Article 13(4) of India-UK DTAA –Payments made for consultancy services cannot be termed as technical services merely because consultancy services has technical inputs-Merely because the recipient of a technical consultancy services learns something with each consultancy, it cannot be considered as satisfying the make available condition.

12.
[2018] 93 taxmann.com 20 (Ahd)

DCIT vs.
BioTech Vision Care (P) Ltd. 

ITA No. :
1388, 2766 & 3154 (AHD.) OF 2014

A.Y.s:
2009-10 to 2011-12

Date of
Order: 18^th April, 2018

Article 13(4) of India-UK DTAA –Payments made for
consultancy services cannot be termed as technical services merely because
consultancy services has technical inputs-Merely because the recipient of a
technical consultancy services learns something with each consultancy, it
cannot be considered as satisfying the make available condition.

Facts

Taxpayer, an Indian entity, made payments to a UK based
company (FCo) for consultancy services in specified areas2. The Taxpayer contended that payment made
to UK Co for such services qualified as business income and in absence of a PE
of the Taxpayer in India, such income was not taxable in India. Thus, Taxpayer
made payments to FCo, without withholding taxes at source.

AO contended that the payments made to FCo were in the
nature of ‘FTS’ under Article 13 of the India-UK DTAA. Thus, the AO disallowed
the payments made to FCo u/s. 40(a)(i) for failure to withhold taxes on such
payments. Aggrieved, the Taxpayer appealed before CIT(A).

CIT(A) deleted the disallowance by holding that the
services rendered by FCo did not make available any technical knowledge, skill
or knowhow and hence it did not qualify as FTS under article 13 of India-UK
DTAA.

Aggrieved, the AO appealed before the Tribunal.

Held

– As per the terms of service
agreement between the Taxpayer and FCo, FCo was obliged to provide technical
advices on phone/fax/ email as and when required. It also required FCo to
provide for consultancy services to the Taxpayer in the specified areas.

– The make available condition in
the FTS article can be considered to be satisfied only when there is a transfer
of technology in the sense that recipient of service is enabled to provide the
same service on his own, without recourse to the original service provider.
Reliance in this regard was placed on the decision in the case of CESC Ltd.
vs. DCIT [(2003) 87 ITD TM 653 (Kol)].

– Merely because the consultancy
services provided by FCo had technical inputs, such services do not become
technical services. Further, simply because the recipient of a technical
consultancy services learns something with each consultancy, there is no
transfer of technology in a manner that the recipient of service is enabled to
provide the same service without recourse to the service provider.