TMI Blog2012 (5) TMI 832X X X X Extracts X X X X X X X X Extracts X X X X ..... ived by the assessee during the relevant previous year. Second issue is regarding deletion of an addition of ₹ 1,04,50,458/- made by the A.O. for non-deduction of tax at source, invoking Section 40(a)(i) of Income-tax Act, 1961 (in short 'the Act'). 2. Short facts apropos are that assessee engaged in manufacturing and sale of computer peripherals, had during the relevant previous year, entered into Annual Maintenance Contracts (AMC) with various customers to which it had sold its products. As per such AMCs, assessee was to provide maintenance support for a period of one year from the date of contract. Assessee had shown as income only that part of the revenue pertaining to the AMCs which fell within the relevant previous ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Electronics (P) Ltd. (274 ITR 336), A.O. was of the opinion that in that case, there was indefiniteness regarding the service to be rendered, but here in assessee's case, the service to be rendered was defined and definite. He, therefore, made an addition of ₹ 3,68,19,800/- for the unexpired value of AMCs not offered by assessee as its income. 3. In its appeal before CIT(Appeals), argument of the assessee was that when it entered into AMCs, 100% revenue was received only as an advance. The AMCs were for a period of 12 months and a part of the 12 months period would always fall beyond the end of the financial year. The unexpired period of contracts represent liability of the assessee for meeting its maintenance obligations and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me on pro rata basis for the duration of the AMC contracts in the relevant previous year. The clients of the assessee could at any point cancel the contract and get a refund for the unexpired period. This itself meant that the amount received by the assessee at the point of time it entered into an AMC was nothing but an advance, which on the progress of each day got converted into revenue. The income was accruing on a day-to-day basis based on the progress of time and it did not accrue on the day of entering into the contract. An obligation was there on the assessee to refund the unexpired value of AMC, if the AMC was cancelled by its customers. So, we cannot say that whole of the income had accrued to the assessee at the point of time it e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Explanation 2 to Section 9(1)(vii) of the Act. Therefore, he held that assessee had failed to deduct tax at source which it was obliged to do. Relying on the decision of Hon'ble Apex Court in the case of Transmission Corporation of AP Ltd. v. CIT (239 ITR 587), A.O. held that assessee had violated Section 195 and made a disallowance of ₹ 1,04,50,458/- under Section 40(a)(i) of the Act. 10. In its appeal before CIT(Appeals), argument of the assessee was that the payments were made for market survey, qualitative consumer measurement, retail store site information, etc. and such payments did not attract Section 195 of the Act. According to the assessee, entire services were rendered outside India and the amounts were business in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 195 of the Act and deleted the disallowance made by the Assessing Officer. 11. Now before us, learned D.R., strongly assailing the order of CIT(Appeals), submitted that none of the agreements placed by the assessee before the CIT(Appeals) were ever made available by the assessee before the A.O. According to him, assessee itself had admitted that expenses paid for market survey was taxable in India. The provisions of DTAA between India and Mauritius was not brought to the notice of the A.O. and CIT(Appeals) had also not obtained remand report. According to him, the services rendered by the Mauritius company were nothing but technical in nature falling within the ambit of Section 9(1)(vii) of the Act. Assessee was obliged to deduct tax at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng data for identifying opportunities for consumer electronics in the overseas market. Such a market survey definitely involved exercise of technical knowledge and skill by the persons doing the survey. We cannot say that the work done by the Mauritius company for the assessee was not a technical service. What assessee paid to Mauritius company was fees for technical services. Explanation 2 to Section 9(1)(vii) of the Act states that fees for technical services meant any consideration for rendering any managerial, technical or consultancy services. There is no case for the assessee that payments were made for any construction, assembly, mining or a project undertaken by the recipient which would fall under the head salaries . Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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