TaxTMI 
TaxTMI 
2020 (10) TMI 1355
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....ithout prejudice to one another: Ground No 1 - Applicability of provisions of Section 195 of the Income Tax Act. 1961 ('Act') on payments towards Instrument Flight Rules ('IFR') paper charts to Jeppessen GmBH, Germany - Rs 1,93,335 1.1 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the learned Income Tax officer (IT & TP), Bhopal, (hereinafter referred to as learned TDS officer) by holding that services provided by Jeppessen GmBH in form of IFR paper charts are in the nature of technical services and hence, taxable under section 9(1 )(vii) of the Act as well as under the India-Germany Double Taxation Avoidance Agreement (,India-Germany DTAA'). 1.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the Decore Exxoils P. Ltd. /ITANos.196 & 197/Ind/2018 learned TDS officer by holding that the IFR paper charts, which covers standardized information on route navigation is a service which required human intervention. 1.3 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in co....
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....rred in holding that services provided by Camp USA makes available technology to the Appellant. 3.3. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in holding that alerts provided by the Camp USA's system in respect of scheduled/nonscheduled maintenance of the aircraft's parts are considered as "making technology available", even as per the Memorandum of Understanding ('MOU') signed between India- USA pursuant to the India- USA DTAA. Ground No 4 - Applicability of provisions of Section 195 of the Act on payments made to Rockwell Collins, USA ('Rockwell USA') for providing services in respect of route navigation - 3,82,186 4.1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the learned TDS officer by holding that services provided by Rockwell USA qualify as Fees for Included Services ('FIS') under the India- USA Double Taxation Avoidance Agreement ('India-USA DTAA') and hence, taxable under Article 12 of the India-USA DTAA. 4.2. On the facts and circumstances of the case and in law, the learned CIT(A) has er....
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....appeal are that Assessing Officer while framing the assessment u/s 201(1)/201(1A) r.w.s. 195 of the Income Tax Act 1961(hereinafter referred as the 'Act') observed that the assessee-deductor is engaged in operation of Lear Jet Aircraft. It is responsible for deducting tax at source. Therefore, a notice was issued regarding various payment made to non-residents for technical service during F.Y. 2014-15 for not deducting tax at source. In response to the notices the authorized representative of the assessee attended the proceedings. However, assessing officer vide order dated 5th July 2016 held the assessee as in default and framed the impugned assessment order. Thereby, he made addition on account of non-deduction of tax of Rs.15,03,387/- and interest thereon u/s 201(1A) @ 1% of Rs.3,13,171/-. 4. Aggrieved against this order assessee preferred an appeal before the Ld. CIT(A) who after considering the submissions partly allowed the appeal. Thereby the Ld. CIT(A) treated the amount related to purchase of spare parts as non-taxable and rest of the additions were sustained. 5. Now the assessee is in appeal before this Tribunal. Ground No.1(1.1 to 1.3) is against applicability of p....
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.... Clause 15 of the Terms and Conditions on Intellectual Property states: "All intellectual property rights embodied in the Products are and shall remain the property of Jeppessen and/or its third party licensors." [PB - 241] 6. Payment made to Jeppessen GmBH, Germany towards annual subscription for obtaining standard IFR paper charts does not fall within the term 'fees for technical services' under the provisions of the Act. 7. Following decisions fortifies the submissions of the appellant - a. Elsevier Information Systems GmbH [2019] 106 taxmann.com 401 (Mum) - Section 9 of the Income-tax Act, 1961 read with Article 12 of India-Germany Tax Treaty - Income - Deemed to accrue or arise in India (Royalties/Fees for technical services - Subscription fee) - Whether for providing technical/managerial service human intervention is a sine qua non - Held, yes - Assessee company had received subscription fee from customers for access to on-line database pertaining to chemical information - Assessing Officer was of view that subscription fees received by assessee was in nature of fees for technical services - It was noted that assessee had neither employed a....
