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TMI Blog2020 (8) TMI 806X X X X Extracts X X X X X X X X Extracts X X X X ..... EMCAP without deducting tax at source, no disallowance under section 40(a)(i) was ever made. There being no difference in facts in the impugned assessment year, considering that the payment was made under the same contract, even, applying the rule of consistency, no disallowance under section 40(a)(i) can be made in the impugned assessment year. Accordingly, we delete the disallowance made by the Assessing Officer - Decided in favour of assessee. - ITA No. 4521/Mum/2017 - - - Dated:- 27-7-2020 - Shri Saktijit Dey (Judicial Member) And Shri N.K. Pradhan (Accountant Member) For the Assessee : Mr. Girish Dave, AR For the Revenue : Mr. Suhas Kulkarni, JCIT ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2009-10. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-56, Mumbai [in short CIT(A) ] and arises out of assessment completed u/s 143(3) of the Income Tax Act 1961 (the Act ). 2. Briefly stated, the facts of the case are that the appellant filed its return of income for the assessment year (AY) 2009-10 on 25.09.2009 declaring total income of ₹ 44,59,83, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TCG Lifesciences TPO 29.54% 8. Alphageo (India) Ltd. TPO 20.30% 9. Transgene Biotech Ltd. (Diagnostic services) TPO -2.93% Average 18.55% Assessee s margins 16.00% Thus the TPO made an adjustment based on PLI of the nine comparables of 18.15% and made an adjustment which is produced below : Particulars Year ended 31 March 2009 Total Cost 4,75,69,866/- OP/TC as per comparable @ 18.15% Total Income as per comparable (A) 86,33,931/- Adjustment offered by assessee to tax (B) 45,84,756/- Amount of adjustment under Technical Support Services 40,49,175/- With respect to back office support segment, the TPO completely reject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is stated that the company has earned its whole operating income from contract research operation and hence it can be concluded that the business of the appellant of provision of technical support service is functionally different to that of the company. Thus the Ld. counsel submits that TCG should be rejected because it is functionally different from the appellant s business of provision of technical services. In respect of Pfizer Ltd. Service Segment ( Pfizer ), the Ld. counsel argues for its exclusion on the ground that the data of the company is unreliable because the margin calculated based on the financials of the year under consideration (YE November 2008) works out to 45.34% ; however, if the margins are calculated based on the immediate subsequent (YE 2009) by taking previous year s figure, it works out to 4.81%. It is stated that the company prepares annual accounts with different year end-i.e. the company has prepared and reported financials with November end whereas the appellant prepares and reports financial data for the financial year end i.e. March. Thus it is stated that since the data considered are for different periods which may result in different bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices, the Ld. DR supports the order of the CIT(A) referring to similar decision for AY 2008-09. Thus it is stated by him that the order passed by the Ld. CIT(A) confirming the adjustment of ₹ 1,98,30,718/- made by the AO be affirmed. 6. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. Let us discuss the 3 comparables, finally selected by the TPO/AO which are in dispute. In the case of Alphageo, as per the Annual Report for the FY 2008-09, they provide 2D and 3D seismic and related services like seismic data acquisition, processing and interpretation. The Company s comprehensive portfolio of services comprises : Seismic data acquisition Designing and preplanning of 2D and 3D surveys Seismic data acquisition in 2D and 3D Seismic data processing Seismic data processing of 2D and 3D data Reprocessing Special processing including pre-stack imaging AVO inversion and other services Seismic data interpretation Structural and Stratigraphic interpretation Generation, evaluation and ranking of prospects Reservoir data acquisition Reservoir analysi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r different periods, which may result in different business conditions, we have no hesitation in rejecting Pfizer as a comparable to the appellant. In view of the above findings, we delete the adjustment of ₹ 40,49,175/- made by the AO. 7. In respect of provision of back-office support services, we find that similar issue arose before the ITAT K Bench, Mumbai in the case of the appellant for AY 2008-09 (ITA No. 3601/Mum/2014). As mentioned earlier, the Ld. CIT(A) while confirming the adjustment of ₹ 1,98,30,718/- has followed the order of his predecessor-in-office for AY 2008-09. The Tribunal vide its order dated 23.05.2018 for the AY 2008-09 has set aside the order of the Ld. CIT(A) and restored the matter to the file of the AO/TPO for fresh adjudication. Facts being identical, we follow the above order of the Co-ordinate Bench and restore the matter in respect of provision of back-office support services to the file of the AO/TPO for fresh adjudication, after affording reasonable opportunity of being heard to the appellant. 8. Finally we deal with the disallowance of ₹ 1,85,29,377/- made by the AO u/s 40(a)(i) of the Act. During the previous year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Treaty. In our considered opinion, we have to address this issue at the very outset. Article 12(4) of India Singapore tax treaty defines fee for technical services as under: 12.4 the term fees for technical services as used in this Article means payments of any kind to any person in consideration of services of a managerial, technical or consultancy nature (including the provision of such services through technical or other personnel) if such services: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or (b) make available technical knowledge, experience, skill, know how or processes, which enables the person acquiring the services to apply the technology contained therein; or (c) consist of the development and transfer of a technical plan or technical design, but excludes any service that does not enable the person acquiring the service to apply the technology contained therein. 49. The Assessing Officer has treated the payment made as fees for technical services on the reasoning that under the agreement EMCAP has made available managerial and techn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service provider. In other words, to fit into the terminology making available , the technical knowledge, skill, etc., must remain with the person receiving the services even after the particular contract comes to an end. It is not enough that the services offered are the product of intense technological effort and a lot of technical knowledge and experience of the service provider have gone into it. The technical knowledge or skills of the provider should he imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. Technology will be considered made available' when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service that may require technical knowledge, skills, etc., does not mean that technology is made available to the person purchasing the service, within the meaning of paragraph (4)(b). Similarly, the use of a product which embodies technology shall not per se be considered to make the technology available, in other words, payment of consideration would be regarded as fees for technical/included services only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO u/s 40(a)(i) of the Act Facts being identical, we follow the above order of the Co-ordinate Bench in appellant s own case for AY 2007-08 and AY 2008-09 and delete the addition of ₹ 1,85,29,377/- made by the AO u/s 40(a)(i) of the Act. 10. However, before we part with the matter, we must deal with one procedural issue as well. While hearing of these appeals was concluded on 03.01.2020, this order thereon is being pronounced today, much after the expiry of 90 days from the date of conclusion of hearing. We are also alive to the fact that rule 34(5) of the Income Tax Appellate Tribunal Rules 1963, which deals with pronouncement of orders. Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, a nationwide lockdown was imposed for 21 days to prevent the spread of Covid-19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid-19. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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