M/s. AB Sandvik Coromant, Pune V. DDIT (Int. Tax)-I, Pune

ITA 270/PUN/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1884 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 21-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 29-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DILIP SHARMA
• Assessee Lawyers: DEENESH BAFNA
• Keywords: Double taxation relief; Advance ruling
• Section: 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 1718/PN/2011 %' ( ')( / ASSESSMENT YEAR : 2007-08 M/S. AB SANDVIK COROMANT, C/O SANDVIK ASIA LIMITED, MUMBAI PUNE ROAD, DAPODI, PUNE-411012 PAN : AABCA5161C ....... / APPELLANT ' / V/S. DEPUTY COMMISSIONER OF INCOME TAX, (INTERNATIONAL TAXATION) 1, PUNE / RESPONDENT / ITA NO. 270/PN/2013 %' ( ')( / ASSESSMENT YEAR : 2009-10 M/S. AB SANDVIK COROMANT, C/O SANDVIK ASIA PRIVATE LIMITED, MUMBAI PUNE ROAD, DAPODI, PUNE-411012 PAN : AABCA5161C ....... / APPELLANT ' / V/S. DEPUTY DIRECTOR OF INCOME TAX, (INTERNATIONAL TAXATION) 1, PUNE / RESPONDENT ASSESSEE BY : SHRI DEENESH BAFNA REVENUE BY : SHRI DILIP SHARMA / DATE OF HEARING : 14-03-2016 / DATE OF PRONOUNCEMENT : 16-05-2016 2 ITA NOS. 1718/PN/2011 & 270/PN/2013 * / ORDER PER VIKAS AWASTHY, JM : THESE TWO APPEALS BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2007-08 AND 2009-10 ARE DIRECTED AGAINST THE ASSESSME NT ORDERS DATED 28-10-2011 AND 27-11-2012, RESPECTIVELY PASSED U/S. 14 3(3) R.W.S. 144C(13) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). SINCE, THE ISSUES RAISED IN BOTH THE APPEALS ARE IDENTICAL, THE APPEALS ARE TAKEN UP TOGETHER FOR ADJUDICATION AND ARE DECIDED BY THIS COMMON ORDER. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS A NON-RESIDENT COMPANY, INCORPORATED IN SWE DEN. THE ASSESSEE IS ENGAGED IN MANUFACTURING AND SALE OF CEMENTED CARBIDE AND HIGH SPEED STEEL TOOLS FOR METAL WORKING IN EUROPE. TH E ASSESSEE IS A TAX RESIDENT OF SWEDEN UNDER THE DOUBLE TAXATION AVOID ANCE AGREEMENT (DTAA) BETWEEN INDIA AND SWEDEN. DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEARS UNDER APPEAL, THE AS SESSEE RECEIVED A SUM OF ` 32,40,082/- IN ASSESSMENT YEAR 2007-08 TOWARDS SERVICE FEES FOR USE OF CAD/CAM SOFTWARE FROM ITS M/S. SANDVIK ASIA PRIVA TE LIMITED, ITS ASSOCIATE CONCERN (HEREINAFTER REFERRED TO AS SAPL). THE ASSESSING OFFICER HELD THAT THE ASSESSEE COMPANY HAS GIV EN USER RIGHTS TO EXPLOIT THE CAD/CAM SOFTWARE DESIGNED ACCORDING TO ITS OWN BUSINESS UTILITY. THE LICENSE FEES FOR USE OF CUSTOMIZED CAD/ CAM SOFTWARE RECEIVED BY THE ASSESSEE FROM ITS INDIAN ASSOCIATE PARTA KES THE NATURE OF ROYALTY. THE ASSESSING OFFICER AFTER DETAILED DISCU SSION ON VARIOUS ASPECTS RELATING TO TAXABILITY OF LICENSE FEES UNDER DTAA, DEFINITION OF TERM ROYALTY AND THE LEGISLATIVE INTENT TO BRIN G INTO TAX 3 ITA NOS. 1718/PN/2011 & 270/PN/2013 NET PAYMENT OF SUCH NATURE WITHIN THE AMBIT OF ROYALTY HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE IS LIABLE TO BE TAXED IN INDIA. 2.1 THE ASSESSING OFFICER FURTHER MADE ADDITION OF ` 25,92,070/- ON ACCOUNT OF PAYMENTS RECEIVED BY ASSESSEE FROM M/S. SAN DVIK ASIA PRIVATE LIMITED (SAPL) TOWARDS INSTALLATION CHARGES OF DEMA TEK LIFTING CRANE, UPGRADATION OF OPERATING SYSTEM OF LASER MACHINE AN D SERVICE COST OF SMARTSCOPE. THE ASSESSING OFFICER HELD THAT THE P AYMENTS ARE IN THE NATURE OF FEES FOR TECHNICAL SERVICES AS PER DTAA BETWEEN INDIA AND SWEDEN. AGGRIEVED BY THE DRAFT ASSESSMENT ORDER DATED 30-12-2 010, THE ASSESSEE FILED OBJECTIONS BEFORE THE DRP. THE DRP VIDE DIR ECTIONS DATED 02-08-2011 REJECTED THE OBJECTIONS OF THE ASSESSEE ON BOTH THE COUNTS. ON THE BASIS OF DIRECTIONS OF DRP, THE ASSESSING OFFICER PASS ED THE FINAL ASSESSMENT ORDER DATED 28-10-2011MAKING ADDITION OF ` 32,40,082/- ON ACCOUNT OF LICENSE FEES FOR CAD/CAM SOFTWARE BY TREATING IT AS ROYALTY PAYMENT AND ` 25,92,070/- ON ACCOUNT OF INSTALLATION CHARGES, UPGRADATION AND SERVICE COST AS FEES FOR TECHNICAL SERVICES. AGAINS T THE IMPUGNED ASSESSMENT ORDER, THE ASSESSEE IS IN APPEAL BEFO RE THE TRIBUNAL. 3. THE ASSESSEE IN ITS APPEAL FOR THE ASSESSMENT YEAR 2 007-08 HAS RAISED FOLLOWING GROUNDS: ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW; 1. THE LD. ASSESSING OFFICER (THE AO') AND THE LD. DI SPUTE RESOLUTION PANEL (THE DRP) HAVE ERRED IN HOLDING RECEIPTS FOR REPA IRS AND MAINTENANCE SERVICES PROVIDED BY THE APPELLANT AMOUNTING TO INR 2,592,070 TAXABLE IN INDIA AS FEES FOR TECHNICAL SERVICES (FTS) WITH IN THE MEANING OF ARTICLE 12 OF THE INDIA-SWEDEN DOUBLE TAXATION AVOIDANCE AG REEMENT (DTAA OR THE TREATY) READ WITH THE PROTOCOL THERETO. 