US Technology Resources P.Ltd,, Trivandrum V. ACIT, Trivandrum

ITA 222/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68988 (ITAT-COCHIN)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 29-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S RAGHUNATHAN
• Keywords: Double taxation relief; Deemed to accrue or arise in india; Permanent establishment; Advance ruling
• Section: 5(2)

Judgement Text

1 ITA NO.222/COCH/2013 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 222/COCH/2013 (ASSESSMENT YEAR 2007-08) US TECHNOLOGY RESOURCES PVT LTD VS A.C.I.T., CIR. 1(1) SEA FACING BLOCK, 4 TH FLOOR TRIVANDRUM 695 003 BHAVANI, TECHNO PARK CAMPUS KARIYAVATTOM TRIVANDRUM 695 581 PAN : AAACU6085C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S RAGHUNATHAN RESPONDENT BY : SHRI M ANIL KUMAR, C.I.T. SMT. S VIJAYAPRABHA DATE OF HEARING : 03-07-2013 DATE OF PRONOUNCEMENT : 27-09-2013 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A), TRIVANDRUM DATED 25-02-2013 FOR THE ASSESSM ENT YEAR 2007-08. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE OF RS. 85,22,743 ON ACCOUNT OF NON DEDUCTION OF TAX UNDER SECTION 40(A)(IA) OF THE ACT. 2 ITA NO.222/COCH/2013 3. SHRI S RAGHUNATHAN, THE LD.COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE ASSESSEE COMPANY ENGAGED ITSELF IN PROVIDING SO FTWARE DEVELOPMENT SERVICES TO THE CUSTOMERS BASED IN INDIA. DURING T HE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY CLAIMED D EDUCTION OF PAYMENT TO THE EXTENT OF RS.85,22,743 MADE TO US TECHNOLOGI ES LLC, A NON RESIDENT COMPANY AND TAX RESIDENT OF USA TOWARDS MA NAGEMENT SERVICES RENDERED BY IT. ACCORDING TO THE LD.COUNSEL, IN AC CORDANCE WITH THE PROVISIONS OF MANAGEMENT SERVICE AGREEMENT WHICH WA S ENTERED INTO BETWEEN THE ASSESSEE COMPANY AND THE US RESIDENT CO MPANY ON 01-04- 2006, THE US RESIDENT COMPANY WOULD PROVIDE ASSISTA NCE, ADVICE AND SUPPORT TO THE ASSESSEE COMPANY IN MANAGEMENT, DECI SION MAKING, SALES AND BUSINESS DEVELOPMENT, FINANCIAL DECISION MAKING , LEGAL MATTERS AND PUBLIC RELATIONS ACTIVITIES, TREASURY SERVICE, RISK MANAGEMENT SERVICE AND ANY OTHER MANAGEMENT SUPPORT AS MAY BE MUTUALLY AGR EED BETWEEN THE PARTIES. ACCORDING TO THE LD.COUNSEL, THE ASSESSIN G OFFICER DISALLOWED THE PAYMENT OF RS.85,22,743 ON THE PRESUMPTION THAT THE PAYMENT MADE BY THE ASSESSEE COMPANY TO US RESIDENT COMPANY WOULD C OME WITHIN THE AMBIT OF CONSULTANCY FEES AND, THEREFORE, THE ASSES SEE IS LIABLE TO DEDUCT TAX U/S 195 OF THE ACT. THE LD.COUNSEL FURTHER SUB MITTED THAT THE ASSESSING OFFICER OBVIOUSLY HAS NOT CONSIDERED THE RELEVANT T AX TREATY BETWEEN GOVERNMENT OF INDIA AND USA AND MADE AN UPWARD ADJU STMENT OF 3 ITA NO.222/COCH/2013 RS.85,27,743 TO THE TOTAL INCOME. THE CIT(A) ALSO CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. ACCORDING TO THE LD .COUNSEL, THE CIT(A) FAILED TO INTERPRET THE MANAGEMENT SERVICE AGREEMEN T BETWEEN THE ASSESSEE AND THE US RESIDENT COMPANY IN THE CONTEXT AND THE SCOPE OF SERVICES PROVIDED BY THE US RESIDENT COMPANY. 4. REFERRING TO PROVISIONS OF SECTION 195(1) OF THE ACT, THE LD.COUNSEL SUBMITTED THAT THE PROVISIONS OF SECTION 195 OF THE ACT WOULD APPLY ONLY IF THE AMOUNT PAID TO THE NON RESIDENT COMPANY IS CHAR GEABLE TO TAX IN INDIA. THE LD. COUNSEL PLACED HIS RELIANCE ON THE JUDGMENT OF THE APEX COURT IN GE INDIA TECHNOLOGY CENTRE PVT LTD VS CIT (2010) 32 7 ITR 456 (SC). REFERRING TO THE PROVISIONS OF THE INCOME-TAX ACT, MORE PARTICULARLY, SECTION 90(2) OF THE ACT, THE LD.COUNSEL SUBMITTED THAT IN CASE OF A NON RESIDENT, WHO IS GOVERNED BY THE PROVISIONS OF DOUBLE TAXATIO N AVOIDANCE AGREEMENT (HEREINAFTER DTAA), THE PROVISIONS OF THE INDIAN INCOME-TAX ACT WOULD APPLY, IN CASE THE SAME IS MORE BENEFICIAL TH AN THE RESPECTIVE PROVISIONS OF DTAA BETWEEN THE TWO SOVEREIGN COUNTR IES. THE LD.COUNSEL HAS ALSO REFERRED TO SECTION 5(2) OF THE ACT AND SU BMITTED THAT TOTAL INCOME OF A NON RESIDENT COMPANY WOULD INCLUDE THE INCOME THAT IS DEEMED TO ACCRUE OR ARISE IN INDIA AS DEFINED IN SECTION 9 OF THE INDIAN INCOME-TAX ACT. THE LD.COUNSEL FURTHER SUBMITTED THAT THE CHA RGEABILITY OF ANY INCOME 4 ITA NO.222/COCH/2013 IN THE HANDS OF A NON RESIDENT NEEDS TO BE ANALYSED UNDER THE PROVISIONS OF RESPECTIVE DTAA BETWEEN TWO SOVEREIGN COUNTRIES. 5. REFERRING TO ARTICLE 12 OF INDIA USA DTAA, MORE PARTICULARLY, SUB CLAUSE 4, THE LD. REPRESENTATIVE SUBMITTED THAT FEE S FOR INCLUDED SERVICE MEANS PAYMENTS OF ANY KIND TO ANY PERSON IN CONSIDE RATION FOR RENDERING OF ANY TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THROUGH THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL), IF SUCH SERVICES, VIZ. TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW HOW OR PROCESS O R CONSISTING OF THE DEVELOPMENT AND TRANSFER OF A TECHNICAL PLAN OR TEC HNICAL DESIGN ARE MADE AVAILABLE. ACCORDING TO THE LD.COUNSEL, THE TERM MANAGERIAL SERVICE IS SPECIFICALLY EXCLUDED IN THE DEFINITION OF FEES FO R INCLUDED SERVICES AS PROVIDED IN SUB CLAUSE 4 OF ARTICLE 12 OF INDIA US DTAA. THEREFORE, ACCORDING TO THE LD.COUNSEL, THE DTAA BETWEEN INDIA AND USA SEEKS TO EXCLUDE CONSIDERATION PAID FOR MANAGERIAL SERVICE F ROM THE PURVIEW OF FEES FOR INCLUDED SERVICES. 6. THE LD.COUNSEL FURTHER SUBMITTED THAT USA RESIDE NT DOES NOT MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE, EXPERTISE, ETC. TO THE ASSESSEE COMPANY. REFERRING TO THE TERM MAKE AVAILABLE AS FOUND IN CLAUSE 4 OF ARTICLE 12 OF INDIA USA DTAA, THE LD.COUNSEL SUBMIT TED THAT THE TECHNOLOGY WILL BE CONSIDERED AS MADE AVAILABLE ONLY WHEN THE PERSON ACQUIRING THE 5 ITA NO.222/COCH/2013 SERVICE IS ENABLED TO APPLY THE TECHNOLOGY. THE SE RVICE PROVIDED BY US RESIDENT COMPANY TO THE ASSESSEE COMPANY MAY REQUIR E TECHNICAL INPUTS BUT DOES NOT PER SE MEANS THAT TECHNICAL KNOWLEDGE, SKILLS, ETC. ARE M ADE AVAILABLE TO THE ASSESSEE COMPANY WHILE RECEIVING S ERVICE FROM THE US RESIDENT COMPANY. ACCORDING TO THE LD.COUNSEL, THE ASSISTANCE, ADVICE AND SUPPORT PROVIDED BY US RESIDENT COMPANY TO THE ASSE SSEE COMPANY SHALL NOT PER SE BE CONSIDERED TO MAKE THE TECHNOLOGY AVAILABLE. T HE LD.COUNSEL FURTHER SUBMITTED THAT THE TERM MAKE AVAILABLE HA S TO BE CONSIDERED WHEN THE TECHNICAL KNOWLEDGE, SKILL, ETC. WOULD BE MADE AVAILABLE TO THE ASSESSEE COMPANY ONLY WHEN THE RECIPIENT OF SERVICE IS ENABLED TO APPLY THE TECHNOLOGY EMBEDDED IN THE SERVICE PROVIDED TO HIM. A MERE PROVISION FOR SERVICE MAY REQUIRE TECHNICAL KNOWLEDGE BY SERV ICE PROVIDER BUT WOULD NOT PER SE MEAN THAT SUCH TECHNICAL KNOWLEDGE HAS BEEN MADE A VAILABLE TO THE ASSESSEE COMPANY AT ANY POINT OF TIME. 7. THE LD.COUNSEL FURTHER PLACED HIS RELIANCE ON TH E JUDGMENT OF THE KARNATAKA HIGH COURT IN CIT VS DE BEERS INDIA MINER ALS P LTD (2012) 21 TAXMAN.COM 214 (KAR) AND SUBMITTED THAT EVEN IF THE NON RESIDENT COMPANY RENDERED TECHNICAL SERVICE AS GIVEN IN SECT ION 9(1)(VII) OF THE ACT, IT DOES NOT SATISFY THE REQUIREMENT OF TECHNICAL S ERVICE AS PROVIDED IN ARTICLE 12 OF DTAA BETWEEN INDIA