TaxTMI 
TaxTMI 
2023 (10) TMI 1186
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....rred in confirming the action of the learned AO in assessing the total income at INR 15,49,92,088 as against income of INR 10,48,860 offered by the Appellant in its return of income for the captioned assessment year. 2. "On the facts and circumstances of the case and in law, the Ld. AO erred in proposing and the Hon'ble DRP further erred in confirming the addition of receipts from Industrial Liaison program ("ILP") amounting to INR 2,90,20,500 as Fees for Included Service ("FIS") under the Double Taxation Avoidance Agreement between India and USA ("Treaty")." 3. "On the facts and circumstances of the case and in law, the Ld. AO erred in proposing and the Hon'ble DRP further erred in confirming the addition of receipts from Sponsorship Assignments amounting to INR 6,06,64,914 as FIS under the Treaty." 4. "On the facts and circumstances of the case and in law, the Ld. AO erred in proposing and the Hon'ble DRP further erred in confirming the addition of the receipts from Co-ordination/ Consortium Membership amounting to INR 6,42,57,814 as FIS under the Treaty." 5. "On the facts and circumstances of the case and in law, the Ld. AO has err....
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....h access to certain parts of MIT that relate to the member's interest, such as recent developments and reports on emerging technologies (like a brochure which is publicly available). ILO also recommend, organize and facilitates interaction with MIT faculty, researchers, labs and centres by scheduling meetings and phone calls. * As a member of ILP program, participants are also eligible for the following facilities/ benefits: i. Free or discounted attendance at MIT conferences and seminars. ii. Access to the ILP video archive that stores digital presentations, abstracts and biographical materials from ILP events. iii. Access to MIT platform comprising information on MIT faculty and projects with abstract and links to faculty-maintained web pages. iv. Discounts for Executive /Professional Education, MIT press book and MIT library fees for providing copies of documents. * MIT merely provides access to the discussion papers, information and reports on technical topics and emerging technologies prepared by MIT faculty and researchers (which are already available in public domain but are provided in a streamlined manner by identifying....
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....taken and / or captured the progress or status of the outcome/ findings. The report does not provide the underlying technical plan / design / process using which the corporates would be able to develop the technology on its own. Thus, the sponsorship receipts did not make available any technical knowledge, know-how etc. or developed and provided any technical plan/ designs. c. Consortium Membership: * A consortium is a group of members that come together to share ideas and information relating to a particular topic. Consortiums are led by hosts that play a role of administrator and coordinator between the members. * MIT acts as the host for following three types of consortium arrangements - o W3C Member Agreement: Under W3C member agreement, as a part of this arrangement, MIT provides co-ordination service to W3C, a group of members that work together as a Consortium to develop protocols and guidelines that ensure the long-term growth of the World Wide Web. In this, MIT provides a member access to a group of other members focused on a common agenda. Each Member of the Consortium pays a membership fee for (1) access to the Consortium'....
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.... part of the above co-ordination activity as a host. MIT is not undertaking any research services for any specified party. MIT does not describe any methods or process involved in carrying out such research. * The receipts merely pertain to co-ordination services. Thus, it cannot be termed that MIT has developed and delivered a technical plan or technical knowledge, experience, skill, know-how or processes is made available to the members. 5. The ld. AO has examined the agreements for each of the nature of receipts and has concluded the following for each receipt: a. ILP INR 2,90,20,500: ILP fees consist of the development and transfer of a technical plan or technical design suitable to the needs of the ILP members and thereby transfer that knowledge and information to them. b. Sponsorship Assignments INR 6,06,64,914: The income earned by MIT from sponsorship assignments is not only restricted to the design and development of customized technologies to the clients but also ancillary and subsidiary to the application or enjoyment of the IP rights developed during the research. c. Consortium Membership INR 6,42,57,814: The researched and develop....
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....T"s research agreement sponsored by ABC Irrigation Limited had a goal of improving water systems in India. MIT uses budgeted funds to pay for direct and indirect costs associated with the research project and the sponsor reimburses MIT for the expenses incurred. Any funding received from a sponsored research sponsor is an offset of expenses, not a source of income, hence sponsored research agreements cannot and do not generate a profit for MIT. Ld. Counsel further submitted that MIT and the sponsor agree upon the project goals and then MIT performs research on that topic. MIT applies its knowledge in performing the research projects and then reports back to the sponsor periodically about the progress and direction of the research. MIT sponsored research agreements may have a desired outcome, but there is no promise of delivery or research results. The research results are unknown at the time of entering into the agreement. The sponsor of MIT research project does not receive technical skills or guidance on how to apply those results in their own business. Thus, the sponsorship receipts neither makes available any technical knowledge, know-how etc., to the participants, nor any tech....