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.... 'technical services' appearing in Explanation 2 of section 9(1)(vii). In the absence of the above distinguishing feature, service, though rendered, would be mere in the nature of a facility offered or available which would not be covered by the aforesaid provision of the Act." [emphasis supplied] c. Siemens Ltd [2013] 30 taxmann.com 200 (Mum) - Para 15 - "The Hon'ble Judge in the case of Skycells Communications Ltd (supra) while interpreting the word 'fees for technical services' as defined in Explanation 2 to section 9(1)(vii) has made a very important observation:........................................................................ ...... Thus if a standard facility is provided through a usage of machine or technology, it cannot be termed as rendering of technical services." [emphasis supplied] Decision of Hon'ble Delhi High Court in the case of Bharti Cellular Ltd [2009] 319 ITR 139 was relied upon while arriving at the finding that the word 'technical' has to be construed in the same sense involving direct human involvement without that, technical services cannot be held to be made available. Where simply an equipment or sophisticated mach....
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....ully considered the facts of the case, assessment order-and the submissions of the Appellant and do not agree with the contention of the AR on account of the following reasons: 7.1 JeppesenGmBH, Germany the non-resident entity has provided IFR charts to the Appellant. These charts are used for navigation of the aircraft. JeppesenGmBH has developed navigational information for several routes in the world and upon requisition it provided the same to the Appellant. Sample chart has also been submitted by the Appellant along with the submission. On review of the said chart, it is seen that the same contains complex navigational routes which are used by the pilots in air travel. However, apart from invoices and sample chart the Appellant has not provided any proof to justify that chart is prepared without any human intervention. From the perusal of invoices and chart it is not possible to judge whether it is prepared with human intervention or not. On the contrary there are certain observations (discussed in the below paragraphs), which indicate human intervention. 7.2 Further, in the chart provided it is mentioned that "These charts are designed for flights at and abo....
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....o be liable for withholding tax under section 194J. Though this decision is in reference to the payment made to Indian resident, the ratio decidendi is equally applicable in the present case. A reference is also made to the decision of Hon'ble Mumbai Tribunal in the case of Decca Survey Overseas Ltd. (ITA No. 8506/BOM/90 and 8625/BOMj91) where services involved substantial use of equipment and incidental involvement of personnel. The Hon'ble Tribunal held that although use of equipment formed substantial part of the contract, both the equipment as well as technical personnel together rendered services and hence, services were in the nature of technical services. Similarly, the Honble Delhi High Court in Rio Tinto Technical Services case (17 taxmann.com 70)held that payment made to acquire technical information would qualify as fees for technical services. Since, it was treated as fees for technical services under the narrow definition (with make available clause) in India - Australia tax treaty which was under consideration before Hon'bie Delhi High Court, it will definitely qualify as fees for technical services under broader definition under the Act and India....
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....l intervention, is one of the points which requires expert evidence ... Whether at that stage, any human intervention is involved is required to be examined, which again needs a technical data. These types of matters cannot be decided without any technical assistance available on record. 7.12 The Appellant in the instant case has failed to provide any technical data and has just submitted sample invoice and made the alleged claim without any technical assistance as mandated by the Supreme Court .The assesse has failed to provide the copy of agreement 'with Jappcsen GMBH Germany before the AO or during Appellate stage in spite of specifically been asked for to determine the nature of services rendered by the nonresident nor has the assesse submitted any certificate or technical data or any other supporting documents to establish the absence of human intervention in rendering the service. The primary onus is on the appellant to establish the claim made by him. Software assembly and the other services detailed supra belie the contention of the Appellant that there is no human intervention. 7.13 In view of the above reasons, the payment made to Jappesen GMBH Germa....
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....tion are outside India. 3. The DGCA manual, 'Civil Aviation Requirement' (CAR) specifies the flight crew training and qualification requirements for scheduled and non-scheduled operators. This manual casts an onerous responsibility on the operator to ensure all of its compliance so as to hold a valid flight operator permit. In the instant case, appellant company is engaged as an operator of Learjet aircraft having non-scheduled operator permit. From the DGCA manual, certain key aspects which are mandatorily required to be complied by an operator are listed for reference [PB 114 - 139] - a. Clause 4.3 - All flight crew members hold an applicable and valid license acceptable to DGCA and are suitably qualified and competent to conduct duties assigned to them. [PB 116] b. Clause 6.1.6 - Each flight crew member undergoes the checks required by Para 9.2 (PPC) and the training and checks required by Para 9.5 (SEP) before commencing supervised line flying (SLF). [PB 117] c. Clause 8.1.2 - For multi-crew operations, the pilot completes an appropriate command course. [PB 118] d. Clause 8.2.3 - Undergo minimum training and checks ....
