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TMI Blog2020 (3) TMI 971X X X X Extracts X X X X X X X X Extracts X X X X ..... service provided by the person technically qualified in the field of engineering. The Consultancy Service is again very wide, it can include the service of every nature. From the scope of work undertaken, it is evident that the Indonesian law firm has provided consultancy services. In this case, the Indonesian firm has provide Consultancy Service . Therefore, I am of the view that it is not open for the petitioner to state that the said service fell within exception provided in Section 9(1)(vii)(b) of the Income Tax Act, 1961 or outside the Explanation 2 to said Section. If the service utilized by the petitioner abroad was for preexisting business in Indonesia, the petitioner could have legitimately stated that the service provided was utilized for a business of profession carried out outside India or for the purpose of making or earning any income from any source from outside India. There is no source that is existing in Indonesia. In this case, there was a mere proposal for acquiring the insurance business in privately or Indonesian Insurance Policy. The service of the said law firm was sought for a range of service which are approval consultancy service. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le by- (b) : A person, who is resident, except where the fees are payable in respect of services utilized in a business or profession carried on by such person outside India, or for the purpose of making or earning any income from any source outside India. Explanation:- For the removal of doubts, it is hereby declared that for the purposes of this section, income of a Non -resident shall be deemed to accrue or arise in India under clause v. clause vi or clause vii of sub section (1) and shall be included in the total income of the Non-resident, whether or not. i. the non-resident has a residence or place of business or business connection in India; or ii. the non-resident has rendered services in India. From the above explanation it is clear that the services are taxable in India, irrespective of the place of rendition of the services, and accordingly the payments to the Non-resident company, in this case, are subjected to withholding tax @ 10%. Plus applicable surcharge and Education Cess, under normal circumstances. But in this case the Non-resident (deductee) is not having a Permanent Account Number (PAN), as mandated U/s.206AA of the I.T.Act, 1961, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. 5. (1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which- (a) is received or is deemed to be received in India in such year by or on behalf of such person ; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year ; or (c) accrues or arises to him outside India during such year : Provided that, in the case of a person not ordinarily resident in India within the meaning of sub-section (6) of section 6, the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India. (2) Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which- (a) is received or is deemed to be received in India in such year by or on behalf of such person ; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year. Explanation 1.- Income accruing or arising outside India shall not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head Salaries .] 7. It is submitted that the transaction which is under consideration fell within under exception to of Section 9(1)(vii)(b) of the Income Tax Act, 1961, since the fees payable was in respect of services utilised in a business or profession carried by the petitioner outside India and for the purpose of making or earning any income from any source outside India. 8. It is submitted that the amount which was paid by engaging services of the aforesaid law firm was for the purpose of making or earning any income from any source outside India within the meaning of Section 9(1)(vii)(b) of the Income Tax Act, 1961. The expenditure incurred was for service procured for a future business to be carried on by the petitioner in Indonesia. Therefore, the petitioner cannot made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arat High Court in T.A.No.1177 of 2018. vi. Clifford Chance Vs. Deputy Commissioner of Income Tax, Circle 2(6), Mumbai, (2009) 318 ITR 237. vii. Commissioner of Income Tax (International Taxation) Vs. Indusind Bank Ltd., (2019) 415 ITR 115 (Bom). viii. Jindal Thermal Power Company Limited Vs. Deputy Commissioner of Income Tax (TDS), (2010) 321 ITR 31 (Kar). ix. GVK Industries Ltd., Vs. Income Tax Officer, (2015) 11 SCC 734. 15. On the other hand, the learned counsel for the respondents would contend that as per Explanation 2 to Section 9(1)(vii)(b), fees for technical services means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel). She submits that it does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head Salaries . She further submits that any amount paid by a resident to a non-resident for managerial, technical or consultancy service is considered to be fees f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this Act (not being income chargeable under the head Salaries ) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force : Provided that in the case of interest payable by the Government or a public sector bank within the meaning of clause (23D) of section 10 or a public financial institution within the meaning of that clause, deduction of tax shall be made only at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode : Provided further that no such deduction shall be made in respect of any dividends referred to in section 115-O. Explanation 1.