TaxTMI 
TaxTMI 
TaxTMI 
2022 (8) TMI 296
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....eceipts of University of Texas, USA, under India-USA DTAA. 2. The Ld. Commissioner of Income Tax (Appeal)-13, Ahmedabad, has erred in law and in the facts and circumstances of the case in not adjudicating the appellant's alternate ground regarding taxability of the receipts of University of Texas, USA, under section 44BB of the Income-tax Act, 1961. 3. The appellant craves permission to add, alter and/or amend any ground(s) of appeal before or at the time of hearing. 3. The only issue raised by the assessee is that the Ld. CIT-A erred in upholding the order passed by the AO (Int. Tax) u/s 195(2) of the Act with the direction to deduct 10% TDS on gross payments made to University of Texas at Austin, USA (Non-Residents). 4. The facts in brief are that the assessee is Central Public Sector Undertaking. The assessee has entered into an agreement with University of Texas at Austin, USA vide agreement No. UTA 16-000955 dated 18-05-2018. The agreement was entered to carry out research activity in collaboration with the assessee for the development of suitable chemical Enhanced Oil Recovery (EOR) formulations for its 5 reservoirs. The assessee agreed to pay to the University of Texas....
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....as of view that the payments made to University of Texas at Austin USA for research activity for development of suitable chemical Enhanced Oil Recovery (EOR) formulations was somewhere directly connected with the extraction and production of mineral oil. The assessee regarding this also relied on the judgment of Hon'ble Apex Court rendered in its own case dated 01-07-2015, reported in 376 ITR 306. 6.4 The assessee, accordingly prayed before the Ld. CIT-A, to tax the receipts of non-residents in accordance to the provisions of section 44BB of the Act. 7. However the Ld. CIT-A disregarded the contention of the assessee and confirmed the order of the AO by observing as under; 5. I have carefully considered the order and the written submission filed by the appellant. On careful consideration of the issue as brought out in the order, the grounds of appeal and the submission of appellant, the grounds raised by the appellant is decided hereunder: 5.1 The primary ground of appeal is regarding non-taxability of receipts of the non-resident from the appellant under India-USA Double Taxation Avoidance Agreement (DTAA). The authorized representatives of the appellant contended that the r....
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....rson. acquiring the service AS enabled to apply the technology. The fad that the provision of the survive man, required technical input by the person providing the service does not per se mean that technical knowledge skills, etc., are ma.de 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 $e be considered to make the technology available (emphasis supplier) 5.2 It was further contended that since there is no transfer of any copyright or patent under the aforesaid agreement, the income of the nonresident is not covered within the definition of "royalty under India-USA DTAA and cannot be charged to tax as such. 5.3 As regards the contention that the income of the non-resident is also not taxable as "fees for included services" under Article 12 of India-USA DTAA, the appellant's argument is based on the premise that as a result of rendering services to ONGC there is no transfer of technology from the nonresident to ONGC and, hence, "make available" clause appearing in the definition of "fees for included services" is not satisfied, The extracts of the relevant written....
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....for the Sponsor 's benefit. " 5.5 In the instant case, collaborative research program is to be carried out for development of chemical Enhanced Oil Recovery (EOR) formulations and field tests for ONGC reservoirs. One of the objects of die program as brought out under Scope of Work is to collaborate to advance both new knowledge and understanding of chemical EOR and on the best ways to conduct experiments, designs, field tests of chemical EOR processes. The representatives of the non-resident in collaboration with the appellant's personnel has to carry out laboratory study, simulation and pilot design, pilot monitoring, evaluation and field implementation etc. Further, the deliverables of the program include the results of analysis and evaluation of monitored pilot data and recommendation to ensure success of die pilot apart from other R&D results. 5.6 Thus, it is evident that the instant case is a clear case of transfer of technical design whereby the appellant is being enabled to apply such technology as well as transfer of certain rights to patents & technology for commercialization of such patents and technology for benefits of ONGC. Therefore, the income of the nonr....
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....Make technology available'. The general principle of 'specific overriding the general' needs to be followed here. It is not disputed that the services rendered by the non-resident in collaboration with the appellant's personnel was to carry out laboratory study, simulation and pilot design, pilot monitoring, evaluation and field implementation therefore due to unambiguous provisions of the MOU the said transfer of technology is Make technology available and covered under fees for included services. It is also covered under the definition of 'Royalty' as held supra. 5.8 In support of the contention regarding non-taxability of receipts of the nonresident, the appellant has relied upon Hon'ble Karnataka High Court judgment in the case of De Beers India Minerals (P.) Ltd., 346 ITR 467 and other pronouncements. The rationale of the aforesaid judicial pronouncements is not applicable in the instant matter as the same are distinguishable on the facts of the matter. Accordingly, this ground is dismissed. 6. In the result, appeal of the Appellant is Dismissed. 8. Being aggrieved by the order of the Ld. CIT-A, the assessee is in appeal before us. 9. The Ld. ....
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....l properties mentioned therein or rendering of any services in connection with the activities referred to in sub-clauses (i) to (iv) (iva) and (v). Therefore fees paid for transfer of rights and services rendered in that regard constitutes royalty. 11.4 Likewise, the explanation 2 to clause (vii) of sub-section (1) of section 9 defines the phrase fees for technical services for the purpose of clause (vii). It is the consideration for the rendering of any managerial, technical or consultancy services. Here there is no question of any right. It is purely for the services rendered. So under the Indian law whether the consideration paid is for the transfer of a right in any Intellectual Property or for rendering of any services which are managerial, technical or consultancy services, the liability to tax is attracted. In the case on hand it is not in dispute that the nature of services rendered are technical in nature. Therefore, it is liable to tax. But this liability arises under the Double Taxation Avoidance Agreement. Section 90 which deals with the Double Taxation relief provides that the provisions of the DTAA override the provisions of the Income-tax Act in the matter of ascert....
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.... that technical knowledge, experience, skill, know-how or process which is used by service provider to render technical service should also be made available to the recipient of the services, so that the recipient also acquires technical knowledge, experience, skill, know-how or processes so as to render such technical services. Once all such technology is made available it is open to the recipient of the service to make use of the said technology. The tax is not dependent on the use of the technology by the recipient. The recipient after receiving of technology may use or may not use the technology. It has no bearing on the taxability aspect is concerned. When the technical service is provided, that technical service is to be made use of by the recipient of the service in further conduct of his business. Merely because his business is dependent on the technical service which he receives from the service provider, it does not follow that he is making use of the technology which the service provider utilizes for rendering technical services. The crux of the matter is after rendering of such technical services by the service provider, whether the recipient is enabled to use the techn....