TaxTMI 
TaxTMI 
2023 (7) TMI 850
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....r Article 12(4)(b) of the India-US DTAA." AY 2015-16 "1. The Assessing Officer ('AO')/Dispute Resolution Panel ('DRP') grossly erred in holding Rs. 57,12,000/- to be Fees for included services ('FIS') under Article 12(4)(b) of the India-US DTAA." 3. Assessee has also raised an additional ground vide its application for admission of additional ground dated 12th December, 2022 as under:- " 1. WITHOUT PREJUDICE TO THE OTHER GROUNDS OF APPEAL. a. The Learned Deputy. Commr. of Income Tax (IT) 2 (2) (1), Delhi (AO) erred in computing tax on the assessed Income @ 20% including applicable surcharge and education cess. b. The appellant respectfully submits that having regard to the provisions of section 115A, the tax rate on the income in the nature of 'fees for technical services shall be 10% as may be increased by the amount of surcharge and education cess. C. The appellant respectfully submits that the amount of tax computed by the Learned DCIT should be rectified accordingly. 2. The assessee prays for appropriate relief. 3. The assessee craves leave to add, alter or amend the grounds of appeal at the time of hearin....
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....ISTRATION A.l Assist SVPRET in selecting Master Planner, upon request, and manage The Master Planner Consultant. A.4 Assist in the preparation of the Project Management Plan (PMP) A.7 Assist in the preparation of Monthly Executive Report . ^ B. CONCEPT DESIGN PHASE (Preceding Selection of EPC Contractor) B.l Prepare and finalize preliminary site planning & architectural designs, Prepare drawings & specifications to the concept stage, which will form the base for the detailed designs & engineering to be given, followed and further developed by the EPC contractor. B.3 Manage, Coordinate & Monitor progress of the Concept Designs, Including design progress meetings as required. C. PROCUREMENT PHASE C.1 Manage selection of EPC Contractor a . Assist in soliciting interest, Pre-Qualify and Short List of EPC Contractors from tender b . Assist in preparation of Scope of Works for EPC Contractors 6.1 For the AY 2014-15 and AY 2015-16 the assessee filed its return of income on 31.03.2016 and 07.03.2017 respectively declaring total income at Rs. Nil. The assessee's case for both the AYs 2014-15 and 2015-16 were selecte....
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...., skill, know-how, or processes, or consist of the development and transfer of a technical plan 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 service. Generally speaking, 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 may require technical input by the person providing the service does not per se mean that technical knowledge, skills, etc. are 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 perse be considered to make the technology available. Typical categories of services that generally involve either the development and transfer of technical plans or technical designs, or making technology available as described in paragraph 4(b), include: (1) engineer....
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....ral drawings and specification for EPC contract tender. These drawings, designs etc. cannot be made by a layman and requires specific technical knowledge and that is why they qualify as technical services. Further, these drawings and designs when passed on to the client for use by them in the specific project as agreed by the assessee and the client, may also be used in future by the clients in some other project of theirs which is of a similar nature and where a similar kind of designs and drawings etc. are required making it fully covered under the 'make available' clause. 3.5 The assistance provided by the assessee as mentioned above also "makes available" the technology to the clients. The agreement does not bar the clients to use the drawings, designs etc. in future in any other project. The clients who have obtained those drawings or designs are made available the technology required for making similar kind of statues as is being done by the clients in the agreement entered into by the assessee. There cannot be any argument regarding the nature of services provided by the assessee which are architectural in nature and thus squarely covered under the services,....
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....hment ("PE") of the assessee in India. The Ld. AR relied on the decisions of the Mumbai Bench of the Tribunal in the case of DCIT vs. Forum Homes (P) Ltd. (2022) 192 ITD 184 (Mum. Trib.) and Pune Bench of the Tribunal in the case of Gera Developments P. Ltd. vs. DCIT (2016) 160 ITD 439 wherein the Tribunal on the similar fact pattern has held that the payment received in lieu of architectural design services does not qualify as FTS. 8.1. Without prejudice to the above, the Ld. AR submitted that the income from FTS should be taxed at the rate of 10% (plus applicable surcharge and education cess) as per the provisions of section 115A of the Act being more beneficial to the assessee as against the rate of tax at 20% under the India- USA DTAA applied by the Ld. AO. This plea has been raised by way of an additional ground before the Tribunal. 9. Ld. DR strongly relied on the findings of the Ld. AO/DRP and by drawing inference from the MOU between India and USA submitted that the services provided by the assessee are in the nature of architectural services which falls within the scope of Article 12(4)(b) as the said services 'make available' the technology to the AOP. The Ld. DR re....
