TaxTMI 
TaxTMI 
2021 (8) TMI 583
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....he part of the Revenue in filing the appeal before the Tribunal. Even the ld. Counsel for the assessee has not raised any objection in this regard. The said delay on the part of the Revenue in filing this appeal before the Tribunal is accordingly condoned and this appeal of the Revenue is being disposed off on merit. 3. The assessee in the present case is a Company, which is engaged in the business of rendering of Logistic Services. The return of income for the year under consideration was filed by it on 30. 11.2014 declaring total income of Rs. 2,83, 50,120/-. In the Profit & Loss Account filed alongwith the said return, a sum of Rs. 19,92, 81, 628/- was debited by the assessee on account of shipment and related expenses. From the perusal of the details of such expenses furnished by the assessee, it was noted by the Assessing Officer that a sum of Rs. 7,89, 00, 854/- was paid by the assessee to the International Freight Forwarding Agents without deduction of tax at source. In this regard, the following explanation was offered on behalf of the assessee before the Assessing Officer during the course of assessment proceedings in support of its case that tax was not required to be de....
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....(a)(i) read with section 194C of the Act for the following reasons given in the assessment order dated 29.11. 2016 passed under section 143( 3) of the Act:- 2.1.1 The assessee has not furnished any proof that the payments made to international freight forwarding agents are the agents of the principal shippers. ln the absence of any evidence it cannot be ascertained that the freight forwarding agents are the agents of the shippers. Further, as per Article 8 of Indo Japan DTAA, it mentioned that profits from the operation of overdraft or ships in international traffic carried on by an enterprise of the contracting state shall be taxable only in that contracting state. Therefore, it does not refer to the taxation of agents but only to the taxable profit of shippers or aircraft carriers. Therefore, the provision of the DTAA cannot be extended for the benefit of the assessee. 2.1.2 It can be seen that the assessee is a group company of Nissin group. Further, it is mentioned in the Audit report that Nissin Corporation, Japan has a substantial interest in the business of the company. Nissin Corporation, Japan is holding 51% of shares in the assessee company Apart from this, there are ....
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.... the Explanation 2 shall also not be affected as Nissin Corporation is neither a broker, general commission agent nor any other agent. As per website information it operated in logistic business, travel service business and real estate business. It is not an agent instead it has a worldwide business and is a leading company in logistics business worldwide. Hence, by any stretch of imagination it cannot be construed to be an agent. The other related parties are the business of mother company i.e. Nissin Corporation and therefore, they also cannot be referred to as agents. 2.2 In view of the discussion above, the amount of payment made to International freight & forwarding agents amounts to Rs. 7,85,93,661/- [Nissin Corporation and its associate concerns- (Japex Do Brasil. + Taehwa International Transport Inc i.e. Rs. 7,89,00,854/- - Rs. 2,16,768/- - Rs. 90,425/-) is disallowed u/s.40a(i) read with u/s. 194C of the Income tax Act, 1961." 5. The disallowance of Rs. 7, 85, 93,661/- made by the Assessing Officer under section 40(a)(i) was challenged by the assessee in the appeal filed before the ld. CIT( Appeals) and after considering the submission made on behalf of the assessee as ....
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....is) Limited (supra)in paragraph no. 4 to 6 of its order which read as under: "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 of providing logistic services both in India and outside India and is a joint venture company between Nissin Corporation, Japan and ABC (India) Ltd. and other group companies. For the services provided outside India, logistic services till the foreign port are rendered by the assessee, however, from the foreign port, the logistics services are undertaken by the foreign parties. The modus operandi adopted by the assessee and foreign companies can be better understood as explained below. (i) Consignment originating in India to be delivered to a destination outside India The subject service can be broadly divided into two parts - (1) Services from the customer's premises to the Indian port/loading in ship - Rendered by the assessee. (2) Services from the destinati....
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.... 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 the payments have been made to the related parties (group entities) and, therefore, automatically there is a business connection and, therefore, payments made to them had to be subjected to TDS. We do not agree with the Ld. DR's contention that merely because the foreign companies are related parties there is automatically a business connection and, therefore, sec. 9 is attracted. According to us, if there is a related party transaction then what is to be examined is whether the payments have been made at an arms length price or not. Unless the foreign company which is an independent legal entity incorporated in a foreign country have a business activity in India or a PE in India, it cannot be brought to tax for the income which it earns for the services ren....
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....ndered 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 of this Tribunal Mumbai bench reported in (2012) 18 Taxman.com 302 in UPS SCS (Asia) Ltd. Vs. ADIT (International Taxation) wherein the facts of the case are as under: "The assessee, a foreign company incorporated under the laws of Hong Kong, was engaged in the business of provision of supply chain management, including the provision of freight and forwarding and logistics services. It entered into a 'Regional Transportation Services Agreement' with 'M' an Indian company for providing freight and logistics services to each other. As per this agreement, each party agreed to render services to the other in respect of import and export of consignments. The Assessing Officer noted two types of consignments, viz., Import consignments and Expor....
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....s) 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 received by the assessee from 'M' in respect of services performed outside India on the export consignments of 'M' originating from India. There is no quarrel over the nature of services for which the above referred amount has been paid to the assessee being, freight and logistics services such as transport, procurement, customs clearance, sorting, delivery, warehousing and pick up services. Now the primary question which arises for consideration is as to whether the payment in respect of these services can be held as 'fees for technical services' within the meaning of section 9(1)(vii ). [Para 4] A bare perusal of the provision of Explanation 2 to section 9(1)(vii ) indicates that the 'fees for technical services' means a....
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....e 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 being any planning part involved in the execution and also the evaluation of the performance. In the absence of any specific definition of the phrase "managerial services" as used in section 9(1)(vii ) defining the "fees for technical services", it needs to be considered in a commercial sense. It cannot be interpreted in a narrow sense to mean simply executing the directions of the other for doing a specific task. For instance, if goods are to be loaded and some worker is instructed to place the goods on a carrier in a particular manner, the act of the worker in placing the goods in the prescribed manner, cannot be described as managing the goods. It is a simple direction given to the worker who has to execute it in the way prescribed. It is quite natural....
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....rvices. 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 making available its technology in the form of sophisticated equipments and software etc. The CIT(A) has held that : "in order to ensure efficient and timely delivery and to provide continuous real time information, the assessee is required to use sophisticated technology for which the Indian entity is also equally involved and to whom the assessee is committed to providing the requisite software and equipment". [Para 10] On going through clause 2 of the Agreement, it is obvious that 'M' shall 'separately execute a technology and software license agreement' for the provision of computer equipment and software supplied by the assessee. It is nobody's case that the consideration in question relates to the supply of any computer equipmen....
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....39; 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 standard facility albeit developed or manufactured with the use of technology is used, such a user cannot be characterized as using 'technical services'. [Para 15] Coming back to the facts of the present case, even if one accepts the First Appellate Authority's point of view that the computer could be used in tracing the movement of the goods, such use of computer, though indirect, remote and not necessary, cannot bring the payment for freight and logistics services within the purview of "technical services". The essence of the consideration for the payment is rendering of services and not the use of computer. If incidentally computer is used at any stage, which is otherwise not necessary for rendering such services, the payment for freight an....