Dy. DIT (International Taxation)-II, Pune V. Tata Technologies Ltd, Pune

ITA 1171/PUN/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2476 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 27-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR DHEERAJ K JAIN
• Keywords: Business income; Transfer pricing; Double taxation relief; Permanent establishment
• Section: 201(1); 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , !, # $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.1171/PN/2013 ASSESSMENT YEAR : 2009-10 THE DY. DIRECTOR OF INCOME TAX, (IT) II, PUNE. . APPELLANT VS. TATA TECHNOLOGIES LIMITED, 25, RAJIV GANDHI INFOTECH PARK, HINJWADI, PUNE 411 057. PAN : AAACT3092N . RESPONDENT / APPELLANT BY : SHRI (DR.) DHEERAJ K. JAIN / RESPONDENT BY : SHRI NARESH KUMAR / DATE OF HEARING : 10.03.2016 / DATE OF PRONOUNCEMENT: 30.03.2016 % / ORDER PER PRADIP KUMAR KEDIA, AM : THE CAPTIONED APPEAL FILED BY THE REVENUE IS AGAINS T THE ORDER OF CIT(A)-IT/TP, PUNE DATED 14.03.2013 RELATING TO ASS ESSMENT YEAR 2008-09 PASSED UNDER SECTION 201(1) R.W.S. 195 OF THE INCOM E-TAX ACT, 1961 (IN SHORT THE ACT). 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN CONCLUDING THAT THE PURPOSE FOR WHICH THE ASSESSEE MADE THE PAYMENT TO TATA TECHNOLOGIES PTE LIMITED (TTPL), A TAX RESIDENT OF SINGAPORE, IS FOR AVAILING OF THE MANAGERIAL OR CONSULTANCY SERVICES, WHEN IN FACT, A S IT IS SEEN FROM THE NATURE OF 2 ITA NO.1171/PN/2013 SERVICES RECEIVED, THE ASSESSEE HAD MADE PAYMENT TO TTPL FOR AVAILING CONSULTANCY OR TECHNICAL SERVICES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN CONCLUDING THAT TTPL, SINGAPORE ENTITY HAS WORKED A S AN AGENT FOR ALL OTHER SERVICE PROVIDER ENTITIES, WHEN IN FACT, THE COST IS ALSO I NCURRED BY TTPL FOR PROVIDING SERVICES TO TTL. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND T HE LAW, THE LD. CIT(A) HAS ERRED IN CONCLUDING THAT THE PAYMENT TO TATA TECHNO LOGIES PTE LIMITED (TTPL), A TAX-RESIDENT OF SINGAPORE, CANNOT BE TAXED AS FEE FOR TECHNICAL SERVICES UNDER ARTICLE 12(4)(B) OF DOUBLE TAXATION AVOIDANCE AGREE MENT (DTAAS) BETWEEN INDIA AND SINGAPORE WHEN THE FACT IS THAT TTPL HAD MADE A VAILABLE THEIR TECHNICAL KNOWLEDGE/EXPERIENCE/SKILL TO THE ASSESSEE AND THE SAME IS OF ENDURING NATURE CAPABLE OF BEING UTILIZED INDEPENDENTLY BY THE ASSE SSEE WITHOUT RECOURSE TO THE SERVICE PROVIDER. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND T HE LAW, THE LD. CIT(A) HAS ERRED IN CONCLUDING THAT THE TERM MAKE AVAILABLE MEANS TO SUPPLYING OR TRANSFERRING OF TECHNICAL KNOWLEDGE OR TECHNOLOGY T O ANOTHER. 5. ON THE FACTS AND CIRCUMSTANCES OF THIS CASE, THE LD. CIT(A) WAS NOT CORRECT IN HOLDING THAT THE ASSESSEE HAS NOT ACQUIRED ANY T ECHNICAL INPUTS FOR ITS OWN FROM TTPL, WHEN IN FACT, THE ASSESSEE DOES ACQUIRE THE T ECHNICAL INPUTS DURING THE SERVICES PROVIDED BY THE SERVICES PROVIDER, WHICH T HEN ARE UTILIZED CONTINUOUSLY FOR ITS OWN USE WITHOUT RECOURSE TO THE SERVICE PROVIDE R. 6. THE APPELLANT CRAVES LEAVE TO ADD TO OR MODIFY A NY OF THE GROUNDS OF APPEAL. 3. THE SHORT QUESTION INVOLVED IN THE PRESENT APPEA L IS WHETHER THE ASSESSEE WHILE MAKING REMITTANCE TOWARDS GROUP COST RECHARG E TO ITS ASSOCIATED ENTERPRISE(AE) IN SINGAPORE WAS LIABLE TO TDS WITHH OLDING TAX IN TERMS OF SECTION 195 OF THE ACT OR NOT. 4. THE BRIEF FACTS CONCERNING THE ISSUE INVOLVED AR E THAT THE ASSESSEE COMPANY IS PART OF THE GLOBAL PROFESSIONAL SERVICES GROUP ENGAGED IN PROVIDING ENGINEERING AND DESIGN SERVICES, PRODUCT LIFE CYCLE MANAGEMENT, AND ENTERPRISE SOLUTION AND PLANT AUTOMATION. THE ASSES SEE CO. AS A PART OF INCAT ENTITIES ENTERED INTO A COST RECHARGE MECHANISM W ITH A VIEW TO SHARE THE GROUP COSTS ATTRIBUTABLE TO IT AS PER GROUP COST R ECHARGE AGREEMENT. SINGAPORE ENTITY NAMELY TATA TECHNOLOGIES PTE LTD. (TTPL) ACTS AS CONDUIT FOR ALLOCATION OF GROUP COST BETWEEN INCAT CO.. DERIVIN G BENEFIT FROM SUCH SERVICES OF OTHER INCAT COS. AS PER THE ARRANGEMENT , THE ASSESSEE HAS REMITTED ITS SHARE OF GROUP COST RECHARGE TO THE CR EDIT OF SINGAPORE COMPANY ALBEIT WITHOUT DEDUCTING TAX AT SOURCE. THE ASSESSING OF FICER TOOK OBJECTION TO 3 ITA NO.1171/PN/2013 SUCH REMITTANCE WITHOUT WITHHOLDING TAX IN VIEW OF THE PROVISIONS OF S. 195 OF THE ACT. AS A CONSEQUENCE, THE AO PASSED UNDER SECT ION 201(1) R.W.S. 195 DATED 14.03.2013 AND HELD THAT THE ASSESSEE RESPONS IBLE FOR PAYING TO NON RESIDENT COMPANY A SUM OF RS.1,04,24,399/- TOWARDS GROUP COST RECHARGE OUGHT TO HAVE DEDUCTED TAX AT SOURCE AT APPROPRIATE RATE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ABOVE AMOUNT WAS INCURRED FOR AVAILING TECHNICAL SERVICES AND THE ASSESSEE SHOULD HAVE DEDUCTED TAX @ 10% BEING PAYMENT MADE AS FEE FOR TECHNICAL SERVICES (FTS) AMOUNTIN G TO RS.10,42,439/-. FOR DEFAULT IN NON DEDUCTION OF TAX AND PAYMENT THEREOF TO THE CREDIT OF INDIAN GOVERNMENT, HE ALSO LEVIED INTEREST UNDER S. 201(1A ). IN THE RESULT, TOTAL DEMAND OF RS.11,46,679/- WAS SADDLED ON THE ASSESSE E FOR THE ALLEGED DEFAULT. 