M/s. Faurecia Automotive Holding, Pune V. Deputy Commissioner of Income-tax,

ITA 784/PUN/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9249 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 01-07-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 28-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief; Advance ruling; Question of law; TDS
• Section: 28; 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH C, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER . / ITA NO.784/PUN/2015 / ASSESSMENT YEAR : 2011-12 M/S.FAURECIA AUTOMOTIVE HOLDING, PLOT NO.T-187, PIMPRI INDUSTRIAL AREA (B.G.BLOCK), BEHIND BHOSARI POLICE STATION, BHOSARI, PUNE 411 026 PAN : AABFG6351K VS. DCIT, INTERNATIONAL TAXATION, CIRCLE-1, PUNE (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : IN THIS APPEAL, CHALLENGE IS LAID TO THE FINAL ASSESSMENT ORD ER DATED 30-03-2015 PASSED BY THE ASSESSING OFFICER (AO) U /S.143(3) READ WITH SECTION 144C(13) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED THE ACT) IN RELATION TO THE ASSESSMEN T YEAR 2011-12. APPELLANT BY SHRI NARESH KUMAR RESPONDENT BY SHRI AVADHESH KUMAR DATE OF HEARING 03-07-2019 DATE OF PRONOUNCEMENT 08-07-2019 ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 2 I. REIMBURSEMENT OF COST WHETHER TAXABLE AS FEES FOR TECHNICAL SERVICES (FTS)? 2. THE FIRST ISSUE IS AGAINST THE INCLUSION OF A SUM OF RS.47,30,250/- IN THE TOTAL INCOME OF THE ASSESSEE. 3. SUCCINCTLY, THE FACTUAL MATRIX OF THE CASE IS THAT THE ASSE SSEE COMPANY IS A TAX RESIDENT OF FRANCE. IT IS ENGAGED IN DESIG NING AND BUILDING DASHBOARDS, DOOR PANELS, FLOOR COVERINGS, SOUND PROOFING & INSULATION INSTALLATIONS AND OTHER MOULDED PLASTIC PARTS FOR PASSENGER CAR INTERIORS. THE ASSESSEE FILED ITS RETURN DEC LARING NIL INCOME. ON PERUSAL OF THE RETURN, THE AO OBSERVED THAT A SUM OF RS.47,30,250/- RECEIVED BY THE ASSESSEE FROM FAURECIA T ECHNOLOGY CENTER INDIA LIMITED (HEREINAFTER CALLED `FAURECIA INDIA O R `INDIAN ENTITY AND ALSO INCLUDES REFERENCE TO ITS EARLIER NAME OR ITS PREDECESSOR COMPANY) WAS NOT OFFERED FOR TAXATION. ON BEING CALLED UPON TO EXPLAIN THE REASONS FOR NON-INCLUSION OF SUC H AMOUNT IN THE TOTAL INCOME, THE ASSESSEE STATED THAT THIS AMOUNT WAS IN THE NATURE OF REIMBURSEMENT OF EXPENSES RECEIVED FROM THE INDIAN ENTITY WHICH WAS NOT CHARGEABLE TO TAX. THE ASSESSEE STATED THAT IT RECEIVED A SUM OF RS. 47.30 LAKH BY WAY OF REIMBU RSEMENT OF SALARY COST OF EXPATRIATE, MR. FRANCK EUVRARD, WHO WAS ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 3 SECONDED TO THE INDIAN ENTITY. IT WAS EXPLAINED THAT AS PER TH E SECONDMENT AGREEMENT, MR. FRANCK WAS TO RENDER SERVICES TO THE INDIAN ENTITY. A SUM OF RS.47.30 LAKH FROM HIS SALARY WAS PAID IN FRANCE DIRECTLY BY THE ASSESSEE COMPANY, WHICH WAS LATER ON REIMBURSED BY THE INDIAN ENTITY WITHOUT ANY MARK UP. NOT CONVINCED, THE AO HELD THAT THE ASSESSEE PROVIDED TECHNICAL SERVICES THROUGH ITS STAFF AND HENCE, THE AMOUNT WAS LIABLE TO BE CONSIDERED AS FEES FOR TECHNICAL SERVICES IN TERMS OF SEC TION 9(1)(VII) OF THE ACT. THE ASSESSEE REMAINED UNSUCCESSF UL BEFORE THE DISPUTE RESOLUTION PANEL (DRP) AS WELL, WHICH OPINED THAT MR . FRANCK EUVRARD MADE AVAILABLE HIS TECHNICAL KNOWLEDGE, EXPERIENCE AND SKILL ETC. TO THE INDIAN ENTITY WHICH WAS OF AN ENDURING NATURE. IT WAS, THEREFORE, HELD THAT SUCH AMOUNT WAS IN THE NATURE OF FEES FOR TECHNICAL SERVICES COVERED U/S. 9( 1)(VII) OF THE ACT AND ALSO ROYALTY UNDER ARTICLE 13 OF THE DOUBLE TAXA TION AVOIDANCE AGREEMENT BETWEEN INDIA AND FRANCE (HEREINAFTER ALSO CALLED `THE DTAA). THE AO IN THE FINAL ASSESSMENT ORDER INCLUDED THIS SUM IN THE TOTAL INCOME OF THE ASSESSEE, AGAINST WHICH THE ASSESSEE HAS APPROACHED THE TRIBUNAL. ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 4 4.1. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE R ELEVANT MATERIAL ON RECORD. IN ORDER TO REACH A PROPER CONCLUS ION AS TO WHETHER THE AMOUNT RECEIVED BY THE ASSESSEE IS IN THE NATU RE OF `FEES FOR TECHNICAL SERVICES AS HELD BY THE DEPARTMENT O R A SIMPLE REIMBURSEMENT OF EXPENSES NOT CHARGEABLE TO TAX, AS CANV ASSED BY THE ASSESSEE, IT WOULD BE WORTHWHILE TO FIRST UNDERSTAND THE N ATURE OF TRANSACTION. MR. FRANCK EUVRARD WAS OFFERED THE POS ITION OF CHIEF EXECUTIVE OFFICER (CEO) OF TACO FAURECIA DESIGN CENTE R PVT. LTD. BY A LETTER ISSUED BY THE CHAIRMAN OF THE INDIAN E NTITY ON 10-04-2006, WHOSE COPY IS AVAILABLE AT PAGE 322 OF THE PA PER BOOK. IN THIS LETTER, THERE IS A REFERENCE TO THE `OFFER O F APPOINTMENT TO MR. FRANCK EUVRARD, WHOSE COPY IS AVAILA BLE AT PAGE 323 OF THE PAPER BOOK. AS PER SUCH OFFER, THE I NDIAN ENTITY WAS PLEASED TO APPOINT MR. FRANCK EUVRARD AS ITS CEO FROM 01-06-2006 TO 30-06-2008 ON THE TERMS AND CONDITIONS SET O UT THEREIN. THERE IS REFERENCE TO SOME AMOUNT OF BASIC SALARY , HOUSING ASSISTANCE, CONVEYANCE ALLOWANCE, CHILD EDUCATION ALLOWANCE AND SPECIAL ALLOWANCE ETC. PARA 13 OF THIS LETTER STATE S THAT: YOU WILL BE REQUIRED TO BECOME A MEMBER AND WILL BE ENTITLED TO THE BENEFITS OF THE PROVIDENT FUND AND SUPERANNUATION SCHEMES OF THE COMPANY. PARA 14 STATES THAT: YOU SHALL B E ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 5 ENTITLED TO LEAVE IN ACCORDANCE WITH THE RULES OF THE COMPANY . LAST PARA OF THE OFFER STATES THAT: YOUR ASSIGNMENT ENTAILS MANAGEMENT/ ADMINISTRATIVE/ SUPERVISORY RESPONSIBILITIES. BEFORE EXPIRY OF THE TERM ON 30-06-2008, MR. FRANCK EU VRARD WAS REQUESTED TO EXTEND HIS SERVICES AS CEO OF THE INDIAN ENTITY FROM 01-06-2008 TO 31-05-2009 ON THE SAME TERMS AND CONDITIONS EXCEPT FOR HIKE IN SALARY AND OTHER ALLOWANCES. ON 06-04 -2009, MR. FRANCK EUVRARD WAS ONCE AGAIN REQUESTED TO EXTEND HI S SERVICES AS CEO OF THE COMPANY UP TO 31 ST MAY, 2010, WHICH WAS ONCE AGAIN RENEWED ON 02-02-2010 FOR A PERIOD UP TO 31 -05-2011. IN THE LAST OFFER LETTER, IT HAS BEEN MENTIONED THAT ALL OTHER CONDITIONS OF HIS CONTRACT REMAIN UNCHANGED. ON GOING THROU GH THE ABOVE DOCUMENTS, IT EMERGES THAT MR. FRANCK EUVRARD WAS APPOINTED BY THE INDIAN ENTITY AS ITS CEO WAY BACK IN THE YEA R 2006 AND THEREAFTER HE GOT EXTENSION FROM TIME TO TIME. IT IS AN ADMITTED POSITION THAT IN NONE OF THE EARLIER YEARS, THE REIMBURSEMENT HAS BEEN TAXED IN THE HANDS OF THE ASSESSE E. THE CASE OF THE ASSESSEE IS THAT THE INDIAN ENTITY EMPLOYED MR. F RANCK EUVRARD ON MONTHLY SALARY AND A PART OF SUCH SALARY, NAM ELY, A SUM OF RS.47.30 LAKH WAS PAID DIRECTLY BY THE ASSESSEE TO MR. FRANCK EUVRARD IN FRANCE DURING THE YEAR, WHICH WAS LATER ON REIM BURSED ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 6 BY FAURECIA INDIA WITHOUT ANY MARK-UP. ON THE CONTRARY, THE REVENUE HAS MADE OUT A CASE THAT THE ASSESSEE RENDERED MANAGERIAL, CONSULTANCY OR TECHNICAL SERVICES TO FAURECIA IN DIA AND HENCE, SUCH A SUM OF RS.47.30 LAKH PAID AS A QUID PRO QUO REPRESENTS FEES FOR TECHNICAL SERVICES COVERED U/S. 9(1) (VII) OF THE ACT AND CONSEQUENTLY CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE COMPANY. 4.2. WE NEED TO HAVE A LOOK AT SECTION 9 OF THE ACT. SUB- SECTION (1) OF SECTION 9 DEEMS CERTAIN INCOMES TO ACCRUE OR ARISE IN INDIA. THIS SUB-SECTION HAS SEVEN CLAUSES. CLAUSE (VII) OF SECTION 9(1) IS INCOME BY WAY OF FEES FOR TECHNICAL SERVICES PAYABLE, INTER ALIA, BY A RESIDENT. MEANING OF THE TERM `FEES FOR TECHNICAL SERV ICES HAS BEEN ENSHRINED IN EXPLANATION 2 WHICH READS AS UNDER: - `FOR THE PURPOSES OF THIS CLAUSE, 'FEES FOR TECHNICAL SERVIC ES' MEANS ANY CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGERIAL, 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 PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD 'SALARIES' . ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 7 4.3. ON GOING THROUGH THE PRESCRIPTION OF THE ABOVE EXPLAN ATION, IT TRANSPIRES THAT ANY CONSIDERATION FOR RENDERING OF MANAGER IAL, TECHNICAL OR CONSULTANCY SERVICES INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL IS FEES FOR TECHNIC AL SERVICES. IN THE PRESENT CONTEXT, IF A NON-RESIDENT PRO VIDES MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES EITHER DIRECTLY O R THROUGH ITS TECHNICAL OR OTHER PERSONNEL, THEN CONSIDERATION F OR THE SAME WILL BE CONSIDERED AS FEES FOR TECHNICAL SERVICES IN ITS HANDS. THE LATTER PART OF THE EXPLANATION CARVES OUT AN EXCEPTION WHIC H STATES, INTER ALIA, THAT ANY AMOUNT RECEIVED AS FEES FOR TECHNICAL SERVICES WITHIN ITS DEFINITION SHALL NOT BE CONSIDERED AS FEES FO R TECHNICAL SERVICES IF THE CONSIDERATION IS INCOME OF THE RECIP IENT CHARGEABLE UNDER THE HEAD SALARIES. NITTY-GRITTY OF THE RELE VANT PART OF THE EXPLANATION IS THAT ANY CONSIDERATION RECEIVED BY A NON- RESIDENT FROM RENDITION OF MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES SHALL BE CONSIDERED AS FEES FOR TECHNICAL SERVICES . IF HOWEVER, SUCH AN AMOUNT IN THE HANDS OF RECIPIENT IS CHARG EABLE TO TAX UNDER THE HEAD `SALARIES, THEN IT WOULD SHED THE CHARAC TER OF `FEES FOR TECHNICAL SERVICES. ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 8 4.4. WE HAVE NOTICED SUPRA THAT MR. FRANCK EUVRARD WAS ENGAGED BY FAURECIA INDIA AS ITS CEO. LIKE ANY OTHER EMPLOYEE, HIS REMUNERATION WAS DIRECTLY FIXED BY THE INDIAN ENTITY WHICH INCLUDED BASIC SALARY, HOUSE RENT ALLOWANCE, OTHER ALLOWANCE S ETC. HE WAS ALSO ENTITLED TO THE PROVIDENT FUND AND SUPERANNUATION BENEFITS. IT IS NEITHER THE CASE OF THE REVENUE NOR ANY M ATERIAL HAS BEEN BROUGHT ON RECORD BY THE LD. DR TO DEMONSTRATE THAT MR . FRANCK EUVRARD WAS ACTUALLY WORKING UNDER CONTROL, SUPER VISION OR DIRECTION OF THE ASSESSEE AND NOT FAURECIA INDIA. THE INDIA N ENTITY DEDUCTED TAX AT SOURCE FROM TOTAL SALARY PAID TO M/S. FRANCK EUVRARD, WHICH ALSO INCLUDED THE AMOUNT WHICH WAS INITIALLY PAID BY THE ASSESSEE IN FRANCE BUT LATER ON REIMBURSED BY FAURE CIA INDIA ON COST TO COST BASIS, WHICH CONSTITUTES FILAMENT OF THE EXTANT CONTROVERSY. A COPY OF FORM 26AS, BEING, TDS CERTIFICATE IN RELATION TO MR. FRANCK EUVRARD, HAS BEEN PLACED AT PAGE 3 33 ONWARDS OF THE PAPER BOOK, WHICH EVIDENCES DEDUCTION OF TAX AT SOURCE FROM HIS TOTAL SALARY. A COPY OF STATEMENT OF TOTAL INC OME OF MR. FRANCK EUVRARD IS AVAILABLE AT PAGE 332 OF THE P APER BOOK, WHICH SPECIFICALLY MAKES A MENTION OF SALARY RECEIVED FROM FAURECIA INDIA AND THE ASSESSEE. THEN THERE IS INCOME TA X RETURN OF MR. FRANCK EUVRARD, WHOSE COPY IS AVAILABLE AT PAGE 331 OF THE ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 9 PAPER BOOK WHICH AGAIN INCLUDES SALARY RECEIVED FROM FAURE CIA INDIA AND ALSO THE PART OF SALARY RECEIVED FROM THE ASSESS EE THAT WAS LATER ON REIMBURSED TO IT WITHOUT ANY PROFIT ELEMENT. ENTIRE AMOUNT WAS OFFERED TO TAX UNDER THE HEAD `SALARIES. ON G OING THROUGH THE ABOVE FACTUAL PANORAMA OF THE CASE, IT BECOMES OSTENSIBLE THAT A SUM OF RS.47.30 LAKH WHICH WAS INITIALLY PAID B Y THE ASSESSEE TO MR. FRANCK EUVRARD AS A PART OF SALARY P AYABLE BY FAURECIA INDIA IN TERMS OF HIS EMPLOYMENT WITH THE INDIAN ENTITY , HAS BEEN ASSESSED TO TAX UNDER THE HEAD SALARIES IN THE HANDS OF MR. FRANCK EUVRARD. 4.5. WE HAVE NOTICED ABOVE THAT THE SECOND EXCEPTION IN THE DEFINITION OF `FEES FOR TECHNICAL SERVICES UNDER THE EXPLANATIO N STATES THAT THE CONSIDERATION WOULD CEASE TO BE FEES FOR TECHN ICAL SERVICES IF IT IS INCOME OF THE ` RECIPIENT CHARGEABLE UNDER THE HEAD `SALARIES. WHAT IS VITAL TO NOTE WITH REFERENCE TO THE WORD `RECIPIENT IN THE PROVISION IS THE REAL RECIPIENT AND NOT THE LITERAL RECIPIENT . IF AN AMOUNT IS PAID BY AN INDIAN ENTITY APPARENTLY TO AN EXPATRIATE OF A NON-RESIDENT ENTITY, BUT THE REAL RECIPIENT BEHIND THE CURTAIN IS NON-RESIDENT ENTITY, THEN THE NATURE OF AMOUNT FROM THE ANGLE OF TAXABILITY WOULD BE VIEWED IN THE HANDS OF THE REAL ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 10 RECIPIENT , THAT IS, NON-RESIDENT ENTITY. AU CONTRAIRE, IF THE REAL RECIPIENT IS THE EXPATRIATE IN HIS OWN RIGHT BECAUSE OF HIS EMP LOYER- EMPLOYEE RELATIONSHIP WITH THE INDIAN ENTITY, BUT IN A GIVEN SITUATION, THE NON-RESIDENT ENTITY JUST ACTS AS A POST OFFICE IN P AYING SOME AMOUNT TO THE EXPATRIATE AND THEN RECEIVING IT BACK FROM THE INDIAN ENTITY ON COST-TO-COST BASIS, THEN THE NATURE OF AMOUN T FROM THE ANGLE OF TAXABILITY WITHIN THE SECOND PROVISO IN THE EXPLANATIO N WOULD HAVE TO BE VIEWED IN THE HANDS OF THE REAL RECIPIENT , THAT IS, THE EXPATRIATE AND NOT THE NON-RESIDENT ENTITY. 4.6. WHILE GOING THROUGH THE FACTUAL DETAILS OF THE CASE, W E HAVE FOUND OUT ABOVE THAT MR. FRANCK EUVRARD WAS ENGAGED BY THE INDIAN ENTITY AS ITS OWN EMPLOYEE, SUBJECT TO ALL THE TERMS AND CONDITIONS OF ITS OWN EMPLOYMENT. THERE IS NOTHING LIKE ANY CLOA K IN THE ARRANGEMENT UNDER WHICH THE REAL RECIPIENT OF THE AMOU NT HAS BEEN SUPPRESSED AND A FAADE HAS BEEN SHOWN. ON CE MR. FRANCK EUVRARD HAS BEEN FOUND TO BE THE REAL RECIPIENT, THE CHARGEABILITY OF THE AMOUNT HAS TO BE SEEN IN HIS HANDS ONLY. ONCE THE AMOUNT PAID BY THE INDIAN ENTITY IS AND HAS BEEN ACTUALLY CHARGED TO TAX UNDER THE HEAD `SALARIES IN THE HANDS OF REAL RECIPIENT , THAT IS, THE EXPATRIATE IN THE PRESENT CASE, THEN GOING BY ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 11 THE COMMAND OF THE SECOND EXCEPTION IN THE EXPLANATION, THE S AME CANNOT BE TREATED AS `FEES FOR TECHNICAL SERVICES IN THE HA NDS OF THE NON-RESIDENT ENTITY. 