EOS POWER INDIA P.LTD, MUMBAI V. DCIT CEN CIR 9(1)(1), MUMBAI

ITA 1043/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6151 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 14-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M V RAJGURU
• Assessee Lawyers: AJAY R SINGH
• Keywords: Transfer pricing; Double taxation relief; Rule of consistency; Services rendered outside India; Permanent establishment; TDS
• Section: 115JB; 205; 195; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.1043/M/2017 ASSESSMENT YEAR: 2012-13 M/S. EOS POWER INDIA P. LTD., (FORMERLY KNOWN AS CELTRONIX POWER INDIA P. LTD.), UNIT NO.57, SDF-II, SEEPZ, ANDHERI (EAST), MUMBAI 400 096 PAN: AACCC3626K VS. DCIT CENTRAL CIRCLE 9(1)(1), MUMBAI (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI AJAY R. SINGH, A.R. REVENUE BY : SHRI M.V. RAJGURU, D.R. DATE OF HEARING : 05.11.2018 DATE OF PRONOUNCEMENT : 15.01.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 29.11.2016 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. THE VARIOUS GROUNDS RAISED BY THE ASSESSEE ARE A S UNDER: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN CONFIRMING THE ADDITION OF RS, 32,25,963 IN RESPECT OF LEGAL & PRO FESSIONAL CHARGES U/S 40(A)(I) R.W.S. 195 OF THE INCOME TAX ACT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) ERRED IN CONFIRMING THE ADDITION OF RS. 32,25,963 U/S. 40(A)(I) R.W.S. 195 OF THE INCOME TAX ACT IN RELATION TO DISALLOWANCE OF CERTIFICATION & OTHER CHARGES PAID TO NON-RESIDENT. ITA NO.1043/M/2017 M/S. EOS POWER INDIA P. LTD., (FORMERLY KNOWN AS CELTRONIX POWER INDIA P. LTD.) 2 3. THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) ERRED IN TREATING CERTIFICATION SERVICES RENDERED BY NON-RESIDENT CER TIFICATION AGENCY AS SERVICES AS REFERRED TO IN ARTICLE 12(4)(A) OF INDO-US DTAA LIA BLE FOR WITHHOLDING TAX. 4. THE LEARNED ASSESSING OFFICER ERRED IN TRE ATING CERTIFICATION SERVICES RENDERED BY NON-RESIDENT CERTIFICATION AGENCY AS A SERVICES AS REFERRED IN ARTICLE 12(4)(B) OF INDO-US DTAA IN THE NATURE OF 'MAKE AVAILABLE'. 5. APPELLANT COMPANY PRAYS THAT, A. DELETE THE ADDITION OF RS. 32,25,963 MADE ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE. B. GRANT ANY OTHER RELIEF DEEMED NECESSARY. 3. THE ONLY ISSUE RAISED IN THE VARIOUS GROUNDS OF APPEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.32,2 5,963/- BY LD. CIT(A) AS MADE BY THE AO IN RESPECT OF LEGAL AN D PERSONAL CHARGES UNDER SECTION 40(A)(I) READ WITH SECTION 19 5 OF THE ACT BY IGNORING THE FACT THAT THE SERVICES WERE RENDERED B Y THE NON RESIDENT CERTIFICATION AGENCIES OUTSIDE INDIA AND THEREFORE NOT CHARGEABLE TO TAX. 4. THE FACTS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SWITCH MODE POWER SUPP LIES AND OTHER COMPUTER PERIPHERALS IN ITS FACTORY LOCATED I N SEEPZ AND THE PRODUCTS WERE BEING MAINLY EXPORTED TO US AND E UROPEAN COUNTRIES. DURING THE YEAR THE ASSESSEE FILED THE RETURN OF INCOME ON 28.09.2012 DECLARING INCOME AT NIL AFTER CLAIMING SET OFF OF BROUGHT FORWARD LOSSES TO THE EXTENT OF RS.6 ,70,45,966/- WHILE DECLARING THE PROFIT UNDER SECTION 115JB AT RS.8,08,12,417/- WHICH WAS REVISED ON 01.10.2012. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO NOTICED FROM SCHEDULE 16 ANNEXED TO P & L ACCOUNT THAT ASSESSEE HAS MADE PAYMENTS TO NON RESIDENT PARTIES AS PER DETAILS BELOW: ITA NO.1043/M/2017 M/S. EOS POWER INDIA P. LTD., (FORMERLY KNOWN AS CELTRONIX POWER INDIA P. LTD.) 3 SR. NO. NAME OF THE NON-RESIDENT PAYEE NATURE OF SERVICES RENDERED AMOUNT (RS.) 1 NEMKOAS CERTIFICATION CHARGES 597099 2 NEMKO USA INC. CERTIFICATION CHARGES 1753161 3 UNDERWRITERS LABORATORIES INC. CERTIFICATION CHARGES 223282 6 VDE CERTIFICATION CHARGES 66176 DENNEMERER & CO. CERTIFICATION CHARGES 187037 JRT INTERNATIONAL CERTIFICATION CHARGES 60968 FM APPROVALS LLC CERTIFICATION CHARGES 338240 TOTAL 32,25,963 THE ASSESSEE REPLIED DURING THE COURSE OF ASSESSME NT PROCEEDINGS TO THE SHOW CAUSE NOTICE ISSUED BY THE AO THAT THE AFORESAID PAYMENTS WERE MADE TO NON RESIDENT PARTI ES NOT BY WAY OF FEES FOR TECHNICAL SERVICES BUT FOR CERTIFIC ATION AND PROFESSIONAL SERVICES RENDERED OUTSIDE INDIA AND TH EREFORE SHOULD NOT BE DISALLOWED BY INVOKING THE PROVISION OF SECTION 40(A)(I) READ WITH SECTION 195 OF THE ACT AND EXPLA NATION 2 TO CLAUSE (VII) BELOW SUB-SECTION (1) OF SECTION 9 REA D WITH EXPLANATION TO SECTION 9(1) OF THE ACT. 5. THE LD. A.R. SUBMITTED THAT AS PER THE RULES AND REGULATIONS IN US AND EUROPEAN COUNTRIES, THE QUAL ITY OF PRODUCTS SOLD IN THE MARKETS HAS TO MEET CERTAIN ST ANDARD REQUIREMENTS BEFORE THE SAME COULD BE USED IN US AN D EUROPEAN MARKETS WHICH REQUIRED THE EXPORTERS TO GE T THEIR PRODUCTS CERTIFIED BY THE AUTHORISED AGENCIES IN U S. THE LD. ITA NO.1043/M/2017 M/S. EOS POWER INDIA P. LTD., (FORMERLY KNOWN AS CELTRONIX POWER INDIA P. LTD.) 4 A.R. SUBMITTED THAT THE SAID CHARGES WERE PAID BY T HE ASSESSEE TO NON RESIDENT CERTIFICATION AGENCIES FOR CERTIFYI NG THE PRODUCTS SOLD OUTSIDE INDIA WHICH WERE NECESSITATED BY US RE GULATION. THE SAID CHARGES ARE ONLY FOR CERTIFICATION ABROAD AND NOT UTILISED ANYWHERE IN THE MANUFACTURING PROCESSES OF THE ASSESSEE. HOWEVER, THE AO, NOT BEING SATISFIED WI TH THE CONTENTIONS OF THE ASSESSEE, ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 6. IN THE APPELLATE PROCEEDINGS, THE LD . CIT(A) AL SO UPHELD THE ORDER OF THE AO BY OBSERVING AND HOLDING AS UND ER: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, SUBMISSIONS MADE BY THE APPELLANT. THE GROUND OF APPEAL IS DECIDED HEREIN A S UNDER. DURING THE YEAR, THE APPELLANT COMPANY HAD PAID RS. 32,25,963 TO VARIOUS ENTITIES AS MENTIONED ABOVE IN USA FOR GETTING PRODUCT CERTI FICATION SERVICES OF SWITCH MODE POWER SUPPLIES AND OTHER COMPUTER PERIPHERALS MANUFACTURED BY THE APPELLANT. THE FOREIGN ENTITIES WERE ASSIGNED THIS JOB SINCE IT HAD A SPECIALIZED KNOWLEDGE AND FACILITY FOR THE REQUISITE TESTING AN D CERTIFICATION. THE AO WAS OF THE VIEW THAT THE SAID TESTING AND CERTIFICATION WAS RE QUIRED TO BE UTILIZED IN THE MANUFACTURING ACTIVITY OF THE ASSESSEE COMPANY. THE APPELLANT, WHILE MAKING THE PAYMENT TO THE FOREIGN ENTITIES, HAD NOT DEDUCTED T DS. ON QUERY BY THE AO, THE APPELLANT SUBMITTED BEFORE THE AO THAT THE PAYMENT HAD BEEN MADE TO THE FOREIGN ENTITIES FOR TESTING OF THEIR PRODUCTS AND SINCE TH E TESTING WAS DONE BY A FOREIGN COMPANY OUTSIDE INDIA, NO INCOME HAD ACCRUED OR ARI SEN IN INDIA DUE TO WHICH, NO TDS WAS DEDUCTED. THE AO, HOWEVER, WAS OF DIVERGENT OPINION AND TAKEN THE OPINION THAT THE PAYMENTS MADE BY THE APPELLANT IS LIABLE TO TDS. AC CORDINGLY, THE AO HAS MADE THE DISALLOWANCE TO THE INCOME OF THE APPELLANT U/S 4O( A)(I). IT IS OBSERVED THAT IN THE PRESENT CASE, THE TESTIN G REPORT AND CERTIFICATION, ETC. WERE OBTAINED IN RESPECT OF PRODUCTS TO BE UTILIZED FOR PURPOSES OF BUSINESS OF THE APPELLANT AND THAT THE TESTING WAS A HIGHLY-SPECIAL IZED JOB OF TECHNICAL NATURE, AMOUNTING TO TECHNICAL SERVICES OFFERED AND RECEIVE D BY THE APPELLANT. IT IS FURTHER OBSERVED THAT SINCE THE FOREIGN ENTITIES WERE BASED IN THE USA, THE SERVICES AND PAYMENTS MADE WERE COVERED UNDER, 'FEES FOR INCLUDE D SERVICES', AS DEALT WITHIN ARTICLE 12(4)(B) OF THE DIRECT TAXATION AVOIDANCE A GREEMENT BETWEEN INDIA AND THE USA (THE DTAA, FOR SHORT). IT IS FURTHER OBSERVED THAT THE TESTING REPORT AND CERTIFICATION WERE IN THE NATURE OF MAKING AVAILABL E OF TECHNICAL KNOWLEDGE, ITA NO.1043/M/2017 M/S. EOS POWER INDIA P. LTD., (FORMERLY KNOWN AS CELTRONIX POWER INDIA P. LTD.) 5 EXPERTISE AND SKILL OF THE FOREIGN ENTITIES TO THE APPELLANT, RENDERING SUCH SERVICES TO BE 'FEES FOR INCLUDED SERVICES' UNDER ARTICLE 12(4) (B) OF THE DTAA, SINCE THE TESTING REPORT AND CERTIFICATIONS WERE UTILIZED IN MANUFACT URE AND SALE OF PRODUCTS IN THE APPELLANTS BUSINESS. THE APPELLANT VIDE THEIR SUBMI SSION ITSELF HAS SUBMITTED AS UNDER: IF FOR ANY REASON THE QUALITY OF THE PRODUCT IS NO T OF THE REQUIRED STANDARD, THE CERTIFICATION AGENCY WILL NOT APPROVE THE SAME. FUR THER, THE MARK IS REQUIRED TO BE EMBOSSED ON ITS PRODUCTS FOR THE BENEFIT OF END USE RS THAT THE PRODUCT IS DULY CERTIFIED AND THE REQUIRED QUALITY STANDARDS AND NO RMS ARE FULFILLED. THUS, IT CAN BE INFERRED FROM THE ABOVE THAT UNLESS THE PRODUCTS MANUFACTURED BY THE APPELLANT IS CERTIFIED FROM THE ABOVE FOREIGN E NTITIES, THE APPELLANT WILL NOT BE ABLE TO SELL THE PRODUCTS IN THE US OR EUROPEAN MAR KETS. FURTHER, UPON EMBOSSING THE LOGO OF THE FOREIGN ENTITIES, THE APPELLANT'S P RODUCT WILL BE ABLE TO COMMAND ADDED BRAND VALUE IN THE FOREIGN MARKETS. FURTHER, EXPLANATION(2) TO SECTION 9(I)(VIII)(B) OF THE I.T. ACT, 'FEES FOR TECHNICAL SERVICES' MEANS CONSIDERATION FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES; THAT IN 'COCHIN REFINERIES LT D. VS. CIT, REPORTED IN 222 ITR 354 (KER.), IT HAS BEEN HELD THAT FEES PAID BY AN INDIA N COMPANY TO A FOREIGN COMPANY TO EVALUATE THE QUALITY OF CERTAIN PRODUCTS AND TO ASC ERTAIN THE SUITABILITY OF SUCH PRODUCTS FOR A SPECIFIC INDUSTRY, CONSIDERED AS REI MBURSEMENT MADE BY THE INDIAN COMPANY, WERE PART AND PARCEL IN THE PROCESS OF ADV ICE OF A TECHNICAL CHARACTER AND WOULD FALL FOR COVERAGE IN THE DEFINITION OF 'FEES FOR TECHNICAL SERVICES', WITHIN THE PROVISIONS OF SECTION 9(I)(VII) OF THE ACT; THAT SI NCE THE PAYMENT MADE BY THE APPELLANT AS FEES FOR TECHNICAL SERVICES WAS UTILIZ ED IN BUSINESS IN INDIA, IT WOULD LEAD TO INCOME BEING DEEMED TO ACCRUE OR ARISE IN I NDIA; THAT SINCE FEES HAD BEEN PAID FOR OBTAINING TECHNICAL SERVICES FOR THE PURPO SES OF THE APPELLANT'S BUSINESS AND IT HAD ALSO BEEN UTILIZED FOR THE PURPOSE OF MA NUFACTURE AND SALE OF PRODUCTS IN THE BUSINESS OF THE ASSESSEE, THE PROVISIONS OF SEC TION 195 OF THE ACT WERE APPLICABLE TO SUCH PAYMENT AND THAT THEREFORE, THE AO WAS CORRECT IN HOLDING THAT DEDUCTION UNDER U/S 40 (A) (I) WAS NOT ALLOWABLE. 7. THE LD. A.R. VEHEMENTLY SUBMITTED BEFORE US THAT THE LD . CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE ORDER OF AO. THE LD. A.R. STATED THAT THE SERVICES ARE RENDERED OUTSIDE INDIA AND PAYMENTS WERE MADE TO NON RESIDENT CERTIFICATION AG ENCIES OUTSIDE INDIA. IT WAS STATED THAT CERTIFICATION CH ARGES WERE PAID TO AS STATED HEREINABOVE IN THIS ORDER TO THE PARTI ES WHO HAVE RENDERED SERVICES OF CERTIFICATION TO ASSESSEE AND ARE IN THE NATURE OF CERTIFYING THE PRODUCTS SOLD IN THE US MA RKET WHICH ITA NO.1043/M/2017 M/S. EOS POWER INDIA P. LTD., (FORMERLY KNOWN AS CELTRONIX POWER INDIA P. LTD.) 6 WAS A NECESSARY REQUIREMENT TO EXPORT THE PRODUCTS UNDER THE US AND EUROPEAN REGULATIONS. THE LD. A.R. SUBMITTE D THAT THE WHOLE SERVICES WERE RENDERED FROM USA/GERMANY AND A LSO OPERATIONS WERE CARRIED OUT OUTSIDE BY WAY OF CERTI FICATION AND PROFESSIONAL SERVICES INDIA WHICH ARE NOT IN THE NA TURE OF FEE FOR TECHNICAL SERVICES AS ENVISAGED BY EXPLANATION (2) TO SECTION 9(1)(VII) & EXPLANATION TO SECTION 9(1) OF THE ACT. THEREFORE THE PROVISIONS OF SECTION 195 ARE NOT APPLICABLE AS PA YMENTS MADE TO NON RESIDENTS OUTSIDE INDIA ARE NOT CHARGEABLE TO TAX IN INDIA. THE LD. A.R. STATED THAT THE INCOME DOES NO T ACCRUE OR ARISE IN INDIA SINCE THERE WAS NO BUSINESS CONNECTI ON IN INDIA AND NO PE OF THE SAID PARTY IN INDIA. BESIDES, REM ITTANCES WERE MADE OUTSIDE INDIA. THE LD. A.R. SUBMITTED THAT AL L THESE RESIDENTS DO NOT HAVE ANY PERMANENT ESTABLISHMENT I N INDIA AND THEREFORE UNDER ARTICLE OF BUSINESS PROFITS OF DO UBLE TAXATION AVOIDANCE AGREEMENT ON SUCH PAYMENTS ARE NOT CHARGE ABLE TO TAX IN INDIA UNLESS IT IS MADE AVAILABLE TO RECIPIE NTS OF SUCH SERVICES. THE LD. A.R. SUBMITTED THAT AS PER ARTIC LE 12(4) OF DOUBLE TAX AVOIDANCE TREATY (DTAA) BETWEEN INDIA AN D USA SUCH FEES ARE CHARGEABLE TO TAX IN INDIA IF SUCH SE RVICES MAKE AVAILABLE, TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOWHOW OR A PROCESS OR TRANSFER OF TECHNICAL PLANTS OR DESIGN. THE SERVICES RENDERED BY ALL THESE PARTIES WERE IN THE NATURE OF CERTIFICATION AND THESE AGENCIES DO NOT MAKE AVAILABLE SUCH TE CHNICAL KNOWHOW ETC. TO THE ASSESSEE. THEREFORE, THE SAID SERVICES RENDERED BY THEM ARE NOT CHARGEABLE TO TAX IN INDIA . THE LD. A.R. FURTHER STATED THAT NO WITHHOLDING THE TAX REQ UIRED TO BE HELD UNDER SECTION 195 AND THEREFORE THE ASSESSEE W AS NOT ITA NO.1043/M/2017 M/S. EOS POWER INDIA P. LTD., (FORMERLY KNOWN AS CELTRONIX POWER INDIA P. LTD.) 7 REQUIRED TO DEDUCT TAX FROM THE SAID PAYMENTS TO T HESE PARTIES AND HENCE CONFIRMATION OF DISALLOWANCE UNDER SECTIO N 40(A)(I) OF THE ACT IS NOT JUSTIFIED. THE LD. A.R. RELIED ON T HE DECISION IN SUPPORT OF HIS CONTENTIONS AS UNDER: DIT VS. TUV BAYREN INDIA LTD. (2015) 234 TAXMAN 388 BOM THE LD. A.R. FURTHER SUBMITTED THAT IN THE EARLIER YEARS AS WELL AS IN THE SUBSEQUENT YEARS SIMILAR PAYMENTS WERE MA DE BY THE ASSESSEE AND WERE BY THE DEPARTMENT EVEN IN THE SC RUTINY PROCEEDINGS. THE LD. A.R. STRONGLY RELIED ON THE P RINCIPLE OF CONSISTENCY BY STRONGLY ARGUING THAT UNLESS AND UNT IL THERE IS A CHANGE IN LAW OR CHANGE OF FACTS , THE EXPENSES CA N NOT BE DISALLOWED WHICH WERE ACCEPTED BY THE DEPARTMENT I N THE EARLIER AND SUCCEEDING YEARS. THE LD. A.R. RELIED STRONGLY ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE O F PR. CIT VS. QUEST INVESTMENT ADVISORS PVT. LTD. IN ITA NO.280 O F 2016 DATED 28.06.2018 BOMBAY HIGH COURT. SIMILARLY, THE LD. A .R. ARGUED THAT THE PROFESSIONAL CHARGES PAID TO JRT INTERNATI ONAL RS.60,968/- AND FM APPROVAL LLC RS.3,38,240/- AS ST ATED ABOVE IN THE TABLE FOR THE SERVICES RENDERED IN USA WITH REGARD TO THE COMPILATION OF THE DOCUMENTS AT USA FOR THE PURPOSE OF TRANSFER PRICING REQUIREMENT IN INDIA. THE SAID SE RVICES WERE RENDERED OUTSIDE INDIA FOR WHICH NO INCOME ACCRUES AND ARISES IN INDIA AND ACCORDINGLY DOES NOT QUALIFY FOR WITHH OLDING TAX. THE LD. A.R. ARGUED THAT THE PAYMENTS MADE FOR DOCU MENTATION AND OTHER PROCEDURAL REQUIREMENT SERVICES RENDERED WOULD NOT FALL WITHIN THE TERM CONSULTANCY SERVICES AND CONSE QUENTLY REMITTANCE MADE TO FOREIGN PARTIES WOULD NOT COME W ITHIN THE ITA NO.1043/M/2017 M/S. EOS POWER INDIA P. LTD., (FORMERLY KNOWN AS CELTRONIX POWER INDIA P. LTD.) 8 AMBIT OF PHRASE FEES FOR TECHNICAL SERVICES U/S 9 (1)(VII) OF THE ACT. THE LD. A.R. RELIED ON THE FOLLOWING DECISION S: 1. DIT VS. TUV BAYREN INDIA LTD. (2015) 234 TAXMAN 388 BOM 2. CIT VS. GRUP ISM P. LTD. (2015) 378 ITR 205 (DEL) 3. ERNST & YOUNG P LTD. (2010) 323 ITR 184 AAR 7. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE O RDERS OF AUTHORITIES BELOW. THE LD. D.R. SUBMITTED THAT SIN CE THE ASSESSEE HAS MADE PAYMENTS TO FOREIGN AGENCIES/PART IES IN CONNECTION WITH THE SERVICES RENDERED BY THOSE FORE IGN PARTIES NONETHELESS AVAILED OUTSIDE INDIA, BUT SAME ARE LI ABLE TO BE TREATED AS FEES FOR TECHNICAL SERVICES UNDER SECTIO N 9(1)(VII) OF THE ACT AND ASSESSEE WAS LIABLE TO WITHHOLD TAX ON THE SAID PAYMENTS UNDER SECTION 195 OF THE ACT AS UNDER ARTI CLE 12(4)(B) OF DTAA. THE LD DR ARGUED THAT THE TESTING AND CE RTIFICATION ARE IN THE NATURE OF MAKING AVAILABLE OF TECHNICAL KNOW LEDGE, EXPERTISE AND SKILLS OF FOREIGN ENTITIES TO THE ASS ESSEE AND THEREFORE WOULD AMOUNT TO RENDERING SUCH SERVICES A S FEES INCLUDING SERVICES SINCE THE TESTING REPORT AND TH E CERTIFICATION WERE UTILISED IN THE RENDERING THE PRODUCTS OF THE ASSESSEE MARKETABLE. THEREFORE, THE LD. D.R. SUBMITTED THAT THE AO HAS RIGHTLY DISALLOWED THE EXPENDITURE OF RS.32,25,963/ - UNDER SECTION 40(A)(I) READ WITH SECTION 195 OF THE ACT A ND THE ORDER OF LD. CIT(A) DESERVES TO BE UPHELD. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE UNDISPUTED FACTS ARE THAT ASSESSEE AVAILED CERTIFICATION SERVICES FROM N ON RESIDENTS IN US FOR CERTIFYING ITS PRODUCTS TO BE SOLD IN USA AN D EUROPE ITA NO.1043/M/2017 M/S. EOS POWER INDIA P. LTD., (FORMERLY KNOWN AS CELTRONIX POWER INDIA P. LTD.) 9 WHICH WAS A PRE CONDITION FOR SELLING THE PRODUCTS IN THOSE MARKETS AS THE ASSESSEE HAS TO ENSURE THAT THE PROD UCTS MEET THE MINIMUM QUALITY STANDARD. FOR THE SAID PURPOSE THE ASSESSEE PAID RS.29,77,958/- TO FIVE PARTIES AS ME NTIONED ABOVE AND TO THE REMAINING TWO PARTIES ASSESSEE PAID PROF ESSIONAL CHARGES FOR COMPILATION OF DOCUMENTS IN USA FOR THE PURPOSE OF TRANSFER PRICING REQUIREMENTS. THE ASSESSEE MADE T HE PAYMENT TOWARDS THE SERVICES RENDERED OUT IN USA BY THESE C ERTIFICATION AGENCIES AND PROFESSIONAL FIRMS. NOW THE DISPUTE B EFORE US IS WHETHER THE SAID CONSTITUTED FEE FOR TECHNICAL SERV ICES UNDER SECTION 9(1)(VII) AND UNDER 12(4) OF INDO GERMAN DT AA. THE AO TREATED THE SAME AS FEES FOR TECHNICAL SERVICES AND STATED THE SAME TO BE COVERED UNDER ARTICLE 12(4) OF THE DTAA BETWEEN INDIA AND USA AND ACCORDINGLY HELD THAT WITHHOLDING OF TAX WAS REQUIRED UNDER SECTION 195 FAILING WHICH THE PROVIS IONS OF SECTION 40(A)(I) OF THE ACT WERE INVOKED AND THE EX PENDITURE WAS DISALLOWED. HAVING CONSIDERED THE RIVAL SUBMISSION S AND VARIOUS CASE LAWS, WE FIND THAT IN THE PRESENT CASE BEFORE US THE PAYMENTS WERE MADE TO NON RESIDENTS FOR RENDERING S ERVICES OUTSIDE INDIA AND THE RECIPIENTS WERE NOT HAVING AN Y PE IN INDIA AND THUS INCOME DOES NOT ACCRUE OR ARISE IN INDIA A S THERE WAS NO BUSINESS TRANSACTIONS IN INDIA. SINCE THE RECIP IENTS DO NOT HAVE ANY PE IN INDIA AND UNDER ARTICLE OF BUSINESS PROFIT OF DOUBLE TAXATION AVOIDANCE AGREEMENT SUCH PAYMENTS A RE NOT CHARGEABLE TO TAX IN INDIA UNLESS THE SERVICES WERE MADE AVAILABLE TO THE ASSESSEE IN INDIA. ARTICLE 12(4) OF DTAA BETWEEN INDIA AND USA, SUCH FEE IS CHARGEABLE TO TAX IN IND IA IF SUCH SERVICES MAKE AVAILABLE, TECHNICAL KNOWLEDGE, EXP ERIENCE, SKILL, ITA NO.1043/M/2017 M/S. EOS POWER INDIA P. LTD., (FORMERLY KNOWN AS CELTRONIX POWER INDIA P. LTD.) 10 KNOWHOW AND A PROCESS OR TRANSFER OF TECHNICAL PLAN S OR DESIGNS. HOWEVER, ALL THESE CERTIFICATION AGENCIES AND PROFESSIONAL FIRMS HAVE NOT MADE AVAILABLE SUCH SER VICES TO THE ASSESSEE SUCH AS KNOWHOW. THEREFORE, SERVICE RENDE RED BY THEM OUTSIDE INDIA IS NOT CHARGEABLE TO TAX IN INDIA AND THE PROVISIONS OF SECTION 195 OF THE ACT ARE NOT APPLICABLE AND CO NSEQUENTLY THE ASSESSEE IS NOT LIABLE TO DEDUCT TDS AT SOURCE. THE REFORE DISALLOWANCE UNDER SECTION 40(A)(I) OF THE ACT IS N OT CORRECT. THE CASE OF THE ASSESSEE IS SUPPORTED BY A SERIES OF DE CISIONS AS MENTIONED ABOVE IN THE CASE OF DIT VS. TUV BAYREN IN DIA LTD. (2015) 234 TAXMAN 388 BOM (SUPRA) WHEREIN THE HONB LE BOMBAY HIGH COURT HAS HELD THAT AUDIT WORK AND CERT IFICATION WOULD NOT COME WITHIN THE REALM OF FEES FOR TECHNIC AL SERVICES UNDER SECTION 9(1)(VII) AND UNDER 12(4) OF INDO GER MAN DTAA. IN THE CASE OF DIAMOND SERVICES INTERNATIONAL P. LTD. VS. UOI (2008) 304 ITR 201 (BOM.) IT WAS HELD BY THE HONBLE BOMBA Y HIGH COURT THAT PAYMENT WITHOUT TDS MADE FOR GRADING CE RTIFICATE ISSUED BY FOREIGN COMPANY TO INDIAN CLIENTS INVOLVI NG NO TRANSFER OF TECHNICAL KNOWLEDGE OR SKILL. THERE WAS NO IMPA RTING OF ITS EXPERIENCE BY THE INSTITUTE IN FAVOUR OF CLIENT. S IMILARLY, IN THE CASE OF INSPECTORATE INTERNATIONAL LTD. VS. ASST. C IT (2018) 95 TAXMANN.COM 229 (DELHI TRIB.) IT WAS HELD BY THE CO -ORDINATE BENCH OF THE TRIBUNAL THAT WHERE INSPECTION AND TES TING SERVICES RENDERED BY A UK BASED COMPANY TO INDIAN CUSTOMERS BUT NO TECHNICAL KNOWLEDGE, ETC. WERE MADE AVAILABLE SO AS TO ENABLE RECIPIENTS TO USE THOSE SERVICES INDEPENDENTLY, PAY MENTS RECEIVED COULD NOT BE TERMED AS FEE FOR TECHNICAL S ERVICES. MOREOVER, ON THE PRINCIPLE OF CONSISTENCY ALSO THE HONBLE ITA NO.1043/M/2017 M/S. EOS POWER INDIA P. LTD., (FORMERLY KNOWN AS CELTRONIX POWER INDIA P. LTD.) 11 BOMBAY HIGH COURT HAS HELD IN THE CASE OF PR. CIT V S. QUEST INVESTMENT ADVISORS PVT. LTD. (SUPRA) THAT ON THE P RINCIPLE OF CONSISTENCY NO DISALLOWANCE IS WARRANTED WHEN A FUN DAMENTAL ASPECT IS ACCEPTED IN OTHER YEARS. THERE IS NO CHAN GE IN FACTS AND IN LAW IN THE PRESENT CASE ALSO. THE EXPENSES WERE ALLOWED UNDER SIMILAR FACTS BY THE REVENUE IN THE EARLIER AND SUCCEEDING YEARS. THEREFORE, ON THIS GROUND ALSO DISALLOWANCE IS NOT CALLED FOR. ACCORDINGLY, WE ARE SETTING ASI DE THE ORDER OF LD. CIT(A) AND DIRECTING THE AO TO ALLOW THE DEDUCT ION. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 15.1.2019. SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 15.1.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.