TMI Blog2019 (1) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... om time to time. And data means geophysical and geological the information, derivatives. It is specifically mentioned that the ownership lies with a licensor. As can be seen from the mentioned clauses what is provided by the licensor is the data relating to the geophysical and geological information about the coast of India and is not responsible for the accuracy or usefulness of such data. Thus it is clear that licensor have only made available the data acquired by them and available with them but are not making available technology available for use of such data by the assessee. It has to be understood that 3D seismic is an exploration technique use in the search for oil and gas underground structure. This technique is analogues to ultrasound technology used in the medical field. The maps / designs are nothing but a way to interpret the data and cannot be equated to development and transfer of technical maps and designs as contemplated by the Assessing Officer / CIT (A). The revenue could not prove that there was transfer of Technology to the assessee nor it has been proved that the impugned transactions have made available technical expertise skill or knowledge by processi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-section (1A) of section 192 , being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: Provided that no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax.] 94-99 [(1A) Without prejudice to the provisions of sub-section (I), if any such person, principal officer or company as is referred to in that subsection does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest,- (i) at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and (ii) at one and one-half per cent for every month or part of a month on the amount of such tax from the date on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by remaining silent on non-residents and only amending the provision, for residents. The question is, whether the petitioner is right in contending that if the Act does not specify a time period, then a reasonable time period should be read into the Act. This contention is based on judgements which were delivered when the Legislature had not made a distinction between residents and nonresidents. The question is when such a distinction exists, can one read a reasonable time period into the Act. 13. The amendment ipso facto is undoubtedly silent about the application of periods of limitation to amounts deducted and payments made to non residents. It is quite possible to argue that the demarcation and distinction between payments made to residents and non-residents through the amendment, can mean that where no period of limitation for Sections 200 and 201 has been prescribed, one cannot be read into the Act. However, the legislative history here becomes instructive; in that context extrinsic material, in the form of statements of objects and reasons, become relevant. At all material times, payments made to residents and non-residents were treated alike. The revenue does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non and must be prepared by the Assessing Officer before he transmits the records to the otrm Assessing Officer who has jurisdiction over such other person. The satisfaction note could prepared at either of the following stages : (a) at the time of or along with the initiation proceedings against the searched person under section 158BC of the Act ; (b) along with to. assessment proceedings under section 158BC of the Act ; and (c) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person.' 10. An added reason why the submission of the Revenue is unaccept able is that had Parliament indeed intended to overrule or set aside the reasoning in NHK Japan {supra), it would have, like other instances and more specifically in the case of section 201(1 A), brought in a retrospective amendment, nullifying the precedent itself. That it chose to bring section 201(3) in the first instance in 2010 and later in 2014 fortifies the reasoning of the court. Accordingly, the issue is answered against the Revenue. 17. It appears to the court that the above decision settles the question whether to declare an assessee to be an assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence under this Act. 21. In the first place, what the said provision does is to not apply the time limit of two years completing the assessment from the end of the financial year where the assessment, reassessment: or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order . Or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act. This can apply only to the assessee in whose case such an order is made by a court. For instance, if the above decision was qua Idea Cellular Ltd. then it certainly cannot form the basis for initiating proceeding qua other assessee. 22. Secondly there has to be a finding or directions as regards the issue in question, viz., the non-deduction of tax at source resulting in an assessee having to be declared an assessee in default under section 201 of the Act. In Rajinder Nath v. CIT [1979] 120 ITR 14 (SC), it was held that the existence of an order disposing of a case qua an assessee containing specific directions of the court was a sine qua non for invoking the powers under section 153(3)(ii) of the Act. Even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the words sum chargeable under the provisions of the Act in section 195(1). The fact that the Revenue has not obtained any information per se cannot be a ground to construe section 195 widely so as to require deduction of TAS even in a case where an amount paid is not chargeable to tax in India at all. We cannot read section 195, as suggested by the Department, namely, that the moment there is remittance the obligation to deduct TAS arises. If we were to accept such a contention it would mean that on mere payment income would be said to arise or accrue in India. Therefore, as stated earlier, if the contention of the Department was accepted it would mean obliteration of the expression sum chargeable under the provisions of the Act from section 195(1). While interpreting a section one has to give weightage to every word used in that section. While interpreting the provisions of the Income-tax Act one cannot read the charging sections of that Act de hors the machinery sections. The Act is to be read as an integrated code. Section 195 appears in Chapter XVII which deals with collection and recovery. As held in the case of CIT v. Eli Lilly and Co. (India) (P.) Ltd. [2009] 312 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k a determination of the appropriate proportion of such sum so chargeable where a proportion of the sum so chargeable is liable to tax. The entire basis of the Department's contention is based on administrative convenience in support of its interpretation. According to the Department, huge seepage of revenue can take place if persons making payments to non residents are free to deduct TAS or not to deduct TAS. It is the case of the Department that section 195(2), as interpreted by the High Court, would plug the loophole as the said interpretation requires the payer to make a declaration before the Income- tax Officer (TDS) of payments made to non residents. In other words, according to the Department, section 195(2) is a provision by which the payer is required to inform the Department of the remittances he makes to non-residents b * which the Department is able to keep track of the remittances being made to non-residents outside India. We find no merit in these contentions. As stated hereinabove, section 195(1) uses the expression sum chargeable under the provisions of the Act. We need to give weightage to those words. Further, section 195 uses the word payer and not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent context) accepting the petitioner's contention in the present case is based on precedent. Furthermore, the only reason cited by the respondent, i.e. administrative convenience, cannot outweigh the harsh nature of the consequence, which would expose resident payers to the onerous responsibility of ' maintaining books and documents for an uncertain period of time. Given these considerations, the 'Impugned notices are quashed. The writ petition is allowed in these terms; no costs. 8. Facts of the case in hand are in parity with the facts of Bharti Airtel, respectfully following the findings of the Hon ble Jurisdictional High Court (supra) we hold that the order dated 28.03.2013 for A. Y. 2006-07, 2007-08 and 2008-09 are barred by limitation. 9. For the sake of the completeness of the adjudication we will now consider whether the payments made by the assessee to GX Technology of America is in the nature of fees for technical services u/s 9 (1) (vii) of the Act and fees for included services under Article 12 of the DTAA between India and America. 10. We are considering the facts of A. Y. 2006-07 and the facts show that during the year the assessee has made paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamples of some services where it can be said that technology can be made available. It is noted that in the case of ABC , In re (234 ITR 371AAR) a UK company rendered consultancy to an Indian oil company under various agreements wherein it only surveyed the area earmarked by Indian company and gave the technical designs and knowhow to enable the Indian company to perform the mining job itself. The payment was considered as fee for technical services, In this case, the data after conducting surveys is to be used for exploration licensing rounds by the participants. 5.33 In view of foregoing, it is held that the receipts of the Appellant were taxable as fee for technical services under 9(l)(vii) and also under Article 12 of India-USA DTAA. Once the receipts of the NR become taxable in India, the AO was right in holding that while making payments to the NR, the Appellant should have deducted tax at source. Since the tax was not deducted at source while making payments to the NR, the AO was correct in his conclusion that the Appellant was assessee in default. Accordingly, the provisions of section 201(1)/201 (1A) of the Act, were rightly invoked. 14. On perusal of the Master ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch situations, Licensor may be unable to provide Licensee copies of the portion of the original Data thereby affected. Licensor shall have the sole right to delete or discard the original Data upon making reasonable efforts to notify Licensee of its intention to do so. Provided however, the Licensee shall be entitled to a refund of license fee applicable in proportion to the data so deleted or discarded by the Licensor, with the exception of instances where the original data becomes irretrievable due to circumstances that were unanticipated, unavoidable or beyond the control of . . the Licensor. Licensee may be granted by Licensor a non-exclusive license to use such original Data, not covered under the terms of this License, upon payment of an additional license fee. 2.3 Notice of RestrictedUse: Licensee may make copies of any Data and Derivatives for the sole purpose of using such copies pursuant to the rights granted in this License; provided that all such copies shall have the following notice printed thereon or attached to it or its medium: NOTICE This Data is proprietary to and a trade secret of GX Technology Corporation ( Licensor ). The use of Unis Data ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ves before disclosure thereof by Licensee. If, in the absence of a protective order, Licensee is nevertheless compelled to disclose Data or Derivatives, Licensee may disclose only that portion of the Data or Derivatives that Licensee is