TaxTMI 
TaxTMI 
2023 (1) TMI 42
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....ative services to its affiliate in India are in the nature of Fees for Included Services [FIS] under the India - USA Double Taxation Avoidance Agreement [DTAA] and thus are liable to taxation in India. 4. Briefly stated, the facts of the case are that the assessee is incorporated under the laws of USA and is engaged in the manufacture and supply of life science research, healthcare, analytical chemistry and other markets with broad range of products and systems. The assessee also provides business support services to its group companies. Being a tax resident of USA, the assessee is entitled to the beneficial provisions of the DTAA. The assessee also has a copy of tax resident certificate. The assessee does not have any presence in India either in form of an office, a branch or a factory, a warehouse or any other fixed place of business. 5. During the year under consideration the assessee has cross charged to its affiliate in India for rendition of information technology and other administrative services. Such services were rendered pursuant to the General Services and Cost Allocation Agreement entered into between the members of the Bio-Rad Group. 6. In both the years unde....
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....art of the assessment order and operative directions of the DRP relying upon the very same judgments which have been referred to by the Assessing Officer in his assessment order. The ld. DR has heavily relied upon the Explanatory Notes to the MOU. 13. We have given thoughtful consideration to the orders of the authorities below and have carefully considered the judicial decisions relied upon by both the representatives. We have also considered the relevant documentary evidences brought on record in light of Rule 18(6) of ITAT Rules. 14. General Services and Cost Allocation Agreement is effective from 01.01.2010 by which it was, inter alia, agreed that the service providers are willing to use their personnel, expertise and faculties to provide such services on the terms and conditions set forth herein and the parties acknowledge that the costs and expenses incurred with respect to the services benefit certain or all the members of the Bio- Rad Group in their efforts to conduct the business and to promote, sell or support the products. 15. The description of the services are as under: "1. Information Technology Services. Services related to the provision of informat....
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....legal issues. 7. Education and Training Services. Services provided in connection with the education and/or training of a Party's customers and employees, including without limitation the provision of trainers to hold training classes at Party's or customer's site and attendance at trainings held at Service Provider's site. 8. Treasury Services. Services relating to treasury services, including without limitation the management of the following: cash and its equivalents, investments, stock plans, hedging, foreign currency exchange risks; and other treasury-related executive and administrative services. 9. Materials Management. Procurement, and Logistics Services. Services relating to materials management, procurement, and logistics, including without limitation services provided in connection with inventory, product, and component handling; transport; inventory; warehousing; packaging; materials; and other related services. 10. General. Administrative, and Other Services. Genera!, administrative and other services snail include any services not otherwise specified in this Agreement. 16. Article 12(4) of the DTAA reads as under: "4....
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.... and transfer of a technical plan and technical design" does not require satisfaction of make available clause. On the other hand, Article 12(4) of India-Singapore Treaty has a separate sub paragraph i.e. 12(4)(c) which implicitly necessitates make available clause in regard to the phrase "Consist of the development and transfer of a technical plan and technical design". This enabling provision of India-US DTAA has larger scope of application to technical services, as has been enumerated in the Explanatory Note (India- US MOU dated 12-09-1989) on paragraph 4(b) which is reproduced below: Paragraph 4(b) of Article 12 refers to technical or consultancy services that make available to the person acquiring the services, technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plant or technical design to such person. (For this purpose, the person acquiring the service shall be deemed to include an agent, nominee, or transferee of such person). This category is narrower than the category described in paragraph 4(a) because it excludes any service that does not make technology available to the person acquiring the ....
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....he company wants to modify its software to permit the salesmen to assess the company's central computers for information on what products are available in inventory and when they can be delivered. The Indian firm hires a U.S. computer programming firm to modify its software for this purpose. Are the fees which the Indian firm pays treated as fees for included services ? Analysis: The fees are for included services. The U.S. company clearly performs a technical service for the Indian company, and it transfers to the Indian company the technical plan (i.e., the computer programme) which it has developed. Example 6 Facts: An Indian vegetable oil manufacturing company wants to produce a cholesterol-free oil from a plant which produces oil normally containing cholesterol. An American company has developed a process for refining the cholesterol out of the oil. The Indian company contracts with the U.S. company to modify the formulas which it uses so as to eliminate the cholesterol, and to train the employees of the Indian company in applying the new formulas. Are the fees paid by the Indian company for included services ? Analysis....
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....o bi observed that the services which come under the 'included services', meaning a technical and consultancy services as understood by the DTAA, have further been elaborated in subclauses (a) and (b) of Clause 4 under Article 12 We are concerned with sub-clause (b) of Article 12(4), which speaks of technical knowledge, experience, skill know-how, or processes, or consist of development and transfer of a technical plan or technical design. The same has to be read along with the MOU which has been entered into on May 15, 1989 and is a part of the notified DTAA. 13. In the MOU, paragraph 4(a) (herein above termed clause) of DTAA was clarified and agreed to be understood in order for a service fee to be considered "ancillary and subsidiary" to the application or enjoyment of the right, property, or information; only with respect to a service related directly to such application or enjoyment. The predominant nature of the arrangement should be the application or enjoyment of the right, property or information described in paragraph 3. It was also agreed that the question as to whether such services is related to the application or enjoyment would be determined by refer....
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....e' and remuneration received would have to be relieved of taxation under I.T. Act. XXXX 17. The decision of the Karnataka High Court referred to by the Tribunal CIT v. De Beers India Minerals (P.) Ltd. f2012l 21 taxmann.com 214/208 Taxman 406. Therein the Indian Company had sought for assistance of a Netherlands Company to conduct air borne survey for providing high quality, high resolution, geophysical data to identify probable kimberlite targets. The non-resident Company did not transfer any technological knowhow to the Indian Company and merely carried out the survey by equipments brought by them into India and supplied the necessary details to the Indian Company. The Division Bench of the Karnataka High Court found that there was no transfer of technology and the foreign company merely carried out a survey, collected data and processed it to identify the probable mining sites. The mere transfer of such data, including maps and photographs, cannot be considered as a transfer of technology was the finding. 18. We are conscious of the fact that the DTAA as relevant in the present case, is not applicable even in the case of De Beers India Minerals (P.....
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....ces, the same being business profits, would be taxable in the US and also in India; however, in India at a reduced rate than as available under the IT Act. The said reduced rate also would not be applicable to the appellant herein with respect to the amounts paid as remuneration to the US Company for the specific services as is seen from the agreement, for it being not an included service as per the DTAA. The tax having been exempted fully, there is no obligation on the assessee/appellant to deduct it at source and the non- compliance of the provisions of Section 195(1) of the IT Act cannot be alleged against the appellant for reason of such obligation not existing in law. The questions of law raised as (i) and (ii) are answered against the Revenue and in favour of the assessee. 21. We have already held that the services offered by the US Company would not come under the definition of 'included services' as available under the DTAA and as a consequence, the remuneration received by the US Company would not be 'fees for included services'. We have to find that the interpretation of the provisions of the DTAA between the Governments of India and USA have not ....
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....DTAA indicates that 'fees for technical services' would mean payments of any kind to any person in consideration for the rendering of any technical or consultancy services which, inter alia, "makes available" technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design. According to the Tribunal this "make available" condition has not been satisfied inasmuch as no technical knowledge, experience, skill, know-how, processes, have been made available by the assessee to the insurance companies operating in India. It also does not consist of the development and transfer of any technical plan or technical design. 10. The Tribunal examined the evidence available on record in order to return a finding on the issue as to whether the payments received by the assessee from the insurance companies operating in India would fall within the expression 'fees for technical services' as appearing in article 13(4)(c) of the DTAA read with section 9(1)(vii) of the said Act. XXXXX 11. The Tribunal also noted the process by which the transaction takes place. It has been pointe....
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....s India Minerals [P] Limited 346 ITR 467 has, inter alia, held as under; "Therefore the clause in USA agreement which explicitly makes clear the meaning of the word make available, the said clause has to be applied, and to be read into this agreement also. Therefore, it follows that for attracting the liability to pay tax not only the services should be of technical in nature, but t should be made available to the person receiving the technical services. The technology will be considered 'made available' when the person who received service is enabled to apply the technology. The service provider in order to render technical services uses technical knowledge, experience, skill, know how or processes. To attract the tax liability, that technical knowledge, experience, skill, know-how or process which is used by service provider to render technical service should also be made available :it is open 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 a a able it is open to the recipient of the service to make use of ....
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....rvices offered are the product of intense technological effort and a lot of technical knowledge and experience of the service provider have gone 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 « edge, 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." 26. In light of the aforementioned judicial decisions, we are of the considered view that the service recipient of the assessee is una....