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2020 (3) TMI 971 - HC - Income TaxTDS u/s 195 - expenditure incurred for service procured for a future business to be carried on by the petitioner in Indonesia - amount which was paid by engaging services of the aforesaid law firm was for the purpose of “making or earning any income from any source outside India” within the meaning of Section 9(1)(vii)(b) - HELD THAT:- To attract exception under Section 9(1)(vii)(b) of the Income Tax Act, 1961, the service should be utilized in India. Any payment by way of fees and technical service to a non-resident by an resident is an income deemed to have accrued or arisen in India and is thus liable to tax. The expression “Fees” for “Technical Service” has been defined in Explanation 2 to Section 9(1)(vii)(b) of the Income Tax Act, 1961. The expression “Technical Service” and “Consultancy Service” also have not been defined in the Act. The “Technical Service” would include any service in connection with the “engineering service” as it is associated with the service provided by the person technically qualified in the field of engineering. The “Consultancy Service” is again very wide, it can include the service of every nature. From the scope of work undertaken, it is evident that the Indonesian law firm has provided consultancy services. In this case, the Indonesian firm has provide “Consultancy Service”. Therefore, I am of the view that it is not open for the petitioner to state that the said service fell within exception provided in Section 9(1)(vii)(b) of the Income Tax Act, 1961 or outside the Explanation 2 to said Section. If the service utilized by the petitioner abroad was for preexisting business in Indonesia, the petitioner could have legitimately stated that the service provided was utilized for a business of profession carried out outside India or for the purpose of making or earning any income from any source from outside India. There is no source that is existing in Indonesia. In this case, there was a mere proposal for acquiring the insurance business in privately or Indonesian Insurance Policy. The service of the said law firm was sought for a range of service which are approval consultancy service. Therefore, the issue as to whether the petitioner was entitled to the benefit of any Clause in the said Double Taxation Avoidance Agreement as notified in Notification No.GSR 77(E), dated 04.02.1988, is left open. It is for the petitioner to file appropriate application before the 2nd respondent within a period of thirty days from the date of receipt of a copy of this order. Writ Petition is dismissed with the above observations
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