TMI Blog2022 (5) TMI 770X X X X Extracts X X X X X X X X Extracts X X X X ..... ts will not conclude that these persons were rendering consultancy services to the assessee. For deciding whether these persons were rendering any technical services as provided under section 9(1)(vii) of the I.T. Act, 1961, one has to look into the terms and conditions of the agreement. We find in the case of M/s. Super Poly Fabrics Ltd.[ 2008 (4) TMI 31 - SUPREME COURT] the Hon ble Supreme Court has held that there cannot be any doubt whatsoever at a document has to be read as a whole. The purport and object with which the parties thereto entered into a contract ought to be ascertained only from the terms and conditions thereof. Neither the nomenclature of the document nor any particular activity undertaken by the parties to the contract would be decisive. We are of the considered opinion that the intention of the agreement and the nature of the services rendered by these agents have to be looked into rather than just wording of the MOU terming the agents as consultants. A perusal of the terms and conditions shows that these persons have to market the assessee s educational courses. The sole purpose for rendering the services was attracting and motivating the internati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave not rendered any services in India. Since the services have been rendered by them outside India, therefore, it cannot be held that the income for the services rendered by them accrues or arise in India in the case of the non-resident. So far as the applicability of provisions of Section 9(1)(vii) of the I.T. Act, 1961 is concerned, we are of the considered opinion that the same is also not applicable. The contention of the Revenue that these agents have been paid fees for technical services rendered by them which is deemed to arise or accrue in India are not correct especially when these agents have not rendered any technical services and the payment made by the assessee to them in our opinion are not fee for technical services. Services rendered by these agents cannot be regarded to be the managerial, technical or consultancy services. These agents are not managing the affairs of the assessee university. They are not giving any technical advise to the assessee. They are also not having any technical or special skill in this regard and no such material was brought to our notice to substantiate the same that these agents are either managing the affairs of the assessee or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground relating to this issue in both the A.Ys. 2016-17 and 2017-18 are allowed. Faculty Development Expenses - We find as per Article 12(5) of DTAA between India and Singapore the services rendered by Singapore party for educating the faculty and staff so that their professional and technical knowledge be upgraded/updated cannot be regarded to be the fee for technical services. Further as per provisions of Section Article 7 of DTAA which is applicable in the instant case, the amount paid to Singapore party shall be liable to tax in India only if that party has PE in India. As mentioned earlier, it is an undisputed fact that the non-resident does not have any PE in India. Therefore, the income so earned by the non-resident cannot be said to be chargeable to tax in India. We, therefore, are of the considered opinion that the assessee was not liable to deduct tax at source under section 195 - we set aside the order of the Ld. CIT(A) and hold that the assessee has not made any default in not deducting the tax and, therefore, assessee is not an assessee in default under section 201 of the I.T. Act, 1961 and consequently the interest under section 201(1A) of the I.T. Act, 1961. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pta, Advisor Finance, Sharda University was recorded on 29.03.2017 to ascertain the remittances which had been made abroad and to ascertain the nature of these payments. Subsequently, a letter dated 08.05.2017 was issued to the assessee requiring it to furnish information regarding TDS on foreign remittances from 01.04.2009 to 31.03.2013. The assessee produced details of outward foreign remittances regarding Consultancy Fees on Student Recruitment, Commission on Student Recruitment, Participation Fee for Education Tours, Advertisement/Marketing Promotional Activities, Educational Tours, Ph. D Thesis Evaluation, Education Fair Charges etc.. 2.2. The AO observed that the assessee had not made TDS on various foreign remittances which it was obliged to do. He, therefore, the A.O. issued notices under section 201(1)/201(1A) dated 17.05.2017 and 29.05.2017 to the assessee asking him to explain as to why TDS has not been made from the above payments. 2.3. The assessee explained that the sums paid under various heads were not chargeable to tax as per the provisions of the I.T. Act, 1961 and the assessee was not required to make TDS as per the provisions of Section 195 of the I.