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TMI Blog2015 (4) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... en accrued or arisen to the assessee in India. Even the existence of the service per manent establishment in India will not make it taxable because of no involvement of such permanent establishment in earning this income for which the services were rendered outside India. - Decided in favour of assessee. Force of attraction rule - Held that:- There is no dispute that out of total marketing and management fee of ₹ 8,15,11,339 received from WNS India only a sum of ₹ 6,52,13,074 has been attributed to such permanent establishment because the services were rendered in India. The remaining amount of marketing and management fee received by the assessee is regarding the services rendered outside India. The learned Departmental representative has contended that since the services which were rendered in India and outside India are same or similar in nature and as per the composite agreement therefore, the entire service is attributable to the service permanent establishment in India by applying the force of attraction rule. We do not find merit in the contention of the learned Departmental representative because the force of attraction rule germane under article 7(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ORDER Vijay Pal Rao (Judicial Member)- This appeal by the Revenue is directed against the order dated January 27, 2012 of the Commissioner of Income-tax (Appeals) for the assessment year 2007-08. 2. The Revenue has raised the following grounds in this appeal : 1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in holding that marketing and management services amounting to ₹ 68,15,11,339 did not satisfy the 'make available' criteria when the nature of services showed otherwise. 2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in holding that marketing and management services amounting to ₹ 6,52,13,074 are to be taxed as business profits when it is part of the marketing and management services rendered by the assessee resulting in total receipts of ₹ 68,15,11,339 and which are in the nature of fees for technical services. 3. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in directing that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly held that the marketing and management services rendered by the assessee to WNS India is fees for included services (FIS) under article 12(4)(b) of the Indo-US Double Taxation Avoidance Agreement and taxed the same as fees for included services under article 12 of the Indo-US Double Taxation Avoidance Agreement. On appeal, the learned Commissioner of Income-tax (Appeals) has decided the issue in favour of the assessee following the decision of this Tribunal in the assessee's own case for the earlier assessment year. 4. At the outset we note that for the earlier assessment years 2003-04 to 2006-07 an identical issue has been considered and decided by the Tribunal in favour of the assessee. We further note that in the assessment years 2004-05 and 2005-06 the order of this Tribunal has been confirmed by the hon'ble jurisdictional High Court. In the latest decision dated December 14, 2012 for the assessment year 2006-07 in I.T.A. No. 8621/M/2011), the Tribunal has again considered and decided this issue in paragraphs 2.4 to 2.6 as under : 2.4. Having heard the rival submissions on the point and consi dered the relevant material on record, we do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vii), the same would not become fees for included services as per the Double Taxation Avoidance Agree ment because of the language of article 12(4)(b) which mandates that such services must be made available to the payer of the considera tion. As the assessee in the instant case has not made available any technical knowledge, experience, skill, etc. to WNS India, in our con sidered opinion, the same cannot be subjected to tax by considering the provisions of section 9(1)(vi) on stand-alone basis. We will discuss infra in a little more detail that the provision of the Act or the relevant Double Taxation Avoidance Agreement, whichever is more beneficial to the assessee, shall apply. As the provisions of article 12(4)(b) are beneficial to the assessee in comparison with section 9(1)(vi), it is the prescription of article 12, which shall apply in supersession of section 9(1)(vi) of the Act. We, therefore, hold that the marketing and man agement services rendered by the assessee to WNS India are not chargeable to tax as fees for included services under article 12 of the Double Taxation Avoidance Agreement. The impugned order is, therefore, reversed to this extent. 2.6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anagement services to WNS India and once the services provided in India are held to be taxable because of the service permanent establishment in India then the similar and part of the composite service provided outside India is also attributable to the service permanent establishment in view of the force of attraction rule. Since this issue has not been considered by this Tribunal as well as by the hon'ble High Court in the earlier years therefore, the Revenue has raised this issue as an alternative plea. In support of his contention he has relied upon the decision of this Tribunal in case of Hindalco Industries Ltd. v. Asst. CIT [2005] 278 ITR (AT) 125 (Mum) and submitted that the Tribunal in the said case has observed that when principle transaction itself is such that it involves taxability in source country, the transactions subsidiary and integral to such a transaction also give rise to the taxability of subsidiary transactions in the source country. The learned Departmental representative has further submitted that the benefit of services is received in India, therefore the services are deemed to have been rendered or made available in India. 6. On the other hand, lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wise the profits of the enterprise shall be taxable in the State of residence. Learned senior counsel then pointed out that the force of attraction rule applies only in a situation when an enterprise of the Contracting State carries on business through permanent establishment as well as direct business activity in the other State where the permanent establishment situated and the business activity carried on directly is same or similar kind as those effected through permanent establishment. Learned senior counsel thus advanced his arguments that in the case of the assessee the marketing and management services provided outside India cannot be brought under article 7 in the category of the business activities carried on of the same or similar kind as those effected through the permanent establishment. Accordingly, he has vehemently opposed the alternative ground raised by the Revenue. 7. We have considered the rival submissions as well as relevant material on record. There is no dispute that out of total marketing and management fee of ₹ 8,15,11,339 received from WNS India only a sum of ₹ 6,52,13,074 has been attributed to such permanent establishment because the serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rule are (i) the business activity carried on should be in the other State where the permanent establishment is situated (ii) the business activity carried on must be of the same or similar kind as those effected through permanent establishment. In the case in hand the condition of business activity carried on in the other State where the permanent establishment is situated is not satisfied because the marketing and management services in question are provided by the assessee outside India. Since the said issue of providing the services outside India has been decided time and again by this Tribunal as well as by the hon'ble High Court in the assessee's own case therefore in view of the finding on the ground Nos. 1 to 3 there is no need for further deliberation/discussion on the same. Having held that the marketing and management services in question were rendered outside India and income of such services cannot be said to have accrued or arisen to the assessee or deemed to have accrued or arisen to assessee in India, the existence of service permanent establishment in India would not make it taxable under article 7 of the Indo-US Double Taxation Avoidance Agreement. 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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