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TMI Blog2016 (7) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the case, the Ld.CIT(A) ought to have upheld the Order of the Assessing Officer. 4. It is, therefore, prayed that the order of the CIT(A) may be cancelled and that of the Assessing Officer may be restored to the above extent. 5. Any other ground that may be urged at the time of hearing. 2. Briefly stated facts are that the Assessing Officer (AO in short) passed order u/s.201(1) & 201(1A) r.w.s.195 of the Income Tax Act,1961 (hereinafter referred to as "the Act") vide order dated 31/03/2010 on the basis that the assessee had made payments to non-resident parties on which he has not deducted the tax. The assessee before the AO submitted that the payments were not subjected to tax, therefore the assessee was not liable to deduct tax on such payments. However, the AO did not accept the contention of the assessee and proceeded to hold the assessee as assessee in default for non-deduction of tax and made the assessee liable for tax a sum of Rs. 7,96,325/- and interest thereon u/s.201(1A) of the Act of Rs. 33,845/-. The AO held that the payments made to B.A. Research International (USA), Allied Research International Inc. (Canada) and MDS Pharma Services Inc. (USA) are taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re reported at [2008] 305 ITR 394 (AAR) (iv) Decision of ITAT Mumbai Bench 'L' -in the case of Wockhardt Ltd. vs. ACIT reported at [2011] 10 taxmann.com 208 (Mumbai) (v) Decision of Hon'ble High Court of Karnataka -in the case of CIT vs. De Beers India Minerals (P.) Ltd. reported at [2012] 21 taxmann.com 214 (Kar.) (vi) Decision of ITAT Delhi Bench 'A' in the case of Dy.CITvs.Pan AmSat International Systems Inc. reported at [2006] 9 SIT 100 (Delhi). 4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the judgements/decisions relied upon by the assessee. There is no dispute with regard to the fact that under the contract, the non-resident entity has carried out bio-analytical services on the sample supplied by the sponsor and submitted its report on the bio-analysis of the tablets studies. The said services have been performed outside India. The nonentities have no permanent establishment in India. It is the contention of the assessee that the services so rendered are not made available to the assessee. In this background, the ld.CIT(A) has decided the issue in favour of assessee by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the fact that the explanation to section 9 has been again substituted by the Finance Act, 2010 with retrospective effect from 1/6/1976. Now, the income is to be included in the total income of the non-resident, whether or not the non-resident has rendered services in India. The decision in the case of 'Jindal Thermal Power Company Limited v. DOT [2009] 225 CTR 220', on the issue therefore is no longer good law. After the amendment with retrospective effect, the payments made by the appellant are definitely falling under the definition of fees for technical services' and the income is deemed to accrue or arise in India under the provisions of section 9(2)(vii). The next issue to be decided is whether the income which has been decided to be deemed to accrue or arise in India under section 9(2)(vii) is of the nature which is exempt from taxation in India under the DTA Agreements with the USA and Canada respectively. As there is no PE in India it would have to be seen whether, in which country and how the 'fees for technical services' are taxable as per the DTA agreements. The appellant's contention is that Article 12(4)(b) of the DTAA between India and USA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08 (Mum.), also squarely applies to the facts of the appellant's case. The same view has been followed in various decisions including decision of Mumbai Special Bench in the case of Mahindra & Mahindra Limited (313 UR 263). In view of the provisions of Article 12 of DTAA read with above referred judicial precedents, I am inclined to agree with the submissions that services cannot be categorised as "fees for included services" under the DTA Agreements with USA and Canada and therefore are not taxable in India as the more favourable DTA A provisions are to be applied. Therefore, it is held that the income of the non-resident concern in the facts and circumstances of the case are not taxable in India. The next issue to be decided is whether the tax has to be deducted u/s. 195 even when the income in the hand of non-resident is not taxable. As the remittance made is not chargeable to tax in India, I am of the view that, in the given case provisions of Section 195 are also not applicable. The Hon'ble Supreme Court has decided the very issue in GE Technology Centre P Ltd 327 ITR 456.lt has held that u/s. s 195 payer is bound to deduct tax only if the sum payable is assessable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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