TaxTMI 
TaxTMI 
2012 (9) TMI 624
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....dia ? 2) Whether on the facts and in the circumstances of the case, the Tribunal ought to have held that the sum payable was "Industrial or Commercial Profits" within the meaning of the Article III of the DTAA between India and Japan and was, therefore, not liable to be taxed in India, the assessee having had no permanent establishment in India ? Similar questions have been raised with respect to the Assessment Year 1982-83. (B). The Tribunal also referred a question at the instance of the Revenue. It is not clear whether the Revenue has had the Reference numbered or not and whether or not the same is pending. We will, therefore, restrict ourselves to the above questions which have been referred to this Court at the instance of the assessee. 3. In the year 1978, the manufacturing operations of the assessee had to be stopped as a result of a waste heat boiler tube bursting. The assessee, therefore, sought technical assistance from Toyo Engineering Corporation Limited (hereinafter referred to as "Toyo"). Pursuant to the assessee's request, Toyo sent three technicians to India to repair the machinery. The repairs were completed by December, 1978. 4.(A) Toyo raised an in....
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....ee filed a return of income and a revised return in respect of assessment year 1982-83. 6. Mr. Pardiwalla conceded that the receipt of the amounts by Toyo would fall within section 9(1)(vii) of the Act. He, however, contended that the assessee / Toyo were entitled to the benefit of the DTAA. 7. The relevant provisions of the DTAA read as under : "Article II.- (1) In the present agreement unless the context otherwise requires : ............ (2) In the application of the provisions of the present Agreement by either Contracting State, any term not otherwise defined in the present Agreement shall, unless the context otherwise requires, have the meaning which it has under the laws of that Contracting State relating to tax. Article III.- (1) The Industrial or commercial profits (excluding the profits derived from the operation of ships or aircraft) of an enterprise of one of the Contracting States shall not be subjected to tax in the other Contracting State unless the enterprise has a permanent establishment situated in that other Contracting State. If it has such permanent establishment, the profits attributable thereto may be subjected to tax in that other Con....
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....me from any source outside India; or (c) a person who is a non-resident, where the fees are payable in respect of services utilised in a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India; Provided that nothing contained in this clause shall apply in relation to any income by way of fees for technical services payable in pursuance of an agreement made before the 1st day of April, 1976, and approved by the Central Government. Explanation 1.- For the purposes of the foregoing proviso, an agreement made on or after the 1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date. 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 re....
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....t they refer to the repairs carried out by Toyo through the technical experts. In other words, the technical work is carried out by Toyo and Toyo has not merely provided technicians to carry out the work. The fees were, therefore, paid not merely for deputing technical experts, but for the technical services rendered by Toyo. That the services were rendered through technical experts engaged by Toyo does not detract from the fact that Toyo rendered the technical services. Technical services obviously had to be rendered, inter-alia, through technical experts. 14. "Technical services" is a composite phrase involving several activities, including rendering advice and suggestions as well as undertaking the actual physical tasks. Rendering technical services may involve one or more or all such activities. Each case must be considered on its facts to ascertain whether the real purpose was the rendition of technical services. However, technical services in most cases at least would be rendered only by the input of technical personnel. Without them, there would be no start to rendering technical services. Toyo did not merely provide the services of its personnel. It provided te....
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....s rendered or agreed to be rendered outside India in certain cases. Section 80-O read as under : "80-O. Deduction in respect of royalties, etc., from certain foreign enterprises.- Where the gross total income of an assessee, being an Indian company, includes 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 services rendered or agreed to be rendered outside India to such government or enterprise by the assessee, under an agreement approved by the Board in this behalf, and such income is received in convertible foreign exchange in India, or having been received in convertible foreign exchange outside India, or having been converted into convertible foreign exchange outside India, is brought in....
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..... ............... 28. But, even assuming that there could be some difference of opinion on the above issue, there can be no doubt at all that, under the contract, technical services were rendered by the assessee to the foreign government. In our opinion, the attempt of Sri Ahuja to differentiate technical services rendered to the assessee by its employees and technicians from technical services rendered by the assessee to a foreign constituent and urge contention that the latter alone can qualify for relief under Section 80-O on the ground that the project in question was a turnkey project which has succeeded before the High Court, proceeds on an unduly narrow interpretation of the section. In our view, the assessee was undoubtedly rendering services to the foreign government by executing the water supply project. These services were no doubt technical services, as they required specialised knowledge experience and skill for their proper execution. The argument seems to be that the services in the present case will not be covered by the section because there was no privity of contract between the employees of the assessee who contributed their technical skill and the foreign ....
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....o substitute the word "technical or professional services" in place of the word "technical services" now used in the section. It seems to us that this amendment may be only of a clarificatory nature. The expression "technical services" has a very broad connotation and it has been used elsewhere in the statute also so widely as to comprehend professional services: vide Section 9(1) (vii), referred to earlier. But we need not digress on this aspect for two reasons. Firstly, whatever may be the position regarding other "professional services", there can hardly be any doubt that services involving specialised knowledge experience and skill in the field of constructional operations are "technical services". The Board's guidelines, to which reference is made later, specifically say so. Secondly, the question whether "professional services" would be "technical services" or not has no impact on the point we are trying to make viz. that in order to say that a person is rendering such services to another, it is not necessary that the services should be rendered by the former personally and not through the medium of others. For the reasons discussed above, we have come to the conclusion that,....