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2020 (3) TMI 971
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.... "The above services rendered by the Nonresident company, with regard to the proposed acquisition of an Indonesian Insurance company, by M/s.Shriram Capital Limited. is in the nature of "consultancy services". M/s.Shriram capital limited is not having any business activity in Indonesia, and hence the proposed payments are not for the purpose of generation of any income from abroad by M/s. Shriram Capital Limited.. Hence the service rendered by the non-resident company are ultimately utilized by the resident company only. "Consultancy services" rendered by the Nonresident company will fall under the category "Fees for Technical Services" and fees payable for such Technical services, though rendered outside India will be deemed as accruing or arising in India as per Sec.9(1)(vii)(b) of the Income-tax Act., read with Explanation to Sec.9(1) (vii), substituted by Finance Act 2010 with effect from 1.6.1976. "Sec.9(1) : The following income shall be deemed to accrue or arise in India- (vii): Income by way of fees for technical services payable by- (b) : A person, who is resident, except where the fees are payable in respect of services utilized in ....
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....iling the consultancy/advisory services, of the Non-resident company. In such a situation, the payments are not for the purpose of earning any income from outside India event on a future date, though the Income-Tax Act does not specify creation of a business or generation of Income outside India at future date. In such a situation also, the utilization of the services rendered by the Non-resident company is wholly in India. In both the above possible circumstances, the services are deemed to have been rendered in India, in terms of Section 9(1) (vii) (b) of the I.T.Act. 4.The learned counsel for the petitioner would submit that to deduct tax at source under Section 194 of Income Tax Act, 1961, such incomes should be either by received in India by the recipient or deemed to have accrued or arise in India within the meaning of Section 5(2) of the Income Tax Act, 1961. He further submits that the question deduction of tax at source for payment would arise only in the circumstances, specifically mentioned in the Section 5 of the Income Tax Act, 1961, which reads as under:- Scope of total income. 5. (1) Subject to the provisions of this Act, the total income of any ....
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....echnical services payable by- (a) the Government ; or (b) a person who is a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India; or (c) a person who is a non-resident, where the fees are payable in respect of services utilised 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 1st 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].-For the purposes of this clause, "fees for technical services" means....
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....ioner is not liable to pay tax in terms of Section 5(2) read with Section 9(1)(vii)(b) of the Income Tax 1961. He further submits that income neither accrued nor received from India, the tax in resident tax in India. 13. Even otherwise, there was neither technical nor consultancy services. As per the Article 12(3)(b) of the Double Taxation Agreement dated 16.03.2016 of the Government of India, in other words, thus the petitioner at best non-residential taxable at 10% and not 20%. 14. The learned counsel for the petitioner relied on the following decisions:- i. Evolv Cloathing Co. (P.) Ltd., Vs. Assistant Commissioner of Income Tax, Company Circle - II(1), Chennai, order dated 14.06.2018 passed by this Court in T.C.(A).No.572 of 2013. ii. Director of Income Tax Vs. Lufthansa Cargo India, 2015 SCC OnLine Del 9760. iii. Commissioner of Income Tax Vs. Toshoku Ltd., 1980 Supp SCC 614. iv. Commissioner of Income Tax Vs. Faizan Shoes (P.) Ltd., order dated 22.07.2014 passed by this Court in T.C.(A).No.789 of 2013. v. Principal Commissioner of Income Tax-2 Vs. Motif India Infotech (P) Ltd., order dated 16.10.2018 passed by the Hon'ble ....
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.... say that only is such a service is rendered in India can the sum be taxed here. The technical or consultancy service can be rendered anywhere, the Income accrued in India. The source of income is from the petitioner who based in India, hence income accrued in India due to the connection. 19. It is submitted that the exception in Section 9(1)(vii)(b) of the Income Tax Act, 1961, does not apply because the payment was not made for earning any income in Indonesia. It was only for the acquisition of an Indonesian company, which is part of the investment of the petitioner company. Hence, the payment does not have any nexus with any income earned abroad but only for an investment, which is part of the business of the petitioner operated from India. 20. I have considered the arguments advanced by the learned counsel for the petitioner and the respondents. 21.Section 195 of the Income Tax Act, 1961 reads as under:- Other sums. 195. (1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest referred to in section 194LB or section 194LC) or section 194LD or any other sum chargeable under ....
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....ncome-tax has to be deducted under subsection (1) may make an application in the prescribed form to the Assessing Officer for the grant of a certificate authorising him to receive such interest or other sum without deduction of tax under that sub-section, and where any such certificate is granted, every person responsible for paying such interest or other sum to the person to whom such certificate is granted shall, so long as the certificate is in force, make payment of such interest or other sum without deducting tax thereon under sub-section (1). (4) A certificate granted under sub-section (3) shall remain in force till the expiry of the period specified therein or, if it is cancelled by the Assessing Officer before the expiry of such period, till such cancellation. (5) The Board may, having regard to the convenience of assessees and the interests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an application may be made for the grant of a certificate under sub-section (3) and the conditions subject to which such certificate may be granted and providing for all other matters connec....
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....When the expression "means" is used, it is a hard and fast definition and no meaning other than that which is put in the definition can be assigned to the same [ see: Bharat Coop. Bank (Mumbai) Ltd. Vs. Employees Union, (2007) 4 SCC 685 and P.Kasilingam Vs. P.S.G. College of Technology, AIR 1995 SC 1395]. In Bharat Coop. Bank (Mumbai) Ltd. Vs. Employees Union, (2007) 4 SCC 685, it was observed that it is trite to say that when in the definition clause given in any statute the word "means" is used, what follows is intended to speak exhaustively. When the word "means" is used in the definition, to borrow the words of Lord Esher, M.R. in Gough v. Gough, (1891) 2 QB 665, it is a "hard-and-fast" definition and no meaning other than that which is put in the definition can be assigned to the same. 25. The expression "Managerial", "Technical" or "Consultancy Service" have not defined. The expression "Management" has been defined in Oxford Advanced Learner's Dictionary, New 9th Edition published by the Oxford University Press reads as follows:- Management: 1. the act of running and controlling a business or similar organization: a carrier in management, hotel/project managem....
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....ular subject to other companies or organizations: a management/design/computer, etc. consultancy 2. expert advice that a company or person is paid to provide on a particular subject: consultancy fees. 29. Thus, the expression "Managerial", "Technical or Consultancy Services" are wide of import. 30. In fact, from the nature of work that was to be undertaken by the Indonesian firm was purely not that of work carried out by the law firms. These services provided by any person holding expertise in the relevant field. 31. Thus, if the service provided by the Indonesian law firm was for managerial, technical or consultancy service or provision of technical or other personnel, the petitioner would be liable to deduct tax at source under Section 195 of the Act, 1961. 32. The service provided by the Indonesian law firm is for the following:- (a) Share Purchase Agreement (SPA) with appropriate warranties and indemnities; (b) Notarial share transfer deed; (c) Assist in obtaining all necessary regulatory approvals for the acquisition including, but not limited to approval from the Ministry of Finance / Indonesian Insurance regulators. The scope o....
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....04, the Delhi High Court observed as follows:- 9. In this context, the ITAT in Dy. DIT Vs. Serum Institute of India Ltd., (2015) 68 SOT 254/56 taxmann.com 1 (Pune - Trib.), discussed this very issue in some detail and stated, as follows: "...................where section 90(2) of the Act provides that DTAAs override domestic law in cases where the provisions of DTAAs are more beneficial to the assessee and the same also overrides the charging sections 4 and 5 of the Act which, in turn, override the DTAAs provisions especially section 206AA of the Act which is the controversy before us. Therefore, in our view, where the tax has been deducted on the strength of the beneficial provisions of section DTAAs, the provisions of section 206AA of the Act cannot be invoked by the Assessing Officer to insist on the tax deduction @ 20%, having regard to the overriding nature of the provisions of section 90(2) of the Act. The CIT(A), in our view, correctly inferred that section 206AA of the Act does not override the provisions of section 90(2) of the Act and that in the impugned cases of payments made to non-residents, assessee correctly applied the rate of tax prescribed under....