TaxTMI 
TaxTMI 
TaxTMI 
2014 (9) TMI 262
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....ing that service work on 4000 tons forging press was wholly connected to the transaction of purchase of 4000 tons forging press by the assessee. 3. The assessee craves leave to add/modify/delete all or any of the grounds of appeal. 2.1 In ITA No.2564/PN/2012, the assessee has filed the appeal on the following grounds: 1. The learned CIT (A) - IT/TP, Pune erred in law and on facts in holding that the assessee is an 'assessee in default' due to non deduction of alleged TDS amounting to Rs. 382,539/- on payment made to M/s. Presstrade Pressenhandel GmbH, Germany for installation, assembly work, erection and commissioning services in connection with of purchase of 4000 tons forging press. 2. The learned CIT (A) - IT/TP, Pune further erred in law and on facts in not appreciating that installation, assembly, erection and commissioning services of 4000 tons forging press was wholly connected to the principal transaction of purchase of 4000 tons forging press by the assessee from M/s. Presstrade Pressenhandel GmbH, Germany. 3. The assessee craves leave to add/modify/delete all o....
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....ng, the learned Authorized Representative has stated that there is a delay in filing of the appeal and requested to condone the same, inter alia stated that Order u/s 201 & 201(1A) in respect of appeals CIT (A) - IT/TP, Pune on 27-07-2012 were personally collected by the authorized representative of the assessee on 02-08-2012 and handed over to assessee company on 12-08-2012. The last date for filing of appeal before ITAT was 01-10-2012 i.e. 60 days from the date of receipt of order which is 02-08-2012. The company officials were required to deliberate on the same and take the directions/approvals from the Management in this regard. Considering the highly technical matter, expert opinion was also sought for. The assessee company is MAHINDRA Group which has a team of counsels acting in various capacities. Their view was sought as crucial before finally filing the appeal. In the said process, delay of about 86 days was occurred. In view of above, the assessee requested to condone the delay of about 86 days in filing the appeal attributable to above mentioned reasons. In this regard, the learned Authorized Representative has pointed out the Hon'ble Allahabad High Court in the case....
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.... party, through separate PO 4,36,211 4 PratoSpol S.R.O. Czech Republic Purchase of forging press and service work thereof from the two different parties, through separate PO 57,274 7. The Assessing Officer in his Orders passed u/s 201 and u/s 201(1 A) held that the payments (other than for purchase) made to Russian Company Firma Ralekc, Russia, to German company Pressdtrade Pressenhandel GmbH and to Prato Spol SRO of Czech Republic are taxable under Section 9(l)(viii) as 'fees for technical services'. These payments were taxable under Article 12 of the India's Tax Treaties with the respective countries as 'fees for technical services'. 8. The Assessing Officer also treated payment made for acquiring designs and drawings from Manyo Co. Ltd. Japan liable for tax deduction at source. According to the Assessing Officer, payment made for acquiring designs and drawings is 'fees for technical service' under sec.9(l)(vii) and also taxable under Article 12 India-Japan Tax Treaty as 'fees for technical services'. 9. The matter was carried before the first appellate authority, wherein the various contentions were raised and having considered ....
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....your cost and we shall not be held responsible for the same in any manner whatsoever. Erection labour and lifting tackles shall be arranged by us for the erection and commissioning purpose at our cost. We shall arrange the tools and tackles and make preliminary preparation for erection and commissioning of Press as per annexure (1 page ) enclosed herewith which is advised by you enclosed please let us know within 7 days of receipt of order, failing which it is your responsibility to arrange the same in order to avoid idling of your engineers. Payment terms As agreed we shall pay you Euro 22500 on Tie road assembly of Forging Press by Telegraphic transfer. Balance payment shall be made after successful trials as soon as it is ready commercial production by telegraphic transfer. Warranty: You shall guarantee trouble free performance of the press for a period of one year from the date of commissioning on account of workmanship of erection. Should there be any defects due to faulty erection in the press the....
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....service charges mentioned above are considering erection and commissioning to be completed within 6 weeks from the date of start. In addition to the above service charges we shall pay you Economy Class Air Fare only (only one time ) to and fro Prague to Mumbai for 6 persons. Local conveyance in India shall be arranged by us at our cost. We shall provide lodging and boarding (in our guest house) as available to equal level of our engineers. Any other charges/expenses/insurance etc. shall be arranged by you at your cost arid we shall not be held responsible for the same in any manner whatsoever. Erection labour and lifting tackles shall be arranged by us for the erection and commissioning purpose at our cost. We shall arrange the tools and tackles and make preliminary preparation for erection and commissioning of Press as per annexure (1 page) enclosed herewith which is advised by you should you require any other additional tools and tackles preparation in addition to the list enclosed please let us know within 7 days of receipt of order, failing which it is your responsibility to ....
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....sioning of the machinery as a part of sale of goods. Such a contract's performance is concluded on successful installation and commissioning of the equipment. In such circumstances, installation and commissioning charges are embedded in the purchase price. Even if they are not embedded in the purchase price and are charged separately, the basic fact that installation as a part of purchase would not change if the seller has undertaken responsibility of installation as part of the composite contract. CIT(A) also observed that erection and commissioning contracts even treated as separately from purchases by having specific terms and conditions relatable to the erection and commissioning. So, the CIT(A) held that there is no composite contract for purchase and erection and commissioning. 15. The assessee has taken an alternative plea, inter alia submitted that even if both the activities are treated separately, installation activity is being incidental to the main activity of purchase, it will draw colour from the main activity of purchase and hence will not be liable for the tax deduction at source. This plea of assessee was rejected by CIT(A) observing that TDS provisions would ....
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....76 16.3. The expression " fees for technical services " has been defined to mean any consideration (including any lump sum consideration) for the rendering the managerial, technical or consultancy services, including the provision of service of technical or other personnel). It, however, does not include fees of the following types, namely: Any consideration received for any construction, assembly, mining or like project undertaken by the recipient. Such consideration has been excluded from the definition on the ground that such activities virtually amount to carrying on business in India for which considerable expenditure will have to be incurred by a non-resident and accordingly it will not be fair to tax .such consideration in the hands of a foreign company on gross basis or to restrict the expenditure incurred for earning the same to 20 per cent of the gross amount as provided in new s. 44D of the Act. Consideration for any construction, assembly, mining or like project will, therefore, be chargeable to tax on net basis, i.e., after allowing deduction in respect of costs and expenditure incurred for earning the same and charge....
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.... payment of Rs. 38,25,394 made to Prestrade Presentrade Gmbh, Germany and on payment of Rs. 1,53,83,470/- made to Firma Ralekc, Russia. 22. Regarding the payment of Rs. 61,20,000/- to Manyo Company Japan for acquiring the design and drawings of Bolster & Cassette. The stand of the assessee has been that these designs and drawings were acquired by it for ensuring smooth performance of the purchased Plant and Machinery. The assessee did not use these drawings in manufacturing of the machinery or did not exploit it for any other commercial purpose. In these circumstances, the acquisition of these drawings along with the purchase of machinery was necessary for its maintenance. So, the CIT(A) held it as purchase transactions as no technology know how relating to this machinery is made available to the assessee. Accordingly, the CIT(A) held that the assessee was not liable to deduct tax on payment made by it to Manyo Corporation Ltd., Japan because payment made on mere supply of drawings is not taxable in India. 23. Before us, the assessee has made detailed arguments with regard to its three appeals. The learned Authorized Representative mainly reiterated the submissions before authori....
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....under the provisions of I.T. Act, because this took place only outside Indian Territory. The Assessing Officer is directed accordingly. 25. The second issue is regarding travelling expenses of technicians. The technicians' travel expenses were negotiated and paid separately on economy airfare basis. Such expenses were for cross border travel and hence, do not arise in India and does not attract provisions of Indian Income-tax Act. 26. Third issue in general is with regard to Supervision of installation/erection. The supervision of installation/erection of machinery is an activity which relates to sale of machinery and is of specific nature i.e. hyper technical and its supervision of installation/erection of machinery was also hyper technical. Even in para 4.7 of order of CIT(A) he observed that in large contracts, installation charges form integral part of the purchase price of the machinery. Such situation remains unaffected, whether these installation charges are embedded in the cost of purchase price or, are charged separately. In contradiction to this, the CIT(A) further observed in para 4.8 of its order that when the transaction of installation charges are independent of....
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....red for providing technical services covering supervision of erection, start up, etc. For same non-resident had to send on deputation specialist employees to India apart from payment on daily basis and assessee had to meet the expenses of travel, living and pocket expenses of said specialists. The Assessing Officer's charge that the payments made to non-residents as technical fee u/s 9(l)(vii), was held not justified. It was held that two agreements constituted one and the same transaction. Services rendered by the experts and payments made towards the same were part and parcel of sale consideration. The payment was exempt under Explanation 2 to sec.9(1) of DTTA. We also found that Hon'ble Supreme Court in the case of Ishikawajma - Harima Heavy Industries Ltd. (supra) held that tax is levied on one transaction where the operations which may give rise to income may take place partly in one territory and partly in another. The question which would fall for consideration is as to whether the income that arises out of the said transaction would be required to be proportioned to each of the territories or not. Income arising out of operation in more than one jurisdiction would h....
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.... the assessee had not obtained any order under section 195(2), 195(3) or under section 197, the gross sum remitted by the assessee was liable to tax under section 195. On appeal, the Commissioner (Appeals) set aside the order of assessment order by observing that as per terms and conditions of agreement, IMAX was to install equipment tested and also provide training for four purchasers. The question arose whether in view of the facts that the Assessing Officer had examined the aforesaid services of transfer of technology, whereas, they were auxiliary to sell the equipment, but amount remitted by the assessee was not chargeable to tax in India and thus, the order of Commissioner (Appeals) was justified in setting aside the impugned assessment order. We find that Mumbai Bench "L" in the case of Dy. CIT v. Dodsal (P.) Ltd. [2013] 29 taxmann.com 65 (Mum), wherein, the assessee was engaged in business of engineering and general contracting. It entered into contracts with a Canada based company, namely, 'S' Ltd., for supply of equipments and for installation and commissioning work. Assessee claimed that amount paid by it to 'S' Ltd. towards installation and commissioning ....
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....fees for included services by virtue of article 12(5)(a) of the DTAA between India and Canada. In view of above, it was held that the assessee was not liable to deduct tax at source from the payment made to 'S' Ltd. and the disallowance made by the Assessing Officer by invoking the provisions of section 40(a)(i) was not sustainable. In view of above discussion, we are of the view that supervision of installation/erection of machinery activity carried by non resident relates to sale of machinery in such large contract. The installation charges forms integral part of purchase price of machinery. In such a situation, remains unaffected, whether these installation charges are embedded in the cost of purchase price or, are charged separately. 27. It is undisputed that the machinery is complex equipment, hence could not be installed by any ordinary person that is why only machinery seller non resident was given contract of erection and installation and services thereof. Such erection/installation of highly complex machinery was not comparable to ordinary installation just because two separate agreements were reached, one for sale transaction and other for installation/erection a....