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TMI Blog2016 (8) TMI 1009X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment years. The CIT(A) had disposed of the appeals for A.Yrs. 2008-09 and 2009-10 vide single order dated 16-08-2012. The assessee inadvertently filed single appeal against the said order of the CIT(A). Subsequently, the assessee realised the mistake. On 07-01-2015 the assessee sought time from the Bench to file independent appeals for the impugned assessment years. Thereafter, on 14-01-2015 the assessee filed the present appeals. In the process, there was delay of 816 days in filing of the appeals. The Ld. Counsel for the assessee submitted that the assessee had filed the initial appeal within the period of limitation. The delay in filing of the subsequent appeals was not willful or deliberate. The delay occurred due to bonafide reasons. 3. After considering the facts, we are of the considered opinion that the assessee has been able to show sufficient cause for delay in filing of the appeals. The delay in filing of appeals has occurred due to bonafide reasons. The Hon'ble Supreme Court of India in the case of Ram Nath Sao @ Ram Nath Sahu and Others reported as 2002 (3) SCC 195 has held that acceptance of explanation furnished for delay should be the rule and refusal an excep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Y. 2007-08 and Rs. 2,37,48,685/- in F.Y. 2008-09 without deduction of withholding tax. The AO vide order dated 31-03-2010 passed u/s.201(1) and 201(1A) r.w.s. 195 of the Act, common for the impugned assessment years held that the payments to the tune of Rs. 2,78,08,685/- made by the assessee to Gensler were in the nature of "Fee for technical services/Royalty". The AO computed that the assessee was liable to deduct tax at source Rs. 55,61,736/- u/s.201(1) on the payments made to Gensler and further charged interest Rs. 12,03,018/- u/s.201(1A). Consequently, a demand notice for Rs. 67,64,754/- was issued to the assessee. 5. Aggrieved by the order passed u/s.201(1) and 201(1A) r.w.s. 195 of the Act, the assessee preferred appeal before the CIT(A). The CIT(A) vide impugned order confirmed the findings of the AO and held that architectural services rendered by Gensler are taxable as 'technical or consultancy services' u/s.9(1)(vii)(b) of the Act and under Article 12(4)(b) of the India-US DTAA. Against these findings of the CIT(A) the assessee is in appeal for both the impugned assessment years. 6. The assessee has assailed the findings of the first appellate authority by raising fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AAR is a Tribunal and the ruling of the AAR has to be challenged before a Division Bench of the High Court and not directly before the Supreme Court. 5. The ld CIT(A) erred in holding that the impugned architectural services were covered under Article 12(4)(b) of the DT AA between India and USA, when no technology was made available, along with the so called technical services as held by the Karnataka High Court, in the case of CIT Vs De Beers India Minerals (P) Ltd [2012J 208 Taxman 406 (Karn). 6. The ld CIT(A) failed to appreciate the legal position that initially after examination whether a payment made to a foreign entity is liable to tax under the Income-Tax Act, 1961 and in case it is so taxable, then only one moves to the provisions of the DT AA. The ld CIT(A) in the present case has totally mixed up the relevance of the provisions of the Income-Tax Act, 1961, vis-a-vis the provisions of the DTAA. 7. All the aforesaid Grounds of Appeal are without prejudice to one another. 8. The appellant craves leave to add, alter, amend, modify or delete any or all the aforesaid Grounds of Appeal." Similar grounds of appeal have been raised by the assessee in both the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India and USA have been applied, as the provisions of DTAA are more beneficial to the appellant and would override the provisions of the Income Tax Act, 1961. In support of his argument, the Ld. Authorised Representative placed reliance on the CBDT Circular No.333, dated 02-04-1982 and the judgment of Hon'ble Supreme Court of India in the case of Union of India Vs. Azadi Bachao Andolan reported as 263 ITR 706. 11. The Ld. Authorised Representative for the assessee submitted that the payments made to Gensler were in the nature of 'business profits'. The Ld. Authorised Representative contended that the expression 'business' includes within its scope professions and vocations. Therefore, 'business income' includes any income for rendering professional services. To support his contentions, the Ld. Authorised Representative placed reliance on the judgement of Hon'ble Apex Court in the case of Barendra Prasad Ray Vs. ITO reported as 129 ITR 295 (SC). The Ld. Authorised Representative contended that Gensler is not having any PE in India, hence, the aforesaid payments were not liable to be taxed as per Article 7(1) of the DTAA between India and USA. The Ld. Authorised Representative furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n) Vs. W.N.S. North America Inc. 30 ITR (Trib.) 646 Mumbai 14. Per contra Shri Ravi Prakash representing the Department vehemently supported the findings of the CIT(A). The Ld. Departmental Representative submitted that to overcome the difficulty faced by the assessees to decide, whether tax has to be deducted or not, the Legislature of the Act has provided a remedy to the assessee under section 248 of the Act for filing appeal denying liability to deduct tax in certain cases. In order to protect itself from the avoidable litigation and its consequences the assessee could have taken the benefit of the provisions of section 248 of the Act. 15. The Ld. Departmental Representative referred to the agreement between the assessee and Gensler and submitted that the US company has provided consultancy services. Fee for technical services is equivalent to "included services". The term "make available" is debatable and thus no inference can be drawn from it. The Ld. Departmental Representative further referred to Article 12(4)(b)(ii) of Indo-US DTAA and submitted that in the case of the assessee, it is transfer of technical know-how, technical plans and designs, therefore, the consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon'ble Apex Court in an unequivocal terms has held that if any payments is made to the non- resident which is not chargeable to tax, no tax has to be deducted at source on such payments. 18. The Ld. Authorised Representative finally submitted that the assessee before making payment to Gensler had sought opinion from the Income Tax Advisor on the issue, whether any tax was required to be deducted on the payments to be made to Gensler. The Tax Consultant vide opinion dated 10-05-2008 advised that : (i) payments for architectural services are not liable to be taxed in India under the provisions of Income Tax Act, 1961. (ii) the payments would not be liable to be taxed in India, as per the DTAA between India and USA; and (iii) No tax was required to be deducted at source u/s.195 of the Act on the payments under consideration. The assessee, in the light of opinion from Tax Consultant proceeded to make payment to Gensler without deducting tax at source u/s.195 of the Act. 19. We have heard the submissions made by the representatives of rival sides at length and have perused the orders of the authorities below. We have also taken into consideration the judgments on which ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fected through that permanent establishment. Article 12 ROYALTIES AND FEES FOR INCLUDED SERVICES 1. Royalties and fees for included services arising in India and paid to a resident of the USA may be taxed in that other State. 2. However, such royalties and fees for included services may also be taxed in the Contracting State in which they arise and according to the laws of that State; but if the beneficial owner of the royalties or fees for included services is a resident of the other Contracting State, the tax so charged shall not exceed: xxxxxxxx xxxxxxxx 3. The term "royalties" as used in this article means: a. payments of any kind received as consideration for the use of, or the right to use, any copyright of a literary, artistic, or scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right or property which are contigent on the productivity, use or dispos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of ADIT Vs.WNS North America Inc. (Supra) has reiterated the proposition that where provisions of Article 12 (4)(b) are beneficial to the assessee in comparison with section 9(1)(vi), the provisions of Article 12 shall apply in supercession of section 9(1)(vi) of the Act. The Authorised Representative of the assessee has asserted that the payments made to Gensler-USA by the assessee should be considered under the provisions of India-USA DTAA as they are more beneficial to the assessee. In the light of well settled law and the provisions of Act, we accept this contention of the assessee. 23. According to the Article 5(l)(i) of DTAA, the undertaking is said to have a Permanent Establishment in India, if any employee or employees of the foreign undertaking carry out any activities in India for period of periods aggregating more than 90 days within total period or 12 months. Undisputedly in the present case, the total stay of employees/executives of Gensler in India was 5 days only. This fact has not been controverted by the Department. No material has been placed on record by the Department to show that the stay of the employees of Gensler, USA in India was for 90 days or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other documents prepared by Gensler shall remain the property of Gensler. The relevant extract of Article 5 of International Terms and Conditions of the Agreement between the Client (assessee) and Gensler is reproduced hereinunder : "5.1 The Drawings, Specifications, and other documents (collectively "Documents") and any computer tapes, disks, electronic data, or CAD files (collectively "Data") prepared by Gensler are instruments of service and shall remain Gensler's property. 5.2 Upon completion of the Services and payment of all amounts due Gensler, Client may retain copies or reproducible of the Documents and/or Data for information and reference in connection with Client's use and occupancy of the completed project. 5.3 Client agrees to indemnify and hold Gensler harmless from and against any and all claims, liabilities, suits, demands, losses, damages, costs, and expenses (including reasonable attorneys' fees and costs of defense), together with interest thereon, accruing or resulting to any persons, firms, or other legal entities, on account of any damages or losses to property or persons, including death of economic loss, arising out of the unauthorized use, re-use, tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended definition intended for the purpose of that Act only. Section 45 of that Act says: "........... The expression 'business' includes every trade, occupation, or profession." Section 2(b) of the Indian Partnership Act, 1932, also defines " business thus: "'Business' includes every trade, occupation and profession." 12. The observation of Rowlatt J. in Christopher Barker & Sons v. IRC [1919] 2 KB 222, 228 (KB), " All professions are businesses, but all businesses are not professions ..........." also supports the view that professions are generally regarded as businesses. The same learned judge in another case, IRC v. Marine Steam Turbine Co. Ltd. [1920] 1 KB 193, 203 (KB) held: "The word 'business ', however, is also used in another and a very different sense, as meaning an active occupation or profession continuously carried on and it is in this sense that the word is used in the Act with which we are here concerned." The word " business " is one of wide import and it means an activity carried on continuously and systematically by a person by the application of his labour or skill with a view to earning an income. We are of the view that in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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