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndidate files, fully attested by Party B, shall be scanned and emailed to Sharda University (global@sharda.ac.in) prior to admission. These documents must be verified and attested by the consultant before emailing/sending to Party A. The original documents should be brought by the student himself. The admission office of Sharda University shall complete authenticity checks on the documentation once the originals are received. 9. The right of admission is solely and purely based at the discretion of Party A's Central Admission Cell, Greater Noida. This is governed by the Rules and Regulations of the Academic Council of Party A. 10. In case of cancellation of admission, the refund of fee will be as per the refund policies of the University. 11. In case of refund the consultant is not entitled to any commission. 12. Consultancy fee. All consultancy charge will be paid 30 days after the student pays the 1st year Tuition fee's. The following charges have been agreed to between Part A and Party B, which shall remain in force for the duration of this agreement For All Cources except MBBS, BDS Total No. of Students ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.Singto Barisuka 2. 2. Sonia Obanu 2.5. He analysed the provisions of DTAA with the respective countries and the MoU between the assessee and the consultants and noted that the assessee has engaged them on behalf of it for recruitment of international students to assessee s various courses offered in India. Rejecting the various explanation given by the assessee, the AO held the commission paid by the assessee to the consultants as Fee for Technical Services (FTS) under section 9(l)(vii) in the nature of consultancy and managerial services on account of the following reasons : a) The consultancy fees on student recruitment is admittedly paid to the agents appointed by Sharda University to visit various school at local area and to collect the data of prospective students. b) These agents approach to interested students through email/phone. They introduce Sharda University by giving the details of the colleges, providing admission brouchers, describe the fee structure of the particular courses and pursue with the students and their families to get them ready for taking admission in Sharda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of professional expenses. 3.3. Since, the assessee has not deducted any tax from the payments made to the foreign firms and nonresidents, the AO rejecting the various explanations given by the assessee held the assessee to be an assessee deemed to be in default under section 201(1) of the I.T. Act, 1961 read with section 195(1) of the I.T. Act, 1961. Since the assessee was deemed to be an assessee in default of tax, therefore, the A.O. charged simple interest at an amount of Rs.20,21,730/- as interest under section 201(1A) of the I.T. Act, 1961 for the A.Ys. 2010-11 to 2017-18 and also initiated penalty proceedings under section 271C separately against the assessee for failure to deduct tax at source for the A.Ys. 2010-11 to 2017-18. 4. In appeal, the Ld. CIT(A) upheld the action of the A.O. by observing as under : 4.13. I have considered the submission of the appellant, perused the assessment order, remand report and rejoinder of the appellant. The assessing officer has held the appellant as assessee in default u/s 201 of the Act for non-deduction of tax u/s 195 of the Act for various remittances abroad. The appellant had taken the different issues for which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minate this Agreement by giving a third party (30) days notice to writing. 7. The consultant can book candidate for Professional Consideration of admission upon payment of the Admission Fees (as specified in the Program Prospectus website) through a Demand Draft in favour of Sharda University payable at New Delhi, India or to Sharda University Bank account as mentioned on the website. 8. Complete candidate file, fully attested by party B, are to be scanned and emailed to Sharda University (global@sharda.ac.in) prior to admission. It has been stipulated that these documents must be verified and attested by the consultant before emailing/ sending to the assessee. 15. Confidentiality Integrity a) Party B undertakes to keep confidential and not to deal with any of the information, documents, material and details acquired under this Agreement for other than the sole purpose of Party B s performance of his/ her obligations under this Agreement and towards the interests and benefits of the Party A. b) Should Party B found exploiting candidates for services that they either cannot provide or have no right to provide, shall immediately be struck off fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India. (vii) income by way of fees for technical services payable by- ..(c) a person who is a non-resident, where the fees are payable in respect of services utilized in a business or profession carried on by such person in India or for the purposes of making or earning tiny income from any source in India : .. Explanation 2.-For the purposes of this clause, fees for technical services means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision 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 . Explanation.