TMI Blog2019 (3) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... e payments made towards the services rendered by WFPL, Srilanka are liable to withholding tax at 10%. Similarly, on the payments made for repair service to Non Resident of Germany, the Ld CIT(A), inter alia, held, that it is in the nature of FTS, rightly treated as income chargeable to tax in India and hence liable to TDS. Therefore, the AO has rightly levied tax and interest u/s 201(1) & u/s 201(1A) of the Act. Since the assessee provided full turnkey installations for wind power projects for the customers outside India and thus the assessee has fulfilled /rendered its turnkey projects outside India by availing the impugned services. Therefore, its business is not carried out entirely outside India. In the facts and circumstances, we do not find any reason to interfere with the order of the ld CIT(A). The corresponding grounds of the assessee are dismissed. Payment made for purchase of software - royalty as per explanation 4 to section 9(1)(vi) of the Act and as per Article 13(3) of the Indo Denmak DTAA r.w.s 90 - HELD THAT:- The impugned consideration is paid for the purchase of software, it is paid for right to use software and hence such consideration is not royalty. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld.CIT(A), the assessee filed this appeal. 3. The Ld AR submitted that the assessee sells its WEG to customers in India and also outside India. For the WEG sold outside India,it engaged the companies resident in the respective countries for providing the erection and commissioning services and subsequent repair services to the customers in those countries.During the assessmentyear it paid, ₹ 1,19,47,013/- to M/s Windforce Private Limited, Srilanka for erection and commission services rendered to its customers outside India and ₹ 3,34,414/- to M/s Wingtec Rotor Service, Germany for repair services rendered to its customers outside India. The Assessing officer held that the above services require technical skills and expertise and hence they are taxable under section 9(1)(vii) Further, the AO held that as per the provisions of Double Taxation Avoidance Agreement with Germany and Srilanka, the Fee for Technical Services payable to anon-resident is taxable in India at 10%. In this regard, the Ld AR submitted that as per the provisions of section 9(1)(vii) (b) of the Act, the income by way of fees for technical services payable by a person who is a resident, except wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant portion is extracted as under : The nature of work mentioned as per the work order in respect of WFPL mentions that WFPL shall provide one no Liebherr LR 1350 serial no 074073 (350t capacity) crawler crane with 96 meter main boom and 12 meters fixed jib in a good working condition and load handling capacity as per the load chart of the crane at kalpitiya sites for erection and de-erection of WIGs belonging to REGEN. Windforce shall give or provide all necessary superintendence during the execution of the works. WindforcePvt. Ltd. shall provide and employ personnel on the site in connection with the execution of the works. Only such technical assistants as are skilled and experienced in their respective callings as area competent to give proper supervision to the work they are required to supervise such skilled, semi-skilled and unskilled labour as in necessary for the proper and timely execution and maintenance of works. Where required by law or regulation of local or other authority, such personnel shall be duly licenses by the competent authority to practice their trades, professions and callings. The appellant has exported Wind turbine generators to its cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nical Service. In the Work Order issued by Regen PowertechPvt. Ltd. to M/s Windforcepvt. ltd., the scope of the work is mentioned as WFPL to operate the crane under supervision and control of REGEN. The work assigned is mentioned as Loading and Unloading of our WEC components at REGEN, WEC locations, De-Erection and Erection of foundation cans, steel towers, Nacelle, Generator, Rotor, Blades and other supporting components of WEC at REGEN sites. Dismantling, assembly, loading and unloading of crane and crane parts at REGEN site. In the conditions of contract, Clause 3.0 states that Windforce Pvt Ltd shall give or provide all necessary superintendence during the cution of the Works and as long thereafter as the Site Engineer may consider necessary for the proper fulfilling of the obligations under the contract. Windforce Put Ltd shall arrange a competent and authorized agent or representative to be constantly on the works who shall give his whole time to the superintendence of the same. clause 4.0 says that Windforce Put Ltd shall provide and employ personnel on the site in connection with the execution of works, Only such technical assistants as are skilled and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment Rs.l,19,47,013/- paid to M/s Windforce Private. Limited, Srilanka for erection and commission services rendered to customers outside India as FTS or Royalty liable to 10% TDS and as appellant has failed to do so, hence appellant is in default in view of sec 201(1) of the Act and therefore the AO has rightly levied tax and interest u/s 20 1(1) u/s 201(1A) of the Act. The ground of appeal is therefore dismissed. As regard the REPAIR SERVICE, the appellant has engaged M/s. Wingtec