TMI Blog2013 (11) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... es for technical services – Following ACIT vs Real Image Media Technologies (P) Ltd [2007 (12) TMI 263 - ITAT MADRAS-C] – Decided in favour of assessee. Exemption by the assessee u/s 10(6A) – Income-tax paid by service receiver on the remuneration paid to the assessee for providing consultancy - Held that:- The definition of ‘infrastructure facility’ can be imported in section 10(6A) - The assessee had furnished consultancy to Water Supply Project which is included in ‘Infrastructure project’ as per Explanation 2 to section 80IA(4) – Following Louis Berger International Inc. [2010 (6) TMI 524 - ITAT, HYDERABAD] - Development of infrastructure falls within the Industrial Policy of Government of India - Approval of the Government is not a pre-requirement for claiming exemption u/s 10(6A) – Fee received by the assessee towards technical services/ consultancy would fall under Article 12 and not under Article 7 - Decided in favour of assessee. - I.T.A No. 2131/Mds/2010 - - - Dated:- 23-6-2011 - Dr. O. K. Narayanan And Shri Hari Om Maratha,JJ. For the Appellant : Shri B. Ramakrishnan For the Respondent : Dr. I. Vijayakumar, CIT ORDER Per Hari Om Maratha, Judicia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in treating the following reimbursements recovered by the assessee from CMWSSB, as its gross receipts and subjecting the same to tax on gross receipts u/s 115A r.w.s 44D of the Act: (a) Car hire charges Rs 36,70,500 (b) International Air Tickets Rs 49,92,429 (c) Equipment procurement Rs 28,89,372 (iv) That the Assessing Officer erred in not granting exemption u/s 10(6A) of the Act of an amount of Rs 1,55,80,850/- being the income-tax on the remuneration paid to the assessee and instead adding it to it income and subjecting the same to tax on gross basis u/s 115A r.w.s 44D of the Act. (v) That the Assessing Officer erred in adding a sum of Rs 2,39,278/- being the loss on account of exchange fluctuation suffered by the assessee to its income. The claim of the assessee was that it had never claimed this amount as deduction and was not reduced from its income offered for tax in the return of income. 3. Thus, the assessee s representative filed objection to the draft order on 27.1.2010. After considering the facts, arguments, objections and reasons advanced on behalf of the assessee with regard to all these issues and also the decisions relied on in this regard, the DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee and subjecting the same to tax on gross basis under section 115A read with section 44D of the Act. 5. That the Learned AO has erred in charging interest amounting to Rs 1,830,979 u/s 234B by overlooking a number of case decisions, more particularly, the recent decision of the Hon'ble Delhi High Court in the case of M/s Jacobs Civil Incorporated and Mitsubishi Corporation (ITA No. 491/2008 and ITA No. 209/2009 dated 30 August 2010) where it was held that interest under S. 234B cannot be charged on non-residents having regard to the provisions of S. 209(1)(d) and S. 195 of the Act. 6. That the appellant may be allowed to add, supplement, revise, amend grounds as raised hereinabove. 5. We have considered the rival submissions and have perused the entire material available on record. In so far as the legal issue challenging the reopening of assessment u/s 147 r.w.s 148 is concerned, that has no legs to stand because this issue has traveled upto the Hon'ble High Court when the assessee challenged the reopening undertaken on various reasons. The Hon'ble High Court, while disposing of the writ petition, has held that out of five reasons only two reasons can be treated as based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions, written documents and other material available before us that the assessee has entered into a Twinning Arrangement Consultancy Agreement with CMWSSB on 19.7.2000 where under, the assessee-company has to provide technical and professional services on matters relating to operation, maintenance, engineering, procurement, supervision of construction, management, information technology, technical and managerial support, development and implementation of organizational structure, systems, procedures and practices required by a well managed commercial water utility, systematic and comprehensive services on all aspects of water utility management etc. for the Second Chennai Water Supply Project. We have to decide whether this receipt on account of the above mentioned services rendered by the assessee-company to be grossed or is to be excluded. 8. The question before us is as to whether the action of the Assessing Officer in treating the service tax amounting to Rs 35,73,981/- charged and collected by the assessee from CMWSSB as its business receipt and subjecting the same to tax on gross basis u/s 115A r.w.s44D of the Act is correct or not. After examining the various facets of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee along with consultancy receipt from the same client through same invoice, but this would not be kept by the assessee because the Government had an overriding claim over it. It is true that the nature of any receipt is to precede not by the manner in which it has been treated by the assessee in its account books but it would depend on its true nature and quality. Therefore, in our considered opinion, keeping in view the factual matrix of this case, benefit of section 28 to 44C would not be available to the assessee and the provisions of section 44D would apply. Section 44D provides for deduction from receipts in the nature of royalty and fee for technical services etc. The issue is regarding service tax and not regarding fee for technical services. Even if technical services has to suffer tax as per the provisions of section 115A(1)(iv)(b)(B0 of the Act @ 20% of such fee if it has been received in pursuance to an agreement made after 31.5.1997 but before 1.6.2005. The agreement was signed in this case on 19.7.2000. In so far as fees for technical services is concerned, the same would suffer tax @ 20% but the amount in question is the amount of service tax collected by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of income under reference because this action provides for approval of Central Government of the agreement wherefrom the income of foreign company claiming exemption is derived. In the present case, the assessee is deriving its fee for consultancy services by virtue of work agreement dated 19.7.2000 and therefore, the same is required to be approved by Central Government to claim this exemption. As per the Assessing Officer, no documentary proof was filed that requisite approval of the agreement was accorded by the central Government. On the other hand, it was argued by the ld.AR that the project taken up by the assessee is covered in Industrial Policy of Government of India for the given period and hence, assessee s claim is allowable u/s 10(6A)(a) of the Act . Again, reliance was placed on the decision of ITAT, Hyderabad Bench in the case of ACIT vs Louis Berger International Inc.(supra). The case of the assessee is that the project under reference is an Infrastructure Project and the assessee is, therefore, entitled for the exemption in the same manner as the claim of Louis Berger International Inc. was accepted by the ITAT. It was argued that although the Work Agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0IA(4) but it has not been specifically limited to this section alone. There is no other definition of Infrastructure Facility given in the Act. Thus, the definition given in Explanation 2 above has to be applied to section 10(6A). When there is no restriction put on the application of the definition of infrastructure facility given in section 80IA(4), the same can be imported to the similar expression used as infrastructure facility in section 10(6A). In the case of Louis Berger International Inc.(supra), ITAT Hyderabd has held that the development of infrastructure falls within the Industrial Policy of Government of India, hence, approval of the Government is not a pre-requirement for claiming exemption u/s 10(6A). Thus, fees received by the assessee for technical services/consultancy would fall under Article 12 and not Article 7 of DTAA and tax has to be levied only @ 15% and not @ 20%. In our considered opinion, this issue also stands covered by the Tribunal orders (supra). We, therefore, order to delete the impugned addition and allow this ground of assessee s appeal. 14. The last issue of this appeal relates to charging of interest u/s 234B of the Act. In view of our ..... X X X X Extracts X X X X X X X X Extracts X X X X
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