Sintex Industries Ltd., Ahmedabad V. The ADIT(Intl.Tax), Ahmedabad

ITA 2021/AHD/2009

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0354 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 07-11-2012
• Assessment Year: 2009-2010
• Appeal Filed On: 22-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D C PATWARI
• Keywords: Double taxation relief; Permanent establishment; Question of law; Non-deduction of tax; Right to appeal

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO.2021/ AHD/2009 & I.T.A.NO. 639/AHD/2010 (ASSESSMENT YEAR 2009-10 & 2010-11) M/S. SINTEX INDUSTRIES LTD., 701-2, ABHIJEET I, MITHAKALI SIX ROADS, ELLISBRIDGE, AHMEDABAD-06 VS. ASSTT. DIRECTOR OF INTERNATIONAL TAX, AHMEDABAD PAN/GIR NO. : AADCS0858E (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI YOGESH SHAH, AR RESPONDENT BY: SHRI D C PATWARI, CIT DR DATE OF HEARING: 07.11.2012 DATE OF PRONOUNCEMENT: 18.01.2013 O R D E R PER SHRI A. K. GARODIA, AM:- BOTH THESE APPEALS ARE FILED BY THE ASSESSEE WHICH ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF LD. CIT(A) GANDHINAG AR DATED 30.03.2009 FOR THE ASSESSMENT YEAR 2009-10 AND DATED 30.11.200 9 FOR THE ASSESSMENT YEAR 2010-11. SINCE THE ISSUE INVOLVED IS SIMILAR IN BOTH THESE YEAS, BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DIS POSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE TAKE UP THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2009-10 IN I.T.A.NO. 2021/AHD/2009. THE GROUNDS RA ISED BY THE ASSESSEE IN THIS YEAR ARE AS UNDER: I.T.A.NO.2021 /AHD/2009 639/AHD/2010 2 THE APPELLANT BEING DISSATISFIED WITH THE ORDER PA SSED BY THE LEARNED COMMISSIONER OF INCOME- TAX (APPEAL), GANDH INAGAR PREFERS AN APPEAL AGAINST THE SAME ON THE FOLLOWING AMONGST OTHER GROUNDS, WHICH ARE WITHOUT PREJUDICE TO EACH OTHER. 1 THE ORDER PASSED BY THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) IS ERRONEOUS AND CONTRARY TO THE PROVISIO NS OF LAW AND FACTS AND THEREFORE REQUIRES TO BE SUITABLY MODIFIE D. 2 BASED ON THE FACTS OF THE CASE THE APPELLANT IS N OT REQUIRED TO DEDUCT TAX AT SOURCE U/S. 195 IN RESPECT OF THE PAY MENT MADE TO TEXOPLAS LIMITED. 3 THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT CONC ERNED PAYMENT, TO BE MADE TO TEXOPLAS LIMITED (UK), IS CO VERED BY THE DEFINITION OF THE TERM 'FEES FOR TECHNICAL SERVICES ' UNDER ARTICLE 13 OF INDIA-UK DTAA AND HENCE IS TAXABLE IN INDIA A ND ACCORDINGLY TAX IS REQUIRED TO BE DEDUCTED AT SOURC E U/S 195 OF THE ACT. 3.1 LEARNED CIT(A) HAS ERRED IN FACT AND IN LAW IN NOT APPRECIATING THAT THE CONSULTANCY SERVICES HAS TO HAVE THE TECHN ICAL ELEMENT IN ORDER TO BE CLASSIFIED AS 'FEES FOR TECHNICAL SERVI CES' WITHIN CLAUSE (C) OF ARTICLE 13(4) OF INDIA UK DTAA. 3.2 LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING TH AT THE DEFINITION OF 'FEES FOR TECHNICAL SERVICES' WOULD C OVER ONLY THOSE SERVICES WHICH MAKE AVAILABLE THE KNOWLEDGE OF TECH NICAL ELEMENT TO THE RECIPIENT OF THE SERVICES. 4 BASED ON THE FACTS OF THE CASE, TEXOPLAS LIMITED DOES NOT HAVE PERMANENT ESTABLISHMENT IN INDIA AND HENCE THE SAID INCOME OF TEXOPLAS LIMITED SHALL NOT BE TAXABLE IN INDIA AS P ER ARTICLE 7 OF DTAA BETWEEN INDIA-UK. 5 IT IS SUBMITTED THAT, CONSEQUENTIAL TO HOLDING TH AT NO TAX IS REQUIRED TO BE DEDUCTED AT SOURCE, LEARNED ADIT BE DIRECTED TO REFUND THE TAX PAID BY THE APPELLANT. YOUR APPELLANT PRAYS FOR LEAVE TO ADD TO ALTER AND/ OR TO AMEND ANY OF THE GROUNDS BEFORE THE FINAL HEARING OF THE APPE AL. 3. BRIEF FACTS TILL THE STAGE OF FILING OF APPEAL B Y THE ASSESSEE FOR THE ASSESSMENT YEAR 2009-10 ARE NOTED BY LD. CIT(A) IN PARA 2 & 3 OF HIS ORDER AND FOR THE SAKE OF READY REFERENCE, THESE PA RAS OF THE ORDER OF LD. CIT(A) ARE REPRODUCED BELOW: I.T.A.NO.2021 /AHD/2009 639/AHD/2010 3 2. IT WAS FOUND THAT THE ASSESSEE HAS MENTIONED SE CTION 246A UNDER WHICH THE APPEAL HAS BEEN PREFERRED. CONSEQUE NT TO QUERIES RAISED, THE AUTHORISED REPRESENTATIVE STATED THAT T HE SECTION HAS BEEN WRONGLY MENTIONED; THE SAME SHOULD HAVE BEEN U /S.248 AND EXPRESSED REGRETS FOR THE ERROR. THE PRESENT APPEAL SQUARELY FALLS WITHIN THE PURVIEW OF SECTION 248, AS IT WAS APPELL ANT'S RESPONSIBILITY TO BEAR THE LIABILITY OF TDS AND AFT ER DEDUCTION OF SUCH A TAX, AN APPLICATION HAS BEEN MADE TO THE ASS ESSING OFFICER FOR NON-DEDUCTION U/S. 195(2), WHICH STANDS REJECTE D. THE APPELLANT IS IN APPEAL AGAINST THAT REJECTION. , SINCE THE WR ONG MENTION OF THE SECTION AS 246A INSTEAD OF 248 CANNOT BE TREATED AS A FATAL ACTION TO DEPRIVE THE APPELLANT'S RIGHT OF APPEAL, OTHERWISE PROVIDED IN THE ACT, THE APPEAL STANDS ADMITTED AND IS BEING TREATE D AS AN APPEAL U/S.248. 3. THE APPELLANT HAS FRAMED ITS CASE THROUGH 5 GROU NDS OF APPEAL BUT THE EFFECTIVE GROUND IS PRIMARILY ONE ONLY, NAM ELY THE PAYMENTS MADE BY THE APPELLANT TO M/S. TEXOPLAS LTD ., U.K. FOR PROVIDING DETAILS OF FABRIC DESIGNS IS NOT TAXABLE AND HENCE NO TDS SHOULD HAVE BEEN DEDUCTED. THE VARIOUS GROUNDS ARE THE LIMBS OF THE ASSESSEE'S ARGUMENTS: 4. FURTHER FACTS ARE NOTED BY LD. CIT(A) IN PARA 5 OF HIS ORDER WHICH IS ALSO REPRODUCED BELOW: 5. APPARENTLY, SIMILAR ARGUMENTS HAD BEEN MADE BEF ORE THE ASSESSING OFFICER ALSO, AS PER THE COPY OF THE LETT ER DATED 01/08/2008 ADDRESSED TO HIM, FILED DURING THE APPEL LATE PROCEEDINGS. THE STAND OF THE ASSESSING OFFICER IS THAT THE SERVICES RENDERED BY M/S. TEXOPLAS LTD. GET COVERED BY THE D EFINITION OF FEE FOR TECHNICAL SERVICES AS PER EXPLANATION (2) TO SE CTION 9(1). AS PER HIM SINCE SECTION 9(L)(VII)(B) R.W. EXPLANATION 2 W OULD LEAD TO THE CONCLUSION THAT THE SERVICES RENDERED BY M/S. TEXOP LAS LTD. WERE IN THE NATURE OF CONSULTANCY AND WERE USED BY A RES IDENT FOR THE PURPOSE OF BUSINESS, THE INCOME SHALL BE DEEMED TO HAVE ACCRUED IN INDIA. CONSEQUENTLY, PROVISIONS OF SECTION 195 F OR THE TDS PURPOSES SHALL BE APPLICABLE. FURTHER, REACTING TO THE APPELLANT'S REFERENCE TO THE ASPECT OF TAXABILITY UNDER INDO-UK DTAA AND THE INTERPRETATION TO BE DRAWN FROM INDO-US DTAA ALONGW ITH THE MOU SIGNED BY THE TWO GOVERNMENTS, THE ASSESSING OF FICER HELD THAT MOU TO THE INDO US TAX TREATY SHALL NOT BE APP LICABLE TO THE INDO-UK TAX TREATY. HE FURTHER HELD THAT THE INTERP RETATION OF I.T.A.NO.2021 /AHD/2009 639/AHD/2010 4 ARTICLE 13 OF INDO-UK TAX TREATY IS AMENABLE TO THE INTERPRETATION THAT THE EXPERIENCE AND SKILLS OF THE EMPLOYEES OF M/S. TEXOPLAS LTD. IS BEING MADE AVAILABLE TO THE APPELLANT AND H ENCE SERVICES RENDERED ARE CONSULTANCY SERVICES AND THE PAYMENT C AN BE TERMED AS 'FEE FOR TECHNICAL SERVICES'. THEREBY HE REJECTE D THE APPELLANT'S CONTENTION FOR NON-DEDUCTION OF TAX ON THE REMITTAN CE TO M/S. TEXOPLAS LTD. 5. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSE E IS IN FURTHER APPEAL BEFORE US. 6. A COPY OF THE AGREEMENT WITH M/S. TEXOPLAS LIMIT ED IS PLACED AT PARA 8-26 OF THE PAPER BOOK AND IN PARTICULAR OUR A TTENTION WAS DRAWN TO PAGE 3.02 AND 3.03 OF THIS AGREEMENT WHICH ARE AVAI LABLE ON PAGE 14 OF THE PAPER BOOK. IT WAS SUBMITTED THAT PARA 3.02 OF THE AGREEMENT PROVIDES RESPONSIBILITY OF THE CONSULTANCY FIRM M/S . TEXOPLAS LIMITED AND RESPONSIBILITY OF THE ASSESSEE FOR TAXES IN CON NECTION WITH ADMISSIBILITY OF THE APPEAL OF THE ASSESSEE AS PER THE PROVISIONS OF SECTION 248 OF THE INCOME TAX ACT, 1961. 7. AS AGAINST THIS, IT WAS SUBMITTED BY THE LD. D.R . THAT THE APPEAL OF THE ASSESSEE IS NOT MAINTAINABLE U/S 248 SINCE ASSE SSEE IS NOT REQUIRED TO BEAR THE TAX AS PER THE AGREEMENT. 8. IN THE REJOINDER, IT WAS SUBMITTED BY THE LD. A. R. THAT LD. CIT(A) HAS ALREADY ADMITTED THE APPEAL U/S 248 AND THE REV ENUE IS NOT IN APPEAL AGAINST THIS ADMISSION OF APPEAL BY LD. CIT(A) AND HENCE, THIS ISSUE CANNOT BE RAISED NOW BY THE LD. D.R. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BLOW. FOR THE SAKE OF READY REFERENCE, WE REPRODUCE BELOW THE RELEVANT PARAS NO.3.02 AND 3.03 OF THE AGREEMENT WHICH ARE AVAILABLE ON PAGE 1 4 OF THE PAPER BOOK. I.T.A.NO.2021 /AHD/2009 639/AHD/2010 5 3.02 RESPONSIBILITY OF CONSULTANT FOR TAXES. ANY TAXES, DUTIES OR OTHER GOVERNMENTAL CHARGES DUE (DIRECTLY OR INDIRECTLY) BY CONSULTANT IN CONNECTION WITH THE RE CEIPT OF THE COMPENSATION SHALL BE THE EXCLUSIVE RESPONSIBIL ITY OF CONSULTANT WITHOUT ANY RIGHT OF REIMBURSEMENT FROM CLIENT FOR SUCH TAXES, DUTIES OR OTHER GOVERNMENTAL CHARGES. 3.03 RESPONSIBILITY OF CLIENT FOR TAXES ANY TAXES, DUTIES OR OTHER GOVERNMENTAL CHARGES DUE (DIRECTLY OR INDIRECTLY) BY CLIENT IN CONNECTION WITH THE PAYMEN T OF THE COMPENSATION SHALL BE THE EXCLUSIVE RESPONSIBILITY OF CLIENT WITHOUT ANY RIGHT OF REIMBURSEMENT FROM CONSULTANT, OR DEDUCTION FROM THE FEE TO CONSULTANT. 10. WE ALSO REPRODUCE THE PROVISIONS OF SECTION 248 OF THE INCOME TAX ACT, 1961, WHICH ARE AS UNDER: WHERE UNDER AN AGREEMENT OR OTHER ARRANGEMENT, THE TAX DEDUCTIBLE ON ANY INCOME, OTHER THAN INTEREST, UNDE R SECTION 195 IS TO BE BORNE BY THE PERSON BY WHOM THE INCOME IS PAY ABLE, AND SUCH PERSON HAVING PAID SUCH TAX TO THE CREDIT OF T HE CENTRAL GOVERNMENT, CLAIMS THAT NO TAX WAS REQUIRED TO BE D EDUCTED ON SUCH INCOME, HE MAY APPEAL TO THE COMMISSIONER (APP EALS) FOR A DECLARATION THAT NO TAX WAS DEDUCTIBLE ON SUCH INCO ME. 11. FROM THE ABOVE PROVISIONS OF SECTION 248 OF THE INCOME TAX ACT, 1961 AND FORM THE RELEVANT PARA OF THE AGREEMENT, I T COMES OUT THAT IF IT IS FOUND THAT IF THE PAYER IS TO BEAR THE TAX AND IF H E HAS MADE PAYMENT OF TAX AND IF HE CLAIMS THAT NO TAX IS REQUIRED TO BE DEDUCTED, HE MAY APPEAL TO LD. CIT(A) FOR A DECLARATION THAT NO TAX IS DEDU CTIBLE ON SUCH INCOME. IN VIEW OF THIS FACT THAT THE APPEAL WAS ALREADY AD MITTED BY LD. CIT(A) U/S 248 AND THE REVENUE IS NOT IN APPEAL AGAINST TH IS ORDER OF LD. CIT(A) REGARDING ADMISSION OF APPEAL U/S 248, WE ARE OF TH E CONSIDERED OPINION THAT THE QUESTION RAISED BY THE LD. D.R. OF THE REV ENUE REGARDING ADMISSIBILITY OF APPEAL U/S 248 OF THE INCOME TAX A CT, 1961, CANNOT BE RAISED IN THE PRESENT CASE BECAUSE THE DECISION IS ALREADY TAKEN BY LD. I.T.A.NO.2021 /AHD/2009 639/AHD/2010 6 CIT(A) FOR ADMISSION OF APPEAL U/S 248 AND THE REVE NUE IS NOT IN APPEAL BEFORE US ON THIS ISSUE AND EVEN NO CROSS OBJECTION IS FILED BY THE REVENUE AND HENCE, THIS OBJECTION RAISED BY THE LD. D.R. CA NNOT BE EVEN CONSIDERED IN THE PRESENT CASE AND HENCE, WE REJECT THE SAME. 12. ON MERIT, REGARDING THE REQUIREMENT OF DEDUCTIO N OF TAX U/S 195, IT WAS SUBMITTED BY THE LD. A.R. THAT OBLIGATION OF CO NSULTANT I.E. M/S. TAXOPLAS LTD. ARE CONTAINED IN PARA 2.02 OF THE AGR EEMENT WHICH IS AVAILABLE ON PAGE 13 OF THE PAPER BOOK AND THE RELE VANT DTAA BETWEEN INDIA AND UK IS AVAILABLE ON PAGES 27-47 OF THE PAP ER BOOK AND THE RELEVANT ARTICLE IS ARTICLE 13 IN RESPECT OF ROYALT Y AND FEES FOR TECHNICAL SERVICES, WHICH IS ALSO AVAILABLE ON PAGES 37-39 OF THE PAPER BOOK. HE ALSO SUBMITTED THAT DTAA BETWEEN INDIA AND USA IS A VAILABLE ON PAGES 48-69 OF THE PAPER BOOK AND THE MOU ON MEANING OF T ERM FEES FOR INCLUDED SERVICES UNDER INDIA US DTAA IS AVAILABL E ON PAGE 70 OF THE PAPER BOOK. HE POINTED OUT THAT AS PER THIS MOU BE TWEEN INDIA AND USA IN RESPECT OF FEES FOR INCLUDED SERVICES WHICH IS P ARA MATERIA TO FTS, IT IS REQUIRED THAT IT SHALL MAKE AVAILABLE TECHNICAL KNO WLEDGE, EXPERIENCE, SKILL, KNOW HOW AND PROCESS AND CONSISTS OF DEVELOP MENT AND TRANSFER OF A TECHNICAL PLAN AND TECHNICAL DESIGN. HE PLACED R ELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: (A) DDIT VS PREROY A.G. 39 SOT 187 (MUM.) (B) R R DONNELLEY INDIA OUTSOURCE (P) LTD. 335 ITR 122 (AAR- NEW DELHI. (C) CIT VS DE BEERS INDIA MINERALS (P.) LTD. 346 IT R 467 (KAR.) (D) DIT VS GUY CARPENTER & CO. LTD. I.T.A.NO. 202/2 012 DATED 23.04.2012 (DEL. H.C.) COPY FILED. 13. HE FURTHER SUBMITTED THAT SINCE IN THE PRESENT CASE, THERE IS NO TECHNICAL EXPERTISE MADE AVAILABLE TO THE ASSESSEE BY THE CONSULTANT, THE PAYMENT BY THE ASSESSEE TO THE CONSULTANT CANNOT BE CONSIDERED AS FTS I.T.A.NO.2021 /AHD/2009 639/AHD/2010 7 AND IT CANNOT BE ADDED INTO INCOME OF THE CONSULTAN T I.E. M/S. TEXOPLAST LTD. AND, THEREFORE, NO TDS IS DEDUCTIBLE BY THE AS SESSEE FROM THIS PAYMENT. 14. AS AGAINST THIS, THE LD. D.R. SUPPORTED THE ORD ERS OF AUTHORITIES BELOW. IT WAS SUBMITTED BY HIM THAT FOR THE PURPOS E OF INTERPRETING INDIA UK DTAA, RELIANCE CANNOT BE PLACED ON THE MOU ENTER ED BETWEEN INDIA AND US. REGARDING THE ARGUMENT THAT THE SERVICES RENDERED ARE TECHNICAL SERVICES AND IT DOES NOT MAKE AVAILABLE T ECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW HOW OR PROCESS, IT WAS SUBM ITTED THAT THE SERVICES RENDERED BY THIS PARTY I.E. THE CONSULTANT, IS OF T ECHNICAL NATURE IN THE AREA OF SERVICES PROVIDER EXPERTISE AND IT HAS MADE AVAI LABLE ALL FABRIC DESIGNS TO THE ASSESSEE. RELIANCE WAS ALSO PLACED BY HIM O N THE FOLLOWING JUDGEMENTS:- (A) RIO TINTO TECHNICAL SERVICES 17 TAXMAN.COM 70(D EL.) (B) ORGANIZATION DEVELOPMENT PTE. LTD. 19 TAXMAN.CO M 156 (C) SHELL INDIA MARKETS P. LTD. 18 TAXMAN.COM 46 (A AR- NEW DELHI) 15. IN THE REJOINDER, IT WAS SUBMITTED BY THE LD. A .R. THAT THESE JUDGEMENTS CITED BY THE LD. D.R. ARE NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. FIRST, WE REPRODUCE PARA 2.02 OF THE AGREEMENT WHICH CONTAINS THE OBLIGATIONS OF THE CONSULTANT: 2.02 OBLIGATIONS OF CONSULTANT IN ITS CAPACITY AS A CONSULTANT FOR SERVICES TO CLI ENT CONSULTANT SHALL, FROM AND AFTER THE EFFECTIVE DATE HEREOF, EITHER DIRECTLY OR THROUGH CONSULTANT'S AFFILIATES, FURNISH TO CLIENT THE FOLLOWING SERVICES: (A) LOOK OUT IN THE MARKET TO FORECAST AND EV ALUATE NEW TRENDS WITH REGARD TO FABRIC DESIGNS FOR COTTON SHIRTING E SPECIALLY IN THE I.T.A.NO.2021 /AHD/2009 639/AHD/2010 8 TREND SETTING MARKETS ITALY, FRANCE AND UNITED KING DOM AND GIVE FEED BACK TO CLIENT; (B) CONSULT AND VISIT DESIGNERS, DESIGN-STUDI OS, FASHION TREND SETTERS TO EVALUATE TRENDS AND NEEDS WITH REGARD TO FABRIC DESIGNS FOR COTTON SHIRTING IN TREND SETTING COUNTRIES LIKE ITALY, FRANCE AND UNITED KINGDOM AND GIVE FEED BACK TO CLIENT; (C ) VISIT FASHION AND TEXTILE FAIRS AS WELL AS FAS HION AND TEXTILE TRADE - SHOWS IN TREND SETTING COUNTRIES LIKE ITALY , FRANCE AND UNITED KINGDOM TO EVALUATE NEW TRENDS IN FABRIC DES IGN AND GIVE FEED BACK TO CLIENT; (D) VISIT FASHION SHOWS IN MILAN, ROME, PARIS AND LONDON TO EVALUATE NEW TRENDS IN FABRIC DESIGN-AND GIVE FEED BACK TO CLIENT; (E) QUARTERLY DELIVER 9'000 FABRIC DESIGNS FO R COTTON SHIRTING TO CLIENT ACCORDING TO THE TERMS AND CONDITIONS SPECIF IED IN EXHIBIT 'C'; (F) PROVIDE DETAILED QUARTERLY PROGRESS REPO RT IN WRITING TO THE CLIENT ALONG WITH, PROOF OF THE NEW DESIGNS DEVELOP ED BY CONSULTANT; (G) CONSULTANT WILL SHOW AND/OR MAKE_AVAMB{E AIL DOCUMENTS AND REPORTS IN RESPECT OF THE TRANSACTION S RELATING TO THIS AGREEMENT; (H) CARRY OUT FURTHER TASKS PURSUANT TO CLAUS E 2.02 A) - G) AS MUTUALLY AGREED IN WRITING BY CONSULTANT AND CLIENT FROM TIME TO TIME. 17. THE RELEVANT ARTICLE IS ARTILCE13 OF DTAA BETWE EN INDIA AND UK AVAILABLE ON PAGES 37-39 OF THE PAPER BOOK, WHICH I S ALSO REPRODUCED BELOW:- RTICLE 13 -ROYALTIES AND FEES FOR TECHNICAL SERVICE S 1. ROYALTIES AND FEES FOR TECHNICAL SERVICES ARISIN G IN A CONTRACTING STATE AND PAID TO A RESIDENT OF THE OTHER CONTRACTI NG STATE MAY BE TAXED IN THAT OTHER STATE. 2. HOWEVER, SUCH ROYALTIES AND FEES FOR TECHNICAL S ERVICES MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH THEY ARI SE AND ACCORDING TO THE LAW OF THAT STATE; BUT IF THE ~ BENEFICIAL O WNER OF THE ROYALTIES OR FEES FOR TECHNICAL SERVICES IS A RESID ENT OF THE OTHER '~ CONTRACTING STATE, THE TAX SO CHARGED SHALL NOT EXC EED : I.T.A.NO.2021 /AHD/2009 639/AHD/2010 9 (A) IN THE CASE OF ROYALTIES WITHIN PARAGRAPH 3(A) OF THIS ARTICLES, AND FEES FOR TECHNICAL SERVICES WITHIN PARAGRAPHS 4 (A) AND (C) OF THIS ARTICLE, (I) DURING THE FIRST FIVE YEARS FOR WHICH THIS CONV ENTION HAS EFFECT; (AD) 15 PER CENT OF THE GROSS AMOUNT OF SUCH ROYALT IES OR FEES FOR TECHNICAL SERVICES WHEN THE PAYER OF THE ROYALTIES OR FEES FOR TECHNICAL SERVICES IS THE GOVERNMENT OF THE FIRST-M ENTIONED CONTRACTING STATE OR A POLITICAL SUBDIVISION OF THA T STATE, AND (BB) 20 PER CENT OF THE GROSS AMOUNT OF SUCH ROYALT IES OR FEES FOR TECHNICAL SERVICES IN ALL OTHER CASES; AND (II) DURING SUBSEQUENT YEARS, 15 PER CENT OF THE GR OSS AMOUNT OF SUCH ROYALTIES OR FEES FOR TECHNICAL SERVICES; AND (B) IN THE CASE OF ROYALTIES WITHIN PARAGRAPH 3(B) OF THIS ARTICLE AND FEES FOR TECHNICAL SERVICES DEFINED IN PARAGRAPH 4( B) OF THIS ARTICLE, 10 PER CENT OF THE GROSS AMOUNT OF SUCH ROYALTIES A ND FEES FOR TECHNICAL SERVICES. 3. FOR THE PURPOSES OF THIS ARTICLE, THE TERM 'ROYA LTIES' MEANS : (A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATIO N FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF A LITERARY, ARTISTIC OR SCIENTIFIC WORK, INCLUDING CINEMATOGRAPHY FILMS OR WORK ON FILMS, TAPE OR OTHE R MEANS OF REPRODUCTION FOR USER IN CONNECTION WITH RADIO OR T ELEVISION BROADCASTING, ANY PATENT, TRADE MARK, DESIGN OR MOD EL, PLAN, SECRET FORMULA OR PROCESS, OR FOR INFORMATION CONCERNING I NDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE; AND (B) PAYMENTS OF ANY KIND RECEIVED AS CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT, OTHER THAN INCOME DERIVED BY AN ENTERPRI SE OF A CONTRACTING STATE FROM THE OPERATION OF SHIPS OR AI RCRAFT IN INTERNATIONAL TRAFFIC. 4. FOR THE PURPOSES OF PARAGRAPH 2 OF THIS ARTICLE, AND SUBJECT TO PARAGRAPH 5, OF THIS ARTICLE, THE TERM 'FEES FOR TE CHNICAL SERVICES' MEANS PAYMENTS OF ANY KIND OF ANY PERSON IN CONSIDE RATION FOR THE RENDERING OF ANY TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF A TECHNICAL OR OTHER PERSO NNEL) WHICH : (A) ARE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF THE RIGHT, PROPERTY OR INFORMATION FOR WHICH A PAYM ENT DESCRIBED IN PARAGRAPH 3(A) OF THIS ARTICLE IS RECEIVED; OR (B) ARE ANCILLARY AND SUBSIDIARY TO THE ENJOYMENT O F THE PROPERTY FOR WHICH A PAYMENT DESCRIBED IN PARAGRAPH 3(B) OF THIS ARTICLE IS RECEIVED ; OR I.T.A.NO.2021 /AHD/2009 639/AHD/2010 10 (C) MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL KNOW- HOW OR PROCESSES, OR CONSIST OF THE DEVELOPMENT AND TRANSFER OF A TECHNICAL PLAN OR TECHNICAL DESIGN. 5. THE DEFINITION OF FEES FOR TECHNICAL SERVICES IN PARAGRAPH 4 OF THIS ARTICLE SHALL NOT INCLUDE AMOUNTS PAID : (A) FOR SERVICES THAT ARE ANCILLARY AND SUBSIDIARY, AS WELL AS INEXTRICABLY AND ESSENTIALLY LINKED, TO THE SALE OF PROPERTY, OTHER THAN PROPERTY DESCRIBED IN PARAGRAPH 3 (A) OF THIS ARTICLE; (B) FOR SERVICES THAT ARE ANCILLARY -AND SUBSIDIARY TO THE RENTAL OF SHIPS, AIRCRAFT, CONTAINERS OR OTHER EQUIPMENT USED IN CONNECTION WITH THE OPERATION OF SHIPS, OR AIRCRAFT IN INTERNA TIONAL TRAFFIC; (C) FOR TEACHING IN OR BY EDUCATIONAL INSTITUTIONS ; (D) FOR SERVICES FOR THE PRIVATE USE OF THE INDIVID UAL OR INDIVIDUALS MAKING THE PAYMENT; OR (E) TO AN EMPLOYEE OF THE PERSON MAKING THE PAYMENT S OR TO ANY INDIVIDUAL OR PARTNERSHIP FOR PROFESSIONAL SERVICES AS DEFINED IN ARTICLE 15 (INDEPENDENT PERSONAL SERVICES) OF THIS CONVENTION. 6. THE PROVISIONS OF PARAGRAPHS 1 AND 2 OF THIS ART ICLE SHALL NOT APPLY IF THE BENEFICIAL OWNER OF THE ROYALTIES OR F EES FOR TECHNICAL SERVICES, BEING A RESIDENT OF A CONTRACTING STATE, CARRIES ON BUSINESS IN THE OTHER CONTRACTING STATE IN WHICH TH E ROYALTIES OR FEES FOR TECHNICAL SERVICES ARISE THROUGH A PERMANE NT ESTABLISHMENT SITUATED THEREIN, OR PERFORMS IN THAT OTHER STATE I NDEPENDENT PERSONAL SERVICES FROM A_FIXED BASE SITUATED THEREI N, AND THE RIGHT, PROPERTY OR CONTRACT IN RESPECT OF WHICH THE ROYALT IES OR FEES FOR TECHNICAL SERVICES ARE PAID IS EFFECTIVELY CONNECTE D WITH SUCH PERMANENT ESTABLISHMENT OR FIXED BASE. IN SUCH CASE , THE PROVISIONS OF ARTICLE 7 (BUSINESS PROFITS) OR ARTICLE 15 (INDE PENDENT PERSONAL SERVICES) OF THIS CONVENTION, AS THE CASE MAY BE, S HALL APPLY. 7. ROYALTIES AND FEES FOR TECHNICAL SERVICES SHALL BE DEEMED TO ARISE IN A CONTRACTING STATE WHERE THE PAYER IS THAT STAT E ITSELF, A POLITICAL SUB-DIVISION, A LOCAL AUTHORITY OR A RESIDENT OF TH AT STATE. WHERE, HOWEVER, THE PERSON PAYING THE ROYALTIES OR FEES FO R TECHNICAL SERVICES, WHETHER HE IS A RESIDENT OF A CONTRACTING STATE OR NOT, HAS IN A CONTRACTING STATE A PERMANENT ESTABLISHMENT OR A FIXED BASE IN CONNECTION WITH WHICH THE OBLIGATION TO MAKE PAYMEN TS WAS INCURRED AND THE PAYMENTS ARE BORNED BY THAT PERMAN ENT ESTABLISHMENT OR FIXED BASE THEN THE ROYALTIES OR F EES FOR TECHNICAL SERVICES SHALL BE DEEMED TO ARISE IN THE CONTRACTIN G STATE IN WHICH THE PERMANENT ESTABLISHMENT OR FIXED BASE IS SITUAT ED. I.T.A.NO.2021 /AHD/2009 639/AHD/2010 11 8. WHERE, OWING TO A SPECIAL RELATIONSHIP BETWEEN T HE PAYER AND THE BENEFICIAL OWNER OR BETWEEN BOTH OF THEM AND SO ME OTHER PERSON, THE AMOUNT OF THE ROYALTIES OR FEES FOR TEC HNICAL SERVICES PAID EXCEEDS FOR WHATEVER REASON THE AMOUNT WHICH W OULD HAVE BEEN PAID IN THE ABSENCE OF SUCH RELATIONSHIP, THE PROVISIONS OF THIS ARTICLE SHALL APPLY ONLY TO THE LAST-MENTIONED AMOU NT. IN THAT CASE, THE EXCESS PART OF THE PAYMENTS SHALL REMAIN TAXABL E ACCORDING TO THE LAW OF EACH CONTRACTING STATE, DUE REGARD BEING HAD TO THE OTHER PROVISIONS OF THIS CONVENTION. 9. THE PROVISIONS OF THIS ARTICLE SHALL NOT APPLY I F IT WAS THE MAIN PURPOSES OR ONE OF THE MAIN PURPOSES OF ANY PE RSON CONCERNED WITH THE CREATION OR ASSIGNMENT OF THE RI GHTS IN RESPECT OF WHICH THE ROYALTIES OR FEES FOR TECHNICAL SERVIC ES ARE PAID TO TAKE ADVANTAGE OF THIS ARTICLE BY MEANS OF THAT CREATION OR ASSIGNMENT. 18. IT WAS ALSO ARGUED THAT MOU IN RESPECT OF INDIA AND US DTAA IS ALSO RELEVANT FOR THE PURPOSE OF UNDERSTANDING THE MEANING OF TERM FEE FOR TECHNICAL SERVICES. IN INDIA US DTAA, ARTICLE 12 IS THE ARTICLE IN RESPECT OF ROYALTY AND FEE FOR INCLUDED SERVICES. THE CONTENTS OF THIS MOU ARE AVAILABLE ON PAGES 72-78, WHICH ARE ALSO RE PRODUCED BELOW FOR THE SAKE OF READY REFERENCE: MAY 15,1989 U.S. - INDIA TAX TREATY MEMORANDUM OF UNDERSTANDING CONCERNING FEES FOR INC LUDED SERVICES IN ARTICLE 12 PARAGRAPH 4 (IN GENERAL) THIS MEMORANDUM DESCRIBES IN SOME DETAIL THE CATEGO RY OF SERVICES DEFINED IN PARAGRAPH 4 OF ARTICLE 12 (ROYALTIES AND FEES FOR INCLUDED SERVICES). IT ALSO PROVIDES EXAMPLES OF SERVICES IN TENDED TO BE COVERED WITHIN THE DEFINITION OF INCLUDED SERVICES AND THOS E INTENDED TO BE EXCLUDED, EITHER BECAUSE THEY DO NOT SATISFY THE TE STS OF PARAGRAPH 4, OR BECAUSE, NOTWITHSTANDING THE FACT THAT THEY MEET TH E TESTS OF PARAGRAPH 4, THEY ARE DEALT WITH UNDER PARAGRAPH 5. THE EXAMPLES IN EITHER CASE ARE NOT INTENDED AS AN EXHAUSTIVE LIST BUT RATHER AS ILLUST RATING A FEW TYPICAL CASES. FOR CASE OF UNDERSTANDING, THE EXAMPLE IN THIS MEMO RANDUM DESCRIBED U.S. PERSONS PROVIDING SERVICES TO INDIAN PERSONS, BUT THE RULES OF ARTICLE 12 ARE RECIPROCAL IN APPLICATION. I.T.A.NO.2021 /AHD/2009 639/AHD/2010 12 ARTICLE 12 INCLUDES ONLY CERTAIN TECHNICAL AND CONS ULTANCY SERVICES. BUT TECHNICAL SERVICES, WE MEAN IN THIS CONTEXT SERVICE S REQUIRING EXPERTISE IN A TECHNOLOGY. BY CONSULTANCY SERVICES, WE MEAN IN T HIS CONTEXT ADVISORY SERVICES. THE CATEGORIES OF TECHNICAL AND CONSULTAN CY SERVICES ARE TO SOME EXTENT OVERLAPPING BECAUSE A CONSULTANCY SERVICE CO ULD ALSO BE A TECHNICAL SERVICE. HOWEVER, THE CATEGORY OF CONSULT ANCY SERVICES ALSO INCLUDES AN ADVISORY SERVICE, WHETHER OR NOT EXPERT ISE IN A TECHNOLOGY IS REQUIRED TO PERFORM IT. UNDER PARAGRAPH 4, TECHNICAL AND CONSULTANCY SERVIC ES ARE CONSIDERED INCLUDED SERVICES ONLY TO THE FOLLOWING EXTENT: (/) AS DESCRIBED IN PARAGRAPH 4(A), IF THEY ARE ANCILLARY AND SUBSIDIAR Y TO THE APPLICATION OR ENJOYMENT OF A RIGHT, PROPERTY OR INFORMATION FOR W HICH ARE ROYALTY PAYMENT IS MADE; OR (2) AS DESCRIBED IN PARAGRAPH 4 (B), IF THEY MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, K NOW-HOW, OR PROCESSES, OR CONSIST OF THE DEVELOPMENT AND TRANSFER OF A TEC HNICAL PLAN OR TECHNICAL DESIGN. THUS, UNDER PARAGRAPH 4(B), CONSULTANCY SER VICES WHICH ARE NOT OF A TECHNICAL NATURE CANNOT BE INCLUDED SERVICES. PARAGRAPH 4(A) PARAGRAPH 4(D) OF ARTICLE 12 REFERS TO TECHNICAL OR CONSULTANCY SERVICES THAT ARE ANCILLARY AND SUBSIDIARY TO THE APPLICATIO N OR ENJOYMENT OF ANY RIGHT, PROPERTY, OR INFORMATION FOR WHICH A-PAYMENT DESCRIBED IN PARAGRAPH 3(A) OR (B) IS RECEIVED. THUS, PARAGRAPH 4(A) INCLUDES A TECHNICAL AND CONSULTANCY SERVICES THAT ARE ANCILLA RY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF AN INTANGIBLE FOR WHICH A ROYALTY IS RECEIVED UNDER A LICENCE OR SALE AS DESCRIBED IN PARAGRAPH 3 (O), AS WELL AS THOSE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR ENJO YMENT OF INDUSTRIAL, COMMERCIAL, OR SCIENTIFIC EQUIPMENT FOR WHICH A ROY ALTY IS RECEIVED UNDER A LEASE AS DESCRIBED IN PARAGRAPH 3(B). IT IS UNDERSTOOD THAT, IN ORDER FOR A SERVICE FEE T O BE CONSIDERED 'ANCILLARY AND SUBSIDIARY' TO THE APPLICATION OR ENJOYMENT OF SOME RIGHT, PROPERTY, OR INFORMATION FOR WHICH A PAYMENT DESCRIBED IN PAR AGRAPH 3(A) OR (B) IS RECEIVED, THE SERVICE MUST BE RELATED TO THE APPLIC ATION OR ENJOYMENT OF THE RIGHT, PROPERTY, OR INFORMATION. IN ADDITION, T HE CLEARLY PREDOMINANT PURPOSE OF THE ARRANGEMENT UNDER WHICH THE PAYMENT OF THE SERVICE FEE AND SUCH OTHER PAYMENTS ARE MADE MUST BE THE APPLIC ATION OR ENJOYMENT OF THE RIGHT, PROPERTY, OR INFORMATION DESCRIBED IN PARAGRAPH 3. THE QUESTION OF WHETHER THE SERVICE IS RELATED TO THE A PPLICATION OR ENJOYMENT OF RIGHT, PROPERTY, OR INFORMATION DESCRIBED IN 73 PARAGRAPH 3 AND WHETHER THE CLEARLY PREDOMINANT PUR POSE OF THE ARRANGEMENT IS SUCH APPLICATION OR ENJOYMENT MUST B E DETERMINED BY REFERENCE TO THE FACTS AND CIRCUMSTANCES OF EACH CA SE. FACTORS WHICH MAY I.T.A.NO.2021 /AHD/2009 639/AHD/2010 13 BE RELEVANT TO SUCH DETERMINATION (ALTHOUGH NOT NEC ESSARILY CONTROLLING) INCLUDE : 1. THE EXTENT TO WHICH THE SERVICES IN QUESTION FAC ILITATE THE EFFECTIVE APPLICATION OR ENJOYMENT OF THE RIGHT, PROPERTY, OR INFORMATION DESCRIBED IN PARAGRAPH 3 ; 2. THE EXTENT TO WHICH SUCH SERVICES ARE CUSTOMARIL Y PROVIDED IN THE ORDINARY COURSE OF BUSINESS ARRANGEMENTS INVOLVING ROYALTIES DESCRIBED IN PARAGRAPH 3 ; J. WHETHER THE AMOUNT PAID FOR THE SE RVICES (OR WHICH WOULD BE PAID BY PARTIES OPERATING AT ARM'S LENGTH) IS AN INSUBSTANTIAL PORTION OF THE COMBINED PAYMENTS FOR THE SERVICES A ND THE RIGHT, PROPERTY, OR INFORMATION DESCRIBED IN PARAGRAPH 3 ; : 4. WHETHER THE PAYMENT MADE FOR THE SERVICES AND TH E ROYALTY DESCRIBED IN PARAGRAPH 3 ARE MADE UNDER A SINGLE CONTRACT (OR A SET OF RELATED CONTRACTS); AND 5. WHETHER THE PERSON PERFORMING THE SERVICES IS TH E SAME PERSON AS, OR A RELATED PERSON TO, THE PERSON RECEIVING THE ROYALTI ES DESCRIBED IN PARAGRAPH 3 [FOR THIS PURPOSE, PERSONS ARE CONSIDE RED RELATED IF THEIR RELATIONSHIP IS DESCRIBED IN ARTICLE 9 (ASSOCI ATED ENTERPRISES) OR IF THE PERSON PROVIDING THE SERVICE IS DOING SO IN CONNECT ION WITH AN OVERALL ARRANGEMENT WHICH INCLUDES THE PAYER AND RECIPIENT OF THE ROYALTIES]. TO THE EXTENT THAT SERVICES ARE NOT CONSIDERED ANCILLA RY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF SOME RIGHT, PROPERTY, O R INFORMATION FOR WHICH A ROYALTY PAYMENT UNDER PARAGRAPH 3 IS MADE, SUCH SERVICES SHALL BE CONSIDERED 'INCLUDED SERVICES' ONLY TO THE EXTEN T THAT THEY ARE DESCRIBED IN PARAGRAPH 4(Z). EXAMPLE 1 FACTS : A U.S. MANUFACTURER GRANTS RIGHTS TO AN INDIAN COMP ANY TO USE MANUFACTURING PROCESSES IN WHICH THE TRANSFEROR HAS EXCLUSIVE RIGHTS BY VIRTUE OF PROCESS, PATENTS OR THE PROTECTION OTHERW ISE EXTENDED BY LAW TO THE OWNER OF A PROCESS. AS PART OF THE CONTRACTUAL ARRANGEMENT, THE U.S. MANUFACTURER AGREES TO PROVIDE CERTAIN CONSULTANCY SERVICES TO THE INDIAN COMPANY IN ORDER TO IMPROVE THE EFFECTIVENESS OF TH E LATTER'S USE OF THE PROCESSES. -SUCH SERVICES INCLUDE, FOR EXAMPLE, THE PROVISION OF INFORMATION AND ADVICE ON SOURCES OF SUPPLY FOR MAT ERIALS NEEDED IN THE MANUFACTURING PROCESS, AND ON THE DEVELOPMENT OF SA LES AND SERVICE LITERATURE FOR THE MANUFACTURED PRODUCT. THE PAYMEN T ALLOCABLE TO SUCH SERVICES DO NOT FORM A SUBSTANTIAL PART OF THE TOTA L CONSIDERATION PAYABLE UNDER THE CONTRACTUAL ARRANGEMENT. ARE THE PAYMENTS FOR THESE SERVICES FEES FOR 'INCLUDED SERVICES? ANALYSIS: THE PAYMENTS ARE FEES FOR INCLUDED SERVIC ES. THE SERVICES DESCRIBED IN THIS EXAMPLE ARE ANCILLARY AND SUBSIDI ARY TO THE USE OF MANUFACTURING PROCESS PROTECTED BY LAW AS DESCRIBED IN PARAGRAPH 3(A) OF I.T.A.NO.2021 /AHD/2009 639/AHD/2010 14 ARTICLE 12 BECAUSE THE SERVICES ARE RELATED TO THE APPLICATION OR ENJOYMENT OF THE INTANGIBLE AND THE GRANTING OF THE RIGHT TO USE THE INTANGIBLE AS THE CLEARLY PREDOMINANT PURPOSE OF TH E ARRANGEMENT. BECAUSE THE SERVICES ARE ANCILLARY AND SUBSIDIARY T O THE USE OF THE MANUFACTURING PROCESS, THE FEES FOR THESE SERVICES ARE CONSIDERED FOR INCLUDED SERVICES UNDER PARAGRAPH 4(A) OF ARTICLE 12, REGARDLESS OF WHETHER THE SERVICES ARE DESCRIBED IN PARAGRAPH 4(6 ). EXAMPLE 2 FACTS: AN INDIAN MANUFACTURING COMPANY PRODUCES A PRODUCT THAT MUST BE MANUFACTURED UNDER STERILE CONDITIONS USING MACHINE RY THAT MUST BE KEPT COMPLETELY FREE OF BACTERIAL OR OTHER HARMFUL DEPOS ITS. A U.S. COMPANY HAS DEVELOPED A SPECIAL CLEANING PROCESS FOR REMOVI NG SUCH DEPOSITS FROM THAT TYPE OF MACHINERY. THE U.S. COMPANY ENTERS IN TO A CONTRACT WITH THE INDIAN COMPANY UNDER WHICH THE FORMER WILL CLEAN TH E LATTER'S MACHINERY ON A REGULAR BASIS. AS PART OF THE ARRANGEMENT, THE U.S. COMPANY LEASES TO THE INDIAN COMPANY A PIECE OF EQUIPMENT WHICH ALLOW S THE INDIAN COMPANY TO MEASURE THE LEVEL OF BACTERIAL DEPOSITS ON ITS MACHINERY IN ORDER FOR IT TO KNOWN WHEN CLEANING IS REQUIRED. AR E THE PAYMENTS FOR THE SERVICES FEES FOR INCLUDED SERVICES ? ANALYSIS: IN THIS EXAMPLE, THE PROVISION OF CLEANING SERVICES BY THE U.S. COMPANY AND THE RENTAL OF THE MONITORING EQUIPMENT ARE RELA TED TO EACH OTHER. HOWEVER, THE CLEARLY PREDOMINANT PURPOSE OF THE ARR ANGEMENT IS THE PROVISION OF CLEANING SERVICES. THUS, ALTHOUGH THE CLEANING SERVICES MIGHT BE CONSIDERED TECHNICAL SERVICES, THEY ARE NOT 'ANC ILLARY AND SUBSIDIARY' TO THE RENTAL OF THE MONITORING EQUIPMENT. ACCORDIN GLY, THE CLEANING SERVICES ARE NOT 'INCLUDED SERVICES' WITHIN THE MEA NING OF PARAGRAPH 4(A). PARAGRAPH 4(B) PARAGRAPH 4(B) OF ARTICLE 12 REFERS TO TECHNICAL OR CONSULTANCY SERVICES THAT MAKE AVAILABLE TO THE PERSON ACQUIRING THE SER VICES, TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HOW, OR PROCESSE S, OR CONSIST OF THE DEVELOPMENT AND TRANSFER OF A TECHNICAL PLANT OR TE CHNICAL DESIGN TO SUCH PERSON. (FOR THIS PURPOSE, THE PERSON ACQUIRING THE SERVICE SHALL BE DEEMED TO INCLUDE AN AGENT, NOMINEE, OR TRANSFEREE OF SUCH PERSON). THIS CATEGORY IS NARROWER THAN THE CATEGORY DESCRIBED IN PARAGRAPH 4(A) BECAUSE IT EXCLUDES ANY SERVICE THAT DOES NOT MAKE TECHNOLOGY AVAILABLE TO THE PERSON ACQUIRING THE SERVICE. GENERALLY SPEA KING, TECHNOLOGY WILL BE CONSIDERED 'MADE AVAILABLE' WHEN THE PERSON ACQU IRING THE SERVICE IS ENABLED TO APPLY THE TECHNOLOGY. THE FACT THAT THE PROVISION OF THE SERVICE MAY REQUIRE TECHNICAL INPUT BY THE PERSON PROVIDING THE SERVICE DOES NOT I.T.A.NO.2021 /AHD/2009 639/AHD/2010 15 PER SE MEAN THAT TECHNICAL KNOWLEDGE, SKILLS, ETC., ARE MADE AVAILABLE TO THE PERSON PURCHASING THE SERVICE-, WITHIN THE MEAN ING OF PARAGRAPH 4(6). SIMILARLY, THE USE OF A PRODUCT WHICH EMBODIES TECH NOLOGY SHALL NOT PER SE BE CONSIDERED TO MAKE THE TECHNOLOGY AVAILABLE. TYPICAL CATEGORIES OF SERVICES THAT GENERALLY INVOL VE EITHER THE DEVELOPMENT AND TRANSFER OF TECHNICAL PLANTS OR TEC HNICAL DESIGNS, OR MAKING TECHNOLOGY AVAILABLE AS DESCRIBED IN PARAGRA PH 4(6), INCLUDE ; 1. ENGINEERING SERVICES (INCLUDING THE SUB-CATEGORI ES OF BIO-ENGINEERING AND AERONAUTICAL, AGRICULTURAL, CERAMICS, CHEMICAL, CIVIL, ELECTRICAL, MECHANICAL, METALLURGICAL, AND INDUSTRIAL ENGINEERI NG) ; 2. ARCHITECTURAL SERVICES ; AND 3. COMPUTER SOFTWA RE DEVELOPMENT. UNDER PARAGRAPH 4(6), TECHNICAL AND CONSULTANCY SER VICES COULD MAKE TECHNOLOGY AVAILABLE IN A VARIETY OF SETTINGS, ACTI VITIES AND INDUSTRIES. SUCH SERVICES MAY, FOR EXAMPLES, RELATE TO ANY OF T HE FOLLOWING AREAS : 1. BIO-TECHNICAL SERVICES ; 2. FOOD PROCESSING ; 3. ENVIRONMENTAL AND ECOLOGICAL SERVICES ; 4. COMMUNICATION THROUGH SATELLITE OR OTHERWISE ; 5. ENERGY CONSERVATION ; 6. EXPLORATION OR EXPLOITATION OF MINERAL OIL OR NA TURAL GAS ; 7. GEOLOGICAL SURVEYS ; 8. SCIENTIFIC SERVICES ; AND 9. TECHNICAL TRAINING. THE FOLLOWING EXAMPLES INDICATE THE SCOPE OF THE CO NDITIONS IN PARAGRAPH 4(6) : EXAMPLE 3 FACTS: A U.S. MANUFACTURER HAS EXPERIENCE IN THE USE OF A PROCESS FOR MANUFACTURING WALLBOARD FOR INTERIOR WALLS OF HOUSE S WHICH IS MORE DURABLE THAN THE STANDARD PRODUCTS OF ITS TYPE. AN INDIAN BUILDER WISHES TO PRODUCE THIS PRODUCT FOR ITS OWN USE. IT RENTS A PL ANT AND CONTRACTS WITH THE U.S. COMPANY TO SEND EXPERTS TO INDIA TO SHOW E NGINEERS IN THE INDIAN COMPANY HOW TO PRODUCE THE EXTRA-STRONG WALLBOARD. THE U.S. CONTRACTORS WORK WITH THE TECHNICIANS IN THE INDIAN FIRM FOR A FEW MONTHS. ARE THE PAYMENTS TO THE U.S. FIRM CONSIDERED TO BE PAYMENTS FOR 'INCLUDED SERVICES' ? ANALYSIS: THE PAYMENTS WOULD BE FEES FOR INCLUDED SERVICES. T HE SERVICES ARE OF A TECHNICAL OR CONSULTANCY NATURE; IN THE EXAMPLE, TH EY HAVE ELEMENTS OF BOTH TYPES OF SERVICES. THE SERVICES MAKE AVAILABLE TO THE INDIAN COMPANY TECHNICAL KNOWLEDGE, SKILL AND PROCESSES. I.T.A.NO.2021 /AHD/2009 639/AHD/2010 16 EXAMPLE 4 . FACTS : A U.S. MANUFACTURER OPERATES A WALLBOARD FABRICATIO N PLANT OUTSIDE INDIA. AN INDIAN BUILDER HIRES THE U.S. COMPANY TO PRODUCE WALLBOARD AT THAT PLANT FOR A FEE. THE INDIAN COMPANY PROVIDES THE RA W MATERIALS, AND THE U.S. MANUFACTURER FABRICATES THE WALLBOARD IN ITS P LANT, USING ADVANCED TECHNOLOGY. ARE THE FEES IN THIS EXAMPLE PAYMENTS F OR INCLUDED SERVICES ? ANALYSIS: THE FEES WOULD NOT BE FOR INCLUDED SERVICES. ALTHOU GH THE U.S. COMPANY IS CLEARLY PERFORMING A TECHNICAL SERVICE, NO TECHN ICAL KNOWLEDGE, SKILL, ETC., ARE MADE AVAILABLE TO THE INDIAN COMPANY, NOR IS THERE ANY DEVELOPMENT AND TRANSFER OF A TECHNICAL PLANT OR DE SIGN. THEJJ.SV- COMPANY IS MERELY PERFORMING A CONTRACT MANUFACTURI NG SERVICE. EXAMPLE 5 FACTS : AN INDIAN FIRM OWNS INVENTORY CONTROL SOFTWARE FOR USE IN ITS CHAIN OF RETAIL OUTLETS THROUGHOUT INDIA. IT EXPANDS ITS SAL ES OPERATION BY EMPLOYING A TEAM OF TRAVELLING SALESMEN TO TRAVEL A ROUND THE COUNTRYSIDE SELLING THE COMPANY'S WARES. THE COMPANY WANTS TO M ODIFY ITS SOFTWARE TO PERMIT THE SALESMEN TO ASSESS THE COMPANY'S CENT RAL COMPUTERS FOR INFORMATION ON WHAT PRODUCTS ARE AVAILABLE IN INVEN TORY AND WHEN THEY CAN BE DELIVERED. THE INDIAN FIRM HIRES A U.S. COMP UTER PROGRAMMING FIRM TO MODIFY ITS 76 SOFTWARE FOR THIS PURPOSE. ARE THE FEES WHICH THE I NDIAN FIRM PAYS TREATED AS FEES FOR INCLUDED SERVICES ? ANALYSIS: THE FEES ARE FOR INCLUDED SERVICES. THE U.S. COMPAN Y CLEARLY PERFORMS A TECHNICAL SERVICE FOR THE INDIAN COMPANY, AND IT TR ANSFERS TO THE INDIAN COMPANY THE TECHNICAL PLAN (I.E., THE COMPUTER PROG RAMME) WHICH IT HAS DEVELOPED. EXAMPLE 6 FACTS : AN INDIAN VEGETABLE OIL MANUFACTURING COMPANY WANTS TO PRODUCE A CHOLESTEROL-FREE OIL FROM A PLANT WHICH PRODUCES OI L NORMALLY CONTAINING CHOLESTEROL. AN AMERICAN COMPANY HAS DEVELOPED A PR OCESS FOR REFINING THE CHOLESTEROL OUT OF THE OIL. THE INDIAN COMPANY CONTRACTS WITH THE U.S. COMPANY TO MODIFY THE FORMULAS WHICH IT USES SO AS TO ELIMINATE THE CHOLESTEROL, AND TO TRAIN THE EMPLOYEES OF THE INDI AN COMPANY IN APPLYING THE NEW FORMULAS. ARE THE FEES PAID BY THE INDIAN C OMPANY FOR INCLUDED SERVICES ? ANALYSIS: THE FEES ARE FOR INCLUDED SERVICES. THE SERVICES AR E TECHNICAL, AND THE TECHNICAL KNOWLEDGE IS MADE AVAILABLE TO THE INDIAN COMPANY. I.T.A.NO.2021 /AHD/2009 639/AHD/2010 17 EXAMPLE 7 FACTS: THE INDIAN VEGETABLE OIL MANUFACTURING FIRM HAS MAS TERED THE SCIENCE OF PRODUCING CHOLESTEROL-FREE OIL AND WISHES TO MARKET THE PRODUCT WORLD WIDE. IT HIRES AN AMERICAN MARKETING CONSULTING FIR M TO DO A COMPUTER SIMULATION OF THE WORLD MARKET FOR SUCH OIL AND TO ADVERSE IT ON MARKETING STRATEGIES. ARE THE FEES PAID TO THE U.S. COMPANY F OR INCLUDED SERVICES ? ANALYSIS: THE FEES WOULD NOT BE FOR INCLUDED SERVICES. THE AM ERICAN COMPANY IS PROVIDING A CONSULTANCY SERVICE WHICH INVOLVES THE USE OF SUBSTANTIAL TECHNICAL SKILL AND EXPERTISE. IT IS NOT, HOWEVER, MAKING AVAILABLE TO THE INDIAN COMPANY ANY TECHNICAL EXPERIENCE, KNOWLEDGE OR SKILL, ETC., NOR IS IT TRANSFERRING A TECHNICAL PLAN OR DESIGN. WHAT IS TRANSFERRED TO THE INDIAN COMPANY THROUGH THE SERVICE CONTRACT IS COMMERCIAL INFORMATION. THE FACT THAT TECHNICAL SKILLS WERE REQUIRED BY THE PER FORMER OF THE SERVICE IN ORDER TO PERFORM THE COMMERCIAL INFORMATION SERVICE DOES NOT MAKE THE SERVICE A TECHNICAL SERVICE WITHIN THE MEANING OF P ARAGRAPH 4(B). PARAGRAPH 5 PARAGRAPH 5 OF ARTICLE 12 DESCRIBES SEVERAL CATEGOR IES OF SERVICES WHICH ARE NOT INTENDED TO BE TREATED AS INCLUDED SERVICES EVEN IF THEY SATISFY THE TESTS OF PARAGRAPH 4. SET FORTH BELOW ARE EXAMPLES OF CASES WHERE FEES WOULD BE INCLUDED UNDER PARAGRAPH 4, BUT ARE EXCLUD ED BECAUSE OF THE CONDITIONS OF PARAGRAPH 5. EXAMPLE 8 FACTS : AN INDIAN COMPANY PURCHASES A COMPUTER FROM A U.S. COMPUTER MANUFACTURER. AS PART OF THE PURCHASE AGREEMENT, TH E MANUFACTURER AGREES TO ASSIST THE INDIAN COMPANY IN SETTING UP THE COMP UTER AND INSTALLING THE OPERATING SYSTEM, AND TO ENSURE THAT THE STAFF OF T HE 77 INDIAN COMPANY IS ABLE TO OPERATE THE COMPUTER. ALS O, AS PART OF THE PURCHASE AGREEMENT, THE SELLER AGREES TO PROVIDE, F OR A PERIOD OFTEN YEARS, ANY UPDATES TO THE OPERATING SYSTEM AND ANY TRAININ G NECESSARY TO APPLY THE UPDATE. BOTH OF THESE SERVICE ELEMENTS TO THE C ONTRACT WOULD QUALIFY UNDER PARAGRAPH 4(6) AS AN INCLUDED SERVICE. WOULD EITHER OR BOTH BE EXCLUDED FROM THE CATEGORY OF INCLUDED SERVICES, UN DER PARAGRAPH 5(A), BECAUSE THEY ARE ANCILLARY AND SUBSIDIARY, AS WELL AS INEXTRICABLY AND ESSENTIALLY LINKED, TO THE SALE OF THE COMPUTER ? ANALYSIS: THE INSTALLATION ASSISTANCE AND INITIAL TRAINING AR E ANCILLARY AND SUBSIDIARY TO THE SALE OF THE COMPUTER, AND THEY ARE ALSO INEX TRICABLY AND ESSENTIALLY FINKED TO THE SALE. THE COMPUTER WOULD BE OF LITTLE VALUE TO THE INDIAN PURCHASER WITHOUT THESE SERVICES, WHICH ARE MOST RE ADILY AND USEFULLY PROVIDED BY THE SELLER. THE FEES FOR INSTALLATION A SSISTANCE AND INITIAL I.T.A.NO.2021 /AHD/2009 639/AHD/2010 18 TRAINING, THEREFORE/ARE NOT FEES FOR INCLUDED SERVI CES, SINCE THESE SERVICES ARE NOT THE PREDOMINANT PURPOSE OF THE ARRANGEMENT. THE SERVICES OF UPDATING THE OPERATING SYSTEM AND P ROVIDING ASSOCIATED NECESSARY TRAINING MAY WELL BE ANCILLARY AND SUBSID IARY TO THE SALE OF THE COMPUTER, BUT THEY ARE NOT INEXTRICABLY AND ESSENTI ALLY LINKED TO THE SALE. WITHOUT THE UPGRADES, THE COMPUTER WILL CONTINUE TO OPERATE AS IT DID WHEN PURCHASED, AND WILL CONTINUE TO ACCOMPLISH THE SAME FUNCTIONS. ACQUIRING THE UPDATES CANNOT, THEREFORE, BE SAID TO BE INEXTRICABLY AND ESSENTIALLY LINKED TO THE SALE OF THE COMPUTER. EXAMPLE 9 -FACTS : AN INDIAN HOSPITAL PURCHASES AN X-RAY MACHINE FROM A U.S. MANUFACTURER. AS PART-OF THE PURCHASE AGREEMENT, TH E MANUFACTURER AGREES TO INSTALL THE MACHINE, TO PERFORM AN INITIA L INSPECTION OF THE MACHINE IN INDIA, TO TRAIN HOSPITAL STAFF IN THE US E OF THE MACHINE, AND TO SERVICE THE MACHINE PERIODICALLY DURING THE USUAL W ARRANTY PERIOD (2 YEARS). UNDER AN OPTIONAL SERVICE CONTRACT PURCHASE D BY THE HOSPITAL, THE MANUFACTURER ALSO AGREES TO PERFORM CERTAIN OTHER S ERVICES THROUGHOUT THE LIFE OF THE MACHINE, INCLUDING PERIODIC INSPECTIONS AND REPAIR SERVICES, ADVISING THE HOSPITAL ABOUT DEVELOPMENTS IN X-RAY F ILM OR TECHNIQUES WHICH COULD IMPROVE THE EFFECTIVENESS OF THE MACHIN E, AND TRAINING HOSPITAL STAFF IN THE APPLICATION OF THOSE NEW DEVE LOPMENTS. THE COST OF THE INITIAL INSTALLATION, INSPECTION, TRAINING AND WARRANTY SERVICE IS RELATIVELY MINOR AS COMPARED WITH THE COST OF THE X -RAY MACHINE. IS ANY OF THE SERVICES DESCRIBED HERE ANCILLARY AND SUBSID IARY, AS WELL AS INEXTRICABLY AND ESSENTIALLY LINKED, TO THE SALE OF THE X-RAY MACHINE ? ANALYSIS : THE INITIAL INSTALLATION, INSPECTION, AND TRAINING SERVICES IN INDIA AND THE PERIODIC SERVICE DURING THE WARRANTY PERIOD ARE ANC ILLARY AND SUBSIDIARY, AS WELL AS INEXTRICABLY AND ESSENTIALLY LINKED, TO THE SALE OF THE X-RAY MACHINE BECAUSE THE USEFULNESS OF THE MACHINE TO TH E HOSPITAL DEPENDS ON THE SERVICE, THE MANUFACTURER HAS FULL RESPONSIBILI TY DURING THIS PERIOD AND THIS COST OF THE SERVICES IS A RELATIVELY MINOR COM PONENT OF THE CONTRACT. THEREFORE, UNDER PARAGRAPH 5(A) THESE FEES ARE NOT FEES FOR INCLUDED SERVICES, REGARDLESS OF WHETHER THEY OTHERWISE WOUL D FALL WITHIN PARAGRAPH 4(B). NEITHER THE POST-WARRANTY PERIOD INSPECTION AND REP AIR SERVICES, NOR THE ADVISORY AND TRAINING SERVICES RELATING TO NEW DEVE LOPMENTS ARE 'INEXTRICABLY AND ESSENTIALLY LINKED' TO 78 THE INITIAL PURCHASE OF THE X-RAY MACHINE. ACCORDIN GLY, FEES FOR THESE SERVICES MAY BE I.T.A.NO.2021 /AHD/2009 639/AHD/2010 19 TREATED AS FEES FOR INCLUDED SERVICES IF THEY MEET THE TESTS OF PARAGRAPH 4(B). EXAMPLE 10 FACTS: AN INDIAN AUTOMOBILE MANUFACTURER DECIDES TO E XPAND INTO THE MANUFACTURER OF HELICOPTERS. IT SENDS A GROUP OF ENGINEERS FROM ITS DESIGN STAFF TO A COURSE OF STUDY CONDUCTED BY THE MASSACHUSETTS INSTITUTES OF TECHNO LOGY (MIT) FOR TWO YEARS TO STUDY AERONAUTICAL ENGINEERING. THE INDIAN FIRMS PAYS TUI TION FEES TO MIT ON BEHALF OF THE FIRM'S EMPLOYEES. IS THE TUITION FEE A FEE FOR AN I NCLUDED SERVICE WITHIN THE MEANING OF ARTICLE 12 ? ANALYSIS: THE TUITION FEE IS CLEARLY INTENDED TO ACQUIRE A TE CHNICAL SERVICE FOR THE FIRM. HOWEVER, THE FEE PAID IS FOR TEACHING BY AN EDUCATIONAL INST ITUTION, AND IS, THEREFORE, UNDER PARAGRAPH 5(C), NOT AN INCLUDED SERVICE. IT IS IRRE LEVANT FOR THIS PURPOSE WHETHER MIT CONDUCTS THE COURSE ON ITS CAMPUS OR AT SOME OTHER LOCATION. EXAMPLE 11 FACTS: AS IN EXAMPLE 10, THE AUTOMOBILE MANUFACTURER WISHE S TO EXPAND INTO THE MANUFACTURER OF HELICOPTERS. IT APPROACHES AN INDIA N UNIVERSITY ABOUT ESTABLISHING A COURSE OF STUDY IN AERONAUTICAL ENGI NEERING. THE UNIVERSITY CONTRACTS WITH A U.S. HELICOPTER MANUFACTURER TO SE ND AN ENGINEER TO BE A VISITING PROFESSOR OF AERONAUTICAL ENGINEERING ON I TS FACULTY FOR A YEAR. ARE THE AMOUNTS PAID BY THE UNIVERSITY FOR THESE TE ACHING SERVICES FEES FOR INCLUDED SERVICES ? ANALYSIS: THE FEES ARE FOR TEACHING IN AN EDUCATIONAL INSTITU TION. AS SUCH, PURSUANT TO PARAGRAPH 5(C), THEY ARE NOT FEES FOR INCLUDED SERVICES. EXAMPLE 12 FACTS: AN INDIAN WISHES TO INSTALL A COMPUTERIZED SYSTEM I N HIS HOME TO CONTROL LIGHTING, HEATING AND AIR-CONDITIONING, A STEREO SOUND SYSTEM AND A B URGLAR AND FIRM ALARM SYSTEM. HE HIRES AN AMERICAN ELECTRICAL ENGINEERING FIRM TO DESIGN THE I.T.A.NO.2021 /AHD/2009 639/AHD/2010 20 NECESSARY WIRING SYSTEM, ADAPT STANDARD SOFTWARE, A ND PROVIDE INSTRUCTIONS FOR INSTALLATIONS. ARE THE FEES PAID T O THE AMERICAN FIRM BY THE INDIAN INDIVIDUAL FEES FOR INC LUDED SERVICES ? ANALYSIS: THE SERVICES IN RESPECT OF WHICH THE FEES ARE PAID ARE OF THE TYPE WHICH WOULD GENERALLY BE TREATED AS FEES FOR INCLUDED SER VICES UNDER PARAGRAPH 4(B). HOWEVER, BECAUSE THE SERVICES ARE FOR THE PER SONAL USE OF THE INDIVIDUAL MAKING THE PAYMENT, UNDER PARAGRAPH 5(D) THE PAYMENTS WOULD NOT BE FEES FOR INCLUDED SERVICES. 18. AS PER THE OBLIGATION OF THE CONSULTANT, WHICH IS TEXOPLAST LTD. IN THE PRESENT CASE, THIS PARTY IS REQUIRED TO DELIVER 9,000 FABRIC DESIGNS FOR COTTON SHIRTING TO THE ASSESSEE EVERY QUARTER. THE CONSULTANT IS ALSO REQUIRED TO SHOW AND / OR MAKE AVAILABLE ALL DOCUME NTS/REPORTS IN RESPECT OF THE TRANSACTION RELATING TO THIS AGREEMENT AND T O PROVIDE DETAILED QUANTITY REPORT IN WRITING TO THE CLIENT I.E. THE A SSESSEE, ALONG WITH SPECIFIC /NEW DESIGN DEVELOPED BY THE CONSULTANT. THE COMPENSATION IS PAYABLE BY THE ASSESSEE TO THE CONSULTANT @ US$22 F OR EACH DESIGN SUPPLIED BY THE CONSULTANT. AS PER CLAUSE 5.5, ON EXPIRY OR TERMINATION OF THIS AGREEMENT, THE CONSULTANT IS REQUIRED TO RETUR N ALL THE DOCUMENTS AND OTHER INTERNAL DOCUMENT OF THE CLIENT BUT THERE IS NO CLAUSE IN THE AGREEMENT TO SAY THAT THE CLIENT I.E. THE ASSESSEE IS REQUIRED TO RETURN THE DESIGN SUPPLIED BY THE CONSULTANT. HENCE, IT IS AP PARENT THAT THE DESIGN SUPPLIED BY THE CONSULTANT TO THE ASSESSEE BECOMES THE PROPERTY OF THE ASSESSEE AND IT CAN BE USED BY THE ASSESSEE FOR ITS OWN BUSINESS AND IT CAN ALSO BE SOLD BY THE ASSESSEE TO ANY OUTSIDER FOR CO NSIDERATION. NOW, IN THE LIGHT OF THESE FACTS, WE EXAMINE THE APPLICABIL ITY OF THE INDIA UK TREATY FIRST. AS PER ARTICLE 13 OF INDIA UK TREATY , CLAUSE (C) OF SUB ARTICLE 4, FTS MAY MAKE AVAILABLE THE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW HOW OR PROCESSES, OR CONSIST OF THE DEVELOPMEN T AND TRANSFER OF A I.T.A.NO.2021 /AHD/2009 639/AHD/2010 21 TECHNICAL PLAN OR TECHNICAL DESIGN. IN THE FACTS O F THE PRESENT CASE, THE CONSULTANT I.E. TEXOPLAST LD. IS REQUIRED TO TRANSF ER THE FABRIC DESIGN TO THE ASSESSEE AND THOSE FABRIC DESIGNS ARE TO BE DEVELOP ED BY THE CONSULTANT I.E. TEXOPLAST LTD. AND THIS PARTY IS ALSO REQUIRED TO PROVIDE DETAILED QUANTITY PROGRESS REPORT IN WRITING TO THE ASSESSEE ALONG WITH SPECIFIC OR NEW DESIGN DEVELOPED BY THE CONSULTANT. IN OUR CO NSIDERED OPINION, THE SERVICES RENDERED BY THE CONSULTANT TO THE ASSESSEE COMPANY ARE FALLING WITHIN THIS ARTICLE 13(4)(C) OF INDIA UK DTAA AND, THEREFORE, IT IS FTS. 19. NOW, WE EXAMINE THE MOU BETWEEN INDIA AND US. AS PER THIS MOU, REGARDING PARA 4(B) OF ARTICLE 12 OF INDIA US DTAA, IT WAS PROVIDED THAT THERE WILL BE NO FTS IF TECHNOLOGY IS NOT MADE AVAILABLE TO THE PERSON ACQUIRING THE SERVICES. IT WAS ALSO SPE CIFIED THAT TECHNOLOGY WILL BE CONSIDERED MADE AVAILABLE WHEN THE PERSON ACQUIRING THE SERVICES IS ENABLED TO APPLY THE TECHNOLOGY. IN TH E PRESENT CASE, FABRIC DESIGN IS MADE AVAILABLE TO THE ASSESSEE AND THE AS SESSEE CAN APPLY SUCH FABRIC DESIGN TO PROCESS AND PRODUCE GARMENTS AND I T CAN ALSO SELL AND TRANSFER SUCH FABRIC DESIGN TO OUTSIDER FOR CONSIDE RATION AND THERE IS NO RESTRICTION ON THE ASSESSEE IN THIS REGARD IN THE A GREEMENT BETWEEN THE ASSESSEE AND THE CONSULTANT. CONSIDERING ALL THESE FACTS AND EVEN AFTER CONSIDERING MOU BETWEEN INDIA AND US, WE ARE OF THE CONSIDERED OPINION THAT THE SERVICES RECEIVED BY THE ASSESSEE AND PROVIDED BY THE CONSULTANT I.E. TEXOPLAST LTD. IS NOTHING BUT FTS A ND HENCE, TAX IS DEDUCTIBLE BY THE ASSESSEE FROM THE PAYMENTS MADE B Y THE ASSESSEE, TO THE CONSULTANT M/S. TEXOPLAST LTD. 20. NOW, WE DISCUSS THE APPLICABILITY OF THE VARIOU S JUDGEMENTS CITED BY THE LD. A.R. MOST OF THE JUDGMENTS ARE IN RESPE CT ON THIS ASPECT THAT MOU BETWEEN INDIA AND US SHOULD ALSO BE CONSIDERED. WE HAVE ALREADY I.T.A.NO.2021 /AHD/2009 639/AHD/2010 22 CONSIDERED THE MOU BETWEEN INDIA AND US AND HENCE, THESE JUDGEMENTS ARE NO MORE RELEVANT FOR THE ISSUE IN DISPUTE. REG ARDING OTHER JUDGEMENTS CITED BY THE LD. A.R., WE FIND THAT THE SAME ARE NO T APPLICABLE IN THE PRESENT CASE BECAUSE THE FACTS ARE DIFFERENT. IN TH E CASE CIT VS DE BEER INDIA PVT. LTD. (SUPRA), IT WAS HELD THAT THIS IS N OT THE CASE OF FTS BECAUSE IN THAT CASE, IT WAS FOUND THAT THE DUTCH COMPANY P ERFORMED SERVICES USING TECHNICAL KNOWLEDGE AND EXPERTISE AND IT HAD GIVEN DATA FOR THE JOB TO THE ASSESSEE BUT THEY HAD NOT MADE AVAILABLE TEC HNICAL EXPERTISE FOR THE KNOWLEDGE IN RESPECT OF COLLECTION OR PROCESSING OF DATA TO THE ASSESSEE. IN THAT CASE, THERE WAS NO DEVELOPMENT AND TRANSFER OF PLAN OR DESIGN. BUT IN THE PRESENT CASE, FABRIC DESIGN WAS DEVELOPE D AND TRANSFERRED AND HENCE, THIS JUDGEMENT IS NOT APPLICABLE IN THE PRES ENT CASE. 21. SIMILARLY, THE TRIBUNAL DECISION RENDERED IN T HE CASE OF DDIT VS PREROY A. G. (SUPRA) IS ALSO NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE FACTS ARE DIFFERENT. IN THAT CASE, THIS STRATEGIC CONSULTANCY SERVICE TO STPL BUT IN THE PRESENT CASE, TECHNICAL DESIGN OF FABRIC S WAS ALSO SUPPLIED TO THE ASSESSEE. 22. SIMILARLY, THE RULING OF AAR IN THE CASE OF R. R. DONNELLEY (SUPRA) IS ALSO NOT APPLICABLE. IN THAT CASE, SERVICES WE RE INVOLVING ROUTINE DATA ENTRY, APPLICATION SORTING, DOCUMENT HANDLING AND D ATA OPERATING, NOT INVOLVING OF SOPHISTICATED TECHNOLOGY AND WERE NON MANAGERIAL, NON TECHNICAL AND NON CONSULTANCY SERVICES. 23. THE JUDGEMENT OF HONBLE DELHI HIGH COURT RENDE RED IN THE CASE OF DIT VS GUY CARPENTER & CO. LTD. (SUPRA) IS ALSO NOT APPLICABLE AS THE FACTS ARE DIFFERENT. IN THAT CASE, THIS FINDING IS GIVEN BY ITAT THAT THE ASSESSEE WAS RENDERING ONLY INTERMEDIARY SERVICES W HILE ACTING AS AN INTERMEDIARY FACILITATOR IN GETTING THE REINSURANCE COVER FOR NEW INDIA I.T.A.NO.2021 /AHD/2009 639/AHD/2010 23 INSURANCE CO. THIS FINDING WAS ALSO GIVEN BY ITAT THAT IT CANNOT BE SAID THAT THE ASSESSEE WAS RENDERING ANY TYPE OF TECHNIC AL/C0NSUNTALCY SERVICES. HONBLE DELHI HIGH COURT HAS HELD THAT T HERE ARE FINDING OF FACT AND NO SUBSTANTIAL QUESTION OF LAW ARISES. THIS JU DGEMENT IS ALSO NOT APPLICABLE AS FACTS ARE DIFFERENT. 24. AS PER ABOVE DISCUSSION, WE HAVE SEEN THAT NONE OF THE JUDGEMENTS CITED BY LD. A.R. IS RENDERING ANY HELP TO THE ASSE SSEE. AS PER PARA 19 ABOVE, WE HAVE ALREADY HELD THAT TDS IS DEDUCTIBLE IN THE PRESENT CASE. HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A). 25. THIS APPEAL OF THE ASSESSEE IS DISMISSED. 26. NOW, WE TAKE UP THE ASSESSEES APPEAL FOR ASSES SMENT YEAR 2010-11 I.E. I.T.A.NO. 639/AHD/2010. BOTH THE SIDES AGREED THAT FACTS AND ARGUMENTS ARE THE SAME AND HENCE, THIS APPEAL CAN B E DECIDED ON SIMILAR LINE. ACCORDINGLY, THIS APPEAL IS ALSO DISMISSED. 27. IN THE COMBINED RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. 28. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD I.T.A.NO.2021 /AHD/2009 639/AHD/2010 24 1. DATE OF DICTATION 14/12/2012 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 30/12/2012.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 18/01/2013 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.18/01 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 18/0 1/2013 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .