M/s. . Sandvik A.B, Pune v. Dy. Comm. of Income-tax,, Pune

ITA 1720/PUN/2011 | 2007-2008
Pronouncement Date: 28-11-2014 | Result: Allowed

Appeal Details

RSA Number 172024514 RSA 2011
Assessee PAN AAHCS7486E
Bench Pune
Appeal Number ITA 1720/PUN/2011
Duration Of Justice 2 year(s) 10 month(s) 29 day(s)
Appellant M/s. . Sandvik A.B, Pune
Respondent Dy. Comm. of Income-tax,, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 28-11-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 28-11-2014
Date Of Final Hearing 19-11-2013
Next Hearing Date 19-11-2013
Assessment Year 2007-2008
Appeal Filed On 30-12-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE: SHRI G.S. PANNU ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO. 1720/PN/2011 ASSESSMENT YEAR : 200 7 - 08 M/S. SANDVIK AB C/O SANDVIK ASIA LIMITED MUMBAI-PUNE ROAD DAPODI PUNE VS. DY. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-II PUNE (APPELLANT) (RESPONDENT) PAN NO. AAHCS7486E A SSESSEE BY: SHR I KANCHAL KOUSHAL SHRI ANUJ DESHMUKH R EVENUE BY: SMT. M.S. VERMA ORDER PER R.S. PADVEKAR JM:- IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE ASSESSING OFFICER U/S. 143(3) AS PER THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL (DRP) GIVEN U/S. 144C(5) OF THE INCOME-TAX ACT FOR THE A.Y. 2007-08. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND IN THE APPEAL: THE LD. ASSESSING OFFICER AND LD. DISPUTE RESOLUTION PANEL HAVE ERRED IN HOLDING THAT THE MANAGEMENT SERVICE FEES (MSF) OF INR 5 92 97 919/- RECEIVED BY THE APPELLANT IS TAXABLE IN INDIA AS FEES FOR TECHNICAL SERVICES (FTS) WITHIN THE MEANING OF ARTICLE 12 OF THE INDIA-SWEDEN DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA OR THE TREATY) READ WITH THE PROTOCOL THERETO. 2. THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDE R. THE ASSESSEE IS A FOREIGN COMPANY INCORPORATED IN SWEDEN . THE ASSESSEE HAS RECEIVED PAYMENT OF RS.5 50 33 677/- FROM SANDVIK ASIA PVT. LTD. (IN SHORT SAPL) AND RS.42 64 242/- FRO M 2 ITA NO. 1720/PN/2011 M/S. SANDVIK AB PUNE WALTER TOOLS INDIA PVT. LTD. (IN SHORT WTIPL). THE ASSES SEE STATED BEFORE THE AUTHORITIES BELOW THAT I.E. AO/DRP IT HAS PROVIDED VARIOUS MANAGEMENT SERVICES TO SAPL AND WTIPL AND TOWARDS THE SAID SERVICES THE ASSESSEE HAS RECEIVED TH E ABOVE AMOUNT FROM THE TWO COMPANIES I.E. SAPL AND WTIPL. THE ASSESSEE FILED THE COPY OF AGREEMENT BEFORE THE AUTHOR ITIES BELOW WITH SAPL. THE A.O. HAS REPRODUCED PART OF THE AGREEMEN T WITH SAPL WHICH IS IN RESPECT OF THE DESCRIPTION OF THE SERVICE S PROVIDED BY THE ASSESSEE COMPANY TO ITS INDIAN SUBSIDIARIES. 3. AFTER EXAMINING THE NATURE OF THE SERVICES IN THE OPINIO N OF THE ASSESSING OFFICER THE ASSESSEE HAS PROVIDED THE T ECHNICAL SUPPORT AND GUIDANCE TO ITS CUSTOMERS AND HENCE THE N ATURE OF THE SERVICES RENDERED BY THE ASSESSEE TO SAPL IS A TE CHNICAL IN NATURE BUT NOT A MANAGERIAL SERVICE AS CLAIMED BY THE AS SESSEE. THE ASSESSING OFFICER HELD THAT AS PER THE PROVISIONS OF SE C. 5(2) R.W.S. 9(1)(I) THE NATURE OF THE SERVICES RENDERED BY THE A SSESSEE IS A TECHNICAL SERVICE AND HENCE THE PAYMENT RECEIVED BY THE SAPL TO THE ASSESSEE IS TOWARDS THE FEES FOR TECHNICAL SERVICE (FTS). THE ASSESSEE CLAIMED BEFORE THE AUTHORITIES BELOW I.E. THE AO/DRP THAT IT IS A TAX-RESIDENT OF SWEDEN AND HENCE ELIG IBLE TO CLAIM BENEFITS UNDER THE INDIA-SWEDEN DTAA. THE ASSES SEE TOOK THE STAND THAT THE NATURE OF THE SERVICES IS NOT TECHNICAL AND THE SERVICES RENDERED BY IT DO NOT SATISFY THE MAKE AVAILABLE CONDITION OF THE TAX TREATY. THE ASSESSEE SUBMITTED BE FORE THE ASSESSING OFFICER THAT THE SERVICES RENDERED BY IT DO NOT SATISFY THE MAKE AVAILABLE CONDITION OF THE TAX TREATY. THE ASS ESSEE ALSO TOOK THE STAND THAT THE SERVICES RENDERED BY IT D O NOT MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE EXPERIENCE SKILL KNOW-HOW PROCESS TO EITHER SAPL OR WTIPL ENABLING IT TO APPLY TH E 3 ITA NO. 1720/PN/2011 M/S. SANDVIK AB PUNE TECHNOLOGY CONTAINED THEREIN WHICH IS A PRE-REQUISITE FOR THE PAYMENT TO BE CATEGORIZED AS FTS UNDER ARTICLE 12 OF THE INDIA- SWEDEN TAX TREATY READ WITH THE PROTOCOL THERETO. THE ASSESSEE ALSO RELIED ON THE FOLLOWING DECISIONS: I. INTERTEK TESTING SERVICES INDIA P. LTD. 307 ITR 418 (AAR). II. ANAPHARM INC AAR NO. 746 OF 2008. III. INVENSYS SYSTEMS INC. VS. DIT 317 ITR 438 (AAR). IV. BHARATI AXA GENERAL INSURANCE CO. LTD. VS. DIT 326 ITR 477. V. ERNST AND YOUNG (P) LTD. 323 ITR 184. VI. BHARAT PETROLEUM CORP. LIMITED VS. JT. DIT 111 TTJ 375 . 4. THE ASSESSING OFFICER REJECTED ALL THE DECISIONS RELIED ON BY THE ASSESSEE BY OBSERVING THAT THE FACTS ARE DISTINGUISHABLE IN ALL THE ABOVE DECISIONS. THE ASSESSING OFFICER FINALLY HELD THA T THE AMOUNTS RECEIVED BY THE ASSESSEE FROM SAPL AND WTIPL TO THE EXTENT OF RS.5 92 97 919/- ARE IN THE NATURE OF THE FEES FO R TECHNICAL SERVICES WITHIN THE MEANING OF SEC.9(1)(VII) OF THE I.T . ACT 1961 AS WELL AS WITHIN THE MEANING OF ARTICLE 12 OF DTAA BETWEEN INDIA AND SWEDEN. THE REASONS GIVEN BY THE AS SESSING OFFICER IN THE DRAFT ASSESSMENT ORDER IN SUPPORT OF THE A BOVE FINDINGS ARE AS UNDER: 6.2 THIS CLEARLY SUGGESTS THAT WORD 'MAKE AVAILABLE' WAS USED IN TREATY IN THAT CONTEXT THAT TREATY TOO SUG GEST THESE SERVICES IN THE NATURE OF TECHNICAL KNOWLEDGE EXPERIE NCE SKILL ETC. WERE OFFERED OR MADE ACCESSIBLE TO THE OTHE R PARTY AND IT NEVER MEANT THAT THE OTHER PARTY SHOULD BE TR AINED OR MADE EXPERT IN SUCH TECHNICAL KNOWLEDGE ETC. IT WILL B E ABSURD ON PART OF A PERSON TO MAKE OTHER PERSON EXP ERT OF ITS CORE COMPETENCY WHICH WILL RESULT IN SITUATION T HAT THE RECIPIENTS OF SERVICE WILL NOT LOOK AGAIN TO HIM WHEN T HESE SERVICES ARE AGAIN NEEDED IN FUTURE. TEACHING / EDUC ATIONAL SERVICES HAVE SEPARATELY DEALT ELSEWHERE IN THE TREA TY. IN VIEW OF ABOVE THE MEANING OF EXPRESSION 'MAKE AVAIL ABLE' HAS TO BE READ IN THE PRESENT CONTEXT. IN THE PRESEN T CASE SERVICE PROVIDER HAS PROVIDED OR MADE ACCESSIBLE THE SERVICES OF ITS TECHNICAL KNOWLEDGE EXPERIENCE..... 