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TMI Blog2011 (2) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... enue : Shri K. Ravi Ramachandran, DR ORDER I.P. Bansal, Judicial Member. - This is an appeal filed by the revenue. It is directed against the order passed by the CIT (A) dated 4th June, 2007 for assessment year 2004-05. Grounds of appeal read as under:- 1. Whether on the facts and in the circumstances of the case, the ld. CIT(A) was justified in allowing the deduction of Rs. 27,11,280/- towards operating expenses being amount paid/payable of M/s MRO International New Zealand holding that the services in the filed of DNA testing to the prospective Indian immigrants by USA based certified laboratory, are not covered by the provisions of TDS and section 40(a) of Income-tax Act, 1961. 2. Whether on the facts and in the circumstances of the case, the ld. CIT(A) was justified in holding that the impugned services not liable for TDS and not covered under provisions of section 40(a) even though necessary particulars were not filed before the AO. In doing so, CIT(A) has not adjudicated the applicability of section 44AD of Income-tax Act, 1961 relied upon by the AO. 3. The appellant craves leave to add, to alter, or amend any grounds of the appeal raised above at the time of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Our charges for providing the above services shall be @ USD 260 per case. We agree to your special request to grant you a moratorium period of nearly a year in respect of our charges. This is for initial establishment and the stream lining of your business operations. The charges shall be levied starting from 1-4-2003 and are to be settled annually. We trust that this special concession will provide a breather to your operations. In case you have any queries regarding the above, please inform us. Thanks Yours Sincerely, Chris Andersen For MRO Ltd. (New Zealand) 3. Accordingly, during the year under consideration, the assessee had incurred a liability towards MRO New Zealand for paying a sum of Rs. 27,11,280/- on account of services rendered by them to the assessee to facilitate to get the DNA test reports of prospective Indian immigrants required to be submitted to US Embassy for immigration of those persons to United States. The assessee was required to show cause as to why such amount could be allowed to the assessee. Vide submissions made vide letters dated 22nd September, 2006, 18th October, 2006 and 27th October, 2006, it was submitted by the assessee that MRO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer has also mentioned about applicability of provisions of DTAA, sections 9(1) and 40(a) and 195 of the Income-tax Act and, accordingly, he disallowed the amount of Rs. 27,11,280/-. 4. Before CIT (A), the assessee had filed detailed submissions and it was submitted that the payments made by the assessee to MRO New Zealand were neither in the nature of royalty nor in the nature of fee for technical services. It was submitted that it is also not chargeable to tax under other sum chargeable under the Act. A certificate was also produced according to which MRO New Zealand had considered the said amount for the purpose of offering the income in New Zealand. After considering all the submissions of the assessee, learned CIT (A) has recorded a finding that MRO New Zealand does not have PE in India. MRO India has paid to MRO New Zealand a sum of Rs. 27,11,280/- for rendering liaison and coordinating services at USA. The said payment does not fall within the ambit of royalty and fee for technical services. According to section 195, the assessee could be under an obligation to deduct tax at source only if the payment/remittance are a sum chargeable to tax in India. In the absence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a condition precedent that the amount on which tax is sought to be deducted should be chargeable to tax under Indian Income-tax Act. Thus, it was pleaded by learned AR that learned CIT (A) has rightly deleted the disallowance and his order should upheld. 7. We have carefully considered the rival submissions in the light of the material placed before us. The question that the assessee whether is under an obligation to deduct tax at source has to be considered in the light of the decision of Hon ble Supreme Court in the case of GE India Technology Centre Pvt. Ltd. v. CIT (supra). Now, it has become a settled law that the expression chargeable under the provisions of the Act is to be understood as a liability to pay tax under Income-tax Act and unless there is a liability to pay income-tax under the Indian income-tax, it cannot be said that in all cases tax has to be deducted from the payment/remittance made by an assessee in India to a non-resident entity. It has been observed by Hon ble Supreme Court that one cannot read section 195, as suggested by the department, namely, the moment there is remittance the obligation to deduct tax at source (TAS) arises and if such contention o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial, or scientific equipment, or for information concerning industrial, commercial or scientific experience. 4. The term fees for technical services as used in this article means payments of any kind to any person, other than payments to an employee of the persons making the payments and to any individual for independent personal services mentioned in Article 14, in consideration for services of a managerial, technical or consultancy nature, including the provision of services of technical or other personnel. 10. As it can be seen, royalty can constitute only if it is a payment of any kind received as a consideration for use of, or the right to use, any copyright of literary, artistic or scientific work including cinematographic films, films on video tapes used in connection with television or radio broadcasting and any patent, trade mark, design or model, plan, secret formula or process or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience. ..... 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