ADIT(IT) 3(1), MUMBAI V. IATA BSP INDIA, MUMBAI

ITA 1149/MUM/2010

• Counselvise Citation: 114919914 RSA 2010
• Duration Of Justice: 4 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 12-02-2014
• Assessment Year: misc
• Appeal Filed On: 11-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEERAJA PRADHAN
• Assessee Lawyers: S E DASTUR
• Keywords: Double taxation relief; Advance ruling

Judgement Text

L IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI .. , ; BEFORE SHRI P.M. JAGTAP, AM AND SHRI VIVEK VARMA, J M ./ I.T.A. NO.1149/ MUM/2010 ( / ASSESSMENT YEAR : DDIT (IT) 3(1), SCINDIA HOUSE, R.NO. 136, IST FLOOR, N.M. ROAD, MUMBAI. / VS. M/S IATA BSP INDIA, 101, NDO CORPORATE ENCLAVE, B WING, B.D. SAWANT MARG, CHAKALA, ANDHERI (E), MUMBAI 400 099. ./ PAN : AAAFB6235E ( # / APPELLANT ) .. ( $%# / RESPONDENT ) A PPELLANT BY SMT. NEERAJA PRADHAN R E SPONDENT BY : SHRI S.E. DASTUR ) * / DATE OF HEARING : 15-4-2014 ) * / DATE OF PRONOUNCEMENT : 110602014 [ / O R D E R PER P.M. JAGTAP, A.M . : .. , THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) - 10, MUMBAI DATED 18-11-2009 AND IN THE SOLITARY GRO UND RAISED THEREIN, THE REVENUE HAS CHALLENGED THE DECISION OF THE LD. CIT( A) HOLDING THAT THE AMOUNT PAID BY THE ASSESSEE TO IATA, CANADA IS NOT TAXABLE IN INDIA BEING NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES AND THE ASSES SEE THEREFORE IS NOT REQUIRED TO DEDUCT TAX AT SOURCE FROM THE PAYMENT OF THE SAI D AMOUNT. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY W HICH IS A BRANCH OFFICE OF IATA, CANADA. THE SAID BRANCH OFFICE IS ESTABLI SHED IN INDIA AS PER THE ITA 1149/M/10 2 PERMISSION GIVEN BY THE RBI VIDE LETTER DATED 25-11 -1995 FOR THE PURPOSE OF UNDERTAKING CERTAIN COMMERCIAL ACTIVITIES ON NO PRO FIT BASIS. IN PURSUANCE OF AN AGREEMENT ENTERED INTO BY IATA CANADA THROUGH IT S ADMINISTRATIVE OFFICE IN GENEVA, SWITZERLAND, ADP-GSI, A CORPORATION INCO RPORATED IN FRANCE DEVELOPED THE SYSTEM AS PER THE SPECIFIC NEED OF TH E AIR LINES AND AGENTS. THE SAID SYSTEM CALLED BSP LINK IS THE ONE WHEREBY THE MANUAL OPERATIONS SUCH AS ISSUE OF DEBIT NOTES/CREDIT NOTES, ISSUE OF REFU ND, BILLING STATEMENT AND ALL THE INFORMATION RELATING TO TICKETS ARE CARRIED OUT ELECTRONICALLY FOR AGENTS AS WELL AS AIR LINES WHO PARTICIPATE IN THE BSP LINK. THESE BSP LINK SERVICES WERE PROVIDED AMONG OTHERS TO THE AGENTS AND AIR LI NES OPERATING IN INDIA FOR WHICH INVOICES WERE INITIALLY RAISED BY ADP-GSI ON GENEVA OFFICE OF IATA, CANADA WHO IN TURN RAISED THE INVOICES ON IATA, IND IA. THE PAYMENT AGAINST THE SAID INVOICES THUS WAS LIABLE TO BE MADE BY THE ASSESSEE COMPANY TO GENEVA OFFICE OF IATA, CANADA. AN APPLICATION U/S 1 95(2) THEREFORE WAS FILED BY THE ASSESSEE BEFORE THE A.O. SEEKING PERMISSION TO REMIT THE SAID AMOUNTS TO GENEVA OFFICE OF IATA, CANADA WITHOUT DEDUCTION OF TAX AT SOURCE ON THE GROUND THAT THE GENEVA OFFICE OF IATA, CANADA WAS N OT RENDERING ANY SERVICE TO IATA, INDIA AND IT WAS ONLY COLLECTING THE FUNDS FROM VARIOUS IATA OFFICES INCLUDING IATA, INDIA FOR MAKING PAYMENTS TO ADP-GS I. IT WAS ALSO CLAIMED THAT THE PROVISIONS OF SECTION 195 OF THE ACT ARE N OT APPLICABLE TO THE PAYMENTS MADE BY IATA, INDIA TO IATA, GENEVA AS THE SAID PROVISIONS DEALING WITH THE DEDUCTION OF TAX AT SOURCE PRE SUPPOSE THE EXISTENCE OF TWO DISTINCT AND SEPARATE ENTITIES WHICH WERE ABSENT IN THE CASE OF THE ASSESSEE. THE STAND TAKEN BY THE ASSESSEE WAS NOT FOUND ACCEPTABL E BY THE A.O. ACCORDING TO HIM, THE ACTUAL BENEFICIARIES OF DSP LINK SERVIC ES WERE AIR LINES AND AGENTS IN INDIA AND IT WAS A CASE