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....ce as Dallas TX, US. Another invoice states training description - "Lear Jet 60XR Pilot Recurrent". [PB 141 and 145] Other invoices states training description - "Lear Jet 60XR Pilot Initial / International Procedures Initial". [PB 142 - 144] 6. It is evident from the invoices that the training to pilots of the operator appellant have been arranged to meet the mandatory requirements of DGCA. There is a dependency factor inherent in the flight operating business of the appellant for maintaining an effective flight crew of pilot. The operator is mandatorily required to satisfy DGCA sufficiently for the qualifications of its pilot crew as stated in clause 12.5 of the CAR. The training availed by a pilot does not go for perpetuity and recurrent training is compulsory for flight operations. [PB 123] 7. Instant issue is directly covered by the decision of Hon'ble Mumbai ITAT in the case of United Helicharters Pvt Ltd in ITA No. 5135 & 5136/Mum/2011. [CLPB 28 - 31] Para 5 - "..................He has referred para 4 of Article 12 and submitted that as per the meaning given in para 4 of the Article 12 of the Indo-US DTAA the 'fees for in....
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....out depending upon the provider. 10. As already stated above, the appellant as an operator is dependent on the service provider to comply with the mandatory requirements of DGCA. There is no 'make available' of technology by the service provider to the appellant to make it independent for its future technical requirements. The decisive factor is not the fact of training services per se but the training services being of such a nature that it results in transfer of technology. In the instant case, there is no transfer of technology in the DGCA mandated training of pilots. Nothing remains with the appellant operator after the expiry of period after which the need to "recurrent training" arises as per the CAR of DGCA. 11. Training given by the Non-resident company is part of its routine business and does not involve transfer of any technology. The training involves use of technology by the training company but there is no technology transfer to the pilots of the assessee company. Consequently, the services cannot be regarded as technical in nature. Further, even in the DTAA with USA, technical services is defined on 'included services' basis. In such cases bo....
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....r the expiry of subscription for the service provided. Article 12 of the India - USA DTAA also does not cover the instant transaction within the meaning of included services of managerial, technical or consultancy. In the instant case, there is no transfer of technology in the subscription of services so availed by the appellant operator. The MoU of DTAA very categorically states that ".........The fact that the provision of the service may require technical input by the person providing the service does not per se mean that technical knowledge, skill, etc. are made available to the person purchasing the service within the meaning of para 4(b)." [emphasis supplied] 19. Article 7 of the India - USA DTAA is also not attracted owing to absence of a PE of the non-resident in India to create a business connection in India. Tax Residency Certificate (TRC) and Form 10F required under section 90(5) of the Act were furnished before the Ld. ITO. [PB 162 - 164] 20. Accordingly, the appellant was not required to deduct tax at source under section 195 of the Act on the payment made to CAMP Systems International Inc. USA, and hence not an assessee in ....
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....is required to be examined, which again needs a technical data. We are only highlighting these facts to emphasise that these types of matters cannot be decided without any technical assistance available on record." [emphasis supplied] In the instant case, there is no human element involved when CAMPS Systems International Inc, USA and Rockwell Collins, USA supplied their subscription services to the appellant operator for operation of its aircraft. [AO Page 19] 25. Article 7 of the India - USA DTAA is also not attracted owing to absence of a PE of the non-resident in India to create a business connection in India. Tax Residency Certificate (TRC) and Form 10F required under section 90(5) of the Act were furnished before the Ld. ITO. [PB 165 - 167] 26. Accordingly, the appellant was not required to deduct tax at source under section 195 of the Act on the payment made to Rock Collins USA, and hence not an assessee in default under section 201(1) of the Act. 11. Ld. D.R. opposed the submissions and supported the orders of authorities below. Ld. DR submitted that essentially the services provided by the assessee fall within the technical ser....
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....hnical Training" is considered as making available technical knowledge to the recipient of income. 9.2. Decision of Hon'ble Ahmedabad Tribunal in the case of ITO v Veeda Clinical Research Private Limited (ITA No. 1406/ Ahdj2009), relied upon by the Appellant is distinguishable on facts. The said judgment was ruled in the context of training pertaining to market awareness and development. These are soft skills training and not technical trainings. It was on the context of these soft skills trainings, Hon'ble Ahmedabad Tribunal ruled that no technology is involved and it is not making available any technical knowledge and skills to the recipient of services. In view of the same, the reliance placed by the Appellant on the decision of Hon'ble Ahmedabad Tribunal in case of Veeda Clinical Research is distinguishable as in the present case, service involved are technical in nature and imparting of training has resulted in transfer of technology, knowledge and / or experience. 9.3 Decision of Hori'ble Mumbai Tribunal in the case of United Helicharters Private Limited Vs ACIT (ITA No. 5136/ Mum/2011 & ITA No. 5135/Mum/2011) dealt with the issue of....
