IN RE: FEDERATION OF INDIAN CHAMBERS OF COMMERCE AND INDUSTRY Vs. STATE
LAWS(AR)-2010-3-4
AUTHORITY FOR ADVANCE RULINGS
Decided on March 05,2010

In Re: Federation of Indian Chambers of Commerce and Industry (FICCI) Appellant
VERSUS
Respondents

JUDGEMENT

P.V. Reddi, J. (Chairman) - (1.) THE applicant, Federation of Indian Chambers of Commerce and Industry ("FICCI") is a company registered under the Companies Act, 1956. It is stated that for meeting several objects, the applicant maintains a liaison with the Government of India/State Governments on the one hand and several corporations and other members on the other. The applicant states that it received a letter dt. 7th Jan., 2009 from Indo -US Science and Technology Forum, New Delhi (hereinafter referred to as "IUSSTF") awarding a job contract for administering DST -Lockheed Martin India Innovation Growth Programme 2009 ("IIGP" for short) as joint partners with IC Institute of University of Texas and IUSSTF. IUSSTF was appointed as co -ordinating agency on behalf of Department of Science and Technology, Government of India (hereinafter referred as DST). The objective of this programme is to identify, award and accelerate innovative new Indian technologies into the market space. IIGP will help Indian innovators to find markets globally. The participants of the programme will receive professional business development assistance to facilitate access to US, Indian and global markets. 1.1 The IIGP has two programme components: I. India Innovation Growth Programme; and II. Capacity Building on Technology Commercialization for Incumbent Managers at IC Institute of University of Texas (hereinafter referred to as "UT (IC) 1.2 In this application, we are not concerned with the II Part of programme. 1.3 DST has allocated funds to the tune of Rs. 530.30 lakhs for implementation of the programme for a period of two years i.e., 2009 and 2010. The year -wise break -up of the said amount, the payment schedule etc. are set out in detail in the application. An amount of US $ 12,00,000 has been committed by Lockheed Martin Global Inc. to be paid to UT (IC) directly in USA for implementation of the programme. The applicant had to make payment to IC Institute to meet their expenses incurred in technology assessment and for travel of their personnel to India to participate in commercialization workshop. 1.4 As per the schedule of payments, $ 4,00,000 is payable in four instalments by FICCI to UT (IC). 1.5 The programme process (I Part) is in 8 steps, some of which are to be accomplished by FICCI and the rest by UT (IC) as per the following Table.* - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Activities To be performed by Location - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Apply to programme FICCI India - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1st screening of innovators FICCI India - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Commercialization workshop FICCI/IC experts India interact and guide - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2nd screening (30 out of 60 selected) UT (IC) USA - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Quick -look analysis (done for 30) UT (IC) USA - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Entrepreneurship workshop (for 3) FICCI/UT (IC) India - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Innovators' competition (30 participants#) FICCI India - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Business development FICCI/IC India/USA - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(2.) 1 The following is the summary of the above activities: (i) Application for the programme -Interested innovator should apply to participate in the programme using the on -line application form. (ii) First screening -Applications are evaluated to select the top 60 innovations. (iii) Commercialization strategy workshop -Top 60 innovators/selectors are invited to attend a 3 -day commercialization strategy workshop at the FICCI campus in Delhi. (iv) Second screening -The top 30 innovators are selected from the group of 60. These innovators will receive a professional assessment of their innovation, and will be invited to attend the entrepreneurship workshop. (v) Each innovator receives a quick -look assessment report prepared by IC Institute. (vi) Entrepreneurship workshop -The top 30 innovators participate in this seven day programme to get professional assessment of their innovations by the experts deputed by IC and a workshop will be conducted in which the instructors from IC give a power point presentation and interact with the innovators on commercialization strategies and guide them through 6 key areas of entrepreneurship. (vii) DST -Lockheed Martin Innovation Competition -The top 30 innovators present their innovations to a panel of Judges made up of renowned technologies and commercialization experts. At the end of these presentations, Judges from the panel of Indian and US experts select 15 most promising innovations and gold and silver medals will be presented to 6 of them. (viii) Business development -Gold and silver medal innovators will receive professional business development services from the UT (IC) and FICCI assist them to create partnerships in US and other global markets. (ix) Global markets -Innovators connect with new global partners. 2.2 Thus, there are five partners involved in this programme, namely, DST, LMC, IUSSTF, FICCI (applicant) and UT (IC). The IC Institute "is a globally recognized 'think and do' component of the University of Texas whose mission is to engage in cutting -edge research to enhance the solving of unstructured problems related to market economics, wealth creation and growth through entrepreneurial activity arid the commercialization of technological innovation." 2.3 It is stated that the applicants who are selected to participate in the programme can look forward to the following benefits: (i) Training in technology commercialization strategies and entrepreneurship; (ii) Analysis of commercial potential of their technology by US and Indian experts; (iii) Participation in a technology competition judged by an international panel of experts. The programme finalists will receive the additional benefits like: (i) Professional business development assistance; and (ii) Access to US and global markets. The applicant submits that the project parameters of this programme are almost similar to the programme involved in the agreements between DRDO -FICCI and UT (IC) which was the subject -matter of another application AAR No. 811 of 2009 [reported as Federation of Indian Chambers of Commerce & Industry (FICCI), In re (2009) 227 CTR (AAR) 456 : (2009) 32 DTR (AAR) 73 - Ed.]. The additional feature of this programme is the involvement of Lockheed Martin Corporation of USA (LMC), a premier systems integrator and global security enterprise which is principally engaged in research, design and development and integration and sustainment of advanced technology systems, products and services LMC has agreed to fund UT (IC) Institute to the extent of US $ 1,200,000 directly for the completion. The DST has committed to provide the sum of Rs. 5.305 crores to the applicant as noted earlier. 3.1 The project is said to be non -commercial and not for profit, having the goal of making the innovators reach the global markets. The IIGP programme is a two year nation -wide project, created to enhance the growth and development of India's entrepreneurial economy. The top selectors will also be eligible to receive professional business development support to assist them in entering into global markets. The programme is open to all Indian researchers, innovators, entrepreneurs and corporate with early stage technologies that possess promising commercial potential. The programme is open to technologies from a wide range of fields. The programme offers the participants a number of training and educational opportunities designed to enhance their commercial potential.
(3.) THE following questions are formulated by the applicant for seeking advance ruling: (i) Whether on the facts and circumstances of the case, the IC Institute of University of Texas, Austin, USA executing the agreement between FICCI and UT (IC) is covered by the Double Taxation Avoidance Agreement (DTAA) between India and USA, therefore, the provisions of the IT Act, 1961 will not be applicable ? (ii) Whether on the facts and circumstances of the case UT (IC) is not liable to pay income -tax in India out of the payments received by it from FICCI in instalments ? (iii) Whether on the facts and circumstances of the case, FICCI is not required to deduct tax under the provisions of Section 195 of the IT Act, 1961 in respect of the payments made by it to UT (IC) for execution of the agreement ? (iv) If the answers to question Nos. (ii) and (iii) above are in the negative, which are the amounts liable to tax and what rate of tax would be applicable to such payments ?;


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