, be such that the result shall be in accordance with the principles contained in this Article. 5. No prof....
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....itself, a political sub-division, a local authority or a resident of that State. Where, however, the person paying the royalties, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties was incurred, and such royalties are borne by such permanent establishment or fixed base, then such royalties shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated. 6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement. ARTICLE 22 OTHER INCOME 1. Subject....
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....e paid in India. Such deduction shall not however, exceed that part of income-tax as computed before the deduction is given, which is attributable to the income which may be taxed in the U.A.E. 4. For the purpose of paragraph (3), the term 'tax paid in India' shall be deemed to include the amount of Indian tax which would have been paid if the Indian tax had not been exempted or reduced in accordance with the special incentive measures under the provisions of the Income-tax Act, 1961, which are designed to promote economic development in India, effective on the date of signature of (his Agreement, or which may be introduced in the future in modification of, or in addition to, the existing provisions for promoting economic development in India, and such other incentive measures which may be agreed upon from time to rime by the Contracting States. 5. Where, in accordance with any provision of the Agreement, income derived or capital owned by a resident of a Contracting State is exempt from tax in that State, such State may, nevertheless, in calculating the amount of tax on the remaining income or capital of such resident, take into account the exempted income or capital. A....
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....e assessee for the purposes of availing the benefit of the said agreement is required to furnish a certificate of the assessee being a resident of the other country. (iii) The assessees would have the benefit of IT Act in India as well as of the DTAA and the provision of whichever is more beneficial to the assessee out of the two shall be applicable to the assessee. 20. In the present case, though it is the case of the assessee that the assessee is a company incorporated in UAE, but the certificate has not been furnished by the assessee before the authorities below saying that the assessee is a resident of UAE. In our view, though assessee is a company, but for the purpose of qualifying for the benefit under DTAA in term of Article 1 and Article 4 of DTAA, it is necessary assessee company is managed and controlled wholly, in UAE. In the absence of any such finding by the authorities below and also in the absence of evidence produced by the assessee, it is difficult to give the benefit of DTAA to the assessee. In our view, it is for the assessee to furnish the certificate of residence of UAE and the onus is on the assessee to prove that the assessee is managed and controlled whol....
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.... of powers conferred on Central Government under clause (b) of Section 90(1) of the Act. Thus the agreement entered between the Central Government and a foreign government can only be in respect of tax leviable under law in force in that country of the same income which is subjected to tax in India. If the income is not subjected to tax in India, then the Central Government is not authorised to enter into an agreement with a foreign country for the purpose of avoiding double taxation. Therefore, in our view, taxation of income is sine qua non in both the contracting and other contracting state. In the present case, the assessee has not filed any document to show that the income arising out of the services rendered by the. assessee are taxable in UAE. 25. Though the appeal of assessee is liable to be dismissed on the ground of assessee was not resident of UAE , however we deem it appropriate to deal with all the grounds raised before us in both the appeals in the following paragraphs collectively as these are interrelated. All GROUNDS OF BOTH THE APPEALS 26. The issue for our consideration is whether during the financial year 2009-10 the assessee company had received fees for pr....
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....eign countries was entered into between the Government of UAE and Government of Republic of India on 22.09.1993. Article 1 of the agreement gives the personal scope of the agreement. Article 2 gives the taxes covered. Article 3 gives the general definitions. Article 4 defines 'Resident'. Article 5 defines 'Permanent Establishment'. Articles 6 to 21, it provides for the income arising to the resident .from immovable property, business profits, shipping. AE, dividends, interest, royalties, capital gains, independent person services, dependent personal services, director fees, income earned by entertainers and athletes, remuneration and pensions in respect of government service, non-government persons and annuities, students, trainees and apprentices, professors, teachers and researchers, etc., Thus approximately all facets of income are covered in Articles 6 to 21 of the DTAA. However, in Article 22, which is in the form of residual article, it is mentioned that, income of the Resident of a contracting state, wherever arising, which is' not expressly dealt in the form of Article, shall not be taxable in the contracting state, i.e., to say' that income not form....
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.... treaty, therefore, it would fall in Article 22 (other income). It was further submitted that as the assessee is not having a Permanent Establishment in India, therefore, the sum received by the assessee is not to be taxed in India. 35. Vide letter dt. 17.05.2012, the assessee was asked to explain the nature of services rendered along with evidence, such as documents, e-mails, reports and copy of invoices, as proof of having rendered the sevices. In response thereto the assessee vide letter dt. 14.06.2012 filed a letter along with Annexures 1 and 2, named 'Regional Headquarter Services Agreement' and "Simple agreement' document relating to entity in India in connection with rendering of services'. The response given by the assessee vide, letter dt. 14.06.2012, is reproduced hereinbelow, for the sake of clarity : We refer to the captioned notice issued by your office for the assessment proceedings of the Company for A.Y 2010-11 and the subsequent discussion our authorised representatives M/s BSR & Co., Chartered Accountants had with your goodself on 6 June 2012 and 7 June 2012. In this connection, we submit the following, in respect of the queries raised by your g....
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.... The invoice copy is enclosed as Annexure 3. In the event that you require any further explanations/clarifications, kindly provide us with an opportunity to present our case and make submissions. 36. The various services to be rendered as per the Regional Headquarter Service agreement, were mentioned in the said agreement and some of the services are reproduced hereinabove while recording the submissions of ld DR. 37. In the reply dt. 14.06.2012, it was mentioned that only three employees were sent to India for 25 days and AO had asked the assessee as to which branch of ABB Ltd the services were provided and when it was provided. Rather a vague reply was submitted stating that the services were provided either during visits to ABB Ltd (India) or mainly outside India over the phone . We refer so the captioned notice (enclosed as Annexure 1) issued by your good self for the assessment proceedings of the Company for AY 2010-11 wherein your good self has asked the Company to show cause as to why: * The payments made to the Company should not be treated as royalty under the Income-tax Act, 1961 ('the Act') as the Double Taxation Avoidance Agreement ('DTAA....
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....ved is various supportive communication via e-mail, telephone calls and telephone conferences with ABB Ltd. The below mentioned Group Functions in ABB FZ LLC were providing services in 2010,, under the Regional Headquarter Agreement, to amongst otters ABB Ltd, India. 1 Regional Occupational Health and Safety (OHS) services Below services were provided either during visits, to ABB Ltd, India or, mainly, from outside India: * Monthly OHS audits in India and follow-up through telephone conferences, visits and videoconferences * Implementation of OHS strategies on an IMA Regional basis, via quarterly Country Safety Strategic Planning and monitoring * Coaching and monitoring the OHS Advisors of ABB Ltd in implementing and developing OHS plans and strategies (via visits, telephone calls, meeting training etc.) * Follow-up the work of ABB Ltd.'s OHS Advisors to ensure proper implementation of Group processes and procedures * Carrying oat of Energized safety audits. Electrical safety audits. Factory inspections * Assistance with Investigations of fatal and serious incidents * Shared lessons learned from other incidents * Provided Regional templates, Group to....
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....7.06.2012, the AO asked the assessee to reply to various issues including the following : 1. Perusal of the agreement: of ABB PX-U.O ("assessee company") with ABB-Ltd shows that the following services are being provided with a markup cost; (a) Regional OHS services (b) Regional Security Services (c) Regional Business Development Services (d) Regional Group Account Management-(GAM) Services (e) Regional EPC services (f) Regional Project Risk Management Services (f) Regional Market Development Services 2. Vide letter dated 17.5/20.12 the assesses company was asked to substantiate with evidence such as reports./documents/invoices for having rendered; the services in India, In response it was claimed that services were rendered from Jan 2010- to March 2010 and in the Annexure 2 to the submission dated 14th June 12 copy of Power Point presentations for "Risk Management'' and "Power Point Productivity for & better world were enclosed as proof of having rendered the services. Alternatively if your contention is accepted that payments are not in the nature of Royalty even then the payments are taxable in India for the reasons discussed here. The payments made to t....
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....divisions or subsidiaries, or whether such unit or division or subsidiary is located at the same place where the enterprise is located or at: a different place or places; (iiia) "permanent establishment", referred to in clause (iii), includes a fixed place of business through which the business of the enterprise is wholly or partly carried on;] 42. The DRP in Para 11, after extensively quoting the judgment of Authority For Advance Rulings (Income Tax) in Golf In Dubai, In re [2008] 174 Taxman 480 recorded as under: "Hence, it cannot be ruled out that a PE is in existence so far as this assessee is concerned. This panel, is of the view that the factual matrix, of the decision in the case before the AAR, does not apply in the case of the assessee, even the case of the assessee also being the case of DTAA between India, and. UAE." 43. As mentioned herein above, the DRP has held that the assessee is having a PE in India. During the course of argument, the ld. Senior Advocate raised an objection that the Revenue cannot take a stand contrary to the stand of the lower authorities and for that purpose, relies upon the decisions of the Special Bench of the Mumbai Tribunal in the matte....
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.... "(i) the furnishing of services including consultancy services by an enterprise of a Contracting State through employees or other personnel in the other Contracting State, provided that such activities continue for the same project or connected project for a period or periods aggregating more than 9 months within'any twelve-month period." 47. Paragraph 3 of Article 5 specifies provides the circumstances in which the PE shall not include various activities. Paragraphs 4 and 5 are complementary and mentions of a person or agent of an. independent status who is working on behalf of the enterprises in a contracting state, the enterprises has been deemed to have a PE. Similarly, if an enterprise carrying on the business in the other State through broker, general commission etc., in ordinary course of business, and then the enterprise shall not be deemed to have a PE, However when the activities of such, a broker /agent are almost devoted wholly on behalf of that enterprise, then the agent will not be considered to have an independent status within the meaning of Article. 48. Now, if we read clause (2)(i) of Article 5 of the DTAA, then it is clear that for the purpose of service....
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....vious that the words used in an inclusive definition denote extension and cannot be treated as restricted in any sense. (Vide: Stroud's "Judicial Dictionary", Vol 2, p. 1415). Where we are dealing with an inclusive definition, it would be inappropriate to put a restrictive interpretation upon terms of wider denotation," 14. Similarly, in Regional Director, Employees' State Insurance Corporation v. High Land Coffee Works of P.P.X. Saldanha and Sons (1991) 3 SCC 617, another three judge Bench of this Court had observed that: "The amendment is in the nature of expansion of the original definition as it is clear from the use of the words "include a factory". The amendment does not restrict the original definition of "seasonal factory" but makes addition thereto by inclusion. The word "include" in the statutory definition is generally used to enlarge the meaning of the preceding words and it is by way of extension, and not with restriction. The word 'include' is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the' body of the statute; and when it is so used, these words or phrases must be construed as ....
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....t ((1976) 4 SCC 601) (2) Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. ((1987) 1 SCC 424)) 12. Lord Watson in Dilworth v. Commissioner of Stamps (1899) AC 99 made the following classic statement: "The word "include" is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it is so used these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. But the word "include" is susceptible of another construction, which may become imperative, if the context of the Act is sufficient to show that it was not merely employed for the purpose of adding to the natural significance of the words or expressions defined. It may" be equivalent to "mean and include", and in that case it may afford an exhaustive explanation of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions." 13. S.Dilworth (supra) and few other decisions came up for consideration in Peerless General ....
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....en intended by the Legislature to be taken into account in construing the expression 'person' as it occurs in Section 2(1)(d). While defining 'person' in Section 2(1) (m), the Legislature never intended to exclude a juristic person like company. As a matter of fact, the four categories by way of enumeration mentioned therein is indicative, categories (i), (ii) and (iv) being unincorporate and category (iii) corporate, of its intention to include body corporate as well as body unincorporate. The definition of 'person' in Section 2 (1)(m) is inclusive and not exhaustive. It does not appear to us to admit of any doubt that company is a person within the meaning of Section 2(1)(d) read with Section 2(l)(m) and we hold accordingly. 52. Thus we hold the Article 5(2) is' independent clause and the condition of having fixed permanent place of business under article 5(1) is not attracted for Permanent Establishment under Article 5(2). 53. It is not disputed by the assessee that the assessee was providing the services of consultancy in the other contracting state i.e., in India. It is also not disputed that the enterprise was rendering these services through its....
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.... v. Govt, of A.P. 2006(13) SCALE 27, Raja Jagdambika Pratap Narain Singh v. CBDT [1975] 100 TTR 698 (SC) 35. It is also trite that while interpreting a machinery provision, the courts would interpret a provision in such a way that it would give meaning to the charging provisions and that the machinery provisions are liberally construed by the courts. In Mahim Patram (P.) Ltd. v. Union of India [2007] 3 SC'C 668 this Court has observed that: "20. A taxing statute indisputably is to be strictly construed. [See J. Srinivasa Rao v. Govt, of Andhra Pradesh 2006 (13) SCALE 21). It is, however, also well-settled that the machinery provisions for calculating the tax or the procedure for its calculation are to be construed by ordinary rule of construction. Whereas a liability has been imposed on a dealer by the charging section, it is well-settled that the court would construe the statute in such a manner so as to make the machinery workable. 21. In J. Srinivasa Rao (supra), this Court noticed the decisions of this Court in Gursahai Saigal v. C77 [1963] 48 ITR 1 (SC) and Ispat Industries Ltd. v. Commissioner of Customs, Mumhai 2006 (202) ELT 561 (SC). In Gursahai Saigal (supra), t....
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....3; CIT v. National Taj Traders [1980] 121 ITR 535 (SC); Associated Cement Co.. Ltd. v. CTO [1981] 48 STC 466 (SC). Francis Bennion in Bennion on Statutory Interpretation, 5th Ed., Lexis Nexis in support of the aforesaid proposition put forth as an illustration that since charge made by the legislator in procedural provisions is excepted to be for the general benefit of litigants and others, it is presumed that it applies to pending as well as future proceedings.' 57. Thus respectfully following the path shown by the Apex Court (supra), in our view, the requirement of fixed place of business is not applicable to the clauses (2), (4) mid (5). Clause (i) of Article 5(2) which provides the service PE, is not dependent upon, the fixed place of business as is only dependent upon the continuation of the activity for the same project or connected project for a period / periods aggregating to more than 9 months within 12. Accordingly we hold that assessee is having the service PE in India, However the determination of this issue will only have any hearing on the issues under considerations if on examination of facts we come to conclusion that the activities of the assessee do not fall ....
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....c Account Manager team to move from a product sales view to an account management view and to understand and effectively operate and navigate within each organisation etc., 59. 'The agreement gives ' opportunity to ABB Ltd. of using the information pertaining to industrial / commercial / scientific experience belonging to Assessee, Can on the basis of material available on record it can be concluded that the assessee had rendered the services mentioned in the agreement? In our view it would not be possible for the assessee to render these activities or services merely with the help of three persons sent only for 25 days to India as the nature of activities scope and ambit of clauses in the agreement is very wide and it is not possible to render these services either through 3 employees or through phone call (moreover the assessee has not provided any evidence of actual rendering of services), therefore instead of providing the services by the assessee through it employees, the assessee had merely given the access to ABB Ltd various secret, confidential, IPRs information and other information acquired by it from its past experience to ABB Ltd. If the services were actually ....
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....for information, concerning industrial, commercial or scientific experience. To bring the case in the definition of royalty, imparting of experience, information by the assessee to TNT India is necessary. The AO has also observed in the assessment order that it is possible to suggest that some information being provide liked sales support, Liaisoning with professional advisors, lobbying activities and coordination with trade associations may not be in the nature of supply of know-how. However, the remaining services where R&D nature of imparting knowledge, information or expertise, which is already in possession and in existence with the assessee, can be ascertained only from the details of the actual nature of the services provided under various categories and the basis of the compensation received by the assessee for providing such services, whether the assessee charged the Indian entity on the basis of Cost Plus or on the basis of gross revenue. If the compensation is charged by the assessee based on the gross revenue, then it implies that assessee did not incur any cost in providing such services as these are the kind of information, knowledge or expertise as well as experience....
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....reement which are material to ascertain the real intention of the parties and the nature of mutual obligations of the parties, As it is manifest from the list of services as provided under Sehedule-2 that some of the services are clearly for new process information including specification and application, evaluation of new opportunities, management information and other automatic system services, which may be the assessee's own expertise and experience and acquired during due course of time. Therefore, these services prima facie appear to be in existence and being provided in the form of information, which are definitely related to the commercial and business activity of the Indian entity. It is not the case of the assessee that all these services provided to the Indian entity is available in the public domain, rather, there is a confidential clause in the agreement which prohibits the parties to reveal the information exchanged between the parties to a third party or to public. The commentary on OECD Model Tax Convention is a relevant guidance for deciding the issue of nature of payment whether it is royalty or business income. The relevant extracts of the OECD Model Tax Conve....
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.... East and Africa on behalf of its parent company in Zurich and therefore it is duty-bound to protect the interest of parent company as well 3) All the employees of the assessee and ABB Ltd are bound to adhere to the policies of ABB global. 65. Therefore the information provided by the assessee to ABB Ltd were in the nature of know-how contract, given by assessee to ABB Ltd, so that such know-how can used ABB Ltd, for its commercial and industrial purposes and further this special knowledge and experience would remain unrevealed to the public. These information were not already existing and were supplied by the assessee after its development or creation to ABB Ltd and there also exist specific provisions concerning the confidentiality of these information( clause 9) . Moreover the assessee has done very little after giving access to these information to ABB Ltd . thus the information provided of the assessee given to ABB Ltd with the right to use and exploit commercially were concerning industrial, 'commercial or scientific experience activities would fall under Royalty of DTAA .' As we had held that the activities under consideration of the assessee falls under Royalty Cla....
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....ich tantamount to 'Royalty' and are clearly distinguishable. Also, there is no information or know-how passed on in the above case w.r.t. grading of diamonds and issuance of certificate. GIA may be having experience of grading but it does not impart the said experience to the client. What the client receives is the report where the GIA uses its commercial or technical knowledge to give a report to the client, in view of this, there is no parting or rendering of technical services either of managerial, technical or consultancy nature or industrial, commercial or scientific experience in this case. In the said judgment in para 9 it was held as under: "9. The question that remains to be answered is whether there is imparting of specific experience by GIA to the person, impart in Webster's Encyclopaedic Unabridged Dictionary has been defined "to give, to bestow, communicate; to grant a part or share of. In Oxford English Reference Dictionary it is prescribed as "give a share of (a thing)". A plain reading, therefore, of the meaning of the word "impart" implies that it means to give, to bestow, communicate, to grant a part or share of or give a share of a thing. Considerin....
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....ning industrial, commercial or scientific experience.' In paragraph 9 of the order, the concept of know-how w.r.t. royalty was reproduced from the Philips baker book to the following effect is discussed as follows : "11. In classifying as royalties payments received as consideration for information concerning industrial, commercial or scientific experience, paragraph 2 alludes to the. concept of "know-how". Various specialist bodies and authors have formulated definitions of know-how which do not differ intrinsically. One such definition, given by the "Association des Bureaux pour la Protection de lal Propriete Industrielle" (ANBPPI) states that "know-how is all the undivulged technical information, whether capable of being patented or not, that is necessary for the industrial reproduction of a product or process, directly and under the same conditions; inasmuch as it is derived from experience, know-how represents what a manufacturer cannot know from mere examination of the product and mere knowledge of the progress of technique". 11.1 In the know-how contract, one of the parties agrees to impart to the other, so that he can use them for his own account, his special know....
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....nder a guarantee, payments for pure technical assistance, - payments for an opinion given by an engineer, an advocate or an accountant, and - payments for advice provided electronically, for electronic communications with technicians or for accessing, through computer networks, a trouble-shooting database such as a database that provides users of software with non-confidential information in response to frequently asked questions or common problems that arise frequently, (emphasis supplied}' 71. In the DTAA with UAE, in Article - 12, clause (3), the term "royalty" has been differently defined than what it was defined in the treaty under consideration Thailand ) in Gef Asia Ltd. case (supra ) as expression alienation and imparting is not used in the treaty. In this case the bench was discussing the issue of Indo-Thailand Treaty in respect of 'Royalty', and as held if there is imparting or alienation of any know-how while rendering the service on account of information concerning industrial, commercial and scientific expertise than it is royalty and if there is no alienation or use of any right to use of know-how or, then it cannot be termed as 'Royalty' 72.....
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....untry management team of India to develop a plan for ABB Ltd., India on how to become more competitive. (iii) Regional Occupational Health and Safety (OHS) services : Provision of information about strategies, goals, targets and instructions in the field of OHS, OHS audit, implementation of OHS strategies, coaching and monitoring OHS advisors in implementing and developing OHS plans and strategies. (iv) Regional Security services : collection analysis and delivery of security intelligence information, basic and advance training in crisis management. 74. One more case relied upon by the assessee is on that of the decision of ITAT, Ahmedabad I Bench, in ITA No.203/Ahd/2014 dated 28.03.2017 in the case of Marck Biosciences Ltd. (supra). In this, case the payment was made on account of professional fee for global biopharmaceutical strategic counselling and advisory services rendered by the service provider, on which no TDS was made. The services rendered in this case is limited to strategic and financial counselling services and there are no secret, confidential and IPRs right information was permitted to be used by the assessee pertaining to industrial, commercial or scientific i....