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2013 (1) TMI 106 - AT - Income TaxFee for Technical Services - whether the consideration received under the Buying Agency Services Agreement ('BAS') could be characterized as 'fees for technical services' u/s 9(1)(vii) and accordingly by taxed under the provisions of section 115A - penalty u/s 271AA - Held that:- It is evident that for a particular stream of income to be characterized as 'fees for technical services', it is necessary that some sort of 'managerial', 'technical' or 'consultancy' services should have been rendered in consideration. The terms 'managerial', 'technical' or 'consultancy' do not find a definition in the Income-tax Act, 1961 and it is a settled law that they need to be interpreted based on their understanding in common parlance. In the case of Skycell Communications Ltd's case (2001 (2) TMI 57 - MADRAS HIGH COURT), it was held that the popular meaning associated with the word 'technical' is 'involving or concerning applied and industrial science'. The consultancy should be rendered by someone who has special skills and expertise in rendering such advisory. Perusal of copies of the Buying Agency Services agreement depicts the nature of services have not been disputed. Department has only interpreted them to be amounting to 'Fees for Technical Services', but these are not technical services but routine services offered in the procurement assistance. The agreements demonstrate that the assessee was to receive commission for procuring the products of AIMPL and rendering incidental services for purchases. The primary services provided by the assessee to AIMPL in terms of the Buying Agency Services agreement are Co-ordinate between AIMPL and manufacturers for the purpose of buying the merchandise,assisting in negotiations,procurement of samples and sending them to AIMPL,maintaining relationship with the manufacturers and search for new manufacturers,supply credit reports and other marketing information concerning manufacturers and to provide translation services as required for communication between AIMPL and the manufacturers. Applying these principles and as decided in Linde A.G. v. ITO [1997 (1) TMI 479 - ITAT MUMBAI ] to the facts of the present case, the services rendered by the assessee in this case were purely in the nature of procurement services and cannot be characterized as 'managerial' 'technical' or 'consultancy' services. Accordingly, the consideration received by the assessee was appropriately classified as 'commission' as against 'fees for technical services'. Penalty u/s 271AA & 271BA - No separate proceedings have been initiated so far and the Grounds about levy of interest u/s 234B, 234D and 244A are consequential in nature. Ground regarding TDS credit will be verified by the AO in accordance with law - assessee's appeal is allowed on above terms.
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