4.7. MORE SIGNIFICANTLY, IN ORDER TO FALL WITHIN THE DOMAIN OF SECTION 9(1)(VII), IT IS ESSENTIAL THAT THE AMOUNT PAYABLE BY THE INDIAN RESIDENT TO THE NON-RESIDENT SHOULD BE FOR RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES. IN OTHER WO RDS, THE NON-RESIDENT SHOULD PROVIDE SUCH MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES. IF THE SERVICES ARE NOT RENDERED B Y A NON- RESIDENT EITHER THROUGH ITS EMPLOYEES OR OTHER PERSONNEL, TH EN THE QUESTION OF FALLING ANY CONSIDERATION WITHIN THE PURVIEW OF SECTIO N 9(1)(VII), DOES NOT ARISE. HERE, WE ARE CONFRONTED WITH A SITUATION IN WHICH MR. FRANCK EUVRARD WAS EMPLOYED BY FAURECIA INDIA AS ITS CEO. IT IS NOT AS IF MR. FRANCK EUVRARD WAS RENDERIN G SERVICES TO FAURECIA INDIA ON BEHALF OF THE ASSESSEE FOR WHICH THE A MOUNT IN DISPUTE WAS RECEIVED BY THE ASSESSEE COMPANY. RATHER, I T IS A CASE OF MR. FRANCK EUVRARD WORKING AS AN EMPLOYEE OF FAURECIA INDIA. THE ASSESSEE HAD NO ROLE TO PLAY IN THE RENDITION OF SERVICE S BY MR. FRANCK EUVRARD TO FAURECIA INDIA, EXCEPT THAT A PART OF SA LARY PAYABLE BY THE INDIAN ENTITY WAS INITIALLY PAID BY THE ASSESSEE IN ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 12 FRANCE TO MR. FRANCK EUVRARD, WHICH WAS LATER ON RECOVER ED WITHOUT ANY PROFIT ELEMENT. THUS, IT IS HELD THAT THE SUM OF RS.47.30 LAC RECEIVED BY THE ASSESSEE FROM FAURECIA INDIA IS NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES U/S.9(1)(VII) OF T HE ACT. 4.8. IT IS FURTHER RELEVANT TO NOTE THAT THE ASSESSEE CONTEND ED BEFORE THE AUTHORITIES BELOW THAT THE SUM OF RS.47.30 LAKH INITIALLY PAID BY IT TO MR. FRANCK EUVRARD IN FRANCE WAS REIMBURSE D AS SUCH BY FAURECIA INDIA WITHOUT ANY PROFIT ELEMENT. SUCH A CONTENTION OF THE ASSESSEE OF REIMBURSEMENT OF THE AMOUNT ON COST-TO-C OST BASIS HAS NOT BEEN CONTROVERTED BY THE AO. IN SUCH CIRCUMSTAN CES, A QUESTION ARISES AS TO WHETHER REIMBURSEMENT OF EXPENSES WITHOUT ANY PROFIT ELEMENT CONSTITUTES INCOME IN THE HANDS OF THE NON- RESIDENT? 4.9. THE LD. DR RELIED ON THE JUDGMENT OF HONBLE DELHI HIG H COURT IN CENTRICA INDIA OFFSHORE PVT. LTD. VS. CIT (2014) 364 ITR 336 (DELHI) TO BRING HOME HIS POINT OF VIEW OF TAXABILITY OF THE AMOUNT DESPITE BEING REIMBURSEMENT. HE FURTHER PUT FORTH THAT SLP FILED BY THE ASSESSEE IN THAT CASE HAS SINCE BEEN DISMISS ED BY THE HONBLE SUPREME COURT IN (2014) 227 TAXMAN 368 (SC). ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 13 4.10. WE HAVE GONE THROUGH THE FACTS OF THE CASE OBTA INING IN CENTRICA INDIA (SUPRA). THE ASSESSEE THEREIN CONTENDED THAT PAYMENT TO FOREIGN PARTY TOWARDS SECONDED EMPLOYEES WAS ONLY REIMBURSEMENT AND HENCE, NO INCOME WAS CHARGEABLE TO TA X IN ITS HANDS. THE AUTHORITY FOR ADVANCE RULING (AAR) HELD THAT PAYMENT MADE BY THE PETITIONER TO THE OVERSEAS ENTITY WAS IN THE NATURE OF INCOME IN VIEW OF THE EXISTENCE OF SERVICE PERMANEN T ESTABLISHMENT (PE) IN INDIA AND HENCE LIABLE FOR TAX WITHHOLDING. OVERTURNING THE VIEW OF THE AAR THAT SERVICE PE WAS CONSTITUTED, THE HONBLE HIGH COURT HELD THAT THE PAYMENT TO AE WAS IN THE NATURE OF `FEES FOR TECHNICAL SERVICES AND NOT REIMBURSE MENT OF EXPENSES AND FURTHER LAID DOWN THAT THE NOMENCLATURE OF REIMBURSEMENT WAS NOT DECISIVE. IT NOTED THAT: MONEY PAID BY ASSESSEE TO OVERSEAS ENTITY ACCRUES TO OVERSEAS ENTITY, WHICH MAY OR MAY NOT APPLY IT FOR PAYMENT TO SECONDEES, BASED ON ITS CONTRACTUAL RELATIONSHIP WITH THEM. IT IS PERCEPTIBLE THAT IN THAT CASE MONEY PAID BY THE INDIAN ENTITY ACCRUED TO OVERSEAS ENTITIES ONLY, WHICH COULD OR COULD NOT HAVE BEEN PAID TO THE SECON DEES DEPENDING UPON THE TERMS OF CONTRACT. PER CONTRA, WE ARE CONFRONTED WITH A SITUATION WHEREIN THE MONEY NEVER ACCRUED TO THE ASSESSEE. IT INITIALLY PAID MONEY TO MR. FRANCK IN ADVANCE A ND THEN ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 14 RECOVERED THE SAME FROM THE INDIAN ENTITY WITHOUT ANY MARK-U P. THERE CAN BE NO QUESTION OF THE ASSESSEE RECEIVING MONEY IN ITS OWN INDEPENDENT RIGHT. RATHER, IT IS A CASE OF DISCHARGE B Y THE INDIAN ENTITY OF ITS OWN LIABILITY TOWARDS SALARY PAYABLE TO MR. FRANCK. IT IS THUS MANIFEST THAT THIS DECISION HAS NO APPLICATION TO THE FACTS OF THE INSTANT CASE. 4.11. IN THE OPPUGNATION , THE HONBLE SUMMIT COURT IN DIT (INTERNATIONAL TAXATION) VS. A.P. MOLLAR MAERSK A.S. (2017) 392 ITR 186 (SC) HAS HELD THAT THE PAYMENT MADE WAS IN THE NATURE OF REIMBURSEMENT OF EXPENSES AND HENCE COULD NOT BE CONSTR UED AS INCOME CHARGEABLE TO TAX IN THE HANDS OF RECIPIENT. SIMILAR V IEW HAS BEEN CANVASSED BY THE HONBLE JURISDICTIONAL HIGH COURT IN DIT(I.T.) VS. WIZCRAFT INTERNATIONAL ENTERTAINMENT PVT. LTD. (201 4) 364 ITR 227 (BOM.) BY HOLDING THAT: `PAYMENTS WERE REIMBURSEMENT OF EXPENSES AND ASSESSEE WAS NOT OBLIGED TO DEDUCT TDS ON COMMISSION PAID TO AGENT. 4.12. IN VIEW OF THE FOREGOING DISCUSSION, WE ARE O F THE CONSIDERED OPINION THAT THE SUM OF RS.47,30,250/- RECEIVE D BY THE NON-RESIDENT ASSESSEE FROM THE INDIAN ENTITY IS NOT CHARGEAB LE TO TAX IN ITS HANDS AS THE SAME IS IN THE NATURE OF REIMBURSEME NT OF ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 15 COST AND DOES NOT FALL WITHIN THE PURVIEW OF `FEES FOR TECHN ICAL SERVICES U/S. 9(1)(VII) OF THE ACT. WE, THEREFORE, OVER TURN THE IMPUGNED ORDER ON THIS SCORE AND ORDER TO DELETE THE ADDITIO N. II. CONSIDERATION FOR TECHNICAL & MANAGERIAL SERVICES- WHETHER ROYALTY OR FTS? 5. THE ASSESSEE HAS RAISED AN ADDITIONAL GROUND CHALLENGIN G THE TAXABILITY OF RS.2,66,72,222/- TOWARDS RECEIPT OF SUPPORT SER VICES IN ITS HANDS. 