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TMI Blog2024 (8) TMI 426X X X X Extracts X X X X X X X X Extracts X X X X ..... ax at source: a. Intertec Systems LLC : Rs. 53,73,994/-. b. Invico Capital Corporation AG : Rs. 86,88,215/- (ii) That the aforesaid act of the CIT(A) is in violation of the provision of Section 251(1)(a) of the Act and therefore bad in law. 3. On the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law, having held that the payments are not in the nature of fee for technical services u/s 9(1)(vii) of the Act, and hence not liable for Tax deduction at source and thereafter giving direction to AO to invoke provision of section 192 for disallowing such payments. 4. On the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and law in confirming the disallowance of Rs. 5,48,090/- in respect of expenses paid to QAI Singapore Pte. Ltd. in relation to the services rendered for earning income from overseas ignoring the explicit provision of Section 9(1)(vii)(b) of the Act. 5. On the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and law in confirming the disallowance of Rs. 91,230/- in respect of expenses paid to KCS Hong Kong Ltd. for earning income outside India. 6. On the facts and circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and circumstances of the case, the Id. CIT(A) has erred, both on facts and in law, in confirming the disallowance of Rs. 26.80 Lacs on account of payment made to Carnegie Mellon University, USA and The Call Centre School, LLC, invoking the provisions of Section 40(a)(i) of the Act. (ii) On the facts and circumstances of the case, the Id. CIT(A) has erred, both on facts and in law, in construing the payment made, for services rendered outside India for the purpose of income earned outside, as chargeable to tax in India. (iii) On the facts and circumstances of the case, the Id. CIT(A) has erred, both in facts and in law, in confirming the disallowance in spite of the fact that the same is covered under the exception clause to Section 9(1)(vi)(b) of the Act. 5 (i) On the facts and circumstances of the case, the Id. CIT(A) has erred, both on facts and in law, in sending the issue of disallowance of Rs. 58.19 Lacs on account payment made to Intertek Systems Agency, UAE towards reimbursement of expenses and payment of service charges, to the Id. AO for further verification. (ii) That the abovesaid act of the Id. CIT(A) is in violation to Section 250(4) of the Act and therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A) has erred both on facts and in law, in confirming the actions of the Id. AO in disallowing a sum of Rs. 5.98 Lacs paid to AFA Project Management and The APM Group Ltd on account of purchase of course material and examination fee. (ii) On the facts and circumstances of the case, the Id. CIT(A) has erred, both on facts and in law, in confirming the aforesaid despite the fact that the payment is being covered by the exception to Section 9(1)(vi)(b) of the Act, hence the provisions of Section 40(a)(i) are not applicable on the same. (iii) That the Id. CIT(A) has erred, both on facts and in law, in construing the said payment in the nature of royalty. (iv) That the payment made on account of purchase of course material and examination fee does not fall within the purview of right, property or information used as defined under Section 9(1)(vi)(b) of the Act. 10 Without prejudice to the above and in the alternative, the Id. CIT(A) has erred, both on facts and in law, in not considering the provisions of the relevant double taxation avoidance agreement entered by India with the other contracting states." 4. Brief facts of the case are that the assessee is engaged in the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing judicial pronouncements in this regard: * Ge India Technology Centre Private Ltd. Vs. CIT, 2010 (9) TMI 7 - Supreme Court Dated 9-9-2010 * Abbey Business Services (India) (P.) Ltd. Vs. DCIT, 2012 (7) TMI 702 - ITAT Bangalore Dated 18-7-2012. * Tata Iron & Steel Co. Ltd. Vs. Union of India, Supreme Court order dated 30-11-2000 13. Considering the facts of the case, above mentioned provisions of the Act and case laws relied upon by the assessee, the disallowance made by the AO and the ld. CIT(A) u/s 40(a)(i) of the Act is unwarranted and liable to be deleted. 14. In the result, the appeal of the assessee on this ground is allowed. ITA No. 3998/Del/2017: A.Y. 2011-12 Payments to QAI Singapore Pte Ltd. and KCS Hong Kong Ltd.: 15. These disallowances made by the AO and confirmed by the ld. CIT(A) u/s 40(a)(i) of Rs. 7,30,550/- are regarding the amounts paid to QAI Singapore Pte. Ltd. of Rs. 5,48,090/- and KCS Hong Kong Ltd. of Rs. 91,230/- in relation to services rendered for earning income from outside India which specifically falls under the exclusionary provision of Section 9(1)(vii)(b) of the Act. 16. It is relevant to note here that the assessee had utilized th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old a bonafide belief that no part of the payment had any element of income which was chargeable to tax in India. When the assessee held such a bonafide belief, it is clearly covered by the decision of Hon'ble Apex Court in GE India Technology Centre Pvt. Ltd. (supra) and decision of Special Bench of this Tribunal in Prasad Productions Ltd. (supra). This being so, assessee could not be put in a position where it can be visited with the rigours associated with non-deduction of tax at source. It cannot be fastened with any liability associated with non-deduction of tax at source on such payments. In these circumstances, application of Section 40(a)(i) of the Act was not called for. Ld. CIT(Appeals) was right in deleting the addition. No interference is called for. Ground No.3 raised by the Revenue is dismissed." * Titan Industries Ltd. Vs. ITO, 2006 (6) TMI 423 - ITAT Bangalore Dated: 02-6-2006 "12. Keeping in view the fact that patent was registered outside country for making an income from a source outside the country. The amounts paid are covered in exception provided in section 9(1)(vii)(b).Hence, the assessee was not required to deduct tax at source. Moreover, it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services as enumerated in Explanation 2 to Section 9(1)(vii) of the Act which is also reproduced below for the sake of ready reference: "9. (1) The following incomes shall be deemed to accrue or arise in India:- (vii) income by way of fees for technical services payable by- ................ Explanation 2.-For the purposes of this clause, "fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical 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". 25. From a plain reading of the above, it is clear that the transaction entered into by the assessee nowhere falls within the definition of Fee for Technical Services. Therefore, the addition made by the AO by holding such amount as Fee for Technical Services is absurd and without any basis and is thus liable to be deleted. 26. Without prejudice to the above, it is to be noted here that the payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmative, in favour of the assessee and against the revenue. No costs. " 28. Considering the facts of the case, above mentioned provisions of the Act and case laws relied upon by the assessee, the disallowance made by the AO and the ld. CIT(A) u/s 40(a)(i) of the Act is unwarranted and liable to be deleted. ITA No. 3998/Del/2017: A.Y. 2011-12 ITA No. 3999/Del/2017: A.Y. 2012-13 Payments to the APM Group: 29. This disallowance made by the AO and confirmed by the ld. CIT(A) u/s 40(a)(i) is regarding the amount of Rs. 23,02,094/- paid to The APM Group on account of purchase of course material. 30. During the course of assessment proceedings, the AO has disallowed the above-mentioned expense by holding it to be of the nature Fee for Technical Services and alleging that since tax has not been deducted at source u/s 195 of the Act, the payment made to The APM Group is disallowed u/s 40(a)(i) of the Act. It is relevant to note the definition of Fee for Technical Services as enumerated in Explanation 2 to Section 9(1)(vii) of the Act. 31. From a plain reading of the above section, it is clear that the transaction entered into by the assessee nowhere falls within the definition of Fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pendent Personal Services). 35. From a plain reading of the above mentioned provisions of the Act as well as DTAA, it is clear that the transaction entered into by the assessee do not postulate any kind of services in the nature of technical, managerial or consultancy. As per DTAA, simple rendering of services is not sufficient for a service to qualify as Fee for Technical Service when the expression "Make Available" is used within the definition of Fee for Technical Services. Rather, the provision of services should enable the recipient to make use of the technical knowledge etc. by himself without taking help from the provider of the services. 36. Reliance is also placed on the following judicial pronouncements in this regard: * Raymond Ltd. Vs. DCIT 2002 (4) TMI 891 - ITAT Mumbai Dated 24-4-2002 "91. Now we have to see if the meaning ascribed to the words "make available" by Mr. Dastur is acceptable or reasonable. Whereas section 9(1)(vii) stops with the "rendering" of technical services, the DTA goes further and qualifies such rendering of services with words to the effect that the services should also make available technical knowledge, experience, skills etc. to the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he recipient in a manner which will enable the latter to apply the technology, processes, skill, etc., in future without recourse to the service provider. The term "make available" encompasses some sort of durability and stability with reference to the transfer of technology, processes and skill etc., so that the same is not regarded as transient or ephemeral." * Intertek Testing Services India Pvt. Ltd. 2008 (11) TMI 9 - Authority for Advance Rulings Dated 5-11-2008 "10.5. Let us now analyse clause (c) of Article 13.4 and then explore the meaning of the crucial phrase "make available". There are three ingredients or requirements in clause (c). The first requirement is that the payment is made by way of consideration for the rendering of technical or consultancy services (including the provision of services of technical or other personnel). The second requirement is that those services should make available technical knowledge, skills, etc. to the recipient of services". The third part of the definition speaks of "development and transfer of a technical plan or technical design" with which we are not concerned." 37. In view of the above mentioned facts of the case and case law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Tejinder Pal Singh: 42. This disallowance made by the AO and confirmed by the ld. CIT(A) u/s 40(a)(i) is regarding the amount of Rs. 2,56,585/- paid to Mr. Tejinder Pal Singh in relation to services rendered for earning income from outside India which specifically falls under the exclusionary provision of Section 9(1)(vii)(b) of the Act. 43. It is relevant to note here that the assessee had utilized the services of Mr. Tejinder Pal Singh, a person resident of USA for provision of services, in terms of agreement dated 15.10.2011. Therefore, the services rendered by Mr. Tejinder Pal Singh have been utilized outside India and the payment which has been made to Mr. Tejinder Pal Singh is for the purpose of earning income from a source outside India which specifically falls under the exclusionary provisions of Section 9(1)(vii)(b) of the Act. 44. Reliance is also placed on the following judicial pronouncements in this regard: * DCIT Vs. M/s Hofincons Infotech and Industrial Services Pvt. Ltd., 2015 (3) TMI 876 - ITAT Chennai dated 18.8.2014 * Aqua Omega Services (P.) Ltd. Vs ACIT, 2013 (10) TMI 748 - ITAT Chennai dated 15.1.2013 * DCIT Vs. Ajapa Integrated Project Management ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Contracting State from the performance in the other Contracting State of professional services or other independent activities of a similar character shall be taxable only in the first-mentioned State except in the following circumstances when such income may also be taxed in the other Contracting State: (a) if such person has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in that other State; or (b) if the person's stay in the other Contracting State is for a period or periods amounting to j or exceeding in the aggregate 90 days in the relevant taxable year." 48. Thus, from a plain reading of the above mentioned provisions it is clear that income derived by an individual being resident of a contracting state is taxable in that contracting state only i.e. country of domicile except where such individual has a fixed base in other contracting state or period of stay of such individual in other contracting state exceeds 90 days in the relevant taxable year. 49. The fact reveals that Mr. Tejinder Pal Singh does not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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