'ENABLE D TO APPLY PHRASE USED IN SAME MOU DOES NOT MEAN THAT SERVICE PROVIDER ALSO HAS TO TEACH TECHNOLOGY EMBEDDE D IN THE SERVICE PROVIDED. A SMALL EXAMPLE CAN EXPLAIN THIS CONTENTION IF SOMEONE IS ENABLED TO APPLY / USE MICR OSOFT 4 ITA NO. 1720/PN/2011 M/S. SANDVIK AB PUNE WINDOWS PROGRAMME IN ITS WORK IT DOES NOT MEAN THAT ONE HAS BEEN TAUGHT ABOUT SOURCE CODE OR TECHNOLOGY OF C REATING WINDOWS SOFTWARE. HE HAS BEEN ENABLED MERELY TO USE WINDOW PROGRAMME WITHOUT UNDERSTANDING TECHNOLOGY / KNOW-HOW BEHIND IT. 6.3 IN OECD COMMENTARY ON ARTICLE 12 IN PARA. 11.3 WHILE DISTINGUISHING TRANSFER OF KNOW-HOW FROM PROVI SION OF SERVICES IT IS MENTIONED 'IN THE CASE OF CONTRACTS F OR THE PROVISION OF SERVICES THE SUPPLIER UNDERTAKES TO PE RFORM SERVICES WHICH MAY REQUIRE THE USE BY THE SUPPLIER OF SPECIAL / KNOWLEDGE SKILL AND EXPERTISE BUT NOT THE TRANSFER OF SUCH SPECIAL KNOWLEDGE SKILL OR EXPERTISE TO THE OT HER PARTY' THE ABOVE CLARIFICATION CLEARLY DIFFERENTIATE BETWEEN TRANSFER OF SUCH SPECIAL KNOWLEDGE SKILL OR EXPERTISE W HICH IS COVERED IN THE DEFINITION OF ROYALTY UNDER 12(3)[ A) OF INDIA- US DTAA AND FEE FOR INCLUDED SERVICES COVERED UNDER 12(4)[B) OF INDIA-US DTAA. 6.4 BY THIS ACT SUPPLIER OF SERVICES HAS ENABLED THE RECIPIENT TO USE THE TECHNOLOGY OF THE SUBJECT MATTE R WITHOUT TRANSFER OF KNOW-HOW OR TECHNOLOGY. THIS IS PRECISELY EXPLAINED IN MEMORANDUM OF UNDERSTANDING CONCERNING FEES FOR INCLUDED SERVICES IN ARTICLE 12 OF INDIA-US T AX TREATY DATED 15/5/1989. THE EXPLANATION CLEARLY FOCUSES ON THE FACT THAT A PERSON ACQUIRING THE SERVICES SH OULD BE ENABLED TO APPLY TECHNOLOGY AND NOT RELATED TO TRANSF ER OF THE TECHNOLOGY. IT FURTHER GOES ON TO EXPLAIN TYPICAL C ATEGORY OF SERVICES WHICH GENERALLY INVOLVES EITHER THE DEVELOP MENT AND TRANSFER OF TECHNICAL PLANTS OR DESIGNS OR MAKIN G TECHNOLOGY AVAILABLE AS DESCRIBED IN PARA.4 (B) WHICH INCLUDE: 1. ENGINEERING SERVICES (INCLUDING THE SUB-CATEGORIES OF BIO- ENGINEERING AND AERONAUTICAL AGRICULTURAL CERAMICS CHEMICAL CIVIL ELECTRICAL MECHANICAL METALLURGICAL AND INDUSTRIAL ENGINEERING) 2. ARCHITECTURAL SERVICES AND 3. COMPUTER SOFTWARE DEVELOPMENT 6.5 UNDER PARAGRAPH 4(B) TECHNICAL AND CONSULTANCY SERVICES COULD MAKE TECHNOLOGY AVAILABLE IN A VARIETY OF SETTINGS ACTIVITIES AND INDUSTRIES. SUCH SERVICES MAY FOR EXAMPLE RELATE TO ANY OF THE FOLLOWING: 1. BIO-TECHNICAL SERVICES 2. FOOD PROCESSING 3. ENVIRONMENTAL AND ECOLOGICAL SERVICES 4. COMMUNICATION THROUGH SATELLITE OR OTHERWISE 5. ENERGY CONSERVATION 6. EXPLORATION OR EXPLOITATION OF MINERAL OIL OR NATURAL GAS 7. GEOLOGICAL SURVEYS 8. SCIENTIFIC SERVICES AND 9. TECHNICAL TRAINING. 5 ITA NO. 1720/PN/2011 M/S. SANDVIK AB PUNE 7. ACCORDINGLY ASSESSEE'S CONTENTION IS NOT ACCEPTAB LE. THESE RECEIPTS FROM TECHNICAL SERVICES ARE IN THE NA TURE OF FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF SEC TION 9(1)(VII) OF THE I.T. ACT 1961 AND FTS WITHIN THE MEANIN G OF ARTICLE 12 OF THE DTAA BETWEEN INDIA AND SWEDEN READ WITH THE PROTOCOL THERETO. HENCE THE AMOUNT RECEIVED BY T HE ASSESSEE FROM ITS INDIAN AFFILIATES FOR RENDERING THES E SERVICES IS TAXED AS FEES FOR TECHNICAL SERVICES @ 1 0% AS PROVIDED UNDER DTAA. FROM THE ABOVE DISCUSSION IT IS C LEAR THAT THE ASSESSEE HAS FAILED TO OFFER SUCH INCOME WH ICH IS CLEARLY TAXABLE UNDER BOTH INCOME TAX ACT AND UNDER T HE PROVISIONS OF DTAA. 5. THE ASSESSEE FILED THE OBJECTION BEFORE THE DRP AGAINS T THE DRAFT ASSESSMENT ORDER BUT WITHOUT SUCCESS. THE MAIN T HRUST OF THE ARGUMENT OF THE ASSESSEE BEFORE THE DISPUTE RESOLUT ION PANEL (IN SHORT DRP) IS THAT THE ASSESSEE HAS RECEIVED THE FEES TOWARDS RENDERING THE MANAGEMENT SERVICES AND NOT FOR THE FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF ARTICLE 12 OF T HE INDIA-SWEDEN DTAA AND THE ASSESSING OFFICER SHOULD HAVE ALLOCATED THE TOTAL FEE BETWEEN FTS AND MANAGERIAL SERVICE SPECIALLY WHEN HE HAS NOT DISPUTED THE NATURE OF SERVIC ES PROVIDED BY THE ASSESSEE WHICH COMPRISES OF ADMINISTRATION MARKETING AND HR SUPPORT. THE ASSESSE SUBMITTED BEFORE THE DRP THAT THE PROTOCOL TO INDIA-SWEDEN DTAA PROVIDES TH AT IN CASE INDIA ENTERS INTO ANY AGREEMENT OR CONVENTION WIT H A THIRD STATE WHICH IS A MEMBER OF OECD AND INDIA LIMITS ITS TAXATIO N AT SOURCE ON DIVIDENDS INTEREST ROYALTIES OR FEES FOR TECH NICAL SERVICE TO A RATE LOWER OR A SCOPE MORE RESTRICTED THA N THE RATE OR SCOPE PROVIDED FOR IN THIS CONVENTION ON THE SAID ITEMS OF INCOME THE SAME RATE OR SCOPE AS PROVIDED FOR IN THAT CONVENTION AGREEMENT OR PROTOCOL ON THE SAID ITEMS OF INC OME SHALL ALSO APPLY UNDER THIS CONVENTION. THE ASSESSEE SU BMITTED BEFORE THE DRP THAT IN THE DTAA BETWEEN INDIA AND PORT UGUESE THE FEES FOR TECHNICAL SERVICES HAS BEEN DEFINED IN ARTICLE 12(4) AND DEFINITION OF THE INDIA-PORTUGUESE DTAA PURPORTS TO R ESTRICT 6 ITA NO. 1720/PN/2011 M/S. SANDVIK AB PUNE THE SCOPE OF TAXABILITY OF FTS. IT WAS ARGUED BEFORE THE DTAA THAT AS PER THE INDIA-PORTUGUESE DTAA ANY PAYMENT FO R SERVICES WOULD BE CONSIDERED AS FTS ONLY IF THE SERVICES ARE: I. TECHNICAL IN NATURE: AND II. WHEN SUCH SERVICES MAKE AVAILABLE TECHNICAL KNOWLEDGE EXPERIENCE SKILL KNOW-HOW PROCESSES TO THE RECIPIENT ENABLING IT TO APPLY THE TECHNOLOGY CONTAINED THEREIN. 6. THE DRP WAS NOT IMPRESSED WITH THE STAND OF THE ASS ESSEE AND REJECTED THE ABOVE CONTENTION AND CONFIRMED THE VIE W OF THE ASSESSING OFFICER IN THE DRAFT ASSESSMENT ORDER. THE REAS ONS GIVEN BY THE DRP ARE AS UNDER: 6. THE PANEL HAS CONSIDERED ASSESSEES SUBMISSION AN D ARGUMENTS IN THIS REGARD. THERE IS NO DISPUTE THAT ABOVE SERVICES ARE TAXABLE AS PER I.T. ACT 1961 IN INDIA HOWE VER IN VIEW INDIA- SWEDEN TREATY SCOPE OF TAXABILITY UNDER FEE FOR TECHNICAL SERVICES IS EXCLUDED AS PER THE ASSESSE E'S CONTENTION. THE FIRST CONTENTION OF THE ASSESSEE IS THAT SUCH SERVICES SHOULD BE TECHNICAL IN NATURE WHEREAS INDIA- PORTUGAL OR INDIA-SWEDEN TREATY CLEARLY PROVIDE FOR 'TECHNICAL OR CONSULTANCY SERVICES'. THE SCOPE OF CON SULTANCY SERVICES HAVE BEEN DISCUSSED IN PROTOCOL OF INDIA-US TREATY AND IT HAS BEEN EXPLAINED THAT A CONSULTANCY SERVICE IS WIDER TERM THEN TECHNICAL SERVICES. THE AUTHORITY FOR ADVANCE RULING HAS ALSO HELD IN ITS RULING DATED 27/05/2011 IN THE CASE OF VERIZON DATE SERVICES IND IA PVT. LTD. AAR/865/2010 THAT MANAGERIAL SERVICES ARE COVERED UNDER FEES FOR INCLUDED FEES. WITHOUT PREJUDIC E TO ABOVE THIS PANEL DOES NOT AGREE WITH THE INTERPRETAT ION OF WORD 'MAKE AVAILABLE' IN INDIA-SWEDEN OR INDIA-PORTUGUE SE TREATY. 