AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (9) TMI 469
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....treating the amount of remittance to Lambda Therapeutic Research Inc., Canada as Fees for Technical Services u/s. 9(l)(vii) of the Act and Fees for Included Services under Art. 12 of the India-Canada DTAA. 3. Both the lower authorities have erred in applying s.9(l)(vii) of the Act for the definition of "fees for technical services. 4. The learned CIT(A) has consequently erred both in law and on the facts of the case in confirming AO's stand that the appellant was required to withhold tax while making the aforesaid remittance. 5. Both the lower authorities have failed to appreciate that the impugned amount of remittance is a business income in the hands of the recipient and in the absence of any business connection / Permanent Establishment in India, no business income can be taxed in India, and accordingly, the Appellant was not required to deduct tax at source u/s. 195 of the Act on such remittance. 6. The learned CIT(A) has accordingly erred both in law and on the facts of the case in confirming the action of AO in treating the Appellant as assessee-in-default u/s 201(1) of the Act for nondeduction of tax at source u/s 195 of the Act. ....
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.... 12 but forms part of Article 7 (business income) and in absence of any permanent establishment of the overseas entity in India to whom payment is made, there is no requirement to deduct tax at source u/s 195 of the Act. The AO however rejected the assessee's contention and held that the assessee is liable to deduction of taxes under section 195 of the Act. While passing the order, the AO made the following observations: "The assessee at the outset admits that a part of the trials related services were outsourced to Lambda Canada who carried out these activities, It is also admitted that Lambda Canada employees acted in coordination with the assessee's employees to carry out the services assigned to them. Therefore the assessee's stand that no technical knowledge, experience, skill, know-how or processes has been made available is not supported by facts. 18. During the course of hearings sample of reports (in CD form) of Bio analysis made available by Lambda Canada to Lambda India were furnished by the assessee. It was explained that the tests/studies conducted by Lambda Canada formed just one part of the entire Study. On receipt of the report of bio analy....
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....hlighted the nature and services rendered in para-15 of the assessment order, wherein it is pointed out that the Lambda Therapeutic Research Inc., Canada has rendered services related to Bio-analyses, pharmacological, pharmacokinetic and bioequivalence. A mere perusal of these tests which were essentially a part of services rendered indicate that they are highly technical in nature and after the information is generated, this technical information relating to drug being tested is given to the appellant company. Even the agreement between the appellant and Lambda Therapeutic Research Inc., Canada, indicates that such services rendered are of the nature of technical services, as is pointed out in para-17 of the assessment order. It is, thus, clear that the Lambda Therapeutic Research Inc., Canada, is providing bio availability and clinical trials and is required to have highly advanced technical skills for such trails. It is evident from the agreement that Lambda Therapeutic Research Inc.. Canada acknowledges that it has the necessary skills, experience, expertise and necessary infrastructure etc. to provide services contemplated in the agreement. In my view, such expertise, experien....
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....Ahmedabad Tribunal), wherein it was held that unless there is "transfer of technology" involved in the technical services rendered by foreign entity, the "make available" clause is not satisfied and hence, consideration for services cannot be taxed under article 13 of India-UK DTAA. The counsel for the assessee further submitted that the AO has grossly erred in holding that the "apply the technology independently in future" condition cannot be read into the Article 12 of India-Canada Tax Treaty. The counsel for the assessee submitted that the findings of the AO that merely by giving a technical report, Lambda Canada has "made available" cannot be accepted in light of the decisions cited above. Further, the "make available" clause is not satisfied in this case as Lambda Canada has merely shared "clinical test reports" which contain results of tests and trials carried out by Lambda Canada. These reports are used by the assessee to finalise the study and hand over the final study report to its customers situated in India. Therefore there is no transfer of technology since the underlying "technology" used by Lambda Canada prepare such reports has not been shared with assessee so as to ....
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....ical procedure, analytical methods, etc., which are proprietary items of the applicant, have neither been nor will they ever be transferred, assigned or handed over to Sandoz or any other Indian client. From the perusal of the relevant agreements, we have not found any provision which would entitle Sandoz/Ranbaxy to know the details of the analytical methods and procedures employed by the applicant in carrying out the bioequivalence tests. The only doubt cast by clause 15 of the agreement with Sandoz is cleared by Sandoz statement that the said clause which was part of standard format was never given effect to. It seems to be inapplicable also having regard to the actual modalities of the transaction as set out in the application. Then agreement with Ranbaxy says that Ranbaxy shall be the owner of the tested samples and test compounds. Further, the applicant will store tested samples and test compounds for three months and make these available to Ranbaxy at the expiry of that period. Handing over tested samples and test compounds cannot be equated with making technology, know-how, etc., available to Ranbaxy. The agreement also states that Ranbaxy shall be the owner of all intellect....