WHERE THE SERVICE PROVID ER NAMELY ADP-GSI WAS PAID BY THESE ENTITIES THROUGH IATA, INDIA AND IATA , CANADA. HE HELD THAT THESE TRANSACTIONS THEREFORE INVOLVED, IN SUBSTANCE , THE PAYMENTS MADE BY AIR LINES AND AGENTS IN INDIA ON ACCOUNT OF DSP LIN K SERVICES PROVIDED BY A COMPANY IN FRANCE AND SINCE THE SAID SERVICES WERE TECHNICAL IN NATURE, THE ITA 1149/M/10 3 AMOUNT PAID FOR THE SAID SERVICES WAS IN THE NATURE OF FEES FOR TECHNICAL SERVICES CHARGEABLE TO TAX IN INDIA @ 10% AS PROVID ED IN ARTICLE 13 OF THE DTAA BETWEEN INDIA AND FRANCE. ACCORDINGLY, HE DIRE CTED THE ASSESSEE COMPANY TO DEDUCT TAX AT SOURCE @ 10% FROM THE REMI TTANCES MADE TO GENEVA OFFICE OF IATA, CANADA VIDE AN ORDER DTD. 12 -1-2006 PASSED U/S 195(2) OF THE ACT. 3. AGAINST THE ORDER PASSED BY THE A.O. U/S 195(2) OF THE ACT, APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) CON TENDING THAT GENEVA OFFICE OF IATA, CANADA WAS NOT RENDERING ANY SERVICE IN CO NNECTION WITH THE DSP LINK. IT WAS ALSO CONTENDED THAT THE PROVISIONS OF SECTION 195 DEALING WITH THE DEDUCTION OF TAX AT SOURCE PRE-SUPPOSE THE EXISTENC E OF TWO DISTINCT AND SEPARATE ENTITIES WHICH WAS ABSENT IN THE CASE OF T HE ASSESSEE. IT WAS ARGUED THAT THE ARRANGEMENT WAS SIMILAR TO THE COST SHARIN G ARRANGEMENT WHEREBY GENEVA OFFICE OF IATA, CANADA WAS ONLY RECOVERING I TS COST THROUGH THE ASSESSEE COMPANY. WITHOUT PREJUDICE, A NEW ARGUMENT WAS ALSO RAISED ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(A) BY SUB MITTING THAT THE AMOUNT IN QUESTION PAID BY THE ASSESSEE WAS NOT IN THE NATURE OF FEE FOR TECHNICAL SERVICES AS ENVISAGED IN ARTICLE 13 OF THE DTAA BET WEEN INDIA AND FRANCE READ WITH CLAUSE 7 OF THE PROTOCOL THERETO. IT WAS CONTENDED THAT AS PER THE SAID CLAUSE 7 OF THE PROTOCOL, WHICH IS AN INTEGRAL PART OF THE TREATY, EITHER THE SERVICES SHOULD MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW- HOW OR PROCESSES OR THERE SHOULD BE DEVELOPMENT AND TRANSFER OF A TECHNICAL PLANT OR A TECHNICAL DESIGN SO AS TO CONSTITUTE THE SAID SERVICES AS FEES FOR INCLUDED SERVICES. IT WAS CONTENDED THAT THE SERVI CES CAN BE CONSIDERED AS MADE AVAILABLE ONLY WHEN THE PERSON ACQUIRING THE SERVICES WILL ENABLE TO APPLY THE TECHNOLOGY CONTAINED THEREIN. IT WAS CON TENDED THAT THE BSP LINK SERVICES PROVIDED BY ADP-GSI DID NOT MAKE AVAILABLE TO AIR LINES/AGENTS ANY TECHNICAL KNOWLEDGE, SKILL, EXPERIENCE, KNOW-HOW OR PROCESSES WHICH WOULD ENABLE THE AIR LINES/AGENTS TO APPLY TECHNOLOGY CON TAINED THEREIN AND ITA 1149/M/10 4 THEREFORE THE AMOUNT PAID FOR THE SAID SERVICES COU LD NOT CONSTITUTE FEES FOR TECHNICAL SERVICES AS ENVISAGED IN ARTICLE 13 OF T HE DTAA BETWEEN INDIA AND FRANCE READ WITH CLAUSE 7 OF THE PROTOCOL THERETO. 4. AFTER CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AS WELL AS MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A ) REJECTED THE CONTENTION OF THE ASSESSEE THAT IN ABSENCE OF TWO DISTINCT AND SE PARATE ENTITIES INVOLVED IN THE IMPUGNED TRANSACTIONS, THE PROVISIONS OF SECTIO N 195 WERE NOT APPLICABLE. IN THIS REGARD, HE RELIED ON THE CBDT CIRCULAR NO. 740 DTD. 17-4-1996 WHEREIN IT WAS CLARIFIED THAT THE BRANCH OF A FOREI GN COMPANY/CONCERN IN INDIA IS SEPARATE ENTITY FOR THE PURPOSE OF TAXATIO N. THE LD. CIT(A) ALSO AGREED WITH THE A.O. THAT THE IMPUGNED PAYMENTS MADE BY TH E ASSESSEE WERE, IN SUBSTANCE, THE PAYMENTS MADE ON BEHALF OF THE AIR L INES AND AGENTS IN INDIA TO ADP-GSI FRANCE FOR PROVIDING BSP LINK SERVICES. HE HOWEVER, ACCEPTED THE ALTERNATIVE CONTENTION OF THE ASSESSEE RAISED BEFOR E HIM THAT THE IMPUGNED AMOUNT PAYABLE FOR DSP