Sandvik A B., Pune V. Assistant Commissioner of Income-tax,

ITA 745/PUN/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2704 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-02-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 15-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DANESH BAFNA
• Keywords: Double taxation relief; Permanent establishment
• Section: 143(3); 5(2); 234B; 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , AM . / ITA NO. 74 5 /PN/201 4 / ASSESSMENT YEAR : 20 0 4 - 0 5 SANDVIK AB, C/O SANDVIK ASIA LTD., MUMBAI PUNE ROAD, DAPODI, PUNE 4110 1 2 . / APPELLANT PAN: A A HCS7486E VS. THE DY . COMMISSIONER OF INCOME TAX , CIRCLE 1 0 , PU NE . / RESPONDENT / APPELLANT BY : SHRI DANESH BAFNA / RESPONDENT BY : SHRI MAHESH D AKH A DE / RESPONDENT BY : SHRI MAHESH D AKH A DE / DATE OF HEARING : 11 . 0 2 .201 6 / DATE OF PRONOUNCEMENT: 19 . 0 2 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - V , PUNE , DATED 27 . 0 1 .20 1 4 RELATING TO ASSESSMENT YEAR 20 0 4 - 0 5 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW; ITA NO. 74 5 /PN/20 1 4 SANDVIK AB 2 1 . GROUND 1: THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) V, [LD.CIT(A)] HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER (LD.AO) OF TAXING RECEIPTS FOR MANAGEMENT SERVICES AMOUNTING TO RS.4,85,82,800/ - TO BE IN THE NATURE OF FEES FOR TECHNICAL SERVICES (FTS) WITHIN THE MEANING OF ARTICLE 12 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN IN DIA AND SWEDEN (TAX TREATY BETWEEN INDIA AND SWEDEN) READ WITH THE PROTOCOL THERETO AS WELL AS UNDER SECTION 9(1)(VII) OF THE INCOME - TAX ACT, 1961 (THE ACT). THE APPELLANT PRAYS THAT THE RECEIPTS FOR MANAGEMENT SERVICES AMOUNTING TO RS. 4,85,82,800/ - A RE NOT TAXABLE IN INDIA AND HENCE, THE ADDITION IN THIS REGARD BE DELETED. 2 . GROUND 2: WITHOUT PREJUDICE TO GROUND 1, SHOULD THE RECEIPTS BE HELD TAXABLE, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ACTION OF THE LD.AO LEVYING INTEREST UNDER SECTION 234B OF THE ACT WITHOUT APPRECIATING THAT ENTIRE INCOME OF THE APPELLANT IS SUBJECT TO TDS. THE APPELLANT PRAYS THAT THE INTEREST CHARGED BY THE LD.AO AND CONFIRMED BY THE LD.CIT(A) BE DELETED. 3. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OU TSET POINTED OUT THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDERS OF TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEARS 2007 - 08 AND 2008 - 09 . IT WAS POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSE E THAT SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN THE ABOVE SAID APPEALS AND THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. OUR ATTENTION WAS DRAWN TO THE GROUNDS OF APPEAL RAISED BEFORE THE TRIBUNAL AND THE ISSUE HAS BEEN DELIBERATED UPON BY THE TRIBUN AL IN ITA NO. 1720/PN/2011, RELATING TO ASSESSMENT YEAR 2007 - 08, ORDER DATED 28.11.2014. IT WAS FURTHER POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE CIT(A) HAD DECIDED THE PRESENT APPEAL RELATING TO ASSESSMENT YEAR 2004 - 05 IN VIEW OF SIMILAR ISSUE BEING DECIDED BY THE DISPUTE RESOLUTION PANEL (DRP) AGAINST THE ASSESSEE IN ASSESSMENT YEAR 2007 - 08 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ITA NO. 74 5 /PN/20 1 4 SANDVIK AB 3 ASSESSEE DREW OUR ATTENTION TO THE ORDER OF TRIBUNAL IN ITA NO. 47/PN/2013, RELATIN G TO ASSESSMENT YEAR 2008 - 09, ORDER DATED 22.05.2015 AND POINTED OUT THAT IDENTICAL ISSUE AROSE AND THE MATTER WAS DECIDED IN FAVOUR OF THE ASSESSEE. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF AUTHORITIES B ELOW. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE WAS A NON - RESIDENT COMPANY, INCORPORATED IN SWEDEN . THE ASSESSEE COMPANY WAS ENGAGED IN CEMENTED CARBIDE AND HIGH SPEED CUTTING TOOLS AND CUTTING TOOL SYSTEMS FOR METAL WORKING AND WAS IN POSSESSION OF EXTENSIVE KNOW - HOW REGARDING THE MANUFACTURE, MARKETING AND SALE OF SUCH PRODUCTS AS WELL AS OF PATENT AND TRADEMARK RIGHTS. THE ASSESSEE HAD ENTERED INTO SERVICE AGREEMENT DATED 08 .11.2002 WITH A GROUP COMPANY IN INDIA I.E. SANDVIK ASIA LIMITED, PUNE (SAL) FOR RENDERING GROUP COMPANY IN INDIA I.E. SANDVIK ASIA LIMITED, PUNE (SAL) FOR RENDERING VARIOUS MANAGEMENT SERVICES. IN LIEU THEREOF, THE ASSESSEE RECEIVED FEES FOR MANAGEMENT SERVICES RENDERED TO SAL PURSUANT TO THE SAID CONTRACT. SAL HAD BEEN ISSUED A ZERO TAX WITHHOLDING ORDER , AS PER MORE BENEFICIAL PROVISIONS OF INDIA - SWEDEN TAX TREATY, ON THE BASIS THAT THE INCOME WAS NOT CHARGEABLE TO TAX IN INDIA. THE ASSESSEE COMPANY THEREAFTER, FILED RETURN OF INCOME DECLARING TOTAL INCOME AT NIL FOR THE CAPTI ONED ASSESSMENT YEAR. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAD RECEIVED MANAGEMENT SERVICE FEES OF RS. 4,85,82,800/ - FROM SANDVIK ASIA LIMITED , PUNE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SAID MANAGEMENT SERVICE FEES O F RS.4.85 CRORES IS TO BE ASSESSED IN THE HANDS OF ASSESSEE, REJECTING THE CLAIM OF THE ASSESSEE THAT THE SAID SERVICES WERE NOT TAXABLE IN INDIA. THE ASSESSING OFFICER WAS OF THE VIEW THAT ON JOINT READING OF MANAGEMENT SERVICE S ITA NO. 74 5 /PN/20 1 4 SANDVIK AB 4 AGREEMENT AND THE DEFINIT ION OF FEES FOR TECHNICAL SERVICES GIVEN IN THE DTAA WITH SWEDEN, IT WAS APPARENT THAT THE AMOUNT RECEIVED BY THE ASSESSEE AS PER THE SAID AGREEMENT WITH SAL WAS CLEARLY IN THE NATURE OF FEES FOR TECHNICAL SERVICES AND THEREFORE, WAS TAXABLE IN INDIA. ANO THER ASPECT NOTED BY THE ASSESSING OFFICER WAS WHETHER THE NATURE OF SERVICES RENDERED BY THE ASSESSEE TO SAL MAKES AVAILABLE ANY TECHNICAL KNOWLEDGE, EXPERIENCE, SKILLS, KNOW - HOW, ETC. AFTER CONSIDERING THE ISSUE AT LENGTH AND TAKING NOTE OF THE CLAUSE S OF AGREEMENT AND THE CORRESPONDENCE BETWEEN THE PARTIES, THE ASSESSING OFFICER HELD THAT THE AMOUNT WAS RECEIVED BY THE ASSESSEE COMPANY FOR PROVIDING SERVICES AS PER THE MANAGEMENT SERVICES AGREEMENT DATED 08.11.2002 , WHICH WAS COVERED NOT ONLY BY THE D EFINITION OF TECHNICAL SERVICES AS LAID DOWN IN DTAA BETWEEN INDIA AND SWEDEN BUT WAS ALSO COVERED BY THE AFORESAID DECISION AS L AID DOWN IN SUBSEQUENT DTAA ENTERED INTO BY INDIA WITH NETHERLAND , USA, PORTUGAL, ETC. HENCE, SAME WAS TAXABLE IN THE HANDS OF ASSESSEE . B UT SINCE THE ASSESSEE WAS THE ACTUAL BENEFICIAL OWNER OF THE FEES FOR TECHNICAL SERVICES, THE TAX WAS CHARGED @ 10% AS PER DTAA OF GROSS AMOUNT. 6. THE CIT(A) WAS OF THE VIEW THAT AS PER DTAA BETWEEN INDIA AND SWEDEN, THE AMOUNT RECEIVED BY THE ASSESSEE FALLS INTO THE CATEGORY OF FEES FOR TECHNICAL SERVICES UNLESS IT FALLS INTO RESTRICTIVE DEFINITION MAKE AVAILABLE CLAUSE SIGNED WITH OTHER OECD COUNTRIES LIKE PORTUGAL, THE BENEFIT OF WHICH WOULD ALSO GO TO THE ASSESSEE COMPANY. REFERRING TO ARTICLE 12(4) OF DTAA BETWEEN INDIA AND PORTUGAL, THE CIT(A) OBSERVED THAT THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE COULD NOT EXPLAIN THE BASIC REQUIREMENT AND MERELY FILED COPIES OF INVOICES CLAIMING THAT SUCH TECHNOLOGY, SKILLS WERE NOT MADE AVAILABLE TO SAL. HOWEVER, THE CIT(A) HELD FROM THE CORRESPONDENCE BETWEEN THE ITA NO. 74 5 /PN/20 1 4 SANDVIK AB 5 PARTIES THAT THE PAYMENT WAS MADE FOR MARKETING SERVICES, MANAGEMENT SERVICES, SERVICES RELATED TO HRD, ADMINISTRATIVE SERVICES AND COORDINATION IN INFORMATION TECHNOLOGY SERVICES. THE CIT(A) FURTHER OBSERVED THAT IN THE SAID SERVICES , THERE WAS NOTHING WHICH COULD HAVE BEEN MADE AVAILABLE TO SAL, BUT WAS NOT DONE. IN VIEW THEREOF, THE ORDER OF ASSESSING OFFICER WAS UPHELD SINCE THE DRP HAD UPHELD THE ORDER OF TPO / AO IN ASSESSMENT YEAR 2007 - 08 . 7. THE ASSESSEE IS IN APPEAL AGAINST THE AFORESAID ORDER OF CIT(A) AND BOTH THE LE ARNED AUTHORIZED REPRESENTATIVE S HAVE PUT FORWARD THEIR CONTENTIONS. 8. WE FIND THAT IDENTICAL ISSUE AROSE BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2007 - 08 AND THE TRIBUNAL HELD ON THE PRINCIPLE OF MOST FAVOURED NATION CLAUSE, THAT THE PAYMENT RECEIVED BY THE ASSESSEE COMPANY FROM ITS INDIAN SUBSIDIARIES COULD NOT BE BROUGHT TO TAX. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE I N PARAS 8 TO 12, WHICH READ AS UNDER: - THE TRIBUNAL ARE I N PARAS 8 TO 12, WHICH READ AS UNDER: - 8. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND HAVE ALSO CONSIDERED THE WRITTEN SUBMISSIONS AND THE PRECEDENTS AND DECISIONS RELIED ON BY BOTH THE PARTIES. THE ASSESSEE IS TAX RESIDENT OF SWEDEN. IT IS C LAIMED THAT THAT IT DOES NOT HAVE A PERMANENT PLACE OF BUSINESS IN INDIA (PE). THE DISPUTE IS IN RESPECT OF THE PAYMENT OF RS.5.9 CRORES RECEIVED BY THE ASSESSEE COMPANY FROM ITS INDIAN SUBSIDIES I.E. SANDVIK ASIA PVT. LTD. (SAPL) AND WTIPL. THE CLAIM OF THE ASSESSEE IS THAT THE ASSESSEE RECEIVED THE SAID PAYMENT FROM ITS INDIAN SUBSIDIES FOR RENDERING THE SERVICES WHICH ARE IN THE NATURE OF COMMERCIAL, MANAGEMENT, MARKETING AND PRODUCTION SERVICES. THE NATURE OF THE SERVICES AS PER THE AGREEMENT ARE ALR EADY MENTIONED HERE - IN - ABOVE. IN THIS CASE THERE IS NO DISPUTE ABOUT THE LEGAL POSITION THAT THE AMOUNT RECEIVED BY THE ASSESSEE FROM ITS INDIAN SUBSIDIES IS TAXABLE IN INDIA UNDER NORMAL PROVISIONS OF ACT MORE PARTICULARLY U/S. 9(1)(VII) R.W.S. 5(2) OF T HE INCOME - TAX ACT. THE MAIN PLANK OF THE ARGUMENT OF THE LD. COUNSEL IS THAT WHEN THE ASSESSEE IS COVERED BY THE BENEFICIAL CLAUSES IN THE TREATY ENTERED INTO AS PER THE PROVISIONS OF SEC. 90 (2) OF THE INCOME - TAX ACT THEN EVEN IF THE ASSESSEES INCOME IS TAXABLE IN THE NORMAL PROVISIONS STILL HE CAN CLAIM THE EXEMPTION FROM THE TAX AS PER THE CLAUSES APPLICABLE IN THE TREATY. 8.1 LD. COUNSEL ARGUES THAT THE ABOVE PAYMENT RECEIVED BY THE ASSESSEE COMPANY IS NOT TAXABLE IN INDIA IN VIEW OF THE BENEFICIAL PROVISIONS OF THE TAX TREATY BETWEEN INDIA AND SWEDEN READ WITH THE PROTOCOL WHICH IS INTEGRAL PART OF SAID TREATY. HE SUBMITS THAT THE PROVISIONS OF TAX TREATY BETWEEN INDIA AND SWEDEN READ WITH THE PROTOCOL RELATING TO THE SCOPE AND TAXATION OF FEES FO R TECHNICAL SERVICES BEING MORE BENEFICIAL THAN THE CORRESPONDENCE PROVISIONS OF THE INCOME - TAX ACT HENCE, THE ASSESSEE MAY BE GIVEN THE BENEFIT OF THE TREATY ITA NO. 74 5 /PN/20 1 4 SANDVIK AB 6 BETWEEN INDIA - PORTUGAL ON THE BASIS OF PROTOCOL. HE SUBMITS THAT WITHOUT ADMITTING EVEN IF THE A MOUNT RECEIVED BY THE ASSESSEE IS IN THE NATURE OF FEES FOR TECHNICAL SERVICES (FTS) BUT GOING ON THE PRINCIPLES OF MOST FAVOURED NATION (MFN) CLAUSE IN THE PROTOCOL ATTACHED TO THE DTAA BETWEEN INDIA AND SWEDEN, THE ASSESSEE CAN CLAIM THE EXEMPTION FROM TAX IN INDIA BECAUSE SUBSEQUENTLY THE INDIA HAS ALSO ENTERED INTO DTAA WITH PORTUGAL WHICH IS ALSO MEMBER OF THE OECD AND FEES FOR TECHNICAL SERVICES ARE NOT TAXABLE UNLESS THE CONDITION OF MAKE AVAILABLE IS FULFILLED. 8.2 LD. COUNSEL PLACED HEAVY RELI ANCE ON THE DECISION OF THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT, CENTRAL CIRCLE, BANGALORE AND ANOTHER VS. M/S. DE BEERS INDIA MINERALS PVT. LTD. 340 ITR 467 (KAR) AND BHARATI AXA GENERAL INSURANCE CO. LTD. VS. DIT 326 ITR 477. HE REFERRED TO THE ASSESSMENT ORDER AND SUBMITS THAT ASSESSING OFFICER HAS IMPLIEDLY ACCEPTED THAT THE TAX TREATY BETWEEN INDIA - PORTUGAL CAN BE APPLIED TO THE ASSESSEE MORE PARTICULARLY IN THE CONTEXT OF THE PROTOCOL ATTACHED TO THE INDIA AND SWEDEN TREATY. THERE IS C ONDITION FOR BEGINNING TO TAX THE FEES FOR TECHNICAL SERVICES (FTS) IN THE DTAA BETWEEN INDIA AND PORTUGUESE I.E MAKE AVAILABLE AND IF SAID CONDITION IS NOT FULFILLED IN SOURCE COUNTRY FTS CANNOT BE TAXED. THE ASSESSEE IS TO BE GIVEN THE BENEFIT OF THE I NDIA - PORTUGUESE TREATY ON PRINCIPLE OF MFN CLAUSE WHICH IS WELL RECOGNIZED IN INTERNATIONAL TAXATION. HE SUBMITS THAT THE IDENTICAL ISSUE HAS COME FOR THE CONSIDERATION BY THE ITAT, PUNE IN THE CASE OF SANDVIK AUSTRALIA PTY. LTD. VS. D.D.I INTERNATIONAL TAX - II, PUNE IN ITA NO. 93/PN/2011 AND THE ASSESSEES CASE IS SQUARELY COVERED ON THE INTERPRETATION OF A EXPRESSION - MAKE AVAILABLE. PER CONTRA, THE LD. DR RELIED ON THE WRITTEN SUBMISSIONS. 9. IN THIS CASE THE ONLY ISSUE TO BE CONSIDERED BY US IS WHET HER THE ASSESSEE CAN BE GIVEN BENEFIT OF INDIA - PORTUGUESE TREATY ON PRINCIPLE OF MFN CLAUSE? THE INDIA ENTERED INTO DTAA WITH THE SWEDEN WHICH WAS NOTIFIED VIDE NOTIFICATION NO. GR 705/E DATED 17.12.1997. ARTICLE 12 OF THE INDIA - SWEDEN NOTIFICATION NO. GR 705/E DATED 17.12.1997. ARTICLE 12 OF THE INDIA - SWEDEN DTAA PROVIDES THE M ODE OF TAXATION OF THE ROYALTIES AND FEES FOR TECHNICAL SERVICES WHETHER THE SAME ARE TO BE TAXED IN THE SOURCE COUNTRY OR IN THE RESIDENCE COUNTRY. THE DEFINITION OF THE FEES FOR TECHNICAL SERVICES (FTS) IS GIVEN IN ARTICLE 12(3)(B) OF THE ACT. IT IS TR UE THAT IT IS A VERY CONSERVATIVE DEFINITION AND THERE IS NO CONDITION THAT THE TECHNICAL SERVICES SHOULD BE MADE AVAILABLE. THE INDIA ALSO ENTERED INTO THE TREATY WITH PORTUGUESE REPUBLIC WHICH WAS NOTIFIED VIDE NOTIFICATION NO. GR F42/E DATED 16 TH JUNE, 2000. IN THE SAID TREATY, MODE OF TAXATION OF THE FEES FOR TECHNICAL SERVICES (FTS) BETWEEN TWO COUNTRIES IS ALSO PROVIDED IN THE ARTICLE 12 BUT INSTEAD OF FEES FOR TECHNICAL SERVICES THE EXPRESSION USED IS FEES FOR INCLUDED TECHNICAL SERVICES. AS PER THE ARTICLE 12(4) FEES FOR INCLUDED SERVICES MEANS PAYMENT OF FEES OF ANY KIND OTHER THAN THOSE MENTIONED IN ARTICLE 14 AND 15 OF THE SAID TREATY, TO ANY PERSON IN CONSIDERATION OF THE RENDERING OF ANY TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THROUGH T HE PROVISIONS OF SERVICES OF TECHNICAL OR OTHER PERSONAL) IF SUCH SERVICES (A) ARE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF THE RIGHT, PROPERTY OR INFORMATION FOR WHICH A PAYMENT DESCRIBE IN PARA NO. 3 IS RECEIVED OR (B) MAKE AVAILABL E TECHNICAL KNOWLEDGE, EXPRESSIONS, SKILL, KNOWHOW OR PROCESS, OR CONSIST OF THE DEVELOPMENT AND TRANSFER OF TECHNICAL PLAN OR TECHNICAL DESIGN WHICH ENABLES THE PERSON ACQUIRING THE SERVICES TO APPLY THE TECHNOLOGY CONTAINED THEREIN. THE MAIN PLANK OF TH E ARGUMENT OF THE LD. COUNSEL IS THAT CONSIDERING THE PRINCIPLE OF MOST FAVOURED NATION (MFN) CLAUSE IN TREATY BETWEEN INDIA AND PORTUGUESE UNLESS A CONDITION OF MAKE AVAILABLE THE TECHNICAL KNOWLEDGE OR ITA NO. 74 5 /PN/20 1 4 SANDVIK AB 7 SKILL OR SERVICES IS FULFILLED THEN SAID PAYMENT CAN NOT BE TAXED IN SOURCE COUNTRY I.E. INDIA. 10. IN THE CASE OF SANDVIK AUSTRALIA PTY. LTD. (SUPRA) AND FOLLOWING THE DECISION IN THE CASE OF M/S. DE BEERS INDIA MINERALS PVT. LTD. (SUPRA) ON THE EXPRESSION MAKE AVAILABLE IT IS HELD AS UNDER 12. THE ASSESSING OFFICER HAS ALREADY REPRODUCED ARTICLE 12 OF THE INDIA AUSTRALIA TREATY IN HIS DRAFT ASSESSMENT ORDER AND HE HAS INTERPRETED THAT AS PER THE TREATY FTS MEANS PAYMENT OF ANY KIND TO ANY PERSON IN CONSIDERATION FOR THE RENDERING OF ANY TECHNICAL OR CONSULTANCY SERVICES IF SUCH SERVICES MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW - HOW OR PROCESS OR CONSISTS OF DEVELOPMENT AND DATA OF TECHNICAL PLAN OR TECHNICAL DESIGN. IN VIEW OF THE ABOVE RENDERED BY THE ASSESSEE COMPANY TO ITS INDIA N AFFILIATES ARE IN THE NATURE OF FTS OR ROYALTIES AND SAME IS TAXABLE IN INDIA. WE REPRODUCE HEREIN UNDER THE RELEVANT PART OF ARTICLE 12: ARTICLE XII - ROYALTIES - 1. ROYALTIES ARISING IN ONE OF THE CONTRACTING STATES, BEING ROYALTIES TO WHICH A RESIDE NT OF THE OTHER CONTRACTING STATE IS BENEFICIALLY ENTITLED, MAY BE TAXED IN THAT OTHER STATE. 2. SUCH ROYALTIES MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH THEY ARISE, AND ACCORDING TO THE LAW OF THAT STATE, BUT THE TAX SO CHARGED SHALL NOT EXCEED : (A) IN THE CASE OF : (I) ROYALTIES REFERRED TO IN SUB - PARAGRAPH (3)(B) ; (II) PAYMENTS OR CREDITS FOR SERVICES REFERRED TO IN SUB - PARAGRAPH (3)(D), SUBJECT TO SUB - PARAGRAPHS (3)(H) TO (L), THAT ARE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR EN JOYMENT OF EQUIPMENT FOR WHICH PAYMENTS OR CREDITS ARE MADE UNDER SUB - PARAGRAPH (3)(B); OR (III) ROYALTIES REFERRED TO IN SUB - PARAGRAPH (3)(F) THAT RELATE TO EQUIPMENT MENTIONED IN SUB - PARAGRAPH (3)(B) ; 10 PER CENT OF THE GROSS AMOUNT OF THE ROYALTI ES; AND (B) IN THE CASE OF OTHER ROYALTIES : (I) DURING THE FIRST 5 YEARS OF INCOME FOR WHICH THIS AGREEMENT HAS EFFECT : (A) WHERE THE PAYER IS THE GOVERNMENT OR A POLITICAL SUB - DIVISION OF THAT STATE OR A PUBLIC SECTOR COMPANY: 15 PER CENT OF THE GR OSS AMOUNT OF THE ROYALTIES; AND (B) IN ALL OTHER CASES: 20 PER CENT OF THE GROSS AMOUNT OF THE ROYALTIES; AND (II) DURING ALL SUBSEQUENT YEARS OF INCOME: 15 PER CENT OF THE GROSS AMOUNT OF THE ROYALTIES. ITA NO. 74 5 /PN/20 1 4 SANDVIK AB 8 3. THE TERM ROYALTIES IN THIS ARTICLE MEANS PAYMENTS OR CREDITS, WHETHER PERIODICAL OR NOT, AND HOWEVER DESCRIBED OR COMPUTED, TO THE EXTENT TO WHICH THEY ARE MADE AS CONSIDERATION FOR : (A) THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT, PATENT, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, T RADE MARK OR OTHER LIKE PROPERTY OR RIGHT; (B) THE USE OF, OR THE RIGHT TO USE, ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT; (C) THE SUPPLY OF SCIENTIFIC, TECHNICAL, INDUSTRIAL OR COMMERCIAL KNOWLEDGE OR INFORMATION; (D) THE RENDERING OF ANY T ECHNICAL OR CONSULTANCY SERVICES (INCLUDING THOSE OF TECHNICAL OR OTHER PERSONNEL) WHICH ARE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF ANY SUCH PROPERTY OR RIGHT AS IS MENTIONED IN SUB - PARAGRAPH (A), OR ANY SUCH EQUIPMENT AS IS MENTIONED IN SUB - PARAGRAPH (B) OR ANY SUCH KNOWLEDGE OR INFORMATION AS IS MENTIONED IN SUB - PARAGRAPH (C); (E) THE USE OF, OR THE RIGHT TO USE : (I) MOTION PICTURE FILMS; (II) FILMS OR VIDEO TAPES FOR USE IN CONNECTION WITH TELEVISION; OR (III) TAPES FOR U SE IN CONNECTION WITH RADIO BROADCASTING; (F) TOTAL OR PARTIAL FORBEARANCE IN RESPECT OF THE USE OR SUPPLY OF ANY PROPERTY OR RIGHT REFERRED TO IN SUB - PARAGRAPHS (A) TO (E); (G) THE RENDERING OF ANY SERVICES (INCLUDING THOSE OF TECHNICAL OR OTHER PERSO NNEL), WHICH MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW - HOW OR PROCESSES OR CONSIST OF THE DEVELOPMENT AND TRANSFER OF A TECHNICAL PLAN OR DESIGN; BUT THAT TERM DOES NOT INCLUDE PAYMENTS OR CREDITS RELATING TO SERVICES MENTIONED IN SUB - PAR AGRAPHS (D) AND (G) THAT ARE MADE; (H) FOR SERVICES THAT ARE ANCILLARY AND SUBSIDIARY, AND INEXTRICABLY AND ESSENTIALLY LINKED, TO A SALE OF PROPERTY; (I) FOR SERVICES THAT ARE ANCILLARY AND SUBSIDIARY TO THE RENTAL OF SHIPS, AIRCRAFT, CONTAINERS OR O THER EQUIPMENT USED IN CONNECTION WITH THE OPERATION OF SHIPS OR AIRCRAFT IN INTERNATIONAL TRAFFIC; (J) FOR TEACHING IN OR BY AN EDUCATIONAL INSTITUTION; ITA NO. 74 5 /PN/20 1 4 SANDVIK AB 9 (K) FOR SERVICES FOR THE PERSONAL USE OF THE INDIVIDUAL OR INDIVIDUALS MAKING THE PAYMENTS OR C REDITS; OR (L) TO AN EMPLOYEE OF THE PERSON MAKING THE PAYMENTS OR CREDITS OR TO ANY INDIVIDUAL OR FIRM OF INDIVIDUALS (OTHER THAN A COMPANY) FOR PROFESSIONAL SERVICES AS DEFINED IN ARTICLE 14. 4. THE PROVISIONS OF PARAGRAPHS (1) AND (2) SHALL NOT APPLY IF THE PERSON BENEFICIALLY ENTITLED TO THE ROYALTIES, BEING A RESIDENT OF ONE OF THE CONTRACTING STATES, CARRIES ON BUSINESS IN THE OTHER CONTRACTING STATE, IN WHICH THE ROYALTIES ARISE, THROUGH A PERMANENT ESTABLISHMENT SITUATED THEREIN, OR PERFORMS IN T HAT OTHER STATE INDEPENDENT PERSONAL SERVICES FROM A FIXED BASE SITUATED THEREIN, AND THE PROPERTY, RIGHT OR SERVICES IN RESPECT OF WHICH THE ROYALTIES ARE PAID OR CREDITED ARE EFFECTIVELY CONNECTED WITH SUCH PERMANENT ESTABLISHMENT OR FIXED BASE. IN SUCH A CASE, THE PROVISIONS OF ARTICLE 7 OR ARTICLE 14, AS THE CASE MAY BE, SHALL APPLY. 5. ROYALTIES SHALL BE DEEMED TO ARISE IN A CONTRACTING STATE WHEN THE PAYER IS THAT STATE ITSELF OR A POLITICAL SUB - DIVISION OR LOCAL AUTHORITY OF THAT STATE OR A PERSON W HO IS A RESIDENT OF THAT STATE FOR THE PURPOSES OF ITS TAX. WHERE, HOWEVER, THE PERSON PAYING THE ROYALTIES, WHETHER THE PERSON IS A RESIDENT OF ONE OF THE CONTRACTING STATES OR NOT, HAS IN ONE OF THE CONTRACTING STATES OR OUTSIDE BOTH CONTRACTING STATES A PERMANENT ESTABLISHMENT OR FIXED BASE IN CONNECTION WITH WHICH THE LIABILITY TO PAY THE ROYALTIES WAS INCURRED, AND THE ROYALTIES ARE BORNE BY THE PERMANENT ESTABLISHMENT OR FIXED BASE, THEN THE ROYALTIES SHALL BE DEEMED TO ARISE IN THE STATE IN WHICH THE PERMANENT SHALL BE DEEMED TO ARISE IN THE STATE IN WHICH THE PERMANENT ESTABLISHMENT OR FIXED BASE IS SITUATED. 6. WHERE, OWING TO A SPECIAL RELATIONSHIP BETWEEN THE PAYER AND THE PERSON BENEFICIALLY ENTITLED TO THE ROYALTIES, OR BETWEEN BOTH OF THEM, AND SOME OTHER PERSON, THE AMOUNT OF THE ROYALTIES PAID OR CRED ITED, HAVING REGARD TO WHAT THEY ARE PAID OR CREDITED FOR, EXCEEDS THE AMOUNT WHICH MIGHT HAVE BEEN EXPECTED TO HAVE BEEN AGREED UPON BY THE PAYER AND THE PERSON SO ENTITLED IN THE ABSENCE OF SUCH RELATIONSHIP, THE PROVISIONS OF THIS ARTICLE SHALL APPLY ON LY TO THE LAST - MENTIONED AMOUNT. IN THAT CASE, THE EXCESS PART OF THE AMOUNT OF THE ROYALTIES PAID OR CREDITED SHALL REMAIN TAXABLE ACCORDING TO THE LAW, RELATING TO TAX, OF EACH CONTRACTING STATE, BUT SUBJECT TO THE OTHER PROVISIONS OF THIS AGREEMENT. 13 . WE ARE CONCERNED WITH PARA NO.3 OF ARTICLE 12, WHICH DEFINES THE TERM ROYALTY. UNDER THE IT ACT, THE TERM ROYALTY AND 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 IN CLUDED 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 TO THE ROOTS OF THE ISSUE. MAIN THRUST OF THE ARGUMENT OF THE LD. COUNSEL IS THAT IT IS NOT ONLY SUFFICIENT TO RENDER THE SERVICES BUT THE SAME SHOULD BE MADE AVAILABLE TO THE RECIPIENT AND THIS PARTICULAR IMPORTANT ASPECT IS MISSED BY THE DRP/TPO. WE FIND THAT THE EXPRESSION MAKING AVAILABLE IS VERY MUCH IMPORTANT TO DECIDE IN WHICH CONTRACTING S TATE ITA NO. 74 5 /PN/20 1 4 SANDVIK AB 10 THE AMOUNT RECEIVED FOR RENDERING THE SERVICES RELATING TO THE TECHNICAL KNOW - HOW IS TO BE TAXED. THE EXPRESSION MAKE AVAILABLE IS USED IN THE CONTEXT OF SUPPLYING OR TRANSFERRING TECHNICAL KNOWLEDGE OR TECHNOLOGY TO ANOTHER. IT IS DIFFERENT THAN THE MERE OBLIGATION OF THE PERSON RENDERING THE SERVICES OF THAT PERSONS OWN TECHNICAL KNOWLEDGE OR TECHNOLOGY IN PERFORMANCE OF THE SERVICES. THE TECHNOLOGY WILL BE CONSIDERED AS MADE AVAILABLE WHEN THE PERSON RECEIVING THE SERVICES IS ABLE TO APPLY THE TECHNOLOGY BY HIMSELF. 14. THE EXPRESSION MAKE AVAILABLE HAS COME FOR CONSIDERATION 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 W AS FOR THE CONSIDERATION OF THEIR LORDSHIPS. THE ASSESSEE IN THAT APPEAL WAS A PROVIDING COMPANY ENGAGED IN THE BUSINESS OF PROSPECTING AND MINING FOR DIAMONDS AND OTHER MINERALS. THEY HAVE BEEN GRANTED LICENCES (RECONNAISSANCE PERMITS) BY THE STATE GOVER NMENT OF KARNATAKA, ANDHRA PRADESH AND CHHATTISGARH. DURING THE EARLY STAGE, VARIOUS TECHNIQUES WERE EMPLOYED FOR THE PURPOSE OF CARRYING OUT GEOPHYSICAL SURVEY, THE ASSESSEE ENTERED INTO AGREEMENT WITH M/S.FUGRO ELBOCON B.V. NETHERLANDS, WHO HAD A TEAM O F EXPERTS SPECIALISED IN AIR BORNE GEOPHYSICAL SERVICES FOR CLIENTS. FOR THE TECHNICAL SERVICES RENDERED BY THEM THE SAID ASSESSEE HAD PAID CONSIDERATION. THE ASSESSING OFFICER APPLIED ARTICLE 12 OF THE INDO - 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 ARE ANALOGOUS TO ARTICLE 12 OF THE INDIA AUSTRALIA TREATY, AS EXPRESSION MAKE AVAILABLE IS ALSO USED WHILE DETERMINING FISCAL JURISDICTION OF T HE 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 APPEARING IN THE INDO - NETHERLANDS TREATY, THE LORDSHIPS EXPLAINED THE EXPRESSION AS UNDER: 13. UNDER THE ACT IF THE CONSIDERATION PAID FOR REN DERING TECHNICAL SERVICES CONSTITUTE INCOME BY WAY OF FEES FOR TECHNICAL SERVICES, IT IS TAXABLE. HOWEVER, ARTICLE 12 OF THE AFORESAID INDIA - NETHERLANDS TREATY DEFINES FEES FOR TECHNICAL SERVICES FOR THE PURPOSE OF ARTICLE 12 WHICH DEALS WITH ROYALTIES A ND FEES FOR TECHNICAL SERVICES. THE FEES FOR TECHNICAL SERVICES MEANS THE PAYMENT OF ANY AMOUNT TO ANY PERSON IN CONSIDERATION FOR RENDERING OF ANY TECHNICAL SERVICES ONLY, IF SUCH SERVICES MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERTISE, SKILL, KNOW - HOW OR PROCESSES. IF THE TECHNICAL KNOWLEDGE EXPERTISE, SKILL, KNOW HOW OR PROCESS IS NOT MADE AVAILABLE BY THE SERVICE PROVIDER, WHO HAS RENDERED TECHNICAL SERVICE FOR THE PURPOSE OF ARTICLE 12 OF DTAA IT WOULD NOT CONSTITUTE FEES FOR TECHNICAL SERVICES. TO T HAT EXTENT THE DEFINITION OF FEE FOR TECHNICAL SERVICES FOUND IN THE AGREEMENT IS INCONSISTENT WITH THE DEFINITION OF FEES FOR TECHNICAL SERVICES PROVIDED IN EXPLANATION 2 TO CLAUSE (VII) OF SUB - SECTION (1) OF SECTION 9. IN VIEW OF SECTION 90 THE DEFINITI ON 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 CLARIFIES THIS POSITION, WHERE THEY HAVE EXPLAINED THE MEANING OF THE W ORD MAKE AVAILABLE. ACCORDING TO THE AFORESAID DEFINITION FEES FOR TECHNICAL SERVICE MEANS PAYMENTS OF ANY KIND TO ANY PERSON IN CONSIDERATION FOR SERVICES OF TECHNICAL NATURE IF SUCH SERVICES MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW HOW ITA NO. 74 5 /PN/20 1 4 SANDVIK AB 11 OR PROCESSES WHICH ENABLES THE PERSON ACQUIRING THE SERVICE TO APPLY TECHNOLOGY CONTAINED THEREIN. THOUGH THIS PROVISION IS NOT CONTAINED IN INDIA NETHERLANDS TREATY, BUT VIRTUE OF PROTOCOL IN THE AGREEMENT, CLAUSE (IV)(2) READS AS UNDER: IF AFTER T HE SIGNATURE OF THIS CONVENTION UNDER ANY 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 OR PAYMENTS FOR THE USE OF EQUIPMENT TO A RATE LOWER OR A SCOPE MORE RESTRICTED THAN THE RATE OR SCOPE PROVIDED FOR IN THIS CONVENTION ON THE SAID ITEMS OF INCOME, THEN AS FROM THE DATE ON WHICH THE RELEVANT 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 WHICH EXPLICITLY MAKES IT CLEAR THE MEANING OF THE WORD MAKE AVAILABLE, THE SAID CLAUSE HAS TO BE APPLIED, AND TO BE READ INTO THIS AGREEMENT ALSO. THEREFORE, IT FOLLOWS THAT FOR ATTRACTING THE LIABILITY TO PAY TAX NOT ONLY THE SERVICES SHOULD BE OF TECHNICAL IN NATURE, BUT IT SHOULD BE MADE AVAILABLE TO THE PERSON RECEIVING THE TECHNICAL SE RVICES. THE TECHNOLOGY WILL BE CONSIDERED MADE AVAILABLE WHEN THE PERSON WHO RECEIVED SERVICE IS ENABLED TO APPLY THE TECHNOLOGY. THE SERVICE PROVIDER IN ORDER TO RENDER TECHNICAL SERVICES USES TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW HOW OR PROCES SES. TO ATTRACT THE TAX LIABILITY, THAT TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW HOW OR PROCESS WHICH IS KNOWLEDGE, EXPERIENCE, SKILL, KNOW HOW OR PROCESS WHICH IS USED BY SERVICE PROVIDER TO RENDER TECHNICAL SERVICE SHOULD ALSO BE MADE AVAILABLE TO THE RECIPIENT OF THE SERVICES, SO THAT THE RECIPIENT ALSO AC QUIRES TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW HOW OR PROCESSES SO AS TO RENDER SUCH TECHNICAL SERVICES. ONCE ALL SUCH TECHNOLOGY IS MADE AVAILABLE IT IS OPEN TO THE RECIPIENT OF THE SERVICE TO MAKE USE OF THE SAID TECHNOLOGY. THE TAX IS NOT DEPENDE NT ON THE USE OF THE TECHNOLOGY BY THE RECIPIENT. THE RECIPIENT AFTER RECEIVING OF TECHNOLOGY MAY USE OR MAY NOT USE THE TECHNOLOGY. IT HAS NO BEARING ON THE TAXABILITY ASPECT IS CONCERNED. WHEN THE TECHNICAL SERVICE IS PROVIDED, THAT TECHNICAL SERVICE IS TO BE 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 FOLLOW THAT HE IS MAKING USE OF THE TECHNOL OGY WHICH THE SERVICE PROVIDER UTILISES 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 PROVIDER HAD US ED. THEREFORE, UNLESS THE SERVICE PROVIDER MAKES AVAILABLE HIS TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW HOW OR PROCESS TO THE RECIPIENT OF THE TECHNICAL SERVICE, IN VIEW OF THE CLAUSES IN THE DTAA, THE LIABILITY TO TAX IS NOT ATTRACTED. 11. NOW, THE NEXT QUESTION IS WHETHER THE ASSESSEE IS ENTITLED FOR THE BENEFITS OF DTAA BETWEEN INDIA - PORTUGUESE AS SECOND CONDITION MAKE ITA NO. 74 5 /PN/20 1 4 SANDVIK AB 12 AVAILABLE IS NOT FULFILLED. THERE IS A PROTOCOL TO THE TREATY BETWEEN INDIA AND SWEDEN WHICH IS AS UNDER: AT THE SIGNING OF THE CO NVENTION BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE KINGDOM OF SWEDEN FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL, THE UNDERSIGNED HAVE AGREED THAT THE FOLLOWING SHALL FORM AN INTEGRAL PART OF THE 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 CONVENTION. AGREEMENT OR PROTOCOL BETWEEN INDIA AND A THIRD STATE WHICH IS A MEMBER OF THE OECD, INDIA LIMITS ITS TAXATION AT SOURCE ON DIVIDENDS, 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 CON VENTION ON THE SAID ITEMS OF INCOME, THE SAME RATE OR SCOPE AS PROVIDED FOR IN THAT CONVENTION, AGREEMENT OR PROTOCOL ON THE SAID ITEMS OF INCOME SHALL ALSO APPLY UNDER THIS CONVENTION. 11.1 AN MFN CLAUSE REFERS TO A SITUATION WHEREIN TWO NON - RESIDENT TA X PAYERS ARE GIVEN IMPARTIAL TREATMENT BY THE CONCERNED COUNTRY. IN DTAAS, MFN CLAUSE FIND PLACE WHEN COUNTRIES ARE RELUCTANT TO FOREGO THEIR RIGHT TO TAX SOME ELEMENTS OF THE INCOME. AN MFN CLAUSE CAN DIRECT MORE FAVOURABLE TREATMENT AVAILABLE IN OTHER TREATIES 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 TAKE CARE OF A SITUATION WHERE IN CASES EITHER OF THE CONTRACTING STATES ENTER INTO A BILATERAL AGREEMENT INTO THE NATURE OF DTAA WITH THE ANOTHER SOVEREIGN STATE AND WHERE THE SAME SUBJECT MATTER HAS BEEN GIVEN MORE FAVOURABLE TREATMENT BY WAY OF A DEFINITION OR MODE OF TAX THEN THE PARTIES MORE FAVOURABLE TREATMENT BY WAY OF A DEFINITION OR MODE OF TAX THEN THE PARTIES CAN CLAIM THE BENEFIT ON THE RECOGNIZED PRINCIPLE OF MFN CLAUSE. IN HIS INTRODUCTION TO DOUBLE TAXATION CONVENTIONS (THIRD 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. 11.2 IN THE CASE OF MARUTI UDYOG LTD., VS. ADIT REPORTED 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 BINDIN G FORCE AS THE MAIN 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 CLAUSES AND ARE SU BJECT 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 PROPERTY FROM UTAC FRANCE. THEREFORE, NONE OF THE FEES I.E., IMPACT TESTING FEES OR FEE PAID FOR TEST REPORTS IS ANCILLARY AND SUBSIDIARY AS WELL AS INEXTRICABLY AND ESSENTIALLY LINKED TO THE SALE OF A PROPERTY. THEREFORE, THE DECISION OF THE TRIBUNAL, CALCUTTA BENCH IN THE CASE OF DY. CIT VS. ITC LTD. (SUPRA) RELI ED UPON BY THE ASSESSEE IS NOT APPLICABLE TO THE FACTS OF THE CASE. IN THIS CASE THE ASSESSEE HAD PURCHASED MACHINES FROM UK AND PAYMENTS WERE MADE TO FOREIGN PARTY FOR INSTALLATION AND COMMISSIONING OF THE MACHINES. THE FOREIGN PARTY DID NOT HAVE ANY PE I N INDIA TO WHICH SUCH INCOME COULD BE ATTRIBUTED. IN THIS VIEW OF THE MATTER IT WAS HELD THAT THE PAYMENTS MADE TO FOREIGN PARTY FOR INSTALLATION AND ITA NO. 74 5 /PN/20 1 4 SANDVIK AB 13 COMMISSIONING OF THE MACHINES WERE RELATED TO TECHNICAL SERVICES, WHICH WERE ANCILLARY AND SUBSIDIARY AS W ELL AS INEXTRICABLY AND ESSENTIALLY LINKED TO THE SALE OF THE PROPERTY. HENCE, THE PAYMENTS MADE TO THE FOREIGN 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 WAS HELD THAT NO TECHNICAL KNOWLEDGE, EXPERIENCE, SKILLS, KNOW - HOW OR PROCESS ETC. WAS MADE AVAILABLE TO THE ASSESSEE COMPANY BY THE NON - RESIDENT MANAGERS OF THE GDR ISSUE WITHIN THE MEANING OF ART. 13(4)(C) OF THE DTAA. LIKEWISE, DECISIONS IN THE CASES OF SKY CELL COMMUNICATIONS LTD. (SUPRA) AND NQA QUALITY SYSTEMS REGISTRAR LTD. (SUPRA) ARE DISTINGUISHABLE ON FACTS, HENCE, ARE NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. 11.3 IT IS ALSO WORTHWHILE TO REFER TO THE RULING GIVEN IN THE CASE OF AUTHORITY FOR ADVANCED RULING (AAA) IN THE CASE OF POONAVALA AVIATIONS REPORTED IN 343 ITR 381 THOUGH IT IS HAVING PERSUASIVE VALUE WHICH READS AS UNDER : 16. IN HIS INTRODUCTION TO DOUBLE TAXATION CONVENTIONS (THIRD EDITION), KLAUS VOGEL, HAS CLARIFIED THE ROLE OF A PROTOCOL AND ITS ROLE IN INTERPRETING A TREATY. HE SAYS, 'PROTOCOLS AND IN SOME CASES OTHER COMPLETING DOCUMENTS ARE FREQUENTLY ATTACHED TO TREATIES. SUCH DOCUMENTS ELABORATE AND COMPLETE THE TEXT OF A TREATY, SOMETIMES EVEN ALTERING THE TEXT. LEGALLY T HEY ARE A PART OF THE TREATY, AND THEIR BINDING FORCE IS EQUAL TO THAT OF THE PRINCIPAL TREATY TEXT. WHEN APPLYING A TAX TREATY, THEREFORE, IT IS NECESSARY CAREFULLY TO EXAMINE THESE ADDITIONAL DOCUMENTS'. A PROTOCOL IS SAID TO BE A TREATY BY ITSELF THAT A MENDS OR SUPPORTS THE EXISTING TREATY. WE CANNOT ALSO FORGET THE OBSERVATIONS OF THE SUPREME COURT IN UNION OF INDIA VS. AZADI BACHAO ANDOLAN (2003) 184 CTR (SC) 450 : (2003) 263 ITR 706 (SC) AT P. 751 THAT 'AN IMPORTANT PRINCIPLE WHICH NEEDS TO BE KEPT IN MIND IN THE INTERPRETATION OF THE PROVISIONS OF AN INTERNATIONAL TREATY, INCLUDING ONE FOR DOUBLE OF THE PROVISIONS OF AN INTERNATIONAL TREATY, INCLUDING ONE FOR DOUBLE TAXATION RELIEF, IS THAT TREATIES ARE NEGOTIATED AND ENTERED INTO AT A POLITICAL LEVEL AND HAVE SEVERAL CONSIDERATIONS AS THEIR BASES'. SO THE ARGUMENT OF TH E 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 CONCERNED, ON THE BASIS OF THE PROTOCOL TO THE DTAA BETWEEN THE INDIA AND SWEDEN THE ASSESSEE CAN CLAIM TH E BENEFIT OF THE CONDITIONS IMPOSED FOR BRINGING TO TAX THE FEES FOR TECHNICAL SERVICES IN THE TREATY BETWEEN THE INDIA AND PORTUGUESE. WE, THEREFORE, HOLD THAT ON THE PRINCIPLE OF THE MOST FAVOURED NATION (MFN) CLAUSES THE PAYMENT OF RS.5.93 CRORES RECEI VED BY THE ASSESSEE COMPANY FROM ITS INDIAN SUBSIDIES CANNOT BE BROUGHT TO TAX. WE, THEREFORE, ALLOW THE GROUNDS TAKEN BY THE ASSESSEE ON THE ABOVE REASONS. 9. THE TRIBUNAL FURTHER IN ASSESSMENT YEAR 2008 - 09 VIDE ORDER DATED 22.05.2015 FOLLOWED ITS EARL IER ORDER. FOLLOWING THE ABOVE SAID PARITY OF REASONING, WHERE THE ISSUE RAISED IS IDENTICAL IN ASSESSMENT YEARS 2007 - 08 AND 2008 - 09 , WHICH WAS ADJUDICATED BY THE TRIBUNAL VIDE SEPARATE ORDERS AND IN VIEW OF THE CIT(A) PLACING RELIANCE ON THE OBSERVATIONS OF DRP IN ASSESSMENT ITA NO. 74 5 /PN/20 1 4 SANDVIK AB 14 YEAR 2007 - 08, WE HOLD THAT THE ISSUE IS SQUARELY COVERED BY THE SEPARATE ORDERS OF TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEARS 2007 - 08 AND 2008 - 09 . FOLLOWING THE SAME PARITY OF REASONING, WE REVERSE THE ORDER OF CIT( A) AND ALLOW THE CLAIM OF THE ASSESSEE AND HOLD THAT ON THE PRINCIPLE OF MOST FAVOURED NATION CLAUSES, THE PAYMENT OF RS. 4,85,82,800/ - RECEIVED BY THE ASSESSEE COMPANY FROM ITS INDIAN SUBSIDIARY COULD NOT BE BROUGHT TO TAX . T HEREFORE, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED . 1 0 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 19 TH DAY OF FEBRU ARY , 201 6 . SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 19 TH FEBR UARY , 201 6 . / PUNE ; DATED : 19 TH FEBR UARY , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE AP PELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - V , PUNE ; 4. / THE CIT - V, PUNE ; 5. , , / DR A , ITAT, PUNE; / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE