Appeal details
Counselvise Citation
[2016] 132 COUNSELVISE.COM (IT) 0223 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 8 month(s) 7 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
25-10-2016
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
I
Next Hearing Date
08-09-2016
Assessment Year
2008-2009
Appeal Filed On
17-02-2012
Judgement Text
, I IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, AHMEDABAD BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO.451/AHD/2012 / ASSTT. YEAR: 2008-2009 TORRENT PHARMACEUTICALS LTD. OFF ASHRAM ROAD AHMEDABAD 380 009. VS ITO (INTL. TAXN.)-III AHMEDABAD. ./ ITA NO.624/AHD/2012 / ASSTT. YEAR: 2008-2009 ITO (INTL. TAXN.)-III AHMEDABAD. VS TORRENT PHARMACEUTICALS LTD. OFF ASHRAM ROAD AHMEDABAD 380 009. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI S.N. SOPARKAR WITH SHRI V.R. CHOKSHI, AR REVENUE BY : SHRI S.K. DEV, SR.DR ! / DATE OF HEARING : 07/09/2016 '#$ ! / DATE OF PRONOUNCEMENT: 25/10/2016 %& / O R D E R PER SHRI S.S.GODARA, JUDICIAL MEMBER: THE ASSESSEE AND REVENUE HAVE FILED INSTANT CROSS- APPEALS FOR ASSTT.YEAR 2008-09 AGAINST ORDER OF THE COMMISSIONE R OF INCOME-TAX (APPEALS), GANDHINAGAR, AHMEDABAD DATED 14.12.2011 IN CASE NO.CIT(A)/GNR/INTL.TAXN./2010-11, IN PROCEEDINGS UN DER SECTION 201(1) AND 201(1A) OF THE INCOME TAX ACT, 1961 (TH E ACT FOR SHORT). ITA NO.451 AND 624/AHD/2012 2 2. BOTH PARTIES REITERATE THEIR RESPECTIVE PLEADING S SEEKING TO CHALLENGE CIT(A)S ORDER PARTLY CONFIRMING SECTION 201(1) AND 201(1A)S DEMAND OF RS.20,92,072/-. THE ASSESSEES OBVIOUS C ASE IS THAT LD.CIT(A) OUGHT TO HAVE DELETED ENTIRE DEMAND AS AG AINST REVENUES GRIEVANCE SEEKING TO RESTORE AOS ACTION IN SUPPORT OF FULL DEMAND SUM. 3. WE COME TO THE RELEVANT FACTS. SAME ARE IN A NA RROW COMPASS. THIS ASSESSEE MANUFACTURES AND MARKETS PHARMACEUTIC AL PRODUCTS. IT REMITTED FOLLOWING PAYMENTS TO OVERSEAS PAYEES LOCA TED AT SWITZERLAND, CANADA AND USA WITHOUT DEDUCTING ANY TDS THEREUPON: SR.NO. NAME OF THE RECIPIENT COUNTRY DATE AMOUNT REASON SHOWN REMARKS 1. RCC LTD SWITZERLAND 22.11.2007 18.01.2008 CHF 66,570 2.080 CONSULTANCY SERVICES ARTICLE 14 OF DTAA WITH SWITZERLAND 2. ANAPHARM 2500 CANADA 16.08.2007 3.11.2007 US$ 2,03,582 43,625 CONSULTANCY SERVICES ARTICLE 7 OF DTAA WITH CANADA 3. MDS PHARMA SERVICES USA 08.09.2007 04.08.2007 26.10.2007 US$ 396.80 US$ 99.20 892.80 PROFESSIONAL SERVICES ARTICLE 7 OF DTAA WITH USA 4. PHARMACEUTIC AL DEVELOPMENT GROUP INC., USA 25.09.2007 25.10.2007 25.10.2007 US$ 1243.75 US% 1063.33 1063.33 PROFESSIONAL SERVICES ARTICLE 7 OF DTAA WITH USA 4. THE ASSESSING OFFICER PASSED SECTION 201 AND 201 (1A) ORDER IN QUESTION DATED 12.3.2010 RAISING IMPUGNED DEMAND AF TER HOLDING THAT THE ABOVE REMITTANCES WERE IN FACT IN THE NATURE OF FEE FOR ROYALTY/TECHNICAL SERVICES COVERED BY DEEMING FICTI ON UNDER SECTION 9(1)(VI) AND (VII) OF THE ACT. HE REJECTED ASSESSE ES CONTENTION PLACING RELIANCE ON RESPECTIVE DOUBLE TAXATION AVOIDANCE AG REEMENTS (DTAA FOR SHORT) AND ITS PLEA THAT PAYEES IN QUESTION HAD NOT MADE AVAILABLE ITA NO.451 AND 624/AHD/2012 3 ANY TECHNICAL KNOWHOW AS WELL. ALL THIS RESULTED I N IMPUGNED DEMAND OF RS.20,92,072/-. 5. ASSESSEE PREFERRED APPEAL. LD.CIT(A) NOTED THAT IT DID NOT DISPUTE AOS FINDING TREATING IMPUGNED PAYMENT TO H AVE BEEN MADE FOR AVAILING TECHNICAL SERVICES LIABLE TO BE TREATED AS FEES FOR TECHNICAL SERVICES. HE CONSIDERED ASSESSEES PLEADINGS SEEK ING TO INVOKE SPECIFIC CLAUSE PERTAINED TO TAXATION OF INCOME ARI SING FROM TECHNICAL SERVICES IN RESPECTIVE DTAA. LD.CIT(A) REJECTS ASS ESSEES ARGUMENT REGARDING ITS SWISS REMITTANCES AS FOLLOWS: 5.1.2 I HAVE GONE THROUGH THE FACTS OF THE CASE, T HE AO'S OBSERVATIONS AND THE SUBMISSIONS OF THE ASSESSEE. THE FOLLOWING PERT INENT OBSERVATIONS AND MY CONSIDERED OPINION ARE MADE ON THE ISSUE OF PAYM ENT TO RCC LTD, SWITZERLAND: A) THE PAYMENT IS DEFINITELY OF THE NATURE OF FEE FOR TECHNICAL - SERVICES. IT IS COVERED U/S 9(L)(VII). THE AGREEMENT SHOWS TH AT THE SWITZERLAND COMPANY WAS TO CONDUCT TESTS FOR RESEARCH WHICH IS DEFINITELY A TECHNICAL SERVICE. THE NATURE OF WORK AND THE EXPERTISE IS DE FINITELY OF TECHNICAL NATURE. THE CLAUSE OF THE AGREEMENT REPRODUCED BY T HE AO CLEARLY REINFORCES THIS ISSUE AND PROVES IT WITHOUT AN IOTA OF DOUBT. IT IS SEEN THAT THE APPELLANT HAS NOT NOTED THE FACT THAT THE EXPLA NATION TO SECTION 9 HAS BEEN AGAIN SUBSTITUTED BY THE FINANCE ACT, 2010 WIT H RETROSPECTIVE EFFECT FROM 1/6/1976. NOW, THE INCOME IS TO BE INCLUDED IN THE TOTAL INCOME OF THE NON-RESIDENT, WHETHER OR NOT THE NON-RESIDENT HAS R ENDERED SERVICES IN INDIA. AFTER THE AMENDMENT WITH RETROSPECTIVE EFFE CT, THE PAYMENTS MADE BY THE APPELLANT ARE DEFINITELY FALLING UNDER THE DEFINITION OF 'FEES FOR TECHNICAL SERVICES' AND THE INCOME IS DEEMED TO ACC RUE OR ARISE IN INDIA UNDER THE PROVISIONS OF SECTION 9(L)(VII). FURTHER, EVEN THOUGH DRUGS GOT APPROVED AFTER THIS RESEARCH MAY HAVE RESULTED IN S ALES OUTSIDE INDIA, HOWEVER, WHEN THE BASIC RESEARCH IS IN INDIA (THE B IO-EQUIVALENCE STUDIES OR PRE-DINICAL TRIALS ARE IN FACT DEMONSTRA TIVE PROOFS OF THE MEDICINES IN THOSE COUNTRIES AGAIN AFTER THE DRUGS HAVE BEEN RESEARCHED AND MANUFACTURED IN INDIA) AND THE DRUGS ARE MANUFACTURED AND SOLD FROM INDIA, THE SOURCE OF INCOME IS IN IND IA . MORE IMPORTANTLY, EVEN THIS ISSUE HAS BEEN ACCEDED IN THE GROUNDS OF APPEAL (REFER GROUND NO.4) BY THE APPELLANT AND DOE S NOT ARISE FROM THE GROUNDS RAISED. ITA NO.451 AND 624/AHD/2012 4 B) THE APPELLANT HAS HARPED ON ITS CLAIM THAT THE SERVICES RENDERED TO IT DOES NOT 'MAKE AVAILABLE' ANY TECHNI CAL KNOWLEDGE ETC TO IT. THE APPELLANT HAS FAILED TO REALIZE THAT 'MAKE AVAILABLE' CLAUSE IS NOT AVAILABLE IN INDIA-SWITZERLAND TREATY . THE FEES FOR TECHNICAL SERVICES MAY ALSO BE TAXED IN WHICH THEY ARISE, ACCORDING TO THIS TREATY. C) THE APPELLANT'S RELIANCE ON THE PROVISION O F THE PROTOCOL, WHERE IN CASE OF MORE LIBERAL SUBSEQUENT AGREEMENT WITH OTHER OECD COUNTRY ALLOWS FOR RE-NEGOTIATION OF THE CLAUS ES IN INDIA- SWITZERLAND TREATY; IS OF NO AVAIL BECAUSE TILL IT IS ACTUALLY RE- NEGOTIATED AND APPROVED, IT DOESN'T MAKE ANY DIFFER ENCE. THEREFORE, THE PAYMENT MADE TO THE SWISS COMPANY IS OF THE NATURE OF 'FEES FOR TECHNICAL SERVICES', IS DEEMED TO BE INCO ME ACCRUED IN INDIA U/S 9(L)(VII), IS ALSO TAXABLE IN INDIA AS PER INDIA-SW ITZERLAND DTA AGREEMENT. THE APPELLANT HAS FAILED TO DEDUCT TDS WHILE MAKING THE PAYMENT AND HAS BEEN CORRECTLY TREATED AS ASSESSEE IN DEFAULT A ND IS LIABLE FOR TAX U/S 201(1 & INTEREST U/S 201(1A) OF THEIR ACT. 6. WE PROCEED FURTHER TO NOTICE THAT LD.CIT(A) THER EAFTER HOLDS THAT ASSESSEE WAS NOT LIABLE TO DEDUCT TDS OF ITS CANADI AN REMITTANCES AS UNDER: 5.2.3 I HAVE GONE THROUGH THE ORDER OF THE AO AND THE SUBMISSIONS OF THE ASSESSEE. THE GROUND OF APPEAL AGAINST DEMAND R AISED U/S.20L(L) REQUIRES CONSIDERATION OF THE FOLLOWING 3 ISSUES: A) WHETHER THE PAYMENTS MADE TO THE NON RESIDENTS A RE INCOME DEEMED TO ACCRUE OR ARISE IN INDIA UNDER THE PROVIS IONS OF SECTION 9(L)(VII) AS BEING 'FEES FOR TECHNICAL SERVICES'. B) WHETHER THE INCOME EVEN IF DEEMED TO ACCRUE OR A RISE IN INDIA UNDER SECTION 9(L)(VII) IS OF THE NATURE WHICH IS E XEMPT FROM TAXATION IN INDIA UNDER THE DTA AGREEMENTS WITH CAN ADA. C) WHETHER THE TAX HAS TO BE DEDUCTED U/S. 195 EVEN WHEN THE INCOME IN THE HAND OF NON RESIDENT IS NOT TAXABLE. / THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSE SSEE HAS MADE PAYMENTS TO ANAPHARM ON AGREEMENT THAT, ANAPHARM WI LL PERFORM THE STUDY (I.E. VENLAFAXINE XR 150 MG, 2-WAY FED, 20 SU BJECTS, PDA) MORE SPECIFICALLY DESCRIBED IN THE STUDY PROTOCOL 7 0222. ANAPHARM TO ISSUE THE COMPANY A FINAL STUDY REPORT. ITA NO.451 AND 624/AHD/2012 5 IN ESSENCE, THE COMPANY ENGAGED THE SERVICES OF THE ANAPHARM FOR CONDUCTING A STUDY ON THE SAMPLES FORWARDED BY THE APPELLANT AND ONCE THE STUDY IS COMPLETED A FINAL STUDY REPORT IS TO BE SUBMITTED TO THE APPELLANT. ANAPHARM ONLY PROVIDES THE RESULT OF THE TEST CARRI ES OUT AND DOESN'T DIVULGE ANY PROCESS OR KNOW HOW OF THE TEST S SO CARRIED OUT. NOW, COMING TO THE FIRST ISSUE, I.E. WHETHER THE PAYMENTS MADE TO THE NON RESIDENTS ARE INCOME DEEMED TO ACCRUE OR ARISE IN INDIA UNDER THE PROVISIONS OF SECTION 9(2)(VII) AS BEING 'FEES FOR TECHNICAL SERVICES'. THE SERVICES ARE DEFINITELY OF THE NATURE OF TECHNI CAL SERVICES AND AS THE SERVICES ARE UTILIZED FOR EARNING INCOME FROM SOURC E IN INDIA,!.E., MANUFACTURING OF DRUGS AND USE OF EXISTING TECHNOLO GY (REDEMONSTRATED OUTSIDE FOR LICENCE) AND THESE ARE NOT EXEMPTED U/S .9(2)(VII)(B).MORE IMPORTANTLY, EVEN THIS ISSUE HAS BEEN ACCEDED IN TH E GROUNDS OF APPEAL (REFER GROUND NO.4) BY THE APPELLANT AND DOES NOT A RISE FROM THE GROUNDS RAISED. THE NEXT ISSUE TO BE DECIDED IS WHETHER THE INCOME WHICH HAS BEEN DECIDED TO BE DEEMED TO ACCRUE OR ARISE IN IND IA UNDER SECTION 9(L)(VII) IS OF THE NATURE WHICH IS EXEMPT FROM TAX ATION IN INDIA UNDER THE DTA AGREEMENTS WITH CANADA RESPECTIVELY. AS THERE I S NO PE IN INDIA IT WOULD HAVE TO BE SEEN WHETHER, IN WHICH COUNTRY AND HOW THE 'FEES FOR TECHNICAL SERVICES' ARE TAXABLE AS PER THE DTA AGRE EMENTS. THE APPELLANT'S CONTENTION IS THAT ARTICLE 12(4)(B) OF THE DTAA BETWEEN INDIA AND CANADA IS NOT APPLICABLE SINCE THE NON-RESIDENT PARTIES DID NOT 'MAKE AVAILABLE' ANY TECHNICAL KNOWLEDGE, EXPERIENC E, SKILL, KNOW-HOW OR PROCESSES. IN THIS CASE THE CONCERN IN CANADA WERE CONDUCTING TESTS ON THE DRUGS WHICH WERE ALREADY RESEARCHED AND AFTER A NALYZING THE DRUGS ON THE REQUIRED PARAMETERS FINAL REPORTS WERE SUBMI TTED TO THE ASSESSEE. I HAVE PERUSED THE SUBMISSIONS MADE BY THE APPELLAN T AS WELL AS THE ORDER PASSED BY THE AO. ON PERUSAL OF THE DECISIONS CITED BY THE APPELLANT IT CAN BE CONCLUDED THAT SERVICE, WHICH I S TECHNICAL IN NATURE CAN BE SAID TO BE 'FEES FOR INCLUDED SERVICES' ONLY WHEN IT 'MAKE AVAILABLE' TECHNICAL KNOWLEDGE OR SKILLS TO THE REC IPIENT OF SERVICES I.E. ONLY WHEN RECIPIENT OF SERVICES CAN APPLY THE SAME ON HIS OWN. IN THIS CONNECTION OBSERVATIONS MADE BY THE AUTHOR ITY FOR ADVANCE RULING (AAR) AS LAID DOWN IN THE CASE OF ANAPHARM I NC. (2008) 305ITR 394 SQUARELY APPLIES TO THE FACTS OF THE APPELLANT' S CASE, SINCE IT RELATED TO RENDERING OF BIO-ANLYTICAL SERVICES BY THE NON-R ESIDENT APPLICANT AND UNDER THE FRAMEWORK OF THE SAME LANGUAGE OF ARTICLE 12(4)(B) OF THE CANADA-INDIA DTAA, WHICH IS PARI-MATERIA WITH THE U .S.-INDIA DTAA AS WELL: ITA NO.451 AND 624/AHD/2012 6 '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. IN THE PRESENT CASE, THE APPLICANT RENDE RS BIO-ANALYTICAL SERVICES WHICH, NO DOUBT, ARE VERY SOPHISTICATED IN NATURE, BUT THE APPLICANT DOES NOT REVEAL TO ITS CLIENTS AS TO HOW IT CONDUCTS THOSE TESTS OR THE INPUTS THAT HAVE GONE INTO IT, SO AS T O ENABLE THEM TO CARRY OUT THOSE TESTS THEMSELVES IN FUTURE. A BROAD DESCRIPTION OR INDICATION OF THE TYPE OF TEST CARRIED OUT TO REACH THIS CONCLUSION DOES NOT ENABLE THE APPLICANT'S CLIENT TO DERIVE REQUISI TE KNOWLEDGE TO CONDUCT THE TESTS OR TO DEVELOP THE TECHNIQUE BY IT SELF.' THEREFORE, THE SERVICES PROVIDED TO THE APPELLANT B Y THE NON- RESIDENT CONCERN OF CANADA DID NOT FAIR WITHIN THE PURVIEW OF 'INCLUDED SERVICES' UNDER ARTICLE 12(4)(B) AND HENCE THERE WA S NO LIABILITY ON THE APPELLANT TO DEDUCT TDS U/S. 195 OF THE IT. ACT, WH ILE MAKING PAYMENT FOR SUCH BIO-ANALYTICAL SERVICES RENDERED TO IT. TH E AO HAS WITHOUT POINTING OUT ANYTHING WHICH SHOWS THAT IN THIS CASE , THE CANADA PARTY HAS PROVIDED SUCH ASSISTANCE (WHETHER ACCEPTED BY T HE ASSESSEE OR NOT) SO THAT THE APPELLANT WAS IN A POSITION TO USE THE EXPERTISE IN FUTURE, WRONGLY RELIED ON THE DECISION OF HON'BLE BANGALORE ITAT IN THE CASE OF BORIS LAND LEASE INDUSTRIES PVT LTD DATED 28/08/200 9. IN THAT CASE THE PAYEE WAS TO PROVIDE EDUCATION AND TRAINING INCLUDI NG THE TRAINING MATERIALS FOR THE STAFF OF THE APPELLANT COMPANY, W HICH WAS CORRECTLY INTERPRETED AS 'MAKE AVAILABLE' BY THE HON'BLE ITAT . IN THIS CASE, THERE IS NOT EVEN A SEMBLANCE OF SUCH ASSISTANCE OR TRAIN ING PROVIDED TO THE APPELLANT. THE AO HAS JUST BRUSHED ASIDE THE JUDGEM ENTS OF AARS WITHOUT GOING INTO THE REASONS FOR THE DECISIONS. FURTHER THE RATIO MUMBAI ITAT DECISION IN THE CASE OF WOCKHARDT LTD. V. ACIT (2010) 10 TAXMANN.COM 208 (MUM.), ALSO SQUARELY APPLIES TO THE FACTS OF THE APPELLANT'S CASE. THE SAME VIEW HAS BEEN FOLLOWED IN VARIOUS DECISION S INCLUDING DECISION OF MUMBAI SPECIAL BENCH IN THE CASE OF MAH INDRA &. MAHINDRA LIMITED (313 ITR 263). IN VIEW OF THE PROVISIONS OF ARTICLE 12 OF DT AA READ WITH ABOVE REFERRED JUDICIAL PRECEDENTS, I INCLINED TO AGREE WITH THE SUBMISSIONS THAT SERVICES CANNOT BE CATEGORISED AS 'FEES FOR INCLUDED SERVICES' UNDER THE DTA AGREEMENTS WITH CANADA AND THEREFORE THE INCOME OF THE NON-RESIDENT IS NOT TAXABLE IN INDIA AS THE MORE FAVOURABLE DTA A PROVISIONS ARE TO BE APPLIED. THEREFORE, IT I S HELD THAT THE INCOME OF THE NON-RESIDENT CONCERN IN THE FACTS AND CIRCUMSTA NCES OF THE CASE ARE NOT TAXABLE IN INDIA. ITA NO.451 AND 624/AHD/2012 7 7. THIS IS FOLLOWED BY LOWER APPELLATE FINDINGS IN CASE OF ASSESSEES USA REMITTANCES DECIDED AGAINST THE REVENUE AS REPR ODUCED IN SUCCEEDING PARAGRAPHS: 5.4.3 I HAVE GONE THROUGH THE FACTS OF THE CASE, THE AO'S ORDER, THE SUBMISSIONS AND THE INDIA-USA DTA AGREEMENT. I D O NOT AGREE WITH THE APPELLANT WHEN HE SAYS THAT THE SOURCE OF INCOME IS OUTSIDE INDIA JUST BECAUSE THE SALES WHICH WOULD BE MADE BENEFITING FR OM THESE PROFESSIONAL SERVICES WOULD BE MADE OUTSIDE INDIA. THE INCOME AC CRUES IN INDIA IN VIEW OF SEC.9(L)(VII) AS TEES FOR TECHNICAL SERVICES' AS DEFINED IN EXPLANATION 2 TO THIS SUB-SECTION. SALES ARE MADE OUTSIDE INDIA BUT ARE TO BE MADE FROM INDIA OF GOODS MANUFACTURED IN INDIA. MORE IMPORTANTLY, EVEN THIS ISSUE HAS BEEN ACCEDED IN THE GROUNDS OF APPEAL (REFER GROUND NO.4) BY THE APPELLANT AND DOE S NOT ARISE FROM THE GROUNDS RAISED. HOWEVER, THESE SERVICES ARE OF THE NATURE OF FEES F OR INCLUDED SERVICES' AS PER ARTICLE 12(4) OF THE DTAA BUT DO NOT 'MAKE AVAI LABLE' THE KNOWLEDGE, EXPERIENCE ETC. FURTHER, THERE IS NO PE OF THE US C ONCERN IN INDIA AND THEREFORE, IT IS NOT TAXABLE UNDER ARTICLE 7 AS BUS INESS PROFITS, ALSO. FOLLOWING THE DETAILED DISCUSSION IN PARA.5.2.3 IN THE CASE OF ANAPHARM; IT IS HELD THAT THE INCOME OF THE NON-RESIDENT FROM TH E PAYMENTS WAS NOT TAXABLE IN INDIA AND THEREFORE, NO LIABILITY TO DED UCT TAX AROSE IN THE HANDS OF THE APPELLANT IN THIS PARTICULAR CASE. CONSEQUENTLY , AS DECIDED EARLIER, NO LIABILITY ARISES U/S 201(1) ON THE ASSESSEE BASED O N THESE PAYMENTS. THE INTEREST U/S 201(1A) CALCULATED ON THIS LIABILITY I S ALSO NOT CHARGEABLE. IT IS IN THIS BACKDROP OF FACTS THAT BOTH PARTIES HAVE INSTITUTED THEIR RESPECTIVE APPEALS. THE ASSESSEE SEEKS TO DE LETE IMPUGNED DEMAND REGARDING ITS SWISS REMITTANCES HELD TO BE L IABLE FOR TDS DEDUCTION AS AGAINST REVENUES CASE IS THAT THE CIT (A) OUGHT TO HAVE AFFIRMED AOS ACTION AGAINST CANADIAN AND AMERICAN REMITTANCES. 8. WE COME TO THE ASSESSEES APPEAL ITA NO.451/AHD/ 2012 FIRST. ITS ONLY ARGUMENT IS THAT INDO-SWISS DOUBLE TAXATION AV OIDANCE AGREEMENT CONTAINS A PROTOCOL WITH RESPECT TO ARTIC LE 10 TO 12 THEREOF. THIS PROTOCOL ENVISAGES THAT IF AFTER SIGNATURE OF THE INSTANT PROTOCOL ON 16.2.2000 UNDER ANY CONVENTION, AGREEMENT OR PROTOC OL BETWEEN INDIA AND THIRD STATE, WHICH IS A MEMBER OF OECD, INDIA S HOULD LIMIT IS ITA NO.451 AND 624/AHD/2012 8 TAXATION AT SOURCE ON DIVIDENDS, INTEREST, ROYALTIE S OR FEE FOR TECHNICAL SERVICES TO A RATE LOWER OR SCOPE MORE RESTRICTED T HAN THE RATE OR SCOPE MORE RESTRICTED THAN THAT PROVIDED FOR IN THIS AGRE EMENT ON THE SAID ITEMS OF INCOME, THEN SWITZERLAND AND INDIA SHALL E NTER INTO NEGOTIATION WITHOUT UNDUE DELAY IN ORDER TO PROVIDE SIMILAR TRE ATMENT TO SWITZERLAND AS IN CASE OF THE THIRD STATE. THE ASSESSEE SUBMIT S THAT INDIA- PORTUGUESE REPUBLIC SIGNED A TAX TREATY NOTIFIED ON 16.6.2000 CONTAINING MAKE AVAILABLE CLAUSE IN RESPECT TO PA YMENTS MADE FOR TECHNICAL SERVICES. IT IS CONTENDED THAT THE ASSES SEE IS VERY MUCH ENTITLED TO RAISE MAKE AVAILABLE PLEA WITH REGARD TO IMPUGNED TECHNICAL SERVICES THAT ITS PAYEE DID NOT PART WITH ANY TECHNICAL KNOWHOW WHICH COULD BE USED INDEPENDENTLY ON ITS OW N. IT THEN QUOTES CASE LAW (2015) 167 TTJ 217 (PUNE) SANDVIK AB VS. D DIT ACCEPTING VERY PLEA IN CASE OF AN IDENTICAL PROTOCOL TO INDIA N-SWEDEN DOUBLE TAXATION AVOIDANCE AGREEMENT. THE ASSESSEE ACCORDI NGLY SEEKS TO DELETE THE IMPUGNED DEMAND PERTAINING TO ITS SWISS REMITTANCES HEREINABOVE. 9. THE REVENUE STRONGLY SUPPORTS CIT(A)S ORDER EXT RACTED HEREINABOVE. 10. WE HAVE HEARD BOTH THE PARTIES. RELEVANT FINDI NGS/CASE RECORDS STAND PERUSED. THERE IS HARDLY ANY DISPUTE ABOUT S ECTION 90(2) OF THE ACT ENVISAGING THAT IN CASE THERE EXISTS A DOUBLE T AXATION AVOIDANCE AGREEMENT IN RESPECT OF ANY COUNTRY, PROVISIONS OF THE ACT APPLY TO THE EXTENT THEY ARE MORE BENEFICIAL TO SUCH AN ASSESSEE AND NOT OTHERWISE. THE ASSESSEE IN THE INSTANT CASE REFERS TO INDO-POR TUGUESE DTAA CONTAINING MAKE AVAILABLE CONDITION TO BE APPLIED IN CASE OF ITS SWISS REMITTANCES AS PER INDO-SWISS DTAA PROTOCOL ON THE GROUND THAT ALTHOUGH SUCH A MAKE AVAILABLE CONDITION IN RESPE CT OF TECHNICAL SERVICES IS NOT EXPLICITLY CONTAINED IN LATTER DTAA , SAME IS DEEMED TO HAVE BEEN APPLICABLE BY VIRTUE OF INDO-PORTUGUESE D TAA PROTOCOL SPECIFIED HEREINABOVE INVOLVING A SPECIFIC CONDITIO N TO THIS EFFECT. THIS ITA NO.451 AND 624/AHD/2012 9 PLEA FAILS TO IMPRESS UPON US. WE MAKE IT CLEAR TH AT NO MAKE AVAILABLE ARTICLES IN RESPECT TO FEE FOR TECHNICAL SERVICE IS USED IN INDO- SWISS DTAA OR PROTOCOL. THE SAID PROTOCOL ONLY POS TULATES THAT INDIA AND SWISS SHALL ENTER INTO NEGOTIATION TO THIS EFFE CT IF FORMER STATE ENTERS INTO A DTAA WITH A MEMBER OF OECD STATE EITH ER REDUCING RATE OF TAX OR RESTRICTING THE SCOPE OF SPECIFIED CATEGO RIES OF INCOME HEREINABOVE. WE NOTICE THAT ASSESSEES RELIANCE ON THE CASE LAW (SUPRA) INVOLVING SIMILAR CLAUSE IN INDO-SWEDEN DTA A IS ALSO MISPLACED SINCE THE SAID DTAA CONTAINS A PROTOCOL TO THE EFFE CT THAT IN CASE INDIA AND AN OECD MEMBER STATE ENTER INTO AN AGREEMENT LI MITING TAXATION IN CASE OF VARIOUS CATEGORIES OF INCOME OR RESTRICT ED THE RATE AND SCOPE ON THE SAID ITEMS OF INCOME, SIMILAR RATE OR SCOPE AS PROVIDED FOR IN THAT CONVENTION, AGREEMENT OR PROTOCOL SHALL APPLY UNDER INDO-SWEDEN AGREEMENT. THE ASSESSEES SOLE ARGUMENT IN VIEW OF THE ABOVE STATED CASE LAW IS ACCORDINGLY REJECTED. SO IS ITS APPEAL IN ITA NO.451/AHD/2012. 11. WE NOW COME TO THE REVENUES APPEAL ITA NO.624/ AHD/2012 SEEKING REVIVAL OF SECTION 201(1) AND 201(1A) DEMAN DS PERTAINS TO TDS NOT DEDUCTED UPON ASSESSEES CANADIAN AND AMERICAN REMITTANCES HEREINABOVE. THERE IS NO DISPUTE THAT INDIA AND TH ESE COUNTRIES HAVE ENTERED INTO DTAAS AND SAME CONTAIN MAKE AVAILABLE STIPULATION WITH RESPECT TO THE IMPUGNED SERVICES TO BE INVOLVED IN CORRESPONDING ARTICLE 12(4)(B) IN BOTH CASES. THE REVENUE FAILS TO TAKE US THROUGH ANY EVIDENCE THAT ASSESSEES PAYEES IN QUESTION BASED I N CANADA OR USA HAVE MADE IT AVAILABLE THEIR EXPERTISE AND TECHNICA L KNOWHOW THEREBY ENABLING IT TO USE THE SAME INDEPENDENTLY WITHOUT T HEIR ASSISTANCE. IT TRANSPIRES THAT THESE PAYEES HAVE MERELY RENDERED C ONSULTANCY SERVICES WITHOUT IMPARTING ANY KNOWLEDGE. WE FIND THAT NO R EASON TO INTERFERE WITH THE LD.CIT(A) OBSERVATION EXTRACTED HEREINABOV E QUOTING VARIOUS JUDICIAL PRECEDENTS IN SUPPORT AS WELL. THE REVENU ES GROUNDS ARE ALSO ITA NO.451 AND 624/AHD/2012 10 DECLINED IN THESE FACTS AND CIRCUMSTANCES. ITS APP EAL ITA NO.624/AHD/2012 IS REJECTED. 12. BOTH THESE ASSESSEES AND REVENUES CROSS APPEA LS ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 25 TH OCTOBER, 2016 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (S.S. GODARA) JUDICIAL MEMBER AHMEDABAD; DATED 25/10/2016