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....ully gone through the agreements. As a member of the ILP program the subscriber will have access to full range of customized activities and supplementary services as detailed in the annexure to the agreement. There are hundreds of research centers at MIT and the external subscriber may not even be aware of the vast resources that are available at MIT. Hence, to assist the subscriber, the subscriber is assigned an Industrial Liaison Officer (officer) who will conduct an on-going assessment of subscriber"s interest, need and objectives as they relate to MIT. The officer will recommend and facilitate interaction at MIT that are custom designed to satisfy the subscriber"s identified objectives. The officer will also provide updates on what is going on at MIT that could impact the business of the subscriber. The officer will facilitate meetings between the subscriber and faculty members of MIT. The officer can organize a one-day seminar at MIT for up to 20 senior corporate staff of the subscriber. The officer may also arrange visits of the MIT faculty members at the facilities of the subscriber. There are various such services listed in the agreement which is essentially a relationsh....
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....of ships or aircraft in international traffic ; (c) for teaching in or by educational institutions ; (d) for services for the personal use of the individual or individuals making the payments ; or (e) to an employee of the person making the payments or to any individual or firm of individuals (other than a company) for professional services as defined in Article 15 (Independent Personal Services)." Further, the relevant para and example in the MOU to the India-USA DTAA explaining the term Fees for included services is extracted below: "Paragraph 4(b) of Article 12 refers to technical or consultancy services that make available to the person acquiring the service technical knowledge, experience, 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 speakin....
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....ts. The assessee is not making available the underlying know-how with respect to the said research projects as enumerated under the DTAA and MOU. 18. From the above facts, we are of the opinion that the receipts under the head ILP cannot be reckoned as FIS in nature within the meaning of Article 12 of the India-US DTAA. Accordingly, we set aside the finding of the DRP and direct the AO to delete the addition made in relation to this ground. Hence the ground of appeal of the assessee is allowed. Sponsorship receipts 19. We now move to the next ground of appeal raised by the assessee in relation to receipts from sponsorship assignments, which is in relation to the addition made by the Ld. AO on account of receipts from Sponsorship Assignments amounting to INR 6,06,64,914 as FIS under the Treaty. 20. We have heard both the parties and perused the records. Shri Jain Ld. Counsel of the assessee further submitted that the sponsorship receipts neither makes available any technical knowledge, know-how etc., to the participants, nor any technical plan/ design is developed and provided. Therefore, the receipts under the Sponsorship research program should not qualify as Fees for ....
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....nder:- "This project is focused on creating village-scale, off-grid water purification and desalination systems for rural India Our proposed approach is to design direct-drive photovoltaic (PV) electrodialysis (ED) water purification systems appropriate for small-scale applications, which can provide a scalable, efficient and sustainable solution for clean drinking water. The project will result in new water provision technology as well as the engineering knowledge required to adapt and scale the technology for various environmental conditions and geographic regions. The project includes investigation into methods to reduce the energy required for ED, and thus the number of PY panels required for a given system, in order to reduce cost. Our aim is to create off and desalination systems that are equal or less in cost than equivalently sized on-grid reverse osmosis systems. The project will be a collaboration between the MIT Global Engineering and Research (GEAR) Lab and Tata Projects. The GEAR Lab is directed by Prof Amos Winter whose research focuses on the creation of technologies for developing and emerging markets. Tata Projects has the right to co-fund this pr....
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....research. Accordingly, we uphold the action of the AO in treating these receipts as FIS" 23. We have gone through the various agreements in relation to sponsorship research. From the perusal of the agreements and IP clause agreement as appearing in paper book 142, the relevant extracts are reproduced hereunder:- SPONSOR INTELLECTUAL PROPERTY Title to any invention conceived or first reduced to practice in performance of the Research solely by the Sponsor's personnel without significant use of MIT administered funds or facilities ("Sponsor Invention") shall remain with the Sponsor Title to and the copyright in any copyrightable material first produced or composed in the performance of the Research solely by the Sponsor's personnel without significant use of Mil administered funds or facilities-("Sponsor Copyright) shall remain with the Sponsor Neither Sponsor Inventions nor Sponsor Copy rights shall be subject to the terms and conditions of this Agreement JOINT INTELLECTUAL PROPERTY A The Parties shall have joint title to (1) any invention conceived or first reduced to practice jointly by employees and/or students of MJT and the Sponsor's personnel i....
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....ts. In the context of make available, the Ahmedabad Tribunal stated the crux of the matter is after rendering of such technical services by the service provider, whether the recipient is enabled to use the technology which the service provider had used. In that case, the broad objective of the research project was to develop the chemical enhanced oil recovery formulation. However, the underlying technology was not passed on by the service provider to the corporate. 26. As has already been discussed above, the assessee undertakes specific research for the corporate and the technology and knowledge from the research is provided to the corporate in the form of research report, who will apply the same and derive an enduring benefit. Once, the assessee after the research submissions report not only provides the research report to the Indian corporate who then apply the research work for their own business. Further, in the specific IP clause agreement as incorporated above, there is a clear-cut stipulation and sponsor will get IP and in some cases it was joint IP, which also goes to show that technical knowledge has been made available to the clients. Thus, in our view it was clearly ....