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TMI Blog2022 (1) TMI 1314X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the details of machinery, there is service agreement for refurbishment / repair of these machines entered with Marubeni Corporation, Japan. This refurbishment from the above facts is clear that is only repairs and services of machinery. Thus where discussion of AR as well as ld.senior DR, we are of the belief that payments for repairs are outside the scope of FTS and such payment do not constitute FTS u/s.9(1)(vii) of the Act. These are simple refurbishment or repairs and payment made for these do not attract TDS provision u/s.195 of the Act. Accordingly, we are of the view that this issue stands covered in favour of the assessee. Hence, the CIT(A) has rightly deleted the addition and we confirm the same. Therefore, the Revenue s appeal is dismissed. Disallowing deduction u/s.80IA in respect of interest on bank deposits - interest on TRA deposits placed with the bank, as the same was a requirement of the financing document - HELD THAT:- We find that this issue is squarely covered by the Tribunal s order in assessee s own case for earlier assessment years 2006-07 to 2008-09 [ 2015 (5) TMI 1244 - ITAT CHENNAI] Therefore, taking a consistent view, we confirm the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f managerial and technical services and therefore, consideration paid for it would constitute fees for technical services. The actual work of refurbishment, etc, in such a case, would be incidental to the main object of contract. 2.4 The learned CIT(A) ought to have appreciated the decision of Hon ble ITA Bangalore Bench C , in the case of M/s Bosch Ltd vs The Income Tax Officer, in ITA No. 552 to 558/Bang/2011 dated 11.10.2012, wherein it is held that the services of repairs by the non-residents rendered include its assistance in analyzing and solving technical problem and disjunctions by locating and mending the cause of the disfunction by providing telephone advice, analysis and assistance to the operator and for preventive maintenance. These services clearly fall within the purview of definition of fees for technical services . In these cases, the services are not mere repairs but are towards preventive maintenance which clearly show that the recipients are providing technical assistance and services to the assessee in India. In view of explanation 2 to clause (vii) of sec.9(1), the fees for technical services is chargeable to tax in India and the assessee is liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sk or assistance to the employee of the company to carry out refurbishment / repair work. The assessee explained that it has entered into a separate agreement with M/s. Marubeni Corporation, Japan to cover for charges towards technical advisory services and payment towards refurbishment charges are outside the scope of technical advisory services agreement, since no intellectual aspect or managerial / consultancy or technical services is involved in the activity. Hence, it was explained that the payment towards refurbishment is not towards technical advisory fee but is only business expenditure in the hands of the assessee and business income in the hands of the non-resident recipient i.e., M/s. Marubeni Corporation. The AO has considered the explanation of assessee but not accepted for the following reasons:- On perusal of the assessee s submissions it is seen that refurbishment of Hot Gas Path Spares (HGPS) involves the following activities: Receive and un-box Hot Gas Path Spares. Perform incoming conditional evaluation of Not Seas Path Spares. Perform incoming flow test: of Hot Gas Path Spares. Disassemble Hot Gas Path Spares using OEM approved me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elaborate discussion held that these are technical services rendered to the appellant and accordingly the provisions of section 40(a)(i) do apply and inasmuch as TDS provisions were not adhered to, disallowed the expenditure. Contesting the above addition the appellant submitted that the major machinery comprised in the power generation operation are Gas and Steam Turbines The gas turbine has certain spare parts viz., Hot Gas Path Spares (HGPS) consisting of Combustor Baskets, Transition pieces, Fuel Nozzles, Turbine Static Blades and Turbine Moving Blades with each component having a pre- defined standard life based on Equivalent Operating Hours (EOH). As these machineries have a pre-defined standard life based or Equivalent Operating Hours (EOH), the continuous operation of the system results in wear and tear / damage and requires periodical reconstruction which in technical term called refurbishment . Thus, above work of refurbishment requires attendance by technical experts who bring back the machinery to its original position to enable the same to give optimum results. Thus, even though the technical term used is refurbishment, it is nothing but repair and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets, Transition pieces, Fuel Nozzles, Turbine Static Blades and Turbine Moving Blades with each component having a pre- defined standard life based on Equivalent Operating Hours (EOH). He explained the entire process by stating that depending on standard life in term of EOH, each part is inspected and reviewed for its wear and tear / damage and accordingly reconstructed / refurbished after completion of every 8,000 /10,500 EOH during the scheduled maintenance cycles of combustor inspection followed by turbine inspection and so on. It was explained that the refurbishment is nothing but a process of reconstruction / repair of the machinery to ensure that the original standard life is achieved / utilized completely in the electricity generation process. The HGPS parts are exposed to a very high temperature of more than 1500 degrees and hence are subjected to extensive wear and tear like coating loss and some minor / medium / major cracks on the surface of the parts which requires reconstruction periodically. In view of the above process, ld.counsel stated that the assessee company carried out periodical preventive reconstruction / repair as per the maintenance procedure prescribed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical services is involved in this refurbishment. It was also explained that payment for refurbishment is claimed as expenditure by assessee and in the hand of non-resident recipient, it is assessed as business income. The ld.counsel for the assessee took us through the decision of Coordinate Bench of Mumbai in the case of DCIT vs. VSNL Broadband Ltd., (2013) 96 DTR 0121 is exactly on same facts, wherein the Tribunal considered the repair and services agreement held that such payment do not constitute FTS and the relevant findings in para 9, 10 11 reads as under:- 9. We have heard both the parties, perused the orders of the Revenue Authorities and the material placed before us as well as the precedents cited by the Ld Representatives. We have also examined the list of the services promised vide the agreement between the parties under consideration involving India and USA. For AY 2005-06, the AMC Payment is for the period of 6 months from October, 2004 to March, 2005and the amount is Rs.23,73,621/- (equalant of USD 48,025/-). For AY 2006-07, the AMC payment is Rs. 42,84,949/- (equalant of USD 96,050/-) and the payment on account of Repair replacement of CORDs, is Rs 8,96,147/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentation, (iii) status review of know defects and workarounds: and (iv) Return Material Authorization (RMA) processing. The above list of services refers to TAC, telephone access 24 hours for all 7days including holidays, single point contact, web-based SOLAR, etc and they constitutes the catchwords. There is provision for dispatch of AR/Field Service Engineers too in suitable cases. Now we shall take up the written submissions filed by the assessee s representative before us and the relevant portions read as follows, namely- 1. Tata Power Co. Ltd had purchased Dense Wave Division Multiplexing Equipment from M/s. Sycamore Networks Inc., USA (Sycamore, USA) 2. The service agreement was entered between Sycamore, USA and Tata Power Co. Ltd effective from April 2003 to March, 2004, with the option of automatic extension from April 2004 to March 2008 after the consent given by Sycamore USA. Exhibit B to the agreement dealt with the nature of the services to be provided Sycamore, USA for the extended period of service from April 2004 till March 2008. 3. For extended period of service Sycamore, USA will charge sum of USD 96,050 p a. 4. As per the agreement, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is the case of the assessee that the payments for the repairs should not be subjected to TDS as the said payments outside the scope. We have examined the cited decision of the Tribunal in the case of M/s. BHELGE- Gas Turbine Servicing (P) Ltd (supra) and find such payments do not constitutes FTS and relevant paragraph 16 is reproduced here as under: 16 Thus, the above decisions of the Tribunal are relevant for the proposition that the routine repairs do not constitute FTS as they are merely repair works and not technical services. Technical repairs are different from technical services . Thus, the payments made for technical services alone attract the provisions of section 9(1)(viii) of the Act and its Explanation 2. Further, it is also a settled issue at the level of the Tribunal that every consideration made for rendering of services do not constitute income within the meaning of section 9(1)(viii) of the Act and for considering the same, first of all the said consideration is for the FTS. Therefore, considering the above decision of Delhi Bench of the Tribunal, which explained the scope of the provisions, we are of the view that the impugned orders of the CIT (A), for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ian to India for supervising repairs to be carried out on the plant and machinery purchased by National Mineral Development Corporation. It is not the repair work per se which has been held to be technical services but it is the provision of the consultant technician deputed to India for supervising the repairs which has been treated as consultancy services. The foreign technician stayed on in India for 44 days to advise and supervise repair work which was obviously carried out by the engineers and workers of the Indian Company. Thus, the nature of services rendered by the foreign company was consultancy of technical nature through the provision of its technician deputed to India. Our conclusion is supported by the decision of Andhra Pradesh high court in the same case reported in 238 ITR 861, wherein Hon'ble High Court affirming the aforesaid decision of the Tribunal held that the Explanation 2 has expanded the scope of Section 9(1)(vii)(b) by providing that the services of technical or other personnel would be taxable. It has been repeatedly stated by the assessee that no foreign Technician was ever deputed of India. The lower authorities and the DR have not pointed out any i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e view that this issue stands covered in favour of the assessee. Hence, the CIT(A) has rightly deleted the addition and we confirm the same. Therefore, the Revenue s appeal is dismissed. ITA No.2092/Chny/2019 8. As regards to ITA No.2092/Chny/2019, the issue is exactly identical and facts and circumstances are also exactly identical to ITA No.3015/Chny/2018, except the quantum. Hence, taking a consistent view, we reverse the order of lower authorities and direct the AO to delete the addition made on account of disallowance of expenses by invoking provisions of section 40(a)(i) of the Act, on account of refurbishment charges paid to M/s. Marubeni Corporation, Japan and. The appeal of the assessee is allowed. CO No.1/Chny/2019 9. The only issue in this cross objection of the assessee is as regards to order of CIT(A) confirming the action of AO in regard to disallowing deduction claimed by assessee u/s.80IA of the Act in respect of interest on bank deposits. For this, assessee has raised following three grounds. 1.1 The CIT(A) has grossly erred in confirming the action of the AO denying deduction u/s.80IA in respect of interest on TRA deposits placed with the ban ..... X X X X Extracts X X X X X X X X Extracts X X X X
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