Delhi ITAT upholds
taxation of consideration for providing SAP/CAD software related support
as FTS under Article 13(4)(a), being ancillary and subsidiary to the enjoyment
of the right / property for which royalty was received by assessee (a UK
co., JCBE), clarifies that ‘make available’ clause under Article 13(4)(c) is
not applicable; ITAT notes that in earlier years, assessee had entered into
bilateral agreement under which it used to receive royalty from JCB India
(Indian subsidiary) for licensing the technology with an exclusive right to
manufacture and market, however, during relevant AY, assessee entered into a
Tripartite Agreement whereby the technology was sub-licensed by assessee to JCB
investments, and the royalty paid by JCB India was routed through JCB
Investments; Thus noting that entire royalty amount was passed on to assessee
through JCB Investments less 0.5%, ITAT holds JCB Investments as a pass through
entity, remarks that "Substance will rule over
form", observes that except for this routing of royalty through JCB
Investments, all the terms and conditions of the agreement between the assessee
and JCB India including secondment of assessee's employee to JCB India for
rendering of services; Rejects assessee’s stand that co-ordinate bench ruling
holding JCB India a Service PE of assessee cannot be applied in present facts,
observes that there is no difference in the facts and circumstances except for
the tripartite vs. bilateral arrangement; Further follows co-ordinate bench
ruling to hold that royalty was not effectively connected to PE in India,
therefore, cannot be considered under Article 13(6), but should be taxed as
royalty / FTS under Article 13 itself:ITAT
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