LINK SERVICES PROVIDED BY TH E ADP-GSI FRANCE WAS NOT IN THE NATURE OF FEES FOR INCLUDED SERVICES WIT HIN THE MEANING OF ARTICLE 12(4)(B) OF INDIA US TREATY READ WITH ARTICLE 13 OF INDO FRENCH DTAA AND CLAUSE 7 OF PROTOCOL THERETO. THE REASONS GIVEN BY THE LD. CIT(A) TO COME TO THIS CONCLUSION AS CONTAINED IN PARA 3 AND 3.1 OF H IS IMPUGNED ORDER ARE REPRODUCED HEREUNDER:- PARA 3 3.1 CIT(A) ORDER 3.0 I HAVE GONE THROUGH THE SUBMISSION OF THE A.R. IT IS SEEN THAT IN PURSUANCE OF THE AGREEMENT ENTERED INTO BY ITA CANA DA AND GSI TRANSPORT TOURISM SA FRANCE, (ADP GSI) HAS DEVELO PED A SYSTEM AS PER SPECIFIC NEEDS OF THE AIRLINES AND AGENTS AND P ROVIDES BSP LINK SERVICES. BSP LINK IS A SYSTEM, WHEREIN THE MANUAL OPERATIONS SUCH AS ISSUE OF DEBIT NOTES/CREDIT NOTES, ISSUE OF REFUND, BILLING STATEMENT AND ALL THE INFORMATION RELATING TO TICKETS ARE CARRIED OUT ELECTRONICALLY BY BSP LINK SYSTEM FOR AGENTS AS WELL AS FOR AIRLINES WHO HAVE PARTICIPATED IN THE BSP LINK. THEREFORE THE SERVICE S RENDERED BY THE ADP-GSI FRANCE TO THE AIRLINES AND AGENTS ARE IN TH E NATURE OF FEES FOR TECHNICAL SERVICES. ITA 1149/M/10 5 3.1 HOWEVER, THE LD. A.R. HAS ALSO SUBMITTED THAT A S PER ARTICLE 13 OF DTAA BETWEEN INDIA AND FRANCE READ WITH CLAUSE 7 OF PROTOCOL TAX TREATY DATED 19.9.1989 THE RESTRICTED DEFINITION OF FEES FOR TECHNICAL SERVICES WOULD BE APPLICABLE AS PROVIDED IN OECD CO UNTRIES LIKE USA AND U.K. AS PER ARTICLE 12.4(B) OF TAX TREATY WITH INDIA AND USA FEES FOR INCLUDED SERVICES MEANS PAYMENT OF ANY KIND TO ANY PERSON IN CONSIDERATION FOR THE RENDERING OF ANY TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TECHNICAL O R OTHER PERSONNEL) IF SUCH SERVICES MADE AVAILABLE TECHNICAL KNOWLEDGE, E XPERIENCE, SKILL, KNOW/HOW OR PROCESSES OR CONSIST OF THE DEVELOPMENT AND TRANSFER OF A TECHNICAL PLAN OR TECHNICAL DESIGN. THEREFORE, THE PAYMENT UNDER CONSIDERATION WOULD BE EXAMINED IF IT FALLS UNDER A RTICLE 13 R.W. PROTOCOL DTD.17.9.89 OF INDIA - FRANCE TREATY. IT I S SEEN THAT ADP-GSI HAS PROVIDED BSP LINK SERVICES TO CARRY OUT MANUAL OPERATIONS SUCH AS ISSUE OF DEBIT NOTE/CREDIT NOTES, ISSUE OF REFUND, BILLING STATEMENT RELATING TO TICKETS AND INFORMATION RELATING TO TIC KETS CARRIED OUT ELECTRONICALLY BY BSP LINK SYSTEM FOR AGENTS AS WEL L AS FOR AIRLINES WHO HAVE PARTICIPATED IN THE BSP LINK. BUT THIS BSP LIN K SERVICES DOES NOT MAKE AVAILABLE THE TECHNOLOGY TO THE AIRLINES AND A GENTS TO ENABLE THEM TO MAKE USE OF THEIR OWN. IT MAY BE SEEN THAT THESE BENEFICIARIES COULD NOT HAVE EXPERIENCE TECHNICAL KNOW-HOW AND ARE NOT ABLE TO USE IN FUTURE AS THEIR OWN. AS PER MEMORANDUM THE SERVICES AS PER MEMORANDUM, THE SERVICES CAN BE CONSIDERED AS MADE AVAILABLE ONLY WHEN THE PERSON ACQUIRING THE SERVICES ENABLE TO AP PLY THE TECHNOLOGY CONTAINED THEREIN. THEREFORE THE PAYMENT MADE TO A DP-GSI DOES NOT AMOUNT TO BE FEES FOR INCLUDED SERVICES. WITHIN THE MEANING OF ARTICLE 12(4)(B) OF INDIA-US TAX TREATY READ WITH ARTICLE 1 3 OF PROTOCOL OF INDIA- FRANCE TAX TREATY. THE CASE LAWS CITED BY ASSESSEE ALSO SUPPORTS HIS VIEW. 5. FOR THE REASONS GIVEN ABOVE, THE LD. CIT(A) HELD THAT THE AMOUNT IN QUESTION PAID BY THE ASSESSEE COMPANY TO GENEVA OFF ICE OF IATA, CANADA WAS NOT TAXABLE IN INDIA BEING NOT IN THE NATURE OF FEE S FOR INCLUDED SERVICES AND THE ASSESSEE THEREFORE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FROM THE PAYMENT OF THE SAID AMOUNT. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUN AL. 6. THE LD. D.R., AT THE OUTSET, INVITED OUR ATTENTI ON TO PARA 3.1 OF THE IMPUGNED ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THE LD. CIT(A) HAS REFERRED ONLY TO THE MEMORANDUM WHILE DECIDING THE ISSUE AS TO WHETHER THE AMOUNT IN QUESTION PAYABLE TO ADP-GSI FOR PROVIDING BSP LINK SERVICES IS IN THE NATURE OF FEES FOR TECHNICAL SERVICES OR NOT. H E CONTENDED THAT THE RELEVANT ITA 1149/M/10 6 AGREEMENT BETWEEN IATA AND ADP-GSI FOR PROVIDING TH E SAID SERVICES, HOWEVER, WAS NOT CONSIDERED BY THE LD. CIT(A). HE CONTENDED THAT THE TERMS AND CONDITIONS OF THE SAID AGREEMENT SHOULD NECESSA RILY BE SEEN TO ASCERTAIN WHETHER IT IS A CASE OF MAKE AVAILABLE OR NOT, BU T THE LD. CIT(A) HAS NOT CONSIDERED AND APPRECIATED THIS VITAL ASPECT. HE IN VITED OUR ATTENTION TO THE COPY OF THE SAID AGREEMENT PLACED ON RECORD AND SUB MITTED THAT CLAUSE NOS. 4,8 & 9 OF THE SAID AGREEMENT CLEARLY SHOW THAT IT WAS A CASE OF MAKING AVAILABLE THE TECHNOLOGY TO THE AIR LINES AND AGENT S. HE POINTED OUT THAT EVEN TRAINING WAS TO BE IMPARTED BY FRENCH SERVICE PROVI DER TO THE TICKETS AGENTS IN INDIA WHICH SUFFICIENTLY INDICATE THAT IT WAS A CAS E OF TECHNOLOGY BEING MADE AVAILABLE BY THE SERVICE PROVIDER TO THE TICKETS AG ENTS. IN SUPPORT OF THIS CONTENTION, SHE RELIED ON THE DECISION OF AUTHORITY FOR ADVANCE RULINGS IN THE CASE OF CARGO COMMUNITY NETWORK PTE LTD. IN RE REPO RTED IN 289 ITR 355 (AAR) AND SUBMITTED THAT A SIMILAR PAYMENT MADE IN THE SAID CASE WAS HELD TO BE IN THE NATURE OF ROYALTY CHARGEABLE TO TAX IN INDIA. HE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF HU KUMCHAND MILLS LTD. VS. CIT (1967) 63 ITR 232 (SC) TO CONTEND THAT THE TRIB UNAL HAS JURISDICTION TO ENTERTAIN THE NEW PLEA RAISED ON BEHALF OF THE REVE NUE THAT THE AMOUNT IN QUESTION PAYABLE TO ASP-GSI IS IN THE NATURE OF ROY ALTY. HE ALSO RELIED ON THE DECISION OF AUTHORITY FOR ADVANCE RULINGS IN THE CA SE OF ABC, IN RE REPORTED IN 238 ITR 296 (AAR) WHEREIN THE CHARGES LEVIED BY THE AMERICAN COMPANY FROM THE INDIAN COMPANY FOR ALLOWING ACCESS TO AND USE IF CPU AT USA WAS HELD TO BE IN THE NATURE OF ROYALTY CHARGEABLE TO T AX AS PER ARTICLE 12(3)(A) OF DTAA BETWEEN INDIA AND USA. 7. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, INVITED OUR ATTENTION TO PARA 3.0 OF THE IMPUGNED ORDER OF THE LD. CIT(A) AND POINTED OUT THAT A SPECIFIC REFERENCE WAS MADE BY THE LD. CIT(A ) TO THE AGREEMENT ENTERED INTO BETWEEN IATA, CANADA AND ADP-GSI, FRANCE FOR D EVELOPING AND PROVIDING DSP LINK SERVICES. HE CONTENDED THAT AFTER MAKING A REFERENCE TO THE SAID ITA 1149/M/10 7 AGREEMENT, A FINDING WAS ALSO RECORDED BY THE LD. C IT(A) IN PARA 3.0 OF HIS IMPUGNED ORDER THAT THE SERVICES RENDERED BY THE AD P-GSI, FRANCE TO THE AIR LINES/AGENTS WERE IN THE NATURE OF FEES FOR TECHNIC AL SERVICES. HE CONTENDED THAT IT CANNOT BE THEREFORE BE SAID THAT THE ISSUE RELATING TO THE PAYMENT IN QUESTION BEING NOT IN THE NATURE OF FEES FOR INCLU DED SERVICES WAS DECIDED BY THE LD. CIT(A) WITHOUT REFERRING TO THE SAID AGREEM ENT OR TO THE RELEVANT TERMS AND CONDITIONS THEREOF AS SOUGHT TO BE CONTENDED BY THE LD. D.R. 8. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AFTER TREATING THE SERVICES RENDERED BY ADP-GSI, FRANCE TO THE AIR LIN ES/AGENTS AS IN THE NATURE OF TECHNICAL SERVICES IN PARA 3.0 OF HIS IMPUGNED O RDER, THE LD. CIT(A) FURTHER PROCEEDED TO EXAMINE THE ISSUE RELATING TO THE NATU RE OF PAYMENT IN QUESTION BEING FEES FOR TECHNICAL SERVICES IN PARA NO. 3.1 O F HIS IMPUGNED ORDER IN THE LIGHT OF ARTICLE 13 OF THE DTAA BETWEEN INDIA AND F RANCE READ WITH ARTICLE 7 OF PROTOCOL THERETO WHICH CLEARLY PROVIDED THAT FEES F OR INCLUDED SERVICES MEANS PAYMENT OF ANY KIND TO ANY PERSON IN CONSIDERATION FOR THE RENDERING OF ANY TECHNICAL OR CONSULTANCY SERVICES, IF SUCH SERVICES MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HOW OR PROCESSES SO THAT THE PERSONS ACQUIRING THE SERVICES IS ENABLE TO APPLY A TECHNOL OGY CONTAINED THEREIN. HE CONTENDED THAT THE DSP-LINKED SERVICES RENDERED BY THE ADP-GSI DID NOT MAKE AVAILABLE ANY TECHNOLOGY TO THE AIR LINES/AGEN TS TO ENABLE THEM TO MAKE USE OF IT IN THEIR OWN AS RIGHTLY HELD BY THE LD. C IT(A) AND EVEN THERE IS NOTHING IN CLAUSE 4,8&9 OF THE AGREEMENT TO SHOW TH AT THE TECHNOLOGY WAS MADE AVAILABLE BY ADP-GSI TO THE AIR LINES AND AGEN TS. HE CONTENDED THAT EVEN TRAINING PROVIDED BY ADP-GSI TO THE EMPLOYEES OF THE AIR LINES/AGENTS IN PURSUANCE OF THESE CLAUSES WAS LIMITED FOR THE PURP OSE OF OPERATION AND IMPLEMENTATION OF THE BSP LINKED SYSTEM IN ORDER TO FACILITATE THEM JUST TO USE THE SAID SYSTEM FOR THEIR OWN PURPOSE. ITA 1149/M/10 8 9. THE LD. COUNSEL FOR THE ASSESSEE INVITED OUR ATT ENTION TO CLAUSE 7 OF THE PROTOCOL FORMING AN INTEGRAL PART OF THE DTAA BETWE EN INDIA AND FRANCE AND SUBMITTED THAT AS PROVIDED THEREIN, IF UNDER ANY AG REEMENT OR PROTOCOL SIGNED AFTER 1-9-1989 BETWEEN INDIA AND A THIRD STATE, WHI CH IS MEMBER OF THE OECD, INDIA LIMITS ITS TAXATION AT SOURCE, INTER AL IA, ON FEES FOR TECHNICAL SERVICES OR A SCOPE MORE RESTRICTED, THE SCOPE AS P ROVIDED FOR IN THAT AGREEMENT SHALL ALSO APPLY UNDER THE DTAA BETWEEN I NDIA AND FRANCE. HE SUBMITTED THAT THE DTAA BETWEEN INDIA AND USA, WHIC H IS A MEMBER OF THE OECD, HAS BEEN ENTERED INTO ON 12-9-89 AND AS PER A RTICLE 12(4)(B), FEES FOR INCLUDED SERVICES MEANS PAYMENT OF ANY KIND TO ANY PERSON IN CONSIDERATION FOR THE RENDERING OF ANY TECHNICAL OR CONSULTANCY S ERVICES IF SUCH SERVICES MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKI LL, KNOW-HOW OR PROCESSES OR CONSIST OF THE DEVELOPMENT AND TRANSFER OF A TEC HNICAL PLAN OR TECHNICAL DESIGN. HE CONTENDED THAT THE RESTRICTIVE MEANING I S THUS GIVEN TO THE TERM FEES FOR TECHNICAL SERVICES IN DTAA BETWEEN INDIA AND USA AND THE SAME HAVING BEEN ENTERED INTO AFTER 1-9-1989, THIS RESTR ICTIVE MEANING IS ALSO APPLICABLE UNDER THE DTAA BETWEEN INDIA AND FRANCE AND IT IS THEREFORE NECESSARY TO ASCERTAIN WHETHER TECHNOLOGY IS MADE A VAILABLE BY ADP-GSI, FRANCE TO THE AGENTS AND AIR LINES WHILE PROVIDING SERVICES OF DSP LINK SERVICES. HE ALSO REFERRED TO ARTICLE 12(4) OF THE INDO PORTUGUESE TREATY ENTERED INTO ON 11-9-1998 WHICH HAS FURTHER RESTRIC TED THE SCOPE OF FEES FOR TECHNICAL SERVICES TO INCLUDE ONLY SUCH SERVICES W HICH ENABLE THE PERSON TO APPLY THE TECHNOLOGY ON THEIR PART. RELYING ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. DE BEER S INDIA MINERALS (P.) LTD. 346 ITR 467 (KAR) AS WELL AS THE DECISION OF KOLKAT A BENCH OF ITAT IN THE CASE OF DCIT VS. ITC LTD. [2002] 82 ITD 239 (KOL.), HE C ONTENDED THAT THE CONCEPT OF MAKE AVAILABLE THE TECHNOLOGY HAS BEEN EXPLAIN ED IN GREATER DETAIL AND GOING BY THE SAID EXPLANATION, THE SERVICES RENDERE D BY ADP-GSI, FRANCE IN THE PRESENT CASE DID NOT MAKE THE TECHNOLOGY AVAILA BLE TO THE AGENTS/AIR LINES IN INDIA SO AS TO SAY THAT THE PAYMENT MADE FOR SUC H SERVICES WAS IN THE ITA 1149/M/10 9 NATURE OF FEES FOR INCLUDED SERVICES CHARGEABLE TO TAX IN INDIA IN THE HANDS OF THE FRENCH SERVICE PROVIDERS. 10. AS REGARDS THE CONTENTION OF THE LD. D.R. THAT THE PAYMENT IN QUESTION IS IN THE NATURE OF ROYALTY, THE LD. COUNSEL FOR TH E ASSESSEE ARGUED THAT THE SAME CANNOT BE ENTERTAINED AT THIS STAGE AS IT WAS NOT EVEN THE CASE OF THE A.O. WHO DECIDED THE ISSUE WITH REFERENCE TO ARTICL E 13 OF THE DTAA AND EVEN THE GROUND RAISED BY THE REVENUE IN THE PRESENT APP EAL ALSO RELICS ON ARTICLE 13 WHICH DEALS WITH FEES FOR TECHNICAL SERVICES. 