Delhi High Court
Tungsten Automation England Limited … vs Deputy Commissioner Of Income Tax, … on 14 July, 2025
Author: Vibhu Bakhru
Bench: Vibhu Bakhru
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 14.07.2025
+ ITA 92/2025 and CM APPL. 22267/2025
TUNGSTEN AUTOMATION ENGLAND LIMITED
(FORMERLY KNOWN AS TUNGSTEN NETWORK
LIMITED) .....Appellant
Versus
DEPUTY COMMISSIONER OF INCOME TAX,
INTERNATIONAL TAXATION, CIRCLE 3(1)(1)
NEW DELHI .....Respondent
AND
+ ITA 93/2025 and CM APPL. 22294/2025
TUNGSTEN AUTOMATION ENGLAND LIMITED
(FORMERLY KNOWN AS TUNGSTEN NETWORK
LIMITED) .....Appellant
Versus
DEPUTY COMMISSIONER OF INCOME TAX,
INTERNATIONAL TAXATION, CIRCLE 3(1)(1),
NEW DELHI .....Respondent
Advocates who appeared in this case:
For the Appellant : Mr Deepak Chopra and Ms Priya Tandon,
Advocates.
For the Respondent : Mr Sunil Agarwal, SSC with Mr Shivansh B.
Pandya, Mr Viplav Acharya, Ms Priya Sarkar and
Mr Utkarsh Tiwari, Advocates.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
HON'BLE MR. JUSTICE TEJAS KARIA
JUDGMENT
Signature Not Verified
Digitally Signed By:GANGA
SINGH RAWAT
ITA 92/2025 and ITA 93/2025 Page 1 of 49
Signing Date:14.07.2025
18:41:49
VIBHU BAKHRU, J
1. The appellant [Assessee] has filed the present appeals under Section
260A of the Income Tax Act, 1961 [the Act] impugning a common order
dated 18.12.2024 passed by the Income Tax Appellate Tribunal [the
Tribunal] in ITA Nos.2237/Del/2024 and 2238/Del/2024 captioned
Tungsten Network Ltd. v. Deputy Commissioner of Income Tax in respect of
the assessment years [AYs] 2016-17 and 2017-18.
2. The Assessee had preferred the said appeals before the Tribunal
impugning separate assessment orders dated 12.03.2024 passed by the
Assessing Officer [AO] under Section 147 read with Section 144 of the Act
in respect of AYs 2016-17 and 2017-18. The final assessment orders were
passed pursuant to directions issued by the Dispute Resolution Panel [DRP]
under Section 144C(5) of the Act by separate orders dated 22.02.2024
passed in respect of each of the relevant AYs 2016-17 and 2017-18.
3. The Assessee is a company incorporated under the laws of the United
Kingdom [UK] and is a tax resident of the UK. The Assessee is a wholly
owned subsidiary of Tungsten Corporation Plc, which is also a company
incorporated in the UK. The Assessee had not filed its return of income for
the relevant assessment years as, according to the Assessee, it did not have
any income which was taxable under the Act. The AO received information
to the effect that the Assessee had received certain amounts during the
financial years relevant to the assessment years in question – an amount of
₹2,93,92,810/- during the previous year relevant to AY 2016-17 and a sum
of ₹3,31,98,980/- during the previous year relevant to AY 2017-18 – from
Signature Not Verified
Digitally Signed By:GANGA
SINGH RAWAT
ITA 92/2025 and ITA 93/2025 Page 2 of 49
Signing Date:14.07.2025
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Genpact India Pvt. Ltd. [GIPL] being a company incorporated in India.
According to the AO, these receipts suggested that the Assessee’s income
for the relevant assessment years had escaped assessment. Accordingly, the
AO issued separate notices under Section 148A of the Act, both dated
30.06.2021, in respect of AYs 2016-17 and 2017-18 respectively.
4. By virtue of the decision rendered by the Supreme Court in Union of
India & Ors. v. Ashish Aggarwal1, such notices were deemed to be notices
issued under Section 148A(b) of the Act and the Assessee was afforded an
opportunity to respond to the said notices. The said proceedings culminated
in the AO passing two separate orders dated 26.07.2022 under Section
148A(d) of the Act holding that it was a fit case for issuance of notices
under Section 148 of the Act in respect of AYs 2016-17 and 2017-18.
Accordingly, the AO issued separate notices, both dated 28.07.2022, under
Section 148 of the Act in respect of AYs 2016-17 and 2017-18.
5. The Assessee did not file the returns of income pursuant to the notices
issued under Section 148 of the Act. The AO issued notices under Section
142(1) of the Act seeking certain information from the Assessee. The
Assessee submitted its response to the said notices and acknowledged that it
had received amounts of ₹1,46,96,822/- and ₹1,46,95,988/- during the
previous year relevant to AY 2016-17. However, part of the said amount
pertained to financial year [FY] 2014-15 relevant to AY 2015-16. It claimed
that it had issued invoices during the previous year relevant to AY 2016-17
amounting to 1,80,877/- GBP, which translated approximately to
₹1,45,84,438/-, computed by considering the average exchange rate of
Signature Not Verified
Digitally Signed By:GANGA
SINGH RAWAT
ITA 92/2025 and ITA 93/2025 Page 3 of 49
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18:41:49
₹80.63/-. Similarly, the Assessee also acknowledged that during the
previous year relevant to AY 2017-18, the Assessee had raised invoices
amounting to 2,71,314/- GBP, which translated approximately to
₹2,47,13,604/- computed at the average exchange rate of ₹91.09/-. The
Assessee also acknowledged that during FY 2016-17 relevant to AY 2017-
18, it had received an amount of ₹3,31,98,980/-, which included advance
pertaining to FY 2017-18.
6. The Assessee also forwarded the copies of the invoices raised as well
as its Tax Residency Certificate [TRC]. Additionally, the Assessee provided
the agreements entered into between OB10 Limited [OB10] – an entity
which was subsequently acquired by the Assessee – and Genpact
International Inc. [GIL]. GIPL is an affiliate of GIL. The Assessee claimed
that the amounts received for rendering services under the said agreements
were its business income and were not chargeable to tax under the Act as it
did not have any permanent establishment [PE] in India.
7. The AO did not accept that the amounts received by the Assessee
from GIPL were not chargeable to tax under the Act. According to the AO,
the said amounts were required to be treated as “fees for technical services”
[FTS] within the scope of Article 13 of the India-UK DTAA2.
8. Accordingly, the AO issued separate draft assessment orders under
Section 144C(1) of the Act dated 31.05.2023 in respect of AYs 2016-17 and
1
[2022] 444 ITR 1.
2
Convention between the Government of Republic of India and the Government of the United Kingdom of
Great Britain and Northern Ireland for the avoidance of double taxation and the prevention of fiscal evasion
with respect to taxes on income and capital gains has entered into on 26.10.1993 and as amended
subsequently.
Signature Not Verified
Digitally Signed By:GANGA
SINGH RAWAT
ITA 92/2025 and ITA 93/2025 Page 4 of 49
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2017-18. In terms of the said orders, the AO assessed the Assessee’s income
for AY 2016-17 at ₹2,93,92,810/-, and ₹3,31,98,980/- in respect of AY
2017-18.
9. The Assessee filed its objections to the draft assessment orders before
the DRP contesting the proposed assessments. The DRP disposed of the said
objections in terms of separate orders dated 22.02.2024 upholding the AO’s
view that the amounts received by the Assessee from GIPL were chargeable
to tax under the Act as well as India-UK DTAA, as FTS. Pursuant to the
directions of the DRP, the AO passed final assessment orders dated
12.03.2024 under Section 147 read with Section 144C(13) of the Act. As
noted above, the Assessee appealed the said assessment orders before the
Tribunal, which were dismissed by the impugned order 18.12.2024.
QUESTIONS OF LAW
10. The present appeals were admitted by this Court by orders dated
17.04.2025 and the following questions of law were framed for
consideration of this Court:
Questions of law framed in ITA No.93/2025
“A. Whether the Appellant was taxable in respect of receipts of
INR 2,93,92,810/- under the provisions of the Act or the
India – UK DTAA?
B. Whether the Tribunal erred in law in re-characterising
business receipts by the Appellant as FTS under
Explanation 2 to section 9(1)(vii) of the Act and Article
13(4)(c) of the India – UK DTAA?”
Question of law framed in ITA No.92/2025
Signature Not Verified
Digitally Signed By:GANGA
SINGH RAWAT
ITA 92/2025 and ITA 93/2025 Page 5 of 49
Signing Date:14.07.2025
18:41:49
“A. Whether the Appellant was taxable in respect of receipts of
INR 3,31,98,980/- under the provisions of the Act or the
India – UK DTAA?
B. Whether the Tribunal erred in law in re-characterising
business receipts by the Appellant as FTS under
Explanation 2 to section 9(1)(vii) of the Act and Article
13(4)(c) of the India – UK DTAA?”
11. As noticed above, the questions of law are worded, essentially, in
similar terms. During the course of the hearing, the learned counsel for the
parties focused their submissions on the question whether the amounts
received by the Assessee – ₹2,93,92,810/- during the previous year relevant
to AY 2016-17 and ₹3,31,92,980/- during the previous year relevant to AY
2017-18 – could be construed as FTS within the meaning of Article 13 of
the India-UK DTAA. Concededly, if the Assessee prevailed in its case that
the said receipts were not FTS within the scope of Article 13(4)(c) under
India-UK DTAA, the question whether the said receipts could be construed
as an FTS within the meaning of Explanation 2 to Section 9(1)(vii) of the
Act would not be material. Thus, we have confined our examination, at this
stage, to the following question:
“Whether the amounts received by the Assessee from
GIPL/Genpact India Pvt. Ltd. can be construed as an FTS
under Article 13 of the India-UK DTAA”.
ANALYSIS
12. At the outset, it would be relevant to examine the nature of the
services rendered by the Assessee resulting in the receipts, which are held to
be taxable. And, whether the said services fall within the scope of FTS under
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Digitally Signed By:GANGA
SINGH RAWAT
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Article 13(4)(c) of the India-UK DTAA.
13. The Assessee claims that it carries on the business of providing
electronic invoice deliveries through its secure e-invoicing platform. It
claims that the said platform enables the businesses supplying products and
services to automatically generate e-invoices instead of creating and printing
them manually. The Assessee has granted a non-exclusive license to GIPL
for using its cloud hosted platform. During the relevant period, GIPL had
used the platform to render services to GlaxoSmithKline Services Unlimited
[GSK], a company which is not a tax resident in India.
14. The terms and conditions on which the license was granted to GIPL
are contained in the Master Partner Agreement dated 13.01.2009 [MPA]
entered into between OB10 and GIL. As noted above, OB10 was acquired
by the Assessee and there is no dispute that the Assessee had stepped into its
shoes.
15. The recitals of the MPA are relevant and are set out below:
“(A) OB10 is the operator of OB10 Services, the global e-
invoicing network and wishes to make these services
available to the Partner.
(B) The Partner is in the business of providing software and
professional service solutions to its existing or potential
customers (“End Users” or “Buyer”) and desires to
promote, market, offer and/or sell the OB10 Services
either as a stand alone service or as part other services
provided by the Partner (the “Partner Services”) to End
Users.”
Signature Not Verified
Digitally Signed By:GANGA
SINGH RAWAT
ITA 92/2025 and ITA 93/2025 Page 7 of 49
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16. Article 2 of the MPA sets out the Scope of the Grant to GIL and the
same is reproduced below:
“2. Scope of Grant to the Partner
2.1 On the Effective Date and subject to the terms and conditions
of this Master Partner Agreement, OB10 grants the Partner a
non-exclusive, non-transferable licence for the Term to
recommend market and/or sell the OB10 Services to End Users
in the Territories. The End User must be an entity that OB10 can
service out of its existing operations (unless otherwise agreed by
OB10 in its complete discretion). The Territories in which the
scope of this Master Partner Agreement may apply can be
amended by mutual written agreement between the parties. Any
additional requirements in relation to the scope of this Master
Partner Agreement will be agreed between the parties
2.2 Subject to the terms of this Master Partner Agreement, OB10
reserves the right to market, solicit, promote or sell or otherwise
transfer or distribute the OB10 Services as a stand alone service
and/or as part of a third parties technology platform anywhere in
the world to any organisation whether directly or indirectly.
2.3 The Partner is granted a licence of the rights itself to use the
OB10 Services for itself and/or its Affiliates subject to the terms
and conditions in this Master Partner Agreement and any SOW
agreed between the parties.
2.4 Save under clause 7.3 below the Partner will act as principal
and no obligations will be created for OB10 towards the End
User.
2.5 The rights granted to the Partner under this Master Partner
Agreement are granted to the Partner subject to the Partner
engaging with OB10 for each End User under the terms and
conditions appearing in Annex B hereto (the ‘Terms and
Conditions for the OB10 Services’) and for the fees stated in
Annex C (Fees for the OB10 Services), unless agreed otherwise
by the parties on a case by case basis.
2.6 The Partner has discretion over the price at which it resells
the OB10 Services.”
Signature Not Verified
Digitally Signed By:GANGA
SINGH RAWAT
ITA 92/2025 and ITA 93/2025 Page 8 of 49
Signing Date:14.07.2025
18:41:49
17. It is apparent from the above that in terms of MPA, the Assessee
(OB10) had granted a “non-exclusive, non-transferable licence for the Term
to recommend market and/or sell the OB10 Services to End Users in the
Territories”. Paragraph 2.3 of the MPA also expressly indicates that the
license is granted to the Partner (GIL) for use of itself or its affiliates (in this
case – GIPL).
18. Paragraph 2.4 of the MPA also expressly provides that the ‘Partner’
would act as a principal and no obligations will be created for OB10 towards
the ‘End Users’.
19. Articles 5A and 5B of the MPA set out the respective obligations of
the parties to the MPA. The said Articles are set out below:
“5(A) Partner Obligations
5.1 The Partner shall use all reasonable efforts to:
(a) inform and collaborate with OB10 to market, promote the use
of OB10 Services through co-operation with it’s sales force and
OB10’s sales force and business to business channels to its
existing on any potential End Users; provided that the Partner
shall not be obligated to sell or promote the use OB10 Services
for all of its existing or potential End Users.
(b) ensure that its sales force and other personnel who promote
and market the use of the OB10 Service have proper skills
training to enable them to demonstrate the use of the OB10
Service in a competent and professional manner;
(c) not do anything which could be materially prejudicial to the
goodwill and business reputation of OB10.
5.2 The Partner warrants and undertakes to OB10 that it shall not
make any representation or give any warranty or guarantee
regarding the capability of the OB10 Services that is greater than
the representation, warranties or guarantees that OB10 would
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Digitally Signed By:GANGA
SINGH RAWAT
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give under its normal course of business or any additional
representations, warranties or guarantees that are agreed by the
parties in writing on a case by case basis.
5.3 The Partner shall fully indemnify OB10 and keep OB10 fully
and effectively indemnified against all claims, demands and
costs (including all reasonable legal costs), expenses and
liabilities of whatsoever nature arising out of any breach of this
clause 5.2.
5.4 The Partner shall be solely responsible for its sales activities
to an End User to be carried out in accordance with this
Agreement. If the Partner reasonably requires sales support from
OB10, OB10 shall subject to adequate notice, use reasonable
endeavours to attend any meetings or provide such sales support
5(B) OB10’s Obligations.
5.6 OB10 shall make reasonable efforts (either directly or
indirectly through it’s agents, sub-contractors or partners) to
provide training to full time employees of the Partner to enable
them to promote and use the OB10 Services in accordance with
this Master Partner Agreement. The scope and terms and
conditions of this training shall be agreed between the parties.
5.7 Both parties shall agree the content and frequency of reports
to be made by either party in order for either party to fulfil their
obligations under this Master Partner Agreement
5.8 In respect of some of the OB10 Services, OB10 provides
standard service levels and/or standard service credits Where
both parties agree that such service levels and/or service credits
apply for an End User, they will be incorporated in the relevant
SOW. For the avoidance of doubt, Partner shall only be entitled
to rely on any service levels or claim any service credits from
OB10 where the same service levels or service credits have been
passed onto an End User.”
20. Paragraph 7.2 of the MPA also specifically provides that the Partner
would be solely responsible for entering into a direct contractual relationship
with all End Users, outlining its responsibilities to the End User. It was also
agreed that the parties would discuss and agree upon the specific services to
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Digitally Signed By:GANGA
SINGH RAWAT
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be rendered as well as other terms and conditions. Paragraph 7.2 of the MPA
is set out below:
“7.2 Re-Sale Model.
(a) Subject to the terms of this Master Partner Agreement, the
Partner shall be solely responsible for entering into a direct
contractual relationship with all End Users outlining its
responsibilities to the End User including those in any SOW
between Partner and OB10.
(b) The parties will discuss and agree (i) which specific OB10
Services (ii) the duration of those OB10 Services and (iii) the
amount Transactions that the End User shall require and their
payment profile and (iv) other terms and conditions that will
apply to that End User (other than those already highlighted in
Annex B (Terms and Conditions for the OB10 Services). Such
provisions shall be incorporated into an SOW for that End User.
A sample SOW is appended to this Master Partner Agreement as
Annex D (Sample SOW).”
21. It is also relevant to refer to Article 12 of the MPA, which specifically
provides that the ownership of the intellectual property would vest with the
respective parties. It was expressly provided that OB10 (which stands
substituted by the Assessee) would “retain all right, title and interest in and
to the OB10 Services (including without limitation the OB10’s proprietary
source code in the OB10 Services and any Documentation)”.
22. The expression “OB10 Services” as used in MPA is defined in terms
of Clause (f) of Article 1 as under:
“(f) OB10 Services means the services provided by
OB10 in any SOW. The OB10
Services in their entirety are
described in Annex A.”
Annexure ‘A’ to the MPA set out in detail the scope of OB10 Services. The
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SINGH RAWAT
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‘core service’ as set out in Annexure ‘A’ is reproduced below:
“B. Core Service
Set up
1. Preparation and maintenance of one (1) Partner Profile for the
Partner within the parameters of the OB10 Network.
2. Supplier Enrolment
OB10’s responsibilities include.
a. Website, OB10 will host and maintain a Client-specific
website at no additional cost that provides a portal for all
Supplier-related communications, giving them access to all
Supplier communications.
b. Assistance with all Internal Communications: OB10 will
assist Buyer in educating Buyer personnel and has developed
various tools to assist with this, such as, newsletter content,
posters, desk drop materials, web and on-site seminars, where
OB10 staff will present alongside Buyer to these groups.
c. Analysis of Supplier Data: OB10 will analyse Supplier data
provided by Buyer to identify Suppliers that are already live on
the OB10 network, or those that are known and already in the
enrolment process for other OB10 Clients. The balance of the
Suppliers will be split into managed and direct campaigns.
d. Assistance with preparing External Communications:
OB10 provides assistance in the creation of communication
packs for Suppliers including the first letters, follow-up letter,
web seminars and where applicable presentations. The OB10 PM
will provide templates of communication packs used for
previous successful campaigns with other organisations. These
templates are available in various European languages. The
Project Manager will offer advice and guidance about the type of
message required in order to obtain the maximum success of the
Supplier enrolment campaign OB10 can also assist in any press
release that may be issued.
e. Managed campaigns. Each Supplier in a Managed Campaign
is allocated an OB10 enrolment professional who is responsibleSignature Not Verified
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SINGH RAWAT
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for working with the Supplier to assist with any queries, to
explain the options, persuade them where possible, and when the
Supplier progresses, to ensure they use the service correctly. The
Supplier can choose to send invoices as a data file, or using the
web-portal. If the Supplier chooses to use the integrated service
(to send a data file) they will also work with the supplier
implementation team in order to create and test a unique profile
on OB10.
f. Direct Campaigns: Each supplier in a direct campaign will be
added to the OB10 Network so that they can use the web-portal
g. Reporting: OB10 will provide Buyer with reports at regular
agreed intervals showing the status of each active campaign for
supplier enrolment. The PM will discuss the results shown by
these reports and provide ideas to improve the take up if needed
h. Data Cleanse: OB10 can assist with projects to enhance
supplier data, to update contact information for suppliers, subject
to the fees in the agreement. All data that is enhanced this way is
provided to Buyer.
l. Supplier Mailings: OB10 will at Buyer request mail shot or e-
mail suppliers as part of the supplier enrolment service subject to
the fees in the Agreement. This includes: printing letters and
information packs on premium quality paper, stuffing envelopes,
addressing and posting.
3. The provision of the services of a program manager to provide
reasonable assistance and guidance in enrolling to the OB10
Network suppliers of the Buyer and Users located and registered
for VAT (or local equivalent) in the Countries.
4. Processing and Transmission of Data
OB10 and Partner agree (within the parameters of the OB10
Network) how Data Transmission will take place, selecting one
or more of the Approved Data Transmission Options. This will
form part of the Partner Profile for that Partner. (The Partner
may select a non-approved Data Transmission option, see
Additional Services below).
5. OB10 will take invoices from Suppliers either as files of data
(in the form agreed by OB10 and the relevant supplier) or via theSignature Not Verified
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SINGH RAWAT
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OB10 supplier portal. This Data will then be formatted and/or
translated, so that it is consistent with the relevant Partner
Profile. The OB10 Network will also augment Data with the
agreed standing data from the relevant Partner Profile for that
Partner.
6. Data Transmission will encompass a data file of the invoices
that have been prepared as stated above and a rendered image of
those invoices in HTML, TIFF and/or PDF form.
7. OB10 shall use industry standard encryption technology to
encrypt Data being transmitted to where the Partner’s choice of
Approved Data Transmission Option or non-approved Data
Transmission option supports this
8. OB10 will implement all reasonable and industry standard
protections to prevent the delivery of data files or data images
from the OB10 Network to Partner containing Harmful Code.
Notwithstanding the foregoing. Partner shall agree that it
remains responsible for ensuring that they have satisfactory
Harmful Code detection technology and firewall technology
implemented and operating to protect the integrity of their
systems, environment and data and OB10 shall not be
responsible for any damage or loss caused by any failure on their
part to do so.
9. Partner may (at its option) elect to accept the delivery by
OB10 of attachments from Suppliers. If Partner elects to do so,
Partner accepts and acknowledges that attachments from
Suppliers are transmitted by OB10 on an “as is” basis and are
not subject to any Harmful Code interrogation.
Minor Changes to Partner Profile
10. Minor changes notified to OB10 by Partner in writing (i.e.
changes that are within the parameters of the OB10 Network and
can be implemented by OB10 support, such as changes to
Partner information, contact details or PO ranges) will be
implemented within five (5) days of receipt of all relevant
information at no additional charge
File Restoration (Due to OB10 Default)
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11. If Data is lost or corrupted due to a default of OB10 under
the terms of any SOW, OB10’s sole liability and Partner’s sole
remedy shall be for (i) OB10 to reconstruct any such Data free of
charge; or (ii) if the Data cannot be restored, for OB10 to
provide Partner with a credit for the fees received by OB10 in
respect of the collection, processing or storage of such data.
(subject in the case of each of (i) and (ii) to the cap on liability
contained in any SOW.
OB10 Support Desks
12. OB10 supports the availability of the OB10 Services by
providing a support desk from 8 a.m to 6 p.m UK Monday to
Friday (excluding UK public holidays).”
23. The MPA also includes standard form of the statement of work
[SOW], which was required to be entered into for provision of services.
The Assessee (OB10) entered into SOW dated 01.04.2009 effective from
05.07.2010, whereby the SOW was suitably amended to include the details
of the specific services.
24. The Assessee claims that it, essentially, provides electronic invoice
delivery and related services such as conversion of raw data into electronic
format, archiving and other ancillary services. The Assessee claims that it
simplifies and streamlines complex invoice to pay process, thus, offering
legal and tax compliant invoicing in various jurisdictions. The Assessee had
entered into SOWs with GIPL to provide an exclusive e-license portal,
which enables generation of e-invoices for its customer (GSK) and its group
entities, which are located overseas. It is the Assessee’s claim – which is not
controverted – that it generates invoices for its customer for the GSK’s
European Operations, which have no link with India. It is also not disputed
that the services provided by the Assessee are within the framework of what
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SINGH RAWAT
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are described as OB10 services under the MPA.
25. It is apparent from the nature of services rendered by the Assessee
that neither GIL nor GIPL acquired any right, title or interest in the platform
operated by the Assessee for generating and transmitting electronic invoices
for the End Users. It is also apparent from the above that GIPL does not
acquire any technology or any right in the electronic platform for exploiting
the same on its own. The role of GIPL is limited to ensuring provision of the
Assessee’s services to the End User by onboarding customers – in the
instant case GSK – on the platform operated by the Assessee.
26. In the given circumstances, the principal question to be addressed is
whether the same would constitute technical services within the scope of
Article 13 of the India-UK DTAA. Article 13 of the India-UK DTAA is set
out below:
“ARTICLE 13
ROYALTIES AND FEES FOR TECHNICAL SERVICES
1. Royalties and fees for technical services arising in a Contracting
State and paid to a resident of the other Contracting State may be
taxed in that other State.
2. However, such royalties and fees for technical services may also
be taxed in the Contracting State in which they arise and according
to the law of that State; but if the beneficial owner of the royalties
or fees for technical services is a resident of the other Contracting
State, the tax so charged shall not exceed :
(a) in the case of royalties within paragraph 3(a) of this
Articles, and fees for technical services within paragraphs
4(a) and (c) of this Article,–
(i) during the first five years for which this Convention has
effect ;
(aa) 15 per cent of the gross amount of such royalties or fees
Signature Not Verified
Digitally Signed By:GANGA
SINGH RAWAT
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for technical services when the payer of the royalties or
fees for technical services is the Government of the first-
mentioned Contracting State or a political sub-division of
that State, and
(bb) 20 per cent of the gross amount of such royalties or fees
for technical services in all other cases; and
(ii) during subsequent years, 15 per cent of the gross
amount of such royalties or fees for technical services;
and
(b) in the case of royalties within paragraph 3(b) of this
Article and fees for technical services defined in
paragraph 4(b)of this Article, 10 per cent of the gross
amount of such royalties and fees for technical services.
3. For the purposes of this Article, the term “royalties” means :
(a) payments of any kind received as a consideration for the
use of, or the right to use, any copyright of a literary,
artistic or scientific work, including cinematography films
or work on films, tape or other means of reproduction for
use in connection with radio or television broadcasting,
any patent, trade mark, design or model, plan, secret
formula or process, or for information concerning
industrial, commercial or scientific experience; and
(b) payments of any kind received as consideration for the use
of, or the right to use, any industrial, commercial or
scientific equipment, other than income derived by an
enterprise of a Contracting State from the operation of
ships or aircraft in international traffic.
4. For the purposes of paragraph 2 of this Article, and subject to
paragraph 5, of this Article, the term “fees for technical services”
means payments of any kind of any person in consideration for the
rendering of any technical or consultancy services (including the
provision of services of a technical or other personnel) which :
(a) are ancillary and subsidiary to the application or
enjoyment of the right, property or information for which
a payment described in paragraph 3(a) of this article is
received ; or
(b) are ancillary and subsidiary to the enjoyment of the
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of this Article is received ; or
(c) make available technical knowledge, experience, skill
know-how or processes, or consist of the development and
transfer of a technical plan or technical design.
5. The definition of fees for technical services in paragraph 4 of this
Article shall not include amounts paid :
(a) for services that are ancillary and subsidiary, as well as
inextricably and essentially linked, to the sale of property,
other than property described in paragraph 3(a) of this
Article;
(b) for services that are ancillary and subsidiary to the rental
of ships, aircraft, containers or other equipment used in
connection with the operation of ships, or aircraft in
international traffic;
(c) for teaching in or by educational institutions ;
(d) for services for the private use of the individual or
individuals making the payment ; or
(e) to an employee of the person making the payments or to
any individual or partnership for professional services as
defined in Article 15 (Independent personal services) of
this Convention.
6. The provisions of paragraphs 1 and 2 of this Article shall not
apply if the beneficial owner of the royalties or fees for technical
services, being a resident of a Contracting State, carries on business
in the other Contracting State in which the royalties or fees for
technical services arise through a permanent establishment situated
therein, or performs in that other State independent personal
services from a fixed base situated therein, and the right, property
or contract in respect of which the royalties or fees for technical
services are paid is effectively connected with such permanent
establishment or fixed base. In such case, the provisions of Article
7 (Business profits) or Article 15 (Independent personal services) of
this Convention, as the case may be, shall apply.
7. Royalties and fees for technical services shall be deemed to arise
in a Contracting State where the payer is that State itself, apolitical
sub-division, a local authority or a resident of that State. Where,
however, the person paying the royalties or fees for technical
services, whether he is a resident of a Contracting State or not, has
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in a Contracting State a permanent establishment or a fixed base in
connection with which the obligation to make payments was
incurred and the payments are borned by that permanent
establishment or fixed base then the royalties or fees for technical
services shall be deemed to arise in the Contracting State in which
the permanent establishment or fixed base is situated.
8. Where, owing to a special relationship between the payer and the
beneficial owner or between both of them and some other person,
the amount of the royalties or fees for technical services paid
exceeds for whatever reason the amount which would have been
paid in the absence of such relationship, the provisions of this
Article shall apply only to the last-mentioned amount. In that case,
the excess part of the payments shall remain taxable according to
the law of each Contracting State, due regard being had to the other
provisions of this Convention.
9. The provisions of this Article shall not apply if it was the main
purposes or one of the main purposes of any person concerned with
the creation or assignment of the rights in respect of which the
royalties or fees for technical services are paid to take advantage of
this Article by means of that creation or assignment.”
27. According to the Revenue, the consideration received by the Assessee
for rendering services in question would qualify as ‘FTS’ within the scope
of Clause (c) of Paragraph 4 of Article 13 of the India-UK DTAA.
28. Explanation 2 to Clause (vii) of Sub-section (1) of Section 9 of the
Act defines the expression “Fees for Technical Services” to mean any
consideration for rendering of any managerial, technical or consultancy
services. However, the said definition would not be applicable for
determining the scope of FTS under Double Taxation Avoidance Treaties
[DTAA] if the same is inconsistent with the meaning of the said expression
in the said treaty. The definition of FTS under Article 13 of the India-UK
DTAA is considerably narrower. Thus, the question whether the
consideration received by the Assessee for rendering the services fall within
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the meaning of FTS under Article 13 of the India-UK DTAA, would
necessarily have to be construed in accordance with the meaning of FTS
under the India-UK DTAA and not with reference to FTS as defined in
Explanation 2 to Section 9(1)(vii) of the Act.
29. We may refer to the decision of the Supreme Court in Engineering
Analysis Centre of Excellence (P) Ltd v. Commissioner of Income Tax3,
wherein the Supreme Court authoritatively explained as under: –
“30. …… Importantly, under section 5(2) of the
Income Tax Act, the total income of a person who is a
non-resident, includes all income from whatever
source derived, which accrues or arises or is deemed to
accrue or arise to such person in India during such
year. This, however, is subject to the provisions of the
Income Tax Act. Certain income is deemed to arise or
accrue in India, under section 9 of the Income Tax Act,
notwithstanding the fact that such income may accrue
or arise to a non-resident outside India. One such
income is income by way of royalty, which, under
section 9(1)(vi) of the Income Tax Act, means the
transfer of all or any rights, including the granting of a
licence, in respect of any copyright in a literary work.
31. That such transaction may be governed by a
DTAA is then recognized by section 5(2) read with
section 90 of the Income Tax Act, making it clear that
the Central Government may enter into any such
agreement with the government of another country so
as to grant relief in respect of income tax chargeable
under the Income Tax Act or under any corresponding
law in force in that foreign country, or for the
avoidance of double taxation of income under the
Income Tax Act and under the corresponding law in
force in that country. What is of importance is that
once a DTAA applies, the provisions of the Income
3
(2022) 3 SCC 321.
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Tax Act can only apply to the extent that they are more
beneficial to the assessee and not otherwise. Further,
by explanation 4 to section 90 of the Income Tax Act,
it has been clarified by the Parliament that where any
term is defined in a DTAA, the definition contained in
the DTAA is to be looked at. It is only where there is
no such definition that the definition in the Income Tax
Act can then be applied. This position has been
recognised by this Court in Union of India v. Azadi
Bachao Andolan : (2004) 10 SCC 1(supra), which
held:
“21. The provisions of Sections 4 and 5 of
the Act are expressly made “subject to the
provisions of this Act”, which would
include Section 90 of the Act. As to what
would happen in the event of a conflict
between the provision of the Income Tax
Act and a notification issued under
Section 90, is no longer res integra.
*** ***
28. A survey of the aforesaid cases makes
it clear that the judicial consensus in India
has been that Section 90 is specifically
intended to enable and empower the
Central Government to issue a
notification for implementation of the
terms of a Double Taxation Avoidance
Agreement. When that happens, the
provisions of such an agreement, with
respect to cases to which they apply,
would operate even if inconsistent with
the provisions of the Income Tax Act. We
approve of the reasoning in the decisions
which we have noticed. If it was not the
intention of the legislature to make a
departure from the general principle of
chargeability to tax under Section 4 and
the general principle of ascertainment of
total income under Section 5 of the Act,
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those sections “subject to the provisions
of the Act”. The very object of grafting
the said two sections with the said clause
is to enable the Central Government to
issue a notification under Section 90
towards implementation of the terms of
DTACs which would automatically
override the provisions of the Income Tax
Act in the matter of ascertainment of
chargeability to income tax and
ascertainment of total income, to the
extent of inconsistency with the terms of
DTAC.” (emphasis supplied)
30. The Supreme Court had proceeded to hold as under :-
“111. Also, any ruling on the more expansive language
contained in the explanations to section 9(1)(vi) of the
Income Tax Act would have to be ignored if it is wider
and less beneficial to the assessee than the definition
contained in the DTAA, as per section 90(2) of the
Income Tax Act read with explanation 4 thereof, and
Article 3(2) of the DTAA. Further, the expression
“copyright” has to be understood in the context of the
statute which deals with it, it being accepted that
municipal laws which apply in the Contracting States
must be applied unless there is any repugnancy to the
terms of the DTAA. For all these reasons, the
determination of the AAR in Citrix Systems (AAR)
(supra) does not state the law correctly and is thus set
aside.”
31. Undisputedly, for the receipts in question to be construed as FTS
under Article 13 of the India-UK DTAA, the services must be such that
“make available technical knowledge, experience, skill know-how or
processes, or consist of the development and transfer of a technical plan or
technical design.”
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32. The Revenue contends that the consideration received by the Assessee
for rendering the services in question would qualify as FTS within the scope
of Clause (c) of Paragraph 4 of Article 13 of the India-UK DTAA.
According to the Revenue, payments made by GIPL to the Assessee for
services rendered are consideration for rendering technical services ‘which
make available technical knowledge, experience, skill, know-how or
process’ to GIPL and therefore, satisfy the requirement of Clause (c) of
Paragraph 4 of Article 13 of the India-UK DTAA.
33. This brings us to the central controversy – whether the services
rendered by the Assessee ‘make available’ any technical knowledge,
experience, skill or know-how to GIPL and / or its customers.
34. The import of the expression ‘make available’ was examined by the
Karnataka High Court in Commissioner of Income Tax, Central Circle v.
De Beers India Minerals (P.) Ltd.4 in the context of Article 12 of India-
Netherlands DTAA. Paragraph 5 of Article 12 of the DTAA between India
and Netherland defines the expression ‘Fees for Technical Services’ as used
in the said treaty. The same is set out below:
“5. For purposes of this Article, “fees for technical services”
means payments of any kind to any person in consideration
for the rendering of any technical or consultancy services
(including through the provision of services of technical or
other personnel) if such services:
(a) are ancillary and subsidiary to the application or
enjoyment of the right, property or information for
which a payment described in paragraph 4 of this
Article is received; or4
[2012] 346 ITR 467Signature Not Verified
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(b) make available technical knowledge, experience,
skill, know-how or processes, or consist of the
development and transfer of a technical, plan or
technical design.”
35. As is apparent from the above, Clause (b) of Paragraph 5 of Article 12
of the said India -Netherlands DTAA is materially similar to Clause (c) of
Paragraph 4 of Article 13 of the India-UK DTAA. In the aforesaid context,
the Karnataka High Court had held as under:
“22. What is the meaning of “make available”. The technical or
consultancy service rendered should be of such a nature that it
“makes available” to the recipient technical knowledge, know-how
and the like. The service should be aimed at and result in
transmitting technical knowledge, etc., so that the payer of the
service could derive an enduring benefit and utilize the knowledge
or know-how on his own in future without the aid of the service
provider. In other words, to fit into the terminology “making
available”, the technical knowledge, skill?, etc., must remain with
the person receiving the services even after the particular contract
comes to an end. It is not enough that the services offered are the
product of intense technological effort and a lot of technical
knowledge and experience of the service provider have gone into it.
The technical knowledge or skills of the provider should be imparted
to and absorbed by the receiver so that the receiver can deploy
similar technology or techniques in the future without depending
upon the provider. Technology will be considered “made available”
when the person acquiring the service is enabled to apply the
technology. The fact that the provision of the service that may
require technical knowledge, skills, etc., does not mean that
technology is made available to the person purchasing the service,
within the meaning of paragraph 4(b). Similarly, the use of a
product which embodies technology shall not per se be considered
to make the technology available. In other words, payment of
consideration would be regarded as “fee for technical / included
services” only if the twin test of rendering services and making
technical knowledge available at the same time is satisfied.”
36. One of the tests as expounded by the Division Bench of the Karnataka
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High Court for determining whether the technical or consultancy services
qualify the ‘make available criteria’ is whether the rendering of services
results in technical knowledge or skill being imparted to the recipient in
order for the recipient to deploy the same technology or techniques in future
on its own without any recourse to the service provider. The fact that the
services rendered by the service provider requires high degree of technical
knowledge or skill is not sufficient to qualify the services rendered as
services that ‘make available technical knowledge, experience, skill or
know-how and / or process or development or transfer of any technical plan
or technical design’ if the same do not result in the service recipient
absorbing the same and enables it to use the same on its own. The services
rendered must entail, the service recipient acquiring the right to use the
technical knowledge, experience, skill and the know-how involved in
rendering the services.
37. It is also relevant to consider the meaning of ‘Fees for Technical
Services’ as included in Agreement of Double Taxation and Prevention of
Fiscal Evasion entered into between India and Singapore. Paragraph 4 of
Article 12 of the said Agreement reads as under:
“4. The term “fees for technical services” as used in this Article
means payments of any kind to any person in consideration for
services of a managerial, technical or consultancy nature (including
the provision of such services through technical or other personnel)
if such services :
(a) are ancillary and subsidiary to the application or enjoyment of
the right, property or information for which a payment
described in paragraph 3 is received ; orSignature Not Verified
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(b) make available technical knowledge, experience, skill, know-
how or processes, which enables the person acquiring the
services to apply the technology contained therein ; or
(c) consist of the development and transfer of a technical plan or
technical design, but excludes any service that does not
enable the person acquiring the service to apply the
technology contained therein.
For the purposes of (b) and (c) above, the person acquiring the
service shall be deemed to include an agent, nominee, or transferee
of such person.”
38. Clauses (b) and (c) of Paragraph 4 of Article 12 of the said treaty
makes the meaning of “make available” explicitly clear that the
consideration for services would be construed FTS only if it enables the
service recipient to apply the technology contained in the services.
39. In Director of Income-tax v. Guy Carpenter & Co. Ltd.5, this court
considered the question whether the consideration for services rendered by
Guy Carpenter & Co. Ltd. – a tax resident of UK – to Indian insurance
company in the process of reinsurance of risk would amount to FTS under
the India-UK DTAA. According to the Revenue, the reinsurance brokerage
/ commission paid by the insurance companies operating in India to the
Assessee was chargeable to tax as FTS within the meaning of Section
9(1)(vii) of the Act. However, the learned Tribunal found that reinsurance
brokerage and commission were not chargeable as FTS as it did not qualify
the condition as stipulated under of Clause (c) of Paragraph 4 of Article 13
of the India-UK DTAA. In this context, the Court concurred with the
interpretation of Clause (c) of Paragraph 4 of Article 13 of the India-UK
5
[2012] 20 taxmann.com 807 (Delhi).
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DTAA and found that no substantial question of law arose for consideration
of this Court. The relevant extract of the said decision is set out below:
“9. A plain reading of Article 13(4)(c) of the DTAA indicates
that ‘fees for technical services’ would mean payments of any kind
to any person in consideration for the rendering of any technical or
consultancy services which, inter alia, “makes available” technical
knowledge, experience, skill, know-how or processes, or consist of
the development and transfer of a technical plan or technical
design. According to the Tribunal this “make available” condition
has not been satisfied inasmuch as no technical knowledge,
experience, skill, know-how, processes, have been made available
by the assessee to the insurance companies operating in India. It
also does not consist of the development and transfer of any
technical plan or technical design.
*** *** ***
12. Based on this manner of transacting, the Tribunal came to a
conclusion that the payment received by the assessee could not be
regarded as ‘fees for technical services’. Further, more, the
Tribunal also held that such receipts would not amount to fees for
technical services as the “make available” clause contained
in article 13(4)(c) had not been satisfied in the facts and
circumstances of the present case.
13. In our view, the Tribunal has arrived at these conclusions
purely on assessing the factual matrix of the case at hand. The
findings are in the nature of factual findings and, therefore,
according to us, no substantial question of law arises for our
consideration, particularly, because the learned counsel for the
Revenue was unable to point out any perversity in the recording of
such findings. As such no substantial question of law arises for our
consideration. The appeal is dismissed. There shall be no order as
to costs.”
40. It is also relevant to refer to the decision of this Court in
Commissioner of Income-tax (International Taxation)-1 v. Bio-Rad
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Laboratories (Singapore) Pte. Ltd.6. In the said decision, this Court
concurred with the decision of the Tribunal to the effect that technical
knowledge and skill would necessarily have to remain with the person
receiving the services even after the contract for the said services had come
to an end if the consideration for services were to qualify as FTS. The
‘make available’ condition would be satisfied only if the receiver can deploy
the similar technology and techniques in the future without depending upon
the provider. The relevant extract of the said decision is set out below:
“13. The Tribunal, in concluding that services offered by the
respondent/assessee to its Indian affiliates did not come within the
purview of FTS, as reflected in Article 12(4)(b) of the Indo-
Singapore DTAA, concluded that they did not fulfil the criteria of
‘make available’ principle.
14. According to the Tribunal, the agreement between the
respondent/assessee and its Indian affiliate had been effective from
01.01.2010, and if, as contended by the appellant/revenue, technical
knowledge, experience, skill, and other processes had been made
available to the Indian affiliate, the agreement would not have run
its course for such a long period.
14.1 Notably, this aspect is adverted to in paragraphs 17 to 23 of
the impugned order. For convenience, the relevant paragraphs are
extracted hereafter:
“17. A perusal of the aforementioned provision shows
that in order to qualify as FTS, the services rendered
ought to satisfy the ‘make available’ test. Therefore, in
our considered opinion, in order to bring the alleged
managerial services within the ambit of FTS under the
India-Singapore DTAA, the services would have to
satisfy the ‘make available’ test and such services should
enable the person acquiring the services to apply the
technology contained therein.
18. As mentioned elsewhere, the agreement is effective
6
(2023) 459 ITR 5Signature Not Verified
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from 01.01.2010 and we are in Assessment Years 2018-
19 and 2019-120 [sic…20]. In our considered opinion, if
the assessee had enabled the service recipient to apply the
technology on its own, then why would the service
recipient require such service year after year every year
since 2010?
19. This undisputed fact in itself demolishes the action of
the Assessing Officer/DRP. Facts on record show that the
recipient of the services is not enabled to provide the
same service without recourse to the service provider, i.e,
the assessee.
20. In our humble opinion, mere incidental advantage to
the recipient of services is not enough. The real test is the
transfer of technology and on the given facts of the case,
there is no transfer of technology and what has been
appreciated by the Assessing Officer/ld. CIT(A) is the
incidental benefit to the assessee which has been
considered to be of enduring advantage.
21. In our understanding, in order to invoke make
available clauses, technical knowledge and skill must
remain with the person receiving the services even after
the particular contract comes to an end and the technical
knowledge or skills of the provider should be imparted to
and absorbed by the receiver so that the receiver can
deploy similar technology or techniques in the future
without depending upon the provider.”
15. We tend to agree with the analysis and conclusion arrived at by
the Tribunal.”
41. The aforesaid view also resonated with the Coordinate Bench of this
Court in Commissioner of Income-tax, International Taxation v. RELX
Inc.7. This court referred to the decision in the case of Commissioner of
Income-tax (International Taxation)-1 v. Bio-Rad Laboratories
(Singapore) Pte. Ltd. (supra) and held as under:
7
[2024] 160 taxmann.com 109 (Delhi).
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“15. Similarly, in order for that income to fall
within the ambit of ‘fees for included services’, it
was imperative for the Department to establish that
the assessee was rendering technical or consultancy
services and which included making available
technical knowledge, experience, skill, know-how
or processes. As has been found by the Tribunal,
the access to the database did not constitute the
rendering of any technical or consultancy services
and in any case did not amount to technical
knowledge, experience, skill, know-how or
processes being made available.”
42. In International Management Group (UK) Ltd. v. Commissioner of
Income Tax (International Taxation)8, the Coordinate Bench of this Court
had the occasion to consider the scope of expression ‘make available’ as
used in of Clause (c) of Paragraph 4 of Article 13 of the India-UK DTAA in
the context of services rendered by the International Management Group
(UK Limited) [IMG] to the Board of Control of Cricket in India [BCCI]. In
terms of the memorandum of understanding, the BCCI had appointed IMG
to provide certain services in connection with the establishment,
commercialization and operation of India Premier League [IPL] of cricket
matches. In the context of Clause (c) of Paragraph 4 of Article 13 of India-
UK DTAA, the Coordinate Bench observed as under:-
“93. As we read article 13(4)(c) of the Double
Taxation Avoidance Agreement, it becomes manifest
that the mere furnishing of service would not suffice
and a liability of tax would be triggered only if the
technical or consultancy service were coupled with a
transfer of the expertise itself. The expression “make
available” must be construed as an enablement,8
(2024) 466 ITR 514.
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conferral of knowledge and which would lead to the
payer becoming skilled to perform those functions
independently. The make available condition would be
satisfied if the services rendered entails equipping the
recipient with skill and evidencing an apparent
conferment, alienation or transfer of skill, knowledge
or know-how. This transfer of knowledge or skill is a
pivotal factor in determining whether the consideration
received can be classified as fees for technical
services. The “make available” stipulation ensures that
only those services that impart lasting technical
benefits are classifiable as fees for technical services.
It was on a consideration of the aforesaid that this
court in CIT (International Taxation) v. Bio-Rad
Laboratories (Singapore) Pte. Ltd., (2023) 459 ITR 5
(Delhi) had held that the real test would be the transfer
of technical knowledge, the knowledge and skills and
expertise of the provider being absorbed by the payer
and who would then have the capability to deploy that
knowledge or skill without reference to the original
provider. This reinforces our view that the make
available condition would be satisfied only if the
rendering of service involves a clear and demonstrable
transfer of technical skills, expertise or know-how to
the recipient. It must involve a transfer of capabilities
and not just the temporary use of the provider’s
knowledge, expertise or skill.
94. This leads us to the definitive conclusion that the
rendering of technical and consultancy services has to
be read alongside and in conjunction with “make
available” as that phrase appears in the aforesaid
paragraph. On a plain textual reading of article 13 it
becomes apparent that both the rendering of service
and the skill, knowledge and expertise being made
available are conditions which must be concurrently
and cumulatively satisfied. What we seek to
emphasize is that article 13 in unambiguous terms
creates an enduring, unfading and imperishable link
between the furnishing of service and a transmission
or conferment of technical expertise, knowledge and
skill.
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95. It is also important to bear in mind that the mere
usage or utilisation of technical or consultative
material in aid of business would not be sufficient to
attract article 13 of the Double Taxation Avoidance
Agreement. If we were to accept the submission that
handing over of research or advisory work were
sufficient for the purposes of article 13, it would
render the “make available” condition comprised in
para 4(c) wholly redundant and otiose since the mere
rendering of service would have sufficed.
As CIT v. De Beers India Minerals P. Ltd., (2012) 346
ITR 467 (Karn) correctly holds “The tax is not
dependent on the use of technology by the recipient”.
The make available prescription bids us to make a
conscious distinction between a mere service provision
and the impartation of lasting expertise. The offer of
service or advise does not fundamentally alter the
recipient’s capabilities. These services, while
potentially valuable, do not endow the recipient with
new skills or knowledge which could be independently
deployed in the future. The kernel of “make available”
must therefore be recognised to be a transfer of
technology or skills rather than a temporary reliance
on external support.
96. It is this aspect which convinces us to hold that the
mere utilisation of the service in connection with
business would not meet the test of article 13. This we
observe in the light of the submission to the contrary
as urged by Mr. Hossain who had contended that the
handing over of research material, processes relating
to the league structure and other services performed by
IMG enabled Board of Control for Cricket in India to
proceed independently in the future. We find ourselves
unable to sustain that submission firstly since the
respondents proceed on the incorrect assumption that
know-how relating to commercial rights exploitation
or that pertaining to structuring, organising and
management of a sports league stood transferred. No
provision of the memorandum of understanding or the
services agreement would warrant such an assumption
being made or conclusion drawn. Equally fallacious
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was the submission that by virtue of the services
furnished by IMG, the Board of Control for Cricket in
India was made available “experience in conducting
and organizing a large-scale sports league”. The
contentions noticed above are neither borne out from
the evidence which exists on the record, they are
additionally rendered wholly unsustainable when one
views the various contractual stipulations forming part
of the memorandum of understanding and the services
agreement.
97. The submissions addressed on this score also fail
to bear in mind that IMG came to be engaged by the
Board of Control for Cricket in India principally in the
light of its expertise, special abilities, experience and
capabilities of conceptualising sporting leagues. IMG
was tasked with creating the IPL based on the special
knowledge, skill and experience that it possessed in
the curation of sporting leagues. A reading of the
various obligations that were placed upon IMG clearly
establish that all facets of the IPL and the entire gamut
of activities connected with the proposed league were
not only to be created by it, IMG was also tasked with
managing and administering all commercial and media
rights of the Board of Control for Cricket in India. As
is evident from a reading of clause 4.2 of the services
agreement, IMG was called upon to prepare and
execute marketing strategies, management of future
tendering processes, craft the league handbook and
discharge various other functions enumerated therein.
The enumeration of functions in clause 4.2(a) was
merely illustrative as that clause used the expression
“including, without limitation:”.
*** *** ***
99. On an overall consideration of all of the above, we
come to the firm conclusion that there was no
expertise, skill or know-how which could be said to
have been made available to the Board of Control for
Cricket in India. The various functions which IMG
was called upon to discharge was to be aided by the
appellant drawing upon its expertise and special
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knowledge in the creation and conduct of leagues of
the stature of the IPL. There was no discernible intent
on the part of the Board of Control for Cricket in India
to absorb or internalise IMG’s unique skills and
knowledge in the curation of sporting leagues. No part
of that knowledge or skill stood transferred to the
Board of Control for Cricket in India. Merely because
research material would have been shared with the
Board of Control for Cricket in India or the service
rendered by it been put to use and utilised cannot
possibly lead one to conclude that the payer stood
enabled or equipped with the special knowledge
underlying the technical and consultancy service
which was extended.
100. The fact that IMG was retained to perform all of
the aforenoted functions for a period of ten years is yet
another indicator of the Board of Control for Cricket in
India having not been enabled or made available the
special knowledge and skill possessed by IMG. The
continued provisioning and rendering of service over a
substantial period of time were factors which were
duly recognised by the court in CIT (International
Taxation) v. Bio-Rad Laboratories (Singapore) Pte.
Ltd., (2023) 459 ITR 5 (Delhi) as well when it
observed that the same would clearly detract from an
assumption that technical or consultancy services had
been made available. We also bear in consideration the
undisputable fact that the contractual arrangement
contemplated a continued engagement and ongoing
reliance on IMG’s expertise without any transfer of
know-how or skills to the Board of Control for Cricket
in India.”
43. Merely availing of services that may require technical expertise,
technical inventions or technology would not qualify the consideration paid
for such services as FTS under Article 13 of the India-UK DTAA. First of
all, the services, rendered must fall within the broad rubric of technical and
consultancy services. Additionally, the said services must also satisfy either
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of the three clauses as are specified under Paragraph 4 of Article 13 of the
India-UK DTAA, that is, (i) the same are ancillary or subsidiary to the
application or enjoyment of the right, property or information for which
royalty within the definition of Clause (a) of Paragraph 3 of Article 13 of the
India-UK DTAA, is received; or (ii) the services are ancillary or subsidiary
application to the enjoyment of the property for which royalty within the
meaning of Paragraph 3(b) are received; or (iii) the services rendered make
available technical knowledge, experience, skill, know how, or process or
consist of development and transfer of technical plan or technical design.
44. If the services rendered do not qualify any of the three clauses of
Paragraph 4 of Article 13 of the India-UK DTAA, the consideration
received would not qualify as FTS for the purposes of India-UK DTAA.
Notwithstanding, such consideration may fall within the definition of FTS
under Explanation 2 to Section 9(1) (vii) of the Act.
45. Additionally, under Paragraph 4 of Article 13 of the India-UK DTAA,
FTS would also exclude the amounts paid for services that are referred to in
Paragraph 5 of the India-UK DTAA.
46. The expression ‘make available’ entails service recipient acquiring
technical knowledge, expertise, skills, know how or the process as involved
in rendering the services. It must entitle the service recipient to use the
technology, technical skills or experience as involved in rendering of the
technical services on its own. The ability of the service recipient to perform
the services or use the technical knowledge as involved in rendering of the
services on its own in future, is vital and the ‘make available’ condition is
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sine qua non for FTS under the India-UK DTAA. The consideration paid for
development and transfer of technical plan or technical design should also
transfer the right to use the technical plans or design, which is provided by
service provider, to the recipient.
47. Clause (c) of Paragraph 4 of Article 13 of the India-UK DTAA is
similarly worded as the Clause (b) of Article 12 of the India-USA DTAA9
which inter alia, entitles the contracting State to tax ‘fees for included
services’ arising in a contracting state and paid to the other contracting state,
to be taxed in the other State. The expression ‘fees for included services’ as
used in Paragraph 4 of Article 12 of the India-USA DTAA reads as under:-
“4. For purposes of this article, ‘fees for included
services’ means payments of any kind to any person in
consideration for the rendering of any technical or
consultancy services (including through the provision
of services of technical or other personnel) if such
services:
(a) are ancillary and subsidiary to the
application or enjoyment of the right,
property or information for which a payment
described in paragraph 3 is received; or
(b) make available technical knowledge,
experience, skill, know- how, or processes,
or consist of the development and transfer of
a technical plan or technical design.”
48. As is apparent, Clause (b) of Paragraph 4 of Article 12 of the India –
USA DTAA is identically worded as Clause (c) of Paragraph 4 of the Article
13 of the India-UK DTAA. The import of the expression ‘make available’
as used in Paragraph 4 of Article 12 of the India-USA DTAA is synonymous
9
Convention between the Government of United States of America and Republic of India for avoiding
double taxation and Prevention of Fiscal Evasion with respect to Taxes on Income.
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to the expression ‘make available’ as used in Clause (c) of Paragraph 4 of
Article13 of the India-UK DTAA for construing the FTS under the India-
USA DTAA.
49. The meaning of the expression ‘make available’ as used in Clause (b)
of Paragraph 4 of Article 12 of the India-US DTAA was also considered by
the Division Bench of the Kerala High Court in US Technology Resources
(Pvt.) Limited v. CIT10. The Kerala High Court concurred with the view of
the Karnataka High Court in CIT v. De Beers India Minerals (P.) Limited
(supra) and found that the subject payments could not be considered as fees
for included services as there was no transfer of technical knowhow. The
relevant extract of the said decision is set out below:-
“12. The specific services availed of by the assessee-
appellant from the US company is covered under
clause 4 of article 12 of the DTAA is the finding of the
lower authorities. In the context of a definition for
“fees for included services” not being available under
the Income-tax Act, we have to necessarily look at the
definition as available under the DTAA. The “fees for
included services” as defined under the DTAA would
take in payment of any kind in consideration for the
rendering of any technical or consultancy services,
which services are quite distinctly defined under sub-
clauses (a) and (b) of paragraph 4 of article 12 of the
DTAA. This is different from the “technical and
consultancy services” as defined under section
9(1)(vii) of the Income-tax Act. At the risk of
reiteration it is to be observed that the services which
come under the “included services”, meaning a
technical and consultancy service as understood by the
DTAA, have further been elaborated in sub-clauses (a)
and (b) of paragraph 4 under article 12. We are10
(2018) 407 ITR 327.
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concerned with sub-clause (b) of article 12(4), which
speaks of technical knowledge, experience, skill,
know-how, or processes, or consist of development
and transfer of a technical plan or technical design.
The same has to be read along with the MOU which
has been entered into on May 15, 1989 and is a part of
the notified DTAA.
13. In the MOU, paragraph 4(a) (hereinabove termed
clause) of DTAA was clarified and agreed to be
understood in order for a service fee to be considered
“ancillary and subsidiary” to the application or
enjoyment of the right, property, or information; only
with respect to a service related directly to such
application or enjoyment. The predominant nature of
the arrangement should be the application or
enjoyment of the right, property or information
described in paragraph 3. It was also agreed that the
question as to whether such services is related to the
application or enjoyment would be determined by
reference to the facts and circumstances of each case.
Paragraph 4(b) was agreed to be narrower than the
category described in paragraph 4(a), since it excludes
any service that does not make technology available to
the person acquiring this service. Technology would
be considered to be “made available” only when the
person acquiring the service is enabled to apply the
technology. So there should clearly be a transfer of
technology with the transferee applying it to its
business. The mere fact that the provision of a service
may require technical input by the service provider
does not per se mean that the technical knowledge,
skills, etc. are made available to the person availing of
such services.
14. The typical category of services were also
specifically referred to as:
1. engineering services (including the
sub-categories of bio-engineering and
aeronautical, agricultural, ceramics,
chemical, civil, electrical, mechanical,
metallurgical, and industrial engineering);
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2. architectural services; and
3. computer software development.
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 areas:
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 gas;
7. geological surveys;
8. scientific services; and
9. technical training.
The MOU and the narrow definition given to
“included services” takes the services availed of by the
appellant herein, out of the “included services” as per
the DTAA.
15. We would also refer to certain examples provided
in the MOU to further substantiate the view taken by
us. The facts in one of the examples refer to an Indian
vegetable oil manufacturing company desiring to
produce cholesterol-free oil with the know-how for
refining cholesterol out of the oil as available with an
American company. The Indian company thus
contracts with the US company for the purpose of
transfer of know-how by which the cholesterol in the
oil would be eliminated and to train the Indian
company in applying the new formula. This was held
to be an “included service” and remuneration received
by the American company coming within the ambit of
“fees for included services”, since technical know-how
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is made available to the Indian company, based on
which the Indian company carries out the
manufacturing activity. However, when a vegetable oil
manufacturing firm having mastered the process of
manufacturing cholesterol-free oil, hired an American
marketing company to advice it on marketing
strategies, the same would be taken out of the
“included services” and any remuneration received
would have to be relieved of taxation under the
Income-tax Act.
16. We have to look at the Andhra Pradesh and
Karnataka decisions with the above understanding of
the DTAA and MOU in our mind. GVK Industries
Ltd. v. ITO (2015) 371 ITR 453 (SC) was a case in
which the Indian company, formed for generation and
sale of electricity, entered into an agreement with a
company at Zurich, Switzerland for help in raising
finance. On the basis of the non-resident company’s
advice regarding processing of loans, the Indian
company obtained finances, both from India and from
a foreign institution. The question was whether the
“success fee” paid to the non-resident company on the
finances being successfully obtained as per the advice
of the non-resident company was taxable in India. The
Division Bench of the Andhra Pradesh High Court,
looking at the various decisions of the Hon’ble
Supreme Court interpreting the definition of “technical
services” as available in section 9(1)(vii) of the
Income- tax Act, found such services availed of by the
Indian company to fall within the ambit and scope of
technical services as understood by the Income-tax
Act. The aforesaid decision has also been upheld by
the Hon’ble Supreme Court in GVK Industries Ltd. v.
ITO (2015) 371 ITR 453 (SC). We do not think that
the said decision interpreting the definition under the
Income- tax Act would be applicable here, specifically
because the DTAA between the Governments of USA
and India was never a relevant factor in considering
the aspect of exemption to tax claimed by the Indian
company therein. Here the DTAA having defined
“included services”, which is technical and
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consultancy services ; but specifically having defined
it quite distinctly from the all inclusive definition in
the Income-tax Act, even by section 90(3) the
definition in the DTAA is to be adopted to decide
taxation or its avoidance.
17. The decision of the Karnataka High Court referred
to by the Tribunal is reported in CIT v. De Beers India
Minerals (P.) Ltd. (2012) 346 ITR 467 (Karn) ; (2012)
208 Taxman 406 (Karn). Therein the Indian company
had sought for assistance of a Netherlands company to
conduct air borne survey for providing high quality,
high resolution, geophysical data to identify probable
kimberlite targets. The non-resident company did not
transfer any technological know-how to the Indian
company and merely carried out the survey by
equipment brought by them into India and supplied the
necessary details to the Indian company. The Division
Bench of the Karnataka High Court found that there
was no transfer of technology and the foreign
company merely carried out a survey, collected data
and processed it to identify the probable mining sites.
The mere transfer of such data, including maps and
photographs, cannot be considered as a transfer of
technology was the finding.
18. We are conscious of the fact that the DTAA as
relevant in the present case, is not applicable even in
the case of De Beers India Minerals (P.) Ltd. where
the non-resident hailed from Netherlands. However,
on facts we are of the opinion that when the definition
clause in DTAA read along with the MOU specifically
refers to transfer of technologies, the facts as available
in the Karnataka decision are more similar to the
present facts. Herein also there is no technology
transfer; nor is there a plan or strategy relating to
management, finance, legal, public relations or risk
management transferred to the appellant. The services
promised by the non-resident company is only to
advice on such aspects as are specifically referred to in
the agreement. The non-resident company only assists
the Indian company in making the correct decisions on
such aspects as is specifically referred to in the
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agreement, as and when such advice is required. There
is no transfer of technology or know-how, even on
managerial, financial, legal or risk management
aspects; which would be available for the Indian
company to be applied without the hands-on advice
offered by the US company. The advice offered on
such aspects would have to be on a factual basis with
respect to the problems arising at various points of
time and there cannot be found any transfer of
technical or other know-how to the Indian company.
19. Particularly under the DTAA, we are of the
opinion that none of these aspects on which the US
company has promised advice to the Indian company
would fall under the “included services” and the “fees
for included services” would not be taxable in India as
per the DTAA. As we noticed, the business profits of a
US company would be taxable in the US. However, a
portion of such business profits relating to royalty and
fees for included services have been carved out to
enable taxation within India also, but at a reduced rate
as per article 12 of the DTAA itself. Even before the
DTAA was notified by the Central Government, a
MOU was entered into between the two Governments
further clarifying as to the specific services qualifying
for taxation within India. A further carving out was
made out of the technical and consultancy services
permitting taxation only in so far as the transfer of
technical know-how, which, a reading of the MOU
would indicate, is clearly scientific technology not
including a managerial or financial strategy.
20. On the above interpretation of the provisions of the
DTAA, we have to find that the services availed of by
the Indian company, the appellant herein, from the US
company are not technical and consultancy services as
defined under the DTAA, clarified by the MOU,
which forms part of the notification issued by the
Central Government on the double taxation avoidance
agreement between the Governments of United States
and India. The remuneration received by the US
company for the services offered to the Indian
company being not a technical or consultancy service
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as defined under the DTAA, would also not be a fee
for included services. The remuneration so obtained by
the US company definitely being an income accruing
within India would not, hence, be taxable in India
under the DTAA. We do not agree with the argument
advanced by the learned standing counsel that the best
evidence available for avoiding taxation within India is
the tax paid within the United States of America. The
non- payment of tax in the U.S cannot automatically
enable taxation in India. As we noticed, with respect to
fees for included services, the same being business
profits, would be taxable in the US and also in India ;
however, in India at a reduced rate than as available
under the Income-tax Act. The said reduced rate also
would not be applicable to the appellant herein with
respect to the amounts paid as remuneration to the US
company for the specific services as is seen from the
agreement, for it being not an included service as per
the DTAA. The tax having been exempted fully, there
is no obligation on the assessee-appellant to deduct it
at source and the non- compliance of the provisions of
section 195(1) of the Income-tax Act cannot be alleged
against the appellant for reason of such obligation not
existing in law. The questions of law raised as (i) and
(ii) are answered against the Revenue and in favour of
the assessee.”
50. In the present case, the Assessee is the proprietor of an e-invoicing
software and provides the services of generating electronic invoices
compliant with local laws through its secure platform. The services entail
automatically generating the e- invoices instead of creating and printing the
same manually. The Assessee has provided the license for using its e-portal
to GIPL in connection with the services rendered to GSK, which is a non-
resident company. The invoices generated pertained to GSK’s European
operations. The license granted to GIPL is a non-exclusive license for the
use of the e-portal/software. It was explained that the data for generating
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the e-invoices is received from GIPL, either as files of data or through its
portal. The Assessee claims that the data is formatted and translated so that
it is consistent with the portal of GIPL. It also augments the data with the
standing data available as per GIPL’s profile. The data which was
transmitted, includes the data files of the invoices, which have been prepared
including the images of the said invoices in HTML, TIFF and/or PDF
format. The data is also encrypted. The Assessee claims that it also
implements reasonable and industry standard protection to eliminate harmful
quotes from its data files/data images.
51. Neither GIPL nor GIL acquires any right in the source code of the
software operated by the Assessee. The licence granted to GIL/GIPL to use
the Assessee’s platform or its services, is limited to the term of the license.
Neither GIPL nor GIL are granted any right to technology or source code of
the software which would enable them to absorb the technology and
independently exploit the same. Thus, whilst the Assessee renders services
and grants access to its e-platform as part of its services, it does not make
available any technical experience, skill, knowhow or process to GIPL or its
client GSK. Thus, the services rendered by the Assessee do not satisfy the
Clause (c) of Paragraph 4 of Article 13 of the India-USA DTAA.
52. Mr Aggarwal, learned counsel for the Revenue referred to Paragraph
2.3, Articles 5A and 5B of the MPA in support of the stand that the services
rendered by the Assessee makes available the technical skill and knowhow
to GIPL. He contended that Paragraph 2.3 of the MPA expressly grants right
to the ‘Partner (GIPL)’ and, therefore, there is a transfer of rights.
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53. We find no merit in the said contention. A plain reading of Paragraph
2.3 of the MPA indicates that the license granted by the Assessee is to use
“OB-10 services”. The Paragraph 2.3 does not indicate any transfer of
intellectual property right or technology, but only a license to use the
services rendered by the Assessee.
54. Mr Aggarwal’s contention that in terms of Articles 5B and 5A, the
Assessee provides training to the employees of GIPL and the same would
amount to making available technical skill and knowhow to GIPL, is also
unmerited.
55. In terms Paragraph 5.6 of the MPA, OB10 is obligated to “provide
training to full time employee of the Partner to enable them to promote and
use the OB10 Services”. The training contemplated is only for the purpose of
using the platform and software in terms of the license granted by the
Assessee. The training is not for imparting technical knowhow or knowledge
which is involved in rendering the services. As noted above, the Assessee
provides the access of its e-portal and uses the software for generating the e-
invoices. The training as contemplated in Paragraph 5.6 is for using the
software and e-platform, and not for the transfer of any technology,
knowhow or source code of the software, which would enable the service
recipient (GIPL) or its employees, who had received training to use the
software, to continue rendering the services of generating of e-invoices after
its license is terminated. There is neither the transfer of knowhow nor any
training that makes available the technical knowledge, skill, knowhow or
process used or involved in rendering the technical services.
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56. Mr Aggarwal, also relied upon the decision of this Court in Centrica
India Offshore P. Limited v. CIT11 and on the strength of the said decision,
contended that since the Assessee is obliged to provide the training to the
employees of GIPL, the same would satisfy the ‘make available’ criterion.
57. In our view, the reliance placed on the decision in Centrica India
Offshore P. Limited v. CIT (supra) is misplaced. In the said case, the
service provider had seconded employees to the service recipient. The said
employees were involved in rendering of the services to the service
recipient. In the facts of that case, the Court found:
“32. ……. The activity of the secondees is thus to
transfer their technical ability to ensure quality control
vis-a-vis the Indian vendors, or in other words, “make
available” their know-how of the field to CIOP for
future consumption. The secondment, if viewed from
this angle, actually leads to a benefit that transmits the
knowledge possessed by the secondees to the regular
employees. Indeed, any other reading would unduly
restrict article 12 of the DTAA, which contemplates
not only a formal transfer of intellectual property but
also other techniques and skills (“soft” intellectual
property, if it can be called as such) required for the
operation of a business. The skills and knowledge
required to ensure that the task entrusted to CIOP –
quality control – is carried on diligently certainly falls
within the broad ambit of article 12.”
58. In SFDC Ireland Limited v. Commissioner of Income Tax &
Another12, this Court had considered a similar contention with regard to the
training imparted to the Indian entity in connection with the sale of certain
products referred to in the relevant agreement and the said decision as
11
(2014) 364 ITR 336.
12
(2024) 465 ITR 471.
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‘SFDC products’. This Court had rejected that the training imparted in the
context of the said products would render the remittance made by the Indian
entity chargeable to tax as FTS. In the given facts, the Court had observed:
“41. The technical assistance and training imparted to
SFDC India staff appears to be aimed at enabling them
to understand the various attributes and capabilities of
SFDC Products so as to be informed when interacting
with prospective customers in the territory. The
technical assistance and training which is spoken of in
Section 4.3 of the Reseller Agreement does not appear
to bear the characteristics of a conferral of specialised
or exclusive technical service. In any case, the training
and assistance proffered by SFDC was a concomitant
to the sale of its principal products in the territory and
fundamentally aimed at readying SFDC India to
undertake the marketing of those products. The
technical assistance and training did not constitute
either the core or the foundational basis of the
consideration which was received by SFDC Ireland.
42. Insofar as the products for SFDC India’s internal
use were concerned, they stood restricted to those
which would enable SFDC India to demonstrate the
functionality of SFDC products in trade shows and
exhibitions, to train its customers and employees on
the use of those products and products to administer
and manage customer accounts. None of these aspects
would appear to be imbued with a technical hue.
Imparting training or educating a person with respect
to the functionality and attributes of a software or
application would clearly not amount to the rendering
of technical service under the DTAA. More
importantly, the technical assistance and training
which the petitioner proposed to provide was confined
to marketing, distribution, support and sale of SFDC
products. The assistance and training which Section
4.3 of the Reseller Agreement speaks of was
concerned with fields wholly unrelated to providing
technical service.”
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59. It is equally relevant to refer to the decision of this Court in
Commissioner of Income Tax International Tax-1 New Delhi v.
Expeditors International of Washington Inc.13, wherein the Court has
observed:
“9. Similarly, under the head of “Training and
Personnel Management”, the assessee has spoken of
Expeditors Ltd attempting to develop a “global
culture” of ongoing development of key personnel.
Neither of the above would in our considered opinion
qualify the “make available” condition which
permeates FTS and as would become clearer from the
discussion which ensues.”
60. Merely because the training is imparted by the service provider does
not necessarily satisfy the ‘make available’ condition. It is important to bear
in mind the purpose for which the training is imparted to the employees and
the resource so developed. Undisputedly, if the training imparted results in
the service recipient absorbing technology that enables the trainees to use
the technical knowhow and the skill, which is central to the technical
services that are rendered, on their own; the ‘make available’ condition
would stand satisfied. This is because such training would result in the
transfer of the technical skill, knowhow and the technical knowledge.
However, if the training does not entail transfer of the technology or the
technical skill or knowhow involved in rendering the services, the same
would not qualify the ‘make available’ condition, which as noted above, is
essential for the consideration to be construed as FTS under Clause (c) of
Paragraph 4 of Article 13of the India-UK DTAA.
61. In the facts of the present case, the training imparted to GIPL’s
13
Neutral Citation : 2025 : DHC: 967-DB.
Signature Not Verified
Digitally Signed By:GANGA
SINGH RAWAT
ITA 92/2025 and ITA 93/2025 Page 48 of 49
Signing Date:14.07.2025
18:41:49
employees for using the software or e-platform, does not transmit the
technical knowhow or the process for rendering the services of generating
electronic invoicing. The said service is performed by the Assessee by the
use of its proprietary software and the e-platform operated by it. The training
to use the said platform does not transfer the knowledge or transfer the
technology, which would enable GIPL to absorb the technology to generate
e-invoices and render the subject services on its own. GIPL does not acquire
any rights in the Assessee’s proprietary software.
62. In view of the above, the question whether the payments received by
the Assessee for rendering the services constitute FTS within the meaning of
Paragraph 4 of Article 13 of the India-UK DTAA, is answered in the
negative. Thus, the said receipts are not chargeable to tax under the Act. In
this view, it is not necessary to examine whether such receipts constitute
FTS within the meaning of Explanation 2 to Section 9(1)(vii) of the Act.
63. The appeals are, accordingly, allowed. The impugned order dated
18.12.2024 as well as the assessment orders dated 12.03.2024 in respect of
AY 2016-17 and AY 2017-18, are set aside. The pending application(s), if
any, also stands disposed of.
VIBHU BAKHRU, J
TEJAS KARIA, J
JULY 14, 2025
RK
Signature Not Verified
Digitally Signed By:GANGA
SINGH RAWAT
ITA 92/2025 and ITA 93/2025 Page 49 of 49
Signing Date:14.07.2025
18:41:49
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