9911796707
TMI Blog2020 (8) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... g the provisions of section 195 and that too without any basis and by recording incorrect facts and findings and without appreciating the facts and circumstances of the case and in violation of principles of natural justice and without considering the submission filed by the assessee. 2. That in any case and in any view of the matter, action of Ld. CIT(A) in not deleting the addition made by Ld. AO amounting to Rs. 39,70,224/- and has erred in enhancing the disallowance by Rs. 92,63,856/-, aggregating to Rs.l,32,34,080/- by wrongly observing the commission receipts in the hands of TEI as fee for technical services u/s 9(1)(vii) of the Act read with explanation 2 and further erred in applying the provisions of section 195, in bad in law and against the facts and circumstances of the case. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234B and 234C of Income Tax Act, 1961." 2. Briefly stated the facts necessary for adjudication of the issue at hand are : Assessee company is into the business of manufacturing and trading of panels, cold rolling mills and int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referral commission @ 6% of the total base value of the order received from the above said prospective buyer. 5. The above commission shall be all inclusive and no expenses shall be reimbursed by the First Party to the Second Party. The Second Party will render its services entirely from out of India. 6. That this understanding is limited to the order to be procured from this customer form Kenya. 7. Terms of Payment : The total commission shall be paid in two installments, (I) 50% on receipt of at least 30% (of the order value) advance from the customer; (II) Balance 50% on receipt of at least 90% (of the order value) payment from the customer. 8. The payment shall be made in USD after deducting withholding tax, if any." 6. AO as well as ld. CIT (A) rejected the contentions raised by the assessee that such income is not taxable in India in terms of Article 12 of Double Taxation Avoidance Agreement (DTAA) entered into between India and Japan as the commission income in the hands of TEI in this case is not chargeable to tax in India as 'fee for technical services' under Article 12 and not as business income under Article 7. 7. In the backdrop of the aforesaid facts and cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has to examine the general or common usage of these words or expressions, how they are interpreted and understood by the persons engaged in business and by the common man who is aware and understands the said terms. [Para 14] The services rendered, the procurement of export orders, etc. cannot be treated as management services provided by the non-resident to the respondent-assessee. The non-resident was not acting as a manager or dealing with administration. It was not controlling the policies or scrutinizing the effectiveness of the policies. It did not perform as a primary executor, any supervisory function whatsoever. This is dear from the facts as recorded by the Commissioner (Appeals), which have been affirmed by the Tribunal. [Para 15] The non-resident, it is dear was appointed as a commission agent for sale of products within the territories specified and subject to and in accordance with the terms set out, which the non-resident accepted. The non-resident, therefore, was acting as an agent for procuring orders and not rendering managerial advice or management services. Further, the respondent-assessee was legally bound with the nonresidents' representations and acts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he respondent-assessee. The nonresident no doubt had acquired skill and expertise in the field of marketing and sale of automobile products, but in the facts, as noticed by the Tribunal and the commissioner (Appeals), the nonresident did not act as a consultant, who advised or rendered any counseling services. The skill, business acumen and knowledge acquired by the nonresident were for his own benefit and use. The nonresident procured orders on the basis of the said knowledge, information and expertise to secure their commission. It is a case of self-use and benefit, and not giving advice or consultation to the assessee on any field, including how to procure export orders, how to market their products, procure payments etc. The assessee upon receipt of export orders, manufactured the required articles/goods and then the goods produced were exported. There was no element of consultation or advice rendered by the nonresident to the respondent-assessee. [Para 22] The technical services consists of services of technical nature, when special skills or knowledge relating to technical field are required for their provision, managerial services are rendered for performing management f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "Salaries"" 15. Explanation 2 to section 9(1)(vii) is categoric enough to explain the 'fee for technical services' which is, 'any consideration for rendering any managerial, technical or consultancy services'. From the facts on record and terms & conditions contained in the MOU, it is difficult to deduce if the TEI has rendered any type of managerial, technical or consultancy services for installation and successful implementation of cold rolling mill (turnkey project) rather introduced M/s. Mabati Rolling Mills, a Kenyan company for supply of cold rolling mills and thereby procured order of $34,90,000. There is not an iota of evidence on file as to what type of managerial, technical or consultancy services have been rendered by TEI to the assessee company for installation or successful commissioning of cold rolling mill. There is also not an iota of evidence on file if TEI was having any such technical expertise and skills, as its fu ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