11. AS REGARDS THE DECISION OF AUTHORITY FOR ADVANC E RULINGS IN THE CASE OF CARGO COMMUNITY NETWORK PTE LTD., IN RE (SUPRA) REL IED UPON BY THE LD. D.R., HE CONTENDED THAT THE FACTS INVOLVED IN THE S AID CASE WERE ENTIRELY DIFFERENT INASMUCH AS THE PAYMENTS MADE FOR CONCURR ENT ACCESS TO UTILIZE THE SOPHISTICATED SERVICES OFFERED BY THE PORTAL WERE F OUND TO BE COVERED BY THE EXPRESSION ROYALTY AS USED IN ARTICLE 12 AS ALSO IN SECTION 9(1) AND THE SAME THEREFORE WAS HELD TO BE IN THE NATURE OF ROYALTY. HE CONTENDED THAT SIMILARLY ANOTHER DECISION OF AUTHORITY FOR ADVANCE RULINGS I N THE CASE OF ABC, IN RE RELIED UPON BY THE LD. D.R. INVOLVED DIFFERENT FACT S AS THE PAYMENT WAS MADE FOR ALLOWING THE USER THE ACCESS TO SOPHISTICATED E QUIPMENTS SUCH AS CENTRAL PROCESSING UNIT AND CONSOLIDATED DATAS AND THE SAME THEREFORE WAS TREATED AS IN THE NATURE OF ROYALTY. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT THE PAYMENT MADE TO ADP- GSI FRANCE FOR PROVIDING BSP LINK SERVICES TO THE A GENTS/AIR LINES WAS TREATED BY THE A.O. AS IN THE NATURE OF FEES FOR TECHNICAL SERVICES AS PER ARTICLE 13 OF THE TREATY BETWEEN INDIA AND FRANCE CHARGEABLE TO T AX IN INDIA @10%. AS PER ARTICLE 13(1), ROYALTY, FEES FOR TECHNICAL SERVICES AND PAYMENTS FOR LEASE OF EQUIPMENTS ARISING IN INDIA AND PAID TO RESIDENT OF FRANCE MAY BE TAXED IN FRANCE. HOWEVER, AS PROVIDED IN ARTICLE 13(2), SUCH ROYALTY FEES AND PAYMENTS ITA 1149/M/10 10 MAY ALSO BE TAXED IN INDIA AT THE MAXIMUM RATE OF 1 0% OF THE GROSS AMOUNT OF SUCH ROYALTY, FEES AND PAYMENTS. BEFORE THE LD. CIT(A), RELIANCE WAS PLACED BY THE ASSESSEE ON CLAUSE 7 OF THE PROTOCOL OF THE DTAA BETWEEN INDIA AND FRANCE TO CONTEND THAT THE PAYMENT MADE TO ADP-GSI FRANCE FOR PROVIDING BSP LINK SERVICES WAS NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES. THE SAID CLAUSE READS AS UNDER:- IN RESPECT OF ARTICLES 11 (DIVIDENDS), 12 (INTEREST ) AND 13 (ROYALTIES, FEES FOR TECHNICAL SERVICES AND PAYMENTS FOR THE US E OF EQUIPMENT), IF UNDER ANY CONVENTION, AGREEMENT OR PROTOCOL SIGNED AFTER 1-9-1989, BETWEEN INDIA AND A THIRD STATE WHICH IS A MEMBER O F THE OECD, INDIA LIMITS ITS TAXATION AT SOURCE ON DIVIDENDS, INTERES T, ROYALTIES, FEES FOR TECHNICAL SERVICES OR PAYMENTS FOR THE USE OF EQUIP MENT TO A RATE LOWER OR A SCOPE MORE RESTRICTED THAN THE RATE OF SCOPE P ROVIDED FOR IN THIS CONVENTION ON THE SAID ITEMS OF INCOME, THE SAME RA TE OR SCOPE AS PROVIDED FOR IN THAT CONVENTION, AGREEMENT OR PROTO COL ON THE SAID ITEMS INCOME SHALL ALSO APPLY UNDER THIS CONVENTION , WITH EFFECT FROM THE DATE ON WHICH THE PRESENT CONVENTION OR THE REL EVANT INDIAN CONVENTION, AGREEMENT OR PROTOCOL ENTERS INTO FORCE , WHICHEVER ENTERS INTO FORCE LATER. 13. AS PROVIDED IN CLAUSE 7 OF THE PROTOCOL OF DTAA BETWEEN INDIA AND FRANCE, IF UNDER ANY CONVENTION, AGREEMENT OR PROTO COL SIGNED AFTER 1-9-1989 BETWEEN INDIA AND A THIRD STATE WHICH IS A MEMBER O F THE OECD, INDIA LIMITS ITS TAXATION AT SOURCE INTER ALIA ON FEES FOR TECHN ICAL SERVICES OR PAYMENTS FOR THE USE OF EQUIPMENT TO A RATE LOWER OR A SCOPE MO RE RESTRICTED THAN THE RATE OR SCOPE PROVIDED FOR IN THE DTAA BETWEEN INDIA AND FRANCE, THE SAME SCOPE AS PROVIDED FOR IN THAT CONVENTION, AGREEMENT OR PR OTOCOL ON THE SAID ITEMS OF INCOME SHALL ALSO APPLY UNDER THE DTAA BETWEEN INDI A AND FRANCE. ON SEPTEMBER 12, 1989, INDIA HAS ENTERED INTO A CONVEN TION WITH USA, WHICH IS A MEMBER OF OECD AND AS PER ARTICLE 