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2015 (9) TMI 1106 - ITAT PUNE

2015 (9) TMI 1106 - ITAT PUNE - TMI - TDS Liablity - ‘fees for technical services’ - whether the “Architectural services” rendered by M/s. Andy Fisher Workshop Pte. Ltd., Singapore and “Interior designing and Architectural services” rendered by M/s. FBEYE International Pte. Ltd., Singapore are taxable u/s. 9(1)(vii)(b) of Income Tax Act, 1961 and also under Article 12(iv)(c) of India Singapore DTAA? - Held that:- Where in rendering of any service there is no transfer of technology, technical kno .....

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not in the ‘nature of royalties or fees for technical services’, we are of the opinion that no purpose would be served by referring to Article 12 of India-Singapore DTAA to see whether such payments are taxable or exempt. Assessee was not required to deduct tax on the impugned payments - Decided in favour of assessee.

Condonation of delay - revenue challenged condoning of delay by Commissioner of Income Tax (Appeals) in filing of appeal u/s. 248 - Held that:- The Commissioner of Incom .....

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ined. On the other hand, minor delay in filing of the appeal is not pardoned where it has not been sufficiently explained or delay is attributable to utter negligence or lackadaisical attitude of appellant. The Commissioner of Income Tax (Appeals) after taking into consideration the reasons and circumstances causing delay has condoned the delay. We do not deem appropriate to interfere with the same. - Decided against revenue. - ITA Nos. 2110 & 2111/PN/2012, ITA Nos. 2377 & 2378/PN/2012 - Dat .....

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he Architectural services rendered by M/s. Andy Fisher Workshop Pte. Ltd., Singapore and Interior designing and Architectural services rendered by M/s. FBEYE International Pte. Ltd., Singapore are taxable u/s. 9(1)(vii)(b) of Income Tax Act, 1961 and also under Article 12(iv)(c) of India Singapore DTAA. In ITA No. 2377/PN/2012 for assessment year 2009-10 and ITA No. 2378/PN/2012 for assessment year 2010-11, the Revenue has assailed the order of Commissioner of Income Tax (Appeals) on following g .....

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Y Inter Associates Ltd. and P 49 Deesign and Associates Co Ltd of Thailand at the subsequent stages of the contract. 3) The Learned CIT(A) erred in concluding that the appellant was not required to deduct tax on payment made to Thailand parties as these are not taxable in India as per DTAA between India and Thailand by only considering that there is no separate Article dealing with Fees for Technical Services and thereby not considering Article 22 of the DTAA. 4) The Learned CIT(A) erred in conc .....

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ne the facts as to whether provision of Consultancy Services by the recipient constituted Permanent Establishment under Article 5(2)(j) and also did not consider the duration of services as per the agreements covering various stages starting from Preliminary Study, to Conceptual Design Stage, Schematic Design stage, Design Implementation stage, Construction documents Review stage which showed that the involvement of the two companies is extensive and involves meetings, visits by personnel of the .....

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stry. During the impugned assessment years the assessee availed the services of Architects and Interior Designers and Decorators from Singapore and Thailand. For availing the services of these overseas consultants, the assessee entered into separate agreements with each consultant. An agreement was executed between the assessee and Andy Fisher Workshop Pte. Ltd., Singapore on 14-07-2008 for design consultancy services for the hotel Le-Meridien, Pimpri, Pune. Another agreement dated 07-07-2008 wa .....

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gn consultants for the services rendered by them at the hotel project sites of the assessee. The contention of the assessee is that the payments for the services rendered by the aforesaid foreign consultants does not fall within the ambit of term fees for technical services . Therefore, the same are not liable to be taxed u/s. 9(1)(vii)(b) of the Act. Since, the assessee deducted tax at source on the aforesaid payments, the assessee filed appeals before the Commissioner of Income Tax (Appeals) u .....

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and P49 Deesign and Associate Co. Ltd., Thailand, the payments are not taxable in view of India-Thailand DTAA. Against these findings of the Commissioner of Income Tax (Appeals) both, the assessee and the Revenue are in appeal before the Tribunal. 3. Shri Kishor Phadke appearing on behalf of the assessee submitted that the Commissioner of Income Tax (Appeals) has erred in coming to the conclusion that the services rendered by Andy Fisher Workshop Pte. Ltd. and FBEYE International Pte. Ltd., Sin .....

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on Article 12 of the India- Singapore DTAA. The ld. AR in support of his contention placed reliance on the following case laws: i. Bangkok Glass Industry Co. Ltd. Vs. Assistant Commissioner of Income Tax reported as 257 CTR (Mad) 326. ii. Romer Labs Singapore Pte. Ltd. Vs. Assistant Director of Income Tax (International Taxation) reported as 22 ITR (Trib) 224 (Delhi). iii. Bharat Petroleum Corpn. Ltd. Vs. Joint Director of Income Tax (International Taxation) reported as (2007) 14 SOT 0307. iv. .....

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f the foreign firm were in India for a period of one week only. Similarly, certificate issued by KTGY Inter-Associates Ltd., Thailand at page 86 of the Paper Book was referred to show that the employees of the said firm were in India for a total period of 18 days during the period starting from 12-07-2008 to 31-03-2011. The ld. AR contended that the issues raised by the Revenue in appeals are squarely covered by the decision of Pune Bench of the Tribunal in the case of Dy. Director of Income Tax .....

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), necessary verification have not been carried out by the Commissioner of Income Tax (Appeals) to ascertain the facts. 6. We have heard the submissions made by the representatives of rival sides and have perused the impugned order. We have also examined the decisions on which the ld. AR has relied. We will first take up the appeals of the assessee. The Commissioner of Income Tax (Appeals) has held that the payments made to Singapore parties fall within the ambit of fees for technical services . .....

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) of India-Singapore DTAA. The same is reproduced here-in-under: 4. The term "fees for technical services" as used in this Article means payments of any kind to any person in consideration for services of a managerial, technical or consultancy nature (including the provision of such services through technical or other personnel) if such services (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragr .....

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e an agent, nominee, or transferee of such person. 5. Notwithstanding paragraph 4, "fees for technical services" does not include payments (a) for services that are ancillary and subsidiary, as well as inextricably and essentially linked, to the sale of property other than a sale described in paragraph 3 (a) (b) for services that are ancillary and subsidiary to the rental of ships, aircraft, containers or other equipment used in connection with the operation of ships or aircraft in int .....

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cle 5; (g) for services referred to in paragraphs 4 and 5 of Article 5. 7. The main emphasis of the Revenue is that the transfer of architectural designs and plans by the Singapore parties amounts to transfer of technical know-how technology to the assessee. The assessee has placed on record the agreement entered between the assessee and Andy Fisher Workshop Pte. Ltd., Singapore. The said agreement gives the detail of scope of work, schedule of payment of fees, responsibilities of the parties, p .....

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tage. The consultant would visit the site for meetings, presentations and review of the projects. The Clause 15 of the agreement speaks about copyright. The same reads as under: The Copyright in all documents and drawings prepared by the Design Consultant and in any work executed there from remain the property of the Design Consultant. In any occasion this appointment is terminated and fees of the Design Consultant gets resolved fully, the Client may continue to utilize drawings/information of t .....

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Therefore, in our considered view there is no transfer of any technology, technical know-how or technical designs which the assessee can utilize subsequently in other projects. The Architectural design/drawings are project specific. The assessee cannot take advantage of same in other projects. 9. The assessee has separately entered into a design agreement with M/s. FBEYE International Pte. Ltd., Singapore. The said agreement also lists the covenants with respect to scope of service and work, pay .....

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pment Phase: 1. Based on the approved Conceptual Design and adjustments authorized by the client, the designer shall prepare design development drawings suitable for preliminary pricing by the client s quantity surveyor. 2. Designer shall provide, on client s confirmation, eight (8) coloured renderings of the interior spaces. Any additional renderings requested by the client are US$2,000 each and a reimbursable expense paid 50% deposit is required in advance. 3. Designer shall coordinate with th .....

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etails and specifications to set forth in sufficient detail the requirements for the special finishes of the Project Areas. 2) Designer shall prepare a colour finish schedule and prepare a corresponding finish notebook including samples of all applies finishes and materials. 3) Designer shall prepare material specifications of interior specialty items and finishes for inclusion into Architect's project manual. 4) These drawings, details and specifications will be sufficient to convey the ent .....

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review and written approval. 10. According to the agreement the designer shall review and take appropriate steps to ensure that the construction is carried out according to the design and plan. Thus, it is unambiguously clear from the agreement that the designs and plans supplied by the oversea consultant are for the particular project, for which their services have been engaged. 11. The assessee in support of his contention placed reliance on the judgment of Hon'ble Madras High Court and v .....

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s are held not to be in the nature of fees for technical services there is no point in travelling to the next step to ascertain whether they are exempt in view of DTAA between the two countries or not. Since, we have held that the payments made to Singapore parties are not in the nature of royalties or fees for technical services , we are of the opinion that no purpose would be served by referring to Article 12 of India-Singapore DTAA to see whether such payments are taxable or exempt. In view o .....

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ncome Tax (Appeals) observed that there is no negligence or laxity on part of the assessee in preferring appeal, the delay was caused because of wrong advice given by the professionals. It is a well settled law that condonation of delay should be a rule and denial an exception. It is not the length of delay which matters but the reason for delay in filing of the appeal which is of prime importance. The Courts have been taking liberal view in condoning substantial delay where the delay has been e .....

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CC 195 has held: There cannot be a straightjacket formula for accepting or rejecting explanation furnished for the delay caused in taking steps. But one thing is clear that the Courts should not proceed with the tendency of finding fault with the cause shown and reject the petition by a slipshod order in over jubilation of disposal drive. Acceptance of explanation furnished should be the rule and refusal an exception more so when no negligence or inaction or want of bona fide can be imputed to t .....

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causing enormous loss and irreparable injury to the party against whom the lis terminates either by default or inaction and defeating valuable right of such a party to have the decision on merit. While considering the matter, courts have to strike a balance between resultant effect of the order it is going to pass upon the parties either way. The Commissioner of Income Tax (Appeals) after taking into consideration the reasons and circumstances causing delay has condoned the delay. We do not dee .....

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me Tax (I. T.) Vs. Sparsh Infratech (supra), where identical grounds were raised by the Revenue. We observe that one of the party i.e. KTGY Inter Associates Ltd. was one of the payee company in the case relied upon by the ld. AR. The Co-ordinate Bench of the Tribunal decided the issue as under: 11. Now, we may address the merits of the controversy before us. In this context, we find that the CIT(A) in para 2.1 of his order has tabulated the services provided by the three payees to the assessee. .....

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y the three recipient concerns as per the respective agreements, whose copies have been placed in the Paper Book. It is quite evident from the perusal of the agreements as also the scope of work enumerated by the CIT(A) in para 2.1 of his order that it involved provision of architectural, designs and drawings services. Factually speaking, the aforesaid finding of the CIT(A) that the services rendered by the recipient concerns to the assessee company in India fall for consideration as fee for tec .....

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terms of DTAA between India and Thailand because the same was favourable and envisaged no tax liability in comparison to the normal provisions of the Act. The CIT(A) found that the impugned payments were not taxable in terms of Indo-Thailand DTAA as the said DTAA did not have any provision for taxing fee for technical services . The aforesaid conclusion of the CIT(A), in our considered opinion, is in accord with the provisions of section 90(2) of the Act. Section 90(2) provides that where Centr .....

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eficial provisions of the DTAA shall prevail. In-fact, before us this aspect of the matter is also not in dispute. 13. However, Revenue has contended that the CIT(A) erred in considering that there is no separate Article in the DTAA to deal with fee for technical services . As per the Revenue, CIT(A) ought to have considered Article 22 of the DTAA which was a residual clause and that such clause covered the taxability of the impugned sums. In our considered opinion, the aforesaid plea of the Rev .....

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dual Article 22 of Indo-Thailand DTAA. 14. Further, as per the Revenue, CIT(A) erred in not appreciating Article 14 of the DTAA which provides for taxation of income on account of professional services. In this context, it is to be appreciated that the Article prescribes for taxation of professional services only in a case where the recipient is present in India for more than 183 days or it maintains a fixed base/permanent establishment in India. In the present case, there is no material to sugg .....

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