Foster Wheeler France S.A., CHENNAI V. DDIT, CHENNAI

ITA 641/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8127 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 22-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 31-03-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PATHLAVATH PEERYA
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Transfer pricing; Double taxation relief; International transaction; Advance ruling
• Section: 234B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI ... , ! ' #, % &' BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.774/MDS/2014 ) *) / ASSESSMENT YEAR :2008-09 & ./ ITA NO.641/MDS/2015 ) *) / ASSESSMENT YEAR : 2009-10 FOSTER WHEELER FRANCE S.A., C/O SRBC & ASSOCIATES LLP, 6 TH & 7 TH FLOOR, A BLOCK, TIDEL PARK, NO.4, RAJIV GANDHI SALAI, TARAMANI, CHENNAI - 600 113. PAN : AABCF 3849 C V. THE DY. DIRECTOR OF INCOME-TAX, INTERNATIONAL TAXATION -1, CHENNAI CHENNAI - 600 034. (,-/ APPELLANT) (./,-/ RESPONDENT) ,- 0 1 / APPELLANT BY : SH. B. RAMAKRISHNAN, C.A. ./,- 0 1 / RESPONDENT BY : SH. PATHLAVATH PEERYA, CIT 2 0 3% / DATE OF HEARING : 18.01.2016 45* 0 3% / DATE OF PRONOUNCEMENT : 05.02.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: BOTH THE APPEALS OF THE ASSESSEE ARE DIRECTED AGA INST THE RESPECTIVE ORDERS OF THE ASSESSING OFFICER, CONSEQU ENT TO THE DIRECTION OF THE DISPUTE RESOLUTION PANEL, PERTAINI NG TO ASSESSMENT 2 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 YEARS 2008-09 AND 2009-10. SINCE COMMON ISSUE ARIS ES FOR CONSIDERATION IN BOTH THE APPEALS, WE HEARD THESE A PPEALS TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2. SH. B. RAMAKRISHNAN, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE IS A NON-RESI DENT COMPANY INCORPORATED IN FRANCE. ACCORDING TO THE LD. REPRE SENTATIVE, THE ASSESSEE-COMPANY ENTERED INTO AN AGREEMENT FOR PROV IDING TECHNICAL AND ENGINEERING SERVICES IN INDIA. DURIN G THE ASSESSMENT YEARS 2008-09 AND 2009-10, THE EMPLOYEES OF THE ASS ESSEE WORKED MORE THAN 180 DAYS. THE LD. REPRESENTATIVE FURTHER SUBMITTED THAT THE ASSESSEE ENTERED INTO AN AGREEMENT WITH RELIANC E PETROLEUM LIMITED FOR PROVIDING TECHNICAL AND ENGINEERING SER VICES WITH REGARD TO DELAYED COKER UNIT OF RELIANCE PETROLEUM LIMITED . ACCORDING TO THE LD. REPRESENTATIVE, THE ENTIRE SERVICES RENDERE D AT THE PREMISES OF RELIANCE PETROLEUM LIMITED. FOR PROVIDING TECHN ICAL AND ENGINEERING SERVICES TO RELIANCE PETROLEUM LIMITED, THE ASSESSEE IN TURN ENTERED INTO ANOTHER AGREEMENT WITH FOSTER WHEELER USA TO MONITOR AND REVIEW THE WORK DONE BY THE ASSESSEES EMPLOYEES ON AN AGREED CONSIDERATION. THE LD. REPRESENTATIVE FU RTHER SUBMITTED THAT THE MATTER WAS REFERRED TO THE TRANSFER PRICIN G OFFICER. THE 3 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 TRANSFER PRICING OFFICER FOUND THAT THERE WAS NO RE QUIREMENT FOR ANY ADJUSTMENT WITH REGARD TO ABOVE SAID TRANSACTION. THE ASSESSING OFFICER PASSED THE DRAFT ASSESSMENT ORDER BY DISALL OWING THE PAYMENT MADE TO FOSTER WHEELER USA CORPORATION TO T HE EXTENT OF ` 3,34,99,151/- AND ` 14,94,99,978/- UNDER SECTION 40(A)(I) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') FOR THE A SSESSMENT YEARS 2008-09 AND 2009-10 RESPECTIVELY. THE ASSESSEE EXP LAINED BEFORE THE ASSESSING OFFICER THAT THE ASSESSEE IS NOT LIAB LE TO DEDUCT TAX IN VIEW OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BET WEEN UNITED STATES OF AMERICA AND INDIA. REFERRING TO THE NATU RE OF WORK TO BE PERFORMED BY FOSTER WHEELER USA CORPORATION, THE LD . REPRESENTATIVE SUBMITTED THAT SHARING OF BEST PRACT ICES IN ENGINEERING SERVICES IN THE FORM OF WRITTEN PROCEDU RE, FORMS, SPECIFICATIONS AND DETAILS DOES NOT MEAN THAT TECHN ICAL KNOWLEDGE HAS BEEN MADE AVAILABLE TO THE ASSESSEE. MERELY BE CAUSE CERTAIN PROCEDURES WERE GIVEN TO THE ASSESSEE IN THE FORM O F DOCUMENTATION IT DOES NOT MEAN THAT THE ASSESSEE CO ULD APPLY SUCH PROCEDURES IN FUTURE WITHOUT THE AID OF FOSTER WHEE LER USA CORPORATION. REFERRING TO SECTION 195 OF THE ACT, THE LD. REPRESENTATIVE SUBMITTED THAT WHEN THE PROFIT EARNE D ON A TRANSACTION WAS CHARGEABLE TO INCOME-TAX, THE ASSES SEE REQUIRED TO 4 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 DEDUCT TAX UNDER SECTION 195 OF THE ACT. REFERRING TO EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT, THE LD. REPRESENTA TIVE SUBMITTED THAT THE CONSIDERATION PAID FOR RENDERING MANAGERIAL, TE CHNICAL OR CONSULTANCY SERVICE HAS TO BE CONSTRUED AS FEE FOR TECHNICAL SERVICES. REFERRING TO DOUBLE TAXATION AVOIDANCE A GREEMENT, THE LD. REPRESENTATIVE SUBMITTED THAT UNLESS THE TECHNI CAL KNOWLEDGE, EXPERTISE, SKILL, KNOWHOW OR PROCESS, ETC. WERE MAD E AVAILABLE TO THE ASSESSEE AND THE ASSESSEE COULD INDEPENDENTLY A PPLY SUCH TECHNICAL KNOWLEDGE, EXPERTISE, KNOWHOW, ETC. IN FU TURE, THE PAYMENT MADE BY THE ASSESSEE CANNOT BE CONSTRUED AS FEE FOR TECHNICAL SERVICE. ACCORDING TO THE LD. REPRESENTA TIVE, THE KEY DIFFERENCE BETWEEN THE DEFINITION OF FEE FOR TECHN ICAL SERVICES IN INDIAN INCOME-TAX ACT AND DOUBLE TAXATION AVOIDANCE AGREEMENT IS THAT THE TECHNICAL KNOWLEDGE, EXPERTISE, SKILL, ETC. SHOULD BE MADE AVAILABLE TO THE ASSESSEE. IF SUCH TECHNICAL KNOWL EDGE AND SKILL ARE NOT AVAILABLE TO THE ASSESSEE, THEN THE PAYMENT MAD E BY THE ASSESSEE IS NOT FEE FOR TECHNICAL SERVICES. 3. THE LD. REPRESENTATIVE FURTHER SUBMITTED THAT TH E SERVICES ARE SAID TO BE MADE AVAILABLE TO THE ASSESSEE ONLY WHEN THE PERSON ACQUIRING THE TECHNICAL SERVICE IS ABLE TO INDEPEND ENTLY APPLY SUCH 5 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 KNOWLEDGE WITHOUT ANY FURTHER REFERENCE TO THE SERV ICE PROVIDER. REFERRING TO THE WORD ENABLE USED IN DOUBLE TAXAT ION AVOIDANCE AGREEMENT, THE LD. REPRESENTATIVE SUBMITTED THAT TH E TECHNICAL SERVICE RECEIVED BY THE ASSESSEE SHOULD MAKE THE AS SESSEE MASTER IN THE SUBJECT. THE LD. REPRESENTATIVE FURTHER SUB MITTED THAT WHEN THE ASSESSEE DOES NOT GET EQUIPPED WITH KNOWLEDGE O R EXPERTISE, IT CANNOT BE SAID THAT THE KNOWLEDGE OR EXPERTISE WAS MADE AVAILABLE TO THE ASSESSEE BY THE SERVICE PROVIDER. IN SUCH A CASE IT CANNOT BE SAID THAT TECHNICAL SERVICE WAS MADE AVAILABLE TO T HE ASSESSEE. 4. THE LD. REPRESENTATIVE FOR THE ASSESSEE PLACED H IS RELIANCE ON THE JUDGMENT OF KARNATAKA HIGH COURT IN CIT V. D EE BEERS INDIA MINERALS (P) LTD. (346 ITR 467) AND SUBMITTED THAT KARNATAKA HIGH COURT INTERPRETED THE WORD MAKE AVAILABLE. THE L D. REPRESENTATIVE SUBMITTED THAT IF THE TECHNICAL KNOWLEDGE IS NOT MA DE AVAILABLE TO THE ASSESSEE ALONG WITH TECHNICAL SERVICE, THIS CAN NOT BE CONSIDERED THAT TECHNICAL SERVICE WAS MADE AVAILABL E. THEREFORE, IT WOULD NOT FALL WITHIN THE DEFINITION OF TECHNICAL SERVICE AS PROVIDED IN DOUBLE TAXATION AVOIDANCE AGREEMENT. THEREFORE, THE PAYMENT MADE BY THE ASSESSEE IS NOT LIABLE FOR TAXATION. 6 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 5. REFERRING TO JUDGMENT OF DELHI HIGH COURT IN GUY CARPENTER & CO. LIMITED (ITA NO.202/2012), THE LD. REPRESENTA TIVE SUBMITTED THAT ONCE TECHNICAL KNOWLEDGE WAS NOT MADE AVAILABL E TO THE ASSESSEE, IT CANNOT BE CONSTRUED AS FEE FOR TECHNIC AL SERVICE. THE LD. REPRESENTATIVE HAS ALSO PLACED HIS RELIANCE ON THE DECISION OF PUNE BENCH OF THIS TRIBUNAL IN SANDVIK AUSTRALIA PT Y. LTD. V. DDIT (ITA NO.93/PN/2011) AND SUBMITTED THAT AT THE BEST, THE ASSESSEE CAN BE SAID TO HAVE BEEN PROVIDED BACK-UP SERVICES. THE LD. REPRESENTATIVE HAS ALSO PLACED HIS RELIANCE ON THE DECISION OF AUTHORITY FOR ADVANCE RULING IN ERNST & YOUNG (P) L TD. [2010-TIOL- 18-ARA-IT] AND ALSO ON THE DECISION OF MUMBAI BENCH OF THIS TRIBUNAL IN MAHINDRA AND MAHINDRA LTD. V. DCIT (313 ITR 263). THE LD. REPRESENTATIVE HAS ALSO PLACED RELIANCE ON VARI OUS OTHER DECISIONS AND SUBMITTED THAT WHEN TECHNICAL KNOWLED GE IS TRANSFERRED THROUGH TECHNICAL SERVICE, THEN ALONE T HE PAYMENT IS CONSIDERED AS FEE FOR TECHNICAL SERVICES AND LIABLE FOR TAXATION IN INDIA. WHEN THE ASSESSEE WAS NOT MADE AVAILABLE AN Y TECHNICAL KNOWLEDGE OR EXPERTISE OF FOSTER WHEELER USA SO THA T THE ASSESSEE COULD PERFORM ITS FUNCTION INDEPENDENTLY I N FUTURE, IT CANNOT BE SAID THAT WHAT WAS PAID BY THE ASSESSEE I S FEE FOR TECHNICAL SERVICE. HENCE, ACCORDING TO THE LD. REP RESENTATIVE, IN 7 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 VIEW OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT, TH E PAYMENT MADE BY THE ASSESSEE CANNOT BE CONSTRUED AS FEE FOR TECHNICAL SERVICES. THEREFORE, THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX IN RESPECT OF THE PAYMENT MADE TO FOSTER WHEELER USA. 6. REFERRING TO LEVY OF INTEREST UNDER SECTION 234A AND 234B OF THE ACT, THE LD. REPRESENTATIVE FOR THE ASSESSEE SU BMITTED THAT THE ASSESSEE BEING A NON-RESIDENT TAXES ON INCOME CHARG EABLE HAVE TO BE DEDUCTED AT SOURCE. THEREFORE, THE TAX ON INCOM E WILL BE NIL AFTER REDUCING THE TAX DEDUCTED AT SOURCE. THEREFO RE, THE PROVISIONS OF SECTION 234A OF THE ACT WILL NOT BE APPLICABLE. REFERRING TO SECTION 234B OF THE ACT, THE LD. REPRESENTATIVE SUB MITTED THAT SINCE THE TAXES ON INCOME CHARGEABLE TO TAX HAVE TO BE DE DUCTED AT SOURCE, THERE IS NO REQUIREMENT TO PAY ADVANCE TAX. HENCE INTEREST UNDER SECTIONS 234A AND 234B CANNOT BE LEVIED. THE LD. REPRESENTATIVE PLACED HIS RELIANCE ON THE JUDGMENT OF MADRAS HIGH COURT IN CIT V. MADRAS FERTILIZERS LIMITED (149 ITR 703). 7. ON THE CONTRARY, SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT FEE FO R TECHNICAL SERVICEIS DEFINED IN INDIAN INCOME-TAX ACT AND IN DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND USA. THE ASS ESSEE CAN 8 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 TAKE ADVANTAGE OF DOUBLE TAXATION AVOIDANCE AGREEME NT IN CASE IT IS BENEFICIAL TO IT. DOUBLE TAXATION AVOIDANCE AGR EEMENT ADMITTEDLY CLARIFIES THAT THE TECHNICAL KNOWLEDGE OR EXPERTISE SHALL BE MADE AVAILABLE TO THE ASSESSEE FOR CONSIDERING PAYMENT A S FEE FOR TECHNICAL SERVICE. THE QUESTION ARISES FOR CONSIDE RATION IS WHETHER THE PAYMENT MADE BY THE ASSESSEE TO FOSTER WHEELER FRANCE USA IS TAXABLE IN INDIA OR NOT? REFERRING TO EXPLANATI ON 2 TO SECTION 9(1)(VII) OF THE ACT, THE LD. D.R. SUBMITTED THAT W HEN THE ASSESSEE PAID FEE FOR TECHNICAL SERVICE FOR UTILIZING SERVIC E IN THE BUSINESS OR PROFESSION CARRIED ON IN INDIA FOR THE PURPOSE OF E ARNING INCOME, THEN IT IS DEEMED THAT THE RECIPIENT-COMPANY EARNED INCOME FROM INDIA. THE LD. D.R. PLACED HIS RELIANCE IN SECTION 9(1)(VII) OF THE ACT. IN THIS CASE, ACCORDING TO THE LD. D.R., THE ASSESSEE RECEIVED SERVICES FROM FOSTER WHEELER USA AND UTILIZED THE S AME IN THE BUSINESS CARRIED ON BY THE ASSESSEE IN INDIA. THER EFORE, THE PAYMENT MADE BY THE ASSESSEE TO FOSTER WHEELER FRAN CE USA HAS TO BE CONSTRUED AS FEE FOR TECHNICAL SERVICE AND TH E INCOME ACCRUED TO FOSTER WHEELER FRANCE S.A IN INDIA. HENCE, THE INCOME IS TAXABLE IN INDIA. THE ASSESSEE IS LIABLE TO DEDUCT TAX UNDER SECTION 195 OF THE ACT ON THE PAYMENT MADE TO FOSTER WHEELE R FRANCE USA. 9 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 8. NOW COMING DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND USA, THE LD. D.R. POINTED OUT THA T IN ORDER TO CLASSIFY A SERVICE AS TECHNICAL SERVICE, THE EXPE RTISE, SKILL OR KNOWLEDGE SHALL BE MADE AVAILABLE TO THE ASSESSEE. IN THIS CASE, ACCORDING TO THE LD. D.R., THE ASSESSEE IS EXECUTIN G ENGINEERING PROJECTS FOR RELIANCE PETROLEUM LIMITED. THE ASSES SEE RECEIVED BEST PRACTICES IN DIFFERENT ENGINEERING SPECIFICATI ONS AS WELL AS ENGINEERING DETAILS TO BE ADOPTED IN EXECUTION OF T HE DIFFERENT PHASES OF THE PROJECT. THE ENGINEERING SPECIFICATI ONS, SERVICES, WHICH ARE THE BEST IN THE WORLD, WERE BEING PROVIDE D TO THE ASSESSEE BY ITS USA ASSOCIATE. WHEN THE ASSESSEE-C OMPANY COMPLETES PROJECTS WITH RELIANCE PETROLEUM LIMITED, THE ASSESSEE WOULD BE WELL EQUIPPED AND CAPABLE OF EXECUTING IDE NTICAL PROJECT IN ENGINEERING IN RESPECT OF THE DETAILS AND SKILL, EX PERTISE AND INFORMATION PROVIDED BY USA ASSOCIATE. ACCORDING T O THE LD. D.R., WITHOUT THE HELP OF FOSTER WHEELER USA, THE ASSESSE E-COMPANY CAN PROVIDE SIMILAR SERVICE IN FUTURE TO OTHER COMP ANIES INCLUDING RELIANCE PETROLEUM LIMITED. THEREFORE, WHAT WAS RE CEIVED BY THE ASSESSEE IS NOT ONLY TECHNICAL SERVICES BUT ALSO TH E TECHNICAL KNOWLEDGE, EXPERTISE AND KNOWHOW WAS MADE AVAILABLE TO THE 10 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 ASSESSEE BY FOSTER WHEELER USA. ONCE THE TECHNICAL KNOWLEDGE, EXPERTISE, KNOWHOW WERE MADE AVAILABLE TO THE ASSES SEE, ACCORDING TO THE LD. D.R., EVEN UNDER DOUBLE TAXATI ON AVOIDANCE AGREEMENT, THE PAYMENT MADE BY THE ASSESSEE TO FOST ER WHEELER USA HAS TO BE CONSTRUED AS FEE FOR TECHNICAL SERVIC ES. THEREFORE, ACCORDING TO THE LD. D.R., INCOME ACCRUED TO FOSTER WHEELER USA IS TAXABLE IN INDIA. HENCE, THE ASSESSEE HAS TO NE CESSARILY DEDUCT TAX UNDER SECTION 195 OF THE ACT. SINCE TAX WAS NO T DEDUCTED, THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED UNDER SECT ION 40(A)(I) OF THE ACT AND LEVIED INTEREST UNDER SECTIONS 234A AND 234B OF THE ACT. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ASSES SEE, A NON- RESIDENT COMPANY INCORPORATED IN FRANCE, ENTERED IN TO AN AGREEMENT WITH RELIANCE PETROLEUM LIMITED FOR PROVI DING TECHNICAL, ENGINEERING SERVICES IN THE PREMISES OF RELIANCE PE TROLEUM LIMITED IN RELATION TO DELAYED COKER UNIT. FOR PROVIDING S UCH SERVICES, THE ASSESSEE-COMPANY HAS ENTERED INTO ANOTHER AGREEMENT WITH FOSTER WHEELER USA, AN ASSOCIATE OF THE ASSESSEE-COMPANY. THE ASSESSEE PAID ` 3,34,99,151/- FOR THE ASSESSMENT YEAR 2008-09 AND 11 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 ` 14,94,99,978/- FOR THE ASSESSMENT YEAR 2009-10 WIT H REGARD TO SERVICES RENDERED BY FOSTER WHEELER USA, THE ASSOCI ATE CONCERN OF THE ASSESSEE. THE ASSESSING OFFICER REFERRED THE M ATTER TO THE TRANSFER PRICING OFFICER UNDER SECTION 92CA(1) OF T HE ACT TO DETERMINE ARM'S LENGTH PRICE OF THE TRANSACTION BET WEEN THE ASSESSEE AND FOSTER WHEELER USA. THE TRANSFER PRIC ING OFFICER REPORTED THAT NO ADJUSTMENT IS CONSIDERED NECESSARY TO THE VALUE OF THE INTERNATIONAL TRANSACTION ENTERED INTO BETWEEN THE ASSESSEE AND FOSTER WHEELER USA. THEREFORE, THE ASSESSING OFFIC ER HAS NOT MADE ANY ADJUSTMENT WITH REGARD TO TRANSACTION BETW EEN THE ASSESSEE AND FOSTER WHEELER USA, AN ASSOCIATE CONCE RN AT USA. WHILE PASSING DRAFT ASSESSMENT ORDER, THE ASSESSING OFFICER FOUND THAT THE PAYMENT MADE BY THE ASSESSEE TO THE ASSOCI ATE CONCERN AT USA WAS LIABLE FOR DEDUCTION OF TAX AT SOURCE UNDER SECTION 195 OF THE ACT. SINCE TAX WAS NOT DEDUCTED, THE ASSESSING OFFICER DISALLOWED THE ENTIRE PAYMENT MADE TO FOSTER WHEELE R USA, THE ASSOCIATE CONCERN BY APPLYING PROVISIONS OF SECTION 40(A)(I) OF THE ACT. ON THE OBJECTION FILED BY THE ASSESSEE WITH R EGARD TO DISALLOWANCE MADE UNDER SECTION 40(A)(I) OF THE ACT , THE MATTER WAS REFERRED TO DISPUTE RESOLUTION PANEL. THE MAIN CON TENTION OF THE ASSESSEE WAS THAT FOSTER WHEELER USA, THE ASSOCIATE CONCERN HAS 12 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 NOT MADE AVAILABLE ANY TECHNICAL KNOWLEDGE, EXPERTI SE, KNOWHOW TO THE ASSESSEE. THEREFORE, THE PAYMENT MADE BY THE A SSESSEE CANNOT BE CONSTRUED AS FEE FOR TECHNICAL SERVICES U NDER DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND USA. THEREFORE, THE RECIPIENT-COMPANY, NAMELY, FOSTER WHEELER FRANC E S.A IS NOT LIABLE TO BE TAXED IN INDIA. CONSEQUENTLY, NO TAX NEEDS TO BE DEDUCTED BY THE ASSESSEE. HENCE, THERE CANNOT BE A NY DISALLOWANCE UNDER SECTION 40(A)(I) OF THE ACT. TO APPRECIATE THE CONTENTION OF THE ASSESSEE, LETS FIRST EXAMINE WHE THER THE PAYMENT MADE BY THE ASSESSEE IS LIABLE FOR TAXATION UNDER T HE INDIAN INCOME-TAX ACT. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 9(1)(VII) OF THE ACT WHICH READS AS FOLLOWS :- 9(1)(VII) INCOME BY WAY OF FEES FOR TECHNICAL SERVIC ES PAYABLE BY-- (A) THE GOVERNMENT ; OR (B) A PERSON WHO IS A RESIDENT, EXCEPT WHERE THE FEE S ARE PAYABLE IN RESPECT OF SERVICES UTILISED IN A BUSINESS OR PR OFESSION 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 UTILISED IN A BUSINESS OR PROFE SSION CARRIED ON BY SUCH PERSON IN INDIA OR FOR THE PURPOSES OF MAKI NG OR EARNING ANY INCOME FROM ANY SOURCE IN INDIA: PROVIDED THAT NOTHING CONTAINED IN THIS CLAUSE SHAL L APPLY IN RELATION TO ANY INCOME BY WAY OF FEES FOR TECHNICAL SERVICES 13 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 PAYABLE IN PURSUANCE OF AN AGREEMENT MADE BEFORE TH E 1ST DAY APRIL, 1976, AND APPROVED BY THE CENTRAL GOVERNMENT. EXPLANATION 1. FOR THE PURPOSES OF THE FOREGOING PROVISO, AN AGREEMENT MADE ON OR AFTER THE 1ST DAY OF APRIL, 1976, SHALL BE DEEMED TO HAVE BEEN MADE BEFORE THAT DATE IF THE AG REEMENT IS MADE IN ACCORDANCE WITH PROPOSALS APPROVED BY THE C ENTRAL GOVERNMENT BEFORE THAT DATE. EXPLANATION 2. FOR THE PURPOSES OF THIS CLAUSE, 'FEES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATION (INCLUD ING ANY LUMP SUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGER IAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJ ECT UNDERTAKEN BY THE RECEPIENT OR CONSIDERATION WHICH WOULD BE IN COME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD 'SALARIES'. WE HAVE ALSO CAREFULLY GONE THROUGH EXPLANATION 2 T O SECTION 9(1) OF THE ACT, WHICH READS AS FOLLOWS:- EXPLANATION FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT 'BUSINESS CONNECTION' SHALL INCLUDE ANY BUSINE SS ACTIVITY CARRIED OUT THROUGH A PERSON WHO, ACTING ON BEHALF OF THE NON- RESIDENT,- (A) HAS AND HABITUALLY EXERCISES IN INDIA, AN AUTHOR ITY TO CONCLUDE CONTRACTS ON BEHALF OF THE NON-RESIDENT, UNLESS HIS ACTIVITIES ARE LIMITED TO THE PURCHASE OF GOODS OR MERCHANDISE FOR THE NON- RESIDENT ; OR (B) HAS NO SUCH AUTHORITY, BUT HABITUALLY MAINTAINS IN INDIA A STOCK OF GOODS OR MERCHANDISE FROM WHICH HE REGULARLY DEL IVERS GOODS OR MERCHANDISE ON BEHALF OF THE NON-RESIDENT ; OR (C) HABITUALLY SECURES ORDERS IN INDIA, MAINLY OR W HOLLY FOR THE NON- RESIDENT OR FOR THAT NON-RESIDENT AND OTHER NON-RES IDENTS 14 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 CONTROLLING, CONTROLLED BY, OR SUBJECT TO THE SAME COMMON CONTROL, AS THAT NON-RESIDENT : 11. A BARE READING OF EXPLANATION 2 TO SECTION 9(1) (VII) AND EXPLANATION 2 TO SECTION 9(1) CLEARLY SAYS THAT THE PAYMENT MADE BY THE ASSESSEE WITH REGARD TO MANAGERIAL, TECHNICAL A ND CONSULTANCY SERVICES IS LIABLE TO BE TAXED IN INDIA SINCE THE S ERVICES ARE UTILIZED IN THE BUSINESS FOR EARNING INCOME IN INDIA. THERE FORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE INCOME ACCRUE D TO FOSTER WHEELER USA, AN ASSOCIATE CONCERN OF THE ASSESSEE IN INDIA IS LIABLE FOR TAXATION UNDER THE INDIAN INCOME-TAX ACT . 12. LETS NOW EXAMINE THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND USA. UNDER THE DOUBLE TAXATION AVOIDANCE AGREEMENT, THE BENEFICIAL CLAUSE IS USED BY INVOKING THE CONCEPT OF MAKE AVAILABLE. THEREFORE, TO CONSIDE R THE PAYMENT OF FEE FOR TECHNICAL SERVICES, THE TECHNICAL KNOWLEDGE , EXPERTISE OR KNOWHOW SHALL BE MADE AVAILABLE TO THE ASSESSEE. T HE QUESTION NOW ARISES FOR CONSIDERATION IS WHETHER THE TECHNIC AL KNOWHOW, EXPERTISE, ETC. WERE MADE AVAILABLE TO THE ASSESSEE BY FOSTER WHEELER USA, THE ASSOCIATE CONCERN IN USA. 15 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 13. WE HAVE CAREFULLY GONE THROUGH THE SERVICE REND ERED BY FOSTER WHEELER USA. FOR THE PURPOSE OF CONVENIENCE , WE ARE REPRODUCING THE SERVICE RENDERED BY FOSTER WHEELER USA, THE ASSOCIATE CONCERN IN USA, AS REPRODUCED BY THE DISP UTE RESOLUTION PANEL. (1) ENGINEERING SUPPORT SERVICE IN THE NATURE OF SI T ENGINEERING, STRUCTURAL ENGINEERING, SOIL ENGINEERI NG, ARCHITECTURAL ENGINEERING, MECHANICAL ENGINEERING, PROJECT ENGINE ERING, ELECTRICAL ENGINEERING, HEAT TRANSFER ENGINEERING, VESSEL ENGI NEERING, PIPING ENGINEERING, CONTROL SYSTEM ENGINEERING, DESIGN TEC HNOLOGY ENGINEERS, MATERIALS HANDLING ENGINEERS AND DOCUMEN T CONTROL ENGINEERS. THE SERVICES IN THE NATURE OF REVIEW AND/OR TRACKING EXECUTION PLANS AND SCHEDUL ES WITH EMPHASIS ON KEY MILESTONES. SHARING BEST PRACTICES IN THE ENGINEERING SERVICE S IN THE FORM OF WRITTEN PRACTICES, PROCEDURES, FORMS, SPECIFIC ATIONS AND DETAILS. REVIEW OF INFORMATION REGARDING TECHNICAL REPORTS , TECHNICAL STANDARDS AND QUALITY MANAGEMENT STANDARDS. REVIEW AND PROVIDE SYSTEMS FOR MEETING THE PROJEC T BUDGET AND CLIENT SATISFACTION. REVIEW THE WORK PROCESS AND PROVIDE TIMELY INPUT FOR PLANNED EXECUTION. REVIEW OF STANDARDS AND JOB SPECIFICATIONS INDICA TING TECHNICAL CONTENT. 16 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 (2) INFORMATION TECHNOLOGY (IT) SERVICES IN THE NAT URE OF COMPUTER SOFTWARE, HARDWARE, HELP DESK, SUPPORT SER VICES FOR EMAIL AND ENGINEERING SOFTWARE APPLICATIONS, REMOTE INFRA STRUCTURE MANAGEMENT, APPLICATION MAINTENANCE, CUSTOM APPLICA TION DEVELOPMENT, SYSTEMS INTEGRATION, PACKAGE SOFTWARE IMPLEMENTATION AND SUPPORT, IT & MANAGEMENT CONSULT ING. 14. IT IS AN ADMITTED POSITION THAT THE ASSESSEE-CO MPANY ALSO ENGAGED IN THE BUSINESS OF ENGINEERING AND CONSTRUC TION CONTRACT, ENGINEERING EQUIPMENT AND POWER EQUIPMENT SUPPLIER. FOR THE PURPOSE OF CARRYING OUT THE BUSINESS IN INDIA, THE ASSESSEE RECEIVED THE ABOVE SERVICES FROM FOSTER WHEELER USA. IN FAC T, THE ASSESSEE HAS RECEIVED EXECUTION PLANS WITH SCHEDULES, SPECIF ICATIONS, ETC. FOSTER WHEELER USA REVIEWED THE WORKING OF THE ASSE SSEE IN RESPECT OF ITS PLANS, EXECUTION AND ALSO PROVIDED T IME SCHEDULE WITH EMPHASIS ON KEY MILESTONES. THE ASSESSEE HAS ALSO RECEIVED SYSTEMS FOR MEETING THE PROJECT BUDGET AND CLIENT S ATISFACTION. THE JOB SPECIFICATION WAS ALSO GIVEN BY THE FOREIGN COM PANY FOSTER WHEELER USA. 15. LETS EXAMINE WHETHER FOSTER WHEELER USA, THE A SSOCIATE COMPANY IN USA, HAS MADE ITS TECHNICAL KNOWLEDGE, E XPERTISE, KNOWHOW TO THE ASSESSEE-COMPANY IN THE COURSE OF IT S BUSINESS ACTIVITY. THE ASSESSEE CLAIMS THAT THE TECHNICAL K NOWHOW AND EXPERTISE WERE NOT MADE AVAILABLE TO THE ASSESSEE. THE LD.COUNSEL 17 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 FOR THE ASSESSEE HAS PLACED RELIANCE ON VARIOUS JUD GMENTS OF THE HIGH COURTS AND DECISIONS OF THIS TRIBUNAL. THE MA JORITY OF THE JUDGMENTS CITED BY THE LD.COUNSEL FOR THE ASSESSEE WAS CONSIDERED BY COCHIN BENCH OF THIS TRIBUNAL IN US TECHNOLOGY R ESOURCES PVT. LTD. V. ACIT IN I.T.A. NO.222/COCH/2013 DATED 27.09 .2013. ON IDENTICAL SET OF FACTS, THE COCHIN BENCH OF THIS TR IBUNAL FOUND THAT THE FOREIGN COMPANY MADE AVAILABLE THE TECHNICAL KN OWLEDGE, EXPERIENCE, EXPERIMENTATION TO THE ASSESSEE-CY. IN FACT THE COCHIN BENCH OF THIS TRIBUNAL HAS OBSERVED AS FOLLOWS:- 28. NOW THE ASSESSEE HERE IS ADMITTEDLY MAKING USE OF THE ADVICE, INPUT, EXPERIENCE, EXPERIMENTATION AND ASSISTANCE RE NDERED BY THE USA COMPANY IN THE DECISION MAKING PROCESS OF MANAG EMENT, FINANCIAL AND RISK MANAGEMENT, ETC. IT IS NOBODYS CASE THAT THE USA COMPANY IS TAKING ANY DECISION ON BEHALF OF THE ASSESSEE. ON THE BASIS OF THE INPUT, ADVICE, ASSISTANCE AND SERV ICE PROVIDED BY THE USA COMPANY, THE MANAGEMENT DECISION IS TAKEN B Y THE ASSESSEE COMPANY IN INDIA BY SELECTING SUITABLE SOL UTION AFTER CONSIDERING ALL THE ALTERNATIVES AVAILABLE. IT IS A LSO TO BE REMEMBERED THAT THE USA COMPANY IS GIVING TRAINING TO THE ASSESSEES EMPLOYEES IN MAKING USE OF THE INPUTS, E XPERIENCE, EXPERIMENTATION, ASSISTANCE AND ADVICE RENDERED BY T HEM FOR TAKING A BETTER AND POSSIBLE DECISION IN ORDER TO A CHIEVE THE DESIRED OBJECTIVES / GOAL. THEREFORE, IN THE CONTEXT OF PROFESSIONAL MANAGEMENT AND DECISION MAKING PROCESS, THE ADVICE AND SERVICE RENDERED BY THE USA COMPANY WHICH WAS MADE USE BY T HE ASSESSEE IN MANAGERIAL DECISION MAKING PROCESS IS IN THE NAT URE OF TECHNICAL SERVICES WHICH FACILITATE THE ASSESSEE TO TAKE CORR ECT AND SUITABLE DECISION TOWARDS ACHIEVEMENT OF THE DESIRED OBJECTS AND BUSINESS GOAL. THEREFORE, IT MAY NOT BE CORRECT TO SAY THAT WHAT WAS RECEIVED BY THE ASSESSEE IS ONLY A MANAGERIAL ADVIC E AND NOT TECHNICAL ADVICE. THE TECHNOLOGICAL INPUT ACQUIRED BY THE US 18 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 COMPANY THROUGH EXPERIENCE AND EXPERIMENT WAS TESTED AT VARIOUS STAGES AND PROCESS AND FURTHER IT WAS MADE AVAILABL E TO THE ASSESSEE SO AS TO ENABLE THE ASSESSEE TO APPLY / US E THE SAME IN ITS DECISION MAKING PROCESS. 29. APART FROM THAT FINANCIAL AND RISK DECISION MAKI NG PROCESS IS A HIGHLY COMPLICATED AND TECHNICAL ONE. UNLESS THE AS SESSEE GETS A TECHNICAL INPUT AND ADVICE FROM FINANCIAL AND RISK MANAGEMENT EXPERTS IT MAY BE DIFFICULT TO SELECT A RIGHT PROCES S FOR THE GROWTH OF THE COMPANY. IT IS NOT THE CASE OF THE ASSESSEE THAT IN A GIVEN SET OF FACTS / PROBLEM, THE USA COMPANY GAVE ITS SO LUTION OR ADVICE. THE SOLUTION OR DECISION IS ADMITTEDLY TAKE N BY THE ASSESSEE COMPANY ON THE BASIS OF THE ADVICE, SERVICE RENDERE D BY THE USA COMPANY. THEREFORE, IT IS OBVIOUS THAT THE TECHNICA L 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 ASSESSE E COMPANY IN THE DECISION MAKING PROCESS NOT ONLY IN MANAGEMENT BUT ALSO IN FINANCIAL MATTERS. ANOTHER ASPECT IS RISK MANAGEMEN T SERVICE. RISK MANAGEMENT SERVICE IS A HIGHLY COMPLICATED ONE IN T HE FINANCIAL SECTOR. UNLESS, THE TECHNICAL EXPERTISE AND KNOWLEDG E GAINED BY THE USA COMPANY IS MADE AVAILABLE TO THE ASSESSEE COMPA NY, THEY MAY NOT BE ABLE TO ANALYSE THE SITUATION TO AVOID RISK IN THE BUSINESS. IT IS ALSO NECESSARY TO NOTE THAT APART FROM PROVIDING THE INPUT, SERVICE AND ADVICE, THE USA COMPANY IS ALSO PROVIDI NG TRAINING TO THE EMPLOYEES OF THE ASSESSEE COMPANY. THEREFORE, T HIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE SERVICE OF TECHN ICAL INPUT, ADVICE, EXPERTISE, ETC. RENDERED BY THE USA COMPANY ARE TECHNICAL IN NATURE AS PROVIDED IN CLAUSE 4(B) OF ARTICLE 12 OF THE DTAA. 30. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF T HE 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 ST ATION DESIGNED TO OPERATE USING INDUSTRIAL GAS AS FUEL NE AR RAJAMUNDRI. THE ASSESSEE COMPANY INTENDED TO UTILIZE THE EXPERT SERVICE OF QUALIFIED AND EXPERIENCED PROFESSIONAL WHO WOULD PRE PARE A SCHEME FOR RAISING THE FINANCES AND TIE UP THE REQUIRED LO AN. A NON RESIDENT COMPANY OFFERED ITS SERVICES AS A FINANCIAL ADVISOR TO THE PETITIONER COMPANYS PROJECT.. THE SERVICES OFFERED BY THE NON 19 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 RESIDENT COMPANY INCLUDES FINANCIAL STRUCTURE AND S ECURITY PACKAGE TO BE OFFERED TO THE LENDER, STUDY OF VARIOUS LENDI NG ALTERNATIVES FOR THE LOCAL AND FOREIGN BORROWINGS, MAKING AN ASS ESSMENT OF EXPORT CREDIT AGENCIES WORLD-WIDE AND OBTAINING COMM ERCIAL BANK SUPPORT ON THE MOST COMPETITIVE TERMS, ASSISTING TH E PETITIONER- COMPANY IN LOAN NEGOTIATIONS AND DOCUMENTATION WITH LENDERS AND STRUCTURING, NEGOTIATING AND CLOSING THE FINANCING FOR THE PROJECT IN A CO-ORDINATED AND EXPEDITIOUS MANNER. FOR ITS SERVI CES THE ASSESSEE COMPANY PAID 0.75% OF THE TOTAL DEBT FINANCIN G AS SUCCESS FEE. ON THE ADVICE OF THE NON-RESIDENT CO MPANY AT ZURICH, THE ASSESSEE APPROACHED THE INDIAN FINANCE INSTITUTION FOR LOAN. THE ASSESSEE ALSO APPROACHED THE INTERNATIONA L FINANCE CORPORATION, USA FOR A PART OF ITS FOREIGN CURRENCY LOAN REQUIREMENT. AFTER SUCCESSFUL RENDERING OF SERVICE, THE NON RESIDENT ZURICH 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 THE INCOME-TAX AUTHORITI ES IN INDIA FOR ISSUING A NO OBJECTION CERTIFICATE TO REMIT THE SAID AMOUNT CLAIMING THAT THE NON RESIDENT COMPANY HAD NO PERMA NENT ESTABLISHMENT IN INDIA AND ALL SERVICES WERE RENDER ED FROM OUTSIDE INDIA. THE INCOME-TAX OFFICER REFUSED TO ISSUE THE C ERTIFICATE. ON A WRIT PETITION BEFORE THE HIGH COURT IT WAS FOUND THAT THE SCOPE OF SERVICE / WORK UNDERTAKEN BY THE NON RESIDENT CO MPANY WAS MERELY TO DRAW UP A SCHEME, ADVISE ON THE TERMS AND METHODS OF NEGOTIATION AND FOR DOCUMENTATION WITH THE LENDER, EVALUATE THE PROS AND CONS OF VARIOUS LENDING ALTERNATIVES, BOTH FOR LOCAL AND THE FOREIGN BORROWINGS, PREPARE A PRELIMINARY INFORMATI ON MEMORANDUM TO BE USED AS THE BASIS FOR PLACING THE FOREIGN AND LOCAL DEBT, AND THAT THE RESPONSIBILITY OF ENTERING INTO CORRESPOND ENCE AS PER THE ADVICE OF THE NON RESIDENT COMPANY AND PURSUING THE MATTER WAS THAT OF THE ASSESSEE COMPANY ITSELF, AND NOT THAT O F THE NON RESIDENT COMPANY. THEREFORE, THE OFFICE OF THE ASSE SSEE COMPANY COULD NOT BE TREATED AS THE PLACE OF BUSINESS OF TH E NON-RESIDENT COMPANY. IN THOSE FACTS AND CIRCUMSTANCES, THE ANDH RA PRADESH HIGH COURT FOUND THAT THE BUSINESS CONNECTION BETWE EN THE ASSESSEE COMPANY AND NON RESIDENT COMPANY HAD NOT B EEN ESTABLISHED. HOWEVER, IT WAS FOUND THAT THE SUCCES S FEE WOULD FALL WITHIN THE DEFINITION OF 9(1)(VII)(B) OF THE AC T. THE ANDHRA PRADESH HIGH COURT FOUND THAT ADVICE GIVEN TO PROCU RE LOAN TO STRENGTHEN FINANCES WOULD BE AS MUCH A TECHNICAL OR CONSULTANCY 20 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 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 THER EFORE, THE ASSESSEE WAS NOT ENTITLED TO NO OBJECTION CERTIFICA TE. 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 SUBMI TTED THAT THE ANDHRA PRADESH HIGH COURT HAD NO OCCASION TO CONSID ER THE DTAA BETWEEN INDIA AND USA. THEREFORE, THE JUDGMENT OF T HE ANDHRA PRADESH HIGH COURT IS NOT APPLICABLE. NO DOUBT, DTA A AGREEMENT BETWEEN INDIA AND USA WAS NOT CONSIDERED BY THE AND HRA PRADESH HIGH COURT, BUT THE RATIO LAID DOWN BY THE ANDHRA P RADESH HIGH COURT CLEARLY SHOWS THAT ADVICE GIVEN TO PROCURE LO AN TO STRENGTHEN THE FINANCE WOULD BE MANAGERIAL OR TECHNICAL OR CON SULTANCY SERVICES FOR GENERATION OF POWER OR PLANT AND MACHI NERY. THIS FINDING OF THE ANDHRA PRADESH HIGH COURT IS SQUAREL Y APPLICABLE IN RESPECT OF THE SERVICE RECEIVED BY THE ASSESSEE FRO M USA COMPANY. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDE RED OPINION THAT ADVICE / SERVICE SAID TO BE RECEIVED BY THE ASSESSE E COMPANY FROM USA COMPANY IS IN THE NATURE OF TECHNICAL OR CONSUL TANCY SERVICES WITHIN THE MEANING OF CLAUSE (IV)(B) OF ARTICLE 12 O F DTAA. 32. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMENT OF THE KARNATAKA HIGH COURT IN THE CASE OF DE BEERS INDIA M INERALS PVT 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 I NTO AN AGREEMENT WITH NETHERLAND COMPANY TO ENGAGE THEIR S ERVICES FOR CONDUCTING AIRBORNE SURVEY FOR HIGH QUALITY, HIGH R ESOLUTION, GEOPHYSICAL DATA SUITABLE FOR SELECTING KIMBERLITE TARGETS. FOR THE TECHNICAL SERVICES RENDERED BY THEM THE ASSESSEE HA D PAID CONSIDERATION AS PER THE AGREEMENT. THE ASSESSING O FFICER FOUND THAT THE PAYMENT MADE TO NETHERLANDS COMPANY WAS FO R TECHNICAL SERVICES PROVIDED BY THEM. THEREFORE, THE ASSESSEE HAS TO DEDUCT TAX ON PAYMENTS MADE TO NETHERLANDS COMPANY. HOWEVER , THE COMMISSIONER (APPEALS) FOUND THAT THE PAYMENT MADE BY THE ASSESSEE TO THE NETHERLANDS COMPANY WAS NOT COVERED BY ARTICLE 12(5) OF THE DTAA BETWEEN INDIA AND NETHERLANDS. HE A LSO FOUND THAT THE NETHERLANDS COMPANY HAS NOT IMPORTED ANY T ECHNOLOGY TO 21 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 THE ASSESSEE AND THEY HAVE JUST USED THE TECHNOLOGY AND HAVE GONE BACK WITH THE SAME. THE CIT(A) FURTHER FOUND THAT N O TECHNOLOGY HAS BEEN MADE AVAILABLE TO THE ASSESSEE BY THE NETH ERLANDS COMPANY, THEREFORE, THE CONSIDERATION PAID DOES NOT FALL WITHIN THE DEFINITION OF ARTICLE 12(5) BETWEEN INDIA AND NETHERL ANDS. ON FURTHER APPEAL BY THE REVENUE BEFORE THE TRIBUNAL I T WAS HELD THAT THE PAYMENT IN QUESTION FOR SERVICES RENDERED WOULD NOT FALL WITHIN THE DEFINITION OF FEE FOR TECHNICAL SERVICES UNDE R ARTICLE 12(5) OF THE DTAA BETWEEN INDIA AND NETHERLANDS. THE TRIBUNA L FOUND THAT NETHERLANDS COMPANY HAS SURVEYED, COLLECTED AND PRO CESSED THE DATA ON BEHALF OF THE ASSESSEE. THERE IS NO DOUBT T HAT NETHERLANDS COMPANY PERFORMED THE SERVICE USING THE TECHNICAL K NOWLEDGE AND EXPERTISE, BUT SUCH TECHNICAL EXPERTISE, SKILL AND KN OWLEDGE HAS NOT BEEN MADE AVAILABLE TO THE ASSESSEE. ON THOSE FACTS , THE KARNATAKA HIGH COURT FOUND THAT THE ASSESSEE WAS NOT BEING PO SSESSED WITH TECHNICAL KNOW HOW TO CONDUCT THE PROSPECTING OPERA TION. THE MAPS AND PHOTOGRAPHS WHICH WERE MADE AVAILABLE TO THE AS SESSEE CANNOT BE CONSIDERED AS TECHNOLOGY MADE AVAILABLE. THEREFO RE, THE QUESTION OF NETHERLANDS COMPANY TRANSFERRING ANY TE CHNICAL PLAN OR TECHNICAL DESIGN DOES NOT ARISE IN THE FACTS OF THE CASE. 33. AS OBSERVED BY THE KARNATAKA HIGH COURT, THE NET HERLANDS COMPANY SURVEYED THE AREA, PREPARED PLAN AND PHOTOG RAPHS WHICH ARE MADE AVAILABLE TO THE ASSESSEE COMPANY LOCATING THE EXACT AREA FOR MINING. IN FACT, THE NETHERLANDS COMPANY LOCATE D THE EXACT AREA WHERE DIAMONDS WERE AVAILABLE AFTER ANALYZING THE PHOTOGRAPH AND THE ASSESSEE COMPANY HAS NOTHING TO DO EXCEPT MI NING THE EARMARKED AREA FOR EXCAVATING DIAMONDS. IN FACT, THE TECHNOLOGY OF LOCATING THE DIAMOND BY AERIAL SURVEY WAS NOT GI VEN TO THE ASSESSEE COMPANY. ONLY, THE RESULT OF THE SURVEY WA S FURNISHED BY THE NETHERLAND COMPANY. THEREFORE, IT IS NOT A CASE OF MAKING AVAILABLE ANY TECHNICAL EXPERTISE. IN FACT, THE DECI SION WAS TAKEN BY THE NETHERLANDS COMPANY FIXING THE LOCATION FOR MINI NG. IN THE CASE ON OUR HAND, THE FACTS ARE ENTIRELY ON DIFFERENT SE T OF FACTS. THE DECISION WAS NOT TAKEN BY THE USA COMPANY. THE USA COMPANY FACILITATED THE ASSESSEE COMPANY FOR MAKING DECISIO N IN THE MANAGERIAL, FINANCIAL AND RISK MANAGEMENT SYSTEM BY PROVIDING THEIR KNOWLEDGE, EXPERTISE, EXPERIMENTATION TO THE ASSESSEE COMPANY. THE ENTIRE EXPERIMENT, KNOWLEDGE, EXPERTISE WAS MADE AVAILABLE TO THE ASSESSEE AND THE ASSESSEE WAS FACILITATED TO TA KE A DECISION ON 22 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 THE KNOWLEDGE, EXPERTISE, EXPERIMENTATION WHICH WERE MADE AVAILABLE BY THE USA COMPANY. THEREFORE, THIS TRIBU NAL IS OF THE CONSIDERED OPINION THAT THE JUDGMENT OF THE KARNATA KA HIGH COURT IN THE CASE OF DE BEERS INDIA MINERALS LTD (SUPRA) MAY NOT BE APPLICABLE TO THE FACTS OF THIS CASE. 34. WE HAVE ALSO CAREFULLY GONE THROUGH THE DECISION 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 ASSESSEE ENGAGED IN MANUFACTURING SUITING, ENGINEERS STEEL FILES AND RASPS AND CEMENT IN INDIA. WITH A VIEW TO MUSTER FUNDS IT PROPOSED TO ISSUE TWO TYPES OF GLOBAL DEPOSITORY RECEIPTS (GDRS ) IN THE INTERNATIONAL MARKET. THE ASSESSEE COMPANY ENGAGED A UK COMPANY AS LEAD MANAGERS TO THE ISSUE. THE ASSESSEE PAID NE CESSARY CHARGES FOR THE SERVICES RENDERED BY THE LEAD MANAGERS AND THE MANAGERS. HOWEVER, NO TAX WAS DEDUCTED BY THE ASSESSEE COMPANY FORM THE PAYMENT MADE TO THEM. THE ASSESSING OFFICER FOUND T HAT THERE WAS VIOLATION OF THE PROVISIONS OF SECTION 195(1) OF THE ACT HOLDING THAT THE AMOUNTS PAID TO LEAD MANAGERS AND MANAGERS WERE CHARGEABLE TO TAX IN INDIA AS FEES FOR TECHNICAL SERVICES WITHI N THE MEANING OF SECTION 9(1)(VII) OF THE ACT. THE APPELLATE COMMISSI ONER ALSO UPHELD THE ORDER OF THE ASSESSING OFFICER. ON FURTHER APPE AL BEFORE THE MUMBAI BENCH OF THIS TRIBUNAL, THE TRIBUNAL FOUND TH AT THE SERVICES RENDERED BY THE LEAD MANAGERS AND MANAGERS ARE MANAGERIAL OR CONSULTANCY SERVICES WITHIN THE MEANI NG OF SECTION 9(1)(VII) R.W.S. EXPLANATION 2 OF THE ACT AND THEREFOR E THE PAYMENT MADE TO MANAGERS ARE INCOME BY WAY OF FEES FOR TECH NICAL SERVICES DEEMED TO ACCRUE OR ARISE IN INDIA. REFERRING TO TH E DTAA BETWEEN INDIA AND UK, THE TRIBUNAL FOUND THAT NO TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW HOW OR PROCESS, ETC. WAS MAD E AVAILABLE TO THE ASSESSEE COMPANY BY THE NON RESIDENT MANAGERS T O THE GLOBAL DEPOSITORY RECEIPTS. HOWEVER, CONSIDERING THE SERVI CES RENDERED BY THE UK COMPANY, THE MUMBAI BENCH OF THIS TRIBUNA L FOUND THAT THE ARRANGEMENT BETWEEN THE ASSESSEE AND THE MANAGE RS OF THE GLOBAL DEPOSITORY RECEIPT ISSUED WAS FOR THE PURPOS E OF ENGAGING THE SERVICE OF THE MANAGERS UNDER THE SUBSCRIPTION AGREEMENT. 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 U NDERTAKEN TO RENDER SERVICE IN CONNECTION WITH THE ISSUE OF GLOB AL DEPOSITORY 23 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 RECEIPTS FOR WHICH THEY ARE ENTITLED FOR REMUNERATI ON. THE TRIBUNAL FOUND THAT THE SERVICES OF THE MANAGERS FO R ISSUE OF GLOBAL DEPOSITORY RECEIPT WERE UTILIZED OUTSIDE IND IA FOR THE PURPOSE OF CARRYING ON ITS BUSINESS IN INDIA. SINCE THE ARRANGEMENT IS ONLY FOR MARKETING THE GLOBAL DEPOSITORY RECEIPT OUTSIDE INDIA, THE TRIBUNAL FOUND THAT THE COMMISSION PAID TO UK C OMPANY CANNOT BE CONSIDERED TO BE FEE FOR TECHNICAL SERVICE, THER EFORE, THERE IS NO OBLIGATION ON THE PART OF THE ASSESSEE TO DEDUCT TAX U/S 195(1) OF THE ACT. THEREFORE, IT IS OBVIOUS THAT ONLY FOR MARKETING THE GDR OUTSIDE INDIA, THE SERVICE OF MANAGERS ARE ENJO YED. THE DECISION TO ISSUE GDR WAS TAKEN BY INDIAN COMPANY W ITHOUT ANY ASSISTANCE FROM MANAGERS. IN THE CASE BEFORE US, IT IS A CLEAR CASE OF USING THE TECHNOLOGY, EXPERTISE OF THE FOREIGN CO MPANY IN INDIA FOR TAKING MANAGERIAL, FINANCIAL DECISION AND RISK MANAGEMENT ANALYSIS. THE EXPERTISE, ANALYSIS, TECHNICAL KNOWLED GE SUPPLIED BY THE FOREIGN COMPANY REMAINS WITH THE ASSESSEE FOR E VER AND IT COULD BE EVEN USED IN FUTURE FOR THE BUSINESS OF TH E ASSESSEE IN THE PROCESS OF MANAGEMENT DECISION, FINANCIAL DECIS ION MAKING AND RISK MANAGEMENT ANALYSIS. THEREFORE, THE DECISION O F THE MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF RAYMOND LTD (S UPRA) IS ALSO NOT APPLICABLE TO THE FACTS OF THE CASE. 35. WE HAVE ALSO CAREFULLY GONE THROUGH THE DECISION OF THE PUNE BENCH OF THIS TRIBUNAL IN THE CASE OF SANDVIK AUSTRA LIA PTY LTD (SUPRA). THE ASSESSEE, AN AUSTRALIAN COMPANY PROVID ED I.T. SUPPORT SERVICE TO INDIAN GROUP COMPANIES IN ASIA PACIFIC R EGION IN ORDER TO ACHIEVE THE CONSOLIDATED AND STANDARDIZED I.T. ENVI RONMENT IN SANDVIK GROUP. THE TRIBUNAL, AFTER CONSIDERING THE AGREEMENT BETWEEN THE PARTIES FOUND THAT THE AGREEMENT PROVID ED ONLY FOR BACK UP SERVICES, I.T. SUPPORT SERVICES FOR SOLVING I.T. RELATED PROBLEMS IN INDIAN SUBSIDIARY. THE AGREEMENT WITH S ANDVIK ASIA LTD NOWHERE SUGGESTED THAT THE ASSESSEE HAS TO MAKE AVA ILABLE REQUIRED TECHNICAL KNOW HOW FOR SOLVING THE PROBLEM IN THE I.T. RELATED PROBLEMS. IN THE CASE BEFORE US, THE USA CO MPANY HAS TO PROVIDE ALL EXPERTISE TO THE ASSESEE COMPANY WHICH W OULD BE UTILIZED IN THE DECISION MAKING PROCESS RELATED TO MANAGEMENT, FINANCIAL AND RISK MANAGEMENT. THEREFORE, THIS DECI SION OF THE PUNE BENCH OF THIS TRIBUNAL MAY ALSO NOT BE APPLICABLE TO THE FACTS OF THE PRESENT CASE. 24 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 36. WE HAVE ALSO CAREFULLY GONE THROUGH THE DECISION OF THE MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF WOKHARD T LTD (SUPRA). IN THE CASE BEFORE THE MUMBAI BENCH OF THIS TRIBUNAL, THE ASSESSEE COMPANY WAS INCORPORATED IN USA AND AS PER THE AGREEMENT, THE SAID COMPANY SENT ONE OF ITS PROFESS IONALS TO INDIA FOR A PERIOD OF TWO DAYS TO ADDRESS CONFERENCE ON F UTURE STRATEGY OF THE COMPANY. THE ASSESSEE COMPANY 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 TH E PROFESSIONAL WAS ESSENTIAL IN THE NATURE OF SHARING MANAGEMENT, EXPERIENCE AND BUSINESS STRATEGY. THEREFORE, THE TRIBUNAL FOUND TH AT THE SERVICES RENDERED BY US COMPANY COULD NOT BE TERMED AS TECHN ICAL SERVICES IN NATURE. IN THE CASE BEFORE US, IT IS NOT A CASE OF SHARING OF EXPERIENCE AND BUSINESS STRATEGY. IT IS A CASE OF PR OVIDING TECHNICAL INFORMATION FOR TAKING MANAGERIAL AND FIN ANCIAL DECISION. THE ASSESSEE ALSO USED THAT TECHNOLOGY, INFORMATION AND EXPERTISE OF USA COMPANY IN MANAGEMENT RISK ANALYSIS. THE INF ORMATION AND EXPERTISE MADE AVAILABLE TO THE ASSESSEE COMPANY WAS VERY MUCH AVAILABLE WITH THEM AND IT CAN BE USED IN FUTURE WH ENEVER THE OCCASION ARISES. APART FROM THE EMPLOYEES OF THE AS SESSEE COMPANY WAS ALSO TRAINED BY USA COMPANY. THEREFORE, THIS TR IBUNAL IS OF THE CONSIDERED OPINION THAT THE DECISION OF THE MUM BAI BENCH OF THIS TRIBUNAL IN THE CASE OF WOKHARDT LTD (SUPRA) A LSO MAY NOT BE OF ANY HELP TO THE ASSESSEE. 37. WE HAVE ALSO CAREFULLY GONE THROUGH THE DECISION OF THE AUTHORITY FOR ADVANCE RULING IN INTERTEK TESTING SE RVICES INDIA (P) LTD (SUPRA). THE AUTHORITY FOR ADVANCE RULING CONSI DERED THE DTAA BETWEEN 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 USE OF THE SERVICE ARE TWO SI DES OF THE SAME COIN. AFTER CONSIDERING THE WORD WHICH THE AUTHOR ITY FOR ADVANCE RULING FOUND THAT RENDERING TECHNICAL OR CONSULTANC Y SERVICE IS FOLLOWED BY RELATIVE PRONOUN WHICH AND IT HAS THE EFFECT OF QUALIFYING THE SERVICES. THE SERVICE OFFERED MAY BE THE PRODUCT OF INTENSE TECHNOLOGICAL EFFORT AND LOT OF TECHNICAL K NOWLEDGE AND THE EXPERIENCE OF THE SERVICE PROVIDER WOULD HAVE GONE I NTO IT. THE AUTHORITY FOR ADVANCE RULING FOUND THAT THE TECHNIC AL KNOWLEDGE AND THE EXPERIENCE OF THE SERVICE PROVIDER SHOULD BE IMPARTED TO AND ABSORBED BY THE RECEIVER, SO THAT THE RECEIVER CAN DEPLOY 25 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 SIMILAR TECHNOLOGY OR TECHNIQUES IN FUTURE WITHOUT DEPENDING ON THE PROVIDER. IN THIS CASE ALSO, THE INFORMATION, EXPERT ISE AND TRAINING PROVIDED BY THE USA COMPANY WAS ABSORBED BY THE ASS ESSEE COMPANY IN THEIR DECISION MAKING PROCESS AND IT WAS UTILIZED FOR THE PURPOSE OF BUSINESS. THE USA COMPANY MADE AVAILABLE ALL THE TECHNICAL DATA, INFORMATION, EXPERTISE TO THE ASSESS EE COMPANY WHICH WAS ABSORBED AND MADE USE OF BY THE ASSESSEE COMPANY IN THEIR MANAGERIAL AND FINANCIAL DECISION MAKING PROC ESS AND OTHER DECISION IN THE DEVELOPMENT OF THE BUSINESS. THEREF ORE, THE EXPERTISE AND TECHNOLOGY WHICH WAS MADE AVAILABLE BY THE USA COMPANY IS TECHNICAL SERVICE WITHIN THE MEANING OF ARTICLE 12(4)(B) OF THE DTAA BETWEEN INDIA AND USA. HENCE, THIS RULI NG OF THE AUTHORITY FOR ADVANCE RULING MAY NOT OF ANY ASSISTA NCE TO THE ASSESSEE. 16. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMEN T OF THE KARNATAKA HIGH COURT IN DEE BEERS INDIA MINERALS ( P) LTD. (SUPRA). IN FACT, THIS JUDGMENT WAS ALSO CONSIDERED BY THE C OCHIN BENCH OF THIS TRIBUNAL IN THE CASE OF US TECHNOLOGY RESOURCE S PVT. LTD. IN THE CASE OF DEE BEERS INDIA MINERALS (P) LTD. (SUPR A), THE ASSESSEE ENGAGED IN THE BUSINESS OF MINING FOR DIAMONDS AND OTHER MINERALS. IN THE COURSE OF ITS BUSINESS ACTIVITY, THE ASSESSE E BEFORE KARNATAKA HIGH COURT ENTERED INTO AN AGREEMENT WITH NETHRLAND COMPANY TO ENGAGE ITS SERVICES IN AIRBORNE SURVEY FOR HIGH QUA LITY, HIGH RESOLUTION, GEOPHYSICAL DATA SUITABLE FOR SELECTING THE AVAILABLE MINERALS. THE NETHERLAND COMPANY GAVE DATA, MAPS A ND PHOTOGRAPHS BY AIR BORNE SURVEY AND LOCATED THE EXA CT AREA FOR MINING. ON THE BASIS OF SURVEY MADE BY NETHERLAND COMPANY, THE 26 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 ASSESSEE EXCAVATED THE MINES. IN THE CASE BEFORE K ARNATAKA HIGH COURT, THE TECHNOLOGY OF LOCATING THE DIAMONDS BY A IR BORNE SURVEY WAS NOT GIVEN TO THE ASSESSEE. ONLY THE RESULT OF THE SURVEY WAS FURNISHED BY THE NETHERLAND COMPANY. IN THE CASE B EFORE US, THE FOREIGN COMPANY REVIEWED THE EXECUTION PLANS, EMPHA SIS ON KEY MILESTONES, PROVIDED THE BEST PRACTICES AVAILABLE I N THE FORM OF WRITTEN PROCEDURES AND SPECIFICATIONS AND DETAILS WHEN THE PROCEDURES AND SPECIFICATIONS ARE PROVIDED TO THE A SSESSEE, WHICH IS ALSO A SPECIALIZED COMPANY IN ENGINEERING AND EX ECUTION OF CONSTRUCTION, THIS TRIBUNAL IS OF THE CONSIDERED OP INION THAT THE SPECIFICATIONS AND DETAILS PROVIDED BY FOREIGN COMP ANY CAN VERY WELL BE USED IN THE BUSINESS OF ENGINEERING AND CON STRUCTION. IT IS NOT A CASE OF AIR BORNE SURVEY OR PROVIDING GUIDELI NES FOR LOCATING OR IDENTIFYING THE POTENTIAL AREA TO LOCATE CENTRES WH ICH COULD NOT BE DONE BY THE ASSESSEE. IT IS A CASE OF PROVIDING SP ECIFICATIONS AND DETAILS, EXECUTION OF ENGINEERING AND CONSTRUCTION CONTRACT. THESE SPECIFICATIONS AND PROCEDURES MADE AVAILABLE TO THE ASSESSEE BY FOREIGN COMPANY CAN VERY WELL BE USED BY THE ASSESS EE-COMPANY FOR EXECUTION OF OTHER PROJECTS ALSO. BUT, IN THE CASE BEFORE KARNATAKA HIGH COURT THE AIR BORNE SURVEY DONE BY T HE NETHERLAND COMPANY CAN BE USED FOR LOCATING DIAMONDS AND OTHER MINERALS AND 27 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 TECHNOLOGY ADOPTED BY THE NETHERLAND COMPANY FOR LO CATING THE DIAMONDS AND OTHER MINERALS WAS NOT TRANSFERRED. L OCATING DIAMONDS CANNOT BE DONE BY THE ASSESSEE-COMPANY IND EPENDENTLY. THE ASSESSEE-COMPANY BEFORE THE KARNATAKA HIGH COUR T IS EXPERTISE ONLY IN EXCAVATION AND NOT IN PERFORMING AIR BORNE SURVEY OR LOCATING THE AVAILABILITY OF THE MINERALS. IN T HIS CASE, THE ASSESSEE IS ALSO AN EXPERTISE COMPANY IN ENGINEERIN G AND CONSTRUCTION WORKS. THEREFORE, WHEN THE SPECIFICAT IONS AND OTHER PROCEDURES ARE MADE AVAILABLE TO THE ASSESSEE-COMPA NY AND THE FOREIGN COMPANY IS REVIEWING AND TRACKING THE EXECU TION PLANS PERIODICALLY, NOT ONLY THE EXECUTION BUT ALSO THE P ROJECT BUDGET AND CLIENT SATISFACTION, THIS TRIBUNAL IS OF THE CONSID ERED OPINION THAT FOSTER WHEELER USA HAS MADE AVAILABLE ITS TECHNICAL KNOWLEDGE, EXPERTISE, KNOWHOW IN EXECUTION OF THE CONTRACT BY THE ASSESSEE IN INDIA. THEREFORE, THIS JUDGMENT OF KARNATAKA HIGH COURT IS NOT APPLICABLE TO THE FACTS OF THE CASE. 17. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMEN T OF DELHI HIGH COURT IN GUY CARPENTER & CO. LIMITED (SUPRA). IN THE CASE OF DELHI HIGH COURT, THE ASSESSEE-COMPANY WAS AN INTER NATIONAL REINSURANCE INTERMEDIARY BROKER AND WAS A TAX RESID ENT OF UNITED 28 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 KINGDOM. THE ASSESSEE BEFORE THE DELHI HIGH COURT RECEIVED COMMISSION FROM VARIOUS INSURANCE COMPANIES OPERATI NG IN INDIA. THE ASSESSING OFFICER FOUND THAT THE RECEIPT OF COM MISSION IS FEE FOR TECHNICAL SERVICES. WHILE ILLUSTRATING THE TRA NSACTION, THE HIGH COURT EXTRACTED THE OBSERVATION MADE BY THE TRIBUNA L AT PARA 11 OF ITS ORDER. AS PER THE ILLUSTRATIVE TRANSACTION, NE W INDIA INSURANCE CO. LTD. HAS ENTERED INTO AN AGREEMENT TO REINSURE ON AN EXCESS LOSS BASIS HE CATASTROPHE RISK ARISING FROM ITS PRI MARY INSURANCE COVER IN CONJUNCTION WITH J.B. BODA AND ALSFORD PAG E AND GEMS LTD. THE ASSESSEE WILL ACT AS A CLAIM ADMINISTRATOR AND WILL SUBMIT CLAIMS ADVICES TO RELEVANT MARKET SYSTEMS. FOR THE SERVICES RENDERED, THE ASSESSEE ALONG WITH OTHER REINSURANCE BROKERS ACTING AS AN INTERMEDIARY IN THE REINSURANCE PROCESS FOR N EW INDIA ASSURANCE CO. WILL BE ENTITLED TO 10% BROKERAGE. THE ASSESSEE- COMPANY WAS RENDERING ONLY AN INTERMEDIARY SERVICE WHILE ACTING AS A FACILITATOR IN GETTING THE REINSURANCE COVER FOR NEW INDIA INSURANCE CO. THE ASSESSEE IS NOT DOING ANY OTHER WORK OTHER THAN ACTING AS AN INTERMEDIARY IN THE REINSURANCE PROCESS. IN THE CASE BEFORE US, IT IS NOT THE CASE OF THE ASSESSEE THAT IT IS PLAYING ONLY AN INTERMEDIARY ROLE. IT IS RECEIVING TECHNICAL SERVICES LIKE SPEC IFICATIONS, PROCEDURES, PROJECT MANAGEMENT, ETC. AND IT IS UTIL IZING THE SAME IN 29 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 THE PROJECT UNDERTAKEN WITH RELIANCE PETROLEUM LIMI TED. THE SPECIFICATIONS, TECHNICAL KNOWLEDGE, ADVICE RECEIVE D FROM FOSTER WHEELER FRANCE S.A IS VEY MUCH AVAILABLE WITH THE A SSESSEE- COMPANY AND IT CAN BE USED IN EXECUTION OF THE ENGI NEERING AND CONTRACT WITH OTHER CLIENTS. THEREFORE, THIS TRIBU NAL IS OF THE CONSIDERED OPINION THAT THE JUDGMENT OF THE DELHI H IGH COURT IS NOT OF ANY ASSISTANCE TO THE ASSESSEE. 18. WE HAVE ALSO CAREFULLY GONE THROUGH THE CASE OF INTERTEK TESTING SERVICES INDIA (P.) LTD. THE DECISION RENDE RED BY AUTHORITY FOR ADVANCE RULINGS. THE AUTHORITY FOR ADVANCE RUL INGS FOUND THAT TECHNICAL KNOWLEDGE AND EXPERIENCE OF SERVICE PROVIDER SHOULD BE IMPARTED AND ABSORBED BY THE RECEIVER SO THAT TH E RECEIVER CAN DEPLOY SIMILAR TECHNOLOGY OR TECHNIQUES IN FUTURE W ITHOUT DEPENDING ON THE SERVICE PROVIDER. IN THIS CASE ALSO, THE IN FORMATION, EXPERTISE, EXECUTION PLAN, PROJECT BUDGET, TECHNICAL STANDARDS AND QUALITY MANAGEMENT STANDARDS PROVIDED BY THE SERVICE PROVID ER FOSTER WHEELER USA IS ABSORBED BY THE ASSESSEE-COMPANY AND THE ASSESSEE-COMPANY IS CAPABLE OF DEPLOYING SUCH TECHN OLOGY IN FUTURE WITHOUT DEPENDING ON FOSTER WHEELER USA. TH EREFORE, THE RULING RENDERED BY AUTHORITY FOR ADVANCE RULINGS IN INTERTEK TESTING 30 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 SERVICES INDIA (P.) LTD. ALSO MAY NOT BE OF ANY ASS ISTANCE TO THE ASSESSEE. 19. WE HAVE ALSO GONE THROUGH THE DECISION OF PUNE BENCH OF THIS TRIBUNAL IN SANDVIK AUSTRALIA PTY. LTD. (SUPRA ). IN THE CASE BEFORE PUNE BENCH, THE ASSESSEE-COMPANY PROVIDING I T SUPPORT SERVICES TO ITS GROUP COMPANIES IN THE NATURE OF HE LP DESK, ADMINISTRATIVE AND MAINTENANCE OF IT SUPPORT. THE ASSESSEE CLAIMED BEFORE THE ASSESSING OFFICER THAT THE ASSES SEE WAS OFFERING ONLY IT SUPPORT SERVICES AND NOT IMPARTING ANY TECH NICAL KNOWHOW AND KNOWLEDGE TO ITS INDIAN COMPANIES. HOWEVER, TH E REVENUE DISPUTED THE CLAIM OF THE ASSESSEE. THE CASE OF TH E REVENUE BEFORE THE PUNE BENCH IS THAT THE ASSESSEE-COMPANY NOT ONLY RENDERING BACK-UP IT SUPPORT SERVICE BUT ALSO TRANS FERRING KNOWLEDGE AND OTHER SAID SERVICES TO INDIAN COMPANI ES. AFTER ANALYSING THE AGREEMENT FILED BEFORE IT, THE PUNE B ENCH FOUND THAT THE AGREEMENT ENTERED INTO BY THE ASSESSEE-COMPANY AND SANDVIK ASIA LTD. IS NOT SUPPORTING THE CASE OF THE REVENUE . THE TRIBUNAL FOUND THAT THE ASSESSEE HAS PROVIDED ONLY IT BACK-U P SERVICE FOR SOLVING IT RELATED PROBLEMS TO ITS INDIAN SUBSIDIAR Y AND NOT SUCH SERVICES ARE AVAILABLE TO THE INDIAN COMPANIES. IN THE CASE BEFORE 31 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 US, WHAT WAS PROVIDED BY FOSTER WHEELER USA IS THE SERVICE IN THE NATURE OF TRACKING EXECUTION PLANS, SCHEDULES WITH EMPHASIS ON KEY MILESTONES, WRITTEN PRACTICES, PROCEDURES, SPECIFIC ATIONS AND DETAILS IN EXECUTION OF THE PROJECT, FURNISHED REVIEW OF IN FORMATION REGARDING TECHNICAL REPORTS, TECHNICAL STANDARDS AND QUALITY MANAGEMENT STANDARDS, PROVIDED SYSTEMS FOR MEETING PROJECT BUD GET AND CLIENT SATISFACTION. ON THE BASIS OF THE TECHNICAL KNOWLE DGE, INFORMATION PROVIDED BY FOSTER WHEELER USA, THE ASSESSEE-COMPAN Y CAN IMPLEMENT THE SAME IN THE PROJECT WHILE EXECUTING T HE PROJECT WITH RELIANCE PETROLEUM LIMITED. UNLESS THE ASSESSEE-CO MPANY ACQUIRES THE KNOWLEDGE, EXPERTISE, TECHNICAL STANDA RDS, QUALITY MANAGEMENT, ETC. PROVIDED BY FOSTER WHEELER USA, TH E SAME CANNOT BE ADOPTED OR IMPLEMENTED WHILE EXECUTING TH E PROJECT WITH RELIANCE PETROLEUM LIMITED WHEN THE ASSESSEE-COMPA NY ABSORBS THE TECHNICAL KNOWLEDGE, EXPERTISE, QUALITY MANAGEM ENT, ETC. FOR THE PURPOSE OF IMPLEMENTING PROJECT WITH RELIANCE PETRO LEUM LIMITED, SUCH KNOWLEDGE IS VERY MUCH AVAILABLE WITH THE ASSE SSEE AND THE SAME CAN BE IMPLEMENTED WITH OTHER PROJECTS WITH OT HER CLIENTS. IT IS TO BE REMEMBERED THAT THE ASSESSEE IS NOT A LAYM AN. THE ASSESSEE COMPANY IS EXPERT IN PROVIDING TECHNICAL A ND ENGINEERING SERVICE. THEREFORE, THE ASSESSEE IS CAPABLE OF OBS ERVING THE 32 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 OPINION / ADVICE GIVEN BY USA ASSOCIATE AND IMPLEME NT THE SAME VIDE THEIR FUTURE PROJECT. THEREFORE, THIS TRIBUNA L IS OF THE CONSIDERED OPINION THAT THE TECHNICAL KNOWLEDGE, EX PERTISE, KNOWHOW WERE MADE AVAILABLE TO THE ASSESSEE. HENCE , THE DECISION OF PUNE BENCH OF THIS TRIBUNAL IN SANDVIK AUSTRALIA PTY. LTD. (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE CASE. 20. WE HAVE ALSO GONE THROUGH THE DECISION OF AUTHO RITY FOR ADVANCE RULINGS IN ERNST & YOUNG (P) LTD. (SUPRA). THE ASSESSEE- COMPANY ENGAGED IN PROVIDING CONSULTANCY SERVICES A S CHARTERED ACCOUNTANCY AND MANAGEMENT STUDIES IN INDIA. THE A UTHORITY FOR ADVANCE RULINGS FOUND THAT WHAT WAS PROVIDED BY EME IA TO THE ASSESSEE-COMPANY IS INFORMATION ON VARIOUS BUSINESS BY PROVIDING SUPPORT SERVICES LIKE COMMERCIAL MATTERS, GUIDELINE S, TEMPLATES, BEST PRACTICES AND STRATEGIES THAT COULD BE ADOPTED IN VARIOUS SPHERES OF THEIR BUSINESS WHICH ULTIMATELY LEAD TO PROTECTION OF EYS IMAGE AND CLIENT RELATIONSHIP. THE AUTHORITY FOR A DVANCE RULINGS FOUND THAT DISSEMINATION OF INFORMATION, FURNISHING GUIDELINES AND SUGGESTING PLANS OF ACTION AIMED AT UNIFORMITY AND SEAMLESS QUALITY IN BUSINESS DEALINGS OF PARTICIPATING GROUP ENTITIE S DO NOT PER SE AMOUNT TO MAKING AVAILABLE THE TECHNICAL KNOWLEDGE AND 33 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 EXPERIENCE POSSESSED BY EMEIA TO A SUBSTANTIAL EXTE NT. IN THE CASE BEFORE US, THE ASSESSEE-COMPANY RECEIVED SPECI FICATION, EXECUTION PLANS, SCHEDULES WITH EMPHASIS ON KEY MIL ESTONES, WRITTEN PRACTICES, PROCEDURES, SPECIFICATIONS AND D ETAILS. APART FROM THAT, THE SYSTEMS WERE REVIEWED PERIODICALLY TO MEE T THE PROJECT BUDGET AND CLIENT SATISFACTION FOR EXECUTION OF SPE CIFIC PROJECT WITH RELIANCE PETROLEUM LIMITED. UNLESS AND UNTIL THE S PECIFICATIONS, TECHNICAL STANDARDS AND QUALITY MANAGEMENT ARE MADE AVAILABLE TO THE ASSESSEE, IT CANNOT EXECUTE THE PROJECT ENTERED INTO WITH RELIANCE PETROLEUM LIMITED. THEREFORE, THIS DECISI ON OF AUTHORITY FOR ADVANCE RULINGS ALSO MAY NOT BE OF ANY ASSISTAN CE TO THE ASSESSEE. 21. IN VIEW OF THE ABOVE DISCUSSION, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE TECHNICAL KNOWLEDGE, EX PERTISE, KNOWHOW, PROVIDED BY FOSTER WHEELER USA WERE VERY M UCH MADE AVAILABLE TO THE ASSESSEE. HENCE, THE ASSESSEE IS LIABLE TO DEDUCT TAX WHILE MAKING PAYMENT. THEREFORE, THE ASSESSEE IS ALSO LIABLE TO PAY INTEREST UNDER SECTION 234A AND 234B OF THE ACT . ACCORDINGLY, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE LOWER AUTHORITY AND THE SAME IS CONFIRMED. 34 I.T.A. NO.774/MDS/14 I.T.A. NO.641/MDS/15 22. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON 5 TH FEBRUARY, 2016 AT CHENNAI. SD/- SD/- (. &56 & ) ( ... ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 8 /DATED, THE 5 TH FEBRUARY, 2016. KRI. 0 .39: ;:*3 /COPY TO: 1. ,- /APPELLANT 2. ./,- /RESPONDENT 3. DRP 4. CIT (INTERNATIONAL TAXATION), CHENNAI 5. :< .3 /DR 6. ) = /GF.