4.1 THE BRIEF RECITAL OF THE CASE ARE THAT THE ASSE SSEE HAS ENTERED INTO GROUP COST RECHARGE MECHANISM WITH THE TTPL-SINGAPORE. TH E COST RECHARGE MECHANISM IS ALLOCATION AND DISTRIBUTION OF COST IN CURRED BY THE INCAT ENTITIES AND BY THE ASSESSEE IN PROVIDING SERVICES FOR THE BENEFIT DERIVED BY OTHER INCAT ENTITIES NAMELY: INCAT SYSTEMS INC, USA INCAT LTD., UK INCAT GMBH, GERMANY 4.2 AS A PART OF THE ARRANGEMENT, COSTS INCURRED IN PROVIDING SERVICES (GROUP COSTS) ARE POOLED IN BY THE TTPL-SINGAPORE IN ITS H ANDS. THEREAFTER, EACH GROUP ENTITY IS ALLOCATED ITS SHARE OF COST REQUIRE D TO BE PAID TO TTPL FOR AVAILING GROUP SERVICES. THE ASSESSEE HAS ALSO CHA RGED THE SINGAPORE COMPANY FOR THE SERVICES RENDERED BY IT TO THE GROU P. LIKEWISE, IT ALSO PAID FOR THE SERVICES AVAILED FROM THE GROUP COMPANIES (INCA T ENTITIES) TO TTPL. THIS AMOUNT PAID BY THE ASSESSEE TO TTPL- SINGAPORE IN C ONSIDERATION OF COST OF SERVICES UTILIZED WAS CONSIDERED TAXABLE BY THE ASS ESSING OFFICER IN INDIA AS FEE FOR TECHNICAL SERVICES ( FTS). 4 ITA NO.1171/PN/2013 4.3 THE ASSESSEE COMPANY FILED AN APPLICATION UNDER SECTION 195 OF THE ACT ON 17.03.2008 REQUESTING THE ASSESSING OFFICER TO G RANT IT CERTIFICATE FOR NIL OR LOWER DEDUCTION OF TAX UNDER SECTION 195(2) ON I MPUGNED REMITTANCE TOWARDS THE GROUP COST RECHARGE TO TTPL, SINGAPORE. THE AO FOUND THAT THE REMITTANCE TOWARDS IMPUGNED SERVICES AVAILED HAS AL READY BEEN REMITTED BY THE ASSESSEE CO. PRIOR TO APPLICATION UNDER S. 195(2) O F THE ACT. ACCORDINGLY, HE REFUSED TO EXAMINE THE BELATED REQUEST OF THE ASSES SEE IN THIS REGARD. 4.4 THEREAFTER, THE ASSESSING OFFICER EMBARKED UPON THE PROCEEDINGS UNDER S. 201 / 201(1A) AND PASSED AN ELABORATE ORDER HOLD ING THE ASSESSEE IN DEFAULT FOR BREACH OF S. 195 WHICH IS SUBJECT MATTER OF PRE SENT APPEAL. THE AO IN THE IMPUGNED ORDER CAME TO THE CONCLUSION THAT THE PAYM ENT MADE BY THE ASSESSEE WAS TAXABLE AS FTS UNDER THE PROVISIONS OF THE AC T AS WELL AS UNDER ARTICLE 12 OF THE INDIA-SINGAPORE DTAA AND THEREFORE ATTRAC TS OBLIGATIONS CAST UNDER S. 195 OF THE ACT. HE DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE REMITTANCE WAS NOT TAXABLE BECAUSE SERVICES RENDERE D BY OTHER INCAT ENTITIES AVAILED BY THE ASSESSEE FOR ITS BENEFIT DID NOT MA KE AVAILABLE THE TECHNICAL KNOWLEDGE PER SE TO THE ASSESSEE WHICH CONDITION SIMULTANEOUSLY CO- EXIST ALONG WITH RENDITION OF TECHNICAL, MANAGERIAL OR CO NSULTANCY SERVICES ETC. TO FALL WITHIN THE SCOPE OF ARTICLE 12 FOR THE TAXABIL ITY UNDER THE DTAA. 4.5 THE ASSESSEE INTER ALIA MADE OUT A CASE BEFORE THE ASSESSING OFFICER THAT THE GROUP COSTS INCURRED BY THE INCAT ENTITIES WE RE TO BE MERELY REIMBURSED BY THE ASSESSEE ACCORDING TO THE AGREEMENT. THE NA TURE OF THE GROUP COST AREAS BROADLY COMPRISES OF :- NATURE OF COST INCLUDES COSTS INCURRED ON MARKETING AND BUSINESS DEVELOPMENT COSTS GLOBAL CON TRACT NEGOTIATIONS GLOBAL BRAND BUILDING ACTIVITIES CUSTOMER IDENTIFICATION REPRESENTATION WITH INDUSTRIAL BODIES I.T. INFRASTRUCTURE SUPPORT COSTS. GLOBAL IT INITIA TIVES GLOBAL NEGOTIATIONS WITH THE VENDORS GLOBAL HR SUPPORT COSTS ASSISTANCE IN CONNECTION W ITH TEMPORARY AND PERMANENT TRANSFER OF EMPLOYEES AND THE GLOBAL POLICIES APPLI CABLE THERETO. LEGAL AND COMPANY SECRETARIAL COSTS GLOBAL COMPANY SECRETARIAL SERVICES. GLOBAL LEGAL COMPLIANCE SERVICES. REVIEW OF CONTRACTS AND ARRANGEMENTS. MANAGING OF ESOPS. 5 ITA NO.1171/PN/2013 GENERAL SUPPORT IN LEGAL MATTERS. QUALITY INITIATIVES COSTS GLOBAL QUALITY POLICIES. FINANCE AND TREASURY MANAGEMENT COSTS GLOBAL TREASU RY MANAGEMENT. GLOBAL FUND MANAGEMENT. GLOBAL CONTRACT MONITORING. 4.6 THE ASSESSEE ALSO EXPLAINED THE NATURE OF THE S ERVICES RECEIVED BY IT FOR EACH OF THE COSTS ENUMERATED AS UNDER :- MARKETING AND BUSINESS DEVELOPMENT SERVICES. PROMOTION OF THE BUSINESS OF TIL INTER ALIA, PUBLIC RELATIONS, MARKETING, CUSTOMER IDENTIFICATION, CONTRACT MAKING CALLS TO C LIENTS AND PROSPECTIVE CLIENTS AND BY RENDERING SUCH SERVICES AS MAY BE RE QUIRED TO DEVELOP THE BUSINESS, DEVELOPMENT OF ESO STRATEGY AND MARKET TH E BUSINESS OF THE TIL. A. ATTENDING TO QUERIES OF CLIENTS AND PROSPECTIVE CLIENTS AND COMMUNICATE THE SAME TO TIL. B. ASSISTING TIL IN BUSINESS DEVELOPMENT AND DEVELO PMENT OF ESO. C. DISCUSSION OF BUSINESS PROPOSALS AND CONTRACTS O N THE BASIS OF INPUTS RECEIVED FROM THE PARTIES, BUT NOT CONFIRM O R SECURE ANY ORDER FOR OR ON BEHALF OF THE TIL. D. PROVIDING OF ADMINISTRATIVE, SALES SUPPORT AND A CCOUNT HANDLING SERVICES TIL. IT INFRASTRUCTURE AND SUPPORT SERVICES. SERVICES IN RELATION TO MAINTAINING OF INCAT GLOBAL WEB SITE. INCAT.COM WEB SITE AND NETWORKS AND MANAGING OF GENERAL IT PR OJECTS AND SYSTEMS. GLOBAL HR SUPPORT SERVICES ASSISTANCE AND ADVICE RELATING OF ISSUE ARISING IN CONNECTION WITH TEMPORARY AND PERMANENT TRANSFER OF PERSONNEL AND GLOBAL POLI CES APPLICABLE THERETO. LEGAL AND COMPANY SECRETARIAL SERVICES. COMPANY SECRETARIAL SERVICES, LEGAL COMPLIANCE SERV ICES, REVIEW OF CONTRACTS AND ARRANGEMENT, MANAGING OF ESOPS SUPERVISION OF E XTERNAL AND/ OR INTERNAL CONTRACTUAL RELATIONSHIP AND GENERAL SUPPO RT IN LEGAL MATTERS. QUALITY INITIATIVE SERVICES. SERVICES IN RELATION COMPLIANCE AND ADHERENCE OF TH E GROUP QUALITY INITIATIVE. FINANCE AND TREASURY MANAGEMENT SERVICES. SERVICES IN RELATION TO FUND MANAGEMENT, GLOBAL TRE ASURY OPERATIONS FINANCING MANAGEMENT, CONTRACT MONITORING, DRAWINGS AND PAYMENTS TRANSACTIONS. CLEARING AND CREDIT MANAGEMENT, SURE TIES, ASSUMPTION OF GUARANTIES, BANK REPORTING AND PROJECT FINANCING. 4.7 THE ASSESSEE (TTL) CONTENDED BEFORE THE AO (TDS ) THAT FIRSTLY SINGAPORE ENTITY (TTPL) HAS MERELY POOLED THE GROUP COSTS TO BE RECHARGED TO THE INCAT ENTITIES BASED ON CERTAIN KEY RATIOS AND HAS MERELY RECHARGED AND 6 ITA NO.1171/PN/2013 ALLOCATED THE COSTS TO THE RESPECTIVE ENTITIES AVA ILING BENEFITS OF SUCH COSTS AS PER GROUP COST RECHARGE AGREEMENT WITHOUT ANY MA RK-UP THEREON. SECONDLY, TTPL HAS NOT RENDERED ANY SERVICES TO THE ASSESSEE PER SE BUT HAS MERELY RECHARGED THE ACTUAL COST INCURRED. TO AUGM ENT THE CASE OF THE ASSESSEE IT WAS CONTENDED THAT FOR A SERVICE PROVID ING CO. ON COMMERCIAL BASIS, IT WOULD NOT BE COMMERCIALLY COHERENT TO REN DER SERVICES AT COST WITHOUT ANY MARK-UP THEREON. IT WAS ALSO CONTENDED THAT SIN GAPORE CO. HAS NO BUSINESS OPERATIONS IN INDIA AND THEREFORE THIS REMITTANCE R ECEIPT CANNOT BE REGARDED AS ITS INCOME WHICH IS ACCRUING OR ARISING OR DEEMED T O BE ACCRUE OR ARISE IN INDIA FROM ANY BUSINESS CONNECTION IN INDIA. 4.8 HAVING EXPLAINED THE MODUS OPERANDI AS BROADLY NOTED ABOVE, THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THA T ALL THE GROUP COMPANIES INCLUDING THE ASSESSEE WERE BENEFITED BY THE COSTS SO INCURRED BY AN ENTITY AT THE GROUP LEVEL FOR WHICH THE EXPENSES HAVE BEEN SH ARED BY RESPECTIVE INCAT ENTITIES WITHOUT ANY MARK-UP. THUS, SHARE OF GROUP COSTS SO INCURRED WERE REIMBURSED TO TTPL, SINGAPORE AT COST WITHOUT ANY M ARK-UP. TTPL HAS MERELY POOLED THE GROUP COSTS TO BE RECHARGED TO THE INCAT ENTITIES. THERE WAS NO ELEMENT OF ANY SERVICE RENDERED BY THE SINGAPORE EN TITY AGAINST THE IMPUGNED PAYMENT AND IT HAS MERELY ACTED AS CONDUIT FOR ALLO CATION OF THE GROUP COSTS BASED ON CERTAIN KEY PARAMETERS. 4.9 IT WAS THE CASE OF THE ASSESSEE BEFORE THE ASSE SSING OFFICER THAT IN TERMS OF THE PROVISIONS OF SECTION 195(1) OF THE ACT, AN Y PERSON RESPONSIBLE FOR MAKING ANY PAYMENT TO A NON-RESIDENT OR TO A FOREIG N COMPANY, ANY SUM CHARGEABLE TO TAX UNDER THE ACT (OTHER THAN SALARI ES), IS UNDER OBLIGATION TO WITHHOLD INCOME-TAX THEREON AT THE RATES IN FORCE, AT THE TIME OF CREDIT OF INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME O F PAYMENT THEREOF BY ANY MODE, WHICHEVER IS EARLIER AND PAY THE SAME INTO TH E GOVERNMENT TREASURY WITHIN STIPULATED TIME LIMIT. ACCORDINGLY, THE OBL IGATION TO WITHHOLD TAXES ON PAYMENTS MADE TO A NON-RESIDENT/ FOREIGN CO. ARISES UNDER S. 195 ONLY IF THE PAYMENTS ARE CHARGEABLE TO TAX UNDER THE ACT. IT WAS THE CASE OF THE ASSESSEE 7 ITA NO.1171/PN/2013 BEFORE THE ASSESSING OFFICER THAT SINGAPORE ENTITY NAMELY TTPL MERELY POOLED GROUP COST TO BE RECHARGED TO INCAT ENTITY. IN THE ABSENCE OF ANY MARK-UP IN THE GROUP COST RECHARGED BY TTPL TO TTL, REMITTANCE MERELY COMPRISES OF ONLY ACTUAL COSTS ALLOCATED AND THEREF ORE THE PAYMENT IS IN THE NATURE OF REIMBURSEMENT OF EXPENSES WHICH IS NOT CH ARGEABLE TO TAX UNDER THE ACT. THE ASSESSEE NEXT SUBMITTED THAT HAVING REGAR D TO S. 90(2) OF THE ACT, TAX LIABILITY OF NON RESIDENTS IN INDIA IS REQUIRED TO BE DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT OR DOUBLE TAX AVOIDA NCE AGREEMENT (DTAA) BETWEEN INDIA AND RELEVANT COUNTRY WHICHEVER IS MOR E BENEFICIAL TO THE ASSESSEE. THE ASSESSEE CONTENDED THAT PROVISIONS OF TAX TREATY BETWEEN INDIA AND SINGAPORE BEING MORE BENEFICIAL TO THE ASSESSEE SHOULD BE APPLIED TO DETERMINE ITS TAX OBLIGATIONS. 4.10 IN THE CONTEXT OF APPLICABILITY OF DTAA, THE A SSESSEE SUBMITTED THAT TTPL IS A TAX RESIDENT OF SINGAPORE AND WOULD ACCOR DINGLY BE ENTITLED TO AVAIL BENEFITS OF INDIA SINGAPORE TREATY. IT WAS THE C ASE OF THE ASSESSEE THAT THE TAXABILITY OF SUCH PAYMENT IS TO BE EXAMINED WITH R EFERENCE TO ARTICLE 12 OF THE TREATY WHICH DEFINES FEES FOR TECHNICAL SERVICES TO MEAN PAYMENT OF ANY KIND TO ANY PERSON IN CONSIDERATION FOR SERVICES OF A MANAGERIAL, TECHNICAL OR CONSULTANCY NATURE (INCLUDING THE PROVISION OF SUCH SERVICES THROUGH TECHNICAL OR OTHER PERSONNEL) IF SUCH SERVICES MAKE AVAILABL E TECHNICAL KNOWLEDGE, EXPERIENCE SKILL, KNOW-HOW OR PROCESSES, WHICH ENAB LES THE PERSON ACQUIRING THE SERVICES TO APPLY THE TECHNOLOGY CONTAINED THER EIN. IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE PAYMENT MADE BY TTL TO TTPL COULD POSSIBLY BE IN CONSIDERATION FOR RENDERING MANAGERIAL OR CON SULTANCY SERVICES INVOLVING USE OF TECHNICAL KNOWLEDGE AND SKILL. HOWEVER, THE SERVICES DO NOT IPSO FACTO MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE, EXPERIENC E, SKILL ETC. PER SE SO AS TO ENABLE TTL INDIA TO APPLY THE SAME. HENCE, THE PAY MENTS MADE UNDER THE AGREEMENT WOULD NOT QUALIFY AS FTS UNDER THE TREA TY. IT WAS ALSO CONTENDED THAT SINCE TTPL DOES NOT HAVE ANY FIXED PLACE OF BU SINESS OR PERMANENT ESTABLISHMENT IN INDIA, SUCH PAYMENTS ARE NOT TAXAB LE AS BUSINESS INCOME IN INDIA AS PER ARTICLE 7 OF THE INDIA SINGAPORE DTA A. CONSEQUENTLY, THE 8 ITA NO.1171/PN/2013 IMPUGNED PAYMENTS ARE NOT TAXABLE IN INDIA IN VIEW OF FAVOURABLE INDIA SINGAPORE DTAA. HENCE, IN THE ABSENCE OF CHARGEABI LITY TO TAX, SUCH REMITTANCES ARE NOT SUBJECT TO WITHHOLDING TAX IN I NDIA UNDER SECTION 195 OF THE ACT. TTL REMITTED USD 250,542 ON 15 TH MAY, 2008 IN TERMS OF STIPULATIONS MADE UNDER GROUP COST RECHARGE AGREEMENT. THE ASSES SEE SUPPORTED ITS ACTION THAT WHILE REMITTING THE IMPUGNED COST TO TTPL, IT OBTAINED THE NECESSARY CERTIFICATE IN PRESCRIBED FORM FROM A CHARTERED ACC OUNTANT. 4.11 HOWEVER, THE ASSESSING OFFICER WAS NOT IMPRESS ED WITH THE SUBMISSIONS OF THE ASSESSEE THAT IT IS A CASE OF MERE REIMBURSE MENT OF EXPENSES. THE ASSESSING OFFICER OBSERVED THAT REIMBURSEMENT IS DI FFERENT FROM ALLOCATION. IN ALLOCATION OF EXPENDITURE EACH PARTY TO THE TRANSAC TION DERIVES SOME BENEFIT AND IN LIEU OF THE BENEFIT SO DERIVED, IT BECOMES LIABL E TO SHARE THE EXPENDITURE. THE ASSESSING OFFICER FURTHER OBSERVED THAT THERE IS NO DIRECT NEXUS BETWEEN ACTUAL COST INCURRED BY A INCAT COMPANY FOR BENEFIT OF THE GROUP AND THE FEES PAYABLE BY RESPECTIVE INDIVIDUAL COMPANY WHICH AVA ILS IMPUGNED SERVICES. 4.12 THE ASSESSING OFFICER ALSO SOUGHT TO DISTINGUI SH THE MEANING OF EXPRESSION MAKE AVAILABLE HEAVILY RELIED UPON BY THE ASSESSEE WITH REFERENCE TO ARTICLE 12 OF INDIA SINGAPORE DTTA. THE ASSES SING OFFICER ADDRESSED THE ARGUMENT OF THE ASSESSEE THAT PAYMENT CAN BE TERMED AS FEE FOR TECHNICAL SERVICES AS PER BENEFICIAL PROVISIONS OF DTAA ONLY WHEN THE PAYMENT ARE IN CONSIDERATION OF RENDERING MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES AND MORE IMPORTANTLY SUCH SERVICES MAKE AVAILABLE TEC HNICAL KNOWLEDGE, SKILL, PROCESSES, ETC. WHICH ENABLES THE PERSON SO AVAILI NG THE SERVICES TO APPLY THE TECHNICAL SERVICES CONTAINED THEREIN. THE ASSESSIN G OFFICER OBSERVED THAT THE EXPRESSION MAKE AVAILABLE USED IN THE TREATY SUGG ESTS THAT THESE SERVICES IN THE NATURE OF TECHNICAL KNOWLEDGE, EXPERIENCE, SKIL L, ETC. WERE TO BE OFFERED OR MADE ACCESSIBLE TO OTHER PARTY AND IT NEVER MEANT T HAT OTHER PARTY SHOULD BE TRAINED OR MADE EXPERT IN SUCH KNOWLEDGE, ETC.. AR TICLE 12 OF THE TREATY LAYS ITS FOCUS IN A MANNER THAT A PERSON ACQUIRING THE S ERVICES SHOULD BE ENABLED TO APPLY THE TECHNOLOGY AND IT DOES NOT CONCERN TRANSF ER OF THE TECHNOLOGY. 9 ITA NO.1171/PN/2013 4.13 THE AO ACCORDINGLY BRUSHED ASIDE VARIOUS CONTE NTIONS OF THE ASSESSEE AND OBSERVED THAT PAYMENT TOWARDS GROUP COST RECHA RGE HAS BEEN MADE TO SINGAPORE COMPANY FOR AVAILING SERVICES OF TECHNICA L, MANAGERIAL NATURE ETC. FOR WHICH ASSESSEE WAS LIABLE FOR DEDUCTING OR WITH HOLDING THE TAX IN TERMS OF SECTION 195 OF THE ACT HAVING REGARD TO THE PROVISI ONS OF THE ACT READ WITH TREATY. AS A RESULT, THE AO CAME A CONCLUSION THAT THE ASSESSEE COMPANY HAVING FAILED TO DEDUCT WITHHOLDING TAX HAS COMMITT ED A DEFAULT IN TERMS OF SECTION 201(1)OF THE ACT WHICH WAS QUANTIFIED AT RS . 10,42,243/- AND INTEREST THEREON WAS ALSO LEVIED UNDER S. 201(1A) ON THE ACT . 5. IN THE FIRST APPEAL, THE CIT(A) REVISITED THE CO NTENTIONS OF ASSESSEE AND ASSERTED THAT IMPUGNED PAYMENT CANNOT BE TAXED UNDE R ARTICLE 12 OF THE INDIA SINGAPORE DTTA IN VIEW OF SECTION 90 OF THE INDIA N INCOME-TAX ACT WHICH PROVIDES THAT THE ASSESSEE IN ITS OPTION CAN USE TH E PROVISIONS OF THE INCOME-TAX ACT OR DTAA, WHICHEVER IS MORE BENEFICIAL TO IT. T HE CIT(A) CONCLUDED THAT IN TERMS OF THE PROVISIONS OF THE DTAA, THE IMPUGNE D PAYMENT TO SINGAPORE ENTITY DOES NOT FALL WITHIN THE DEFINITION OF FEE FOR TECHNICAL SERVICES AS PROVIDED UNDER ARTICLE 12 OF TREATY, WHICH PROVISIO N IS MORE BENEFICIAL TO THE ASSESSEE. HE ACCORDINGLY CAME TO THE CONCLUSION TH AT THE ASSESSEE IS NOT REQUIRED TO WITHHOLD TAX WHILE MAKING PAYMENT TO SI NGAPORE ENTITY UNDER SECTION 195 OF THE ACT. AS A CONSEQUENCE, THE ORDE R OF AO UNDER S. 201(1) / 201(1A) WAS SET ASIDE AND QUASHED BY THE CIT(A). 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US. 7. BEFORE US, THE LEARNED DEPARTMENT REPRESENTATIVE (DR) DR. DHEERAJ JAIN APPEARING FOR REVENUE ASSAILED THE ORDER THE CIT(A) AND STRONGLY RELIED UPON THE OBSERVATIONS MADE BY THE ASSESSING OFFICER. HE REFERRED TO THE DISCUSSIONS IN THE ORDER UNDER S. 201(1) WITH RESPECT TO EXPRES SION MAKE AVAILABLE IN THE CONTEXT OF TREATY AND CONTENDED THAT THE ASSESSING OFFICER HAS RIGHTLY CONCLUDED THAT THE EXPRESSION MAKE AVAILABLE AS U SED IN THE INDIA 10 ITA NO.1171/PN/2013 SINGAPORE ENTITY MERELY SIGNIFIES THAT A PERSON ACQ UIRING THE SERVICES SHOULD BE ENABLED TO APPLY THE TECHNOLOGY CONTAINED THEREIN A ND TRANSFER OF TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, PROCESSES ETC. INVOLV ED IN RENDERING SUCH SERVICES IS NOT MANDATED PER SE . HE THEREFORE SUBMITTED THAT ASSESSEE WAS UNDER LEGAL OBLIGATION TO DEDUCT AND DEPOSIT WITHHO LDING TAX BOTH UNDER THE PROVISIONS OF THE ACT AS WELL AS IN TERMS OF DTAA O N ALL REMITTANCES MADE TO SINGAPORE ENTITY. ACCORDINGLY, HE ASSERTED THAT THE ORDER OF THE ASSESSING OFFICER UNDER SECTION 201(1A) OF THE ACT CANNOT BE FAULTED AND PLEADED FOR REVERSAL OF THE ORDER OF CIT(A). 8. PER CONTRA, THE LD. AUTHORIZED REPRESENTATIVE(AR ) SHRI NARESH KUMAR APPEARING ON BEHALF OF THE ASSESSEE OUTLINED THAT T HE ASSESSEE HAS INTER-ALIA MADE CERTAIN PAYMENTS TO THE ASSOCIATED ENTERPRISE( AE) NAMELY TTPL DOMICILED AND TAX RESIDENT OF SINGAPORE. THE LD. AR FOR THE ASSESSEE REITERATED THE FACTS NOTED SUPRA AND ADVERTED OUR ATTENTION TO GROUP COST RECHARGE AGREEMENT ENTERED INTO BETWEEN ASSESSEE CO. AND OT HER INCAT ENTITIES FOR MUTUAL BENEFIT WITH A VIEW TO SHARE GROUP COSTS WHI CH IS INCURRED BY ANY OF THE GROUP ENTITY FOR THE BENEFIT OF OTHERS. AS PER THE AGREEMENT, THE SINGAPORE COMPANY ACTS A CONDUIT WHO IS AUTHORISED TO RECHARG E AND ALLOCATE THE GROUP COSTS TO OTHER BENEFICIARY ENTITIES FORMING PART OF THE AGREEMENT. THE LEARNED AR SUBMITTED WITH VEHEMENCE THAT THE SINGAPORE COMP ANY MERELY GIVES EFFECT TO THE ENTIRE COST RECHARGE MECHANISM AND ALLOCATES THE COSTS TO VARIOUS INCAT ENTITIES AS PER THE IMPUGNED AGREEMENT. HE NO TED THAT THE GROUP COST WHICH IS SUBJECT TO ALLOCATION DO NOT INCLUDE COSTS INCURRED FOR THE BENEFIT OF ITS OWN BUSINESS OPERATION BY THE RESPECTIVE INCAT ENTI TIES. 8.1 THE LD. AR LAID SPECIAL EMPHASIS TO THE FACT TH AT ALL THE GROUP COSTS INCURRED BY INCAT ENTITIES ARE REIMBURSED BY TTPL A T COSTS WITHOUT ANY MARK-UP THEREON AND THIS COST IS RECOVERED FROM OTH ER BENEFICIARY COMPANIES OF THE GROUP. THUS, THE REMITTANCE TOWARDS COST OF SERVICES SO ALLOCATED AND ATTRIBUTABLE TO THE ASSESSEE COMPRISES OF ACTUAL CO STS ALONE WITH NO ELEMENT OF PROFIT THEREON. THUS, IN ESSENCE, SINGAPORE CO.-TTP L HAS MERELY POOLED THE 11 ITA NO.1171/PN/2013 GROUP COSTS TO BE RECHARGED AND ALLOCATED TO VARIOU S INCAT ENTITIES. IN PURSUANCE OF THE AFORESAID ARRANGEMENT, THE TTPL RA ISED INVOICE OF USD 250,642/- ON ASSESSEE AND THE ASSESSEE PAID THE SAI D INVOICE ON 15 TH MAY, 2008. 8.2 THE LD. AR NEXT ASSERTED THAT IN VIEW OF SECTIO N 90(2) OF THE ACT, THE ASSESSEE IS ENTITLED TO ASCERTAIN THE LIABILITY FOR WITHHOLDING TAXES AS PER PROVISIONS OF DTAA ENTERED INTO BY INDIA SINGAPOR E ENTITY BEING MORE BENEFICIAL TO THE ASSESSEE IN THE INSTANT CASE. HE CONTENDED THAT THE AFORESAID PAYMENT TO SINGAPORE ENTITY IN CONSIDERATION OF SER VICES DO NOT MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE, EXPERIENCE, SKI LL ETC. PER SE SO AS TO ENABLE THE ASSESSEE TO APPLY THE TECHNOLOGY CONTAINED THER EIN. HENCE, THE PAYMENT MADE UNDER THE GROUP RECHARGE AGREEMENT WOULD NOT Q UALIFY AS FTS UNDER THE TREATY. 8.3 THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE DISCREDITED THE PREMISE ADOPTED BY THE ASSESSING OFFICER IN UNDERST ANDING THE MEANING OF EXPRESSION MAKE AVAILABLE WITH REFERENCE TO GENER AL DICTIONARY OR OTHER ENACTMENTS AND IN RESORTING TO GOOGLE SEARCH ON THE SUBJECT. HE ADVERTED OUR ATTENTION TO THE DECISION OF APEX COURT IN THE CASE OF STATE OF ORISSA & OTHER VS. TITAGHUR PAPER MILLS COMPANY, 1985 AIR 1293 (SC ) WHEREIN THE HONBLE SUPREME COURT HAS OBSERVED AS UNDER :- IT IS NOW WELL SETTLED THAT THE DICTIONARY MEANING OF A WORD CANNOT BE LOOKED AT WHERE THAT WORD HAS BEEN STATUTORILY DEFINED OR JUD ICIALLY INTERPRETED BUT WHERE THERE IS NO SUCH DEFINITION OR INTERPRETATION, THE COURT MAY TAKE THE AID OF DICTIONARIES TO ASCERTAIN THE MEANING OF A WORD IN COMMON 1 PARLANCE. 8.4 HE THEREAFTER CONTENDED THAT THE EXPRESSION MA KE AVAILABLE HAS BEEN SUBJECTED TO JUDICIAL SCRUTINY ON VARIOUS OCCASIONS . HE RELIED UPON THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL I N THE CASE OF SANDVIK AUSTRALIA PTY. LTD. VS. DDIT (2013) 31 TAXMANN.COM 256 (PUNE TRIB.) TO SUBMIT THAT PAYMENT IN CONSIDERATION WOULD BE REGAR DED AS FEE FOR TECHNICAL SERVICES ONLY IF TWIN TESTS OF RENDERING SERVICES AS WELL AS MAKING TECHNICAL KNOWLEDGE AVAILABLE AT THE SAME TIME IS SATISFIED W HICH IT IS NOT SHOWN IN THE 12 ITA NO.1171/PN/2013 PRESENT CASE. REFERENCE WAS ALSO MADE TO THE DECIS ION OF ITAT, MUMBAI IN THE CASE OF RAYMOND LIMITED VS. CIT, (2003) 86 ITD 791 TO UNDERSTAND THE EXPRESSION MAKE AVAILABLE USED IN THE TREATY. IN THE INSTANT CASE, SINGAPORE ENTITY HAS ONLY RE-CHARGED THE GROUP COSTS FOR THE SERVICES PROVIDED BY THE INCAT COMPANIES WHERE THE TECHNICAL KNOWLEDGE, EXPE RIENCE, SKILL, KNOW- HOW OR PROCESSES, ETC. EMBEDDED IN RENDERING SUCH T ECHNICAL SERVICES WERE NOT MADE AVAILABLE TO THE ASSESSEE IN CONSIDERATION OF THE IMPUGNED PAYMENTS. HE THUS SUBMITTED THAT THE PROVISIONS OF DTAA WOULD PR EVAIL OVER S. 9(1)(VII) OF THE ACT CONCERNING TAXABILITY OF FTS. ARTICLE 12 GO VERNING SCOPE AND AMBIT OF FEE FOR TECHNICAL SERVICE DOES NOT INCLUDE A SITU ATION WHERE SERVICES WERE RENDERED WITHOUT TECHNICAL KNOWLEDGE ETC. BEING MAD E AVAILABLE TO THE RECIPIENT OF SERVICE. THEREFORE, THE IMPUGNED REMIT TANCE DOES NOT FALL WITHIN THE DEFINITION OF FEE FOR TECHNICAL SERVICES UNDE R THE BENEFICIAL TREATY AND AS A COROLLARY, THE REMITTANCE (FTS) IS NOT CHARGEABLE T O TAX IN INDIA . 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. IN THE PRESENT APPEAL, THE ASSESSEE HAS DENIED TAXABILITY OF PAYME NT MADE BY IT TO A SINGAPORE ENTITY UNDER THE INCOME-TAX ACT AS WELL AS THE DTAA . AS A SEQUEL THERETO, THE ASSESSEE HAS DENIED ITS OBLIGATIONS TO DEDUCT WITHH OLDING TAX UNDER SECTION 195(1) OF THE ACT. THE ASSESSEE DURING THE RELEVANT YEAR HAS MADE A REMITTANCE OF RS.1,04,24,399/- TO THE CREDIT OF SINGAPORE ENTI TY NAMELY TTPL TOWARDS GROUP COSTS RECHARGE FOR AVAILING PURPORTED TECHN ICAL SERVICES. THE ASSESSEE HAS MADE THE REMITTANCE WITHOUT DEDUCTING WITHHOLDI NG TAX CONTEMPLATED @ 10% THEREON AS CONTEMPLATED UNDER ARTICLE 12 OF DTA A READ WITH S. 115A OF THE ACT. IN CONSEQUENCE, THE ASSESSING OFFICER HAS DECLARED THE ASSESSEE AS ASSESSEE IN DEFAULT UNDER SECTION 201(1)/201(1A) OF THE ACT. 9.1 WITHOUT INTENDING TO REPEAT THE FACTS ALREADY N ARRATED ABOVE, THE PERTINENT CASE OF THE ASSESSEE IN SHORT IS THAT IN TERMS OF GROUP COSTS RECHARGE AGREEMENT TIED UP WITH SINGAPORE ENTITY AND OTHER INCAT ENTITIES, THE ASSESSEE CLAIMS TO HAVE MADE REIMBURSEMENT OF EXPEN SES ALLOCATED TOWARDS ITS SHARE OF GROUP COSTS FOR AVAILING GROUP SERVICES. SUCH REIMBURSEMENT IS NOT 13 ITA NO.1171/PN/2013 CHARGEABLE TO TAX UNDER SECTION 195 OF THE ACT. IT IS ALSO THE CASE OF THE ASSESSEE THAT THE AFORESAID GROUP COSTS RECHARGE PA YABLE TO THE SINGAPORE ENTITY CANNOT BE CONSTRUED AS FEE FOR TECHNICAL SERVICES (FTS) IN VIEW OF ARTICLE 12 OF THE INDIA SINGAPORE TREATY AS THE SERVICES OBT AINED BY THE ASSESSEE DO NOT COME WITHIN THE AMBIT OF EXPRESSION MAKE AVAILABLE WHICH IS A SIN QUA NON TO BRACKET IT WITHIN THE AMBIT OF FTS UNDER TREATY. TH E CIT(A) OBSERVED THAT UNDER THE NORMAL PROVISIONS OF THE INCOME-TAX ACT, THE SERVICES AVAILED BY THE ASSESSEE ARE IN THE NATURE OF MANAGERIAL OR CONSULT ANCY SERVICES AS PER EXPLANATION TO SECTION 9(1)(VII) OF THE INCOME-TAX ACT. ACCORDINGLY, THE PAYMENT WOULD BE CONSIDERED AS TAXABLE UNDER SECTIO N 9(1)(VII) AS PER DOMESTIC TAX LAW. HOWEVER, IN THE SAME VAIN, THE C IT(A) CONCLUDED IN FAVOUR OF THE ASSESSEE ON THE TOUCHSTONE OF ARTICLE 12 OF THE DTAA BETWEEN INDIA SINGAPORE. THE CIT(A) RETURNED A FINDING TO THE EFF ECT THAT THE ASSESSEE HAS NOT ACQUIRED ANY TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL ETC. PER SE FOR ITS OWN FUTURE USE OR BENEFIT WITHOUT TAKING RECOURSE TO TH E SERVICE PROVIDER. THEREFORE THE SINGAPORE ENTITY HAS NOT MADE AVAILABLE ANY TEC HNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HOW, ETC. WHICH WOULD ENABL E THE ASSESSEE ACQUIRING THE SERVICES TO APPLY THE TECHNOLOGY CONTAINED THER EIN. 9.2 WE SHALL DELINEATE THE FIRST PLANK OF ARGUMENT ON BEHALF OF THE ASSESSEE THAT THE PAYMENT IS IN THE NATURE OF REIMBURSEMENT AND THEREFORE NOT CHARGEABLE TO TAX. WE FIND THAT THE STAND OF THE A SSESSEE THAT THE PAYMENT TO SINGAPORE ENTITY IS MERELY IN THE NATURE OF REIMBUR SEMENT OF GROUP COSTS ALLOCATED TO IT AND OTHER BENEFICIARIES OF SERVICES WITHOUT ANY MARK-UP I.E. WITHOUT ANY ELEMENT OF PROFIT EMBEDDED IN SUCH REIM BURSEMENT HAS REMAINED UN-CONTROVERTED. THE CONTENTION OF THE ASSESSEE THA T TTPL HAS MERELY ADMINISTERED THE COSTS RECHARGE MECHANISM AND HAS M ERELY POOLED THE GROUP COSTS TO BE RE-CHARGED TO INCAT ENTITIES WITHOUT AN Y MARK-UP IN THE GROUP COSTS HAS NOT BEEN DISCREDITED BY THE ASSESSING OFF ICER WHILE ADDRESSING THE POINT AS CAN BE SEEN FROM PARA 12.3 OF THE ORDER UN DER SECTION 201(1) OF THE ACT. IN PARA 12.10 OF ITS ORDER, THE ASSESSING OFFI CER HAS ONLY QUESTIONED THE BASIS OF ALLOCATION WHICH IS QUA THE ECONOMIC BENEFIT OF SUCH EXPENSES. THE 14 ITA NO.1171/PN/2013 CIT(A) HAS ALSO NOT DISPUTED THE CASE OF THE ASSESS EE THAT IN REALITY NO SERVICES WERE RENDERED BY THE SINGAPORE COMPANY, WHICH HAS M ERELY ACTED AS A CONDUIT TO RECOVER GROUP COSTS AS AN AGENT FOR ALL OTHER SE RVICES PROVIDER ENTITIES. THE CIT(A) BRUSHED ASIDE THIS ASPECT OF THE ARGUMENT OF THE ASSESSEE MERELY ON THE GROUND THAT THE ASSESSEE HAS PAID TO THE SINGAPORE ENTITY AGAINST CERTAIN SERVICES AVAILED. THE CIT(A) TOOK THE ISSUE TO A DI FFERENT TANGENT AND OBSERVED THAT IT DOES NOT MAKE A DIFFERENCE THAT SERVICES WE RE ONLY RENDERED BY THE SOME OTHER ENTITIES BY VIRTUE OF AN AGREEMENT AND THE PA YMENTS WERE ROUTED THROUGH SINGAPORE ENTITIES. BE THAT IT MAY, WE ARE OF THE O PINION THAT IN THE ABSENCE OF QUID PRO QUO FOR THE COSTS INCURRED BY A GIVEN INCAT ENTITY, IT IS THE MERE REIMBURSEMENT OF EXPENSES. AS A COROLLARY, ON THE F ACE OF THE AFORESAID STAND OF THE ASSESSEE THAT PAYMENT IS IN THE NATURE OF RE IMBURSEMENT WITH SERVICE PROVIDERS NOT MAKING PROFITS BUT MERELY RECOUPING T HEIR COSTS THOUGH SINGAPORE CO. WHICH REMAINS UNCONTROVERTED, WE ARE OF THE VIEW THAT S. 195 IS RENDERED A NON STARTER AND THUS LIABILITY TO DEDUCT TAX CANNOT BE FASTENED ON THE PAYER ASSESSEE. IT WOULD BE PERTINENT TO MAKE REFE RENCE TO SECTION 195 HERE WHICH CASTS OBLIGATION ON THE PERSON RESPONSIBLE FO R MAKING PAYMENT TO NON- RESIDENT / FOREIGN ENTITY TO DEDUCT INCOME-TAX ON T HE AMOUNT OF REMITTANCE PROVIDED SUCH SUM IS CHARGEABLE UNDER THE PROVISIONS OF THE ACT. THE RELEVANT EXPRESSION ANY OTHER SUM CHARGEABLE UNDER THE PROV ISIONS OF THIS ACT EMPLOYED IN S. 195 REQUIRES TO BE NOTICED. IN VIEW OF THE AFORESAID EXPRESSION SET-OUT, SECTION 195 WOULD APPLY ONLY IF AN ELEMENT OF INCOME, HOWSOEVER MINISCULE IT MAY, IS EMBEDDED IN THE IMPUGNED TRANS ACTION. DECISION OF THE APEX COURT IN THE CASE OF TRANSMISSION CORPORATION (1999) 239 ITR 587(SC) RELIED UPON LD. AR PROVIDES LEGAL AUTHORITY FOR THI S PROPOSITION. YET ANOTHER DECISION IN THE CASE OF CIT VS. DUNLOP RUBBER CO. L TD. 10 TAXMAN 179 (CAL.) RELIED ON BEHALF OF THE ASSESSEE ECHOES SIMILAR VIE W THAT MERE SHARING OF EXPENSES TOGETHER WITH OTHER ENTITIES WOULD NOT GIV E RISE TO ANY INCOME PER SE IN THE HANDS OF RECIPIENT. WE ALSO NOTICE THAT GOA BENCH OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SERA RESOURCES LTD. VS. D CIT TAX APPEAL NO.11 OF 2016, ORDER DATED 07.03.2016 HAS RESTATED THE PO SITION OF LAW THAT BEFORE EFFECTING DEDUCTION AT SOURCE ONE OF THE ASPECTS TO BE EXAMINED IS WHETHER 15 ITA NO.1171/PN/2013 SUCH INCOME IS TAXABLE IN TERMS OF INCOME TAX ACT. IN CONSEQUENCE, REIMBURSEMENT OF COSTS SIMPLICITOR WITHOUT ANY ELEM ENT OF PROFITS EMBEDDED THEREIN CANNOT BE SAID TO BE A SUM CHARGEABLE UNDER THE PROVISIONS OF THE INCOME-TAX ACT. IN THE LIGHT OF ABOVE DISCUSSION, W E ARE OF THE CONSIDERED VIEW THAT MERE ALLOCATION OF GROUP CHARGE ON THE BA SIS OF CERTAIN KEY RATIOS OR SOME OTHER BASIS WILL NOT VITIATE THE FACT THAT IT IS MERE REIMBURSEMENT OF ACTUAL EXPENDITURE BY VARIOUS GROUP ENTITIES TOWARDS GROUP COSTS. AS OBSERVED, THE INCAT ENTITIES WHO HAVE RENDERED GROUP SERVICES AND COLLECTED THE SAME THROUGH SINGAPORE COMPANY HAS NOT MADE ANY RESULTAN T PROFIT AGAINST COST INCURRED AND WERE MERELY REIMBURSED TOWARDS THE COS T ALBEIT IN A DIFFERENT PROPORTION BY VARIOUS GROUP ENTITIES BASED ON PARAM ETERS FIXED IN THE GROUP COST RECHARGE AGREEMENT. ON THIS PREMISE, IN THE A BSENCE OF ITS CHARGEABILITY IN THE HANDS OF RECIPIENTS, WE ARE OF THE VIEW THAT SE CTION 195 OF THE ACT DOES NOT COME INTO PLAY AT ALL. 10. THERE IS ANOTHER ASPECT RAISED BY THE ASSESSEE WHICH IS ARGUED IN GREAT LENGTH. THE ASSESSEE HAS TAKEN A PLEA THAT IN VIEW OF THE BENEFICIAL OF PROVISIONS OF DTAA, THE IMPUGNED PAYMENT TO SINGAPO RE ENTITY DOES NOT FALL WITHIN THE SCOPE AND AMBIT OF FEE FOR TECHNICAL SE RVICES. 10.1 FOR CONSIDERING THE TAXABILITY UNDER DTAA, IT IS PERTINENT TO PERUSE RELEVANT ARTICLE 12 OF INDIA SINGAPORE TREATY WHI CH IS REPRODUCED HEREUNDER FOR READY REFERENCE:- ARTICLE 12: ROYALTIES AND FEES FOR TECHNICAL SERV ICES 1. ROYALTIES AND FEES FOR TECHNICAL SERVICES ARISIN G IN A CONTRACTING STATE AND PAID TO A RESIDENT OF THE OTHER CONTRACTING STATE M AY BE TAXED IN THAT OTHER STATE. 2. HOWEVER, SUCH ROYALTIES AND FEES FOR TECHNICAL S ERVICES MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH THEY ARISE AND ACCOR DING TO THE LAWS OF THAT CONTRACTING STATE, BUT IF THE RECIPIENT IS THE BENE FICIAL OWNER OF THE ROYALTIES OR FEES FOR TECHNICAL SERVICES, THE TAX SO CHARGED SHALL NO T EXCEED 10 PER CENT. 3. THE TERM 'ROYALTIES' AS USED IN THIS ARTICLE MEA NS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE: 16 ITA NO.1171/PN/2013 (A) ANY COPYRIGHT OF A LITERARY, ARTISTIC OR SCIENT IFIC WORK, INCLUDING CINEMATOGRAPH FILM OR FILMS OR TAPES USED FOR RADIO OR TELEVISION BROADCASTING, ANY PATENT, TRADE MARK, DESIGN OR MOD EL, PLAN, SECRET FORMULA OR PROCESS, OR FOR INFORMATION CONCERNING INDUSTRIA L, COMMERCIAL OR SCIENTIFIC EXPERIENCE, INCLUDING GAINS DERIVED FROM THE ALIENATION OF ANY SUCH RIGHT, PROPERTY OR INFORMATION; (B) ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPM ENT, OTHER THAN PAYMENTS DERIVED BY AN ENTERPRISE FROM ACTIVITIES D ESCRIBED IN PARAGRAPH 4(B) OR 4(C) OF ARTICLE 8. 4. THE TERM 'FEES FOR TECHNICAL SERVICES' AS USED I N THIS ARTICLE MEANS PAYMENTS OF ANY KIND TO ANY PERSON IN CONSIDERATION FOR SERV ICES OF A MANAGERIAL, TECHNICAL OR CONSULTANCY NATURE (INCLUDING THE PROVISION OF SUCH SERVICES THROUGH TECHNICAL OR OTHER PERSONNEL) IF SUCH SERVICES: (A) ARE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF THE RIGHT, PROPERTY OR INFORMATION FOR WHICH A PAYMENT DESCRIBED IN PARAGRAPH 3 IS RECEIVED; OR (B) MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HOW O R PROCESSES, WHICH ENABLES THE PERSON ACQUIRING THE S ERVICES TO APPLY THE TECHNOLOGY CONTAINED THEREIN; OR (C) CONSIST OF THE DEVELOPMENT AND TRANSFER OF A TE CHNICAL PLAN OR TECHNICAL DESIGN, BUT EXCLUDES ANY SERVICE THAT DOE S NOT ENABLE THE PERSON ACQUIRING THE SERVICE TO APPLY THE TECHNOLOGY CONTA INED THEREIN. FOR THE PURPOSES OF (B) AND (C) ABOVE, THE PERSON A CQUIRING THE SERVICE SHALL BE DEEMED TO INCLUDE AN AGENT, NOMINEE, OR TRANSFER EE OF SUCH PERSON. 5. NOTWITHSTANDING PARAGRAPH 4, 'FEES FOR TECHNICAL SERVICES' DOES NOT INCLUDE PAYMENTS: (A) FOR SERVICES THAT ARE ANCILLARY AND SUBSIDIARY , AS WELL AS INEXTRICABLY AND ESSENTIALLY LINKED, TO THE SALE OF PROPERTY OTH ER THAN A SALE DESCRIBED IN PARAGRAPH 3(A); (B) FOR SERVICES THAT ARE ANCILLARY AND SUBSIDIARY TO THE RENTAL OF SHIPS, AIRCRAFT, CONTAINERS OR OTHER EQUIPMENT USED IN CON NECTION WITH THE OPERATION OF SHIPS OR AIRCRAFT IN INTERNATIONAL TRAFFIC; (C) FOR TEACHING IN OR BY EDUCATIONAL INSTITUTIONS ; (D) FOR SERVICES FOR THE PERSONAL USE OF THE INDIV IDUAL OR INDIVIDUALS MAKING THE PAYMENT; (E) TO AN EMPLOYEE OF THE PERSON MAKING THE PAYMEN TS OR TO ANY INDIVIDUAL OR FIRM OF INDIVIDUALS (OTHER THAN A COM PANY) FOR PROFESSIONAL SERVICES AS DEFINED IN ARTICLE 14; 17 ITA NO.1171/PN/2013 (E) FOR SERVICES RENDERED IN CONNECTION WITH AN IN STALLATION OR STRUCTURE USED FOR THE EXPLORATION OR EXPLOITATION OF NATURAL RESOURCES REFERRED TO IN PARAGRAPH 2(J) OF ARTICLE 5; (G) FOR SERVICES REFERRED TO IN PARAGRAPHS 4 AND 5 OF ARTICLE 5. 6. THE PROVISIONS OF PARAGRAPHS 1 AND 2 SHALL NOT A PPLY IF THE BENEFICIAL OWNER OF THE ROYALTIES OR FEES FOR TECHNICAL SERVICES, BE ING A RESIDENT OF A CONTRACTING STATE, CARRIES ON BUSINESS IN THE OTHER CONTRACTING STATE IN WHICH THE ROYALTIES OR FEES FOR TECHNICAL SERVICES ARISE, THROUGH A PERMANENT ESTAB LISHMENT SITUATED THEREIN, OR PERFORMS IN THAT OTHER STATE INDEPENDENT PERSONAL S ERVICES FROM A FIXED BASE SITUATED THEREIN, AND THE RIGHT, PROPERTY OR CONTRACT IN RES PECT OF WHICH THE ROYALTIES OR FEES FOR TECHNICAL SERVICES ARE PAID IS EFFECTIVELY CONN ECTED WITH SUCH PERMANENT ESTABLISHMENT OR FIXED BASE. IN SUCH CASE, THE PROV ISIONS OF ARTICLE 7 OR ARTICLE 14, AS THE CASE MAY BE, SHALL APPLY. 7. ROYALTIES AND FEES FOR TECHNICAL SERVICES SHALL BE DEEMED TO ARISE IN A CONTRACTING STATE WHEN THE PAYER IS THAT STATE IT SELF, A POLITICAL SUB-DIVISION, A LOCAL AUTHORITY, A STATUTORY BODY OR A RESIDENT OF THAT STATE. WHERE, HOWEVER, THE PERSON PAYING THE ROYALTIES OR FEES FOR TECHNICAL S ERVICES, WHETHER HE IS A RESIDENT OF A CONTRACTING STATE OR NOT, HAS IN A CONTRACTING ST ATE A PERMANENT ESTABLISHMENT OR A FIXED BASE IN CONNECTION WITH WHICH THE LIABILITY TO PAY THE ROYALTIES OR FEES FOR TECHNICAL SERVICES WAS INCURRED, AND SUCH ROYALTIES OR FEES FOR TECHNICAL SERVICES ARE BORNE BY SUCH PERMANENT ESTABLISHMENT OR FIXED BASE , THEN SUCH ROYALTIES OR FEES FOR TECHNICAL SERVICES SHALL BE DEEMED TO ARISE IN THE STATE IN WHICH THE PERMANENT ESTABLISHMENT OR FIXED BASE IS SITUATED. 8. WHERE, BY REASON OF A SPECIAL RELATIONSHIP BETWE EN THE PAYER AND THE BENEFICIAL OWNER OR BETWEEN BOTH OF THEM AND SOME O THER PERSON, THE AMOUNT OF ROYALTIES OR FEES FOR TECHNICAL SERVICES PAID EXCEE DS THE AMOUNT WHICH WOULD HAVE BEEN PAID IN THE ABSENCE OF SUCH RELATIONSHIP, THE PROVISIONS OF THIS ARTICLE SHALL APPLY ONLY TO THE LAST-MENTIONED AMOUNT. IN SUCH CA SE, THE EXCESS PART OF THE PAYMENTS SHALL REMAIN TAXABLE ACCORDING TO THE LAWS OF EACH CONTRACTING STATE, DUE REGARD BEING HAD TO THE OTHER PROVISIONS OF THIS AG REEMENT. [ UNDERLINE IS OURS] 10.2 PERUSAL OF THE ARTICLE 12(4)(B) INTER ALIA WOULD SHOW THAT IN VIEW OF THE AFORESAID EXCLUSION PROVIDED, PAYMENT CANNOT BE TAX ED AS TTPL HAS NOT MADE AVAILABLE ANY TECHNICAL KNOWLEDGE, EXPERIENCE, SKI LL, KNOW-HOW, ETC. WHICH WOULD ENABLE THE ASSESSEE ACQUIRING THE SERVICES TO APPLY THE TECHNOLOGY CONTAINED THEREIN. THE ASSESSEE HAS QUOTED VARIOUS DECISIONS OF THE DIFFERENT BENCHES, WHICH HAVE CONSISTENTLY HELD THAT MERELY B ECAUSE THE PROVISION OF SERVICE REQUIRES TECHNICAL INPUT BY THE PERSON PROV IDING THE SERVICE DOES NOT PER SE MEAN THAT TECHNICAL KNOWLEDGE, SKILLS, ETC. WERE MADE AVAILABLE. THE EXPRESSION MAKE AVAILABLE IS USED IN THE SENSE TH AT ONE PERSON SUPPLYING OR 18 ITA NO.1171/PN/2013 TRANSFERRING TECHNICAL KNOWLEDGE OR TECHNOLOGY TO T HE RECIPIENT OF SERVICE. FURTHER, SERVICE RECIPIENT SHOULD BE ABLE TO MAKE U SE OF TECHNICAL KNOWLEDGE, SKILL, ETC. BY HIMSELF IN HIS BUSINESS OR FOR HIS O WN BENEFIT WITHOUT TAKING RECOURSE TO THE PERFORMER OF THE SERVICES IN FUTURE . TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, ETC. MUST REMAINS WITH THE PERSO N USING THE SERVICE EVEN AFTER RENDERING OF SERVICES HAS COME TO AN END. SUCH IS NOT THE CASE HERE. THE ASSESSEE HAS ADMITTEDLY NOT ACQUIRED ANY SUCH TECHN ICAL INPUTS FOR ITS OWN USE FROM THE TTPL. THUS, PAYMENT UNDER GROUP RECHARGE A GREEMENT TO SINGAPORE ENTITY CANNOT BE TAXED UNDER THE ARTICLE 12 OF INDI A SINGAPORE DTAA. 11. TO CONCLUDE, WE ARE OF THE CONSIDERED VIEW THAT THE IMPUGNED SERVICES RENDERED BY INCAT GROUP COMPANIES FOR WHICH THE PAY MENT WAS COLLECTED BY SINGAPORE ENTITY THROUGH COST RECHARGE MECHANISM IS NOT ASSESSABLE AS FEE FOR TECHNICAL SERVICES UNDER ARTICLE 12 OF INDIA SIN GAPORE DTAA WHEN IT DOES NOT MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE, SKILL , EXPERIENCE, ETC. TO FIT INTO TERMINOLOGY MAKE AVAILABLE, THE TECHNICAL KN OWLEDGE, SKILL, ETC. MUST REMAIN WITH THE PERSON RECEIVING THE SERVICES EVEN AFTER THE PARTICULAR CONTRACT COMES TO AN END. THE TECHNICAL MANAGERIAL SERVICES ETC. OFFERED MAY BE THE PRODUCT OF TECHNOLOGY AND TECHNICAL KNOWLEDGE, EXPE RIENCE OF THE SERVICE PROVIDER WOULD HAVE GONE INTO IT BUT THIS IS NOT EN OUGH TO FALL WITHIN THE DESCRIPTION OF SERVICES WHICH MAKE AVAILABLE TO T ECHNICAL KNOWLEDGE, ETC.. THE TECHNICAL KNOWLEDGE OR SKILLS OF THE PROVIDER S HOULD BE IMPARTED TO AND ABSORBED BY THE RECEIVER OF SERVICE SO THAT THE REC EIVER CAN DEPLOY THE SIMILAR TECHNOLOGY OR TECHNIQUES IN FUTURE WITHOUT DEPENDIN G UPON THE PROVIDER. THEREFORE, THE ASSESSEE STANDS EXONERATED FROM ITS OBLIGATION TO DEDUCT WITHHOLDING TAX IN VIEW OF NON-APPLICATION OF ARTIC LE 12 OF THE BENEFICIAL PROVISIONS OF DTAA. THE HONBLE SUPREME COURT IN T HE CASE OF UNION OF INDIA VS. AZADI BACHAO ANDOLAN (2003) 132 TAXMANN.C OM 173 (SC) RELIED UPON BY THE ASSESSEE HAS UPHELD THE PROPOSITION THA T THE PROVISIONS MADE UNDER THE DTAA WILL PREVAIL OVER THE GENERAL PROVISION CO NTAINED IN THE INCOME-TAX ACT TO THE EXTENT THAT THEY ARE BENEFICIAL TO THE A SSESSEE. WE ALSO REFER TO SECTION 90(2) WHICH PROVIDES THAT THE PROVISIONS OF DTAA WOULD OVERRIDE THE 19 ITA NO.1171/PN/2013 PROVISIONS OF DOMESTIC ACT IN CASES WHERE THE PROVI SIONS OF DTAA ARE MORE BENEFICIAL TO THE ASSESSEE. THEREFORE, WE FIND THA T THE ASSESSEE WAS NOT UNDER ANY LEGAL OBLIGATION TO DEDUCT WITHHOLDING TAX ON T HE IMPUGNED REMITTANCE. THEREFORE, WE DECLINE TO INTERFERE WITH THE ORDER O F THE CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED ON THIS 30 TH DAY OF MARCH, 2016. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER # / ACCOUNTANT MEMBER PUNE ; DATED : 30 TH MARCH, 2016. % & '() *)' / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-IT/TP, PUNE; 4) THE CIT-IT/TP, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. %+ / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE