TMI Blog2012 (8) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, reporting and evaluation - as decided in Lufthansa Cargo India Private Limited V/s. Dy. CIT [2004 (6) TMI 273 - ITAT DELHI-B ] routine maintenance repairs are not FTS & that the payments made by the assessee to non-residents workshops outside India do not constitute payment of fees for managerial, consultancy or Technical services as defined in Explanation 2 to section 9(1)(vii) - in favour of assessee. - ITA No.976/Hyd/2011, ITA No.977/Hyd/2011, ITA No.978/Hyd/2011, ITA No.979/Hyd/2011, ITA No.980/Hyd/2011, ITA No.981/Hyd/2011 - - - Dated:- 31-7-2012 - SHRI D.KARUNAKARA RAO, SHRI SAKTIJIT DEY, JJ. For the Appellant: Shri V.Srinivas For the Respondent: Shri Arvind V. Sonde O R D E R Per D.Karunakara Rao, Accountant Member: There are six appeals by the Revenue in this bunch, which are directed against separate orders of the Commissioner of Incometax( Appeals) V, Hyderabad, all dated 14.3.2011, in the context of the orders passed by the assessing officer under S.201(1A) of the Act, for the assessment years 2001-02 to 2007-08. Assessee has also filed crossobjection in the appeal of the Revenue for the assessment year 2001-02. Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee, the assessing officer analysed the provisions of S.9(1) of the Act in general and clause (vii) of the said subsection relating to fee for technical services in particular. Further, the assessing officer perused the scope of the works carried on by the non-resident companies vide clauses (a) to (s) enlisted in para 8 of the impugned order and came to the conclusion that these items of work done by the foreign agencies cannot be said to be consisting mainly of physical involvement, since those woks would definitely involve technical inputs of high order by the qualified engineers and trained technical personnel. Accordingly, he decided that the payments in question would fall within the scope of Fee for Technical Services (FTS) as defined in sec.9(1)(vii) of the Act. Further, the assessing officer also examined the applicability of the provisions of Double Taxation Avoidance Agreement(DTAA) between India - Saudi Arabia and India - Singapore and came to the conclusion that knowledge and skill are made available in this case while repairing and refurbishment of the items sent broad and therefore, he held that the provisions of S.195 of the Income-tax Act are appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion relevant to assessment year 2001-02, stating the order passed by the assessing officer for that year is required to be quashed also for the reason that the same was passed beyond the limitation and therefore, it is time-barred. 7. During the proceedings before us, the Learned Departmental Representative for the Revenue made various submissions/arguments, which include that the assessee made payments to Middle East Engineering Company Ltd, Saudi Arabia and M/s. Watt Ackkermans Pte. Ltd. of Singapore and these amounts were paid for repairing and refurbishment of gas turbines. As per the assessing officer, such services constitute service charges and therefore, the same constitute fee for technical services. The Learned Departmental Representative referred to the provisions of S.9(1) of the Act and mentioned that he is of the opinion that the expression rendering , used in the Explanation of defining the expression FTS , should be understood in common sense parlance, which should include all kinds of services. In that case, the impugned services shall constitute FTS. Referring to the views of the CIT(A) on whether the impugned services are FTS or not, Learned Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neering Company Ltd,, Saudi Arabia and M/s. Watt Ackkermans Pte. Ltd. of Singapore for repairing and refurbishment etc. The said non-resident companies undertake the repair and refurbishment works as may be required for use, and return the refurbished /repaired articles by raising invoices against which the assessee makes the payments. In this regard, the learned counsel took us through various pages, say pages 335 to 341, which relates to the case of supplying works for ESSAR, and demonstrated that it is a case of receiving works for refurbishment of GE components by sending them to Singapore for its refurbishment, assembly and returning the same with the invoices raised by the Singapore company against which the assessee made the payment of $ 136000 US. In this regard, he mentioned that the employees of the company never accompanied the Turbine parts to be refurbished abroad. Therefore, there is no interaction or importing of technical skill or knowledge by the non-resident company. Thus, it is straight case of repairing, maintenance and refurbishment. Explaining the provisions of S.9(1)(vii) of the Act in general and its Explanation 2 in particular, learned counsel for the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retrospective amendment to S.201 and mentioned that the amended provisions took care of the cases in which the assessee fail to deduct TDS, but the retrospective amendment does no apply only to the assessment year 2001-02 and 2002-03. On this count also the orders passed by the assessing officer under S.201(1A) for assessment years 2001-02 and 2002-03 have to be quashed. 10. The learned counsel read out the copy of the notes and clause 43 to the above amendment to support the above interpretation of the assessee. Referring to the cross-objection filed by the assessee about the limitation, learned counsel fairly mentioned that the said issue is now covered against the assessee by the Special Bench decision in the case of Mahindra and Mahindra V/s. DCIT (30 SOT 374)(SB), for the proposition that the orders under S.201(1A) could be passed within a period of six years specified for initiating and completing the re-assessment s and the said period constitutes reasonable period for taking action under s.201 and 201(1A) of the Act. 11. During the rebuttal time, the Learned Departmental Representative, primarily reiterated the arguments made by him earlier and pleaded that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter considering the Hyderabad Bench decision for the proposition that the repairs of routine and recurring nature do not constitutes FTS and therefore such payments do not constitute income u/s 9 of the Act. The expression rendering used in the Explanation 2 to clause (vii) to section 9(1) fall in the stage prior to the stage of providing technical services or making available of the technical services. These stages alone attract the FTS provisions and not mere cases of rendering of technical services . Mere repairs and refurbishing of the damaged turbines do not constitute services. Therefore, the payment made by the assessee is not for rendering of the technical services and therefore, such consideration is not for FTS. For falling with the basket of FTS, there must be transfer of the technical knowledge or skill to the assessee or its personal. The case of decision of the Hyderabad Bench involves transfer of such knowledge to the accompanying personnel of the assessee and therefore, the said case is distinguishable on facts. 15. We have perused the said principles in the light of the detailed scope of work done in the case of the assessee, which as noted by the CIT(A) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of its business in Germany, without any involvement or participation of the assessee s personnel. The overhaul repairs involved were routine maintenance repairs. It cannot therefore be said that Technik rendered any managerial, technical or consultancy service to the assessee. In this view of the matter, we hold that the payments made by the assessee to non-residents workshops outside India do not constitute payment of fees for managerial, consultancy or Technical services as defined in Explanation 2 to section 9(1)(vii). The assessee succeeds on this ground. Regarding the decision of the Hyderabad in the case of Mannesmann Demag L Kauchhammer V/s. CIT (supra) which involves deputing of technicians to India for supervision of repairs to be carried out at the plant and machinery purchased by the NMDC, we find that the said decision is distinguishable on facts. Such deputation, whether deputation or supervision, is absent in both instant cases as well as the case before it, as observed by the Delhi Bench of the Tribunal in the cited case. The relevant para of the order of the Tribunal in that case reads as follows- We find that in Demag's case, the foreign compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, the assessee raised the issue of nonapplicability of the provisions of S.201 to the assessment years 2001-02 and 2002-03 and the said argument was never raised or discussed by the lower authorities. Since the impugned order of the assessing officer was passed prior to the amendment to the provisions of S.201 by the Finance Act, 2008 with retrospective effect from 1.4.2003, to be fair, the Revenue normally deserves fresh opportunity to be heard on this issue. Instead of setting aside this issue to the files of the lower authorities, considering the alternative nature of the argument, and also considering the fact, we have already granted relief to the assessee as per discussion in the preceding paragraphs of this order on merits, we dismiss the alternate argument of Ld Counsel holding the adjudication of this issue becomes an academic exercise. Therefore, the same are dismissed as academic. 18. In the result, all the appeals of the Revenue are dismissed. Assessee s Cross Objection: 19. Effective grounds of the assessee in its cross-objection for the assessment year 2001-02, reads as follows- 1. On the facts and in the circumstances of the case and in law, the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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