Cargill Asia Pacific Holdings Pte. Ltd., Singapore V. ADIT, New Delhi

ITA 1438/DEL/2012

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1182 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 13-07-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 27-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SATPAL GULATI
• Keywords: Double taxation relief; Opportunity of being heard; Deemed to accrue or arise in india; Corroborative evidences; TDS; Set aside
• Section: 271(1)(c); 143(3); 244A; 234B; 250; 264; 64; 43; 13; 22; 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI O.P. KANT, ACCOUNTANT MEMBER AND SHRI K.N CHARY, JUDICIAL MEMBER ITA NO.1437/DEL/2012 ASSESSMENT YEAR: 2005-06 AND ITA NO.1438/DEL./2012 ASSESSMENT YEAR: 2006-07 AND ITA NO.5444/DEL./2010 ASSESSMENT YEAR: 2007-8 M/S. CARGILL ASIA PACIFIC HOLDINGS PTE. LTD., 300, BEACH RAOD, #23-01, THE CONCOURSE ROAD, SINGAPORE VS. ADIT, CIRCLE-1(1), INTERNATIONAL TAXATION, NEW DELHI PAN :AACCC6911B (APPELLANT) (RESPONDENT) APPELLANT BY SHRI NAGESHWAR RAO, ADV. SHRI SANDEEP KARHAIL, ADV. RESPONDENT BY SHRI SATPAL GULATI, CIT(DR) DATE OF HEARING 09.01.2020 DATE OF PRONOUNCEMENT 23.03.2020 ORDER PER O.P. KANT, A.M.: OUT OF THE ABOVE THREE APPEALS OF THE ASSESSEE, THE FIRST TWO APPEALS ARE DIRECTED AGAINST COMMON ORDER DATED17/0 3/2011 PASSED BY THE LEARNED CIT(APPEALS)-XI, NEW DELHI [I N SHORT THE LD. CIT(A)] FOR ASSESSMENT YEARS 2005-06 AND 2006- 07. THE THIRD APPEAL IS DIRECTED AGAINST FINAL ASSESSMENT ORDER D ATED 2 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 27/09/2010 PASSED BY THE LEARNED ASSISTANT DIRECTOR OF INCOME- TAX, CIRCLE-1(1), INTERNATIONAL TAXATION, NEW DELHI [IN SHORT THE LD. ASSESSING OFFICER (AO)] IN PURSUANT TO THE DI RECTION OF THE LEARNED DISPUTE RESOLUTION PANEL (DRP) FORASSESSMEN T YEAR2007- 08. IN THESE APPEALS IDENTICAL ISSUES PERMEATING FR OM THE SAME SET OF THE FACT AND CIRCUMSTANCES ARE INVOLVED AND THEREFORE THESE APPEALS WERE HEARD TOGETHER AND DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER FOR CONVENIENCE. ITA NO. 1437 & 1438/DEL./2012 2. FIRST, WE TAKE UP THE APPEAL BEARING ITA NO.1437 /DEL./2012 FOR ASSESSMENT YEAR 2005-06 AND ITA NO. 1438/DEL/20 12 FOR ASSESSMENT YEAR 2006-07. GROUNDS OF APPEAL FOR ASSESSMENT YEAR 2005-06: 1. THAT THE ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE ORDER PASSED UNDER SECTION 143(3) OF THE ACT BY THE ASSISTANT DIRECTOR OF INCOME-TAX, CIRCLE 1(1), INTERNATIONAL TAX, NEW DELHI (HEREINAFTER REFERRED TO AS THE LEARNED AO)AND OR DER PASSED UNDER SECTION 250 OF THE ACT BY THE LEARNED COMMISSIONER OF INCOME- TAX(APPEALS)-XI, NEW DELHI (HEREINAFTER REFERRED TO AS LEARNEDCIT(A) SHOULD BE SET ASIDE AS THE SAME IS BASED ON CONJECT URES AND SERVICES AND IS BAD IN LAW. 2. THAT THE LEARNED AO AND CIT(A) HAVE ERRED IN FAC TS AND IN LAW IN MAKING ADDITION AMOUNTING TO RS.3,19,89,426/- THE R ETURNED INCOME BY TREATING REIMBURSEMENTS/RECHARGES OF ACTUAL COST INCURRED BY THE APPELLANT UNDER AN AGREEMENT FOR SERVICES AND COST SHARING (THE AGREEMENT) WITH INDIAN ENTITIES AS INTEREST (RS.31 ,35,588) AND FEE FOR TECHNICAL SERVICES (RS.2,88,53,838/-) UNDER THE ACT AS WELL AS UNDER THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWE EN INDIA AND SINGAPORE (THE TREATY) 2.1 THAT THE LD. AO AND CIT(A) HAVEERRED IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN TREATING THE COST REIMBURSEM ENTS RECEIVED FROM ITS INDIAN ENTITIES ON ACTUAL BASIS AS INCOME CHARGEABLE TO TAX UNDER THE PROVISIONS OF ACT AND DTAA. THE LEARNED CIT(A) AND AO HAVE FAILED TO APPRECIATE THAT THE ASSESSEE HAS NOT RECEIVED ANY MARKUP OR EMBEDDED PROFIT ELEMENT AND ACCORDINGLY T HE SAME ARE NOT TAXABLE AT ALL 2.2 THAT THE LEARNEDAO AND CIT(A) HAVE ERRED IN TA XING THE COST RECHARGES AMOUNTING TO RS.31,35,588/- RECEIVED UNDE R THE 3 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 AGREEMENT AS INTEREST TAXABLE UNDER THE ACT AS WELL AS DTAA ON THE BASIS OF AN IN ADVERTISEMENT MISTAKES IN THE TDS CE RTIFICATE ISSUED BY THE PRAYER OF SUCH RECHARGES AND BY COMPLETELY I GNORING THE DOCUMENTARY EVIDENCES BROUGHT ON RECORD THE ACTUAL NATURE OF THE PAYMENT. 2.3 THAT THE LEARNED AO AND CIT(A) HAVE ERRED IN F ACTS AND IN LAW IN NOT ACCEPTING THE VARIOUS CLASSES OF THE AGREEMENT REAL LY ON THE GROUND THAT THE AGREEMENT WAS NOT SIGNED BY THE APPELLANT/ SIGNED AFTER 1ST JUNE 2004 EVEN THOUGH IT HAS BEEN DULY SIGNED BY TH E APPELLANT AND THE INDIAN ENTITIES. 3. WITHOUT PREJUDICE TO THE ABOVE THAT THE COST RE IMBURSEMENT MADE BY THE INDIAN ENTITIES TO THE PLANT UNDER THE AGREEMEN T IS NOT TAXABLE UNDER THE ACT AS WELL AS TREATY, THE LEARNED AO & C IT(A) HAVE ERRED IN FACTS AND IN LAW IN HOLDING THAT THE SERVICES PR OVIDED UNDER THE AGREEMENT ARE COVERED UNDER THE DEFINITION OF FTS U NDER ARTICLE 12(4)(B) OF THE TREATY EVEN THOUGH THE PLANT HAS NO T MADE AVAILABLE ANY TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HO W OR PROCESSES, WHICH ENABLES THE PERSON ACQUIRING THE SERVICE IS T HE SERVICES TO APPLY THE TECHNOLOGY CONTAINED THEREIN. 3.1 THE LEARNED AO AND CIT(A) HAVE ALSO ERRED IN NO T CONSIDERING THE MEMORANDUM OF UNDERSTANDING (MOU) TO ARTICLE 12 O F THE TREATY BETWEEN INDIA AND USA, WHEREIN THE TERMS MAKE AVAI LABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL KNOW-HOW ARE PROCESSES, HAVE BEEN EXPLAINED, WHILE TREATING THE COST REIMBU RSEMENTS/ RECHARGES AS FTS UNDER ARTICLE 12(4)(B) OF THE TREA TY BETWEEN INDIA AND SINGAPORE. 4. WITHOUT PREJUDICE TO ABOVE THE LEARNED CIT(A) HAS ALSO ERRED IN FACTS IN UPHOLDING RS.31,989,426/- AS TAXABLE RECEIPTS IN THE HANDS OF THE PLANT EVEN THOUGH THE PLANT HAS RECEIVED RS.31,529, 315/- ONLY UNDER THE AGREEMENT. THE LEARNEDCIT(A) HASERRED IN IGNORING THE SUBMISSION MADE BY THE APPELLANT TO HIGHLIGHT THAT RS.460,112/- (31,989,426 31,529,315) WAS INSTEAD PAID BY THE A PPELLANT TO THE INDIAN ENTITY AND DOES NOT REPRESENT ANY RECEIPT. 5. THAT THE LEARNED AO AND CIT(A) HAVE ERRED IN FAC TS AND IN LAW NOT ALLOWING ANY CREDIT OF TAX DEDUCTED AT SOURCE WHILE COMPUTING THE TAX LIABILITY OF THE APPELLANT FOR THE SUBJECT YEAR . 6. THE LEARNED AO HAS ERRED IN FACTS AND IN LAW IN LEVYING INTEREST AMOUNTINGTO RS.1,080,269/- UNDER SECTION 234B OF TH E ACT AS THE PROVISIONS UNDER SECTION 210/211 FOR PAYMENT OF ADV ANCE TAX ARE NOT APPLICABLE ON THE PLANT IN VIEW OF THE DELHI HI GH COURT RULING IN THE CASE OF MITSUBISHI CORPORATION, JAPAN. 7. THE LD. AO HAS ERRED IN FACTS AND IN LAW IN LEVY ING INTEREST UNDER SECTION 234D OF THE ACT AND WITHDRAWING INTEREST UN DER SECTION 24A OF THE ACT IN THE ABSENCE OF ANY REFUND BEING GRANT ED TO THE APPELLANT. 8. THAT THE LEARNED AO HAS ERRED IN FACTS AND IN LA W IN INITIATING THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT FOR THE SUBJECT YEAR FOR CONCEALING PARTICULARS OF INCOME FOR FURNI SHING INACCURATE PARTICULARS OF INCOME. 4 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 9. THAT THE LEARNED AO HAS ERRED IN FACTS AND IN LA W IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271AA AND 271BA O F THE ACT FOR NON-COMPLIANCE OF VARIOUS PROVISIONS OF CHAPTER X O F THE ACT IN CONNECTION WITH THE AFORESAID INTERNATIONAL TRANSAC TIONS WHICH ARE NOT TAXABLE IN THE HANDS OF THE ASSESSEE. GROUND OF APPEAL FOR ASSESSMENT YEAR 2006-07: 1. THAT THE ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE ORDER PASSED UNDER SECTION 143(3) OF THE ACT BY THE ASSISTANT DIRECTOR OF INCOME-TAX, CIRCLE 1(1), INTERNATIONAL TAX, NEW DELHI (HEREINAFTER REFERRED TO AS THE LEARNED AO)AND OR DER PASSED UNDER SECTION 250 OF THE ACT BY THE LEARNED COMMISSIONER OF INCOME- TAX(APPEALS)-XI, NEW DELHI (HEREINAFTER REFERRED TO AS LEARNEDCIT(A) SHOULD BE SET ASIDE AS THE SAME IS BASED ON CONJECT URES AND SERVICES AND IS BAD IN LAW. 2. THAT THE LEARNED AO AND CIT(A) HAVE ERRED IN FAC TS AND IN LAW IN MAKING ADDITION AMOUNTING TO RS.10,125,068/-TO THE RETURNED INCOME OF RS.3,21,71,721/- BY TREATING REIMBURSEMEN TS/RECHARGES OF ACTUAL COST INCURRED BY THE APPELLANT UNDER AN A GREEMENT FOR SERVICES AND COST SHARING (THE AGREEMENT) WITH IN DIAN ENTITIES AS FEE FOR TECHNICAL SERVICES (FTS) UNDER THE ACT AS WELL AS UNDER THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA A ND SINGAPORE (THE TREATY) 2.1 THAT THE LD. AO AND CIT(A) HAVEERRED IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN TREATING THE COST REIMBURSEM ENTS RECEIVED FROM ITS INDIAN ENTITIES ON ACTUAL BASIS AS INCOME CHARGEABLE TO TAX UNDER THE PROVISIONS OF ACT AND DTAA. THE LEARNED CIT(A) AND AO HAVE FAILED TO APPRECIATE THAT THE ASSESSEE HAS NOT RECEIVED ANY MARK-UP OR EMBEDDED PROFIT ELEMENT ON SUCH RECEIPTS AND ACCORDINGLY, THE SAME ARE NOT TAXABLE AT ALL. 2.2 THAT THE LEARNEDAO AND CIT(A) HAVE ERRED IN FA CTS AND IN LAW IN NOT ACCEPTING THE VARIOUS CLAUSES OF AGREEMENT MER ELY ON THE GROUND THAT THE AGREEMENT WAS NOT SIGNED BY THE APP ELLANT/SIGNED AFTER 1 ST JUNE, 2004, EVEN THOUGH IT HAS BEEN DULY SIGNED BY THE APPELLANT AND THE INDIAN ENTITIES. 3. WITHOUT PREJUDICE TO GROUND 2 ABOVE, THE LEARNED AO AND CIT(A) HAVE ALSO ERRED IN FACTS AND CIRCUMSTANCES OF THE C ASE IN MAKING ADDITION OF RS.4,075,156/- BASED ON THE FORM 3CEB OF CARGILL GLOBAL TRADING INDIA PVT. LTD. (CGTIPL) INSTEAD O F RS.34,00,066/- BEING ACTUAL REIMBURSEMENT RECEIVED FROM CGTIPL UND ER THE AGREEMENT BY IGNORING THE SUBMISSIONS MADE IN THIS REGARD. 4. WITHOUT PREJUDICE TO THE ABOVE THAT THE COST REI MBURSEMENT MADE BY THE INDIAN ENTITIES TO THE APPELLANT UNDER THE AGRE EMENT IS NOT TAXABLE UNDER THE ACT AS WELL AS TREATY, THE LEARNE D AO & CIT(A) HAVE ERRED IN FACTS AND IN LAW IN HOLDING THAT THE SERVICES PROVIDED UNDER THE AGREEMENT ARE COVERED UNDER THE DEFINITIO N OF FTS UNDER ARTICLE 12(4)(B) OF THE TREATY EVEN THOUGH THE APPE LLANT HAS NOT MADE AVAILABLE ANY TECHNICAL KNOWLEDGE, EXPERIENCE, SKIL L, KNOW-HOW OR 5 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 PROCESSES, WHICH ENABLES THE PERSON ACQUIRING THE S ERVICE IS THE SERVICES TO APPLY THE TECHNOLOGY CONTAINED THEREIN. 4.1 THE LEARNED AO AND CIT(A) HAVE ALSO ERRED IN NO T CONSIDERING THE MEMORANDUM OF UNDERSTANDING (MOU) TO ARTICLE 12 O F THE TREATY BETWEEN INDIA AND USA, WHEREIN THE TERMS MAKE AVAI LABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL KNOW-HOW ARE PROCESSES, HAVE BEEN EXPLAINED, WHILE TREATING THE COST REIMBU RSEMENTS/ RECHARGES AS FTS UNDER ARTICLE 12(4)(B) OF THE TREA TY BETWEEN INDIA AND SINGAPORE. 5. THAT THE LEARNED AO HAS ERRED IN FACTS AND IN LA W BY APPLYING THE TAX RATE @15% ON THE FTS INCOME OFFERED TO TAX BY T HE APPELLANT IN THE RETURN @10% UNDER ARTICLE 12(2) OF THE TREATY B ETWEEN INDIAN AND SINGAPORE WITHOUT PROVIDING ANY OPPORTUNITY OF BEING HEARD. 6. THE LEARNED AO AND CIT(A) HAVEERRED IN FACTS AND IN LAW IN LEVYING INTEREST AMOUNTING TO RS.514,364/- UNDER SECTION 23 4B OF THE ACT AS THE PROVISIONS UNDER SECTION 210/211 FOR PAYMENT OF ADVANCE TAX ARE NOT APPLICABLE ON THE APPELLANT IN VIEW OF THE DELHI HIGH COURT RULING IN THE CASE OF JACABS CIVIL INCORPORATED (IT A NO. 491/2008). 7. THE LEARNED AO AND CIT(A) HAVE ERRED IN FACTS AN D IN LAW IN WITHDRAWING INTEREST UNDER SECTION 244A OF THE ACT AMOUNTING TO RS.180,431 IN ABSENCE OF ANY REFUND BEING GRANTED T O THE APPELLANT. 8. THAT THE LEARNED AO HAS ERRED IN FACTS AND IN LA W IN INITIATING THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT FOR THE SUBJECT YEAR FOR CONCEALING PARTICULARS OF INCOME FOR FURNI SHING INACCURATE PARTICULARS OF INCOME. 9. THAT THE LEARNED AO HAS ERRED IN FACTS AND IN LA W IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271AA AND 271BA O F THE ACT FOR NON-COMPLIANCE OF VARIOUS PROVISIONS OF CHAPTER X O F THE ACT IN CONNECTION WITH THE AFORESAID INTERNATIONAL TRANSAC TIONS WHICH ARE NOT TAXABLE IN THE HANDS OF THE ASSESSEE. FACTS OF ASSESSMENT YEAR: 2005-06: 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE, CARGILL ASIA PACIFIC HOLDING PTE LIMITED (CAPHL), IS INCORP ORATED IN THE SINGAPORE AND A TAX RESIDENT OF THE SINGAPORE. THE ASSESSEE CLAIMED TO HAVE ENTERED INTO A COST SHARING AGREEME NT WITH CARGILL PRIVATE LIMITED (CIPL), CARGILL GLOBAL TRAD ING INDIA PRIVATE LIMITED (CGTIPL) AND MOSIC INDIA PRIVATE LIMITED (M IPL) (HEREINAFTER COLLECTIVELY REFERRED TO AS COMPANIES ). UNDER THE AGREEMENT, THE COMPANIES WERE CHARGED TOWARDS THE C OST OF THE SERVICES INCURRED BY THE ASSESSEE ON ACTUAL BASIS, WITHOUT ANY 6 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 MARKUP, AS PER THE METHODS PROVIDED IN THE AGREEMEN T FOR ALLOCATION OF THE COST. IN THE PREVIOUS YEAR RELEVA NT TO THE ASSESSMENT YEAR, THE COMPANIES HAVE DEDUCTED TAX AT SOURCE AMOUNTING TO RS.47,22,953/-ON THE PAYMENTS/CREDIT T O THE ASSESSEE. 3.1 THE ASSESSEE FILED RETURN OF INCOME ON 31/10/20 05 DECLARING NIL INCOME. IN THE NOTES FORMING PART OF THE RETURN OF INCOME, THE ASSESSEE CLAIMED THAT THOSE PAYMENTS/CREDIT/REIMBURSEMENT FOR ACTUAL COST INCUR RED WITHOUT ANY INBUILT ELEMENT OF PROFIT, CHARGEABLE TO TAX IN INDIA AND THEREFORE THE TAX DEDUCTED AT SOURCE AMOUNTING TO RS.47,22,953/-HAD BEEN CLAIMED FOR REFUND IN THE RE TURN OF THE INCOME. THE ASSESSEE FURTHER SUBMITTED THAT THE AMO UNT RECEIVED FOR THE SERVICES RENDERED UNDER THE AGREEMENT DOES NOT CONSTITUTE FEE FOR TECHNICAL SERVICES (FTS)UNDER ARTICLE 12 OF INDIA SINGAPORE DOUBLE TAX AVOIDANCE AGREEMENT (DTAA), AS IT DOES NOT MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE ETC. 3.2 THE RETURN OF INCOME FILEDBY THE ASSESSEE WAS S ELECTED FOR SCRUTINY ASSESSMENT AND STATUTORY NOTICES UNDER INC OME-TAX ACT, 1961 (IN SHORT THE ACT) WERE ISSUED AND COMPLIED WITH. 3.3 THE ASSESSING OFFICER OBSERVED THE RECEIPTS SHO WN BY THE ASSESSEE AND HELD THE TAXABILITY OF THOSE RECEIPTS UNDER THE PROVISIONS OF THE ACT AS WELL AS UNDER THE DTAA AND TAXED THE SAME UNDER THE DTAA IN VIEW OF THE PROVISIONS OF SE CTION 90 OF THE ACT IN FOLLOWING MANNER: (I) INTEREST RECEIVED OF RS. 31,35,588/-: ACCORDING TO THE TDS CERTIFICATE ISSUED BY CARGILL INDIA PRIVATE LIMITED(CIPL), THE SAID COMPANY HAS PAID INTEREST O F 7 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 RS.31,35,588/-AND DEDUCTED TAX OF RS.4,70,339/-AT THE RATE OF 15% FROM THE PAYMENT AND DEPOSITED INTO CENTRAL GOVERNMENT ACCOUNT. THE INTEREST PAYMENT HAS BEEN MADE BY AN INDIAN RESIDENT, THEREFORE IN V IEW OF THE SECTION 9(1)(V)(B) OF THE ACT, THE INTEREST INCOME IS DEEMED TO ACCRUE OR ARISE IN INDIA AND SAME IS LIAB LE TO TAX AS PER THE PROVISIONS OF SECTION 115A(1)(A)(II) AT THE RATE OF 20% ON THE GROSS AMOUNT. THE INTEREST IS AL SO DEEMED TO ARISE IN INDIAAS PER THE PROVISIONS OF PARAGRAPH 5 OF ARTICLE 11 OF THE DTAA BETWEEN INDIA AND THE SINGAPORE AND SAME IS TAXABLE AT THE RATE O F THE 15% OF THE GROSS AMOUNT IN VIEW OF THE PROVISIO N OF PARAGRAPH 2(B) OF THE ARTICLE 11 OF THE DTAA. CONSIDERING THE BENEFICIAL DTAA PROVISIONS, THE INTEREST WAS HELD TAXABLE AT THE RATE OF 15% OF THE GROSS AMOUNT. (II) PROFESSIONAL SERVICES AND AP/IT RECHARGE :THE ASSESSING OFFICER OBSERVED DEDUCTION OF TAX AT SOUR CE BY THE COMPANIES AT THE RATE OF 15% ON PAYMENT MADE ON ACCOUNT OF PROFESSIONAL SERVICES AND AP/IT RECHA RGE. THE ASSESSING OFFICER NOTED THAT ONLY PART INVOICES OF AP RECHARGE, IT RECHARGE, INTERNATIONAL LEASED CHAR GES WERE PROVIDED TO HIM AND FURTHER NO DOCUMENTS IN SUPPORT OF THE INVOICES, AS HOW THE COST WAS ALLOCA TED BY THE ASSESSEE TO DIFFERENT COMPANIES FOR A SPECIF IC SERVICE. IN VIEW OF FAILURE TO PROVIDE THE SAID DOC UMENT, THE ASSESSING OFFICER REJECTED THE CONTENTION OF TH E REIMBURSEMENT OF THE EXPENSES TOWARDS COST. 8 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 (III) THE ASSESSEE PROVIDED INVOICES SUMMARY WHICH INCLUDED DOLLAR AMOUNT EQUIVALENT TO RS.2,10,46,637 /- AND BALANCE INVOICES WERE ON ACCOUNT OF IT RECHARGE / AP RECHARGE AND RELOCATION OF PHILKANA JAIRAM. TH E ASSESSEE DID NOT PROVIDE COMPLETE INVOICES AND ALSO DID NOT EXPLAIN WHAT WERE THE TECHNICAL SERVICES, HOW T HE SAME RENDERED AND WHAT WERE THE DELIVERABLES. THE ASSESSEE ONLY PROVIDED CERTAIN TIMESHEET OF THE ACTIVITIES PERFORMED INDICATING TAX RELATED ADVICES . ACCORDING TO THE ASSESSING OFFICER, THE AMOUNT RECE IVED FOR SERVICES RENDERED ARE FTS IN TERMS OFPARAGRAPH 1 TO 4 OF ARTICLE 12 OF THE DTAA BETWEEN INDIA AND THE SINGAPORE. THE CONTENTION OF THE ASSESSEE ON THE OT HER HAND IS THAT IT HAS NOT MADE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HOW OR PROCESS WHICH ENABLES THE PERSON ACQUIRING THE SERVICE TO A PPLY THE TECHNOLOGY CONTAINED THEREIN. ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE HAS NOT PROVIDED DOCUMENT OF THE NATURE OF THE SERVICES RENDERED AND ONLY PROVIDED TIMESHEET IN RELATION TO ADVISORY SER VICES PROVIDED AND THUS CLAIM OF THE ASSESSEE THAT NO TECHNICAL KNOWLEDGE ETC HAS BEEN MADE AVAILABLE, CA N BE VERIFIED. THE LEARNEDASSESSING OFFICER DISTINGUI SHED VARIOUS JUDICIAL PRECEDENTSCITED BY THE ASSESSEE AN D HELD THE PAYMENT RECEIVED FOR TECHNICAL SERVICES OF RS.2,21,21,518/- FOR IT RECHARGE/AP RECHARGESAS TAXABLE IN INDIA AS PER THE PROVISIONS OF THE ACT AS WELL AS DTAA BETWEEN INDIA AND SINGAPORE. 9 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 FACTS OF ASSESSMENT YEAR 2006-07: 4. FOR THE ASSESSMENT YEAR 2006-07, THE ASSESSEE FI LED RETURN OF INCOMEON 30/11/2006 DECLARING TOTAL INCOME OF RS.3,21,71,721/-. IN THE NOTES TO THE COMPUTATION O F THE INCOME, IT WAS SUBMITTED THAT DURING THE YEAR, THE ASSESSEE HAS ENTERED INTO A SERVICE AGREEMENT DATED 01/06/2005 WITH CER TAIN INDIAN ENTITIES OF THE GROUP, WHEREBY THE ASSESSEE HAS REN DERED CERTAIN SERVICES AND FOR WHICH IT HAS CHARGED THE INDIAN EN TITIES AT COST +6%. FURTHER, CERTAIN OTHER SERVICES HAVE BEEN REND EREDBY THE ASSESSEE AT COST WITHOUT ANY PROFIT ELEMENT. DURING THE SCRUTINY ASSESSMENT PROCEEDING, THE LEARNEDASSESSING OFFICER OBSERVED THAT FORA PERIOD OF TWO MONTHS OF THE ASSESSMENT YE AR I.E. APRIL AND MAY 2005, THE ASSESSEE HAS RENDERED SERVICES TO THE INDIAN ENTITIES AT COST WITHOUT ANY MARKUP UNDER THE AGREE MENT ENTERED INTO IN JUNE , 2004(OLD AGREEMENT) AND INCOME OF SAME HAS NOT BEEN OFFERED FOR TAX IN INDIA EITHER UNDER THE PROV ISIONS OF THE ACT OR UNDER THE PROVISIONS OF THE DTAA. FROM 01/06/200 5, THE ASSESSEE HAS RENDERED SERVICES UNDER NEW SERVICE AG REEMENT( NEW AGREEMENT ) UNDER WHICH A MARKUP OF 6% ON TH E COST HAS BEEN CHARGED, AND THE AMOUNT HAS BEEN OFFERED FOR T AX AS FEE FOR TECHNICAL SERVICES (FTS). 4.1 THE ASSESSING OFFICER OBSERVED THAT NEITHER ALL THE INVOICES NOR DOCUMENTSIN SUPPORT OF THE DETAILS OF THE SERVI CES RENDERED UNDER THE OLD AGREEMENT WERE FILED BEFORE HIM. HE ALSO OBSERVED THAT SIMILAR SERVICES WITH DIFFERENT NOMENCLATURES HAVE BEEN RENDERED FROM JUNE 2005 UNDER NEW AGREEMENT , BUT NO DETAILS OF THOSE ALSO WERE PROVIDED BY THE ASSESSEE SO AS T O CORRELATE THE 10 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 SERVICES RENDERED BY THE ASSESSEE. THE ASSESSING OF FICER FOLLOWING HIS FINDING IN ASSESSMENT YEAR 2005-06, HELD THE PA YMENT RECEIVED AND CLAIMED BY THE ASSESSEE AS COST REIM BURSEMENT , AS TAXABLE IN INDIAAS PER THE PROVISIONS OF THE ACT AS WELL AS THE PROVISION OF THE DTAA BETWEEN INDIA AND THE SINGAPO RE AND MADE ADDITION OF RS.1,01,25,068/- TO THE RETURNED INCOME . 4.2 ON FURTHER APPEAL BY THE ASSESSEE FOR BOTH ASSE SSMENT YEARS 2005-06 AND 2006-07 , THE LD. CIT(A) PASSED A COMMO N ORDER FOR BOTH ASSESSMENT YEARS. HE OBSERVED THAT CLAIM OF TH E ASSESSEE OF THE REIMBURSEMENT OF THE COST WAS NOT JUSTIFIABLE I N VIEW OF MATERIAL FACTS BROUGHT ON RECORD BY THE ASSESSING O FFICERI.E. NEITHER INVOICES IN RESPECT OF THE TECHNICAL SERVIC ES NOR DETAILS IN RESPECT OF THE RENDERING OF THE TECHNICAL SERVICES WERE PROVIDED BY THEASSESSEE. 4.3 FOR BOTH THE ASSESSMENT YEARS I.E 2005-06 AND 2 006-07, THE LD. CIT(A), UPHELD THE ACTION OF THE ASSESSING OFFI CER HOLDING THE AMOUNT OF REIMBURSEMENT RECEIVED AS TAXABLE UNDER T HE PROVISIONS OF THE ACT AS WELL AS UNDER THE PROVISIO NS OF THE DTAA BETWEEN THE INDIA AND THE SINGAPORE. 4.4 IN ASSESSMENT YEAR 2005-06, LD. CIT(A) ALSO UPH ELD THE TAXING OF AMOUNT OF RS.31,35,588/-AS INTEREST RECEI VED BY THE ASSESSEE AS AGAINST THE CLAIM OF THE ASSESSEE OF RE IMBURSEMENT OF THE COST. 5. BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE F OR ASSESSMENT YEAR 2005-06, HAS FILED A PAPER BOOK CON TAINING PAGES 1 TO 144 CONTAINING A COPY OF THE AGREEMENT R ELIED UPON BY THE ASSESSEE FOR CLAIMING COST SHARING BETWEEN THE ASSESSEE AND THE COMPANIES IN RESPECT OF THE VARIOUS SERVICES RE NDERED BY THE 11 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 ASSESSEE. FOR ASSESSMENT YEAR 2006-07, THE LEARNEDC OUNSEL FILED A PAPER CONTAINING PAGES 1-150 CONTAINING A COPY OF OLD SERVICE AGREEMENT AS WELL AS NEW SERVICE AGREEMENT DATED 01 /06/2005. 5.1 IN ASSESSMENT YEAR 2005-06, THE GROUND NO. 1 TO 2.1 AND 2.3 TO 3.1 ARE RELATED TO TREATING THE PAYMENT RECE IVED BY THE ASSESSEE FOR SERVICES RENDERED AS FEE FOR TECHNICAL SERVICES (FTS). SIMILARLY, IN ASSESSMENT YEAR 2006-07, THE GROUNDS NO. 1 TO 4.1 OF THE APPEAL RELATES TO THE SAME ISSUE OF TREATING THE PAYMENT RECEIVED BY THE ASSESSEE FOR SERVICES RENDERED AS F EE FOR TECHNICAL SERVICES (FTS). 5.2 REGARDING THE ISSUE OF PAYMENT OF SERVICES CONS IDERED AS FTS FOR ASSESSMENT AT 2005-06 AND 2006-07, THE LEAR NEDCOUNSEL FIRST OF ALL, SUBMITTED THAT THE ASSESSEE PROVIDED SUPPORT SERVICES SUCH AS ACCOUNTING, LEGAL, TAXATION TO ITS GROUP CO MPANIES IN ASIA-PACIFIC SECTOR UNDER A, SHARING AGREEMENT EFFE CTIVE FROM JUNE 2004(HEREINAFTER SHALL BE REFERRED AS OLD SERVICE AGREEMENT), A COPY OF WHICH IS AVAILABLE ON PAGE 4-21 OF PB FOR A Y 2006-07. FOR THE SERVICES RENDERED FOR 10 MONTHS OF ASSESSMENT Y EAR 2005-06 (JUNE, 2004 TO MARCH, 2005) AND FOR 2 MONTHS OF AS SESSMENT YEAR 2006-07 ( APRIL 2005 TO MAY 2005), THE ASSESSE E CHARGED ONLY COST INCURRED WITHOUT ANY MARKUP, AS PER THIS OLD SERVICE AGREEMENT. 5.3 BUT FROM 01/06/2005, THE ASSESSEE ENTERED INTO ANOTHER AGREEMENT FOR RENDERING SERVICES TO GROUP ENTITIES LOCATED IN INDIA, ACOPY OF WHICH IS AVAILABLE ONPAGE 22 -37 OF THE PB FOR ASSESSMENT YEAR 2006-07(HEREINAFTER REFERRED TO AS NEW SERVICE AGREEMENT). CONSEQUENTLY, FROM JUNE, 2005, AS PER THIS NEW SERVICE AGREEMENT, THE ASSESSEE HAS CHARGED COST P LUS 6% 12 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 MARKUP AND HAS ALSO OFFERED TO TAX SUCH INCOME AS F EE FOR TECHNICAL SERVICES (FTS). 5.4 THE LEARNEDCOUNSEL REFERRED TO PAGE 136 TO 147 OF THE PAPER-BOOK FOR ASSESSMENT YEAR 2006-07, WHEREIN ART ICLE 12 OF THE DTAA BETWEEN INDIA AND THE SINGAPORE IS CONTAIN ED. ACCORDING TO THE LEARNEDCOUNSEL, THE DEFINITION FOR FEE FOR TECHNICAL SERVICES IN ARTICLE 12(4) GET ATTRACTED O NLY WHEN THE CONDITION MENTIONED IN PARAGRAPHS (B) AND (C) IS M ET. HE SUBMITTED THAT PARA (B) STATES THAT SERVICE QUALIFY AS FTS ONLY WHEN SUCH SERVICES MAKE AVAILABLE TECHNICAL KNOWLE DGE, EXPERIENCE, SKILL, KNOW-HOW OR PROCESSES, WHICH ENA BLES THE PERSON ACQUIRING THE SERVICES TO APPLY THE TECHNOLO GY CONTAINED THEREIN OR AND PARA (C) STATES THAT SERVICE QUALI FY AS FTS ONLY WHEN SUCH SERVICE CONSIST OF THE DEVELOPMENT AND TRANSFER OF THE TECHNICAL PLAN OR TECHNICAL DESIGN BUT EXCLUDE ANY SERVICE THAT DOES NOT ENABLE THE PERSON ACQUIRING THE SERVI CE TO APPLY THE TECHNOLOGY CONTAINED THEREIN. 5.5 THE LEARNED COUNSEL SUBMITTED THAT NATURE OF SE RVICES INVOLVED UNDER THE AGREEMENT WAS SET OUT AT PAGES 7 5 TO 77 OF THE PAPER-BOOK AND IN VIEW OF THE CASES RELIED UPON, T HE AMOUNT RECEIVED BY THE ASSESSEE WERE IN THE NATURE OF THE REIMBURSEMENT AND IN ANY CASE DO NOT CONSTITUTE FTS AS A MAKE AVA ILABLE CONDITION IS NOT SATISFIED. 5.6 THE LEARNED COUNSEL FURTHER SUBMITTED THAT, WIT HOUT PREJUDICE TO THE ABOVE, THE CONTEXT IN WHICH SERVIC ES IN QUESTION ARE RENDERED UNDER COST SHARING AGREEMENT BETWEEN G ROUP CONCERNS CANNOT BE LIGHTLY IGNORED. ECONOMIC CONTEX T AND NECESSITY OF RESORTING TO SUCH AN ARRANGEMENT FOR R OUTINE DAY-TO- 13 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 DAY ACTIVITIES, IN CONTRAST TO SAY RESEARCH AND DEV ELOPMENT OR TECHNOLOGY DEVELOPMENT EFFORTS, NEED TO BE APPRECIA TED. ANY ENTITY DESIROUS OF ACQUIRING TECHNICAL KNOWLEDGE, W HICH IT INTEND TO PUT TO USE INDEPENDENTLY IN FUTURE WITHOUT RECO URSE TO THE PERFORMANCE OF THE SERVICE, WOULD NOT ENTER INTO, S HARING ARRANGEMENT YEAR ON YEAR FOR DAY-TO-DAY ACTIVITIE S. WHERE COST CONSIDERATION AND BUSINESS ECONOMICS DO NOT JUSTIFY ENGAGEMENT OF SKILLED PERSONNEL IN EACH OF THE ROUTING FUNCTIO NS NECESSARY FOR CONDUCTING DAY-TO-DAY BUSINESS, BUSINESS GROUP HAS RESORTED TO, SHARING ARRANGEMENT. THUS, LACK OF DESIRE TO ACQUIR E KNOWLEDGE IN SUCH DAY-TO-DAY DYNAMIC ACTIVITIES FOR FUTURE US E, BEING ROOT CAUSE FOR COST SHARING ARRANGEMENT, ALLEGATIONS SUC H AS ONCE RAISED BY THE LEARNED AO AND UPHELD BY THE LD. CIT( A) THAT THE SERVICE PROVIDER MADE AVAILABLE TECHNICAL KNOWLE DGE, AS CONTEMPLATED UNDER ARTICLE 12(4)(B), ARE WITHOUT A NY BASIS IN THE PRESENT FACTS OF THE CASE. 5.7 THE LEARNED COUNSEL SUBMITTED THAT THE FACT THA T THE PROVISION OF SERVICES MAY REQUIRE TECHNICAL INPUT B Y PERSON PROVIDING THE SERVICE, DOES NOT PER SE MEAN THAT TE CHNICAL KNOWLEDGE, SKILLS ETC ARE MADE AVAILABLE TO THE PER SON PURCHASING THE SERVICES. 5.8 FURTHER, IN VIEW OF THE FACT THAT AFTER JUNE 20 05 ONWARD THE ASSESSEE HAS CHARGED MARKUP AT THE RATE OF 6 PERCEN TILE ON THE COST AND HAS OFFERED TO TAX AS INCOME AS FTS, THE L EARNEDCOUNSEL SUBMITTED THAT IN VIEW OF THE DECISION OF THE HONB LE SUPREME COURT IN THE CASE OF CIT VS MRP FIRM, MUAR (1965) 56 ITR 67 (SC), WHEREIN IT IS HELD THAT THE DOCTRINE OF APPR OBATE AND REPROBATE IS ONLY A SPECIES OF ESTOPPEL AND APPLIE S ONLY TO THE 14 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 CONDUCT OF THE PARTIES. AS IN THE CASE OF THE ESTOP PEL, IT CANNOT OPERATE AGAINST THE PROVISION OF THE STATUTE. IF A PARTICULAR INCOME IS NOT TAXABLE UNDER THE INCOME-TAX ACT, IT CANNOT BE TAXED ON THE BASIS OF THE ESTOPPEL OR ANY OTHER EQUITABLE DOCTRI NE. EQUITY IS OUT OF THE PLACE IN THE TAX LAW, APARTICULARINCOME IS E ITHER ELIGIBLE TO TAX UNDER THE TAX STATUTE OR IT IS NOT. IF IT IS NO T, THE ITO HAS NO POWER TO IMPOSE TAX ON THE SAID INCOME. ACCORDINGLY , THE LEARNEDCOUNSEL SUBMITTED THAT QUESTION INVOLVED IN PRESENT CASE ON WHETHER COST REIMBURSEMENT RECEIVED BY THE ASSES SEE DURING ASSESSMENT YEAR 2005-06 AND 2006-07 SATISFY MAKE AV AILABLE CONDITION UNDER ARTICLE 12 WILL HAVE TO BE DECIDED IN ACCORDANCE WITH LAW WITHOUT BEING INFLUENCED BY THE EXTRANEOUS FACTORS LIKE IN SUBSEQUENT YEARS BY ADOPTING A DIFFERENT MODEL R ECEIPT OR OFFERED TO TAX IN INDIA. 5.9 ON THE CONTRARY, THE LEARNED DEPARTMENTAL REPRE SENTATIVE (DR) SUBMITTED THAT THE ASSESSEE HAS NEITHER FURNIS HED ALL INVOICES IN RESPECT OF THE SERVICES RENDERED NOR FU RNISHED ANY DOCUMENTARY EVIDENCE IN RESPECT OF THE DETAILS OF T HE SERVICES RENDERED. IF THE ASSESSEE CONTESTED THAT PAYMENT FO R SERVICES RENDERED UNDER THE AGREEMENT ARE NOT FEE FOR TECHNI CAL SERVICES (FTS), THEN ONUS IS ON THE ASSESSEE TO SUBSTANTIATE WITH THE HELP OF DOCUMENTARY EVIDENCE.HE SUBMITTED THAT THE AUTHO RITIES HAVE BEEN PRECLUDED FROM EXAMINING THE DOCUMENTS WHICH A MOUNTS TO FORECLOSURE OF THE OPPORTUNITY TO THE DEPARTMENTALA UTHORITIES. IN ABSENCE OF THOSE DOCUMENTS, THE LEARNEDASSESSING OF FICER WAS JUSTIFIED IN REJECTING THE CONTENTION OF THE ASSESS EE THAT THE PAYMENTS ARE IN RESPECT OF REIMBURSEMENT OF THE COS T OF SUPPORT SERVICES ONLY. 15 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 5.10 HE FURTHER SUBMITTED THAT THE AGREEMENT FOR SE RVICES INCOME SHARING (OLD SERVICE AGREEMENT) , WHICH IS BETWEEN THE ASSESSEE AND CARGIL INC., START WITH THE SENTENCE THAT THE A GREEMENT IS MADE AMONG THE FOLLOWING AS OF 01/06/2004, HOWEVER, REPRESENTATIVE OF CARGILL INC HAS SIGNED ON 19/01/2 005. HE FURTHER SUBMITTED THAT ACCORDING THE DOCUMENTS FILE D IN PAPER BOOK , THE INDIAN ENTITIES I.E. CARGILL INDIA PRIVA TE LIMITED (CIPL) AND CARGILL GLOBAL TRADING INDIA PRIVATE LIMITED ( CGTIPL) BECAME PARTY TO THE AGREEMENT BY WAY OF LETTER DATED 01/06 /2004 ADDRESSED TO THE ASSESSEE. ACCORDING TO THE LEARNED DR, WHEN THE ORIGINAL AGREEMENT (OLD SERVICE AGREEMENT) ITSE LF CAME INTO OPERATION FROM 19/01/2005 AFTERSIGNING BY THE ACCEP TING PARTY, THE CLAIM OF THE ASSESSEE THAT AGREEMENT CAME INTO EFFECT FROM 01/06/2004 WITH THE INDIAN ENTITIES BY WAY OF LETTE R DATED 01/06/2004, IS DOUBTFUL AND NEED PROPER EXAMINATION OF THE AUTHENTICITY OF THE AGREEMENT. 5.11 HE FURTHER REFERRED TO VARIOUS CLAUSES OF THE AGREEMENT TO HIGHLIGHT THAT THE SERVICES RENDERED WERE SPECIFIC TO THE ENTITIES AND NOT IN THE NATURE OF THE COST SHARING. HE REFER RED TO THE SERVICES UNDER THE GROUP MANAGEMENT WHICH READS AS UNDER: (III) ADVISES ON THE PROPER HANDLING OF BALANCE SH EET, FINANCE AND RISK OF THE ASIA PACIFIC BUSINESSES. (IV) PROMOTES AND SUPPORTS THE GROWTH OF EXISTING BUSINESSES, DEVELOPS NEW BUSINESS OPPORTUNITIES, AND SEEKS OUT AND IDENTIFIES ACQUISITION CANDIDATES. 5.12 HE SUBMITTED THAT UNDER THE SERVICES OF ADVISI NG ON THEPROPER HANDLING OF THE BALANCE-SHEET, FINANCE AN D RISK OF THE BUSINESSES, THE ASSESSEE PROVIDES KNOWLEDGE TO THE RECIPIENT, WHICH IS HAVING POSSIBILITY OF UTILIZING FOR FURTHE R USE BY THE 16 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 RECIPIENT, AND THUS PAYMENT FOR SUCH SERVICES FALLS UNDER FTS AND MAKE AVAILABLE CLAUSE ALSO GET SATISFIED. 5.13 THE LEARNED DR FURTHER REFERRED TO THE SERVICE S MENTIONED IN THE AGREEMENT UNDER THE HEAD CONTROLLER-ASIA /PACIF IC SECTOR, WHICH ARE REPRODUCED AS UNDER: CONTROLLER-ASIS/PACIFIC SECTOR: (I) ENSURES THAT FINANCIAL AND OPERATING CONTROLS IN TH E ASIA/PACIFIC SECTOR ARE ADEQUATE TO SAFEGUARD CARGILL ASSETS AND THE INTEGRITY OF THE FINANCIAL REPORTING SYSTEM. (II) MONITORS COMPLIANCE WITH CORPORATE FINANCIAL AND OP ERATING POLICIES. (III) ADVISES AND PARTICIPATES IN THE DEVELOPMENT OF MAJO R NEW ACCOUNTING AND DATA PROCESSING SYSTEMS. (IV) PARTICIPATES IN THE SELECTION PROCESS FOR COUNTRY A ND PRODUCT LINE CONTROLLERS, SENIOR ACCOUNTANTS AND SENIOR DATA PRO CESSING POSITIONS WITHIN THE GROUP. (V) REVIEWS AND ADVISES REGARDING THE ESTABLISHMENT OF MAJOR RESERVES AND REGARDING OTHER DECISIONS/EVENTS THAT COULD HAVE A SIGNIFICANCE IMPACT ON THE EARNINGS AND FINANCIAL STATEMENTS OF THE MEMBERS OF THE GROUP. 5.14 THE LEARNED DR SUBMITTED THAT ABOVE SERVICES A RE CORE TO THE BUSINESS WHICHARE IN THE NATURE OF FTS AND ALSO FULFILS THE CONDITION OF MAKE AVAILABLE CLAUSE. 5.15 THE LD DR IN SUPPORT OF HIS CONTENTION THAT PA YMENT FOR SERVICES RENDERED IN THE INSTANT CASE ARE FTS, RELI ED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF H J HEINZ ( ITA NO. 6252/DEL/2012). 5.16 THE LEARNEDCOUNSEL OF THE ASSESSEE IN THE REJO INDER SUBMITTED THAT ASSESSEE HAD SUBMITTED PART OF THE I NVOICES, WHICH HAVE BEEN EXAMINED BY THE LEARNEDASSESSING OF FICER. FURTHER, HE SUBMITTED THAT LD DR ATTEMPTED TO SET U P A NEW CASE BY READING OUT OF CONTEXT OBSERVATIONS, WHICH WAS N OT PERMITTEDIN VIEW OF THE GUIDELINES LAID DOWN IN A SPECIAL BENCH DECISION IN THE CASE OF MAHINDRA AND MAHINDRA 313 ITR 264 AT PLACIT UM 79. HE 17 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 FURTHER SUBMITTED THAT FACTS OF THE CASE OF H. J. H EINZ (SUPRA) ARE DISTINGUISHABLE AND CONCLUSION REACHED THEREIN WOUL D NOT BE APPLICABLE OVER THE FACTS OF THE INSTANT CASE. HE S UBMITTED THAT IN THE SAID CASE THE SERVICES PROVIDED UNDER SERVICE A GREEMENT FLEW FROM THE TERMS OF TTLA (TECHNOLOGY TRANSFER AND LIC ENSE AGREEMENT). HE SUBMITTED THAT BOTH SERVICE AGREEMEN T AND TTLA UNDER WHICH ROYALTY WAS PAID FOR TECHNOLOGY TRANSFE R, ARE RELATED CONTRACTS AND THE SERVICE FEE CAN BE CONSIDERED ANC ILLARY AND SUBSIDIARY TO APPLICATION AND ENJOYMENT OF RIGHTS F OR WHICH ROYALTY WAS PAID AND HENCE COVERED UNDER ARTICLE 12 (4)(A) OF THE TREATY AND THUS THE ASSESSEES CLAIM THAT IT DOES N OT MAKE AVAILABLE ANY KNOW HOW TECHNOLOGY THROUGH SERVICE W AS ACADEMIC. ACCORDING TO THE LEARNEDCOUNSEL DECISION OF THE COORDINATE BENCH IN THE CASE OF EXXON MOBIL (2018)9 2 TAXMANN.COM 5 IS MORE RELEVANT TO THE PRESENT CASE WHICH INVOLVES INDIA SINGAPORE TREATY AS ALSO SERVICES OF THE SIMILAR NATURE ARE DIRECTLY RELEVANT TO DECIDE THE ISSUE IN THE PRESENT APPEAL. 5.17 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON THE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON REC ORD. THE MOOT QUESTION IN THE INSTANT CASE IS WHETHER THE PAYMENT FOR SERVICES RENDERED BY THE ASSESSEE ARE MAINLY IN THE NATURE O F THE COST REIMBURSEMENT FOR SUPPORT SERVICES OR IN THE NATURE OF FEE FOR TECHNICAL SERVICES (FTS). 5.18 FOR PAYMENT FOR SERVICES TO FALL UNDER THE ART ICLE 12 ( FEE FOR TECHNICAL SERVICES) OF THE INDIA SINGAPORE DTAA, TH E SERVICES SHOULD FIRST BE OF TECHNICAL OR MANAGERIAL OR CONS ULTANCY IN 18 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 NATURE AS DEFINED UNDER ARTICLE 12(4) OF THE DTAA, WHICH READS AS UNDER: ARTICLE 12(4): THE TERM FEES FOR TECHNICAL SERVIC ES AS USED IN THIS ARTICLE MEANS PAYMENTS OF ANY KIND TO ANY PERSON IN CONSIDERATION FOR SERVICES OF A MANAGERIAL, TECHNICAL OR CONSULTA NCY NATURE (INCLUDING THE PROVISION OF SUCH SERVICES THROUGH T ECHNICAL 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 PAY MENT DESCRIBED IN PARAGRAPH 3 IS RECEIVED: OR B. MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKI LL, KNOW- HOW OR PROCESSES, WHICH ENABLES THE PERSON, ACQUIRI NG THE SERVICES TO APPLY THE TECHNOLOGY CONTAINED THEREIN; OR C. CONSIST OF THE DEVELOPMENT AND TRANSFER OR A TECHNI CAL PLAN OR TECHNICAL DESIGN, BUT EXCLUDES ANY SERVICE THAT DOE S NOT ENABLE THE PERSON ACQUIRING THE SERVICE TO APPLY THE TECHN OLOGY CONTAINED THEREIN. 5.19 FOLLOWING PAYMENTS, HOWEVER HAVE BEEN EXCLUDED FROM THE DEFINITION OF THE FEE FOR TECHNICAL SERVICES AS PROVIDED IN ARTICLE 12(5) OF THE TREATY: 5. NOTWITHSTANDING PARAGRAPHE 4, FEES FOR TECHNIC AL 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 OTHER THAN A SALE DESCRIBED IN PARAGRAPH 3(A); B. FOR SERVICES THAT ARE ANCILLARY AND SUBSIDIARY TO T HE RENTAL OF SHIPS, AIRCRAFT, CONTAINERS OR OTHER EQUIPMENT USED IN CONNECTION WITH THE OPERATION OF SHIPS OR AIRCRAFT IN INTERNAT IONAL TRAFFIC; C. FOR TEACHING IN OR BY EDUCATION INSTITUTIONS; D. FOR SERVICES FOR THE PERSONAL USE OF THE INDIVIDUAL OR INDIVIDUALS MAKING THE PAYMENT; E. TO AN EMPLOYEES OF THE PERSON MAKING THE PAYMENTS O R TO ANY INDIVIDUAL OR FIRM OF INDIVIDUALS (OTHER THAN A COM PANY) FOR PROFESSIONAL SERVICES AS DEFINED IN ARTICLE 14; F. FOR SERVICES RENDERED IN CONNECTION WITH AN INSTALL ATION 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 A RTICLE 5. 5.20 FOR ASCERTAINING THE CHARACTER OF THE SERVICES WHETHER THE SAME ARE ROUTINE SUPPORT SERVICES OR TECHNICAL, MANAGERIAL OR CONSULTANCY, BEFORE THE LOWER AUTHORITIES THE ASSE SSEE PROVIDED ONLY PART INVOICES AND COPY OF THE AGREEMENT. COPIE S OF 5 INVOICES 19 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 PROVIDED BY THE ASSESSEE TO THE ASSESSING OFFICER A RE PLACED ON PAGE 46 TO 50 OF THE PAPER-BOOK FOR AY 2005-06. THE COPY OF THE AGREEMENT (OLD AGREEMENT) IS PROVIDED BY THE ASSESS EE TO THE ASSESSING OFFICER, WHICH IS PLACED ON PAGE 4-21 OF THE PAPER-BOOK FOR ASSESSMENT YEAR 2005-6 AS WELL AS FOR THE PAPER -BOOK FOR ASSESSMENT YEAR 2006-07. WE HAVE PERUSED THE AGREEM ENTS. THE DETAILS OF THE SERVICES AND ALLOCATION METHOD HAVE BEEN PROVIDED IN EXHIBIT-1 TO THE AGREEMENT. THE TITLE OF THE SER VICES INCLUDE ACCOUNTING, AUDIT. GROUP MANAGEMENT, PUBLIC AFFAIRS , CONTROLLER- ASIA, HUMAN RESOURCES, LEGAL, TAX, BUSINESS UNIT EN GINEERING, INFORMATION AND SYSTEM SERVICES (REGIONAL IT MANAGE MENT AND INFORMATION PROTECTION, REGIONAL NETWORK GROUP, TCO PROJECT, MICROSOFT WINDOWS TECHNICAL SERVICE GROUP, REIGONAL CAN IT GROUP) , GLOBAL FINANCIAL SOLUTION DEPARTMENT ETC. 5.21 THE INVOICES PROVIDED BY THE ASSESSEE CONTAIN S THE DESCRIPTION OF THE SERVICES AS AP RECHARGE, IT RE CHARGE, INTERNATIONAL LEASED CCT, DIGINET ETC. 5.22 IN THE AGREEMENT UNDER VARIOUS TITLES FURTHER SCOPE OF THE SERVICES HAS BEEN PROVIDED. BUT IN OUR OPINION, FRO M THE MERE SCOPE OF THE SERVICES, IT CANNOT BE ASCERTAINED WHI CH SERVICES HAVE BEEN ACTUALLY RENDERED BY THE ASSESSEE. FURTHE R, NOTHING CAN BE MADE OUT ABOUT THE NATURE OF THE SERVICES FR OM THE OF DESCRIPTION SERVICES RENDERED IN THE INVOICES. THE DESCRIPTION OF THE SERVICES IN THE INVOICEIS ALSO NOT GETTING CORR ELATED WITH THE VARIOUS TITLES OF SERVICES UNDER THE AGREEMENT. 5.23 FURTHER, THE LEARNED DR HAS REFERRED TO THE VA RIOUS CLAUSES OF THE AGREEMENT TO HIGHLIGHT THE POSSIBILITY OF TH E SERVICES IN THE NATURE OF TECHNICAL SERVICES. IN OUR VIEW, THE AGRE EMENT PROVIDES 20 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 SCOPE OF THE SERVICES BUT WHAT THE ACTUAL SERVICES HAVE BEEN RENDERED CANNOT BE ASCERTAINED FROM THE AGREEMENT. THE AGREEMENT CAN GIVE A SMELL ABOUT POSSIBILITY OF SER VICES IN THE NATURE OF THE TECHNICAL SERVICES, MANAGERIAL OR CON SULTANCY BUT THAT IS NOT A CONFIRMATORY TEST AND FOR ASCERTAININ G THE NATURE OF THE SERVICES, THE ASSESSEE WAS REQUIRED TO PROVIDE ALL THE DOCUMENTS IN RELATION TO THE SERVICES RENDERED. BUT THE ASSESSEE HAS NEITHER SUBMITTED ANY SUCH DOCUMENTS BEFORE THE LOWER AUTHORITIES NOT BEFORE US. 6. WE HAVE NOTICED THAT THE ASSESSEE HAS ENTERED IN TO A FRESH AGREEMENT (NEW SERVICE AGREEMENT) FROM 01/06/2005 A ND SCOPE OF SERVICESUNDERTHE AGREEMENT HAS BEEN PROVIDED ON PAGE 26 TO 32 OF THE PAPER-BOOK FOR ASSESSMENT YEAR 2006-07. T HE SERVICES COVERED UNDER THE SCOPE OF THE AGREEMENT ARE ACCOUN TING, AUDIT, GROUP MANAGEMENT, HUMAN RESOURCES, LEGAL, TAX, BUSI NESS UNIT ENGINEERING, INFORMATION AND SYSTEM SERVICES, FINAN CIAL SOLUTIONS DEPARTMENT ETC. WE FIND THAT SIMILAR SERVICES WERE PROVIDED UNDER THE OLD AGREEMENT, DETAILS OF WHICH ARE AVA ILABLE ON PAGE 11 TO 14 OF THE PAPER-BOOK FOR ASSESSMENT TO 2006- 07. 6.1 FOR THE SERVICES RENDERED UNDER THE NEW AGREEME NT, THE ASSESSEE HAS CHARGED MARKUP AT THE RATE OF 6% ON TH E COST AND ALSO OFFERED THE PAYMENT FOR TAX AS FEE FOR TECHNIC AL SERVICES UNDER DTAA BETWEEN INDIA AND SINGAPORE. 6.2 BEFORE US THE ASSESSEE IS CONTENDING THAT ISSUE IN DISPUTE OF WHETHER THE COST REIMBURSEMENT ISSUED BY THE ASSESS EE DURING ASSESSMENT AT 2005-06 AND 2006-07 SATISFY THE MAKE AVAILABLE CONDITION UNDER ARTICLE 12 SHOULD BE DECIDED IN ACC ORDANCE WITH THE LAW WITHOUT BEING INFLUENCED BY THE FACTOR THAT IN THE 21 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 SUBSEQUENT YEAR THE ASSESSEE HAS OFFERED THE SAME F OR TAX IN INDIA. WE DO NOT UNDERSTAND, HOW THE ASSESSING OFFI CER CAN DECIDE THIS ISSUE WITHOUT EXAMINING THE DOCUMENTARY EVIDENCE IN SUPPORT OF THE ACTUAL SERVICES RENDERED. THE ONUS W AS ON THE ASSESSEE TO PROVIDE THE DOCUMENTARY EVIDENCE IN SUP PORT OF ITS CLAIM THATPAYMENT RECEIVED WAS ONLY IN RESPECT OF T HE REIMBURSEMENT OF COST OF DAILY ROUTINE SUPPORT SERV ICES, BUT THE ASSESSEE HAS NOT PROVIDED ANY SUCH DOCUMENTARY EVID ENCE EITHER BEFORE THE LOWER AUTHORITIES OR BEFORE US. BEFORE U S EVEN THE ASSESSEE HAS NOT OFFERED WILLINGNESS TO PRODUCE SUC H DOCUMENTS BEFORE THE ASSESSING OFFICER, OTHERWISE WE WOULD HA VE AN OPTION TO RESTORE THE MATTER BACK TO THE ASSESSING OFFICER FOR DECIDING A FRESH. BUT IN ABSENCE OF ANY SUCH WILLINGNESS, WE D O NOT FIND THIS AS A FIT CASE FOR RESTORING THE MATTER BACK TO THE ASSESSING OFFICER. IN THE CIRCUMSTANCES, THE ONLY OPTION IS THAT WHEN THE SAME SERVICES RENDERED BY THE ASSESSEE UNDER THE GARB OF THE NEW SERVICE AGREEMENT WITH EFFECT FROM 01/06/2005 AND O FFERED THE SAME FOR TAX AS FEE FOR TECHNICAL SERVICES (FTS), T HE SAME SERVICES RENDERED UNDER THE OLD AGREEMENT DURING P ERIOD OF 10 MONTHS IN ASSESSMENT YEAR 2005-06AND PERIOD OF TWO MONTHSIN ASSESSMENT YEAR 2006-07, ALSO FALLS IN THE NATURE O F TECHNICAL, MANAGERIAL OR CONSULTANCYSERVICES LIABLE TO BE TAXE D UNDER THE DTAA. THE RULE OF THE CONSISTENCY ALSO DEMANDS THAT WHEN THE ASSESSEE HAS ADMITTED THE PAYMENT FOR IDENTICAL SER VICES AS FEE FOR TECHNICAL SERVICES IN THE SUBSEQUENT YEAR, THE ASSESSEE SHOULD NOT DISPUTE THIS ISSUE IN THE YEARS UNDER CONSIDERA TION. THE ASSESSEE CANNOT TAKE SHELTER UNDER THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. M R P FIRM (SUP RA), WITHOUT 22 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 PROVIDING THE DOCUMENTARY EVIDENCE TO THE ASSESSING OFFICER FOR EXAMINING THE NATURE OF THE SERVICES RENDERED. IN T HE CIRCUMSTANCES, WE UPHOLD THE ORDER OF THE ASSESSING OFFICER ON THE ISSUE IN DISPUTE. THE OTHER ARGUMENTS RAISED BY THE ASSESSEE ARE RENDERED MERELY ACADEMIC ONLY AS WITHOUT KNOWIN G THE ACTUAL SERVICES RENDERED AND WHETHER THE TECHNICAL INFORMA TION, KNOWLEDGE, KNOW HOW ACQUIRED BY THE ASSESSEE HAS BE EN UTILIZED BY THE ASSESSEE AS PER REQUIREMENT OF ARTICLE12 OF THE DTAA, THE APPLICABILITY OF THE JUDICIAL DECISIONS CITED BY TH E ASSESSEE CANNOT BE EXAMINED. ACCORDINGLY, WE ARE NOT ADJUDICATING U PON THE OTHER ARGUMENTS RAISED BY THE ASSESSEE. 6.3 IN THE RESULT, THE GROUNDS OF THE APPEAL FOR AS SESSMENT YEAR 2005-06 AND 2006-07 RELATING TO THE ADDITION OF FEE FOR TECHNICAL SERVICES ARE DISMISSED. 7. IN THE GROUND NO. 2.2 FOR ASSESSMENT YEAR 2005-0 6, THE ASSESSEE HAS RAISED THE ISSUE OF INTEREST INCOME OF RS.31,35,588/- ASSESSED BY THE ASSESSING OFFICER. 7.1 REGARDING THE ADDITION OF RS.31,35,588/-AS INTE REST INCOME FOR ASSESSMENT YEAR 2005-06,WE HAVE HEARD RIVAL SUB MISSION OF THE PARTIES ON THE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON RECORD. 7.2 THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED T HAT THIS WAS INADVERTENT MISTAKE IN THE TDS CERTIFICATES ISS UED BY THE DEDUCTOR OR PAYER FOR ASSESSMENT YEAR 2005-06. HE R EFERRED TO PAGE 62 OF THE PAPER-BOOK, WHICH IS A COPY THE TDS CERTIFICATE AND SUBMITTED THAT THE DEDUCTOR ( I.E. CARGIL INDIA P. LTD.) HAS IN THE NATURE OF PAYMENT COLUMN INADVERTENTLY MENTIO NED INTERESTIN PLACE OF AP RECHARGE. WE FIND THAT IN THE TDS 23 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 CERTIFICATE, COPY OF WHICH IS AVAILABLE ON PAGE 62 OF THE PAPER- BOOK FOR ASSESSMENT AT 2005-06), FOLLOWING TWO PAYM ENTS/CREDIT ARE APPEARING: DETAILS OF PAYMENT, TAX DEDUCTION AND DEPOSIT OF T AX INTO CENTRAL GOVERNMENT ACCOUNT DATE OF PAYMENT/ CREDIT AMOUNT PAID/CREDIT(RS. AMOUNT OF INCOME- TAX DEDUCTED (RS.) RATE AT WHICH DEDUCTED DATE & CHALLAN NO. OF DEPOSIT OF TAX INTO CENTRAL GOVERNMENT ACCOUNT NAME OF BANK AND BRANCH WHERE TAX DEPOSITED 28-AUG-04 31-AUG-04 USD 16,065.30 OR INR 7,45,832 USD 51,475.63 OR INR 23,89,756 USD 2,409.80 OR INR 1,11,875 USD 7,721.34 OR INR 3,58,464 15% 15% 27/08/2004 /ITNS 281 6/09/2004/I TNS 281 IOB BANK, CP MA IDBI BANL LTD, KG MARG NC TOTAL USD 67,540.93 USD 10,131.14 OR OR INR 31,35,588 INR 4,70,339 7.3 THE LEARNED COUNSEL SUBMITTED THAT ON THE FIRST PAYMENT OF USD 16,065.30 TAX AT THE RATE OF 15% AMOUNTING TO U SD 2409.80 HAS BEEN DEDUCTED. THE LEARNEDCOUNSEL REFERRED TO CORRESPONDING INVOICE ISSUED BY THE ASSESSEE, WHICH IS AVAILABLE ON PAGE 63 OF THE PAPER-BOOK FOR ASSESSMENT YEAR 20 05-06. WE FIND THAT THIS INVOICE NO. 007 HAS BEEN ISSUEDON 18 /08/2004 FOR A SUM OF USD 16065.30. THE DESCRIPTION OF THE SERVI CES, IN THE INVOICE IS MENTIONED AS JUNE-AUG 04 AP RECHARGE. THE ASSESSEE HAS ALSO REFERRED TO LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF ACCOUNTS OF CARGIL INDIA PRIVATE LIMITED, WHICH I S AVAILABLE ON PAGE 64 OF THE PAPER-BOOK FOR ASSESSMENT YEAR 2005- 06. IN THE SAID LEDGER ACCOUNT, AGAINST INVOICE NO. 7 DATED 18 /08/2004, AMOUNT OF USD 13,655.51 HAS BEEN SHOWN AS CREDITED, WHICH ACCORDING TO THE ASSESSEE IS THE NET AMOUNT CREDITE D AFTER 24 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 DEDUCTION OF TAX AT SOURCE OF USD 2409.80/-. AS FAR AS THIS CONTENTIONOF THE ASSESSEE IS CONCERNED, IT GOT RECO NCILED WITH THE TDS CERTIFICATE, BUT IN THE LEDGER ACCOUNT, THE DES CRIPTION OF THE SERVICE HAS BEEN MENTIONED AS IT RECHARGE, AS AGAIN ST MENTIONED BY THE ASSESSEE IN THE INVOICE AS AP RECHARGE. 7.4 REGARDING THE SECOND PAYMENT/CREDIT OF USD 51,475.63APPEARING IN THE TDS CERTIFICATE, THE LEAR NEDCOUNSEL REFERRED TO COPY OF LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S CARGILL INDIA PRIVATE LIMITED, A COPY OF WHICH IS AVAILABLE ON PAGE 64 OF THE PAPER-BOOK FOR ASSESSMENT YEAR 2005- 06. THE LEARNEDCOUNSEL REFERRED TO 1 ST ENTRY IN THE SAID LEDGER ACCOUNT, ACCORDING TO WHICH THE PAYMENT OF USD 43,754.29 ( A FTER DEDUCTION OF TAXES SOURCE OF USD 7,721.34) BY M/S CARGILL INDIA PRIVATE LIMITED AGAINST INVOICE NO. 43 DATED 18/08/ 2004 FOR SERVICES OF IT CHARGE. BUT COPY OF CORRESPONDING IN VOICEISSUED BY THE ASSESSEE HAVE NOT BEEN MADE AVAILABLEBEFOREUSFO R VERIFICATION OF THE CLAIM WHETHER THE PAYMENT BY M/S CARGILL IND IA PRIVATE LIMITED WAS TOWARDS INTEREST OR TOWARDS SERVICES. 7.5 IN THE CIRCUMSTANCES, WE ARE OF THE OPINION THA T AS FAR AS SECOND PAYMENT OF USD 51,475.63 IS CONCERNED, IN AB SENCE OF COPY OF INVOICE AND SUPPORTING EVIDENCE OF RENDERIN G SERVICES, THE DOCUMENTS FILED BY THE ASSESSEE ARE NOT SUFFICIENT TO ESTABLISH THAT THE AMOUNT IN QUESTION WAS PAYMENT TOWARDS SER VICES. IN THE INTEREST OF THE SUBSTANTIAL JUSTICE, WE FEEL IT APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFF ICER, WITH THE DIRECTIONTO THE ASSESSEE TO FILE ALL THE RELEVANT D OCUMENTS BEFORE THE ASSESSING OFFICER FOR VERIFICATION OF THE CLAIM OF THE ASSESSEE. THE LD. ASSESSING OFFICER IS DIRECTED TO VERIFY THE CLAIM OF THE 25 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 ASSESSEE IN ACCORDANCE WITH LAW AND IF HE FINDS THE PAYMENT IN RESPECT OF THE SERVICES RENDERED THEN, TAKE ACTION AS PER OUR FINDING IN EARLIER PARAGRAPHS IN RESPECT OF THE REI MBURSEMENT OF THE COST OF SERVICES. IT IS NEEDLESS TO MENTION THA T THE ASSESSEE SHALL BE AFFORDED ADEQUATE OPPORTUNITY OF BEING HEA RD. THE GROUND IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPO SE. 8. THE GROUND NO.4 RAISED IN ASSESSMENT YEAR 2005-0 6 RELATES TO QUANTUM OF TAXABLE RECEIPTIN THE HANDS OF THE AS SESSEE. THE LD. CIT(A) HAS UPHELD THE AMOUNT OF TAXABLE RECEIPT AS RS.3,19,89,426/-WHEREAS ACCORDING TO THE ASSESSEE T HE AMOUNT LIABLE FOR RECEIPT UNDER THE AGREEMENT IS ONLY OF R S.3,15,29,315/-. 8.1 IN OUR OPINION ,THIS IS A MATTER OF FACTUAL VE RIFICATION BY THE ASSESSING OFFICER. ACCORDINGLY, WE RESTORE THIS ISS UE TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO THE ASS ESSEE TO PRODUCE ALL THE NECESSARY DOCUMENTS IN SUPPORT OF ITS CLAIM S BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER AFTER VERI FICATION OF THE DOCUMENTS AND AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, SHALL DECIDE THE ISSUE IN DI SPUTE IN ACCORDANCE WITH LAW. THE GROUND OF THE APPEAL IS AC CORDINGLY ALLOWED FOR STATISTICAL PURPOSES. THE IDENTICAL GRO UND NO. 3 HAS BEEN RAISED IN ASSESSMENT YEAR 2006-07. THE SAID GR OUND IS ALSO ACCORDINGLY RESTORED TO THE FILE OF THE ASSESSING O FFICER FOR DECIDING IN ACCORDANCE WITH THE DIRECTIONS GIVEN WH ILE ADJUDICATING THE GROUND NO. 4 OF THE APPEAL FOR ASS ESSMENT AT 2005-06. 9. THE GROUND NO. 5 RAISED IN ASSESSMENT YEAR 2005- 06 IS RELATING TO CREDIT OF TAX DEDUCTED SOURCE NOT ALLOW ED TO THE ASSESSEE. 26 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 9.1 IN OUR OPINION, THE ISSUE OF ALLOWING CREDIT OF TAX AT SOURCE IS A MATTER OF VERIFICATION, THEREFORE WE RESTORE THIS MATTER TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TOTHE A SSESSEETO PRODUCE ALL THE NECESSARY DOCUMENTS IN SUPPORT OF I TS CLAIM INCLUDING ORIGINAL TDS CERTIFICATES AND CONFIRMATIO N FROM THE DEDUCTOR (S) THAT CORRESPONDING TAX HAS BEEN DEPOS ITED IN GOVERNMENT ACCOUNT, COPY OF FORM NO. 26 ETC. THE AS SESSING OFFICER IS DIRECTED TO VERIFY THE EVIDENCES WHICH W ILL BE FURNISHED BY THE ASSESSEE AND THEN DECIDE THE ISSUE IN ACCORD ANCE WITH LAW. IT IS NEEDLESS TO MENTION THAT THE ASSESSEE SHALL B E AFFORDED ADEQUATE OPPORTUNITY OF BEING HEARD. THE GROUND OF THE APPEAL IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 10. THE GROUND NO. 5 RAISED IN APPEAL FOR ASSESSMEN T YEAR 2006-07 IS IN RESPECT OF THE RATE OF THE TAX APPLIE D ON THE INCOME UNDER FTS. ACCORDING TO THE ASSESSEE, IT SHOULD BE TAXED AT THE RATE OF 10% UNDER ARTICLE 12(2) OF THE TREATY, WHER EAS ASSESSING OFFICER HAS APPLIED THE RATE OF 15%. WE FIND THAT T HE ASSESSEE HAS FILED A COPY OF THE DTAA BETWEEN THE INDIA AND THE SINGAPORE. THE RELEVANT PART OF THE ARTICLE 12(2), SPECIFYING THE RATE OF TAX IS REPRODUCED AS UNDER: ARTICLE -12(2)- HOWEVER, SUCH ROYALTIES AND FEES F OR TECHNICAL SERVICES MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH THEY ARISE AND ACCORDING TO THE LAWS OF THAT STATE, BUT IF THE RECIPIENT IS THE BENEFICIAL OWNER OF THE ROYALTIES OR FEES FOR TECHNICAL SERVICES, THE TAX SO CHANGED SHALL NOT EXCEED: A. IN THE CASE OF ROYALTIES REFERRED TO IN PARAGRAPH 3 (A) AND FEES FOR TECHNICAL SERVICES AS DEFINED IN THIS ARTICLE ( OTHER THAN SERVICES DESCRIBED IN SUB-PARAGRAPH (B) OF THIS PAR AGRAPH), 15 PER CENT OF THE GROSS AMOUNT OF THE ROYALTIES AND F EES; B. IN THE CASE OF ROYALTIES REFERRED TO IN PARAGRAPH 3 (B) AND FEES FOR TECHNICAL SERVICES AS DEFIEND IN THIS ARTICLE T HAT ARE ANCILLARY AND SUBSIDIARY TO THE ENJOYMENT OF PROPERTY FOR WHI CH ROYALTIES UNDER PARAGRAPH 3(B) ARE RECEIVED, 10 PER CENT, OF THE GROSS AMOUNT OF THE ROYALTIES AND FEES. 27 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 10.1 ON PERUSAL OF THE ABOVE ARTICLE, IT IS EVIDENT THAT TAX RATE OF THE 10% IS APPLICABLE WHEN THE FTS ARE ANCILLARY AN D SUBSIDIARY TO THE ENJOYMENT OF THE PROPERTY FOR WHICH ROYALTIE S ARE RECEIVED. BUT IN THE INSTANT CASE NO SUCH ROYALTIES HAVE BEEN RECEIVED AND THUS THE FTS IS TAXABLE AT THE RATE OF THE 15% OF T HE GROSS AMOUNT OF FTS. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY IN FIRMITY IN THE ORDER OF THE ASSESSING OFFICER, AND WE ACCORDINGLY UPHOLD THE SAME. THE GROUND OF THE APPEAL OF THE ASSESSEE IS A CCORDINGLY DISMISSED. 11. THE GROUND NO. 6 TO 9 FOR BOTH ASSESSMENT YEARS 2005-06 AND 2006-07, WERE NOT ARGUED SPECIFICALLY BEFORE US , AND THEREFORE SAME ARE DISMISSED AS INFRUCTUOUS. ITA NO.5444/DEL./2010 12. NOW, WE TAKE UP THE APPEAL OF THE ASSESSEE BEAR ING ITA NO. 5444/DEL/2010 FOR ASSESSMENT YEAR 2007-08. THE GROU NDS RAISED BY THE ASSESSEE ARE REPRODUCED AS UNDER: 1. THAT THE LEARNED ASSISTANT DIRECTOR OF INCOME TA X, CIRCLE01(1), INTERNATIONAL TAXATION, NEW DELHI, (HEREINAFTER REF ERRED TO AS LEARNED AO)/HONBLE DISPUTE RESOLUTION PANEL (D RP) HAS ERRED IN FACTS AND IN LAW IN TREATING THE REIMBURSEMENT O F ACTUAL EXPENSES PAID/INCURRED BY THE ASSESSEE ON BEHALF OF ITS INDI AN GROUP COMPANY AMOUNTING TO RS.22,24,216/- AS FEES FOR TEC HNICAL SERVICES (FTS) CHARGEABLE TO TAX UNDER THE ACT AND DOUBLE TA X AVOIDANCE AGREEMENT BETWEEN INDIAN AND SINGAPORE. 1.1 THAT THE LEARNED AO/HONBLE DRP HAS ERRED IN FA CTS AND IN LAW IN HOLDING THAT THESE REIMBURSEMENT RECEIVED IS ESSEN TIAL PART OF OVERALL SERVICES AGREEMENT BETWEEN THE ASSESSEE AND INDIAN GROUP COMPANY. 1.2 THAT THE LEARNED AO/HONBLE DRP HAS ERRED IN FA CTS AND IN LAW IN HOLDING THAT THESE REIMBURSEMENT ARE RECEIVED BY TH E ASSESSEE FOR MAKING AVAILABLE ADVISORY/TECHNICAL SERVICES OF ITS EMPLOYEES AND THUS COVERED UNDER THE DEFINITION OF FTS UNDER DOUB LE TAX AVOIDANCE AGREEMENT BETWEEN INDIAN AND SINGAPORE. 28 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 1.3 THAT THE LEARNED AO/HONBLE DRP HAS ERRED IN FA CTS AND IN LAW IN HOLDING THAT THE REIMBURSEMENT RECEIVED FROM INDIAN GROUP COMPANY IS TAXABLE AS FTS IN INDIA WITHOUT APPRECIA TING THAT SUCH REIMBURSEMENT OF ACTUAL EXPENSES DOES NOT ACCRUE OR ARISE IN INDIA AND DEEMED TO ACCRUE OR ARISE IN INDIA UNDER SECTIO N 9(1)(VII)(B) OF THE ACT. 2. THAT THE LEARNED AO HAS ERRED IN FACTS AND IN LA W IN LEVYING THE INTEREST AMOUNTING TO RS.93,416 UNDER SECTION 234B OF THE ACT BY COMPLETING IGNORING THE FACT THAT NO ADVANCE TAX WA S PAYABLE BY THE APPELLANT AS THE ENTIRE TAX WAS DEDUCTIBLE AT SOURC E ON THE SAID REIMBURSEMENT. 13. IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE F ILED RETURN OF INCOME ON 28/10/2007 DECLARING TOTAL INCOME OF RS.6,47,34,867/-. THE ASSESSEE CLAIMED TO HAVE PROV IDED SERVICES TO THE INDIAN ENTITY OF THE GROUPS UNDER SERVICE AG REEMENT DATED 01/06/2005 AND CHARGED MARK UP OF 6% AND OFFERED T HE RESPECTIVE INCOME AS FTS. 14. DURING THE SCRUTINY ASSESSMENT PROCEEDING, THE ASSESSING OFFICER FURTHER OBSERVED AN AMOUNT OF RS.22,24,216/ - RECEIVED FROM CIPL, BUT NOT OFFERED FOR TAX. ACCORDING TO TH E ASSESSEE, IT MADE CERTAIN PAYMENTS TO 3 RD PARTIES ON BEHALF OF THE BRANCH OFFICE OF CIPL IN SINGAPORE, WHICH THE CIPL HAS REI MBURSED TO THE ASSESSEE. IT WAS SUBMITTED BY THE ASSESSEE THAT SAI D PAYMENT ARE NOT UNDER THE SERVICE AGREEMENT. THE LEARNEDASSESSI NG OFFICER, HOWEVER REJECTED THE CONTENTION OF THE ASSESSEE AND IN THE DRAFT ASSESSMENT ORDER DATED 30/11/2009 PROPOSED TO ASSES S THE SAME AS FTS AND TAX ON GROSS BASIS AS PER THE PROVISIONS OF THE DTAA BETWEEN INDIA AND THE SINGAPORE. THE OBJECTIONS RAI SED BY THE ASSESSEE AGAINST THE DRAFT ASSESSMENT, HAVE BEEN RE JECTED BY THE LEARNED DRP AND CONSEQUENTLY, PURSUANT TO THE DIREC TION OF THE LEARNED DRP, PASSED THE IMPUGNED FINAL ASSESSMENT O RDER, HOLDING THE AMOUNT OF RS.22,24,216/-AS FTS. 29 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 15. IN THE GROUNDS RAISED FROM 1 TO 1.3 OF THE APPE AL, THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFF ICER IN TREATING THE AMOUNT OF RS.22,24,216/- AS FEE FOR TECHNICAL S ERVICES. 15.1 WE HAVE HEARD THE RIVAL SUBMISSION OF THE PART IES ON THE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON RECORD INCLUDING THE PAPER-BOOK FILED BY THE ASSESSEE CONT AINING PAGES 1 TO 45. 15.2 IN THE INSTANT CASE, THE DISPUTE IS REGARDING THE AMOUNT OF RS.22,24,216/- PAID BY M/S CIPL TO THE ASSESSEE. TH ERE IS NO DETAIL AVAILABLE ON RECORD WHETHER ANY TAX WAS DEDU CTED AT SOURCE BY M/S CIPL ON THE SAID PAYMENT. THE DETAILED BREAK UP OF THE PAYMENT IS PROVIDED ON PAGE 17 OF THE APPEAL SET, W HICH IS PART OF THE SUBMISSION MADE BY THE ASSESSEE BEFORE THE LEAR NED DRP. THE SAID DETAILED BREAKUP BEING RELEVANT TO DECIDE THE CONTROVERSY BEFORE US AND THEREFORE SAME IS REPRODU CED AS UNDER: SL. NO. PARTICULARS AMOUNT (USD) AMOUNT (INR) INVOICE NUMBER 1. PAYMENT OF SINGAPORE INCOME TAXES 33,849.56 1,519,599 INVOICE NO- 0463, 0542, 0270, 0382. 0631, 0862 2. SBF SUBSCRIPTION 493.11 22, 128 INVOICE NO- 0542 3. PAYMENT TO KPMG FOR: FILING SINGAPORE INCOME TAX RETURN AND HANDLING SINGAPORE INCOME TAX MATTERS. PROVIDING AUDIT SERVICES TO SINGAPORE BRANCH 14,664.65 650,407 INVOICE NO- 0270, 0631, 0862 4. PAYMENT TO DHL 709.34 31,744 INVOICE NO - 0463, 0542, 0270, 0382, 0631, 0862 30 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 5. GST 7.64 338 INVOICE NO. - 0862 49,724.30 2,224,216 15.3 THE LEARNED COUNSEL ALSO REFERRED TO THE DETAI LED INVOICES IN RESPECT OF THE PAYMENTS, AVAILABLE ON PAGE 20 TO 45 OF THE PAPER- BOOK. 15.4 IN RESPECT OF THE ABOVE PAYMENTS, THE ASSESSIN G OFFICER IS OF THE VIEW THAT THE REIMBURSEMENT RECEIVED BY THE ASS ESSEE ARE ESSENTIALLY AND STRONGLY LINKEDWITH THE SERVICE REN DERED WHICH HAD BEEN OFFERED TO TAX. ACCORDING TO HIM THE ABOVE REIMBURSEMENT ARE PART OF THE SERVICE AGREEMENT AND WHEN THE BASE/ROOT SERVICE CONSTITUTE THE FTS, THE REIMBURSE MENT DOES NOT REMAIN MERE REIMBURSEMENT AND TAKE THE COLOUR OF TH E SERVICE. ACCORDING TO THE ASSESSING OFFICER THE EXPERIENCE A ND SKILLS OF THE EMPLOYEES OF THE ASSESSEE IS MADE AVAILABLE IN THE FORM OF THE ADVISORY SERVICES/TECHNICAL SERVICES AND SUCH SERVI CES ARE BEING USED BY THE INDIAN COMPANIES IN THE BUSINESS AND TH US COVERED UNDER ARTICLE 12(4)(B) OF THE DTAA BETWEEN INDIA AN D THE SINGAPORE WHICH REQUIRE THAT TECHNICAL SERVICE SHOU LD BE MAKE AVAILABLE IS SATISFIED. 15.5 HOWEVER, ON PERUSAL OF THE ABOVE DETAILS OF TH E PAYMENT AND CORRESPONDING INVOICES, WE FIND THAT THE ASSESSEE H AS PAID CERTAIN PAYMENTS TO 3 RD PARTIES IN SINGAPORE ON BEHALF OF THE BRANCH OF CARGILL INDIA PRIVATE LIMITED (CIPL). ONE OF THE MA JOR PAYMENT OF USD 33,849.56 (INDIAN RS.15,19,599) IS OF PAYMENT OF THE SINGAPORE INCOME-TAXES OF BRANCH OF CIPL. THE ANOTH ER MAJOR PAYMENT IS PAYMENT TO KPMG (A CONSULTANCY FIRM) FO R AUDIT SERVICES, TAX FILING AND HANDLING TAX MATTER OF BR ANCH OF CIPL IN SINGAPORE. THE SUPPORTINGLETTERS OF PAYMENT AND COR RESPONDING 31 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 INVOICES RAISED FOR REIMBURSEMENTBY THE ASSESSEE AR E AVAILABLE ON PAGE 20 TO 45 OF THE PAPER-BOOK. IT IS EVIDENT FRO M THE INVOICES AND SUPPORTING LETTERS THAT NO SERVICES HAVE BEEN R ENDERED BY THE ASSESSEE AND THE ASSESSEE HAS MERELY MADE PAYMENT T O 3 RD PARTIES ON BEHALF OF THE BRANCH OF CIPL AND SUBSEQU ENTLY RAISE INVOICES ON THE CIPL. THE CIPL HAS ACCORDINGLY MADE THE PAYMENT FOR COST OF REIMBURSEMENT OF PAYMENT MADE TO 3 RD PARTIES BY THE ASSESSEE. IN OUR OPINION, THE PAYMENT RECEIVED BY T HE ASSESSEE ARE MERELY REIMBURSEMENTOF THE PAYMENT MADE TO 3 RD PARTIES ON BEHALF OF THE CIPL .THE SAID PAYMENT WAS OBLIGATI ON OF THE CIPL AND NO SERVICES HAVE BEEN RENDERED BY THE ASSESSEE AND THUS THE PAYMENTS RECEIVED DO NOT CONSTITUTE AN INCOME IN TH E HANDS OF THE ASSESSEE AND CANNOT BE TERMED AS FTS. 15.6 THE LEARNED COUNSEL SUBMITTED THAT IDENTICAL P AYMENTS IN ASSESSMENT YEAR 2009-10 AND 2010-11 HAVE BEEN HELD AS REIMBURSEMENT OF THE COST BY THE LD. CIT(A) AND NO FURTHER APPEAL HAS BEEN IN FILED BY THE REVENUE. THE RELEVANT OBSE RVATION OF THE LD. CIT(A) REGARDING THE COST OF REIMBURSEMENT IN A SSESSMENT YEAR 2009-10 AND 2010-11 IS REPRODUCED AS UNDER: 6.3 THE APPELLANT SUBMITTED THAT IT HAS NOT PROVID ED ANY SERVICE AND HAS JUST MADE PAYMENT ON BEHALF OF SINGAPORE BR ANCH OF CIPL AS A MATTER OF CONVENIENCE. THESE REIMBURSEMENT ARE NOT IN PURSUANCE TO THE SERVICE AGREEMENT UNDER WHICH THE APPELLANT IS PROVIDING VARIOUS SERVICES ON MARK-UP BASIS. A PICT ORIAL REPRESENTATION OF THE TRANSACTION BETWEEN THE APPEL LANT AND BRANCH OFFICE OF CIPL IS AS UNDER: 32 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 IN VIEW OF THE ABOVE PRESENTATION, THE TRANSACTION CAN BE SUMMARIZED AS UNDER: - BO OF CIPL HAS RECEIVED VARIOUS SERVICES FROM THIRD PARTIES. - THE THIRD PARTIES HAVE RAISED INVOICES ON THE BO OF CIPL. - IN RESPECT OF THE ABOVE SERVICES RENDERED, THE APPE LLANT HAS MADE PAYMENTS TO THE THIRD PARTY ON BEHALF OF BO OF CIPL AS A MATTER OF CONVENIENCE. - THE APPELLANT HAS RAISED DEBIT NOTES FOR ALL THE PA YMENTS MADE ON BEHALF OF THE BO WHICH HAS LATER REIMBURSED THE AMO UNT SO PAID BY THE APPELLANT TO THE THIRD PARTIES. 15.7 AFTER CONSIDERING THE SUBMISSION OF THE ASSES SEE, THE LD. CIT(A) IN ASSESSMENT YEAR 2009-10 AND 2010-11 DELET ED THE ADDITION OF OBSERVING AS UNDER: 7.1 I HAVE DULY CONSIDERED SUBMISSIONS OF THE APPE LLANT. THE RELEVANT FACTS ARE THAT THE APPELLANT HAS ENTERED I NTO A SERVICE AGREEMENT WITH ITS GROUP ENTITIES UNDER WHICH IT IS PROVIDING CERTAIN SERVICES ON COST PLUS 6% MARK UP BASIS AND CONSIDER ATION RECEIVED ITS BEING OFFERED TO TAX AS FTS ON GROSS BASIS UNDE R ARTICLE 12 OF INDO-SINGAPORE DTAA. THE APPELLANT MADE CERTAIN PAY MENTS TO AUDITOR NAMELY KPMG WHO CONDUCTED AUDIT OF SINGAPOR E BRANCH OF CARGTILL INDIA PVT. LTD. (CIPL) AND SUBSEQUENTLY SINGAPORE BRANCH OF CIPL REIMBURSED THE APPELLANT ON COST TO COST BASIS . THE CASE OF THEAO IS THAT THE APPELLANT HAS INCURRED THE EXPENS ES IN CONNECTION WITH SERVICES BEING RENDERED BY IT UNDER THE SERVIC E AGREEMTN AND THEREFORE, PAYMENT RECEIVED FROM SINGAPORE BRANCH O F CIPL IS ALSO IN NATURE OF FTS. THE ARGUMENTS OF THE APPELLANT IS TH AT SINGAPORE BRANCH OF CIPL RECEIVED SERVICES FROM A THIRD PARTY AND NOT FROM THE APPELLANT AND THE APPELLANT MADE PAYMENTS TO AUDITO R FOR AND ON BEHALF OF SINGAPORE BRANCH OF CIPL. THE APPELLANT A LSO ARGUED THAT 33 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 PAYMENT DOES NOT AMOUNT TO FTS U/S 9(1)(VII)(B) OF THE ACT AND ARTICLE 12(4)(B) OF DTAA. 7.2 THE APPELLANT HAS FURNISHED ENGAGEMENT LETTER ISSUED BY SINGAPORE BRANCH OF CIPL IN FAVOUR OF KPMG UNDER WH ICH KPMG HAS BEEN APPOINTED AS TAX ADVISOR WHO SHALL BE PROVIDIN G VARIOUS SERVICES TO SINGAPORE BRANCH OF CIPL. THE APPELLANT HAS ALSO FURNISHED COPIES OF INVOICES RAISED BY KPMG ON SING APORE BRANCH OF CIPL. PERUSAL OF THESE DOCUMENTS SHOWS THAT SERVICE S ARE RECEIVED BY SINGAPORE BRANCH OF CIPL FROM KPMG AND NOT FROM THE APPELLANT. TAX ADVISORY SERVICES RENDERED BY KPMG ARE NOT COVE RED BY SERVICES AGREEMENT ENTERED INTO BY THE APPELLANT WITH CIPL. THE PAYMENTS MADE BY THE APPELLANT TO KPMG WHICH HAS BEEN LATER ON REIMBURSED BY SINGAPORE BRANCH OF CIPL ARE NOT IN CONNECTION W ITH SERVICES RENDERED BY THE APPELLANT UNDER THE SERVICE AGREEME NT. IT IS SIMPLY IN NATURE OF DEBTOR CREDITOR RELATIONSHIP. RELEVANT FACTS IN VARIOUS CASE LAWS RELIED UPON BY THE AO WERE DIFFERENT AS I N THOSE CASE, REIMBURSEMENTS WERE RECEIVED FROM THE EXPENSES INCU RRED IN CONNECTION WITH RENDERING OF TECHNICAL SERVICES AND HENCE REIMBURSEMENTS WERE CLOSELY CONNECTED WITH FTS. 7.3 I FIND FORCE IN CONNECTION OF THE APPELLANT THA T EVEN ASSUMING THAT REIMBURSEMENT REPRESENT FTS, MAKE AVAILABLE CLAUSE AS CONTAINED IN ARTICLE 12(4)(B) OF DTAA IS NOT SATISF IED. THERE IS NO TRAINING CLAUSE UNDER WHICH SINGAPORE BRANCH OF CIP L CAN BE SAID TO HAVE BEEN MADE AVAILABLE THE TECHNOLOGY. 7.4 IN VIEW OF DISCUSSION ABOVE, I HOLD THAT PAYMEN TS MADE BY THE APPELLANT TO KPMG WHICH WERE LATER ON REIMBURSE D BY SINGAPORE BRANCH OF CIPL ARE NOT IN NATURE OF FTS. THE GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 15.8 IN VIEW OF OUR OBSERVATION ABOVE, AS THE PAYME NTS BEING OBLIGATION OF THE CIPL AND THE ASSESSEE PAID TO 3 RD PARTIES AND NO SERVICES HAVE BEEN RENDERED BY THE ASSESSEE TO CIPL UNDER THE SERVICE AGREEMENT, THE PAYMENT RECEIVED BY THE ASSE SSEE FROM THE CIPL ARE MERELY REIMBURSEMENT AND NOT LIABLE TO BE TAXED AS FEE FOR TECHNICAL SERVICES (FTS). THE GROUND NO. 1 TO 1 .3 OF THE APPEAL ARE ACCORDINGLY ALLOWED. 16. THE GROUND NO. 2 IS CONSEQUENTIAL AND FURTHER N O ARGUMENTS WERE RAISED BEFORE US IN RESPECT OF THE GROUND, ACC ORDINGLY WE DISMISS THE SAME AS INFRUCTUOUS. 34 ITA NO.1437 & 1438/DEL/2012 & 5444/DEL./2010 17. IN THE RESULT, THE APPEALS OF THE ASSESSEE FOR ASSESSMENT YEAR 2005-06 AND 2006-07 ARE ALLOWED PARTLY FOR STA TISTICAL PURPOSES AND THE APPEAL OF THE ASSESSEE FOR ASSESSM ENT YEAR 2007-08 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MARCH, 2020. SD/- SD/- ( K.N. CHARY ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23 RD MARCH, 2020. RK/- (D.T.D.S) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI