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2020 (10) TMI 654 - AT - Income TaxIncome accrued in India - nature of fees for technical services - taxability of the amount received by the assessee from Expeditors International in respect of services performed outside India on the export consignments of Expeditors International originating from India - whether DRP is correct in holding that the receipts of the assessee do not fall within the scope of section 9(1)(i)? - HELD THAT - On going through the provisions of the Act, facts of the case, business operations of the assessee, we hold that the services rendered by the assessee do not fall within the purview of managerial , consultancy or technical services. The payment for freight and logistics cannot be treated as technical services. Similarly, the provisions of Section 9(1)(i) are not attracted in this case as no income has accrued or arised from the business connection abroad in India. The explanation states that only that part of income from business operations can be said to be accruing or arising in India only if it is relatable to the carrying of operations in India. Thus, the payment received by the assessee neither falls under Section 9(1)(i) or Section 9(1)(vii). Hence, we hereby decline to interfere with the directions of the Dispute Resolution Panel in this case. - Decided against revenue.
Issues Involved:
1. Whether the receipts are in the nature of fees for technical services. 2. Whether the receipts of the assessee fall within the scope of section 9(1)(i) of the Income Tax Act. Issue-wise Detailed Analysis: Issue 1: Whether the receipts are in the nature of fees for technical services The primary question was whether the payments received by the assessee for logistics services performed outside India could be classified as "fees for technical services" under section 9(1)(vii) of the Income Tax Act. The assessee, a foreign company, provided freight and logistics services to its associated enterprise in India. The services included activities such as packing, loading/unloading, customs clearance, and transportation, all performed outside India. The Assessing Officer (AO) classified these services as "fees for technical services" under section 9(1)(vii), arguing that the services involved managerial, technical, or consultancy elements. However, the Dispute Resolution Panel (DRP) disagreed, stating that the services provided were purely logistical and did not involve any managerial, technical, or consultancy aspects. The DRP emphasized that managerial services involve planning and evaluating performance, which was not the case here. Similarly, consultancy services involve giving advice or opinions, which was also not applicable. The DRP concluded that the services were purely executional and did not fall under the definition of "technical services." Issue 2: Whether the receipts of the assessee fall within the scope of section 9(1)(i) of the Income Tax Act The second issue was whether the receipts could be deemed to accrue or arise in India under section 9(1)(i) of the Income Tax Act. The AO argued that since the assessee had a business connection in India, the receipts should be taxable in India. However, the DRP pointed out that section 9(1)(i) applies only if the income is attributable to operations carried out in India. In this case, the services were performed entirely outside India, and therefore, the income could not be attributed to any operations in India. The DRP further referred to Explanation 1(a) of section 9(1)(i), which clarifies that only the part of the income attributable to operations carried out in India can be deemed to accrue or arise in India. Since the entire logistics operations were conducted outside India, the receipts could not be taxed under section 9(1)(i). Conclusion: The Tribunal upheld the DRP's decision, concluding that the services provided by the assessee did not qualify as "fees for technical services" under section 9(1)(vii) and that the receipts could not be deemed to accrue or arise in India under section 9(1)(i). Therefore, the appeal by the revenue was dismissed.
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