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The Bombay High Court in 304ITR201 in the context of a company in diamond market held that consideration received by the non resident company against grading and certification of diamond and giving reports in that regarddoes not render it as payment of royalty of FTS. It was observed that the assessee did not part with information concerning industrial, commercial or scientific experience when it issued the grading certificate. It was also not a payment received by them in consideration for services of managerial, technical or consultancy nature which could include to the application or enjoyment of the right, property or information. It also does not make available technical knowledge, experience, skill, etc. to enable the person acquiring the service to apply the technology contained therein.


Such a payment according to the Court would be akin to lawyer giving advice to its client, a doctor giving his medical opinion, a laboratory submitting blood analysis report and the like.


The Court thus made a distinction between using knowledge, experience and skill and imparting of knowledge and skill.


Using this fraction the Kolkata bench in the context of payment arising under cost sharing arrangement of RD facility ( research and development co-operation agreement) held that in that case the NR assessee uses knowledge, experience and skill but does not impart such knowledge, experience and skill to Indian party.


In 416ITR95 the market study for wind energy carried out by EY is held in the nature of technical services and the remittance was treated as fees for technical services. In alternate conclusion the department also took the plea that the said market study is in the nature of information concerning commercial experience and hence is royalty under Indo-UAE Agreement. The High Court further held that in order to get the benefit of the exception in section 9(1)(vii)(b) it is not sufficient for the assessee to prove that the technical services were not utilised for its business activities of production in India, but it is further necessary for the assessee to show that the technical services were utilised in a business carried on outside India. Likewise by 352ITR376 testing and certification fees are held as FTS.

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