CASE LAWS DETAILS
DECIDED BY: AUTHORITY FOR ADVANCE RULINGS (INCOME TAX), NEW DELHI,
IN THE CASE OF: Bharati AXA General Insurance Co. Ltd., In re , APPEAL NO: A.A.R. No. 845 of 2009, DECIDED ON AUGUST 6, 2010
9. The definition of FTS as contained in clause (b) of Article 12.4 is explicitly designed to restrict the scope and ambit of the technical and consultancy services. Even if we proceed on the basis that some of the services have the flavour of imparting technical knowledge and experience to the recipient of service, the further question is whether such provision of services enables the person acquiring the services to apply the technology contained therein. This test specifically laid down in clause (b), in our view, is not satisfied and the legal position clarified by this Authority while interpreting more or less similar Treaty provisions applies with greater force to the present case in view of the narrow language employed in the India-Singapore Tax Treaty.
10. Providing comments and suggestions after reviewing the strategies and plans developed by the applicant, giving suggestions to the applicant to improve the product developed by it so as to bring it in line with the common practices followed by other AXA entities across the globe, providing HR support assistance, assisting the applicant in choosing cost effective re-insurance partners, reviewing the actuarial methodologies developed by the applicant and providing suggestions and inputs to achieve standard actuarial practices and processing guidelines in connection with the settlement of claims, marketing and risk analysis, fall short of the requirements laid down in the definition of fees for technical services in Tax Treaty between India and Singapore. It will be too much to say that by providing such services (assuming they are technical or consultancy services), the applicant receiving the services is enabled to apply the technology contained therein i.e. the technology, knowledge, skills, etc. possessed by the service provider or technical plan developed by the service provider. We do not find anything in the IT support services that answer the description of technical services as defined in the Treaty.
11. Coming to the payments made by the applicant to AXA ARC for providing access to software applications and to the server hardware system hosted in Singapore for internal purposes and for availing of related support services under the terms of the Service Agreement, we do not think that the payment can be brought within the scope of the definition of `royalty’ in Art. 12.3 of the India-Singapore Tax Treaty. There is no transfer of any copyright contained in the computer software provided by AXA ARC. Applying the principle laid down in Dassult Systems case and the earlier ruling in Fact Set Research Systems Inc., etc. we are of view that clause (a) of Art. 12.3 of Tax Treaty relating to `use of’ or `right to use’, copyright of literary/scientific work is attracted. The payments made for access to the system hosted in Singapore is for availing of the facility provided by AXA ARC and it cannot be said that the applicant has been conferred any right of usage of the equipment located abroad, more so when the server is not dedicated to the applicant.
12. The learned departmental representative has contended that AXA ARC provides consultancy services and as a result of the suggestions and sharing of information with service provider, the applicant utilizes the technology transmitted to the applicant, who can thereby act independently to develop its business is not a convincing argument. This contention cannot be accepted as it amounts to stretching the point to bring the services within the net of FTS as defined in the Treaty. One has to look into the substance and the core of the services availed of by the applicant while giving full effect to the definition contained in the Treaty. This Authority is, therefore, of the view that the fee paid to the AXA ARC by the applicant does not amount to fee for technical services within the meaning of India-Singapore Tax Treaty.