Spectrum Power Generation Ltd., Hyd, Secunderabad V. ACIT, Circle-3(2), Hyd, Hyderabad

ITA 1101/HYD/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5912 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 19-08-2016
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: M V ANIL KUMAR
• Keywords: Double taxation relief; Deemed to accrue or arise in india; Retrospective amendment; Permanent establishment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1101/HYD/2016 ASSESSMENT YEAR: 2009-10 SPECTRUM POWER GENERATION LIMITED, HYDERABAD [PAN: AAECS3685A] VS ASST. COMMISSIONER OF INCOME TAX, CIRCLE-3(2), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI M.V. ANIL KUMAR, AR FOR REVENUE : SMT. SUMAN MALIK, DR DATE OF HEARING : 28-11-2016 DATE OF PRONOUNCEMENT : 16-12-2016 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-3, HYDERABAD D ATED 26-05-2016, CONFIRMING THE ACTION OF THE ASSESSING OF FICER (AO) IN DISALLOWING AN AMOUNT OF RS. 1,05,05,655/- UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME TAX ACT [ACT]. 2. BRIEFLY STATED FACTS ARE THAT ASSESSEE DEBITED AN AM OUNT OF RS. 1,05,05,655/- UNDER THE HEAD PROFESSIONAL CHARGES. WHEN ENQUIRED, IT WAS EXPLAINED THAT THIS PAYMENT WAS MADE TO A PARTY CALLED PRECISION ENERGY ASSOCIATES, LLC, USA, REPRES ENTED BY ITS PROPRIETOR, MR. JOE MITCHELL, A PROFESSIONAL CONSULTAN T. AO I.T.A. NO. 1101/HYD/2016 SPECTRUM POWER GENERATION LIMITED :- 2 -: DISALLOWED THE AMOUNT ON THE REASON THAT THE SERVICES R ENDERED BY THE SAID PERSON ARE TECHNICAL SERVICES AND AS PER THE PROVISIONS OF SECTION 9(1)(VII)(B), THE PAYMENT WAS LIABLE FOR TDS AND AS NO TDS WAS COLLECTED/DEDUCTED, SUCH PAYMENT ITSELF IS DISALLOW ABLE U/S. 40(A)(IA). 3. BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT THERE WAS A COPY OF SERVICES CONTRACT AGREEMENT DT. 18-01-2007 AND THE CORRESPONDENCE BETWEEN MR. JOE MITCHELL, IN THE FORM OF E-MAILS, DOCUMENTS AND HIS PRESENCE IN INDIA ON THE SITE DURI NG THE RELEVANT FINANCIAL YEAR WAS SUBMITTED TO AO ALONG WITH C OPY OF THE PASSPORT. IT WAS FURTHER SUBMITTED THAT DTA BETWEEN IND IA AND USA OVERWRITES THE PROVISIONS OF INCOME TAX ACT, 1961 AND THE SERVICES RENDERED BY MR. JOE MITCHELL, ARE INDEPENDE NT, PERSONAL SERVICES AND ARE COVERED BY ARTICLE 16 OF THE DTAA. SINCE MR. JOE MITCHELL WAS NOT IN INDIA FOR MORE THAN 183 DAYS, THE AMOUNT RECEIVED BY HIM IS NOT TAXABLE IN INDIA. ALTERNATELY, IT WAS ALSO SUBMITTED THAT IF MR. JOE MITCHELL AND PRECISION ENERGY ASSOCIATES, LLC, USA, TO BE CONSIDERED AS ONE AND THE SAME, THEN, IT IS THE PROFESSIONAL INCOME COVERED UNDER ARTICLE 7. IN THE ABSENCE OF A PERMANENT ESTABLISHMENT, THE SAME CANNOT BE TAXED IN IND IA. LOOKING AT THE EITHER WAY, IT WAS SUBMITTED THAT THE PROV