TaxTMI 
TaxTMI 
2021 (7) TMI 46
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....HARGES IN INDIA: 1. On the facts and circumstances of the case and in law, the learned Commissioner of Income tax (Appeals) - 58, Mumbai ("the CIT(A)") erred in holding that the entire turnover (receipts) from the Indian Parties) is liable to be treated as turnover for the purpose of taxation in India. The Appellant submits that the said receipt of Standby Maintenance Charges from TCL cannot be treated as turnover for taxation purpose in India. 2. On the fact and circumstances of the case, the learned CIT(A) erred in holding that the entire turnover (receipts from the Indian parties) is to be treated as turnover for the purpose of taxation in India without giving any notice for enhancement or opportunity to the Appellant. The Appellant submits that the CIT(A) ought not to have held that the entire turnover (receipt from the Indian parties) is liable to be treated as turnover for the purpose of taxation in India. 3. On the fact and circumstances of the case and in law, the learned CIT(A) erred in holding that the entire turnover (receipts from Indian Parties) of Standby Maintenance Charges from TCL is liable to be treated as turnover for ....
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....al condition at all times and in case of actual need for the repairs and maintenance, the same could be carried out within least time? 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in concluding that the amount received by assessee as standby Maintenance charges was not in the nature of 'fee for technical services' under section 9(1)(vii) of the Act on the ground that it was a mere collection of annual charge without appreciating that it cast a responsibility on the assessee to actually deploy personnel and maintain equipment to keep the submarine system in working condition? 5. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in concluding that the amount received by assessee as standby maintenance charges was not in the nature of 'Fee for technical services' under section 9(1)(vii) of the Act on the ground that it was in the nature of reimbursement without any profit element or mark up without appreciating that existence of a profit element or mark-up is not a criterion for determination of income by way of fees from technical services under section 9(1)(vii) of the Act? ....
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.... 2010-11 2010-11 2804/M/2016 2805/M/2016 10 to 18 12 to 16 Para 18 on Page 15 27 to 32 2009-10 2012-13 CO.28/M/2018 CO. 29/M/2019 7 to 10 9 to 12 Para 9 on Page 11 42 to 45 2013-14 5806/M/2017 3.4 7/8 Para 5 on Page 13 59 to 61 The ld. A.R took us through relevant observations of the Tribunal in the aforementioned orders. It was, thus, submitted by the ld. A.R that the Tribunal in the assessee's own case had consistently been holding that the Standby Maintenance Charges received by the assessee from TCL could not be brought to tax as 'Fees for Technical Services' (for short 'FTS') and were liable to be taxed as its 'business income', and that too, to the extent of its reference to the "business connection" in India. Also, it was submitted by the ld. A.R that the Tribunal had observed that the turnover (receipts) of Standby Maintenance Charges from TCL i.e attributable to India had to be calculated on the basis of proportion of the cable length in India vis-a-vis worldwide cable length. In the backdrop of his aforesaid contention, it was submitted by the ld. A.R that though the CIT(A) had rightly concluded that the S....
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.... operations carried out had to be calculated on the basis of apportionment of cable length in India vis-a-vis the worldwide cable length. For the sake clarity the relevant observations of the Tribunal in its aforesaid order are culled out as under: "5. We have heard rival submissions. We find that grounds raised by the revenue and the Ground Nos.1 to 5 raised by the assessee are adjudicated by this Tribunal under similar circumstances in assessee's own case in ITA No.2084 & 2085/Mum/2016 for A.Y. 2010-11 & 2011-12 dated 04/05/2018 wherein it was held as under:- "8. In this manner, the rival counsels have made their submissions. We find that the issue regarding the nature of services came-up before the Tribunal for the first time in Assessment Years 1998-99 to 2000-01, and vide order dated 06.02.2015 it was held that the same are not in the nature of 'fee for technical services'. Subsequently, for Assessment Years 2001-02 to 2008-09, the matter again came-up before the Tribunal, and vide order dated 15.06.2015, the amount has been held not to be in the nature of 'fee for technical services' u/s 9(1)(vii) of the Act. The relevant discussion in the order of the Tribu....
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.... de-mobilization expenses, consumables, replenished equipment, and remotely operated vehicles, the extent not included in the wet maintenance agreement standby charges, shall be apportioned among Signatories (excluding the Founding Signatory) and other holders of Assignable Capacity on the affected Segment S or Segment X-1 or Segment X-2 in accordance with Schedule F. 69. Thus, under the C&MA the responsibility of maintenance and repairs belongs to both, assessee and the landing parties. The maintenance activities under taken by the assessee for the purpose of standby maintenance which is the impugned issue, was for the arrangement for standby cover and maintenance and operation of FNOC. So far as standby maintenance charges is concerned, it is not in respect of any actual rendering of services but to maintain infrastructures for coordination and setting up conditions for efficient rendering of services in relation to maintenance and repairs of cable system. There is a separate charge for repair and maintenance under the C&MA whereby, the assessee is actually required to undertake repair and maintenance and for which the assessee separately charges. Such a repair and maint....
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.... there is no consultancy services. The word "technical" services connote services which are provided in technical field or by the person who has skill, knowledge expertise in the area of technical or science. Here-in-this case if the assessee is providing some kind of repair services in the cable system, then it can be termed as technical services, however, if there is no actual rendering of services, but mere collection of annual charge to recover the cost of standby facility, agreed by all the members of the consortium on proportionate cost basis, then it cannot be held that it is providing any kind of technical services. Here the most crucial point which has to be seen is firstly, whether there is any actual rendering of services; secondly, is there any mark up or element of profit in the charge received for standby maintenance; and lastly whether it is in the nature of fixed annual charge which is to be recovered as proportionate cost of maintain the standby facility ready for carrying out any maintenance or repair services. This charge is different from an annual maintenance contract, whereby repairs and maintenance is covered for a certain period or services. In the present c....
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....the Indian landing party, i.e. TCL. 11. On this aspect, the stand of the assessee is that the turnover (receipts of standby maintenance charges from TCL) that is attributable to the operations carried out in India has to be calculated on the basis of apportionment of cable length in India vis-a- vis the worldwide cable length. On the contrary, the stand of the Revenue is that the turnover of the assessee derived from standby maintenance charges has no connection with the length of the cable laid in India. As per the Revenue, the standby maintenance charges relate to expenditure incurred by the assessee in maintaining the standby facility and Network Operating Centre (NOC) for a quick response to repair the interruptions and coordination of maintenance. The said facility is maintained and can be mobilised at short notice for rendering any repair work whatever and wherever needed. Therefore, as per the Revenue, the standby maintenance charges are relatable to the cable capacity assigned to various landing parties and not the length of the cable. In other words, as per the Revenue, once such expenses on standby maintenance charges is allocated to TCL, i.e. the Indian landing ....
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....Additional Grounds of appeal nos. 1 & 3 are concerned, which read as under, the same are primarily in support of the original Grounds raised in the Memo of appeal. "1. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) - 58, Mumbai ("the CIT(A)") erred in holding that the entire turnover (receipts from the Indian Parties) is liable to be treated as turnover for the purpose of taxation in India. The Appellant submits that the said receipt of Standby Maintenance Charges from TCL cannot be treated as turnover for taxation purpose in India. 3. On the facts and circumstances of the case and in law, the Learned CIT(A) erred in holding that the entire turnover (receipts from the Indian parties) of Standby Maintenance Charges from TCL is turnover for the purpose of taxation in India without giving notice for enhancement or opportunity to the Appellant. The Appellant submits that the CIT(A) ought not to have held that the entire turnover (receipt from the Indian parties) is liable to be treated as turnover for the purpose of taxation in India. 17. On this aspect, the short dispute relates to th....
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...., in our view, it is only the revenue from TCL which is on account of standby maintenance charges proportionate to the cable length in India that deserves to be considered for computing the profit or loss from standby maintenance activity ITA No.5881/Mum/2017 & 5806/Mum/2017 M/s. Reliance Globalcom Ltd., Bermuda 15 attributable to India in terms of Sec. 9(1)(i) of the Act. Therefore, on this aspect, we uphold the plea of the assessee and direct the Assessing Officer to verify the calculation made by the assessee in this regard in its computation of income and recompute the income accordingly. Thus, on this aspect, assessee succeeds as above." 5.1. The grounds raised by the revenue and ground Nos. 1 to 5 raised by the assessee are disposed off in line with the aforesaid findings of this Tribunal in assessee's own case." On being confronted with the aforesaid view taken by the Tribunal in the case of the assessee for the aforementioned preceding years the ld. D.R could not rebut the same. 6. We have given a thoughtful consideration to the issue before us, and find, that as stated by the ld. A.R, and rightly so, both the issues in question involved in the present cross-....