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....tax treaty that "Technical Training" is "Make Technology Available" for the purpose of Article 12 paragraph 4(bJ has not been considered or overlooked. Mere fact that the trainings are mandated by DGCA does not alter the fact that the training is a technical training and making available technical knowledge. There is no such exception mentioned in the MOU that if mandated by DGCA, it will alter the nature of service rendered 9.7 Further, it is seen from the bare reading of the May 15, 1989 U.S. - INDIA TAX TREATY, Memorandum of understanding concerning fees for included services in Article 12 is as follows: "Typical categories of services that generally involve either the development and transfer of technical plants or technical designs, or making technology available as described in paragraph 4(b), include: 1. Engineering services (including the sub-categories of bio-engineering and aeronautical, agricultural, ceramics, chemical, civil, electrical, mechanical, metallurgical, and industrial engineering) ; 2.Architectural services; and 3.Computer software development. Under paragraph 4(b), technical and consultancy services could make tec....
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.... of DTAA between India and USA. The assessee also accepted that as per MOU technical training may be one which makes available the technical knowledge but the assessee also contended that MOU used the words may" and to arrive at the final conclusion whether technical training is fees for included services or not, the same needs to be checked against the substantive provision of MOU in conjunction with the facts of same. This contention of the assessee is not genuine as MOU clearly scribe the position as under: Typical categories of services that generally involve either the development and transfer of technical plants or technical designs, or making technology available as described in paragraph 4(b}, include: 1 . 9. Technical training. T can be seen that MOU does not used the word "Mau" but used the wards Typical categories of services that generally involve", hence his point of the assessee cannot be accepted. =Further the assessee stated that "In the instant case, the pilots are already well equipped with technical knowledge and service provider is only checking his Proficiency. Service provider is not imparting any ....
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....cation requires recurrent training and checking. Recurrent training includes ground recurrent training, aeroplane/ FS1'D training and safety and emergency procedures training and Crew resource tnanaqement training. Recurrent checking includes pilot proficiency checks, route checks and safety and emergency procedures checking. By above discussion it is clear that as per the DGCA notification. the crew members attended the training proqranis which includes above types of training. The statement of the assessee awl service provider is only checking his Proficiency is not correct. The services provider provided sufficient knowledge, experience and training to the pilots by which they became trained and used that knowledge and experience for their own use without the help of the services provider. I am in agreement with the said observations of the AO.The contentions of the Appellant are factually incorrect. The claim of the AR that service provider is only checking proficiency is factually incorrect. In fact, the service provider is imparting technical training to the pilots which also includes besides training, a simulator training course. Recurrent trai....
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....also, the Appellant ha that the training / test were to ensure that the pilots are component t0 handle contingency situations. It is not disputed that the training provided to pilots is technical in nature. Once training is imparted and the necessary certification is issued by CAE Simuflire confirming their eligibility, the pilots become equipped with knowledge and possess the required skills sets. Therefore, it cannot be at there is no transfer of knowledge, technology and/or experience. 9.10 The Hon'ble Delhi Tribunal in case of Steel Authority of India Ld. (120 TTJ 297) held that fees received by the UK entity for imparting technical training was taxable in India as fees for technical services. 9.11 In the case of Maruti Udyog Ltd (34 SOT 480), the Hori'ble Delhi Tribunal held that fees paid to a French entity for conducting impact test on motor cars and providing the testing reports was technical in nature. These decisions were rendered in the context of the applicable tax treaty which contain the clause 'make technology available'. 9.12 The learned AO has also held that the said income is taxable under the head royalty. The Assessee h....
