By K. B. Bhujle Advocate
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DIT vs. Sun Microsystems India P. Ltd.; 369 ITR 63 (Karn):
The assessee entered into an agreement for availing of logistic services of S of Singapore. Under the agreement, the services included spare management services, provision of buffer stock, defective repair services, managing local repair centres, business planning to address service levels, etc. S did not have any place of business or permanent establishment in India. The entire services were rendered by S from outside India. The Assessing Officer held that the payments made by the assessee to S were taxable in India. The Tribunal held that as S did not have any permanent establishment and had not made available the technical knowledge, experience or skill, the payments made by the assessee to S were not required to be taxed under the head “Business” and were not taxable in view of article 7 of DTAA between India and Singapore.
On appeal by the Revenue, the Karnataka High Court upheld the decision of the Tribunal and held as under:
“i) If along with the technical services rendered, the service provider also makes available the technology which it used in rendering the services, the case falls within the definition of “fees for technical services” as contained in DTAA . However, if technology is not made available along with technical services what rendered is only technical services and the technical knowledge is withheld, such a technical service would not fall within the definition of “technical services” in DTAA and the payment thereof is not liable to tax.
ii) From the facts of this case, it was clear that S had not made available to the assessee the technology or the technological services which was required to provide the distribution, management and logistic services. That was a finding of fact recorded by the Tribunal on appreciation of the entire material on record. The Payments made by the assessee were not liable to be taxed under the head “ fees for technical services”.”
