TMI Blog2022 (5) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Commissioner of Income Tax (Appeals) 58, Mumbai ( learned CIT(A) ), under section 250 of the Income Tax Act, 1961 ( the Act ) for the assessment year 2015 16. 2. The appeal is listed before us pursuant to order dated 21.02.2022 passed under section 254(2) of the Act in MA No. 224/Mum/2021, whereby the Co-ordinate Bench of Tribunal recalled its earlier order dated 09/11/2020 passed under section 254(1) of the Act and restored the appeal to its original position for fresh hearing. 3. In this appeal, the Revenue has raised following grounds: 1. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in concluding that the amount received by the assessee from Tata Communications Ltd. (erstwhile VSNL) as 'standby maintenance charges was not in the nature of 'Fees for technical services' under section 9(1)(vii) of the Income tax Act, 1961 without appreciating the fundamental fact that the act of maintenance of infrastructure by the assessee by way of deploying cable ships, submersible equipment, keeping trained staff on standby and maintenance and operation of Network Operation Centre under the Construction and Maintenance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chnical services under section 9(1)(vii) of the Act? 6. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in ignoring that the Flag Network Operating Centre's activities as per the Construction Maintenance Agreement, such as developing the routing plan, implementing, administering and maintaining the routing plan, liaisoning during restoration activity, monitoring and reviewing capacity utilization assignments for optimum bandwidth utilization, identifying capacity requirement for restoration of facilities, coordinating arrangements for unassigned capacity and providing periodic reports for Assignment, Routing etc. are highly specialized activities which come under the purview of management , technical as well as consultancy services for the purposes of section 9(1)(vii) of the IT Act? 7. The appellant prays that the order of the CIT(A) may be set aside on the above ground and that of the assessing officer restored. 4. The only issue arising in present appeal filed by the Revenue is whether the amount received by the assessee from Tata Communications Ltd as standby maintenance charges is in the nature of Fees for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue is in appeal before us. During the course of hearing, Shri Milind Chavan, learned Departmental Representative ( learned D.R. ) vehemently relied upon the order passed by the Assessing Officer. On the other hand, Shri Amit Khatiwala, learned Authorised Representative submitted that the issue arises in present appeal is covered in favour of the assessee by decisions of Co-ordinate Bench of the Tribunal in assessee s own case for preceding assessment years. 8. We have considered the rival submissions and perused the material available on record. We find that the Co-ordinate Bench of Tribunal in assessee s own case in Reliance Globalcom Ltd. v/s DCIT, in ITA Nos. 2304 2335/Mum/2019, vide order dated 28/06/2021, for assessment year 2014 15, while holding that amount received by the assessee towards standby maintenance charges from Tata Communications Ltd is not in the nature of Fees for Technical Services under section 9(1)(vii) of the Act, observed as under: 5. We have heard the ld. authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue regarding the nature of services came-up before the Tribunal for the first time in Assessment Years 1998-99 to 2000-01, and vide order dated 06.02.2015 it was held that the same are not in the nature of fee for technical services . Subsequently, for Assessment Years 2001-02 to 2008-09, the matter again came-up before the Tribunal, and vide order dated 15.06.2015, the amount has been held not to be in the nature of fee for technical services u/s 9(1)(vii) of the Act. The relevant discussion in the order of the Tribunal dated 06.02.2015 (supra) is as under:- 68. The second issue relates to taxability of standby maintenance charges as fees for technical services u/s 9(1)(vii), as raised by the assessee in ground no. 4. As stated earlier, the assessee along with consortium of other parties has built the submarine fibre optic cable providing telecommunication link between UK and Japan. Under the terms of C MA the FLAG cable system is to be jointly operated and maintained in efficient working condition or along with the founding signatory i.e. Flag and the landing party signatories. The operation and maintenance duties and rights has been elaborated in para 10 along wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of standby maintenance which is the impugned issue, was for the arrangement for standby cover and maintenance and operation of FNOC. So far as standby maintenance charges is concerned, it is not in respect of any actual rendering of services but to maintain infrastructures for coordination and setting up conditions for efficient rendering of services in relation to maintenance and repairs of cable system. There is a separate charge for repair and maintenance under the C MA whereby, the assessee is actually required to undertake repair and maintenance and for which the assessee separately charges. Such a repair and maintenance is separate from standby maintenance cost, which is in the nature of