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2009 (8) TMI 845 - AT - Income TaxIncome accrued in India - payment so made to the firm of legal advisors at Hongkong - whether services being rendered by the non-resident to the resident company, being in the nature of the underwriting, managing the issue and other allied financial services constitute technical, managerial and/or consultancy services in terms of the language used in section 9(1)(vii) of Income-tax Act, 1961 and the clauses dealing with ‘fees for technical services’ in the relevant treaty? - HELD THAT:- It is manifest that the legal charges for bringing out the GDR issue were incurred by the assessee in UK also apart from Hongkong. When the legal charges paid in UK are accepted to be covered under section 9(1)(vii), then how it can be argued that similar charges paid in Hongkong be given a different treatment, more so when the relation of the services with the subject continues to remain the same. As respectfully following the Special Bench order in Mahindra & Mahindra Ltd.’s case [2009 (4) TMI 207 - ITAT BOMBAY-H], we hold that the disputed amount paid in Hongkong is covered by the definition of ‘fees for technical services’ as given in Explanation 2 and is in the nature of income deemed to accrue or arise in India as per section 9(1)(vii). However, we want to make it clear that on going through the two bills raised by the said firm, it is noticed that the second bill dated 9-11-1994 has two components. One part is of 40,000 Dollars representing "out of pocket expenses and disbursement". This part of the total amount of 200,000 Dollars paid to C.S.First Boston & Others shall be considered as reimbursement of expenses on which tax is not deductible as per the Special Bench order in the case of Mahindra & Mahindra Ltd. We, therefore, hold that equivalent of 160,000 Dollars in Indian rupees is covered under the Explanation-2 as ‘fees for technical services’. Insofar as the reliance of the learned A.R. on the case of Cliford Chance [2008 (12) TMI 30 - HIGH COURT OF BOMBAY] is concerned we find that the ratio of that judgment is not applicable for the reason that the said judgment was rendered while interpreting section 9(1)(vii)( c) as is apparent from the head notes as well as the operative part of the judgment. the Hon’ble Bombay High Court considered the judgment of the Hon’ble Supreme Court in the case of Ishikawajma Harima Heavy Industries Ltd. v. DIT [2007 (1) TMI 91 - SUPREME COURT]. In that judgment also section 9(1)(vii)( c) was under the consideration of the Hon’ble Supreme Court. It was in the context of this provision that it was laid down about the satisfaction of the twin conditions - rendering the services in India and their utilization in India was necessary ingredient for invoking section 9(1)(vii). As discussed above clause (c) applies to a person, making payment by way of fees for technical services, who is a non-resident. Since the assessee before us is admittedly resident in India, clause (c) of section 9(1)(vii), which is applicable in the case of a non-resident payer, can have absolutely no application here. Resultantly the ratio decidendi in the case of Clifford Chance is alien to the issue under consideration. We are, therefore, of the considered opinion that there is no substance in this contention raised by the ld. AR. This ground is partly allowed to the extent of granting immunity from deduction of tax at source only on the reimbursement of expenses, as discussed. The remaining amount in Indian rupees equivalent to 1,60,000 $ is taxable u/s 9(1)(vii). Having failed to deduct tax at source, the assessee is in default as per section 195 and liable to be visited with the consequences as per section 201(1) and (1A). Additional ground - validity of order passed by the AO - limitation period - HELD THAT:- It is noticed that the Hon’ble Delhi High Court in Delhi Development Authority v. ITO [1997 (7) TMI 79 - DELHI HIGH COURT] has held that the order u/s 201(1) is an order of assessment and the same judgment stands approved by the Hon’ble Apex Court in the case of ITO v. Delhi Development Authority [2001 (11) TMI 6 - SUPREME COURT]. Now when the Hon’ble Supreme Court has held that order u/s 201(1) is to be treated as an order of assessment and as per section 2(8) ‘assessment includes reassessment’, then it becomes manifest that the time-limit for initiating and completing the proceedings u/s 201(1) has to be at par with the time-limit available for initiating and completing the reassessment, more so when the scope of section 147 also ropes in the cases of assessment apart from reassessment. The golden rule - ‘If two views are possible, then the view in favour of the taxpayer should be adopted’ - envisages two equally convincing views sustainable in law, based on the interpretation of section. It presupposes the existence of two divergent plausible views with equal pull from both the sides. If a provision is capable of interpretation in such a manner that two views can be possibly formed, then, of course, the one in favour of the assessee should be followed. But if force in both the views is not of same magnitude inasmuch as one view greatly overweighs the other by considering either the language of the provision itself or as interpreted by the Hon’ble Supreme Court, then the view not in conformity with such interpretation shall have to lean in favour of the other view, notwithstanding the fact that it is in favour of the assessee. In that view of the matter, it is manifest that once a particular view has been expressed by the Hon’ble Supreme Court on an issue, then any contrary view taken by the other High Courts has to be considered as impliedly overruled. Thus it is palpable that the Special Bench has taken an unexceptionable view on the question of limitation and the contention raised on behalf of the assessee, in an attempt to persuade us to depart from it, deserves to be and is hereby dismissed as devoid of any merit. This additional ground, therefore, fails. In the result, the revenue’s appeal is dismissed and that of the assessee is partly allowed.
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