‘Make Available’ clause is not satisfied if NR services are repetitive in nature

Case Details: GE Energy Management Services Inc. v. ADIT - [2022] 135 taxmann.com 173 (Delhi - Trib.)

Judiciary and Counsel Details

• • N.K. Billaiya, Accountant Member and Sudhanshu Srivastava, Judicial Member
  • Sachit Jolly and Ms. Disha Jham, Advs. for the Appellant.
  •  Mrs. Anupama Anand, CIT-DR for the Respondent.

Facts of the Case

Assessee-foreign company entered into an agreement to provide offshore maintenance and support services to Power Grid Corporation of India Ltd (PGCIL). The assessee from outside India performed the entire services for software and hardware maintenance and support work through remote system monitoring, remote launching of the system, telephonic discussion or internet communication, etc.

The Assessing Officer (AO) held that services rendered by the assessee to PGCIL were taxable as fees for included services (FIS) under section 9(1)(vii). The Dispute Resolution Panel (DRP) upheld the findings of AO.

ITAT Held

On appeal, the Tribunal held that if article 12(4)(a) of India –USA treaty is read along with MOU, it is clear that for a service to qualify as FIS, there should be made available technical knowledge, experience, skill, know-how or processes to the service recipient.
The receiver of this service can be said to acquire the relevant skills used by the service provider only if he acquires those skills so that he can himself use them independently without getting any assistance or being dependent on the service provider in the future.
In the instant case, the assessee’s offshore maintenance and support services to PGCIL were not geared towards making available any technical knowledge, experience, skills, know-how, or processes to PGCIL.

Further, the term of the agreement was for five years and services provided by the assessee were repetitive and ongoing. It means that PGCIL could not apply the technical or skills used by the assessee for rendering such service.

Given the repetitive nature of the services, it would be factually incorrect to allege that the services make available any technical knowledge, expertise, skill, know-how or processes to PGCIL.

Consequently, the PGCIL would not apply technology on its own. It would continue to depend on the assessee for provision of software and hardware maintenance and support services in the future.

Thus, keeping in view of the facts and circumstances of the case, receipts from PGCIL do not qualify as ‘fees for included services ‘under articles 12(4)(a) and 12(4)(b) of India – US DTAA.

Case Review

• • Engineering Analysis Centre of Excellence (P.) Ltd. v. CIT [2021] 125 taxmann.com 42/281 Taxman 19/432 ITR 471 (SC) (para 37) followed.

List of Cases Referred to

• • DIT v. Guy Carpenter & Co. Ltd. [2012] 20 taxmann.com 807/207 Taxman 121/346 ITR 504 (Delhi) (para 30)
  • CIT v. De Beers India Minerals (P.) Ltd. [2012] 21 taxmann.com 214/208 Taxman 406/346 ITR 467 (Kar.) (para 30)
  • Raymond Ltd. v. Dy. CIT [2003] 86 ITD 791 (Mum.) (para 30)
  • CESC Ltd. v. Dy. CIT [2003] 87 ITD 653 (Kol.) (para 30)
  • Mckinsey & Co. Inc. v. Asstt. DIT [2006] 99 ITD 549 (Mum.) (para 30)
  • Anapharm Inc., In re [2008] 174 Taxman 124 (AAR) (para 30)
  • ISRO Satellite Centre, In re [2008] 175 Taxman 97/307 ITR 59 (AAR) (para 30)
  • Dell International Services India (P.) Ltd., In re [2008] 172 Taxman 418 (AAR) (para 30)
  • Cushman & Wakefield (S) Pte. Ltd., In re [2008] 172 Taxman 179 (AAR) (para 30)
  • Intertek Testing Services India (P.) Ltd., In re [2008] 175 Taxman 375/307 ITR 418 (AAR) (para 30)
  • Dy. DIT (International Taxation) v. Scientific Atlanta Inc. [2009] 33 SOT 220 (Mum.) (para 30)
  • Engineering Analysis Centre of Excellence (P.) Ltd. v. CIT [2021] 125 taxmann.com 42/281 Taxman 19/432 ITR 471 (SC) (para 36)
  • DIT v. Mitsubishi Corpn. [2021] 130 taxmann.com 276 (SC) (para 41).