reimbursement of fixed cost. The standby maintenance is a fixed annual charge which is payable not for providing or rendering services but for arranging standby maintenance arrangement which is required for a situation whenever some repair work in the undersea cable or terrestrial cable is actually to be performed or rendered. It is a facility or infrastructure maintained for ready to use or render the technical services or repair services, if required. On these facts we have to examine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that it is providing any kind of technical services. Here the most crucial point which has to be seen is firstly, whether there is any actual rendering of services; secondly, is there any mark up or element of profit in the charge received for standby maintenance; and lastly whether it is in the nature of fixed annual charge which is to be recovered as proportionate cost of maintain the standby facility ready for carrying out any maintenance or repair services. This charge is different from an annual maintenance contract, whereby repairs and maintenance is covered for a certain period or services. In the present case as evident from the clause 11.1, that so far as standby maintenance charges is concerned, it is in the form of fixed annual charge which is in the nature of reimbursement. It has been also brought on record that only actual cost incurred has been recovered from VSNL in providing the standby maintenance services. There is no profit element or mark up involved. The assessee has also provided the details of receipt and cost involved in providing standby maintenance services to VSNL for A.Ys. 1998- 99, 1999-2000 and which are as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gth in India vis-a- vis the worldwide cable length. On the contrary, the stand of the Revenue is that the turnover of the assessee derived from standby maintenance charges has no connection with the length of the cable laid in India. As per the Revenue, the standby maintenance charges relate to expenditure incurred by the assessee in maintaining the standby facility and Network Operating Centre (NOC) for a quick response to repair the interruptions and coordination of maintenance. The said facility is maintained and can be mobilised at short notice for rendering any repair work whatever and wherever needed. Therefore, as per the Revenue, the standby maintenance charges are relatable to the cable capacity assigned to various landing parties and not the length of the cable. In other words, as per the Revenue, once such expenses on standby maintenance charges is allocated to TCL, i.e. the Indian landing party, with reference to the capacity used, it cannot be further apportioned based on the length of the cable so as to determine profit of the assessee attributable to the business connection in India. 12. The learned representative, however, pointed out that the income of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) ) erred in holding that the entire turnover (receipts from the Indian Parties) is liable to be treated as turnover for the purpose of taxation in India. The Appellant submits that the said receipt of Standby Maintenance Charges from TCL cannot be treated as turnover for taxation purpose in India. 3. On the facts and circumstances of the case and in law, the Learned CIT(A) erred in holding that the entire turnover (receipts from the Indian parties) of Standby Maintenance Charges from TCL is turnover for the purpose of taxation in India without giving notice for enhancement or opportunity to the Appellant. The Appellant submits that the CIT(A) ought not to have held that the entire turnover (receipt from the Indian parties) is liable to be treated as turnover for the purpose of taxation in India. 17. On this aspect, the short dispute relates to the manner in which the income from standby maintenance charges taxable in India u/s 9(1 Xi) of the Act is to be computed. Said charges have been received by the assessee from TCL and, as per the assessee, portion thereof which is relatable to the length of cable in Indian territorial waters vis-a-vis the len ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... da 15 attributable to India in terms of Sec. 9(1)(i) of the Act. Therefore, on this aspect, we uphold the plea of the assessee and direct the' Assessing Officer to verify the calculation made by the assessee in this regard in its computation of income and recompute the income accordingly. Thus, on this aspect, assessee succeeds as above. 5.1. The grounds raised by the revenue and ground Nos. 1 to 5 raised by the assessee are disposed off in line with the aforesaid findings of this Tribunal in assessee's own case. On being confronted with the aforesaid view taken by the Tribunal in the case of the assessee for the aforementioned preceding years the Id. D.R could not rebut the same. 6. We have given a thoughtful consideration to the issue before us, and hold that as stated by the ld. A.R. and righly so, both the issues in question involved in the present cross appeals are squarely covered by the aforementioned orders passed by the Tribunal in the assessee s own case for the preceding years. As such, finding no reason to take a different view we therein respectfully follow the same. We, thus, in terms of our aforesaid observations uphold the view taken b ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
