TaxTMI 
TaxTMI 
2019 (4) TMI 1677
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....under the provisions of Section 195 of the I.T. Act, 1961? (b) Whether on the facts and in the circumstances of the case and in law, the Tribunal erred in ignoring the decision of jurisdictional special bench in the case of Mahindra & Mahindra Ltd Vs. Dy. CIT (2009) 30 SOT 374 (Mum)(SB) wherein it was held that fee for technical services (FTS) under Section 9(i)(vii) read with explanation 2, covered management commission, selling commission and legal expenses paid to non-resident lead managers in respect of GDR issue?" 3. Respondent - assessee is a scheduled bank and is engaged in banking business duly registered under the Banking Regulation Act. For its need for capital, the bank decided to raise capital abroad through the issuance of Global Depository Receipts ("GDRs" for short). The assessee engaged different agencies for such purpose. The assessee had engaged one Amas Bank (Middle East) Ltd which was incorporated under the laws of United Arab Emirates and was carrying on financial services, for providing services such as Global coordinator and Lead Manager to the said GDR offer. The assessee bank had raised USD 51,732,334/- by way of the gross proceeds of GDR issued....
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....tely USD 18,10,632. The said fees were adjusted from the proceeds of GDR and transferred to an escrow account on 25/06/2008. Pursuant to this remittance, the assessee on the due date of payment of tax being 7/7/2008 paid income tax thereon under section 195 of the Income Tax Act (the Act) in the amount of Rs. 90,83,185. (Copy of receipted challan enclosed - Annexure - 2). In accordance with the procedure for foreign remittances prescribed with reference to section 195 of the Act, certificate of Chartered Accountants, M/ s B.K Khare & Co. was obtained dated 4/7/2008. Although the certificate in item (4) therein mentioned and certified deduction of tax at source of USD 2,13,722 equivalent to Rs. 90,83,185/- being the amount of tax grossed up @ 10.5575%, the assessee contended that no tax was payable at all under section 195 of the Act. 6. In view of the above discussion, we do not find anything wrong in asessee's denial of its liability to pay tax u/s.195 of the IT Act. In respect of the amount payable to AMAS Bank UAE, we also found that the services rendered by Amas Bank were purely of a commercial nature and bore the character of income arising to it wholly outside India,....
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....borately discussed by the Supreme Court. It was held that the expression "chargeable under the provisions of the Act" in Section 195(1) shows that the remittance has got to be of a trading receipt, the whole or part of which is liable to tax in India. It was observed that if the tax is not so assesseable, there is no question of tax at source being deducted. With this background, we may revisit the nature of transaction between the assessee and Amas Bank. We may recall the assessee desired to raise capital through Global Depository Receipts. To assist the assessee in such process, the assessee had engaged Amas Bank for certain financial services. The payment was made for such financial services rendered by Amas Bank. The GDR was issued outside India. The services were rendered by Amas Bank outside India for raising such funds outside India. It was, in this context, the Tribunal had, as noted above, come to the conclusion that the services rendered by Amas Bank were neither rendered in India nor utilized in India and the charterer of income arising out of such transaction was wholly outside India emanating from commercial services rendered by the bank in course of carrying busine....
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....s a residence or place of business or business connection in India. This explanation starts with expression "For the removal of doubts, it is hereby declared.......". Through this explanation, thus, the legislature desired to delink the question of income deemed to have accrued or arisen in India from the requirement of the non-resident having a residence or place of business or business connection in India. This, however, did not imply that the basic requirement of income having arisen in relation to the activity in India and having connection to the consumption of such services in India was totally done away with. This explanation was subsequently substituted by the following explanation by the Finance Act of 2010 w.r.e.f. 1.6.1976:- "Explanation.-For the removal of doubts, it is hereby declared that for the purposes of this section, income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) and shall be included in the total income of the non-resident, whether or not,- (i) the non-resident has a residence or place of business or business connection in India; or (ii) the non-re....