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....ience, skill, know-how, or processes, or consists of the development and transfer of a technical plan or technical design. The training in the case in hand was given to the pilots and other staff as per the requirement of the DGCA Rules therefore, it was only a part of the eligibility of the pilots and other staff for working in the industry of aviation and such training would not fall under the term "service make available". The decisions relied upon by the Ld. DR are on the taxability of the income in the hand of the non-resident in view of the retrospective amendment therefore the said principle cannot be applied while deciding the issue of disallowance u/s 40(a)(i). In view of the above discussion and the facts and circumstances of the case we are of the considered opinion that the ITA No. 5136 & 5135/M/2011 United Helicharters Pvt. Ltd.disallowance of u/s 40(a)(i) is not justified and accordingly the same is deleted. 14. The facts of the case are identical as were in the case of United Helicharters Pvt. Ltd.. We, therefore, do not see any reason to take a contrary view as taken by the Coordinate Bench. We, therefore, direct the assessing officer to delete this addition. Gro....
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....he orders of the authorities below. 17. We have heard rival submissions and perused the material available on records. The Assessing officer treated the assessee in default. The requirement of tax in respect of fee for technical services and 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. Another requirement is that as per the Article 7 of the India -USA DTAA the service provider should have a Permanent Establishment (PE) in India. We find in the contention of the Ld. counsel for the assessee that the judgment relied by the TDS officer rendered in the case of De Beers (supra) which in fact helps the case of the assessee. We, therefore, direct the assessing officer to delete this addition. 18. Now, coming to the assessee's appeal in ITANo.196/Ind/2018, the assessee has raised following grounds of appeal: On the facts and circumstances of the case and in law, the Commissioner of Income-tax (Appeals)-13, Ahmedabad [CIT(A)] erred on the following grounds, which are independent, separate/alternative and withou....
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....r by holding that services provided by in the form of scheduled/unscheduled component removals' and service bulletins containing kits used for maintenance of aircraft, by Learjet Inc. is a service which makes available technology to the Appellant. 2.3. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the learned TDS officer by holding that services provided by Learjet USA is considered as "making technology available", even as per the Memorandum of Understanding ('MOU') signed between India- USA pursuant to the India- USA DT AA. 19. At the outset, Ld. counsel for the assessee submitted that in the present appeal the assessee had made payment to CAE Simuflite Inc. USA - Rs 16,39,768/- in respect of mandatory training for pilots requirement by the Directorate General of Civil Aviation (DGCA) and Larjet Inc. USA of Rs.20,40,761/- in respect of providing service bullentins, alerts manual for maintenance of air craft and supply of component parts under the 'Smart Parts Plus Agreement. It is contend that the facts for the payments made referred two non-residents remain unchanged except for the quantum.....
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....n the operator to ensure all of its compliance so as to hold a valid flight operator permit. In the instant case, appellant company is engaged as an operator of Learjet aircraft having non-scheduled operator permit. From the DGCA manual, certain key aspects which are mandatorily required to be complied by an operator are listed for reference [PB 114 - 139] - q. Clause 4.3 - All flight crew members hold an applicable and valid license acceptable to DGCA and are suitably qualified and competent to conduct duties assigned to them. [PB 116] r. Clause 6.1.6 - Each flight crew member undergoes the checks required by Para 9.2 (PPC) and the training and checks required by Para 9.5 (SEP) before commencing supervised line flying (SLF). [PB 117] s. Clause 8.1.2 - For multi-crew operations, the pilot completes an appropriate command course. [PB 118] t. Clause 8.2.3 - Undergo minimum training and checks as stipulated in Appendix 2 (Para 5) to this CAR [PB 119] u. Clause 9.2 - Pilot's proficiency check (PPC): [PB 120] v. Clause 9.2.3 - The period of validity of a PPC shall be six months......[PB 120] w. Clause 9.3 -....
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....". [PB 142 - 144] 32. It is evident from the invoices that the training to pilots of the operator appellant have been arranged to meet the mandatory requirements of DGCA. There is a dependency factor inherent in the flight operating business of the appellant for maintaining an effective flight crew of pilot. The operator is mandatorily required to satisfy DGCA sufficiently for the qualifications of its pilot crew as stated in clause 12.5 of the CAR. The training availed by a pilot does not go for perpetuity and recurrent training is compulsory for flight operations. [PB 123] 33. Instant issue is directly covered by the decision of Hon'ble Mumbai ITAT in the case of United Helicharters Pvt Ltd in ITA No. 5135 & 5136/Mum/2011. [CLPB 28 - 31] Para 5 - "..................He has referred para 4 of Article 12 and submitted that as per the meaning given in para 4 of the Article 12 of the Indo-US DTAA the 'fees for included services' means inter alia if such services make available technical knowledge, experience, skill, know-how, or processes, or consists of the development and transfer of a technical plan or technical design. The training was given to ....