4 ITA NOS. 1718/PN/2011 & 270/PN/2013 2. THE AO AND THE DRP HAVE ERRED IN HOLDING THAT RECEI PTS OF INR 3,240,082 TOWARDS USE OF CAD/CAM (DESIGNING) SOFTWARE AND IT SUPPORT PROVIDED, IS TAXABLE AS ROYALTY WITHIN THE MEANING OF ARTIC LE 12 OF THE DTAA. THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTH ER. YOUR APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, W ITHDRAW, MODIFY AND/OR SUBSTITUTE, AND TO WITHDRAW THE ABOVE GROUNDS OF AP PEAL. 4. SHRI DEENESH BAFNA APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE COMPANY HAS PROVIDED LIMITED USER RIGH TS TO SAPL FOR CAD/CAM SOFTWARE OWNED AND MAINTAINED BY IT. AS A G LOBAL POLICY OF THE SANDVIK GROUP THE WORLDWIDE INSTALLATION OF UNIQRAPHICS CAD/CAM SYSTEM WAS SHARED BY THE GROUP COMPANIES. THE CAD CAM SOFTWARE IS A DESIGNING TOOL AND IS USED TO DESIGN SANDVIK PRODUCTS. THE LD. AR FURTHER SUBMITTED THAT THE COMPANY IS A CENTR AL HUB OF IT SUPPORT SERVICES INVOLVING CAD/CAM SOFTWARE. THE ASSESSE E PURCHASED BASIC VERSION OF THE SOFTWARE FROM A THIRD PART Y AND THEN MODIFIED THE SAME TO MEET REQUIREMENTS OF SANDVIK GROUP. T HE ASSESSEE IS RESPONSIBLE FOR MAINTAINING THE SOFTWARE AND U PGRADING THE SAME. THE LD. AR CONTENDED THAT THE SANDVIK GROUP COMP ANIES ALL OVER THE WORLD ARE GIVEN LIMITED USER RIGHT TO THIS SYSTEM TO ENABLE TH EM DESIGN THE PRODUCTS IN AN EFFICIENT AND COST EFFECTIVE MANNE R. THE GROUP COMPANIES DO NOT OWN THE LICENSE BUT ARE GRANTED ACCES S TO THE SOFTWARE. THE USER COMPANIES CAN ONLY INPUT DATA AND O BTAIN FINAL DESIGN RELATED TO THE PRODUCTS. THE RIGHT TO UPGRADE THE SOFTWARE, EDIT THE SOFTWARE, AND MAINTAIN THE SOFTWARE LIES WITH THE ASSESSEE. 4.1 THE LD. AR FURTHER CONTENDED THAT CAD/CAM SERVICES A RE OF TWO KINDS : (I) SPECIAL MANUFACTURING TOOLS; AND (II) STANDARD MANUFACT URING TOOLS. SPECIFIED EMPLOYEES OF EACH GROUP COMPANIES ARE GIVE N ACCESS TO THIS SOFTWARE. EACH GROUP COMPANY IS ANNUALLY CHARGED A SUPPORT FEE 5 ITA NOS. 1718/PN/2011 & 270/PN/2013 BASED ON THE NUMBER OF USERS AT EACH SITE. IN THE PERIO D UNDER CONSIDERATION SAPL HAD 6 USERS FOR THE SPECIAL MANUFACTUR ING TOOLS AND 5 USERS FOR THE STANDARD MANUFACTURING TOOLS. FURT HER, SUPPORT SERVICES RELATING TO THESE CAD/CAM SOFTWARE WAS PROVIDE D BY THE ASSESSEE. THE SUPPORT FEE IS CHARGED FOR THE FOLLOWING SERVICES; I. GENERAL SUPPORT FOR THE USE OF UG. II. SYSTEM UPDATES. III. INSTALLATION AND MAINTENANCE OF 'ADD ON' PRODUCTS LIKE POSITIONING PROGRAMS, ARCHIMEDES, ROUTINES FOR PLOT AND PRIN T; ETC. IV. ACCESS TO BASIC GEOMETRIES, AND OTHER COMMON DATA AND INFORMATION. V. DOCUMENTED WORKING METHODS AND DIRECTIVES. VI. DRAWING ARCHIVE SERVICES. VII. TROUBLE SHOOTING. VIII. ACCESS TO RESULTS OF CENTRAL DEVELOPMENT EFFORTS IN THE AREA 4.2 THE LD. AR SUBMITTED THAT THE IT SUPPORT SERVICES CA NNOT BE CATEGORIZED AS ROYALTY AS THE SAME IS NOT AN EXPLOITATIO N OF A RIGHT/COPYRIGHT IN A LICENSED PRODUCT BUT ONLY FOR THE US E OF A SOFTWARE SYSTEM. THUS, THE PAYMENT FOR THE SAME IS NEITHER FEE FOR TECHNICAL SERVICES (FTS) NOR ROYALTY. IN SUPPORT OF HIS SUBMISSIONS T HE LD. AR PLACED RELIANCE ON THE DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SANDVIK AUSTRALIA PTY. LTD. VS. DEPUTY DIRECTO R OF INCOME TAX (INTERNATIONAL TAXATION-II, PUNE IN ITA NO. 93/PN/2011 FOR THE ASSESSMENT YEAR 2007-08 DECIDED ON 31-01-2013 AND IN THE CASE OF ALLIANZ SE VS. ASSISTANT DIRECTOR OF INCOME TAX (INTERNATION AL TAXATION- I, PUNE REPORTED AS 21 TAXMANN.COM 62 (PUNE). 6 ITA NOS. 1718/PN/2011 & 270/PN/2013 4.3 IN RESPECT OF RECEIPT OF PAYMENT FOR INSTALLATION OF DEM ATEK LIFTING CRANE AND SMARTSCOPE MACHINE THE LD. AR SUBMITTED THAT THESE SERVICES ARE INEXTRICABLE AND ESSENTIALLY LINKED TO SALE OF M ACHINERY. THE NATURE OF SERVICES PROVIDED BY THE ASSESSEE DOES N OT FALL WITHIN THE EXPRESSION MAKE AVAILABLE. BY RENDERING THESE SERVICES THE ASSESSEE DOES NOT PROVIDE/TRANSFER ANY TECHNICAL KNOWLEDGE, EXPERI ENCE, SKILL, KNOW-HOW, PROCESSES TO SAPL. HENCE, THESE SERVICES DO NOT FALL WITHIN THE DEFINITION OF FEES FOR TECHNICAL SERVICES UNDER ARTICLE 1 2 OF THE DTAA. THE LD. AR SUBMITTED THAT MAKE AVAILABLE TEST IS N OT FULFILLED IN RESPECT OF THE SERVICES RENDERED BY THE ASSESSEE FOR IN STALLATION OF THE MACHINES. THE LD. AR IN SUPPORT OF HIS SUBMISSIONS PLACED RE LIANCE ON THE DECISION RENDERED IN ASSESSEES ASSOCIATE CONCERN B Y THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. SANDVIK AB, VS. D Y. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-II, PUNE IN ITA NO. 1720/PN/2011 FOR THE ASSESSMENT YEAR 2007-08 DECIDED ON 28-11-2014. 5. AU CONTRAIRE SHRI SHRI DILIP SHARMA REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE ASSESSMENT ORDERS AND THE OBSERVATIONS MADE BY THE DRP. THE LD. DR SUBMITTED THAT THE EXPRESS ION MAKE AVAILABLE IS NOT DEFINED UNDER THE PROVISIONS OF INCOME T AX ACT OR THE DTAA SIGNED BY INDIA WITH VARIOUS COUNTRIES. THUS, IN THE ABSENCE OF THE DEFINITION OF MAKE AVAILABLE UNDER THE ACT, THE TERM MA KE AVAILABLE HAS TO BE UNDERSTOOD IN GENERAL TERMS FROM DICTIONARY OR OTHER LEGAL ENACTMENTS. THE LD. DR REFERRED TO THE ASSESSMENT ORDE R WHEREIN THE TERM MAKE AVAILABLE HAS BEEN DEFINED AFTER TAKING CUE FR OM VARIOUS WEBSITES. THE LD. DR SUBMITTED THAT THE WORDS MAKE AVA ILABLE USED IN THE TREATY IF READ WITH REFERENCE TO THE MEANING IN THE D ICTIONARY AS WELL AS AVAILABLE ON WEBSITES WOULD SUGGEST THAT THE SERVICES RENDERED BY 7 ITA NOS. 1718/PN/2011 & 270/PN/2013 THE ASSESSEE ARE IN THE NATURE OF TECHNICAL KNOWLEDGE, EX PERIENCE, SKILL ETC. AND THE PAYMENTS RECEIVED IN LIEU THEREOF ARE CLEARLY IN THE NATURE OF FEES FOR TECHNICAL SERVICES. IN RESPECT OF GROUND NO. 2 RAISED BY THE ASSESSEE, THE LD. DR CONTENDED THAT THE ASSESSEE HAS NOT GIVEN ANY DETAILS WITH REGARD TO MODIFICATION CARRIED OUT TO THE BASIC PROGRAM/SOFTWARE ALLEG EDLY PURCHASED FROM THIRD PARTY EITHER BEFORE THE ASSESSING O FFICER OR DRP. THE LD. DR STRONGLY DEFENDED THE FINDINGS OF ASSESSING OFFICE R AND DRP AND PRAYED FOR DISMISSING THE APPEAL OF THE ASSESSEE. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENT ATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. WE HAVE ALSO CONSIDERED THE DECISIONS ON WHICH THE LD. AR OF T HE ASSESSEE HAS PLACED RELIANCE. THE TWO ISSUES WHICH HAVE BEEN RAISE D BY THE ASSESSEE IN APPEAL ARE WITH RESPECT TO (I) ADDITION OF ` 25,92,070/- AS FEES FOR TECHNICAL SERVICES IN RESPECT OF SERVICES RENDER ED BY THE ASSESSEE FOR INSTALLATION OF CRANES ETC; AND (II) ` 32,40,082/- AS ROYALTY TOWARDS USE OF CAD/CAM DESIGNING SOFTWARE AND IT SUPPORT. 7. THE ASSESSEE HAD INSTALLED DEMATEK LIFTING CRANE AND HA S CHARGED FOR THE INSTALLATION OF THE SAID CRANES/UPGRADATION OF OPERATING SYSTEM OF LASER MACHINE AND SERVICE COST FOR SMARTSCOPE. AS PER THE CONTENTIONS OF THE ASSESSEE THE SERVICES PROVIDED BY TH E ASSESSEE ARE INEXTRICABLE AND ESSENTIALLY LINKED TO SALE OF MACHINERY. AS PER THE CONTENTIONS OF THE ASSESSEE THE SERVICES RENDERED BY IT DO NOT MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE/EXPERIENCE, SKILL, KNOW-HOW, PROCESSES ETC. TO SAPL ENABLING IT TO APPLY THE TECHNOLO GY IN FUTURE. THE ASSESSEE IN SUPPORT OF HIS SUBMISSIONS HAS PLACED RELI ANCE ON THE 8 ITA NOS. 1718/PN/2011 & 270/PN/2013 DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE O F SANDVIK AUSTRALIA PTY. LTD. VS. DEPUTY DIRECTOR OF INCOME TAX (INTE RNATIONAL TAXATION-II, PUNE (SUPRA). WE FIND THAT THE CO-ORDINATE BE NCH OF THE TRIBUNAL IN THE AFORESAID CASE HAS DEALT WITH SIMILAR ISSUE IN DETAILED. THE FINDINGS OF THE TRIBUNAL ARE REPRODUCED HERE-IN-BELOW: 13. WE ARE CONCERNED WITH PARA NO.3 OF ARTICLE 12, WHICH DEFINES THE TERM ROYALTY. UNDER THE IT ACT, THE TERM ROYALTY A ND EXPRESSION FTS ARE CLASSIFIED AS TWO DIFFERENT CONNOTATIONS, I.E. 9(1) (VI) AND 9(1)(VII). SO FAR AS ARTICLE 12 IS CONCERNED, FTS IS INCLUDED IN THE TERM ROYALTY FOR THE PURPOSE OF DECIDING IN WHICH CONTRACTING STATE THE INCOME FROM THE SAME IS TO BE TAXED. CLAUSE (G) IN ARTICLE 12(3) GOES T O THE ROOTS OF THE ISSUE. MAIN THRUST OF THE ARGUMENT OF THE LD. COUNSEL IS T HAT IT IS NOT ONLY SUFFICIENT TO RENDER THE SERVICES BUT THE SAME SHOU LD BE MADE AVAILABLE TO THE RECIPIENT AND THIS PARTICULAR IMPORTANT ASPE CT IS MISSED BY THE DRP/TPO. WE FIND THAT THE EXPRESSION MAKING AVAIL ABLE IS VERY MUCH IMPORTANT TO DECIDE IN WHICH CONTRACTING STATE THE AMOUNT RECEIVED FOR RENDERING THE SERVICES RELATING TO THE TECHNICAL KN OW-HOW IS TO BE TAXED. THE EXPRESSION MAKE AVAILABLE IS USED IN THE CONT EXT OF SUPPLYING OR TRANSFERRING TECHNICAL KNOWLEDGE OR TECHNOLOGY TO A NOTHER. IT IS DIFFERENT THAN THE MERE OBLIGATION OF THE PERSON RENDERING TH E SERVICES OF THAT PERSONS OWN TECHNICAL KNOWLEDGE OR TECHNOLOGY IN PE RFORMANCE OF THE SERVICES. THE TECHNOLOGY WILL BE CONSIDERED AS MAD E AVAILABLE WHEN THE PERSON RECEIVING THE SERVICES IS ABLE TO APPLY THE TECHNOLOGY BY HIMSELF. 14. THE EXPRESSION MAKE AVAILABLE HAS COME FOR CO NSIDERATION BEFORE THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF M/S.DE BEERS INDIA MINERALS PVT. LTD. (SUPRA). IN THE SAID CASE, THE TREATY BETWEEN INDIA AND NETHERLANDS WAS FOR THE CONSIDERATION OF THEIR LORDSHIPS. THE ASSESSEE IN THAT APPEAL WAS A PROVIDING COMPANY ENG AGED IN THE BUSINESS OF PROSPECTING AND MINING FOR DIAMONDS AND OTHER MINERALS. THEY HAVE BEEN GRANTED LICENCES (RECONNAISSANCE PER MITS) BY THE STATE GOVERNMENT OF KARNATAKA, ANDHRA PRADESH AND CHHATTI SGARH. DURING THE EARLY STAGE, VARIOUS TECHNIQUES WERE EMPLOYED F OR THE PURPOSE OF CARRYING OUT GEOPHYSICAL SURVEY, THE ASSESSEE ENTER ED INTO AGREEMENT WITH M/S.FUGRO ELBOCON B.V. NETHERLANDS, WHO HAD A TEAM OF EXPERTS SPECIALISED IN AIR BORNE GEOPHYSICAL SERVICES FOR C LIENTS. FOR THE TECHNICAL SERVICES RENDERED BY THEM THE SAID ASSESSEE HAD PAI D CONSIDERATION. THE ASSESSING OFFICER APPLIED ARTICLE 12 OF THE IND O-NETHERLANDS TREATY AND HELD THAT THE SAME WAS TAXABLE IN THE HANDS OF THE NETHERLANDS COMPANY. AS THE WORDINGS OF ARTICLE 12 IN THE INDO -NETHERLANDS TREATY 9 ITA NOS. 1718/PN/2011 & 270/PN/2013 ARE ANALOGOUS TO ARTICLE 12 OF THE INDIA AUSTRALIA TREATY, AS EXPRESSION MAKE AVAILABLE IS ALSO USED WHILE DETERMINING FIS CAL JURISDICTION OF THE CONTRACTING STATE, THE HON'BLE HIGH COURT EXPLAINED THE MEANING OF THE EXPRESSION MAKE AVAILABLE WHICH WAS APPEARING IN THE INDO- NETHERLANDS TREATY, THE LORDSHIPS EXPLAINED THE EXP RESSION AS UNDER: 13. UNDER THE ACT IF THE CONSIDERATION PAID FOR RE NDERING TECHNICAL SERVICES CONSTITUTE INCOME BY WAY OF FEES FOR TECHN ICAL SERVICES, IT IS TAXABLE. HOWEVER, ARTICLE 12 OF THE AFORESAID IND IA-NETHERLANDS TREATY DEFINES FEES FOR TECHNICAL SERVICES FOR THE PURPOSE OF ARTICLE 12 WHICH DEALS WITH ROYALTIES AND FEES FOR TECHNICAL SERVICE S. THE FEES FOR TECHNICAL SERVICES MEANS THE PAYMENT OF ANY AMOUNT TO ANY PERSON IN CONSIDERATION FOR RENDERING OF ANY TECHNICAL SERVIC ES ONLY, IF SUCH SERVICES MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERT ISE, SKILL, KNOW-HOW OR PROCESSES. IF THE TECHNICAL KNOWLEDGE EXPERTISE , SKILL, KNOW HOW OR PROCESS IS NOT MADE AVAILABLE BY THE SERVICE PROVID ER, WHO HAS RENDERED TECHNICAL SERVICE FOR THE PURPOSE OF ARTICLE 12 OF DTAA IT WOULD NOT CONSTITUTE FEES FOR TECHNICAL SERVICES. TO THAT EX TENT THE DEFINITION OF FEE FOR TECHNICAL SERVICES FOUND IN THE AGREEMENT IS IN CONSISTENT WITH THE DEFINITION OF FEES FOR TECHNICAL SERVICES PROVIDED IN EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION (1) OF SECTION 9. IN V IEW OF SECTION 90 THE DEFINITION OF FEES FOR TECHNICAL SERVICES CONTAINED IN THE AGREEMENT OVERRIDES THE STATUTORY PROVISIONS CONTAINED IN THE ACT. IN FACT, THE LATEST AGREEMENT BETWEEN INDIA AND SINGAPORE FURTHER CLARI FIES THIS POSITION, WHERE THEY HAVE EXPLAINED THE MEANING OF THE WORD MAKE AVAILABLE. ACCORDING TO THE AFORESAID DEFINITION FEES FOR TECH NICAL SERVICE MEANS PAYMENTS OF ANY KIND TO ANY PERSON IN CONSIDERATION FOR SERVICES OF TECHNICAL NATURE IF SUCH SERVICES MAKE AVAILABLE TE CHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW HOW OR PROCESSES WHICH ENAB LES THE PERSON ACQUIRING THE SERVICE TO APPLY TECHNOLOGY CONTAINED THEREIN. THOUGH THIS PROVISION IS NOT CONTAINED IN INDIA NETHERLANDS TRE ATY, BUT VIRTUE OF PROTOCOL IN THE AGREEMENT, CLAUSE (IV)(2) READS AS UNDER: IF AFTER THE SIGNATURE OF THIS CONVENTION UNDER AN Y CONVENTION OR AGREEMENT BETWEEN INDIA AND THIRD STATE WHICH IS A MEMBER OF THE OECD INDIA SHOULD LIMIT ITS TAXATION AT SOURCE ON DIVIDENDS, INTERESTS, ROYALTIES, FEES FOR TECHNICAL SERVICES O R PAYMENTS FOR THE USE OF EQUIPMENT TO A RATE LOWER OR A SCOPE MORE RE STRICTED THAN THE RATE OR SCOPE PROVIDED FOR IN THIS CONVENTION O N THE SAID ITEMS OF INCOME, THEN AS FROM THE DATE ON WHICH THE RELEV ANT INDIAN CONVENTION OR AGREEMENT ENTERS INTO FORCE THE SAME RATE OR SCOPE AS PROVIDED FOR IN THAT CONVENTION OR AGREEMENT ON THE SAID ITEMS OF INCOME SHALL ALSO APPLY UNDER THIS CONVENTION. 14. THEREFORE THE CLAUSE IN SINGAPORE AGREEMENT WHI CH EXPLICITLY MAKES IT CLEAR THE MEANING OF THE WORD MAKE AVAILA BLE, THE SAID CLAUSE 10 ITA NOS. 1718/PN/2011 & 270/PN/2013 HAS TO BE APPLIED, AND TO BE READ INTO THIS AGREEME NT ALSO. THEREFORE, IT FOLLOWS THAT FOR ATTRACTING THE LIABILITY TO PAY TA X NOT ONLY THE SERVICES SHOULD BE OF TECHNICAL IN NATURE, BUT IT SHOULD BE MADE AVAILABLE TO THE PERSON RECEIVING THE TECHNICAL SERVICES. THE TECHN OLOGY WILL BE CONSIDERED MADE AVAILABLE WHEN THE PERSON WHO REC EIVED SERVICE IS ENABLED TO APPLY THE TECHNOLOGY. THE SERVICE PROVI DER IN ORDER TO RENDER TECHNICAL SERVICES USES TECHNICAL KNOWLEDGE, EXPERI ENCE, SKILL, KNOW HOW OR PROCESSES. TO ATTRACT THE TAX LIABILITY, THAT T ECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW HOW OR PROCESS WHICH IS USE D BY SERVICE PROVIDER TO RENDER TECHNICAL SERVICE SHOULD ALSO BE MADE AVA ILABLE TO THE RECIPIENT OF THE SERVICES, SO THAT THE RECIPIENT ALSO ACQUIRE S TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW HOW OR PROCESSES SO AS TO R ENDER SUCH TECHNICAL SERVICES. ONCE ALL SUCH TECHNOLOGY IS MADE AVAILAB LE IT IS OPEN TO THE RECIPIENT OF THE SERVICE TO MAKE USE OF THE SAID TE CHNOLOGY. THE TAX IS NOT DEPENDENT ON THE USE OF THE TECHNOLOGY BY THE RECIP IENT. THE RECIPIENT AFTER RECEIVING OF TECHNOLOGY MAY USE OR MAY NOT US E THE TECHNOLOGY. IT HAS NO BEARING ON THE TAXABILITY ASPECT IS CONCERNE D. WHEN THE TECHNICAL SERVICE IS PROVIDED, THAT TECHNICAL SERVICE IS TO B E MADE USE OF BY THE RECIPIENT OF THE SERVICE IN FURTHER CONDUCT OF HIS BUSINESS. MERELY BECAUSE HIS BUSINESS IS DEPENDENT ON THE TECHNICAL SERVICE WHICH HE RECEIVES FROM THE SERVICE PROVIDER, IT DOES NOT FOL LOW THAT HE IS MAKING USE OF THE TECHNOLOGY WHICH THE SERVICE PROVIDER UT ILISES FOR RENDERING TECHNICAL SERVICES. THE CRUX OF THE MATTER IS AFTER RENDERING OF SUCH TECHNICAL SERVICES BY THE SERVICE PROVIDER, WHETHER THE RECIPIENT IS ENABLED TO USE THE TECHNOLOGY WHICH THE SERVICE PRO VIDER HAD USED. THEREFORE, UNLESS THE SERVICE PROVIDER MAKES AVAILA BLE HIS TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW HOW OR PROCESS T O THE RECIPIENT OF THE TECHNICAL SERVICE, IN VIEW OF THE CLAUSES IN THE DT AA, THE LIABILITY TO TAX IS NOT ATTRACTED. 