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TMI Blog2014 (9) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... facts in allowing the appeal of the assessee on the order passed by the A.O. u/s.201(1) & u/s.201(1A) r.w.s. 195 of the I. T. Act 1961 2. The Ld.CIT(A) has erred in law and on facts in not considering the remittance to non-resident as fees for technical services as 'make available' as per Article 13(c) of India - UKDTAA. 3. The Ld. CIT(A) has erred in law and on facts in not accepting the deeming provisions as per Explanation to sec.9(l)(vii) inserted by Finance Act, 2007 with retrospective effect from 1.6.1976. 4. On the facts and in the circumstances of the case learned CIT(A)-XXI, Ahmedabad ought to have upheld the order of the assessing Officer. 2.1 Facts in brief as emerged from the corresponding order passed u/s.201(l) & 201(1 A) r.w.s. 195 of the I.T. Act dated 16.9.2008 were that the Assessing Officer has observed that the assessee-company had made payment to one M/s.HR JWallingford Ltd., United Kingdom, a non-resident company of 40,635 GBP on 22.05.2007. It was noted by the Assessing Officer that the said payment was in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le was also reproduced by the AO. "Article 13: Royalties and fees for technical services 1............................ 2........................... 3........................... 4. For the purposes of paragraph of 2 of this Article, and subject to paragraph 5, of this Article, the term fees for technical services means payment of any kind of any person in consideration for 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 subsidiary to the enjoyment of the property for which a payment described in paragraph 3(b) of this article is received; or (c) make available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design." 3.1 H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO has concluded that the services rendered were in the nature of providing consultancy service which was made available to Dholera port Ltd. The AO has computed the tax and interest thereon as under: "6. To summaries, it is held that payment received by M/s. HR Wallingford. UK is taxable both as per the provision of the IT Act, 1961 and the tax treaty between India and United Kingdom. As the assessee company has already remitted the total payment to the non-resident, the tax deducted at source has to be arrived by grossing u/s.195A of the Act. The assessee is also liable for interest as per section 201(1A) of the Act, for the delay. Tax u/s. 201(1) and interest u/s.201(1A) of the Act payable by the assessee are as under: Remittance in GBP 40,635 In Indian [@ 1 GBP = Rs. 80.129] Total amount Rs. 32,56,048 (Grossin up u/s. 195A Rs. 36,17,831) Total amount of tax u/s. 201(1) at 10% Rs.3,61,783 Interest u/s. 201(1A) Rs. 54,270 Total Amount payable Rs.4,16,053" 4. When the matter reached to the First Appellate Authority, the matter was discussed at length in the light of fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its own to others. Thus, in terms of Article 13(4)(c) of the India UK DTAA, the fees paid by the appellant Company are not fees for technical services and they constitute business income in the hands of the British Company. Consequently, the appellant Company would not be liable to with-holding tax u/s. 195(1) of the Income Tax Act, 1961. Hence, this ground of appeal is partly allowed." 5. From the side of Revenue, learned DR Mr. P.L. Kureel appeared. He has informed that the assessee had remitted a sum of Rs. 32,56,048/- to a non resident company, namely, M/s. HR Wallingford Company, U.K. for the technical services rendered. The assessee had not deducted the tax u/s.195 of IT Act while remitting the amount. The reason given for non deduction of TDS was that no services were made available by the said non-resident to the assessee as per the meaning assigned in Article 13 DTAA between India and UK. But according to Ld DR the remittance was covered by the definition of "fees for technical services, and "that the amount remitted was chargeable to tax in the hands of the said non resident". He has argued that the provisions of Section 9(1)(vii) were applicable on the fees paid for tec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he technology, that there should be transfer of technical knowledge, skill etc. from the service provider to the recipient in order for the services to qualify as making available technical knowledge, skill etc. [Ref.: Intertek Testing Services India (P) Ltd. In re [2008] 307 ITR 418 (AAR - New Delhi)National Organic Chemicals Ind., Ltd. v. Dy. CIT [2005] 96 TTJ 765 (Mum.); CESC v. CIT [2003] 80 TTJ 806 (Kal.) (TM)............. Thus, we are of the opinion that services under the Service Agreement when read with TTLA, fall within the purview of Article 12.5(A) of the DTAC as such services "are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 4 of this Article is received.......................... Chairman (adding) AAR/869/2010 I fully agree with the ruling proposed by Member (R) A convention is a treaty entered into by two sovereign States relating to rights and duties of subjects or citizens of the respective States in one another's possessions (see Ramanatha Aiyar - Law Lexicon). A treaty is negotiated and entered into at political level and have several considerations as their base (S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht to continue the practice put into effect and adopted under the service agreement on its expiry." 5.3 Some more case laws were referred from the side of the Revenue, as listed below: "1. Hindustan Shipyard Limited, ITA Nos.204 & 205/Vizag/2011. 2. CGG Veritas Services SA, (2012) 18 taxmann.com 13 (Delhi-Tribunal) 3. SNC Lavalin International Inc., (2011) 11 taxmann.com 23 (Delhi) 4. Hindalco Industries Ltd v. ITO, ITA No.3773(Mum) 1996 5. Ashapura Minichem Ltd., (2010) 40 SOT 220 (Mum.) 6. Maruti Udyog Ltd. (2009) 34 SOT 480 (Delhi) 7. Shell India Markets P. Ltd.,(2012) 18 taxmann. com 46 (AAR - New Delhi). 8. Sintex Limited, ITA No.2021/Ahd/2009 & ITA No.639/Ahd/2010 (Assessment Year 2009-10 & 2010-11)(ITAT Ahmedabad.) 6. From the side of the respondent assessee, learned AR Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal erosion; therefore, a survey is required to be undertaken to investigate all those aspects. The assessee has therefore requested to give the report in two phases as under: "Phase 1 - Morphological studies 1. Determine the rate of sedimentation and the quantity and frequency of dredging. 2. Agreement of channel alignment. 3. Sedimentation and maritime dredging requirements for the berthing packet. 4. Requirement and nature of any shore protect measures. 5. The impact of capital dredging works and shore protection on the hydrodynamic and morphology of the area. Phase II - Navigation Studies 1. Orientation of the berths 2. Review of approach, departure and turning maneuvers and emergency procedures. 3. Mooring arrangements." 7.2 The reports were in the form of preliminary assessment, as claimed by the assessee; therefore, the result of the survey was required to be projected in Tabular and Graphical form. Wherever it was appropriate a design of the terminal with proper analysis was also required to be provided by the service provider. There was a clause of confidentiality and the know-how. In the agreement it is provided that the report so prepared by HR Wallingford sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istinction between the definition as prescribed u/s.9 of IT Act of "fees for technical services" as compared with the definition prescribed in Article 13 of Indo-UK treaty. But the settled law is that the provisions of DTAA overrides the provisions of IT Act in the matter of ascertainment of taxability under the Income Tax Act. Therefore, we have to decide this issue in the light of articles of DTAA. Resultantly Ground No 3 of the Revenue shall also not survive. At this juncture, it is worth to mention a decision of Hon'ble Apex Court pronounced in the case of Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706. Further in the case of GE India Technology Cen (P.) Ltd. v. CIT [2010] 327 ITR 456 (SC) it was decided that there was no obligation for withholding the tax on any person making payment to a non resident if the payment made to the non resident is not chargeable under the provisions of IT Act. In any case, the issue before us is limited to the applicability of the provisions of Article 13 of DTAA between India and UK and after considering the facts and circumstances of the case as discussed at length hereinabove we hereby hold that the fees for technical services wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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