rotor service, Germany for carrying out repair on the rotor blades by deploying its service technicians and had incurred an amount of ₹ 3,34,414 towards the same and appellant has not deducted IDS on the said payment for the reason that the nature of remittance is towards repair charges, the repairs are most typical features like cracking and roughness on the surface of the blades, electric short circuit in the generator arid overheating of the gearbox all demand a sophisticated approach to maintenance. Hence these repairs are not mundane repairs, but require highly sophisticated techniques and hence in the nature of Technical Services as per section 9(l)(vii) r.w. Explanation 2 of IT A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaken in India.Hence, an order of installing turbine outside India, cannot be considered as a business or profession done by Regen outside India. The materials (turbine)involved in that business are not procured from outside India. Hence, the A O held that the assessee s contention that execution of works in Srilanka are not the business carried out entirely outside India. After examination of the agreements, Article 12 of India-Srilanka DTAA, Article 12 of India-Germany , the Ld CIT(A) has after distinguishing the case laws relied on by the assessee, inter alia, held , supra, that the services of technical personnel are used in the Installation of Wind turbines and hence the services rendered by Wind Force Pvt. Ltd. to Regen Power tech for its projects in Srilanka are in the nature of Fee for Technical Services and the payments made to M/s Windforce Private Limited, Srilanka for erection and commission services rendered to customers outside India are also in the nature of Royalty as it involves the payment for the right to use industrial, commercial, or scientific equipment, as the present payment is towards hiring of cranes and hence in the nature of right to use Industrial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience. Since as per the provisions of Indo-Denmark DTAA purchase of packaged software isoutside the definition or scope of Royalty or FTS, the provisions of DTAA, being morebeneficial prevails over the provisions of the Act as held in the decision of the Apex Court in the case of Union of India v. Azadi Bachao Andolan (2003) 263 ITR 705/132 Taxman 373. Further, he relied on the following cases,wherein it was held that the amendedprovisions of the domestic law cannot be read into the DTAA: 1. ADIT V. First Advantage (P.) Ltd [2017] 77 taxmann.com 195 (Mumbai - Trib.) 2. Dy. DIT (IT) v. Reliance Industries Ltd. [2016] 159 ITD 208/69 taxmann.com 311(Mum. - Trib.) 3.Capgemini Business Services (India) Ltd. v. Asstt. CIT 120161 158 ITD 1/68 taxmann.com 36 (Mum.- Tub.) 4. Financial Software Systems (P.) Ltd. Vs. DCIT / ACIT Company Circle 11(1), Chennai [2014] 47 taxmann.com 410 6.2 Further, the Ld AR submitted that in the case of Financial Software Systems (P.) Ltd. Vs. DCIT / ACIT Company Circle 11(1), Chennai [2014] 47 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in UAE, which amounts to business connection outside India. Hence, as per the provisions of section 9(1)(vii)(b) of the Act, which is read as under: 9. (1) The following incomes shall be deemed to accrue or arise in India: (vii) income by way of fees for technical services payable by- ------- (b) a person who is a resident, except where the fees are payable in respect of servicesin a business or profession carried on by such person outside India or for theof making or earning any income from any source outside India; or... Therefore, the remittances made to Ernst Young UAE is not taxable in India. In this regard, the Ld AR relied on the decision of Kotak Mahindra Bank Ltd. V. ITO in [2016] 74246 (Mumbai - Trib.) Since the said payments are not subject to tax in India, it is not liable to TDS as held by the Hon ble Supreme Court in the case of GE India Technology Cen. (P.) Ltd. V. CIT in [2010] 193 TAXMAN 234 (SC)and hence prayed that the AO may be directed not to treat the assessee in default and delete the taxes and interest levied pray that your authority may direct the assessing officer not to treat the assessee in default u/s 201/201(1A) of the Act an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause(vii) of subsection. (1) and shall be included in the total income of the non-resident, whether or not,- The non-resident has a residence or place of business or business connection in India; or The non-resident has rendered services in India. Hence the market study being in the nature of Technical Services the remittances is treated as FTS income in the hands of E Y and is liable to TDS. Without prejudice to the above, the said market study is in the nature of information concerning commercial experience and hence is Royalty under Indo UAE DTAA. To quote the same the term royalties as used in Article means payment of any kind received as a consideration for the use of, or the right to use, any copyright of literately, artistic or scientific work, including cinematography films, or films tapes used for radio or tee vision broadcasting, any patent, trade mark, artistic or scientific work, including cinematography films or tapes used for radio or television broadcasting, and patent, trademark, design or model, plan, secret formula or process, or for the use of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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