Appeal details
Counselvise Citation
[2020] 110 COUNSELVISE.COM (IT) 5487 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
5 year(s) 6 month(s) 3 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-09-2020
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
B
Assessment Year
2010-2011
Appeal Filed On
27-03-2015
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE MS. SUSHMA CHOWLA, VICE PRESIDENT DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (E-COURT MODULE) ITA NO. 1740/DEL/2015 : ASSTT. YEAR : 2010-11 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-1(2)(2), INTERNATIONAL TAXATION, NEW DELHI VS M/S EXPEDITORS INTERNATIONAL OF WASHINGTON, 1015, 3 RD AVENUE, 12 TH FLOOR, SEATTLE WASHINGTON (APPELLANT) (RESPONDENT) PAN NO. AACCE4315R ASSESSEE BY : SH. DEEPAK CHOPRA, ADV. REVENUE BY : SH. SATPAL GULATI, CIT DR DATE OF HEARING: 25.08.2020 DATE OF PRONOUNCEMENT: 30.09.2020 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE A GAINST THE ORDER DATED 28.01.2015 PASSED BY THE AO U/S 144C(13)/143(3) OF THE INCOME TAX ACT, 1961. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENU E: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE HONBLE DRP IS CORRECT IN HOLDING THAT THE RECEIPTS ARE NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE DRP IS CORRECT IN HOLDING THAT THE RECEIPTS OF THE ASSESSEE DO NOT FA LL WITHIN THE SCOPE OF SECTION 9(1)(I) OF THE INCOME T AX ACT. ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 2 3. THE FACTS AND THE ARGUMENTS HAVE BEEN TAKEN FROM THE ORDER OF THE LD. DRP. 4. THE ASSESSEE IS HEADQUARTERED IN SEATTLE, WASHIN GTON, AND IS ENGAGED IN THE BUSINESS OF PROVIDING GLOBAL LOGI STICS SERVICES WORLDWIDE. THE COMPANY CARRIES OUT OPERATIONS IN VA RIOUS SEGMENTS SUCH AS AIRFREIGHT, OCEAN FREIGHT & OCEAN SERVICES, CUSTOMS BROKERAGE AND IMPORT SERVICES. THE NATURE O F SERVICES PRIMARILY INCLUDES CONSOLIDATION OR FORWARDING OF A IR AND OCEAN FREIGHT. ADDITIONALLY THESE SERVICES INCLUDE DISTRI BUTION MANAGEMENT, VENDOR CONSOLIDATION, CARGO INSURANCE, PURCHASE ORDER MANAGEMENT, AND CUSTOMIZED LOGISTICS INFORMAT ION. THESE OPERATIONS ARE RENDERED BY THE ASSESSEE FROM OUTSID E INDIA. LOGISTICS OPERATIONS: 5. DURING AY 2010-11, THE ASSESSEE ENTERED INTO LOG ISTICS TRANSACTIONS WITH EXPEDITERS INTERNATIONAL (INDIA) PRIVATE LIMITED (EI INDIA) WHICH IS ITS ASSOCIATED ENTERP RISE. THE INDIAN LEG OF THE LOGISTICS CONTRARY WITH ME CUSTOM ERS IS HANDLED BY EI INDIA FROM THE CUSTOMERS PREMISES TO THE INDIAN PORT OF AIRPORT, WHILE THE ASSESSEE TYPICALLY HANDL ES SIMILAR SERVICES AT THE OTHER END OF THE CONSIGNMENT FOR TH E USA REGION AND VICE-VERSA. THE CONTRACT IS ENTERED INTO BETWEE N EL AND THE CUSTOMER I.E. AT THE CONSIGNORS END IN THE CASE OF EXPORT OF CONSIGNMENT FROM INDIA TO OVERSEAS COUNTRIES VIZ. U SA AND BETWEEN THE ASSESSE AND THE CUSTOMER I.E. AT THE CO NSIGNORS END IN THE CASE OF IMPORT OF CONSIGNMENT FROM OTHER COUNTRIES VIZ. USA TO INDIA. ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 3 6. THE LOGISTICS OPERATIONS COVERS A RANGE OF ACTIV ITIES FROM PACKING, LOADING/UNLOADING, TRUCKING, /CONTAINERIZA TION, CUSTOM CLEARANCE AND OTHER CARGO HANDLING ACTIVITIES BESID ES MOVING THE GOODS VIA AIR/SEA. THE NATURE OF THESE OPERATIO NS IS PURELY LOGISTICS SUPPORT PROVIDED BY THE ASSESSEE FOR SHIP MENT OF TRANSPORT OF GOODS, PERFORMED OUTSIDE OF INDIA. REIMBURSEMENT OF GLOBAL ACCOUNT MANAGEMENT (GAM) EXPENSES: 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED THE NATURE OF GAM EXPENSES WHICH ARE INCU RRED IN RELATION TO ROUTINE' BUSINESS SUPPORT SERVICES REND ERED BY A TEAM OF EMPLOYEES (TEAM) OF THE ASSESSEE, WHICH H AS THE RESPONSIBILITY TO MANAGE A SET OF GLOBAL CUSTOMERS OF THE EXPEDITORS GROUP, HAVING OPERATIONS IN MANY COUNTRI ES. 8. GLOBAL ACCOUNT MANAGERS (GAMS) ARE APPOINTED I N ORDER TO MANAGE THE CLIENTS GLOBALLY. GAMS MANAGE GLOBAL CUSTOMER SALES AND ACT AS A MARKETING INTERFACE. THEY INSTRU CT, COACH THE LOCAL ACCOUNT TEAMS BELONGING UNDER THEM AND SUPPOR T THE ACCOUNT TEAMS THROUGHOUT THE WHOLE PROJECT. THE COS T OF THESE GAMS IS ALLOCATED TO ALL THE RESPECTIVE COUNTRIES B ENEFITING FROM THESE SERVICES. ACCORDINGLY, EL INDIA PAID THE ASSE SSEE ON ACCOUNT OF GAM EXPENSES INCURRED OUTSIDE INDIA. 9. THE GAM STAFF IS EMPLOYED WITH THE ASSESSEE AND THERE IS NO EMPLOYER - EMPLOYEE RELATIONSHIP BETWEEN THE EMP LOYEES AND EI INDIA. THE ASSESSE INCURS EXPENSES ON THE EM PLOYEES WORKING AS PART OF THE GAM TEAM, VIZ. THEIR SALARY, OPERATIONAL EXPENSES (INCLUDING SALARY, TELEPHONE EXPENSES OF G AM TEAM, ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 4 CONVEYANCE, TOUR AND TRAVELLING EXPENSES, ENTERTAIN MENT EXPENSES ETC). THESE ACTUAL EXPENSES INCURRED BY TH E ASSESSEE ARE ALLOCATED IN PROPORTION TO THE REVENUE EARNED B Y THE RELEVANT EXPEDITER GROUP ENTITY IN THAT COUNTRY FRO M THAT PARTICULAR CUSTOMER ACCOUNT, WHICH IS MANAGED BY TH E GAM TEAM. 10. THESE ALLOCATED EXPENSES WITHOUT ANY INCOME ELE MENT EMBEDDED IN THEM ARE THEN REIMBURSED TO THE ASSESSE E ON ACTUAL BASIS BY EL INDIA. 11. THE AO IN THE DRAFT ASSESSMENT ORDER ON 26MARCH 2014HAS PROPOSED THE FOLLOWING ADDITIONS TO THE INCOME AND DISALLOWANCE OF EXPENSES: S.NO. PARTICULA RS AMOUNT (IN INR) 1. RETURNED INCOME (ROYALTY INCOME AS PER RETURN OF INCOME) 246,183,805 2. FEE FOR INCLUDED SERVICES SHARE IN L OGISTICS OPERATIONS 1,653,922,311 REIMBURSEMENT OF GAM EXPENSES 20,875,810 1,684,798,121 TOTAL TAXABLE INCOME 1,930,981,930 12. ISSUE-1: WHETHER IN THE FACTS OF THE CASE, THE AO IS- RIGHT IN ASSESSING THE COST ALLOCATION OF INTERNATIONAL F REIGHT LOGISTIC SUPPORT SERVICES AND REIMBURSEMENT OF GLOBAL ACCOUN T MANAGEMENT (GAM) EXPENSES AS TECHNICAL SERVICES / FEE FOR INCLUDED SERVICES (FIS) AS PER THE PROVISIONS OF SECTION 9(1)(VII) OF THE ACT. ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 5 BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE A SSESSEE, A FOREIGN COMPANY INCORPORATED UNDER THE LAWS OF USA, IS ENGAGED IN THE BUSINESS OF THE PROVISION OF FREIGHT AND FORWARDING AND LOGISTICS SERVICES. THE ASSESSEE COM PANY AGREED WITH EXPEDITORS INTERNATIONAL AN INDIAN COMPANY FOR PROVIDING THE FREIGHT AND LOGISTICS SERVICES TO EACH OTHER. E ACH PARTY AGREED TO RENDER SERVICES TO THE OTHER IN RESPECT O F IMPORT AND EXPORT OF CONSIGNMENTS. IT IS OBSERVED THAT IMPORT CONSIGNMENTS ARE THOSE WHICH ORIGINATE OUTSIDE INDI A AND ARE TO BE DELIVERED IN INDIA. THE SERVICES IN ORIGIN OF FO REIGN COUNTRY BROADLY COMPRISE OF OVERSEAS LOCAL PICK, OVERSEAS G ROUND TRANSPORTATION, OVERSEAS CUSTOMER CLEARANCE, OVERSE AS DOCUMENTATION, LOADING AND UNLOADING AND STUFFING C ONSIGNMENT IN- CARGO, AGREED TO BE PERFORMED OUTSIDE INDIA. EX PEDITORS INTERNATIONAL, UNDERTOOK TO PERFORM DESTINATION SER VICES ON THE ARRIVAL OF CONSIGNMENT IN INDIA. THE DESTINATION SE RVICES TO BE CARRIED OUT IN INDIA BY EXPEDITORS INTERNATIONAL CO MPRISES OF LOCAL UNLOADING AND LOADING OF CONSIGNMENT, LOCAL C USTOM CLEARANCE, LOCAL GROUND TRANSPORTATION, LOCAL DOCUM ENTATION ETC. ON THE OTHER HAND, EXPORT CONSIGNMENTS ORIGINATE FR OM INDIA FOR THE DELIVERY OF CONSIGNMENTS OUTSIDE INDIA. THE TAX PAYER, UNDERTOOK TO PERFORM THE DESTINATION, SERVICES OUTS IDE INDIA, SIMILAR TO THOSE PERFORMED BY EXPEDITORS INTERNATIO NAL IN INDIA AS DISCUSSED ABOVE IN THE CONTEXT OF IMPORT CONSIGN MENTS. DURING THE YEAR IN QUESTION, THE TAXPAYER RECEIVED INR- 1,663,922,311 AS INTERNATIONAL TRANSPORTATION FEE F ROM EXPEDITORS INTERNATIONAL TOWARDS SERVICES RENDERED BY IT ABROAD ON THE ABOVE DESCRIBED EXPORT CONSIGNMENTS. IN ADDI TION, THE TAXPAYER RECEIVED THE REIMBURSEMENT OF GLOBAL ACCOU NT MANAGEMENT (GAM) EXPANSES OF INR 20,875,810. SUCH AMOUNT ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 6 WAS CLAIMED BY THE TAXPAYER TO BE NOT CHARGEABLE TO TAX IN INDIA AS PER THE PROVISIONS OF SECTION 5 READ WITH SECTION 9 OF THE INCOME-TAX ACT, 1961. IT WAS SO CLAIMED ON THE PREMISE THAT THE INCOME AROSE FROM SERVICES RENDERED BY IT OUTSIDE INDIA AND NO OPERATIONS IN THIS REGARD WERE CARRIED OUT I N INDIA. THE TAXPAYER ALSO CLAIMED THAT ITS RELATIONSHIP WITH EX PEDITORS INTERNATIONAL WAS THAT OF INDEPENDENT CONTRACTOR AN D THE BUSINESS BETWEEN THEM WAS DONE ON PRINCIPAL TO PRIN CIPAL BASIS AND AT ARM'S LENGTH. THE ASSESSING OFFICER OBSERVED THAT THE SERVICES RENDERED BY THE TAXPAYER WERE IN THE NATUR E OF FREIGHT AND LOGISTICS SERVICES SUCH AS TRANSPORT, PROCUREME NT, CUSTOM CLEARANCE, SORTING, DELIVERY, WAREHOUSING AND PICKI NG UP SERVICES. IN HIS OPINION SUCH SERVICES WERE COVERED UNDER THE PROVISIONS OF SECTION 9(1)(VII), BEING 'FEES FOR TE CHNICAL SERVICES'. 13. THE ENTIRE DISPUTE CENTERS AROUND THE TAXABILIT Y OF THE AMOUNT RECEIVED BY THE ASSESSEE FROM EXPEDITORS INT ERNATIONAL IN RESPECT OF SERVICES PERFORMED OUTSIDE INDIA ON T HE EXPORT CONSIGNMENTS OF EXPEDITORS INTERNATIONAL ORIGINATIN G 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, P ROCUREMENT, CUSTOMS CLEARANCE, SORTING, DELIVERY, WAREHOUSING A ND PICK UP SERVICES. THE PRIMARY QUESTION WHICH ARISES FOR CON SIDERATION OF IS AS TO WHETHER THE PAYMENT IN RESPECT OF THESE SE RVICES CAN BE HELD AS 'FEES FOR TECHNICAL SERVICES' WITHIN THE ME ANING OF SECTION 9(1)(VII). THE EXPRESSION FEES FOR TECHNICA L SERVICES' HAS BEEN DEFINED IN EXPLANATION 2 TO SECTION 9(1)(VII) AS UNDER:- FEES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATIO N (INCLUDING ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 7 ANY LUMP SUM CONSIDERATION) FOR THE RENDERING OF AN Y MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES (INCL UDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONN EL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASS EMBLY, MINING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONS IDERATION WHICH WOULD BE INCOME OF THE RECIPIENT CHANGEABLE U NDER THE HEAD 'SALARIES'. 14. A BARE PERUSAL OF THE ABOVE QUOTED PROVISION IN DICATES THAT THE 'FEES FOR TECHNICAL SERVICES' MEANS ANY CONSIDE RATION FOR RENDERING OF ANY 'MANAGERIAL, TECHNICAL OR CONSULTA NCY SERVICES' BUT DOES NOT INCLUDE THE CONSIDERATION FOR ANY CONS TRUCTION, ASSEMBLY ETC. THE ASSESSING OFFICER HAS HELD THE SE RVICES RENDERED BY THE ASSESSEE AS TEES FOR TECHNICAL SERV ICES' COMING WITHIN THE SWEEP OF 'MANAGERIAL, TECHNICAL OR CONSU LTANCY SERVICES'. ON THE CONTRARY, THE CONTENTION OF THE A SSESSEE HAS REMAINED THAT THE SUCH SERVICES DO NOT FALL WITHIN THE AMBIT OF ANY OF THE CATEGORIES TAKEN NOTE OF BY THE AUTHORIT IES BELOW. IT IS TO BE EXAMINED AS TO WHETHER THE SERVICES SO PRO VIDED BY THE ASSESSEE FALL WITHIN THE SCOPE OF 'MANAGERIAL, TECH NICAL OR CONSULTANCY SERVICES AS PER EXPLANATION 2 TO SECTI ON 9(1)(VII). 15. THE LD. AR MADE THE FOLLOWING SUBMISSION IN THI S REGARD: THE NATURE OF SUCH FREIGHT AND LOGISTICS SERVICES RANGE FROM PACKING, LOADING/UNLOADING, TRUCKING, CONTAINERIZAT ION, CUSTOMER CLEARANCE AND OTHER CARGO HANDLING ACTIVITIES BESID ES MOVING THE GOODS VIA AIR/SEA. 16. IN THE CASE OF A TYPICAL LOGISTIC CONSIGNMENT R EQUIRING IMPORT OF GOODS TO INDIA / EXPORT OF GOODS FROM USA , THE ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 8 ASSESSEE EXECUTES THE RESPECTIVE PORTION OF THE CON SIGNMENT IN THE USA REGION ONLY WHEREAS EL INDIA INDEPENDENTLY CARRIES OUT ITS PART OF THE CONSIGNMENT IN THE INDIA REGION. FO R THE PURPOSE OF EXECUTION OF SUCH CONSIGNMENT, INVOLVING THE EXP ORT OF THE GOODS FROM THE USA, THE FOLLOWING ACTIVITIES ARE UN DERTAKEN BY THE ASSESSEE UNTIL THE CONSIGNMENT LEAVES THE US AI RPORT/PORT: I. PICK-UP SERVICES WHICH INVOLVE PROCURING GOODS/ PACKAGES FROM THE CUSTOMERS IN USA; II. SORTING OF GOODS/ PACKAGES IF REQUIRED; III. WAREHOUSING OF GOODS DUE TO THE TIME LAG BETWEEN TH E PROCUREMENT AND SHIPMENT OF GOODS, IF ANY; IV. NOMINATING CUSTOMS HOUSING AGENT (CHA) FOR EXPORT O F GOODS AT THE CUSTOMS STATION; V. OBTAINING CUSTOM CLEARANCE AT THE AIRPORT/PORT; VI. LOADING OF GOODS ONTO CARGO AIRPLANE OR SHIP FOR TRANSPORTATION. 17. AFTER THE GOODS HAVE BEEN LOADED TO THE AIRPLAN E / SHIP, THE US PORTION OF THE LOGISTIC CONTRACT INVOLVING T RANSPORTATION OF THE CONSIGNMENT IS COMPLETED. 18. SIMILARLY, IN RESPECT OF LOGISTIC CONSIGNMENT R EQUIRING EXPORT OF GOODS FROM INDIA/ IMPORT OF GOODS TO USA, THE ASSESSEE EXECUTES THE RESPECTIVE PORTION OF THE CON SIGNMENT IN THE USA REGION ONLY WHEREAS EI INDIA INDEPENDENTLY CARRIES OUT ITS PART OF THE CONSIGNMENT IN THE INDIA REGION. FO R THE PURPOSE OF EXECUTION OF SUCH CONSIGNMENT, INVOLVING THE IMP ORT OF GOODS TO USA, THE FOLLOWING ACTIVITIES ARE UNDERTAKEN BY THE ASSESSEE ONCE THE CONSIGNMENT REACHES TO THE US AIRPORT/PORT : ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 9 I. UNLOADING OF GOODS FROM CARGO AIRPLANE OR SHIP FOR TRANSPORTATION PURPOSES IN USA; II. OBTAINING CUSTOMS CLEARANCE AT THE AIRPORT/PORT; III. NOMINATING CUSTOMS HOUSING AGENT (CHA) FOR IMPORT O F GOODS AT THE CUSTOM STATION; IV. WAREHOUSING OF GOODS (IF REQUIRED) TILL THE TIME TH E NECESSARY CUSTOMS -CLEARANCES ARE OBTAINED; V. TRANSPORTATION OF GOODS TO THE ULTIMATE CONSUMER IN USA; 19. IN LINE WITH WORLDWIDE ACCEPTABLE STANDARDS IN THE LOGISTICS INDUSTRY AND THE GROUPS POLICY, THE INCOME FROM FR EIGHT LOGISTICS OPERATIONS REPRESENTS GROSS INCOME LESS C OSTS FOR THE ACTUAL TRANSPORTATION EXPENSE PAID TO THIRD PARTIES AND OTHER DIRECT COSTS SUCH AS THIRD PARTY FEES, COMMISSION, ALLOWANCE, DISCOUNT, DELIVERY COSTS, COST OF CARRIERS LIABILI TY INSURANCE, GATEWAY COSTS, TERMINAL FEE ETC. FOR THE SERVICES P ROVIDED AT THE ORIGIN. THEREAFTER, THE RESIDUAL PROFITS IS THEN SH ARED EQUALLY (I.E. 50/50 BETWEEN ASSESSEE AND EL INDIA) IN RESPE CT OF THE IMPORT AND EXPORT OF INTERNATIONAL CARGO. 20. THE ASSESSEE UNDERTAKES THE LOGISTICS OPERATION S WITH RESPECT TO THE CONSIGNMENT IN THE USA AND NO PART O F THE OPERATIONS OR BUSINESS WAS CARRIED OUT BY THE ASSES SEE IN INDIA. 21. FURTHER, THE ASSESSEE PLACES RELIANCE ON THE DE CISION OF UPS SCS ASIA LIMITED (MUMBAI ITAT) WHEREIN IT WAS H ELD THAT INTERNATIONAL FREIGHT FORWARDING LOGISTICS SERVICES PERFORMED BY THE UPON RESIDENT TAX PAYER OUTSIDE INDIA IS NEITHE R MANAGERIAL NOR TECHNICAL NOR CONSULTANCY IN NATURE AND HENCE W OULD NOT BE TAXABLE AS FTS AS PER PROVISIONS OF THE ACT. IT WAS FURTHER HELD ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 10 THAT AS SUCH SERVICES WERE HELD OUTSIDE INDIA THE S AME WILL NOT FALL WITHIN THE SCOPE OF SECTION 9(1 )(I) OF THE AC T. 22. THE ASSESSEE SUBMITS THAT THE TRANSFER PRICING OFFICER (TPO) HAS ALREADY ACCEPTED THE LOGISTICS OPERATIONS AT ARMS LENGTH PRICE AND NO ADVERSE OBSERVATION HAS BEEN GI VEN BY HIM. 23. ALSO, NO DISALLOWANCE HAS BEEN MADE WITH RESPEC T TO FREIGHT LOGISTICS TRANSACTIONS IN THE SCRUTINY ASSE SSMENT PROCEEDINGS OF EL INDIA IN ANY OF THE PREVIOUS YEAR S. 24. THE ADJUDICATION OF THE LD. DRP ON THE ISSUE OF MANAGERIAL SERVICE IS AS UNDER: FIRST, THE PANEL WILL CONSIDER THE AMBIT OF 'MANAG ERIAL SERVICES TO TEST WHETHER THE INSTANT SERVICES CAN QUALIFY TO BE SO CALLED. ORDINARILY THE MANAGERIAL SERVICES MEAN MANAGING TH E AFFAIRS BY LAYING DOWN CERTAIN POLICIES, STANDARDS AND PROCEDU RES AND THEN EVALUATING THE ACTUAL PERFORMANCE IN THE LIGHT OF T HE PROCEDURES SO LAID DOWN. THE MANAGERIAL SERVICES CONTEMPLATE NOT ONLY EXECUTION BUT ALSO THE PLANNING PART OF THE ACTIVITY TO BE DO NE. 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 WO ULD MEAN THAT THE DIRECTIONS OF THE LATTER ARE EXECUTED SIMPLICITY WI THOUT THERE BEING ANY PLANNING PART INVOLVED IN THE EXECUTION AND ALS O 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 CONSI DERED IN A COMMERCIAL SENSE. IT CANNOT BE INTERPRETED IN A NAR ROW SENSE TO MEAN SIMPLY EXECUTING THE DIRECTIONS OF THE OTHER F OR DOING A SPECIFIC TASK. FOR INSTANCE, IF GOODS ARE TO BE LOADED AND S OME WORKER IS INSTRUCTED TO PLACE THE GOODS ON A CARRIER IN A PAR TICULAR MANNER, THE ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 11 ACT OF THE WORKER IN PLACING THE GOODS IN THE PRESC RIBED MANNER, CANNOT BE DESCRIBED AS MANAGING THE GOODS. IT IS A SIMPLE DIRECTION GIVEN TO THE WORKER WHO HAS TO EXECUTE IT IN THE WA Y PRESCRIBED. IT IS QUITE NATURAL THAT SOME SORT OF APPLICATION OF MIND IS REQUIRED IN EACH AND EVERY ASPECT OF THE WORK DONE. AS IN THE A BOVE EXAMPLE WHEN THE WORKER WILL LIFT THE GOODS, HE IS EXPECTED TO BE VIGILANT IN PICKING UP THE GOODS MOVING TOWARDS THE CARRIER AND THEN PLACING THEM. THIS ACT OF THE WORKER CANNOT BE DESCRIBED AS MANAGING THE GOODS BECAUSE HE SIMPLY FOLLOWED THE DIRECTION GIVE N TO HIM. ON THE OTHER HAND, 'MANAGING' ENCOMPASSES NOT ONLY THE SIM PLE EXECUTION OF A WORK, BUT ALSO CERTAIN OTHER ASPECTS, SUCH AS PLANNING FOR THE WAY IN WHICH THE EXECUTION IS TO BE DONE COUPLED WI TH THE OVERALL RESPONSIBILITY IN A LARGER SENSE. THUS IT IS MANIFE ST THAT THE WORD 'MANAGING' IS WIDER IN SCOPE THAN THE WORD 'EXECUTI NG'. RATHER THE LATER IS EMBEDDED IN THE FORMER AND NOT VICE VERSA. ADVERTING TO THE FACTS OF THE INSTANT CASE, IT IS O BSERVED THAT THE TAXPAYER PERFORMED THE FREIGHT AND LOGISTICS SERVIC ES OUTSIDE INDIA IN RESPECT OF CONSIGNMENTS ORIGINATING, FROM INDIA UND ERTAKEN TO BE DELIVERED BY EXPEDITORS INTERNATIONAL. THE ROLE OF THE TAXPAYER IN THE ENTIRE TRANSACTION WAS TO PERFORM ONLY THE DESTINAT ION SERVICES OUTSIDE INDIA BY UNLOADING AND- LOADING OF CONSIGNM ENT, CUSTOM CLEARANCE AND TRANSPORTATION TO THE ULTIMATE CUSTOM ER. IN THE CONSIDERED OPINION OF THIS PANEL, IT IS TOO MUCH TO CATEGORIZE SUCH RESTRICTED SERVICES AS MANAGERIAL SERVICES, THIS PA NEL, THEREFORE, JETTISON THIS CONTENTION RAISED BY THE ASSESSING OF FICER. 25. ON THE ISSUE OF FEE FOR TECHNICAL SERVICES AN D WITH REGARD TO THE PROVISIONS OF SECTION 9(1)(VII), THE ORDER O F THE LD. DRP IS AS UNDER: NOW THE PANEL TAKES UP THE NEXT COMPONENT OF THE D EFINITION OF 'FEES FOR TECHNICAL SERVICES', BEING 'CONSULTANCY S ERVICES', WHICH HAS ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 12 BEEN PRESSED INTO SERVICE BY THE ASSESSING OFFICER TO FORTIFY HIS VIEW THAT THE AMOUNT RECEIVED 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 EXECUTI ON OF ANY WORK. IT IS ONLY WHEN SOME CONSIDERATION IS. GIVEN FOR RE NDERING SOME ADVICE OR OPINION ETC., THAT THE SAME FALLS WITHIN THE SCOPE OF 'CONSULTANCY SERVICES'. THE WORD 'CONSULTANCY' EXCL UDES ACTUAL 'EXECUTION'. THE NATURE OF SERVICES, BEING FREIGHT AND LOGISTICS SERVICES PROVIDED BY THE TAXPAYER TO EL HAS NOT BEE N DISPUTED BY THE ASSESSING OFFICER. THERE IS NOTHING LIKE GIVING ANY CONSULTATION WORTH THE NAME. RATHER SUCH PAYMENT IS WHOLLY AND EXCLUSI VELY FOR THE EXECUTION IN THE SHAPE OF TRANSPORT, PROCUREMENT, C USTOMS CLEARANCE, DELIVERY, WAREHOUSING AND PICKING UP SER VICES. THAT BEING THE POSITION, THIS PANEL OPINE THAT THE PAYMENT IN LIEU OF FREIGHT AND LOGISTICS SERVICES CANNOT BE RANKED AS CONSULTANCY SERVICES. THE ONLY LEFT OVER COMPONENT OF THE DEFINITION OF 'FEES FOR TECHNICAL SERVICES' TAKEN NOTE OF BY THE ASSESSING OFFICER IS 'TECHNICA L SERVICES'. HE OBSERVED THAT THE TAXPAYERS BUSINESS STRUCTURE IS TIME BOUND SERVICE COUPLED WITH CONTINUOUS REAL TIME TRANSMISS ION OF INFORMATION BY USING AND ALSO MAKING AVAILABLE ITS TECHNOLOGY I N THE FORM OF SOPHISTICATED EQUIPMENTS AND SOFTWARE ETC. THE ASSE SSING OFFICER HAS HELD THAT IN ORDER TO ENSURE EFFICIENT AND TIMELY D ELIVERY AND TO PROVIDE CONTINUOUS REAL TIME INFORMATION, THE TAXPA YER IS REQUIRED TO USE SOPHISTICATED TECHNOLOGY FOR WHICH THE INDIAN E NTITY IS ALSO EQUALLY INVOLVED AND TO WHOM THE TAXPAYER IS COMMIT TED TO PROVIDE THE REQUISITE SOFTWARE AND EQUIPMENT. THE ASSESSING OFFICER IN REACHING THE CONCLUSION TH AT THE TAXPAYER RENDERED 'TECHNICAL SERVICES ALSO OBSERVED THAT IT S 'BUSINESS STRUCTURE IS TIME BOUND SERVICE COUPLED WITH CONTIN UOUS REAL TIME TRANSMISSION OF INFORMATION BY USING AND ALSO MAKIN G AVAILABLE ADVANCED TECHNOLOGY IN THE FORM OF SOPHISTICATED EQ UIPMENT AND SOFTWARE. HE WAS SWAYED BY THE CONTENTION OF THE TA XPAYER THAT THE ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 13 EXPEDITORS INTERNATIONAL OR THE ULTIMATE CUSTOMER C OULD TRACK THE MOVEMENT OF CARGO WITH THE HELP OF COMPUTERS. THE P ANEL NOTED THAT THE CONSIDERATION RECEIVED BY THE TAXPAYER DID NOT INCLUDE ANY CONSIDERATION FOR THE SUPPLY OF ANY EQUIPMENT TO EX PEDITORS INTERNATIONAL. NOW THE PANEL WILL EXAMINE AS TO WHE THER THE USE OF COMPUTER IN ANY MANNER FOR KNOWING THE LOCATION OF THE CARGO AT A PARTICULAR TIME, CAN BE HELD AS TECHNICAL SERVICE. EXPLANATION TO SECTION 9(1)(VII) DEFINES THE EXPRES SION 'FEES FOR TECHNICAL SERVICES' AS CONSIDERATION FOR RENDERING 'MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES. IT IS SEEN THAT THERE IS NO DEFINITION OF THE TERM 'TECHNICAL SERVICES' IN THE ACT. THE PRINCIPLE OF NOSCITUR A SOCIIS MANDATES THAT TH E MEANING OF A WORD IS TO BE JUDGED BY THE COMPANY OF OTHER WORDS WHICH IT KEEPS. THIS RULE IS WIDER IN SCOPE THAN THE RULE OF EJUSDE M GENERIS. IN ORDER TO DISCOVER THE MEANING OF A WORD WHICH HAS NOT BEE N DEFINED IN THE ACT, THE HONBLE SUPREME COURT HAS APPLIED THE PRIN CIPLE OF NOSCITUR A SOCIIS IN SEVERAL CASES INCLUDING ARAVINDA PARAMI LA WORKS VS. CIT REPORTED .IN 237 ITR 284 (SC). AS NOTED ABOVE THE W ORD 'TECHNICAL' HAS BEEN SANDWICHED BETWEEN THE WORDS 'MANAGERIAL' AND 'CONSULTANCY' IN EXPLANATION 2 TO SEC. 9(1)(VII) AN D NO DEFINITION HAS BEEN ASSIGNED TO THE 'TECHNICAL' SERVICES IN THE RE LEVANT PROVISION, WE NEED TO ASCERTAIN THE MEANING OF THE 'TECHNICAL SERVICES FROM THE OVERALL MEANING OF THE WORDS 'MANAGERIAL' AND 'CONS ULTANCY' SERVICES BY APPLYING THE PRINCIPLE OR NOSTICUR A SOCIIS. IT HAS BEEN HELD ABOVE THAT THE 'MANAGERIAL SERVICES' AND 'CONSULTANCY SER VICES PRE-SUPPOSE SOME SORT OF DIRECT HUMAN INVOLVEMENT. THESE SERVIC ES CANNOT BE CONCEIVED WITHOUT THE DIRECT INVOLVEMENT OF MAN. TH ESE SERVICES CAN BE RENDERED WITH OR WITHOUT ANY EQUIPMENT, BUT THE HUMAN INVOLVEMENT IS INEVITABLE. MOVING IN THE LIGHT OF T HIS RULE, THERE REMAINS NO DOUBT WHATSOEVER THAT THE TECHNICAL SERV ICES CANNOT BE CONTEMPLATED WITHOUT THE DIRECT INVOLVEMENT OF HUMA N ENDEAVOR. ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 14 WHERE SIMPLY AN EQUIPMENT OR A STANDARD FACILITY AL BEIT DEVELOPED OR MANUFACTURED WITH THE USE OF TECHNOLOGY IS USED, SU CH A USER CANNOT BE CHARACTERIZED AS USING 'TECHNICAL SERVICES'. COMING BACK TO THE FACTS OF THE PRESENT CASE,, EVEN IF THE PANEL ACCEPT THE ASSESSING OFFICERS POINT OF VIEW THAT T HE 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 WITH IN THE. PURVIEW OF 'TECHNICAL SERVICES'. THE ESSENCE OF THE CONSIDERAT ION FOR THE PAYMENT IS RENDERING OF SERVICES AND NOT THE USE OF COMPUTER. IF INCIDENTALLY COMPUTER IS USED AT ANY STAGE, WHICH I S OTHERWISE NOT NECESSARY FOR RENDERING SUCH SERVICES, THE PAYMENT FOR FREIGHT AND LOGISTICS WILL NOT PARTAKE OF THE CHARACTER OF FEES OF 'TECHNICAL SERVICES'. THE PANEL, THEREFORE, REPEL THIS CONTENT ION RAISED BY THE ASSESSING OFFICER. THUS, IT CAN BE NOTICED THAT THE PAYMENT MADE TO TH E TAXPAYER IN QUESTION IS NOT A CONSIDERATION FOR MANAGERIAL OR T ECHNICAL OR CONSULTANCY SERVICES. THAT BEING THE POSITION, IT C ANNOT FALL WITHIN THE AMBIT OF SECTION 9(1)(VII). SECTION 4 PROVIDES THAT THE INCOME TAX SHALL BE CHA RGED ON THE TOTAL INCOME OF ANY TAXPAYER OF THE PREVIOUS YEAR FOR ANY ASSESSMENT YEAR AT THE RATES IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS ACT. SCOPE OF TOTAL INCOME OF ANY PERSON HAS BEEN E NSHRINED IN SECTION 5. THE TAXPAYER IN QUESTION IS A NON-RESIDE NT COMPANY. SECTION 5(2) MANDATES THAT THE TOTAL INCOME OF A NO N-RESIDENT INCLUDES THE INCOME FROM WHATEVER SOURCE DERIVED WH ICH IS RECEIVED OR IS DEEMED TO BE RECEIVED IN INDIA; OR ACCRUES OR ARISES OR IS DEEMED TO ACCRUE OR ARISE IN INDIA. THE ONLY POSSIB ILITY OF THE RECEIPT BY THE ASSESSEE IN THE PRESENT FACTS AND CIRCUMSTAN CES QUALIFYING FOR INCLUSION IN THE TOTAL INCOME, CAN BE UNDER SECTION 9. THE PANEL HAS ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 15 OBSERVED THAT SECTION 9(1)(VII) IS NOT APPLICABLE. NOW LET US EXAMINE THE PRESCRIPTION OF SECTION 9(1)(I) WHICH DEALS WIT H THE INCOME ACCRUING OR ARISING FROM ANY BUSINESS CONNECTION IN INDIA. IT PROVIDES THAT WHERE AN INCOME ACCRUES OR ARISES WHETHER DIRE CTLY OR INDIRECTLY THROUGH OR FROM ANY BUSINESS CONNECTION IN INDIA ET C., IT SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA. EXPLANATION 1(A ) STATES THAT IN THE CASE OF A BUSINESS OF WHICH ALL OPERATIONS ARE NOT CARRIED 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 IN COME AS IS REASONABLY ATTRIBUTABLE TO THE OPERATIONS CARRIED O UT 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 OPERAT IONS IN INDIA. IN OTHER WORDS, IF A NON-RESIDENT EARNS ANY INCOME FRO M INDIA BY MEANS' OF OPERATIONS CARRIED ON OUTSIDE INDIA, THAT WILL NOT FALL WITHIN THE SCOPE OF SECTION 9(1)(I). IT SHOWS THAT UNLESS' A NON-RESIDENT EARNS INCOME FROM BUSINESS OPERATIONS CARRIED OUT I N INDIA, SUCH INCOME CANNOT BE DEEMED ACCRUING OR ARISING IN INDI A. REVERTING TO THE FACTS OF THE INSTANT CASE, IT IS CRYSTAL CLEAR THAT, THE TAXPAYER RENDERED 'INTERNATIONAL SERVICES' OUTSIDE INDIA WHI CH REQUIRED THE PAYMENT IN QUESTION. IF THIS-IS THE POSITION, WHICH HAS NOT EVEN BEEN DISPUTED BY THE ASSESSING OFFICER, THEN THERE CAN B E NO QUESTION OF ROPING SUCH INCOME WITHIN THE KEN OF SECTION 9(1)(I ) OF THE ACT. IT IS, THEREFORE, PATENT THAT THE PAYMENT RECEIVED BY THE TAXPAYER NEITHER FALLS U/S 9(1)(I) NOR U/S 9(1)(VII). SINCE THE INCOME CANNOT BE DESCRIBED AS DEEMED TO ACCRUE OR ARISE IN INDIA AND THERE IS NO DOUBT ABOUT SUCH INCOME HAVING NOT BEEN RECEIVED OR DEEMED TO BE RECEIVED OR ACCRUING OR ARISING IN INDIA, THE TAXAB ILITY OF SUCH INCOME FAILS. THIS PANEL, THEREFORE, DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION MADE TO THE INCOME OF THE TAXPAYER. ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 16 26. BEFORE US, THE LD. DR RELIED ON THE ORDER OF TH E TPO WHILE THE LD. AR REITERATED THE SUBMISSIONS MADE BEFORE T HE LD. DRP AND ON THE ORDER OF THE LD. DRP. 27. THE PROVISIONS OF SECTION 9(1)(VII) ARE AS UNDE R: 9. (1) THE FOLLOWING INCOMES SHALL BE DEEMED45 TO ACCRUE OR ARISE IN INDIA : (I) ALL INCOME ACCRUING OR ARISING, WHETHER DIRECTL Y OR INDIRECTLY, THROUGH OR FROM ANY BUSINESS CONNECTION IN INDIA, OR THROUGH OR FROM ANY PROPERTY IN INDIA, OR THROUG H OR FROM ANY ASSET OR SOURCE OF INCOME IN INDIA, [***] OR TH ROUGH THE TRANSFER OF A CAPITAL ASSET SITUATE IN INDIA. [EXPLANATION 1].FOR THE PURPOSES OF THIS CLAUSE (A) IN THE CASE OF BUSINESS OF WHICH ALL THE OPERAT IONS ARE NOT CARRIED OUT IN INDIA, THE INCOME OF THE BUSINESS DE EMED UNDER THIS CLAUSE TO ACCRUE OR ARISE IN INDIA SHALL BE ON LY SUCH PART OF THE INCOME AS IS REASONABLY ATTRIBUTABLE TO THE OPERATIONS50 CARRIED OUT IN INDIA ; (B) IN THE CASE OF A NON-RESIDENT, NO INCOME SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA TO HIM THROUGH OR FROM OPERATIONS WHICH ARE CONFINED TO THE PURCHASE OF GOODS IN INDI A FOR THE PURPOSE OF EXPORT ; [* * *] [(C) IN THE CASE OF A NON-RESIDENT, BEING A PERSON ENGAGED IN THE BUSINESS OF RUNNING A NEWS AGENCY OR OF PUBLISH ING NEWSPAPERS, MAGAZINES OR JOURNALS, NO INCOME SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA TO HIM THROUGH O R FROM ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 17 ACTIVITIES WHICH ARE CONFINED TO THE COLLECTION OF NEWS AND VIEWS IN INDIA FOR TRANSMISSION OUT OF INDIA ;] [(D) IN THE CASE OF A NON-RESIDENT, BEING (1) AN INDIVIDUAL WHO IS NOT A CITIZEN OF INDIA ; O R (2) A FIRM WHICH DOES NOT HAVE ANY PARTNER WHO IS A CITIZEN OF INDIA OR WHO IS RESIDENT IN INDIA ; OR (3) A COMPANY WHICH DOES NOT HAVE ANY SHAREHOLDER W HO IS A CITIZEN OF INDIA OR WHO IS RESIDENT IN INDIA, NO INCOME SHALL BE DEEMED TO ACCRUE OR ARISE IN IND IA TO SUCH INDIVIDUAL, FIRM OR COMPANY THROUGH OR FROM OPERATI ONS WHICH ARE CONFINED TO THE SHOOTING OF ANY CINEMATOGRAPH F ILM IN INDIA;] [(E) IN THE CASE OF A FOREIGN COMPANY ENGAGED IN TH E BUSINESS OF MINING OF DIAMONDS, NO INCOME SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA TO IT THROUGH OR FROM THE ACTIVIT IES WHICH ARE CONFINED TO THE DISPLAY OF UNCUT AND UNASSORTED DIA MOND IN ANY SPECIAL ZONE NOTIFIED BY THE CENTRAL GOVERNMENT IN THE OFFICIAL GAZETTE IN THIS BEHALF.] [EXPLANATION 2.FOR THE REMOVAL OF DOUBTS, IT IS H EREBY DECLARED THAT 'BUSINESS CONNECTION' SHALL INCLUDE A NY BUSINESS ACTIVITY CARRIED OUT THROUGH A PERSON WHO, ACTING O N BEHALF OF THE NON-RESIDENT, [(A) HAS AND HABITUALLY EXERCISES IN INDIA, AN AUTH ORITY TO CONCLUDE CONTRACTS ON BEHALF OF THE NON-RESIDENT OR HABITUALLY CONCLUDES CONTRACTS OR HABITUALLY PLAYS THE PRINCIP AL ROLE LEADING TO CONCLUSION OF CONTRACTS BY THAT NON-RESI DENT AND THE CONTRACTS ARE ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 18 (I) IN THE NAME OF THE NON-RESIDENT; OR (II) FOR THE TRANSFER OF THE OWNERSHIP OF, OR FOR T HE GRANTING OF THE RIGHT TO USE, PROPERTY OWNED BY THAT NON-RESIDE NT OR THAT NON-RESIDENT HAS THE RIGHT TO USE; OR (III) FOR THE PROVISION OF SERVICES BY THE NON-RESI DENT; OR] (B) HAS NO SUCH AUTHORITY, BUT HABITUALLY MAINTAINS IN INDIA A STOCK OF GOODS OR MERCHANDISE FROM WHICH HE REGULAR LY DELIVERS GOODS OR MERCHANDISE ON BEHALF OF THE NON-RESIDENT; OR (C) HABITUALLY SECURES ORDERS IN INDIA, MAINLY OR W HOLLY FOR THE NON-RESIDENT OR FOR THAT NON-RESIDENT AND OTHER NON -RESIDENTS CONTROLLING, CONTROLLED BY, OR SUBJECT TO THE SAME COMMON CONTROL, AS THAT NON-RESIDENT: PROVIDED THAT SUCH BUSINESS CONNECTION SHALL NOT IN CLUDE ANY BUSINESS ACTIVITY CARRIED OUT THROUGH A BROKER, GEN ERAL COMMISSION AGENT OR ANY OTHER AGENT HAVING AN INDEP ENDENT STATUS, IF SUCH BROKER, GENERAL COMMISSION AGENT OR ANY OTHER AGENT HAVING AN INDEPENDENT STATUS IS ACTING IN THE ORDINARY COURSE OF HIS BUSINESS : PROVIDED FURTHER THAT WHERE SUCH BROKER, GENERAL CO MMISSION AGENT OR ANY OTHER AGENT WORKS MAINLY OR WHOLLY ON BEHALF OF A NON-RESIDENT (HEREAFTER IN THIS PROVISO REFERRED TO AS THE PRINCIPAL NON-RESIDENT) OR ON BEHALF OF SUCH NON-RE SIDENT AND OTHER NON-RESIDENTS WHICH ARE CONTROLLED BY THE PRI NCIPAL NON- RESIDENT OR HAVE A CONTROLLING INTEREST IN THE PRIN CIPAL NON- RESIDENT OR ARE SUBJECT TO THE SAME COMMON CONTROL AS THE PRINCIPAL NON-RESIDENT, HE SHALL NOT BE DEEMED TO B E A BROKER, GENERAL COMMISSION AGENT OR AN AGENT OF AN INDEPEND ENT STATUS. ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 19 [EXPLANATION 2A.FOR THE REMOVAL OF DOUBTS, IT IS H EREBY CLARIFIED THAT THE SIGNIFICANT ECONOMIC PRESENCE OF A NON- RESIDENT IN INDIA SHALL CONSTITUTE 'BUSINESS CONNEC TION' IN INDIA AND 'SIGNIFICANT ECONOMIC PRESENCE' FOR THIS PURPOS E, SHALL MEAN (A) TRANSACTION IN RESPECT OF ANY GOODS, SERVICES O R PROPERTY CARRIED OUT BY A NON-RESIDENT IN INDIA INCLUDING PR OVISION OF DOWNLOAD OF DATA OR SOFTWARE IN INDIA, IF THE AGGRE GATE OF PAYMENTS ARISING FROM SUCH TRANSACTION OR TRANSACTI ONS DURING THE PREVIOUS YEAR EXCEEDS SUCH AMOUNT AS MAY BE PRE SCRIBED; OR (B) SYSTEMATIC AND CONTINUOUS SOLICITING OF BUSINES S ACTIVITIES OR ENGAGING IN INTERACTION WITH SUCH NUMBER OF USER S AS MAY BE PRESCRIBED, IN INDIA THROUGH DIGITAL MEANS: PROVIDED THAT THE TRANSACTIONS OR ACTIVITIES SHALL CONSTITUTE SIGNIFICANT ECONOMIC PRESENCE IN INDIA, WHETHER OR NOT, (I) THE AGREEMENT FOR SUCH TRANSACTIONS OR ACTIVIT IES IS ENTERED IN INDIA; OR (II) THE NON-RESIDENT HAS A RESIDENCE OR PLACE OF B USINESS IN INDIA; OR (III) THE NON-RESIDENT RENDERS SERVICES IN INDIA: PROVIDED FURTHER THAT ONLY SO MUCH OF INCOME AS IS ATTRIBUTABLE TO THE TRANSACTIONS OR ACTIVITIES REFERRED TO IN CL AUSE (A) OR CLAUSE (B) SHALL BE DEEMED TO ACCRUE OR ARISE IN IN DIA.] FOLLOWING EXPLANATION 2A SHALL BE INSERTED IN CLAUS E (I) OF SUB- SECTION (1) OF SECTION 9 BY THE FINANCE ACT, 2020, W.E.F. 1-4- 2022 : EXPLANATION 2A.FOR THE REMOVAL OF DOUBTS, IT IS HE REBY DECLARED THAT THE SIGNIFICANT ECONOMIC PRESENCE OF A NON- ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 20 RESIDENT IN INDIA SHALL CONSTITUTE 'BUSINESS CONNEC TION' IN INDIA AND 'SIGNIFICANT ECONOMIC PRESENCE' FOR THIS PURPOS E, SHALL MEAN (A) TRANSACTION IN RESPECT OF ANY GOODS, SERVICES O R PROPERTY CARRIED OUT BY A NON-RESIDENT WITH ANY PERSON IN IN DIA INCLUDING PROVISION OF DOWNLOAD OF DATA OR SOFTWARE IN INDIA, IF THE AGGREGATE OF PAYMENTS ARISING FROM SUCH TRANSAC TION OR TRANSACTIONS DURING THE PREVIOUS YEAR EXCEEDS SUCH AMOUNT AS MAY BE PRESCRIBED; OR (B) SYSTEMATIC AND CONTINUOUS SOLICITING OF BUSINES S ACTIVITIES OR ENGAGING IN INTERACTION WITH SUCH NUMBER OF USER S IN INDIA, AS MAY BE PRESCRIBED: PROVIDED THAT THE TRANSACTIONS OR ACTIVITIES SHALL CONSTITUTE SIGNIFICANT ECONOMIC PRESENCE IN INDIA, WHETHER OR NOT (I) THE AGREEMENT FOR SUCH TRANSACTIONS OR ACTIVIT IES IS ENTERED IN INDIA; OR (II) THE NON-RESIDENT HAS A RESIDENCE OR PLACE OF B USINESS IN INDIA; OR (III) THE NON-RESIDENT RENDERS SERVICES IN INDIA: PROVIDED FURTHER THAT ONLY SO MUCH OF INCOME AS IS ATTRIBUTABLE TO THE TRANSACTIONS OR ACTIVITIES REFERRED TO IN CL AUSE (A) OR CLAUSE (B) SHALL BE DEEMED TO ACCRUE OR ARISE IN IN DIA. EXPLANATION 3.WHERE A BUSINESS IS CARRIED ON IN IN DIA THROUGH A PERSON REFERRED TO IN CLAUSE (A) OR CLAUS E (B) OR CLAUSE (C) OF EXPLANATION 2, ONLY SO MUCH OF INCOME AS IS ATTRIBUTABLE TO THE OPERATIONS CARRIED OUT IN INDIA SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA.] ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 21 [EXPLANATION 4.FOR THE REMOVAL OF DOUBTS, IT IS HE REBY CLARIFIED THAT THE EXPRESSION 'THROUGH' SHALL MEAN AND INCLUDE AND SHALL BE DEEMED TO HAVE ALWAYS MEANT AND INCLUD ED 'BY MEANS OF', 'IN CONSEQUENCE OF' OR 'BY REASON OF'. EXPLANATION 5.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY CLARIFIED THAT AN ASSET OR A CAPITAL ASSET BEING AN Y SHARE OR INTEREST IN A COMPANY OR ENTITY REGISTERED OR INCOR PORATED OUTSIDE INDIA SHALL BE DEEMED TO BE AND SHALL ALWAY S BE DEEMED TO HAVE BEEN SITUATED IN INDIA, IF THE SHARE OR INTEREST DERIVES, DIRECTLY OR INDIRECTLY, ITS VALUE SUBSTANT IALLY FROM THE ASSETS LOCATED IN INDIA:] [PROVIDED THAT NOTHING CONTAINED IN THIS EXPLANATIO N SHALL APPLY TO AN ASSET OR CAPITAL ASSET, WHICH IS HELD B Y A NON- RESIDENT BY WAY OF INVESTMENT, DIRECTLY OR INDIRECT LY, IN A FOREIGN INSTITUTIONAL INVESTOR AS REFERRED TO IN CL AUSE (A) OF THE EXPLANATION TO SECTION 115AD FOR AN ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2012 B UT BEFORE THE 1ST DAY OF APRIL, 2015:] [PROVIDED FURTHER THAT NOTHING CONTAINED IN THIS E XPLANATION SHALL APPLY TO AN ASSET OR CAPITAL ASSET, WHICH IS HELD BY A NON- RESIDENT BY WAY OF INVESTMENT, DIRECTLY OR INDIRECT LY, IN CATEGORY-I OR CATEGORY-II FOREIGN PORTFOLIO INVESTO R UNDER THE SECURITIES AND EXCHANGE BOARD OF INDIA (FOREIGN POR TFOLIO INVESTORS) REGULATIONS, 2014 61A[PRIOR TO THEIR REP EAL], MADE UNDER THE SECURITIES AND EXCHANGE BOARD OF INDIA AC T, 1992 (15 OF 1992):] [PROVIDED ALSO THAT NOTHING CONTAINED IN THIS EXPL ANATION SHALL APPLY TO AN ASSET OR A CAPITAL ASSET, WHICH IS HELD BY A NON- RESIDENT BY WAY OF INVESTMENT, DIRECTLY OR INDIRECT LY, IN CATEGORY-I FOREIGN PORTFOLIO INVESTOR UNDER THE SEC URITIES AND ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 22 EXCHANGE BOARD OF INDIA (FOREIGN PORTFOLIO INVESTOR S) REGULATIONS, 2019, MADE UNDER THE SECURITIES AND EX CHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992).] [EXPLANATION 6.FOR THE PURPOSES OF THIS CLAUSE, IT IS HEREBY DECLARED THAT (A) THE SHARE OR INTEREST, REFERRED TO IN EXPLANATI ON 5, SHALL BE DEEMED TO DERIVE ITS VALUE SUBSTANTIALLY FROM THE A SSETS (WHETHER TANGIBLE OR INTANGIBLE) LOCATED IN INDIA, IF, ON THE SPECIFIED DATE, THE VALUE OF SUCH ASSETS (I) EXCEEDS THE AMOUNT OF TEN CRORE RUPEES; AND (II) REPRESENTS AT LEAST FIFTY PER CENT OF THE VALU E OF ALL THE ASSETS OWNED BY THE COMPANY OR ENTITY, AS THE CASE MAY BE; (B) THE VALUE OF AN ASSET SHALL BE THE FAIR MARKET VALUE AS ON THE SPECIFIED DATE, OF SUCH ASSET WITHOUT REDUCTION OF LIABILITIES, IF ANY, IN RESPECT OF THE ASSET, DETER MINED IN SUCH MANNER AS MAY BE PRESCRIBED; (C) 'ACCOUNTING PERIOD' MEANS EACH PERIOD OF TWELVE MONTHS ENDING WITH THE 31ST DAY OF MARCH: PROVIDED THAT WHERE A COMPANY OR AN ENTITY, REFERRE D TO IN EXPLANATION 5, REGULARLY ADOPTS A PERIOD OF TWELVE MONTHS ENDING ON A DAY OTHER THAN THE 31ST DAY OF MARCH FO R THE PURPOSE OF (I) COMPLYING WITH THE PROVISIONS OF THE TAX LAWS OF THE TERRITORY, OF WHICH IT IS A RESIDENT, FOR TAX PURPO SES; OR (II) REPORTING TO PERSONS HOLDING THE SHARE OR INTE REST, THEN, THE PERIOD OF TWELVE MONTHS ENDING WITH THE O THER DAY SHALL BE THE ACCOUNTING PERIOD OF THE COMPANY OR, A S THE CASE MAY BE, THE ENTITY: ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 23 PROVIDED FURTHER THAT THE FIRST ACCOUNTING PERIOD O F THE COMPANY OR, AS THE CASE MAY BE, THE ENTITY SHALL BE GIN FROM THE DATE OF ITS REGISTRATION OR INCORPORATION AND E ND WITH THE 31ST DAY OF MARCH OR SUCH OTHER DAY, AS THE CASE MA Y BE, FOLLOWING THE DATE OF SUCH REGISTRATION OR INCORPOR ATION, AND THE LATER ACCOUNTING PERIOD SHALL BE THE SUCCESSIVE PERIODS OF TWELVE MONTHS: PROVIDED ALSO THAT IF THE COMPANY OR THE ENTITY CEA SES TO EXIST BEFORE THE END OF ACCOUNTING PERIOD, AS AFORESAID, THEN, THE ACCOUNTING PERIOD SHALL END IMMEDIATELY BEFORE THE COMPANY OR, AS THE CASE MAY BE, THE ENTITY, CEASES TO EXIST ; (D) 'SPECIFIED DATE' MEANS THE (I) DATE ON WHICH THE ACCOUNTING PERIOD OF THE COM PANY OR, AS THE CASE MAY BE, THE ENTITY ENDS PRECEDING THE DATE OF TRANSFER OF A SHARE OR AN INTEREST; OR (II) DATE OF TRANSFER, IF THE BOOK VALUE OF THE ASS ETS OF THE COMPANY OR, AS THE CASE MAY BE, THE ENTITY ON THE D ATE OF TRANSFER EXCEEDS THE BOOK VALUE OF THE ASSETS AS ON THE DATE REFERRED TO IN SUB-CLAUSE (I), BY FIFTEEN PER CENT. EXPLANATION 7. FOR THE PURPOSES OF THIS CLAUSE, (A) NO INCOME SHALL BE DEEMED TO ACCRUE OR ARISE TO A NON- RESIDENT FROM TRANSFER, OUTSIDE INDIA, OF ANY SHARE OF, OR INTEREST IN, A COMPANY OR AN ENTITY, REGISTERED OR INCORPORATED OUTSIDE INDIA, REFERRED TO IN THE EXPLANATION 5, (I) IF SUCH COMPANY OR ENTITY DIRECTLY OWNS THE AS SETS SITUATED IN INDIA AND THE TRANSFEROR (WHETHER INDIVIDUALLY O R ALONG WITH ITS ASSOCIATED ENTERPRISES), AT ANY TIME IN THE TWE LVE MONTHS PRECEDING THE DATE OF TRANSFER, NEITHER HOLDS THE R IGHT OF MANAGEMENT OR CONTROL IN RELATION TO SUCH COMPANY O R ENTITY, NOR HOLDS VOTING POWER OR SHARE CAPITAL OR INTEREST EXCEEDING ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 24 FIVE PER CENT OF THE TOTAL VOTING POWER OR TOTAL SH ARE CAPITAL OR TOTAL INTEREST, AS THE CASE MAY BE, OF SUCH COMPANY OR ENTITY; OR (II) IF SUCH COMPANY OR ENTITY INDIRECTLY OWNS THE ASSETS SITUATED IN INDIA AND THE TRANSFEROR (WHETHER INDIV IDUALLY OR ALONG WITH ITS ASSOCIATED ENTERPRISES), AT ANY TIME IN THE TWELVE MONTHS PRECEDING THE DATE OF TRANSFER, NEITH ER HOLDS THE RIGHT OF MANAGEMENT OR CONTROL IN RELATION TO S UCH COMPANY OR ENTITY, NOR HOLDS ANY RIGHT IN, OR IN RE LATION TO, SUCH COMPANY OR ENTITY WHICH WOULD ENTITLE HIM TO T HE RIGHT OF MANAGEMENT OR CONTROL IN THE COMPANY OR ENTITY THAT DIRECTLY OWNS THE ASSETS SITUATED IN INDIA, NOR HOLDS SUCH P ERCENTAGE OF VOTING POWER OR SHARE CAPITAL OR INTEREST IN SUC H COMPANY OR ENTITY WHICH RESULTS IN HOLDING OF (EITHER INDIVIDU ALLY OR ALONG WITH ASSOCIATED ENTERPRISES) A VOTING POWER OR SHAR E CAPITAL OR INTEREST EXCEEDING FIVE PER CENT OF THE TOTAL VOTIN G POWER OR TOTAL SHARE CAPITAL OR TOTAL INTEREST, AS THE CASE MAY BE, OF THE COMPANY OR ENTITY THAT DIRECTLY OWNS THE ASSETS SIT UATED IN INDIA; (B) IN A CASE WHERE ALL THE ASSETS OWNED, DIRECTLY OR INDIRECTLY, BY A COMPANY OR, AS THE CASE MAY BE, AN ENTITY REFE RRED TO IN THE EXPLANATION 5, ARE NOT LOCATED IN INDIA, THE IN COME OF THE NON-RESIDENT TRANSFEROR, FROM TRANSFER OUTSIDE INDI A OF A SHARE OF, OR INTEREST IN, SUCH COMPANY OR ENTITY, DEEMED TO ACCRUE OR ARISE IN INDIA UNDER THIS CLAUSE, SHALL BE ONLY SUC H PART OF THE INCOME AS IS REASONABLY ATTRIBUTABLE TO ASSETS LOCA TED IN INDIA AND DETERMINED IN SUCH MANNER AS MAY BE PRESCRIBED; (C) 'ASSOCIATED ENTERPRISE' SHALL HAVE THE MEANING ASSIGNED TO IT IN SECTION 92A;] ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 25 (II) INCOME WHICH FALLS UNDER THE HEAD 'SALARIES', IF IT IS EARNED63 IN INDIA. [EXPLANATION.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT THE INCOME OF THE NATURE REFERRED TO IN THIS CLAUSE PAYABLE FOR (A) SERVICE RENDERED IN INDIA; AND (B) THE REST PERIOD OR LEAVE PERIOD WHICH IS PRECED ED AND SUCCEEDED BY SERVICES RENDERED IN INDIA AND FORMS P ART OF THE SERVICE CONTRACT OF EMPLOYMENT, SHALL BE REGARDED AS INCOME EARNED IN INDIA ;] (III) INCOME CHARGEABLE UNDER THE HEAD 'SALARIES' P AYABLE BY THE GOVERNMENT63 TO A CITIZEN OF INDIA FOR SERVICE OUTSIDE INDIA ; (IV) A DIVIDEND PAID BY AN INDIAN COMPANY OUTSIDE I NDIA ; [(V) INCOME BY WAY OF INTEREST PAYABLE BY (A) THE GOVERNMENT ; OR (B) A PERSON WHO IS A RESIDENT, EXCEPT WHERE THE IN TEREST IS PAYABLE IN RESPECT OF ANY DEBT INCURRED, OR MONEYS BORROWED AND USED, FOR THE PURPOSES OF A BUSINESS OR PROFESS ION CARRIED ON BY SUCH PERSON OUTSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE OUTSIDE INDIA ; OR (C) A PERSON WHO IS A NON-RESIDENT, WHERE THE INTER EST IS PAYABLE IN RESPECT OF ANY DEBT INCURRED, OR MONEYS BORROWED AND USED, FOR THE PURPOSES OF A BUSINESS OR PROFESS ION CARRIED ON BY SUCH PERSON IN INDIA. [EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 26 (A) IT IS HEREBY DECLARED THAT IN THE CASE OF A NON -RESIDENT, BEING A PERSON ENGAGED IN THE BUSINESS OF BANKING, ANY INTEREST PAYABLE BY THE PERMANENT ESTABLISHMENT IN INDIA OF SUCH NON-RESIDENT TO THE HEAD OFFICE OR ANY PERMANE NT ESTABLISHMENT OR ANY OTHER PART OF SUCH NON-RESIDEN T OUTSIDE INDIA SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA A ND SHALL BE CHARGEABLE TO TAX IN ADDITION TO ANY INCOME ATTRIBU TABLE TO THE PERMANENT ESTABLISHMENT IN INDIA AND THE PERMANENT ESTABLISHMENT IN INDIA SHALL BE DEEMED TO BE A PERS ON SEPARATE AND INDEPENDENT OF THE NON-RESIDENT PERSON OF WHICH IT IS A PERMANENT ESTABLISHMENT AND THE PROVISIONS OF THE ACT RELATING TO COMPUTATION OF TOTAL INCOME, DETERMINAT ION OF TAX AND COLLECTION AND RECOVERY SHALL APPLY ACCORDINGLY ; (B) 'PERMANENT ESTABLISHMENT' SHALL HAVE THE MEANIN G ASSIGNED TO IT IN CLAUSE (IIIA) OF SECTION 92F;] (VI) INCOME BY WAY OF ROYALTY67 PAYABLE BY (A) THE GOVERNMENT ; OR (B) A PERSON WHO IS A RESIDENT, EXCEPT WHERE THE RO YALTY IS PAYABLE IN RESPECT OF ANY RIGHT, PROPERTY OR INFORM ATION USED OR SERVICES UTILISED FOR THE PURPOSES OF A BUSINESS OR PROFESSION CARRIED ON BY SUCH PERSON OUTSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY S OURCE OUTSIDE INDIA ; OR (C) A PERSON WHO IS A NON-RESIDENT, WHERE THE ROYAL TY IS PAYABLE IN RESPECT OF ANY RIGHT, PROPERTY OR INFORM ATION USED OR SERVICES UTILISED FOR THE PURPOSES OF A BUSINESS OR PROFESSION CARRIED ON BY SUCH PERSON IN INDIA OR FO R THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY S OURCE IN INDIA : PROVIDED THAT NOTHING CONTAINED IN THIS CLAUSE SHA LL APPLY IN RELATION TO SO MUCH OF THE INCOME BY WAY OF ROYALTY AS CONSISTS ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 27 OF LUMP SUM CONSIDERATION FOR THE TRANSFER OUTSIDE INDIA OF, OR THE IMPARTING OF INFORMATION OUTSIDE INDIA IN RESPE CT OF, ANY DATA, DOCUMENTATION, DRAWING OR SPECIFICATION RELAT ING TO ANY PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY, IF SUCH INCOME IS P AYABLE IN PURSUANCE OF AN AGREEMENT MADE BEFORE THE 1ST DAY O F APRIL, 1976, AND THE AGREEMENT IS APPROVED BY THE CENTRAL GOVERNMENT : [PROVIDED FURTHER THAT NOTHING CONTAINED IN THIS CL AUSE SHALL APPLY IN RELATION TO SO MUCH OF THE INCOME BY WAY O F ROYALTY AS CONSISTS OF LUMP SUM PAYMENT MADE BY A PERSON, WHO IS A RESIDENT, FOR THE TRANSFER OF ALL OR ANY RIGHTS (IN CLUDING THE GRANTING OF A LICENCE) IN RESPECT OF COMPUTER SOFTW ARE SUPPLIED BY A NON-RESIDENT MANUFACTURER ALONG WITH A COMPUTE R OR COMPUTER-BASED EQUIPMENT UNDER ANY SCHEME APPROVED UNDER THE POLICY ON COMPUTER SOFTWARE EXPORT, SOFTWARE DEVELOPMENT AND TRAINING, 1986 OF THE GOVERNMENT OF INDIA.] EXPLANATION 1.FOR THE PURPOSES OF THE [FIRST] PROV ISO, AN AGREE-MENT MADE ON OR AFTER THE 1ST DAY OF APRIL, 1 976, SHALL BE DEEMED TO HAVE BEEN MADE BEFORE THAT DATE IF THE AGREEMENT IS MADE IN ACCORDANCE WITH PROPOSALS APPR OVED BY THE CENTRAL GOVERNMENT BEFORE THAT DATE; SO, HOWEVE R, THAT, WHERE THE RECIPIENT OF THE INCOME BY WAY OF ROYALTY IS A FOREIGN COMPANY, THE AGREEMENT SHALL NOT BE DEEMED TO HAVE BEEN MADE BEFORE THAT DATE UNLESS, BEFORE THE EXPIR Y OF THE TIME ALLOWED UNDER SUB-SECTION (1) OR SUB-SECTION ( 2) OF SECTION 139 (WHETHER FIXED ORIGINALLY OR ON EXTENSI ON) FOR FURNISHING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1977, OR THE AS SESSMENT YEAR IN RESPECT OF WHICH SUCH INCOME FIRST BECOMES CHARGEABLE TO TAX UNDER THIS ACT, WHICHEVER ASSESSMENT YEAR IS LATER, THE ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 28 COMPANY EXERCISES AN OPTION BY FURNISHING A DECLARA TION IN WRITING TO THE 70[ASSESSING] OFFICER (SUCH OPTION B EING FINAL FOR THAT ASSESSMENT YEAR AND FOR EVERY SUBSEQUENT A SSESSMENT YEAR) THAT THE AGREEMENT MAY BE REGARDED AS AN AGRE EMENT MADE BEFORE THE 1ST DAY OF APRIL, 1976. EXPLANATION 2.FOR THE PURPOSES OF THIS CLAUSE, 'RO YALTY' MEANS CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDE RATION BUT EXCLUDING ANY CONSIDERATION WHICH WOULD BE THE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD 'CAPITAL GA INS') FOR (I) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING T HE GRANTING OF A LICENCE) IN RESPECT OF A PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY ; (II) THE IMPARTING OF ANY INFORMATION CONCERNING TH E WORKING OF, OR THE USE OF, A PATENT, INVENTION, MODEL, DESI GN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERT Y ; (III) THE USE OF ANY PATENT, INVENTION, MODEL, DESI GN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERT Y ; (IV) THE IMPARTING OF ANY INFORMATION CONCERNING TE CHNICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXP ERIENCE OR SKILL ; [(IVA) THE USE OR RIGHT TO USE ANY INDUSTRIAL, COMM ERCIAL OR SCIENTIFIC EQUIPMENT BUT NOT INCLUDING THE AMOUNTS REFERRED TO IN SECTION 44BB;] (V) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING TH E GRANTING OF A LICENCE) IN RESPECT OF ANY COPYRIGHT, LITERARY, ART ISTIC OR SCIENTIFIC WORK INCLUDING FILMS OR VIDEO TAPES FOR USE IN CONNECTION WITH TELEVISION OR TAPES FOR USE IN CONN ECTION WITH RADIO BROADCASTING [, BUT NOT INCLUDING CONSIDERATI ON FOR THE SALE, DISTRIBUTION OR EXHIBITION OF CINEMATOGRAPHIC FILMS] ; OR ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 29 (VI) THE RENDERING OF ANY SERVICES IN CONNECTION WI TH THE ACTIVITIES REFERRED TO IN SUB-CLAUSES (I) TO 71[(IV ), (IVA) AND] (V). [EXPLANATION 3.FOR THE PURPOSES OF THIS CLAUSE, 'C OMPUTER SOFTWARE' MEANS ANY COMPUTER PROGRAMME RECORDED ON ANY DISC, TAPE, PERFORATED MEDIA OR OTHER INFORMATION S TORAGE DEVICE AND INCLUDES ANY SUCH PROGRAMME OR ANY CUSTO MIZED ELECTRONIC DATA.] [EXPLANATION 4.FOR THE REMOVAL OF DOUBTS, IT IS HE REBY CLARIFIED THAT THE TRANSFER OF ALL OR ANY RIGHTS IN RESPECT OF ANY RIGHT, PROPERTY OR INFORMATION INCLUDES AND HAS ALW AYS INCLUDED TRANSFER OF ALL OR ANY RIGHT FOR USE OR RIGHT TO US E A COMPUTER SOFTWARE (INCLUDING GRANTING OF A LICENCE) IRRESPEC TIVE OF THE MEDIUM THROUGH WHICH SUCH RIGHT IS TRANSFERRED. EXPLANATION 5.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY CLARIFIED THAT THE ROYALTY INCLUDES AND HAS ALWAYS INCLUDED CONSIDERATION IN RESPECT OF ANY RIGHT, PROPERTY OR INFORMATION, WHETHER OR NOT (A) THE POSSESSION OR CONTROL OF SUCH RIGHT, PROPER TY OR INFORMATION IS WITH THE PAYER; (B) SUCH RIGHT, PROPERTY OR INFORMATION IS USED DIR ECTLY BY THE PAYER; (C) THE LOCATION OF SUCH RIGHT, PROPERTY OR INFORMA TION IS IN INDIA. EXPLANATION 6.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY CLARIFIED THAT THE EXPRESSION 'PROCESS' INCLUDES AN D SHALL BE DEEMED TO HAVE ALWAYS INCLUDED TRANSMISSION BY SATE LLITE (INCLUDING UP-LINKING, AMPLIFICATION, CONVERSION FO R DOWN- ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 30 LINKING OF ANY SIGNAL), CABLE, OPTIC FIBRE OR BY AN Y OTHER SIMILAR TECHNOLOGY, WHETHER OR NOT SUCH PROCESS IS SECRET;] (VII) INCOME BY WAY OF FEES FOR TECHNICAL SERVICES7 5 PAYABLE BY (A) THE GOVERNMENT ; OR (B) A PERSON WHO IS A RESIDENT, EXCEPT WHERE THE FE ES ARE PAYABLE IN RESPECT OF SERVICES UTILISED IN A BUSINE SS OR PROFESSION CARRIED ON BY SUCH PERSON76 OUTSIDE INDI A OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY S OURCE OUTSIDE INDIA ; OR (C) A PERSON WHO IS A NON-RESIDENT, WHERE THE FEES ARE PAYABLE IN RESPECT OF SERVICES UTILISED IN A BUSINESS OR PR OFESSION CARRIED ON BY SUCH PERSON IN INDIA OR FOR THE PURPO SES OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE IN IND IA : [PROVIDED THAT NOTHING CONTAINED IN THIS CLAUSE SHA LL APPLY IN RELATION TO ANY INCOME BY WAY OF FEES FOR TECHNICAL SERVICES PAYABLE IN PURSUANCE OF AN AGREEMENT MADE BEFORE TH E 1ST DAY OF APRIL, 1976, AND APPROVED BY THE CENTRAL GOVERNM ENT.] [EXPLANATION 1.FOR THE PURPOSES OF THE FOREGOING P ROVISO, AN AGREEMENT MADE ON OR AFTER THE 1ST DAY OF APRIL, 19 76, SHALL BE DEEMED TO HAVE BEEN MADE BEFORE THAT DATE IF THE AGREEMENT IS MADE IN ACCORDANCE WITH PROPOSALS APPR OVED BY THE CENTRAL GOVERNMENT BEFORE THAT DATE.] EXPLANATION [2].FOR THE PURPOSES OF THIS CLAUSE, ' FEES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATION (INCLUD ING ANY LUMP SUM CONSI-DERATION) FOR THE RENDERING OF ANY M ANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PR OVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MININ G OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT78 OR CONSIDERAT ION WHICH ITA NO. 1740/DEL/2015 EXPEDITORS INTERNATIONAL OF WASHINGTON 31 WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER T HE HEAD 'SALARIES';] 28. THUS, ON GOING THROUGH THE PROVISIONS OF THE AC T, FACTS OF THE CASE, BUSINESS OPERATIONS OF THE ASSESSEE, WE H OLD THAT THE SERVICES RENDERED BY THE ASSESSEE DO NOT FALL WITHI N THE PURVIEW OF MANAGERIAL, CONSULTANCY OR TECHNICAL SERVICES. T HE PAYMENT FOR FREIGHT AND LOGISTICS CANNOT BE TREATED AS TECH NICAL SERVICES. SIMILARLY, THE PROVISIONS OF SECTION 9(1)(I) ARE NO T ATTRACTED IN THIS CASE AS NO INCOME HAS ACCRUED OR ARISED FROM T HE BUSINESS CONNECTION ABROAD IN INDIA. THE EXPLANATION STATES THAT ONLY THAT PART OF INCOME FROM BUSINESS OPERATIONS CAN BE SAID TO BE ACCRUING OR ARISING IN INDIA ONLY IF IT IS RELATABL E TO THE CARRYING OF OPERATIONS IN INDIA. THUS, THE PAYMENT RECEIVED BY THE ASSESSEE NEITHER FALLS UNDER SECTION 9(1)(I) OR SEC TION 9(1)(VII). HENCE, WE HEREBY DECLINE TO INTERFERE WITH THE DIRE CTIONS OF THE DISPUTE RESOLUTION PANEL IN THIS CASE. 29. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/09/2020. SD/- SD/- (SUSHMA CHOWLA) (DR. B. R. R. KUMAR) VICE PRESIDENT ACCOU NTANT MEMBER DATED: 30/09/2020 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR
