TMI Blog2019 (4) TMI 1677X X X X Extracts X X X X X X X X Extracts X X X X ..... of a non-resident would be deemed to accrue or arise in India under clauses (v),(vi) and (vii) of sub-section (1) and would be included in the total income of the non-resident whether or not such non-resident has a residence or place of business or business connection in India, or, the non-resident has rendered services in India. We are conscious that subsequent explanation which replaced the previous one by the Finance Act of 2010 has somewhat widened the scope of applicability of Section 9. The question of non-resident having rendered services in India is quite different from such services having been consumed by the assessee in India. - The appeals are dismissed - INCOME TAX APPEAL NO. 659 OF 2018 WITH INCOME TAX APPEAL NO. 662 OF 2018 - - - Dated:- 22-4-2019 - AKIL KURESHI SARANG V. KOTWAL, JJ. Mr. Tejveer Singh for the Appellant Mr. Sanjiv M. Shah for the Respondent P.C.: 1. These appeals involve the same assessee, similar facts and legal issues. They have been heard together and would be finally disposed of by this common order. For convenience, we may refer facts from Income Tax Appeal No. 659 of 2018. 2. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The Assessing Officer and the CIT(A) ruled in favour of the Revenue. The issue thereupon reached the Tribunal. The Tribunal by the impugned judgment reversed the decisions of the Revenue Authorities and allowed the assessee's appeal making following observations:- 4. Facts in brief are that the assessee is a scheduled Bank duly registered and carrying on the business of banking under the Reserve Bank of India Act and Banking Regulation Act of India. For the purpose of expanding its banking business activities and also for meeting other capital needs, the Bank felt the need to raise capital abroad through the issuance of Global Depository Receipts (GDRs). After considering various option and evaluating the cost as well as benefits of raising such capital through GDRs the assessee decided to engage Amas Bank (Middle East) Ltd. (Amas Bank for short) incorporated and carrying on Financial Services business in the United Arab Emirates (U.A.E.) as a licensed entity by Dubai Financial Services Authority ( DFSA ), for providing the services as sole Bookrunner, Global coordinator and Lead-Manager to the above mentioned GDR offer. The proposed transaction was aimed at ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax in India and the tax already paid be refunded to assessee. In terms of paragraph 4 of the Agreement (Annexure 1 hereto), so entered by assessee, the payment of fees shall be free, inter alia, of any withholding tax, meaning thereby that such tax was to be borne by the assessee under the Agreement, thus the basis condition for making an appeal under Section 248 of the Act for a declaration that no tax was deductible on the said income being fulfilled. 8. In the result, appeals of the assessee are allowed. 5. In essence, the Tribunal came to the conclusion that services rendered by Amas Bank were purely of a commercial nature and bore the character of income arising to it wholly outside India, emanating from commercial services rendered by the Bank in the course of carrying on of its business wholly outside India. Such services were neither rendered in India nor utilized in India and therefore, such services did not partake the character of fees for technical services. 6. As is well known, under sub-section (1) of Section 195 of the Act, any person responsible for paying to a nonresident any other sum chargeable under the provisions of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be inconsequential when one decides whether in terms of Section 9(1) of the Act, the income was to be charged in India or not. He submitted that Section 9 gives rise to deeming fiction which must be allowed to take its full effect. 8. As is well known, Section 9(1) of the Act specifies the incomes which would be deemed to be accrued or arise in India. Clause (vii) thereof reads as under:- (vii) income by way of fees for technical services payable by- (a) the Government ; or (b) a person who is a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India ; or (c) a person who is a non-resident, where the fees are payable in respect of services utilised in a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India. 9. An explanation was inserted at the end of Section 9 by Finance Act of 2007, w.r.e.f. 1.6.1976 which reads as under:- Explanation - For the removal of doubts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This explanation further seeks to delink the concept of income deemed to have accrued or arisen in India to the non-resident having rendered services in India. In case of CIT Vs. Gujarat Reclaim and Rubber Products Ltd [2016] 383 ITR 236 (Bom), this Court had come to the conclusion that payment of commission to non-resident agent which commission was not an income deemed to accrue or arise in India would not invite the requirement of deducting tax at source. In case of Jindal Thermal Power Co Ltd Vs. Deputy CIT (TDS) [2010] 321 ITR 31 (Karn) in the context of Section 9 of the Act, the Karnataka High Court observed that the twin requirement of rendering of services in India and utilization of services in India would have to be satisfied. The Court was examining the effect of the newly inserted explanation to Section 9 by virtue of Finance Act of 2007. We are conscious that subsequent explanation which replaced the previous one by the Finance Act of 2010 has somewhat widened the scope of applicability of Section 9. However, the question of non-resident having rendered services in India is quite different from such services having been consumed by the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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