TaxTMI 
TaxTMI 
2018 (1) TMI 1537
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....e as per the provisions of section 195. Therefore, the Assessing Officer issued notice u/s. 201 r.w.s. 195 and passed order under section 201(1)/201(1A) of the I.T. Act on 30/03/2015, disallowing the said payments. 3. The first common ground in all the appeals is with regard to the action of the CIT(A) in upholding the tax levied by the Assessing Officer u/s. 201(1) and 201(1A) of the I.T. Act on account of consulting services as there is no deduction of TDS in terms of sec. 40a(ia) of the Act. 4. After hearing both the parties, we find that a similar issue came up for consideration before this Tribunal in assessee's own case in I.T.A. No. 222/Coch/2013 for the AY 2007-08. The Tribunal vide order dated 29/07/2017 held as under: "16. We have considered the rival submissions on either side and also perused the material available on record. Admittedly, the assessee, a resident company, entered into management service agreement with a company, viz. US Technology Resources LLC, a company incorporated in USA and a tax resident in USA. As per this management service agreement, the USA company agreed t....
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....esident, where the fees are payable in respect of services utilized in a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India: Provided that nothing contained in this clause shall apply in relation to any income by way of fees for technical services payable in pursuance of an agreement made before the 1st day of April, 1976, and approved by the Central Government) [Explanation 1.- For the purposes of the foregoing proviso, an agreement made on or after the 1s: day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date.]" Explanation 2 to section 9(1)(vii) which was introduced by Finance Act, 1977 with effect from 01-04-1977 clearly says that fees for technical service means any consideration for rendering any managerial, technical or consultancy services. 18. We have also carefully gone through the provisions of DTAA between India and USA as notified by the Government of India in Notification No.GSR 990(E), dated 20-12-1990. Arti....
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....concerning the fees for included service in Article 12 of the DTAA between India and USA. For the purpose of convenience, we are reproducing the relevant portion of the Memorandum of Understanding said to be executed between India and USA on 15th May, 1989: "Under paragraph 4, technical and consultancy services are considered included services only to the following extent: (1) as described in paragraph 4(a), if they are ancillary and subsidiary to the application or enjoyment of a right, property or information for which are royalty payment is made; or (2) as described in paragraph 4(b), if they make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design. Thus, under paragraph 4(b), consultancy services which are not of a technical nature cannot be included services." 21. From this Memorandum of Understanding, it is obvious that as provided in clause 4(b) of Article 12 of the DTAA between India and USA, if the technical or consultancy services made available are technical knowledge, experience, skill, know-how, or processes, or consist of the d....
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....es will be rendered by different risk managers of USTR. - And any other management support as may be mutually agreed between the parties. NOW THEREFORE in consideration of the mutual promises and covenants hereinafter contained, the parties hereto agree as follows: I. GENERAL DESCRIPTION OF OBJECTIVES AND SCOPE OF DELIVERY 1. During the term of this agreement the role of each company in this partnership is as follows: a) USTRPL employs USTR to provide management services. The knowledge and experience of USTR will be used to support USTRPL in managing its business and in training its employees. b) USTR is responsible for recruiting, training and deploying adequate resources to provide the services. II. ROLE OF USTRPL 1. The USTRPL designated Person will operate as the main interface between USTR and USTRPL. He will ensure that USTRPL's personnel coordinates and interfaces with USTR's personnel in a manner satisfactory to USTR. 2. Depending upon the requirements, USTRPL will send its personnel from time to time to USTR office in US or 23 ITA No.222/Coch/20....
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....rces to achieve the stated organizational goals." Some of the other authors described management as - latest of the arts and youngest of sciences. The systematic body of knowledge is the phenomenon of present century in management. So the recent trend in management is to adopt systematic body of knowledge in the management process. As per the management service agreement, the managerial advice rendered by the USA company was used in the decision making process of management, financial and risk management etc. Science is fact based, critically tested, systematized body of knowledge pertaining to specific field. The knowledge is accumulated through study, experience and experimentation. The scientific knowledge produces impersonal results and it can be empirically tested and universally applied. Therefore, the knowledge which was accumulated through study, experience and experimentation with regard to management, finance, risk, etc. of a particular business is nothing but a technical knowledge. In the era of technology transformation, the information / experience gathered by US resident company relating to financial risk management of business is technical knowl....
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....managerial decision making process is in the nature of technical services which facilitate the assessee to take correct and suitable decision towards achievement of the desired objects and business goal. Therefore, it may not be correct to say that what was received by the assessee is only a managerial advice and not technical advice. The technological input acquired by the US company through experience and experiment was tested at various stages and process and further it was made available to the assessee so as to enable the assessee to apply / use the same in its decision making process. 29. Apart from that financial and risk decision making process is a highly complicated and technical one. Unless the assessee gets a technical input and advice from financial and risk management experts it may be difficult to select a right process for the growth of the company. It is not the case of the assessee that in a given set of facts / problem, the USA company gave its solution or advice. The solution or decision is admittedly taken by the assessee company on the basis of the advice, service rendered by the USA company. Therefore, it is obvious that the technical kn....
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.... Finance Corporation, USA for a part of its foreign currency loan requirement. After successful rendering of service, the non resident Zurich company sent an invoice for payment of "success fee" to the extent of US$ 17,15,476.16 (Rs. 5.4 crores). The assessee company approached the income-tax authorities in India for issuing a no objection certificate to remit the said amount claiming that the non resident company had no permanent establishment in India and all services were rendered from outside India. The Incometax Officer refused to issue the certificate. On a writ petition before the High Court it was found that the scope of service / work undertaken by the non resident company was merely to draw up a scheme, advise on the terms and methods of negotiation and for documentation with the lender, evaluate the pros and cons of various lending alternatives, both for local and the foreign borrowings, prepare a preliminary information memorandum to be used as the basis for placing the foreign and local debt, and that the responsibility of entering into correspondence as per the advice of the non resident company and pursuing the matter was that of the assessee company itself, and not ....
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....a suitable for selecting kimberlite targets. For the technical services rendered by them the assessee had paid consideration as per the agreement. The assessing officer found that the payment made to Netherlands company was for technical services provided by them. Therefore, the assessee has to deduct tax on payments made to Netherlands company. However, the Commissioner (Appeals) found that the payment made by the assessee to the Netherlands company was not covered by Article 12(5) of the DTAA between India and 33 ITA No.222/Coch/2013 Netherlands. He also found that the Netherlands company has not imported any technology to the assessee and they have just used the technology and have gone back with the same. The CIT(A) further found that no technology has been made available to the assessee by the Netherlands company, therefore, the consideration paid does not fall within the definition of Article 12(5) between India and Netherlands. On further appeal by the revenue before the Tribunal it was held that the payment in question for services rendered would not fall within the definition of "fee for technical services" under Article 12(5) of the DTAA between India and Netherlands. The....
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....d (supra). In the case before the Mumbai Bench of this Tribunal the assessee engaged in manufacturing suiting, engineers' steel files and rasps and cement in India. With a view to muster funds it proposed to issue two types of Global Depository Receipts (GDRs) in the international market. The assessee company engaged a UK company as lead managers to the issue. The assessee paid necessary charges for the services rendered by the lead managers and the managers. However, no tax was deducted by the assessee company form the payment made to them. The assessing officer found that there was violation of the provisions of section 195(1) of the Act holding that the amounts paid to lead managers and managers were chargeable to tax in India as fees for technical services within the meaning of section 9(1)(vii) of the Act. The Appellate Commissioner also upheld the order of the assessing officer. On further appeal before the Mumbai Bench of this Tribunal, the Tribunal found that the services rendered by the lead managers and managers are managerial or consultancy services within the meaning of section 9(1)(vii) r.w.s. Explanation 2 of the Act and therefore the payment made to managers are inco....
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....an company provided I.T. support service to Indian group companies in Asia Pacific Region in order to achieve the consolidated and standardized I.T. environment in Sandvik group. The Tribunal, after considering the agreement between the parties found that the agreement provided only for back up services, I.T. support services for solving I.T. related problems in Indian subsidiary. The agreement with Sandvik Asia Ltd nowhere suggested that the assessee has to make available required technical know how for solving the problem in the I.T. related problems. In the case before us, the USA company has to provide all expertise to the assesee company which would be utilized in the decision making process related to management, financial and risk management. Therefore, this decision of the Pune Bench of this Tribunal may also not be applicable to the facts of the present case. 36. We have also carefully gone through the decision of the Mumbai Bench of this Tribunal in the case of Wokhardt Ltd (supra). In the case before the Mumbai Bench of this Tribunal, the assessee company was incorporated in USA and as per the agreement, the said company sent one of its professionals to India for a perio....
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....ess and it was utilized for the purpose of business. The USA company made available all the technical data, information, expertise to the assessee company which was absorbed and made use of by the assessee company in their managerial and financial decision making process and other decision in the development of the business. Therefore, the expertise and technology which was made available by the USA company is technical service within the meaning of Article 12(4)(b) of the DTAA between India and USA. Hence, this ruling of the Authority for Advance Ruling may not of any assistance to the assessee. 37. In view of the above, we do not find any infirmity in the order of the lower authority. Accordingly the same is confirmed. 38. In the result, the appeal of the assessee is dismissed." 5. In view of the above decision of the Tribunal, we are inclined to uphold the orders of the CIT(A) and sustain the additions on account of non deduction of TDS on account of management fees for the relevant assessment years. 6. Without prejudice to the other grounds in I.T.A. Nos. 103&104/Coch/2017, the assessee has raised Ground 5.1&n....