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....ervice provider to the appellant to make it independent for its future technical requirements. The decisive factor is not the fact of training services per se but the training services being of such a nature that it results in transfer of technology. In the instant case, there is no transfer of technology in the DGCA mandated training of pilots. Nothing remains with the appellant operator after the expiry of period after which the need to "recurrent training" arises as per the CAR of DGCA. 37. Training given by the Non-resident company is part of its routine business and does not involve transfer of any technology. The training involves use of technology by the training company but there is no technology transfer to the pilots of the assessee company. Consequently, the services cannot be regarded as technical in nature. Further, even in the DTAA with USA, technical services is defined on 'included services' basis. In such cases both hardware and technology have to be transferred together which is not the case with party concerned herein. Above decision of Hon'ble Karnataka High Court has been followed by Hon'ble ITAT Ahmedabad Bench in the case of Veeda Cl....
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.... instant case, there is no transfer of technology in the subscription of services so availed by the appellant operator. The MoU of DTAA very categorically states that ".........The fact that the provision of the service may require technical input by the person providing the service does not per se mean that technical knowledge, skill, etc. are made available to the person purchasing the service within the meaning of para 4(b)." [emphasis supplied] 45. Article 7 of the India - USA DTAA is also not attracted owing to absence of a PE of the non-resident in India to create a business connection in India. Tax Residency Certificate (TRC) and Form 10F required under section 90(5) of the Act were furnished before the Ld. ITO. [PB 162 - 164] 46. Accordingly, the appellant was not required to deduct tax at source under section 195 of the Act on the payment made to CAMP Systems International Inc. USA, and hence not an assessee in default under section 201(1) of the Act. 47. In respect of payment to Rockwell Collins, USA, it is engaged in providing avionics and information technology systems and services and enhanced map overlay services. Appellant....
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....ied] In the instant case, there is no human element involved when CAMPS Systems International Inc, USA and Rockwell Collins, USA supplied their subscription services to the appellant operator for operation of its aircraft. [AO Page 19] 51. Article 7 of the India - USA DTAA is also not attracted owing to absence of a PE of the non-resident in India to create a business connection in India. Tax Residency Certificate (TRC) and Form 10F required under section 90(5) of the Act were furnished before the Ld. ITO. [PB 165 - 167] 52. Accordingly, the appellant was not required to deduct tax at source under section 195 of the Act on the payment made to Rock Collins USA, and hence not an assessee in default under section 201(1) of the Act. 11. Ld. D.R. opposed the submissions and supported the orders of authorities below. Ld. DR submitted that essentially the services provided by the assessee fall within the technical services. 12. We have heard rival submissions and perused the material available on record and gone through the orders of lower authorities. The assessee company made payments towards for pilots mandatorily required as per Directorate....
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....dj2009), relied upon by the Appellant is distinguishable on facts. The said judgment was ruled in the context of training pertaining to market awareness and development. These are soft skills training and not technical trainings. It was on the context of these soft skills trainings, Hon'ble Ahmedabad Tribunal ruled that no technology is involved and it is not making available any technical knowledge and skills to the recipient of services. In view of the same, the reliance placed by the Appellant on the decision of Hon'ble Ahmedabad Tribunal in case of Veeda Clinical Research is distinguishable as in the present case, service involved are technical in nature and imparting of training has resulted in transfer of technology, knowledge and / or experience. 9.3 Decision of Hori'ble Mumbai Tribunal in the case of United Helicharters Private Limited Vs ACIT (ITA No. 5136/ Mum/2011 & ITA No. 5135/Mum/2011) dealt with the issue of training services taxability which was mandated by the DGCA. In the case of United Helicharters, the Mumbai Tribunal has not considered the aspect whether the training resulted in transfer of knowledge, and merely on the basis that t....