12(4)(B) THEREO F, THE SCOPE OF FEES FOR INCLUDED SERVICES IS RESTRICTED TO MEAN PAYMENTS O F ANY KIND TO ANY PERSON IN CONSIDERATION FOR THE RENDERING OF ANY TECHNICAL OR CONSULTANCY SERVICES, IF SUCH SERVICES MAKE AVAILABLE TECHNICAL KNOWLEDGE, E XPERIENCE, SKILL, KNOW- HOW, OR PROCESSES, OR CONSIST OF THE DEVELOPMENT AN D TRANSFER OF A TECHNICAL PLAN OR TECHNICAL DESIGN. INDIA HAS ALSO ENTERED I NTO AN AGREEMENT FOR ITA 1149/M/10 11 AVOIDANCE OF DOUBLE TAXATION AND PREVENTION OF FISC AL EVASION WITH PORTUGUESE REPUBLIC ON SEPTEMBER 11, 1998 AND AS PER ARTICLE 1 2(4)(B) OF THE SAID AGREEMENT ENTERED INTO WITH ANOTHER MEMBER OF OECD, THE CONCEPT OF INCOME FFROM FEES FOR INCLUDED SERVICES IS FURTHER RESTRIC TED TO MEAN THE SERVICES WHICH MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENC E, SKILL, KNOW-HOW OR PROCESSES OR CONSIST OF THE DEVELOPMENT AND TRANSF ER OF A TECHNICAL PLAN OR TECHNICAL DESIGN WHICH ENABLES THE PERSON ACQUIRING THE SERVICES TO APPLY THE TECHNOLOGY CONTAINED THEREIN. THIS RESTRICTED SCOPE PROVIDED IN INDIA-US DTAA AND INDIA-PORTUGUESE DTAA THUS IS APPLICABLE E VEN UNDER INDIA-FRANCE DTAA AS PER CLAUSE 7 OF THE PROTOCOL AND GOING BY T HIS RESTRICTED SCOPE, WE AGREE WITH THE CONCLUSION DRAWN BY THE LD. CIT(A) O N PERUSAL OF THE RELEVANT AGREEMENT THAT THE BSP LINK SERVICES PROVIDED BY AD P-GSI FRANCE DID NOT MAKE AVAILABLE TO THE AGENTS/AIR LINES ANY TECHNICA L KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HOW, OR PROCESSES SO AS TO ENABLE THEM TO APPLY THE TECHNOLOGY. 14. AT THE TIME OF HEARING BEFORE US, THE LD. D.R. HAS RELIED ON CLAUSE 3,8 & 9 OF THE RELEVANT AGREEMENT IN SUPPORT OF HIS CONTE NTION THAT IT WAS A CASE OF TECHNOLOGY BEING MADE AVAILABLE BY THE SERVICE PROV IDER TO AIR LINES/AGENTS. THE SAID CLAUSE OF THE AGREEMENT RELIED UPON BY THE LD. D.R. ARE REPRODUCED HEREUNDER:- 3. APPOINTMENT 3.1 IATA HEREBY APPOINTS ADP-GSI ON AN EXCLUSIVE BA SIS, SUBJECT TO CLAUSE 27.2, TO PROVIDE THE SERVICES FOR THE TERM I N ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS AGREEMENT. 3.2 ADP-GSI HEREBY ACCEPTS THE APPOINTMENT TO PROVI DE THE SERVICES IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS AG REEMENT. 3.3 IATA AGREES THAT FOR SO LONG AS THE EXCLUSIVE A PPOINTMENT HAS NOT BEEN WITHDRAWN PURSUANT TO CLAUSE 27.2, NOT TO BY I TSELF OR THROUGH THIRD PARTIES, DIRECTLY OR INDIRECTLY, FULFILL THE SERVICES. 8. DEVELOPMENT DEVELOPMENT SERVICES AND TESTING ITA 1149/M/10 12 0.1 ADP-GSI WILL FURTHER DEVELOP THE EMP AND THE PA RTIES WILL EACH USE THEIR BEST ENDEAVORS TO JOINTLY AGREE THE SAME ON OR BEFORE THE END OF OCTOBER 2000. 8.2 ADP-GSI WILL PERFORM THE DEVELOPMENT SERVICES I N ACCORDANCE WITH THE BASE SPECIFICATION AND/OR THE SPECIFICATION IN ACCORDANCE WITH THE DATES SET OUT IN THE FMF. ADP-GSI AGREES THAT IT WI LL DELIVER A FIRST RELEASE OF EARS TO IATA FOR ACCEPTANCE TEST(S) BY O CTOBER 2000. ADP- GSI AGREES THAT IT WILL DEVELOP A SECOND PHASE OF S OFTWARE CONCURRENTLY WITH THE FIRST PHASE. 8.3 ADP-GSI WILL PERFORM THE ACCEPTANCE TEST(S) FOR THE DEVELOPMENT SERVICES A ACCORDANCE WITH THE ACCEPTANCE TEST REQU IREMENTS AND ON THE DATES SET OUT IN TIRE EMP AND DEMONSTRATE TO IA TA THAT THE SOFTWARE AND THE SYSTEM CAN BE IMPLEMENTED WITHIN T HE USER GROUP IN ACCORDANCE WITH THE BASE SPECIFICATION AND/OR THE S PECIFICATION AND THE SLA. 9. IMPLEMENTATION DELIVERY, INSTALLATION, TRAINING AND TESTING 9.1 ADP-GSI WILL DEVELOP AND JOINTLY AGREE WITH IAT A ON OR BEFORE THE 10TH OCTOBER 2000, THE TECHNICAL REQUIREMENTS. 