- For the purposes of this section, where any interest or other sum as aforesaid is credited to any account, whether called Interest payable account or Suspense account or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or paying to a nonresident, not being a company, or to a foreign company, any sum, whether or not chargeable under the provisions of this Act, shall furnish the information relating to payment of such sum, in such form and manner, as may be prescribed. (7) Notwithstanding anything contained in subsection (1) and sub-section (2), the Board may, by notification in the Official Gazette, specify a class of persons or cases, where the person responsible for paying to a non-resident, not being a company, or to a foreign company, any sum, whether or not chargeable under the provisions of this Act, shall make an application [in such form and manner to the Assessing Officer, to determine in such manner, as may be prescribed], the appropriate proportion of sum chargeable, and upon such determination, tax shall be deducted under sub-section (1) on that proportion of the sum which is so chargeable. 22. As per decision of the Hon'ble Supreme Court in G.V.K.Industries Ltd., Vs. Income Tax Officer, (2015) 11 SCC 734, Section 9(1)(vii)(b) of the Income Tax Act, 1961 carves out an exception. The exception carved out in the latter part of sub-clause (b) applies to a situation when f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t blames bad management. 2. the people who run and control a business or similar organization: The management is/are considering closing the factory. The shop is now under new management, junior/middle/senior management, a management decision/job. My role is to act as a mediator between employees and management. Most managements are keen to avoid strikes. 3. the act or skill of dealing with people or situations in a successful way: classroom management, time management, management of staff. Diet plays an important role in the management of heart disease. 26. In Black's Law Dictionary, 10th Edition published by Thomson Reuters, the expression Management has been defined as follows:- Management. 1. The people in an organization who are vested with a certain amount of discretion and independent judgment in managing its affairs. C-level management. (2001) Collectively, the officers of an organization holding titles prefixed by chief ; the upper tier of top management she promoted from senior vice president to the c-level - Also termed c-board. Middle management. (1941) Company employees who exercise some discretion and independent judgment in carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process, preparation / vetting of all related papers / documents and accompanying your representative / representing you before the regulatory authorities as and when required; (d) Power of Attorneys (as may be required); (e) Public announcements in respect of the acquisition (as required by the Indonesian company law); (f) Form in respect of shares transfers (e.g. Shares certificates, shareholders register); and (g) Amended Articles of Association of the Target Company. 33. From the scope of work undertaken, it is evident that the Indonesian law firm has provided consultancy services. 34. In this case, the Indonesian firm has provide Consultancy Service . Therefore, I am of the view that it is not open for the petitioner to state that the said service fell within exception provided in Section 9(1)(vii)(b) of the Income Tax Act, 1961 or outside the Explanation 2 to said Section. 35. If the service utilized by the petitioner abroad was for preexisting business in Indonesia, the petitioner could have legitimately stated that the service provided was utilized for a business of profession carried out outside India or for the purpose of making or earn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereby affirm the ultimate conclusion of the CIT(A) in deleting the tax demand relatable to difference between 20% and the actual tax rate on which tax was deducted by the assessee in terms of the relevant DTAAs. As a consequence, Revenue fails in its appeals. 10.Having regard to the position of law explained in Azadi Bachao Andolan(supra) and later followed in numerous decisions that a Double Taxation Avoidance Agreement acquires primacy in such cases, where reciprocating states mutually agree upon acceptable principles for tax treatment, the provision in Section 206AA (as it existed) has to be read down to mean that where the deductee i.e the overseas resident business concern conducts its operation from a territory, whose Government has entered into a Double Taxation Avoidance Agreement with India, the rate of taxation would be as dictated by the provisions of the treaty. 39. Therefore, the issue as to whether the petitioner was entitled to the benefit of any Clause in the said Double Taxation Avoidance Agreement as notified in Notification No.GSR 77(E), dated 04.02.1988, is left open. It is for the petitioner to file appropriate application before the 2nd respondent ..... 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