6. HAVING GONE THROUGH THE SUBJECT MATTER OF THE ADDITIONAL GROUND TAKEN BY THE ASSESSEE, IT IS DISCERNIBLE THAT THE SAME IS A LEGAL GROUND INVOLVING ADJUDICATION ON QUESTION OF LAW. THE HONBLE SUPREME COURT IN NATIONAL THERMAL POWER COMPANY LTD. VS. CIT (1998) 229 ITR 383 (SC) HAS OBSERVED THAT THE PURPOSE OF THE ASSESSMENT PROCEEDINGS BEFORE THE TAXING AUTHORITIES IS TO ASSESS CORRECTLY THE TAX LIABILITY OF AN ASSESSEE IN ACCORDAN CE WITH LAW. IF, FOR EXAMPLE, AS A RESULT OF A JUDICIAL DECISION GIV EN WHILE THE APPEAL IS PENDING BEFORE THE TRIBUNAL, IT IS FOUND THAT A NON- TAXABLE ITEM IS TAXED OR A PERMISSIBLE DEDUCTION IS DENIED, WE D O NOT SEE ANY REASON WHY THE ASSESSEE SHOULD BE PREVENTED FROM RAISING THAT QUESTION BEFORE THE TRIBUNAL FOR THE FIRST TIME, SO LONG AS ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 16 THE RELEVANT FACTS ARE ON RECORD IN RESPECT OF THAT ITEM. ANSWERING THE QUESTION POSED BEFORE IT IN AFFIRMATIVE, THEIR LORDSHIPS HELD THAT ON THE FACTS FOUND BY THE AUTHORITIES BELO W A QUESTION OF LAW ARISES (THOUGH NOT RAISED BEFORE THE AUTHORITIE S) WHICH BEARS ON THE TAX LIABILITY OF THE ASSESSEE AND THE TRIBUN AL HAS JURISDICTION TO EXAMINE THE SAME. WE FIND THAT THE ADDITIONAL GROUND RAISED BEFORE THE TRIBUNAL INVOLVES A PURE QUESTION OF LAW AND NO FRESH INVESTIGATION OF FACTS IS NECESSARY FOR ITS DETERMINATION. WE ARE, THEREFORE, ADMITTING SUCH ADDITIONAL GRO UND TO BE ESPOUSED FOR DISPOSAL ON MERITS. 7. BRIEFLY STATED, THE FACTS OF THIS ADDITIONAL GROUND ARE THAT THE ASSESSEE RECEIVED A SUM OF RS.2,66,72,222/- FROM FAU RECIA INDIA TOWARDS PROVISION OF GLOBAL INFORMATION SUPPORT SERVICES. TH E SAME WAS NOT OFFERED TO TAX. ON BEING CALLED UPON TO EXPLA IN AS TO WHY THIS AMOUNT WAS NOT DECLARED AS INCOME, THE ASSESSEE SUBMITTED THAT IT PROVIDED ASSISTANCE TO RUN OPERATIONS, GIVING TECHNICAL SUPPORT AND PROVIDING STUDIES FOR ADAPTATION OF INFORMATION SYSTEM TO MEET USERS NEEDS, WHICH DID NOT MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL OR KNOWH OW ETC. TO FAURECIA INDIA AND HENCE, THE SAME DID NOT FALL WITHIN TH E ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 17 MEANING OF FEES FOR TECHNICAL SERVICES UNDER ARTICLE 13 OF THE DTAA WITH FRANCE READ WITH PARA 7 OF THE PROTOCOL. THE ASS ESSEE MADE FURTHER DETAILED SUBMISSIONS WHICH HAVE BEEN INCORPORA TED IN THE IMPUGNED ORDER. THE AO ANALYZED THE NATURE OF SERV ICES RENDERED BY THE ASSESSEE TO FAURECIA INDIA. CONSIDERING RETROSPECTIVELY INSERTED EXPLANATION BELOW SECTION 9(2) OF THE A CT AND CLAUSE (IV) OF EXPLANATION 2 TO SECTION 9(1)(VI), THE AO OPINED THAT THE AMOUNT RECEIVED BY THE ASSESSEE WAS IN THE NATURE O F ROYALTY. HE FURTHER HELD THAT THE AMOUNT RECEIVED BY THE AS SESSEE WAS ALSO `FEES FOR TECHNICAL SERVICES AS PER EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT. THE DRP DID NOT INTERFERE WITH TH E IMPUGNED ORDER WHICH HAS BROUGHT THE ASSESSEE BEFORE TH E TRIBUNAL. 8. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEV ANT MATERIAL ON RECORD, WE CONSIDER IT EXPEDIENT TO, FIRST, DISCUS S THE NATURE OF SERVICES RENDERED BY THE ASSESSEE TO FAURECIA I NDIA IN TERMS OF SERVICES AGREEMENT DATED 3.1.2011, PURSUANT TO W HICH THE SERVICES WERE RENDERED TO THE INDIAN ENTITY. A COPY OF SUC H AGREEMENT HAS BEEN PLACED AT PAGE176 ONWARDS OF THE PA PER BOOK. ARTICLE 3 OF THE SERVICES AGREEMENT STATES THAT THE ASSESSEE AG REES ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 18 TO SUPPLY THE INDIAN ENTITY SERVICES IN ONE OR SEVERAL OF THE FOLLOWING AREAS : 1.1 GENERAL MANAGEMENT 1.2 COMMUNICATION 1.3 SALES AND MARKETING 1.4 PROGRAM MANAGEMENT 1.5 ACCOUNTING, CONTROLLING AND TAX 1.6 TREASURY 1.7 LEGAL, INSURANCE, REAL ESTATE 1.8 GENERAL MANAGEMENT OF INFORMATION SYSTEM ORGANISATION 1.9 INFORMATION SYSTEM 1.10 HUMAN RESOURCES 1.11 GENERAL MANAGEMENT OF PURCHASING ORGANISATION 1.12 PRODUCTION PURCHASING 1.13 NON PRODUCTION PURCHASING 1.14 MANUFACTURING 1.15 QUALITY 9. FURTHER ELABORATION OF THE SERVICES HAS BEEN MADE IN EXHIBIT- 1 TO THE AGREEMENT. FIRST IS `GENERAL MANAGEMENT. IT HAS BEEN MENTIONED UNDER THIS THAT: THIS SERVICE AIMS TO PROVIDE ASSIS TANCE TO THE COMPANY (I.E. THE INDIAN ENTITY) WITH THE DEFINITION OF STRATEGIC PLANS FOR FAURECIA INTERIOR SYSTEMS (OPENING OF NE W MARKETS, LONG RANGE DEVELOPMENT OF PRODUCTS ETC.). IT ALSO ASSISTS THE COMPANY IN THE DEVELOPMENT OF EXISTING AND NEW MARKETS IN OTHER REGIONS. IT PROMOTES THE COMPANYS INTERESTS TOWARDS WORLDWIDE CAR MANUFACTURERS. IT HELPS THE COMPANY TO IDENTIF Y ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 19 AND NEGOTIATE THE ACQUISITION OF BUSINESSES THAT REINFORCE THE COMPANYS EXISTING BUSINESSES AND/OR ENABLE IT TO ENTER NEW MARKETS. IT CAN BE SEEN THAT THE ASSESSEE IS LOOKING AFTER SEVERAL FIELDS OF FAURECIA INDIAS BUSINESS, WHICH EVEN EXTEND TO NEGOTIATIONS AND ACQUISITION OF NEW BUSINESSES AS WELL. UNDER THE HEAD OF `SALES AND MARKETING SERVICES:, `THE SERVICE PROV IDER ASSISTS THE COMPANY IN MONITORING THE MARKET FOR FAURECIA INTE RIOR SYSTEMS. IT HELPS THE COMPANY TO PRODUCE BROCHURES ON S URVEYS, MARKET SHARE, SALES TECHNIQUES ETC. FOR THE USE OF THE CO MPANY IT ALSO PROVIDES THE COMPANY WITH ASSISTANCE IN THE FIELD OF TH E SALE OF INTERIOR SYSTEMS. THE SERVICE PROVIDER CONSULTS ON BEHA LF OF THE COMPANY THE CAR MANUFACTURERS AND/OR THEIR SUBCONTRAC TORS AND IT ADVISES THE COMPANY ON THE PRICING STRATEGY REGARDING THE C AR MANUFACTURERS PURCHASES. IT CAN BE SEEN FROM THE SALE S AND MARKETING SERVICES THAT THE ASSESSEE IS IN FULL CONTROL OF THE MARKETING ACTIVITY OF FAURECIA INDIA. NOT ONLY THIS, IT IS ALSO LA YING FOUNDATION FOR THE FUTURE MARKETING PLANS OF FAURECIA INTERIOR SYSTEMS. THE ASSESSEE IS ALSO PROVIDING `ACCOUNTING, CONTR OLLING AND TAX SERVICES. IT HAS BEEN MENTIONED THAT: THE SERV ICE PROVIDER ASSISTS THE COMPANY IN THE ORGANIZATION OF ACCOUNTIN G SYSTEMS AND IN THE IMPLEMENTATION OF PROCEDURES IN COMPLIAN CE ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 20 WITH THE FCP STANDARDS. THIS ASSISTANCE INCLUDES UP-TO-DATE COSTING ACCOUNTING, INVENTORIES MANAGEMENT SYSTEMS, FORECASTIN G PROCEDURES ETC.. THIS SERVICE ALSO INCLUDES ASSISTANCE FO R ALL TAX MATTERS RELATED TO THE COMPANYS BUSINESS WHETHER IN THE ORD INARY COURSE OF BUSINESS, DOMESTIC, FOREIGN VENTURES, OR IN SP ECIFIC PROJECTS SUCH AS INVESTMENTS, ACQUISITIONS OR REORGANIZATIONS , ETC. NARRATION OF THE ABOVE SERVICE INDICATES THAT THE ASSESSEE IS IN FULL CHARGE OF THE ACCOUNTING, CONTROLLING AND TAX MATTERS OF FAURE CIA INDIA, WHICH ALSO EMERGES FROM CLAUSE 1.7 OF THE EXHIBIT, W HICH STATES THAT: THIS DEPARTMENT ASSISTS THE COMPANY WITH ALL LEGA L MATTERS (E.G. COMPANY LAW, COMMERCIAL LAW, CIVIL LAW OR ANTI- TRUST LAW). THEN THE NEXT SERVICE IS `HUMAN RESOURCES UNDER WHICH THE ASSESSEE PROVIDES: ASSISTANCE TO THE COMPANY IN THE STAF