Advance Ruling - DTAA with USA - provision of Architectural design services - not sale – liable to tax in India - AAR
IN an order delivered yesterday, the Authority for Advance Ruling held,
The Agreement cannot be read in isolation and the components of the contract cannot be placed in water-tight components. The agreement shall be read as a whole. The approach should be to ascertain what is the true scope and dominant object of the contract. One should take stock of the predominant features of the contract.
By taking the view that the essence of the transaction is the sale of designs, models and plans and everything else is incidental thereto is to distort and stultify the true nature and dominant purpose of the contract. The Agreement is in reality nothing different from what is described in the opening sentence i.e. “design and consultancy services”. The Architect while performing such services, will participate with and assist the owner in developing and refining the general project concept. The architect will develop the detailed programme for the project based on in depth interviews with the Owner and others.
Basic(design) services which include preparation of Master Plan, concept design, schematic design, design development and construction documents, assistance in bidding and contractors' selection process and consultancy during construction phase are all part of architectural services undertaken the HOK as per the Agreement and the payment received by HOK for furnishing all these documents and services to the applicant fall appropriately within the meaning of ‘fees for included services' under Article 12.4(b) of the India-US Treaty. They cannot be disintegrated and viewed in water-tight compartments.