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TMI Blog2021 (7) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case and in law, the learned Commissioner of Income tax (Appeals) - 58, Mumbai ("the CIT(A)") erred in holding that the entire turnover (receipts) from the Indian Parties) is liable to be treated as turnover for the purpose of taxation in India. The Appellant submits that the said receipt of Standby Maintenance Charges from TCL cannot be treated as turnover for taxation purpose in India. 2. On the fact and circumstances of the case, the learned CIT(A) erred in holding that the entire turnover (receipts from the Indian parties) is to be treated as turnover for the purpose of taxation in India without giving any notice for enhancement or opportunity to the Appellant. The Appellant submits that the CIT(A) ought not to have held that the entire turnover (receipt from the Indian parties) is liable to be treated as turnover for the purpose of taxation in India. 3. On the fact and circumstances of the case and in law, the learned CIT(A) erred in holding that the entire turnover (receipts from Indian Parties) of Standby Maintenance Charges from TCL is liable to be treated as turnover for the purpose of taxation in India. The Appellant submits that the turnover (receipts) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e? 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in concluding that the amount received by assessee as standby Maintenance charges was not in the nature of 'fee for technical services' under section 9(1)(vii) of the Act on the ground that it was a mere collection of annual charge without appreciating that it cast a responsibility on the assessee to actually deploy personnel and maintain equipment to keep the submarine system in working condition? 5. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in concluding that the amount received by assessee as standby maintenance charges was not in the nature of 'Fee for technical services' under section 9(1)(vii) of the Act on the ground that it was in the nature of reimbursement without any profit element or mark up without appreciating that existence of a profit element or mark-up is not a criterion for determination of income by way of fees from technical services under section 9(1)(vii) of the Act? 6. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in ignoring that the Flag Network Operating Centre's acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013-14 5806/M/2017 3.4 7/8 Para 5 on Page 13 59 to 61 The ld. A.R took us through relevant observations of the Tribunal in the aforementioned orders. It was, thus, submitted by the ld. A.R that the Tribunal in the assessee's own case had consistently been holding that the Standby Maintenance Charges received by the assessee from TCL could not be brought to tax as 'Fees for Technical Services' (for short 'FTS') and were liable to be taxed as its 'business income', and that too, to the extent of its reference to the "business connection" in India. Also, it was submitted by the ld. A.R that the Tribunal had observed that the turnover (receipts) of Standby Maintenance Charges from TCL i.e attributable to India had to be calculated on the basis of proportion of the cable length in India vis-a-vis worldwide cable length. In the backdrop of his aforesaid contention, it was submitted by the ld. A.R that though the CIT(A) had rightly concluded that the Standby Maintenance Charges could not be assessed as FTS in the hands of the assessee, however, he had wrongly observed that the entire turnover (receipts from the Indian parties) were liable to be treated as turnover for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as under: "5. We have heard rival submissions. We find that grounds raised by the revenue and the Ground Nos.1 to 5 raised by the assessee are adjudicated by this Tribunal under similar circumstances in assessee's own case in ITA No.2084 & 2085/Mum/2016 for A.Y. 2010-11 & 2011-12 dated 04/05/2018 wherein it was held as under:- "8. In this manner, the rival counsels have made their submissions. We find that the issue regarding the nature of services came-up before the Tribunal for the first time in Assessment Years 1998-99 to 2000-01, and vide order dated 06.02.2015 it was held that the same are not in the nature of 'fee for technical services'. Subsequently, for Assessment Years 2001-02 to 2008-09, the matter again came-up before the Tribunal, and vide order dated 15.06.2015, the amount has been held not to be in the nature of 'fee for technical services' u/s 9(1)(vii) of the Act. The relevant discussion in the order of the Tribunal dated 06.02.2015 (supra) is as under :- 68. The second issue relates to taxability of 'standby maintenance charges' as fees for technical services u/s 9(1)(vii), as raised by the assessee in ground no. 4. As stated earlier, the assessee along wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Capacity on the affected Segment S or Segment X-1 or Segment X-2 in accordance with Schedule F. 69. Thus, under the C&MA the responsibility of maintenance and repairs belongs to both, assessee and the landing parties. The maintenance activities under taken by the assessee for the purpose of standby maintenance which is the impugned issue, was for the arrangement for standby cover and maintenance and operation of FNOC. So far as standby maintenance charges is concerned, it is not in respect of any actual rendering of services but to maintain infrastructures for coordination and setting up conditions for efficient rendering of services in relation to maintenance and repairs of cable system. There is a separate charge for repair and maintenance under the C&MA whereby, the assessee is actually required to undertake repair and maintenance and for which the assessee separately charges. Such a repair and maintenance is separate from standby maintenance cost, which is in the nature of reimbursement of fixed cost. The standby maintenance is a fixed annual charge which is payable not for providing or rendering services but for arranging standby maintenance arrangement which is required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stem, then it can be termed as technical services, however, if there is no actual rendering of services, but mere collection of annual charge to recover the cost of standby facility, agreed by all the members of the consortium on proportionate cost basis, then it cannot be held that it is providing any kind of technical services. Here the most crucial point which has to be seen is firstly, whether there is any actual rendering of services; secondly, is there any mark up or element of profit in the charge received for standby maintenance; and lastly whether it is in the nature of fixed annual charge which is to be recovered as proportionate cost of maintain the standby facility ready for carrying out any maintenance or repair services. This charge is different from an annual maintenance contract, whereby repairs and maintenance is covered for a certain period or services. In the present case as evident from the clause 11.1, that so far as standby maintenance charges is concerned, it is in the form of fixed annual charge which is in the nature of reimbursement. It has been also brought on record that only actual cost incurred has been recovered from VSNL in providing the standby main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he stand of the Revenue is that the turnover of the assessee derived from standby maintenance charges has no connection with the length of the cable laid in India. As per the Revenue, the standby maintenance charges relate to expenditure incurred by the assessee in maintaining the standby facility and Network Operating Centre (NOC) for a quick response to repair the interruptions and coordination of maintenance. The said facility is maintained and can be mobilised at short notice for rendering any repair work whatever and wherever needed. Therefore, as per the Revenue, the standby maintenance charges are relatable to the cable capacity assigned to various landing parties and not the length of the cable. In other words, as per the Revenue, once such expenses on standby maintenance charges is allocated to TCL, i.e. the Indian landing party, with reference to the capacity used, it cannot be further apportioned based on the length of the cable so as to determine profit of the assessee attributable to the business connection in India. 12. The learned representative, however, pointed out that the income of the assessee, which is to be taxed in India, can be appropriately calculated onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turnover for the purpose of taxation in India. The Appellant submits that the said receipt of Standby Maintenance Charges from TCL cannot be treated as turnover for taxation purpose in India. 3. On the facts and circumstances of the case and in law, the Learned CIT(A) erred in holding that the entire turnover (receipts from the Indian parties) of Standby Maintenance Charges from TCL is turnover for the purpose of taxation in India without giving notice for enhancement or opportunity to the Appellant. The Appellant submits that the CIT(A) ought not to have held that the entire turnover (receipt from the Indian parties) is liable to be treated as turnover for the purpose of taxation in India. 17. On this aspect, the short dispute relates to the manner in which the income from standby maintenance charges taxable in India u/s 9(1)(i) of the Act is to be computed. Said charges have been received by the assessee from TCL and, as per the assessee, portion thereof which is relatable to the length of cable in Indian territorial waters vis-a-vis the length of cable worldwide be taken as the total revenue deemed to accrue or arise in India from which relatable expenses are to be redu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Assessing Officer to verify the calculation made by the assessee in this regard in its computation of income and recompute the income accordingly. Thus, on this aspect, assessee succeeds as above." 5.1. The grounds raised by the revenue and ground Nos. 1 to 5 raised by the assessee are disposed off in line with the aforesaid findings of this Tribunal in assessee's own case." On being confronted with the aforesaid view taken by the Tribunal in the case of the assessee for the aforementioned preceding years the ld. D.R could not rebut the same. 6. We have given a thoughtful consideration to the issue before us, and find, that as stated by the ld. A.R, and rightly so, both the issues in question involved in the present cross-appeals are squarely covered by the aforementioned orders passed by the Tribunal in the assessee's own case for the preceding years. As such, finding no reason to take a different view we therein respectfully follow the same. We, thus, in terms of our aforesaid observations uphold the view taken by the CIT(A) that the amounts received by the assessee towards Standby Maintenance Charges from TCL were not in the nature of FTS u/s 9(1)(vii) of the Act, and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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