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TMI Blog2009 (8) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... payment to M/s. LLAH in respect of the invoices raised by M/s. LLAH made an application to the concerned officer u/s 197 so as to enable the appellant to make the payment without deduction of tax at source - concerned party issued certificate u/s 197 and the payments were remitted - AO, International Taxation, initiated proceedings u/s 201(1) and 201(1A). The stand of the revenue is that the certificates issued were not valid and were not applicable in case the tax was required to be deducted at source on a date prior to the date of issue of certificates. HELD THAT:- It is true that the primary responsibility of paying the tax is on the recipient and the TDS is one of the modes of collection of such tax. The payer discharges the liability of the payee and, therefore, liability in the hands of payer is a vicarious liability. In the instant case, M/s. LLAH is having no presence in India though u/s 163, the appellant can be considered as an agent. In order to collect the tax on income of the non-resident, who is having no presence in India, TDS is only and effective source of collecting such tax. The Hon ble Gujarat High Court in the case of Sarika Estate Investments (P.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... draw the certificate. Whether sections 195(3) and 197 stand on the same pedestal? - During the course of proceedings before us, the learned AR has raised a plea that provisions of sections 195(3) and 197 stand on the same pedestal. Section 195(3) is subject to rule 29B. As per rule 29B, provisions of section 195(3) can be applied in case person concerned is a banking company or a person who carried on business or profession in India through a branch. There is no such restriction u/s 197. In the instant case, section 195(3) is not applicable. Hence, it cannot be said that sections 195(3) and 197 stand on the same pedestal. In the instant case, section 195(3) is not applicable and the payee could not have moved an application under section 195(3). Hence, to say that the application u/s 197 could have been made before receipt of payment by equating it to section 195(3) is not correct. Normally, an application u/s 197 is to be made before the credit or payment, whichever is earlier. However, by virtue of Circular No. 774, the assessee can make an application and can request for condonation of delay. Hence, an application us 197 can be made belatedly also. In the instant case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tting reimbursement of expenses, then there is no income element and TDS is not required to be deducted. As per Indo-Singapore Treaty, fee for technical services is taxable in India if such services make available technical knowledge, experience, skill, know-how or processes which enable the person acquiring the services to apply the technology contained therein. For interpreting the word make available it has been held by the Calcutta Bench in the case of Dy. CIT v. ITC Ltd. [ 2001 (12) TMI 196 - ITAT CALCUTTA-A] that interpretation in similar situation under the agreement entered into between the two countries can be followed while interpreting the same word in respect of DTAA between other two countries. The Special Bench, in the case of Mahindra Mahindra Ltd.[ 2009 (4) TMI 207 - ITAT BOMBAY-H] , had an occasion to consider the meaning of the words make available with reference to DTAA between India and UK. The Bangalore Bench in the case of ITO v. Cepha Imaging (P.) Ltd.[ 2009 (7) TMI 1277 - ITAT BANGALORE] has held that the meaning of the expression make available in MoU between India and USA can be considered to be applicable for the interpretation of the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be deducted on the ground that the appellant-company reimburse the expenses as the amounts payable were to be taxed in the hands of recipient as fees for technical services as per DTAA. Since we have given a finding that the appellant was not required to deduct tax at source u/s 195 and, therefore, the assessee cannot be treated as an assessee in default and no interest is leviable u/s 201(1A). However, in case it is finally held that the assessee was required to deduct the tax at source then interest u/s 201(1A) will be leviable from the date of credit till the date of receipt of certificate u/s 197 because after receipt of certificate u/s 197, the assessee could not have been treated as an assessee in default. In the result, the appeals filed by the assessee are allowed. - GEORGE GEORGE K AND N.L KALRA, JJ. Padamchand Khincha for the Appellant. Smt. Swathi S. Patil for the Respondent. ORDER Per Bench. - Bovis Lend Lease India Private Limited - the assessee-company - has preferred eight appeals in toto, aggrieved by the findings of the Ld. CIT (A)-IV, Bangalore, for the assessment years 2003-04, 2004-05 and 2005-06. 