TaxTMI 
TaxTMI 
2021 (4) TMI 93
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....4,16,65,106/- on the basis of the order passed under Section 92CA of the Act dated 24.10.2016. The assessing authority also made other additions. The assessee's objections were not considered by the Dispute Resumption Panel and therefore, an appeal was filed before the Income Tax Appellate Tribunal, Bangalore (hereinafter referred to as 'Tribunal'). The Tribunal has allowed the appeal by granting relief to the respondent-assessee in respect of disallowance made under Section 40(a)(1) of the Act by following its earlier decision delivered in the case of M/s. Exotic Fruits Pvt. Ltd. Vs. ITO (ITA Nos.1008 to 1013/Bang/2012 dated 4.10.2013). In the aforesaid cases, it was held that the income of the non-residents by way of commission cannot be considered as accrued or arisen or deemed to accrue or arise in India as the services of such agent were rendered/utilized outside India and the commission was paid outside India. The department being aggrieved by the order of the Appellate Tribunal, dated 28.9.2017, has preferred the present appeal on the following grounds: (a) It has been contended that the Tribunal has erred in law and facts in setting aside the disallowance made under Secti....
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....ns of Section 40(a)(i) of the Act. He has also contended that the income of non resident by way of commission is to be considered as accrued or arisen or deemed to accrue or arise in India. 6. On the other hand, learned Counsel for the respondent-assessee has supported the order passed by the Tribunal and has placed reliance upon the following judgments: 1. Commissioner of Income Tax, Andhra Pradesh Vs. M/s. Toshoku Ltd. Guntur and Others reported in 1980 (Supp). SCC 614 2. GE India Technology Centre Private Limited Vs. Commissioner of Income Tax and Another reported in (2010) 10 SCC 29 3. The judgment in ITA Nos.1008 to 1013/Bang/2012 decided on 04.10.2013 (M/s. Exotic Fruits Pvt. Ltd. Vs. Income Tax Officer) 4. The judgment in R/Tax Appeal No.281 of 2019 decided on 30.07.2019 (The Principal Commissioner of Income Tax-2 Vs. Ferromatic Milacron India Pvt. Ltd.) 5. The judgment in T.C.(A) No.789 of 2013 decided on 22.07.2014 (The Commissioner of Income Tax, Chennai Vs. Faizan Shoes Pvt. Limited) 6. The judgment in R/Tax Appeal No.290 of 2018 decided on 09.04.2018 (Principal Commissioner of Income Tax Rajkot-1 Vs. Nova Technocast Pvt. Ltd.) 7. The undisputed facts revea....
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....axable under the head 'fee for technical services'. The Apex Court in the aforesaid case, at paragraphs-20 to 24 has held as under: 20. At this juncture, it is demonstrable that NRC is a Non-Resident Company and it does not have a place of business in India. The revenue has not advanced a case that the income had actually arisen or received by the NRC in India. The High Court has recorded the payment or receipt paid by the appellant to the NRC as success fee would not be taxable under Section 9(1)(i) of the Act as the transaction/activity did not have any business connection. The conclusion of the High Court in this regard is absolutely defensible in view of the principles stated in C.I.T. V. Aggarwal and Company (1965) 56 ITR 20, C.I.T. V. TRC (1987) 166 ITR 1993 and Birendra Prasad Rai V. ITC (1981) 129 ITR 295. That being the position, the singular question that remains to be answered is whether the payment or receipt paid by the appellant to NRC as success fee would be deemed to be taxable in India under Section 9(1)(vii) of the Act. As the factual matrix would show, the appellant has not invoked Double Taxation Avoidance Agreement between India and Switzerland. That being no....
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....o 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-resident has rendered services in India.] As amended by Finance Act, 2007 Explanation.-For the removal of doubts, it is hereby declared that for the purposes of this section, where income is deemed to accrue or arise in India under clauses (v), (vi) and (vii) of sub- section (1), such income shall be included in the total income of the non-resident, whether or not the non-resident has a residence or place of business or business connection in India." 22. The princip0al provision is Clause (b) of Section 9(1)(vii) of the Act. The said provision carves out an exception. The exception carved out in the latter part of clause (b) applies to a situation when fee is payable in respect of services utilized for business or profession carried out by an Indian payer outside India or for the purpose of making or earning of income by the Indian assessee i.e. the payer, for the purpose of making or earnin....
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....ory even when the income benefits belongs to a nonresidence person, that is, a person resident in another country. The aforesaid principle sometimes is given a different name, that is, the territorial principle. It is apt to state here that the residence based taxation is perceived as benefiting the developed or capital exporting countries whereas the source based taxation protects and is regarded as more beneficial to capital importing countries, that is, developing nations. Here comes the principle of nexus, for the nexus of the right to tax is in the source rule. It is founded on the right of a country to tax the income earned from a source located in the said State, irrespective of the country of the residence of the recipient. It is well settled that the source based taxation is accepted and applied in international taxation law." 10. However, the facts of the aforesaid case are distinguishable as in the present case, the services were rendered by Associated Enterprises outside India. The consultancy was not at all utilized in India. In case the argument canvassed by the learned Counsel is accepted, it will certainly amount to violation of double taxation treaty. On th....