Marck Biosciences Ltd., Ahmedabad V. The Income Tax Officer, International Taxation-II, Ahmedabad

ITA 203/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8996 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 23-03-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 21-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Double taxation relief; Permanent establishment
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 201(1); 195; 201

Judgement Text

ITA NO. 203/AHD/2014 MARCK BIOSCIENCES LTD VS. ITO ASSESSMENT YEAR: 2009-10 PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD I BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND MAHAVIR PRASAD JM] ITA NO. 203/AHD/2014 ASSESSMENT YEAR: 2009-10 MARCK BIOSCIENCES LTD., ...............APPE LLANT 5 TH FLOOR, HERITAGE, NR. GUJARAT VIDHYAPITH, ASHRAM ROAD, AHMEDABAD-380014 PAN : AABCM 0366 P VS. INCOME-TAX OFFICER, ........................... .RESPONDENT INTERNATIONAL TAXATION-II, AHMEDABAD APPEARANCES BY: SN DIVATIA FOR THE APPELLANT DILEEP KUMAR FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : MARCH 23, 2017 DATE OF PRONOUNCING THE ORDER : MARCH 28, 2017 O R D E R PER PRAMOD KUMAR AM: 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HA S CALLED INTO QUESTION CORRECTNESS OF LEARNED CIT(A)S ORDER DATED 04.10.2 013, IN THE MATTER OF TAX WITHHOLDING DEMANDS RAISED UNDER SECTION 201 R.W.S. 195 OF THE INCOME-TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2009-10. 2. GRIEVANCES RAISED BY THE APPELLANT ARE AS FOLLOW S:- 1. THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW A ND IN FACTS IN TREATING PROFESSIONAL FEES PAID TO MAHTA PARTNERS, LLC USA A NON RESIDENT TO THE TUNE OF RS.60,00,000/- (US $ 1,20,000) AS INCOME AS ROYALTY U/S 9(1)(VI) AND CONSEQUENTLY PASSING ORDERS UNDER SECTION 201(1) AN D CHARGED INTEREST U/S 201(1A) AND HONOURABLE CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE SAME, DISREGARDING THE SUBMISSIONS MADE BY THE APPELLANT. ITA NO. 203/AHD/2014 MARCK BIOSCIENCES LTD VS. ITO ASSESSMENT YEAR: 2009-10 PAGE 2 OF 8 2. THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW A ND IN FACTS IN TREATING PROFESSIONAL FEES PAID TO MAHTA PARTNERS, LLC USA, A NON RESIDENT AND HOLDING THAT THE SAID PAYMENT REQUIRES DEDUCTION OF TAX AT SOURCE U/S 195 / 195 9A) AND HONOURABLE CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE SAME, DISREGARDING THE SUBMISSIONS MADE BY THE APPELLANT. 3. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. DURING THE RELEVANT FINANCIAL PERIOD, THE ASSESSEE MADE A PAYMENT OF US $ 1,20,000 TO A US BASED ENTITY BY THE NAME OF MEHTA PARTNERS LLC. THIS PAYMENT WAS M ADE ON ACCOUNT OF PROFESSIONAL FEE FOR GLOBAL BIOPHARMACEUTICAL STRATEGIC COUNSELL ING AND ADVISORY SERVICES RENDERED BY THIS ENTITY. THE ASSESSEE DID NOT DEDUCT ANY TAX A T SOURCE FROM THE PAYMENT SO MADE, ON THE GROUND THAT THE INCOME EMBEDDED THEREIN WAS NOT TAXABLE IN INDIA IN VIEW OF THE PROVISIONS OF INDIA USA DOUBLE TAXATION AVOIDANCE A GREEMENT [(1991) 187 ITR (87) 102]. THE ASSESSING OFFICER WAS, HOWEVER, OF THE V IEW THAT THE SERVICES RENDERED BY THE US ENTITY ARE COVERED BY THE DEFINITION OF ROYALTY UNDER EXPLANATION 2 TO SECTION 9(1)(VI) AS ALSO UNDER ARTICLE 12 (3)(A) AND, ACCORDINGLY, T AX SHOULD HAVE BEEN DEDUCTED AT SOURCE @ 10%. ON THIS BASIS, TAX WITHHOLDING LIABI LITY UNDER SECTION 201 R.W.S. 195, AMOUNTING TO RS.9,33,306/-, WAS RAISED ON THE ASSES SEE. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. WHILE CONFIRMING THE STAND TAKEN BY THE ASSESSING OFFICER, LEARNED CIT(A ), INTER ALIA, OBSERVED AS FOLLOWS:- FROM THE ABOVE DISCUSSION AND JUDGMENT A ANALOGY C AN BE DRAWN THAT FOR THE PURPOSE OF ANY INFORMATION TO BE ROYALTY TO BE REGA RDED AS KNOWLEDGE AS MENTIONED IN SUB CLAUSE (IV) OF EXPLANATION 2 OF SE CTION 9(1)(VI) FOLLOWING PARAMETERS NEEDS TO BE SATISFIED: THE KNOWLEDGE MUST A PROPRIETY KNOWLEDGE OF THE PER SON TO WHOM PAYMENT IS MADE; THERE MUST BE SOME INTELLECTUAL VALUES ASSIGNED TO THE INFORMATION RECEIVED. NOW ADVERTING TO THE FACTS OF THE INSTANT CASE. THE SCOPE OF SERVICES TO BE GIVEN BY MPL TO THE APPELLANT IS MENTIONED IN PARAG RAPHS 1 TO 4 OF THE AGREEMENT. THE SUM AND SUBSTANCE OF THESE SERVICES IS SUMMARIZED AS FOLLOWS : (A) BUSINESS PROMOTION; ITA NO. 203/AHD/2014 MARCK BIOSCIENCES LTD VS. ITO ASSESSMENT YEAR: 2009-10 PAGE 3 OF 8 (B) MARKETING; (C) PUBLICITY; AND (D) FINANCIAL ADVISORY. THE INFORMATION PARTED BY MPL IS ONE WHICH IS GAINE D BY ITS OWN EXPERIENCE IN THE FIELD OF PHARMACEUTICAL INDUSTRY. THE ROLE OF MPL, TO THE EXTENT APPLICABLE, WAS TO UNDERSTAND MARCK MANAGEMENT'S PH ILOSOPHY AND PRIORITIES: WORKING CLOSELY WITH THE SENIOR MANAGEMENT OF MARCK , BECOMING AN EXTENSION OF THE MANAGEMENT TERM, PROVIDING A PERSPECTIVE IND IAN PHARMACEUTICAL MARKET AND ASSISTING MARCK IN IDENTIFYING POTENTIAL CORPOR ATE PARTNERS, LICENSING OPPORTUNITIES OR ACQUISITION TARGETS; ASSISTING IN DEVISING OPTIMAL APPROACHES TO ESTABLISHING CONTACT WITH SELECTED PROSPECTIVE CORP ORATE PARTNERS OR ACQUISITION TARGETS; EVALUATING AND RECOMMENDING FINANCIAL AND STRATEGIC ALTERNATIVES WITH RESPECT TO A STRATEGIC ALLIANCE; COUNSELING MARCK W ITH RESPECT TO NEGOTIATION TACTICS AND STRATEGIES; ASSISTING MARCK IN CONDUCTI NG DETAILED NEGOTIATIONS (DIRECTLY OR BEHIND THE SCENES) WITH A PROSPECTIVE CORPORATE PARTNER OR ACQUISITION TARGET; AND ASSISTING IN THE PREPARATION, IMPLEMENT ATION AND EVALUATION OF POST- TRANSACTION BUSINESS PLANS TO ADVANCE MARCK'S OPERA TIONS. MPL WILL WORK CLOSELY WITH MARCK MANAGEMENT IN ADVISING THE LONG TERM FINANCIAL STRATEGIC PLANNING AND IN ITS GOAL OF ENHANCING THE SHAREHOLD ER'S GROWTH CAPITAL. THE INFORMATION RELATING TO INDIAN PHARMACEUTICAL M ARKET PARTED BY MPL PERTAINS TO ITS OWN EXPERIENCE GAINED OVER THE PERI OD OF TIME. THE INFORMATION HAS AN ELEMENT OF ITS OWN COMMERCIAL AND INDUSTRIAL EXP ERIENCE AND CAN BE TERMED AS ROYALTY UNDER SECTION 9(1)(VI) OF THE ACT EXPLANATI ON 2 SUB-CLAUSE (IV). ACCORDINGLY IT CAN BE SAID THAT THE INCOME IS DEEMED TO ACCRUE ARISE IN INDIA. FURTHER THE WORDINGS OF IN THE DEFINITION OF ROYALT Y ARE SIMILAR IN ARTICLE 12(3) OF THE INDIA-USA DTAA. THE SAME DISCUSSION HOLDS GO OD FOR TREATY ALSO. ACCORDINGLY THE REMITTANCE MADE CAN BE TERMED AS RO YALTY UNDER THE ACT AS WELL AS DTAA. THUS, THE REMITTANCE TO MEHTA PARTNERS LLC IS COVER ED BY THE DEFINITION OF 'ROYALTIES' AS PER ARTICLE 12.3 OF INDIA-USA TAX TR EATY AND THE CONTENTION OF THE AO IS UPHELD. AS THE PAYMENT RECEIVED BY MEHTA PARTNERS LLC, USA IS TAXABLE AS 'ROYALTIES' AS PER THE PROVISIONS OF THE IT ACT AND THAT OF AS PER DTA BETWEEN INDIA AND USA, APPELLANT SHOULD HAVE DEDUCTED TAX IN ACCORDANCE WI TH THE PROVISIONS OF SECTION 195 OF THE ACT WHILE REMITTING THE SUM, WHICH THE A PPELLANT HAS FAILED AND THEREFORE THE AO HAS RIGHTLY HELD THE APPELLANT AS 'ASSESSEE IN DEFAULT' WITHIN THE MEANING OF SECTION) 201(1) OF THE ACT. THE GROUND O F APPEAL IS THEREFORE DISMISSED. ITA NO. 203/AHD/2014 MARCK BIOSCIENCES LTD VS. ITO ASSESSMENT YEAR: 2009-10 PAGE 4 OF 8 4. THE ASSESSEE IS NOT SATISFIED WITH THE STAND SO TAKEN BY THE CIT(A) AS WELL, AND IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 6. IT IS ONLY ELEMENTARY THAT SO FAR AS THE CASES C OVERED BY DOUBLE TAXATION AVOIDANCE AGREEMENTS, ENTERED INTO BY INDIA WITH TH E RESPECTIVE JURISDICTIONS, ARE CONCERNED, THE PROVISIONS OF THE INCOME TAX ACT APP LY ONLY TO THE EXTENT SUCH PROVISIONS ARE MORE FAVOURABLE TO THE ASSESSEE. IN OTHER WORD S, IN A SITUATION IN WHICH AN ENTITY FISCALLY DOMICILED IN THE UNITED STATES IS NOT TAXA BLE IN INDIA, UNDER THE PROVISIONS OF THE APPLICABLE DTAA, IT IS NOT TAXABLE IN INDIA AT ALL. IT IS IN THIS BACKDROP THAT LET US BEGIN BY LOOKING AT RELEVANT PROVISIONS IN THE INDO US DTAA, WHICH HAVE BEEN RELIED UPON BY THE REVENUE AUTHORITIES, AS FOLLOWS:- ARTICLE 12 ROYALTIES AND FEES FOR INCLUDED SERVICES 1. ROYALTIES AND FEES FOR INCLUDED SERVICES ARISING IN A CONTRACTING STATE AND PAID TO A RESIDENT OF THE OTHER CONTRACTING STATE MAY BE TA XED IN THAT OTHER STATE. 2. HOWEVER, SUCH ROYALTIES AND FEES FOR INCLUDED SE RVICES MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH THEY ARISE AND ACCORDING TO THE LAWS OF THAT STATE; BUT IF THE BENEFICIAL OWNER OF THE ROYALTIES OR FEES FOR I NCLUDED SERVICES IS A RESIDENT OF THE OTHER CONTRACTING STATE, THE TAX SO CHARGED SHALL N OT EXCEED : (A) IN THE CASE OF ROYALTIES REFERRED TO IN SUB- PARAGRAPH (A) OF PARAGRAPH 3 AND FEES FOR INCLUDED SERVICES AS DEFINED IN THIS ARTICLE [OTHER THAN SERVICES DESCRIBED IN SUB- PARAGRAPH (B) OF THIS PARAGRAPH] : (I) DURING THE FIRST FIVE TAXABLE YEARS FOR WHICH THIS CONVENTION HAS EFFECT, (A) 15 PER CENT OF THE GROSS AMOUNT OF THE ROYALTIES OR FEES FOR INCLUDED SERVICES AS DEFINED IN THIS ARTICLE, WHERE THE PAYER OF THE ROYALTIES OR FEES IS THE GOVERNMENT OF THAT C ONTRACTING STATE, A POLITICAL SUB -DIVISION OR A PUBLIC SECTOR COMPANY ; AND ITA NO. 203/AHD/2014 MARCK BIOSCIENCES LTD VS. ITO ASSESSMENT YEAR: 2009-10 PAGE 5 OF 8 (B) 20 PER CENT OF THE GROSS AMOUNT OF THE ROYALTIES OR FEES FOR INCLUDED SERVICES IN ALL OTHER CASES ; AND (II) DURING THE SUBSEQUENT YEARS, 15 PER CENT OF THE GRO SS AMOUNT OF ROYALTIES OR FEES FOR INCLUDED SERVICES ; AND (B) IN THE CASE OF ROYALTIES REFERRED TO IN SUB- PARAGRAPH (B) OF PARAGRAPH 3 AND FEES FOR INCLUDED SERVICES AS DEFINED IN THIS ARTICLE THAT A RE ANCILLARY AND SUBSIDIARY TO THE ENJOYMENT OF THE PROPERTY FOR WHICH PAYMENT IS RECEIVED UNDER PARAGRAPH 3(B) OF THIS ARTICLE, 10 PER CENT OF THE GROSS AMOUNT OF TH E ROYALTIES OR FEES FOR INCLUDED SERVICES. 3. THE TERM 'ROYALTIES' AS USED IN THIS ARTICLE MEA NS : (A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERAT ION FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF A LITERARY, ARTISTIC, OR SCIENTIFI C WORK, INCLUDING CINEMATOGRAPH FILMS OR WORK ON FILM, TAPE OR OTHER MEANS OF REPRO DUCTION FOR USE IN CONNECTION WITH RADIO OR TELEVISION BROADCASTING, ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE, INCLUDING GAIN S DERIVED FROM THE ALIENATION OF ANY SUCH RIGHT OR PROPERTY WHICH ARE CONTINGENT ON THE PRODUCTIVITY, USE, OR DISPOSITION THEREOF ; 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 PAYMENTS DERIVED BY AN ENTERPRISE DESCRIBED IN PARAGRAPH 1 OF ARTI CLE 8 (SHIPPING AND AIR TRANSPORT) FROM ACTIVITIES DESCRIBED IN PARAGRAPH 2(C) OR 3 OF ARTICLE 8. 4. FOR PURPOSES OF THIS ARTICLE, 'FEES FOR INCLUDED SERVICES' MEANS PAYMENTS OF ANY KIND TO ANY PERSON IN CONSIDERATION FOR THE RENDERI NG OF ANY TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THROUGH THE PROVISION OF SERVIC ES OF TECHNICAL OR OTHER PERSONNEL) IF SUCH SERVICES : (A) ARE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF THE RIGHT, PROPERTY OR INFORMATION FOR WHICH A PAYMENT DESCRIBED IN PAR AGRAPH 3 IS RECEIVED ; OR (B) MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKI LL, KNOW- HOW, OR PROCESSES, OR CONSIST OF THE DEVELOPMENT AND TRANSFER OF A TECHNI CAL PLAN OR TECHNICAL DESIGN. 5. NOTWITHSTANDING PARAGRAPH 4, 'FEES FOR INCLUDED SERVICES' DOES 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 A SALE D ESCRIBED IN PARAGRAPH 3(A) ; (B) FOR SERVICES THAT ARE ANCILLARY AND S UBSIDIARY TO THE RENTAL OF SHIPS, AIRCRAFT, CONTAINERS OR OTHER EQUIPMENT USED IN CONNECTION WI TH THE OPERATION OF SHIPS OR AIRCRAFT IN INTERNATIONAL TRAFFIC ; (C) FOR TEACHING IN OR BY EDUCATIONAL INSTITUTIONS ; (D) FOR SERVICES FOR THE PERSONAL USE OF THE INDIVIDUAL OR INDIVIDUALS MAKING THE PAYMENTS ; OR ITA NO. 203/AHD/2014 MARCK BIOSCIENCES LTD VS. ITO ASSESSMENT YEAR: 2009-10 PAGE 6 OF 8 (E) TO AN EMPLOYEE OF THE PERSON MAKING THE PAYMENTS OR TO ANY INDIVIDUAL OR FIRM OF INDIVIDUALS (OTHER THAN A COMPANY) FOR PROFESSIONAL SERVICES AS DEFINED IN ARTICLE 15 (INDEPENDENT PERSONAL SERVICES). 6. THE PROVISIONS OF PARAGRAPHS 1 AND 2 SHALL NOT A PPLY IF THE BENEFICIAL OWNER OF THE ROYALTIES OR FEES FOR INCLUDED SERVICES, BEING A RE SIDENT OF A CONTRACTING STATE, CARRIES ON BUSINESS IN THE OTHER CONTRACTING STATE, IN WHIC H THE ROYALTIES OR FEES FOR INCLUDED SERVICES ARISE, THROUGH A PERMANENT ESTABLISHMENT S ITUATED THEREIN, OR PERFORMS IN THAT OTHER STATE INDEPENDENT PERSONAL SERVICES FROM A FIXED BASE SITUATED THEREIN, AND THE ROYALTIES OR FEES FOR INCLUDED SERVICES ARE ATTRIBUTABLE TO SUCH PERMANENT ESTABLISHMENT OR FIXED BASE. IN SUCH CASE THE PROVI SIONS OF ARTICLE 7 (BUSINESS PROFITS) OR ARTICLE 15 (INDEPENDENT PERSONAL SERVICES), AS T HE CASE MAY BE SHALL APPLY. 7. (A) ROYALTIES AND FEES FOR INCLUDED SERVICES SHA LL BE DEEMED TO ARISE IN A CONTRACTING STATE WHEN THE PAYER IS THAT STATE ITSE LF, A POLITICAL SUB-DIVISION, A LOCAL AUTHORITY, OR A RESIDENT OF THAT STATE. WHERE, HOWE VER, THE PERSON PAYING THE ROYALTIES OR FEES FOR INCLUDED SERVICES, WHETHER HE IS A RESIDENT OF A CONTRACTING STATE OR NOT, HAS IN A CONTRACTING STATE A PERMANENT ESTA BLISHMENT OR A FIXED BASE IN CONNECTION WITH WHICH THE LIABILITY TO PAY THE ROYA LTIES OR FEES FOR INCLUDED SERVICES WAS INCURRED, AND SUCH ROYALTIES OR FEES FOR INCLUD ED SERVICES ARE BORNE BY SUCH PERMANENT ESTABLISHMENT OR FIXED BASE, THEN SUCH RO YALTIES OR FEES FOR INCLUDED SERVICES SHALL BE DEEMED TO ARISE IN THE CONTRACTIN G STATE IN WHICH THE PERMANENT ESTABLISHMENT OR FIXED BASE IS SITUATED. (B) WHERE UNDER SUB-PARAGRAPH (A) ROYALTIES OR FEES FOR INCLUDED SERVICES DO NOT ARISE IN ONE OF THE CONTRACTING STATES, AND THE ROY ALTIES RELATE TO THE USE OF, OR THE RIGHT TO USE, THE RIGHT OR PROPERTY, OR THE FEES FO R INCLUDED SERVICES RELATE TO SERVICES PERFORMED, IN ONE OF THE CONTRACTING STATES, THE RO YALTIES OR FEES FOR INCLUDED SERVICES SHALL BE DEEMED TO ARISE IN THAT CONTRACTI NG STATE. 8. WHERE, BY REASON OF A SPECIAL RELATIONSHIP BETWE EN THE PAYER AND THE BENEFICIAL OWNER OR BETWEEN BOTH OF THEM AND SOME OTHER PERSON , THE AMOUNT OF THE ROYALTIES OR FEES FOR INCLUDED SERVICES PAID EXCEEDS THE AMOU NT WHICH WOULD HAVE BEEN PAID IN THE ABSENCE OF SUCH RELATIONSHIP, THE PROVISIONS OF THIS ARTICLE SHALL APPLY ONLY TO THE LAST-MENTIONED AMOUNT. IN SUCH CASE, THE EXCESS PART OF THE PAYMENTS SHALL REMAIN TAXABLE ACCORDING TO THE LAWS OF EACH CONTRA CTING STATE, DUE REGARD BEING HAD TO THE OTHER PROVISIONS OF THE CONVENTION. 7. THE CASE OF THE REVENUE RESTS ON DEFINITION OF ROYALTIES UNDER ARTICLE 12(3)(A) IN THE SENSE THAT, ACCORDING TO THE AUTHORITIES BELOW, RENDITION OF SERVICES BY THE US ENTITY AMOUNTS TO PARTING WITH THE INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL AND SCIENTIFIC EXPERIENCE GAINED BY THE US ENTITY OVER A PERIOD O F TIME. ITA NO. 203/AHD/2014 MARCK BIOSCIENCES LTD VS. ITO ASSESSMENT YEAR: 2009-10 PAGE 7 OF 8 8. AS WE HAVE SEEN A LITTLE WHILE EARLIER, FROM THE EXTRACTS REPRODUCED FROM LEARNED CIT(A)S ORDER, THE SUM AND SUBSTANCE OF THESE SER VICES IS....... (A) BUSINESS PROMOTION; (B) MARKETING; (C) PUBLICITY; AND (D) FINANCIAL ADV ISORY. THESE SERVICES, UNDER THE AGREEMENT, ARE TERMED AS STRATEGIC AND FINANCIAL C OUNSELLING SERVICES. THE PAYMENTS MADE BY THE ASSESSEE ARE THUS FOR RENDITIO N OF THESE SERVICES AND NOT FOR USE OF ANY INFORMATION CONCERNING INDUSTRIAL, COMMERCIA L OR SCIENTIFIC INFORMATION. WHILE CHARACTERIZING NATURE OF PAYMENT WHAT IS TO BE SEEN IS THE ACTIVITY TRIGGERING IN CONSIDERATION OF WHICH THE PAYMENT IS MADE. THAT A CTIVITY, IN THE PRESENT CASE, IS RENDITION OF SERVICES. THE FACT THAT IN THE PROCES S OF AVAILING THESE SERVICES, THE ASSESSEE BENEFITS FROM RICH EXPERIENCE OF THE SERVI CE PROVIDER IS WHOLLY IRRELEVANT IN THE PRESENT CONTEXT. THE PAYMENT IS FOR RENDITION OF S ERVICES AND NOT FOR RIGHT TO USE ANY INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SC IENTIFIC EXPERIENCE, IN POSSESSION OF THE SERVICE PROVIDER. IN THIS VIEW OF THE MATTER, THE AUTHORITIES BELOW WERE CLEARLY IN ERROR IN HOLDING THAT THE IMPUGNED PAYMENT WAS COVERED BY THE DEFINITION OF ROYALTY UNDER ARTICLE 12(3)(A). 9. COMING TO THE TAXABILITY OF IMPUGNED FEES AS FEE S FOR INCLUDED SERVICES UNDER ARTICLE 12.4, IT IS ONLY ELEMENTARY THAT SUCH ON ST ANDALONE BASIS A TAXABILITY CAN ARISE ONLY WHEN THESE SERVICES MAKE AVAILABLE TECHNICAL KNOW LEDGE, EXPERIENCE, SKILL, KNOW-HOW OR PROCESS ETC, IN THE SENSE THAT RECIPIENT OF SERV ICES IS ENABLED TO PERFORM SUCH SERVICES, IN FUTURE, ON HIS OWN AND WITHOUT ANY REC OURSE TO SERVICE PROVIDER. IT IS NOT, HOWEVER, THE CASE OF THE REVENUE AND RIGHTLY SO, TH AT SUCH A CONDITION IS SATISFIED ON THE FACTS OF THE PRESENT CASE. LEARNED DEPARTMENTAL RE PRESENTATIVE FAIRLY ACCEPTS THAT IT IS NOT EVEN THE CASE OF THE AUTHORITIES BELOW THAT MA KE AVAILABLE CLAUSE IS SATISFIED. ITA NO. 203/AHD/2014 MARCK BIOSCIENCES LTD VS. ITO ASSESSMENT YEAR: 2009-10 PAGE 8 OF 8 10. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING I N MIND ENTIRETY OF THE CASE, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE. THE IMPUGNED DEMAND RAISED UNDER SECTION 201 R.W.S. 195, ACCORDINGLY, STAND QUASHED. 11. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCE D IN THE OPEN COURT ON THIS 28 TH DAY OF MARCH, 2017. SD/- SD/- MAHAVIR PRASAD PRAMOD KU MAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 28 TH DAY OF MARCH, 2017 BT* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION: ....NINE PAGES MANUSCRIPT OF HONBLE AM ATTACHED... 27.03.2017 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ..28.03.2017......... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S.: 28.03.2017....... . 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: .......... 28.03.2017.............. .. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : ... .. 28.03.2017.. 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: .. 8. DATE OF DESPATCH OF THE ORDER: ......