Payment to Foreign healthcare services companies for advising, recommending ,assisting in healthcare projects and for conducting education and training programmes are not royalty

JDIT- OSD(IT) Vs. Harvard Medical International USA (ITAT Mumbai)

The payment in question was purely for the purpose of advising, recommending and assisting in relation to healthcare projects. It was also for conducting education and training programmes. It was also for the purpose of review and giving feed back of various aspects and new cardiac hospital to be set up, recommendation on planned patient care delivery system.

In page 1 5A to 1 5D of the CIT(A)’s order a summary of the activities undertaken by the assessee for WHL have been given. A perusal of the same shows that the consideration received by the assessee cannot be said to be royalty as they were not a payment for use of order, the right to use any copy right, trademark or industrial, commercial or scientific experience. Similarly the assessee did not make available any technical knowledge, experience, skill know how or process. The decision of the Delhi Bench of the ITAT in the case of Sheraton International Inc.(supra) supports the plea of the assessee that where the agreement between the parties provides that there was no economic consideration for right to use the name it cannot be said that any payment can be called royalty. So also the consideration paid in a lump sum cannot be split as a part being in the nature of royalty and any part being in the nature of FIS as laid down in the case of Motorola Inc.(supra). The payment cannot be said to be FIS for the reason that nothing is made available by the Assessee to WHL and in this regard, the observations while deciding payments received by the Assessee from MAX would be equally applicable to the payments received from WHL also. We are of the view that the entire payment received by the assessee from WHL is in the nature of business profits and since the assessee does not have a PE in India the same cannot be brought to tax in India.

INCOME TAX APPELLATE TRIBUNAL, MUMBAI

BEFORE SHRI N.V. VASUDEVAN(J.M) & SHRI B. RAMAKOTAIAH (A.M)

JDIT- OSD(IT) 3(1) Vs. Harvard Medical International USA

ITA NO. 1558/MUM/07 (A.Y. 2002- 03) ,

ITA NO. 1559/MUM/07 (A.Y. 2003- 04)

Harvard Medical International USA Vs. JDIT- OSD(IT) 3(1)