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TMI Blog2010 (10) TMI 611X X X X Extracts X X X X X X X X Extracts X X X X ..... s these services are, as noted in the assessment order itself, are in the nature of strategy and business consulting which are intended to improve the performance of its clients by focusing on fundamentals of business - the nature of services rendered by the assessee do not fit into the description of fees for technical services' under the provisions of the India Singapore tax treaty - It is well settled in law that when two views are possible, and one of these views is in favour of the assessee, the ambiguity is to be resolved in favour of the assessee - The assessee is hereby directed to produce all necessarily details as to the claim of set off of brought forward unabsorbed depreciation as per law Regarding interest u/s 234B - The AO shall apply the provisions of Section 234B to the facts of the present case and shall decide the matter accordingly after giving an opportunity of being" heard to the assessee - Appeals are disposed of - ITA Nos. 4889,4893 & 4894/Del/2000 - - - Dated:- 29-10-2010 - ORDER PER: CL. SETHI, J.M. ITA Nos. 4889, 4893 4894/Del/2000, pertinent to assessment years 1989-90, 1993-94 and 1994-95, filed by the assessee against the order dated 18.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made u/s. 143( 1 )(a) of the Act It would. therefore, be suffice to reproduce the reasons recorded by the AO for issuing the notice u/s. 148 of the Act in A.Y. 1989-90. which reads as under:- Assessee had field return of income for A. Y. 89-90 on 25.12.1989 showing total toss of Rs. 8076095. The assessment was completed u/s. 143(l)(a) on 8076095. White finalizing the assessment for A.Y. 95-96, it was noticed that the nature of income is in the nature of 'fee fot Technical Services" as per provisions of section 44D read with section 115 of IT Act, and the tax on the total income without giving any deduction u/s. 28 to 44C shall to be calculated @ 30% of the total turnover as the payment for maintenance services provided by deptt. of Science Technology to M/s. Cray Research India Ltd, squarely fall within the payment of fee for Technical services. In view of these facts, I have reason to believe that the income so chargeable to tax has escaped assessment" 6. Thereafter, the AO issued the notice u/s. 142(1) on 08.12.1999 fixing the matter for hearing on..L7H2.1999_.injall. these three assessment years, but there was no compliance by the assessee. The AO then issued another no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return u/s. 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year." However, the provisions of the proviso as stated above do not apply in the instant case as the original assessment in this case had been completed u/s. 143(l)(a). The reasons for reopening the assessment has been duly recorded by the AO after new facts came to the notice that the assessee s receipts for the maintenance of the computer was in the nature of fee for technical services as per the provisions of Sec. 44D, while passing the order for A.Y. 95-96. In" view of the above, there is no infirmity in initiating the proceedings u/s. 147 of the LT. Act, '1961." (emphasis supplied) 11. In addition to the report submitted for the A.Y. 1989~90,the AO has also submitted the following additional report in assessment years 1993-94 and 1994-95 as under: - Moreover, proceedings u/s. 147 were initiated in this case within four years from the end of the relevant assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings made u/s. 143(l)(a) assessment made u/s. 143(3). As regards AYs 89-90, 93-94 and 94-95 where the processing u/s. 143(l)(a) were completed, the AO has clearly mentioned that while finalizing the assessment for A.Y. 95-96, he noticed that the income of the appellant was of the nature of 'fee for technical services as per the provisions of section 44D read with section 115A of the I.T. Act, 1961 and that the tax on total income without giving any deduction u/s. 28 to 44C had to be calculated at 30% of the total turnover as the payment for maintenance services provided by the Deptt. of Science Technology to the appellant squarely fell within the ambit of payment technical fee for technical services. In view of the aforecited facts, he felt that he had reason to believe that income chargeable to tax had escaped assessment It is to be noted that original assessment in respect of AYs 89-90, 93-94 and 94-95 had been made u/s. 143(l)(a) in a summary manner and as such no opinion was formed by the AO at the time of processing of returns originally u/s. 143(l)(a). There is, therefore, no case of the Id. AR who has alleged that there was a change of opinion. The AO has, as per his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plated under the unamended section 147(a). An Assessing Officer can now legitimately reopen the assessment in respect of an income which has been escaped, assessment Undoubtedly under the section power to reopen assessment is much wider ami can be exercised even if an assessee had disclosed fully and truly all material facts." - (emphasis supplied) In view of the reasons mentioned by the AO in the impugned Writers in respect of AYs 89-90, 93-94 and 94-95 and the discussion in his aforecited reports, as also keeping in view like entirety f facts and circumstances, it is held that the proceedings initiated u/s. 147 by the AO were initiated within due time and were in accordance with law." 14. Still aggrieved, the assessee has raised this issue before us. 15. The Id. counsel for the assessee has submitted that action taken by the AO u/s. 147 is bad in law in as much as the AO has initiated the proceedings u/s. 147 of the Act, without there being no fresh material on record to entertain belief that income had escaped assessment. He elaborated this aspect of the matter by contending that the reasons recorded by the AO do not refer to any material or record which came to his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well settled that the decision of Hon'ble Supreme Court is considered as a law of the land and it is binding upon all the Courts exercising jurisdiction within India. Therefore, we proceed to decide this issue from the point of view of the decision rendered by the Hon'ble Supreme Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (supra), which is squarciy applicable to the facts of the present case. The various other decisions rendered in the same context by the High Courts would undoubtedly have no precedence over the decision of Hon'ble Supreme Court. Therefore, we are not inclined to burden this order by discussing those cases referred to by the Id. counsel for the assessee decided by the High Courts. 19. After analyzing scope and scheme of section 143(1) has substituted w.e.f. April K 1989 and prior to its substitution w.e.f. June : 1999. and alter its substitution w.e.f. June 1. 1999. the Hon'ble Supreme Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (supra) has laid down the following proposition:- (i) Though technically the intimation issued u/s. 143(1) is deemed to be a demand notice u/s. 156, that does not preclude the right o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is essential. At that stage, the final outcome of the proceedings is not relevant In other words, at the initiation stage, what is required is "reason to believe", but not the established fact of escapement of income. At the stage of issue of notice, the only issue whether there was relevant material on which a reasonable person could have formed a requisite belief Whether the material would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO vs. Selected Dalurband Coal Co. P. Ltd. [1996] 217 ITR 597 (SC); Raymond Woollen Mills Ltd. vs. ITO [1999] 236 ITR 34 (SC) ". 21. In that case, the Hon'ble Supreme Court then held that the AO had jurisdiction to issue notice u/s. 148 for bringing to tax income escaping assessment in an intimation u/s. 143(1)(a) on the ground that the claim for of debt by the assessee was not acceptable as the conditions for allowance specified in section 36( 1) and 36(2) were not fulfilled. 22. Now let us look to the ("acts of the present case it is an admitted position that the return of income originally filed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of notice u/s. 148 of the Act, the only issue is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the material would conclusively prove the escapement, is not the concern at that stage. This is so because formation of belief is within the realm of the subjective satisfaction of the AO. In this view of the matter held by the Hon'ble Supreme Court, therefore, have to see whether there was a prima facie believe that income had escaped assessment, and it is not necessary that whether, material would conclusively prove the escapement of income. At this stage the only question to be considered is whether there was relevant material on which a reasonable person could have form a requisite believe. In the preset case. the AG has form a requisite believe in the light of his view or finding taken in the A.Y. 1995-96, while completing the assessment u/s. 143(3) of the Act It is well settled that the finding or view taken in any subsequent assessment year by the AO is relevant material on which a reasonable could have form a requisite belief required u/s. 147 of the Act. In the case of Raymond Woollen Mills Ltd. vs. ITO [1999] 236 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AG u/s. 143(3)/I47 of the Act vide order dated 18.10.2000 prior to that, the regular assessment for A.Y 1995-96 came to be completed u/s 143(3) of the Act vide order dated 16.10.1997. Thereafter, the assessment u/s. 143(3) for the A.Y. 1996-97 was completed by the Act on 26.02.1999. For the first time, the AO treated the maintenance and service charges us be in the nature of fees for technical services in the A.Y. 1995-96, which was completed on 16.10.1997. In the light of the view the AG had taken in A.Y. 1995-96. the AO initiated proceedings u/s. 147 of the Act for the assessment years 1989-90. 1993-94 and 1994-95. The assessment u/s. 143(3) for the A.Y. 1996-97. was made by the AG orf 26:02^1999 after assessment for A.Y. 1995-96 was made on 16.10.1997 and even after the appellate order by the Id. CIT(A) passed on 11.01.1999. In the light of these facts, it is seen that the basic and primary order of the AO treating the maintenance/service charges received by the assessee to be in the nature of fees for technical services pertains to the A.Y. 1995-96 made u/s. 143(3) on 16.10.1997. This issue is common and identical in all the assessment years involved in these groups of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent shall be taxed as per provisions of article 7 of the DTAA. In this respect the AO had made a reference to para (3) and para (6) of article 7 of the DTAA between India and USA as well as provisions of section 44D read with section 115 A of the Act. The AO then considered the meaning of expression "fees for technical services" as defined in Explanation 2 to clause (vii) of sub-section (1) of section 9 and then hold that the payment of maintenance services paid by the Department of Science Technology to the assessee squarely falls within the definition of "fees for technical services as defined in section 9(l)(ii) read with Explanation 2 thereto. The AO. therefore, brought the amount to tax by applying the provisions of section 44D read with section 115A of the Act. being 30% of the total charges received by the assessee. 27. Being aggrieved, the assessee preferred an appeal before the Id. CIT(A)in the A.Y. 1995-96 28. The id. CIT(A) vide his order dated 11,01.1999 for the A.Y. 1995-96 has decided the issue in favour of the assessee by holding that there was no justification in treating the receipts from maintenance services as technical fee and in applying the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Asstt. Years 1989-90, 1993-94 and 1994-95 are dated 18.02.2000. 34. Being aggrieved, the. assessee went in appeal before the Id. CTT(A). who uphold the order of the AO by following his own order passed m A.Y, 1996-97 dated 25.31.1999. The CIT(A) further observed that he was unable to agree with the decision taken by other CIT(A) in A.Y. 1995-96. 35. Being aggrieved with the order of the CIT(A), the assessee has filed this appeal before us for the assessment years 1989-90, 1993-94 and 1994-95. 36. In the light of the discussions made above, it is transfers that there exist two contrary decisions of the CIT(A) on the same issue i.e. one view in favour" of the assessee taken in A.Y. 1995-96 and, secondly, the view taken in favour of the revenue in A.Y. 1996-97, which has been followed in assessment years 1989-90, 1993-94 and 1994-95. 37. Since the common and identical issue was involved in these appeals pertaining to Asstt. Years 1989-90, 1993-94, 1994-95, 1995-96 and 1996-97, all these appeals were consolidated as so also requested by the Id. counsel for the assessee. All these appeal were heard together and a common order is being passed on the question whether maintenanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raneously entered into by the same parties describing it as "Agreement for Maintenance Service". This was a contract for maintenance of equipment supplied as per Schedule II of the agreement. Article 3.1 of the agreement provides that Cray will provide maintenance service and will maintain the equipment in good operative condition during the maintenance service period. This Maintenance Service contract was assigned on 31sl May, 1988 by Cray Research Inc., USA to another company Cray Research (India) Ltd., a Delaware Corporation with registered office at Corporation Trust Centre, 1209, Orange Street, New Castle Country, Wilmington Delaware 19801, USA. Cray Research India ltd. Opened a project office in India with the permission granted u/s 29(1) of the Foreign Exchange Regulation Act, 1973 by the Controller Exchange Control Department, Reserve Bank of India. 39. It is an admitted position that India and USA have entered info an agreement for the Avoidance of Double Taxation. Therefore, the non resident of USA is to be governed by the provisions contained in DTAA. It is well established that where a matter is governed by the provisions of Income-tax Act. 1961 and also by DTAA. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the local Act Where tax liability is imposed by the Act, the agreement may be resorted to either for reducing the tax liability or altogether avoiding the tax liability. In case of any conflict between the provisions of the agreement and the Act, the provisions of the agreement would prevail over the provisions of the Act, as is clear from the provisions of Section 90(2) of the Act. Section 90(2) made it clear that "where the Central Government has entered into an agreement with the Government of any country outside India for granting relief of tax, or for avoidance of double taxation, then in relation to the assessee to whom such agreement applies, the provisions of the Act shall apply to the extent they are more beneficial to that assessee s meaning thereby that the for gets modified in regard to the assessee insofar as the agreement is concerned if it falls within the category stated therein.: 42. Thus, the question for our consideration could be that whether the receipts arising from the agreement for maintenance service would fall within the expression "'fees for included services" as defined in Article 12(4) of the DTAA between India and USA. 43. Article 12(4) of DTAA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion fees for included services should be applied as against the definition for "fees for technical services" as defined in Explanation Section 9(l)(viii) of the Act. This contention of the assessee has been rejected by the AC) by observing and holding as under: 5. The above submissions of the AR are not tenable for the following reasons :- M/s Cray Research India Ltd Has a project office in India which has been set up for providing maintenance, service to the Deptt. of Science and Technology, m the Ministry of Science and Technology. The foreign company thus has a permanent establishment in India as defined in Article 5 of the India USA DTAA. The payment for maintenance charges are directed attributable to this permanent establishment Hence, the payment shall be taxed as per the provisions of Article 7 of the DTAA. Para (3) of Article states that - In the determination of the profits of a permanent establishment including a reasonable allocation of executive and general administrative expenses, research and development expenses, interest and other expenses incurred for the purposes of the enterprises as a whole for the part thereof which includes the permanent establi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 9. Para 2(b)(vii)(B) of Part IT of the first schedule states that the rate of income tax on income by way of technical services paid to a foreign company is 30%. Thus, if a foreign company receives payment which is in nature of fees for technical services, then the payment shall be taxed at a flat rate of 30% and n deduction/expense shall be allowed on the payment. The payment in the said case squarely falls within the definition of fee for technical services as defined in Section 9. Fee for technical services as defined in Section 9 means any Qonsideration (any lumpsum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient 8. The payment for maintenance services provided by Deptt. of Science Technology to M/s Cray Research India Ltd, squarely fall within the above definition of ''fee for technical services. The maintenance services are described in details in Article 2 of the Agreement. Thus, the provisions of section 441) and USA are applicable i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DTAA with USA. However, the department has taken a stand that for the purpose of determining the assessee's total income, the definition given in Explanation 2 to Section 9(l)(vii) shall be applied inasmuch as assessee has a permanent establishment in India and its income has to he computed in the manner laid down in Article 7 of DTAA between India and USA and in the light of the fact that Article 7(3) provides that income shall be computed in the manner laid down in local Act, and since the local Act Section 44D overrides to other provisions of the Act, the same would prevail over others and income shall be computed as laid down therein. Since it has been accepted by the department that maintenance sendees are not in the nature of fees for technical services within the meaning of Article 12 of DTAA between India and USA, we do not proceed to decide this issue after examining the terms and conditions of the maintenance agreement. It is not the case of the department that maintenance services are technical services within the meaning of Article 12 of DTAA with USA. We, therefore, proceed to decide the controversy arising in these appeals on the admitted position that maintenance se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on certain incomes including the income from royalties and fees for technical services. The provisions of these two sections are required U) be read together inasmuch as while one section lays down that no deductions are permissible in computation of incdme from, inter alia, royalties and fees for technical services, the other section provides for a down rate of tax from the said income. These are complementary provisions in that sense. These to sections are to he read in conjunction and not 'in 'isolation, .the scope and nature of these sections, Board Circular No. 202, dated 5th July, 1976 (105 ITR Statute 17) stated that: "Special provision for computing income by way of royalties and technical service fees in the case of foreign companies - New section 44D. 26.1 Hitherto, income byway of royalties received under agreements made after the 31st March, 1961, and approved by the Central Government was taxed in the hands of foreign companies at the rate of 52.5 per cent (income-tax 50 per cent plus surcharge 2.5 per cent). Income by way of technical service fees received under agreements made after the 9th February, 1964, and approved by the Central Government was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead with section 115A of the Indian Income-tax Act and article 12 of the India Singapore tax . treaty are, therefore, similar in nature. These alternate paradigms, contained in section 44D, read with section 115A and in article 12 of the India Singapore tax treaty, offer alternative hut similar models of taxation of income from royalties and fees from technical services. While these two sets of provisions dealing with taxability on gross basis may belong to the same genus of taxation models, but, at the same time, these are two independent, mutually exclusive, and, therefore, competing sets of provisions. Once it is clear that these are competing models of taxation of royalties and fees for technical services on gross basis, in the Income-tax Act and in the India Singapore tax treaty, it has to follow that the provisions of the Income-tax Act cannot come to play unless these are more beneficial to the assessee. That certainly is not the casea here. The law is trite that the provisions of taxability under the Income-tax Act, in preference over the provisions of the applicable tax treaty, cannot be thrust upon an unwilling assessee. Therefore, the provisions of section 44D cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he limitation for deduction of expenses which are applicable on the facts of this case. In the present case, there is no dispute that the receipts are not in the nature of 'royalties', and, therefore, these receipts are required to be examined from the point of view of scope of fees for technical services only. In case the receipts are held to be outside the scope of fees for technical services', which is defined under article 12(4), and for the reasons we shall now set out, the limitations set out in section 44D will not he applicable. 21. The heading of section 44D, as we have reproduced earlier in this order, is "Special Provisions for computing income by way of royalties, etc., in the case of the foreign companies" It is a well known Latin legal maxim that A rubre and migrum which means, literally from red to the black. In olden times, the title of a statute as welt as headings of a provision, were written in red while its body text was written in black. Viewed in this background, this Latin maxim implies that in the process of interpreting a statute, one must start from the title and interpret the text of the provision with reference to its title. Somewhat identical were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 44D itself In a situation where there is no occasion to enter section 44D, as the receipts do not meet the description of fees for technical services in terms of tax treaty which is admittedly applicable, it is quite illogical to apply the definition of fees for technical services' envisaged in Explanation (a) to section 44D itself When the main door of the house is locked, how does one open the main door with the help of the keys lying inside the living room. There is no occasion to invoke section 44D, because one cannot take recourse to the definition inside the section which one has no occasion to invoke. In terms of the provisions of the tax treaty, if receipts in question cannot he treated as fees for technical services", could it be the scheme of the treaty to apply the limitations for deduction of expenses which are applicable only in the cases of receipts in the nature of fees for technical services9? To our understanding the answer has to be an emphatic 'No\ In coming to this conclusion, we are particularly guided by the observations of Hon'ble Madras High Court in the case of CIT v. S.R. M Firms (supra) that "tax treaties are ,. considered to be mini legislatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e profits in respect of the same, limitation on deduction of expenses which are applicable only on receipts from fees for te^nicdfjen^^^f'is applicable while computing taxable profits from such receipts. What must prevail is the inherent scheme of the tax treaty. In case, under, the scheme of a tax treaty, a particular receipt is not to be treated as a fees for technical services for the purposes of Us taxability, it cannot be treated as a fees for technical services for the purposes of application of limitation on deduction of expenses under article 7(3) either. In our considered view, the limitation on deduction of expenses under article 7(3) cannot be viewed in isolation of other provisions under the tax treaty. 23. On the touchstone of broad principles of general expectation also, referred to in the case of Ensco Maritime Ltd. (supra), it is futile to expect that once the treaty provides that a certain income is not to be treated as fees for technical services, the limitations on deduction of expenses, which are applicable only on the fees for technical services, can be applied in computation of income from such receipts. In our considered view therefore, the limitations on ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he scope of fees for technical services under the India Singapore tax treaty. 26. The provisions of article 12(4)(b) of India Singapore tax treaty are, to a limited extent, in pari materia with the provisions of with the definition of fees for included services1 under article 12(4)(b) of Indo USA DTAA which is as follows : "(4) For the purposes of this Article, "fees for included services means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services; (b) make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design." The scope of India Singapore tax treaty is narrower in the sense it specifically provides the services should be such "which enables the person acquiring the services to apply the technology contained therein", even though as observed by a co-ordinate bench of this Tribunal in the case of Raymonds Ltd. v. Dy. CIT [2003/ 86 ITD 791 (Mum.) "... , the addition of these words in the Singapore DTAA merely make if explici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion becomes more clear from the following example given in the same Moll: Example (7) Facts - The Indian vegetable oil manufacturing firm has mastered the science of producing cholesterol-free oil and wishes to market the product world-wide. It hires an American marketing consulting firm to do a computer simulation of the world market for such oil and to advise it on marketing strategies. Are the fees paid to the US company for included services ? Analysis - The fees would not be for included services. The American company is providing a consultancy which involves the use of substantial technical skill and expertise. It is not, however making available to the Indian company any technical experience, knowledge or skill, etc., nor is it transferring a technical plan or design. What is transferred to the Indian company through the service contract is commercial information. The fact that technical skills were required by the performer of the service in order to perform the commercial information service does not make the service a technical service within the meaning of paragraph 4(b). In the above example, advising on "marketing strategies" is held to be outside the scope of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Loxdale 97 ER 394 at p. 395). In our considered view, this principle of interpretation of statutes should also govern the interpretation of tax treaties, particularly when those tax treaties deal with the same thing and are identical in material respect We may also refer to the observations of Griffith, CJ.y in the case of Webb v. Outrim AC Si PC, at p. 89 that, ''When a particular form of legislative enactment, which has received authoritative interpretation whether by judicial decision or by a long course of practice, is adopted in framing it-later statute if is a sound rule of construction to hold that the words so adopted by the Legislature to bear that meaning which has been so put on them". A fortiorari, when a particular tax treaty clause has received an authoritative interpretation, from an authority no less than the Government of India itself, and identical clause is adopted in framing a later tax treaty, it is to be held that the clause so adopted in the later tax treaty will also normally have the same meaning as assigned to that clause. 28. In this view of the matter, in our considered view,* the scope of fees for technical services' under article12(4)(b) does not cov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner (Appeals) but then we agree with his conclusions. Accordingly, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter. 30. We may also mention that there at least two important rulings by the Hon'ble Authority for Advance Ruling, namely Ericsson Telephone Corpn. India All In re [1997/ 224 ITR 203 and ABC, In re [1997] 228 ITR 487 which are m favour of the revenue on somewhat similar issues, but none of the parties before us considered it necessary to invite our attention to these rulings. Be that as it may, we have careful!} gone through these rulings and, having guilty through these rulings also, we still see no reasons to take any other view than the view so arrived of above for several reason set out below 31. First, howsoever strong be the persuasive value of the ruling given by the Hon 'tie Authority, these rulings are certainly not binding precedents on us. That gives us the liberty to, in deserving cases and for the cogent reasons to be placed on record, take an independent view of the matter, when so considered appropriate. In our considered view, the case before us is a fit case to exercise this option. For the detailed re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44D in computation of income attributable to PE wilt result in incongruities, but the Authority expressed its helplessness to do anything about it We may, in this regard, refer to the following observations of the Authority in paragraph 27 of the said ruling: "Pausing here, it will be noticed that the above conclusion results in a somewhat anomalous situation. If the applicants receipts had been assessed as royalties and fees for technical services simpliciter under article 13 of the DTA, the applicant could have insisted that they cannot be charged at a rate exceeding 20 per cent. However, the applicant wilt not be able to avail itself of this privilege or concession because the royalties and technical fees, having been derived in the course of business carried on through a permanent establishment, have specifically been taken out of the purview of 13(1) and 13(2). The anomaly is one which arises from the terms of the DTA cannot be helped. Lord Denning, in the case of Seaford Court Estates Ltd. v. Asher [1949] 2 AER 155 at page 164, had observed that "when a defect appears, a judge simply cannot fold his hands and blame the draftsmanship" and that "A judge should ask himself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raftsman". It is not open for us to disregard these views and proceed to interpret the provisions of a tax treaty only on the basis of technical rules of law and precedents, and, thereby, ignore the broad principles of general expectations. 36. In any event, it is certainty not the case that there is a binding precedent in favour of the revenue. Therefore, even if there is a reasonably possible view in favour of the revenue, this possibility per se does not clinch the issue. The view that we have accepted and elaborated earlier in this order is an equally, if not more, reasonable and possible view of the matter. It is well settled in law that when two views are possible, and one of these views is in favour of the assessee, the ambiguity is to be resolved in favour of the assessee. The authority for this proposition is contained in the Hon'ble Supreme Court s judgment in the case of CIT v Vegetable. Products Ltd. (I973J 88 ITR 192 wherein Their Lordships have observed that "if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must he adopted," 37. In the light of these reasons, us also for the detailed reasons set out a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdinate bench in the above referred case has thus taken a view that in case the receipts in respect of which profits arc computed under Article 7(3). do not fit the description of royalty and fees for technical -services under the applicable tax treaty, the limitation of deduction of expenses u/s 44D does not come into play. 54. Respectfully following the aforesaid decision of coordinate bench, we hold that the nature of the receipts in the present case is to be examined in the light of the definition of fees for technical services gj\'Zn under the Treaty. 55. In the remand report submitted by the AO to CIT(A) is appellate proceedings for the Asstt. Year 2006-07. the AG has in very clear terms conceded to die fact mat the consideration received by the assessee from maintenance services are not fees for technical services within the meaning of Article 12 of Indo-US DTAA. The relevant portion of the AGs remand report has been reproduced by the CIT(A) at para 9. pages 6-8 of his order. where the AO has stated as under:- "I am in complete agreement with the assessee that its a$ 4k 68*JwLjaU under Article 12 of DTAA. Once the case does not fall under Article 12, it automatically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... back o the nie oi AG So examine and verify the same and to consider it in the agent of the provisions contained in the Income-tax Act and Slaving regard to the facts of the present case, the AO snail provide reasonable opportunity of being heard to the assessee. The assessee is hereby directed to produce ail necessarily details as to the claim of set off* of brought forward unabsorbed depreciation as per law. We order accordingly. 59. Now, we shall take up the Cross Objection No.40/DeL'20G3"filed by the assessee pertaining to the Asstt. Year 1995-96. In the course of bearing of this appeal, the learned counsel for the assessee has submittal that aM Ac issues except the issue with regard to charging of interest u/s 234B have been withdrawn by the assessee. fn the light of the categorical submission of the learned counsel of the assessee, the various grounds taken in the Cross Objection for the Asstt. Year 1995-96 are dismissed as not pressed for except the ground relating to charging of interest u/s 234B of the Act. 60. The issue with regard to the charging of interest u/s 234B ss consequential, and it shall be looked into and examined by (he AC) while computing the business p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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