AND USA. THEREFOR E, THERE IS NO LIABILITY TO PAY TAX BY THE US RESIDENT COMPANY IN INDIA. HE NCE, THERE IS NO 6 ITA NO.222/COCH/2013 QUESTION OF ANY DEDUCTION OF TAX AS REQUIRED U/S 19 5 OF THE ACT. THE LD.COUNSEL HAS ALSO PLACED HIS RELIANCE ON THE DECI SION OF THE MUMBAI BENCH OF THIS TRIBUNAL IN RAYMOND LTD VS DCIT (2003 ) 86 ITD 791(MUM) AND SUBMITTED THAT THE TERM MAKE AVAILABLE MEANS TO PROVIDE SOMETHING WHICH IS CAPABLE OF USE BY THE OTHER. SUCH USE MAY BE FOR ONCE ONLY OR ON A CONTINUOUS BASIS. THE LD.COUNSEL HAS ALSO PLACED HIS RELIANCE ON THE DECISION OF THE MUMBAI SPECIAL BENCH OF THIS TRIBUN AL IN MAHINDRA & MAHINDRA LTD VS DCIT (2009) 30 SOT 374 (MUM)(SB) A ND ALSO THE DECISION OF THE MUMBAI BENCH OF THIS TRIBUNAL IN DD IT VS SCIENTIFIC ATLANTA INC 2009-TIOL-585-ITAT-MUM. REFERRING TO THE UNREP ORTED DECISION OF THE PUNE BENCH OF THIS TRIBUNAL IN THE CASE OF SANDVIK AUSTRALIA PTY LTD VS DDCIT, ITA NO. 93/PNB/2011 ORDER DATED 31 ST JANUARY, 2013, COPY OF WHICH IS AVAILABLE AT PAGE 95 OF THE PAPER BOOK, TH E LD.COUNSEL SUBMITTED THAT THE ASSESSEE BEFORE THE PUNE BENCH OF THIS TRI BUNAL, AN AUSTRALIAN COMPANY, PROVIDED INFORMATION TECHNOLOGY SUPPORT SE RVICE TO INDIAN GROUP COMPANIES IN ASIA PACIFIC REGION IN ORDER TO ACHIEV E THE CONSOLIDATED AND STANDARDIZED INFORMATION TECHNOLOGY ENVIRONMENT IN SANDVIK GROUP. THE SERVICES PROVIDED WERE IN THE NATURE OF HELP DESK, ADMINISTRATIVE AND MAINTENANCE IT SUPPORT, DATA STORAGE, ETC. ACCORDI NG TO THE LD.COUNSEL, IN THOSE CIRCUMSTANCES, THE PUNE BENCH OF THIS TRIBUNA L FOUND THAT SERVICES RENDERED TO THE ASSESSEE BY THE INDIAN GROUP, THOUG H IN THE NATURE OF 7 ITA NO.222/COCH/2013 TECHNICAL SERVICES, BUT NOT COVERED BY PARA 3(G) TO ARTICLE 12 OF INDIA AUSTRALIA DTAA AND, THEREFORE, NOT TAXABLE IN INDIA . 8. ACCORDING TO THE LD.COUNSEL, THE NATURE OF TRANS ACTION BETWEEN THE ASSESSEE COMPANY BEFORE THIS TRIBUNAL AND US RESIDE NT COMPANY ARE NOT IN THE NATURE OF FEES FOR INCLUDED SERVICE UNDER DTAA BETWEEN INDIA AND USA. THEREFORE, THE PAYMENT MADE BY THE ASSESSEE W OULD ASSUME THE CHARACTER OF BUSINESS PROFIT TO US RESIDENT COMPANY UNDER ARTICLE 7 OF INDIA USA DTAA WHICH WOULD BE TAXABLE IN INDIA ONLY IF THE SAME IS ATTRIBUTABLE TO PERMANENT ESTABLISHMENT OF THE US R ESIDENT COMPANY IN INDIA. IN THE ABSENCE OF ANY PERMANENT ESTABLISHME NT OF THE US RESIDENT COMPANY IN INDIA, THE AMOUNT PAID BY THE ASSESSEE W OULD NOT BE TAXABLE IN INDIA AS BUSINESS PROFIT. 9. ACCORDING TO THE LD.COUNSEL, THE MANAGEMENT FEES PAID BY THE ASSESSEE WOULD NOT BE CHARGEABLE TO TAX IN INDIA IN THE HANDS OF US RESIDENT COMPANY IN THE LIGHT OF THE PROVISIONS OF DTAA R.W.S. 90(2) OF THE ACT. THEREFORE, THE MANAGEMENT FEE PAID BY THE ASS ESSEE TO US RESIDENT COMPANY IS NOT SUBJECTED TO DEDUCTION / WITHHOLDING TAX U/S 195 OF THE ACT. 10. THE LD.COUNSEL FURTHER SUBMITTED THAT AS PER TH E AGREEMENT BETWEEN THE ASSESSEE AND THE US RESIDENT COMPANY, THE US RE SIDENT COMPANY 8 ITA NO.222/COCH/2013 SHALL PROVIDE ASSISTANCE, ADVICE AND SUPPORT TO THE ASSESSEE IN MANAGEMENT, DECISION MAKING, SALES AND BUSINESS DEV ELOPMENT, FINANCIAL DECISION MAKING, LEGAL MATTERS AND PUBLIC RELATIONS ACTIVITY, TREASURY SERVICE, RISK MANAGEMENT SERVICE AND OTHER MANAGEME NT SUPPORT AS MAY BE MUTUALLY AGREED BETWEEN THE PARTIES. THEREFORE, THERE IS NO KIND OF TECHNOLOGY RELATED SERVICES BEING RENDERED BY US RE SIDENT COMPANY. THE LD.COUNSEL FURTHER SUBMITTED THAT IT MAY NOT BE COR RECT TO CONSIDER THE MANAGEMENT SERVICE AS CONSULTANT SERVICE FOR THE PU RPOSE OF INDIA USA DTAA . REFERRING TO ARTICLE 12 OF INDIA USA DTAA, THE LD.COUNSEL SUBMITTED THAT THE TERM TECHNICAL SERVICES MEANS SERVICES REQUIRING EXPERTISE IN TECHNOLOGY. HOWEVER, THE TERM CONSUL TANCY SERVICE MEANS ADVISORY SERVICES. UNDER SUB CLAUSE 4 OF ARTICLE 1 2, TECHNICAL AS WELL AS CONSULTANCY SERVICES ARE CONSIDERED AS INCLUDED SER VICES ONLY TO THE EXTENT THAT IT WAS MADE AVAILABLE AS DESCRIBED IN A RTICLE 12(4)(B) OF DTAA. THEREFORE, CONSULTANCY SERVICES WHICH ARE NOT OF TE CHNICAL NATURE CANNOT BE INCLUDED IN THE INCLUDED SERVICE. REFERRING T O THE DIPLOMATIC NOTE RELATING TO THE MEMORANDUM OF UNDERSTANDING ON ARTI CLE 12 OF THE DTAA, THE LD.COUNSEL SUBMITTED THAT THE SCOPE OF INCLUDED SERVICE IS TO BE UNDERSTOOD AS IF TECHNICAL SERVICE MEANS ANY SERVIC E WHICH REQUIRES EXPERTISE IN TECHNOLOGY. CONSULTANCY SERVICE MEANS ADVISORY SERVICE IN RELATION TO TECHNICAL SERVICE. THE SERVICES RENDER ED BY USA RESIDENT COMPANY ARE MAINLY IN THE FORM OF ASSISTANCE IN DEC ISION MAKING AND 9 ITA NO.222/COCH/2013 OPERATIONAL MATTERS OF THE ASSESSEE COMPANY. THE P URPOSE OF THE ACTIVITIES UNDERTAKEN UNDER THE AGREEMENT IS TO GIV E DIRECTION OR GUIDANCE TO THE GROUP COMPANIES AS A WHOLE SO THAT THEY WILL ADOPT AND FOLLOW STANDARD PROCEDURE IN VARIOUS MATTERS. BY VIRTUE O F SUCH MANAGERIAL INTERVENTION COMMON BENEFIT ACCRUES TO THE AFFILIAT ED COMPANIES AND THEIR LEVEL OF PERFORMANCE WILL CONSEQUENTLY IMPROVE WHIC H, IN TURN, WOULD BENEFIT THE GROUP AS A WHOLE. THEREFORE, SUCH SERV ICES ARE CLEARLY IN THE NATURE OF MANAGEMENT SERVICES IN THE INTEREST OF TH E US TECHNOLOGY GROUP AS A WHOLE. ACCORDING TO THE LD.COUNSEL, MANAGEMEN T SERVICE PROVIDED BY US RESIDENT COMPANY INVOLVING SUPPORT IN DECISION M AKING AND OPERATIONAL MATTERS IS OUTSIDE THE PURVIEW OF ARTICLE 12 OF IND IA USA DTAA. 11 REFERRING TO THE DECISION OF THE MUMBAI BENCH OF THIS TRIBUNAL IN WOKHARDT LTD VS ACIT (2011) 10 TAXMANN.COM 208 (MUM ), THE LD.COUNSEL SUBMITTED THAT THE MANAGERIAL SERVICES ARE OUTSIDE THE AMBIT OF DEFINITION OF FEES FOR TECHNICAL SERVICES UNDER INDIA USA DT AA. REFERRING TO ANOTHER MUMBAI BENCH OF THIS TRIBUNAL IN DY.CIT VS BOSTON CONSULTING GROUP PTE LTD (2005) 94 ITD 31 (MUM), THE LD.COUNSE L SUBMITTED THAT THE MUMBAI BENCH OF THIS TRIBUNAL, AFTER CONSIDERING TH E DTAA BETWEEN INDIA AND SINGAPORE FOUND THAT FOR STRATEGY, CONSULTANCY SERVICES SUCH AS MARKETING AND SALES STRATEGY, BUSINESS STRATEGY AND PORTFOLIO STRATEGY, ETC. ARE NOT TECHNICAL IN NATURE AND, THEREFORE, NOT TAX ABLE AS FEES FOR TECHNICAL 10 ITA NO.222/COCH/2013 SERVICES UNDER DTAA BETWEEN INDIA AND SINGAPORE. A CCORDING TO THE LD.COUNSEL, THE DTAA BETWEEN INDIA AND SINGAPORE HA S A SIMILAR CLAUSE FOR FEES FOR INCLUDED SERVICE AS THAT OF DTAA BETWEEN I NDIA AND USA. 12. REFERRING TO THE DECISION OF THE AUTHORITY FOR ADVANCED RULING IN INTERTEK TESTING SERVICES INDIA (P) LTD (2008) 175 TAXMAN 375 (AAR-NEW DELHI), THE LD.COUNSEL SUBMITTED THAT THE TERM MAK E AVAILABLE WAS SUBJECT MATTER OF DISCUSSION IN DETAIL IN THE CONTEXT OF IN DIA AND UK DTAA WHEREIN A SIMILAR CLAUSE FOR FEES FOR INCLUDED SERVICE SIMI LAR TO INDIA US DTAA WAS CONSIDERED. HOWEVER, THE FIRST APPELLATE AUTHORITY , ACCORDING TO THE LD.COUNSEL, SELECTIVELY INTERPRETED THE RULING OF A UTHORITY FOR ADVANCE RULING WITHOUT REFERRING TO THE PRINCIPLES LAID DOWN THERE ON IN RESPECT OF THE TERM MAKE AVAILABLE. ACCORDING TO THE LD.COUNSEL, THE AUTHORITY FOR ADVANCE RULING HELD THAT THE MANAGERIAL SERVICE WOULD NOT C ONSTITUTE FEES FOR INCLUDED SERVICE UNDER ARTICLE 13(4)(C) OF DTAA BE TWEEN INDIA AND UK WHICH IS SIMILAR TO ARTICLE 12(4)(B) OF DTAA BETWEE N INDIA AND USA. REFERRING TO THE DECISION RENDERED BY AUTHORITY FOR ADVANCE RULING IN INTERTEK TESTING SERVICES INDIA (P) LTD (SUPRA), TH E LD.COUNSEL SUBMITTED THAT RENDERING OF SERVICE AND MAKING USE OF SERVICE GO TOGETHER. THEY ARE TWO SIDES OF THE SAME COIN. ACCORDING TO THE LD.CO UNSEL, IT CARVES OUT A QUALIFICATION THERETO BY EMPLOYING THE WORDS WHICH MAKE AVAILABLE TECHNICAL EXPERIENCE, SKILL, KNOW-HOW OR PROCESSES . THEREFORE, ACCORDING 11 ITA NO.222/COCH/2013 TO THE LD.COUNSEL, THE SERVICE SHOULD BE AIMED AT A ND RESULT IN TRANSMITTING THE TECHNICAL KNOWLEDGE, ETC. SO THAT THE BUYER OF SERVICE COULD DERIVE AN ENDURING BENEFIT AND UTILIZE THE KNOWLEDGE OR KNOW- HOW IN FUTURE ON HIS OWN WITHOUT THE AID OF SERVICE PROVIDER. ACCORDING TO THE LD.COUNSEL, THE CONCEPT OF MAKE AVAILABLE COVERS ONLY TECHNICAL T RAINING FOR THE PURPOSE OF ARTICLE 12 OF DTAA BETWEEN INDIA AND USA SINCE T HE US RESIDENT COMPANY, IN THIS CASE, ADMITTEDLY PROVIDED MANAGERI AL SERVICE; THE SAME WOULD NOT BE IN THE NATURE OF TECHNICAL TRAINING. THEREFORE, THE SERVICE, AT THE BEST, WOULD FALL WITHIN THE AMBIT OF ARTICLE 7 OF DTAA BETWEEN INDIA AND USA. ACCORDING TO THE LD.COUNSEL, THE CIT(A) IS NO T JUSTIFIED IN REFERRING TO THE WORD TRAINING USED IN THE MANAGEMENT SERVICE AGREEMENT. ACCORDING TO THE LD.COUNSEL, THE ENTIRE GAMUT OF SERVICE REND ERED IN PURSUANCE TO THE MANAGEMENT SERVICE AGREEMENT IS IN THE NATURE OF MA NAGEMENT SERVICE AND THE TRAINING, IF ANY, PROVIDED IS ONLY INCIDENT AL TO THE MANAGEMENT SERVICE AND IS NEGLIGIBLE CONSIDERING THE RANGE AND EXTENT OF SERVICE COVERED UNDER MANAGEMENT SERVICE AGREEMENT. THEREF ORE, ACCORDING TO THE LD.COUNSEL, THE PAYMENT MADE BY THE ASSESSEE CO MPANY TO US RESIDENT COMPANY IS NOT CHARGEABLE TO TAX IN INDIA AND, HENCE, IT IS OUTSIDE THE PURVIEW OF SECTION 195 OF THE ACT. 13. THE LD.COUNSEL FURTHER SUBMITTED THAT EVEN ASSU MING THAT THE MANAGEMENT RELATED TRAINING ARE RENDERED BY THE NON RESIDENT USA COMPANY TO THE ASSESSEE, THE SAME WOULD NOT EQUIP T HE ASSESSEE 12 ITA NO.222/COCH/2013 COMPANY WITH SKILL, KNOWLEDGE OR EXPERTISE. THE AS SESSEE COMPANY WOULD NOT BE ABLE TO MAKE USE OF SUCH ASSISTANCE IN FUTUR E INDEPENDENT OF USA RESIDENT COMPANY. HENCE, THERE IS NO TECHNOLOGY TH AT IS MADE AVAILABLE TO THE ASSESSEE COMPANY BY THE USA RESIDENT COMPANY IN PURSUANCE OF MANAGEMENT SERVICE AGREEMENT. THEREFORE, THE SERVI CES PROVIDED BY THE USA RESIDENT COMPANY TO THE ASSESSEE WOULD NOT FALL WITHIN THE AMBIT OF ARTICLE 12 OF DTAA BETWEEN INDIA AND USA. 14. ON THE CONTRARY, SHRI M ANIL KUMAR, THE LD.DR S UBMITTED THAT ADMITTEDLY, THE ASSESSEE COMPANY ENTERED INTO A MAN AGEMENT SERVICE AGREEMENT WITH A USA RESIDENT COMPANY FOR PROVIDING ASSISTANCE, ADVICE AND SUPPORT IN MANAGEMENT DECISION MAKING, SALES AN D BUSINESS DEVELOPMENT, FINANCIAL DECISION MAKING, LEGAL MATTE RS AND PUBLIC RELATIONS ACTIVITY, TREASURY SERVICE, RISK MANAGEMENT SERVICE AND ANY OTHER MANAGEMENT SUPPORT AS MAY BE MUTUALLY AGREED UPON B ETWEEN THE ASSESSEE AND THE USA COMPANY. REFERRING TO THE JUD GMENT OF THE ANDHRA PRADESH HIGH COURT IN GVK INDUSTRIES LTD VS ITO (19 97) 228 ITR 564 (AP), THE LD.DR SUBMITTED THAT ADVICE GIVEN BY NON RESIDENT COMPANY IN TAKING A FINANCIAL DECISION EITHER TO PROCURE LOAN OR TO STRENGTHEN THE FINANCE WOULD BE A TECHNICAL OR CONSULTANCY SERVICE S WITH REGARD TO MANAGEMENT AND DEVELOPMENT OF SOFTWARE. IN VIEW OF THE JUDGMENT OF THE ANDHRA PRADESH HIGH COURT, THE SERVICES PROVIDED BY NON RESIDENT 13 ITA NO.222/COCH/2013 COMPANY HAVE TO BE CONSIDERED AS TECHNICAL SERVICES . THEREFORE, THE PAYMENT MADE BY THE ASSESSEE TO USA RESIDENT COMPAN Y IS TAXABLE IN INDIA; HENCE, THE ASSESSEE IS LIABLE TO DEDUCT TAX AS PROVIDED IN SECTION 195 OF THE ACT. 15. ACCORDING TO THE LD.DR, AS SOON AS THE ADVICE O R SUPPORT IS RECEIVED, THE SAME IS AVAILABLE TO THE ASSESSEE COMPANY FOR M AKING USE OF THE SAME IN THE DECISION MAKING PROCESS OF THE MANAGEME NT AND FINANCIAL DECISION, ETC. THEREFORE, IT MAY NOT BE CORRECT TO SAY THAT THE TECHNICAL SERVICES WERE NOT MADE AVAILABLE TO THE ASSESSEE CO MPANY. REFERRING TO THE MANAGEMENT SERVICE AGREEMENT, THE LD.DR SUBMITT ED THAT THE KNOWLEDGE AND EXPERTISE OF USA RESIDENT COMPANY WIL L BE USED TO SUPPORT THE ASSESSEE IN MANAGING ITS BUSINESS AND IN TRAINI NG ITS EMPLOYEES. THEREFORE, TRAINING PROVIDED BY THE NON RESIDENT CO MPANY TO THE EMPLOYEES OF THE ASSESSEE COMPANY IN TECHNICAL MATT ERS WOULD FALL WITHIN THE EXPRESSION FEES FOR INCLUDED SERVICES. ACCO RDING TO THE LD.DR, EVEN THE ADVICE GIVEN BY THE USA RESIDENT COMPANY WHICH WAS MADE USE FOR TAKING MANAGERIAL DECISION HAS TO BE TREATED AS TEC HNICAL SERVICES WITHIN THE MEANING OF ARTICLE 12 OF THE DTAA BETWEEN INDIA AND USA. REFERRING TO THE ORDER OF CIT(A), MORE PARTICULARLY, PARAGRAP H 14, WHEREIN THE CIT(A) HAS EXTRACTED SOME OF THE CLAUSES OF THE MANAGEMENT SERVICE AGREEMENT BETWEEN THE ASSESSEE AND THE NON RESIDENT USA COMPA NY, THE LD.DR 14 ITA NO.222/COCH/2013 SUBMITTED THAT THE NON RESIDENT COMPANY PROVIDES HI GHLY TECHNICAL SERVICES LIKES, CUSTOMER SPECIFIED SOFTWARE DEVELOPMENT SERV ICES AND I.T. CONSULTANCY SERVICES WHICH CAN BE RENDERED ONLY BY PERSON WHO HAS HIGH DEGREE OF EXPERTISE. MOREOVER, ACCORDING TO THE LD .DR, THE SERVICES LIKE FINANCIAL DECISION MAKING, TREASURY SERVICES, MANAG ERIAL SERVICES, ETC. REQUIRES HIGH DEGREE OF KNOWLEDGE, EXPERIENCE AND E XPERTISE. THEREFORE, THE EXPERTISE, WHICH ARE AVAILABLE TO THE NON RESID ENT USA COMPANY ARE MADE AVAILABLE TO THE ASSESSEE COMPANY FOR USING TH E SAME IN THE FINANCIAL DECISION MAKING PROCESS, MANAGERIAL DECIS ION MAKING PROCESS, ETC. HENCE, ACCORDING TO THE LD.DR, THE ASSESSEE W OULD VERY MUCH FALL WITHIN THE AMBIT OF ARTICLE 12 OF DTAA BETWEEN INDI A AND USA. THEREFORE, THE LD.DR SUBMITTED THAT THE CIT(A) HAS RIGHTLY CON FIRMED THE ORDER OF THE ASSESSING OFFICER. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTED LY, THE ASSESSEE, A RESIDENT COMPANY, ENTERED INTO MANAGEMENT SERVICE A GREEMENT WITH A COMPANY, VIZ. US TECHNOLOGY RESOURCES LLC, A COMPAN Y INCORPORATED IN USA AND A TAX RESIDENT IN USA. AS PER THIS MANAGEM ENT SERVICE AGREEMENT, THE USA COMPANY AGREED TO PROVIDE ASSIST ANCE, ADVICE AND SUPPORT TO ASSESSEE COMPANY IN MANAGEMENT DECISION MAKING, SALES AND BUSINESS DEVELOPMENT, FINANCIAL DECISION MAKING, LE GAL MATTERS AND PUBLIC 15 ITA NO.222/COCH/2013 RELATION ACTIVITIES, TREASURY SERVICE, RISK MANAGEM ENT SERVICE AND ANY OTHER MANAGEMENT SUPPORT AS MAY BE MUTUALLY AGREED BETWEE N THE PARTIES. IN PURSUANCE OF THIS AGREEMENT, THE USA COMPANY PROVID ED ITS ASSISTANCE, ADVICE AND SUPPORT AND THE ASSESSEE COMPANY PAID A SUM OF RS.85,22,743 IN CONSIDERATION OF THE SERVICES RENDE RED BY THE USA COMPANY. THUS, THE QUESTION ARISES FOR CONSIDERATI ON IS WHETHER THE PAYMENT MADE BY THE ASSESSEE COMPANY TO USA COMPANY FOR THE SERVICES RENDERED WOULD BE TAXED IN INDIA OR NOT? IF IT IS TAXABLE IN INDIA THE ASSESSEE HAS TO NECESSARILY DEDUCT TAX AT SOURC E AT THE TIME OF MAKING PAYMENT AS PROVIDED IN SECTION 195 OF THE INDIAN IN COME-TAX ACT. THE CONTENTION OF THE ASSESSEE BEFORE THIS TRIBUNAL IS THAT THE MANAGERIAL CONSULTANCY SERVICE HAS BEEN SPECIFICALLY OMITTED I N CLAUSE 4 OF ARTICLE 12 OF DTAA. THEREFORE, THE MANAGERIAL SERVICE PROVIDE D BY THE USA COMPANY TO THE ASSESSEE COMPANY IS NOT TAXABLE IN I NDIA. IT IS ALSO THE CONTENTION OF THE ASSESSEE BEFORE THIS TRIBUNAL THA T AT THE BEST, THE PAYMENT MADE BY THE ASSESSEE COMPANY TO USA COMPANY MAY BE CONSIDERED AS A BUSINESS PROFIT UNDER ARTICLE 7 OF THE DTAA BETWEEN INDIA AND USA AND IN THE ABSENCE OF A PERMANENT ESTABLISH MENT IN INDIA FOR THE USA COMPANY IT CANNOT BE TAXABLE IN INDIA. THEREFOR E, THE ASSESSEE COMPANY IS NOT LIABLE TO DEDUCT TAX AT THE TIME OF PAYMENT AS REQUIRED U/S 195 OF THE ACT. 16 ITA NO.222/COCH/2013 17. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS O F SECTION 9(1)(VII) OF THE INCOME-TAX ACT WHICH DEFINES FEES FOR TECHNIC AL SERVICES. FOR THE PURPOSE OF CONVENIENCE, THE PROVISIONS OF SECTION 9 (1)(VII) ARE REPRODUCED ALONGWITH EXPLANATION 1: 9.(1) THE FOLLOWING INCOMES SHALL BE DEEMED TO ACCR UE OR ARISE IN INDIA:- (I) TO (VI) XXXXXXXXXXXXXXXX (VII) INCOME BY WAY OF FEES FOR TECHNICAL SERVICES PAYABLE BY (A) THE GOVERNMENT; OR (B) A PERSON WHO IS A RESIDENT, EXCEPT WHERE THE FE ES ARE PAYABLE IN RESPECT OF SERVICES UTILIZED IN A BUSINESS OR PROFESSION CARRIED ON BY SUCH PERSON OUTSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE OUTSIDE INDIA; OR (C) A PERSON WHO IS A NON-RESIDENT, WHERE THE FEES ARE PAYABLE IN RESPECT OF SERVICES UTILIZED IN A BUSINE SS OR PROFESSION CARRIED ON BY SUCH PERSON IN INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE IN INDIA: PROVIDED THAT NOTHING CONTAINED IN THIS CLAUSE SHALL APPLY IN RELATION TO ANY INCOME BY WAY OF FEES FOR TECHNICAL SERVICES PAYABLE IN PURSUANCE OF AN AGREEMENT MADE BEFORE THE 1 ST DAY OF APRIL, 1976, AND APPROVED BY THE CENTRAL GOVERNMENT) 17 ITA NO.222/COCH/2013 [EXPLANATION 1.- FOR THE PURPOSES OF THE FOREGOING PROVISO, AN AGREEMENT MADE ON OR AFTER THE 1 ST DAY OF APRIL, 1976, SHALL BE DEEMED TO HAVE BEEN MADE BEFORE THAT DATE IF THE AGREEMENT IS MADE IN ACCORDANCE WITH PROPOSALS APPROVED BY THE CENTRAL GOVERNMENT BEFORE THAT DATE.] EXPLANATION 2 TO SECTION 9(1)(VII) WHICH WAS INTROD UCED BY FINANCE ACT, 1977 WITH EFFECT FROM 01-04-1977 CLEARLY SAYS THAT FEES FOR TECHNICAL SERVICE MEANS ANY CONSIDERATION FOR RENDERING ANY M ANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES. 18. WE HAVE ALSO CAREFULLY GONE THROUGH THE PROVISI ONS OF DTAA BETWEEN INDIA AND USA AS NOTIFIED BY THE GOVERNMENT OF INDIA IN NOTIFICATION NO.GSR 990(E), DATED 20-12-1990. ARTI CLE 12 OF DTAA BETWEEN INDIA AND USA DEALS WITH ROYALTIES AND FEES FOR INCLUDED SERVICE. FEE FOR INCLUDED SERVICE IS DEFINED IN CLAUSE 4 OF ARTICLE 12 OF DTAA. FOR THE PURPOSE OF CONVENIENCE, WE ARE REPRODUCING BELO W CLAUSE 4 OF ARTICLE 12 OF THE DTAA BETWEEN INDIA AND USA: 4. FOR THE PURPOSES OF THIS ARTICLE, FEES FOR INC LUDED SERVICES MEANS PAYMENTS OF ANY KIND TO ANY PERSON IN CONSIDERATION FOR THE RENDERING OF ANY TECHNICAL OR CONSULTANCY 18 ITA NO.222/COCH/2013 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 P AYMENT DESCRIBED IN PARAGRAPH 3 IS RECEIVED; OR (B) MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HOW, OR PROCESSES, OR CONSIST OF DEVELOPMENT A ND TRANSFER OF A TECHNICAL PLAN OR TECHNICAL DESIGN. 19. AS PER THE ABOVE DEFINITION IN DTAA, FEES FOR I NCLUDED SERVICES MEANS PAYMENT OF ANY KIND TO ANY PERSON IN CONSIDER ATION FOR RENDERING OF ANY TECHNICAL OR CONSULTANCY SERVICES. AS RIGHTLY SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE, THE TERM MANAGERIAL S ERVICE AS FOUND IN EXPLANATION 2 TO SECTION 9(1)(VII) OF THE INDIAN IN COME-TAX ACT, 1961 IS NOT FOUND IN CLAUSE 4 OF ARTICLE 12 OF THE DTAA BETWEEN INDIA AND USA. TAKING ADVANTAGE OF THE ABSENCE OF THESE WORDS MAN AGERIAL SERVICES IN CLAUSE 4 OF ARTICLE 12 OF THE DTAA BETWEEN INDIA AN D USA, THE LD.COUNSEL ARGUED THAT CLAUSE 4 OF ARTICLE 12 OF THE DTAA BETW EEN INDIA AND USA IS MORE BENEFICIAL TO THE ASSESSEE WHEN COMPARED TO SE CTION 9(1)(VII) OF THE INDIAN INCOME-TAX ACT, 1961. THEREFORE, IN VIEW OF SECTION 90(2) OF THE INCOME-TAX ACT, 1961, THE ASSESSEE IS ENTITLED TO T AKE THE BENEFIT OUT OF THE DTAA BETWEEN INDIA AND USA. THEREFORE, THE QUESTIO N NOW ARISES FOR CONSIDERATION IS WHICH ARE THE SERVICES INCLUDED I N CLAUSE 4 OF ARTICLE 12 OF THE DTAA BETWEEN INDIA AND USA? 19 ITA NO.222/COCH/2013 20. THE CONTENTION OF THE ASSESSEE IS THAT FEES FOR INCLUDED SERVICES AS PROVIDED IN CLAUSE 4 OF ARTICLE 12 INCLUDES ONLY FE ES PAID FOR TECHNICAL SERVICES WHICH ARE MADE AVAILABLE TO THE ASSESSEE T O AVAIL TECHNICAL KNOWLEDGE, EXPERTISE, SKILL, KNOW HOW OR PROCESS, E TC. WE HAVE CAREFULLY GONE THROUGH THE MEMORANDUM OF UNDERSTANDING CONCER NING THE FEES FOR INCLUDED SERVICE IN ARTICLE 12 OF THE DTAA BETWEEN INDIA AND USA. FOR THE PURPOSE OF CONVENIENCE, WE ARE REPRODUCING THE RELE VANT PORTION OF THE MEMORANDUM OF UNDERSTANDING SAID TO BE EXECUTED BET WEEN INDIA AND USA ON 15 TH MAY, 1989: UNDER PARAGRAPH 4, TECHNICAL AND CONSULTANCY SERVI CES ARE CONSIDERED INCLUDED SERVICES ONLY TO THE FOLLOWING EXTENT: (1) AS DESCRIBED IN PARAGRAPH 4(A), IF THEY ARE ANCILLA RY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF A RIG HT, PROPERTY OR INFORMATION FOR WHICH ARE ROYALTY PAYMENT IS MAD E; OR (2) AS DESCRIBED IN PARAGRAPH 4(B), IF THEY MAKE AVAILA BLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HOW, O R PROCESSES, OR CONSIST OF THE DEVELOPMENT AND TRANSF ER OF A TECHNICAL PLAN OR TECHNICAL DESIGN. THUS, UNDER PA RAGRAPH 4(B), CONSULTANCY SERVICES WHICH ARE NOT OF A TECHN ICAL NATURE CANNOT BE INCLUDED SERVICES. 20 ITA NO.222/COCH/2013 21. FROM THIS MEMORANDUM OF UNDERSTANDING, IT IS OB VIOUS THAT AS PROVIDED IN CLAUSE 4(B) OF ARTICLE 12 OF THE DTAA B ETWEEN INDIA AND USA, IF THE TECHNICAL OR CONSULTANCY SERVICES MADE AVAIL ABLE ARE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HOW, OR PROCESSE S, OR CONSIST OF THE DEVELOPMENT AND TRANSFER OF A TECHNICAL PLAN OR TEC HNICAL DESIGN ARE CONSIDERED TO BE TECHNICAL OR CONSULTANCY SERVICES. IT IS ALSO CLARIFIED THAT CONSULTANCY SERVICES NOT OF TECHNICAL NATURE CANNOT FALL UNDER INCLUDED SERVICES. IN VIEW OF THIS MEMORANDRUM OF UNDERSTA NDING BETWEEN TWO SOVEREIGN COUNTRIES, THE CONSULTANCY SERVICES WHICH ARE TECHNICAL IN NATURE ALONE ARE TO BE INCLUDED AS TECHNICAL AND CONSULTAN CY SERVICES FOR THE PURPOSE OF FEES FOR INCLUDED SERVICES AS PER SUB CL AUSE 4(B) OF ARTICLE 12 OF DTAA BETWEEN INDIA AND USA. 22. WITH THIS BACKGROUND, LET US NOW EXAMINE WHETHE R THE SERVICE PROVIDED BY USA COMPANY TO THE ASSESSEE COMPANY WOU LD BE OF SERVICE OF TECHNICAL NATURE AS PROVIDED IN CLAUSE 4(B) OF A RTICLE 12 OF DTAA BETWEEN INDIA AND USA. COPY OF THE SO-CALLED MANAG EMENT SERVICE AGREEMENT BETWEEN THE ASSESSEE AND THE USA COMPANY IS NOT FILED BY THE ASSESSEE BEFORE THIS TRIBUNAL. THEREFORE, THIS TRI BUNAL HAS TO EXAMINE THE SERVICES FROM THE ORDER OF THE CIT(A) WHERE THE REL EVANT PART OF THE MANAGEMENT SERVICE AGREEMENT IS EXTRACTED AT PARAGR APH 14 ON PAGE 22 OF HIS ORDER: 21 ITA NO.222/COCH/2013 WHEREAS, USTRPL (I.E. APPELLANT) IS IN THE BUSINES S OF DEVELOPING WORLD CLASS INFORMATION TECHNOLOGY TURNK EY SOFTWARE SOLUTIONS AND INNOVATIVE APPLICATION DEVEL OPMENT SERVICES. WHEREAS USTR (I.E. SERVICE PROVIDER) PROVIDES CUSTO MER SPECIFIED SOFTWARE DEVELOPMENT SERVICES AND IT CONS ULTING SERVICES. WHEREAS, USTRPL AND USTR NOW DESIRE TO ENTER INTO A N AGREEMENT WHEREBY USTR WOULD PROVIDE FOLLOWING MANAGEMENT SERVICES TO USTRPL: - ASSISTANCE, ADVICE AND SUPPORT IN THE FIELD OF MA NAGEMENT DECISION MAKING. THESE SERVICES WILL BE RENDERED B Y USTRS CEO AND HIS SUPPORT PERSONNEL. - ASSISTANCE, ADVICE AND SUPPORT IN THE FIELD OF FI NANCIAL DECISION MAKING. THESE SERVICES WILL BE RENDERED B Y USTRS CFO AND USTRS GROUP CONTROLLER INCLUDING TH EIR SUPPORT PERSONNEL. - ASSISTANCE, ADVICE AND SUPPORT IN LEGAL MATTERS A ND PUBLIC RELATION ACTIVITIES. THESE SERVICES WILL BE RENDER ED BY USTRS LEGAL ADVISOR AND HIS SUPPORT PERSONNEL. - ASSISTANCE, ADVICE AND SUPPORT IN THE FIELD OF TR EASURY SERVICES. THESE SERVICES WILL BE RENDERED BY DIFFE RENT TREASURY MANAGERS OF USTR. 22 ITA NO.222/COCH/2013 - ASSISTANCE, ADVICE AND SUPPORT IN THE FIELD OF RI SK MANAGEMENT SERVICES. THESE SERVICES WILL BE RENDER ED BY DIFFERENT RISK MANAGERS OF USTR. - AND ANY OTHER MANAGEMENT SUPPORT AS MAY BE MUTUAL LY AGREED BETWEEN THE PARTIES. NOW THEREFORE IN CONSIDERATION OF THE MUTUAL PROMIS ES AND COVENANTS HEREINAFTER CONTAINED, THE PARTIES HE RETO AGREE AS FOLLOWS: I. GENERAL DESCRIPTION OF OBJECTIVES AND SCOPE OF DELIVERY 1. DURING THE TERM OF THIS AGREEMENT THE ROLE OF EA CH COMPANY IN THIS PARTNERSHIP IS AS FOLLOWS: A) USTRPL EMPLOYS USTR TO PROVIDE MANAGEMENT SERVIC ES. THE KNOWLEDGE AND EXPERIENCE OF USTR WILL BE USED T O SUPPORT USTRPL IN MANAGING ITS BUSINESS AND IN TRAI NING ITS EMPLOYEES. B) USTR IS RESPONSIBLE FOR RECRUITING, TRAINING AND DEPLOYING ADEQUATE RESOURCES TO PROVIDE THE SERVICES. II. ROLE OF USTRPL 1. THE USTRPL DESIGNATED PERSON WILL OPERATE AS THE MAIN INTERFACE BETWEEN USTR AND USTRPL. HE WILL ENSURE THAT USTRPLS PERSONNEL CO-ORDINATES AND INTERFACES WITH USTRS PERSONNEL IN A MANNER SATISFACTORY TO USTR. 2. DEPENDING UPON THE REQUIREMENTS, USTRPL WILL SEN D ITS PERSONNEL FROM TIME TO TIME TO USTR OFFICE IN US OR 23 ITA NO.222/COCH/2013 OVERSEAS TO STUDY AND ANALYSE THE REQUIREMENTS. US TRPL WILL BEAR ALL THE EXPENSES INCLUDING TRAVEL, LODGIN G, TRAINING EXPENSES ASSOCIATED EITHER DIRECTLY OR INDIRECTLY W ITH THE SAID ASSIGNMENTS. 23. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS RECE IVED THE ABOVE SERVICES FROM THE USA COMPANY IN TERMS OF MANAGEMEN T SERVICE AGREEMENT BETWEEN THE ASSESSEE AND THE USA COMPANY. THEREFORE, IT IS OBVIOUS THAT THE USA COMPANY PROVIDES HIGHLY TECHNI CAL SERVICES WHICH ARE USED BY THE ASSESSEE FOR TAKING MANAGERIAL DECI SION, FINANCIAL DECISION, RISK MANAGEMENT DECISION, ETC. 24. THE NEXT QUESTION ARISES FOR CONSIDERATION IS W HETHER THE ABOVE SERVICES COULD BE CONSIDERED AS TECHNICAL AND CONS ULTANCY SERVICES AS PROVIDED IN CLAUSE 4 OF ARTICLE 12 OF DTAA? AS ALR EADY DISCUSSED, ONLY THE SERVICES WHICH ARE TECHNICAL IN NATURE, ALONE COULD BE CONSIDERED FOR INCLUDED SERVICES. THEREFORE, THIS TRIBUNAL HAS TO EXAMINE WHETHER THE SERVICES RENDERED BY THE USA COMPANY ARE IN THE NAT URE OF TECHNICAL SERVICES. ADMITTEDLY, THE SERVICES RENDERED BY THE USA COMPANY ARE MADE USE BY THE ASSESSEE COMPANY IN MANAGEMENT DECI SION MAKING, SALES AND BUSINESS DEVELOPMENT, FINANCIAL DECISION MAKING, LEGAL MATTERS AND PUBLIC RELATIONS ACTIVITY, TREASURY SERVICE, RI SK MANAGEMENT SERVICE, ETC. 24 ITA NO.222/COCH/2013 25. LET US ALSO EXAMINE WHETHER THE SERVICES PROVID ED BY THE USA COMPANY ARE TECHNICAL IN NATURE OR NOT? AROUND 250 0 YEARS AGO, THE TAMIL POET THIRUVALLUVAR IN THIRUKKURAL UNDER CHAPTER X LVII UNDER THE HEADING ACTION AFTER DELIBERATIONS HAS ELABORATED THE POI NTS WHICH ARE REQUIRED FOR HUMAN RELATIONS, MANAGEMENT, SCIENCE AND COMMUN ICATION. IT MAY BE RELEVANT TO CONSIDER ONE OF THE VERSES # 461 THE TR ANSLATED VERSION OF WHICH READS AS FOLLOWS: ANALYSE THE COST INVOLVED, YIELD AND PROFITS ACHIE VABLE BEFORE ACTING ON A PROPOSITION. THEREFORE, IT COULD BE SEEN THAT THE TECHNOLOGY THA T IS INVOLVED IN ANALYZING A BUSINESS PROPOSITION WAS WELL DEVELOPED EVEN BEFO RE 2500 YEARS AGO. THE TERM MANAGEMENT HAS BEEN EXPLAINED BY VARIOUS AUTHORS AT VARIOUS POINT OF TIME. IN FACT, MR. JAMES A.F. STONER EXPL AINS MANAGEMENT AS FOLLOWS: MANAGEMENT IS THE PROCESS OF PLANNING, ORGANIZING, LEADING AND CONTROLLING THE EFFECTS OF ORGANIZATION MEMBERS AND OF USING ALL OTHER ORGANIZATIONAL RESOURCES TO ACHIEVE THE STATED ORGANIZATIONAL GOALS. 25 ITA NO.222/COCH/2013 SOME OF THE OTHER AUTHORS DESCRIBED MANAGEMENT AS LATEST OF THE ARTS AND YOUNGEST OF SCIENCES. THE SYSTEMATIC BODY OF K NOWLEDGE IS THE PHENOMENON OF PRESENT CENTURY IN MANAGEMENT. SO TH E RECENT TREND IN MANAGEMENT IS TO ADOPT SYSTEMATIC BODY OF KNOWLEDGE IN THE MANAGEMENT PROCESS. AS PER THE MANAGEMENT SERVICE AGREEMENT, THE MANAGERIAL ADVICE RENDERED BY THE USA COMPANY WAS USED IN THE DECISION MAKING PROCESS OF MANAGEMENT, FINANCIAL AND RISK MANAGEMEN T ETC. SCIENCE IS FACT BASED, CRITICALLY TESTED, SYSTEMATIZED BODY OF KNOWLEDGE PERTAINING TO SPECIFIC FIELD. THE KNOWLEDGE IS ACCUMULATED THROU GH STUDY, EXPERIENCE AND EXPERIMENTATION. THE SCIENTIFIC KNOWLEDGE PROD UCES IMPERSONAL RESULTS AND IT CAN BE EMPIRICALLY TESTED AND UNIVER SALLY APPLIED. THEREFORE, THE KNOWLEDGE WHICH WAS ACCUMULATED THROUGH STUDY, EXPERIENCE AND EXPERIMENTATION WITH REGARD TO MANAGEMENT, FINANCE, RISK, ETC. OF A PARTICULAR BUSINESS IS NOTHING BUT A TECHNICAL KNOW LEDGE. IN THE ERA OF TECHNOLOGY TRANSFORMATION, THE INFORMATION / EXPERI ENCE GATHERED BY US RESIDENT COMPANY RELATING TO FINANCIAL RISK MANAGEM ENT OF BUSINESS IS TECHNICAL KNOWLEDGE. 26. WE NOW MOVE ON TO SEE WHAT IS MEANT BY DECISIO N MAKING. THE TERM DECISION MAKING IS NOT DEFINED EITHER IN THE INCOME-TAX ACT OR IN THE DTAA. THEREFORE, ONE HAS TO GO BY THE MEANING UNDE RSTOOD IN THE 26 ITA NO.222/COCH/2013 MANAGEMENT. SHRI HAROLD KOONTEZ AND KEINZ WEIHRACH , EXPERTS IN THE MANAGEMENT DEFINE DECISION MAKING AS FOLLOWS: DECISION MAKING IS A SELECTION OF A COURSE OF ACTI ON FROM AMONGST THE ALTERNATIVES, IT IS THE CORE PLANNING. ANOTHER EXPERT BY NAME, R TERRY DEFINES DECISION M AKING AS FOLLOWS: DECISION MAKING IS A SELECTION OF AN ALTERNATIVE F ORM FROM TWO OR MORE ALTERNATIVE TO DETERMINE A COURSE OF ACTION . YET ANOTHER EXPERT, KENNETH R ANDREWS DEFINES DECIS ION MAKING AS FOLLOWS: DECISION MAKING IS A PROCESS INVOLVING INFORMATION , CHOICE OF ALTERNATIVE OPTIONS, IMPLEMENTATION AND EVOLUTION T HAT IS DIRECTED TOWARDS ACHIEVEMENT OF CERTAIN SELECTED GO ALS. 27. FROM THE ABOVE DEFINITIONS GIVEN BY VARIOUS EXP ERTS, WE MAY COME TO A SIMPLE AND COMPREHENSIVE MEANING AS FOLLOWS: 27 ITA NO.222/COCH/2013 - DECISION MAKING IS AN ACT OF SELECTING THE SUITAB LE SOLUTION TO THE PROBLEMS FROM VARIOUS AVAILABLE ALTERNATIVE SOLUTIO NS TO GUIDE ACTIONS TOWARDS ACHIEVEMENT OF DESIRED OBJECTIVES. 28. NOW THE ASSESSEE HERE IS ADMITTEDLY MAKING USE OF THE ADVICE, INPUT, EXPERIENCE, EXPERIMENTATION AND ASSISTANCE R ENDERED BY THE USA COMPANY IN THE DECISION MAKING PROCESS OF MANAGEMEN T, FINANCIAL AND RISK MANAGEMENT, ETC. IT IS NOBODYS CASE THAT THE USA COMPANY IS TAKING ANY DECISION ON BEHALF OF THE ASSESSEE. ON THE BAS IS OF THE INPUT, ADVICE, ASSISTANCE AND SERVICE PROVIDED BY THE USA COMPANY, THE MANAGEMENT DECISION IS TAKEN BY THE ASSESSEE COMPANY IN INDIA BY SELECTING SUITABLE SOLUTION AFTER CONSIDERING ALL THE ALTERNATIVES AVA ILABLE. IT IS ALSO TO BE REMEMBERED THAT THE USA COMPANY IS GIVING TRAINING TO THE ASSESSEES EMPLOYEES IN MAKING USE OF THE INPUTS, EXPERIENCE, EXPERIMENTATION, ASSISTANCE AND ADVICE RENDERED BY THEM FOR TAKING A BETTER AND POSSIBLE DECISION IN ORDER TO ACHIEVE THE DESIRED OBJECTIVES / GOAL. THEREFORE, IN THE CONTEXT OF PROFESSIONAL MANAGEMENT AND DECISION MAK ING PROCESS, THE ADVICE AND SERVICE RENDERED BY THE USA COMPANY WHIC H WAS MADE USE BY THE ASSESSEE IN MANAGERIAL DECISION MAKING PROCESS IS IN THE NATURE OF TECHNICAL SERVICES WHICH FACILITATE THE ASSESSEE TO TAKE CORRECT AND SUITABLE DECISION TOWARDS ACHIEVEMENT OF THE DESIRED OBJECTS AND BUSINESS GOAL. THEREFORE, IT MAY NOT BE CORRECT TO SAY THAT WHAT W AS RECEIVED BY THE 28 ITA NO.222/COCH/2013 ASSESSEE IS ONLY A MANAGERIAL ADVICE AND NOT TECHNI CAL ADVICE. THE TECHNOLOGICAL INPUT ACQUIRED BY THE US COMPANY THRO UGH EXPERIENCE AND EXPERIMENT WAS TESTED AT VARIOUS STAGES AND PROCESS AND FURTHER IT WAS MADE AVAILABLE TO THE ASSESSEE SO AS TO ENABLE THE ASSESSEE TO APPLY / USE THE SAME IN ITS DECISION MAKING PROCESS. 29. APART FROM THAT FINANCIAL AND RISK DECISION MAK ING PROCESS IS A HIGHLY COMPLICATED AND TECHNICAL ONE. UNLESS THE ASSESSEE GETS A TECHNICAL INPUT AND ADVICE FROM FINANCIAL AND RISK MANAGEMENT EXPER TS IT MAY BE DIFFICULT TO SELECT A RIGHT PROCESS FOR THE GROWTH OF THE COM PANY. IT IS NOT THE CASE OF THE ASSESSEE THAT IN A GIVEN SET OF FACTS / PROB LEM, THE USA COMPANY GAVE ITS SOLUTION OR ADVICE. THE SOLUTION OR DECIS ION IS ADMITTEDLY TAKEN BY THE ASSESSEE COMPANY ON THE BASIS OF THE ADVICE, SE RVICE RENDERED BY THE USA COMPANY. THEREFORE, IT IS OBVIOUS THAT THE TEC HNICAL KNOWLEDGE, EXPERIENCE, SKILL POSSESSED BY THE USA COMPANY WITH REGARD TO FINANCIAL AND RISK MANAGEMENT WAS MADE AVAILABLE IN THE FORM OF ADVICE OR SERVICE WHICH WAS MADE USE BY THE ASSESSEE COMPANY IN THE D ECISION MAKING PROCESS NOT ONLY IN MANAGEMENT BUT ALSO IN FINANCIA L MATTERS. ANOTHER ASPECT IS RISK MANAGEMENT SERVICE. RISK MANAGEMENT SERVICE IS A HIGHLY COMPLICATED ONE IN THE FINANCIAL SECTOR. UNLESS, T HE TECHNICAL EXPERTISE AND KNOWLEDGE GAINED BY THE USA COMPANY IS MADE AVA ILABLE TO THE ASSESSEE COMPANY, THEY MAY NOT BE ABLE TO ANALYSE T HE SITUATION TO AVOID 29 ITA NO.222/COCH/2013 RISK IN THE BUSINESS. IT IS ALSO NECESSARY TO NOTE THAT APART FROM PROVIDING THE INPUT, SERVICE AND ADVICE, THE USA COMPANY IS A LSO PROVIDING TRAINING TO THE EMPLOYEES OF THE ASSESSEE COMPANY. THEREFOR E, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE SERVICE OF TECHNICA L INPUT, ADVICE, EXPERTISE, ETC. RENDERED BY THE USA COMPANY ARE TEC HNICAL IN NATURE AS PROVIDED IN CLAUSE 4(B) OF ARTICLE 12 OF THE DTAA. 30. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF THE ANDHRA PRADESH HIGH COURT IN THE CASE OF GVK INDUSTRIES LT D (SUPRA). IN THE CASE BEFORE THE ANDHRA PRADESH HIGH COURT, THE ASSESSEE COMPANY CONSTRUCTED AND ERECTED POWER GENERATING STATION DE SIGNED TO OPERATE USING INDUSTRIAL GAS AS FUEL NEAR RAJAMUNDRI. THE ASSESSEE COMPANY INTENDED TO UTILIZE THE EXPERT SERVICE OF QUALIFIED AND EXPERIENCED PROFESSIONAL WHO WOULD PREPARE A SCHEME FOR RAISING THE FINANCES AND TIE UP THE REQUIRED LOAN. A NON RESIDENT COMPANY OFFER ED ITS SERVICES AS A FINANCIAL ADVISOR TO THE PETITIONER COMPANYS PROJE CT.. THE SERVICES OFFERED BY THE NON RESIDENT COMPANY INCLUDES FINANCIAL STRU CTURE AND SECURITY PACKAGE TO BE OFFERED TO THE LENDER, STUDY OF VARIO US LENDING ALTERNATIVES FOR THE LOCAL AND FOREIGN BORROWINGS, MAKING AN ASS ESSMENT OF EXPORT CREDIT AGENCIES WORLD-WIDE AND OBTAINING COMMERCIAL BANK SUPPORT ON THE MOST COMPETITIVE TERMS, ASSISTING THE PETITIONER-CO MPANY IN LOAN NEGOTIATIONS AND DOCUMENTATION WITH LENDERS AND STR UCTURING, NEGOTIATING 30 ITA NO.222/COCH/2013 AND CLOSING THE FINANCING FOR THE PROJECT IN A CO-O RDINATED AND EXPEDITIOUS MANNER. FOR ITS SERVICES THE ASSESSEE COMPANY PAID 0.75% OF THE TOTAL DEBT FINANCING AS SUCCESS FEE. ON THE ADVICE OF THE NON-RESIDENT COMPANY AT ZURICH, THE ASSESSEE APPROACHED THE INDI AN FINANCE INSTITUTION FOR LOAN. THE ASSESSEE ALSO APPROACHED THE INTERNA TIONAL FINANCE CORPORATION, USA FOR A PART OF ITS FOREIGN CURRENCY LOAN REQUIREMENT. AFTER SUCCESSFUL RENDERING OF SERVICE, THE NON RESIDENT Z URICH COMPANY SENT AN INVOICE FOR PAYMENT OF SUCCESS FEE TO THE EXTENT OF US$ 17,15,476.16 (RS.5.4 CRORES). THE ASSESSEE COMPANY APPROACHED T HE INCOME-TAX AUTHORITIES IN INDIA FOR ISSUING A NO OBJECTION CER TIFICATE TO REMIT THE SAID AMOUNT CLAIMING THAT THE NON RESIDENT COMPANY HAD N O PERMANENT ESTABLISHMENT IN INDIA AND ALL SERVICES WERE RENDER ED FROM OUTSIDE INDIA. THE INCOME-TAX OFFICER REFUSED TO ISSUE THE CERTIFI CATE. ON A WRIT PETITION BEFORE THE HIGH COURT IT WAS FOUND THAT THE SCOPE O F SERVICE / WORK UNDERTAKEN BY THE NON RESIDENT COMPANY WAS MERELY T O DRAW UP A SCHEME, ADVISE ON THE TERMS AND METHODS OF NEGOTIAT ION AND FOR DOCUMENTATION WITH THE LENDER, EVALUATE THE PROS AN D CONS OF VARIOUS LENDING ALTERNATIVES, BOTH FOR LOCAL AND THE FOREIG N BORROWINGS, PREPARE A PRELIMINARY INFORMATION MEMORANDUM TO BE USED AS TH E BASIS FOR PLACING THE FOREIGN AND LOCAL DEBT, AND THAT THE RESPONSIBI LITY OF ENTERING INTO CORRESPONDENCE AS PER THE ADVICE OF THE NON RESIDEN T COMPANY AND PURSUING THE MATTER WAS THAT OF THE ASSESSEE COMPAN Y ITSELF, AND NOT THAT 31 ITA NO.222/COCH/2013 OF THE NON RESIDENT COMPANY. THEREFORE, THE OFFICE OF THE ASSESSEE COMPANY COULD NOT BE TREATED AS THE PLACE OF BUSINE SS OF THE NON-RESIDENT COMPANY. IN THOSE FACTS AND CIRCUMSTANCES, THE AND HRA PRADESH HIGH COURT FOUND THAT THE BUSINESS CONNECTION BETWEEN TH E ASSESSEE COMPANY AND NON RESIDENT COMPANY HAD NOT BEEN ESTABLISHED. HOWEVER, IT WAS FOUND THAT THE SUCCESS FEE WOULD FALL WITHIN THE DEFINITION OF 9(1)(VII)(B) OF THE ACT. THE ANDHRA PRADESH HIGH COURT FOUND THAT ADVICE GIVEN TO PROCURE LOAN TO STRENGTHEN FINANCES WOULD BE AS MUC H A TECHNICAL OR CONSULTANCY SERVICE, AS IT WOULD BE WITH REGARD TO MANAGEMENT, GENERATION OF POWER OR PLANT AND MACHINERY. THE SUCCESS FEE WAS CHARGEABLE UNDER THE PROVISIONS OF THE INCOME-TAX ACT, AND THEREFORE , THE ASSESSEE WAS NOT ENTITLED TO NO OBJECTION CERTIFICATE. 31. DURING THE COURSE OF HEARING, THE LD.COUNSEL FO R THE ASSESSEE WAS CALLED UPON TO COMMENT ON THE APPLICABILITY OF THIS JUDGMENT OF THE ANDHRA PRADESH HIGH COURT. THE LD.COUNSEL SUBMITTED THAT THE ANDHRA PRADESH HIGH COURT HAD NO OCCASION TO CONSIDER THE DTAA BET WEEN INDIA AND USA. THEREFORE, THE JUDGMENT OF THE ANDHRA PRADESH HIGH COURT IS NOT APPLICABLE. NO DOUBT, DTAA AGREEMENT BETWEEN INDIA AND USA WAS NOT CONSIDERED BY THE ANDHRA PRADESH HIGH COURT, BUT TH E RATIO LAID DOWN BY THE ANDHRA PRADESH HIGH COURT CLEARLY SHOWS THAT AD VICE GIVEN TO PROCURE LOAN TO STRENGTHEN THE FINANCE WOULD BE MANAGERIAL OR TECHNICAL OR 32 ITA NO.222/COCH/2013 CONSULTANCY SERVICES FOR GENERATION OF POWER OR PLA NT AND MACHINERY. THIS FINDING OF THE ANDHRA PRADESH HIGH COURT IS SQUAREL Y APPLICABLE IN RESPECT OF THE SERVICE RECEIVED BY THE ASSESSEE FROM USA CO MPANY. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT ADV ICE / SERVICE SAID TO BE RECEIVED BY THE ASSESSEE COMPANY FROM USA COMPANY I S IN THE NATURE OF TECHNICAL OR CONSULTANCY SERVICES WITHIN THE MEANIN G OF CLAUSE (IV)(B) OF ARTICLE 12 OF DTAA. 32. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMEN T OF THE KARNATAKA HIGH COURT IN THE CASE OF DE BEERS INDIA MINERALS P VT LTD (SUPRA). IN THE CASE BEFORE THE KARNATAKA HIGH COURT, THE ASSESSEE ENGAGED IN THE BUSINESS OF PROSPECTING AND MINING FOR DIAMONDS AND OTHER MINERALS. THE ASSESSEE ENTERED INTO AN AGREEMENT WITH NETHERLAND COMPANY TO ENGAGE THEIR SERVICES FOR CONDUCTING AIRBORNE SURVEY FOR H IGH QUALITY, HIGH RESOLUTION, GEOPHYSICAL DATA SUITABLE FOR SELECTING KIMBERLITE TARGETS. FOR THE TECHNICAL SERVICES RENDERED BY THEM THE ASSESSE E HAD PAID CONSIDERATION AS PER THE AGREEMENT. THE ASSESSING OFFICER FOUND THAT THE PAYMENT MADE TO NETHERLANDS COMPANY WAS FOR TECHNIC AL SERVICES PROVIDED BY THEM. THEREFORE, THE ASSESSEE HAS TO D EDUCT TAX ON PAYMENTS MADE TO NETHERLANDS COMPANY. HOWEVER, THE COMMISSI ONER (APPEALS) FOUND THAT THE PAYMENT MADE BY THE ASSESSEE TO THE NETHERLANDS COMPANY WAS NOT COVERED BY ARTICLE 12(5) OF THE DTA A BETWEEN INDIA AND 33 ITA NO.222/COCH/2013 NETHERLANDS. HE ALSO FOUND THAT THE NETHERLANDS CO MPANY HAS NOT IMPORTED ANY TECHNOLOGY TO THE ASSESSEE AND THEY HA VE JUST USED THE TECHNOLOGY AND HAVE GONE BACK WITH THE SAME. THE C IT(A) FURTHER FOUND THAT NO TECHNOLOGY HAS BEEN MADE AVAILABLE TO THE A SSESSEE BY THE NETHERLANDS COMPANY, THEREFORE, THE CONSIDERATION P AID DOES NOT FALL WITHIN THE DEFINITION OF ARTICLE 12(5) BETWEEN INDIA AND N ETHERLANDS. ON FURTHER APPEAL BY THE REVENUE BEFORE THE TRIBUNAL IT WAS HE LD THAT THE PAYMENT IN QUESTION FOR SERVICES RENDERED WOULD NOT FALL WITHI N THE DEFINITION OF FEE FOR TECHNICAL SERVICES UNDER ARTICLE 12(5) OF THE DTAA BETWEEN INDIA AND NETHERLANDS. THE TRIBUNAL FOUND THAT NETHERLANDS C OMPANY HAS SURVEYED, COLLECTED AND PROCESSED THE DATA ON BEHALF OF THE A SSESSEE. THERE IS NO DOUBT THAT NETHERLANDS COMPANY PERFORMED THE SERVIC E USING THE TECHNICAL KNOWLEDGE AND EXPERTISE, BUT SUCH TECHNICAL EXPERTI SE, SKILL AND KNOWLEDGE HAS NOT BEEN MADE AVAILABLE TO THE ASSESSEE. ON TH OSE FACTS, THE KARNATAKA HIGH COURT FOUND THAT THE ASSESSEE WAS NO T BEING POSSESSED WITH TECHNICAL KNOW HOW TO CONDUCT THE PROSPECTING OPERATION. THE MAPS AND PHOTOGRAPHS WHICH WERE MADE AVAILABLE TO THE AS SESSEE CANNOT BE CONSIDERED AS TECHNOLOGY MADE AVAILABLE. THEREFORE , THE QUESTION OF NETHERLANDS COMPANY TRANSFERRING ANY TECHNICAL PLAN OR TECHNICAL DESIGN DOES NOT ARISE IN THE FACTS OF THE CASE. 34 ITA NO.222/COCH/2013 33. AS OBSERVED BY THE KARNATAKA HIGH COURT, THE NE THERLANDS COMPANY SURVEYED THE AREA, PREPARED PLAN AND PHOTOGRAPHS WH ICH ARE MADE AVAILABLE TO THE ASSESSEE COMPANY LOCATING THE EXAC T AREA FOR MINING. IN FACT, THE NETHERLANDS COMPANY LOCATED THE EXACT ARE A WHERE DIAMONDS WERE AVAILABLE AFTER ANALYZING THE PHOTOGRAPH AND T HE ASSESSEE COMPANY HAS NOTHING TO DO EXCEPT MINING THE EARMARKED AREA FOR EXCAVATING DIAMONDS. IN FACT, THE TECHNOLOGY OF LOCATING THE DIAMOND BY AERIAL SURVEY WAS NOT GIVEN TO THE ASSESSEE COMPANY. ONLY, THE R ESULT OF THE SURVEY WAS FURNISHED BY THE NETHERLAND COMPANY. THEREFORE , IT IS NOT A CASE OF MAKING AVAILABLE ANY TECHNICAL EXPERTISE. IN FACT, THE DECISION WAS TAKEN BY THE NETHERLANDS COMPANY FIXING THE LOCATION FOR MINING. IN THE CASE ON OUR HAND, THE FACTS ARE ENTIRELY ON DIFFERENT SET O F FACTS. THE DECISION WAS NOT TAKEN BY THE USA COMPANY. THE USA COMPANY FACI LITATED THE ASSESSEE COMPANY FOR MAKING DECISION IN THE MANAGER IAL, FINANCIAL AND RISK MANAGEMENT SYSTEM BY PROVIDING THEIR KNOWLEDGE , EXPERTISE, EXPERIMENTATION TO THE ASSESSEE COMPANY. THE ENTIR E EXPERIMENT, KNOWLEDGE, EXPERTISE WAS MADE AVAILABLE TO THE ASSE SSEE AND THE ASSESSEE WAS FACILITATED TO TAKE A DECISION ON THE KNOWLEDGE, EXPERTISE, EXPERIMENTATION WHICH WERE MADE AVAILABLE BY THE US A COMPANY. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE JUDGMENT OF THE KARNATAKA HIGH COURT IN THE CASE OF DE BEERS IN DIA MINERALS LTD (SUPRA) MAY NOT BE APPLICABLE TO THE FACTS OF THIS CASE. 35 ITA NO.222/COCH/2013 34. WE HAVE ALSO CAREFULLY GONE THROUGH THE DECISIO N OF THE MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF RAYMOND LTD ( SUPRA). IN THE CASE BEFORE THE MUMBAI BENCH OF THIS TRIBUNAL THE ASSESS EE ENGAGED IN MANUFACTURING SUITING, ENGINEERS STEEL FILES AND R ASPS AND CEMENT IN INDIA. WITH A VIEW TO MUSTER FUNDS IT PROPOSED TO ISSUE TW O TYPES OF GLOBAL DEPOSITORY RECEIPTS (GDRS) IN THE INTERNATIONAL MAR KET. THE ASSESSEE COMPANY ENGAGED A UK COMPANY AS LEAD MANAGERS TO TH E ISSUE. THE ASSESSEE PAID NECESSARY CHARGES FOR THE SERVICES RE NDERED BY THE LEAD MANAGERS AND THE MANAGERS. HOWEVER, NO TAX WAS DED UCTED BY THE ASSESSEE COMPANY FORM THE PAYMENT MADE TO THEM. TH E ASSESSING OFFICER FOUND THAT THERE WAS VIOLATION OF THE PROVI SIONS OF SECTION 195(1) OF THE ACT HOLDING THAT THE AMOUNTS PAID TO LEAD MANAG ERS AND MANAGERS WERE CHARGEABLE TO TAX IN INDIA AS FEES FOR TECHNIC AL SERVICES WITHIN THE MEANING OF SECTION 9(1)(VII) OF THE ACT. THE APPEL LATE COMMISSIONER ALSO UPHELD THE ORDER OF THE ASSESSING OFFICER. ON FURT HER APPEAL BEFORE THE MUMBAI BENCH OF THIS TRIBUNAL, THE TRIBUNAL FOUND T HAT THE SERVICES RENDERED BY THE LEAD MANAGERS AND MANAGERS ARE MANA GERIAL OR CONSULTANCY SERVICES WITHIN THE MEANING OF SECTION 9(1)(VII) R.W.S. EXPLANATION 2 OF THE ACT AND THEREFORE THE PAYMENT MADE TO MANAGERS ARE INCOME BY WAY OF FEES FOR TECHNICAL SERVICES DEEMED TO ACCRUE OR ARISE IN INDIA. REFERRING TO THE DTAA BETWEEN INDIA AND UK, THE TRIBUNAL FOUND 36 ITA NO.222/COCH/2013 THAT NO TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNO W HOW OR PROCESS, ETC. WAS MADE AVAILABLE TO THE ASSESSEE COMPANY BY THE N ON RESIDENT MANAGERS TO THE GLOBAL DEPOSITORY RECEIPTS. HOWEVE R, CONSIDERING THE SERVICES RENDERED BY THE UK COMPANY, THE MUMBAI BEN CH OF THIS TRIBUNAL FOUND THAT THE ARRANGEMENT BETWEEN THE ASSESSEE AND THE MANAGERS OF THE GLOBAL DEPOSITORY RECEIPT ISSUED WAS FOR THE PU RPOSE OF ENGAGING THE SERVICE OF THE MANAGERS UNDER THE SUBSCRIPTION AGRE EMENT. THE SUBSCRIPTION AGREEMENT CONTAINED DETAILED CLAUSES A S TO RIGHTS AND LIABILITIES OF THE ASSESSEE COMPANY AND THE MANAGER S. THE TRIBUNAL FOUND THAT AS PER THE AGREEMENT, THE MANAGERS HAD UNDERTA KEN TO RENDER SERVICE IN CONNECTION WITH THE ISSUE OF GLOBAL DEPOSITORY R ECEIPTS FOR WHICH THEY ARE ENTITLED FOR REMUNERATION. THE TRIBUNAL FOUND THAT THE SERVICES OF THE MANAGERS FOR ISSUE OF GLOBAL DEPOSITORY RECEIPT WER E UTILIZED OUTSIDE INDIA FOR THE PURPOSE OF CARRYING ON ITS BUSINESS I N INDIA. SINCE THE ARRANGEMENT IS ONLY FOR MARKETING THE GLOBAL DEPOSI TORY RECEIPT OUTSIDE INDIA, THE TRIBUNAL FOUND THAT THE COMMISSION PAID TO UK COMPANY CANNOT BE CONSIDERED TO BE FEE FOR TECHNICAL SERVICE, THER EFORE, THERE IS NO OBLIGATION ON THE PART OF THE ASSESSEE TO DEDUCT TA X U/S 195(1) OF THE ACT. THEREFORE, IT IS OBVIOUS THAT ONLY FOR MARKETING TH E GDR OUTSIDE INDIA, THE SERVICE OF MANAGERS ARE ENJOYED. THE DECISION TO I SSUE GDR WAS TAKEN BY INDIAN COMPANY WITHOUT ANY ASSISTANCE FROM MANAG ERS. IN THE CASE BEFORE US, IT IS A CLEAR CASE OF USING THE TECHNOLO GY, EXPERTISE OF THE FOREIGN 37 ITA NO.222/COCH/2013 COMPANY IN INDIA FOR TAKING MANAGERIAL, FINANCIAL D ECISION AND RISK MANAGEMENT ANALYSIS. THE EXPERTISE, ANALYSIS, TECH NICAL KNOWLEDGE SUPPLIED BY THE FOREIGN COMPANY REMAINS WITH THE AS SESSEE FOR EVER AND IT COULD BE EVEN USED IN FUTURE FOR THE BUSINESS OF TH E ASSESSEE IN THE PROCESS OF MANAGEMENT DECISION, FINANCIAL DECISION MAKING AND RISK MANAGEMENT ANALYSIS. THEREFORE, THE DECISION OF TH E MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF RAYMOND LTD (SUPRA) IS ALSO NOT APPLICABLE TO THE FACTS OF THE CASE. 35. WE HAVE ALSO CAREFULLY GONE THROUGH THE DECISIO N OF THE PUNE BENCH OF THIS TRIBUNAL IN THE CASE OF SANDVIK AUSTRALIA P TY LTD (SUPRA). THE ASSESSEE, AN AUSTRALIAN COMPANY PROVIDED I.T. SUPPO RT SERVICE TO INDIAN GROUP COMPANIES IN ASIA PACIFIC REGION IN ORDER TO ACHIEVE THE CONSOLIDATED AND STANDARDIZED I.T. ENVIRONMENT IN S ANDVIK GROUP. THE TRIBUNAL, AFTER CONSIDERING THE AGREEMENT BETWEEN T HE PARTIES FOUND THAT THE AGREEMENT PROVIDED ONLY FOR BACK UP SERVICES, I .T. SUPPORT SERVICES FOR SOLVING I.T. RELATED PROBLEMS IN INDIAN SUBSIDIARY. THE AGREEMENT WITH SANDVIK ASIA LTD NOWHERE SUGGESTED THAT THE ASSESSE E HAS TO MAKE AVAILABLE REQUIRED TECHNICAL KNOW HOW FOR SOLVING T HE PROBLEM IN THE I.T. RELATED PROBLEMS. IN THE CASE BEFORE US, THE USA C OMPANY HAS TO PROVIDE ALL EXPERTISE TO THE ASSESEE COMPANY WHICH WOULD BE UTILIZED IN THE DECISION MAKING PROCESS RELATED TO MANAGEMENT, FINA NCIAL AND RISK 38 ITA NO.222/COCH/2013 MANAGEMENT. THEREFORE, THIS DECISION OF THE PUNE B ENCH OF THIS TRIBUNAL MAY ALSO NOT BE APPLICABLE TO THE FACTS OF THE PRES ENT CASE. 36. WE HAVE ALSO CAREFULLY GONE THROUGH THE DECISIO N OF THE MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF WOKHARDT LTD (SUPRA). IN THE CASE BEFORE THE MUMBAI BENCH OF THIS TRIBUNAL, THE ASSES SEE COMPANY WAS INCORPORATED IN USA AND AS PER THE AGREEMENT, THE S AID COMPANY SENT ONE OF ITS PROFESSIONALS TO INDIA FOR A PERIOD OF TWO D AYS TO ADDRESS CONFERENCE ON FUTURE STRATEGY OF THE COMPANY. THE ASSESSEE CO MPANY PAID US$ 80,000 FOR THE SERVICES RENDERED BY THE USA COMPANY AND NO TAX WAS DEDUCTED. THE TRIBUNAL FOUND THAT THE PRESENTATION MADE BY THE PROFESSIONAL WAS ESSENTIAL IN THE NATURE OF SHARING MANAGEMENT, EXPERIENCE AND BUSINESS STRATEGY. THEREFORE, THE T RIBUNAL FOUND THAT THE SERVICES RENDERED BY US COMPANY COULD NOT BE TERMED AS TECHNICAL SERVICES IN NATURE. IN THE CASE BEFORE US, IT IS N OT A CASE OF SHARING OF EXPERIENCE AND BUSINESS STRATEGY. IT IS A CASE OF PROVIDING TECHNICAL INFORMATION FOR TAKING MANAGERIAL AND FINANCIAL DEC ISION. THE ASSESSEE ALSO USED THAT TECHNOLOGY, INFORMATION AND EXPERTIS E OF USA COMPANY IN MANAGEMENT RISK ANALYSIS. THE INFORMATION AND EXPE RTISE MADE AVAILABLE TO THE ASSESSEE COMPANY WAS VERY MUCH AVAILABLE WIT H THEM AND IT CAN BE USED IN FUTURE WHENEVER THE OCCASION ARISES. APART FROM THE EMPLOYEES OF THE ASSESSEE COMPANY WAS ALSO TRAINED BY USA COMPAN Y. THEREFORE, THIS 39 ITA NO.222/COCH/2013 TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE DECI SION OF THE MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF WOKHARDT LTD (SUPRA) ALSO MAY NOT BE OF ANY HELP TO THE ASSESSEE. 37. WE HAVE ALSO CAREFULLY GONE THROUGH THE DECISIO N OF THE AUTHORITY FOR ADVANCE RULING IN INTERTEK TESTING SERVICES INDIA ( P) LTD (SUPRA). THE AUTHORITY FOR ADVANCE RULING CONSIDERED THE DTAA BE TWEEN INDIA AND UK AND FOUND THAT RENDERING OF SERVICE AND MAKING USE OF SERVICE GO TOGETHER. IT WAS FOUND THAT RENDERING OF SERVICE AND MAKING U SE OF THE SERVICE ARE TWO SIDES OF THE SAME COIN. AFTER CONSIDERING THE WORD WHICH THE AUTHORITY FOR ADVANCE RULING FOUND THAT RENDERING T ECHNICAL OR CONSULTANCY SERVICE IS FOLLOWED BY RELATIVE PRONOUN WHICH AND IT HAS THE EFFECT OF QUALIFYING THE SERVICES. THE SERVICE OFFERED MAY B E THE PRODUCT OF INTENSE TECHNOLOGICAL EFFORT AND LOT OF TECHNICAL KNOWLEDGE AND THE EXPERIENCE OF THE SERVICE PROVIDER WOULD HAVE GONE INTO IT. THE AUTHORITY FOR ADVANCE RULING FOUND THAT THE TECHNICAL KNOWLEDGE AND THE E XPERIENCE OF THE SERVICE PROVIDER SHOULD BE IMPARTED TO AND ABSORBED BY THE RECEIVER, SO THAT THE RECEIVER CAN DEPLOY SIMILAR TECHNOLOGY OR TECHNIQUES IN FUTURE WITHOUT DEPENDING ON THE PROVIDER. IN THIS CASE AL SO, THE INFORMATION, EXPERTISE AND TRAINING PROVIDED BY THE USA COMPANY WAS ABSORBED BY THE ASSESSEE COMPANY IN THEIR DECISION MAKING PROCESS A ND IT WAS UTILIZED FOR THE PURPOSE OF BUSINESS. THE USA COMPANY MADE AVAI LABLE ALL THE 40 ITA NO.222/COCH/2013 TECHNICAL DATA, INFORMATION, EXPERTISE TO THE ASSES SEE COMPANY WHICH WAS ABSORBED AND MADE USE OF BY THE ASSESSEE COMPANY IN THEIR MANAGERIAL AND FINANCIAL DECISION MAKING PROCESS AND OTHER DEC ISION IN THE DEVELOPMENT OF THE BUSINESS. THEREFORE, THE EXPERT ISE AND TECHNOLOGY WHICH WAS MADE AVAILABLE BY THE USA COMPANY IS TECH NICAL SERVICE WITHIN THE MEANING OF ARTICLE 12(4)(B) OF THE DTAA BETWEEN INDIA AND USA. HENCE, THIS RULING OF THE AUTHORITY FOR ADVANCE RUL ING MAY NOT OF ANY ASSISTANCE TO THE ASSESSEE. 37. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRM ITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY THE SAME IS CONFIRMED . 38. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH SEPTEMBER, 2013. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 27 TH SEPTEMBER, 2013 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH