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TMI Blog2024 (1) TMI 1005X X X X Extracts X X X X X X X X Extracts X X X X ..... hting, greenhouse lighting and solar lighting. The company is also engaged in research and development in the area of lighting products and solutions. 5. The Assessing Officer noted that the assessee had claimed management fee amounting to Rs. 9,85,54,700/ - paid to NTL Lemnis Holding BV and Rs. 1,08,57,200/-. Before the AO the assessee filed management Agreement entered into by the assessee with NTL Lemnis Holding BV but not the Agreement in respect of management fee paid to NTL Electronics India Limited. The AO referred to the management Agreement with the assessee company and noted the following scope of services: "Advise NL India's management on financial matters, which shall include review of operating results and budgets and assist NL India in evaluating the same for decision making purposes; Advise NL India's management on fund raising strategy with respect to funds to be raised from Bankers, Investors and other financial institutions to secure investment finance requirements; Assist in review of internal control procedures; Provide such assistance and advisory services as may be requested by NL India from time to time pertaining to management of operations and fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (Appeal) against order of AO u/s 143(3). 1. FACTS OF THE CASE: 1.1. The assessee is a private limited company engaged in the business of import, export, trading and manufacturing of lighting products. 1.2. The assessee filed its ITR for A.Y 2013-14 declaring total loss of Rs. 10,77,13,660 and assessment under section 143(3) was completed on 18-03-2016. 1.3. The Learned A.O has disallowed expenses for management and marketing support services of Rs. 6,74,32,200 paid to foreign company under section 40(a) (i). 1.4. During the relevant P.Y, assessee paid Rs. 9,85,54,700/- to NTL Lemnis holding BV, a tax resident of Netherlands towards management support services received pursuant to management agreement dated 02-04-2012(Copy enclosed at Annexure-2) and towards sales and marketing support services received pursuant to sales and marketing services agreement dated 02-04-2012(Copy enclosed at Annexure-3). 1.5. Management support services provided to the assessee by NTL Lemnis Holding BV pertain to administration and management of assessee business. Specifically, services included reviewing and evaluating operating results, internal control procedures, management of fund r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices' ("FTS") both under the Act and under the Treaty." In respect of above remarks of the learned AO, it is submitted that Management support services provided to the assessee by NTL Lemnis Holding BV pertain to administration and management of assessee business. Management support services provided by personnel of NTL Lemnis Holding BV independently from outside India did not impart any training to the assessee or its personnel in the course of providing such services. All these services are administrative and non technical in nature and do not fall in FTS. 2.2. AO has stated in para 3.8 of his order that "i have carefully considered the assessee's reply, but do not find the same as acceptable..... In respect of above, it is submitted that The learned AO has erred on facts and in law in disregarding the provisions of Income Tax Act, 1961, rules made there under and beneficial provisions of DTAA between India and Netherlands, in as much as treating the management support services and sales and marketing support services provided by foreign company to the assessee as Fees for technical services according to the India-Netherland Tax Treaty 2.3. AO has stated in par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .3. The assessee denies the additions of Rs. 6,74,32,200/- made in Assessment Order u/s 143(3) dated 18/03/2016 on the following grounds: 3.3.1. That the learned AO has erred on facts and in law in adding to income Rs. 6,74,32,200/- u/s 40(a) (i). 3.3.2. The learned AO has erred on facts and in law in disregarding the provisions of Income Tax Act, 1961, rules made there under and beneficial provisions of DTAA between India and Netherlands, in as much as treating the management support services and sales and marketing support services provided by foreign company to the assessee as Fees for technical services according to the India-Netherland Tax Treaty and also assuming that these services made available technical knowledge, experience, skill, knowhow etc to the assessee without any rational logic. 3.3.3. During the relevant P.Y., assessee incurred expenses of Rs. 9,85,54,700/- to NTL Lemnis holding BV, a tax resident of Netherlands towards management support services and sales & marketing support services. In the assessment proceedings of NTL Lemnis Holding BV, the amount received for management and sales marketing support services has been assessed to be non-taxable in view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t treaties, but also 'the Memorandum of Understanding and the Confirmation of Understanding, dated 12-9-1989, with reference to paragraph 4 of article 12 of the Indo-USA Double Taxation Avoidance Convention (DTAC), will apply mutatis mutandis for the purpose of paragraphs III, IV, V and VI above. 3.3.8. As held in case of Shell Global Solutions International BV vs. Income-tax Officer [2015] 64 taxmann.com 3 (Ahmedabad - Trib.), connotations of 'make available' clause in the treaty is no longer res integra. As stated in Moll to the Indo-US DTAA, which stands incorporated in the Indo-Dutch DAA as well by the virtue of MN clause, under para 4(b), consultancy services which are not of a technical nature cannot be treated as technical services. As services rendered by assessee are managerial or consultancy services in nature, which donot transmit the technology, the same cannot be brought to tax as FTS. 3.3.9. Even if the commercial or managerial services are linked with the technical services, it doesnot change the character of commercial or managerial services which is also stated in the Moll to Indo-US tax treaty From the explanations and examples contained in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en in Rule 46A of the I T Rules 1962. The same are reproduced hereunder: "(a) Where the Assessing Officer has refused to admit evidence which ought to have been admitted: or (b) Where the assessee was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer; or (c) Where the assessee was prevented by sufficient cause from producing the evidence before the Assessing Officer; any evidence which is relevant to any ground of appeal; or (d) Where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the assessee to adduce evidence relevant to any ground of appeal." 2.2 Here in the case of the appellant, it may kindly be submitted that not a single exception as enumerated above exists which is evidenced by the fact that order by the DCIT (International Taxation, Noida) was passed on 11.03.2016 and order by the DCIT, Circle-18(2), Delhi was passed on 18.03.2016. Assessee had ample time to bring the order before AO, however, it chose not to do so. Therefore, admission of additional/evidence at this stage should not be allowed. 2.3 In view of above, it is clear that the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld liable for default u/s 40(a) (i). 2. Reply to Para 3.1 of remand report: Assessing Officer has erred on facts and in law in interpreting the Agreements and beneficial provisions of DTAA between India and Netherlands, particularly the Most Favoured Nation (MFN) clause. It is an admitted position that by virtue of the MFN clause in India-Netherlands tax treaty, whatever benefit is extended under India-US tax treaty, stands incorporated in IndiaNetherlands tax treaty as well. N/No. 11050, dt. 30-8-1999 categorically states that not only the provisions of article 12 stana amended accordingly, in the light of the Indo-US tax treaty and other similarly worded subsequent treaties, but also 'the Memorandum of Understanding and the Confirmation of Understanding, dated 12-9-1989, with reference to paragraph 4 of article 12 of the Indo-USA Double Taxation Avoidance Convention (TAC), will apply mutatis mutandis for the purpose of paragraphs III, IV, V and VI above. As held in case of Shell Global Solutions International BV vs. Income-tax Officer [2015] 64 taxmann.com 3 (Ahmedabad - Trib.), connotations of 'make available' clause in the treaty is no longer res integra. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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