6.1 THE EXPRESSION 'MAKE AVAILABLE IS NOT DEFINED IN THE INCOME-TAX ACT OR DTAA SIGNED BY INDIA WITH VARIOUS COUNTRIES. IN VIEW OF ABOVE ONE HAS TO LOOK FORWARD F OR ITS MEANING IN OTHER LEGAL ENACTMENTS OR IN THE GENERAL DICTIONARY TO UNDERSTAND ITS MEANING. IT IS FOUND THA T THE EXPRESSION HAS BEEN USED IN VARIOUS OTHER ENACTMENT S IN UNITED STATES. THE EXPRESSION HAS BEEN USED IN ENAC TMENT TERRORISM RISK INSURANCE ACT 'OF UNITED STATES AND IN 'COPYRIGHT INFRINGEMENT ACT' OF USA. ON LATER ACT N UMBER OF DECISIONS HAS COME UP REGARDING MEANING OF EXPRESSI ON 'MAKE AVAILABLE' WHICH MEANS 'OFFER OR MAKE AVAILABLE OR PROVIDE FOR' IN THE CONTEXTS. IF THESE WORDS ARE SUB STITUTED IN SUB PARA-4(B) OF ARTICLE-12 OF INDIA US TREATY (WHERE FIRST TIME WORD MAKE AVAILABLE WAS USED IN TREATY CONTEXT) IT WILL BE AS UNDER IF SUCH SERVICES OFFERED/SUPPLY TEC HNICAL KNOWLEDGE EXPERIENCE SKILLS KNOW-HOW OR PROCESSES...... IT 7 ITA NO. 1720/PN/2011 M/S. SANDVIK AB PUNE MAKES PERFECT SENSE. A PERSON HAVING SUCH TECHNICAL KNOWLEDGE/ EXPERIENCE/ SKILLS/ KNOW-HOW WILL NOT BE OFFERING THROUGH ITS SERVICES THESE TECHNICAL KNOWLED GE/ EXPERIENCE/ KNOW HOW TO THE RECIPIENT OF THE SERVIC ES FOR THE PRICE OF ONLY SERVICES. IF THAT BE THE CASE SUCH SERV ICES WOULD BE COVERED AS ROYALTIES UNDER PARA-3(A) OF ARTI CLE-12 OF INDIA USA DTAA. PARA 49B) OF ARTICLE-12 DEALS WITH PROVISION OF SERVICES TO THE RECIPIENT THROUGH USE OF ONE'S TECHNICAL KNOWLEDGE/EXPERIENCE ETC. AND NOT FOR TRANS FER OF SUCH TECHNICAL KNOWLEDGE/ EXPERIENCE TO THE RECIPIE NT OF SERVICES. THESE AGREEMENTS ARE FOR PROVISION OF SERV ICES AND DO NOT CONTAIN PROVISION FOR TRANSFER OF RELATED EXP ERIENCE/ TECHNICAL KNOWLEDGE/ KNOW-HOW ETC. 6.3 THE BOSTON COURT IN THE USA HAS GIVEN A RULING O N THE PHRASE 'MAKE AVAILABLE' WHICH AGAIN SUPPORTS ABOVE CONTENTION. QUOTING FROM THE BELOW MENTIONED WEBSITE FURTHER SUPPORTS CONTENTION- ANOTHER COURT RULING ACTUALLY DOES SAY MAKING AVAIL ABLE IS NOT DISTRIBUTION WHILE THE RULING IN THE ELEKTRA V . BARKER CASE GOT PLENTY OF ATTENTION EVEN IF SOME OF IT WAS MISLEADING THE EFF POINTS OUT THAT IN ANOTHER RULING ON THE SAME DAY (WHICH GOT MUCH LESS PUBLICITY) A COURT IN B OSTON SEEMS TO HAVE MADE A MUCH STRONGER CASE FOR WHY MAK ING AVAILABLE IS NOT DISTRIBUTION. ONCE AGAIN THE JUDGE DID NOT THROW OUT THE CASE SAYING THAT AN 'OFFER TO DISTRIB UTE' IS STILL ENOUGH OF A CLAIM TO HAVE THE CASE MOVE FORWARD TO T RIAL (AT WHICH POINT THE COPYRIGHT HOLDER WOULD NEED TO SHOW T HAT ACTUAL DISTRIBUTION OCCURRED). HOWEVER WITH SO MANY DIFFERENT COURT RULINGS MAKING SO MANY DIFFERENT INTERPRETATIONS OF 'MAKING AVAILABLE ' THERE ARE GOI NG TO BE APPEALS AND EVENTUALLY IT WILL MOVE UP THE CHAIN. IF (AS IS LIKELY) DIFFERENT APPEALS COURTS END UP DISAGREEING IT MAY EVENTUALLY MAKE IT TO THE SUPREME COURT WHERE WE CAN GET A FINAL RULING ON WHETHER MAKING AVAILABLE IS OR IS N OT THE EQUIVALENT OF DISTRIBUTION. (WEBSITE REFERENCE HTTP;//TECHDIRT. COM/BLOG.PHP?TAG =MAKE+AVAILABLE) 6.4 TREATY WITH THE NETHERLANDS ALSO USES PHRASE 'MAKE AVAILABLE' BUT HAS NOT BEEN DEFINED IN THE TREATY OR ELSEWHERE. THE OFFICIAL WEB SITE BELONGING TO THE NETHERLANDS GOVERNMENT HAS ALSO USED WORD MAKE AVAILABLE IN SAME CONTEXT AS HAS BEEN DISCUSSED EARLI ER. IT HAS BEEN QUOTED FROM WEB SITE- YOU MAKE AVAILABLE PERSONNEL IN THE NETHERLANDS: IF YOU MAKE AN EMPLOYEE AVAILABLE ON THE DUTCH LABOUR MARKET YOU WILL BE LIABLE IN DUTCH LAW TO MAKE SALARY DEDUCT IONS SUBMIT WAGE TAX AND SOCIAL SECURITY DECLARATIONS AND PROBABLY WITHHOLD AND DEDUCT THEM. WHETHER THE LATTER WILL BE THE CASE WILL DEPEND ON THE TAX LAW OF THE NETHER LANDS THE TAX TREATY BETWEEN THE NETHERLANDS AND THE COUN TRY OF HABITUAL RESIDENCE AND ON VARIOUS INTERNATIONAL SOCIAL SECURITY TREATIES SUCH AS EU REGULATION 1408/11 AND THE EUROPEAN SOCIAL CHARTER. 8 ITA NO. 1720/PN/2011 M/S. SANDVIK AB PUNE PLEASE NOTE: 'MAKING AVAILABLE' SHOULD BE TAKEN TO MEAN ANY KIND O F SUPPLY OF PERSONNEL SUCH AS POSTING TRANSFER OR SUPP LY. IF YOU MAKE AVAILABLE PERSONNEL YOU ARE A SUPPLIER. THE EMPLOYER TO WHOM YOU MAKE AVAILABLE PERSONNEL IS REFER RED TO AS THE RECIPIENT.' (WEBSITE REFERENCE-HTTP;WWW.BELASTINGDIENST.NL/VARIABELLB U ITENLAND/EN/BUSINESS TAXPAYERS/BUSINESS) 6.5 THE MEANING OF ABOVE EXPRESSION WAS ALSO SEARCHED ON THE INTERNET AND IT WAS FOUND IN THE FREE DICTION ARY BY FARLEX THAT 'MAKE AVAILABLE' IS THE MEANING OF THE WO RD 'OFFER' AND THIS MEANING CLEARLY FITS INTO IN PARA-4 O F ARTICLE- 12 OF INDIA - SWEDEN. 6.6 THE ASSESSING OFFICER HAS ALSO TRIED AND HAS MAD E EFFORTS TO SEARCH THE MEANING OF ABOVE EXPRESSION I.E. 'MA KE AVAILABLE' ON THE GOOGLE SEARCH ON THE INTERNET AND IT WAS FOUND THAT THE OTHER PERSONS ARE USING THIS EXPRESS ION 'MAKE AVAILABLE' IN THE SENSE OF 'MAKING ACCESSIBLE/S UPPLY THINGS IN THE CONTEXT; 6.7 THE ASSESSING OFFICER HAS DISCUSSED ALL THE CASE LAWS AND TAX NOTES IN DETAIL AND TWO OF THE ABOVE C ASES ARE RULINGS OF 'AUTHORITY FOR ADVANCE RULING' WHICH DOES NOT HAVE PRECEDENT VALUE FOR OTHER CASES. THE OTHER CAS ES DECIDED ON THE ISSUE OF 'MAKE AVAILABLE' HAVE NOT B EEN ACCEPTED BY THE DEPARTMENT AS THESE ARE NOT BASED O N CORRECT INTERPRETATION OF 'MAKE AVAILABLE'. THESE CAS ES HAVE NOT DISCUSSED ALL EXAMPLES AND OTHER TECHNICAL NOTES PROVIDED IN PROTOCOL OF INDIA- US TREATY THERE WERE CE RTAIN OTHER EXAMPLES WHICH SUGGEST THAT TRANSFER / TEACHIN G OF SUCH EXPERIENCE/ KNOW-HOW IS NOT REQUIRED TO TREAT T HESE SERVICES AS MAKE AVAILABLE EXAMPLES FROM PROTOCOL RELA TED TO TECHNICAL AND CONSULTANCY SERVICES COULD MAKE TECHNOLOGY AVAILABLE IN A VARIETY OF SETTINGS ACTIVITIE S AND INDUSTRIES. AN EXAMPLE GIVEN IN MOU WHICH IS RELEVANT FOR INTERPRETING TERM MAKE AVAILABLE IS AS UNDER: EXAMPLE-12 FACTS: AN INDIAN WISHES TO INSTALL A COMPUTERIZED SYSTEM IN H IS HOME TO CONTROL LIGHTING HEATING AND AIR-CONDITIONING A STEREO SOUND SYSTEM AND A BURGLAR AND FIRM ALARM SY STEM. HE HIRES AN AMERICAN ELECTRICAL ENGINEERING FIRM TO DE SIGN THE NECESSARY WIRING SYSTEM ADAPT STANDARD SOFTWARE AND PROVIDE INSTRUCTIONS FOR INSTALLATIONS. ARE THE F EES PAID TO THE AMERICAN FIRM BY THE INDIAN INDIVIDUAL FEES FO R INCLUDED SERVICES? 9 ITA NO. 1720/PN/2011 M/S. SANDVIK AB PUNE ANALYSIS: THE SERVICES IN RESPECT OF WHICH THE FEES ARE PAID ARE OF THE TYPE WHICH WOULD GENERALLY BE TREATED AS FEES FOR INC LUDED SERVICES UNDER PARAGRAPH 4(B). HOWEVER BECAUSE THE SERVICES ARE FOR THE PERSONAL USE OF THE INDIVIDUAL MA KING THE PAYMENT UNDER PARAGRAPH 5(D) THE PAYMENTS WOULD NOT BE FEES FOR INCLUDED SERVICES. 6.8 THIS EXAMPLE CLEARLY SUGGESTS THAT THE RECIPIENT H AS NOT BEEN PROVIDED BY SERVICE PROVIDER ANY TECHNICAL KNOWLEDGE REGARDING COMPUTERIZED SYSTEM SO THAT HE CAN DEVELOP SUCH SYSTEM OF HIS OWN. IN FACT HE HAS BEEN MERELY ADVISED HOW HE CAN APPLY THAT KNOWLEDGE FOR AUTOMATION FOR ITS USE. THE RECIPIENT HAS NOT BECOME EXPERT IN THE TECHNOLOGY OF THE COMPUTER SYSTEM FOR CONTROLL ING LIGHTING HEATING ETC. IN THIS EXAMPLE. 6.9 THIS CLEARLY SUGGESTS THAT WORD 'MAKE AVAILABLE' W AS USED IN TREATY IN ABOVE SAID CONTEXT. TREATY TOO SUG GEST THESE SERVICES OF TECHNICAL KNOWLEDGE/EXPERIENCE/SKI LL ETC. WERE OFFERED OR MADE ACCESSIBLE TO THE OTHER PARTY A ND IT NEVER MEANT THAT THE OTHER PARTY SHOULD BE TRAINED O R MADE EXPERT IN SUCH TECHNICAL KNOWLEDGE ETC. IT WILL BE ABSURD ON PART OF A PERSON TO MAKE OTHER PERSON EXPERT OF ITS OWN CORE COMPETENCY WHICH WILL RESULT IN SITUATION THAT THE RECIPIENTS OF SERVICE WILL NOT LOOK AGAIN TO HIM WHEN T HESE SERVICES ARE AGAIN NEEDED IN FUTURE. TEACHING /EDUCA TIONAL SERVICES HAVE BEEN SEPARATELY DEALT ELSEWHERE IN THE TREATY. THE ASSESSEE HAS ALSO NOT ARGUED ON INTERPRET ATION OF WORD 'MAKE AVAILABLE' IN US COURTS. IN VIEW OF ABO VE THE MEANING OF EXPRESSION 'MAKE AVAILABLE' HAS TO BE REA D IN THE ABOVE CONTEXT. IN THE PRESENT CASE SERVICE PROVI DER HAS PROVIDED OR MADE ACCESSIBLE THE SERVICES OF ITS TECH NICAL KNOWLEDGE/ EXPERIENCE.... 'ENABLED TO APPLY' PHRASE USED IN SAME PROTOCOL DOES NOT MEAN THAT SERVICE PROVIDER ALSO HAS TO TEACH TECHNOLOGY EMBEDDED IN THE SERVICE PRO VIDED. IN VIEW OF ABOVE WE ARE OF THE VIEW THAT THERE IS NO NEED O F ANY INTERFERENCE IN THE ASSESSMENT ORDER OF THE A.O ON THIS ISSUE. 7. AS PER THE DIRECTIONS OF THE DRP U/SEC. 144C(5) OF THE ACT THE ASSESSING OFFICER FINALLY BROUGHT TO TAX THE ENTIRE AMO UNT UNDER THE PROVISIONS OF THE I.T. ACT . NOW THE ASSESSEE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND HAVE ALSO CONSIDERED THE WRITTEN SUBMISSIONS AND THE PRECEDENTS AND DECISIONS RELIED ON BY BOTH THE PARTIES. THE ASSESSEE IS TAX RESIDENT OF SWEDEN. IT IS CLAIMED THAT THAT IT DOES 10 ITA NO. 1720/PN/2011 M/S. SANDVIK AB PUNE NOT HAVE A PERMANENT PLACE OF BUSINESS IN INDIA (PE). THE DISPUTE IS IN RESPECT OF THE PAYMENT OF RS.5.9 CRORES REC EIVED BY THE ASSESSEE COMPANY FROM ITS INDIAN SUBSIDIES I.E. SANDVIK ASIA PVT. LTD. (SAPL) AND WTIPL. THE CLAIM OF THE ASSESSEE IS THAT THE ASSESSEE RECEIVED THE SAID PAYMENT FROM ITS INDIAN SUBS IDIES FOR RENDERING THE SERVICES WHICH ARE IN THE NATURE OF COMMER CIAL MANAGEMENT MARKETING AND PRODUCTION SERVICES. THE NATU RE OF THE SERVICES AS PER THE AGREEMENT ARE ALREADY MENTIONE D HERE-IN- ABOVE. IN THIS CASE THERE IS NO DISPUTE ABOUT THE LEGAL POSITION THAT THE AMOUNT RECEIVED BY THE ASSESSEE FROM ITS INDIA N SUBSIDIES IS TAXABLE IN INDIA UNDER NORMAL PROVISIONS OF ACT MORE PARTICULARLY U/S. 9(1)(VII) R.W.S. 5(2) OF THE INCOME-TAX A CT. THE MAIN PLANK OF THE ARGUMENT OF THE LD. COUNSEL IS THAT WHEN THE ASSESSEE IS COVERED BY THE BENEFICIAL CLAUSES IN THE TREATY ENTERED INTO AS PER THE PROVISIONS OF SEC. 90 (2) OF THE I NCOME- TAX ACT THEN EVEN IF THE ASSESSEES INCOME IS TAXABLE IN THE NORMAL PROVISIONS STILL HE CAN CLAIM THE EXEMPTION FROM THE T AX AS PER THE CLAUSES APPLICABLE IN THE TREATY. 8.1 LD. COUNSEL ARGUES THAT THE ABOVE PAYMENT RECEIVED BY THE ASSESSEE COMPANY IS NOT TAXABLE IN INDIA IN VIEW OF T HE BENEFICIAL PROVISIONS OF THE TAX TREATY BETWEEN INDIA AND S WEDEN READ WITH THE PROTOCOL WHICH IS INTEGRAL PART OF SAID TR EATY. HE SUBMITS THAT THE PROVISIONS OF TAX TREATY BETWEEN INDIA AND SWEDEN READ WITH THE PROTOCOL RELATING TO THE SCOPE AND TAXATION OF FEES FOR TECHNICAL SERVICES BEING MORE BENEFICIAL THAN THE CORRESPONDENCE PROVISIONS OF THE INCOME-TAX ACT HENCE THE ASSESSEE MAY BE GIVEN THE BENEFIT OF THE TREATY BETWEE N INDIA- PORTUGAL ON THE BASIS OF PROTOCOL. HE SUBMITS THAT WITHO UT ADMITTING EVEN IF THE AMOUNT RECEIVED BY THE ASSESSEE IS IN THE 11 ITA NO. 1720/PN/2011 M/S. SANDVIK AB PUNE NATURE OF FEES FOR TECHNICAL SERVICES (FTS) BUT GOING ON T HE PRINCIPLES OF MOST FAVOURED NATION (MFN) CLAUSE IN THE PROTO COL ATTACHED TO THE DTAA BETWEEN INDIA AND SWEDEN THE A SSESSEE CAN CLAIM THE EXEMPTION FROM TAX IN INDIA BECAUSE SUBSEQ UENTLY THE INDIA HAS ALSO ENTERED INTO DTAA WITH PORTUGAL WHIC H IS ALSO MEMBER OF THE OECD AND FEES FOR TECHNICAL SERVICES ARE NO T TAXABLE UNLESS THE CONDITION OF MAKE AVAILABLE IS FULFILLED. 8.2 LD. COUNSEL PLACED HEAVY RELIANCE ON THE DECISION OF THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT CENTR AL CIRCLE BANGALORE AND ANOTHER VS. M/S. DE BEERS INDIA MINE RALS PVT. LTD. 340 ITR 467 (KAR) AND BHARATI AXA GENERAL INSU RANCE CO. LTD. VS. DIT 326 ITR 477. HE REFERRED TO THE ASSESS MENT ORDER AND SUBMITS THAT ASSESSING OFFICER HAS IMPLIEDLY ACCE PTED THAT THE TAX TREATY BETWEEN INDIA-PORTUGAL CAN BE APP LIED TO THE ASSESSEE MORE PARTICULARLY IN THE CONTEXT OF THE PROTOC OL ATTACHED TO THE INDIA AND SWEDEN TREATY. THERE IS CON DITION FOR BEGINNING TO TAX THE FEES FOR TECHNICAL SERVICES (FTS) IN TH E DTAA BETWEEN INDIA AND PORTUGUESE I.E MAKE AVAILABLE AND IF SAID CONDITION IS NOT FULFILLED IN SOURCE COUNTRY FTS CANNOT BE TAXED. THE ASSESSEE IS TO BE GIVEN THE BENEFIT OF THE INDIA-PORT UGUESE TREATY ON PRINCIPLE OF MFN CLAUSE WHICH IS WELL RECOGNIZED IN INTERNATIONAL TAXATION. HE SUBMITS THAT THE IDENTICAL ISSUE HAS COME FOR THE CONSIDERATION BY THE ITAT PUNE IN THE CAS E OF SANDVIK AUSTRALIA PTY. LTD. VS. D.D.I INTERNATIONAL TAX-II P UNE IN ITA NO. 93/PN/2011 AND THE ASSESSEES CASE IS SQUAR ELY COVERED ON THE INTERPRETATION OF A EXPRESSION-MAKE AVA ILABLE. PER CONTRA THE LD. DR RELIED ON THE WRITTEN SUBMISSIONS. 