15. THEIR LORDSHIPS ALSO CONSIDERED THE DECISIONS O F THE AUTHORITY FOR ADVANCE RULINGS (AAR) WHERE THE TERM MAKE AVAILABL E IS INTERPRETED. THE RELEVANT DISCUSSION AND OBSERVATIONS OF THEIR L ORDSHIPS ARE AS UNDER: 22. WHAT IS THE MEANING OF MAKE AVAILABLE. THE TECHNICAL OR CONSULTANCY SERVICE RENDERED SHOULD BE OF SUCH A NA TURE THAT IT MAKES AVAILABLE TO THE RECIPIENT TECHNICAL KNOWLEDGE, KN OW-HOW AND THE LIKE. THE SERVICE SHOULD BE AIMED AT AND RESULT IN TRANSM ITTING TECHNICAL KNOWLEDGE, ETC., SO THAT THE PAYER OF THE SERVICE C OULD DERIVE AN ENDURING BENEFIT AND UTILIZE THE KNOWLEDGE OR KNOW-HOW ON HI S OWN IN FUTURE WITHOUT THE AID OF THE SERVICE PROVIDER. IN OTHER WORDS, TO FIT INTO THE TERMINOLOGY MAKING AVAILABLE, THE TECHNICAL KNOWL EDGE, SKILLS, ETC., MUST REMAIN WITH THE PERSON RECEIVING THE SERVICES EVEN AFTER THE PARTICULAR CONTRACT COMES TO AN END. IT IS NOT ENO UGH THAT THE SERVICES OFFERED ARE THE PRODUCT OF INTENSE TECHNOLOGICAL EF FORT AND A LOT OF 11 ITA NOS. 1718/PN/2011 & 270/PN/2013 TECHNICAL KNOWLEDGE AND EXPERIENCE OF THE SERVICE P ROVIDER HAVE GONE INTO IT. THE TECHNICAL KNOWLEDGE OR SKILLS OF THE PROVIDER SHOULD BE IMPARTED TO AND ABSORBED BY THE RECEIVER SO THAT TH E RECEIVER CAN DEPLOY SIMILAR TECHNOLOGY OR TECHNIQUES IN THE FUTURE WITH OUT DEPENDING UPON THE PROVIDER. TECHNOLOGY WILL BE CONSIDERED MADE AVAILABLE WHEN THE PERSON ACQUIRING THE SERVICE IS ENABLED TO APPLY TH E TECHNOLOGY. THE FACT THAT THE PROVISION OF THE SERVICE THAT MAY REQUIRE TECHNICAL KNOWLEDGE, SKILLS, ETC., DOES NOT MEAN THAT TECHNOLOGY IS MADE AVAILABLE TO THE PERSON PURCHASING THE SERVICE, WITHIN THE MEANING O F PARAGRAPH 4(B). SIMILARLY, THE USE OF A PRODUCT WHICH EMBODIES TECH NOLOGY SHALL NOT PER SE BE CONSIDERED TO MAKE THE TECHNOLOGY AVAILABLE. IN OTHER WORDS, PAYMENT OF CONSIDERATION WOULD BE REGARDED AS FEE FOR TECHNICAL/INCLUDED SERVICES ONLY IF THE TWIN TEST OF RENDERING SERVICES AND MAKING TECHNICAL KNOWLEDGE AVAILABLE AT THE SAM E TIME IS SATISFIED. 16. IN THE PRESENT CASE, AS PER THE TERMS OF THE AG REEMENT BETWEEN THE ASSESSEE COMPANY AND SANDVIK ASIA LTD., DOES NO T SUPPORT THE CASE OF THE REVENUE THAT THE ASSESSEES CASE IS COVERED IN CLAUSE (G) OF PARA 3 TO ARTICLE 12 OF THE INDIA AUSTRALIA TREATY AS THE ASSESSEE HAS NOT MADE AVAILABLE ANY TECHNICAL KNOWLEDGE OR EXPERTISE TO T HE RECIPIENT INDIAN COMPANY. IN OUR OPINION, THE ASSESSEE HAS ONLY PRO VIDED THE BACK-UP SERVICES AND IT SUPPORT SERVICES FOR SOLVING IT REL ATED PROBLEMS TO ITS INDIAN SUBSIDIARY. HENCE, UNLESS AND UNTIL THE SER VICES ARE NOT MADE AVAILABLE, SAME CANNOT BE TAXABLE IN INDIA. WE, THE REFORE HOLD THAT THE SERVICES RENDERED BY ASSESSEE COMPANY TO ITS INDIAN GROUP COMPANIES, THOUGH ARE IN THE NATURE OF TECHNICAL SERVICES, BUT IS NOT COVERED IN PARA (3)(G) TO ARTICLE 12 OF THE INDIA AUSTRALIA TREATY AND HENCE, THE SAME IS NOT TAXABLE IN INDIA. WE ALSO HOLD THAT THE AMOUNT RECEIVED BY THE ASSESSEE CANNOT BE TREATED AS A ROYALTY EVEN UNDER THE NORMAL PROVISIONS OF I.T. ACT. BUT UNDER THE NORMAL PROVI SION OF THE I.T. ACT THE SAME CONSTITUTE CONSIDERATION FOR RENDERING THE TEC HNICAL SERVICES COVERED U/S.9(1)(VII) OF THE I.T.ACT. ACCORDINGLY, GROUND NO.1 IS ALLOWED AND ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 8. SIMILARLY, THE ISSUE HAD COME UP IN THE CASE OF M/S. SAND VIK AB, VS. DY. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-II, PUNE (SUPRA). THE CO-ORDINATE BENCH OF THE TRIBUNAL FOLLOWING ITS OWN DECIS ION IN THE CASE OF SANDVIK AUSTRALIA PTY. LTD. VS. DEPUTY DIRECTOR OF I NCOME TAX (INTERNATIONAL TAXATION-II, PUNE (SUPRA) REITERATED ITS VIEW. IN THE SAID CASE THE CO-ORDINATE BENCH ALSO CONSIDERED THE PROTOCO L TO THE TREATY 12 ITA NOS. 1718/PN/2011 & 270/PN/2013 BETWEEN INDIA AND SWEDEN AND HELD THAT ON THE BASIS OF PROTOCOL TO THE DTAA BETWEEN INDIA AND SWEDEN, THE ASSESSEE CAN CLAIM T HE BENEFIT OF CONDITIONS IMPOSED TO BRING TO TAX THE FEES FOR TECHNICAL SERVICES. THE RELEVANT EXTRACT OF THE ORDER OF TRIBUNAL IS REPRODUCED HERE-IN-B ELOW: 11. NOW, THE NEXT QUESTION IS WHETHER THE ASSESSEE IS ENTITLED FOR THE BENEFITS OF DTAA BETWEEN INDIA-PORTUGUESE AS SECOND CONDITION MAKE AVAILABLE IS NOT FULFILLED. THERE IS A PROTOCOL TO THE TREATY BETWEEN INDIA AND SWEDEN WHICH IS AS UNDER: AT THE SIGNING OF THE CONVENTION BETWEEN THE GOVERN MENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE KINGDOM OF SWEDE N FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL, THE UNDE RSIGNED HAVE AGREED THAT THE FOLLOWING SHALL FORM AN INTEGRAL PART OF T HE CONVENTION : WITH REFERENCE TO ARTICLES 10, 11 AND 12 : IN RESPECT OF ARTICLES 10 (DIVIDENDS), 11 (INTEREST ) AND 12 (ROYALTIES AND FEES FOR TECHNICAL SERVICES) IF UNDER ANY CONVENTIO N. AGREEMENT OR PROTOCOL BETWEEN INDIA AND A THIRD STATE WHICH IS A MEMBER OF THE OECD, INDIA LIMITS ITS TAXATION AT SOURCE ON DIVIDE NDS, INTEREST, ROYALTIES, OR FEES FOR TECHNICAL SERVICES TO A RATE LOWER OR A SCOPE MORE RESTRICTED THAN THE RATE OR SCOPE PROVIDED FOR IN THIS CONVENT ION ON THE SAID ITEMS OF INCOME, THE SAME RATE OR SCOPE AS PROVIDED FOR IN THAT CON VENTION, AGREEMENT OR PROTOCOL ON THE SAID ITEMS OF INCOME S HALL ALSO APPLY UNDER THIS CONVENTION. 11.1 AN MFN CLAUSE REFERS TO A SITUATION WHEREIN TW O NON-RESIDENT TAX PAYERS ARE GIVEN IMPARTIAL TREATMENT BY THE CONCERN ED COUNTRY. IN DTAAS, MFN CLAUSE FIND PLACE WHEN COUNTRIES ARE REL UCTANT TO FOREGO THEIR RIGHT TO TAX SOME ELEMENTS OF THE INCOME. AN MFN CLAUSE CAN DIRECT MORE FAVOURABLE TREATMENT AVAILABLE IN OTHER TREATI ES ONLY IN REGARD TO THE SAME SUBJECT MATTER, THE SAME CATEGORY OF MATTER OR THE SAME CLAUSE OF THE MATTER. THE PROTOCOL ATTACHED TO THE TREATY TA KE CARE OF A SITUATION WHERE IN CASES EITHER OF THE CONTRACTING STATES ENT ER INTO A BILATERAL AGREEMENT INTO THE NATURE OF DTAA WITH THE ANOTHER SOVEREIGN STATE AND WHERE THE SAME SUBJECT MATTER HAS BEEN GIVEN MORE F AVOURABLE TREATMENT BY WAY OF A DEFINITION OR MODE OF TAX THE N THE PARTIES CAN CLAIM THE BENEFIT ON THE RECOGNIZED PRINCIPLE OF MF N CLAUSE. IN HIS INTRODUCTION TO DOUBLE TAXATION CONVENTIONS (THIR D EDITION) KLAUS VOGEL HAS EXPLAINED THE ROLE OF THE PROTOCOL AND ITS ROLE IN INTERPRETING THE TREATY. THE SAME HAS BEEN CONSIDERED BY THE ITAT, CALCUTTA IN THE CASE OF DCIT V. ITC LTD., 76 TTJ 323. 13 ITA NOS. 1718/PN/2011 & 270/PN/2013 11.2 IN THE CASE OF MARUTI UDYOG LTD., VS. ADIT RE PORTED IN (2010) 37 DTR 85 (DELHI) EXPLAINING THE SCOPE OF THE PROTOCOL IT IS HELD AS UNDER : 11.1 IT IS SETTLED POSITION IN LAW THAT PROTOCOL IS AN INDISPENSABLE PART OF THE TREATY WITH THE SAME BINDING FORCE AS THE MA IN CLAUSES THEREIN, AS PROTOCOL IS AN INTEGRAL PART OF THE TREATY AND ITS BINDING FORCE IS EQUAL TO THAT OF THE PRINCIPAL TREATY. THE PROVISIONS OF THE AFORESAID DTAA ARE, THEREFORE, REQUIRED TO BE READ WITH THE PROTOCOL CL AUSES AND ARE SUBJECT TO THE PROVISIONS CONTAINED IN SUCH PROTOCOL. EXAMINED IN THE LIGHT OF DTAAS BETWEEN INDIA AND UK, USA AND SWITZERLAND, WE FIND THAT IN THE CASE BEFORE US THE ASSESSEE HAD NOT PURCHASED ANY PROPER TY FROM UTAC FRANCE. THEREFORE, NONE OF THE FEES I.E., IMPACT TE STING FEES OR FEE PAID FOR TEST REPORTS IS ANCILLARY AND SUBSIDIARY AS WELL AS INEXTRICABLY AND ESSENTIALLY LINKED TO THE SALE OF A PROPERTY. THERE FORE, THE DECISION OF THE TRIBUNAL, CALCUTTA BENCH IN THE CASE OF DY. CIT VS. ITC LTD. (SUPRA) RELIED UPON BY THE ASSESSEE IS NOT APPLICABLE TO THE FACTS OF THE CASE. IN THIS CASE THE ASSESSEE HAD PURCHASED MACHINES FROM UK AN D PAYMENTS WERE MADE TO FOREIGN PARTY FOR INSTALLATION AND COM MISSIONING OF THE MACHINES. THE FOREIGN PARTY DID NOT HAVE ANY PE IN INDIA TO WHICH SUCH INCOME COULD BE ATTRIBUTED. IN THIS VIEW OF THE MAT TER IT WAS HELD THAT THE PAYMENTS MADE TO FOREIGN PARTY FOR INSTALLATION AND COMMISSIONING OF THE MACHINES WERE RELATED TO TECHNICAL SERVICES, WHICH WERE ANCILLARY AND SUBSIDIARY AS WELL AS INEXTRICABLY AND ESSENTIALLY LINKED TO THE SALE OF THE PROPERTY. HENCE, THE PAYMENTS MADE TO THE FOREI GN PARTY WERE NOT LIABLE TO BE TAXED IN INDIA. IN THE DECISION RELIED UPON BY THE ASSESSEE IN THE CASE OF RAYMOND LTD. VS. DY. CIT (SUPRA), IT WA S HELD THAT NO TECHNICAL KNOWLEDGE, EXPERIENCE, SKILLS, KNOW-HOW O R PROCESS ETC. WAS MADE AVAILABLE TO THE ASSESSEE COMPANY BY THE NON-R ESIDENT MANAGERS OF THE GDR ISSUE WITHIN THE MEANING OF ART. 13(4)(C ) OF THE DTAA. LIKEWISE, DECISIONS IN THE CASES OF SKYCELL COMMUNI CATIONS LTD. (SUPRA) AND NQA QUALITY SYSTEMS REGISTRAR LTD. (SUPRA) ARE DISTINGUISHABLE ON FACTS, HENCE, ARE NOT APPLICABLE TO THE FACTS OF TH E ASSESSEES CASE. 11.3 IT IS ALSO WORTHWHILE TO REFER TO THE RULING G IVEN IN THE CASE OF AUTHORITY FOR ADVANCED RULING (AAA) IN THE CASE OF POONAVALA AVIATIONS REPORTED IN 343 ITR 381 THOUGH IT IS HAVING PERSUAS IVE VALUE WHICH READS AS UNDER : 16. IN HIS INTRODUCTION TO DOUBLE TAXATION CONVENT IONS (THIRD EDITION), KLAUS VOGEL, HAS CLARIFIED THE ROLE OF A PROTOCOL A ND ITS ROLE IN INTERPRETING A TREATY. HE SAYS, 'PROTOCOLS AND IN SOME CASES OTH ER COMPLETING DOCUMENTS ARE FREQUENTLY ATTACHED TO TREATIES. SUCH DOCUMENTS ELABORATE AND COMPLETE THE TEXT OF A TREATY, SOMETIMES EVEN A LTERING THE TEXT. LEGALLY THEY ARE A PART OF THE TREATY, AND THEIR BI NDING FORCE IS EQUAL TO THAT OF THE PRINCIPAL TREATY TEXT. WHEN APPLYING A TAX TREATY, THEREFORE, IT 14 ITA NOS. 1718/PN/2011 & 270/PN/2013 IS NECESSARY CAREFULLY TO EXAMINE THESE ADDITIONAL DOCUMENTS'. A PROTOCOL IS SAID TO BE A TREATY BY ITSELF THAT AMEN DS OR SUPPORTS THE EXISTING TREATY. WE CANNOT ALSO FORGET THE OBSERVAT IONS OF THE SUPREME COURT IN UNION OF INDIA VS. AZADI BACHAO ANDOLAN (2 003) 184 CTR (SC) 450 : (2003) 263 ITR 706 (SC) AT P. 751 THAT 'AN IM PORTANT PRINCIPLE WHICH NEEDS TO BE KEPT IN MIND IN THE INTERPRETATIO N OF THE PROVISIONS OF AN INTERNATIONAL TREATY, INCLUDING ONE FOR DOUBLE T AXATION RELIEF, IS THAT TREATIES ARE NEGOTIATED AND ENTERED INTO AT A POLIT ICAL LEVEL AND HAVE SEVERAL CONSIDERATIONS AS THEIR BASES'. SO THE ARGU MENT OF THE REVENUE THAT THE PROTOCOL CANNOT BE RELIED ON TO UNDERSTAND THE SCOPE OF TAXATION CANNOT BE ACCEPTED. 12. SO FAR AS THE PRESENT CASE BEFORE US IS CONCERN ED, ON THE BASIS OF THE PROTOCOL TO THE DTAA BETWEEN THE INDIA AND SWED EN THE ASSESSEE CAN CLAIM THE BENEFIT OF THE CONDITIONS IMPOSED FOR BRINGING TO TAX THE FEES FOR TECHNICAL SERVICES IN THE TREATY BETWEEN T HE INDIA AND PORTUGUESE. WE, THEREFORE, HOLD THAT ON THE PRINCI PLE OF THE MOST FAVOURED NATION (MFN) CLAUSES THE PAYMENT OF RS.5.9 3 CRORES RECEIVED BY THE ASSESSEE COMPANY FROM ITS INDIAN SUBSIDIES C ANNOT BE BROUGHT TO TAX. WE, THEREFORE, ALLOW THE GROUNDS TAKEN BY THE ASSESSEE ON THE ABOVE REASONS. THUS, IN VIEW OF THE DECISION OF THE CO-ORDINATE BENCH AND THE FACTS OF THE PRESENT CASE, WE ARE OF CONSIDERED OPINION TH AT THE FEE CHARGED BY THE ASSESSEE FROM SAPL FOR INSTALLATION OF CRAN E, UPGRADATION/SERVICE OF OTHER EQUIPMENTS DOES NOT INVOLVE MAKE AVAILABLE OF ANY KNOW HOW, TECHNOLOGY WHICH CAN BE USED BY THE INDIA N ASSOCIATE OF ASSESSEE INDEPENDENTLY FOR ITS BENEFIT IN ANY MANNER, WHATSOEVER. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER T O DELETE THE ADDITION OF ` 25,92,070/- MADE ON ACCOUNT OF FEE FOR TECHNICAL SERVICES FOR INSTALLATION OF MACHINES ETC. 9. THE SECOND ISSUE IN APPEAL IS TOWARDS THE ADDITION OF ` 32,40,082/- AS ROYALTY FOR USE OF CAD/CAM DESIGNING SOFT WARE. THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE HAS PU RCHASED THE BASIC VERSION OF PROGRAM/SOFTWARE FROM THE THIRD PARTY AND AFT ER MAKING 15 ITA NOS. 1718/PN/2011 & 270/PN/2013 CERTAIN CHANGES/MODIFICATION TO THE BASIC PROGRAM HAS STA NDARDIZED THE SOFTWARE TO BE USED BY THE ENTIRE GROUP. IT HAS B EEN FURTHER CONTENDED THAT THE BASIC PROGRAM HAS BEEN STORED IN S WEDEN. IT IS NOT A CASE WHERE THE USERS CAN MODIFY THE PROGRAM. THE USERS HAVE LIM ITED ACCESSIBILITY TO THE PROGRAM FOR USING IT WITHOUT ANY FURTHE R MODIFICATION. 10. THE LD. AR OF THE ASSESSEE IN SUPPORT OF HIS CONTENT IONS HAS PLACED RELIANCE ON THE DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SANDVIK AUSTRALIA PTY. LTD. VS. DEPUTY DIRECTO R OF INCOME TAX (INTERNATIONAL TAXATION-II, PUNE (SUPRA). THE ISSUE BEFO RE THE TRIBUNAL IN THE SAID CASE WAS : 1.1 THE LEARNED DEPUTY DIRECTOR OF INCOME-TAX, (IN TERNATIONAL TAXATION)-II, PUNE, I.E., ASSESSING OFFICER (AO) HA S ERRED IN HOLDING THAT THE IT SUPPORT SERVICES RENDERED BY THE APPELL ANT ARE IN THE NATURE OF ROYALTY/FTS WITHIN THE MEANING OF ARTICLE 12 OF THE INDIA-AUSTRALIA TREATY AND/OR SECTION 9(1)(VII) OF THE INCOME TAX ACT, 1961. THE TRIBUNAL HELD : 8. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PART IES AND PERUSED THE RECORD. THE ASSESSEE IS A NON-RESIDENT COMPANY . THE ASSESSEE IS PROVIDING THE IT SUPPORT SERVICES TO ITS GROUP COMP ANIES IN THE ASIA- PACIFIC REGION. SO FAR AS THE ISSUE BEFORE US IS C ONCERNED, TWO GROUP COMPANIES FROM INDIA, I.E., SANDVIK ASIA LTD. AND W ALTER TOOLS INDIA PVT. LTD., HAVE MADE THE PAYMENTS TO THE ASSESSEE COMPAN Y. THE DRP CONFIRMED THE ACTION OF THE TPO TREATING THE PAYMEN T RECEIVED BY THE ASSESSEE COMPANY FROM ITS INDIAN AFFILIATES AS TAXA BLE AS ROYALTY/FTS. THE LD. COUNSEL FAIRLY CONCEDED THAT SO FAR AS NORM AL PROVISIONS OF I.T. ACT ARE CONCERNED, I.E., MORE PARTICULARLY SECTION 9(1)(VII), IN VIEW OF THE EXPLANATION 2 BELOW THE SAID SECTION, THE AMOUNT RE CEIVED BY THE ASSESSEE FROM ITS INDIAN AFFILIATES IS TAXABLE AS F TS, BUT THE SAME IS EXEMPT IN VIEW OF THE ARTICLE 12 OF THE TREATY. WE , THEREFORE, NEED NOT GO INTO THE FIRST LIMB OF THIS ISSUE WHETHER THE AMOUN T RECEIVED BY THE ASSESSEE COMPANY IS TAXABLE UNDER THE NORMAL PROVIS IONS OF THE I.T. ACT. 16 ITA NOS. 1718/PN/2011 & 270/PN/2013 9. LET US EXAMINE THE CLAIM OF THE ASSESSEE THAT IN VIEW OF ARTICLE 12 OF THE INDIA AUSTRALIA TREATY, AS NO SERVICES ARE MADE AVAILABLE, HENCE, THE SAME CANNOT BE TAXED IN THE SOURCED COUNTRY. T HE ASSESSEE IS PROVIDING HELP DESK AND USER ADMINISTRATION SERVICE S, I.E., IT SUPPORT AND ADVISORY SERVICES FOR SOLVING ANY IT RELATED PROBLE MS FACED BY THE USERS AS WELL AS USER ADMINISTRATION SERVICES SUCH AS ADD ITION OF NEW USER/DELETION OF ANY EXISTING USERS IN THE SYSTEM. IT IS FURTHER CLAIMED BY THE ASSESSEE COMPANY THAT IT ALSO PROVIDES IT HE LP DESK SERVICES IN CONNECTION WITH ANY PROBLEMS FACED BY THE USERS IN THE USAGE OF LOTUS NOTES I.E., NOTES DOMINO ADMINISTRATION. ASSESSEE ALSO PROVIDES S&C BASED SERVICES WHICH ARE IN THE NATURE OF IT HELP D ESK SERVICES IN CONNECTION WITH ANY PROBLEMS FACED BY THE USERS IN OPERATING VARIOUS APPLICATION SOFTWARES. ASSESSEE PROVIDES NETWORKIN G SERVICES WHICH COMPRISE PROVISION OF ROUTERS AND NETWORKING LINES FOR CONNECTION TO THE GLOBAL SERVERS. ASSESSEE ALSO CONTENDED THAT THE R OUTERS, NETWORK LINES, WAN AND OTHER HARDWARE DEVICES ARE OWNED AND MAINTA INED BY THE ASSESSEE. ASSESSEE ALSO PROVIDES DATA CENTRE SERVI CES. AS400 SOFTWARE APPLICATION IS STORED ON THE CENTRALISED SERVER OF THE ASSESSEE IN SYDNEY. AS PER THE AGREEMENT, ASSESSEE IS RESPONSIBLE FOR U PDATION OF PATCHES OF THE SOFTWARE AND PROVISION OF BACKUP AND RECOVERY S ERVICES IN RESPECT OF DATA STORED ON THE CENTRALISED SERVER. THE RESPONS IBILITY OF THE ASSESSEE IS TO MAINTAIN AND UPKEEP OF THE CENTRALISED SERVER OWNED BY IT. IN SUM AND SUBSTANCE, ASSESSEE HAS NOT IMPARTED ANY TECHNI CAL KNOW-HOW, SKILL, PROCESS OR TECHNICAL PLAN OR DESIGN AND HENC E, IN VIEW OF ARTICLE 12(3)(G), THE AMOUNT RECEIVED BY THE ASSESSEE CANNO T BE TAXED IN INDIA. 10. THE ASSESSEE HAS FILED THE COPY OF THE AGREEMEN T WITH THE SANDVIK ASIA LTD. DATED 19.12.2006. IT IS PLACED I N THE PAPERBOOK (PAGE NOS.1 TO 10). WE FIND THAT IN THE SAID AGREEMENT T HE PARTIES HAVE DESCRIBED THE NATURE OF THE SERVICES WHICH THE ASSE SSEE COMPANY IS TO PROVIDE TO THE RECIPIENT COMPANY I.E., SANDVIK ASIA LTD. THE DRP HAS PLACED HIS EMPHASIS IN THE RECITAL OF THE SAID AGRE EMENT WHERE IT IS STATED AS UNDER: PROVIDING PARTY IS PREPARED TO TRANSFER SUCH KNOWL EDGE TO THE RECEIVING PARTY AND TO PROVIDE THE RECEIVING PARTIE S WITH INFORMATION TECHNOLOGY, CONSULTANCY AND DATA PROCES S SERVICES. 11. THOUGH THE AGREEMENT IS TO BE READ AS A WHOLE A ND CANNOT BE READ INTO PIECE-MEAL BASIS BUT WHAT WE FIND AS PER OPERATIVE CLAUSES IN RESPECT OF THE CONTRACTUAL OBLIGATION OF THE ASSESS EE COMPANY NOWHERE IT IS SUGGESTED THAT ASSESSEE HAS TO MAKE AVAILABLE TH E REQUIRED TECHNICAL 17 ITA NOS. 1718/PN/2011 & 270/PN/2013 KNOW-HOW FOR SOLVING THE PROBLEMS FACED BY THE SAND VIK ASIA LTD. IN THEIR IT RELATED PROBLEMS. 11. IT HAS BEEN CONTENDED BEFORE US THAT THE ASSESSEE HAS NOT GIVEN THE DETAILS OF THE MODIFICATIONS CARRIED OUT BY THE ASSESSE E EITHER BEFORE THE ASSESSING OFFICER OR THE DRP. WE FURTHER FIND THAT T HE AUTHORITIES BELOW WHILE DECIDING THE ISSUE HAS NOT CONSIDERED THE AGR EEMENT BETWEEN THE ASSESSEE AND SANDVIK ASIA PRIVATE LIMITED FOR THE USE OF PROGRAM. THUS, WE ARE OF THE CONSIDERED VIEW THAT THIS IS SUE NEEDS A REVISIT TO THE FILE OF ASSESSING OFFICER. THE ASSESSEE SHALL FUR NISH THE DETAILS OF MODIFICATIONS/CHANGES CARRIED OUT BY THE ASSESSE E IN THE PROGRAM FOR STANDARDIZING THE SAME TO BE USED BY ALL THE GROUP CONCERNS AND ALSO THE TERMS AND CONDITIONS FOR THE USE OF PROGRAM BY SAPL. THE ASSESSING OFFICER AFTER CONSIDERING THE SAME SHALL DECIDE TH E ISSUE AFRESH IN THE LIGHT OF DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SANDVIK AUSTRALIA PTY. LTD. VS. DEPUT Y DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION-II, PUNE (SUPRA). AC CORDINGLY, THE GROUND NO. 2 RAISED IN THE APPEAL FOR ASSESSMENT YEAR 20 07-08 IS PARTLY ALLOWED IN THE AFORESAID TERMS. ITA NO. 270/PN/2013 (A.Y. 2009-10) 12. THE ASSESSEE HAS FILED APPEAL IN ASSESSMENT YEAR 2009 -10 ON THE FOLLOWING GROUNDS : ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW; 1. GROUND 1: THE LEARNED DISPUTE RESOLUTION PANEL (LD. DRP) AND THE LEARNED ASSESSING OFFICER ('LD AO') HAVE ERRED IN H OLDING THAT THE RECEIPTS FROM INDIAN AFFILIATE COMPANY FOR USE OF C AD/ CAM SOFTWARE AMOUNTING TO INR 7,79,156 IS IN THE NATURE OF 'ROYALTY' WITHIN THE MEANING OF ARTICLE 12 OF DOUBLE TAXATION AVOIDANCE AGREEMENT ('DTAA') BETWEEN INDIA AND SWEDEN. 18 ITA NOS. 1718/PN/2011 & 270/PN/2013 2. GROUND 2: THE LD. DRP AND THE LD. AO HAVE ERRED IN TAXING INR 3,97,875 TOWARDS PRODUCT INSPECTION CHARGES AS 'FEES FOR TEC HNICAL SERVICES' ('FTS') WITHIN THE MEANING OF ARTICLE 12 OF THE DTAA BETWEEN INDIA AND SWEDEN READ WITH THE PROTOCOL THERETO. YOUR APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, W ITHDRAW, MODIFY AND/OR SUBSTITUTE, AND TO WITHDRAW THE ABOVE GROUND OF APPEAL. 13. THE ISSUES RAISED BY THE ASSESSEE IN THE APPEAL FOR A SSESSMENT YEAR 2009-10 ARE SIMILAR TO THE ISSUES RAISED IN ASSESSME NT YEAR 2007-08. THE GROUND NO. 1 RAISED IN THE APPEAL FOR ASSE SSMENT YEAR 2009-10 IS IDENTICAL TO GROUND NO. 2 IN THE APPEAL FOR ASS ESSMENT YEAR 2007-08. SINCE, WE HAVE REMITTED THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR ASSESSMENT YEAR 2007-08, WE REMIT TH E GROUND NO. 1 RAISED IN THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YE AR 2009-10 TO ASSESSING OFFICER, AS WELL WITH SIMILAR DIRECTIONS. ACCORDINGLY, G ROUND NO. 1 RAISED IN THE APPEAL FOR ASSESSMENT YEAR 2009-10 IS ALLOWED FOR STATISTICAL PURPOSE. 14. IN GROUND NO. 2 THE ASSESSEE HAS ASSAILED THE ADDITIO N OF ` 3,97,875/- ON ACCOUNT OF FEES FOR TECHNICAL SERVICES IN RESP ECT OF PRODUCT INSPECTION CHARGES. THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE PRODUCT INSPECTION CHARGES DO NOT QUALIFY THE TEST OF MAKE AVAILABLE. THEREFORE, THE ADDITION MADE ON ACCOUNT OF FEES FO R TECHNICAL SERVICES IS BAD IN LAW. THE LD. AR SUBMITTED THAT THE ISSU E IS SIMILAR TO GROUND NO. 1 RAISED IN THE APPEAL FOR THE ASSESSMENT YEA R 2007-08. THE LD. DR HAS NOT CONTROVERTED THE CONTENTION OF THE LD . AR. SINCE, THIS ISSUE HAS BEEN DEALT WITH IN DETAIL IN THE APPEAL FOR A SSESSMENT YEAR 2007-08 AND AFTER PLACING RELIANCE ON THE DECISION O F CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SANDVIK AUSTRALIA PTY. LTD. VS. DEPUTY DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION-II, PUNE (SUPRA), 19 ITA NOS. 1718/PN/2011 & 270/PN/2013 WE ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE ON SIMILAR TE RMS. ACCORDINGLY, THE APPEAL OF THE ASSESSEE FOR ASSESSMENT Y EAR 2009-10 IS PARTLY ALLOWED IN THE AFORESAID TERMS. 15. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED ON MONDAY, THE 16 TH DAY OF MAY, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 16 TH MAY, 2016 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. DRP, PUNE 4. DDIT (INTERNATIONAL TAXATION)-I, PUNE 5. !'( %%)* , )* , + +,- , / DR, ITAT, B BENCH, PUNE. 6. ( . /0 / GUARD FILE. // ! % // TRUE COPY// #1 / BY ORDER, %2 )- / PRIVATE SECRETARY, )* , / ITAT, PUNE