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TMI Blog2019 (1) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... Act and fees for included services under Article 12 of the DTAA between India and the United States of America. 4. With ground No.1 the assessee claims that the proceedings are barred by limitation. 5. Representatives of both the sides were heard at length. Case records carefully perused and the judicial decisions relied upon carefully considered. 6. Facts on record show that in all the three years the order framed u/s 201 (1) / 201 (1A) are dated 28.03.2013. The counsel vehemently stated that the orders so framed are barred by limitation. Before proceeding further let us consider the provisions of the Act as under :- Consequences of failure to deduct or pay._- 201. -[(1) Where any person, including the principal officer of a company,- ( a) who is required to deduct any sum in accordance with the provisions of this Act; or ( b) referred to in sub-section (1A) of section 192 , being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble High Court read as under :- It is proposed to make these amendments effective from 1st April, 2010. Accordingly it will apply to such orders passed on or after the 1st April, 2010." 12. When NHK Japan {supra) and Hutchinson (supra) were decided, the amendment was not brought about and therefore the issue of existence of a period of limitation, did not arise. The court therefore, considered, on the basis of available authority, that a four year period was "reasonable period" as the outer limit for issuance of notice under Section 201. However, in the present case, Parliament consciously amended the Act. In doing so, it prescribed a limitation only for residents. Instead of actively barring the applicability of the provision on non-residents, did the Parliament choose to passively do so by remaining silent on non-residents and only amending the provision, for residents. The question is, whether the petitioner is right in contending that if the Act does not specify a time period, then a reasonable time period should be read into the Act. This contention is based on judgements which were delivered when the Legislature had not made a distinction between residents and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then ruled as follows: "9. More recently in CIT v. Calcutta Knitwears [2014] 362 ITR 673, the Supreme Court had the occasion to deal with the correct position in law as to the initiation of Income-tax proceedings. Although, the context of the dispute was in respect of recording of a satisfaction note as to the initiation of proceedings against third parties under the erst while section 158BD of the Act which did not prescribe the period of limitation and left it to the discretion of the Assessing Officer to decide on being satisfied that such proceedings were required to be initiated, the court limited such discretion in the following terms (page 691 of 362 ITR): 44. In the result, we hold that for the purpose of section 1 58BD of the Act a satisfaction note is sine qua non and must be prepared by the Assessing Officer before he transmits the records to the otrm Assessing Officer who has jurisdiction over such other person. The satisfaction note could prepared at either of the following stages : (a) at the time of or along with the initiation proceedings against the searched person under section 158BC of the Act ; (b) along with to. assessment proceedings under section 158BC of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The above submission of Mr. Shivpuri cannot be accepted if section 153 is perused carefully. It reads as under: '153. Time limit for completion of assessments and reassessments.-. . . (3) The provisions of sub-sections (1), (1 A), (IB) and (2) shall not apply to the following classes of assessments, reassessments and recomputations which may, subject to the provisions of sub-section (2A), be completed at any time- . . . (ii') where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 250. 254, 260, 262, 263 or 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act." 21. In the first place, what the said provision does is to not apply the time limit of two years completing the assessment from the end of the financial year "where the assessment, reassessment: or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order .... Or in an order of any court in a proceeding otherwise than by way of appeal or refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the provisions we find the expression "sum chargeable under the provisions of the Act", which as stated above, is an expression used only in section 195(1). Therefore, this court is required to give meaning and effect to the said expression. It follows, therefore, that the obligation to deduct TAS arises only when there is a sum chargeable under the Act. Section 195(2) is not merely a provision to provide information to the Income-tax Officer (TDS). It is a provision requiring tax to be deducted at source to be paid to the Revenue by the payer who makes payment to a non-resident. Therefore, section 195 has to be read in conformity with the charging provisions, i.e., sections 4, 5 and 9. This reasoning flows from the words "sum chargeable under the provisions of the Act" in section 195(1). The fact that the Revenue has not obtained any information per se cannot be a ground to construe section 195 widely so as to require deduction of TAS even in a case where an amount paid is not chargeable to tax in India at all. We cannot read section 195, as suggested by the Department, namely, that the moment there is remittance the obligation to deduct TAS arises. If we were to accept such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law requires tax to be deducted on all payments, the payer, therefore, has to deduct and pay tax, even if the so-called deduction comes out of his own pocket and he has no remedy whatsoever, even where the sum paid by him is not a sum chargeable under the Act. The interpretation of the Department, therefore, not only requires the words "chargeable under the provisions of the Act" to be omitted, it also leads to an absurd consequence. The interpretation placed by the Department would result in a situation where even when the income has no territorial nexus with India or is not chargeable in India, the Government would nonetheless collect tax. In our view, section 195(2) provides a remedy by which a person may seek a determination of the "appropriate proportion of such sum so chargeable" where a proportion of the sum so chargeable is liable to tax. The entire basis of the Department's contention is based on administrative convenience in support of its interpretation. According to the Department, huge seepage of revenue can take place if persons making payments to non residents are free to deduct TAS or not to deduct TAS. It is the case of the Department that section 195(2), as in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce Act, 2008, with effect from April I, 2008, sub-section (6) has been inserted in section 195 which requires the payer to furnish information relating to payment of any sum in such form and manner as may be prescribed by the Board. This provision is brought into force only from April 1, 2008. It will not apply for the period with which we are concerned in these cases before us. Therefore, in our view, there are adequate safeguards in the Act which would prevent revenue leakage." 16. In this court's view, therefore, since Vodafone Essar {supra) considered the entire issue and noted that even recently a reasonable period was read into the Act, in relation to exercise of powers (although in a different context) accepting the petitioner's contention in the present case is based on precedent. Furthermore, the only reason cited by the respondent, i.e. administrative convenience, cannot outweigh the harsh nature of the consequence, which would expose resident payers to the onerous responsibility of ' maintaining books and documents for an uncertain period of time. Given these considerations, the 'Impugned notices are quashed. The writ petition is allowed in these terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d services appended to the India-USA DTAA, inter-alia, provides that typical categories of services that generally involve either the development and transfer of technical plans or technical involve either the development and transfer of technical plans or technical designs or making technology available [as described in paragraph 4 (b)] include engineering services, architectural services and computer software development. Further, memorandum also states that technical and consultancy services could make technology available in a variety of settings, activities and industries. Memorandum has considered geological surveys, exploration or exploitation of mineral oil or natural gas as examples of some services where it can be said that technology can be made available. It is noted that in the case of ABC , In re (234 ITR 371AAR) a UK company rendered consultancy to an Indian oil company under various agreements wherein it only surveyed the area earmarked by Indian company and gave the technical designs and knowhow to enable the Indian company to perform the mining job itself. The payment was considered as fee for technical services, In this case, the data after conducting surveys i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt as expressly permitted by this License, Licensee agrees (a) to keep strictly confidential, and shall ensure that its employees and agents keep strictly confidential, the Data and Derivatives and (b) not to Disclose, allow the use of, or display the Data or Derivatives to any Third Party. 2.2 Original Data-Retention/Licensing/Right to Destroy It is the intent of Licensor to retain the original Data (such as field tapes and other related information obtained during acquisition); however, Licensee acknowledges that original media containing the original Data may erode, become damaged, and/or contain Data not relevant to the geological area covered by the Data and in such situations, Licensor may be unable to provide Licensee copies of the portion of the original Data thereby affected. Licensor shall have the sole right to delete or discard the original Data upon making reasonable efforts to notify Licensee of its intention to do so. Provided however, the Licensee shall be entitled to a refund of license fee applicable in proportion to the data so deleted or discarded by the Licensor, with the exception of instances where the original data becomes irretrievable due to circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncies 3.2.1 Notwithstanding the foregoing, the Data and Derivatives may be disclosed by Licensee to the extent such disclosure is specifically required by law, governmental or court decree, order rule or regulation, or by any similar legal process. In the event Licensee is required by aw, governmental or court decree, order, rule or reguiat.cn, or by any similar legal process to disclose any Data or Derivatives, Licensee shall give Licensor prompt notice ot such process so that Licensor may seek an appropriate protective order (or other appropriate remedy) with respect to maintaining the confidentiality of the affected Data and Derivatives before disclosure thereof by Licensee. If, in the absence of a protective order, Licensee is nevertheless compelled to disclose Data or Derivatives, Licensee may disclose only that portion of the Data or Derivatives that Licensee is advised to be disclosed in compliance with the relevant process. In the event of such disclosure, Licensee shall give Licensor written notice of the Data or Derivatives to be disclosed as far in advance of its disclosure as practicable, and upon Licensor's formal written request, Licensee shall use reasonable ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to any Prospective Co-venturer, the Data or Derivatives Disclosed are limited to such portions of the Data or Derivatives covering the prospect(s) and/or the particular geographical area(s) under negotiation for a Third Party Business Transaction. 3.5 Co-venturers: Licensee shall not Disclose or give copies of the Data or Derivatives to any Co-venturer without the prior written consent of Licensor which shall not be unreasonably withheld or delayed. 3.6 Internet Disclosures: Licensee shall not Disclose Data or Derivatives to any Third Party via the Internet, E-Commerce sites, virtual data rooms, asset divestiture web sites, or any other similar means of virtual access outside of Licensee's premises without the express written consent of Licensor which shall not be unreasonably withheld or delayed; Taxes: Any sales, gross receipts, value added, use or similar tax is levied or assessed against Licensor as a consequence of the licensing of Data to Licensee under this License and in particular any Supplement, such taxes shall be paid by the Party liable to pay such tax under the relevant statute. Transfer of License: Licensee shall nor sell, sublicense, assign, or tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exploration work in Mumbai Shallow Offshore Block MB- OSN-2005/2, which is located in Tapti-Daman Sector of Mumbai Offshore Basin along with west coast of India which covers an area of 1191 sq. knr. A perusal of the related documentary evidences shows that the objective of the project was to carry out a 3D Seismic interpretation which included the basin modeling, culminating in prospect generation along with GRV calculations, play fairway mapping and risking of prospects for exploratory drilling." 18. And the relevant findings of the coordinate bench read as under :- 20. On identical set of facts, the Hon'ble High Court of Karnataka in the case of De Beers India Minerals (P.) Ltd. (supra) had the occasion to interpret the relevant Articles of India-Netherlands DTAA. In this case, the Hon'ble Karnataka High Court held as under:- "'The test is whether tire recipient of the service is equipped to carry on his business without reference to the service provider, if he is able to carry on his business in future without the technical service of tire service provider in respect of services rendered then, it would be said that technical knowledge is made available." The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iding^ data information and maps. That is the technical services which the Fugro has rendered to the assessees. The technology adopted by Fugro in rendering that technical services is not made available to the assessees. The survey report is very clear. Unless that technology is also made available, the assessees are unable to undertake the very same survey independently excluding Fugro in future. Therefore that technical services which is rendered by Fugro is not of enduring in nature. It is a case specific. That information pertains to 8 blocks. The assessees can make use of the data supplied by way of technical services and put its experience in identifying the locations where the diamonds are found and carrying on its business. But the technical services which is provided by Fugro will not enable the assesses to independently undertake any survey either in the very same area Fugro conducted the survey or in any other area. They did not get any enduring benefit from the aforesaid survey. In that view of the matter, though Fugro rendered technical services as defined under Section 9(l)(vii) Explanation 2, it does not satisfy the requirement of technical services as contained in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in running the business, the employees of the Indian entity get equipped, to carry on that business model or service mode! on their own without reference to the service provider, when the service agreement comes to and end. It is not as if for making available, the recipient must also be conveyed specifically the right to continue the practice put into effect and adopted under the service agreement on its expiry." 22. An analysis of the aforementioned rulings lead to one conclusion- "if the fruits of the services remained with the service provider then out of the ambits of the term "make available' but after the fruits of the service rendered remained with the service recipient and the service recipient is able to perform similar activity, for which the services were sought, without the help or recourse of the service rendered then the technology can be said to be transferred or made available to the recipient." 23. For the sake of completeness, there are significant distinction between the definition as prescribed u/s. 9 of the Act of "fees for technical services" as compared with the definition prescribed in Article 13of Indo-UK treaty. But the settled law is that th ..... 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