INCOME TAX ACT, 1961

Section 90

Double taxation relief - Agreement between India and USA - Fee for technical services - Assessee paid charges towards paid charges towards technical assistance to Federal Aviation Administration

Assessee Airport Authority of India (AAI) has entered into Memorandum of Agreement with Federal Aviation Administration, USA (FAA), for providing technical assistance to AAI by way of roviding its ersonnel and meeting on ATFM requirements and assisting AAI to connection with ATFM by development of detailed quantitative requirements, detailed ATFM system architectuure and draft ATFM implementation plan. AO treated consideration aid by assessee as fees for technical services (FTS), chargeable to tax 10% + surcharge + cess on the gross amount as er section 115 and, therefore, disallowed deduction for want of TDS under section 195.Held: The concept of make available requires that fruits of services should remain available to the service recipient in some concrete shape such as technical knowledge, experience, skills, etc. The assistance provided by FAA in preparation of QRs and development of ATFM system were neither any licensed product of FAA nor exclusive patents of FAA. In assessee's case assistance rendered on reimbursable basis was based on agreement between MoCA and FAA of US. The ATFM technology per se has not been made available to AAI for any perpetual use. Provision of assistance to MoCA in developing and modernization of civil aviation structure, review analysis and documentation of a traffic flow management system was a dynamic process requiring further development of the process by MoCA, India was a case of assistance and technical cooperation between FAA and AAI sans any commercial interest by the rendering party. Based on the manner of transacting, agreements, services provided, reimbursement received, it could be unhesitatingly held that 'make available' clause contained in article 12(4)(b) had not been satisfied in the facts and circumstances of case, and payment made by assessee could not be regarded as for the purpose of 'fees for included services' (FIS). Accordingly, no taxability arose in India and no TDS was called for.

Supported by:DIT v. Guy Carpenter & Co. Ltd. in ITA 202/2012, dated 23-4-2012 : 2012 TaxPub(DT) 2095 (Del-HC). Relied:Dunlop Rubber Company Ltd. (1983) 142 ITR 493 (Cal) : 1983 TaxPub(DT) 599 (Cal-HC) and CIT v. Industrial Engineering Projects (1993) 202 ITR 1014 (Del-HC.) : 1993 TaxPub(DT) 505 (Del-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

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