TaxTMI 
TaxTMI 
2018 (7) TMI 2213
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....ere is no liability to withhold tax under Sec.195 of the Act on the foreign remittances made to Aditya Acquisition Company Limited, Israel. 2. The Id. CIT(A) has erred in law and on facts of the case in admitting the appeal U/s.248 of the Act though the Assessee had neither deducted tax at source u/s.195 of the Act at the time of credit of remittances nor paid any taxes to the Government Account, as such this appeal was not maintainable. 3. The Id. CIT(A) has erred in law and on facts of the case in deciding the appeal U/s.248 of the Act without providing opportunity of being heard to the Assessing Officer and in admitting the additional evidences in contravention of Rule 46A(3) of the I.T. Rules, 1962. 4. The Id. CIT(A) has erred in law and on facts of the case in accepting the contention of the Assessee that the services provided by Aditya Acquisition Company Limited, Israel had not resulted in imparting and making available technological skill, know-how to the Assessee, merely considering the contract period of 5 years. 5. The ld. CIT(A) has erred in law and on facts in holding that Aditya Acquisition Company Limited, Israel merely provid....
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....on denying liability to deduct tax in certain cases Where under an agreement or other arrangement, the tax deductible on any income, other than interest, under section 195 is to be borne by the person by whom the income is payable, and such person having paid such tax to the credit of the Central Government, claims that no tax was required to be deducted on such income, he may appeal to the Commissioner (Appeals) for a declaration that no tax was deductible on such income. 5. While on this issue, it is useful to take note of a coordinate bench of this Tribunal, in the case of Mahindra & Mahindra Ltd Vs Addl DIT [(2006) 106 ITD 521 (Bom)]. In this decision, it was held that unless there is an order holding assessee liable for deduction of tax at source under section 195, there is no occasion to appeal under section 248. That was a case in which the assessee had filed an appeal under section 248 on the ground that the Chartered Accountant issuing certificate with respect to ascertainment of tax withholding liability from payment made to non-resident entities had held that the assessee was liable to withhold taxes at source. Denying this liability, assessee carried t....
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....has been substituted, so as to provide that where under an agreement or other arrangement, the tax deductible on any income, other than interest, under section 195 is to be borne by the person by whom the income is payable, and such person having paid such tax to the credit of the Central Government, claims that no tax was required to be deducted on such income, he may appeal to the Commissioner (Appeals) for a declaration that no tax was deductible on such income. 63.3 Applicability-These amendments will take effect from the 1st day of June, 2007. 7. As a plain reading of the present statutory provision indicates, the right to appeal under section 248 thus covers only such persons making the payments who, under an agreement or other arrangement, are bear the tax deductible on any income paid to the nonresident. In other words, unless a person bears the tax liability of the recipient, by agreement or otherwise, he does not have a right to appeal under section 248. In the present case, however, it is an undisputed position that the appellant before us, under clause 4.3 of the agreement under which the services were received from the non-resident entity, had the obl....
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....ssessee had duly paid the taxes, before filing of the appeal, and, as such, there was no bar on the CIT(A) in admission of appeal. To this extent, the grievances raised before us are ill conceived. 11. Learned representatives fairly agreed that the issues requiring our adjudication are two neatly identified issues- one legal issue and one factual issue. There is no dispute that the assessee has paid fees for certain services to an Israeli entity and that the determination of taxability of the said remuneration is to be examined in the light of the provisions of the Indo Israel Double Taxation Avoidance Agreement [(2000) 254 ITR (Stat) 245; Indo Israel tax treaty, in short]. While the learned CIT(A) has granted the impugned relief by invoking Most Favoured Nation (MFN) clause read with Article 13, dealing with fees for technical services) and by holding that the services rendered by the Israeli entity did not "make available technical knowledge, experience, skill, know-how or processes ....... which enables the person acquiring the services to apply the technology contained therein", in substance, the stand of the learned Departmental Representative is that (a) the MFN clau....
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....ing that all manufacturing facilities are properly maintained to comply with cGMP norms and the Environmental, regulatory laws and corporate and safety policies The relevant tax treaty provisions: 13. Article 13 of the Indo Israel tax treaty, which deals with the taxation of fees for technical services, provides as follows: ARTICLE 13- Fees for Technical Services 1. Fees for technical 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 fees for technical services may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the recipient is the beneficial owner of the fees for technical services, the tax so charged shall not exceed 10 per cent of the gross amount of the fees for technical services. 3. The term "fees for technical services" as used in this Article means payments of any kind received as a consideration for services of a managerial, technical or consultancy nature, including the provision of services by technical or other personnel, but does not include payments for services mentioned....
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....tion with the operation of ships or aircraft in international traffic; (iii) Teaching in or by an educational institution; (iv) Services for the personal use of the individual or individuals making the payments; or (v) Professional services as defined in Article 15. 14. The stand of the assessee, however, is that this provision is to be read alongwith second paragraph of the protocol to the Indo Israel tax treaty which provides that, "The competent authorities of the Contracting States shall initiate the proper procedure to review the provisions of Articles 12 and 13 (Royalties and fees for technical services respectively) after a period of five years from the date of entry into force of this Convention. However, if under any convention or Agreement between India and any third State which enters into force after 1st January, 1995, India limits its taxation at source on Royalties or Fees for Technical Services or Interest or Dividends to a rate lower or a scope more restricted than the rate or scope provided for in this Convention, the same rate or scope as provided for in that Convention or Agreement on the said items of income shall also apply under this....
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.... the development and transfer of a technical plan or technical design which enables the person acquiring the services to apply the technology contained therein. (remining portion of this article not relevant for present purposes) 15. In effect, thus, the stand of the assessee is that the make available provisions, which find place in Indo Portuguese tax treaty, must be read into the Indo Israel tax treaty as well in the light of the MFN clause set out in the Indo Israeli tax treaty. It is then contented that the given the nature of services that the assessee has received under the agreement, nothing is 'made available' to the assessee is the sense that these services are consultancy services in nature and the assessee is not enabled to perform these services without recourse to the service provider. These are the contention which has found favour with the CIT(A), and the Assessing Officer is not content with the stand so taken by the CIT(A). The Assessing Officer is, therefore, in appeal before us. 16. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. ....
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....ature of this Agreement under any Convention or Agreement between India and a third State which is a member of the OECD India should limit its taxation at source on dividends, interest, royalties or fees for included services to a rate lower or a scope more restricted than the rate or scope provided for in this Agreement on the said items of income, then, Switzerland and India shall enter into negotiations without undue delay in order to provide the same treatment to Switzerland as that provided to the third State" and India Philippines DTAA [(1996) 219 ITR St 60] which provides that " With reference to Articles 8 and 9 if at any time after the date of signature of the Convention the Philippines agrees to a lower or nil rate of tax with a third State the Government of the Republic of the Philippines shall without undue delay inform the Government of India through diplomatic channels and the two Governments will undertake to review these Articles with a view to providing such lower or nil rate to profits of the same kind derived under similar circumstances by enterprises of both Contracting States". The effect of these MFN clauses is thus negotiations and review by the parties so as....
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....edge and experience of the service provider have gone into it. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. Technology will be considered "made available" when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service 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 technical/included services" only if the twin test of rendering services and making technical knowledge available at the same time is satisfied. 19. The question thus arises as to whether the assessee can be said have received any services which makes available any "technical knowledge, experience, skill, know-how or processes or consist of the development and tra....