TaxTMI 
TaxTMI 
2023 (7) TMI 406
X X X X Extracts X X X X
X X X X Extracts X X X X
....ave erroneously formed an opinion on the taxability of subcontracting charges received by misapplying the provisions of the Act and India-US DTAA, without considering the information, arguments and evidence provided by the Appellant. 1.3. The Hon'ble DRP has erred in concluding that the sub-contracting charges paid by SPi India to the Appellant are chargeable to tax by treating the same as 'FIS' under Article 12(4) of the India-US DTAA, without appreciating that the condition of 'make available' of technical knowledge is a prerequisite for determining whether an income falls under Article 12(4) of the India-USA DTAA. 1.4. The Hon'ble DRP has erred in concluding that the sub-contracting services were made available to SPi India, without appreciating the meaning of the term 'make available' as defined in the Memorandum of Understanding to India-USA DTAA and various judicial precedents. 1.5. The lower authorities have failed to bring any material on record to prove that the subcontracting services provided by SPi US have satisfied the conditions of make available in order to conclude that such services are taxable under FIS mentioned in Article 12(4) of the India-USA DTAA. 1.6....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d that the sub-contracting charges constitutes 'Fees for Including Services' ("FIS") within the meaning and scope of Article 12(4)(b) of the India-USA DTAA. Consequently, the Ld. AO passed the final assessment order dated 24.05.2022 under section 143(3) r.w.s 144C(13) of the Act determining the income of the assessee at Rs. 5,27,15,350/-. 4. Aggrieved, the assessee is in appeal before the Tribunal and all the grounds of appeal relate thereto. Ground No. 1.1 is general in nature. The main issue raised by the assessee in all other grounds of appeal relate to the taxability of sub-contracting charges received by the assessee under the provisions of India-USA DTAA which we proceed to deal with in the succeeding paragraphs. 5. The Ld. AR submitted that the assessee has merely assisted SPi India in the provision of certain services to its end clients and the payment for sub-contracting does not involve any transfer of technical knowledge, plan or design to SPi India so as to trigger the provisions of FIS under the India- USA DTAA. The Ld. AR further submitted that though the service rendered by the assessee involves technical expertise, the expertise is not transferred by the assessee ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....S Inc is a company incorporated under the laws of USA. It is a wholly owned subsidiary of SPi Global Content Holding Pvt. Ltd., Singapore. The Company is stated to be engaged in e-publishing work in the nature of editorial services including page composition, language polishing, indexing, correcting faulty grammar and punctuation etc. 2. During the relevant assessment year, the assessee was subcontracted a part of e-publishing work by SPi Technologies India Private Limited, ("SPi India"), an associate enterprise and pursuant to the services rendered, the assessee received an amount of Rs. 5,27,15,350/-. While making these payments, the SPi India had deducted TDS at an effective rate of 16.78%. 3. The assessee admitted that the services provided qualifies under the category of Fee for Included Services (FIS) but claimed that the same cannot be taxed since the services doesn't satisfy "make available" clause of article 12(4)(b) of India-USA treaty. 4. During the course of assessment proceedings, the assessee did not submit the relevant contract under which the assessee had provided services to SPI India. In the absence of such a contract, the unexplained receipts of the assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee and SPI India were in the identical nature of business and the onus lies on the assessee to substantiate it's arguments that while providing the services, the technical knowledge contained therein were not made available to it's service recipient, SPI India. 10. Since the assessee couldn't substantiate it's arguments and had not discharged it's onus that no technology was made available to SPI India in rendering services, it is humbly prayed that the appeal of the assessee may be dismissed." 7. We have heard the Ld. Representative of the parties and perused the material on record. It is an admitted fact that the assessee is a tax resident of US and hence can opt to be governed by the provisions of India-USA DTAA if more beneficial to it in terms of section 90(2) of the Act. 7.1 The perusal of records reveal that the assessee executed a document titled 'statement of work' effective as at 1st January, 2018 with the assessee for the provision of services defined and at the prices agreed upon. This statement of work documents the contract deliverables to be provided by the assessee to SPi India (at page 38 and 39 of Paper Book). The overview of work as contained in the said s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The Memorandum of Understanding (MOU) to India-USA DTAA contains various instances explaining the meaning of the term 'make available'. The 'make available' clause is satisfied when the person acquiring the services is enabled to apply the technology independently in the future without the assistance of the service provider. The fact that the provision of the service may require technical/consultancy input by the person providing the service does not per se mean that technical knowledge, skills etc. are made available to the person availing the service. There has to be a transfer of the technical knowledge, experience, skill, know-how or processes or a technical plan or technical design from the service provider to the service recipient and the same should remain with the service recipient even after rendering of the services has come to an end. 7.5 The e-publishing work in the nature of editorial services comprising of page composition, language polishing, indexing, correcting faulty grammar and punctuation etc. sub-contracted to the assessee involves technical expertise, however, such expertise is not transferred by the assessee which can be independently applied by SPi India in....