2022 (5) TMI 614 - AT - Income Tax

Income accruing or arising in India u/s 9(1)(i) - amount received by the assessee from Tata Communications Ltd as standby maintenance charges - whether it is in the nature of Fees for Technical Services under section 9(1)(vii)? - HELD THAT - We find that the Co-ordinate Bench of Tribunal in assessee s own case in Reliance Globalcom Ltd 2021 (7) TMI 46 - ITAT MUMBAI for assessment year 2014 15, while holding that amount received by the assessee towards standby maintenance charges from Tata Communications Ltd is not in the nature of Fees for Technical Services under section 9(1)(vii). - Decided against revenue.

Issues Involved:
1. Determination of whether the amount received by the assessee from Tata Communications Ltd. as "standby maintenance charges" constitutes "Fees for Technical Services" under section 9(1)(vii) of the Income Tax Act, 1961.

Detailed Analysis:

1. Nature of Standby Maintenance Charges as Fees for Technical Services:

The Revenue's primary contention was that the amount received by the assessee from Tata Communications Ltd. (erstwhile VSNL) as standby maintenance charges should be classified as "Fees for Technical Services" under section 9(1)(vii) of the Income Tax Act, 1961. This argument was based on the assertion that the infrastructure maintenance activities performed by the assessee, including deploying cable ships, submersible equipment, and maintaining trained staff on standby, constituted managerial and technical services. The Revenue argued that these activities involved constantly monitoring the under-sea cable systems, thereby falling within the purview of technical services.

2. Previous Judicial Decisions:

The learned Commissioner of Income Tax (Appeals) [CIT(A)] had previously ruled in favor of the assessee, concluding that the standby maintenance charges were not in the nature of Fees for Technical Services. This conclusion was based on judicial precedents from assessment years 1998-99 to 2012-13 and CIT(A) orders for subsequent years, including A.Y. 2013-14. The CIT(A) noted that the commercial agreement governing the assessee's activities had been judicially examined, and the decision was consistently in favor of the assessee.

3. Tribunal's Consideration and Findings:

The Tribunal considered the rival submissions and reviewed the material on record. It was noted that the Tribunal had previously ruled in the assessee's favor for the assessment year 2014-15, concluding that the standby maintenance charges were not Fees for Technical Services under section 9(1)(vii) of the Act. The Tribunal had observed that the standby maintenance charges were not for actual rendering of services but for maintaining infrastructure and readiness to perform services if required. The charges were fixed annual charges for maintaining standby facilities, which were reimbursed without any profit element or markup.

4. Consistency with Past Decisions:

The Tribunal upheld the CIT(A)'s decision, emphasizing that the issue was recurring and had been consistently decided in favor of the assessee in previous years. The Tribunal found no reason to deviate from the established judicial precedents and reaffirmed that the standby maintenance charges were not in the nature of Fees for Technical Services.

5. Revenue's Appeal Dismissed:

The Tribunal dismissed the Revenue's appeal, reiterating that the standby maintenance charges received by the assessee from Tata Communications Ltd. were not taxable as Fees for Technical Services under section 9(1)(vii) of the Income Tax Act, 1961. The Tribunal's decision was based on the consistent judicial precedents and the nature of the charges being for maintaining infrastructure and readiness rather than actual rendering of technical services.

Conclusion:

The Tribunal concluded that the standby maintenance charges received by the assessee from Tata Communications Ltd. were not in the nature of Fees for Technical Services under section 9(1)(vii) of the Income Tax Act, 1961. The appeal by the Revenue was dismissed, and the decision of the CIT(A) was upheld.

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