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TMI Blog2012 (6) TMI 516X X X X Extracts X X X X X X X X Extracts X X X X ..... the persons, therefore, by virtue of Explanation 2 to Section 9(1)(vii), the type of service received was nothing but fees for technical services. However, Chapter III of DTAA between India and Mauritius did not provide for taxing any fees paid for technical services. Only for a reason that DTAA is silent on a particular type of income, such income will not automatically become business income of the recipient. Hence, when DTAA is silent on an aspect, the provisions of the Act has to be considered and applied. Therefore, matter remitted back to A.O. for consideration afresh. - IT Appeal NO. 811 (MDS.) of 2010 - - - Dated:- 25-5-2012 - ABRAHAM P. GEORGE, VIKAS AWASTHY, JJ. ORDER Abraham P. George, Accountant Member This is an appeal filed by the Revenue against order dated 18.3.2010 of Commissioner of Income Tax (Appeals)-III, Chennai, for the impugned assessment year, in which two core issues have been raised by it. First is on a deletion of an addition made by the A.O. on account of unexpired value of Annual Maintenance Contracts received by the assessee during the relevant previous year. Second issue is regarding deletion of an addition of Rs. 1,04,50,458/- mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f AMCs not offered by assessee as its income. 3. In its appeal before CIT (Appeals), argument of the assessee was that when it entered into AMCs, 100% revenue was received only as an advance. The AMCs were for a period of 12 months and a part of the 12 months period would always fall beyond the end of the financial year. The unexpired period of contracts represent liability of the assessee for meeting its maintenance obligations and therefore, corresponding revenue could not be recognized. In any case, as per the assessee, any customer could terminate their AMC agreement before the expiry of the contract and the assessee was bound to refund the amount pertaining to the unexpired period. CIT (Appeals) was appreciative of this contention of the assessee and deleted the addition made by the A.O. 4. Before us, learned D.R. submitted that CIT (Appeals) erroneously relied on the decision of Hon'ble jurisdictional High Court in the case of Coral Electronics (P) Ltd. ( supra ). According to him, in the said decision of Hon'ble jurisdictional High Court, the service to be rendered by the concerned assessee was not at all definite, whereas, it was clearly defined in the present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8/- to M/s Rosewell Group Services Ltd. based in Mauritius, for a market survey conducted by them for preparation of project report called "Opportunities in Asia for Electronics". A.O. noted that no tax was deducted at source while making payment to the concerned party. According to him, assessee was obliged to deduct tax at source under Section 195 of the Act. The company being a non-resident, as per the A.O., the payments made fell within the ambit of clause (vii) of Section 9(1) of the Act. It was nothing but fees for technical services, and for reaching this conclusion, A.O. relied on Explanation 2 to Section 9(1)(vii) of the Act. Therefore, he held that assessee had failed to deduct tax at source which it was obliged to do. Relying on the decision of Hon'ble Apex Court in the case of Transmission Corporation of AP Ltd. v. CIT (239 ITR 587), A.O. held that assessee had violated Section 195 and made a disallowance of Rs. 1,04,50,458/- under Section 40(a)(i) of the Act. 10. In its appeal before CIT (Appeals), argument of the assessee was that the payments were made for market survey, qualitative consumer measurement, retail store site information, etc. and such payments d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce thereof irrespective of the citus of receipt of the money or rendering of the service. According to him, in view of the explanation added to Section 9 of the Act by Finance Act, 2007 with retrospective effect from 1.6.1976, it was not necessary that a non-resident should have a permanent business establishment or business connection in India, insofar as fees received for technical services was concerned. He, therefore, submitted that assessee fell in default by not deducting tax at source and attracted the rigours of Section 40(a)(i) of the Act. 12. Per contra, learned A.R. submitted that the non-resident never had any permanent establishment or business connection in India. In any case, according to him, the DTAA provisions prevailed over the Act and therefore, assessee was having every liberty to take advantage of provisions of DTAA. Further, according to him, assessee was under a bonafide belief that in view of the provisions of DTAA, it was not required to deduct any tax at source on the payments effected to a non-resident. Relying on the decision of Special Bench of this Tribunal in the case of ITO v. Prasad Production Ltd. (125 ITD 263), learned A.R. submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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