-For the removal of doubts, it is hereby declared that for the purposes of this Section, income of a non-resident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nated into admission of students to the educational university run by the appellant. These technical and professional advice to the students were given by the consultant having technical expertise in the field. The appellant cannot just appoint any entity for this special job which is resulting into more business to the appellant. It is also certain such managerial and consultancy services are not available at hand internally to the appellant otherwise it could have sent its own personnel for this purpose to different countries and could have saved money also. 4.26. In the circumstances when the appellant is appointing a foreign consultant for the special job by signing a memorandum of understanding to various consultants in different countries, it is evident that without such expert advice from these foreign consultant the appellant could not have got the business in the form of admission of foreign students. In lieu of such services the appellant is making payment of fee based on the number of students taking admission in the institutions run by the appellant university. In view of all such facts, I am of the opinion that the services provided by all the firms/company are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nical field has no basis. Thus, these services are clearly technical in nature and fall under the purview of Fess for technical services u/s 9(l)(vii) of the Act 4.30. Similarly, the services for Faculty Development and Professional Services ure si.io technical in nature. It is indisputable that the training of faculties/staff who are already experts in their fields can be rendered only by professionally and technically more qualified persons than them. The faculty development program is a technical service because it is not merely in the nature of a discussion or advice but specific programs to not only increase the technical knowledge but also other skills of any faculty. The contention of the assessee that the income does not accrue or arise in India and does not fall within the purview of Section 9(1)(vii) is not correct as any service^ for Faculty Development and Professional Services can be given by an expert of that field and will be in the nature of technical services only. 4.31. In view of all such facts, I am of the opinion that the services provided for Ph. D Thesis Evaluation, Faculty Development Expenses and Professional Fees are in the nature of techni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018, the appellant filed certain additional evidences in regard to the details of membership/affiliation fee, documents for membership/affiliation fee and details of advertisement for faculty position vide page number 57 to 71 of the submission. These additional evidences were sent to the assessing officer for a remand report on admissibility and merit of the same. A remand report dated 30.01.2018 was received. It is observed by the assessing officer that the assessee had been granted adequate opportunity for presenting his case, hence the additional evidences may not be accepted at this stage as per the provisions of rule 46A of Income Tax Rules. Further, on merit the AO has reported as below : Without prejudice to the above, reporting in respect of additional evidence submitted by the assessee is as under: The main contention of the assessee is that the AO has erred in calculating TDS liability on payments i.e (i) Expenses and Commission on the student recruitment/ admission, (ii) PhD thesis evaluation, (iii) faculty development expenses,(iv) professional services, and (v) membership/affiliation fees made to non-resident parties is baseless. The above payments mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of royalty. 4.41. In view of the above facts, the submission of the appellant that such remittances were in regard to getting membership a prestigious international educational bodies for global recognition of the university and the courses of International Students are acceptable. Documents do not suggest that su.eh membership fees are in regard to use of any trademark/logo/Goodwill of any foreign educational institutions and therefore cannot be equated with nature of royalty as per tine provisions of section 9(1 ((vi) of the Act. Hence, for failure to deduct TDS on payment of Rs. 7,60,267 for A.Y 2011-12 to 2013-14 on account of Membership and Subscription Fees, the action of the assessing officer to treat the appellant as assessee in default u/s 201 of the Act is incorrect. Charging interest of Rs.97,729/ u/s 201(1 A) of the Act is also found to be incorrect. D. Claim for Lower Rate of TDS @ 10% under the provisions of Section 206AA of the Income Tax Act, 1961 4.42. The assessing officer has elaborately dealt with the issue on page33-35 of tlie assessment order. All the aspects of the issue have been covered by the assessing officer in detail. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation which was required to be filed by it. 4.48. In view of the above facts, it is evident that the assessee has no explanations for its failure to deduct TDS on the various foreign remittances made and its reliance on the provisions of Rule 37BC is without any basis. Therefore, the action of the assessing officer to charge the rate of deduction @ 20 % is correct. E. Applicability of the provisions of DTAA 4.49. On the issue of applicability of the provisions of DTAA, the assessing officer has elaborately dealt with the issue on page 44-46 of the assessment order. All the aspects of the issue have been covered by the assessing officer in detail. 4.50. The remittances made to the Authorized Consultants are in various countries. From a perusal of the MoUs submitted by the assessee, it has been found that remittances have been made largely to consultants off those countries with which there is no DTAA. In these cases, it implies, that the provisions of Section 9(1)(vii) of tint Income Tax Act, 1961 will be fully applicable. It has already earlier been held that Consultancy Services are taxable in India as per the provisions of Section 9(l)(vii). The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y erred in rejecting the appellant ground and submission that the impugned order u/s 201(1 )/201(1A) has been passed as a result of survey proceedings u/s 133A carried out at the premises of the appellant educational trust (Charitable trust) whereas survey proceedings as per the provisions of section 133A cannot be carried out at the charitable trust. Thus the very basis of initiating the proceedings u/s 201(1) being itself wrong and bad in law, the impugned order passed u/s201(1)/201(1A) is also wrong and bad in law and deserves to be cancelled. 2. Because the Ld. CIT(Appeals) has erred both in law and on facts in not adjudicating the specific ground that proper and reasonable opportunity of representing the case before the Assessing Officer and of being heard has not been allowed by the Assessing Officer. 3. Because the Ld. CIT(Appeals) has erred both in law and on facts in rejecting the appellant ground and the submission that the appellant trust is not liable deduct tax at source on payments made to non-resident parties. 4. Because the Ld. CIT(Appeals) has erred both in law and on facts in rejecting the appellants ground and the submission and in confirming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Numbers.3 to 5, are concerned these relate to the order of ld. CIT(A) in confirming the action of the AO that the tax was required to be deducted at source u/s 195 on the following payments for which demand was raised: - (i) Commission on Student Recruitment/ Admission (ii) Phd. D Thesis Evaluation (iii) Faculty Development Expenses (iv) Professional services on which tax was deducted. 7.1. The ld. counsel for the assessee drew the attention of the Bench to the following table and drew the attention of the Bench to the various amounts paid on which the AO has treated the assessee as an assessee in default. Financial Year Commission on Student Recruitment/admission Ph. D Thesis Evaluation Professional Services (Advertisement expenses wrongly mentioned as professional services) Faculty Development ' Expenses Amount (Rs.) TDS @ 20% Amount (Rs.) Amount (Rs.) TDS @ 20% Amount (Rs.) Amount (Rs.) TDS @ 20% Amount (Rs.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entered into with the various parties in different countries contains standard terms and conditions which has been reproduced by the assessing officer So far as the contention of the revenue that the agents have rendered technical services as defined u/s 9(l)(vii) read with explanation 2 is concerned, he submitted that the same is incorrect. He submitted that the agents have rendered marketing services and have been paid for that computed on basis of per-admission of the students in Sharda University referred and introduced by them. He submitted that marketing services are outside the purview of Section 9(l)(vii) and therefore amount received by the agents as per the MoU is not the income deemed to accrue or arise in India. He submitted that all the agents with whom assessee has entered MoU are Non-residents and have rendered services outside India. Payment has been received by them outside India. Since the income is not deemed to have accrued in their respective hands in India, therefore, in view of the provision of section 5(2) of the Income Tax Act, the amount so received by them is not chargeable to tax in India and therefore, assessee is not liable to deduct tax u/s 195 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l students for taking admission in Sharda University, these agents do not have any role in the admission of the students. Referring to clause 8 of the MOU he submitted that the right of admission is solely and purely based at the discretion of Appellant s Central Administration Cell, Greater Noida, India . 7.6. The ld. counsel for the assessee submitted that the agents were not managing Sharda University. Sharda University did not ask for any technical services from them for which the person must be technically qualified. No consultancy was provided by them to the appellant. It may be a consultancy to the prospective students so that they get admission in Sharda University but not to the assessee. 7.7. The ld. counsel for the assessee submitted that the work of a commission agent is to market the product /services of the seller/service provider to the prospective buyers/service receivers. For the said purposes, the commission agent is required to pitch and inform the buyer/service receivers for the various products/services of the seller/service provider or get him introduced with the seller. This cannot be termed as consultancy to the assessee. 7.8. He submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n-resident for evaluation of the thesis. The expenses were incurred under the head related to education which cannot be considered as fee for technical services as it is neither a technical services for applied or industrial sciences nor consultancy for technical services and nor the managerial services. 7.12. So far as of Faculty Development Charges are concerned, the Learned Counsel for the Assessee submitted that the amount is paid to train and educate the staff in the field of education and not for any technical field. The payment is like a coaching fee and independent individual services. Thus, the said payment cannot be said to be any income that can be said to have accrued or arisen in India or deemed to have accrued or arisen in India nor can be said to be any payment in the nature of Section 9(l)(vii) of the I.T. Act. The payment was made to the service provider at Singapore. He submitted that payments for educating are not covered under Fee for Technical Services in DTAA between India and Singapore. Hence, the assessee is not required to deduct tax at source. 7.13. So far as Professional Expenses are concerned, the Learned Counsel for the Assessee submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be renewed further on the basis of achievement of targets by the foreign parties. The foreign parties would work exclusively with the assessee i.e. Sharda University. It is evident from the above that the consultants were providing expert advice and inputs to the students on behalf of the assessee. The assessee is a large university offering courses in various disciplines. Giving information about these courses requires technical information and knowledge about them by the foreign consultants. The payment received by these consultants also depends on the target achieved by them. Therefore, these services are very clearly in the nature of managerial and consultancy services and would fall squarely within the ambit of fee for technical services (FTS) u/s 9(l)(vii) of the Act. 8.2. So far as failure to deduct to TDS on remittance made for Ph.D thesis evaluation, faculty development expenses and professional fees are concerned, he submitted that in respect of these expenses it is clear, as noted by the CIT(A) on pages 28 29 of his order, and is also a well accepted fact, that evaluation of PhD theses is done by experts and highly qualified professionals in the respective fiel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld fall under the purview of section 9(l)(vii) of the Act. She accordingly submitted that the grounds raised by the assessee should be dismissed. 9. We have considered the rival arguments made by both the sides, perused the orders of the A.O. and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both the sides. We find the assessee in the instant case is a Trust registered under section 12A of the I.T. Act, 1961 and is also approved under section 10(23)(vi) of the I.T. Act, 1961. In this case, during the course of TDS survey under section 133A(2A) of the I.T. Act, 1961, it was noticed by the A.O. that the assessee has not deducted tax from payments remitted abroad under various heads i.e., Commission on Student Recruitment, Ph.D Thesis Evaluation, Participation Fee for Education Tour, Advertisement/Marketing Promotional Activities, fee towards outsourced admission process, Educational Tours, and Education Fair Charges etc. Rejecting the various explanations given by the assessee, the A.O. held that as per the terms of the agreement, the agents are consultants who were appointed to aid and advise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement as consultants will not conclude that these persons were rendering consultancy services to the assessee. For deciding whether these persons were rendering any technical services as provided under section 9(1)(vii) of the I.T. Act, 1961, one has to look into the terms and conditions of the agreement. A perusal of the terms and conditions which has been reproduced by the A.O. and which has already been reproduced in the preceding paragraph shows that these are standard terms and conditions. 10.2. We find in the case of M/s. Super Poly Fabrics Ltd., vs., Commissioner of Central Excise vide order dated 24.04.2008 the Hon ble Supreme Court has held that there cannot be any doubt whatsoever at a document has to be read as a whole. The purport and object with which the parties thereto entered into a contract ought to be ascertained only from the terms and conditions thereof. Neither the nomenclature of the document nor any particular activity undertaken by the parties to the contract would be decisive. 10.3. Similarly we find the Hon ble Supreme Court in the Court of Bhopal Sugar Industries Ltd., vs., STO reported in (1977) 3 SCC 147 (SC) has held that while interpr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commission only after the student is enrolled. In case of refund the agent is not entitled to any commission. The agent has no role to direct the assessee how they should admit the students. The work of the agent, in our opinion, is only relating to the marketing of the assessee s educational courses. It is also not disputed that these persons are not having any permanent establishment in India. Even the remittance was made outside India. Therefore, the question that arises as to whether the services rendered by these persons (Agents) can be regarded to be technical services so that the income earned for such services are deemed to accrue or arise in India ? and Whether the assessee has made any default for not deducting the tax at source while remitting the amount to these persons ? 10.5. We find the provisions of Section 9(1)(vii) of the I.T. Act, 1961 read as under : (1) The following incomes shall be deemed to accrue or arise in India (i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able by the Government or a public sector bank within the meaning of clause (23D) of section 10 or a public financial institution within the meaning of that clause, deduction of tax shall be made only at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode.] Explanation - For the purposes of this section, where any interest or other sum as aforesaid is credited to any account, whether called Interest Payable Account or Suspense Account or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.] (2) Where the person responsible for paying any such sum chargeable under this Act (other than ] interest on securities, and salary) to a non- resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application to the Assessing] Officer to determine, by general or special order], the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted under sub- sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent includes all income from whatever source derived which- (a) is received or is deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year. Explanation 1-Income accruing or arising outside India shall not be deemed to be received in India within the meaning of this section by reason only of the fact that it is taken into account in a balance sheet prepared in India. Explanation 2.- For the removal of doubts, it is hereby declared that income which has been included in the total income of a person on the basis that it has accrued or arisen or is deemed to have accrued or arisen to him shall not again be so included on the basis that it is received or deemed to be received by him in India. 10.9. We find there is no dispute to the fact that these agents have not received the consideration in respect of their services in India or deemed to be received in India on their behalf as they do not have any PE or agent in India. The amount has been remitted directly to them outside India by the assessee. Therefore, provisions of section 5(a) is not applicable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is evident that for a particular item of income to be categorized as FTS, it is necessary that some sort of managerial, technical or consultancy services should have been rendered by payees. The terms managerial, technical and consultancy do not find mention in the I. T. Act, 1961 and it is a settle law that they need to be interpreted based on their understanding in common parlance. Hon'ble Delhi High Court, in J.K. (Bom.) Limited Vs CBDT and Another 118 ITR 312 (Del.) referred an article on Management Services wherein it is stated that the Management action includes at least the following: (a) Discovering, developing, defining and evaluating the I.T.A.Nos. 1989,1778/Del/2013 goals of the organization and the alternative policies that will lead towards the goals; (b) Getting the organization to adopt the policies; (c) Scrutinizing the effectiveness of the policies that are adopted and (d) Initiating steps to change policies when they are judged to be less effective than they ought to be. Management thus pervades all organizations. Technical: In the case of Skycell Communications Ltd. Vs DCIT, the Hon'ble High Court had held that the popular meaning associated with the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Sultan will be paid a monthly retainer ship of USD 3000/- (USS THREE THOUSAND) per month, payable, always in the middle of each month, In addition to this amount he would' be paid monthly up to USD 70o/D(USD SEVEN HUNDRED) towards Communications telephone answering service, office telephone, cellphone, charges for internet. Normal office material (excluding printing), Postal charges, electricity, reasonable entertainment etc. on an actual basis. Local bus transport etc on actual basis Bus / train and car rental expenses on actual basis for making sales calls within the tri state area (New York. New Jersey . Connecticut). I.T.A.Nos.1989, 1778/Del/20l3 14. Similarly, the area of activities to be performed by another agent Mr. Naresh Sarvaria as placed in paper book pages 119-122 are reproduced below: Functions of Mr. Naresh Sarvaria: Mr. Naresh Sarvaria will conduct regular direct emailing campaigns to key clients tour operators and incentive houses in JK, Scotland and Ireland markets for Le Passage to India Tours and Travels Pvt. Ltd. Mr. Naresh Sarvaria will conduct regular direct e-mailing campaigns to key clients tour operators and ince ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvaria will report on a monthly basis his actions towards Le Passage to India Tours and Travels Pvt. Ltd., 15. From the nature of services to be performed by the overseas agents, we are of the view that services rendered by the agents in this case are purely in the nature of advancement of business of the assessee company and cannot be categorized as managerial/ technical/consultancy services. Accordingly, the consideration paid by the assessee cannot be classified as fee for technical services (FTS). 16. We further find that Hon'ble Delhi High Court in the case of Panalfa Autoelektrik Ltd. while explaining meaning of the word managerial, technical or consultancy services falling under the scope of FTS u/s 9(i)(vii) of the Act held that sales and marketing services made by an overseas commission agent do not fall within the meaning of aforesaid words and, therefore, the payment of commission made to such agent will not be deemed to accrue or arise in India and consequently, would not be liable to tax in India. Similarly, in a number of case laws relied upon by Ld. A.R. as noted in his synopsis page 5, we find that various courts have held that sales and marketing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utside India, or for the purpose of making or earning of any income from any source outside India. The respondent-assessees manufacturing unit was in India and it would be proper to hold that the source of income would be the manufacturing unit of the respondent-assessee in India, even if the sale proceeds were on account of exports. 13. The main question and issue, which would arise is whether the payment made to the non-resident would be covered under the expression, fee for technical services as defined in Explanation 2 quoted above. There are three categories of technical services as per Explanation 2; managerial services, technical services and consultancy services, and it includes provisions for services of technical and other personnel albeit there are specific exclusions, but we are not concerned with the same in the present appeal. 14. The expressions managerial, technical and consultancy services have not been defined either under the Act or under the General Clauses Act, 1897. The said terms have to be read together with the word services to understand and appreciate their purport and meaning. We have to examine the general or common usage of these word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... First, about the connotation of the term managerial . The adjective managerial relates to manager or management. Manager is a person who manages an industry or business or who deals with administration or a person who organizes other peoples activity [New Shorter Oxford Dictionary]. As pointed out by the Supreme Court in R. Dalmia v. CIT [1977] 106 ITR 895, management includes the act of managing by direction, or regulation or superintendence. Thus, managerial service essentially involves controlling, directing or administering the business. 15. 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 scrutinising the effectiveness of the policies. It did not perform as a primary executor, any supervisory function whatsoever. This is clear from the facts as recorded by the Commissioner of Income Tax (Appeals), which have been affirmed by the Tribunal. The Commissioner of Income Tax (Appeals) has quoted excerpts of the agreement between the respondent-a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the respondent-assessee received in terms of the purchase contract or order, in addition to a pre-determined guarantee consideration. Again, an indication contra to the contention that the non-resident was providing management service to the respondent-assessee. 17. The Revenue, which is the appellant before us, has not placed copy of the agreement to contend that the aforesaid clauses do not represent the true nature of the transaction. The Assessing Officer in his order had not bothered to refer and to examine the relevant clauses, which certainly was not the right way to deal with the issue and question. 18. It would be incongruous to hold that the nonresident was providing technical services. To quote from Skycell Communications Ltd. and Anr. Vs. Deputy Commissioner of Income Tax and Ors. (2001) 251 ITR 53 (Mad), the word technical has been interpreted in the following manner :- Thus while stating that technical service would include managerial and consultancy service, the Legislature has not set out with precision as to what would constitute technical service to render it technical service . The meaning of the word technical as given in the New O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m for a proposed action . It is obvious that the service of consultancy also necessarily entails human intervention. The consultant, who provides the consultancy service, has to be a human being. A machine cannot be regarded as a consultant. The AAR in the case of In Re: P.No. 28 of 1999, reported as [1999] 242 ITR 208 had observed:- By technical services, we mean in this context services requiring expertise in technology. By consultancy services, we mean in this context advisory services. The category of technical and consultancy services are to some extent overlapping because a consultancy service could also be technical service. However, the category of consultancy services also includes an advisory service, whether or not expertise in technology is required to perform it. 21. The word consultant refers to a person, who is consulted and who advises or from whom information is sought. In Blacks Law Dictionary, Eighth Edition, the word consultation has been defined as an act of asking the advice or opinion of someone (such as a lawyer). It may mean a meeting in which parties consult or confer. For consultation service under Explanation 2, there should be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... managing the affairs of the assessee university. They are not giving any technical advise to the assessee. They are also not having any technical or special skill in this regard and no such material was brought to our notice to substantiate the same that these agents are either managing the affairs of the assessee or are giving any technical advise to the assessee. Further they are also not having any technical special skill in this regard. The services rendered by them are also not the consultancy services as they are not giving any consultancy to the assessee. For a consultancy services, the services must be rendered in the form of an advise or consultation given by the non-resident to the Indian resident. However, in the instant case, these agents are only marketing the educational course of the assessee among the intended non-resident students for which commission was paid for motivating and attracting the students or making them aware of about the utility of the various educational courses run y the assessee university. Such type of services, in our opinion, cannot be called as consultancy services. The nature of services rendered by these foreign agents is simply marketing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of provisions of Section 5(2)(b) of the I.T. Act, 1961. Since the assessee has not deducted tax at source, therefore, the assessee should be held as assessee in default. 14. After considering the rival arguments by both the sides, we are of the considered opinion that the issue to be decided in this regard is whether the consideration paid by the assessee for evaluating Ph.d thesis by remitting the same outside India can be regarded to be the income of non-resident deemed to accrue or arise to him in India so that it may be chargeable to tax in India. As per the provisions of Section 195 of the I.T. Act, 1961, payment made to a non- resident, if chargeable to tax, the assessee is liable to deduct tax at source. In case he fails to deduct tax at source, he will be deemed to be an assessee in default as per provisions of Section 201 of the I.T. Act, 1961 and is also liable for interest under section 201(1A) of the I.T. Act, 1961. As per Explanation-2 to Section 9(1)(vii) defines fee for technical services which is for rendering of any managerial, technical or consultancy services. It is not the case of the Revenue that the Ph.d thesis evaluators have rendered managerial or c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment under section 9(1)(vii) of the I.T. Act, 1961. It is also his submission that payment for educating are not covered under fee for technical services as defined under DTAA between India and Singapore. 17. It is the submission of the Ld. D.R. that the Faculty Development Provider has rendered technical services by giving training to the staff. 18. We have heard the rival arguments made by both the sides. We find Article 12(5) of DTAA between India and Singapore read as under : 5. Notwithstanding paragraph 4, fees for technical services does not include payments : a) For services that are ancillary and subsidiary, as well as inextricably and essentially linked, to the sale of property other than a sale described in paragraph 3(a) ; b) for services that are ancillary and subsidiary to the rental of ships, aircraft, containers or other equipment used in connection with the operation of ships or aircraft in international traffic ; c) for teaching in or by educational institutions ; d) for services for the personal use of the individual or individuals making the payment; e) to an employee of the person making the payments or to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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