9.2 ADP-GSI WILL PERFORM THE ACCEPTANCE TEST(S) FOR THE IMPLEMENTATION SERVICES IN ACCORDANCE WITH THE ACCEPTANCE TEST REQ UIREMENTS AND ON THE DATES SET OUT IN THE EMP AND DEMONSTRATE TO IAT A THAT THE EARS SERVICES ARE IN ACCORDANCE WITH THE SLA. 9.3 ASP-GSI WILL PROVIDE, IN ADP-GSI OFFICES, TRAI NING TO THE NAMED PERSONNEL OF IATA, AT NO COST TO IATA, IN ACCORDANC E WITH THE SERVICE LEVEL AGREEMENT ON THE DATES SET OUT IN THE EMP. I ATA WILL PAY AT COST, ADP-GSI REASONABLE TRAVEL AND ACCOMMODATION EXPENSE S INCURRED IN ACCORDANCE WITH ADP-GSIS CORPORATE TRAVEL POLICY, TO THE EXTENT THAT THE TRAINING IS NOT PROVIDED BY ADP-GSI AT ADP-GSI S OFFICES IN MANDRID OR MEXICO CITY. 9.4 ADP-GSI WILL DELIVER, INSTALL AND IMPLEMENT THE SOFTWARE AND THE SYSTEM, AND MAKE THE SAME AVAILABLE TO THE USER GRO UP, SUBJECT TO THE AVAILABILITY OF THE TECHNICAL REQUIREMENTS, IN EACH OF THE BSP(S) IN ACCORDANCE WITH THE EMP. 9.5 ADP-GSI AGREES THAT, FOLLOWING DEVELOPMENT, TES TING AND ACCEPTANCE OF EACH NEW RELEASE OF THE SOFTWARE. IT WILL NOTIFY AND MAKE THE ACCEPTED NEW RELEASE AVAILABLE TO ANY USER GROU P PREVIOUSLY CONNECTED IN ACCORDANCE WITH THIS CLAUSE 9. ITA 1149/M/10 13 15. ON PERUSAL OF THE ABOVE CLAUSES OF THE AGREEMEN T RELIED UPON BY THE LD. D.R., WE FIND OURSELVES IN AGREEMENT WITH THE CONTE NTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THERE IS NOTHING TO SHOW THAT THE SERVICES PROVIDED BY BSP LINK SERVICES PROVIDED BY ADP-GSI FRANCE ACTUAL LY MADE AVAILABLE TO THE AGENTS/AIR LINES ANY TECHNICAL KNOWLEDGE, EXPERIENC E, SKILL, KNOW-HOW OR PROCESSES SO AS TO ENABLE THEM TO APPLY THE SAID TE CHNOLOGY. THE SERVICES ENVISAGED IN CLAUSE 4, 8 & 9 OF THE AGREEMENT RELAT ED TO DEVELOPMENT SERVICES, TESTING AND OTHER FACILITIES WERE PROVIDED TO THE A GENTS/AIR LINES JUST TO ENABLE THEM TO OPERATE AND IMPLEMENT BSP LINK SERVICES IN ORDER TO UTILIZE THE SAME FOR THEIR OWN USE. THE DECISION OF HONBLE KARNATA KA HIGH COURT IN THE CASE OF DE BEERS INDIA MINERALS (P.) LTD. (SUPRA) AND TH AT OF KOLKATA BENCH OF ITAT IN THE CASE OF DCIT VS. ITC LTD.(SUPRA) EXPLAINING THE CONCEPT OF TECHNOLOGY BEING MADE AVAILABLE FULLY SUPPORTS THIS VIEW. ON THE OTHER HAND, THE DECISIONS OF AUTHORITY FOR ADVANCE RULINGS IN THE C ASE OF CARGO COMMUNITY NETWORK PTE LTD., IN RE (SUPRA) AND ABC, IN RE (SUP RA) RELIED UPON BY THE LD. D.R. IN SUPPORT OF THE REVENUES CASE INVOLVED DIFFERENT FACTS AS RIGHTLY POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE AND THE SAME CITED BY THE LD. D.R. IN SUPPORT OF THE NEW PLEA OF PAYMENT IN QUEST ION BEING ROYALTY, IN ANY CASE, CANNOT BE RELIED UPON AS IT WAS NOT EVEN THE CASE OF THE A.O. AND THE GROUND RAISED BY THE REVENUE IN THE PRESENT APPEAL ALSO CLAIMS THE PAYMENT IN QUESTION TO BE IN THE NATURE OF FEES FOR TECHNIC AL SERVICES AND NOT ROYALTY. WE THEREFORE FIND NO INFIRMITY IN THE IMPUGNED ORDE R OF THE LD. CIT(A) HOLDING THAT THE PAYMENT IN QUESTION MADE FOR BSP LINK SERV ICES RENDERED BY ADP- GSI FRANCE IS NOT IN THE NATURE OF FEES FOR INCLUD ED SERVICES CHARGEABLE TO TAX IN INDIA AND UPHOLDING THE SAME, WE DISMISS THIS AP PEAL FILED BY THE REVENUE. ITA 1149/M/10 14 16. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JUNE, 2014 . ) 6 7 11-6-2014 ) SD/- SD/- (VIVEK VARMA) (P.M. JAGTAP ) JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 7 DATED 110602014 [ \ .../ RK , SR. PS ' #%& '& / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT 2. $%# / THE RESPONDENT. 3. ; () / THE CIT(A)10 MUMBAI. 4. ; / DIT (IT), MUMBAI 5. $? , * ? , / DR, ITAT, MUMBAI L BENCH 6. / GUARD FILE. / BY ORDER, % $ //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI