Soregam SA, Gurgaon V. DDIT, New Delhi

ITA 123/DEL/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0545 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 07-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G K DHALL INTL
• Keywords: Double taxation relief; Advance ruling
• Section: 271(1)(c); 143(3)

Judgement Text

1 ITA NO. 123/DEL/2015 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEM BER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER ITA NO. 123/DEL/2015 ( A.Y 2011-12) SOREGAM SA C/O. DELOITTE HASKINS AND SELLS LLP, 7 TH FLOOR, BUILDING NO. 10 TOWER B, DLF CYBER CITY COMPLEX, DLF CITY PHASE-II GURGAON AAOCS3856K (APPELLANT) VS DDIT CIRCLE-3(2) INTL. TAXATION, BLOCK-E2, CIVIL CENTRE, JLN MARG NEW DELHI (RESPONDENT) APPELLANT BY SH. VISHAL KALRA, CA RESPONDENT BY SH. G. K. DHALL, CIT(DR) INTL. ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 27/10/2014 PASSED BY THE ASSESSING OFFICER U/S 144C(3) READ W ITH SECTION 143(3) OF THE INCOME TAX ACT, 1961 FOR ASSESSMENT YEAR 2011-12. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- APPEAL AGAINST THE ORDER UNDER SECTION 143(3) READ WITH SECTION 144C(13) OF THE INCOME-TAX ACT, 1961 (THE ACT) DATED 27 OC TOBER 2014 FOR THE ASSESSMENT YEAR 2011-2012 PASSED BY THE DEPUTY DIRE CTOR OF INCOME TAX, CIRCLE 3(2), INTL. TAXATION, NEW DELHI DATE OF HEARING 04.09.2018 DATE OF PRONOUNCEMENT 30.11.2018 2 ITA NO. 123/DEL/2015 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED BY THE ASSESSING OFFICER (AO') IS BAD IN LAW AS WELL AS IN FACTS. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/ DISPUTE RESOLUTION PANEL ('DRP) HAS ERRED IN H OLDING THAT THE IT SERVICES PROVIDED/RENDERED BY THE APPELLANT QUALIFY AS FEES FOR TECHNICAL SERVICES AS PER THE INDIA - BELGIUM TAX TREATY (REA D WITH INDIA-PORTUGAL TAX TREATY), SINCE SUCH SERVICES FALL WITHIN THE MEANIN G OF MAKE-AVAILABLE PRESCRIBED IN THE TAX TREATY. 3. THAT THE AO/ DRP DID NOT DISCUSS IN DETAIL AS TO HOW THE GROUP IT SERVICES RENDERED BY THE APPELLANT FROM BELGIUM QUA LIFY THE TEST OF MAKE- AVAILABLE UNDER THE TAX TREATY. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO HAS ERRED IN HOLDING THE ENTIRE INCOME EARNED BY TH E ASSESSEE AS TAXABLE IN INDIA, THEREBY DENYING THE REFUND CLAIMED. 5. THAT WITHOUT ANY PREJUDICED TO ABOVE, WHILE C ALCULATING THE DEMAND, THE A.O HAS ERRED IN APPLY THE SURCHARGE AN D CESS ON THE GROSS TREATY RATE OF 10% APPLICABLE ON FEES FOR TECHNICAL SERVICES. 6. THAT WITHOUT ANY PREJUDICE TO ABOVE, THE AO HAS ERRED IN COMPUTING INTEREST UNDER SECTION 234A THE ACT. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , DRP HAS ERRED IN NOT EXAMINING THE VALIDITY OF SUCH INITIATION OF PE NALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 3. THE LD. AR SUBMITTED THAT THERE IS DELAY OF 2 DA YS IN FILING OF THE PRESENT APPEAL. THE LD. AR SUBMITTED THAT ALL THE DIRECTORS OF THE ASSESSEE COMPANY ARE RESIDENT OF BELGIUM AND THE DIRECTORS AUTHORIZE D TO SIGN AND VERIFY THE 3 ITA NO. 123/DEL/2015 APPEAL WERE TRAVELLING OUT OF BELGIUM FOR OFFICIAL WORK, THEREFORE, THERE IS DELAY OF 2 DAYS IN FILING THE PRESENT APPEAL. THE DIRECTO R OF THE ASSESSEE COMPANY HAS FILED AFFIDAVIT ALONG WITH THE APPLICATION FOR CONDONATION OF DELAY. WE HAVE GONE THROUGH THE APPLICATION ALONG WITH THE AFFIDAV IT. THE DELAY IS CONDONED AS THE REASON FOR DELAY IS EXPLAINED BY THE ASSESSEE C OMPANY. 4. ASSESSEE FILED ITS RETURN OF INCOME ON 20-03-201 3 DECLARING NIL INCOME. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) WAS ISSUED ON 12-08-2013 AND WAS DULY SERVED ON ASSESSEE. IN R ESPONSE TO NOTICES AND QUESTIONNAIRE, C.A. AND COUNSEL APPEARED AND SUBMIT TED DETAILS, INFORMATION AND EXPLANATIONS. SOREGAM SA IS A TAX RESIDENT OF B ELGIUM. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING INF ORMATION TECHNOLOGY SUPPORT SERVICES TO VARIOUS GROUP ENTITIES. IN INDI A, IT RENDERED SUCH SERVICES TO MAGOTTEAUX INDUSTRIES PRIVATE LIMITED (MIPL). TH E ASSESSEE FILED RETURN OF INCOME IN INDIA DECLARING NIL TAXABLE INCOME AND TH E AMOUNT OF THE TAX WITHHELD BY MIPL WAS CLAIMED AS REFUND IN THE RETUR N OF INCOME. IN ITS REPLY DATED 06.11.2013, APART FROM OTHER SUBMISSIONS, THE ASSESSEE PROVIDED COPIES OF THE COMPUTATION OF INCOME ALONGWITH THE NOTES ON SUCH COMPUTATION AS ANNEXURE II OF THE REPLY . THE ASSESSEE DID NOT OFFER ANY INCOME FOR TAX IN I NDIA AND THE WHOLE OF THE AMOUNT OF RS. 1,78,10,591/- WA S CLAIMED AS EXEMPT ON ACCOUNT OF THE DIFFERENT PROVISIONS OF THE INDIA BE LGIUM TAX TREATY. INFORMATION WAS GIVEN BY THE ASSESSEE IN ITS REPLY DATED 06.11.2013, THE DETAILS OF THE TRANSACTIONS WITH FELLOW SUBSIDIARIE S WERE PROVIDED. IN REPLY, THE ASSESSEE DISCLOSED RECEIPT OF RS. 1,78,10,591/- FRO M MIPL AS IT SUPPORT SERVICES REMITTANCES. THIS AMOUNT WAS RECEIVED BY T HE ASSESSEE FOR RENDERING INFORMATION TECHNOLOGY SERVICES UNDER SERVICE AGREE MENT WITH MAGOTTEAUX INDUSTRIES PVT. LTD. A COPY OF THIS SERVICE AGREEME NT WAS PROVIDED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. THE DRAFT ASS ESSMENT ORDER WAS PASSED ON 12.02.2014 WHEREIN THE ASSESSING OFFICER TREATED ENTIRE INCOME RECEIVED BY THE ASSESSEE COMPANY AS TAXABLE IN INDIA AS FEES FO R TECHNICAL SERVICES (FTS). THE ASSESSEE FILED OBJECTIONS BEFORE THE DRP AND TH E DRP VIDE DIRECTIONS DATED 4 ITA NO. 123/DEL/2015 27.08.2014 DISMISSED THE OBJECTIONS. THE ASSESSING OFFICER MADE ADDITION ON FEES FOR TECHNICAL SERVICES IN RESPECT OF ROYALTY F OR RS.1,78,10,592/-. 5. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED PRESENT APPEAL. 6. THE LD. AR SUBMITTED THAT THE ASSESSEE COMPANY W AS INCORPORATED AND REGISTERED UNDER THE LAWS OF BELGIUM AND IS ENGAGED IN PROVIDING SUPPORT SERVICES TO ITS GROUP COMPANIES. DURING THE YEAR UN DER CONSIDERATION, THE ASSESSEE COMPANY PROVIDED INFORMATION TECHNOLOGY ( IT) SUPPORT SERVICES IN INDIA TO MAGOTTEAUX INDUSTRIES PRIVATE LIMITED (MI PL/AE). THE ASSESSEE COMPANY ENTERED INTO AN AGREEMENT DATED DECEMBER 3, 2008 WITH MIPL (EFFECTIVE FROM JANUARY 1, 2008) FOR RENDERING IT SUPPORT SERVICES. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE PRESENT ASSESSMENT YEAR ON MARCH 20, 2013 DECLARING NIL INCOME. THE CASE WAS S ELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE INCOME-TAX ACT, 1961 WAS ISSUED ON AUGUST 12, 2013. THE ASSESSING OFFICER PROPOSED AN ADDITIO N AMOUNTING TO INR 1,78,10,592 HOLDING THAT THE AMOUNT RECEIVED BY THE ASSESSEE COMPANY FROM ITS AE IN CONSIDERATION FOR PROVISION OF IT SUPPORT SERVICES IS IN THE NATURE OF FEE FOR TECHNICAL SERVICES (FTS) AND THEREFORE, T AXABLE IN INDIA IN VIEW OF THE ACT READ WITH THE INDIA-BELGIUM DOUBLE TAXATION AVO IDANCE AGREEMENT (DTAA). THE ASSESSEE COMPANY FILED OBJECTIONS IN FORM 35A AGAINST THE DRAFT ASSESSMENT ORDER BEFORE THE DISPUTE RESOLUTION PANE L (DRP) ON APRIL 3, 2014. THE DRP VIDE DIRECTIONS DATED AUGUST 27, 2014 HELD THAT IN VIEW OF THE PROTOCOL TO INDIA-BELGIUM DTAA, DEFINITION OF FTS AS GIVEN I N ARTICLE 12 OF INDIA- PORTUGAL SHALL APPLY. THE DRP FURTHER HELD THAT THE ASSESSEE COMPANY SATISFIES THE MAKE-AVAILABLE REQUIREMENT AND THEREFORE, THE AMOUNT RECEIVED IS TAXABLE AS FTS IN INDIA. THE ASSESSING OFFICER, PUR SUANT TO THE DIRECTIONS OF THE DRP, COMPLETED THE ASSESSMENT VIDE ORDER DATED OCTO BER 27, 2014 ASSESSING THE INCOME AT INR 1,78,10,592 AND DEMAND PAYABLE WA S DETERMINED AT INR 53,24,213. 5 ITA NO. 123/DEL/2015 7. THE LD. AR SUBMITTED THAT GROUND NO. 1 IS GENER AL IN NATURE. HENCE GROUND NO. 1 IS NOT ADJUDICATED UPON. 8. AS REGARDS TO GROUND NOS. 2, 3 & 4, THE LD. AR S UBMITTED THAT THE A.O/DRP ERRED IN HOLDING THAT IT SERVICES RENDERED QUALIFY AS FTS AS PER THE DTAA. THE LD. AR FURTHER SUBMITTED THAT THE AO/ DRP HELD THAT ASSESSEE COMPANY SATISFIES MAKE-AVAILABLE CONDITION UNDER INDIA- BELGIUM DTAA. THE ASSESSING OFFICER HELD THAT SERVICES PROVIDED B Y THE ASSESSEE COMPANY ARE IN THE NATURE OF IT SUPPORT SERVICES OR ROUTINE INF ORMATION TECHNOLOGY RELATED WORK WHICH IS NOT VERY COMPLEX/ HIGHLY TECHNICAL IN NATURE. FURTHER, THE ASSESSING OFFICER HELD THAT DURING THE COURSE OF PR OVISION OF THESE IT SUPPORT SERVICES, RECIPIENT BECOMES KNOWLEDGEABLE AS THERE IS AUTOMATIC TRANSFER OF TECHNICAL KNOWLEDGE/ EXPERIENCE. THE LD. AR SUBMITT ED THAT THE ASSESSING OFFICER FURTHER OBSERVED THAT THERE IS NO SPECIFIC REQUIREMENT OF TRAINING TO BE IMPART BY THE ASSESSEE COMPANY AND RELIED UPON THE AUTHORITY FOR ADVANCE RULINGS (AAR) IN CASE OF SHELL INDIA MARKETS PVT. LTD. [2012] 342 ITR 223 (AAR), AREVA T&D INDIA LTD. [2012] 346 ITR 456 (AAR ) AND MERSEN INDIA (P.) LTD. [2013] 353 ITR 628 (AAR). 9. THE LD. AR SUBMITTED THAT SECTION 90(2) OF THE A CT PROVIDES THAT THE PROVISIONS OF THE ACT OR THE DTAA, WHICHEVER IS BEN EFICIAL TO THE TAXPAYER SHALL APPLY. THE ASSESSEE COMPANY IS A TAX RESIDENT OF BE LGIUM AND THEREFORE, IS ENTITLED TO BE TAXED IN ACCORDANCE WITH THE PROVISI ONS OF THE INDIA- BELGIUM DTAA TO THE EXTENT THEY ARE MORE BENEFICIAL. THE TE RM FTS IS DEFINED UNDER ARTICLE 12(3)(B) OF THE INDIA-BELGIUM DTAA AND INCL UDES ALL KINDS OF PAYMENTS IN THE NATURE OF MANAGERIAL, TECHNICAL AND CONSULTA NCY. FURTHER, THE PROTOCOL TO THE INDIA-BELGIUM DTAA PROVIDES FOR TAXATION OF FTS IN ACCORDANCE WITH THE PROVISIONS OF DTAA BETWEEN INDIA AND A MEMBER OF OE CD ENTERED INTO AFTER JANUARY 1, 1990, WHERE SUCH PROVISIONS PROVIDE FOR A LOWER RATE OR RESTRICTIVE SCOPE OF TAXATION, COMMONLY KNOWN AS MOST FAVORED N ATION CLAUSE. IN THIS REGARD, THE LD. AR SUBMITTED THAT THE DTAA BETWEEN INDIA-PORTUGAL (AN OECD 6 ITA NO. 123/DEL/2015 MEMBER COUNTRY), ENTERED INTO ON APRIL 30, 2000, UN DER ARTICLE 12 PROVIDES FOR A RESTRICTED SCOPE FOR TAXATION OF AMOUNTS AS F TS BY LAYING DOWN THE MAKE- AVAILABLE CONDITION. THE LD. AR SUBMITTED THAT THE IT SUPPORT SERVICES RENDERED BY THE ASSESSEE COMPANY TO ITS AE MAY QUALIFY AS FT S ONLY IF THEY SATISFY THE MAKE AVAILABLE CONDITION. IN OTHER WORDS, THE AMOUN TS RECEIVED AS CONSIDERATION FOR PROVISION OF IT SUPPORT SERVICES MAY NOT BE TAXED UNDER ARTICLE 12 OF THE DTAA IF THE IT SERVICES DO NOT 'MAKE AVAILABLE' TECHNOLOGY, SKILL, KNOW-HOW ETC. TO ITS AE. THE LD. AR FURTHER SUBMITTED THAT THE TERM MAKE AVAILABLE HAS NOT BEEN DEFINED IN THE DTAA. HOWEVER, REFERENC E WAS MADE TO THE MEMORANDUM OF UNDERSTANDING (MOU) EXEC UTED BETWEEN INDIA AND US BY THE LD. AR WHICH READS AS UNDER: GENERALLY SPEAKING, TECHNOLOGY WILL BE CONSIDERED MADE AVAILABLE WHEN THE PERSON ACQUIRING THE SERVICE IS ENABLED TO APPLY TH E 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 TEC HNICAL KNOWLEDGE, SKILLS, ETC., ARE MADE AVAILABLE TO THE PERSON PURCHASING T HE SERVICE, WITHIN THE MEANING OF PARAGRAPH 4(B). SIMILARLY, THE USE OF A PRODUCT WHICH EMBODIES TECHNOLOGY SHALL NOT PER SE BE CONSIDERED TO MAKE T HE TECHNOLOGY AVAILABLE THE LD. AR RELIED UPON THE DECISION OF RAYMOND LTD . VS. DCIT [2003] 86 ITD 791 (MUM) WHEREIN THE TRIBUNAL INTERPRETED THE MEANING OF THE TERM MAKE-AVAILABLE . THE LD. AR ALSO RELIED UPON THE FOLLOWING CASE LAW S: I. CIT VS. DE BEERS INDIA MINERALS (P.) LTD. [2012] 346 ITR 467 (KAR) II. ACIT VS. PETRONET LNG LTD. ITA NO. 865/DEL/2011 10. THE LD. AR SUBMITTED THAT IN LIGHT OF THE EXPLA NATION IN THE MIPL TO THE INDIA-US TAX TREATY ALONG WITH THE OBSERVATIONS OF THE VARIOUS COURTS, INTERPRETATION OF 'MAKE AVAILABLE IS SUMMARIZED AS UNDER: -THE PERSON ACQUIRING THE SERVICES IS ENABLED TO AP PLY THE TECHNOLOGY 7 ITA NO. 123/DEL/2015 CONTAINED THEREIN ON HIS OWN IN FUTURE WITHOUT RECO URSE TO THE SERVICE PROVIDER; -KNOWLEDGE MUST REMAIN WITH SERVICE RECIPIENT ONCE SERVICE HAS ENDED, I.E. SOME SORT OF DURABILITY OR PERMANENCY OF THE RESULT MUST REMAIN ONCE SERVICE IS RENDERED; -SERVICE RECIPIENT IS AT LIBERTY TO USE THE TECHNIC AL KNOWLEDGE, SKILL, KNOW- HOW AND PROCESSES 11. THE LD. AR FURTHER SUBMITTED THAT DURING THE YE AR UNDER CONSIDERATION, THE ASSESSEE COMPANY PROVIDED IT SUPPORT SERVICES T O ITS AE IN INDIA UNDER THE SERVICE AGREEMENT DATED DECEMBER 3, 2008. THE DESCR IPTION AND NATURE OF THE IT SUPPORT SERVICES PROVIDED ARE IN PARA 2.4 OF THE AGREEMENT WHICH ARE AS UNDER: N1 - INFORMATION TECHNOLOGY (IT) SERVICES: IT SERVICES CONSIST OF DEFINING THE GROUP IT POLICY , SETTING UP GENERAL GUIDELINES, AND ENSURING DATA INTEGRITY AND SYSTEMS AVAILABILITY. THESE SERVICES INCLUDE THE FOLLOWING SERVICES: RECOMMENDATIONS AND DIRECTION IN THE FIELD OF INFOR MATION AND COMMUNICATION TECHNOLOGY (ICT). A WIDE RANGE OF SERVICES IN THE FIELDS OF IT AND C OMMUNICATION SUCH AS PURCHASE, IMPLEMENTATION, MAINTENANCE AND TECHNICAL SUPPORT OF INTERNALLY DEVELOPED SOFTWARE APPLICATIONS (DATA WAREHOUSE, QU OTE MANAGER, ETC ..) AND SERVICES AS WELL AS COMMERCIAL ONES (E.G. OPERATING SYSTEMS, PRODUCTIVITY APPLICATIONS, SERVER/NETWORK, ANTIVIRUS, CORPORATE WEBSITES), HARDWARE (E.G. DESKTOPS, LAPTOPS, SERVERS, DATA CENTER, NETWORK AN D DISASTER RECOVERY), ERP SYSTEM (BAAN), INFRASTRUCTURE, AND DATE TELECOMMUNI CATION (E.G. LOTUS NOTES, TELEPHONE, FAX, INTERNET, WEBSITE, MOBILE PHONES). 8 ITA NO. 123/DEL/2015 THE MARK-UP IS SET AT 6%. 12. THE LD. AR SUBMITTED THAT THE IT SUPPORT SERVIC ES CONSISTS OF DEFINING THE GROUP IT POLICY, SETTING UP GENERAL IT GUIDELIN ES, AND ENSURING DATA INTEGRITY AND SYSTEMS AVAILABILITY. THE SERVICES WO ULD INVOLVE PROVIDING RECOMMENDATIONS AND DIRECTION IN THE FIELD OF INFOR MATION AND COMMUNICATION TECHNOLOGY, PURCHASE, IMPLEMENTATION, MAINTENANCE A ND TECHNICAL SUPPORT OF INTERNALLY DEVELOPED AND COMMERCIAL SOFTWARE APPLIC ATIONS AND SERVICES, HARDWARE, ERP SYSTEM, INFRASTRUCTURE AND DATA TELEC OMMUNICATION. THE LD. AR SUBMITTED THAT IT SUPPORT SERVICES ARE MERELY IN THE NATURE OF ROUTINE IT SUPPORT SERVICES AND AVAILING SUCH SERVICES IN NO M ANNER WILL EQUIP MIPL WITH TECHNICAL KNOWLEDGE, SKILL OR EXPERTISE TO BE ABLE TO APPLY IT IN FUTURE TO PERFORM THE FUNCTIONS INDEPENDENT OF THE ASSESSEE C OMPANY. THE LD. AR RELIED UPON THE DECISION IN CASE OF SANDVIK AUSTRALIA PTY. LTD. VS. DDIT [2013] 141 ITD 598 (PUNE) WHEREIN THE ASSESSE WAS ENGAGED IN PROVIDING THE IT SUPPORT SERVICES TO ITS GROUP COMPANIES IN THE ASIA-PACIFIC REGION IN VIEW OF THE INDIA- AUSTRALIA DTAA, IT WAS CLAIMED THAT THE AMOUNT RECE IVED ON PROVISION OF SERVICES WAS NOT TAXABLE AS THE SERVICES DO NOT MAK E-AVAILABLE SERVICES TO ITS GROUP ENTITIES IN INDIA. THE LD. AR FURTHER SUBMITT ED THAT THE TRIBUNAL HELD THAT THE ASSESSEE HAS ONLY PROVIDED THE BACK-UP SER VICES AND IT SUPPORT SERVICES FOR SOLVING IT RELATED PROBLEMS TO ITS IND IAN SUBSIDIARY. HENCE, UNLESS AND UNTIL THE SERVICES ARE MADE AVAILABLE, SAME CAN NOT BE TAXABLE IN INDIA. THEREFORE, THE SERVICES RENDERED BY ASSESSEE-COMPAN Y TO ITS INDIAN GROUP COMPANIES, THOUGH WERE IN THE NATURE OF TECHNICAL S ERVICES, BUT WERE NOT COVERED IN PARA (3)(G) TO ARTICLE 12 OF THE INDIA A USTRALIA TREATY AND, HENCE, THE SAME WERE HELD NOT TAXABLE IN INDIA. FURTHER, THE LD. AR RELIED UPON THE AAR RULING IN THE CASE OF BHARTI AXA GENERAL INSURANCE CO. LTD. [2010] 326 ITR 477 (AAR) WHEREIN THE APPLICANT, AMONGST OTHER SERV ICES, WAS RECEIVING IT SUPPORT SERVICES LIKE, ACCESS TO SOFTWARE APPLICATI ONS, RELATED SERVICES TO MAINTAIN AND SUPPORT THESE SOFTWARE APPLICATIONS, R EMOTE HELP DESK SERVICES, ETC. IN THIS CASE, THE AAR HELD THAT ALL THE TECHNI CAL OR CONSULTANCY SERVICES 9 ITA NO. 123/DEL/2015 CANNOT BE BROUGHT WITHIN THE SCOPE OF THE DEFINITIO N OF FTS AS PROVIDED IN INDIA-SINGAPORE DTAA UNLESS THEY MAKE-AVAILABLE TEC HNICAL KNOWLEDGE, KNOW- HOW, ETC., WHICH IN TURN FACILITATES THE PERSON ACQ UIRING THE SERVICES TO APPLY THE TECHNOLOGY EMBEDDED THEREIN. THE AAR FURTHER HE LD THAT IT WILL BE TOO MUCH TO SAY THAT BY PROVIDING SERVICES (PROVIDING C OMMENTS AND SUGGESTIONS AFTER REVIEWING STRATEGIES AND PLANS, GIVING SUGGES TIONS SO AS TO BRING THE PRODUCTS IN LINE WITH THE COMMON PRACTICES FOLLOWED BY OTHER AXA ENTITIES ACROSS THE GLOBE), THE RECEIVER OF SERVICES IS ENAB LED TO APPLY THE TECHNOLOGY EMBEDDED THEREIN SO AS TO FALL WITHIN THE DEFINITIO N OF FTS. THE LD. AR FURTHER RELIED UPON THE FOLLOWING AAR RULINGS WHEREIN SIMIL AR INTRA GROUP SERVICES WERE PROVIDED AND THE AAR HELD THAT DISSEMINATION OF INF ORMATION, FURNISHING GUIDELINES AND SUGGESTING PLANS OF ACTION AIMED AT UNIFORMITY AND SEAMLESS QUALITY IN BUSINESS DEALINGS OF PARTICIPATING GROUP ENTITIES DO NOT PER SE AMOUNTS TO MAKING AVAILABLE TECHNICAL KNOWLEDGE AND EXPERIENCE: -ERNST & YOUNG (P.) LTD. [2010] 323 ITR 184 (AAR) -INVENSYS SYSTEMS INC. [2009] 317 ITR 438 (AAR) 13. THE LD AR FURTHER SUBMITTED THAT THE ASSESSEE C OMPANY RENDERS THE IT SUPPORT SERVICES FROM OUTSIDE INDIA AND NO PERSONNE L OF THE ASSESSEE COMPANY VISITS INDIA IN CONNECTION WITH THE PROVISION OF SU CH SERVICES TO MIPL. ADDITIONALLY, THE LD. AR SUBMITTED THAT NO EMPLOYEE OF MIPL IS BEING TRAINED IN THE COURSE OF RENDERING THESE SERVICES TO MIPL. THE LD. AR FURTHER SUBMITTED THAT THE AO/DRP DID NOT SPECIFY AS TO HOW THE IT SU PPORT SERVICES MAKE- AVAILABLE KNOWLEDGE, EXPERIENCE ETC. TO THE RECIPI ENT AND HAS ALSO NOT EXAMINED AS TO HOW THE EMPLOYEES OF MIPL COULD HAVE UTILIZED THE EXPERIENCE GAINED BY THEM. THUS, THERE WAS NO EVIDENCE ON RECO RD THAT THE SERVICES RENDERED BY THE ASSESSEE QUALIFY THE TEST OF MAKE- AVAILABLE. IN THIS REGARD, THE LD. AR RELIED UPON THE DECISION OF LINKLATERS L LP VS. DCIT [2017] 185 TTJ 525 (MUMBAI) WHEREIN IT IS HELD THAT THE VIEW TAKEN BY THE REVENUE WAS NOT A PLAUSIBLE ONE SINCE THEY WERE NOT ABLE TO POINT OUT AS TO HOW THERE WAS TRANSFER 10 ITA NO. 123/DEL/2015 OF TECHNICAL KNOWLEDGE, SKILL, EXPERIENCE OR KNOW-H OW, ETC., IN SUCH MANNER THAT THE RECIPIENTS WERE ABLE TO UTILIZE AND PERFOR M THESE TASKS AGAIN ON THEIR OWN WITHOUT FALLING BACK ON THE ASSESSE FOR ITS ASS ISTANCE. IT WAS HELD SIMILARLY IN THE FOLLOWING CASES THAT SINCE IT HAS NOT BEEN E STABLISHED BY THE DEPARTMENT THAT WHILE RENDERING THE SERVICES, TECHNICAL KNOWLE DGE, KNOWHOW, SKILL ETC. HAS BEEN MADE AVAILABLE SO AS TO ENABLE THE RECIPIENT T O APPLY THEM INDEPENDENTLY, THE SERVICES CANNOT BE HELD TAXABLE AS FEES FOR TEC HNICAL SERVICES: -ENDEMOL INDIA (P.) LTD. [2014] 361 ITR 340 (AAR) -EXXON MOBIL COMPANY INDIA (P.) LTD. VS. ACIT ITA N O. 6708 (MUM) OF 2011 IN VIEW OF THE ABOVE, THE LD. AR SUBMITTED THAT THE SE SERVICES DO NOT MAKE AVAILABLE ANY KNOW-HOW OR SKILL AND DO NOT FALL WIT HIN THE AMBIT OF FTS AS DEFINED IN ARTICLE 12 OF THE INDIA-BELGIUM DTAA REA D WITH INDIA-PORTUGAL DTAA. 14. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE DRP DIRECTIONS /ORDER OF THE CIT(A) AND RESTRICTED SUBMISSIONS ONL Y TO SPECIFIC ASPECTS. ON BALANCE ASPECTS, ABOVE ORDERS AND ORAL SUBMISSIONS ARE RELIED UPON. THE ASSESSEE, A TAX RESIDENT OF BELGIUM PROVIDED SERVIC ES TO ITS INDIAN AE UNDER THE SERVICE AGREEMENT DATED 1.1.2008. THE AO TREATED TH E CONSIDERATION RECEIVED BY THE ASSESSEE FROM ITS INDIAN AE FOR PROVIDING TH E ABOVE SERVICES AS 'FEES FOR TECHNICAL SERVICES'. THE ASSESSEE STATED THAT IT IS COVERED UNDER THE MFN CLAUSE OF THE PROTOCOL TO THE DTAA BETWEEN INDIA AND BELGI UM AND ACCORDINGLY RELIED UPON THE DEFINITION OF FTS AS PER INDO-PORTUGUESE D TAA AND CLAIMED THAT CLAUSE (B) OF ARTICLE 12(4) IS NOT SATISFIED AND NO TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW -HOW ETC HAD BEEN MADE AVAI LABLE TO THE INDIAN AE. IN THE ABOVE BACK DROP THE UNDISPUTED FACTS ARE AS UNDER: I. THE ASSESSEE HAS RECEIVED CONSIDERATION FROM ITS I NDIAN AE IN LIEU OF SERVICES PROVIDED BY IT; 11 ITA NO. 123/DEL/2015 II. THE SERVICES SO PROVIDED ARE IN THE NATURE OF 'TECHNICA L OR CONSULTANCY' SERVICES. IN FACT THE NATURE OF SERVICES AS PER THE LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF THE AE AS APPEARING IN PAGES 110 TO 112 OF THE PAPER BOOK ARE IN THE NATURE OF 'CONSULTANCY' SERVICES. 15. THE LD. DR SUBMITTED THAT THE SERVICES WERE DES CRIBED AS 'INFORMATION TECHNOLOGY SERVICES' AND DESCRIBED IN ARTICLE 2.4 O F THE GENERAL AGREEMENT. THE DETAILS OF THE SERVICE RENDERED AS PER AGREEMEN T AND AS REPRODUCED BY THE ASSESSMENT ORDER IN PAGE 3 OF THE ORDER. THE LD. D R SUBMITTED THAT THE LANGUAGE OF ARTICLE 2.4 OF THE GENERAL TERMS OF SER VICE AGREEMENT DATED 01.01.2008, THE SERVICES PROVIDED BY THE ASSESSEE T O ITS INDIAN AE CONSISTS OF THE FOLLOWING SERVICES : I. SERVICES TO ' DEFINE THE GROUP IT POLICY' (FOR THE AE RECIPIENT) - THE TERM 'POLICY' HAS BEEN DEFINED IN THE COLLINS DICTIONARY AS 'A SET OF IDEAS OR PLANS THAT IS USED AS A BASIS FOR MAKING DECISIONS, ESPEC IALLY IN POLITICS, ECONOMICS, OR BUSINESS A PLAN OF ACTION ADOPTED OR PURSUED BY AN INDIVIDUAL, GOVERNMENT, PARTY, BUSINESS, ETC' THERE FORE, 'DEFINING THE POLICY' MUST NECESSARILY INVOLVE AND MEAN THE PROCESS OF 'F ORMULATION OF APPROPRIATE IT POLICY' FOR THE AE (WITH REFERENCE TO AND IN ACC ORDANCE WITH THE IT POLICY OF THE GROUP). II. SERVICES TO ' SET-UP GUIDELINES' - ONCE A POLICY HAS BEEN FORMULA TED, IT FOLLOWS THAT A SET OF GUIDELINES/INSTRUCTIONS/DOS A ND DON'TS ARE DEVISED AND SETUP FOR THE SUCCESSFUL IMPLEMENTATION AND COMPLIA NCE OF SUCH POLICY. IT IS TOWARDS THIS END THAT THE ASSESSEE PROVIDED THE SER VICE RECIPIENT WITH NECESSARY ' RECOMMENDATIONS AND DIRECTION IN THE FIELD OF INFOR MATION AND COMMUNICATION ('ICT')'. III. SERVICES TO 'ENSURE DATA INTEGRITY AND SYSTEM AVAIL ABILITY'- THIS INCLUDE SERVICES SUCH AS 'PURCHASE, IMPLEMENTATION, MAINTEN ANCE AND TECHNICAL SUPPORT OF INTERNALLY DEVELOPED SOFTWARE APPLICATIONS (DATA WAREHOUSE, QUOTE 12 ITA NO. 123/DEL/2015 MANAGER ETC.) AND SERVICES AS WELL AS COMMERCIAL ON ES (E.G. OPERATING SYSTEMS, PRODUCTIVITY APPLICATIONS, SERVER/NETWORK, ANTIVIRU S, CORPORATE WEBSITE), HARDWARE E.G . DESKTOPS, LAPTOPS, SERVERS, DATA CENTER, NETWORK AN D DISASTER RECOVERY) ERP SYSTEM,(BAAN), INFRASTRUCTURE AND DAT A TELECOMMUNICATION (E.G. LOTUS NOTES, TELEPHONE, FAX INTERNET, WEBSITE PHONE S.). 16. THE LD. DR POINTED OUT THAT ALL THE ABOVE 3 SER VICES ARE INTERCONNECTED AND CANNOT BE IMPLEMENTED INDEPENDENT OF EACH OTHER . THE LD. DR SUBMITTED THAT AT THE TOP OF THE HIERARCHY IS THE FORMULATION OF AN APPROPRIATE IT POLICY FOR THE INDIAN AE WHICH SHOULD BE COMPATIBLE AND IN ACC ORDANCE WITH THE GROUP IT POLICY. IN ORDER TO ENSURE THAT THE POLICY IS IM PLEMENTED EFFECTIVELY, A SET OF GUIDELINES/INSTRUCTIONS/DOS AND DON'TS ARE DEVISED AND SETUP. THUS, NEXT IN THE LINE ARE THE 'ICT' OR RECOMMENDATIONS AND DIREC TIONS TOWARDS THIS END AND FINALLY SETTING UP OF THE SYSTEMS APPARATUS AND PRO CEDURES NEEDED FOR THE EFFECTIVE IMPLEMENTATION OF THE IT POLICY OF THE IN DIAN AE AND ITS SEAMLESS INTEGRATION WITH THE GLOBAL IT POLICY OF THE GROUP. THIS CAN ONLY BE ACHIEVED THROUGH THE PROCESS OF 'DATA INTEGRATION' AND 'SYST EM AVAILABILITY'. TOWARDS THIS END TO ENSURE DATA INTEGRATION AND AVAILABILIT Y OF SYSTEM HARDWARE, APPROPRIATE SOFTWARE, BOTH THAT ARE (A) INTERNALLY DEVELOPED SOFTWARE AS WELL AS (B) COMMERCIAL SOFTWARE APPLICATIONS AND HARDWARE A S WELL AS OTHER NECESSARY SYSTEM AND INFRASTRUCTURE REQUIREMENTS NEED TO BE P URCHASED, INSTALLED AND MAINTAINED. 17. THE LD. DR SUBMITTED THAT THE SERVICES PROVIDED BY THE ASSESSEE TO ITS INDIAN AE MUST BE VIEWED AND THE SATISFACTION OF 'M AKE AVAILABLE CLAUSE OF ARTICLE 12(4)(B)' OF THE INDO-PORTUGUESE DTAA MUST BE EXAMINED. THE LD. DR POINTED OUT THAT THE VERY EXPRESSIONS 'DEFINING', ' SETTING UP', 'RECOMMENDATIONS', 'DIRECTIONS', SERVICES FOR IDENT IFYING AND PURCHASING APPROPRIATE 'SOFTWARE' AND 'HARDWARE' ETC. CLEARLY DENOTE SOMETHING WHICH HAVE BEEN 'MADE AVAILABLE' TO THE RECIPIENT. IT CAN NOT BE SAID THAT THE RECIPIENT WILL CONTINUE TO DEPEND UPON THE SERVICE PROVIDER F OR THE FORMULATION OF ITS IT 13 ITA NO. 123/DEL/2015 POLICY OR THE GUIDELINES AND SYSTEM APPARATUS FOR T HE IMPLEMENTATION OF SUCH POLICY. ONCE THE POLICY IS DEVELOPED IT IS FOR THE RECIPIENT TO FOLLOW IT AND MODIFY IT, IF NEEDED. ONCE GUIDELINES AND DIRECTIONS HAVE BEEN DEVISED AN D FORMALIZED, THE RECIPIENT OF SUCH GUIDELINES NEED NOT SEEK THE CONTINUAL SERVICE OF THE SERVICE PROVIDER FOR IT. IT CAN ISSUE OR MODIFY SUC H GUIDELINES AND DIRECTIONS ITSELF IN FUTURE DEPENDING UPON THE SITUATION AND C IRCUMSTANCES WITHOUT DEPENDING UPON THE SERVICE PROVIDER. SIMILARLY, ONCE SYSTEM APPARATUS INVOLVING THE APPROPRIATE HARDWARE AND SOFTWARE HAV E BEEN IDENTIFIED, PROCURED, INSTALLED AND INTEGRATED FOR THE EFFECTIV E IMPLEMENTATION OF THE IT POLICY OF THE RECIPIENT, THE INDIAN AE NEED NOT DEP END UPON THE SERVICE PROVIDER FOR THE SAME IN FUTURE. IT CAN ITSELF PROC URE/PURCHASE/ASSEMBLE THE SPECIFIED HARDWARE OR COMMERCIAL SOFTWARE AND DEVEL OP/CONFIGURE OR MODIFY THE INTERNALLY DEVELOPED SOFTWARE OR OTHER INFRASTRUCTU RAL REQUIREMENTS. TO SUM UP, THE LD. DR SUBMITTED THAT ONCE THE SERVICE HAVE BEEN RENDERED BY THE ASSESSEE, THE RECIPIENT INDIAN AE IS ARMED AND HAS BEEN ENABLED WITH BOTH THE 'POLICY', 'GUIDELINES' AND THE 'IT SYSTEM' NECESSAR Y FOR THE IMPLEMENTATION OF SUCH POLICY. THE INDIAN AE IS THUS, NO LONGER DEPEN DENT UPON THE ASSESSEE FOR AVAILING SUCH SERVICES RELATING TO THE FORMULATION AND IMPLEMENTATION OF THE 'POLICY', 'GUIDELINES' AND THE 'IT SYSTEM'. IN OTHE R WORDS, THE TECHNICAL AND CONSULTANCY SERVICES HAVE BEEN 'MADE AVAILABLE' BY THE ASSESSEE TO ITS INDIAN AE IN LIEU OF WHICH THE CONSIDERATION WAS RECEIVED. ACCORDINGLY, THE AO AND DRP ARE JUSTIFIED IN HOLDING THE RECEIPTS BY THE AS SESSEE TO BE IN THE NATURE OF 'FEES FOR TECHNICAL SERVICES'. IN SUPPORT OF THE AB OVE, THE LD. DR RELIED UPON THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CAS E OF DE BEERS INDIA MINERALS (P) LTD. (2012) (346 ITR 467) WHERE IT WAS HELD AS UNDER:- 22. 'WHAT IS THE MEANING OF MAKE AVAILABLE'. THE T ECHNICAL OR CONSULTANCY SERVICE RENDERED SHOULD BE OF SUCH A NATURE THAT IT 'MAKES AVAILABLE' TO THE RECIPIENT TECHNICAL KNOWLEDGE, KNOW-HOW AND THE LIK E. THE SERVICE SHOULD BE AIMED AT AND RESULT IN TRANSMITTING TECHNICAL KNOWL EDGE, ETC., SO THAT THE PAYER OF THE SERVICE COULD DERIVE AN ENDURING BENEF IT AND UTILIZE THE 14 ITA NO. 123/DEL/2015 KNOWLEDGE OR KNOW-HOW ON HIS OWN IN FUTURE WITHOUT THE AID OF THE SERVICE PROVIDER. IN OTHER WORDS, TO FIT INTO THE TERMINOLO GY 'MAKING AVAILABLE', THE TECHNICAL KNOWLEDGE, SKILL, ETC., MUST REMAIN WITH THE PERSON RECEIVING THE SERVICES EVEN AFTER THE PARTICULAR CONTRACT COMES TO AN END'. THE TECHNICAL KNOWLEDGE OR SKILLS OF THE PROVIDER SHOULD BE IMPAR TED TO AND ABSORBED BY THE RECEIVER SO THAT THE RECEIVER CAN DEPLOY SIMILAR TE CHNOLOGY OR TECHNIQUES IN THE FUTURE WITHOUT DEPENDING UPON THE PROVIDER. TECHNOL OGY WILL BE CONSIDERED 'MADE AVAILABLE' WHEN THE PERSON ACQUIRING THE SERV ICE IS ENABLED TO APPLY THE TECHNOLOGY IN OTHER WORDS, PAYMENT OF CONSIDERATION WOULD BE R EGARDED AS 'FEE FOR TECHNICAL/INCLUDED SERVICES' ONLY IF TH E TWIN TEST OF RENDERING SERVICES AND MAKING TECHNICAL KNOWLEDGE AVAILABLE A T THE SAME TIME IS SATISFIED. 18. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. SOREGAM SA IS A TAX RESIDENT O F BELGIUM. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING INF ORMATION TECHNOLOGY SUPPORT SERVICES TO VARIOUS GROUP ENTITIES. IN INDI A, IT RENDERED SUCH SERVICES TO MAGOTTEAUX INDUSTRIES PRIVATE LIMITED (MIPL). TH ESE FACTS WERE NOT DISPUTED BY THE REVENUE AT ANY POINT OF TIME. SECTION 90(2) OF THE ACT PROVIDES THAT THE PROVISIONS OF THE ACT OR THE DTAA, WHICHEVER IS BEN EFICIAL TO THE TAXPAYER SHALL APPLY. THE ASSESSEE COMPANY IS A TAX RESIDENT OF BE LGIUM AND THEREFORE, IS ENTITLED TO BE TAXED IN ACCORDANCE WITH THE PROVISI ONS OF THE INDIA- BELGIUM DTAA TO THE EXTENT THEY ARE MORE BENEFICIAL. THE TE RM FTS IS DEFINED UNDER ARTICLE 12(3)(B) OF THE INDIA-BELGIUM DTAA AND INCL UDES ALL KINDS OF PAYMENTS IN THE NATURE OF MANAGERIAL, TECHNICAL AND CONSULTA NCY. FURTHER, THE PROTOCOL TO THE INDIA-BELGIUM DTAA PROVIDES FOR TAXATION OF FTS IN ACCORDANCE WITH THE PROVISIONS OF DTAA BETWEEN INDIA AND A MEMBER OF OE CD ENTERED INTO AFTER JANUARY 1, 1990, WHERE SUCH PROVISIONS PROVIDE FOR A LOWER RATE OR RESTRICTIVE SCOPE OF TAXATION, COMMONLY KNOWN AS MOST FAVORED N ATION CLAUSE. IN THIS REGARD, THE DTAA BETWEEN INDIA-PORTUGAL (AN OECD ME MBER COUNTRY), ENTERED INTO ON APRIL 30, 2000, UNDER ARTICLE 12 PR OVIDES FOR A RESTRICTED SCOPE 15 ITA NO. 123/DEL/2015 FOR TAXATION OF AMOUNTS AS FTS BY LAYING DOWN THE M AKE-AVAILABLE CONDITION. THE IT SUPPORT SERVICES RENDERED BY THE ASSESSEE CO MPANY TO ITS AE MAY QUALIFY AS FTS ONLY IF THEY SATISFY THE MAKE AVAILA BLE CONDITION. IN OTHER WORDS, THE AMOUNTS RECEIVED AS CONSIDERATION FOR PROVISION OF IT SUPPORT SERVICES MAY NOT BE TAXED UNDER ARTICLE 12 OF THE DTAA IF THE IT SERVICES DO NOT 'MAKE AVAILABLE' TECHNOLOGY, SKILL, KNOW-HOW ETC. TO ITS AE. THE TERM MAKE AVAILABLE HAS NOT BEEN DEFINED IN THE DTAA. HOWEVER, REFERENC E WAS MADE TO THE MEMORANDUM OF UNDERSTANDING (MOU) EXECUTED BET WEEN INDIA AND US BY THE LD. AR. THE LD. AR RELIED UPON THE DECISION OF RAYMOND LTD. VS. DCIT [2003] 86 ITD 791 (MUM) WHEREIN THE TRIBUNAL INTERPRETED THE MEANING OF THE TERM MAKE-AVAILABLE . THE LD. AR ALSO RELIED UPON THE FOLLOWING CASE LAWS: I. CIT VS. DE BEERS INDIA MINERALS (P.) LTD. [2012] 346 ITR 467 (KAR) II. ACIT VS. PETRONET LNG LTD. ITA NO. 865/DEL/2011 THE EXPLANATION IN THE MIPL TO THE INDIA-US TAX TRE ATY ALONG WITH THE OBSERVATIONS OF THE VARIOUS COURTS, INTERPRETATION OF 'MAKE AVAILABLE IS THAT THE PERSON ACQUIRING THE SERVICES IS ENABLED TO APP LY THE TECHNOLOGY CONTAINED THEREIN ON HIS OWN IN FUTURE WITHOUT RECOURSE TO TH E SERVICE PROVIDER; AND KNOWLEDGE MUST REMAIN WITH SERVICE RECIPIENT ONCE S ERVICE HAS ENDED, I.E. SOME SORT OF DURABILITY OR PERMANENCY OF THE RESULT MUST REMAIN ONCE SERVICE IS RENDERED; AS WELL AS SERVICE RECIPIENT IS AT LIBERT Y TO USE THE TECHNICAL KNOWLEDGE, SKILL, KNOW-HOW AND PROCESSES. DURING TH E YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY PROVIDED IT SUP PORT SERVICES TO ITS AE IN INDIA UNDER THE SERVICE AGREEMENT DATED DECEMBER 3, 2008. THE DESCRIPTION AND NATURE OF THE IT SUPPORT SERVICES PROVIDED ARE IN PARA 2.4 OF THE AGREEMENT. FROM THE RECORDS IT CAN BE SEEN THAT THE ASSESSEE COMPANY RENDERS THE IT SUPPORT SERVICES FROM OUTSIDE INDIA AND NO P ERSONNEL OF THE ASSESSEE COMPANY VISITS INDIA IN CONNECTION WITH THE PROVISI ON OF SUCH SERVICES TO MIPL. NO EMPLOYEE OF MIPL IS BEING TRAINED IN THE COURSE OF RENDERING THESE SERVICES 16 ITA NO. 123/DEL/2015 TO MIPL. THE AO/DRP DID NOT SPECIFY AS TO HOW THE I T SUPPORT SERVICES MAKE- AVAILABLE KNOWLEDGE, EXPERIENCE ETC. TO THE RECIPI ENT AND HAS ALSO NOT EXAMINED AS TO HOW THE EMPLOYEES OF MIPL COULD HAVE UTILIZED THE EXPERIENCE GAINED BY THEM. THUS, THERE WAS NO EVIDENCE ON RECO RD THAT THE SERVICES RENDERED BY THE ASSESSEE QUALIFY THE TEST OF MAKE- AVAILABLE. IN THIS REGARD, THE LD. AR RELIED UPON THE DECISION OF LINKLATERS L LP VS. DCIT [2017] 185 TTJ 525 (MUMBAI) WHEREIN IT IS HELD THAT THE VIEW TAKEN BY THE REVENUE WAS NOT A PLAUSIBLE ONE SINCE THEY WERE NOT ABLE TO POINT OUT AS TO HOW THERE WAS TRANSFER OF TECHNICAL KNOWLEDGE, SKILL, EXPERIENCE OR KNOW-H OW, ETC., IN SUCH MANNER THAT THE RECIPIENTS WERE ABLE TO UTILIZE AND PERFOR M THESE TASKS AGAIN ON THEIR OWN WITHOUT FALLING BACK ON THE ASSESSE FOR ITS ASS ISTANCE. IT WAS HELD SIMILARLY IN THE FOLLOWING CASES THAT SINCE IT HAS NOT BEEN E STABLISHED BY THE DEPARTMENT THAT WHILE RENDERING THE SERVICES, TECHNICAL KNOWLE DGE, KNOWHOW, SKILL ETC. HAS BEEN MADE AVAILABLE SO AS TO ENABLE THE RECIPIENT T O APPLY THEM INDEPENDENTLY, THE SERVICES CANNOT BE HELD TAXABLE AS FEES FOR TEC HNICAL SERVICES: -ENDEMOL INDIA (P.) LTD. [2014] 361 ITR 340 (AAR) -EXXON MOBIL COMPANY INDIA (P.) LTD. VS. ACIT ITA N O. 6708 (MUM) OF 2011 THUS, THESE SERVICES DO NOT MAKE AVAILABLE ANY KNOW -HOW OR SKILL AND DO NOT FALL WITHIN THE AMBIT OF FTS AS DEFINED IN ARTICLE 12 OF THE INDIA-BELGIUM DTAA READ WITH INDIA-PORTUGAL DTAA. THE SUBMISSIONS OF T HE LD. DR THAT THE ASSESSEE COMPANY IS PROVIDING MAKE AVAILABLE SERVIC ES AND THE SERVICES ARE INTERLINKED HAS NOT BEEN SUPPORTED BY ANY DOCUMENTA RY EVIDENCE WHICH WAS PRODUCED BY THE ASSESSEE COMPANY DURING THE ASSESSM ENT PROCEEDINGS. THE HONBLE KARNATAKA HIGH COURT HELD THAT THE TECHNICA L KNOWLEDGE OR SKILLS OF THE PROVIDER SHOULD BE IMPARTED TO AND ABSORBED BY THE RECEIVER SO THAT THE RECEIVER CAN DEPLOY SIMILAR TECHNOLOGY OR TECHNIQUE S IN THE FUTURE WITHOUT DEPENDING UPON THE PROVIDER. THE HONBLE HIGH COURT FURTHER HELD THAT TECHNOLOGY WILL BE CONSIDERED 'MADE AVAILABLE' WHEN THE PERSON ACQUIRING THE SERVICE IS ENABLED TO APPLY THE TECHNOLOGY. IN OTHER WORDS, PAYMENT OF 17 ITA NO. 123/DEL/2015 CONSIDERATION WOULD BE REGARDED AS 'FEE FOR TECHNIC AL/INCLUDED SERVICES' ONLY IF THE TWIN TEST OF RENDERING SERVICES AND MAKING TECH NICAL KNOWLEDGE AVAILABLE AT THE SAME TIME IS SATISFIED. IN THE PRESENT ASSESSEE COMPANYS CASE, THE SERVICES PROVIDED BY THE ASSESSEE COMPANY ARE THAT OF IT SUP PORT SERVICES WHICH ARE MERELY IN THE NATURE OF ROUTINE IT SUPPORT SERVICES AND AVAILING SUCH SERVICES IN NO MANNER HAS GIVEN ANY BENEFIT TO MIPL WITH TEC HNICAL KNOWLEDGE, SKILL OR EXPERTISE TO BE ABLE TO APPLY IT IN FUTURE TO PERFO RM THE FUNCTIONS INDEPENDENT OF THE ASSESSEE COMPANY. THUS, THE TWIN TEST IS NOT FULFILLED IN THE PRESENT CASE. THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITIONS IN THIS ASPECT. GROUND NOS. 2, 3 AND 4 ARE ALLOWED. 19. THE LD. AR SUBMITTED THAT AS REGARDS TO GROUND NO. 5, THE ASSESSING OFFICER ERRED IN APPLYING THE SURCHARGE AND CESS ON THE GROSS TREATY RATE OF 10% APPLICABLE ON FEES FOR TECHNICAL SERVICES. THE LD. AR SUBMITTED THAT THE AO, IN THE FINAL ASSESSMENT ORDER, ASSESSED THE INCOME AS FEE FOR TECHNICAL SERVICES UNDER ARTICLE 12 OF THE INDIA-BELGIUM DTAA. CONSEQU ENTLY, TAX WAS COMPUTED @10%. THE AO FURTHER APPLIED SURCHARGE AT THE RATE OF 2.5% AND EDUCATION CESS & SECONDARY AND HIGHER EDUCATION CESS AT THE RATE OF 3% ON THE TAX RATE OF 10%. THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER ER RED IN APPLYING SURCHARGE AND CESS OVER AND ABOVE THE TAX RATE OF 1 0% AS PER ARTICLE 12 OF THE DTAA BETWEEN INDIA AND BELGIUM. IN THIS REGARD, ATT ENTION IS INVITED TO ARTICLE 2 OF THE DTAA WHICH IS REPRODUCED AS UNDER: THE EXISTING TAXES TO WHICH THE AGREEMENT SHALL AP PLY ARE. (A) IN THE CASE OF INDIA : (I) THE INCOME-TAX INCLUDING ANY SURCHARGE THEREON, AN D (II) THE SURTAX, (HEREINAFTER REFERRED TO AS 'INDIAN TAX') 18 ITA NO. 123/DEL/2015 THE LD. AR SUBMITTED THAT THE EXPRESSION TAX IS D EFINED IN ARTICLE 2(2) OF THE DTAA TO INCLUDE INCOME TAX AND SURCHARGE THEREON, SO FAR AS INDIA IS CONCERNED ARTICLE 2(3) FURTHER EXTENDS THE SCOPE OF TAX TO ALSO COVER ANY IDENTICAL OR SUBSTANTIALLY SIMILAR TAXES WHICH ARE IMPOSED AFTER THE DATE OF SIGNATURE OF THE AGREEMENT IN ADDITION TO, OR IN PL ACE OF, EXISTING TAXES. THE LD. AR SUBMITTED THAT WHEN ARTICLE 2 STATES THAT SURCHA RGE IS INCLUDED IN INCOME TAX AND THE TAX RATE OF 10% FOR FEE FOR TECHNICAL S ERVICES IS PRESCRIBED IN ARTICLE 12 SHALL HAVE TO BE DEEMED TO INCLUDE SURCHARGE AND SINCE CESS IS NOTHING BUT AN ADDITIONAL SURCHARGE, THE TAX PRESCRIBED UNDER D TAA AT THE RATE OF 10% SHALL BE DEEMED TO INCLUDED SURCHARGE AND EDUCATION CESS. THE LD. AR RELIED UPON THE DECISION OF ELEKTROBIT AUTOMOTIVE GMBH VS. DCIT ITA NO. 678/DEL/2013 WHEREIN THE TRIBUNAL HELD THAT EDUCATI ON CESS IS ONLY A SURCHARGE AS CLARIFIED BY THE FINANCE ACT AND SURCH ARGE IS ONLY A TAX CLARIFIED BY THE HONBLE APEX COURT IN CASE OF CIT VS. K. SRI NIVASAN [1972] 83 ITR 346 (SC), THEREFORE, EDUCATION CESS OR ANY OTHER SURCHA RGE SHOULD NOT BE ADDED SEPARATELY TO THE TAX RATE AS PER THE DTAA. THE TRI BUNAL RELIED ON THE COORDINATE BENCH DECISION IN THE CASE OF OSRAM INDI A PVT. LTD. VS DCIT (ITA NO. 4052/DEL/2015) TO COME TO THIS CONCLUSION. THE LD. AR ALSO RELIED UPON THE FOLLOWING DECISIONS: I. DIC ASIA PACIFIC PTE. LTD. VS. ADIT [2012] 52 SOT 4 47 (KOLKATA) II. DDIT VS. BOC GROUP LTD. [2016] 156 ITD 402 (KOLKATA ) III. CAPGEMINI SA VS. DCIT [2016] 160 ITD 13 (MUMBAI) IV. SUNIL V, MOTIANI VS. ITO [2013] 59 SOT 37 (MUMBAI) V. PARKE DAVIS AND COMPANY LLC VS. ACIT [2014] 62 SOT 282 (MUMBAI) IN VIEW OF THE ABOVE, THE LD. AR SUBMITTED THAT TA X RATE MENTIONED IN ARTICLE 12 OF THE INDIA-BELGIUM DTAA IS A GROSS RAT E OF TAX INCLUSIVE OF SURCHARGE AND THEREFORE, SINCE EDUCATION CESS IS A FORM OF ADDITIONAL SURCHARGE, EDUCATION CESS OR ANY OTHER SURCHARGE CA NNOT BE APPLIED ADDITIONALLY TO INCREASE THE TAX RATE MENTIONED IN THE DTAA I.E 10%. 19 ITA NO. 123/DEL/2015 20. THE LD. DR RELIED UPON THE ASSESSMENT ORDER. 21. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. AR RELIED UPON THE DEC ISION OF ELEKTROBIT AUTOMOTIVE GMBH VS. DCIT ITA NO. 678/DEL/2013 WHERE IN THE TRIBUNAL HELD THAT EDUCATION CESS IS ONLY A SURCHARGE AS CLARIFIE D BY THE FINANCE ACT AND SURCHARGE IS ONLY A TAX CLARIFIED BY THE HONBLE AP EX COURT IN CASE OF CIT VS. K. SRINIVASAN [1972] 83 ITR 346 (SC), THEREFORE, EDUCA TION CESS OR ANY OTHER SURCHARGE SHOULD NOT BE ADDED SEPARATELY TO THE TAX RATE AS PER THE DTAA. THE TRIBUNAL RELIED ON THE COORDINATE BENCH DECISION IN THE CASE OF OSRAM INDIA PVT. LTD. VS DCIT (ITA NO. 4052/DEL/2015) TO COME T O THIS CONCLUSION. THUS, THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSE SSEE. GROUND NO. 5 IS ALLOWED. 22. AS REGARDS TO GROUND NO. 6, THE LD. AR SUBMI TTED THAT THE ASSESSING OFFICER ERRED IN COMPUTING INTEREST UNDER SECTION 2 34A OF THE ACT AND IS CONSEQUENTIAL. THE INTEREST UNDER SECTION 234A OF T HE ACT IS NOT APPLICABLE AS THE TAXES WERE DULY DEDUCTED ON THE SUBJECT TRANSAC TION AND DEPOSITED BY MIPL/AE (I.E. THE DEDUCTION). 23. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. GROUND NO. 6 IS CONSEQUENTIAL HENCE DO NOT REQUIRE ANY ADJUDICATION. 24. IN RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEM BER, 2018 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 30/11/2018 COPY FORWARDED TO: 20 ITA NO. 123/DEL/2015 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 05.09.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 05.09.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 1 5 . 1 1 . 2 0 1 8 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 1 2 . 1 2 .2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 1 2 . 1 2 .2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 2 . 1 2 .2018 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER