ORDER
Pramod Kumar, Accountant Member - The short issue that we are required to adjudicate in these appeals is whether or not the learned CIT(A) was justified in holding that the assessee did not have any obligations to deduct tax at source under section 195 in respect of payments of GBP 35,600, made to Veeda Clinical Research Ltd UK, for providing in-house training of its employees, and of GBP 8,500, made to Steve Matheson UK, for providing market awareness and development training to its employees. The assessment year involved is 2008-09 and the impugned passed by the learned Commissioner (Appeals), in the matter of tax withholding demands raised under section 201 r.w.s. 195 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for the assessment year 2008-09, is dated 4th February 2009.
2. There is no dispute that the payments were made by the assessee for certain training services provided to the employees of the assessee company. The training was in the nature of "in house training of IT staff and medical staff" and of "market awareness and development training". There is also no dispute that in terms of the provisions of Article 13(4)(c) of India UK Double Taxation Avoidance Agreement [206 ITR 235 (Statute)], fees for technical services can be brought to tax in the source country only when such services "make available (emphasis supplied by us) technical knowledge, experience, skill know-how or processes, or consist of the development and transfer of a technical plan or technical design". However, the claim of the assessee that the training services received by the assessee did not "make available" any technical knowledge, experience, skill, know how or process, or consist of the development and transfer of a technical plan or design, has been rejected on the ground that connotations of the expression 'make available' also include the cases in which technical services were offered or made accessible to the recipient of services and not necessarily confined to the cases in which the recipient should be "trained or made expert in such technical knowledge etc". The Assessing Officer also added that "it will be absurd on the part of a person to make other person expert of its core competence, which will result in a situation that the recipients of services will not look again to him when these services are again needed in future. The Assessing Office then referred to the examples set out in MOU to India US Double Taxation Avoidance Agreement [ 187 ITR 102 (Statute)] wherein 'technical training' is said to be specifically included. References were also made to the search results produced by google search engine for meaning of the expression 'make available' and it was emphasized that the same meaning be applied in the present context as well. On this basis, the Assessing Officer concluded that the training fees paid by the assessee is taxable in India under Article 13(4)(b) of India UK DTAA. Accordingly, the Assessing Officer raised demands under section 201 r.w.s. 195 of the Act. Aggrieved, assessee carried the matter in appeal before the learned CIT(A). Learned CIT(A), in his rather brief, referred to the wordings of Article 13(4)(b), stated that this deals only with technical and consultancy services which "are ancillary and subsidiary to the enjoyment of the property" referred to in Article 13(3)(b) - something which is clearly unrelated to the facts of this case, and inferred that since the services are not covered under Article 13(4)(b), "the payment made by the appellant is not covered by Article 13(4) of the DTAA between India and UK". It was thus concluded that "the order passed by the Assessing Officer is not as per Article 13(4) of the DTAA between India and UK". The demands raised under section 201(1) r.w.s. 195 and under section 201(1A) r.w.s. 195 were, accordingly, cancelled.
3. Aggrieved by the relief so granted by the CIT(A), the Assessing Officer is in appeal before us.
4. We have heard the rival contentions, perused the material on record and duly considered facts on record in the light of the applicable legal position. We have also duly considered written submissions filed by the learned Departmental Representative.
5. The law is by now settled so far as the connotations of 'make available' clause in the definition of fees for technical services in the contemporary tax treaties are concerned. It is held to be a condition precedent for invoking this clause that the services should enable the person acquiring the services to apply technology contained therein. There are at least two non-jurisdictional High Court decisions, namely Hon'ble Delhi High Court in the case of DIT v. Guy Carpenter & Co. Ltd. [2012] 346 ITR 504/207 Taxman 121/20 taxmann.com 807 and Hon'ble Karnataka High Court in the case of CIT v. De Beers India (P.) Ltd. [2012] 346 ITR 467/208 Taxman 406/21 taxmann.com 214 in support of this proposition, and there is no contrary decision by Hon'ble jurisdictional High Court or by Hon'ble Supreme Court. We, therefore, hold that unless there is a transfer of technology involved in technical services extended by the UK based company, the 'make available' clause is not satisfied and, accordingly, the consideration for such services cannot be taxed under Article 13(4)(c) of India UK tax treaty. No doubt, as pointed out by the learned Assessing Officer, there can indeed be situations in which technical training is imparted resulting in transfer of technology, even consideration for rendering of training services will be covered by the definition of 'fees for technical services' but what is really the decisive factor is not the fact of training services per se but the training services being of such a nature that it results in transfer of technology. In the present case, the training services rendered by the service provider are general in nature as the training is described as 'in house training of IT staff and medical staff' and of 'market awareness and development training'. Clearly this training does not involve any transfer of technology. In any case, in order to successfully invoke the coverage of training fees by 'make available' clause in the definition of fees for technical services, the onus is on the revenue authorities to demonstrate that these services do involve transfer of technology. That onus in not at all discharged by the Assessing Officer, or even by the learned Departmental Representative. In the written submissions filed before us, main thrust of the arguments is that "the services provided were in the nature of 'fees for technical services' as defined in Explanation 2 to Section 9(1)(vii) of the Income Tax Act", that "the AO has finally held that the service provider has provided or made accessible the services of its technical knowledge and experience to the assessee company and, therefore, the payment was covered by the definition of 'fess for technical services' as per Article 13 of tax treaty between India and United Kingdom", and that, therefore, "the aforesaid payments were held taxable by virtue of both the provisions of the Income Tax Act and (the applicable) tax treaty………..". These submissions overlook the fundamental position that the provisions of the Income Tax Act apply in a treaty situation only to the extent they are more favourable, vis-à-vis the provisions of tax treaties, to the assessee. Accordingly, when case of the revenue authorities fails on the tests of the treaty provisions, there is no occasion at all for their leaning upon the provisions of the Income Tax Act. The case of the revenue authorities, as discussed above, does not succeed on the provisions of the tax treaty as there is nothing to establish, or even indicate, that there is any transfer of technology in the present case. In view of these discussions as also bearing in mind entirety of the case, in our considered view, the fees for training services of general nature, which does not seem to involve any transfer of technology, cannot be brought to tax under section 13(4)(c) of India UK tax treaty.
6. For the reasons set out above, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter. Even as we do so, we are alive to the fact that reasoning adopted by the CIT(A) is altogether different, and wholly incorrect, but what really matters for the present purposes is that he reached the right conclusions, even if serendipitously. We approve the same.
7. In the result, the appeal is dismissed.
P. SEN