TaxTMI 
TaxTMI 
2022 (3) TMI 833
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....ed by an independent corporate entity (though a subsidiary of GIA Inc. USA) namely GIA Hong Kong Laboratory Ltd. situated at Hong Kong and the payment was merely routed through GIA Inc. USA. iii) The Ld. CIT(A)-13, Ahmedabad has erred in facts and in law in allowing the appeal of the assessee despite the fact that the beneficial owner of the payment is M/s. GIA Hong Kong Laboratory Ltd. situated at Hong Kong and therefore the DTAA between India and USA cannot be invoked. iv) The Ld. CIT(A)-13, Ahmedabad has erred in facts and in law in allowing the appeal of the assessee despite the fact that as per very disclosure on the official website of the M/s. GIA Inc. USA, the currency of payment for diamond testing and certification has to be made in the currency of the laboratory where the item is submitted for testing and articles were shipped to Hong Kong and payment was made in Hong Kong Dollars. v) The Ld. CIT(A)-13, Ahmedabad has erred in facts and in law in holding that there is no element of make available in the services rendered despite the fact that this was not the ground of disallowance by the AO. vi) That the department craves leave to add or alter any further grounds....
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....esting, gradation and certification. Such testing related work has been carried out at GIA Laboratory at Hong Kong this set up under the company GIA Hong Kong. The testing services were rendered by Hong Kong Laboratory. The payments were made in bank account located in Hong Kong as per condition of payment, since there exist no branch of GIA, Inc in Hong Kong; it is incontrovertible that the testing and certification related services rendered by GIA Hong Kong. The payments were merely made to GIA, Inc, America even though all services were rendered by GIA Hong Kong Laboratory at Hong Kong, thus, GIA Hong Kong Laboratory is the rightful owner of such payment which merely routed through GIA, Inc, America. The state of source is not obliged to give up the taxing rights over the passive income in the nature of Fees for Technical Services (FTS) merely because the income was paid direct to recipient of a state which with the state of source had concluded/executed DTAA. On the aforesaid observation, the AO concluded that assessee was required deduct tax on sum chargeable to tax at the rate in force. The assessee was required to deduct tax @40.024%. The assessee failed to do so, accordingl....
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....ngs the assessee furnished the copy of tax residency certificate (TRC) and permanent establishment (PE) certificate of GIA America. The assessee also furnished the copy of sample invoices raised by GIA USA, instructing the assessee to make payments to GIA America. It was submitted that assessing officer failed to consider the submission of the assessee and made the additions. During the period under consideration the assessee has made remittances qua diamond testing certification services to GIA. The payment has been made to the offshore bank account of GIA US in Hong Kong. The invoices are raised by the GIA USA instructing assessee to make payment to offshore bank accounts of GIA USA in Hong Kong. In case of non-payment of segregation fees, GIA US has the legal right for the production from the assessee has all the risks and rewards of the agreement are between the assessee and GIA US. The assessee has no direct relationship with GIA Hong Kong. 6. The assessing officer invoked the provisions of section 201(1) r.w.s 201(1A) of the Income tax Act by taking view that India USA DTAA benefit is not granted as payment is made to GIA Hong Kong and there is no tax treaty with Hong Kong, ....
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....any in India. In absence of any permanent establishment of US resident company in India, the amount paid by the assessee would not be taxable in India and in business profit. It was explained that in case of assessee, GIA US, foreign enterprises does not have any permanent establishment in India; therefore, any income accruing from business carried in India cannot be made taxable if the source of such income pertains to business outside India. The assessee also relied on certain case laws. 7. The assessee further explained that due to clerical error while filling the name of beneficiary of remittance is wrongly mentioned as "GIA Hong Kong laboratory Ltd" instead of "GIA United State of America Inc". Due to which foreign outward limit is advice also in the name of GIA Hong Kong laboratory Ltd., was mentioned, but in fact the assessee is neither entered into transaction with GIA Hong Kong laboratory nor has any remittance been made to it. The claim of assessee is evident from the invoices issued by GIA Inc of USA and certified copy of the bank's statement of GIA Inc reflecting payments received was filed. Thus, the rightful owner of the remittances made in GIA Inc of USA and in ....
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.... officer. it was also recorded that the assessee made error in mentioning the name of beneficiary while filing entry in Form-15CA/15CB. 9. On the basis of his aforesaid observation the ld. CIT(A) concluded that the diamonds certification are issued by GIA Inc USA are considered as standard benchmark by the trade as well as by the customers and all intellectual property rights in the certification belongs to GIA Inc. The assessee entered in agreement with GIA Inc USA, on perusal of which it can be seen that the term of agreement clearly describes the status of GIA Laboratory in Hong Kong. Further, it is clear from the agreement that Honk Hong, Dubai and Israel are the "take in window" where articles are delivered but the services agreement is between the assessee and GIA USA. Copy of grading certificate is also issued by GIA USA, but due to clerical mistake the beneficiary of the remittance was erroneously specified as GIA Honk Kong Laboratory. The assessee has furnished confirmation letter from HSBC Bank, confirming that the payments were made by assessee to GIA Inc USA in Bank Account No. 801-045451-001, owned by GIA Inc USA. The ld. CIT(A) held that the assessing officer tried t....
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....ission of the technical knowledge, experience, skill, from the personal writing services to the person utilising the same is not entered related under the agreement between the assessee and the GIA Inc USA. There is no durability or permanency of the result of the rendering of services envisaged which will remain at the disposal of the assessee. The services will not remain available to the assessee in any concrete shape such as technical knowledge, experience; skill etc. There is no transfer of either technical knowledge or skill and experience or know-how or process to the assessee. The learned CIT(A) further held that GIA Inc USA does not provide any training to the employee of the assessee nor it does share any technique or expertise connected with performance of its services or imparted any skill to the assessee. As the services is question are not "make available" in nature and consequently do not qualified for fees for technical services under tax treaty between India and USA and allowed the grounds of appeal raised by assessee. Aggrieved, from the order of ld. CIT(A), the Revenue has filed this appeal before Tribunal. 11. We have heard the submissions of Sh. Saurabh Sopark....
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....rther the services in Hong Kong were in the nature of a "limited risk service provider." The ld. Senior Counsel submits that the GIA US has no permanent establishment (PE) in India. Further, nature of transaction between assessee-company and the USA resident company are not in the nature of 'fee for included services'. Under Article 12 of tax treaty between India USA as it is not imparting any technical knowledge know-how to the assessee company. Thus, the payment made by the assessee-company would not assume the character of business profit US resident company under Article 7 of India US tax treaty, which would be taxable in India only if the same is attributable to permanent establishment of US resident company in India. In absence of any permanent establishment of US resident company in India, the amount paid by the assessee would not be taxable in India and in business profit. The ld. CIT(A) appreciated the facts of the case and granted relief to the assessee. To support his submissions the ld. Senior Counsel for the assessee relied on the following decision; * Alabra Shipping Pte Ltd. Vs ITO (Inter.tax.) [2015] 62 taxmann.com 185 (Rajkot Tribunal), * M. T Maersk Mi....
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....branch of GIA, Inc in Hong Kong; it is incontrovertible that the testing and certification related services rendered by GIA Hong Kong. The payments were merely made to GIA, Inc, America even though all services were rendered by GIA Hong Kong Laboratory at Hong Kong, thus, GIA Hong Kong Laboratory is the rightful owner of such payment which merely routed through GIA, Inc, America. The state of source is not obliged to give up the taxing rights over the passive income in the nature of Fees for Technical Services (FTS) merely because the income was paid direct to recipient of a state which with the state of source had concluded/executed DTAA. As recorded above that before the ld. CIT(A) the assessee filed detailed written synopsis and relied on certain case laws. It was also contended that the entry on Form-15CA/15CB were wrongly filled up and that the payment of certification charges were infact made to GIA Inc USA and furnished certificate of HSBC Bank that the bank account wherein the remittance were made owned by GIA Inc USA. The ld. CIT(A) on appreciation of facts held that There is no dispute about the services rendered by GIA to assessee. Further the diamonds certification is i....
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....on concerning industrial, commercial or scientific experience by GIA when it issues the grading certificate. GIA Inc USA has the experience of grading and report certificate and there is no imparting of its experience in favour of assessee. The assessee has only receives report of certification. This activity of issuing certificate cannot be said to be imparting of information by the person who possesses such information. On considering the definition of ' fee for included services' under Article 12, it was observed that there is no parting of rendering of technical services either of military, technical consultancy services or industrial commercial or scientific experience. The grading report are not "make available" for the reasons that assessee, whose utilising the services will not be able to make use of technical knowledge, by itself in its business without recourse to GIA INC USA in future. The technical knowledge, experience skill etc will not remain with the assessee after rendering the services has come to an end. 18. We find that coordinate bench of Delhi Tribunal in a recent decision Delhi Tribunal in GE Energy Management Services Inc. v. ADIT - [2022] 135 taxma....