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....ts etc. for the project. By doing so, according to the Ld. AO/DRP the assessee rendered technical and architectural design services which made available the technology, skill, experience etc. to AOP and thus fell within the ambit of FIS under Article 12(4)(b) of the India-USA DTAA. 11. We have considered the detailed submissions of the assessee before the lower authorities. The case of the assessee is that the project specific services rendered by the assessee do not 'make available' technical knowledge, experience, skill, know-how, or processes or consist of the development and transfer of a technical plan or technical design. The submissions of the assessee as recorded by the Ld. DRP in its orders for the relevant AYs are as under:- • "The drawings are not construction documents that can be used to build the buildings because there is no technical design contained within the drawings and they do not contain details sufficient for execution of any construction works. • The drawings were provided to AOP members, but AOP members cannot use/apply/execute design concepts of the assessee without technical processing by others because there was no rendition ....
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....fer and access to the working papers/Calculation Sheets of Sub-consultant to verify and recommendations made." 13.1 In our humble opinion, the Revenue has missed an important fact that the designs, drawings, lay-outs etc. provided to AOP by the assessee are project specific which are specifically made for the construction of "Statue of Liberty" and therefore even if the ownership of such drawings etc. are transferred to the AOP the same could not be utilised for any other purpose by the AOP. Further, the said clause of ownership states that subconsultants (i.e. the assessee) working papers shall belong to subconsultant which means that the know-how shall remain with the assessee itself. 13.2 Similarly, the contention of the Revenue that architectural services are included within the scope of "FIS" as per the MOU between India and USA, in our view, does not have any legs to stand since here too the Revenue has missed an important fact that while providing architectural services neither any technical knowledge, skill, experience, know-how etc. was made available to AOP for utilising them in future independently nor any developed drawing or design have been provided by the asses....
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....hitecture + Urbanism Pte Ltd is concerned, it will provide an illustrative site/roof plan showing all the components of the project, general landscape, recommendation and overall infrastructure elements, such as, entry driveways and service circulation, Diagram showing each of the major public at 1:200 scale, image board to describe the architectural character of the project etc. The scope of work also requires the entity to prepare schematic design drawings, approved by the client, in case of minor adjustment. The terms of the agreement make it clear that the design, drawing, rendering, model, specification, electronic files including database and spreadsheets and other derivation that are part of the ITA 5804/Mum/2018 project will remain the intellectual property of the service provider and are intended for use solely with respect to the project. It further restrains the assessee from utilizing such intellectual property for any other project or for addition to the subject project or for completion of the project by any other entity. Similar is the scope of work and terms and conditions in respect of Web Structures Pte Ltd, another non-resident entity. 11. Thus, from the....
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....cal know-how, skill or process by Gensler. The AO in his order has categorically mentioned that the CD which was passed on to the assessee by Gensler contain drawings, designs and layouts of different buildings and facilities. It also contained the designs of interior buildings, walls, windows along with the measurements. The designs, drawings, layouts of buildings does not fall within the ambit of transfer of technical know-how or technical designs. Mere passing of project specific architectural drawings & designs with measurements does not amount to 'making available' technical knowledge, knowhow or process. Gensler has not transferred any technical expertise, skill or knowledge alongwith the drawings & designs of the particular building to the assessee. The assessee cannot independently use the drawings & designs in any manner whatsoever for commercial purpose. Since, the drawings & designs were project specific, the assessee could not have used these designs for any of its other projects. A further perusal of terms and conditions of the Agreement between the assessee and Gensler show that-* Article 5 of the agreement clearly indicate that the drawings, specificatio....
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....gs in connection with real estate development. As per the agreement entire designs and drawings were transferred at Singapore. The entire work was carried outside India. The assessee/ made payment to overseas company without deducting any tax at source. The AO issued notice u/s. 201 of the Act on the premise that payments made by assessee to overseas company were 'fees for technical services and hence the income is chargeable to tax in India u/s. 9(l)(vii) of the Act. The assessee carried the matter appeal to CIT(A). The C1T(A) upheld the order of AO. The matter travelled to Tribunal. The Tribunal appreciating the facts of case and by following the decision of Hon'ble Supreme Court of India in the case of Transmission Corpn. of A. P. Ltd. v. CIT [1999] 239 ITR 587/105 Taxman 742 and the Mumbai Bench of Tribunal in the case of Indian Hotels Co. Ltd. v. ITO [IT Appeal No. 553/Mum./2000, dated 14-2-2005] concluded: "................ that the transaction in question is a transaction of sale and not a case of rendering technical services as contemplated under s.9(l)(vii) of the Act and even otherwise no part of the service is rendered in India and thus, the assessee can....