ISIONS OF SECTION 40(A)(IA) OR SECTION 9(1)(VII)(B) ARE NOT APPLICABLE TO THE PAYMENT MADE. 4. LD. CIT(A) EXAMINED THE ISSUE AND REJECTED THE CON TENTIONS OF ASSESSEE BY STATING AS UNDER: 5.1 I HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS OF THE APPELLANT, SERVICES CONTRACT AGREEMENT SUBMITTED BY THE APPELL ANT AND DTA I.T.A. NO. 1101/HYD/2016 SPECTRUM POWER GENERATION LIMITED :- 3 -: AGREEMENT BETWEEN INDIA AND USA. AFTER CONSIDERING ALL THE INFORMATION ON RECORD, THE ISSUE IS DECIDED AS UNDER. 5.2 DURING THE APPEAL PROCEEDINGS, THE CASE WAS DI SCUSSED WITH SRI R.LAKSHMAN RAO, FINANCE MANAGAR AND SRI S.VALRA MANL, GENERAL MANAGER ( OPERATION & MAINTENANCE) AND IT WAS INFOR MED TO ME THAT THE APPELLANT IS ONE OF THE EARLIEST UNITS OF GAS BASED POWER GENERATING UNITS. THE UNIT WAS STARTED IN 1990S WITH IMPORTED MACHINE RY. INITIALLY ROLLS ROYCE COMPANY WAS GIVING REQUIRED TECHNICAL GUIDANC E TILL NOVEMBER'2006. THE APPELLANT COMPANY WAS NOT EARNIN G PROFITS, ON THE OTHER HAND ROLLS ROYCE WAS CHARGING BOTH FOR SERVIC ES AND ALSO FOR ITS BRAND WHICH HAD BECOME BURDENSOME TO THE APPELLANT. THEREFORE THE SERVICES OF ROLLS ROYCE WERE REPLACED WITH MR.JOE M ITCHELL AND AN AGREEMENT FOR PERIOD OF 3 YEARS FROM JANUARY'2007 T O JANUARY'2010 WAS ENTERED BETWEEN THE APPELLANT COMPANY AND MR.JOE MI TCHELL, WHO WAS A TECHNICAL EXPERT RENDERING HIS ADVICE ON OPERATION AND MAINTENANCE OF THIS IMPORTED MACHINERY. IN THE MEANTIME, THE APPELLANT DEVELOPED IN-HOUSE TALENT AND FROM FEBRUARY2010 ONWARDS THE CONSULTAN CY OF FOREIGNERS WAS DONE AWAY WITH. 5.3 DURING THE RELEVANT FINANCIAL YEAR AN AMOUNT OF RS.1,05,05,650/- WAS PAID TO FOREIGN CONSULTANT MR. JOE MITCHELL. THE AMOUNTS WERE PAID THROUGH BANKING CHANNELS. FROM TH E COPY OF INVOICES RAISED BY MR. JOE MITCHELL, ONE CAN UNDERSTAND THAT MR.JOE MITCHELL RAISED ONE INVOICE PER MONTH WHICH INCLUDES REMUNERATION O F 18,000/- USD PER MONTH ALONG WITH OTHER EXPENSES LIKE TRAVEL, LIVING AND OTHER MISC EXPENSES. AS PER THE LEDGER ACCOUNT OF MR.JOE MITCH ELL, ALL THE AMOUNTS WERE PAID THROUGH THE BANKS. 5.4 AS PER NOTE GIVEN BY THE APPELLANT DURING APPEA L PROCEEDINGS, THE SERVICES RENDERED BY MR.JOE MITCHELL ARE AS UND ER: 'ALL THE PLANT TECHNICAL DECISIONS WERE FINALIZED & VETTED BY HIM. MR. JOE MITCHELL USED TO VISIT KAKINADA SITE FOR COUPLE OF D AYS EVERY MONTH/ALTERNATE MONTH AND HE COMMUNICATED EITHER TELEPHONICALLY OR THROU GH EMAIL FOR THE REST OF THE PERIOD DURING THE FINANCIAL YEAR 2008-09 . ALL THE PURCHASE REQUESTS & THIRD PART SERVICES WERE SC RUTINIZED AND FINALIZED BY HIM. AFTER TECHNICAL EVALUATION OF ALL THE PURCHASES AND SERVICES BY THE SITE TECHNICAL AND COMMERCIAL STAFF, MR. JOE MITCHELL EVAL UATED THE SAME AND ADVISED THE BEST OPTION TO THE COMPANY. SUCH DECISIONS WERE PROVIDED EITHER IN PERSON DURING HIS VISITS TO INDIA OR THROUGH EMAILS. WHENEVER, HE WAS IN INDIA, HE PARTICIPATED IN ALL THE T ECHNICAL MEETINGS. I.T.A. NO. 1101/HYD/2016 SPECTRUM POWER GENERATION LIMITED :- 4 -: HE WAS IN THE INTERVIEW PANEL FOR THE TECHNICAL STAFFS RECRUITMENT. DURING HIS VISITS TO INDIA, HE USED TO TAKE INTERVIEWS PERSONAL LY AND DECIDE ON THE SELECTION PROCESS OTHERWISE HE USED TO CONDUCT THE INTERVIEWS T ELEPHONICALLY. PERIODICAL GAS TURBINES & STEAM TURBINE MAINTENANCE SCHEDULES PLANNING WERE APPROVED BY HIM. ALSO THE LIST OF-GAS TURBINE PA RTS REFURBISHMENT ITEMS AND NEW ITEMS PROCUREMENT LIST WERE APPROVED BY HIM. MAINTENANCE SCHEDULES AND PARTS REFURBISHMENT PERIODICITY IS FINALIZED BY MR. JOE MITCHELL IN CONSULTATION WITH OEM. HE WAS INVOLVED IN TECHNICAL AND COMMERCIAL 'NEGOTIA TIONS AND HE WAS FINALIZING THE WORK ORDERS' AND PURCHASE ORDERS. AFTE R TECHNICAL AND COMMERCIAL NEGOTIATIONS BY SITE TECHNICAL AND COMMER CIAL STAFF, MR. JOE MITCHELL WAS INVOLVED IN THE LAST ROUND OF FINAL NEG OTIATIONS AND FINALIZES THE WORK/PURCHASE ORDERS. SOURCING OF ALTERNATE VENDORS FOR GAS TURBINES HARDW ARE PROCUREMENTS FROM THE FOREIGN COUNTRIES. HIS INTERNATIONAL EXPOSURE HEL PED THE COMPANY IN IDENTIFYING ALTERNATE VENDORS IN USA. HIS RICH AND V ARIED EXPERIENCE HELPED THE COMPANY IN GETTING IN BETTER PRICE. ATTENDED GAS TURBINE USERS' CONFERENCES AT CANADA/U SA AND IMPLEMENTED TECHNICAL IMPROVEMENTS IN THE PLANT AND SUCH TECHNICAL INFORMATION/ KNOWLEDGE WAS IMPARTED TO THE PLANT STAFF. FROM THE CAREFUL READING OF ABOVE NOTE, IT IS UNDER STOOD THAT MR.JOE MITCHELL IS A TECHNICAL EXPERT HANDLING MACHINERY O F GAS BASED TURBINES AND WAS RENDERING ENGINEERING SERVICE AND FINANCIAL SERVICES IN CONNECTION WITH OPERATION AND MAINTENANCE OF SUCH M ACHINERY. THEREFORE THE SERVICES RENDERED ARE TO BE CLASSIFIED AS TECHN ICAL SERVICES. 5.5 THE PROVISIONS OF INCOME TAX ACT DEALING WITH ' INCOME DEEMED TO ACCRUE OR ARISE IN INDIA' IN SEC.9 OF INCOME TAX ACT, 1961 READ AS UNDER: (VII) INCOME BY WAY OF FEES FOR TECHNICAL SERVICES PAYABLE BY- (A) THE GOVERNMENT; OR (B) A PERSON WHO IS A RESIDENT, EXCEPT WHERE THE FEE S ARE PAYABLE IN RESPECT OF SERVICES UTILIZED IN A BUSINESS OR PROFESSION CARRI ED ON BY SUCH PERSON OUTSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY I NCOME FROM ANY SOURCE OUTSIDE INDIA IS DEEMED TO BE INCOME ACCRUING OR ARISING IN INDIA . IN THE INSTANT CASE, THE SERVICES WERE RENDERED IN INDIA BY A FOREIGN CONSULTANT. THEREFORE, THE PROVISIONS OF SEC.9(1)(V II)(B) ARE CLEARLY ATTRACTED AND THE PAYMENT MADE TO MR.JOE MITCHELL IS CLEARLY TAXABLE IN INDIA. I.T.A. NO. 1101/HYD/2016 SPECTRUM POWER GENERATION LIMITED :- 5 -: EXPLANATION TO SEC.9(2) READ AS UNDER:- [EXPLANATION. - FOR THE REMOVAL OF DOUBTS, IT LS HER EBY DECLARED THAT FOR THE PURPOSES OF THIS SECTION, INCOME OF A NON-RESIDENT S HALL BE DEEMED TO ACCRUE OR ARISE IN INDIA UNDER CLAUSE (V) OR CLAUSE (VI) OR C LAUSE (VII) OF SUB-SECTION (1) AND SHALL BE INCLUDED IN THE TOTAL INCOME OF THE NON-R ESIDENT, WHETHER OR NOT. (I) THE NON-RESIDENT HAS A RESIDENCE OR PLACE OF BUSI NESS OR BUSINESS CONNECTION IN INDIA, OR (II) THE NON-RESIDENT HAS RENDERED SERVICES IN INDIA. THIS EXPLANATION WAS INTRODUCED IN FINANCE ACT 2010 WITH RETROSPECTIVE EFFECT FROM 1.6.1976. ACCORDING TO THIS EXPLANATION , THE NON-RESIDENT IS LIABLE TO TAX ON THE PAYMENT MADE BY A RESIDENT IN INDIA IRRESPECTIVE OF WHETHER HE (NONRESIDENT) HAS ANY BUSINESS CONNECTIO N IN INDIA OR NOT. FURTHER, PAYMENT MADE BY A RESIDENT TO NON-RESIDENT IS STILL TAXABLE EVEN IF THE SERVICES WERE RENDERED OUTSIDE INDIA BY NON- RESIDENT. WHEREAS IN THE INSTANT CASE MR.JOE MITCHELL RENDERE D HIS SERVICES IN INDIA AT A PLACE CALLED KAKINADA IN ANDHRA PRADESH. THERE FORE, ACCORDING TO PROVISIONS OF SEC.9(1)(VII)(B) THE PAYMENT MADE TO MR.JOE MITCHELL IS CLEARLY LIABLE TO TAX IN INDIA. 5.6 COMING TO THE PROVISIONS OF DTAA WITH USA, BEFO RE DETERMINING TAXABILITY OF INCOME OF MR.JOE MITCHELL, IT IS RELE VANT TO KNOW HIS PERIOD OF STAY IN INDIA. THE DETAILS ARE AS UNDER: DATE OF ARRIVAL DATE OF DEPARTURE DAYS OF STAY 01-04-2008 10-04-2008 10 31-05-2008 11-06-2008 12 12-07-2008 24-07-2008 13 02-10-2008 28-10-2008 27 15-01-2009 22-01-2009 8 19-02-2009 20-02-2009 2 11-03-2009 31-03-2009 21 TOTAL 93 THE ARTICLE 15 OF DTAA READ AS UNDER: INDEPENDENT PERSONAL SERVICES 1. INCOME DERIVED BY A PERSON WHO IS AN INDIVIDUAL OR FIRM OF INDIVIDUALS (OTHER THAN A COMPANY) WHO IS A RESIDENT OF A CONTR ACTING STATE FROM, THE PERFORMANCE IN THE OTHER CONTRACTING STATE OF PROFE SSIONAL SERVICES OR OTHER INDEPENDENT ACTIVITIES OF A SIMILAR CHARACTER SHALL BE TAXABLE ONLY IN THE I.T.A. NO. 1101/HYD/2016 SPECTRUM POWER GENERATION LIMITED :- 6 -: FIRST-MENTIONED STATE EXCEPT IN THE FOLLOWING CIRCU MSTANCES WHEN SUCH INCOME MAY ALSO BE TAXED IN THE OTHER CONTRACTING S TATE: (A) IF SUCH PERSON HAS A FIXED BASE REGULARLY AVAIL ABLE TO HIM IN THE OTHER CONTRACTING STATE FOR THE PURPOSE OF PERFORMI NG HIS ACTIVITIES; IN THAT CASE, ONLY SO MUCH OF THE INCOME AS IS ATTR IBUTABLE TO THAT FIXED BASE MAY BE TAXED IN THAT OTHER STATE; OR (B) IF THE PERSON'S STAY IN THE OTHER CONTRACTING S TATE IS FOR A PERIOD OR PERIODS AMOUNTING TO OR EXCEEDING IN THE AGGREGA TE 90 DAYS IN THE RELEVANT TAXABLE YEAR. 2. THE TERM 'PROFESSIONAL SERVICES' INCLUDES INDEPE NDENT SCIENTIFIC, LITERARY, ARTISTIC, EDUCATIONAL OR TEACHING ACTIVIT IES AS WELL AS THE INDEPENDENT ACTIVITIES OF PHYSICIANS, SURGEONS, LAW YERS, ENGINEERS, ARCHITECTS, DENTISTS AND ACCOUNTANTS. AS EVIDENT FROM CLAUSE (B) OF ARTICLE 15, THE PROFE SSIONAL SERVICES ARE TAXABLE IN OTHER CONTRACTING STATE (INDIA) IF THE P ERIOD OF STAY EXCEEDS 90 DAYS DURING THE RELEVANT FINANCIAL YEAR. IN THE INS TANT CASE, PERIOD OF STAY WAS 93 DAYS, THEREFORE MR. JOE MITCHELL WAS CLEARLY LIABLE TO TAX IN INDIA, THEREFORE SUCH PAYMENT IS LIABLE TO TDS . ARTICLE 16 OF DTAA READ AS UNDER: . DEPENDENT PERSONAL SERVICES 1. SUBJECT TO THE PROVISIONS OF ARTICLES 17 (DIRECT ORS' FEES), 18 (INCOME EARNED BY ENTERTAINERS AND ATHLETES), 19 (REMUNERAT ION AND PENSIONS IN RESPECT OF GOVERNMENT SERVICE), 20 (PRIVATE PENSION S, ANNUITIES, ALIMONY AND CHILD SUPPORT), 21 (PAYMENTS RECEIVED BY STUDEN TS AND APPRENTICES) AND 22 ( PAYMENTS RECEIVED BY PROFESSORS, TEACHERS AND RESERCH SCHOLRS), SALARIES, WAGES AND OTHER SIMILAR REMUNERATION DERI VED BY A RESIDENT OF A CONTRACTING STATE IN RESPECT OF AN EMPLOYMENT SHALL BE TAXABLE ONLY IN THAT STATE UNLESS THE EMPLOYMENT IS EXERCISED IN THE OTH ER CONTRACTING STATE. IF THE EMPLOYMENT IS SO EXERCISED, SUCH REMUNERATION A S IS DERIVED THEREFROM MAY BE TAXED IN THAT OTHER STATE. 2. NOTWITHSTANDING THE PROVISIONS OF PARAGRAPH 1, R EMUNERATION DERIVED BY A RESIDENT OF A CONTRACTING STATE IN RESPECT OF AN EMPLOYMENT EXERCISED IN THE OTHER CONTRACTING STATE SHALL BE TAXABLE ONL Y IN THE FIRST MENTIONED STATE, IF: I.T.A. NO. 1101/HYD/2016 SPECTRUM POWER GENERATION LIMITED :- 7 -: (A) THE RECIPIENT IS PRESENT IN THE OTHER STATE FOR PERIOD OR PERIODS NOT EXCEEDING IN THE AGGREGATE 183 DAYS IN THE RELEVANT TAXABLE YEAR; (B) THE REMUNERATION IS PAID BY, OR ON BEHALF OF, A N EMPLOYER WHO IS NOT A RESIDENT OF THE OTHER STATE; AND (C) THE REMUNERATION IS NOT BORNE BY A PERMANENT ES TABLISHMENT OR A FIXED BASE OR A TRADE OR BUSINESS WHICH THE EMPLOYER HAS IN THE OTHER STATE. 3. NOTWITHSTANDING THE PRECEDING PROVISIONS OF THIS ARTICLE, REMUNERATION DERIVED IN RESPECT OF AN EMPLOYMENT EXERCISED ABOAR D A SHIP OR AIRCRAFT OPERATING IN INTERNATIONAL TRAFFIC BY AN EMPLOYEE O F A CONTRACTING STATE MAY BE TAXED IN THAT STATE. IF MR.JOE MITCHELL IS CONSIDERED AS EMPLOYEE OF M/S .PRECISION ENERGY ASSOCIATES, AS THE PERIOD OF STAY IN INDIA IS LESS THAN 183 DAYS, ACCORDING TO ARTICLE 16 SUCH INCOME IS NOT TAXABLE. IN VIEW OF THE ABOVE DISCUSSION, THE PAYMENT MADE T O NONRESIDENT CONSULTANT TOWARDS TECHNICAL SERVICES IS LIABLE TO TDS U/S 195 OF INCOME TAX ACT AS PER ARTICLE 15 OF DTAA WITH USA. AS NO T DS WAS MADE ON SUCH PAYMENT, THE SAME CANNOT BE ALLOWED AS DEDUCTION. 6. IN RESULT, THE APPEAL IS DISMISSED. 5. ASSESSEE IS AGGRIEVED AND PREFERRED THE GROUNDS A S UNDER: 1. THE CIT (A) ERRED IN LAW AND FACTS OF THE CASE IN HOLDING THAT SECTION 9 (1)(VII)(B) OF THE INCOME TAX ACT, 1961 ARE APPLICABLE IGNORING TH E FACT AT DT AA WITH USA PREVAILS OVER THE PROVISIONS OF THE INCOME TAX ACT, 1961. 2. YOUR APPELLANT SUBMITS THAT THE EXPLANATION INTR ODUCED BY FINANCE ACT 2010 TO SECTION 9(1)(VII)(B) ARE APPLICABLE TO THE FACT AND CIRCUMSTANCE OF THE CASE, THE PAYMENT IS NOT TAXABLE IN INDIA. 3. YOUR APPELLANT SUBMITS THAT THE CIT(A) ON APPLYI NG THE PROVISIONS OF SECTION 90, BY VIRTUE OF WHICH, THE DTAA WITH USA PREVAILS OVER TH E INCOME TAX ACT, 1961 OUGHT TO HAVE DELETED THE DISALLOWANCE OF PAYMENT TO FOREIGN CONSULTANT OF RS. 1,05,05,655. 4. YOUR APPELLANT SUBMITS THAT THE PROVISIONS OF SE CTION 40(A)(I) OR 40(A)(IA) ARE NOT APPLICABLE TO THE FACTS OF THE CASE, THEREFORE THE ADDITION MAY BE DELETED. I.T.A. NO. 1101/HYD/2016 SPECTRUM POWER GENERATION LIMITED :- 8 -: 5. YOUR APPELLANT SUBMITS THAT THE CIT(A) ERRED IN HOLDING THAT THE SERVICES RENDERED BY MR. JOE MITCHELL ARE INDEPENDENT PERSONAL SERVICES AND NOT DEPENDENT PERSONAL SERVICES IGNORING THE FACT THAT HE IS AN EMPLOYEE OF M/S. PR ECISION ENERGY ASSOCIATES, A COMPANY IN USA. 6. YOUR APPELLANT SUBMITS THAT THE ACTUAL STAY OF M R. JOE MITCHELL DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR IN QUESTION IS ONLY 86 DAYS AND NOT 93 DAYS, AS THE DAY OF ARRIVAL OR DEPARTURE ARE IGNORED WHILE CALCU LATING THE DAYS OF STAY, THEREFORE EVEN AS PER ARTICLE 15 OR ARTICLE 16 OF DTAA WITH USA, H IS STAY IN INDIA IS WITHIN THE STIPULATED PERIOD. HENCE, THE PAYMENT IS NOT TAXABLE IN INDIA. 7. YOUR APPELLANT ALTERNATIVELY SUBMITS THAT IN ABS ENCE OF ANY PERMANENT ESTABLISHMENT (PE) IN INDIA, THE SERVICES OF MR. JOE MITCHELL OR M/S PRECISION ENERGY ASSOCIATES ARE NOT TAXABLE UNDER THE INCOME TAX ACT, 1961 BY VIRTUE OF THE DTAA WITH USA. 8. YOUR APPELLANT SUBMITS THAT IT IS NOT THE CASE O F THE ASSESSING OFFICER OR THE CIT(A) THAT THE SERVICES RENDERED BY MR. JOE MITCHELL OR M /S. PRECISION ENERGY ASSOCIATES ARE COVERED BY ARTICLE 12 OF DTAA WITH USA, YOUR APPELL ANT SUBMITS THAT ARTICLE 7 OF DTAA IS APPLICABLE AND THEREFORE NOT SUBJECT TO TAX IN INDI A. 6. LD. COUNSEL IN THE COURSE OF ARGUMENTS SUBMITTED THAT LD. CIT(A) HAS GIVEN A FINDING THAT IF ARTICLE 16 IS APPL ICABLE THE AMOUNT IS NOT TAXABLE. IT WAS SUBMITTED THAT THE SERVICES RENDERED BY THE PERSON ARE CATEGORISED AS INDEPENDENT PERSONA L SERVICES AND LD. CIT(A) CONSIDERED THE PERIOD OF STAY AS NINET Y THREE DAYS. IT WAS SUBMITTED THAT WHILE CALCULATING THE PERIOD, LD. CI T(A) HAS NOT EXCLUDED EITHER THE DAY OF ARRIVAL OR THE DAY OF D EPARTURE IN COMPUTING THE DAYS OF STAY. IF, FOR THE SEVEN VISITS M ADE BY MR. JOE MITCHELL SEVEN DAYS ARE EXCLUDED, THEN PERIOD OF STAY IN INDIA FALLS LESS THAN NINETY DAYS AND HIS SERVICES ARE NOT TAXABLE UNDER ARTICLE 15 EVEN. CONSIDERING THE DTAA, IT WAS SUBMITTED THAT THE AMOUNT IS NOT LIABLE TO TAX IN INDIA AND ACCORDINGLY, THE PROV ISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE. I.T.A. NO. 1101/HYD/2016 SPECTRUM POWER GENERATION LIMITED :- 9 -: 7. LD. DR HOWEVER, RELIED ON THE ORDERS OF THE LD. C IT(A) TO SUBMIT THAT THE AMOUNT IS TAXABLE AS THERE IS NO DISPUTE W ITH REFERENCE TO APPLICABILITY OF SECTION 9(1)(VII)(B). 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE DETAILS ON RECORD. WHILE THERE IS NO DISPUTE WITH REFE RENCE TO APPLICABILITY OF SECTION 9(1)(VII)(B), THE ISSUE AS D ECIDED BY THE LD. CIT(A) IS WITH REFERENCE TO ARTICLE 15 OF THE DTAA. P ROVISIONS OF DTAA OVER WRITE THE PROVISIONS OF IT ACT AS HELD BY TH E HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. AZADI BACHAO ANDOLAN (2003) [132 TAXMAN 373] (SC). IF THE SERVICES ARE CONSIDERED AS DEPENDENT PERSONAL SERVICES BEING GIVE N BY THE EXECUTIVE DIRECTOR OF ONE MAN COMPANY M/S. PRECISION ENERGY ASSOCIATES, LLC, USA, THEN IT COMES UNDER ARTICLE 16 O N WHICH LD. CIT(A) GAVE A FINDING THAT AMOUNT IS NOT TAXABLE. IN TH E ALTERNATE, IF THE SERVICES ARE CONSIDERED AS INDEPENDENT PERSONA L SERVICES UNDER THE ARTICLE 15, THEN THE PERIOD OF NINETY DAYS IS RELEVANT. HOWEVER, THE LD. CIT(A) MADE A MISTAKE IN CALCULATING DAYS BY INCLUDING DAY OF ARRIVAL AND DAY OF DEPARTURE ALSO F OR THE PERIOD OF STAY. ONE OF THE DAYS IS TO BE EXCLUDED TO CONSIDER TH E PERIOD OF STAY. IF THAT IS TAKEN INTO CONSIDERATION, FOR THE SEVEN TRIPS MADE BY MR. JOE MITCHELL, THE PERIOD OF STAY WILL COME TO EI GHTY SIX DAYS I.E., LESS THAN NINETY DAYS. LOOKING AT EITHER WAY, A S THE AMOUNT IS NOT TAXABLE IN INDIA APPLYING THE PROVISIONS OF DTAA, QUESTION OF DISALLOWANCE U/S. 40(A)(IA) DOES NOT ARISE. MOREOVE R, FROM THE RECORD, NO STEPS WERE TAKEN BY THE AO U/S. 201 / 201(1 A) UNDER THE PROVISIONS OF TDS. KEEPING THE AMENDMENT BROUGHT TO SECTION 40(A)(IA) ON THIS ISSUE ALSO, WE HAVE TO HOLD THAT T HE AMOUNT IS NOT DISALLOWABLE U/S. 40(A)(IA). ACCORDINGLY, ASSESSEE S GROUNDS ARE I.T.A. NO. 1101/HYD/2016 SPECTRUM POWER GENERATION LIMITED :- 10 -: ALLOWED. AO IS DIRECTED TO EXCLUDE THE AMOUNT AND AL LOW THE SAME AS DEDUCTION. 9. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH DECEMBER, 2016 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 16 TH DECEMBER, 2016 TNMM COPY TO : 1. SPECTRUM POWER GENERATION LIMITED, C/O. M. ANAND AM & CO., CHARTERED ACCOUNTANTS, 7A, SURYA TOWERS, S.D . ROAD, SECUNDERABAD. 2. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-3(2 ), HYDERABAD. 3. CIT (APPEALS)-3, HYDERABAD. 4. PR.CIT-3, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.