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TMI Blog2012 (10) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer and such error should be prejudicial to the interests of Revenue, have not been satisfied. - in favour of Assessee. - I.T.A. No. 755/Mds/2011 - - - Dated:- 11-7-2012 - SHRI ABRAHAM P. GEORGE AND SHRI VIKAS AWASTHY, JJ. Appellant by : Shri K. Raghu, CA Respondent by : Shri Vikramaditya, JCIT ORDER PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : In this appeal filed by the assessee, it assails an order dated 23.3.2011 of Commissioner of Income Tax-III, Coimbatore, passed under Section 263 of Income-tax Act, 1961 (in short 'the Act'). 2. Short facts apropos are that assessee, a company engaged in manufacture and export of cotton yarn fabrics and garments, had filed its return for impugned assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to assessee, vide Article 6 of Double Taxation Avoidance Agreement (DTAA) between India and United Kingdom, profits of an enterprise arising in United Kingdom will be taxable in India only if such enterprise was having a permanent establishment in India. Since M/s Thin Red Line was not having any permanent establishment in India, its profits could not be considered as taxable in India. Further, according to it, such receipts in the hands of M/s Thin Red Line could not be considered as technical services, under DTAA, as well. 3. However, the CIT was not impressed. According to him, what was paid by the assessee in the guise of market development fees was nothing but consultancy charges and it fell within the definition of technical ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excluded from purview of fee for technical services, fees paid in respect of services as well as business promotion carried on by a non-resident outside India. Reliance was placed on the decision of Hon ble Bombay High Court in the case of Grasim Industries Ltd. v. CIT (332 ITR 276) and also that of Authority for Advance Ruling in the case of Intertek Testing Services India (P) Ltd. in re (307 ITR 418). 5. Per contra, learned D.R. supporting the order of CIT, submitted that what was paid by the assessee was nothing but fee for technical services. Once it was considered as fee for technical services, there was no necessity for the concerned non-resident to have a place of business or business connection in India for taxing such amount u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elation to any income by way of fees for technical services payable in pursuance of an agreement made before the 1st day of April, 1976, and approved by the Central Government.] [Explanation 1 For the purposes of the foregoing proviso, an agreement made on or after the 1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date.] Explanation [2] For the purposes of this clause, fees for technical services means any consideration (including any lump sum consideration) for the rendering of any managerial, technical consultancy services (including the provision of services of technical or other personnel) but does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices under DTAA between India and UK. Clause (4) of Article 13 thereof clearly gives what is construed as term fee for technical services under the said DTAA. The said clause is reproduced hereunder:- 4. For the purposes of paragraph 2 of this Article, and subject to paragraph 5 of this Article, the term fees for technical services means payments of any kind of any person in consideration for the rendering of any technical or consultancy services (including the provision of services of a technical or other personnel) which: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3(a) of this article is received; or (b) are ancillary and sub ..... X X X X Extracts X X X X X X X X Extracts X X X X
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