TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 736
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....entered into an Agreements dated 1st July, 2008, & 28.7.2008 with Electrosteel Integrated Limited with respect to onshore services and construction contract for construction of an integrated steel plant project, at Bokaro, Jharkhand. By tripartite agreements all dated 31.10.2008 between the Assessee, ECGCL and Electrosteel Integrated Ltd., it was agreed that the onshore services and construction contract would be carried out in India by the Assessee instead of ECGCL. 3. For the purpose of steel plants, the Assessee wanted to use services of engineers from China. The Chinese Engineers had to be trained in English language, Safety Standards which is to be followed by steel plants in India as per Indian law and to attend Visa interview. Hunan Province Overseas Working Training Centre (hereinafter referred to as "Hunan"), an entity in China is engaged in providing services with regard to training for the purpose of communicating in English language, safety standards to be followed for construction of steel plant, answering questions that may be asked before issue of Visa by other countries. The Assessee engaged the services of Hunan for the purpose of training Engineers in China conve....
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....ist in Party A to make out internal management rules arid standardize Party A's internal organization and management. 1.6 Assist in Party A to manage economy contract and other contracts and also supervise the performance and execution. 1.7 Provide law training to Party A's staff to portend law risk. 1.8 Issue the lawyer's letter to concerning company or individual as to protect Party A's legitimate rights and interests. 1.9 Other legal service required by Party A. 2. Legal Service commissioned by Party B 2.1 As Defender or Attorney in concerning criminal proceedings. 2.2 As Attorney in civil, economic, administrative proceedings or arbitration proceeding involved by party A." 5. The consideration for rendering of the aforesaid services payable to Hunan law of Rs. 14,00,000/- was paid by ECGCL as per the agreement between the Assessee and ECGCL dated 10.5.2009 whereby ECGCL agreed to make payment of certain expenses of the Assessee which the Assessee agreed to reimburse ECGCL. It is not in dispute that the consideration payable to Hunan Law was paid by ECGCL and the Assessee in turn paid ECGCL the sums ECGCL had paid to Hunan Law. 6. The Asse....
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....appeal before the Tribunal. 8. Before proceeding to discuss the contentions put forth by the Assessee before us, it is necessary to notice that the obligation to deduct tax at source on the part of the Assessee will arise only if the payment in question is considered as a payment made by the Assessee to Hunan and Hunan Law and not as a mere reimbursement by the Assessee to ECGCL. Further the sums paid to Hunan and Hunan Law should be chargeable to tax in the hands of Hunan and Hunan Law respectively in India under the Act. Since Hunan and Hunan Law are non-residents in India and tax residents of the People's Republic of China, the sums in question will be chargeable to tax in their hands in India only if the sums are considered as payment made towards FTS under the India-China DTAA. Therefore the main issue to be decided in this appeal will be as to whether the payments made by the Assessee to Hunan and Hunan Law through ECGCL would constitute FTS within the meaning of the India China DTAA. We will now deal with the grounds of appeal and the arguments advanced before us. 9. The grounds of appeal raised by the Assessee before the Tribunal reads thus: "1. That on the facts and ci....
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....ore services and construction of steel plant in India. The Assessee was bound to make payment for such services to Hunan. The fact that ECGCL made payment one behalf of the Assessee which was subsequently repaid by the Assessee to ECGCL will not make the payment in question as pure reimbursement which did not involve any element of income in the hands of the recipient. In fact on identical facts the Mumbai "L" Bench of the Tribunal in the case of C. U. Inspections (I) Pvt. Ltd. Vs. DCIT ITA No. 577/Mum/2011 order dated 6.3.2013 held that if the Indian subsidiary company incurs expenses or makes purchases or avails any service from some third party abroad and the payment to such third party is routed through its holding or related company abroad, the provision for deduction of tax at source apply as if the assessee has made the payment to such independent party de hors the routing of payment through the holding company. The remission of amount to the holding or related company for finally making payment to the third person will be considered as payment to third party. It cannot be termed as reimbursement of expenses to the holding company. The Mumbai Tribunal further held that if th....
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....rom a fixed base situated therein, and the right, property or contract in respect of which the royalties or fees for the technical services are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply. 6. Royalties or fees for technical services shall be deemed to arise in a Contracting State when the payer is the Government of that Contracting State, a political sub-division, a local authority thereof or a resident of that Contracting State. Where, however, the person paying the royalties or fees for technical services, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties or fees for technical services was incurred, and such royalties or fees for technical services are borne by such permanent establishment or fixed base, then such royalties or fees for technical services shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated. 7. xxxxx Explanation 2 to Sec.9(1)(vii) of the Act defin....
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....ces" has not been defined anywhere in the Act. However, "fees for technical services" has been defined in Explanation 2 to section 9(1)(vii). [Para 7] ■ In the present case, the assessee is getting the translation of the text from one language to another. The only requirement for translation from one language to other is, the proficiency of the translators in both the languages, i.e. the language from which the text is to be translated, to the language in which it is to be translated. The translator is not contributing anything more to the text which is to be translated. He is not supposed to explain or elaborate the meaning of the text. Apart from the knowledge of the language, the translator is not expected to have the knowledge of applied science or the craft or the techniques in respect of the text which is to be translated. ■ A bare perusal of Explanation 2 to section 9(1)(vii), which explains "fees for technical service" and the dictionary meaning of the word "technical" makes it unambiguously clear that translation services rendered by the assessee are not technical services. Therefore, the payment made by the assessee to the non-resident translators would ....
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....c of China and carries on profession of rendering legal services. It does not have a fixed base regularly available to it in India for the purpose of performing its activities. They did not have physical presence for more than 183 days during the previous year. The question for consideration is whether the payment will fall within the Article 12(4) of India China DTA and Article 14 of India China DTA. If income falls within Article 14, then only People's Republic of China has right to levy tax on the said income and not India. Article 14 of the India-China DTAA reads as follows: ARTICLE 14 INDEPENDENT PERSONAL SERVICES 1. Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that Contracting State except in one of the following circumstances, when such income may also be taxed in the other Contracting State : a) If he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in that other Contracting State; b) if h....