TMI Blog2012 (2) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... Accountant Member This appeal by the assessee arises out of the order passed by the Commissioner of Income-tax (Appeals) on 04th January, 2010, in relation to the assessment year 2006-07. 2. The only grievance of the assessee projected through ground no.1 as under:- "1. Transportation fee being erroneously treated as fees for technical services under Section 9(1)(vii) of the Income-tax Act, 1961. 1.1 On the facts and circumstances of the case and in law, the Commissioner of Income-tax (Appeals)-11 has erred in upholding the action of the Assessing Officer in treating the transportation fee receivable by the Appellant from Menlo Worldwide Forwarding India Private Limited is taxable in India as fees for technical services under Section 9(1)(vii) of the Income-tax Act, 1961 on the contention that the services provided by the Appellant are in the nature of managerial, technical or consultancy services. 1.2 The Appellant prays that the transportation fee receivable by it is not in the nature of fees for technical, managerial or consultancy services under Section 9(1)(vii) of the Act and therefore such fees are not liable to tax in India and the entire addition of Rs. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia was that of independent contractor and the business between them was done on principal to principal basis and at arm's length. The Assessing Officer observed that the services rendered by the assessee under the Agreement were in the nature of freight and logistics services such as transport, procurement, custom clearance, sorting, delivery, warehousing and picking up services. In his opinion such services were covered under the provisions of section 9(1)(vii), being "fees for technical services". In order to buttress his view point, the A.O. also observed that Menlo India had deducted tax at source from the transportation fees paid to the assessee and in that view of the matter the assessee's contention that the amount was not chargeable to tax in India, was bereft of any force. The learned CIT(A) echoed the assessment order on this point by holding that the transportation fees received by the assessee from Menlo India was taxable in India as "fees for technical services" u/s 9(1)(vii) as it was for the services in the nature of "managerial, technical or consultancy services". The assessee is in appeal before us. 4. We have heard the rival submissions and perused the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 with effect from 1st June, 2005, a copy of which is available on page 1 onwards of the paper book. The scope of services has been given in clause 1.1. In the recital clause it has been provided that the assessee-company may require Menlo India to perform logistics services such as transport, procurement, custom clearance, sorting, delivery, warehousing and picking up services (Local services) within India (Local operating area). It has further been provided that Menlo India may also seek similar services from the assessee-company such as transport, procurement, customs clearance, sorting, delivery, warehousing and pick up services (International services) outside India. In the present appeal we are concerned with the "International services" provided by the assessee to Menlo outside India. These services comprise of transport, procurement, customs clearance, sorting, warehousing and pick up services on the cargo exported by Menlo on behalf of its customers. Having noted the nature of services provided by the assessee outside India, for which Menlo India made the payment, let us consider if these can be described as managerial or technical or consultancy services. 7. First we wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of consignments originating from India undertaken to be delivered by Menlo India. The role of the assessee in the entire transaction was to perform only the destination services outside India by unloading and loading of consignment, custom clearance and transportation to the ultimate customer. In our considered opinion, it is too much to categorize such restricted services as managerial services. We, therefore, jettison this contention raised on behalf of the Revenue. 9. Now we take up the next component of the definition of "fees for technical services", being 'consultancy services', which has been pressed into service by the learned CIT(A) to fortify his view that the amount received by the assessee is covered within section 9(1)(vii). The word "consultancy" means giving some sort of consultation de hors the performance or the execution of any work. It is only when some consideration is given for rendering some advice or opinion etc., that the same falls within the scope of "consultancy services". The word 'consultancy' excludes actual 'execution'. The nature of services, being freight and logistics services provided by the assessee to Menlo India has not been disputed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he light of the day. 12. The learned CIT(A) has also harped on "transportation of time sensitive packages" with a view to bring the services provided by the assessee within the fold of "technical services". In reaching this conclusion the learned CIT(A) also relied on the order passed by the Mumbai bench of the Tribunal in Blue Dart Express Limited v. JCIT [(2000) 75 ITD 414 (Mum.)]. Let us examine the facts of that case. The assessee there claimed deduction u/s 80-O in respect of its foreign exchange earnings for rendering technical / professional services to a US Multi International company. During the course of assessment proceedings, the A.O. required the assessee to furnish the nature of services rendered and also the calculation of deduction. The assessee did it. On being satisfied the A.O. granted deduction u/s 80-O. By exercising the power u/s 263, the learned CIT held the assessment order to be erroneous and prejudicial to the interest of the Revenue to the extent of granting deduction u/s 80-O. When the matter came up before the Tribunal, it was observed that the issue is debatable and hence outside the ambit of section 263. Apart from that, it was also observed that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 DTR 148] (to which one of us, namely, the ld. JM is party) in which it has been held that the ratio laid down in that case cannot be universally applied. Due to material difference in the language of sections 9(1)(vii) and 80-O as discussed above, we hold that the decision in Blue Dart Express Limited (supra), can not be held to be supporting the case of the Revenue. 13. The ld. CIT(A) in reaching the conclusion that the assessee rendered 'technical services' also observed that its 'business structure is time bound service coupled with continuous real time transmission of information by using and also making available advanced technology in the form of sophisticated equipment and software.' He was swayed by the contention of the assessee that the Manlo India or the ultimate customer could track the movement of cargo with the help of computers. We have noted supra that the consideration received by the assessee did not include any consideration for the supply of any equipment to Manlo India. Now we will examine as to whether the use of computer in any manner for knowing the location of the cargo at a particular time, can be held as technical service. 14. Explanation to section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fees of 'technical services'. We, therefore, repel this contention raised on behalf of the Revenue. 17. Thus it can be noticed that the payment made to the assessee in question is not a consideration for managerial or technical or consultancy services. That being the position, it cannot fall within the ambit of section 9(1)(vii). 18. Section 4 provides that the income tax shall be charged on the total income of any assessee of the previous year for any assessment year at the rates in accordance with and subject to the provisions of this Act. Scope of total income of any person has been enshrined in section 5. The assessee in question is a non-resident company. Section 5(2) mandates that the total income of a non-resident includes the income from whatever source derived which is received or is deemed to be received in India; or accrues or arises or is deemed to accrue or arise in India. The only possibility of the receipt by the assessee in the present facts and circumstances qualifying for inclusion in the total income, can be under section 9. We have observed that section 9(1)(vii) is not applicable. Now let us examine the prescription of section 9(1)(i) which deals with the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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