On facts, transaction was for supply of technology and therefore, the p

On facts, transaction was for supply of technology and therefore, the payment was FTS  under Article 13(4) of India-UK DTAA.

The taxpayer was an Indian company manufacturing automotive two-wheelers. The taxpayer entered into an agreement with a UK company (“UKCo”) for developing inkjet printing solution comprising printers and special inks for decoration of two-wheelers. The printing solution was to be developed as per the specifications of the taxpayer and was to be installed and commissioned at the plant of the taxpayer in India. The taxpayer was required to pay certain startup fees for printing solution, and, also the manufacturing cost of printer. In terms of the agreement, the taxpayer was to exclusively own intellectual property for its own field (namely, inkjet decoration for two-wheelers) and even had the right to obtain a patent on the same. The supplier was restrained from supplying the same printing solution in India but there was no restraint for such supply outside India. The issue before the Tribunal was whether the payment made to UKCo was for supply of machinery or for supply of technology (which would constitute FTS).

Held

The Tribunal observed and held as follows. As per the agreement, UKCo had supplied technology to the taxpayer who even had right to obtain patent. Hence the transaction was not for supply of printer but for supply of technology, which was exclusively made available to the taxpayer. Accordingly, the consideration paid was in the nature of FTS under Article 13(4) of India-UK DTAA.