9911796707
TMI Blog2005 (2) TMI 746X X X X Extracts X X X X X X X X Extracts X X X X ..... DS) under sections 195, 201(1) and 201(1A) all dated 8-12-1999 are well reasonable time and not barred by limitation. 3.0 That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified in holding that the services rendered by Lead Managers were in the nature of technical, managerial and consultancy services as specified in the Explanation to section 9(1)(vii) and management & underwriting commission and selling concession retained by them were fees for technical services as per section 9(1)(vii) and management & underwriting commission and selling concession retained by them were fees for technical services as per section 9(1)(vii) of the Act. 4.0 That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) failed to appreciate the fact that, the impugned underwriting commission and selling concession did not accrue or arise in India and hence there could be no deduction of tax thereon. 5.0 That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified in holding that the appellant is to be considered as an 'assessee in default' under section 201(1) and in not quashing the interest charged by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for 16 million US$ and other Managers jointly and severally agreed to subscribe for 59 million US$ of the principal amount of the Bonds aggregating to 75 million US$. The assessee has agreed to pay the Managers a combined management and underwriting commission of 1% of such principal amount. Apart from this, the assessee agreed to reimburse the Managers for expenses in connection with the issue of the Bonds. In pursuance of the said agreement, the assessee has issued 80 million US$ 3.5% Foreign Currency Convertible Bonds convertible into GDR at an issue price of 100%. They were issued in the denomination of 5,000 US$ each. A single certificate was issued in respect of the bonds and title to the bond was registered in the name of Barclays Bank, plc., U.K. as a common depositary. The bonds were convertible into GDR and each GDR represented one equity share with nominal value of Rs. 10 each of the assessee at a value of Rs. 373.45 per GDR and with a fixed rate of exchange conversion of Rs. 31.37 equal to 1.0 US$. Out of the total issue of 80 million US$, the assessee received net proceeds of 78 million US$ after deducting selling concession and underwriting commission as per the agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pport of the orders of the Departmental Authorities and sought for up-holding the same by dismissing the appeal filed by the assessee. 10. On careful consideration of the material placed before the Tribunal and analysing the same in the light of the order of this Tribunal passed in the case of Raymond Ltd. (supra) and relied on by the Learned Representative for the assessee, we find that similar such issue was threadbare examined by this Tribunal in the said order rendered in the case of Raymond Ltd. ( supra). This Tribunal, Mumbai "C" Bench, has given its decision in Para-130 which reads as follows :- "(1) There was no sale of GDRs to the lead managers/managers so that it can be said that they had 'resold' them. They did not also 'subscribe' to the GDRs. Consequently, it cannot be said that the amounts paid to them (selling concession/commission, underwriting commission and management commission) or deducted by them from the sale proceeds of GDRs represented only sale discount. (2) The 'finished package' theory is also rejected. It cannot be said that the assessee-company obtained a 'finished package' (a successfully marketed GDR issue) in return for what was paid to the lead ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Act read with Explanation II thereto and those services are 'Managerial' or 'consultancy' services. The management commission and selling commission are, therefore, income of the Lead Managers deemed to accrue or arise in India and, as such, the assessee is liable to deduct tax under section 195(1), the underwriting services are not 'technical services'. Accordingly, underwriting commission will not fall under section 9(1)(vii). The reimbursement of expenses are not taxable in India even under section 9(1)(vii). Accordingly, the selling commission for Rs. 3,76,74,000 paid by the assessee is taxable in India and accordingly TDS under section 195 is deductible on this. Accordingly, the management commission also is taxable in India and the assessee is liable to deduct TDS on that amount but the underwriting commission is not falling within the definition of 'technical services' in so far it relates to issue of GDRs outside USA and accordingly no tax is deductible thereon under section 195. The reimbursement of expenses made by the assessee amounting to Rs. 31,85,271 are not taxable as it will not come within the purview of section 9(1)(vii) of the Income-tax Act. So also the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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