AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (4) TMI 2000
X X X X Extracts X X X X
X X X X Extracts X X X X
....filed detailed submission from which the AO was of the opinion that assessee has not deducted TDS on the expenses amounting to Rs. 3,07,54,392/- towards ocean freight payment. When asked by the AO as to why TDS has not been deducted, the assessee submitted that it is not liable to deduct TDS since sec. 172 of the Act applies. So, the AO asked the assessee to produce evidence to prove that the parties to whom payments were made by the assessee were shipping agent of any non-resident ship owners or charters in respect to which provision of sec. 172 of the Act applies. According to AO, since no evidence was submitted before him, he disallowed Rs. 3,07,54,392/- u/s. 40(a)(ia) of the Act. Aggrieved, assessee preferred an appeal before the Ld. CIT(A), who was pleased to allow the same. Aggrieved by the decision of the Ld. CIT(A) the revenue is before us. 4. We have heard rival submissions and gone through the facts and circumstances of the case. Before us the Ld. AR submitted that the amount of Rs. 3,07,54,392/- includes an amount of Rs. 1,68,44,535/- which was given to foreign companies for export consignments/off-shore activities. We note that the assessee is engaged in the business o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....our notice that the payments were made, inter alia, to the foreign group entities of the assessee viz., (i) Nissin Corporation, Japan, (ii) Nissin International Transport USA Inc., USA, (iii) Nissin Logistics (Vn) Co. Ltd, Vietnam, (iv) Nissin Transport (S) Pte Ltd, Singapore, (v) Nissin Transport Philippines Corp, Philippines, (vi) Nissin Transportation & Warehousing (H.K.) Ltd, Hongkong, (vii) Nistrans (M) Sdn Bhd, Malaysia, (viii) PT. Nissin Transport Indonesia, Indonesia and (ix) Siam Nistrans Co. Ltd., Thailand. It was brought to our notice that during the assessment proceedings, proper opportunity was not given to the assessee to explain the nature of activities carried out by the foreign companies from the foreign port onwards in respect to the logistic work. Therefore, the confusion arose in the first place. It was submitted by the Ld. AR that before the Ld. CIT(A) all the facts were brought to his notice and the Ld. CIT(A) after calling for a remand report and considering the same and the rejoinder filed by the assessee (which has been reproduced in the impugned order), the Ld. CIT(A) has allowed the claim of the assessee. Before us, the Ld. DR vehemently submitted that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons and carries on business on its own, instead of functioning as an agent of the foreign group entities and accordingly, the assessee cannot be construed to have business connection with foreign group entities in India. Further, we note that the assessee does not have an authority to conclude contracts on behalf of foreign group companies. The assessee being in the business of logistic service, the question of maintaining a stock of goods in India also does not arise and the assessee does not secure orders in India mainly or wholly for the foreign group entities but carries business on its own. Thus, the assessee cannot be construed to have created a business connection in India for foreign group entities. It is not the case of the AO that the services rendered are not at arms length so, therefore, we do not find any merit in the grounds of appeal raised by the revenue in this regard. We also observe that the precise question as to whether a foreign company incorporated under the respective foreign country laws when engaged in the business of providing freight and forwarding and logistic services with an Indian entity needs to deduct TDS at source came before the coordinate bench ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... principal to principal basis and at arm's length. The Assessing Officer observed that the services rendered by the assessee under the agreement were in the nature of freight and logistics services such as transport, procurement, custom clearance, sorting, delivery, warehousing and picking up services. In his opinion such services were covered under the provisions of section 9(1)(vii), being 'fees for technical services'. In order to buttress his viewpoint, the Assessing Officer also observed that 'M' had deducted tax at source from the transportation fees paid to the assessee and in that view of the matter the assessee's contention that the amount was not chargeable to tax in India, was bereft of any force. The Commissioner (Appeals) echoed the assessment order on this point by holding that the transportation fees received by the assessee from 'M' was taxable in India as 'fees for technical services' under section 9(1)(vii) as it was for the services in the nature of 'managerial, technical or consultancy services'." On second appeal it was held by Tribunal as under: "The entire dispute centers around the taxability of the amount r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rovided by the assessee to 'M' outside India. These services comprise of transport, procurement, customs clearance, sorting, warehousing and pick up services on the cargo exported by 'M' on behalf of its customers. Having noted the nature of services provided by the assessee outside India, for which 'M' India made the payment, it is necessary to consider if these can be described as managerial or technical or consultancy services. [Para 6] First one has to consider the ambit of 'managerial services' to test whether the instant services can qualify to be so-called. Ordinarily the managerial services mean managing the affairs by laying down certain policies, standards and procedures and then evaluating the actual performance in the light of the procedures so laid down. The managerial services contemplate not only execution but also the planning part of the activity to be done. If the overall planning aspect is missing and one has to follow a direction from the other for executing particular job in a particular manner, it cannot be said that the former is managing that affair. It would mean that the directions of the latter are executed without there ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by the assessee is covered within section 9(1)(vii ). The word "consultancy" means giving some sort of consultation de hors the performance or the execution of any work. It is only when some consideration is given for rendering some advice or opinion etc., that the same falls within the scope of "consultancy services". The word 'consultancy' excludes actual 'execution'. The nature of services, being freight and logistics services provided by the assessee to 'M' has not been disputed by the authorities below. There is nothing like giving any consultation worth the name. Rather such payment is wholly and exclusively for the execution in the shape of transport, procurement, customs clearance, delivery, warehousing and picking up services. That being the position, the payment in lieu of freight and logistics services cannot be ranked as consultancy services. [Para 9] The only left over component of the definition of "fees for technical services" taken note of by the ld. CIT(A) is "technical services". He observed that the assessee's business structure is time-bound service coupled with continuous real time transmission of information by using and also makin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y the company of other words which it keeps. This rule is wider in scope than the rule of ejusdem generis in order to discover the meaning of a word which has not been defined in the Act. As noted above the word 'technical' has been sandwiched between the words 'managerial' and 'consultancy' in Explanation 2 to section 9(1)(vii) and no definition has been assigned to the 'technical' services in the relevant provision, one needs to ascertain the meaning of the 'technical services' from the overall meaning of the words 'managerial' and 'consultancy' services by applying the principle of nosticur a sociis. It has been held above that the 'managerial services' and 'consultancy services' pre suppose some sort of direct human involvement. These services cannot be conceived without the direct involvement of man. These services can be rendered with or without any equipment, but the human involvement is inevitable. Moving in the light of this rule, there remains no doubt whatsoever that the technical services cannot be contemplated without the direct involvement of human endeavour. Where simply an equipment or a standar....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India. This Explanation makes it prominent that only that part of the income from business operations can be said to be accruing or arising in India, as is relatable to the carrying on of operations in India. In other words, if a non-resident earns any income from India by means of operations carried on outside India, that will not fall within the scope of section 9(1)(i ). Even Explanation below section 9(2), as relied on by the revenue, requiring inclusion of income in the total income of the non-resident whether or not the nonresident has a residence or place of business or business-connection in India or the non-resident has rendered services in India, is applicable only in respect of clauses (v) to (vii ). Clause (i) of section 9 has not been included by the legislature within the ambit of this Explanation. It shows that unless a non-resident earns income from business operations carried out in India, such income cannot be deemed as accruing or arising in India. Reverting to the facts....