DECIDED BY: ITAT, BANGALORE BENCH `B’, IN THE CASE OF: Sun Micro systems India Pvt. Ltd. Vs. ITO, APPEAL NO: ITA No. 443 & 444/Bang/06, DECIDED ON August 21, 2009
15. We have heard both the parties. It is an undisputed fact that the appellant ‘entered into an agreement for availing the logistics services from Sun Singapore; Since . the appellant has not adduced evidence before the lower authorities that all the, payments were in respect of spare parts only and therefore, we are confining :our discussion on the issue as to whether the assessee was liable to deduct tax at source in view of the logistics services agreement entered between the assessee and Sun Singapore.
16. For interpreting the word ‘make available’, it has been held by the Calcutta Bench in the case of DCIT v ITC Ltd. 82 ITD 239 that the interpretation given in similar situation under the agreement entered into between the two countries can be followed while interpreting the same word in respect of DTAA between other two countries. The Tribunal held as under:-
“Accordingly, the same scope of ‘fees for technical services’ as provided for in the Indian OTA As with UK, USA and Switzerland, which is far more restricted vis-a-vis the scope of this expression in Indo-French DTAA, shall also apply under Indo-French DTAA, with effect from the date on which the Indo-French DTAA or such other DTAA enters into force. As all the three DTAAs discussed above came into force on a date earlier than the commencement of the previous year 1995- 96, the scope of technical services, for the purpose of Indo-French DTAA, could not be broader than that envisaged in the above DTAAs. In this view of the matter, the ‘fees for services that are ancillary and subsidiary, as well as inextricably and essentially linked to the. sale of property’ are outside the scope of technical services, so far as Indo-French D TAA is also concerned, even though no such specific exclusion clause is incorporated directly in the treaty itself right from the time Indo- French OTA A came into force. Accordingly, in the year in appeal, the ‘fees for technical services; for the purpose of Indo-French DTAA, did not include ‘fees for services that are ancillary and subsidiary, as well as inextricably and essentially linked, to the sale of property’.” ‘
17. The Special Bench; Mumbai in the case of Mahindra and Mahindra Ltd. v DCIT (Mumbai) (SB) 313 ITR 263 (AT), had an occasion to consider the meaning of the word ‘make available’ with reference to DTAA between India and UK, wherein the Tribunal at page 329 observed as under:-
“We have considered the rival submissions in the light of material placed before us and precedents relied upon. We find that clauses (1) and (2) of article 13 in the D TAA with the UK clearly provide that the fees for technical services are taxable in India. Now we hove to consider the meaning of the term ‘fees for technical services’ as employed in this article. As noted above clause (4) of article 13 defines the meaning of the term ‘fees for technical services’. The entire quarrel is about the applicability of otherwise of sub-clause (c) of clause 4 of article 13 as per which fees for making available of the : technical knowledge, experience, skill, etc. is included in the definition of this Sub-clause. In other words, the technical knowledge, experience or skill etc. must be made available to the assessee so as to be covered within its scope and mere providing of such services, without making them available to the assessee will not serve the purpose and hence will be outside the ambit of article. The assessee has ab initio con tended before the authorities below that even if the services rendered by the lead managers were held to be technical services but those were not ‘made available’ to the assessee. “Rendering of any technical or consultancy services” is followed by “which make available technical knowledge, experience, skill, know-how”. In this context it becomes imperative to understand the meaning of the expression ‘make available’ as Used in this article. Make Available means to provide something to one, which is capable of use by the other. Such use may be for once only or on a continuous basis. In our context to make available the technical services means that such technical information or advice is transmitted by the non-resident to the assessee, which remains at its disposal for taking the benefit therefrom by use. Even the use of such technical services by the recipient for once only will satisfy the test of making available the technical services to the assessee. If the non-resident uses all the technical services at its own end, albeit the benefit of that directly and solely flows to the payer of the services, that cannot be characterized as the making available of the ; technical services to the recipient”.
The special Bench thereafter held that management and selling commission cannot be taxed in India as Article 13 of the DTAA with UK does not apply. In the Instant case, ;the facts are paramateria with the facts which were before the Special Bench.
18. J Before us, the learned DR has argued that the technical knowledge, experience and skill was made available to the appellant but the appellant was not willing to utilize the same for the reasons best known to them. However, as an argument it may look attractive but there is nothing on record to suggest that the appellant acquired the necessary skill for using the experience. The revenue has not examined any of the employee of the appellant to bring on record that they could have utilized the experience gained by themselves. Thus, there Is no evidence on record that the agreement for logistics services in fact made available the technical knowledge, experience and skill to the appellant for use by themselves.
19. The Authority for Advance Ruling in the case of Intertek Testing Services India: P. Ltd. 307? ITR 418 had an occasion to consider as to whether an expression interpreted in the MoU relating to the India-US Treaty can be applied to the Indo-UK Treaty when the same expression is found to be used. .- The Authority for Advance, ruling .observed at page 434 as under:-
“True, the MOU relating to the”-India-US Treaty in terms does not apply to the Indo UK Treaty but when a similar expression found in another Treaty is interpreted and explained in a particular manner consistent with one shade. of meaning that can be attributed to it, there is no reason why that interpretation shall be eschewed. In our view, the explanatory memorandum becomes a valuable aid in interpreting the phrase “make available”. It reflects the Government of India’s viewpoint on the true connotation of the expression. It stands on a higher pedestal than the principle of contemporaneous exposition applied in several cases. Hence, the interpretation given in the MOU can be usefully adopted while dealing with a provision similarly worded”.
20. Various Benches of the Tribunal in a series of decisions interpreted the expression ‘make available1 in tune with the Memorandum to the India-US DTAA. The decisions are as under:-
• Raymond Limited v DCIT86ITD 791 (Mum.);
• CESC Ltd. vbCIT275ITR(AT) 15(Del);
• NQA Quality System Ltd v DCIT92 TTJ.446 (AT):
• Mckinsey A Co. Inc. (Philippines) v Assistant Director of Income-tax (International Taxation) 284 ITR (AT) 227 (Mum.)
21. The Bangalore. Bench in the case of ITO v M/s . Cepha Imaging P. Ltd. in ITA No1180/Bang/2008 vide order , dated 24th July,2009 has held that the meaning of the expression `make available’ in MoU between India and USA can be considered to be applicable for the interpretation of the same word as appearing in Indo-UK Treaty. Following the decision of the Bangalore Bench and other decisions referred to above, we hold that the interpretation of the word ‘make available’ as given in MoU between India and USA Treaty can be applied in the Mutant case and as per the facts on record, it has not been established by the revenue that the technology, experience or skill has, been made available to the assessee. Hence, as per Article 12(4) of the DTAA between India and Singapore, the payments made by the assessee were not liable to be taxed under the head ‘ fees for technical services’. Sun Singapore is not having any permanent establishment and therefore, the payments which were required to be taxed under the head ‘business’ were not taxable in view of Article 7 of the DTAA between India and Singapore.
22. The Hon’ble jurisdictional High Court in the case of Jindal Thermal Power Ltd. v DCIT (2009) 182 Taxman 252 (KAR) Karnataka held that rendering of services and utilization should be both in India and Explanation to section 9(2) does not dilute such requirements as laid down by Hon’ble Apex Court in Ishqzama case though Explanation has been introduced subsequently. It was held that if technical services provided off-shore do not require any deduction of tax at source. In the . instant case, the services have been rendered off-shore though these are utilized in India and as per the; decision of the jurisdictional High Court, no TD5 was required to be made. It is true that through e-commerce, the services can be rendered in India without any geographical boundary but no facts have been put before us to establish that Sun Singapore provided such services in India When the income of the recipients not taxable in India then the appellant was not required to deduct tax at source. Hence, it is held that the appellant was not required to deduct tax at source u/s 195 of the IT Act.