TaxTMI 
TaxTMI 
2023 (10) TMI 1186
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....ssessing 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 erred in not granting the TDS credit of INR 2,922,328 as claimed by the Appellant i....
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....e 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 the relevant reports/ papers which are aligned to the interest of the members and not undertaken specifically for them). * In summary, the ILP membership fee is merely for tailore....
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.... 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's research so that it can build its knowledge and education on Web issues; (2) access to an open forum for the exchange of ideas and technology solutions; (3) ability to help drive the direction of new research. o Media Lab Consortium Agreement: Under Media Lab Consort....
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.... 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 developed technical knowledge/ documentation/ software are made available to the members of the consortium to use in their own business as per their needs. Based on the above observations, the AO has subjected the income earned from ILP, Sponsorship assignments and consortium membership fees to tax as FIS under Article 12(4) of US-India DTAA. 6. Ag....
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....rce 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 technical plan/ design is developed and provided. Therefore, the receipts under the Sponsorship research program should not qualify as Fees for Included Services under the tax treaty. In this regard, the assessee has relied on the decision of the Ahmadabad Tribunal in the case of ONGC vs. ITO dated 3 August 2022 [ITA Nos. 1881-1882/Ahd/2019]. 9. As regar....
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....ssist 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 relationship building between MIT and the external companies. 14. We observe from the agreements that MIT does not provide any technical services to the corporates under the ILP program. This program is akin to a trade exhibition whereby the corporates are introduced to the MIT faculty members and researchers and their projects. This helps the corporates to identify the spe....
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....he 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 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 he considered to make....
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....orship 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 Included Services under the tax treaty. In this regard, the assessee has relied on the decision of the Ahmadabad Tribunal in the case of ONGC vs. ITO dated 3 August 2022 [ITA Nos. 1881-1882/Ahd/2019]. 21. AO in his draft assessment order has observed that, as per the nature of programme MIT design systems that are appropriate and customized to the needs of the clients, with its own research team and collaborations. The research work is monitored and supervised by the staff of the MIT Accordingly, the services....
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....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 project with other companies within the Tata Group." From the above, the ld. DRP observed that "the project will result in new water purification technology as well as the engineering knowledge required to adapt and scale the technology for various environmental conditions and geographic regions. According to the assessee by merely issuing the research reports, MIT does not make available any technical knowledge experience, skill etc. such that the sponsor will be enabled to apply the same independently We find it difficult to ....
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....") 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 in the performance of the Research and (II) any invention conceived or first reduced to practice by the Sponsor's personnel in the performance of the Research with significant use of funds or facilities administered by VIIIT (each, a "Joint Invention") The Sponsor shall be notified of any Joint Invention promptly after an invention disclosure is received by MIT's Technology Licensing Office MIT shall have the first right to file a patent application on a Joint Invention in the names of both Parties All expenses incurred in obtaining and maintaining any patent on s....
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....hnology 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 making available of technical designs and knowhow and accordingly, the ld. AO and ld. DRP had rightly concluded that the receipts under this programme falls within five years clause of India-US DTAA. 27. Accordingly, we conclude that the receipts earned by the assessee under the sponsorship arrangement qualify as FTS/ FIS within the meaning of the Act and DTAA. In the result, this ground filed by the assessee is dismissed. 28. Now coming to the next ground of appeal raised by the assessee in relation the receipts under the head:- Receipts from co-ordination / consortium membe....