TaxTMI 
TaxTMI 
2009 (8) TMI 6
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....s stated that none of the personnel of the applicant visited nor would in the future visit India for providing the centralized assistance to IIPL. 2. On these facts stated in the application, the applicant seeks advance ruling on the following two questions: "1. On the facts and in the circumstances of the case whether the payment made by IIPL towards the costs allocated by the Applicant is taxable in India as per the provisions of the Double Taxation Avoidance Agreement ('DTAA') entered into between India and USA? 2. On the facts and in the circumstances of the case whether IIPL is liable to withhold tax at source under section 195 of the Income-tax Act, 1961 ('the Act') on the payments made by IIPL towards the cost allocated by the Applicant?" 3. The Centralized Assistance functions are enumerated in Schedule-I of the Agreement. 19 functions are mentioned therein. The same have been categorized by the applicant's counsel into five broad categories. They are set-out herein:- A. Environmental Health & Safety (EHS) s.no.1: Guidelines for relevant safety, health and security support to employees on travel; s.no.17: Assistance in relation to global policies and fr....
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....of Services". 4. We may refer briefly to the relevant clauses in the Cost Allocation Agreement dated 01.04.2007 entered into between Invensys Systems Inc. the applicant, (referred to as 'Assistance Provider') and Invensys India Private Limited (referred to as recipient). The recitals therein may be noted. A. It is recognized that the Centralised Assistance Provider incurs specific cost for the benefit of group entities situated in various countries. The assistance includes activities specified in Schedule I of this Agreement. B. Therefore the Parties wish to document in writing that the Centralised Assistance Provider supports the operations of the Recipient, and have done on a regular basis since April 1,2007. This Agreement sets out the detail of the arrangements already in existence, and includes the terms on which the costs of such Centralised Assistances are to be calculated and charged. C. It is agreed that the cost incurred by the Centralised Assistance provider would be allocated on a cost-to-cost basis and without any margin. Clauses 2.1 and 2.2 provide; 2.1.1 Since the Effective Date and from time to time thereafter, the Providing Party provides on reque....
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....dia. Relying on the observations in that judgment in which section 9(1)(vii) was interpreted, the learned counsel submits that it is not sufficient that the services are utilized in India but they must also be rendered in India. 6. In the comments furnished by the DIT (Intl. Taxation) Chennai, the points raised by the applicant have not been squarely met. However, it is contended that the payments made under the Cost Allocation Agreement are in the nature of service fee and it is not entirely on cost-to-cost basis. It is pointed out that it is not merely a case of reimbursement of expenses as the profit element is not ruled out. The stand taken by the Revenue addresses the larger question: whether the receipts under the Agreement are in the nature of income or merely reimbursement of expenses. That question has not been raised in the application and it does call for an answer. Assuming that it is a fee received for rendering certain services, can it be subjected to tax under the provisions of the IT Act, 1961 or the DTAA? That is the question which arises for consideration. 7. At this stage, it would be appropriate to refer to the crucial provisions in the Double Taxation Avo....
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....that the purpose of the activities undertaken under the Agreement is to give direction or guidance to the group companies as a whole so that they will adopt or follow standard procedures or templates in various matters. By virtue of such managerial intervention, common benefit accrues to the affiliated companies and their level of performance will consequently improve. 8.2. I find force in the contention of the learned counsel that the services are not really technical or consultancy services. No doubt, the expression "technical services" cannot be construed in a narrow sense as held by this Authority in Intertek Testing Services India Pvt. Ltd. 317 ITR 418. It was observed therein that the term "technical" ought not to be confined only to technology relating to engineering, manufacturing or other applied sciences. Professional service imbued with expertise could be regarded as technical service. For instance, in G.V.K. Industries vs ITO 228 ITR 564 referred to in Intertek case, it was held that the advice given by a financial consultancy firm on the modalities of procuring loans shall be regarded as technical and consultancy service. It was further pointed out in Intertek....
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.... of the phrase "make available". It was explained in the MOU: "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 per se be considered to make the technology available." 9.1. The observations of this Authority in Intertek may also be quoted: "By making available the technical skills or know-how, the recipient of service will get equipped with that knowledge or expertise and be able to make use of it in future, independent of the service provider. In other words, to fit into the terminology "make available", the technical knowledge, skills etc. must remain with the person receiving the services even after the particular contract comes to an end. The services offered may be the product of intense technological effort and lot of technical knowledge and experience....
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....erings is found in the Chart submitted by the applicant's counsel. However, it was explained that this involves communicating the result of the research and development efforts and does not involve any transfer of technical designs, or know-how. Then, against No. 7 (assistance in bid preparation and project acquisition), "providing ability to penetrate higher levels in our customer organization to improve our chances to win" (the bid) has been mentioned. However, the nature of this function has been explained to be that it involves the applicant getting in touch with the customers directly, if required, in order to improve the chances to win. Taking an overall view, the services even if they are technical, do not 'make available' the technical knowledge, etc. within the meaning of Art. 12.4(b) of the Treaty. 10. In view of the conclusion reached on the applicability of Art. 12.4, there is no need to deal with the contention raised by the applicant's counsel that even if the services fall within the definition of Art. 12.4, the income cannot be taxed in India in view of the fact that the services are rendered from abroad. 11. There are certain services categorized under ....