TaxTMI 
TaxTMI 
2022 (7) TMI 76
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.... set aside and that of the Assessing Officer be restored". 2. The Ld. CIT(A) erred in ignoring the fact that as per "Technical Service Agreement" assessee company does more than mere a review of the work done by the owner of hotel and is involved in the project from conceptualization to the final stage and makes available knowledge and experience and skill to the owner of the hotel. 4. To adjudicate on these grievances it is sufficient to take note of the fact that the assessee before us is a company incorporated and fiscally domiciled in United States of America and that during the relevant previous year it has received a sum of Rs. 10,71,58,100/- towards advisory assistance for design and construction of hotel. The Assessing Officer was of the view that the amount so received by the assessee is taxable in the hands of the assessee as fees of included services under article 12 of the US Tax Treaty and also as fees for technical services u/s. 9(1)(vii) of the Income Tax Act. For the reasons set out in short while it is not really necessary to go into any further details in respect of nature of the services rendered. Suffice to take note of the fact that when the taxability of an....
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....iding the service does not per se mean the technical knowledge, skill etc., are made available to the person acquiring the service within the meaning of Article 12(4)(a). An example (example 7) given in the Memorandum of Understanding will further elucidate the issue. In this example, an Indian Vegetable Oil Manufacturing firm wished to market its product worldwide for which it hired an American Marketing Consulting Firm to do a Computer Simulation of the World Market and advise the Indian company on the marketing strategy. On the issue whether the fees paid to the US Company will be for included services, it has been stated that the fees would not be for included services. The American Company is not making available to the Indian Company any technical knowledge, experience and skill nor is it transferring a technical plan or design. What is transferred to the Indian company through the service contract is commercial information. The fact that Technical skills were required by the performer of the service in order to perform commercial information service does not make the service a technical service within the meaning of Article 12(4)(b). 32. Further we find that similar issue ....
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....t and going through the clinical reports, the service rendered by the doctor cannot said to have made available to the patient, the knowledge and expertise possessed by the doctor. On the other hand, if the same doctor teaches or trains student on the aspect of diagnosis or techniques of surgery, that will amount to making available the technical knowledge and experience of the doctor. In the case of Carborandum Co. v. CIT [1977] 108 ITR 335 (SC), a foreign company entered into an agreement with an Indian company for rendering technical and know how services to the Indian company. In lieu of those services, the foreign company was to receive from the Indian company an annual fee equal to three per cent of the net sale proceeds of the products manufactured by the Indian company every year. The question was how much of the money received by the foreign company would be taxable under the provisions of the Act. The Indian company employed personnel made available by the foreign company, who worked under the direct control of the Indian company. The Supreme Court held that the services of the foreign company in making the employees available were rendered wholly outside India and that....
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....such, the said sum paid to the foreign company at London was not assessable in the hands of the assessee company even as agent of the foreign company. In the case of C.E.S.E. Ltd. v. Dy. CIT [275 ITR (AT) 15], Hon'ble Calcutta Tribunal have held that, if the services provided was of mere reviewing and opining rather than designing and directing the project, no technical knowledge etc., is made available to the assessee. The decision was rendered in the context of Indo UK treaty, but the same can also be applied to interpretation of the phrase 'make available' appearing in Indo US Treaty. The fact of the present case is almost identical to the ones discussed above. As in the case of CESE Ltd., the present case what was being made available to the assessee company was advisory services and opinion for improvement of the existing facilities. Accordingly, in the light of the of ITAT Mumbai & Calcutta, no technology or technical skill is being transferred to the assessee company. 33. In view of the above, in our opinion, in the present case, what was made available to the assessee company was advisory services and opinion for improvement of the existing facilities. It is....