9911796707
TMI Blog2022 (5) TMI 770X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 and is running a University under the name and style of M/s. Sharda University which is engaged in the business of providing Medical Education, Hospital Services and other Educational Courses at Greater Noida. A TDS survey under section 133A of the Income Tax Act, 1961 was conducted on 29.03.2017 at the educational premises of the deductor. 2.1. During the course of such TDS survey, it was found that the assessee had remitted abroad amounts under various heads viz. Consultancy Fees on Student Recruitment, Commission on Student Recruitment, Participation Fee for Education Tour, Advertisement/ Marketing Promotional Activities, Educational Tours, Ph.D Thesis Evaluation, Education Fair Charges etc. However, the assessee has not made TDS on these foreign remittances. The statement of Shri Ram Phal Gupta, Advisor Finance, Sharda University was recorded on 29.03.2017 to ascertain the remittances which had been made abroad and to ascertain the nature of these payments. Subsequently, a letter dated 08.05.2017 was issued to the assessee requiring it to furnish information regarding TDS on foreign remittances from 01.04.2009 to 31.03.2013. The assessee produced details of outward foreign r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorized consultant. 4. This agreement shall be effective for one year from 30/07/2015 to 30/07/2016 and based on satisfactory performance and targets achieved, will be renewed for a similar period of time. 5. Exclusively you will work only with Sharda University in India. 6. Either Party may terminate this Agreement giving a thirty (30) days notice in writing. 7. The consultants can book candidates for Provisional consideration of admission upon payment of the Admission Fees (as specified in the Program Prospectus & Website) th tough and Demand Draft in favour of Sharda University payable at New Delhi, India or to Sharda University Bank Account as mentioned on the website. 8. Complete candidate files, fully attested by Party B, shall be scanned and emailed to Sharda University ([email protected]) prior to admission. These documents must be verified and attested by the consultant before emailing/sending to Party A. The original documents should be brought by the student himself. The admission office of Sharda University shall complete authenticity checks on the documentation once the originals are received. 9. The right of admission is solely and purely based at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party B (Sharda University) MBS ADMISSION Witnessed By: Witnessed By: 1. 1.Singto Barisuka 2. 2. Sonia Obanu" 2.5. He analysed the provisions of DTAA with the respective countries and the MoU between the assessee and the consultants and noted that the assessee has engaged them on behalf of it for recruitment of international students to assessee's various courses offered in India. Rejecting the various explanation given by the assessee, the AO held the commission paid by the assessee to the consultants as Fee for Technical Services (FTS) under section 9(l)(vii) in the nature of consultancy and managerial services on account of the following reasons : a) The consultancy fees on student recruitment is admittedly paid to the agents appointed by Sharda University to visit various school at local area and to collect the data of prospective students. b) These agents approach to interested students through email/phone. They introduce Sharda University by giving the details of the colleges, providing admission brouchers, describe the fee structure of the particular courses and pursue with the students and their families to get them ready for taking admission in Sharda Uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, the assessee has not deducted any tax from the payments made to the foreign firms and nonresidents, the AO rejecting the various explanations given by the assessee held the assessee to be an assessee deemed to be in default under section 201(1) of the I.T. Act, 1961 read with section 195(1) of the I.T. Act, 1961. Since the assessee was deemed to be an assessee in default of tax, therefore, the A.O. charged simple interest at an amount of Rs.20,21,730/- as interest under section 201(1A) of the I.T. Act, 1961 for the A.Ys. 2010-11 to 2017-18 and also initiated penalty proceedings under section 271C separately against the assessee for failure to deduct tax at source for the A.Ys. 2010-11 to 2017-18. 4. In appeal, the Ld. CIT(A) upheld the action of the A.O. by observing as under : "4.13. I have considered the submission of the appellant, perused the assessment order, remand report and rejoinder of the appellant. The assessing officer has held the appellant as "assessee in default u/s 201 of the Act for non-deduction of tax u/s 195 of the Act for various remittances abroad. The appellant had taken the different issues for which the assessee was considered to be in default under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the assessee. 15. Confidentiality & Integrity a) Party B undertakes to keep confidential and not to deal with any of the information, documents, material and details acquired under this Agreement for other than the sole purpose of Party B's performance of his/ her obligations under this Agreement and towards the interests and benefits of the Party A. b) Should Party B found exploiting candidates for services that they either cannot provide or have no right to provide, shall immediately be struck off from the University's list of consultants." 4.16. On perusal of the agreement following facts emerge : 1. Sharda University has hired the parties to which remittances have been made (referred to as Party B or the consultant in the Memorandums of Understanding) as Authorized Consultants. They are required, by virtue of this MoU, to advise the applicants seeking admission to take admission in different programmes of Sharda University only. This is a binding condition on the Authorized Consultants as the Clause 5 of the MoU lays a pre-condition that the consultant will work exclusively for Sharda University only. 2. The consultant also had the duty to verify and attest the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnical 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". 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) or Clause (vi) or Clause (vii) of sub-section (1) and shall be included in the total income of the nonresident, 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." 4.20. So, in the present case it has to be examined only whether the services provided by the foreign firm to the appellant falls under the category of "fees for technical services" U/s 9 (1)(vii) of the Act. 4.21. A consultant is a professional who provides expert advice in a particular area such as management, education, accountancy, law, human sources, marketing, public relations, finance, engineering, scie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice from these foreign consultant the appellant could not have got the business in the form of admission of foreign students. In lieu of such services the appellant is making payment of fee based on the number of students taking admission in the institutions run by the appellant university. In view of all such facts, I am of the opinion that the services provided by all the firms/company are in the nature of managerial and consultancy services which clearly falls within the ambit of "Fee for Technical Services" under Section 9(l)(vii)of the Act. In view of this the appellant was very much liable to deduct tax over such payments to non residents consultants u/s 195 of the Act. Hence, for failure to deduct TDS on remittances of Rs.2,31,81,507/ paid to Authorized Consultants, the action of the assessing officer to treat the appellant as assessee in default u/s 201 of tins Act is correct. Charging interest of Rs.18,83,199/u/s 201 (1 A) of the Act is also found to be correct. B. Failure to deduct TDS on remittances made for Ph.d Thesis Evaluation, Faculty Development Expenses and Professional Fees. 4.27. During the period, remittances have been made for Ph. D Thesis Evaluation, Fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t correct as any service^ for Faculty Development and Professional Services can be given by an expert of that field and will be in the nature of technical services only. 4.31. In view of all such facts, I am of the opinion that the services provided for Ph. D Thesis Evaluation, Faculty Development Expenses and Professional Fees are in the nature of technical services which clearly falls within the ambit of Fee for Technical Services under Section 9(l)(vii)of the Act. and therefore the appellant was very much liable to deduct tax over such payments abroad u/s 195 of the Act. Hence, for failure to deduct TDS on remittances paid on these three accounts, the action of the assessing officer to treat the appellant as assessee in default u/s 201 of the Act is correct. 4.32. Hence, for failure to deduct TDS on remittances of Rs.81,110/ paid for Ph.D Thesis Evaluation, the action of the assessing officer to treat the appellant as assessee in default u/s 201 of the Act is correct. Charging interest of Rs. 2,820/ u/s 201(1 A) of the Act is also found to be correct. 4.33. Similarly, for failure to deduct TDS on remittances of Rs.1,88,820/paid for Faculty Development Expenses and Rs.30,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has erred in calculating TDS liability on payments i.e (i) Expenses and Commission on the student recruitment/ admission, (ii) PhD thesis evaluation, (iii) faculty development expenses,(iv) professional services, and (v) membership/affiliation fees made to non-resident parties is baseless. The above payments must be made after deducting TDS as the sums paid under different heads were taxable in India as per the provisions of income tax Act and relevant DTAAs. The mere submission of the copy of payment made for professional services and the copy of membership/affiliation fee letter from the International Education Bodies does not support the claim of the assessee. Moreover, the assessee did not provide the supporting document during the assessment proceedings and additional evidence may not be accepted at this stage as per the provisions of rule 46A of Income Tax Rules, 1962. In view of the details submitted by the assessee, the claim of the assessee appears to be false and the deserves to be rejected. " 4.37 I have verified the content of the details of membership/affiliation fee, documents for membership/ affiliation fee furnished as additional evidences. The document ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f TDS @ 10% under the provisions of Section 206AA of the Income Tax Act, 1961 4.42. The assessing officer has elaborately dealt with the issue on page33-35 of tlie assessment order. All the aspects of the issue have been covered by the assessing officer in detail. 4.43. The assessee has stated that the proposed imposition of higher rate @ 20% is without considering the amendment made by the Notification No. SO 2196 (E) dated 24th June 2016, whereby Rule 37BC has been inserted in the Income Tax Rules, 1962 providing relaxation from deduction of tax at higher rate u/s 206AA on providing certain information / documents in case of non-residents not having PAN. 4.44. I agree with the observation of the AO that the Notification No. 53 of 2016 has come into force only from 24th June, 2016 and therefore it is not applicable for all the relevant assessment years. In the case of the assessee, the remittances have been made from the A.Y. 2010-11 onwards. Therefore, the provisions of the above notification are not applicable for the remittances made by the assessee during the A.Ys. 2009-10 to 2015-16 and till 24.06.2016 in the F.Y. 2016-17. 4.45. Further, the provisions of Rule 37BC ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the provisions of Section 9(1)(vii) of tint Income Tax Act, 1961 will be fully applicable. It has already earlier been held that Consultancy Services are taxable in India as per the provisions of Section 9(l)(vii). The assessee was therefore required to deduct TDS as per the provisions of Section 195 on such foreign remittances. 4.51. Further, DTAAs exist in the cases of Countries- Kenya, Korea, Mauritius and Tanzania. The FTS clauses are present in these DTAAs in which Managerial, Technical and Consultancy Services are taxable in the source state. 4.52. The AO has been very judicious in discussing the case of remittance of $ 6700 made to M/s Global Education Link Ltd., Dar es Salam, Tanzania as Consultancy Fees. A perusal of the MoU with this consultant shows that this agreement is effective from 1st May, 2015 to 31st April, 2016. Further, perusal of DTAA between India and Tanzania reveals that there is no FTS Clause. However, Article 14 and 15 of the DTAA provides that income of the individuals will be taxable in the other contracting state (India in this case) for providing Technical Services. M/s Global Education Link Ltd. is a company and not an individual. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to non-resident parties. 4. Because the Ld. CIT(Appeals) has erred both in law and on facts in rejecting the appellants ground and the submission and in confirming the order passed u/s 201(1)/201(1A) vide which the Assessing Officer has calculated the TDS liability on the appellant trust on following payments to non-resident parties :- i. Faculty Development expenses. ii. Professional Services. 5. Because the Assessing Officer in the order passed u/s 201(1)/201(1A) has wrongly, illegally, and arbitrarily held that the payments to non-resident parties are covered under the definition of fees for technical services and the receipts are taxable in India in the hands of respective recipients as per the provisions of section 9( 1 )(vii) of the I.T Act. The Ld. CIT(Appeals) has erred both in law and on facts in confirming the observations of the Assessing Officer and in rejecting the appellants ground and the submission on the issue. 6. Because the Ld. CIT (Appeals) has erred both in law and on facts in confirming the action of the Assessing Officer who treated the payments made to certain non residents as their income deemed to accrue or arise in India. Further the Ld. CIT (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 97,466/- 1,19,493/-' 2012-13 12,20,595/ 2,44,119/- 2013-14 24,45,250/ 4,89,050/- 2014-15 1,61,42,203/- 32,28,441/- 2015-16 19,99,843/ 3,99,969/- 16,110/- 3,222/- 2016-17 7,76,150/- 1,55,230/- 65,000/- 13,000/- 2,31,81,507/- 46,36,302/- 81,110/- 16,222/- 30,000/- 6,002/- 1,88,28 37,656/- Total TDS 46,96,182/- Interest 19,24,001/- Grand Total 66,20,183/- 7.2. So far as Commission on Student Recruitment/ Admission is concerned, the Learned Counsel for the Assessee submitted that the MOU entered into with the various parties in different countries contains standard terms and conditions which has been reproduced by the assessing officer So far as the contention of the revenue that the agents have rendered technical services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Vs. STO (1977) 3 SCC 147. iii. Moped India Ltd Vs. Asst. Collector Central Excise 1985 (SC) iv. State of Andhra Pradesh Vs. Kone Elevators India Ltd (2005) 181 ELT 156 (SC) v. Sundaram Finance Ltd Vs. State of Kerala AIR 1966 SC 1178 (SC). vi. Mc Dowell & Co. Ltd Vs. Commercial Tax Officer, 1985 TMI 40038 (SC). vii. Bharat Sanchar Nigam Ltd Vs. Union of India 2006 TMI 309 (SC). 7.5. The ld. Counsel for the assessee submitted that the agents entered into an MOU with the assessee exclusively for admission of the students in Sharda University. The payment to such persons are also dependent on the number of students enrolled through them in Sharda University. He submitted that as per Explanation 2 to section 9(l)(vii), the "Fee for Technical Services" means consideration for rendering of any managerial, technical or consultancy services. He submitted that except motivating and convincing the international students for taking admission in Sharda University, these agents do not have any role in the admission of the students. Referring to clause 8 of the MOU he submitted that "the right of admission is solely and purely based at the discretion of Appellant's Central Adminis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt Ltd. Vs. DCIT ITA No.1047/Kol/2016. iv. Evolv Clothing Company Pvt Ltd Vs. Asst. CIT ITA No. 572/2013 (Mad.). v. Batlivala & Karani Securities (India) Pvt Ltd Vs. DCIT ITA No.1234 and 1235/Kol/ 2013. b) Commission to Non-Resident on marketing services is not taxable in India: i. CIT Vs. Eon Technology P Ltd (2012) 246 CTR 40 (Delhi HC). ii. DCIT vs., Taj International Pvt Ltd [2018] 96 taxmann.com 222 (Delhi Trib.). iii. Southern Borewells Vs. CIT [2014] 43 taxmann.com 378 (HC Kerala). iv. ITO Vs. Trident Exports [2014] 44 taxmann.com 297 (Chennai). v. Allied Nippon Ltd Vs. DCIT [2013] 37 taxmann.com 135 (Delhi Trib). vi. Armavesh Global Vs. ACIT [2012] 21 taxmann.com 130 (Mum. Trib). 7.11. So far as Ph. D Thesis Evaluation is concerned, the Learned Counsel for the Assessee submitted that the payment was made by the assessee to non-resident for evaluation of the thesis. The expenses were incurred under the head related to education which cannot be considered as fee for technical services as it is neither a technical services for applied or industrial sciences nor consultancy for technical services and nor the managerial services. 7.12. So far as of Faculty D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per which managerial, technical and consultancy services are to be taxed in the source state (Page 45 of AO). The CIT (A) in para E on page 33 of his order has also referred to the provisions of DTAA and provisions of FTS clause while confirming the finding of the AO. He drew the attention of the Bench to provisions of section 9(l)(vii) of the Act and submitted that failure to deduct TDS on remittances to authorized consultants attract the provisions of section 201(1)/201(1A) of the Act. 8.1. The ld. DR referring to the MOU submitted that a perusal of the MOU made with the consultants (reproduced on Pages 39 - 42 of the assessment order) shows that the assessee had engaged them on its behalf for recruitment of international students to the assessee's courses in India. It is seen that the MOU stipulated that the agreement would be renewed further on the basis of achievement of targets by the foreign parties. The foreign parties would work exclusively with the assessee i.e. Sharda University. It is evident from the above that the consultants were providing expert advice and inputs to the students on behalf of the assessee. The assessee is a large university offering courses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. (ITA No. 292/2014 dated 18.09.2014) relied on by the Ld.AR is concerned, she submitted that on a perusal of the relevant paras 21 & 22 that were relied on by the assessee, it is seen that the facts of the case are entirely different from those in the present case. In the case before the Hon'ble Delhi High Court the issue was in respect of commission paid for arranging exports sales and recovery of payment and it was held that these were not in the nature of consultancy services. However in the present case the issue involved giving expert advice and inputs in various disciplines to foreign students thereby enabling them to take a considered decision leading to admission in the assessee university. Thus, it was clearly a technical service that was being provided and that they were being paid for and the same would fall under the purview of section 9(l)(vii) of the Act. She accordingly submitted that the grounds raised by the assessee should be dismissed. 9. We have considered the rival arguments made by both the sides, perused the orders of the A.O. and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... niversity which is nothing but marketing by the agent. It is his submission that as per the terms of the MoU the agent is entitled for commission only after the student is enrolled and the nomenclature does not decide the real nature of the transaction. It is also his submission that the MoUs entered into with the various parties in different countries contain standard terms and conditions. Further it is also his submission that the said marketing services are outside the purview of Section 9(1)(vii) and, therefore, the amount received by the agents as per the MOU is not the income deemed to accrue or arise in India. 10.1. We find force in the above arguments of the Learned Counsel for the Assessee. We find merit in the arguments of the Learned Counsel for the Assessee that the nomenclature given in the agreement as consultants will not conclude that these persons were rendering consultancy services to the assessee. For deciding whether these persons were rendering any technical services as provided under section 9(1)(vii) of the I.T. Act, 1961, one has to look into the terms and conditions of the agreement. A perusal of the terms and conditions which has been reproduced by the A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... give admission to any person they want. We find as per Clause-9 of the MOU, it is apparent that the right of admission of the students in assessee's university is surely and purely based on the discretion of the assessee's central admission cell. The working of the agent is limited to collect the required documents, attest the same and sent a scanned copy of these documents to the assessee. After receiving these documents from the agents, the university admission cell checks the documents and evaluate the same for the eligibility of the admission of the applicants. Once the non-resident student takes admission in the university and pay full fee, the agent who referred that particular applicant is entitled for commission. Similarly as per clauses 10 and 11 of the MOU the agent is entitled to commission only after the student is enrolled. In case of refund the agent is not entitled to any commission. The agent has no role to direct the assessee how they should admit the students. The work of the agent, in our opinion, is only relating to the marketing of the assessee's educational courses. It is also not disputed that these persons are not having any permanent establishment in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the recipient chargeable under the head" Salaries".]" 10.6. We find the provisions of Section 195 of the I.T. Act, 1961 reads as under : "195. Other sums (1) Any person responsible for paying to a nonresident, not being a company, or to a foreign company, any interest (not being interest on securities) or any other sum chargeable under the provisions of 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.] Explanation - 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" Susp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chnology Centre Pvt. Ltd., vs., CIT 327 ITR 456 (SC) has held that "tax has to be deducted at source if the income is chargeable to tax in the hands of the non-resident in India." 10.8. Now the question arises as to whether the remittances made by the assessee to these agents as per the terms and conditions of the MoU are chargeable to tax in the case of the non-resident. Provisions of section 5(2) of the Act determine the scope of total income chargeable to tax in case of non-resident. Provisions of Section 5 (2) of the I.T. Act, 1961 reads as under : "Section 5 (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 be deemed to be received in India within the meaning of this section by reason only of the fact that it is taken into account in a balance sheet prepared in India. Explanation 2.- For the removal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verseas nonresident agents can be categorized as FTS u/s 9(i)(vii) of the Act and accordingly be taxed under the provisions of the Act. Explanation (2) to Section 9(i)(vii) defines FTS as under: "For the purpose of this clause, FTS means any consideration including any consideration for rendering any managerial, technical or consultancy services (including the provisions 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"." 13. It is evident that for a particular item of income to be categorized as FTS, it is necessary that some sort of managerial, technical or consultancy services should have been rendered by payees. The terms managerial, technical and consultancy do not find mention in the I. T. Act, 1961 and it is a settle law that they need to be interpreted based on their understanding in common parlance. Hon'ble Delhi High Court, in J.K. (Bom.) Limited Vs CBDT and Another 118 ITR 312 (Del.) referred an article on Management Services wherein it is stated that the Manage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ELHI Special mailing on request. Cost of promotional functions . Advertising, media planning & media placing. Construction & staffing of exhibition booths., Assistance at travel trade shows & full time-dedicated participation by Mr Sultan-Assistance with legal affairs Execution of dedicated sales blitzes on behalf of-the client. Printing of material. Marketing &. Managerial time. Personal sates calls as mentioned, travel expenses within the area other than transport by air/train to distance places & to Canada, Mexico &. Caribbean, 8. CHARGES: Mr. Sultan will be paid a monthly retainer ship of USD 3000/- (USS THREE THOUSAND) per month, payable, always in the middle of each month, In addition to this amount he would' be paid monthly up to USD 70o/D(USD SEVEN HUNDRED) towards Communications telephone answering service, office telephone, cellphone, charges for internet. Normal office material (excluding printing), Postal charges,' electricity, reasonable entertainment etc. on an actual basis. Local bus transport etc on actual basis Bus / train and car rental expenses on actual basis for making sales calls within the tri state area (New York. New Jersey &. Connecticut) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onvenience of Le Passage to India Tours and Travels Pvt. Ltd. Out of pocket and travel expenses are to be billed by him separately. Mr. Naresh Sarvaria will support Le Passage to India Tours and Travels Pvt. Ltd.'s work and assists requests and answers whenever needed. Mr. Naraesh Sarvaria will not represent any other Destination Management Company form India. In the same manner Le Passage to India Tours and Travels Pvt. Ltd. will not appoint any other representative in the same country. Mr. Naresh Sarvaria will report on a monthly basis his actions towards Le Passage to India Tours and Travels Pvt. Ltd.," 15. From the nature of services to be performed by the overseas agents, we are of the view that services rendered by the agents in this case are purely in the nature of advancement of business of the assessee company and cannot be categorized as managerial/ technical/consultancy services. Accordingly, the consideration paid by the assessee cannot be classified as fee for technical services (FTS). 16. We further find that Hon'ble Delhi High Court in the case of Panalfa Autoelektrik Ltd. while explaining meaning of the word managerial, technical or consultancy servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court in the case of DIT (Intl.) vs., Panalfa Autoelekrik Ltd. vide order dated 18/09/2014 has observed as under : "12. In the present case, clause (b) to Section 9(i)(vii) would be applicable as the respondent-assessee, the payer was a resident of India. The exceptions carved out under clause (b) are not applicable as it is not the case of the respondent-assessee that the fee paid was in respect of services to be utilised in business or profession carried out by the payer outside India, or for the purpose of making or earning of any income from any source outside India. The respondent-assessees manufacturing unit was in India and it would be proper to hold that the source of income would be the manufacturing unit of the respondent-assessee in India, even if the sale proceeds were on account of exports. 13. The main question and issue, which would arise is whether the payment made to the non-resident would be covered under the expression, "fee for technical services" as defined in Explanation 2 quoted above. There are three categories of technical services as per Explanation 2; managerial services, technical services and consultancy services, and it includes provisions for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch pertains to or has the characteristic of a manager. It is obvious that the expression "manager" and consequently "managerial service" has a definite human element attached to it. To put it bluntly, a machine cannot be a manager." Reference can be also made to the decision of the Authority for Advance Rulings in In Re: Intertek Testing Services India Private Limited, [2008] 307 ITR 418, wherein it was elucidated :- "First, about the connotation of the term "managerial". The adjective "managerial" relates to manager or management. Manager is a person who manages an industry or business or who deals with administration or a person who organizes other peoples activity [New Shorter Oxford Dictionary]. As pointed out by the Supreme Court in R. Dalmia v. CIT [1977] 106 ITR 895, "management" includes the act of managing by direction, or regulation or superintendence. Thus, managerial service essentially involves controlling, directing or administering the business." 15. The services rendered, the procurement of export orders, etc. cannot be treated as management services provided by the non- resident to the respondent-assessee. The non-resident was not acting as a manager or deali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed authorization issued by the respondent-assessee in favour of the non-resident. Thus, the respondent-assessee dictated and directed the non-resident. The Commissioner of Income Tax (Appeals) has also dealt with quantification of the commission and as per clause 4, the commission payable was the difference between the price stipulated in the agreement and the consideration that the respondent-assessee received in terms of the purchase contract or order, in addition to a pre-determined guarantee consideration. Again, an indication contra to the contention that the non-resident was providing management service to the respondent-assessee. 17. The Revenue, which is the appellant before us, has not placed copy of the agreement to contend that the aforesaid clauses do not represent the true nature of the transaction. The Assessing Officer in his order had not bothered to refer and to examine the relevant clauses, which certainly was not the right way to deal with the issue and question. 18. It would be incongruous to hold that the nonresident was providing technical services. To quote from Skycell Communications Ltd. and Anr. Vs. Deputy Commissioner of Income Tax and Ors. (2001) 251 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word "consultant" is a derivative of the word "consult" which entails deliberations, consideration, conferring with someone, conferring about or upon a matter. Consult has also been defined in the said Dictionary as "ask advice for, seek counsel or a professional opinion from; refer to (a source of information); seek permission or approval from for a proposed action". It is obvious that the service of consultancy also necessarily entails human intervention. The consultant, who provides the consultancy service, has to be a human being. A machine cannot be regarded as a consultant." The AAR in the case of In Re: P.No. 28 of 1999, reported as [1999] 242 ITR 208 had observed:- "By technical services, we mean in this context services requiring expertise in technology. By consultancy services, we mean in this context advisory services. The category of technical and consultancy services are to some extent overlapping because a consultancy service could also be technical service. However, the category of consultancy services also includes an advisory service, whether or not expertise in technology is required to perform it." 21. The word consultant refers to a person, who is consulte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tight compartments, but in the present case this issue or differentiation is again not relevant." 10.15. Respectfully following the above decision, we are of the considered opinion that the services rendered by these agents cannot be regarded to be the managerial, technical or consultancy services. These agents are not managing the affairs of the assessee university. They are not giving any technical advise to the assessee. They are also not having any technical or special skill in this regard and no such material was brought to our notice to substantiate the same that these agents are either managing the affairs of the assessee or are giving any technical advise to the assessee. Further they are also not having any technical special skill in this regard. The services rendered by them are also not the consultancy services as they are not giving any consultancy to the assessee. For a consultancy services, the services must be rendered in the form of an advise or consultation given by the non-resident to the Indian resident. However, in the instant case, these agents are only marketing the educational course of the assessee among the intended non-resident students for which commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. D.R. that the evaluators are technically qualified and they have rendered technical services while evaluating Ph.d thesis submitted to them. Therefore, being technical services, the consideration received by them deemed to have accrued or arisen in India. Therefore, it was chargeable to tax in India in view of provisions of Section 5(2)(b) of the I.T. Act, 1961. Since the assessee has not deducted tax at source, therefore, the assessee should be held as assessee in default. 14. After considering the rival arguments by both the sides, we are of the considered opinion that the issue to be decided in this regard is whether the consideration paid by the assessee for evaluating Ph.d thesis by remitting the same outside India can be regarded to be the income of non-resident deemed to accrue or arise to him in India so that it may be chargeable to tax in India. As per the provisions of Section 195 of the I.T. Act, 1961, payment made to a non- resident, if chargeable to tax, the assessee is liable to deduct tax at source. In case he fails to deduct tax at source, he will be deemed to be an assessee in default as per provisions of Section 201 of the I.T. Act, 1961 and is also liable fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any technical field. The payment is like a coaching fee and independent individual service and, therefore, such payment cannot be said to be any income that can be said to have accrued or arisen in India or deemed to have accrued or arisen in India nor it can be said that it is in the nature of payment under section 9(1)(vii) of the I.T. Act, 1961. It is also his submission that payment for educating are not covered under fee for technical services as defined under DTAA between India and Singapore. 17. It is the submission of the Ld. D.R. that the Faculty Development Provider has rendered technical services by giving training to the staff. 18. We have heard the rival arguments made by both the sides. We find Article 12(5) of DTAA between India and Singapore read as under : "5. Notwithstanding paragraph 4, "fees for technical services" does not include payments : a) For services that are ancillary and subsidiary, as well as inextricably and essentially linked, to the sale of property other than a sale described in paragraph 3(a) ; b) for services that are ancillary and subsidiary to the rental of ships, aircraft, containers or other equipment used in connection with the oper ..... X X X X Extracts X X X X X X X X Extracts X X X X
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