advised to be disclosed in compliance with the relevant process. In the event of such disclosure, Licensee shall give Licensor written notice of the Data or Derivatives to be disclosed as far in advance of its disclosure as practicable, and upon Licensor's formal written request, Licensee shall use reasonable efforts to obtain assurances that the disclosed Data or Derivatives will be accorded confidential treatment 3.3 Outside Service Providers 3.3.1 Consultants The Data and Derivatives may be made available to any Licensee's Consultant for the sole use and benefit of Licensee, but subject to the rights of Licensee under this License, provided that the Consultant prior signs with Licensee a Confidentiality Agreement for the restricted use of the Data or Derivatives. The Data and Derivatives shall remain on the premises of Licensee and all analyses or interpretations thereof by Consultant shall be done on such premises and shall not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titure web sites, or any other similar means of virtual access outside of Licensee's premises without the express written consent of Licensor which shall not be unreasonably withheld or delayed; Taxes: Any sales, gross receipts, value added, use or similar tax is levied or assessed against Licensor as a consequence of the licensing of Data to Licensee under this License and in particular any Supplement, such taxes shall be paid by the Party liable to pay such tax under the relevant statute. Transfer of License: Licensee shall nor sell, sublicense, assign, or transfer this License to a Third Party, in whole or in part, or transfer its rights or obligations hereunder, except as expressly authorized in this License. 5.1 Acquisitions/Mergers This License shall automatically terminate at such time a Third Party becomes an Acquirer of Licensee unless Licensor receives payment from either Licensee or the Acquirer in the amount of a transfer fee equal to 50% of Licensor's then published market rate license fee wife respect to the Data and the Acquirer signs directly with Licensor the Licensor's then standard license agreement. Should this License termin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On identical set of facts, the Hon'ble High Court of Karnataka in the case of De Beers India Minerals (P.) Ltd. (supra) had the occasion to interpret the relevant Articles of India-Netherlands DTAA. In this case, the Hon'ble Karnataka High Court held as under:- 'The test is whether tire recipient of the service is equipped to carry on his business without reference to the service provider, if he is able to carry on his business in future without the technical service of tire service provider in respect of services rendered then, it would be said that technical knowledge is made available. The facts of the case and observations made by the Hon'ble Karnataka HC are as under: (Para 18) In terms of the contract entered into with Fugro, they have given the data, photographs and maps. But they have not made available technical expertise, skill or know ledge in respect of such collection or processing of data to the assessees. which the assessee can apply independently and without assistance and undertake such survey independently excluding Fugro in future. The Fugro has not made available the aforesaid technology with the aid of which they were a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessees can make use of the data supplied by way of technical services and put its experience in identifying the locations where the diamonds are found and carrying on its business. But the technical services which is provided by Fugro will not enable the assesses to independently undertake any survey either in the very same area Fugro conducted the survey or in any other area. They did not get any enduring benefit from the aforesaid survey. In that view of the matter, though Fugro rendered technical services as defined under Section 9(l)(vii) Explanation 2, it does not satisfy the requirement of technical services as contained in DTAA. Therefore the liability to tax is not attracted. Accordingly the first substantial question of law is answered in favour of the assessees and against the Revenue. Para 27) Therefore the assessees not being possessed with the technical know how to conduct this prospecting- operations and reconnaissance operations, engaged die services of Fugro which is expert in the field. By way of technical services Fugro delivered to the assessees dre data and information after such operations. The said data is certainly made use of by die assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remained with the service provider then out of the ambits of the term make available' but after the fruits of the service rendered remained with the service recipient and the service recipient is able to perform similar activity, for which the services were sought, without the help or recourse of the service rendered then the technology can be said to be transferred or made available to the recipient. 23. For the sake of completeness, there are significant distinction between the definition as prescribed u/s. 9 of the Act of fees for technical services as compared with the definition prescribed in Article 13of Indo-UK treaty. But the settled law is that the provisions of DTAA overrides the provisions of IT Act in the matter of ascertainment of taxability under the Income Tax Act. At this juncture, it is worth to mention the decision of the Hon'ble Supreme Court in the case of GE India Technology Centre (P.) Ltd. v. CIT [2010] 7 taxmann.com 18/193 Taxman 234/327 ITR 456 wherein the Hon'ble Apex Court has decided that there was no obligation for withholding tax on any person making payment to a non-resident, if the payment made to non-resident is not chargeable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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