12 ITA NO. 1720/PN/2011 M/S. SANDVIK AB PUNE 9. IN THIS CASE THE ONLY ISSUE TO BE CONSIDERED BY US IS WHETHER THE ASSESSEE CAN BE GIVEN BENEFIT OF INDIA-PORTU GUESE TREATY ON PRINCIPLE OF MFN CLAUSE? THE INDIA ENTERED INTO DTAA WITH THE SWEDEN WHICH WAS NOTIFIED VIDE NOTIFICATION NO. GR 705/E DATED 17.12.1997. ARTICLE 12 OF THE INDIA-SWEDEN DT AA PROVIDES THE MODE OF TAXATION OF THE ROYALTIES AND FEES FO R TECHNICAL SERVICES WHETHER THE SAME ARE TO BE TAXED IN THE SOURCE COUNTRY OR IN THE RESIDENCE COUNTRY. THE DEFINITIO N OF THE FEES FOR TECHNICAL SERVICES (FTS) IS GIVEN IN ARTICLE 12(3)(B) OF T HE ACT. IT IS TRUE THAT IT IS A VERY CONSERVATIVE DEFINITION AND THERE IS NO CONDITION THAT THE TECHNICAL SERVICES SHOULD BE MADE AVAILABLE. THE INDIA ALSO ENTERED INTO THE TREATY WITH PORT UGUESE REPUBLIC WHICH WAS NOTIFIED VIDE NOTIFICATION NO. GR F42/E DATE D 16 TH JUNE 2000. IN THE SAID TREATY MODE OF TAXATION OF THE FEES FOR TECHNICAL SERVICES (FTS) BETWEEN TWO COUNTRIES IS ALSO PROVIDED IN THE ARTICLE 12 BUT INSTEAD OF FEES FOR TECHNICAL SERVICES THE EXPRESSION USED IS FEES FOR INCLUDED TECHNICA L SERVICES. AS PER THE ARTICLE 12(4) FEES FOR INCLUDED SERVICE S MEANS PAYMENT OF FEES OF ANY KIND OTHER THAN THOSE ME NTIONED IN ARTICLE 14 AND 15 OF THE SAID TREATY TO ANY PERSON IN CONSIDERATION OF THE RENDERING OF ANY TECHNICAL OR CONSULTA NCY SERVICES (INCLUDING THROUGH THE PROVISIONS OF SERVICES OF TEC HNICAL OR OTHER PERSONAL) IF SUCH SERVICES (A) ARE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF THE RIGHT PROPERTY OR INFORMATION FOR WHICH A PAYMENT DESCRIBE IN PARA NO. 3 IS RECEIVED OR (B) MAKE AVAILABLE TECHNICAL KNOWLEDGE EXPRESSIONS SKILL KNOWHOW OR PROCESS OR CONSIST OF THE DEVELOPMENT AND TRANSFER OF TECHNICAL PLAN OR TECHNICAL DESIGN WHICH ENABLES THE PERSON ACQUIRING THE SERVICES TO APPLY THE TECHNOLOGY CONTAINED THEREIN. 13 ITA NO. 1720/PN/2011 M/S. SANDVIK AB PUNE THE MAIN PLANK OF THE ARGUMENT OF THE LD. COUNSEL IS THA T CONSIDERING THE PRINCIPLE OF MOST FAVOURED NATION (MFN) CLAU SE IN TREATY BETWEEN INDIA AND PORTUGUESE UNLESS A CONDITIO N OF MAKE AVAILABLE THE TECHNICAL KNOWLEDGE OR SKILL OR SERVICES IS FULFILLED THEN SAID PAYMENT CANNOT BE TAXED IN SOURCE COUNT RY I.E. INDIA. 10. IN THE CASE OF SANDVIK AUSTRALIA PTY. LTD. (SUPRA) AN D FOLLOWING THE DECISION IN THE CASE OF M/S. DE BEERS INDIA MINERALS PVT. LTD. (SUPRA) ON THE EXPRESSION MAKE AVAILABLE IT IS HELD AS UNDER 12. THE ASSESSING OFFICER HAS ALREADY REPRODUCED AR TICLE 12 OF THE INDIA AUSTRALIA TREATY IN HIS DRAFT ASSESSM ENT ORDER AND HE HAS INTERPRETED THAT AS PER THE TREATY FTS MEANS PAYMENT OF ANY KIND TO ANY PERSON IN CONSIDER ATION FOR THE RENDERING OF ANY TECHNICAL OR CONSULTANCY SE RVICES IF SUCH SERVICES MAKE AVAILABLE TECHNICAL KNOWLEDGE EXPERIENCE SKILL KNOW-HOW OR PROCESS OR CONSISTS OF DEVELOPMENT AND DATA OF TECHNICAL PLAN OR TECHNICAL DE SIGN. IN VIEW OF THE ABOVE RENDERED BY THE ASSESSEE COMPA NY TO ITS INDIAN AFFILIATES ARE IN THE NATURE OF FTS OR ROY ALTIES AND SAME IS TAXABLE IN INDIA. WE REPRODUCE HEREIN UNDER T HE RELEVANT PART OF ARTICLE 12: ARTICLE XII - ROYALTIES - 1. ROYALTIES ARISING IN ONE OF THE CONTRACTING STATES BEING ROYALTIES TO WHICH A RESIDENT OF THE OTHER CONTRACTING STATE IS BENEFICI ALLY ENTITLED MAY BE TAXED IN THAT OTHER STATE. 2. SUCH ROYALTIES MAY ALSO BE TAXED IN THE CONTRACTIN G STATE IN WHICH THEY ARISE AND ACCORDING TO THE LAW OF THAT STATE BUT THE TAX SO CHARGED SHALL NOT EXCEED: (A) IN THE CASE OF : (I) ROYALTIES REFERRED TO IN SUB-PARAGRAPH (3)(B) ; (II) PAYMENTS OR CREDITS FOR SERVICES REFERRED TO I N SUB-PARAGRAPH (3)(D) SUBJECT TO SUB-PARAGRAPHS (3)(H) TO (L) THAT ARE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF EQUIPMENT FOR WHICH PAYMENTS OR CREDITS ARE MADE UNDER SUB-PARAGRAPH (3)(B); OR (III) ROYALTIES REFERRED TO IN SUB-PARAGRAPH (3)(F) T HAT RELATE TO EQUIPMENT MENTIONED IN SUB-PARAGRAPH (3)(B) ; 14 ITA NO. 1720/PN/2011 M/S. SANDVIK AB PUNE 10 PER CENT OF THE GROSS AMOUNT OF THE ROYALTIES; AND (B) IN THE CASE OF OTHER ROYALTIES : (I) DURING THE FIRST 5 YEARS OF INCOME FOR WHICH T HIS AGREEMENT HAS EFFECT : (A) WHERE THE PAYER IS THE GOVERNMENT OR A POLITICAL SUB-DIVISION OF THAT STATE OR A PUBLIC SECTOR COMPANY: 15 PER CENT OF THE GROSS AMOUNT OF THE ROYALTIES; AND (B) IN ALL OTHER CASES: 20 PER CENT OF THE GROSS AMOUNT OF THE ROYALTIES; AND (II) DURING ALL SUBSEQUENT YEARS OF INCOME: 15 PER CENT OF THE GROSS AMOUNT OF THE ROYALTIES. 3. THE TERM ROYALTIES IN THIS ARTICLE MEANS PAYMENTS OR CREDITS WHETHER PERIODICAL OR NOT AND HOWEVER DESCRIB ED OR COMPUTED TO THE EXTENT TO WHICH THEY ARE MADE AS CONSIDERATION FOR : (A) THE USE OF OR THE RIGHT TO USE ANY COPYRIGHT PATENT DESIGN OR MODEL PLAN SECRET FORMULA OR PROCESS TRADE MARK OR OTHER LIKE PROPERTY OR RIGHT; (B) THE USE OF OR THE RIGHT TO USE ANY INDUSTRIAL COMMERCIAL OR SCIENTIFIC EQUIPMENT; (C) THE SUPPLY OF SCIENTIFIC TECHNICAL INDUSTRIAL OR COMMERCIAL KNOWLEDGE OR INFORMATION; (D) THE RENDERING OF ANY TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THOSE OF TECHNICAL OR OTHER PERSO NNEL) WHICH ARE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF ANY SUCH PROPERTY OR RIGHT AS IS MENTI ONED IN SUB-PARAGRAPH (A) OR ANY SUCH EQUIPMENT AS IS MENTIONED IN SUB-PARAGRAPH (B) OR ANY SUCH KNOWLEDGE OR INFORMATION AS IS MENTIONED IN SUB-PARAGRAPH (C); (E) THE USE OF OR THE RIGHT TO USE : (I) MOTION PICTURE FILMS; (II) FILMS OR VIDEO TAPES FOR USE IN CONNECTION WIT H TELEVISION; OR (III) TAPES FOR USE IN CONNECTION WITH RADIO BROADCASTING; (F) TOTAL OR PARTIAL FORBEARANCE IN RESPECT OF THE U SE OR SUPPLY OF ANY PROPERTY OR RIGHT REFERRED TO IN SU B- PARAGRAPHS (A) TO (E); 15 ITA NO. 1720/PN/2011 M/S. SANDVIK AB PUNE (G) THE RENDERING OF ANY SERVICES (INCLUDING THOSE OF TECHNICAL OR OTHER PERSONNEL) WHICH MAKE AVAILABLE TECHNICAL KNOWLEDGE EXPERIENCE SKILL KNOW-HOW OR PROCESSES OR CONSIST OF THE DEVELOPMENT AND TRANSFER OF A TECHNICAL PLAN OR DESIGN; BUT THAT TERM DOES NOT INCLUDE PAYMENTS OR CREDITS RELATING TO SERVICES MENTIONED IN SUB-PARAGRAPHS (D) AND (G) THAT ARE MADE; (H) FOR SERVICES THAT ARE ANCILLARY AND SUBSIDIARY AND INEXTRICABLY AND ESSENTIALLY LINKED TO A SALE OF PROPERTY; (I) FOR SERVICES THAT ARE ANCILLARY AND SUBSIDIARY T O THE RENTAL OF SHIPS AIRCRAFT CONTAINERS OR OTHER EQUIPME NT USED IN CONNECTION WITH THE OPERATION OF SHIPS OR AIRCRAFT IN INTERNATIONAL TRAFFIC; (J) FOR TEACHING IN OR BY AN EDUCATIONAL INSTITUTION; (K) FOR SERVICES FOR THE PERSONAL USE OF THE INDIVIDUAL OR INDIVIDUALS MAKING THE PAYMENTS OR CREDITS; OR (L) TO AN EMPLOYEE OF THE PERSON MAKING THE PAYMENTS OR CREDITS OR TO ANY INDIVIDUAL OR FIRM OF INDIVIDUALS (OTHER THAN A COMPANY) FOR PROFESSIONAL SERVICES AS DEFINED IN ARTICLE 14. 4. THE PROVISIONS OF PARAGRAPHS (1) AND (2) SHALL NOT A PPLY IF THE PERSON BENEFICIALLY ENTITLED TO THE ROYALTIES BEIN G A RESIDENT OF ONE OF THE CONTRACTING STATES CARRIES O N BUSINESS IN THE OTHER CONTRACTING STATE IN WHICH TH E ROYALTIES ARISE THROUGH A PERMANENT ESTABLISHMENT S ITUATED THEREIN OR PERFORMS IN THAT OTHER STATE INDEPENDENT PERSONAL SERVICES FROM A FIXED BASE SITUATED THEREIN AND THE PROPERTY RIGHT OR SERVICES IN RESPECT OF WHICH THE ROYALTIES ARE PAID OR CREDITED ARE EFFECTIVELY CONNE CTED WITH SUCH PERMANENT ESTABLISHMENT OR FIXED BASE. IN SUCH A CASE THE PROVISIONS OF ARTICLE 7 OR ARTICLE 14 AS THE CASE MAY BE SHALL APPLY. 5. ROYALTIES SHALL BE DEEMED TO ARISE IN A CONTRACTING STATE WHEN THE PAYER IS THAT STATE ITSELF OR A POLITICAL S UB-DIVISION OR LOCAL AUTHORITY OF THAT STATE OR A PERSON WHO IS A RESIDENT OF THAT STATE FOR THE PURPOSES OF ITS TAX. WHERE HOW EVER THE PERSON PAYING THE ROYALTIES WHETHER THE PERSON IS A RESIDENT OF ONE OF THE CONTRACTING STATES OR NOT HA S IN ONE OF THE CONTRACTING STATES OR OUTSIDE BOTH CONTRACTI NG STATES A PERMANENT ESTABLISHMENT OR FIXED BASE IN CONNECTIO N WITH WHICH THE LIABILITY TO PAY THE ROYALTIES WAS INCURRED AND THE ROYALTIES ARE BORNE BY THE PERMANENT ESTABLISHM ENT OR FIXED BASE THEN THE ROYALTIES SHALL BE DEEMED TO ARIS E IN THE STATE IN WHICH THE PERMANENT ESTABLISHMENT OR F IXED BASE IS SITUATED. 16 ITA NO. 1720/PN/2011 M/S. SANDVIK AB PUNE 6. WHERE OWING TO A SPECIAL RELATIONSHIP BETWEEN THE PAYER AND THE PERSON BENEFICIALLY ENTITLED TO THE ROYALTIES OR BETWEEN BOTH OF THEM AND SOME OTHER PERSON THE AMO UNT OF THE ROYALTIES PAID OR CREDITED HAVING REGARD TO WHAT THEY ARE PAID OR CREDITED FOR EXCEEDS THE AMOUNT WHICH MI GHT HAVE BEEN EXPECTED TO HAVE BEEN AGREED UPON BY THE PAYER AND THE PERSON SO ENTITLED IN THE ABSENCE OF SUCH RELATIONSHIP THE PROVISIONS OF THIS ARTICLE SHALL APPL Y ONLY TO THE LAST-MENTIONED AMOUNT. IN THAT CASE THE EXCESS P ART OF THE AMOUNT OF THE ROYALTIES PAID OR CREDITED SHALL RE MAIN TAXABLE ACCORDING TO THE LAW RELATING TO TAX OF EAC H CONTRACTING STATE BUT SUBJECT TO THE OTHER PROVISI ONS OF THIS AGREEMENT. 13. WE ARE CONCERNED WITH PARA NO.3 OF ARTICLE 12 WH ICH DEFINES THE TERM ROYALTY. UNDER THE IT ACT THE TERM ROYALTY AND EXPRESSION FTS ARE CLASSIFIED AS TWO DIFFERENT CONNOTATIONS I.E. 9(1)(VI) AND 9(1)(VII). SO FAR AS ARTIC LE 12 IS CONCERNED FTS IS INCLUDED IN THE TERM ROYALTY FOR THE PURPOSE OF DECIDING IN WHICH CONTRACTING STATE THE INCOME FROM THE SAME IS TO BE TAXED. CLAUSE (G) IN ARTICLE 1 2(3) GOES TO THE ROOTS OF THE ISSUE. MAIN THRUST OF THE ARGUMENT OF THE LD. COUNSEL IS THAT IT IS NOT ONLY SUFFICIENT T O RENDER THE SERVICES BUT THE SAME SHOULD BE MADE AVAILABLE TO THE RECIPIENT AND THIS PARTICULAR IMPORTANT ASPECT IS MI SSED BY THE DRP/TPO. WE FIND THAT THE EXPRESSION MAKING AVAILABLE IS VERY MUCH IMPORTANT TO DECIDE IN WHICH CONTRACTING STATE THE AMOUNT RECEIVED FOR RENDERING THE SERVICES RELATING TO THE TECHNICAL KNOW-HOW IS TO BE TAXED. THE EXPRESSION MAKE AVAILABLE IS USED IN THE CONTE XT OF SUPPLYING OR TRANSFERRING TECHNICAL KNOWLEDGE OR TECH NOLOGY TO ANOTHER. IT IS DIFFERENT THAN THE MERE OBLIGATION OF THE PERSON RENDERING THE SERVICES OF THAT PERSONS OWN T ECHNICAL KNOWLEDGE OR TECHNOLOGY IN PERFORMANCE OF THE SERVIC ES. THE TECHNOLOGY WILL BE CONSIDERED AS MADE AVAILABLE WH EN THE PERSON RECEIVING THE SERVICES IS ABLE TO APPLY T HE TECHNOLOGY BY HIMSELF. 14. THE EXPRESSION MAKE AVAILABLE HAS COME FOR CONSIDERATION BEFORE THE HON'BLE HIGH COURT OF KARNA TAKA IN THE CASE OF M/S.DE BEERS INDIA MINERALS PVT. LTD. (SUPRA ). IN THE SAID CASE THE TREATY BETWEEN INDIA AND NETHE RLANDS WAS FOR THE CONSIDERATION OF THEIR LORDSHIPS. THE A SSESSEE IN THAT APPEAL WAS A PROVIDING COMPANY ENGAGED IN TH E BUSINESS OF PROSPECTING AND MINING FOR DIAMONDS AND OTHER MINERALS. THEY HAVE BEEN GRANTED LICENCES (RECONNAISSA NCE PERMITS) BY THE STATE GOVERNMENT OF KARNATAKA ANDHRA PRADESH AND CHHATTISGARH. DURING THE EARLY STAGE VAR IOUS TECHNIQUES WERE EMPLOYED FOR THE PURPOSE OF CARRYING OUT GEOPHYSICAL SURVEY THE ASSESSEE ENTERED INTO AGREEM ENT WITH M/S.FUGRO ELBOCON B.V. NETHERLANDS WHO HAD A TEAM OF EXPERTS SPECIALISED IN AIR BORNE GEOPHYSICAL SERVI CES FOR CLIENTS. FOR THE TECHNICAL SERVICES RENDERED BY THEM THE SAID ASSESSEE HAD PAID CONSIDERATION. THE ASSESSING OFFICER APPLIED ARTICLE 12 OF THE INDO-NETHERLANDS TR EATY AND HELD THAT THE SAME WAS TAXABLE IN THE HANDS OF TH E NETHERLANDS COMPANY. AS THE WORDINGS OF ARTICLE 12 I N THE 17 ITA NO. 1720/PN/2011 M/S. SANDVIK AB PUNE INDO-NETHERLANDS TREATY ARE ANALOGOUS TO ARTICLE 12 OF THE INDIA AUSTRALIA TREATY AS EXPRESSION MAKE AVAILABLE I S ALSO USED WHILE DETERMINING FISCAL JURISDICTION OF TH E CONTRACTING STATE THE HON'BLE HIGH COURT EXPLAINED T HE MEANING OF THE EXPRESSION MAKE AVAILABLE WHICH WAS APPEARING IN THE INDO-NETHERLANDS TREATY THE LORDSHI PS EXPLAINED THE EXPRESSION AS UNDER: 13. UNDER THE ACT IF THE CONSIDERATION PAID FOR RE NDERING TECHNICAL SERVICES CONSTITUTE INCOME BY WAY OF FEES F OR TECHNICAL SERVICES IT IS TAXABLE. HOWEVER ARTICLE 12 OF THE AFORESAID INDIA-NETHERLANDS TREATY DEFINES FEES FOR TECHNICAL SERVICES FOR THE PURPOSE OF ARTICLE 12 WHIC H DEALS WITH ROYALTIES AND FEES FOR TECHNICAL SERVICES. THE FEES FOR TECHNICAL SERVICES MEANS THE PAYMENT OF ANY AMOUNT T O ANY PERSON IN CONSIDERATION FOR RENDERING OF ANY TECHNI CAL SERVICES ONLY IF SUCH SERVICES MAKE AVAILABLE TECHNI CAL KNOWLEDGE EXPERTISE SKILL KNOW-HOW OR PROCESSES. IF T HE TECHNICAL KNOWLEDGE EXPERTISE SKILL KNOW HOW OR PROCES S IS NOT MADE AVAILABLE BY THE SERVICE PROVIDER WHO HAS RENDERED TECHNICAL SERVICE FOR THE PURPOSE OF ARTIC LE 12 OF DTAA IT WOULD NOT CONSTITUTE FEES FOR TECHNICAL SERVIC ES. TO THAT EXTENT THE DEFINITION OF FEE FOR TECHNICAL SERVIC ES FOUND IN THE AGREEMENT IS INCONSISTENT WITH THE DEFINITION OF FEES FOR TECHNICAL SERVICES PROVIDED IN EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION (1) OF SECTION 9. IN VIEW OF SECT ION 90 THE DEFINITION OF FEES FOR TECHNICAL SERVICES CONTAINED IN THE AGREEMENT OVERRIDES THE STATUTORY PROVISIONS CONTAIN ED IN THE ACT. IN FACT THE LATEST AGREEMENT BETWEEN IND IA AND SINGAPORE FURTHER CLARIFIES THIS POSITION WHERE THE Y HAVE EXPLAINED THE MEANING OF THE WORD MAKE AVAILABLE. ACCORDING TO THE AFORESAID DEFINITION FEES FOR TECHN ICAL SERVICE MEANS PAYMENTS OF ANY KIND TO ANY PERSON IN CONSIDERATION FOR SERVICES OF TECHNICAL NATURE IF S UCH SERVICES MAKE AVAILABLE TECHNICAL KNOWLEDGE EXPERIENC E SKILL KNOW HOW OR PROCESSES WHICH ENABLES THE PERSON ACQUIRING THE SERVICE TO APPLY TECHNOLOGY CONTAINED THEREIN. THOUGH THIS PROVISION IS NOT CONTAINED IN INDIA NETH ERLANDS TREATY BUT VIRTUE OF PROTOCOL IN THE AGREEMENT CLAUS E (IV)(2) READS AS UNDER: IF AFTER THE SIGNATURE OF THIS CONVENTION UNDER AN Y CONVENTION OR AGREEMENT BETWEEN INDIA AND THIRD STATE WHICH IS A MEMBER OF THE OECD INDIA SHOULD LIMIT ITS TAXATION AT SOURCE ON DIVIDENDS INTERESTS ROYALTIES FEES FOR TECHNICAL SERVICES OR PAYMENTS FO R THE USE OF EQUIPMENT TO A RATE LOWER OR A SCOPE MORE RESTRICTED THAN THE RATE OR SCOPE PROVIDED FOR IN T HIS CONVENTION ON THE SAID ITEMS OF INCOME THEN AS FROM THE DATE ON WHICH THE RELEVANT INDIAN CONVENTION OR AGREEMENT ENTERS INTO FORCE THE SAME RATE OR SCOPE AS PROVIDED FOR IN THAT CONVENTION OR AGREEMENT ON THE SAID ITEMS OF INCOME SHALL ALSO APPLY UNDER THIS CONVENTION. 18 ITA NO. 1720/PN/2011 M/S. SANDVIK AB PUNE 14. THEREFORE THE CLAUSE IN SINGAPORE AGREEMENT WHICH EXPLICITLY MAKES IT CLEAR THE MEANING OF THE WORD MAKE AVAILABLE THE SAID CLAUSE HAS TO BE APPLIED AND TO BE READ INTO THIS AGREEMENT ALSO. THEREFORE IT FOLLOWS THAT FOR ATTRACTING THE LIABILIT Y TO PAY TAX NOT ONLY THE SERVICES SHOULD BE OF TECHNICAL IN NATURE BUT IT SHOULD BE MADE AVAILABLE TO THE PERSON RECEIVING THE TECHNICAL SERVICES. THE TECHNOLOGY WILL BE CONSIDERED MADE AVAILABLE WHEN THE PERSON WHO RECEIVED SERVICE IS ENABLED TO APPLY THE TECHNOLOGY. THE SERVICE PROVIDER IN ORDER TO RENDER TECHNICAL SERVICES USES TECHNICAL KNOWLEDGE EXPERIENCE SKILL KNOW HOW OR PROCESSES. TO ATTRACT THE TAX LIABILITY THAT TECHNICAL KNOWLEDGE EXPERIENCE SKILL KNOW HOW OR PROCESS WHICH IS USED BY SERVICE PROVIDER TO REN DER TECHNICAL SERVICE SHOULD ALSO BE MADE AVAILABLE TO THE RECIPIENT OF THE SERVICES SO THAT THE RECIPIENT ALSO ACQUIRES TECHNICAL KNOWLEDGE EXPERIENCE SKILL KNOW HOW OR PROCESSES SO AS TO RENDER SUCH TECHNICAL SERVICES. ONCE ALL SUCH TECHNOLOGY IS MADE AVAILABLE IT IS OPEN TO THE RECIPIENT OF THE SERVICE TO MAKE U SE OF THE SAID TECHNOLOGY. THE TAX IS NOT DEPENDENT ON THE USE OF THE TECHNOLOGY BY THE RECIPIENT. THE RECIPIEN T AFTER RECEIVING OF TECHNOLOGY MAY USE OR MAY NOT USE THE TECHNOLOGY. IT HAS NO BEARING ON THE TAXABILITY ASPECT IS CONCERNED. WHEN THE TECHNICAL SERVICE IS PROVIDED THAT TECHNICAL SERVICE IS TO BE MADE USE OF BY THE RECIPIENT OF THE SERVICE IN FURTHER CONDUCT OF HIS BUSINESS. MERELY BECAUSE HIS BUSINESS IS DEPENDENT ON THE TECHNICAL SERVICE WHICH HE RECEIVES FROM THE SERVICE PROVIDER IT DOES NOT FOLLOW THAT HE IS MAKING USE OF THE TECHNOLOGY WHICH THE SERVICE PROVIDER UTILISES FOR RENDERING TECHNICAL SERVICES. THE CRUX OF THE MATTER IS AFTER RENDERING OF SUCH TECHNICAL SERVICES BY THE SERVICE PROVIDER WHETHER THE RECIPIE NT IS ENABLED TO USE THE TECHNOLOGY WHICH THE SERVICE PROVIDER HAD USED. THEREFORE UNLESS THE SERVICE PROVIDER MAKES AVAILABLE HIS TECHNICAL KNOWLEDGE EXPERIENCE SKILL KNOW HOW OR PROCESS TO THE RECIPIEN T OF THE TECHNICAL SERVICE IN VIEW OF THE CLAUSES IN TH E DTAA THE LIABILITY TO TAX IS NOT ATTRACTED. 11. NOW THE NEXT QUESTION IS WHETHER THE ASSESSEE IS E NTITLED FOR THE BENEFITS OF DTAA BETWEEN INDIA-PORTUGUESE AS SE COND CONDITION MAKE AVAILABLE IS NOT FULFILLED. THERE IS A PROTOCOL TO THE TREATY BETWEEN INDIA AND SWEDEN WHICH IS AS UNDER: AT THE SIGNING OF THE CONVENTION BETWEEN THE GOVERN MENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE KING DOM OF SWEDEN FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL THE UNDERSIGNED HAVE AGREED THAT THE FOLLOWING SHALL FORM AN INTEGRAL PART OF THE CONVENTION : 19 ITA NO. 1720/PN/2011 M/S. SANDVIK AB PUNE WITH REFERENCE TO ARTICLES 10 11 AND 12 : IN RESPECT OF ARTICLES 10 (DIVIDENDS) 11 (INTEREST) A ND 12 (ROYALTIES AND FEES FOR TECHNICAL SERVICES) IF UNDER A NY CONVENTION. AGREEMENT OR PROTOCOL BETWEEN INDIA AND A THIRD STATE WHICH IS A MEMBER OF THE OECD INDIA LIMITS ITS TAXATION AT SOURCE ON DIVIDENDS INTEREST ROYALTIES OR FEES FOR TECHNICAL SERVICES TO A RATE LOWER OR A SCOPE MOR E RESTRICTED THAN THE RATE OR SCOPE PROVIDED FOR IN T HIS CONVENTION ON THE SAID ITEMS OF INCOME THE SAME RATE OR SCOPE AS PROVIDED FOR IN THAT CONVENTION AGREEMENT O R PROTOCOL ON THE SAID ITEMS OF INCOME SHALL ALSO APPLY U NDER THIS CONVENTION. 11.1 AN MFN CLAUSE REFERS TO A SITUATION WHEREIN TWO NON - RESIDENT TAX PAYERS ARE GIVEN IMPARTIAL TREATMENT BY THE CONCERNED COUNTRY. IN DTAAS MFN CLAUSE FIND PLACE WHEN COUNTRIES ARE RELUCTANT TO FOREGO THEIR RIGHT TO TAX SOM E ELEMENTS OF THE INCOME. AN MFN CLAUSE CAN DIRECT MORE FAVOURABLE TREATMENT AVAILABLE IN OTHER TREATIES ONLY IN REGARD TO T HE SAME SUBJECT MATTER THE SAME CATEGORY OF MATTER OR THE SA ME CLAUSE OF THE MATTER. THE PROTOCOL ATTACHED TO THE TREATY TA KE CARE OF A SITUATION WHERE IN CASES EITHER OF THE CONTRACTING STATES ENTER INTO A BILATERAL AGREEMENT INTO THE NATURE OF DTAA WITH TH E ANOTHER SOVEREIGN STATE AND WHERE THE SAME SUBJECT M ATTER HAS BEEN GIVEN MORE FAVOURABLE TREATMENT BY WAY OF A DEFINITION OR MODE OF TAX THEN THE PARTIES CAN CLAIM THE BENEFIT ON THE RECOGNIZED PRINCIPLE OF MFN CLAUSE. IN HIS INTRODUCTION TO DOUBLE TAXATION CONVENTIONS (THIRD EDITION) KLAUS VOGEL HA S EXPLAINED THE ROLE OF THE PROTOCOL AND ITS ROLE IN INTERPRET ING THE TREATY. THE SAME HAS BEEN CONSIDERED BY THE ITAT CALC UTTA IN THE CASE OF DCIT V. ITC LTD. 76 TTJ 323. 11.2 IN THE CASE OF MARUTI UDYOG LTD. VS. ADIT REPORTE D IN (2010) 37 DTR 85 (DELHI) EXPLAINING THE SCOPE OF THE PROTOCO L IT IS HELD AS UNDER : 20 ITA NO. 1720/PN/2011 M/S. SANDVIK AB PUNE 11.1 IT IS SETTLED POSITION IN LAW THAT PROTOCOL IS AN INDISPENSABLE PART OF THE TREATY WITH THE SAME BIND ING FORCE AS THE MAIN CLAUSES THEREIN AS PROTOCOL IS AN INTE GRAL PART OF THE TREATY AND ITS BINDING FORCE IS EQUAL TO THAT O F THE PRINCIPAL TREATY. THE PROVISIONS OF THE AFORESAID DTAA ARE T HEREFORE REQUIRED TO BE READ WITH THE PROTOCOL CLAUSES AND A RE SUBJECT TO THE PROVISIONS CONTAINED IN SUCH PROTOCOL. EXAMI NED IN THE LIGHT OF DTAAS BETWEEN INDIA AND UK USA AND SWITZE RLAND WE FIND THAT IN THE CASE BEFORE US THE ASSESSEE HAD NOT PURCHASED ANY PROPERTY FROM UTAC FRANCE. THEREFORE NONE OF THE FEES I.E. IMPACT TESTING FEES OR FEE PAID F OR TEST REPORTS IS ANCILLARY AND SUBSIDIARY AS WELL AS INEXTRICABLY AND ESSENTIALLY LINKED TO THE SALE OF A PROPERTY. THERE FORE THE DECISION OF THE TRIBUNAL CALCUTTA BENCH IN THE CAS E OF DY. CIT VS. ITC LTD. (SUPRA) RELIED UPON BY THE ASSESSEE IS NOT APPLICABLE TO THE FACTS OF THE CASE. IN THIS CASE T HE ASSESSEE HAD PURCHASED MACHINES FROM UK AND PAYMENTS WERE MA DE TO FOREIGN PARTY FOR INSTALLATION AND COMMISSIONING OF THE MACHINES. THE FOREIGN PARTY DID NOT HAVE ANY PE IN INDIA TO WHICH SUCH INCOME COULD BE ATTRIBUTED. IN THIS VIEW OF THE MATTER IT WAS HELD THAT THE PAYMENTS MADE TO FOREIG N PARTY FOR INSTALLATION AND COMMISSIONING OF THE MACHINES WERE RELATED TO TECHNICAL SERVICES WHICH WERE ANCILLARY AND SUBSIDIARY AS WELL AS INEXTRICABLY AND ESSENTIALLY LINKED TO THE SALE OF THE PROPERTY. HENCE THE PAYMENTS MADE TO T HE FOREIGN PARTY WERE NOT LIABLE TO BE TAXED IN INDIA. IN THE DECISION RELIED UPON BY THE ASSESSEE IN THE CASE OF RAYMOND LTD. VS. DY. CIT (SUPRA) IT WAS HELD THAT NO TECHN ICAL KNOWLEDGE EXPERIENCE SKILLS KNOW-HOW OR PROCESS ETC. WAS MADE AVAILABLE TO THE ASSESSEE COMPANY BY THE NON-R ESIDENT MANAGERS OF THE GDR ISSUE WITHIN THE MEANING OF ART . 13(4)(C) OF THE DTAA. LIKEWISE DECISIONS IN THE CA SES OF SKYCELL COMMUNICATIONS LTD. (SUPRA) AND NQA QUALITY SYSTEMS REGISTRAR LTD. (SUPRA) ARE DISTINGUISHABLE ON FACTS HENCE ARE NOT APPLICABLE TO THE FACTS OF THE ASSES SEES CASE. 11.3 IT IS ALSO WORTHWHILE TO REFER TO THE RULING GIVEN IN TH E CASE OF AUTHORITY FOR ADVANCED RULING (AAA) IN THE CASE OF POONAV ALA AVIATIONS REPORTED IN 343 ITR 381 THOUGH IT IS HAVING PUR SUASIVE VALUE WHICH READS AS UNDER : 16. IN HIS INTRODUCTION TO DOUBLE TAXATION CONVENT IONS (THIRD EDITION) KLAUS VOGEL HAS CLARIFIED THE ROLE OF A PROTOCOL AND ITS ROLE IN INTERPRETING A TREATY. HE SAYS 'PROTOC OLS AND IN SOME CASES OTHER COMPLETING DOCUMENTS ARE FREQUENTL Y ATTACHED TO TREATIES. SUCH DOCUMENTS ELABORATE AND COMPLETE THE TEXT OF A TREATY SOMETIMES EVEN ALTERING THE T EXT. LEGALLY THEY ARE A PART OF THE TREATY AND THEIR BINDING FO RCE IS EQUAL TO THAT OF THE PRINCIPAL TREATY TEXT. WHEN APPLYING A TAX TREATY THEREFORE IT IS NECESSARY CAREFULLY TO EXA MINE THESE ADDITIONAL DOCUMENTS'. A PROTOCOL IS SAID TO BE A T REATY BY ITSELF THAT AMENDS OR SUPPORTS THE EXISTING TREATY. WE CANNOT ALSO FORGET THE OBSERVATIONS OF THE SUPREME COURT I N UNION OF INDIA VS. AZADI BACHAO ANDOLAN (2003) 184 CTR (SC) 450 : (2003) 263 ITR 706 (SC) AT P. 751 THAT 'AN IMPORTAN T PRINCIPLE WHICH NEEDS TO BE KEPT IN MIND IN THE INT ERPRETATION 21 ITA NO. 1720/PN/2011 M/S. SANDVIK AB PUNE OF THE PROVISIONS OF AN INTERNATIONAL TREATY INCLU DING ONE FOR DOUBLE TAXATION RELIEF IS THAT TREATIES ARE NEGOTI ATED AND ENTERED INTO AT A POLITICAL LEVEL AND HAVE SEVERAL CONSIDERATIONS AS THEIR BASES'. SO THE ARGUMENT OF THE REVENUE THAT THE PROTOCOL CANNOT BE RELIED ON TO UN DERSTAND THE SCOPE OF TAXATION CANNOT BE ACCEPTED. 12. SO FAR AS THE PRESENT CASE BEFORE US IS CONCERNED ON THE BASIS OF THE PROTOCOL TO THE DTAA BETWEEN THE INDIA A ND SWEDEN THE ASSESSEE CAN CLAIM THE BENEFIT OF THE CONDITIONS IMPOSE D FOR BRINGING TO TAX THE FEES FOR TECHNICAL SERVICES IN THE TRE ATY BETWEEN THE INDIA AND PORTUGUESE. WE THEREFORE HOLD T HAT ON THE PRINCIPLE OF THE MOST FAVOURED NATION (MFN) CLAUSES THE PAYMENT OF RS.5.93 CRORES RECEIVED BY THE ASSESSEE COMP ANY FROM ITS INDIAN SUBSIDIES CANNOT BE BROUGHT TO TAX. WE THEREFORE ALLOW THE GROUNDS TAKEN BY THE ASSESSEE ON T HE ABOVE REASONS. 13. IN THE RESULT THE ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 28-11-2014 SD/ - SD/ - (G.S. PANNU) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER RK/PS PUNE DATED: 28 TH NOVEMBER 2014 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 4 THE DRP PUNE THE ASSESSING OFFICER DIT (INTERNATIONAL TAXATION)-II PUNE 5 THE DR ITAT A BENCH PUNE. 6 GUARD FILE. BY ORDER // TRUE COPY // ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE