TaxTMI 
TaxTMI 
2012 (9) TMI 647
X X X X Extracts X X X X
X X X X Extracts X X X X
....rder under section 143(3) and served a notice of demand under section 156 for Rs. 30,86,180/-. The Assessing Officer, inter-alia, added to the total income, the sum of Rs. 77,14,828/- received by the respondent towards upfront appraisal fee. 4. It is necessary first to indicate what the upfront appraisal fee is. The assessee advances loans, inter-alia, to Indian companies. Before doing so, it examines the creditworthiness of the borrower and the financial efficacy of advancing the credit facilities. To do so, it appraises the applicant for the loan. The report is then considered by the respondent's various departments to enable them to decide whether or not to advance the loan/credit facilities. The respondent charges the applicants, a fee for carrying out the appraisal. This fee is termed as the upfront appraisal fee (hereinafter referred to as "the said fee"). It covers the cost of the appraisal and expenses incidental thereto and in connection therewith. 5. It is important to note two things. Firstly, the applicant for the facility is normally not furnished a copy of the report. Secondly, the fee is charged irrespective of whether the loan/credit facility is advanced to the ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or in respect of any credit facility which has not been utilized". This is so irrespective of whether or not the loan transactions were entered into between the respondent and the applicants. 10. (A) Where the loan transaction was not entered into, the said fee could not be said to have been in respect of moneys borrowed for moneys were not even lent. It was, therefore, not in respect of a debt incurred for it was the debt itself. Nor could the said fee be said to have been charged or made in respect of any credit facility which had not been utilized for the credit facility had not even been sanctioned, leave alone advanced. (B) The position would be the same even where the loan transactions had been entered into between the respondent and the applicants. The said fee was charged prior to and entirely independent of the loan transaction that was subsequently entered into. The parties had agreed that the respondent would be entitled to the said fee irrespective of whether the loan transaction was entered into or not. Interest was separately charged by the respondent in respect of the moneys lent pursuant to the agreements that were entered into. Nor can the fee be said to be in re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lar to Article 12(5) of the India-UK DTAA. The difference between the two Articles is not material to the question before us. The difference in Article 12(5) is the addition and the absence of certain words which we will underline. "INDIA - UK DTAA ARTICLE 12 - Interest ............. 5. The term "interest" as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits, and in particular, income from Government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures but, subject to the provisions of paragraph 9 of this Article, shall not include any item which is treated as a distribution under the provisions of Article 11 (Dividends) of this Convention." NOTE : The underlined words do not appear in Article 11(4) of the India-Cyprus DTAA. "INDIA-CYPRUS DTAA ARTICLE 11 - Interest - 1. ................. 4. The term "interest" as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lable technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design. 18. He firstly submitted that the Tribunal had not dealt with this aspect at all. This would not be entirely fair as it appears that the point was not pressed before the Tribunal. The Commissioner of Income Tax (Appeals) dealt with this issue. The order of the Tribunal does not refer to this point. No application was made to the Tribunal in this regard. The appeal memo filed by the appellant before the Tribunal states only this: "On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition made by the A.O. Amounting to Rs. 77,14,828/-" This is an omnibus ground. On the basis of this ground, we are unable to accept the contention that the point was raised before the Tribunal. In any event, we permitted Mr. Suresh Kumar to address us on this aspect of the matter and have decided the same. 19. The submission that the upfront appraisal fee constitutes fees for technical services within the meaning of those words in Article 13(4)(c) is unsustainable. The said fees did not constitute paymen....