2. The assessee-co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the time spent in rendering of services to the assessee- company. The recovery did not include any profit mark up. The auditors report by KPMG also certified that the amounts charged to the assessee-company did not include any profit mark up. An application was made under section 197(1) of the Act by LLAH for receiving the payments under the MSA without deduction of tax at source. In the said application, it was explained as to why no tax was required to be deducted at source. A copy of the auditors report certifying that the payments under the MSA did not include any profit element was also enclosed along with the said application. 5. The Assessing Officer, after considering the application, issued certificate under section 197 to the assessee-company for making payments to LLAH without deduction of tax at source. The certificates issued under section 197 on various dates were neither revoked nor cancelled there-after. Subsequently, notices were issued under section 201 of the Act by the Assessing Officer to show cause as to why the payer should not be treated as assessee in default under section 201(1) of the Act and also interest should not be levied under section 201(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred by LLAH and do not contain any element of markup. The extent or otherwise of any markup, in such circumstances, is hardly of great relevance. Under the circumstances, the appellant s reliance on various judicial precedents that only reimbursements with an income element are chargeable to tax is hardly of any relevance and is quite inconsequential in the light of the foregoing analysis, as such precedents can come into play only if the appellant s claim of the payment constituting reimbursements were to be accepted; ( ii )The Hon ble Supreme Court in the case of National Cement Mines Industries v. CIT [1961] 42 ITR 77 had observed that, the name which the parties give to the transaction which is the source of receipt and characterization of the receipt by them are of little moment and the true nature and character of the transaction have to be ascertained from the covenants of the contract in the light of the surrounding circumstances . Hence, the Assessing Officer had rightly concluded that the payments could not be exempted from tax merely because they are termed as reimbursement . Briefly put, the true nature and character of the transaction are relevant in deciding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticle 12(4)( b ) of the DTAA. Drawing support from the finding of AAR in the case of AT S. Austria Technologie Systemtchnik, Aktiengesellschaft v. CIT that reimbursement of salary and other related expenses by an Indian company on assignment of personnel of foreign company to work for that Indian company would be chargeable as FTS, the service being the service of provision of technically qualified personnel, the CIT(A) had confirmed the action of the Assessing Officer; ( v )In regard to the Department itself had granted Nil deduction certificates for the assessment years in dispute, thereby treating the reimbursement of expenses as not constituting income, the CIT(A) was of the view that at the time of issuing certificate under section 197, there was no mandate that a finding should be given at this juncture regarding the chargeability of the sum or any conclusion arrived at that the sums constitute income; ( vi )In respect of the assessee-company s grievance that the Assessing Officer had not applied the rationale of judicial precedents which support the assessee s claim, the CIT(A) asserted that the Assessing Officer had given a clear finding that the case laws ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smission Corpn. of A.P. Ltd. v. CIT [1999] 239 ITR 587 stated that TDS represents a tentative deduction. This tentative deduction is subject to a final assessment. TDS provisions are, thus, complementary in nature (being substitutionary or vicarious in character) as they enable a discharge of the primary liability of an assessee. The Mumbai Tribunal in the case of Industrial Development Bank of India v. ITO [2007] 107 ITD 45 has also confirmed this view. The fact that TDS is only a substitutionary mechanism is reinforced by section 202. Section 202 provides that tax deduction is only one mode of recovery. This mode is without prejudice to any other manner of recovery. 10. Having provided for various types of payments liable to tax deduction at source, the statute also contains inherent mechanisms to mitigate the rigour of these provisions. The statute for example may exempt the payer from complying with the TDS obligations if the sum is below the threshold limit ( e.g., limit of Rs. 20,000 under section 194C). In respect of payments to non-residents, the payer can make an application under section 195(2) for determination of the appropriate sum on which tax is to be req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct with one another, an interpretation that favours the assessee is to be adopted. - CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC). 13. In the present case, applications were filed under section 197(1). These applications were filed by the Singapore Company being the recipient of the sums. The Income-tax Officer issued a certificate authorizing payment of the sums to the non-resident without deduction of tax at source. Some payments were made to the Singapore Company after the receipt of the abovesaid certificate. An application was made for renewal of the certificate (for NIL TDS) under section 197 for two payments due. The said application has not been acted upon. Instead, notice under section 201 of the Income-tax Act was issued and an order ultimately passed thereunder. 14. Section 197 provides that the certificate shall be issued by the Assessing Officer if he is satisfied that the circumstances of the case justify a lower or nil deduction of tax at source. Satisfaction refers to situation where the element of uncertainty or doubt no longer exists. The expression employed in section 197(1) is satisfied . As per Shorter Oxford English Dictionary, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit would happen before the ruling is obtained. If TDS liability is to be triggered on the factum of credit, then the certificate obtained from the Authority subsequently would be of no avail. Similar would be the position when an application (for NIL TDS certificate) is made to the Assessing Officer before the accounting year end but the same is disposed by him after financial year and subsequent to the passing of the accounting entries by the payer. In either circumstance, the ruling or certificate obtained subsequently should enable the recipient of the sums to receive the amount without deduction of tax at source. It should, therefore, be held that the payees obligation and the timing thereunder is one facet of the issue. The other facet is the payees right to take advantage of certain avenues to mitigate or reduce the rigours of TDS. These two aspects represent two sides of the same coin. Any favourable conclusion under one facet should, therefore, be held as equally applicable to the other facet. 18. In the instant case, the applications were disposed of by Assessing Officer authorizing the reimbursements without deduction of tax at source. The certificate clearly me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Income-tax Act. A subsequent Assessing Officer different from those who had issued a certificate has now passed an order that the conclusion drawn by the preceding officers were not in accordance with law. Such a finding by a succeeding officer is not permissible under the statute. This is more particularly so when one of the preceding officers was higher in rank. The entire exercise by the succeeding Assessing Officer to re-examine the issue and pass a contrary order is bad in law and void ab initio . 22. The impugned transactions were reported by the appellant in an audit report under section 92E under the Transfer Pricing provisions [Chapter X of the Act]. It was mentioned therein that the impugned sums represent reimbursements. The characterization thereunder has not been disturbed. The assessment orders for two of the years were passed under section 143(3). One of these orders (For assessment year 2004-05) was passed subsequent to the issuance of notice under section 201 proposing to record a finding that the transaction warranted deduction of tax at source. For the assessment year 2005-06, the intimation under section 143(1) was passed after the notice und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jaipur Udyog Ltd. v. CIT [1985] 155 ITR 476 1 observed as follows: In this regard, it may be mentioned that merely because certain material was required to be placed before the ITO for the purpose of enabling him to grant and certificate and such material was not placed before him by the assessee and the said material was also not required to be produced before the ITO would not invalidate a certificate which otherwise satisfies the requirements of section 197(3) of the Act. This is also because the determination made by the ITO under an error of law would not cease to be a determination on which the assessee can legitimately act and it is not open to the department to hold the assessee liable for short deduction of tax made on the basis of such certificate. [Emphasis supplied] 28. The Supreme Court in the case of ITO v. Jaipur Udyog Ltd. [1996] 217 ITR 190 has confirmed the above view. 29. The orders passed by the CIT(A) are otherwise also bad in law. During the course of the appeal hearing, the CIT(A) has asked for various details. One such letter in the hand writing of the CIT(A) calling for details was faxed to the appellant on 13-3-2008 at 5.18 p.m. 14- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal validity. Reliance has been placed on CBDT Circular No. 774 in this connection. 33. The amounts payable under the MSA were initially credited to outstanding expenses account. Thereafter, after obtaining the certificates under section 197, the said sums were credited to the account of LLAH and subsequently the payments were made. 34. In Industrial Development Bank of India s case ( supra ), it has been held that crediting of interest to outstanding expenses would not be liable for deduction of tax at source. Thus, the contentions of the lower income-tax authorities are without any merit and liable to be disregarded. 35. Even otherwise, Circular No. 774 [1999] 236 ITR (St.) 250 recognizes the practice of applications made beyond the dates of credit. In the operative portion of the above Circular, the direction of the Board is that a certificate under section 197 should not be issued after the amount stands credited or paid whichever is earlier. The direction of the Board is not that the certificate if issued would be invalid. The direction is only to enforce the conduct of the Assessing Officer in a particular manner. The Circular does not stipulate that if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ging the primary liability of the recipient. If the payer of sums secures an exemption from withholding tax at source, the Assessing Officer may not be without remedy. He has the power to make an assessment on the non-resident directly. He also has the power to regard a person in India as an agent of the non-resident and recover the taxes from such agent. The issuance of a nil deduction certificate is, therefore, not the end of the story. Since the payments to LLAH were bereft of profit element, there was no liability to withhold tax at source 41. Management Services Agreement (MSA) was entered into between the appellant and its holding company in Singapore. The MSA is dated 1-7-2001. The MSA was preceded by the terms being outlined vide correspondence dated 30-6-2001. It was agreed that the appellant would contribute to the cost of providing the services. A cost contribution arrangement was agreed upon. It was stipulated that - ( i ) there would be no mark up on costs, ( ii ) certain costs would not be recovered, ( iii ) the costs would not in way be referable to the Singapore Company s function as a shareholder, ( iv ) the costs would not give rise to duplication of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of costs included a profit element. The contentions of the lower authorities are without any merit. 44. Thus, the contention of the lower authorities that application ought to have been made under section 195(2) before crediting the payments to LLAH is without any merit. 45. In the present case, the payments made to LLAH were bereft of any iota of profit element. The payments represented a reimbursement of costs incurred. The said payments were made after obtaining certificates under section 197(1). 46. A listing of some of the cases is separately attached where it has been held that reimbursement does not have any component of income and, hence, is not income chargeable to tax. 47. The Karnataka High Court in an unreported decision in Karnataka State Urban Infrastructure Development Finance Corpn. v. ITO [IT Appeal No. 466 of 2004, dated 4-8-2008] observed as follows : In the circumstances, we are of the opinion that the levy of penalty (tax) under section 201 in respect of the tax not deducted on the amount of the reimbursement made by the assessee has to be set aside. 48. In Expeditors International India (P.) Ltd. v. Addl. CIT [2008] 118 TT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 706 (SC); CIT v. Visakhapatnam Port Trust [1983] 144 ITR 146 (AP); CIT v. Davy Ashmore India Ltd. [1991] 190 ITR 626 (Cal.); CIT v. R.M. Muthaiah [1993] 202 ITR 508 (Kar.); Arabian Express Line Ltd. of United Kingdom v. Union of India [1995] 212 ITR 31 (Guj.) and P. No. 13 of 1995, In re [1997] 228 ITR 487 (AAR - New Delhi). CBDT Circular No. 333, dated 2-4-1982 [1982] 137 ITR (St.) 1. 53. In the present case, assuming without admitting that the payments to LLAH are chargeable under the Act, it is submitted that the said payments do not constitute fees for technical services under Article 12 of the DTAA between India and Singapore. 54. The definition of the term fees for technical services under Article 12 of the DTAA is as follows : The term fees for technical services as used in this Article means payments of any kind to any person in consideration for services of a managerial, technical or consultancy nature (including the provision of such services through technical or other personnel) if such services : ( a )are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfer of technology, processes and skill etc., so that the same is not regarded as transient or ephemeral. 58. Under section 9(1)( vii ) of the Income-tax Act, mere rendering services is sufficient to deem the accrual of income. A rendering of services normally translates into a utilization of such services by the recipient. In other words, generally, when a person renders services, the other person is said to have made use of those services. Making use of services is, therefore, a consequence of the rendering of services. Under the Treaty, however, it not just the rendering of services or making use of services that enables the classification of the payment as fees for technical services. A payment would be classified as fees for technical services only when it makes available technical knowledge, skill, experience or processes. Making available refers to a stage subsequent to the making use of services. 59. In Raymond Ltd. v. Dy. CIT [2003] 86 ITD 791 (Mum.), in the course of interpretation of the MoU between India and US, the Tribunal held that unless technical services are rendered in a manner which would enable the recipient to apply the technology, it wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larly, the use of the product which embodies technology shall not per se be considered to make technology available. 62. The fact that the service provider uses/employs sophisticated techno-logy in providing the services is not relevant. Example 7 given protocol to the India-USA DTAA also signifies that mere use of sophisticated techno-logy in providing the services does not lead to the conclusion that the service provider has made available the technology. 63. The Tribunal in the case of Raymond Ltd. ( supra ) was dealing with India-UK Treaty wherein the definition of FTS was similar to the India-US Treaty. The Tribunal held that the elucidation of the concept of make available in the India-US Treaty would hold good also for the India-UK Treaty. The conclusion as above was reiterated in Intertek Testing Services India (P.) Ltd., In re [2008] 307 ITR 418 (AAR - New Delhi) whereunder services similar to the case of the appellant were rendered the AAR observed as follows : 64. In another recent decision in Diamond Services International (P.) Ltd. v. Union of India [2008] 304 ITR 201 a Division Bench of the Bombay High Court held that the job of grading diamo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derive benefit therefrom without recourse to the tutor, it would not fall within the expression technical services as defined in the Treaty. 69. In the present case, the MSA included training services. The training was with regard to operation manual, accounting system cheops, manage- ment information system and other internal/statutory reporting, safety regulations, etc. Training of the above nature does not make available technical knowledge, experience, skill, know-how or processes. There was no transfer of technology. It merely facilitated the employees of the appellant to work in accordance with the expected standards. Thus, the training did not make available any technical knowledge, experience, skill, know-how or processes. 70. Similarly, the various other services outlined in the order of the learned CIT(A) were with regard to matters such as administrative, financial, personnel, legal, marketing, insurance matters. These services were with regard to day-to-day business operations and did not involve transfer of any technical knowledge, experience, skill, know-how or processes to the appellant. The services in relation to information technology merely allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Sinar Mas Pulp Paper (India) Ltd. [2004] 85 TTJ (Delhi) 794; ( d ) Jindal Thermal Power Co. Ltd. v. Dy. CIT (TDS) [2009] 182 Taxman 252 (Kar.); ( e ) Ranbaxy Laboratories Ltd. v. Dy. CIT [2004] 91 TTJ (Delhi) 831; ( f ) Gentex Merchants (P.) Ltd. v. Dy. DIT (International Taxation) [2005] 94 ITD 211 (Cal.); ( g ) Jindal Tractebal Power Co. Ltd. v. Dy. CIT (TDS) [2007] 106 ITD 227 (Bang.); ( h ) Cargo Community Network (P.) Ltd., In re [2007] 289 ITR 355 (AAR - New Delhi); ( i ) CIT v. ONGC [2008] 299 ITR 438 (Uttaranchal); ( j ) Gujarat Ambuja Cements Ltd. v. Dy. CIT [2005] 2 SOT 784 (Mum.); ( k ) Headstart Business Solutions (P.) Ltd., In re [2006] 285 ITR 530 (AAR- New Delhi); ( l ) DIT (International Taxation) v. Morgan Stanley Co. [2007] 292 ITR 416 (SC). 75. We have heard both the parties. The assessee, Bovis Lend Lease India Private Limited (hereinafter referred to as BLL ), is engaged in the business of project and construction management. It is a part of the Land Lease group of companies, which have worldwide presence. M/s. BLL entered into a Management Service Agreement (hereinafter referred to as MSA) with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 2004-05, order dated 31-8-2006 by the Assessing Officer Date of Invoice Date of Application u/s 197 Date on which Certificate u/s 197 was issued 1. 14-11-2003 8-8-2005 19-9-2005 ITA No. 1452, assessment year 2004-05, order dated 29-12-2006 by the Assessing Officer Date of Invoice Date of Application u/s 197 Date on which Certificate u/s 197 was issued 1. 24-4-2003 17-6-2004 6-8-2004 76. The stand of the revenue is that as per section 195, the payer has to deduct tax at source at the time of credit of income to the account of the payee or at the time of payment, whichever is earlier. The revenue has also relied on Explanation to section 195 of the Income-tax Act which says that crediting of the sum payable under the head Suspense account or by any other name, will be deemed to be credit of such income to the account of the payee and the provisions of section 195 are applicable . Hence, the assessee was required to deduct tax at source when the sums were debited under the head Regional Overhead Charges A/c and credited to the Outstanding Expenses A/c. Applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced the dates on which such applications were made. Copies of such applications are available in the paper book filed by the learned AR on 14-11-2008. All the applications contain the similar information, so we will be considering the contents of one such application. Application moved on 17-6-2004 is available at pages 25 to 27 of the paper book filed on 14-11-2008. In the application, the appellant has referred to the agreement under the head Background for making it clear as to why the appellant has to make the payment and, therefore, has applied for a certificate under section 197. In the application, it is mentioned that the appellant is reimbursing LLAH for all costs incurred in provision of services rendered by LLAH. It is also mentioned that the assessee-company has received the debit note on 14-10-2002 and 24-4-2003. The certificate was being sought on the ground that the appellant is making reimbursement of the expenses and there is no element of income involved in such payment. It was submitted in the application that payments to be made by BLL does not constitute income and, therefore, this will not be subjected to tax at all. Copies of the tax invoices were al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at source. According to the Board, this practice is not in accordance with the provisions of law. The Board clarified that no certificate under section 197(1) of the Income-tax Act should be issued after the amount subject to tax deducted at source stands credited or paid, whichever is earlier. In the Circular, it was also mentioned that if the assessee is having genuine hardship in submitting application under section 197(1) on time, may refer to the Board for condonation of delay in terms of section 119(2)( b ) of the Income-tax Act. 81. From this Circular, it is clear that the delay in submitting the application under section 197 can be condoned by the Board. The Assessing Officer instead of intimating the applicant for submitting an application for condonation of delay issued a certificate and in the certificate, it is clear that the credits were made prior to the date of issue of certificate. Thus, the officer, who has issued the certificate, was fully aware that tax was required to be deducted at the time of credit and the application filed under section 197 is belated one. It is to be noted that the certificate is issued to the payer while the application is made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tributable to profits for which deduction is allowable under section 80K to the company. Since the issue of computation of deduction under section 80K in the case of the company may be disputable but in case a certificate has been issued under section 197(3) then the Assessing Officer, who is to assess the shareholder, has to accept such provisional certificate unless such certificate is rectified, modified or changed. Thus, the officer to whom such certificate is issued is required to comply with the certificate unless such certificate is changed, modified or withdrawn irrespective of the fact that officer concerned was having jurisdiction over company as well as on some of its shareholder. 85. The Hon ble Bombay High Court in the case of CIT v. Garware Nylons Ltd. [1995] 212 ITR 242 had an occasion to consider as an appeal can be filed against an order passed under section 197(3) of the Act. Though there was no specific reference to consider as to whether the certificate under section 197(3) can be considered as an order but the Hon ble High Court while considering that appeal cannot be filed in respect of certificate under section 197, has considered the same as an orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 95(3) is subject to rule 29B. As per rule 29B, provisions of section 195(3) can be applied in case person concerned is a banking company or a person who carried on business or profession in India through a branch. There is no such restriction under section 197. In the instant case, section 195(3) is not applicable. Hence, it cannot be said that sections 195(3) and 197 stand on the same pedestal. In case, the payer wants to remit the payment without deduction of tax at source, he can file an application under section 195(2). Alternatively, the payer can deduct the tax at source and deposit the same and can file an appeal under section 248 of the Income-tax Act before the Commissioner of Income-tax (Appeals). In case the payee wants to have the remittance without deduction of tax at source then it has to apply for a certificate under section 197. In the instant case, section 195(3) is not applicable and the payee could not have moved an application under section 195(3). Hence, to say that the application under section 197 could have been made before receipt of payment by equating it to section 195(3) is not correct. Normally, an application under section 197 is to be made before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght hand is doing and the revenue in assessment proceedings has accepted that no tax was required to be deducted at source and such orders have become final except for the assessment year 2005-06. On this ground also, the lower authorities are not justified in raising the demand under section 201 of the Income-tax Act. 90. Agreement between BLL and LLAH is available at pages 15 to 25 of the paper book filed on 14-11-2008. As per the agreement, LLAH was to provide the following services: ( a )Assistance with respect to administrative matters between the appellant and LLAH; ( b )Assistance with respect to personal matter; ( c )Assistance with respect to legal matters; ( d )Assistance with respect to finance and accounting information; ( e )Assistance with respect to marketing support; ( f )Assistance with respect to insurance matters; ( g )Assistance in operation of the business; ( h )Treasury Management; ( i )Information Technology. 91. As per Article 2 of the agreement, the appellant-company was to reimburse LLAH for all costs incurred by it in providing the above-referred services. Such costing is to be done on the basis of actual time and cost of provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal India (P.) Ltd. s case ( supra ); u Bangalore International Airport Ltd. s case ( supra ). 93. The learned CIT(A) has considered the submissions but held that the payments are not to be treated as reimbursement. The findings of the learned CIT(A) are as under : 4.2 In this connection, it is pertinent to note that the meaning of the term reimbursement for the purposes of chargeability is quite close to its dictionary meaning, viz., to pay back money spent by someone else on one s own count . For this to happen it is essential to have the following conditions satisfied cumulatively: ( a )The actual liability to pay should be of the person who reimburses the money to the original payer. ( b )The liability ought to have been clearly determined. It should not be an approximate or varying amount. ( c )The liability ought to have crystallized. In other words, payments which were never required to be done, but were done just to avoid a potential problem may not qualify. ( d )There should be a clear ascertainable relationship between the paying and reimbursing parties. Thus, an alleged reimbursement by an unconnected person may not qualify. ( e )The paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 115A of the Income-tax Act. The rate of tax is a percentage of fees for technical services. Hence, if payments are for the technical services then computation of such fees with reference to cost becomes not relevant as one has to ascertain the income in the hands of recipient because income by way of fee for technical services is the amount payable. Under such circumstances, one has to apply the decision of Hon ble Apex Court in the case of Transmission Corpn. of A.P. Ltd. ( supra ). Hence, we cannot accept the contention of the learned AR that no tax was required to be deducted on the ground that payments were reimbursement of expenses. However, if the payments were to be assessed in the hands of recipient as business income then one is required to ascertain the income in the hands of recipient and in case the non-resident is getting reimbursement of expenses, then there is no income element and TDS is not required to be deducted. 96. As per Indo-Singapore Treaty, fee for technical services is taxable in India if such services make available technical knowledge, experience, skill, know-how or processes which enable the person acquiring the services to apply the tec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use may be for once only or on a continuous basis. In our context to make available the technical services means that such technical information or advice is transmitted by the non-resident to the assessee, which remains at its disposal for taking the benefit therefrom by use. Even the use of such technical services by the recipient for once only will satisfy the test of making available the technical services to the assessee. If the non-resident uses all the technical services at its own end, albeit the benefit of that directly and solely flows to the payer of the services, that cannot be characterized as the making available of the technical services to the recipient. The Special Bench thereafter held that management and selling commission cannot be taxed in India as Article 13 of the DTAA with UK does not apply. In the instant case, the facts are pari materia with the facts which were before the Special Bench. 98. The Authority for Advance Ruling in the case of Intertek Testing Services India (P.) Ltd. ( supra ) had an occasion to consider as to whether an expression interpreted in the MoU relating to the India-US Treaty can be applied to the Indo-UK Treaty when the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... training to the employees of the appellant-company. The words make available only refer to the willingness of the provider of the services and does not refer the acceptance of the receiver of the services. 102. The dictionary meaning of assistance is to help or support. It does not mean to provide. When one is going to help or support then he is making the other person to do the same in future. The word Assistance is defined in Law Lexicon by Venkataramaiya as : The word assistance as used in the section implies that the party who assists is doing something which in ordinary circumstances the party assisted could do for himself. - Ramaya Naoka ILR 26 Mad. 419 at p. 421. From the agreement, it is clear that LLAH was to provide assistance for the services and, hence, it will mean that LLAH is also making available the skill, experience to the recipient. 103. The dictionary meaning of the words make available is able to use or obtain . It does not mean that the recipient should equally use the technology. In a case like this where group owns a number of companies and certain companies provides services to the companies belonging to the group then it becomes t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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