TaxTMI 
TaxTMI 
2011 (10) TMI 617
X X X X Extracts X X X X
X X X X Extracts X X X X
....of technologies. Therefore, the Assessing Authority held that the payments received by M/s.Arianespace from the assessee are clearly foes foe technical services as per the definition in section 9(1)(vii0 of the Income Tax Act ( for short hereinafter referred to as the Act). The Assessing Authority also referred to the DTAA between India and France, fees for technical services, where fees for technical services defined as under: "The term "fees for technical services" as used in the Article means payment of any kind to any person, other than the payments to an employee pf the person making the payments and to any individual for independent personal services mentioned in Article 15, in consideration for services of a managerial, technical or consultancy nature." 3. In view of the aforesaid clause, the Assessing Authority was of the view that the services rendered by Arianespace clearly fall within the aforesaid definition of technical services. Accordingly payment made by the assessee to Arianespace and M/s.Intelsat is fee for technical services/fees for ancillary services which is chargeable to Indian Income-tax as income of the recipient. Thus, the Indian Payee/the assessee....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the same, the assessee preferred an appeal to the tribunal. The Tribunal on a consideration of the entire material on record held that Arianespace was to provide a launching medium for launching the satellite produced by the Indian assessee. This launching medium has no other activity other than helping the satellites' movement into and towards space. The satellites have their own management power, engines,fuel etc. and all that it is required to push itself into space was a launching medium. This activity could be compared with a ship hired for movement of goods from one port to another. Because the goods have to be transported thorugh water, the ship becomes the medium for movement of goods from one palce to another. In order that the goods may be loaded and unloaded, the ship may offer various facilities of crane and loaders and so on, but these activities of the shipping company are something that are connected with their business activity and has got nothing to do with the assessee, who owns the goods. All that the owner of the goods is interested in, is his goods to be safely placed in the shil, carried and delivers to the destination. Likewise, the launch vehicle or the lau....
X X X X Extracts X X X X
X X X X Extracts X X X X
....red as M.P. Nos.90-99/2008 with a request to clarify and direct the revenue to refund the interest as the Tribunal held that there is no liability to pay tax at all. Accepting their case, the tribunal directed for refund of interest levied on the assessee as the interest is payable for non-payment of tax in time, if there is no liability to pay tax, there us no liability to pay interest and the interest paid is required to be refunded. Aggrieved by the said order, the department has preferred these appeals in ITA Nos.152/2009 and connected matters. 7. When the appeal preferred the assessee before the commissioner of Income tax (Appeals) was dismissed, the assessee paid the entire sum due as per demand notice dated 13.07.2001. Thereafter, the assessing officer charged interest under Section 201 (1A) from 01.07.2001 to 08.02.2002 by issuing a demand notice on 22.02.2002, which was served on the assessee in March,2002. Though the assessee challenged the main order of the Appellate Commissioner dismissing the appeal affirming the order of the Assessing Authority, the assessee had not preferred appeals for the period up to the date of payment and also levy of interest under Secti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the event of make available or transfer the technology used for rendering technical services, the said income is regarded as fee for technical service and chargeable to tax in India. If there is no liability to pay tax under law, there is no obligation to deduct tax at source as is clear from the wordings of Section 195(1) of the Income Tax Act abs therefore, he submits that the ultimate finding recorded by the tribunal that there is no liability to pay tax cannot be found fault with. It was also submitted that the orders have been passed after 10 years in some cases i.e., for 88.89 to 99.00 on 28.2.2006 and also hit by limitation. 10. In the light of the aforesaid facts and the rival contentions, the questions of law that arises for our consideration are: (a) Whether the service rendered by a non-resident is a technical service? (b) Whether the remuneration paid in lieu of technical service is liable under the Act ans if so, whether the assessee is liable to deduct tax under Section 195 (1) of the Act? 12. The entire claim is based on Section 9(1) (vii) of the act,which reads as under:- 13. The Double taxation Avoidance Agreement with the French Republic dated 07.09.1994 d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le to the person acquiring the service technical knowledge, experience, skill, know how, or processes, or consist of the development and transfer of a technical plan or technical plan or technical design to such person. ( For this purpose, the person acquiring the service shall be deemed to include an agent nominee, or transferee of such person.) This category is narrower than the category described in paragraphs 4(a) because it excludes any service that does not make technology available to the person acquiring the service. Generally speaking, technology will be considered "made available" when the person acquiring the service is enabled to apply the technology. The fact that the provision of the services may require technical input by the person providing the service does not per se mean that technical knowledge, skills, etc., are made available to the person purchasing the services, within the meaning of paragraph 4(b) Similarly, the use of a product which embodies technology shall not per se be considered to make the technology available." 17. The contract entered into between the assessee and the French company, which also provides for the nature of assistance rendered,....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... total income of the non-resident, whether or not,- * The non-resident has a residence or place of business or business connection in India ;or * The non-resident has rendered services in India." 19. In light of the aforesaid explanation irrespective of the fact whether the non-resident has rendered any service in India or not, the income accured to such non-resident falls within the aforesaid definition. However as the contract in questions is between the Indian Company, Section 90 of the Act comes into operation. 20. Chapter 9 deals with double taxation Releifs.Section 90 provides for granting relief of the income which has been paid both under the Act as well as in the country to which the non-resident belongs to and the said provision gives an overriding effect to the provisions of the Act. The Apex court in the case of Union of India vs. Azadi Bachao Andolan and another reported in 263 ITR 706 (SC) dealing with this provision has held as under:- "Taxation of foreign companies and other non-resident taxpayers: 43. Tax treaties generally contain a provision to the effect that the laws of the two contracting states will govern the taxation of income in the respective Stat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ection 90, as we have already noticed (including its precursor under the 1922 Act), was brought on the statute book precisely to enable the executive to negotiate a DTAC and quickly implement it. Even accepting the contention of the respondent that the powers exercised by the Central Government under section 90 are delegated powers of legislation, we are unable to see as to why a delegate pf legislative power in all cases has no power to grant exemption. There are provisions glore in statutes made by parliament and the state Legislatures wherein the power from the provisions of the statues are expressly delegated to the executive. For example, even in fiscal legislation like the Central Excise Act and Sales Tax Act, there are provisions for exemption from the levy of tax (see section 5A of the central Excise Tax Act, 1956).Therefore, we are unable to accept the contention that the delegate of a legislative power cannot exercise the power of exemption in a fiscal statute. 21. In the light of the aforesaid judgement of the Apex court, we have to see whether there is any inconsistency in the definitions of technical service in the Act and that in the DTAA. 22.In the DTAA read with p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....upreme Court in the case of GE India Technology Centre (P) Ltd. vs. CIT and Anr. (2010) 234 CTR (SC) 153 : (2010) 44 DTR (SC) 201 : (2010) 327 ITR 456 (SC), held as under:- "Sec. 195(1) uses the expression 'sum chargeable under the provisions of the Act.' We need to give weightage to those words. Further, s. 195 uses the word 'payer' and not the word 'assessee'. The payer is not an assessee. The payer becomes an assessee-in-default only when he fails to fulfil the statutory obligation under s. 195(1). If the payment does not contain the element of income the payer cannot be made liable. He cannot be declared to be an assessee-in-default." 25. Similarly even in respect of the services which is rendered by the American Company, there is no transfer of technology or making available the technology which was used by them in detecting the satellite before it is brought under the control of the assessee. 26. In that view of the matter, we are satisfied that the technical services rendered by these two foreign companies to the assessee do not satisfy the definition of the technical services as prescribed in the DTAA. As such it is not liable to tax. Therefore, t....