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.... training is a technical training and making available technical knowledge. There is no such exception mentioned in the MOU that if mandated by DGCA, it will alter the nature of service rendered 9.7 Further, it is seen from the bare reading of the May 15, 1989 U.S. - INDIA TAX TREATY, Memorandum of understanding concerning fees for included services in Article 12 is as follows: "Typical categories of services that generally involve either the development and transfer of technical plants or technical designs, or making technology available as described in paragraph 4(b), include: 1. Engineering services (including the sub-categories of bio-engineering and aeronautical, agricultural, ceramics, chemical, civil, electrical, mechanical, metallurgical, and industrial engineering) ; 4.Architectural services; and 5.Computer software development. Under paragraph 4(b), technical and consultancy services could make technology available in a variety of settings, activities and industries. Such services may, for examples, relate to any of the following areas: 10.Bio- technical services ; 11.Food processing; 12.Envi....
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.... at the final conclusion whether technical training is fees for included services or not, the same needs to be checked against the substantive provision of MOU in conjunction with the facts of same. This contention of the assessee is not genuine as MOU clearly scribe the position as under: Typical categories of services that generally involve either the development and transfer of technical plants or technical designs, or making technology available as described in paragraph 4(b}, include: 1 . 9. Technical training. T can be seen that MOU does not used the word "Mau" but used the wards Typical categories of services that generally involve", hence his point of the assessee cannot be accepted. =Further the assessee stated that "In the instant case, the pilots are already well equipped with technical knowledge and service provider is only checking his Proficiency. Service provider is not imparting any additional skill to the pilots." This contention of the assessee is also not correct. The copy of offer letter issued by the nonresident has already been scanned and pasted in this order. As per the offer letter the amount mentioned to be paid....
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....ludes pilot proficiency checks, route checks and safety and emergency procedures checking. By above discussion it is clear that as per the DGCA notification. the crew members attended the training proqranis which includes above types of training. The statement of the assessee awl service provider is only checking his Proficiency is not correct. The services provider provided sufficient knowledge, experience and training to the pilots by which they became trained and used that knowledge and experience for their own use without the help of the services provider. I am in agreement with the said observations of the AO.The contentions of the Appellant are factually incorrect. The claim of the AR that service provider is only checking proficiency is factually incorrect. In fact, the service provider is imparting technical training to the pilots which also includes besides training, a simulator training course. Recurrent training and proficiency test is only a small portion of the entire course schedule. Even otherwise, any mandatory requirement does not alter the characteristic and nature of service rendered. There is no dispute that the alleged training is technical tr....
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....ation is issued by CAE Simuflire confirming their eligibility, the pilots become equipped with knowledge and possess the required skills sets. Therefore, it cannot be at there is no transfer of knowledge, technology and/or experience. 9.10 The Hon'ble Delhi Tribunal in case of Steel Authority of India Ld. (120 TTJ 297) held that fees received by the UK entity for imparting technical training was taxable in India as fees for technical services. 9.11 In the case of Maruti Udyog Ltd (34 SOT 480), the Hori'ble Delhi Tribunal held that fees paid to a French entity for conducting impact test on motor cars and providing the testing reports was technical in nature. These decisions were rendered in the context of the applicable tax treaty which contain the clause 'make technology available'. 9.12 The learned AO has also held that the said income is taxable under the head royalty. The Assessee has not provided any submission on non-taxability of income received by CAE under royalty. In view of the same, without prejudice to the above observations, the income earned by CAE for training services is also taxable under Article 12 as royalty Income. ....
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....ules therefore, it was only a part of the eligibility of the pilots and other staff for working in the industry of aviation and such training would not fall under the term "service make available". The decisions relied upon by the Ld. DR are on the taxability of the income in the hand of the non-resident in view of the retrospective amendment therefore the said principle cannot be applied while deciding the issue of disallowance u/s 40(a)(i). In view of the above discussion and the facts and circumstances of the case we are of the considered opinion that the ITA No. 5136 & 5135/M/2011 United Helicharters Pvt. Ltd. disallowance of u/s 40(a)(i) is not justified and accordingly the same is deleted. "14. The facts of the case are identical as were in the case of United Helicharters Pvt. Ltd.. We, therefore, do not see any reason to take a contrary view as taken by the Coordinate Bench. We, therefore, direct the assessing officer to delete this addition. Ground no.2 to 4 of the assessee's appeal are allowed." 22. Therefore, taking a consistent view this ground of the assessee is also allowed. We, therefore, direct the assessing officer to delete this addition. 23. Now, in....