TaxTMI 
TaxTMI 
2023 (10) TMI 458
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct, 1961 (hereinafter referred to as 'the Act'). 4. Briefly the facts are, the assessee is a non-resident corporate entity incorporated in France and a tax resident of that country. As stated, assessee owns certain right, know-how, designs, and processes required to design, build and implement integrated aluminium production plants. The assessee is also a leader in primary metals and their by-products and also provides a variety of technical and related services that include quality control, the design of machines, equipment and production processes, supervision and advice on industrial installations, along with their commissioning and operations, mainly in the field of aluminium and associated installations. For the assessment year under dispute, the assessee filed its return of income on 23.03.2012 declaring income of Rs. 113,44,74,298/-. The assessee claimed the income declared to be in the nature of Royalty/Fee for Technical Services (FTS) under Article 13 of India - France Double Taxation Avoidance Agreement (DTAA). In course of assessment proceeding, the assessee came up with fresh claim that the income declared in the return of income is not taxable in India. In this contex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted, the disputed amount was received from HIL in connection with certain services relating to their plant in Orissa. The break-up of such service is as under: Nature of Services (1) -* Installations or Structures in connection with services rendered (2) Eligible Exclusion under Article 12(5)(f) &(g) (3) Hindalco paid for technical documentation in the form of an Engineering Package made, based on an agreed Basic Site Data List that included flow sheets, specifications, drawings, layouts, and operating procedures to implement Aditya Smelter in Odisha to produce Aluminium. Aditya Aluminium Smelter at Lapanga, DDisistttt.. Sambalpur , Odisha paid under clause 4.2. (c) & (d); 4.19.2 (g) & (h), read with Articles 3.2; 3.3; 4.19; 4.19.2; & Schedule 3.2 of the TLA. Rs.10,35,94,783 For getting Main Drawings to enable Hindalco to Study and comment on the Solios Proposal i.e., Process specifications, equipment lists for Paste Plant and Anode Recycling Shops of Green Anode based on RHODAX Technology. Aditya Smelter at Lapanga, Distt. Sambalpur Odisha under Purchase Order No. 8183 dated 22/01/2009 Rs. 49,42,601 For getting Paste Plant Layout Drawings & Process operation manual; m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....melting of alumina in a smelter to produce ingots, an usable raw material for the industry. 8. He submitted, learned first appellate authority has erroneously concluded that the amounts received by the assessee towards basic site data list, including flow sheets, specifications, drawings, layouts, and operating procedures under TLA as FTS falling under Article 12(4)(a) of India - Portugal DTAA. He submitted, the observations of the first appellate authority that the services provided have no connection with the tangible plant, is completely wrong. He submitted, without the aid of such services, the service recipient could not have erected the plant or expanded their capacities. He submitted, the services provided were highly site-centric, tailor-made, and were delivered in the form of deliverables like drawings, layouts, manuals, on-site supervision, flow-charts etc., which cannot be termed as intangible service or property. He submitted, the services are neither ancillary nor subsidiary to the application or enjoyment of the right, property or information for which the assessee had received payment in the nature of royalty, nor while rendering such services the assessee had made ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ions or Structures in connection with services rendered (2) Eligible Exclusion under Article 12(5)(f) &(g) (3) For getting Main Drawings to enable Hindalco to Study and comment on the Solios Proposal i.e., Process specifications, equipment lists for Paste Plant and Anode Recycling Shops of Green Anode based on RHODAX Technology. Aditya Smelter at Lapanga, Distt. Sambalpur Odisha under Purchase Order No. 8183 dated 22/01/2009 X49,42,601 For getting Paste Plant Layout Drawings & Process operation manual; material proportionating specification and material balance; assembly drawings electrical & automation specifications for anode recycling shop; and process specificat ions & flow diagram along with equipment list for the fines handling based on RHODAX Technology for installing Hindalco 35 TPH capacity Green Anode plant. 35 TPH capacity Green Anode plant of Hindalco at Mahan Smelter Singrauli (M.P.) under Purchase Order No. 9150 dated 24/09/2009 ,12,62,600 TOTAL 1,62,05,201/- 11. Firstly, there is a factual error in the observations of learned Commissioner (Appeals) that HIL has obtained any drawings/layouts for a power plant. Drawing our attention to the purchase order, he....
X X X X Extracts X X X X
X X X X Extracts X X X X
....signs cannot be termed as FTS. In support of such contention, he relied upon the following decisions: i. CIT Vs. De Beers India Minerals Ltd. (2012) 346 ITR 467 (Kar.) ii. Raymond Vs. Dy.CIT (2003) 86 ITD 791 (Mumbai) iii. DCIT Vs. ITC Ltd. (2002) 82 ITD 239 (ITAT-Kol) iv. DIT Vs. Guy Carpenter & Co. Ltd. (2012) 346 ITR 504 (Del.) v. Intertek Testing Services India Pvt. Ltd. (2008) 307 ITR 418 AAR vi. Steria (India) Ltd. Vs. CIT (2016) 72 taxmann.com 1 (Del) 12. He submitted, Article 12(4)(b) presupposes an 'application of technology' (commercial use) as an owner, not for the limited use of a service/technology. Therefore, unless the technology is made available to the service recipient, which can be applied by him as an owner for commercial use, it cannot be said that the assessee has made available technology, knowledge, skill etc. to satisfy the condition of Article 12(4)(b) of the tax treaty. Thus, he submitted, the receipts cannot be treated as FTS under Article 13 read with paragraph 7 of Protocol to Indian - France DTAA read with Article 12(4) and 12(5)(f) of India - Portugal tax treaty. 13. Strongly relying upon the observations of the Assessing Officer and le....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fy as FTS under Article 12(4)(a) of India - Portugal DTAA. However, it is the claim of the assessee that the aforesaid two amounts would not qualify as FTS due to exceptions provided under Article 12(5)(f) and 12(5)(g) of India - Portugal DTAA. Obviously, learned Commissioner (Appeals) has rejected the aforesaid claim of the assessee by observing that the services rendered by the assessee are in respect of intangible in the form of technology process/solution, which has no connection with the installation or structure, which is tangible in nature. He has observed that the function of installation of HIL and Nalco plant is not within the scope of work given to the assessee. He has further observed that the production of alumina involves three stages from mining of bauxite, at the first stage, to the process of smelting, which is the third stage. He observed that the technology solution provided by the assessee is for the process of smelting and not related to the mining of bauxite. According to learned Commissioner (Appeals), the exceptions carved out in the treaty is only in respect of installation or structure for the first stage of mining of natural resources and not for the othe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wings, layouts, operating manuals, procedures to build/construct/install/assemble these smelter plants. It is not a simple case of loading a technology solution/software as observed by learned Commissioner (Appeals). The smelter plant certainly requires installation of multiple plants and machineries. It involves on-site planning and supervision of erection and installation of not only civil work but also the plant and machinery. There cannot be any dispute that the installation/erection process has to be taken up as per the flowsheets, equipments, specifications, drawings, layouts, operating manuals, procedures etc., without which, the installation process cannot be carried out. Therefore, in our view, the service rendered by the assessee is in connection with installation/erection of plant and machinery involved in mining of natural resources. Moreover, scope of Article 5(2)(g) of India - Portugal DTAA is not merely limited to mining or extraction of natural resources but also covers installation or structure used for exploration and exploitation of nature resources. Therefore, in our considered view, the amounts received would fall within the exceptions provided under Article 12....