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TMI Blog2024 (6) TMI 1137X X X X Extracts X X X X X X X X Extracts X X X X ..... 40,570 as against the returned income of Rs. 7.12,87,080. 2. On the facts and circumstances of the case and in law, the learned AO and the Hon'ble CIT(A) erred in making several allegations, observations and assertions based on mere conjectures and surmises, without any relevant material on record. Inter-alia the incorrect assumptions/ inferences made by the Hon'ble CIT(A) are as under: (a) The Hon'ble CIT(A) has erred in rejecting the contentions of the Appellant that the Appellant has not acted as the permanent establishment ('PE'). The Hon'ble CIT(A) has erred in holding that the Appellant has acted as a PE of the foreign university on the premise that there is no express written contract between the Appellant and University of Cambridge ('foreign university'). (b) The Hon'ble CIT(A) has erred in not appreciating the fact that the foreign university has granted an affiliation certificate to the Appellant based on Appellant meeting all the standards as required by foreign university and the payments made by the Appellant to the foreign university are in pursuance of the invoices raised by the foreign university and there is no express wri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 has clearly spelled out with detailed deliberations that the Appellant was not required to deduct any taxes at source of payment of examination fees to the foreign university. 8. That the learned AO erred in disallowing and the Hon'ble CIT(A) further erred in confirming the addition of Rs. 35,02,105 to the Appellant's returned income on account of disallowance under Section 40(a)(ia) of the Act without appreciating that Section 40(a)(ia) of the Act does not squarely cover payments made to non-residents. Section 40(a)(ia) of the Act covers only payments made to resident persons and inter alia reads as under: "40. Notwithstanding anything to the contrary in Sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession",- (a) in the case of any assessee- (i)................ (ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... University of Cambridge. Accordingly the students who sits in the exam has to pay exam fee to the University of Cambridge and examination fee so collected from students by the assessee was transferred to University of Cambridge. It was further submitted that University of Cambridge is not a resident of India and it does not have any control over the assessee company and it also does not have unhindered and unlimited access to assessee premises. The arrangement between Assessee Company and University of Cambridge is simple that of affiliation. In terms of shareholding, managerial and professional control, University of Cambridge does not have any control over the assessee company. In support of its contention, the assessee submitted the following documents: * Copy of form 10F furnished by University of Cambridge * Copy of Tax Residency Certificate of University of Cambridge * Copy of affiliation certificate It was also submitted that verbatim same disallowance was made by the AO during the A.Y. 2011- 12 and it was deleted by the ld. CIT(A). However, the AO ignoring the detailed submissions made by the assessee, made the disallowance of Rs. 35,02,105/- u/s 40(a)(ia) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween Assessee Company and University of Cambridge. It is pertinent to mention that similar disallowance was made by AO in immediately preceding A.Y. 2011-12 and same was deleted by ld. CIT(A). Relevant finding of the ld. CIT(A) is as under: "2 Regarding the Ground No. 1 of the appeal, keeping in view the certificate issued by HM Revenue and Customs dated 13.03.2010 in Form No. 10F, and keeping in view the facts of the case, it is evident that the University of Cambridge to whom payment was made is not resident in India. On careful consideration of the arrangements between the appellant and the University of Cambridge, it is seen that the appellant was engaged by University of Cambridge for the limited purposes i.e. to conduct examination at various Indian educational institutions run by the appellant. There is no evidence on record that the said Cambridge University had any supervision or control over the appellant company, nor does it indicate that it had unlimited and unhindered access to the appellant's premises. The arrangements between the appellant and the University of Cambridge are plain and simple as the appellant was getting the examination carried out for the Universi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmanent Establishment. Furthermore, on perusal of the submissions filed by the appellant, I am also of the view that as per Article 13 (para 5) of the DTAA between India and UK the appellant company cannot be held to be the PE of the Foreign University as there is no fixed place under control and disposal of the foreign university. Furthermore, the appellant company does not have any principal agent relationship with foreign university. On careful consideration, I find no reason to deviate from the appellant order of my Ld. Predecessor on the issue for AY 2011-12. 6.1.5 In this regard, reliance is also placed on the decision of the Hon'ble Delhi Bench of Income Tax appellate Tribunal in the case of M/s. Hughes Escort Communications Ltd. Vs. DCIT, Circle 2(2) [ITA No. 752/Del/2005]. 6.1.6 In this case, it was held that when role of the Indian Company was merely to enroll students, and provide the infrastructure by way of computer broad band access VSAT connectivity etc. for accessing course material in the class room and there is no use of Trademark by the Indian Company, the payment made by the Indian Company will not be treated as royalty and there is no business profit he ..... X X X X Extracts X X X X X X X X Extracts X X X X
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