AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2012 (2) TMI 365
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....chnical or consultancy services. 1.2 The Appellant prays that the transportation fee receivable by it is not in the nature of fees for technical, managerial or consultancy services under Section 9(1)(vii) of the Act and therefore such fees are not liable to tax in India and the entire addition of Rs. 2,32,89,208 should be deleted." 3. Briefly stated the facts of the case are that the assessee, a foreign company incorporated under the laws of Hong Kong, is engaged in the business of provision of supply chain management, including the provision of freight and forwarding and logistics services. The assessee entered into a "Regional Transportation Services Agreement" (hereinafter called the 'Agreement') on 01.06.2005 with Menlo Worldwide Forwarding (India) Private Limited (hereinafter called 'Menlo India') for providing freight and logistics services to each other. As per this Agreement, each party agreed to render services to the other in respect of import and export of consignments. The Assessing Officer vide para 5 has noted two types of consignments, viz, Import consignments and Export consignments. He has observed that Import consignments are those which originate outside ....
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....fees received by the assessee from Menlo India was taxable in India as "fees for technical services" u/s 9(1)(vii) as it was for the services in the nature of "managerial, technical or consultancy services". The assessee is in appeal before us. 4. We have heard the rival submissions and perused the relevant material on record in the light of precedents cited. The entire dispute centers around the taxability of the amount received by the assessee from Menlo India in respect of services performed outside India on the export consignments of Menlo India originating from India. There is no quarrel over the nature of services for which the above referred amount has been paid to the assessee being, freight and logistics services such as transport, procurement, customs clearance, sorting, delivery, warehousing and pick up services. Now the primary question which arises for our consideration is as to whether the payment in respect of these services can be held as 'fees for technical services' within the meaning of section 9(1)(vii). The expression "fees for technical services" has been defined in Explanation 2 to section 9(1)(vii) as under:- "For the purposes of this clause, "fees for tec....
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....d pick up services on the cargo exported by Menlo on behalf of its customers. Having noted the nature of services provided by the assessee outside India, for which Menlo India made the payment, let us consider if these can be described as managerial or technical or consultancy services. 7. First we will consider the ambit of 'managerial services' to test whether the instant services can qualify to be so called. Ordinarily the managerial services mean managing the affairs by laying down certain policies, standards and procedures and then evaluating the actual performance in the light of the procedures so laid down. The managerial services contemplate not only execution but also the planning part of the activity to be done. If the overall planning aspect is missing and one has to follow a direction from the other for executing particular job in a particular manner, it cannot be said that the former is managing that affair. It would mean that the directions of the latter are executed simplicity without there being any planning part involved in the execution and also the evaluation of the performance. In the absence of any specific definition of the phrase "managerial services" as use....
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....tion is given for rendering some advice or opinion etc., that the same falls within the scope of "consultancy services". The word 'consultancy' excludes actual 'execution'. The nature of services, being freight and logistics services provided by the assessee to Menlo India has not been disputed by the authorities below. There is nothing like giving any consultation worth the name. Rather such payment is wholly and exclusively for the execution in the shape of transport, procurement, customs clearance, delivery, warehousing and picking up services. That being the position, we opine that the payment in lieu of freight and logistics services cannot be ranked as consultancy services. 10. The only left over component of the definition of "fees for technical services" taken note of by the ld. CIT(A) is "technical services". He observed that the assessee's business structure is time bound service coupled with continuous real time transmission of information by using and also making available its technology in the form of sophisticated equipments and software etc. The learned CIT(A) has held that : "in order to ensure efficient and timely delivery and to provide continuous real time infor....
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....ent order to be erroneous and prejudicial to the interest of the Revenue to the extent of granting deduction u/s 80-O. When the matter came up before the Tribunal, it was observed that the issue is debatable and hence outside the ambit of section 263. Apart from that, it was also observed that the assessee was engaged in integrated air and ground transportation of time sensitive packages to various destinations rendering commercial services. It was in this context that the assessee was held to be eligible for deduction u/s 80-O. At this juncture it will be useful to note that at the material time section 80-O provided for deduction on any 'income by way of royalty, commission, fees or any similar payment received by the assessee from the Government of a foreign State or a foreign enterprise in consideration for the use outside India of any patent, invention, model, design, secret formula or process, or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided to such Government or enterprise by the assessee, or in consideration of technical or profession....
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.... received by the assessee did not include any consideration for the supply of any equipment to Manlo India. Now we will examine as to whether the use of computer in any manner for knowing the location of the cargo at a particular time, can be held as technical service. 14. Explanation to section 9(1)(vii) defines the expression "fees for technical services" as consideration for rendering 'managerial, technical or consultancy services'. It is seen that there is no definition of the term "technical services" in the Act. 15. The principle of noscitur a sociis mandates that the meaning of a word is to be judged by the company of other words which it keeps. This rule is wider in scope than the rule of ejusdem generis. In order to discover the meaning of a word which has not been defined in the Act, the Hon'ble Supreme Court has applied the principle of noscitur a sociis in several cases including Aravinda Paramila Works v. CIT [(1999) 237 ITR 284 (SC)]. As noted above the word 'technical' has been sandwiched between the words 'managerial' and 'consultancy' in Explanation 2 to sec. 9(1)(vii) and no definition has been assigned to the 'technical' services in the relevant provision, we n....
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.... only possibility of the receipt by the assessee in the present facts and circumstances qualifying for inclusion in the total income, can be under section 9. We have observed that section 9(1)(vii) is not applicable. Now let us examine the prescription of section 9(1)(i) which deals with the income accruing or arising from any business connection in India. It provides that where an income accrues or arises whether directly or indirectly through or from any business connection in India etc., it shall be deemed to accrue or arise in India. Explanation 1(a) states that in the case of a business of which all operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India. This Explanation makes it prominent that only that part of the income from business operations can be said to be accruing or arising in India, as is relatable to the carrying on of operations in India. In other words, if a non-resident earns any income from India by means of operations carried on outside India, that will not fall within the scope of section....