TMI Blog2014 (12) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... nts with a view to earn income by allowing customers to avail of the benefit of the use of such equipment does not result in the provision of technical service to the customer for a fee – the order of the CIT(A) is upheld in deleting the addition made by the AO on account of amount received by the assessee towards shared IT Global Portfolio Tracking System by treating the same as fees for technical services – Decided against revenue. - IT APPEAL NO. 1809 (MUM.) OF 2012 - - - Dated:- 18-6-2014 - P. M. JAGTAP, AND VIJAY PAL RAO,JJ Somanath S. Ukkali for the Appellant. Porus Kaka for the Respondent. ORDER P.M. Jagtap, Accountant Member-This appeal is preferred by the Revenue against the order of ld. CIT(A) -10, Mumbai dated 29-09-2011 and the grounds raised by the Revenue therein read as under: 1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in holding that the reassessment proceedings are not valid as it could not be said that there was escapement of income, whereas, what is only required at the time of reopening the proceedings is to have 'reason to believe' that income had escaped and this 'reason to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... para 14 to 17 and 23 of its order: 14. We will first deal with the question as to whether the receipt in question can be said to be FTS. The definition of FTS both under the DTAA as well as under Expln.-2 to Sec.9(1)(vii) of the Act has already been referred to earlier. The substance of the definition is that it refers to a payment in consideration for the services of managerial, technical or consultancy nature. But it should not be a payment to an employee of the person making payment. In that case it would become salary. Two things are thus clear, viz, (i) That there should be an agreement to engage/utilise technical service and a person undertaking to render them; (ii) If there is a contract of employment and the employee renders technical service under a contract of employment then the payment of remuneration for such services are outside the purview of fees for technical services . 15. The Assessee maintained a global telecommunication facility, capable of supporting communication facility between itself and its agents in various countries. The above facility run on a combination of mainframe and non-mainframe servers located at Denmark. These systems are an integral ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd consultancy service, the Legislature has not set out with precision as to what would constitute technical service to render it technical service . The meaning of the word technical as given in the New Oxford Dictionary is adjective 1. of or relating to a particular subject, art or craft or its techniques : technical terms (especially of a book or article) requiring special knowledge to be understood a technical report. 2. of involving, or concerned with applied and industrial sciences : an important technical achievement. 3. resulting from mechanical failure a technical fault. 4. according to a strict application or interpretation of the law or the rules the arrest was a technical violation of the treaty. Having regard to the fact that the term is required to be understood in the context in which it is used, fee for technical services could only be meant to cover such things technical as are capable of being provided by way of service for a fee. The popular meaning associated with technical is involving or concerning applied and industrial science . In the modem day world, almost every facet of one's life is linked to science and technology inasmuch as numero ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sophisticated technical equipment in the exchange to ensure connectivity to its subscriber, does not on that score, make it provision of a technical service to the subscriber. The subscriber is not concerned with the complexity of the equipment installed in the exchange, or the location of the base station. All that he wants is the facility of using the telephone when he wishes to, and being able to get connected to the person at the number to which he desires to be connected. What applies to cellular mobile telephone is also applicable in fixed telephone service. Neither service can be regarded as technical service for the purpose of section 194J of the Act .. ..At the time the income-tax Act was enacted in the year 1961, as also at the time when Explanation 2 to section 9(l)(vii) was introduced by the Finance (No. 2) Act, with effect from April 1, 1977, the products of technology had not been in such wide use as they are today. Any construction of the provisions of the Act must be in the background of the realities of day-to-day life in which the products of technology play an important role in making life smoother and more convenient. Section 1 94J, as also Explanati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the basic data is entered by human effort and therefore the payment should be treated as FTS. We are of the view that the argument of the learned D.R. cannot be accepted because ultimately the machine only performs and no human element is involved. The learned D.R. also submitted that the huge cost for installation of the system and the huge payment made by the Assessee by itself is an indication that the payment is FTS. In this regard we notice that the percentage of payment received by the Assessee towards reimbursement compared to the total receipts in the form of freight etc., from shipping business in India is less than 1%. Thus the plea of the learned D.R. in this regard is without any merit. We therefore hold that the receipt in question cannot be considered as Fees for Technical services rendered.' 4. Following the order dated 11-6-2010 (supra) passed in the case of Dampskibsselskabet af 1912 Aktiesselskab, the Tribunal has also deleted a similar addition made by the A.O. on account of amount received towards shared IT Global Portfolio Tracking System in the assessment originally completed u/s 143(3) of the Act in the case of the assessee for A.Y. 2002-03 as well a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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