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TMI Blog2012 (8) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... e explanation in Para 8 of the AO order, where in the Assessing officer clearly explained that it is not mere repair work but specific and technical expertise are required to perform the work order. 3. The Learned. CIT(A) has erred where he has treated the services rendered by the assessee as non technical services in view of the Section 9(1)(vii) of the Income-tax Act. However, technical personnel is included in the definition of technical services and as per Section 9(1)(vii) of the Income-tax Aft. Therefore, it will be treated as technical services as defined in the I.T. Act." 3. Briefly stated, relevant facts of the case common in all these cases excepting for the amounts involved, as taken from the appeal for assessment year 2001-02, are that the assessee is a joint venture company involving Bharat Heavy Electrical Limited (BHEL) and GE Pacific (Mauritius) Limited. TDS survey took place in the premises of the assessee. During the survey action under S.133A of the Act, it was noticed that, in the financial year 2001-02, BHEL-GE has paid to/credited the accounts of Middle East Engineering Company Ltd,, Saudi Arabia with Rs. 4,89,39,5335; and M/s. Watt & Ackkermans Pte. Ltd. of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2007. 4. Aggrieved by the above, the assessee filed an appeal before the CIT(A) and raised ten grounds, which are extracted in para 3 of the impugned order of the CIT(A). As can be seen from the discussion at 5.3 to 5.6 of the impugned order, the CIT(A) analysed the scope of S.5(2) of the Act and S.9(1)(vii) of the Act and interpreted the same by stating that it is only where any application of any technical knowledge is involved, it amounts to providing technical services, and otherwise not. He analysed the list of items and the schemes of works listed in (a) to (s) of the impugned order of the assessing officer, also extracted by him, and concluded that they do not involve providing of any knowledge. In para 5.4.2, the CIT(A) referred to certain controversial list of items, before concluding that any evaluation and testing of a repair work done by the repairer cannot be termed as technical service. In the process, the CIT(A) also examined the applicability of the Delhi Tribunal decision in the case of Lufthansa Cargo India Private Limited V/s. Dy. CIT(274 ITR (AT) 20)- Del which in turn considered various other decisions for the proposition that every repair and maintenance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the context of the provisions of S.9(1)(vii) of the Act. The expression 'make available' is a language of the provisions of DTAA and the should not be extended to define the expression 'rendering' used in Explanation 2 to clause (vii) of Section 9(1) of the Act. When the expression 'rendering' is understood in normal common sense parlance, any payment for the rendering of services, gets covered by the meaning of FTS used in S.9(1)(vii). It is the fact that once the payment in question constitutes 'fee for technical services', the same must be subjected to TDS as per the provisions of S.195 of the Act. The Learned Departmental Representative also relied on the decisions of the Delhi Bench of the Tribunal in Sahara Airlines Ltd. V/s. Dy.CIT(83 ITD 11) and Hyderabad Bench in the case of Mannesmann Demag L Kauchhammer V/s. CIT(1988) 26 ITD 198(Hyd), for the proposition that when the services are rendered and the payments involved, it should ordinarily must constitute 'fee for technical services'. The Learned Departmental Representative also argued stating that when the payments are received abroad for the items relatable to the assets located in India, such payments should be subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned that 'making available' of the services would arise only if it involves transfer of knowledge and skill to the employees of the assessee directly or indirectly. Therefore, the case of the assessee falls in stage prior to the rendering of services. Referring to the case-laws relied upon by the Learned Departmental Representative, Learned counsel for the assessee mentioned that the decision in the case of Lufthansa Cargo India (P)Ltd. (supra) was rendered only after distinguishing the decision of the Madras Bench of the Tribunal in the case of Raymond Ltd. (86 ITD 79). He relied on the decision of the Hyderabad Bench of the Tribunal in the case of Mannesmann Demag L Kauchhammer V/s. CIT(1988) 26 ITD 198(Hyd), and Sahara Airlines (83ITD 11), but submitted that the ratio of the decision in the case of Lufthansa Cargo India Ltd. (supra) is relevant for the proposition that the provisions of S.9(1)(vii) are not applicable to the payments made to the foreign companies for execution of normal maintenance and repairs without any involvement or consultation with the assessee's or their employees, and such payment does not tantamount to 'fee for technical services'. 9. Without prejudice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abroad to Saudi Arabia and Singapore for repairs and refurbishment by the non resident companies abroad. It is a fact that the assessee personnel do not accompany these items and therefore, there is no involvement of assessee's personnel in getting the items repaired or refurbished. As per the invoices raised by the said nonresident companies, the assessee makes the payment. In these factual circumstances, we are to decide whether the said payment made by the assessee to the nonresident companies would constitute 'fee for technical services' as defined in the Explanation 2 to section 9(1)(vii) of the Act. 13. The case of the Revenue is that in view of the language of Explanation 2 to clause (vii) to sub-section (1) of section 9 of the Act, i.e. 'rendering of technical services', the expression 'rendering' if interpreted in its common parlance, the payments made by the assessee would amount to 'fee for technical services'. The said expression 'rendering' does not involve providing for or transfer of any technical knowledge to the assessee or its accompanying personnel. Therefore, the fact no personnel of the company is sent abroad along with the items to be repaired, is not relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emix gas flexible manifolds. d) Perform incoming flow test of fuel nozzle assembly. e) Disassemble fuel nozzle assemblies using GE approved method f) Clean {chemical, ultrasonic, grit blast} bolts tubing, gas swozzles, oil/water, cartridges, end covers, and water manifold to remove dirt, rust foreign material and paint. g) Disassemble, clean rebuilt and pressure test the distributor value. h) Perform Non-destructive Evaluation of fuel nozzle components. i) Perform boroscope inspection on end cover gas passage, j) Individually flow test fuel nozzle components according to GE factory standards. k) Complete evaluation of components and test results (GE Engineering) l) Utilize piece part flow data to best match fuel nozzle tips and oil/water cartridges to the end covers. m) Re-assemble all fuel nozzle components with new seals and lock plates. n) Perform final flow check and leak check of assembly to verify work. o) Reassembled all fuel nozzle components with new seals and lock plates. p) Complete final Quality Assurance inspection (GE Engineering) q) Ship parts to customer with a copy of the flow test results' r) Provide repair report. s) Ship parts to the customer wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The foreign technician stayed on in India for 44 days to advise and supervise repair work which was obviously carried out by the engineers and workers of the Indian Company. Thus, the nature of services rendered by the foreign company was consultancy of technical nature through the provision of its technician deputed to India. Our conclusion is supported by the decision of Andhra Pradesh high court in the same case reported in 238 ITR 861, wherein Hon'ble High Court affirming the aforesaid decision of the Tribunal held that the Explanation 2 has expanded the scope of Section 9(1)(vii)(b) by providing that the services of technical or other personnel would be taxable. It has been repeatedly stated by the assessee that no foreign Technician was ever deputed of India. The lower authorities and the DR have not pointed out any instance of a technician having been assigned of India. This decision therefore is of no assistance to the Revenue." Thus, the above decisions of the Tribunal are relevant for the proposition that the routine repairs do not constitute 'FTS' as they are merely repair works and not technical services. Technical repairs are different from 'technical services'. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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