F MANAGEMENT. IT ASSISTS THE COMPANY IN PERSONNEL EVALUATION , JOB DESCRIPTIONS, SALARY PACKAGES AND PENSION SCHEMES TAILORED FOR FAURECIA INTERIOR SYSTEMS. IT ALSO ASSISTS IN THE MONITORING O F THE CAREER MANAGEMENT AND SUCCESSION PLANNING WITHIN THE COMPAN Y AND THE FAURECIA GROUP. UNDER THE HEAD `GENERAL MANAGE MENT OF PURCHASING ORGANISATION, IT HAS BEEN MENTIONED THAT: THE SER VICE PROVIDER COORDINATES THE PURCHASING ACTIONS AND/OR THE EXE CUTION OF SPECIFIC PROJECTS, WHICH ARE BORNE AT A CENTRAL LEVEL. IT HAS FURTHER ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 21 BEEN SET OUT UNDER THE HEADING `PRODUCTION PURCHASING THAT: THE SERVICE PROVIDER HELPS THE COMPANY WITH THE PRODUCTION PURCHASING ACTIVITIES, ESPECIALLY THOSE REGARDING CHEMICALS, P LASTIC PARTS, STAMPING, MECHATRONICS, TOOLS AND EQUIPMENTS. IT ADV ISES THE COMPANY ON GENERAL MANAGEMENT AND STRATEGY DEFINED AT BUS INESS GROUP LEVEL, WHICH MEANS SUPPLIER DEVELOPMENT, QUALITY, TOOLS AND METHODS. THE ASSESSEE ALSO PROVIDED NON-PRODUCTIVE PU RCHASING SERVICES IN ADDITION TO THE MANUFACTURING SERVICES. THE AGRE EMENT STATES THAT: THE SERVICE PROVIDER HELPS THE COMPANY TO REAC H THE HIGH LEVEL OF PERFORMANCE AND COMPETITIVENESS AT A WORLDWIDE LEVEL. .. IT ASSISTS THE COMPANY IN THE FIELDS OF EFFICIENCY IN PRODUCTION THE SERVICE PROVIDER HELPS THE COMPANY TO GO THROUGH THE THREE STEPS OF PRODUCTION,.. PRODUCTION PREPARATION; PRODUCTION CONTROL; AND PRODUCTION EXECUTION. U NDER THE HEAD `QUALITY SERVICES, IT CAN BE SEEN THAT: THE SER VICE PROVIDER HELPS THE COMPANY TO IMPROVE QUALITY OF FAURECIA IN TERIOR SYSTEMS. BY SPECIALLY DESIGNING GLOBAL ACTIONS AND BY STANDARDIZING METHODOLOGICAL TOOLS AND BY PREPARING COMMUNICATIONS ON HSE TOPICS. ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 22 10. A PERUSAL OF THE SERVICES REFERRED TO IN THE EXHIBIT TO THE AGREEMENT REVEALS THAT THESE CATER TO VARIOUS FACETS OF BUS INESS OPERATIONS, SUCH AS, MANAGEMENT, MARKETING, ACCOUNTING AND FINANCE, HUMAN RESOURCES, PURCHASING, MANUFACTURING AND QUALITY, WHICH FALL IN THE OVERALL REALM OF MANAGERIAL SERVICES. 11. IN ADDITION TO THE ABOVE, THE ASSESSEE HAS ALSO REN DERED IT SUPPORT SERVICES THAT HAVE BEEN SET OUT IN PARAS 1.8 AND 1.9 OF THE SERVICES AGREEMENT. PARA 1.8 WITH THE CAPTION `GENERAL MANAGEMENT OF INFORMATION SYSTEM ORGANISATION STATES THAT: `T HE SERVICE PROVIDER (I.E. THE ASSESSEE) COORDINATES THE INFO RMATION SYSTEM ACTIONS AND/OR THE EXECUTION OF SPECIFIC PROJECTS, WHIC H ARE BORNE AT A CENTRAL LEVEL. PARA 1.9 WITH THE HEADING `INFORM ATION SYSTEM STATES THAT THE SERVICE PROVIDER ASSISTS THE COMPA NY IN THE COMPUTERIZATION OF SYSTEMS, OFFICE AUTOMATION AND UTILISATION OF PERSONAL COMPUTERS ADAPTED TO THE COMPANY AND THE FAURECIA INTERIOR SYSTEMS. IT HELPS THE COMPANY TO CHOOSE THE EQUIPME NT (SOFTWARE, HARDWARE, NETWORKS). IT ALSO ASSISTS THE COMPAN Y IN THE IMPLEMENTATION OF SYSTEMS. THE COMPANY MIGHT REQUEST HELP F ROM THE SERVICE PROVIDER TO DESIGN TAILORED PROGRAMS. THIS SERVIC E NEITHER INCLUDES THE LICENSING, NOR THE SALE OF SOFTWARE, NOR ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 23 COMPUTER PROGRAMS. THE SERVICES PROVIDED BY THE SERVICE PROVIDER FALL INTO THREE CATEGORIES: OPERATIONS, TECHNICAL SUPPORT AND STUDIES. THEN THERE IS A DETAILED AMPLIFICATION OF SUCH SERV ICES UNDER THE ABOVE THREE HEADS, AS SUBMITTED BEFORE THE AO, WHICH IS AS UNDER :- A. OPERATIONS FAH HELPS THE INDIAN ENTITY TO RUN THE IT OPERATIONS, WHICH INCLUDES THE ORGANIZATION, MANAGEMENT OF THE IT INFRASTRUCTURE AND OF THE APPLICATIONS AVAILABLE ON IT INFRASTRUCTURE, UPGRADE OF CURRENT APPLICATIONS FROM PROJEC T PHASE TO DELIVERY PRODUCTION. B. TECHNICAL SUPPORT FAH PROVIDES LOCAL IT SUPPORT TO USERS ON SITE TO ORDER, CHANGE OR UPGRADE PC OR LOCAL APPLICATIONS AND INFRASTRUCTURE ISSUES, CORE COMPETENCE CENTRES FOR DEDICATED APPLICATIONS AND C. STUDIES THIS INCLUDES STUDIES UNDERTAKEN TO ADAPT INFORMATION SYSTEM TO MEET USERS NEED IN RESPECT OF THE REGULATIONS AND FAURECIA CORE PROCEDURES ON THE FOLLOWING AREAS, LEGAL EVOLUTIONS NEW ORGANIZATIONS, NOW PARAMETERS, FINAL CUSTOMERS NEEDS, FAURECIA GROUPS NEEDS AND IT (APPLICATIONS, INFRASTRUCTURE). 12. THE ABOVE DISCUSSED SERVICES PROVIDED BY THE ASSE SSEE TO FURACEIA INDIA ARE LARGELY IN THE NATURE OF TECHNICAL SERVICE S. 13. THOUGH THE ASSESSEE CONTENDED BEFORE THE AO THA T IT RENDERED ONLY IT SUPPORT SERVICES, HOWEVER, ON PERUSAL O F SAMPLE INVOICES SUBMITTED BY THE ASSESSEE BEFORE THE TRIBUNAL, IT TUR NS OUT ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 24 THAT IT RENDERED NOT ONLY IT SUPPORT SERVICES BUT ALSO MANAGER IAL SERVICES. FOR EXAMPLE, A COPY OF INVOICE NO. 180000028 9 FOR THE SERVICES RENDERED DURING THE PERIOD 9.11.2011 TO 20.11.2 011 GIVES THE DESCRIPTION OF SERVICES AS `BG FEES , GROUP FEES, IT F EES, DIVISION FEES AND PURCHASE FEES. THOUGH THIS INVOICE RELATES TO THE NEXT YEAR, THE LD. AR ADMITTED THAT THE NATURE OF SERVICES RENDERED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDE RATION WERE ON THE SAME LINES AS DEPICTED IN THE ABOVE REFERRED INVOICE. IT, THEREFORE, EMERGES THAT THE ASSESSEE RENDERED TO THE INDIA N ENTITY NOT ONLY IT SUPPORT SERVICES, WHICH OUTNUMBER OTHERS, BUT A LSO SOME PART CONSISTS OF MANAGERIAL SERVICES. 14. THE AO HAS CHARACTERIZED RECEIPT OF FEES FOR THE ABOVE SERVICES BOTH AS ROYALTY AS WELL AS FEES FOR TECHNICAL SER VICES UNDER THE ACT AS WELL AS THE DTAA. 15.1. WE WILL FIRST EXAMINE IF THE RECEIPT CAN BE CONSIDERED AS ROYALTY? SECTION 9(1)(VI) OF THE ACT DEALS WITH INCOME BY WA Y OF ROYALTY PAYABLE, INTER ALIA, BY A RESIDENT. THE TERM `ROYALTY HAS BEEN DEFINED IN EXPLANATION 2 WHICH HAS SIX CLAUSES. T HE CASE OF THE AO IS THAT THE ASSESSEE RECEIVED ROYALTY IN TERMS O F CLAUSE (IV) OF EXPLANATION TO SECTION 9(1) OF THE ACT, WHICH PROVIDE S THAT ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 25 ANY CONSIDERATION FOR (IV) THE IMPARTING OF ANY INFORMATION CONCERNING TECHNICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL SHALL BE CONSIDERED AS ROYALTY. ON GOING THROUGH THE PRESCRIPTION OF CLAUSE (IV), IT BECOMES PER TINENT TO NOTE THAT BEFORE THE WORDS TECHNICAL, INDUSTRIAL, COMMERC IAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL, THE LEGISLATURE HAS U SED THE EXPRESSION IMPARTING OF ANY INFORMATION CONCERNING. THE WORD IMPARTING ASSUMES SIGNIFICANCE IN THIS CONTEXT. THIS WORD DOES NOT CONNOTE RENDERING SOME SERVICES INVOLVING TECHNICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE ETC. RATHER, IT REFERS TO IMPARTING OF INFORMATION REGARDING SOME TECHNICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL . WHEN WE READ THE WORD `IMPARTING IN THE BEGINNING OF THE PROVISION IN CONJUNCTION WITH KNOWLEDGE, EXPERIENCE, OR SKILL AT THE END OF THE PROVISION, IT BECOMES CRYSTAL CLEAR THAT THE SA ME REFERS TO PROVIDING SOME TECHNICAL, INDUSTRIAL OR COMMERCIAL KNOWHOW ETC. TO BE USED BY THE RECIPIENT AND NOT CONSUMIN G IT AS SUCH AS A SERVICE RECEIVED. 15.2. AT THIS STAGE, IT IS IMPERATIVE TO APPRECIATE THAT WE ARE DEALING WITH THE DEFINITION OF THE TERM `ROYALTY, WHICH IS ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 26 PRIMARILY A CONSIDERATION FOR USE OF INTELLECTUAL PROPERTIES, SUCH AS, PATENT, MODEL OR INVENTION ETC. OR TECHNICAL, INDUSTRIAL OR SCIE NTIFIC KNOWLEDGE OR SPECIFIED TYPES OF INDUSTRIAL OR COMMERCIAL EQUIPMENTS ETC. PLACEMENT OF CLAUSE (IV) IN THE EXPLANATION 2, WHICH IS A PART OF INCOME BY WAY OF `ROYALTY, ITSELF IMP LIES THAT THE CONSIDERATION REFERRED TO HEREIN IS FOR USE OF SOME R IGHT, PROPERTY OR INFORMATION CONCERNING TECHNICAL, INDUSTRIAL OR COMMERCIAL KNOWLEDGE ETC. AND NOT A MERE RENDERING OF SE RVICES INVOLVING SOME TECHNICAL EXPERTISE ETC.. IN WARLEY PARSON SERVICES PTY. LTD. IN RE (2009) 313 ITR 74 AAR , THE AUTHORITY HAS HELD THAT MERE RENDERING OF TECHNICAL SERVICES IS NOT SUFFICIENT TO ATTRAC T THAT CLAUSE BUT THE EXPERT KNOWLEDGE, SKILLS ETC. BEHIND THE SERVIC E SHOULD BE IMPARTED TO THE OTHER CONTRACTING PARTY, THAT IS TO SAY, THERE HAS TO BE A TRANSFER OF TECHNICAL KNOW-HOW . IN VIEW OF THE FOREGOING DISCUSSION, IT BECOMES EVIDENT THAT THE IT SUPPORT SERVICES RENDERED BY THE ASSESSEE, WHICH ARE OTHERWISE TE CHNICAL IN NATURE, DO NOT INVOLVE ANY IMPARTING OF INFORMATION CONCER NING TECHNICAL, INDUSTRIAL, OR COMMERCIAL KNOWLEDGE TO FAURECIA, INDIA . THE SAME BEING A MERE RENDERING OF SERVICES, CANNOT BE BROUGHT WITHIN THE SCOPE OF SECTION 9(1)(VI) OF THE ACT. IN VIEW OF OUR DECISION ABOUT THE RECEIPT NOT FALLING WITHIN THE AMBIT OF SECTION ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 27 9(1)(VI) OF THE ACT, THERE IS NO NEED TO EXAMINE THE RELE VANT PROVISION UNDER THE DTAA. WE, THEREFORE, HOLD THAT THE AMO UNT RECEIVED BY THE ASSESSEE IS NOT IN THE NATURE OF ROYALTY. 16. NEXT WE PROCEED TO EXAMINE IF THE PAYMENT RECEIVED BY THE ASSESSEE CAN BE CONSIDERED AS `FEES FOR TECHNICAL SERVIC ES? SECTION 9(1)(VII) DEALS WITH INCOME BY WAY OF `FEES FOR TECHNICAL SE RVICES PAYABLE, INTER ALIA, BY A RESIDENT. DEFINITION OF THE EXPRESSION `FEES FOR TECHNICAL SERVICES HAS BEEN EXTRACTED IN AN EA RLIER PART OF THIS ORDER. ON GOING THROUGH SUCH PROVISION, TO THE EXTENT IT IS RELEVANT FOR OUR PURPOSE, IT DECIPHERS THAT FEES FOR TECHNIC AL SERVICES MEANS ANY CONSIDERATION FOR RENDERING MANAGERIA L, TECHNICAL OR CONSULTANCY SERVICES EXCLUDING ANY CONSIDERATION FOR CONSTRUCTION, ASSEMBLY, MINING ETC. IT IS NOBODYS CLAIM THA T THE CASE IS COVERED UNDER THE EXCEPTION. WE HAVE HEREINABOV E DISCUSSED THE NATURE OF SERVICES RENDERED BY THE ASSESSE E TO THE INDIAN ENTITY AND HELD THESE TO BE TECHNICAL AS WELL AS MANAGER IAL SERVICES. THAT BEING THE POSITION, THE TRANSACTION IS CAUGHT WITH IN THE SCOPE OF `FEES FOR TECHNICAL SERVICES U/S.9(1)(VII) OF THE ACT. ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 28 17. SECTION 90(1) OF THE ACT PROVIDES THAT THE CENTRAL GOVE RNMENT MAY ENTER INTO AN AGREEMENT WITH THE GOVERNMENT OF ANY OTH ER COUNTRY FOR THE GRANTING OF RELIEF OF TAX IN RESPECT OF INCOM E ON WHICH TAX HAS BEEN PAID IN TWO DIFFERENT TAX JURISDICTIONS. SU B- SECTION (2) OF SECTION 90 UNEQUIVOCALLY PROVIDES THAT WHERE THE CENTRAL GOVERNMENT HAS ENTERED INTO AN AGREEMENT WITH THE GOVERNMENT OF ANY COUNTRY OUTSIDE INDIA UNDER SUB-SECTION (1) FOR GRANTING RELIEF OF TAX OR FOR AVOIDANCE OF DOUBLE TAXATION, THEN, IN RELATION TO THE ASSESSEE TO WHOM SUCH AGREEMENT APPLIES, 'THE PROVISIONS OF THIS ACT SHALL APPLY TO THE EXTENT THEY ARE MORE BENEFICIAL TO THAT ASSESSEE . CRUX OF SUB-SECTION (2) IS THAT WHERE A DTAA HAS BEEN ENTERED INTO WITH ANOTHER COUNTRY, THEN THE PROVISIONS OF THE ACT SHALL APPLY ONLY IF THEY ARE MORE BENE FICIAL TO THE ASSESSEE. IN SIMPLE WORDS, IF THERE IS A CONFLICT BETWEE N THE PROVISIONS UNDER THE ACT AND THE DTAA, THE ASSESSEE WILL BE SUBJECTED TO THE MORE BENEFICIAL PROVISION OUT OF THE TWO. IF THE PROVISION OF THE ACT ON A PARTICULAR ISSUE IS MORE BENEFICIAL TO THE ASSESSEE VIS-A-VIS THAT IN THE DTAA, THEN SUCH PROVISION OF THE ACT SHALL APPLY AND VICE VERSA . THE HONBLE SUPREME COURT IN THE CASE OF CIT V. P.V.A.L. KULANDAGAN CHETTIAR (2004) 267 ITR 654 (S C) HAS HELD THAT THE PROVISIONS OF SECTIONS 4 AND 5 ARE SUBJECT TO THE ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 29 CONTRARY PROVISION, IF ANY, IN DTAA. SUCH PROVISIONS OF A D TAA SHALL PREVAIL OVER THE ACT AND WORK AS AN EXCEPTION TO OR MODIFICATION OF SECTIONS 4 AND 5. SIMILAR VIEW HAS BEEN TAK EN BY THE HONBLE JURISDICTIONAL HIGH COURT IN CIT V. SIEMENS AKTIONGESELLSCHAFT (2009) 310 ITR 320 (BOM.) . IN THE LIGHT OF THE ABOVE DISCUSSION, IT BECOMES VIVID THAT IF THE PROVISIONS OF TH E TREATY ARE MORE BENEFICIAL TO THE ASSESSEE VIS-A-VIS ITS COUNTERPART IN THE ACT, THEN THE ASSESSEE SHALL BE ENTITLED TO BE RULED BY THE PROVISIONS OF THE TREATY. 18.1. HAVING SEEN THAT THE PAYMENT FALLS WITHIN THE DEFINITION OF `FEES FOR TECHNICAL SERVICES UNDER THE ACT, LET US EXAMINE THE POSITION UNDER THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND FRANCE. ARTICLE 13 OF THE DTAA DEALS WITH ROYALTIES AND FEES FOR TECHNICAL SERVICES. PARA 4 OF ARTICLE 13 DEFINES THE TERM FEES FOR TECHNICAL SERVICES AS UNDER : - `THE TERM 'FEES FOR TECHNICAL SERVICES' AS USED IN THIS ARTIC LE MEANS PAYMENTS OF ANY KIND TO ANY PERSON, OTHER THAN PAYMENTS TO AN EMPLOYEE OF THE PERSON MAKING THE PAYMENTS AND TO ANY INDIVIDUAL FOR INDEPENDENT PERSONAL SERVICES MENTIONED IN ARTICLE 15, IN CONSIDERATION FOR SERVICES OF A MANAGERIAL, TECHNICAL OR CONSULTANCY NATURE. ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 30 18.2. ON GOING THROUGH THE MANDATE OF PARA 4 OF ARTICLE 13 DEFINING THE TERM `FEES FOR TECHNICAL SERVICES, IT BECOMES P LAIN THAT THE SAME REFERS TO A CONSIDERATION FOR SERVICES OF MAN AGERIAL, TECHNICAL OR CONSULTANCY NATURE. IT TURNS OUT THAT DEFINITION O F THE EXPRESSION `FEES FOR TECHNICAL SERVICES UNDER ARTICLE 13 OF THE DTAA IS BY AND LARGE SIMILAR TO THAT GIVEN IN SECTION 9(1)(VII) OF THE ACT TO THIS EXTENT, WHICH DOES NOT DIRECTLY SUPPORT THE CAS E OF THE ASSESSEE. 18.3. AT THIS STAGE, IT WOULD BE RELEVANT TO REFER TO THE PROTOCOL, WHICH FOR ALL PRACTICAL PURPOSES, IS CONSIDERED AS A PART A ND PARCEL OF THE DTAA. RELEVANT PART OF PARA 7 OF THE PROTOCOL DATED 29-09-2012 BETWEEN INDIA AND FRANCE, READS AS UNDER:- `IN RESPECT OF ARTICLES 11 (DIVIDENDS), 12 (INTERES T) AND 13 (ROYALTIES, FEES FOR TECHNICAL SERVICES AND PAYMENT S FOR THE USE OF EQUIPMENT), IF UNDER ANY CONVENTION, AGREEMENT OR PROTOCOL SIGNED AFTER 1ST SEPT., 1989, BETWEEN INDIA AND A THIRD STATE WHICH IS A MEMBER OF THE OECD, INDIA LIMITS ITS TAXATION AT SOURCE ON DIVIDENDS, INTEREST, ROYALTIES, FEES FOR TECHNICAL SERVICES OR PAYMENTS FOR THE USE OF EQUIPMENT TO A RATE LOWER OR A SCOPE MORE RESTRICTED THAN THE RATE OF SCOPE PROVIDED FOR IN T HIS CONVENTION ON THE SAID ITEMS OF INCOME, THE SAME RATE OR SCOPE AS PROVIDED FOR IN THAT CONVENTION, AGREEMENT OR PROTOCOL ON THE SAID ITEMS INCOME SHALL ALSO APPLY UNDER THIS CONVENTION, WITH EFFECT FROM THE DATE ON WHICH THE PRESENT CONVENTION OR THE RELEVANT IND IAN CONVENTION, AGREEMENT OR PROTOCOL ENTERS INTO FORCE , WHICHEVER ENTERS INTO FORCE LATER. ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 31 18.4. A CAREFUL CIRCUMSPECTION OF PARA 7 OF THE PROTOCOL INDICATES THAT THE SAME CONTAINS A MOST FAVOURED NATION (MFN) CLAUSE, AS PER WHICH, IF INDIA ENTERS INTO A DTAA AFTER 01- 09-1989 WITH A THIRD STATE WHICH IS A MEMBER OF THE OECD AND THE RATE OF TAXATION OR SCOPE OF FEES FOR TECHNICAL SERVICES ETC. UNDER SUCH OTHER DTAA WITH A THIRD STATE IS NARROWER THAN PARA 4 OF ARTIC LE 13 OF THE DTAA WITH FRANCE, THEN SUCH LOWER RATE OR RESTRICTED SCOPE SHALL APPLY UNDER THE DTAA WITH FRANCE. NET EFFECT OF THE M FN CLAUSE IN THE PRESENT CONTEXT IS THAT IF INDIA HAS ENTERED INTO A DTAA WITH A THIRD STATE WHICH IS A MEMBER OF THE OECD AND TH E SCOPE OF THE TERM FEES FOR TECHNICAL SERVICES UNDER SUCH DTAA WITH A THIRD STATE IS LIMITED VIS--VIS ITS SCOPE GIVEN IN THE DTAA WITH FRANCE, THEN SUCH LIMITED SCOPE AS PER THE DTAA WITH THE THIRD STATE SHALL STAND SUBSTITUTED IN PLACE OF PARA 4 OF ARTICLE 13 OF DTAA WITH FRANCE. 18.5. IN THIS CONNECTION, IT IS SEEN THAT INDIA ENTERED INTO A DTAA WITH THE UK, WHICH IS A MEMBER OF THE OECD. ARTICLE 13 OF SUCH DTAA WITH THE UK DEFINES THE TERM FEES FOR TECHNIC AL SERVICES UNDER PARA 4 OF ARTICLE 13, AS UNDER: - ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 32 `FOR THE PURPOSES OF PARAGRAPH 2 OF THIS ARTICLE, A ND SUBJECT TO PARAGRAPH 5, OF THIS ARTICLE, THE TERM 'FEES FOR TE CHNICAL SERVICES' MEANS PAYMENTS OF ANY KIND TO ANY PERSON IN CONSIDE RATION FOR THE RENDERING OF ANY TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONN EL) WHICH : (A) ARE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF THE RIGHT, PROPERTY OR INFORMATION FOR WHICH A PAYM ENT DESCRIBED IN PARAGRAPH 3(A) OF THIS ARTICLE IS RECEIVED; OR (B) ARE ANCILLARY AND SUBSIDIARY TO THE ENJOYMENT O F THE PROPERTY FOR WHICH A PAYMENT DESCRIBED IN PARAGRAPH 3(B) OF THIS ARTICLE IS RECEIVED; OR (C) MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW- HOW OR PROCESSES, OR CONSIST OF THE DEVELOPMENT AND TRANSFER OF A TECHNICAL PLAN OR TECHNICAL DESIGN. 18.6. ON GOING THROUGH ARTICLE 13(4) OF DTAA WITH THE UK, IT CAN BE SEEN THAT THE TERM FEES FOR TECHNICAL SERVICES HA S THREE CONSTITUENTS. CLAUSES (A) AND (B) DEAL WITH PAYMENT FOR SER VICES WHICH ARE ANCILLARY AND SUBSIDIARY TO THE ENJOYMENT OF RIGHT, PROPERTY OR INFORMATION FOR WHICH PAYMENT HAS BEEN DESCR IBED UNDER PARAS 3 (A) AND (B) OF THIS ARTICLE. PARA 3 OF ARTICLE 13 DEFINES `ROYALTIES TO MEAN PAYMENTS OF ANY KIND RECEIVED A S A CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY CO PYRIGHT OF A LITERARY, ARTISTIC OR SCIENTIFIC WORK ETC. OR ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT ETC. THUS, IT IS SEEN THAT CLAUSES (A) AND (B) OF PARA 4 OF THE DTAA WITH THE UK AR E NOT RELEVANT FOR OUR PURPOSE. THEN THERE IS CLAUSE (C) OF PARA 4 WHICH ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 33 STATES THAT THE TERM FEES FOR TECHNICAL SERVICES MEANS PAYM ENT OF ANY KIND FOR RENDERING ANY TECHNICAL OR CONSULTANCY SERVICE S WHICH MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW- HOW OR PROCESSES OR CONSISTS OF THE DEVELOPMENT AND TRAN SFER OF A TECHNICAL PLAN OR TECHNICAL DESIGN. THIS CLAUSE BEARS USEFU LNESS IN SO FAR AS INTERPRETATION OF ARTICLE 13(4) OF THE DTAA WITH FRA NCE IS CONCERNED. IN VIEW OF THE MFN CLAUSE IN THE PROTOCOL, AR TICLE 13(4) OF THE DTAA WITH THE UK SHALL OVERSHADOW ARTICLE 13( 4) OF THE DTAA WITH FRANCE AND LIMIT THE SCOPE OF THE DTAA WITH FRANCE TO THE EXTENT PROVIDED IN THE DTAA WITH THE UK. FOLLOWING TWO THINGS EMERGE ON GOING THROUGH THE AMBIT OF FE ES FOR TECHNICAL SERVICES UNDER ARTICLE 13(4)(C) OF THE DTAA WITH THE UK. FIRST IS THAT UNLIKE ARTICLE 13(4) OF DTAA WITH FRANCE DEFINING FEES FOR TECHNICAL SERVICES AS CONSIDERATION FOR SERVICES OF MANAGERIAL, TECHNICAL OR CONSULTANCY NATURE, ARTICLE 13(4) OF THE UK DTAA DEFINES FEES FOR TECHNICAL SERVICES AS PAYMENT FOR RENDERING OF ONLY `TECHNICAL OR CONSULTANCY SER VICES. THE TERM `MANAGERIAL IS MISSING IN SO FAR AS THE SCOPE OF FEES FOR TECHNICAL SERVICES UNDER THE DTAA WITH THE UK IS CONCERNED. THE SECOND DEPARTURE IN THE DTAA WITH THE UK FROM THE DTA A WITH FRANCE IS THAT THE `SCOPE OF TECHNICAL OR CONSULTANCY S ERVICES ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 34 IN THE DTAA WITH THE UK HAS BEEN RESTRICTED TO `MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOWHOW OR PROC ESSES ETC. IN FACT, THE REASON FOR OMISSION OF THE WORD `MANA GERIAL FROM THE DEFINITION OF THE EXPRESSION `FEES FOR TECHNICAL SER VICES IN THE DTAA WITH THE UK IS COMPREHENSIBLE. IT IS SO BECAUSE THE CLAUSE REFERS TO MAKING AVAILABLE THE SERVICES. UNLIKE TECHNIC AL OR CONSULTANCY SERVICES, MANAGERIAL SERVICES CANNOT BE MADE AVAILABLE FOR USE IN FUTURE. THIS APPEARS TO BE THE RAISON DETRE FOR EXCLUSION OF THE TERM `MANAGERIAL SERVICES FROM THE DEFINITIO N. THUS, A READING OF ARTICLE 13(4)(C) OF THE DTAA WITH THE UK , WHEN READ IN PLACE OF ARTICLE 13(4) OF THE DTAA WITH FRANC E, DECIPHERS THAT FEES FOR TECHNICAL SERVICES SHALL MEAN ANY PAYMENT FOR RENDERING OF ANY TECHNICAL OR CONSULTANCY SER VICES WHICH `MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE OR S KILL ETC. TO THE RECIPIENT. 18.7. WE HAVE ADVERTED TO THE NATURE OF SERVICES RENDER ED BY THE ASSESSEE TO FAURECIA INDIA AND FOUND THEM TO BE MANAGE RIAL AND ALSO TECHNICAL IN NATURE. IN SO FAR AS THE MANAGERIA L SERVICES ARE CONCERNED, THE CONSIDERATION FOR THEM GOES OUT OF THE PURVIEW OF `FEES FOR TECHNICAL SERVICES, AS THE TERM MANAGERIAL IS ABSENT ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 35 IN ARTICLE 13(4) OF THE DTAA WITH UK. CASE OF THE AO RESTS ON TREATING CONSIDERATION FOR SUCH SERVICES AS `ROYALTY OR `FEES FOR TECHNICAL SERVICES ONLY. RESULTANTLY, PAYMENT FOR THE MANAGE RIAL SERVICES CANNOT BE BROUGHT WITH IN THE SCOPE OF THE TERM `FEE S FOR TECHNICAL SERVICES UNDER ARTICLE 13 OF THE DTAA WITH FRANCE AS READ IN CONJUNCTION WITH THE DTAA WITH THE UK. 18.8. AS FAR AS THE REMAINING TECHNICAL SERVICES REND ERED BY THE ASSESSEE TO FAURECIA INDIA ARE CONCERNED, IT IS SEEN THAT TH ESE ARE OF COORDINATING THE INFORMATION SYSTEM AND ASSISTING FAURECIA IND IA IN COMPUTERISATION OF SYSTEMS, OFFICE AUTOMATION AND UTILISATION OF PERSONAL COMPUTERS WHICH FALL INTO THE AFORESAID THREE CATEGOR IES NAMELY, OPERATIONS, TECHNICAL SUPPORT AND STUDIES. ON GOING THROUGH THE NATURE OF SUCH SERVICES, IT IS MANIFESTED THAT THES E DO NOT RESULT IN MAKING AVAILABLE ANY TECHNICAL KNOWHOW ETC. TO TH E FAURECIA INDIA. 18.9. THE TERM MAKE AVAILABLE HAS COME UP FOR CONS IDERATION BEFORE THE HONBLE KARNATAKA HIGH COURT IN CIT VS. DE BEERS INDIA MINERALS PVT. LTD. (2012) 346 ITR 467 (KAR.) IN WHICH IT HAS BEEN HELD THAT THIS TERM MEANS THAT THE PAYER OF THE SERVICES SHOULD BE ABLE TO UTILISE THE ACQUIRED KNOWLEDGE OR KNOWHOW AT HIS OWN ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 36 IN FUTURE WITHOUT THE AID OF SERVICE PROVIDER. THE AUTHORITY FOR ADVANCE RULING IN PRODUCTION RESOURCES GROUP, IN RE (2018) 401 ITR 56 AAR HAS ALSO HELD THAT MAKE AVAILABLE CONNOTES SOMETHING WHICH RESULTS IN TRANSMITTING THE TECHNICAL KNOWLEDGE S O THAT THE RECIPIENT COULD DERIVE AN ENDURING BENEFIT AND UTILISE THE SAME IN FUTURE ON HIS OWN WITHOUT THE AID AND ASSISTANCE OF THE PROVIDER. ON GOING THROUGH THE ABOVE INTERPRETATION, IT BECO MES PALPABLE THAT IN ORDER TO `MAKE AVAILABLE TECHNICAL SERVICES, IT IS SINE QUA NON THAT THE PAYER OF THE SERVICES MUST ACQUIRE SUCH TECHNICAL KNOW-HOW ETC. WHICH HE CAN HIMSELF USE IN FUTURE WITHOUT ANY ASSISTANCE OF THE PROVIDER AND THE SAME IS NOT AN Y SUCH ACT OR SERVICE WHICH VANISHES OR DISAPPEARS ON ITS PROVISIO N BY THE PAYEE ITSELF. 18.10. WHEN WE ADVERT TO THE NATURE OF THE TECHNICAL S ERVICES RENDERED BY THE ASSESSEE, IT GETS AXIOMATIC THAT NO TECHNICAL KNOWLEDGE WAS MADE AVAILABLE BY THE ASSESSEE TO FAURECIA I NDIA FOR ITS USE THEREAFTER. RATHER, IT IS A CASE OF PROVIDING A SERVICE INVOLVING TECHNICAL KNOWLEDGE, WHICH GOT CONSUMED WITH ITS PROVISION ITSELF. SINCE SUCH SERVICES SIMPLY INVOLVE USE OF TECHNICAL KNOWLEDGE AND DO NOT RESULT INTO HANDING OVER SOME ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 37 TECHNICAL KNOWHOW TO FAURECIA INDIA, THE SAME, IN OUR CONSIDE RED OPINION, CANNOT BE TERMED AS FEES FOR TECHNICAL SERVICES U NDER THE DTAA. 18.11. THUS, IT IS OVERT THAT THE TOTAL AMOUNT RECEIVED BY THE ASSESSEE FOR RENDITION OF SERVICES TO FAURECIA INDIA, WHIC H IS A MIXED BAG OF MANAGERIAL AND TECHNICAL SERVICES, DOES NOT EVENTUALLY MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HOW ETC. TO THE INDIA ENTITY AND HENCE THE SAME CA NNOT IN OUR CONSIDERED OPINION BE CONSIDERED AS `FEES FOR TEC HNICAL SERVICES UNDER ARTICLE 13(4) OF THE DTAA WITH FRANCE WHEN READ WITH THE PROTOCOL AND ARTICLE 13(4) OF DTAA WITH THE UK. 19. RELIANCE OF THE LD. AO ON THE EXPLANATION BELOW SEC TION 9(2) OF THE ACT IS OF NO CONSEQUENCE. THIS EXPLANATION SIMPLY S TATES THAT INCOME OF A NON-RESIDENT SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA, INTER ALIA, UNDER CLAUSES (VI) OR (VII) OF SUB-SECTION (1) OF SECTION 9 AND SHALL BE INCLUDED IN THE TOTAL INCOME OF THE NON- RESIDENT, WHETHER OR NOT (I) THE NON-RESIDENT HAS A RE SIDENCE OR PLACE OF BUSINESS OR BUSINESS CONNECTION IN INDIA; OR (II) THE NON- RESIDENT HAS RENDERED SERVICES IN INDIA. IN THE INSTANT AP PEAL, THE ISSUE IS WHETHER THE SERVICES RENDERED BY THE ASSESSEE FA LL WITHIN ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 38 THE DEFINITION OF `ROYALTIES OR `FEES FOR TECHNICAL SERVICES U/S 9(1)(VI) OR (VII) OF THE ACT. WE HAVE HELD THAT SECTION 9(1) (VI) IS NOT ATTRACTED. ALBEIT SECTION 9(1)(VII) IS ATTRACTED, BUT THE AMOU NT CEASES TO BE `FEES FOR TECHNICAL SERVICES IN THE LIGHT OF THE DTAA. THUS, THERE IS NO QUARREL ON WHETHER OR NOT THE ASSESSEE HAS A PLACE OF BUSINESS OR BUSINESS CONNECTION IN INDIA OR IT HAS R ENDERED SERVICES IN OR OUTSIDE INDIA. THE POSITION WOULD HAVE BEEN OTHERWISE IF THE ASSESSEE HAD BEEN COVERED U/S 9(1)(VI) O R (VII) AND NOT GETTING IMMUNITY UNDER THE DTAA AND THEN CLAIMING THAT NO INCOME ON THIS SCORE SHOULD BE INCLUDED IN ITS TOTAL INCOME AS EITHER IT HAD NO PLACE OF BUSINESS IN INDIA ETC. OR THE SERV ICES WERE NOT RENDERED IN INDIA. AS SUCH, THE RELIANCE OF THE LD. AO ON THE EXPLANATION BELOW SECTION 9(2) OF THE ACT, FOR FORTIFYING HIS POINT OF VIEW THAT THE AMOUNT IN QUESTION BE CHARGED TO TAX, IS PO INTLESS. 20. AS THE EXTANT PAYMENT RECEIVED BY THE ASSESSEE CAN NEITHER BE CONSTRUED AS `ROYALTY U/S 9(1)(VI) OF THE ACT NOR AS `FEE S FOR TECHNICAL SERVICES UNDER THE DTAA, THE SAME CANNOT BE INC LUDED IN THE TOTAL INCOME OF THE ASSESSEE. EX CONSEQUENTI, WE OVERTURN THE IMPUGNED ORDER ON THIS SCORE AND ORDER THE DELETION OF THE ADDITION. ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 39 21. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH JULY, 2019. SD/- SD/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VI CE PRESIDENT PUNE; DATED : 08 TH JULY, 2019 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-13, PUNE 4. 5. 6. THE CIT/IT/TP, PUNE , , / DR C, ITAT, PUNE; / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR P RIVATE SECRETARY , / ITAT, PUNE ITA NO.784/PUN/2015 M/S.FAURECIA AUTOMOTIVE HOLDING 40 DATE 1. DRAFT DICTATED ON 03-07-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 08-07-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. **