The ACIT, Circle-2(1)(1), Ahmedabad V. Indo Colchem Pvt. Ltd., Ahmedabad

ITA 1825/AHD/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6555 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 04-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANJAN KUMAR SINGH
• Assessee Lawyers: KISHOR M MEHTA
• Keywords: Capital asset; Business income; Double taxation relief; Services rendered outside India; Deemed to accrue or arise in india; Retrospective amendment; Permanent establishment; Advance ruling; TDS
• Section: 143(3); 40(a)(ia); 195; 2; 139

Judgement Text

ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 1 OF 29 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR, VP AND MS. MADHUMITA ROY, JM] ITA NO. 1825/AHD/2017 ASSESSMENT YEAR: 2014-15 ASSTT. COMMISSIONER OF INCOME-TAX ........... .......APPELLANT CIRCLE -2(1)(1), AHMEDABAD VS. INDO COLCHEM PVT LTD ............................RESPONDENT 36-2, PHASE-II, GIDC ESTATE, VATVA, AHMEDABAD 382 425 [PAN : AAACI 4393 K] APPEARANCES BY: RANJAN KUMAR SINGH, FOR THE APPELLANT KISHOR M MEHTA, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 29.04.2019 DATE OF PRONOUNCING THE ORDER : 30.04.2019 O R D E R PER PRAMOD KUMAR, VICE PRESIDENT : 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF THE LEARNED CIT(A)S ORDER DATED 15 TH MAY 2017, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2014-15. 2. THE ASSESSING OFFICER HAS RAISED FOLLOWING GRIEV ANCE:- THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE DISALLOWANCE U/S 40(A)(IA) OF THE IT ACT OF RS.1,66,95,647/- ON ACCO UNT OF COMMISSION PAID TO NON-RESIDENT WITHOUT PROPERLY APPRECIATING THE FACT S OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 3. THE VERY FOUNDATION OF THIS DISALLOWANCE IS THAT , IN THE CONSIDERED VIEW OF THE AUTHORITIES BELOW, COMMISSION PAID FOR THE SERVICES RENDERED BY THE NON-RESIDENT AGENTS IS TAXABLE IN INDIA. IT IS FOR THIS REASON T HAT THE ASSESSEE IS HELD TO BE RESPONSIBLE FOR DEDUCTION FOR TAX AT SOURCE FROM SU CH COMMISSION PAYMENTS TO THE NON-RESIDENTS, AND THE ASSESSEE IS ALSO VISITED WIT H DISALLOWANCE UNDER SECTION 40(A)(IA) FOR ANY PAYMENTS MADE TO SUCH NON-RESIDEN T AGENTS WITHOUT DEDUCTION OF TAX AT SOURCE. LEARNED REPRESENTATIVES, HOWEVER, FA IRLY AGREE, EVEN AS LEARNED DEPARTMENTAL REPRESENTATIVE DUTIFULLY RELIES UPON T HE STAND OF THE AUTHORITIES BELOW, THAT THIS ISSUE IS NOW COVERED BY A COORDINATE BENC H DECISION OF THIS TRIBUNAL IN THE CASE OF DCIT VS. WELSPUN CORPORATION LIMITED [(2017 ) 55 ITR (T) 405 (AHD)]. IN THE SAID DECISION, THE COORDINATE BENCH, SPEAKING THROU GH ONE OF US (I.E. THE ACCOUNTANT MEMBER), HAS, INTER ALIA , OBSERVED AS FOLLOWS: ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 2 OF 29 22. SO FAR AS THE FIRST CATEGORY OF CASES ARE CON CERNED, I.E. PAYMENTS TO THE RESIDENTS OF THE TAX JURISDICTIONS WITH WHICH I NDIAN HAS TAX TREATIES BUT THESE TREATIES HAVE NO SPECIFIC ARTICLE DEALING WIT H THE TAXABILITY OF 'FEES FOR TECHNICAL SERVICES', ARE CONCERNED, IT IS IMPORTANT TO NOTE THAT INDIA DOES NOT HAVE A COMPREHENSIVE DOUBLE TAXATION AGREEMENT WITH IRAN. THE INDIA IRAN DOUBLE TAXATION AVOIDANCE AGREEMENT [INDO IRANIAN T AX TREATY, IN SHORT; (1973) 91 ITR (STAT) 31] IS A LIMITED AGREEMENT FOR AVOIDANCE OF DOUBLE TAXATION OF INCOME OF ENTERPRISE OPERATING AIRCRAFT , AND ITS BENEFIT, THEREFORE, IS RESTRICTED TO THIS CATEGORY OF ENTERPRISE. GIVEN TH IS FACT, NOTHING REALLY TURNS ON INDO IRANIAN TAX TREATY NOT HAVING A SPECIFIC PROVI SION FOR TAXATION OF INCOME BY WAY OF FEES FOR TECHNICAL SERVICES. ALL OTHER INCOM ES, EXCEPT FOR THE INCOME OF ENTERPRISE OPERATING AIRCRAFT, CONTINUE TO BE COVER ED BY THE DOMESTIC TAXATION LAWS IN ENTIRETY. IN THIS VIEW OF THE MATTER, SO FA R AS PAYMENT OF RS 12,05,96,574 TO NJ-IRAN IS CONCERNED, WE WILL TAKE IT UP ALONGWITH THE CASES IN RESPECT OF WHICH ARE COVERED ONLY BY THE DOMESTIC L AW. THAT LEAVES US WITH THE CASES OF PAYMENT OF RS 1,06,251 TO A THAILAND B ASED ENTITY GMS- THAILAND AND OF RS 35,73,878 TO AFRAS-UAE IN THIS C ATEGORY. 23. THERE IS NO DISPUTE THAT THERE IS NO SPECIFIC P ROVISION FOR TAXATION OF FEES FOR TECHNICAL SERVICES IN INDIA THAILAND TAX TREATY AND INDIA UAE TAX TREATY. THERE IS ALSO NO DISPUTE THAT GMS-THAILAND AND AFRA S-UAE DID NOT HAVE ANY PERMANENT ESTABLISHMENTS IN INDIA. CLEARLY, THEREFO RE, INCOME IN THE HANDS OF THE RECIPIENTS OF THIS INCOME COULD NEITHER BE TAXE D IN AS BUSINESS INCOME OR UNDER THE HEAD FEES FOR TECHNICAL SERVICES. 24. THE STAND OF THE REVENUE, HOWEVER, IS THAT THE INCOME EMBEDDED IN THE AMOUNTS RECEIVED BY THE ASSESSEE COULD ANYWAY BE TA XED AS 'OTHER INCOME' UNDER THE RESPECTIVE TAX TREATIES. THERE IS A DECIS ION OF A COORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF DY. CIT V. TVS ELECTR ONICS LTD. [2012] 57 SOT 287/22 TAXMANN.COM 215 (CHENNAI), WHICH SUPPORT THI S SCHOOL OF THOUGHT AND HOLDS THAT 'ADMITTEDLY, CHAPTER III OF DTAA BETWEEN INDIA AND MAURITIUS DID NOT PROVIDE FOR TAXING ANY FEES PAID FOR TECHNICAL SERVICES. ONLY FOR A REASON THAT DTAA IS SILENT ON A PARTICULAR TYPE OF INCOME, WE CANNOT SAY THAT SUCH INCOME WILL AUTOMATICALLY BECOME BUSINESS INCOME OF THE RECIPIENT. IN OUR OPINION, WHEN DTAA IS SILENT ON AN ASPECT, THE PROV ISIONS OF THE ACT HAS TO BE CONSIDERED AND APPLIED. THIS SCHOOL OF THOUGHT DID NOT FIND FAVOUR WITH THE VERY JURISDICTIONAL HIGH COURT OF THIS COORDINATE B ENCH. IN THE CASE OF BANGKOK GLASS INDUSTRIES (P.) LTD. V. ASSTT. CIT [2013] 215 TAXMAN 116 (MAG.)/34 TAXMANN.COM 77 (MAD.), HON'BLE MADRAS HIGH COURT RE JECTED THIS SCHOOL OF THOUGHT AND DEALING WITH INDIA THAILAND TAX TREATY, WHICH DOES NOT HAVE FTS CLAUSE, REJECTED THE CLAIM OF THE REVENUE THAT EVEN THOUGH THE THAI ENTITY DID NOT HAVE ANY PE IN INDIA AND, FOR THAT REASON THIS AMOUNT COULD NOT HAVE TAXED IN INDIA UNDER ARTICLE 7, FTS COULD BE TAXED AS 'OTHER INCOME' UNDER ARTICLE 22. THEIR LORDSHIPS, IN THIS CONTEXT, ALSO OBSERVED THAT, 'SINCE THE SAID INCOME DOES NOT FALL AS MISCELLANEOUS INCOME, THE S AME CANNOT BE BROUGHT UNDER ART. 22 AS WE DEAL WITH THIS ASPECT OF THE MA TTER, AND TO EXPLAIN THE SAME PRINCIPLE IN LITTLE MORE DETAIL, LET US FIRST TAKE A LOOK AT THE RELEVANT TREATY PROVISIONS. THE RELEVANT TREATY PROVISIONS ARE AS F OLLOWS: INDIA THAILAND TAX TREATY ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 3 OF 29 ARTICLE 22- OTHER INCOME ITEMS OF INCOME OF A RESIDENT OF A CONTRACTING STAT E, WHEREVER ARISING, NOT EXPRESSLY DEALT WITH IN THE FOREGOING ARTICLES MAY BE TAXED IN THAT STATE. SUCH ITEMS OF INCOME MAY ALSO BE TAXED IN THE CONTRACTIN G STATE WHERE THE INCOME ARISES. INDIA UAE TAX TREATY ARTICLE 22- OTHER INCOME 1. SUBJECT TO THE PROVISIONS OF PARAGRAPH 2, ITEMS OF INCOME OF A RESIDENT OF A CONTRACTING STATE, WHEREVER ARISING, WHICH ARE NOT EXPRESSLY DEALT WITH IN THE FOREGOING ARTICLES OF THIS AGREEMENT, SHALL BE TAXA BLE ONLY IN THAT CONTRACTING STATE. 2. THE PROVISIONS OF PARAGRAPH 1 SHALL NOT APPLY T O INCOME, OTHER THAN INCOME FROM IMMOVABLE PROPERTY AS DEFINED IN PARAGRAPH 2 O F ARTICLE 6, IF THE RECIPIENT OF SUCH INCOME, BEING A RESIDENT OF A CONTRACTING S TATE, CARRIES ON BUSINESS IN THE OTHER CONTRACTING STATE THROUGH A PERMANENT EST ABLISHMENT SITUATED THEREIN, OR PERFORMS IN THAT OTHER STATE INDEPENDEN T PERSONAL SERVICES FROM A FIXED BASE SITUATED THEREIN, AND THE RIGHT OR PROPE RTY IN RESPECT OF WHICH THE INCOME IS PAID IS EFFECTIVELY CONNECTED WITH SUCH P ERMANENT ESTABLISHMENT OR FIXED BASE. IN SUCH CASE, THE PROVISIONS OF ARTICLE 7 OR ARTICLE 14, AS THE CASE MAY BE, SHALL APPLY 25. TO UNDERSTAND THE SCOPE OF THESE TREATY PROVISI ONS, WHICH ARE BROADLY IN PARI MATERIA WITH THE PROVISIONS OF ARTICLE 21 OF U N MODEL CONVENTION, WE FIND GUIDANCE FROM THE OECD MODEL CONVENTION COMMENTARY WHICH STATES THAT 'THE ARTICLE COVERS INCOME OF A CLASS NOT EXPRESSLY DEALT WITH IN THE PRECEDING ARTICLES (E.G. AN ALIMONY OR A LOTTERY INCOME) AS W ELL AS INCOME FROM SOURCES NOT EXPRESSLY REFERRED TO THEREIN (E.G. A RENT PAID BY A RESIDENT OF A CONTRACTING STATE FOR THE USE OF IMMOVABLE PROPERTY SITUATED IN A THIRD STATE). THE ARTICLE COVERS INCOME ARISING IN THIRD STATES A S WELL AS INCOME FROM A CONTRACTING STATE' IN OTHER WORDS, AN INCOME IS OF SUCH A NATURE AS, ON SATISFACTION OF CONDITIONS SPECIFIED IN THE RELATED PROVISION, COULD BE TAXED UNDER ANY OF THESE SPECIFIC TREATY PROVISIONS, CANN OT BE COVERED BY THIS RESIDUARY CLAUSE. TAKE FOR EXAMPLE, INCOME EARNED B Y A RESIDENT OF A CONTRACTING STATE BY CARRYING ON BUSINESS IN THE OT HER CONTRACTING STATE. WHEN, FOR EXAMPLE, ARTICLE 5 PROVIDES THAT THE INCOME OF RESIDENT OF A CONTRACTING STATE, FROM CARRYING ON BUSINESS IN THE OTHER CONTR ACTING STATE, CANNOT BE TAXED IN THE SOURCE STATE UNLESS SUCH A RESIDENT HA S A PERMANENT ESTABLISHMENT IN THE OTHER CONTRACTING STATE, I.E. SOURCE STATE, IT CANNOT BE OPEN TO THE TAX ADMINISTRATION OF SOURCE STATE TO C ONTEND THAT EVEN IF IT CANNOT BE TAXED AS BUSINESS INCOME, IT CAN BE TAXED AS 'OT HER INCOME' NEVERTHELESS. IT IS IMPORTANT TO BEAR IN MIND THE IMPORT OF EXPRE SSION 'NOT EXPRESSLY DEALT WITH IN THE FOREGOING ARTICLES'. SIMILARLY, IF INDE PENDENT PERSONAL SERVICES CANNOT BE TAXED IN THE SOURCE STATE AS MINIMUM THRE SHOLD LIMIT OF FIXED BASE IS NOT SATISFIED, SUCH A TREATY CONCESSION CANNOT B E NULLIFIED BY INVOKING ARTICLE 21. WHEN A PARTICULAR NATURE OF INCOME IS DEALT WIT H IN THE TREATY PROVISIONS, AND ITS TAXABILITY FAILS BECAUSE OF THE CONDITIONS PRECEDENT TO SUCH TAXABILITY ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 4 OF 29 AND AS SPECIFIED IN THAT PROVISION ARE NOT SATISFIE D, THAT IS THE END OF THE ROAD FOR TAXABILITY IN THE SOURCE STATE. 26. IT IS ALSO IMPORTANT TO BEAR IN MIND THE FACT T HAT ARTICLE 21 STATES THAT IT APPLIES TO THE 'ITEMS OF INCOME OF A RESIDENT OF A CONTRACTING STATE, WHEREVER ARISING, WHICH ARE NOT EXPRESSLY DEALT WITH IN THE FOREGOING ARTICLES OF THIS AGREEMENT'. THEREFORE, IT IS NOT THE FACT OF NON-TA XABILITY UNDER THE OPERATIVE ARTICLES (I.E. ARTICLES 6 TO 20) WHICH LEADS TO TAX ABILITY UNDER RESIDUARY CLAUSE IN ARTICLE 22, BUT THE FACT OF INCOME OF THAT NATURE B EING COVERED BY THOSE ARTICLES WHICH CAN LEAD TO TAXABILITY UNDER ARTICLE 22. THER E COULD BE MANY SUCH ITEMS OF INCOME WHICH ARE NOT COVERED BY THESE SPECIFIC T REATY PROVISIONS, SUCH AS ALIMONY, LOTTERY INCOME, GAMBLING INCOME, RENT PAID BY RESIDENT OF A CONTRACTING STATE FOR THE USE OF AN IMMOVEABLE PROP ERTY IN A THIRD STATE, AND DAMAGES (OTHER THAN FOR LOSS OF INCOME COVERED BY S PECIFIC PROVISIONS OF THE TREATY) ETC. THIS IS HOW UN MODEL CONVENTION COMMEN TARY, WHICH IS REFERRED TO EARLIER IN THIS ORDER, ALSO EXPLAINS THE SCOPE O F THIS ARTICLE. IN OUR HUMBLE UNDERSTANDING, THEREFORE, ARTICLE 21 DOES NOT APPLY TO ITEMS OF INCOME WHICH CAN BE TAXED IN ANY SITUATIONS UNDER ARTICLES 6-20 WHETHER OR NOT SUCH AN INCOME IS ACTUALLY TAXABLE UNDER THESE ARTICLES. 27. THE QUESTION THEN ARISES WHETHER INCOME EARNED BY THE RECIPIENTS IN QUESTION, I.E. AFRAS UAE AND GMS THAILAND, CAN BE S AID TO IN THE NATURE OF AN INCOME WHICH IS NOT EXPRESSLY DEALT WITH BY OTHER O PERATIVE ARTICLES (I.E. ARTICLE 6 TO 20) OF THE TREATY. THE INCOME EARNED BY THESE ENTITIES WAS IN THE REGULAR COURSE OF THEIR BUSINESS, AND THERE IS NO DISPUTE A BOUT THIS FUNDAMENTAL ASPECT. THERE CANNOT ALSO BE DISPUTE ABOUT THE FACT THAT IN THE EVENT OF THESE ENTITIES SATISFYING THE CONDITIONS REGARDING EXISTE NCE OF PERMANENT ESTABLISHMENT IN INDIA, THE AMOUNTS SO RECEIVED BY THESE ENTITIES WOULD HAVE BEEN TAXABLE AS BUSINESS INCOME. THE INCOME IN QUES TION IS THUS CLEARLY DEALT WITH BY ARTICLE 7 READ WITH ARTICLE 5 AND THE REASO N WHY IT HAS NOT BEEN TAXED IS THAT THE ENTITIES CONCERNED DID NOT HAVE PERMANENT ESTABLISHMENTS IN INDIA. 28. AS WE HOLD SO, WE ARE ALIVE TO THE FACT THAT TH ERE IS NO SPECIFIC TAXABILITY PROVISION, UNDER INDIA THAILAND TAX TREATY OR, FOR THAT PURPOSE, UNDER INDIA UAE TAX TREATY, WITH RESPECT TO TAXABILITY OF FEES FOR TECHNICAL SERVICES. PROFITS EARNED BY RENDERING FEES FOR TECHNICAL SERVICES ARE ONLY A SPECIES OF BUSINESS PROFITS JUST AS THE PROFITS ANY OTHER ECONOMIC ACTI VITY. HOWEVER, WITHOUT THE CHARACTER OF SUCH RECEIPTS IN THE NATURE OF BUSINES S RECEIPTS BEING ALTERED, THE FEE FOR TECHNICAL SERVICES IS DEALT WITH SEPARATELY IN SOME TREATIES FOR THE REASON BECAUSE, UNDER THOSE TREATIES THE RELATED CO NTRACTING STATES PROCEED ON THE BASIS THAT EVEN IN THE ABSENCE OF THE PERMAN ENT ESTABLISHMENT OR FIXED BASE REQUIREMENTS, THE RECEIPTS OF THIS NATURE CAN BE TAXED, ON GROSS BASIS, AT THE AGREED TAX RATE, AND, TO THAT EXTENT, SUCH RECE IPTS DOES NOT FALL IN LINE WITH THE SCHEME OF TAXATION OF BUSINESS PROFITS UNDER AR T. 7 AND PROFESSIONAL INCOME UNDER 14. IT IS INTERESTING TO NOTE THAT THE MOMENT THE THRESHOLD LIMITS FOR PERMANENT ESTABLISHMENT OR FIXED BASE, AS THE C ASE MAY BE, IS SATISFIED, THE TAXABILITY SHIFTS ON NET BASIS AS BUSINESS PROF ITS OR PROFESSIONAL (INDEPENDENT PERSONAL SERVICES) INCOME. THE BUSINES S RECEIPTS OR PROFESSIONAL RECEIPTS THUS CANNOT BE SEEN IN ISOLAT ION WITH THE FEES FOR TECHNICAL SERVICES. ITS ONLY THE FACT OF, AND MODE OF, TAXATION IN THE ABSENCE OF ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 5 OF 29 PE OR FIXED BASE, WHICH GETS AFFECTED AS A RESULT O F THE FEES FOR TECHNICAL SERVICES. WHEN THERE IS AN FTS CLAUSE, THE FTS GETS TAXED EVEN IN THE ABSENCE OF THE PE OR THE FIXED BASE, BUT THE CHARAC TER OF FTS RECEIPT IS THE SAME, I.E. BUSINESS INCOME OR PROFESSIONAL (INDEPEN DENT PERSONAL) INCOME, IN THE HANDS OF THE SAME. WHEN THERE IS NO FTS CLAUSE, THIS SUB CATEGORIZATION OF INCOME BECOMES IRRELEVANT, BECAUSE FTS OR ANY OT HER BUSINESS RECEIPT, THE INCOME EMBEDDED IN SUCH RECEIPTS GETS TAXED ONL Y IF THERE IS A PERMANENT ESTABLISHMENT OR FIXED BASE- AS THE CASE MAY BE. TH E SCOPE OF BUSINESS PROFIT AND INDEPENDENT PERSONAL SERVICE COMPLETELY COVERS THE FEES FOR TECHNICAL SERVICES AS WELL. WITH FTS ARTICLE OR WITHOUT FTS A RTICLE, THE INCOME BY WAY OF FEES OF TECHNICAL SERVICES CONTINUES TO BE DEALT WI TH THE PROVISIONS OF ARTICLES RELATING TO BUSINESS PROFITS, INDEPENDENT PERSONAL SERVICES, AND ADDITIONALLY, IN THE EVENT OF EXISTENCE OF AN FTS ARTICLE, WITH THE ARTICLE RELATING TO THE FEES FOR TECHNICAL SERVICES. 29. IN VIEW OF THE ABOVE DISCUSSIONS, IN OUR CONSID ERED VIEW, EVEN IF THE RECEIPTS IN QUESTION ARE IN THE NATURE OF FEES FOR TECHNICAL SERVICES IN THE HANDS OF AFRAS UAE AND GMS THAILAND, THESE RECEIPTS ARE NOT TAXABLE IN THE HANDS OF THESE ENTITIES, IN TERMS OF THE RESPECTIVE TAX TREATIES, IN INDIA. IT IS ONLY ELEMENTARY THAT UNDER ARTICLE 90(2) WHERE THE GOVERNMENT HAS ENTERED INTO A TAX TREATY WITH ANY TAX JURISDICTION, IN REL ATION TO THE ASSESSEE TO WHOM SUCH TREATY APPLIES, 'THE PROVISIONS OF THIS (INCOM E TAX) ACT SHALL APPLY TO THE EXTENT THEY ARE MORE BENEFICIAL TO THAT ASSESSEE'. QUITE CLEARLY, WHEN THERE IS NO TAXABILITY UNDER THE RESPECTIVE TREATY PROVISION S, THERE CANNOT BE ANY TAXABILITY UNDER THE PROVISIONS OF THE INCOME TAX A CT EITHER. 30. AS REGARDS THE REMAINING CASES, IN CATEGORY (B) AND IN CATEGORY (C) AS ALSO IN THE CASE OF JT-IRAN, THE PROVISIONS OF THE TAX TREATIES DONOT COME TO THE RESCUE OF THE RECIPIENTS, AND, THEREFORE, THE TAXAB ILITY IN THESE CASES IS TO BE DECIDED ON THE BASIS OF THE PROVISIONS IN THE DOMES TIC LAW. 31. THE SCHEME OF TAXABILITY IN INDIA, SO FAR AS TH E NON-RESIDENTS, ARE CONCERNED, IS LIKE THIS. SECTION 5 (2), WHICH DEALS WITH THE TAXABILITY OF INCOME IN THE HANDS OF A NON-RESIDENT, PROVIDES THAT 'THE TOTAL INCOME OF ANY PREVIOUS YEAR OF A PERSON WHO IS A NON-RESIDENT INCLUDES ALL INCOME FROM WHATEVER SOURCE DERIVED WHICH (A) IS RECEIVED OR IS DEEMED TO BE RECEIVED IN INDIA IN SUCH YEAR BY OR ON BEHALF OF SUCH PERSON; OR (B) AC CRUES OR ARISES OR IS DEEMED TO ACCRUE OR ARISE TO HIM IN INDIA DURING SU CH YEAR'. THERE IS NO DISPUTE THAT SINCE NO PART OF THE OPERATIONS OF THE RECIPIENT NON-RESIDENTS IS CARRIED OUT IN INDIA, NO INCOME ACCRUES TO THESE NO N-RESIDENTS IN INDIA. THE CASE OF THE REVENUE HINGES ON INCOME WHICH IS 'DEEM ED TO ACCRUE OR ARISE IN INDIA'. COMING TO THE DEEMING PROVISIONS, WHICH ARE SET OUT IN SECTION 9, WE FIND THAT THE FOLLOWING STATUTORY PROVISIONS ARE RE LEVANT IN THIS CONTEXT: 'SECTION 9- INCOMES DEEMED TO ACCRUE OR ARISE IN IN DIA (1) THE FOLLOWING INCOMES WILL BE DEEMED 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 FRO M ANY PROPERTY IN INDIA, OR THROUGH OR FROM ANY ASSET OR SOURCE OF INCOME IN IN DIA, ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 6 OF 29 EXPLANATION: FOR THE PURPOSE OF THIS CLAUSE [I.E. 9 (1)(I)], (A) IN THE CASE OF A BUSINESS OF WHICH ALL THE OPER ATIONS 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 INCOME AS I S REASONABLY ATTRIBUTABLE TO THE OPERATIONS CARRIED OUT IN INDIA; (B) (C) (D)** ** **' (VII) INCOME BY WAY OF FEES FOR TECHNICAL SERVICES PAYABLE BY- (A)** ** **' (B) A PERSON WHO IS A RESIDENT, EXCEPT WHERE THE FE ES ARE PAYABLE IN RESPECT OF SERVICES UTILISED IN A BUSINESS OR PROFESSION CA RRIED ON BY SUCH PERSON OUTSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARN ING ANY INCOME FROM ANY SOURCE OUTSIDE INDIA; OR (C)** ** **' EXPLANATION 1-.* EXPLANATION 2.- FOR THE PURPOSES OF THIS CLAUSE, 'F EES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATION (INCLUDING ANY LUMP SUM CON SIDERATION) FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTAN CY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONN EL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MININ G OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD' SALARIES'.' * NOT RELEVANT FOR OUR PURPOSES 32. SO FAR AS DEEMING FICTION UNDER SECTION 9(1)(I) IS CONCERNED, IT CANNOT BE INVOKED IN THE PRESENT CASE SINCE NO PART OF THE OP ERATIONS OF THE RECIPIENT'S BUSINESS, AS COMMISSION AGENT, WAS CARRIED OUT IN I NDIA. EVEN THOUGH DEEMING FICTION UNDER SECTION 9(1)(I) IS TRIGGERED ON THE FACTS OF THIS CASE, ON ACCOUNT OF COMMISSION AGENT'S BUSINESS CONNECTION I N INDIA, IT HAS NO IMPACT ON TAXABILITY IN THE HANDS OF COMMISSION AGENT BECA USE ADMITTEDLY NO BUSINESS OPERATIONS WERE CARRIED OUT IN INDIA, AND, THEREFORE, EXPLANATION 1 TO SECTION 9(1)(I) COMES INTO PLAY. 33. THERE ARE A COUPLE OF RULINGS BY THE AUTHORITY FOR ADVANCE RULING, WHICH SUPPORT TAXABILITY OF COMMISSION PAID TO NON-RESIDE NTS UNDER SECTION 9(1)(I), BUT, NEITHER THESE RULINGS ARE BINDING PRECEDENTS F OR US NOR ARE WE PERSUADED BY THE LINE OF REASONING ADOPTED IN THESE RULINGS. AS FOR THE AAR RULING IN THE CASE OF SKF BOILERS & DRIERS (P.) LTD. IN RE [2012] 343 ITR 385/206 TAXMAN 19/18 TAXMANN.COM 325 (AAR - NEW DELHI), WE FIND TH AT THIS DECISION MERELY FOLLOWS THE EARLIER RULING IN THE CASE OF RAJIV MAL HOTRA, IN RE [2006] 284 ITR 564/155 TAXMAN 101 (AAR - NEW DELHI) WHICH, IN OUR CONSIDERED VIEW, DOES NOT TAKE INTO ACCOUNT THE IMPACT OF EXPLANATION 1 T O SECTION 9(1)(I) PROPERLY. THAT WAS A CASE IN WHICH THE NON-RESIDENT COMMISSIO N AGENT WORKED FOR PROCURING PARTICIPATION BY OTHER NON-RESIDENT ENTIT IES IN A FOOD AND WINE SHOW IN INDIA, AND THE CLAIM OF THE ASSESSEE WAS THAT SI NCE THE AGENT HAS NOT CARRIED OUT ANY BUSINESS OPERATIONS IN INDIA, THE C OMMISSION AGENT WAS NOT CHARGEABLE TO TAX IN INDIA, AND, ACCORDINGLY, THE A SSESSEE HAD NO OBLIGATION TO ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 7 OF 29 DEDUCT TAX AT SOURCE FROM SUCH COMMISSION PAYMENTS TO THE NON-RESIDENT AGENT. ON THESE FACTS, THE AUTHORITY FOR ADVANCE RU LING, INTER ALIA, OPINED THAT 'NO DOUBT THE AGENT RENDERS SERVICES ABROAD AND PUR SUES AND SOLICITS EXHIBITORS THERE IN THE TERRITORY ALLOTTED TO HIM, BUT THE RIGHT TO RECEIVE THE COMMISSION ARISES IN INDIA ONLY WHEN EXHIBITOR PART ICIPATES IN THE INDIA INTERNATIONAL FOOD & WINE SHOW (TO BE HELD IN INDIA ), AND MAKES FULL AND FINAL PAYMENT TO THE APPLICANT IN INDIA' AND THAT 'THE CO MMISSION INCOME WOULD, THEREFORE, BE TAXABLE UNDER SECTION 5(2)(B) READ WI TH SECTION 9(1)(I) OF THE ACT'. THE AUTHORITY FOR ADVANCE RULING ALSO HELD THAT 'TH E FACT THAT THE AGENT RENDERS SERVICES ABROAD IN THE FORM OF PURSUING AND SOLICITING PARTICIPANTS AND THAT THE COMMISSION IS REMITTED TO HIM ABROAD ARE W HOLLY IRRELEVANT FOR THE PURPOSE OF DETERMINING SITUS OF HIS INCOME'. WE DO NOT CONSIDER THIS APPROACH TO BE CORRECT. WHEN NO OPERATIONS OF THE BUSINESS O F COMMISSION AGENT IS CARRIED ON IN INDIA, THE EXPLANATION 1 TO SECTION 9 (1)(I) TAKES THE ENTIRE COMMISSION INCOME FROM OUTSIDE THE AMBIT OF DEEMING FICTION UNDER SECTION 9(1)(I), AND, IN EFFECT, OUTSIDE THE AMBIT OF INCOM E 'DEEMED TO ACCRUE OR ARISE IN INDIA' FOR THE PURPOSE OF SECTION 5(2)(B). THE P OINT OF TIME WHEN COMMISSION AGENT'S RIGHT TO RECEIVE THE COMMISSION FRUCTIFIES IS IRRELEVANT TO DECIDE THE SCOPE OF EXPLANATION 1 TO SECTION 9(1 )( I), WHICH IS WHAT IS MATERIAL IN THE CONTEXT OF THE SITUATION THAT WE ARE IN SEIS IN OF. THE REVENUE'S CASE BEFORE US HINGES ON THE APPLICABILITY OF SECTION 9( 1)(I) AND, IT IS, THEREFORE. IMPORTANT TO ASCERTAIN AS TO WHAT EXTENT WOULD THE RIGOUR OF SECTION 9(1)(I) BE RELAXED BY EXPLANATION 1 TO SECTION 9(1)(I). WHEN W E EXAMINE THINGS FROM THIS PERSPECTIVE, THE INEVITABLE CONCLUSION IS THAT SINC E NO PART OF THE OPERATIONS OF THE BUSINESS OF THE COMMISSION AGENT IS CARRIED OUT IN INDIA, NO PART OF THE INCOME OF THE COMMISSION AGENT CAN BE BROUGHT TO TA X IN INDIA. IN THIS VIEW OF THE MATTER, VIEWS EXPRESSED BY THE HON'BLE AAR, WHI CH DO NOT FETTER OUR INDEPENDENT OPINION ANYWAY IN VIEW OF ITS LIMITED B INDING FORCE UNDER S. 245S OF THE ACT, DO NOT IMPRESS US, AND WE DECLINE TO BE GUIDED BY THE SAME. THE STAND OF THE REVENUE, HOWEVER, IS THAT THESE RULING S, BEING FROM SUCH A HIGH QUASI-JUDICIAL FORUM, EVEN IF NOT BINDING, CANNOT S IMPLY BE BRUSHED ASIDE EITHER, AND THAT THESE RULINGS AT LEAST HAVE PERSUA SIVE VALUE. WE HAVE NO QUARREL WITH THIS PROPOSITION. WE HAVE, WITH UTMOST CARE AND DEEPEST RESPECT, PERUSED THE ABOVE RULINGS RENDERED BY THE HON'BLE A UTHORITY FOR ADVANCE RULING. WITH GREATEST RESPECT, BUT WITHOUT SLIGHTES T HESITATION, WE HUMBLY COME TO THE CONCLUSION THAT WE ARE NOT PERSUADED BY THESE RULINGS. 34. COMING TO SECTION 9(1)(VII)(B), THIS DEEMING FI CTION- WHICH IS FOUNDATIONAL BASIS FOR THE ACTION OF THE ASSESSING OFFICER, INTE R ALIA, PROVIDES THAT THE INCOME BY WAY OF TECHNICAL SERVICES PAYABLE BY A PE RSON RESIDENT IN INDIA, EXCEPT IN CERTAIN SITUATIONS- WHICH ARE NOT ATTRACT ED IN THE PRESENT CASE ANYWAY, ARE DEEMED TO BE INCOME ACCRUING OR ARISING IN INDIA. EXPLANATION 2 TO SECTION 9(1)(VII) DEFINES 'FEES FOR TECHNICAL SE RVICES' AS ANY CONSIDERATION (INCLUDING ANY LUMPSUM CONSIDERATION) FOR THE RENDE RING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PR OVISIONS OF SERVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJECT UNDE RTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIEN T CHARGEABLE UNDER THE HEAD 'SALARIES' [RELEVANT PORTION HIGHLIGHTED BY UN DERLINING]'. ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 8 OF 29 35. IN THE LIGHT OF THE ABOVE LEGAL POSITION, WHAT WE NEED TO DECIDE AT THE OUTSET IS WHETHER THE AMOUNTS PAID BY THE ASSESSEE TO THE NON-RESIDENT AGENTS COULD BE TERMED AS 'CONSIDERATION FOR THE RE NDERING OF ANY MANAGERIAL, TECHNICAL AND CONSULTANCY SERVICES'. AS WE DO SO, I T IS USEFUL TO BEAR IN MIND THE FACT THAT EVEN GOING BY THE STAND OF THE ASSESS ING OFFICER, AT BEST SERVICES RENDERED BY THE NON-RESIDENT TO THE AGENT INCLUDED TECHNICAL SERVICES BUT IT IS FOR THIS REASON THAT THE AMOUNTS PAID TO THESE AGEN TS, ON ACCOUNT OF COMMISSION ON EXPORTS, SHOULD BE TREATED AS FEES FO R TECHNICAL SERVICES. EVEN PROCEEDING ON THE ASSUMPTION THAT THESE NON-RESIDEN T AGENTS DID RENDER THE TECHNICAL SERVICES, WHICH, AS WE WILL SEE A LITTLE LATER, AN INCORRECT ASSUMPTION ANYWAY, WHAT IS IMPORTANT TO APPRECIATE IS THAT THE AMOUNTS PAID BY THE ASSESSEE TO THESE AGENTS CONSTITUTED CONSIDERATION FOR THE ORDERS SECURED BY THE AGENTS AND NOT THE SERVICES ALLEGED RENDERED BY THE AGENTS. THE EVENT TRIGGERING CRYSTALLIZATION OF LIABILITY OF THE ASSE SSEE, UNDER THE COMMISSION AGENCY AGREEMENT, IS THE EVENT OF SECURING ORDERS A ND NOT THE RENDITION OF ALLEGED TECHNICAL SERVICES. IN A SITUATION IN WHICH THE AGENT DOES NOT RENDER ANY OF THE SERVICES BUT SECURES THE BUSINESS ANYWAY , THE AGENT IS ENTITLED TO HIS COMMISSION WHICH IS COMPUTED IN TERMS OF A PERC ENTAGE OF THE VALUE OF THE ORDER. IN A REVERSE SITUATION, IN WHICH AN AGEN T RENDERS ALL THE ALLEGED TECHNICAL SERVICES BUT DOES NOT SECURE ANY ORDER FO R THE PRINCIPAL I.E. THE ASSESSEE, THE AGENT IS NOT ENTITLED TO ANY COMMISSI ON. CLEARLY, THEREFORE, THE EVENT TRIGGERING THE EARNINGS BY THE AGENT IS SECUR ING THE BUSINESS AND NOT RENDITION OF ANY SERVICES. IN THIS VIEW OF THE MATT ER, IN OUR CONSIDERED VIEW, THE AMOUNTS PAID BY THE ASSESSEE TO ITS NON-RESIDEN T AGENTS, EVEN IN THE EVENT OF HOLDING THAT THE AGENTS DID INDEED RENDER TECHNICAL SERVICES, CANNOT BE SAID TO BE CONSIDERATION FOR RENDERING OF ANY MA NAGERIAL, TECHNICAL OR CONSULTANCY SERVICES (EMPHASIS BY UNDERLINING SUPPL IED BY US)'. THE SERVICES RENDERED BY THE AGENTS, EVEN IF THESE SERVICES ARE HELD TO BE IN THE NATURE OF TECHNICAL SERVICES, MAY BE TECHNICAL SERVICES, BUT THE AMOUNTS PAID BY THE ASSESSEE ARE NOT FOR THE RENDITION OF THESE TECHNIC AL SERVICES NOR THE QUANTIFICATION OF THESE AMOUNTS HAVE ANY RELATION W ITH THE QUANTUM OF THESE TECHNICAL SERVICES. THE KEY TO TAXABILITY OF AN AMO UNT UNDER SECTION 9(1)(VII) IS THAT IT SHOULD CONSTITUTE 'CONSIDERATION' FOR RENDI TION OF TECHNICAL SERVICES. THE CASE OF THE REVENUE FAILS ON THIS SHORT TEST, AS IN THE PRESENT CASE THE AMOUNTS PAID BY THE ASSESSEE ARE 'CONSIDERATION' FOR ORDERS SECURED BY THE ASSESSEE IRRESPECTIVE OF HOW AND WHETHER OR NOT THE AGENTS H AVE PERFORMED THE SO CALLED TECHNICAL SERVICES. 36. LET US SUM UP OUR DISCUSSIONS ON THIS PART OF T HE SCHEME OF SECTION 9, SO FAR AS TAX IMPLICATIONS ON COMMISSION AGENCY BUSINE SS CARRIED OUT BY NON- RESIDENTS FOR INDIAN PRINCIPALS IS CONCERNED. IT DO ES NOT NEED MUCH OF A CEREBRAL EXERCISE TO FIND OUT WHETHER THE INCOME FR OM THE BUSINESS CARRIED ON BY A NON-RESIDENT ASSESSEE, AS A COMMISSION AGENT A ND TO THE EXTENT IT CAN BE SAID TO DIRECTLY OR INDIRECTLY ACCRUING THROUGH OR FROM ANY BUSINESS CONNECTION IN INDIA, IS REQUIRED TO BE TAXED UNDER SECTION 9(1)(I) OR UNDER SECTION 9(1)(VII), OF THE INCOME TAX ACT, 1961. THE ANSWER IS OBVIOUS. DEEMING FICTION UNDER SECTION 9(1)(I) READ WITH PRO VISO THERETO, AS WE HAVE SEEN IN THE EARLIER DISCUSSIONS, HOLDS THE KEY, AND LAYS DOWN THAT ONLY TO THE EXTENT THAT WHICH THE OPERATIONS OF SUCH A BUSINESS IS CARRIED OUT IN INDIA, THE INCOME FROM SUCH A BUSINESS IS TAXABLE IN INDIA. WH EN NO OPERATIONS OF THE ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 9 OF 29 BUSINESS ARE CARRIED ON INDIA, THERE IS NO TAXABILI TY OF THE PROFITS OF SUCH A BUSINESS IN INDIA EITHER. THE QUESTION THEN ARISES WHETHER IN A SITUATION IN WHICH, IN THE COURSE OF CARRYING ON SUCH BUSINESS, THE ASSESSEE HAS TO NECESSARILY RENDER CERTAIN SERVICES, WHICH ARE OF S UCH A NATURE AS COVERED BY EXPLANATION 2 TO SECTION 9(1)(VII), AND EVEN THOUGH THE ASSESSEE IS NOT PAID ANY FEES FOR SUCH SERVICES PER SE, ANY PART OF THE BUSINESS PROFITS OF THE ASSESSEE CAN BE TREATED AS 'FEES FOR TECHNICAL SERV ICES' AND TAXED AS SUCH UNDER SECTION 9(1)(VII). THIS QUESTION DOES NOT POS E MUCH DIFFICULTY EITHER. IN THE LIGHT OF THE DISCUSSIONS IN THE FOREGOING PARAG RAPH, UNLESS THERE IS A SPECIFIC AND IDENTIFIABLE CONSIDERATION FOR THE REN DITION OF TECHNICAL SERVICES, TAXABILITY UNDER SECTION 9(1)(VII) DOES NOT GET TRI GGERED. THEREFORE, IRRESPECTIVE OF WHETHER ANY TECHNICAL SERVICES ARE RENDERED DURI NG THE COURSE OF CARRYING ON SUCH AGENCY COMMISSION BUSINESS ON BEHALF OF IND IAN PRINCIPAL, THE CONSIDERATION FOR SECURING BUSINESS CANNOT BE TAXED UNDER SECTION 9(1)(VII) AT ALL. THIS PROFITS OF SUCH A BUSINESS CAN HAVE TAXAB ILITY IN INDIA ONLY TO THE EXTENT SUCH PROFITS RELATE TO THE BUSINESS OPERATIO NS IN INDIA, BUT THEN, AS ARE THE ADMITTED FACTS OF THIS CASE, NO PART OF OPERATI ONS OF BUSINESS WERE CARRIED OUT IN INDIA. THE COMMISSION AGENTS EMPLOYED BY THE ASSESSEE, THEREFORE, DID NOT HAVE ANY TAX LIABILITY IN INDIA IN RESPECT OF T HE COMMISSION AGENCY BUSINESS SO CARRIED OUT. 37. ON A MORE FUNDAMENTAL NOTE, HOWEVER, IT IS ALSO A SETTLED LEGAL POSITION BY NOW THAT THE SERVICES OF THE NATURE RENDERED BY THE SE COMMISSION AGENTS CANNOT ANYWAY BE TREATED AS FEES FOR TECHNICAL SERV ICES ANYWAY. VIEWED THUS, EVEN THE DISCUSSION ON WHETHER THE AMOUNTS IN QUEST ION COULD BE TREATED AS 'CONSIDERATION' FOR TECHNICAL SERVICES, MAY BE REND ERED ACADEMIC IN EFFECT. LEARNED CIT(A) HAS VERY WELL SUMMARIZED THE JUDICIA L PRECEDENTS IN SUPPORT OF THIS LINE OF REASONING, AND, IN AN ERUDITE AND E XTENDED DISCUSSION, DEALT WITH EACH LIMB OF THE DEFINITION OF TECHNICAL SERVI CES. THESE FINDINGS ARE REPRODUCED BY US EARLIER IN THIS ORDER. WHILE, FOR THE SAKE OF BREVITY, WE NEED TO REPEAT EACH OF THESE REASONS ANALYSED BY THE LEA RNED CIT(A), SUFFICE TO SAY THAT WE APPROVE HIS WELL-REASONED FINDINGS AND LINE OF REASONING, AND WE WILL ALSO BRIEFLY TOUCH UPON THIS ASPECT OF THE MATTER. BEFORE WE DO SO, WE MAY TAKE NOTE OF SOME OF THE CLAUSES IN A TYPICAL COMMI SSION AGREEMENT ENTERED INTO BY THE ASSESSEE WITH ITS COMMISSION AGENTS. TH E KEY PROVISIONS IN THIS AGREEMENT, A COPY OF WHICH IS PLACED BEFORE US AT P AGES 103 TO 109 OF THE PAPER-BOOK, ARE AS FOLLOWS: ARTICLE 5 - AGENT'S OBLIGATION THE AGENT SHALL CARRY OUT ALL THE DUTIES NORMALLY R ENDERED BY AN AGENT INCLUDING BUT NOT LIMITED TO THE FOLLOWING: 5.1 TO ACT EXCLUSIVELY ON BEHALF OF THE PRINCIPAL A ND NOT SOURCE, PROCURE OR MARKET PRODUCTS OF SIMILAR TYPE MANUFACTURED BY COM PETITIVE COMPANIES WITHOUT PRIOR WRITTEN CONSENT OF THE PRINCIPAL. 5.2 TO USE ITS BEST ENDEAVORS AND FACILITIES TO DEV ELOP, EXPAND AND PROMOTE DILIGENTLY, THE SALE AND THE MARKET FOR THE PRODUCT S. THE AGENT WILL BE ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 10 OF 29 RESPONSIBLE OF MAKING THE NECESSARY MARKET PLANS AN D ESTABLISH THE MARKETING NETWORK OF REPRESENTATIVES TO HELP PROMOT E WELSPUN PRODUCTS . 5.3 TO PROVIDE THE PRINCIPAL WITH INFORMATION SUCH AS MARKER DEVELOPMENTS, ACTIVITIES OF COMPETITORS, INTENTIONS AND PLANS OF CLIENTS TO THE MAXIMUM OF HIS KNOWLEDGE. 5.4 ENDEAVOR TO PROVIDE THE PRINCIPAL PROMPT ADVANC E INFORMATION REGARDING TENDERS. TO FORWARD TO THE PRINCIPAL TEND ER DOCUMENTS, INQUIRIES ETC, WITH FULL TECHNICAL SPECIFICATIONS WELL AHEAD - AS MUCH AS HE CAN - OF TENDER CLOSING. 5.5 THE AGENT ON BEHALF OF THE PRINCIPAL, WILL PURC HASE TENDER DOCUMENTS AND FORWARD THE SAME TO THE PRINCIPAL WELL AHEAD - AS MUCH AS HE CAN - OF TENDER CLOSING. THE COST OF PURCHASE OF SUCH TENDER DOCUMENTS SHALL BE REIMBURSED BY THE PRINCIPAL TO THE AGENT. 5.6 TO ASSIST FOR CLAIMS AND COMPLAINTS (IF SAY) TH AT MAY ARISE FROM THIRD PARTIES AND HELP TO REACH APPROPRIATE SETTLEMENT IN CLOSE CO-ORDINATION WITH THE PRINCIPAL. 5.7 THE AGENT WILL NOT ENTER INTO AGREEMENTS OR CON TRACTUAL OBLIGATIONS &. CREATE ANY FINANCIAL LIABILITIES ON BEHALF OF THE P RINCIPAL, WITHOUT THE PRINCIPAL'S PRIOR WRITTEN CONSENT. 5.8 THE AGENT HEREBY NOMINATES MR. HOSSAM KAWASH AS THEIR CONTACT POINT WHO WILL BE TOTALLY RESPONSIBLE FOR THE PRINCIPAL'S BUSINESS FOR CLARITY OF COMMUNICATION & EXPEDITIOUS ACTION. 5.9 TO ASSIST THE PRINCIPAL IN ALL POSSIBLE WAY, AS AND WHEN REQUESTED BY THE PRINCIPAL FOR THE FULFILLMENT OF ITS OBLIGATION S, IN CASE OF A CONTRACT WITHIN THE TERRITORY. IT INCLUDES ASSISTING THE PRINCIPAL IN IDENTIFYING SUBCONTRACTORS LIKE LOGISTICS, SHIPPERS, CARGO HAND LING AGENCIES FOR SMOOTH EXECUTION OF SUCH CONTRACTS. 5.9A TO SEND THE PRINCIPAL PERIODIC REPORTS ON BUSI NESS ACTIVITY. 5.9B TO KEEP THE PRINCIPAL CONTINUOUSLY APPRISES OF ALL RELEVANT POLITICAL/ ECONOMIC CHANGES WHICH WOULD AFFECT TIE BUSINESS, 5.9C TO UNDERTAKE NOT TO DIVULGE SALES DOCUMENTS, C ATALOGUES, PRICES ETC. TO COMPETITORS AND THEIR AGENTS AND ASSOCIATES. ARTICLE 7 PRINCIPAL'S OBLIGATIONS DURING THE CONTINUANCE OF THIS AGREEMENT THE PRINCI PAL AGREES : 7.1 TO GIVE THE AGENT FULL SUPPORT FOR PROMOTING AN D CREATING MARKET FOR THE PRODUCTS OF THE PRINCIPAL IN THE TERRITORY. 7.2 TO INFORM THE AGENT ON RECEIPT OF AN INQUIRY FR OM THE TERRITORY REQUIRING DIRECT SUPPLY . 7.3 THE AGENT SHALL BE ENTITLED TO COMMISSION AS AG REED UPON IN THE CONTRACT. ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 11 OF 29 7.4 TO TAKE INTO CONSIDERATION THE RECOMMENDATIONS MADE BY THE AGENT WHILE MAKING THE OFFER. 7.5 TO PROVIDE ALL INFORMATIVE DATA, CATALOGUES AND TECHNICAL MATERIAL (ALL IN THE ENGLISH LANGUAGE) REGARDING THE PRINCIPAL'S PRO DUCTS AND ACTIVITIES AND KEEP THE AGENT INFORMED ABOUT ALL RELEVANT CHAR GES. 7.6 TO OFFER COMPETITIVE PRICES AS FAR AS POSSIBLE TO ENABLE THE SALE OF THE PRODUCTS AS THE AGENT IS ONLY ENTITLED FOR COMMISSI ONS AND NOT FIXED SALARY ON HIS WORK. 7.7 THE PRINCIPAL NOMINATES MR. RANJIT LALA AS THE CONTACT PERSON WITH THE AGENT FOR ALL CORRESPONDENCES AND COMMUNICATIONS. ARTICLE 9 - TERMINATION. 9.1 THIS AGREEMENT SHALL REMAIN VALID FOR A PERIOD OF ONE YEAR FROM THE DATE OF SIGNING. THE SAID AGREEMENT CAN ALSO BE TERMINAT ED BY EITHER PARTY ANYTIME GIVING NOTICE TO THE OTHER PARTY OF AT LEAS T 90 DAYS IN ADVANCE BY FAX AND FOLLOWED BY REGISTERED LETTER STATING REASONS F OR THE TERMINATION. THE AGREEMENT CAN BE REINSTATED FOR A FURTHER PERIOD OF TWO YEARS BASED ON MUTUAL AGREEMENT AND THEN AFTER ITS TERMINATION ANOTHER PE RIOD OF FIVE YEARS. 9.2 IN THE EVENT OF THE TERMINATION, THE AGENT WILL FURNISH ALL THE RELEVANT INFORMATION TO THE PRINCIPAL AND WILL BE RESPONSIBL E FOR REALIZATION OF PAYMENTS OUTSTANDING TILL DATE WITHIN THE TERRITORY . ALSO THE AGENT SHALL RETURN ALL THE CUSTOMERS RECORDS AND OTHER DATA REL ATING TO THE COMPANY'S BUSINESS OR SERVICES WHICH MAY BE IN HIS POSSESSION . 9.3 IN THE EVENT OF TERMINATION, IF ANY CONTRACT IS CONCLUDED AFTER THE TERMINATION DATE, BUT THE EXERCISE HAS COMMENCED PR IOR TO THE TERMINATION DATE, THE AGENT IS ENTITLED FOR THE APPLICABLE COMM ISSIONS. SALES COMMISSION FOR THE SONATRACH GK3 PROJECT WELSPUN WILL PAY GLOBAL SYNERGY INTERNATIONAL LTD. IN ITS CAPACITY AS AGENT FOR WELSPUN A SALES COMMISSION, B ASED ON THE FOB MILL SALES PRICE FOR THE GK 3 PROJECT EQUAL TO: (I) 2% OF THE FOB MILL VALUE IN U.S. DOLLARS FOR TH E ORDERED QUANTITY. ALL SALES COMMISSIONS SHALL BE PAID IN U.S. DOLLARS TO THE BANK ACCOUNT TO BE ADVISED BY GLOBAL SYNERGY, DETAILS OF WHICH WILL BE PROVIDED BY THE AGENT. THE SALES COMMISSION SHALL BE PAYABLE BY WEL SPUN TO GLOBAL SYNERGY INTERNATIONAL LTD. AS INTERIM PAYMENTS ON P RORATE BASIS AFTER REALIZATION OF THE PAYMENTS RECEIVED BY THE PRINCIP AL WITHIN A REASONABLE TIME BUT NOT EXCEEDING 30 DAYS FROM RECEIPT OF PAYM ENT BY THE PRINCIPAL. SALES COMMISSION FOR THE SONATRACH GK3 PROJECT BY THE VIRTUE OF THIS ADDENDUM, WELSPUN AGREE TO PA Y GLOBAL SYNERGY INTERNATIONAL LTD., IN ITS CAPACITY AS AGENT FOR WE LSPUN, A SALES COMMISSION, BASED ON THE FOB MILL SALES PRICE FOR T HE GK 3 PROJECT EQUAL TO: ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 12 OF 29 (I) 4.10% OF THE FOB MILL VALUE IN U.S. DOLLAR FOR THE QUANTITY SHIPPED IS LAST (18') SHIPMENT. (A) GLOBAL SYNERGY INTERNATIONAL LTD AGREES TO UNCO NDITIONALLY TO FULFIL THE SCOPE SET THEREIN BY THE VIRTUE OF THIS ADDENDUM. (B)THIS COMMISSION IS OVER THE ABOVE THE COMMISSION PAYABLE BY WELSPUN TO GLOBAL SYNERGY AS SPECIFIED IN ANNEXURE-1 OF AGENCY AGREEMENT DATED 29TH DAY OF JUNE, 2008. ALL SALES COMMISSION SHALL BE PAID IN U.S. DOLLARS TO THE BANK ACCOUNT TO BE ADVISED BY GLOBAL SYNERGY, DETAILS OF WHICH ARE AVA ILABLE WITH WELSPUN. UNLESS OTHERWISE AGREED, THE SALES COMMISS ION SHALL BE PAYABLE BY WELSPUN TO GLOBAL SYNERGY INTERNATIONAL LTD., AS INTERIM PAYMENTS ON PRORATE BASIS AFTER REALIZATION OF THE PAYMENTS RECEIVED BY THE PRINCIPAL WITHIN A REASONABLE TIME BUT NOT EXCEEDIN G 30 DAYS FROM RECEIPT OF PAYMENT BY WELSPUN. 38. AS IS CLEAR FROM THE ABOVE PROVISIONS OF THE AG REEMENT, THE WORK THAT THE AGENT HAS TO DONE UNDER THIS AGREEMENT, AS IS STATE D UNAMBIGUOUSLY IN THE AGREEMENT ITSELF, IS TO 'CARRY OUT ALL THE DUTIES N ORMALLY RENDERED BY AN AGENT' INCLUDING BUT NOT LIMITED TO THE ACTIVITIES SPECIFI ED THEREIN. THE CONSIDERATION FOR WHICH THE PAYMENT MADE TO THE COMMISSION AGENT IS OBTAINING OF THE ORDERS AND NOT ANY SERVICES PER SE. THE CONSIDERATI ON IS COMPUTED ON THE BASIS OF BUSINESS PROCURED. OBVIOUSLY, IF THERE ARE NO BUSINESS GENERATED FOR THE PRINCIPAL, THE AGENT GETS NOTHING. QUITE CLEARL Y, WHAT IS DONE BY THE AGENT IS NOT A RENDITION OF SERVICE BUT PURE ENTREPRENEUR IAL ACTIVITY. THE WORK ACTUALLY UNDERTAKEN BY THE AGENT IS THE WORK OF ACTING AS AG ENT AND SO PROCURING BUSINESS FOR THE ASSESSEE BUT AS THE CONTEMPORARY B USINESS MODELS REQUIRE THE WORK OF AGENT CANNOT SIMPLY AND ONLY BE TO OBTA IN THE ORDERS FOR THE PRODUCT, AS THIS OBTAINING OF ORDERS IS INVARIABLY PRECEDED BY AND FOLLOWED BY SEVERAL PREPARATORY AND FOLLOW UP ACTIVITIES. THE D ESCRIPTION OF AGENT'S OBLIGATION SETS OUT SUCH COMMON ANCILLARY ACTIVITIE S AS WELL BUT THAT DOES NOT OVERRIDE, OR RELEGATE, THE CORE AGENCY WORK. THE CO NSIDERATION PAID TO THE AGENT IS ALSO BASED ON THE BUSINESS PROCURED AND TH E AGENCY AGREEMENTS DONOT PROVIDE FOR ANY INDEPENDENT, STANDALONE OR SP ECIFIC CONSIDERATION FOR THESE SERVICES. THE SERVICES RENDERED UNDER THE AGR EEMENT CANNOT, THEREFORE, BE CONSIDERED TO BE TECHNICAL SERVICES IN NATURE OR CHARACTER. THE SERVICES RENDERED IN THE COURSE OF RENDERING AGENCY SERVICES ARE ESSENTIALLY BUSINESS SERVICES AND TO OBTAIN THE BUSINESS. WE HAVE ALSO N OTED THAT, SO FAR AS RENDITION OF TECHNICAL SERVICES IS CONCERNED, ONE O F THE MAIN POINTS IN THE CASE OF THE REVENUE, AS EVIDENT FROM A PLAIN READING OF THE IMPUGNED ORDER UNDER SECTION 201, IS THAT 'MANUFACTURING OF SPECIALIZED PIPE WAS A HIGHLY TECHNICAL ACTIVITY INVOLVING VERY COMPLEX TECHNICAL EXERCISE OF TECHNOLOGY AND SKILLED LABOUR AND FINEST GRADE OF RAW MATERIAL' AND THAT ' OBVIOUSLY, TO PROCURE THE ORDERS, THE ASSESSEE COMPANY WILL NEED SPECIALIST A GENTS WHO CAN UNDERSTAND THE NITTY GRITTY OF THE ASSESSEE'S BUSIN ESS AND CAN DEMONSTRATE THE ASSESSEE'S BUSINESS PROFILE AND QUALITY OF PROD UCTS OF THE ASSESSEE TO THE POTENTIAL CLIENTS TO CONVINCE THEM TO ENTER INTO A CONTRACT WITH THE ASSESSEE COMPANY JUST BECAUSE A PRODUCT IS HIGHLY TECHNICAL DOES NOT CHANGE THE CHARACTER OF ACTIVITY OF THE SALE AGENT. WHETHER A SALESMAN SELLS A ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 13 OF 29 HANDCRAFTED SOUVENIR OR A TOP OF THE LINE LAPTOP, H E IS SELLING NEVERTHELESS. IT WILL BE ABSURD TO SUGGEST THAT IN THE FORMER CASE, HE IS SELLING AND THE LATTER, HE WILL BE RENDERING TECHNICAL SERVICES. THE OBJECT OF THE SALESMAN IS TO SELL AND FAMILIARITY WITH THE TECHNICAL DETAILS, WHATEVE R BE THE WORTH OF THOSE TECHNICAL DETAILS, IS ONLY TOWARDS THE END OF SELLI NG. IN A TECHNOLOGY DRIVEN WORLD THAT WE LIVE IN, EVEN SIMPLEST OF DAY TO DAY GADGETS THAT WE USE ARE FAIRLY TECHNICAL AND COMPLEX. UNDOUBTEDLY WHEN A TE CHNICAL PRODUCT IS BEING SOLD, THE PERSON SELLING THE PRODUCT SHOULD BE FAMI LIAR WITH TECHNICAL SPECIFICATIONS OF THE PRODUCT BUT THEN THIS ASPECT OF THE MATTER DOES NOT ANYWAY CHANGE THE ECONOMIC ACTIVITY. NOTHING, THERE FORE, TURNS ON THE DETAILS OF THE PRODUCTS BEING TECHNICAL. IT WAS ALSO NOTED THAT BY THE ASSESSING OFFICER THAT 'IT IS A VERY TECHNICAL EXERCISE TO OB TAIN THE CONTRACTS SINCE IT INVOLVES COMPLEX PROCESS REQUIRING ELABORATE DISCUS SION, TECHNICAL EXPERTISE AND PRESENT OF COMPLEX TECHNICAL PRESENTATION, ON B EHALF OF THE ASSESSEE, WHICH CAN ONLY BE DONE BY A SPECIALIST IN THIS FIEL D SO AS TO CONVINCE THE CLIENTS ABOUT WELSPUN'S SUITABILITY TO THE CONTRACT '. THIS AT BEST SIGNIFIES COMPLEXITY IN THE BUSINESSES AND THE NEED OF TECHNI CAL INPUTS IN THE PROCESS OF BUSINESSES, PARTICULARLY WHEN THE PRODUCTS BEING DEALT WITH ARE TECHNICAL PRODUCTS, BUT THEN MERELY BECAUSE TECHNICAL INPUTS ARE NEEDED IN CARRYING OUT BUSINESS ACTIVITY, IT DOES NOT BECOME A TECHNICAL S ERVICE RATHER THAN A BUSINESS ACTIVITY. AT THE COST OF REPETITION, WE MU ST EMPHASIZE THE IMPORTANT DISTINCTION BETWEEN A BUSINESS ACTIVITY, REQUIRING UNDERSTANDING OF RELATED TECHNOLOGY, AND RENDITION OF TECHNICAL SERVICES SIM PLICTOR. IN ANY CASE, WHAT HAS BEEN DESCRIBED AS A TECHNICAL SERVICE IS THE SE RVICE BEING RENDERED TO THE BUYER BUT THE PAYMENT RECEIVED BY THE COMMISSION AG ENTS IS NOT FOR THIS SERVICE PER SE BUT FOR GENERATING BUSINESS ORDERS F OR THE ASSESSEE. GENERATING BUSINESS OR SECURING ORDERS IS AN ENTREP RENEURIAL ACTIVITY AND CANNOT, BY ANY STRETCH OF LOGIC, BE TREATED AS A TE CHNICAL SERVICE PER SE. THE SAME IS THE POSITION WITH REGARD TO ASSISTANCE WITH RESPECT OF LOGISTICS, SUCH AS SHIPPING AND HANDLING SERVICES, WITH RESPECT TO SALE FORECASTING, WITH RESPECT TO GATHERING INFORMATION ON MARKETS, BUSINE SS ENVIRONMENT AND ON SPECIFIC BUYERS AND WITH RESPECT TO DEVELOPMENT OF SALES NETWORK. ALL THESE SERVICES ARE ESSENTIALLY INTEGRAL PART OF, AND ARE THUS AIMED AT, DEVELOPING BUSINESS FOR THE ASSESSEE AND SECURING ORDERS FOR T HE ASSESSEE FROM THE RIGHT PERSONS. NEITHER THESE SERVICES CAN BE VIEWED ON A STANDALONE BASIS DIVORCED FROM THE ECONOMIC ACTIVITY OF SECURING ORD ERS, NOR ANY PAYMENT CAN BE SAID TO BE FOR RENDITION OF THESE SERVICES INASM UCH AS IT IS NOT THE RENDITION OF THESE SERVICES BUT SECURING BUSINESS OF THE ASSE SSEE WHICH TRIGGERS THE INCOME ACCRUING TO THE NON-RESIDENT AGENTS OF THE A SSESSEE AND IT IS SECURING OF BUSINESS FOR THE ASSESSEE WHICH IS THE PROXIMATE CAUSE OF THE INCOME ACCRUING TO THE ASSESSEE. THIS ISSUE IS ALSO COVERE D, IN FAVOUR OF THE ASSESSEE, BY A COORDINATE BENCH DECISION IN THE CAS E OF DY. CIT V. TROIKAA PHARMACEUTICALS LTD. [IT APPEAL NO. 2028/AHD/13 AND CO NO 13/AHD/14] AND VICE VERSA, WHEREIN IT HAS BEEN, INTER ALIA, OBSERV ED AS FOLLOWS: '5. AS REGARDS THE REFERENCES TO SECTION 9(1)(VII), AS MADE BY THE ASSESSING OFFICER AND THE LEARNED DEPARTMENTAL REPR ESENTATIVE, WE FIND THAT ASPECT OF THE MATTER IS ALSO COVERED, IN FAVOUR OF THE ASSESSEE, BY A LARGE NUMBER OF JUDICIAL PRECEDENTS- INCLUDING HON'BLE MADRAS HIGH COURT'S JUDGMENT IN THE CASE OF CIT V. FARIDA LEATHER CO. [(2016) ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 14 OF 29 66 TAXMANN.COM 321 (MADRAS)], WHEREIN THEIR LORDSHI PS HAVE, INTER ALIA, OBSERVED AS FOLLOWS: 5. THE MAIN CONTENTION OF THE LEARNED COUNSEL FOR T HE ASSESSEE/RESPONDENT IS THAT THE AGENCY COMMISSION/S ALES COMMISSION PAID BY THE ASSESSEE TO NON-RESIDENT AGENTS, FOR TH E SERVICES RENDERED BY THEM, OUTSIDE INDIA, IN PROCURING EXPORT ORDERS FOR THE ASSESSEE, WOULD NOT ATTRACT OR PARTAKE THE CHARACTER OF 'FEES FOR TECHNICAL SERVICES' AS EXPLAINED IN THE CONTEXT OF 9(1)(VII) OF THE ACT AND THEREFORE, THERE IS NO SCOPE FOR THE APPLICATION OF THE PROVISIONS OF SECTION 195 OF THE ACT (TAX DEDUCTED AT SOURCE). IT IS ALSO CONTENDED THAT AS THE NON-RESIDENT AGENTS HAVE NEITHER BUSINE SS CONNECTION IN INDIA NOR THEY HAVE PERMANENT ESTABLISHMENT IN INDI A, THEY ARE LIABLE TO BE TAXED IN INDIA. 5.1 YET ANOTHER CONTENTION OF THE LEARNED COUNSEL F OR THE ASSESSEE IS THAT: (A) THE ASSESSEE PAID THE AMOUNT BY WAY OF CO MMISSION TO FOREIGN AGENTS FOR THE SERVICES RENDERED OUTSIDE INDIA; (B) THE TAX DEDUCTION AT SOURCE (TDS) IS REQUIRED TO BE MADE ON ALL PAYMENTS TO NON-RESIDENTS, ONLY IF SUCH PAYMENTS ARE LIABLE TO BE TAXED IN IND IA. (C) FOLLOWING THE DECISION OF THIS COURT, CIT V. FAIZAN SHOES (P.) LT D. [2014] 367 ITR 155/226 TAXMAN 115/48 TAXMANN.COM 48 (MAD.), THE AS SESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE, WHEN THE NON-RESIDE NT AGENT PROVIDES SERVICES OUTSIDE INDIA ON PAYMENT OF COMMISSION. 5.2 THE CONTENTION OF THE REVENUE IS THAT SUCH SERV ICES ARE ATTRACTED BY EXPLANATION (2) TO SECTION 9 (1) (VII) OF THE AC T AND THEREFORE TDS CERTIFICATE IS ESSENTIAL. 6. WHETHER THIS CONTENTION IS CORRECT, IS THE ISSUE TO BE DECIDED. 7. IN ORDER TO APPRECIATE THIS CONTENTION, IT IS NE CESSARY TO CONSIDER THE RELEVANT PROVISIONS OF THE ACT: (I) SECTION 40(A)(I) OF THE ACT : 'SECTION 40 - AMOUNTS NOT DEDUCTIBLE: NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION S 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTIN G THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUS INESS OR PROFESSION', (A) IN THE CASE OF ANY ASSESSEE (I) ANY INTEREST (NOT BEING INTEREST ON A LOAN IS SUED FOR PUBLIC SUBSCRIPTION BEFORE THE 1ST DAY OF APRIL, 1938), RO YALTY, FEES FOR TECHNICAL SERVICES OR OTHER SUM CHARGEABLE UNDER TH IS ACT, WHICH IS PAYABLE, (A) OUTSIDE INDIA; OR (B) IN INDIA TO A NON-RESIDENT, NOT BEING A COMPA NY OR TO A FOREIGN COMPANY, ON WHICH TAX IS DEDUCTIBLE AT SOUR CE UNDER CHAPTER XVIIB AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 15 OF 29 BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SU B-SECTION (1) OF SECTION 139: PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCT ED DURING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139, SUCH SUM SHALL BE ALLOWED AS A DEDUCTI ON IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX H AS BEEN PAID. EXPLANATION: FOR THE PURPOSES OF THIS SUB-CLAUSE, (A) 'ROYALTY' SHALL HAVE THE SAME MEANING AS IN E XPLANATION 2 TO CLAUSE (VI) OF SUB-SECTION (1) OF SECTION 9: (B) 'FEES FOR TECHNICAL SERVICES' SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION (1) OF SECTION 9: (IA) THIRTY PER CENT OF ANY SUM PAYABLE TO A RESIDE NT, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVIIB AND SUCH T AX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139. PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCT ED DURING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139 THIRTY PER CENT OF, SUCH SUM SHALL BE A LLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHI CH SUCH TAX HAS BEEN PAID. PROVIDED FURTHER THAT WHERE AN ASSESSEE FAILS TO DE DUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIO NS OF CHAPTER XVII-B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SUB-SECTION (1) OF SECTION 201 , THEN, FOR THE PURPOSE OF THIS SUB-CLAUSE, IT SHALL BE DEEMED THAT THE ASS ESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISH ING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN THE SAI D PROVISO.' (II) EXPLANATION 2 TO SECTION 195(1) OF THE ACT : 'SECTION 195 - OTHER SUMS: (1) ANY PERSON RESPONSIB LE FOR PAYING TO A NON-RESIDENT NOT BEING A COMPANY, OR TO A FOREIGN C OMPANY, ANY INTEREST (NOT BEING INTEREST REFERRED TO IN SECTION 194LB OR SECTION 194LC) OR SECTION 194LD OR ANY OTHER SUM CHARGEABLE UNDER THE PROVISIONS OF THIS ACT (NOT BEING INCOME CHARGEABLE UNDER THE HEAD 'SALARIES') SHALL, AT THE TIME OF CREDIT OF SUCH IN COME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATES IN FORCE : PROVIDED THAT IN THE CASE OF INTEREST PAYABLE BY TH E GOVERNMENT OR A PUBLIC SECTOR BANK WITHIN THE MEANING OF CLAUSE (23 D) OF SECTION 10 OR A PUBLIC FINANCIAL INSTITUTION WITHIN THE MEANING O F THAT CLAUSE, DEDUCTION OF TAX SHALL BE MADE ONLY AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE : ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 16 OF 29 PROVIDED FURTHER THAT NO SUCH DEDUCTION SHALL BE MA DE IN RESPECT OF ANY DIVIDENDS REFERRED TO IN SECTION 115-O. [EXPLANATION 1] :...................... [EXPLANATION 2.- FOR THE REMOVAL OF DOUBTS, IT IS H EREBY CLARIFIED THAT THE OBLIGATION TO COMPLY WITH SUB-SECTION (1) AND TO MA KE DEDUCTION THEREUNDER APPLIES AND SHALL BE DEEMED TO HAVE ALWA YS APPLIED AND EXTENDS AND SHALL BE DEEMED TO HAVE ALWAYS EXTENDED TO ALL PERSONS, RESIDENT OR NON-RESIDENT, WHETHER OR NOT THE NON-RE SIDENT PERSON HAS (I) A RESIDENCE OR PLACE OF BUSINESS OR BUSINESS CONNECTION IN INDIA; OR (II) ANY OTHER PRESENCE IN ANY MANNER WHATSOEVER IN INDIA.' EXPLANATION 4 TO SECTION 9 (1) (I) OF THE ACT: 'SECTION 9 - INCOME DEEMED TO ACCRUE OR ARISE IN IN DIA (1) THE FOLLOWING INCOMES SHALL BE DEEMED 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 THROUG H OR FROM ANY PROPERTY IN INDIA, OR THROUGH OR FROM ANY ASSET OR SOURCE OF INCOME IN INDIA, OR THROUGH THE TRANSFER OF A CAPITAL ASSET S ITUATE IN INDIA. ** ** ** EXPLANATION 4.- FOR THE REMOVAL OF DOUBTS, IT IS HE REBY CLARIFIED THAT THE EXPRESSION 'THROUGH' SHALL MEAN AND INCLUDE AND SHA LL BE DEEMED TO HAVE ALWAYS MEANT AND INCLUDED ''BY MEANS OF', 'IN CONSEQUENCE OF' OR 'BY REASON OF'.' 7.1 SECTION 40 OF THE ACT SPELLS OUT WHAT AMOUNTS A RE NOT DEDUCTIBLE FROM THE INCOME CHARGED TO TAX UNDER THE PROFITS AN D GAINS OF BUSINESS OR PROFESSION. 7.2 SECTION 40(A)(I) OF THE ACT DEALS WITH INTEREST AND OTHER SUMS PAYABLE OUTSIDE INDIA. THE PROVISIONS OF THIS SUB-C LAUSE MADE APPLICABLE TO INTEREST HAVE BEEN EXTENDED TO PAYMEN T OF ROYALTY, TECHNICAL FEES AND ANY OTHER SUM CHARGEABLE UNDER T HIS ACT. THE SECTION PROVIDES THAT THE SUMS COVERED BY THE SUB-C LAUSE, WHICH ARE CHARGEABLE UNDER THE ACT AND ARE PAYABLE OUTSIDE IN DIA, SHALL NOT BE ALLOWED AS AN EXPENDITURE TO THE ASSESSEE, UNLESS T AX IS PAID THEREON OR IS DEDUCTED THEREFROM UNDER CHAPTER XVII-B OF TH E ACT. 7.3 SECTION 195(1) OF THE ACT DEALS WITH DEDUCTION OF TAX FROM PAYMENT TO NON-RESIDENTS AND FOREIGN COMPANIES. SECTION 195 (1) OF THE ACT COMES INTO PLAY AT A STAGE WHERE THE PAYER, WHO IS ENJOINED TO DEDUCT THE TAX, EITHER CREDIT SUCH INCOME TO THE ACCOUNT O F THE PAYEE OR MAKE PAYMENT THEREOF, WHETHER IN CASH / CHEQUE / DRAFT O R ANY OTHER MODE. THE TAXABILITY OF SUCH AMOUNT IN THE HANDS OF THE P AYEE OR OCCASIONING ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 17 OF 29 OF THE TAXABLE EVENT IS ALIEN FOR THE PURPOSE OF SE CTION 195(1) OF THE ACT. 7.4 SECTION 195(2) IS AN ENABLING PROVISION, ENABLI NG AN ASSESSEE TO FILE AN APPLICATION BEFORE THE ASSESSING OFFICER TO DETERMINE THE APPROPRIATE PROPORTION OF THE SUM CHARGEABLE AND UP ON SUCH DETERMINATION, THE TAX HAS TO BE DEDUCTED UNDER SEC TION 195(1) OF THE ACT. THE PAYMENT IS MADE CREDITED TO THE ACCOUNT OF THE PAYEE. 8. THE QUESTION NOW IS, WHETHER THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE AS CONTEMPLATED UNDER SECTION 195 OF THE ACT, WHEN THE ASSESSEE PAID COMMISSION TO FOREIGN AGENT. 9. THIS QUESTION HAS BEEN ANSWERED BY THE HON 'BLE SUPREME COURT, IN THE CASE OF G.E.INDIA TECHNOLOGY CENTRE (P.) LTD. ( SUPRA), IN WHICH, IT IS VERY CATEGORICALLY HELD THAT THE TAX DEDUCTED AT SO URCE OBLIGATIONS UNDER SECTION 195(1) OF THE ACT ARISES, ONLY IF THE PAYMENT IS CHARGEABLE TO TAX IN THE HANDS OF THE NON-RESIDENT RECIPIENT. 9.1 THEREFORE, MERELY BECAUSE A PERSON HAS NOT DEDU CTED TAX AT SOURCE OR A REMITTANCE ABROAD, IT CANNOT BE INFERRE D THAT THE PERSON MAKING THE REMITTANCE, NAMELY, THE ASSESSEE, IN THE INSTANT CASE, HAS COMMITTED A DEFAULT IN DISCHARGING HIS TAX WITHHOLD ING OBLIGATIONS BECAUSE SUCH OBLIGATIONS COME INTO EXISTENCE ONLY W HEN THE RECIPIENT HAS A TAX LIABILITY IN INDIA. 9.2 THE UNDERLYING PRINCIPLE IS THAT, THE TAX WITHH OLDING LIABILITY OF THE PAYER IS INHERENTLY A VICARIOUS LIABILITY ON BEHALF OF THE RECIPIENT AND THEREFORE, WHEN THE RECIPIENT / FOREIGN AGENT DOES NOT HAVE THE PRIMARY LIABILITY TO BE TAXED IN RESPECT OF INCOME EMBEDDED IN THE RECEIPT, THE VICARIOUS LIABILITY OF THE PAYER TO DEDUCT TAX DOES NOT ARISE. THIS VICARIOUS TAX WITHHOLDING LIABILITY CANNOT BE INVOK ED, UNLESS PRIMARY TAX LIABILITY OF THE RECIPIENT / FOREIGN AGENT IS ESTAB LISHED. IN THIS CASE, THE PRIMARY TAX LIABILITY OF THE FOREIGN AGENT IS NOT E STABLISHED. THEREFORE, THE VICARIOUS LIABILITY ON THE PART OF THE ASSESSEE TO DEDUCT THE TAX AT SOURCE DOES NOT EXIST. 10. FURTHER, JUST BECAUSE, THE PAYER / ASSESSEE HAS NOT OBTAINED A SPECIFIED DECLARATION FROM THE REVENUE AUTHORITIES TO THE EFFECT THAT THE RECIPENT IS NOT LIABLE TO BE TAXED IN INDIA, IN RES PECT OF THE INCOME EMBEDDED IN THE PARTICULAR PAYMENT, THE ASSESSING O FFICER CANNOT PROCEED ON THE BASIS THAT THE PAYER HAS AN OBLIGATI ON TO DEDUCT TAX AT SOURCE. HE STILL HAS TO DEMONSTRATE AND ESTABLISH T HAT THE PAYEE HAS A TAX LIABILITY IN RESPECT OF THE INCOME EMBEDDED IN THE IMPUGNED PAYMENT. 11. IN THE INSTANT CASE, IT IS SEEN, ADMITTEDLY THA T THE NONRESIDENT AGENTS WERE ONLY PROCURING ORDERS ABROAD AND FOLLOW ING UP PAYMENTS WITH BUYERS. NO OTHER SERVICES ARE RENDERED OTHER T HAN THE ABOVE. SOURCING ORDERS ABROAD, FOR WHICH PAYMENTS HAVE BEE N MADE DIRECTLY ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 18 OF 29 TO THE NON-RESIDENTS ABROAD, DOES NOT INVOLVE ANY T ECHNICAL KNOWLEDGE OR ASSISTANCE IN TECHNICAL OPERATIONS OR OTHER SUPP ORT IN RESPECT OF ANY OTHER TECHNICAL MATTERS. IT ALSO DOES NOT REQUIRE A NY CONTRIBUTION OF TECHNICAL KNOWLEDGE, EXPERIENCE, EXPERTISE, SKILL O R TECHNICAL KNOW-HOW OF THE PROCESSES INVOLVED OR CONSIST IN THE DEVELOP MENT AND TRANSFER OF A TECHNICAL PLAN OR DESIGN. THE PARTIES MERELY SOUR CE THE PROSPECTIVE BUYERS FOR EFFECTING SALES BY THE ASSESSEE, AND IS ANALOGOUS TO A LAND OR A HOUSE / REAL ESTATE AGENT / BROKER, WHO WILL B E INVOLVED IN MERELY IDENTIFYING THE RIGHT PROPERTY FOR THE PROSPECTIVE BUYER / SELLER AND ONCE HE COMPLETES THE DEAL, HE GETS THE COMMISSION. THUS , BY NO STRETCH OF IMAGINATION, IT CANNOT BE SAID THAT THE TRANSACTION PARTAKES THE CHARACTER OF 'FEES FOR TECHNICAL SERVICES' AS EXPLA INED IN THE CONTEXT OF SECTION 9(1)(VII) OF THE ACT. 12. AS THE NON-RESIDENTS WERE NOT PROVIDING ANY TEC HNICAL SERVICES TO THE ASSESSEE, AS HELD ABOVE AND AS HELD BY THE COMM ISSIONER OF INCOME TAX (APPEALS), THE COMMISSION PAYMENT MADE T O THEM DOES NOT FALL INTO THE CATEGORY OF 'FEES OF TECHNICAL SE RVICES' AND THEREFORE, EXPLANATION (2) TO SECTION 9(1)(VII) OF THE ACT, AS INVOKED BY THE ASSESSING OFFICER, HAS NO APPLICATION TO THE FACTS OF THE ASSESSEE'S CASE. 13. IN THIS CASE, THE COMMISSION PAYMENTS TO THE NO N-RESIDENT AGENTS ARE NOT TAXABLE IN INDIA, AS THE AGENTS ARE REMAINI NG OUTSIDE, SERVICES ARE RENDERED ABROAD AND PAYMENTS ARE ALSO MADE ABRO AD. 14. THE CONTENTION OF THE LEARNED COUNSEL FOR THE R EVENUE IS THAT THE TRIBUNAL OUGHT NOT TO HAVE RELIED UPON THE DECISION G.E.INDIA TECHNOLOGY'S CASE, CITED SUPRA, IN VIEW OF INSERTIO N OF EXPLANATION 4 TO SECTION 9(1)(I) OF THE ACT WITH CORRESPONDING INTRO DUCTION OF EXPLANATION 2 TO SECTION 195(1) OF THE ACT, BOTH BY THE FINANCE ACT, 2012, WITH RETROSPECTIVE EFFECT FROM 01.04.1962. 15. THE ISSUE RAISED IN THIS CASE HAS BEEN THE SUBJ ECT MATTER OF THE DECISION, IN THE RECENT CASE, CIT V. KIKANI EXPORTS (P.) LTD. [2014] 369 ITR 96/[2015] 232 TAXMAN 255/49 TAXMANN.COM 601 (MA D.) WHEREIN THE CONTENTION OF THE REVENUE HAS BEEN REJECTED AND ASSESSEE HAS BEEN UPHELD AND THE RELEVANT OBSERVATION READS AS U NDER: '... THE SERVICES RENDERED BY THE NON-RESIDENT AGEN T COULD AT BEST BE CALLED AS A SERVICE FOR COMPLETION OF THE EXPORT CO MMITMENT AND WOULD NOT FALL WITHIN THE DEFINITION OF 'FEES FOR TECHNIC AL SERVICES' AND, THEREFORE, SECTION 9 WAS NOT APPLICABLE AND, CONSEQ UENTLY, SECTION 195 DID NOT COME INTO PLAY. THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER TOWARDS EXPORT COMMISSION PAID BY THE ASSESSEE TO THE NON-RESIDENT WAS RIGHTLY DELETED.' 16. WHEN THE TRANSACTION DOES NOT ATRACT THE PROVIS IONS OF SECTION 9 OF THE ACT, THEN THERE IS NO QUESTION OF APPLYING EXPL ANATION 4 TO SECTION ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 19 OF 29 9 OF THE ACT. THEREFORE, THE REVENUE HAS NO CASE AN D THE TAX CASE APPEAL IS LIABLE TO BE DISMISSED. 6. CLEARLY, THEREFORE, THE PAYMENT OF COMMISSION IN THE HANDS OF THE NON-RESIDENT AGENT, AS LONG AS SUCH AN AGENT CARRIE S OUT ITS ACTIVITIES OUTSIDE INDIA, DOES NOT RESULT IN TAXABILITY IN THE HANDS OF THE AGENT IN INDIA.' 39. AS WE DEAL WITH THIS ASPECT OF THE MATTER, WE M AY ALSO TAKE NOTE OF THE FOLLOWING ANALYSIS, IN THE CASE OF UPS SCS ASIA LTD . V. ASSTT. DIT, (INTERNATIONAL TAXATION) [2012] 50 SOT 268/18 TAXMA NN.COM 302 (MUM.), ABOUT THE SCOPE OF MANAGERIAL, CONSULTANCY AND TECH NICAL SERVICES WHICH THE SERVICES RENDERED MUST FULFIL SO AS TO LEAD TO TAXA BILITY AS FEES FOR TECHNICAL SERVICES: '5. A BARE PERUSAL OF THE ABOVE QUOTED PROVISION IN DICATES THAT THE 'FEES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATION FOR RENDERING OF ANY 'MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES' BUT DOES NOT INCLUDE THE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY ET C. THE LEARNED CIT(A) HAS HELD THE SERVICES RENDERED BY THE ASSESS EE AS FEES FOR TECHNICAL SERVICES' COMING WITH IN THE SWEEP OF 'MA NAGERIAL, TECHNICAL OR CONSULTANCY SERVICES'. ON THE CONTRARY, THE CONT ENTION OF THE ASSESSEE HAS REMAINED BEFORE THE AUTHORITIES BELOW AS WELL AS US THAT THE SUCH SERVICES DO NOT FALL WITHIN THE AMBIT OF A NY OF THE CATEGORIES TAKEN NOTE OF BY THE AUTHORITIES BELOW. WE WILL EXA MINE AS TO WHETHER THE SERVICES SO PROVIDED BY THE ASSESSEE FALL WITHI N THE SCOPE OF 'MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES' AS PER EXPLANATION 2 TO SECTION 9(1)(VII). 6. IN ORDER TO APPRECIATE THE NATURE OF SERVICES MO RE ELABORATELY, IT IS RELEVANT TO CONSIDER THE TERMS OF THE AGREEMENT ENT ERED INTO BETWEEN THE ASSESSEE AND MENLO INDIA EXECUTED ON NOVEMBER 7 , 2006 WITH EFFECT FROM 1ST JUNE, 2005, A COPY OF WHICH IS AVAI LABLE ON PAGE 1 ONWARDS OF THE PAPER BOOK. THE SCOPE OF SERVICES HA S BEEN GIVEN IN CLAUSE 1.1. IN THE RECITAL CLAUSE IT HAS BEEN PROVI DED THAT THE ASSESSEE COMPANY MAY REQUIRE MENLO INDIA TO PERFOR M LOGISTICS SERVICES SUCH AS TRANSPORT, PROCUREMENT, CUSTOM CLE ARANCE, SORTING, DELIVERY, WAREHOUSING AND PICKING UP SERVICES (LOCA L SERVICES) WITHIN INDIA (LOCAL OPERATING AREA). IT HAS FURTHER BEEN P ROVIDED THAT MENLO INDIA MAY ALSO SEEK SIMILAR SERVICES FROM THE ASSES SEECOMPANY SUCH AS TRANSPORT, PROCUREMENT, CUSTOMS CLEARANCE, SORTI NG, DELIVERY, WAREHOUSING AND PICK UP SERVICES (INTERNATIONAL SER VICES) OUTSIDE INDIA. IN THE PRESENT APPEAL WE ARE CONCERNED WITH THE 'INTERNATIONAL SERVICES' PROVIDED BY THE ASSESSEE TO MENLO OUTSIDE INDIA. THESE SERVICES COMPRISE OF TRANSPORT, PROCUREMENT, CUSTOM S CLEARANCE, SORTING, WAREHOUSING AND PICK UP SERVICES ON THE CA RGO EXPORTED BY MENLO ON BEHALF OF ITS CUSTOMERS. HAVING NOTED THE NATURE OF SERVICES PROVIDED BY THE ASSESSEE OUTSIDE INDIA, FOR WHICH M ENLO INDIA MADE THE PAYMENT, LET US CONSIDER IF THESE CAN BE DESCRI BED AS MANAGERIAL OR TECHNICAL OR CONSULTANCY SERVICES. ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 20 OF 29 7. FIRST WE WILL CONSIDER THE AMBIT OF 'MANAGERIAL SERVICES' TO TEST WHETHER THE INSTANT SERVICES CAN QUALIFY TO BE SO C ALLED. ORDINARILY THE MANAGERIAL SERVICES MEAN MANAGING THE AFFAIRS BY LA YING DOWN CERTAIN POLICIES, STANDARDS AND PROCEDURES AND THEN EVALUAT ING THE ACTUAL PERFORMANCE IN THE LIGHT OF THE PROCEDURES SO LAID DOWN. THE MANAGERIAL SERVICES CONTEMPLATE NOT ONLY EXECUTION BUT ALSO THE PLANNING PART OF THE ACTIVITY TO BE DONE. IF THE OV ERALL PLANNING ASPECT IS MISSING AND ONE HAS TO FOLLOW A DIRECTION FROM THE OTHER FOR EXECUTING PARTICULAR JOB IN A PARTICULAR MANNER, IT CANNOT BE SAID THAT THE FORMER IS MANAGING THAT AFFAIR. IT WOULD MEAN THAT THE DIRECT IONS OF THE LATTER ARE EXECUTED SIMPLICITY WITHOUT THERE BEING ANY PLANNIN G PART INVOLVED IN THE EXECUTION AND ALSO THE EVALUATION OF THE PERFOR MANCE. IN THE ABSENCE OF ANY SPECIFIC DEFINITION OF THE PHRASE 'M ANAGERIAL SERVICES' AS USED IN SECTION 9(1)(VII) DEFINING THE 'FEES FOR TECHNICAL SERVICES', IT NEEDS TO BE CONSIDERED IN A COMMERCIAL SENSE. IT CA NNOT BE INTERPRETED IN A NARROW SENSE TO MEAN SIMPLY EXECUTING THE DIRE CTIONS OF THE OTHER FOR DOING A SPECIFIC TASK. FOR INSTANCE, IF GOODS A RE TO BE LOADED AND SOME WORKER IS INSTRUCTED TO PLACE THE GOODS ON A C ARRIER IN A PARTICULAR MANNER, THE ACT OF THE WORKER IN PLACING THE GOODS IN THE PRESCRIBED MANNER, CANNOT BE DESCRIBED AS MANAGING THE GOODS. IT IS A SIMPLE DIRECTION GIVEN TO THE WORKER WHO HAS TO EXECUTE IT IN THE WAY PRESCRIBED. IT IS QUITE NATURAL THAT SOME SORT OF A PPLICATION OF MIND IS REQUIRED IN EACH AND EVERY ASPECT OF THE WORK DONE. AS IN THE ABOVE 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 DESC RIBED AS MANAGING THE GOODS BECAUSE HE SIMPLY FOLLOWED THE DIRECTION GIVEN TO HIM. ON THE OTHER HAND, 'MANAGING' ENCOMPASSES NOT ONLY THE SIMPLE EXECUTION OF A WORK, BUT ALSO CERTAIN OTHER ASPECTS, SUCH AS PLANNING FOR THE WAY IN WHICH THE EXECUTION IS TO BE DONE COUPLED WITH T HE 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. 8. ADVERTING TO THE FACTS OF THE INSTANT CASE IT IS OBSERVED THAT THE ASSESSEE PERFORMED FREIGHT AND LOGISTICS SERVICES O UTSIDE INDIA IN RESPECT OF CONSIGNMENTS ORIGINATING FROM INDIA UNDE RTAKEN TO BE DELIVERED BY MENLO INDIA. THE ROLE OF THE ASSESSEE IN THE ENTIRE TRANSACTION WAS TO PERFORM ONLY THE DESTINATION SER VICES OUTSIDE INDIA BY UNLOADING AND LOADING OF CONSIGNMENT, CUSTOM CLE ARANCE AND TRANSPORTATION TO THE ULTIMATE CUSTOMER. IN OUR CON SIDERED OPINION, IT IS TOO MUCH TO CATEGORIZE SUCH RESTRICTED SERVICES AS MANAGERIAL SERVICES. WE, THEREFORE, JETTISON THIS CONTENTION R AISED ON BEHALF OF THE REVENUE. 9. NOW WE TAKE UP THE NEXT COMPONENT OF THE DEFINIT ION OF 'FEES FOR TECHNICAL SERVICES', BEING 'CONSULTANCY SERVICES', WHICH HAS BEEN PRESSED INTO SERVICE BY THE LEARNED CIT(A) TO FORTI FY HIS VIEW THAT THE AMOUNT RECEIVED BY THE ASSESSEE IS COVERED WITHIN S ECTION 9(1)(VII). ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 21 OF 29 THE WORD 'CONSULTANCY' MEANS GIVING SOME SORT OF CO NSULTATION DE HORS THE PERFORMANCE OR THE EXECUTION OF ANY WORK. IT IS ONLY WHEN SOME CONSIDERATION IS GIVEN FOR RENDERING SOME ADVI CE OR OPINION ETC., THAT THE SAME FALLS WITHIN THE SCOPE OF 'CONSULTANC Y SERVICES'. THE WORD 'CONSULTANCY' EXCLUDES ACTUAL 'EXECUTION'. THE NATURE OF SERVICES, BEING FREIGHT AND LOGISTICS SERVICES PROVIDED BY TH E ASSESSEE TO MENLO INDIA HAS NOT BEEN DISPUTED BY THE AUTHORITIES BELO W. THERE IS NOTHING LIKE GIVING ANY CONSULTATION WORTH THE NAME. RATHER SUCH PAYMENT IS WHOLLY AND EXCLUSIVELY FOR THE EXECUTION IN THE SHA PE OF TRANSPORT, PROCUREMENT, CUSTOMS CLEARANCE, DELIVERY, WAREHOUSI NG AND PICKING UP SERVICES. THAT BEING THE POSITION, WE OPINE THAT TH E PAYMENT IN LIEU OF FREIGHT AND LOGISTICS SERVICES CANNOT BE RANKED AS CONSULTANCY SERVICES. 10. THE ONLY LEFT OVER COMPONENT OF THE DEFINITION OF 'FEES FOR TECHNICAL SERVICES' TAKEN NOTE OF BY THE LD. CIT(A) IS 'TECHN ICAL SERVICES'. HE OBSERVED THAT THE ASSESSEE'S BUSINESS STRUCTURE IS TIME BOUND SERVICE COUPLED WITH CONTINUOUS REAL TIME TRANSMISSION OF I NFORMATION BY USING AND ALSO MAKING AVAILABLE ITS TECHNOLOGY IN THE FOR M OF SOPHISTICATED EQUIPMENTS AND SOFTWARE ETC. THE LEARNED CIT(A) HAS HELD THAT : 'IN ORDER TO ENSURE EFFICIENT AND TIMELY DELIVERY AND T O PROVIDE CONTINUOUS REAL TIME INFORMATION, THE APPELLANT IS REQUIRED TO USE SOPHISTICATED TECHNOLOGY FOR WHICH THE INDIAN ENTITY IS ALSO EQUA LLY INVOLVED AND TO WHOM THE APPELLANT IS COMMITTED TO PROVIDING THE RE QUISITE SOFTWARE AND EQUIPMENT'. THE LEARNED CIT(A) HAS ALSO ACCENTU ATED ON THE CLAUSE 2 OF THE AGREEMENT WHICH READS AS UNDER: '2. CONTRACTOR SHALL SEPARATELY EXECUTE A TECHNOLOG Y AND SOFTWARE LICENSE AGREEMENT FOR THE PROVISION OF COMPUTER EQU IPMENT AND SOFTWARE SUPPLIED BY SCS. CONTRACTOR SHALL SEPARATE LY EXECUTE A TRADEMARK LICENSE AGREEMENT FOR THE USE OF ANY MARK S OR BRANDS OWNED BY UNITED PARCEL SERVICE OF AMERICA, INC. THE FEE PAYABLE BY CONTRACTOR UNDER PARAGRAPH 3.1 WILL NOT INCLUDE ANY ROYALTY AMOUNT RELATING TO THE USE OF INTANGIBLE PROPERTY OR INFOR MATION.' 11. ON GOING THROUGH CLAUSE 2 OF THE AGREEMENT, IT IS OBVIOUS THAT MENLO INDIA SHALL 'SEPARATELY EXECUTE A TECHNOLOGY AND SOFTWARE LICENSE AGREEMENT' FOR THE PROVISION OF COMPUTER EQ UIPMENT AND SOFTWARE SUPPLIED BY THE ASSESSEE. IT IS NOBODY'S C ASE THAT THE CONSIDERATION IN QUESTION RELATES TO THE SUPPLY OF ANY COMPUTER EQUIPMENT AND SOFTWARE BY THE ASSESSEE TO MENLO IND IA. WE FAIL TO APPRECIATE AS TO HOW THIS CLAUSE 2 MAKES THE SERVIC ES PROVIDED BY THE ASSESSEE AS 'TECHNICAL'. RATHER CLAUSE 2 MANDATES T O EXECUTE A SEPARATE TECHNOLOGY AND SOFTWARE LICENSE AGREEMENT FOR THE PROVISION OF COMPUTER EQUIPMENT AND SOFTWARE. HOW IS IT THAT THE CONSIDERATION FOR THE SERVICES CAN BE ATTRIBUTED TO A PROPOSED AG REEMENT, WHICH HAS YET TO SEE THE LIGHT OF THE DAY. 12. THE LEARNED CIT(A) HAS ALSO HARPED ON 'TRANSPOR TATION OF TIME SENSITIVE PACKAGES' WITH A VIEW TO BRING THE SERVIC ES PROVIDED BY THE ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 22 OF 29 ASSESSEE WITHIN THE FOLD OF 'TECHNICAL SERVICES'. I N REACHING THIS CONCLUSION THE LEARNED CIT(A) ALSO RELIED ON THE OR DER PASSED BY THE MUMBAI BENCH OF THE TRIBUNAL IN BLUE DART EXPRESS L IMITED V. JCIT. LET US EXAMINE THE FACTS OF THAT CASE. THE ASSESSEE THE RE CLAIMED DEDUCTION U/S 80O IN RESPECT OF ITS FOREIGN EXCHAN GE EARNINGS FOR RENDERING TECHNICAL / PROFESSIONAL SERVICES TO A US MULTI INTERNATIONAL COMPANY. DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE A.O. REQUIRED THE ASSESSEE TO FURNISH THE NATURE OF SERV ICES RENDERED AND ALSO THE CALCULATION OF DEDUCTION. THE ASSESSEE DID IT. ON BEING SATISFIED THE A.O. GRANTED DEDUCTION U/S 80O. BY E XERCISING THE POWER U/S 263, THE LEARNED CIT HELD THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE TO T HE EXTENT OF GRANTING DEDUCTION U/S 800. WHEN THE MATTER CAME UP BEFORE THE TRIBUNAL, IT WAS OBSERVED THAT THE ISSUE IS DEBATABLE AND HENCE OUTSIDE THE AMBIT OF SECTION 263. APART FROM THAT, IT WAS ALSO OBSERV ED THAT THE ASSESSEE WAS ENGAGED IN INTEGRATED AIR AND GROUND TRANSPORTA TION OF TIME SENSITIVE PACKAGES TO VARIOUS DESTINATIONS RENDERIN G COMMERCIAL SERVICES. IT WAS IN THIS CONTEXT THAT THE ASSESSEE WAS HELD TO BE ELIGIBLE FOR DEDUCTION U/S 80O. AT THIS JUNCTURE IT WILL BE USEFUL TO NOTE THAT AT THE MATERIAL TIME SECTION 80O PROVIDED FOR DEDUCTI ON ON ANY 'INCOME BY WAY OF ROYALTY, COMMISSION, FEES OR ANY SIMILAR PAYMENT RECEIVED BY THE ASSESSEE FROM THE GOVERNMENT OF A FOREIGN STATE OR A FOREIGN ENTERPRISE IN CONSIDERATION FOR THE USE OUTSIDE IND IA OF ANY PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS , OR SIMILAR PROPERTY RIGHT, OR INFORMATION CONCERNING INDUSTRIAL, COMMER CIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL MADE AVAILABLE OR PR OVIDED OR AGREED TO BE MADE AVAILABLE OR PROVIDED TO SUCH GOVERNMENT OR ENTERPRISE BY THE ASSESSEE, OR IN CONSIDERATION OF TECHNICAL OR PROFE SSIONAL SERVICES RENDERED OR AGREED TO BE RENDERED OUTSIDE INDIA TO SUCH GOVERNMENT OR ENTERPRISE BY THE ASSESSEE'. FROM THE ABOVE QUOT ED PART OF SEC. 80 O, IT CAN BE SEEN THAT THE DEDUCTION AT THAT TIME W AS AVAILABLE NOT ONLY IN RESPECT OF INCOME AS A CONSIDERATION FOR THE USE OF 'TECHNICAL OR PROFESSIONAL SERVICES' BUT ALSO ANY 'COMMERCIAL.... KNOWLEDGE EXPERIENCE OR SKILL'. THESES TWO SOURCES ARE DISTIN CT FROM EACH OTHER AS CAN BE SEEN FROM THE EMPLOYMENT OF WORD 'OR' BETWEE N THEM. IN ORDER TO QUALIFY FOR DEDUCTION UNDER THIS SECTION, THE IN COME COULD HAVE RESULTED FROM THE RENDERING OF 'TECHNICAL OR PROFES SIONAL SERVICES' OR COMMERCIAL KNOWLEDGE, EXPERIENCE OR SKILL ETC. WHEN THE TRIBUNAL IN BLUE DART EXPRESS LIMITED (SUPRA) HELD THE ASSESSEE TO BE ENTITLED TO DEDUCTION, IT WAS CONSIDERING ALL THE SPECIES OF TH E SERVICES SET OUT IN SECTION 80O AND NOT ONLY 'TECHNICAL OR PROFESSIONA L SERVICES'. IT WAS IN THE LIGHT OF SUCH LANGUAGE OF THE PROVISION THAT TH E TRIBUNAL HELD THE ASSESSEE TO BE ELIGIBLE FOR RELIEF U/S 80O. WE ARE CURRENTLY DEALING WITH SECTION 9(1)(VII), BEING THE 'FEES FOR TECHNIC AL SERVICES' AND THE DEFINITION OF SUCH EXPRESSION IS RESTRICTED ONLY TO 'MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES' AND DOES NOT HAVE ANY SUCH ELEMENTS AS ARE THERE IN SECTION 80O. THE DECISION IN THE CASE OF BLUE DART EXPRESS LIMITED (SUPRA) CAME UP FOR CONSIDERATION BEFORE TH E MUMBAI BENCH OF THE TRIBUNAL IN DAMPSKIBSSELSKABET AF 1912 V. ADDL. DIT (INTERNATIONAL TAXATION) [(2011) 51 DTR 148] (TO WHICH ONE OF US, NAMELY, THE LD. JM ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 23 OF 29 IS PARTY) IN WHICH IT HAS BEEN HELD THAT THE RATIO LAID DOWN IN THAT CASE CANNOT BE UNIVERSALLY APPLIED. DUE TO MATERIAL DIFF ERENCE IN THE LANGUAGE OF SECTIONS 9(1)(VII) AND 80O AS DISCUSSE D ABOVE, WE HOLD THAT THE DECISION IN BLUE DART EXPRESS LIMITED (SUP RA), CAN NOT BE HELD TO BE SUPPORTING THE CASE OF THE REVENUE. 13. THE LD. CIT(A) IN REACHING THE CONCLUSION THAT THE ASSESSEE RENDERED 'TECHNICAL SERVICES' ALSO OBSERVED THAT IT S 'BUSINESS STRUCTURE IS TIME BOUND SERVICE COUPLED WITH CONTINUOUS REAL TIME TRANSMISSION OF INFORMATION BY USING AND ALSO MAKING AVAILABLE ADVA NCED TECHNOLOGY IN THE FORM OF SOPHISTICATED EQUIPMENT AND SOFTWARE.' HE WAS SWAYED BY THE CONTENTION OF THE ASSESSEE THAT THE MANLO INDIA OR THE ULTIMATE CUSTOMER COULD TRACK THE MOVEMENT OF CARGO WITH THE HELP OF COMPUTERS. WE HAVE NOTED SUPRA THAT THE CONSIDERATI ON RECEIVED BY THE ASSESSEE DID NOT INCLUDE ANY CONSIDERATION FOR THE SUPPLY OF ANY EQUIPMENT TO MANLO INDIA. NOW WE WILL EXAMINE AS TO WHETHER THE USE OF COMPUTER IN ANY MANNER FOR KNOWING THE LOCATION OF THE CARGO AT A PARTICULAR TIME, CAN BE HELD AS TECHNICAL SERVICE. 14. EXPLANATION TO SECTION 9(1)(VII) DEFINES THE EX PRESSION '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. 15. THE PRINCIPLE OF NOSCITUR A SOCIIS MANDATES THA T THE 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 BEEN D EFINED IN THE ACT, THE HON'BLE SUPREME COURT HAS APPLIED THE PRINCIPLE OF NOSCITUR A SOCIIS IN SEVERAL CASES INCLUDING ARAVINDAPARAMILA WORKS V. CIT [(1999) 237 ITR 284 (SC)]. AS NOTED ABOVE THE WORD 'TECHNICAL' HAS BEEN SANDWICHED BETWEEN THE WORDS 'MANAGERIAL' AND 'CONSULTANCY' IN EXPLANATION 2 TO SEC. 9(1)(VII) AND NO DEFINITION H AS BEEN ASSIGNED TO THE 'TECHNICAL' SERVICES IN THE RELEVANT PROVISION, WE NEED TO ASCERTAIN THE MEANING OF THE 'TECHNICAL SERVICES' FROM THE OV ERALL MEANING OF THE WORDS 'MANAGERIAL' AND 'CONSULTANCY' SERVICES BY AP PLYING THE PRINCIPLE OF NOSTICUR A SOCIIS. IT HAS BEEN HELD ABOVE THAT T HE 'MANAGERIAL SERVICES' AND 'CONSULTANCY SERVICES' PRESUPPOSE SO ME SORT OF DIRECT HUMAN INVOLVEMENT. THESE SERVICES CANNOT BE CONCEIV ED WITHOUT THE DIRECT INVOLVEMENT OF MAN. THESE SERVICES CAN BE RE NDERED WITH OR WITHOUT ANY EQUIPMENT, BUT THE HUMAN INVOLVEMENT IS INEVITABLE. MOVING IN THE LIGHT OF THIS RULE, THERE REMAINS NO DOUBT WHATSOEVER THAT THE TECHNICAL SERVICES CANNOT BE CONTEMPLATED WITHO UT THE DIRECT INVOLVEMENT OF HUMAN ENDEAVOR. WHERE SIMPLY AN EQUI PMENT OR A STANDARD FACILITY ALBEIT DEVELOPED OR MANUFACTURED WITH THE USE OF TECHNOLOGY IS USED, SUCH A USER CANNOT BE CHARACTER IZED AS USING 'TECHNICAL SERVICES'. 16. COMING BACK TO THE FACTS OF THE PRESENT CASE, E VEN IF WE ACCEPT THE LEARNED FIRST APPELLATE AUTHORITY'S POINT OF VIEW T HAT THE COMPUTER COULD ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 24 OF 29 BE USED IN TRACING THE MOVEMENT OF THE GOODS, SUCH USE OF COMPUTER, THOUGH INDIRECT, REMOTE AND NOT NECESSARY, CAN NOT BRING THE PAYMENT FOR FREIGHT AND LOGISTICS SERVICES WITHIN THE PURVI EW OF 'TECHNICAL SERVICES'. THE ESSENCE OF THE CONSIDERATION FOR THE PAYMENT IS RENDERING OF SERVICES AND NOT THE USE OF COMPUTER. IF INCIDENTALLY COMPUTER IS USED AT ANY STAGE, WHICH IS OTHERWISE N OT NECESSARY FOR RENDERING SUCH SERVICES, THE PAYMENT FOR FREIGHT AN D LOGISTICS WILL NOT PARTAKE OF THE CHARACTER OF FEES OF 'TECHNICAL SERV ICES'. WE, THEREFORE, REPEL THIS CONTENTION RAISED ON BEHALF OF THE REVEN UE. 17. THUS IT CAN BE NOTICED THAT THE PAYMENT MADE TO THE ASSESSEE 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).' 40. WE MAY ALSO TAKE NOTE OF ANOTHER DECISION OF A COORDINATE BENCH DEALING WITH MATERIALLY SIMILAR QUESTION DEALING WITH TAXAB ILITY OF INCOME IN THE HANDS OF NON-RESIDENT COMMISSION AGENTS, REPRESENTING IND IAN PRINCIPAL, IN WHICH SIMILAR ACTIVITIES WERE SAID TO HAVE BEEN PERFORMED . IN THE CASE OF ARMYESH GLOBAL V. ASSTT. CIT [2012] 51 SOT 564/21 TAXMANN.C OM 130 (MUM.), THE COORDINATE BENCH HAS, INTER ALIA, OBSERVED AS FOLLO WS: '16. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE FACTS ON RECORD. THE LEARNED ASSESSING OFFICER TRIED TO INVOKE THE D EFINITIONS OF TECHNICAL SERVICES ON THE COMMISSION PAID TO THE FO REIGN COMPANY. THE REASON BEING THAT COMMISSION PAYMENT TO NON-RESIDEN T IS NOT COVERED BY THE PROVISIONS OF SECTION 40(A)(IA), AS IT HAS O NLY APPLICABLE TO ANY INTEREST ROYALTY, FEES FOR TECHNICAL SERVICES OR OT HER SUM CHARGEABLE UNDER THIS ACT WHICH PAYABLE OUTSIDE INDIA ON WHICH TAX IS DEDUCTIBLE AT SOURCE BUT HAS NOT BEEN DEDUCTED. THE ASSESSING OFF ICER MADE OUT A CASE THAT THE COMMISSION PAID IS TEES FOR TECHNICAL SERVICES' WITHOUT SPECIFYING WHAT ARE THE TECHNICAL/MANAGERIAL SERVIC ES RENDERED BY THE SAID COMPANY TO THE ASSESSEE. ASSESSEE INDEED ENTER ED INTO AN AGREEMENT FOR PROPAGATION OF ITS HANDICRAFT PRODUCT S WITH THE NON- RESIDENT COMPANY. THE COPIES OF THE AGREEMENT HAVE BEEN PLACED BEFORE THE AUTHORITIES. THE AGREEMENT CLEARLY SHOWS THAT THE NON- RESIDENT COMPANY WAS TO GET COMMISSION FOR PROMOTIN G THE PRODUCTS OF THE ASSESSEE COMPANY AND RENDERING INCIDENTAL SERVI CES ON SALES SUCH AS RECOVERY ETC. FOR DOING EXPORT SALES. IT IS ALSO RESPONSIBILITY OF THE NON-RESIDENT COMPANY TO DISSEMINATE THE INFORMATION AND INQUIRE ABOUT VARIOUS IMPORTERS IN VARIOUS COUNTRIES SO THAT ASSE SSEE EXPORTS CAN BE INCREASED. THE AGREEMENT CLEARLY SHOWS THAT NON-RES IDENT COMPANY WAS TO GET THE COMMISSION FOR PROMOTING THE PRODUCT OF ASSESSEE COMPANY AFTER SALES PROCEEDS ARE RECEIVED. THE DETA ILED TERMS OF THE AGREEMENT ARE AS UNDER: 'AGENCY AGREEMENT ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 25 OF 29 IN THIS AGREEMENT BETWEEN M/S ARMAYESH GLOBAL, KAMA NWALA CHAMBERS, 2ND FLOOR, SIR P.M. ROAD, FORT, MUMBAI 40 0 001, INDIA HEREINAFTER REFERRED TO AS 'PRINCIPAL' AND INDIJACK LIMITED, 99 BRECK NOCK ROAD, LONDON N19 5 AB, U.K. HEREINAFTER REFE RRED TO AS 'AGENT' THE FOLLOWING IS AGREED UPON: - ARTICLE 1- OBJECT OF AGREEMENT 1.1. THE PRINCIPAL ENTRUSTS THE AGENT WITH THE NON EXCLUSIVE AGENCY FOR THE FOLLOWING CONTRACTUAL TERRITORY (AREA): WORLDWI DE 1.2. THE PRINCIPAL ALSO HAS THE RIGHT TO OPERATE AC TIVELY' IN HE AFOREMENTIONED TERRITORY (AREA). 1.3. THE AGENCY COVERS THE FOLLOWING PRODUCTS: HAND EMBROIDERED PRODUCTS OF ANY AND ALL KINDS. 1.4. THE AGENT COVENANTS AND AGREES TO REPRESENT TH E PRINCIPAL ON A COMMISSION BASIS. ARTICLE 2 DUTIES OF THE AGENT 2.1 IT SHALL BE THE AGENT'S DUTY TO NEGOTIATE CONTR ACTS WITH THE OVERSEAS PARTY. FURTHERMORE, THE AGENT SHALL ACT ON THE PRIN CIPAL'S BEHALF IN CONFORMITY WITH PROVISIONS HEREINAFTER ENUMERATED. THE AGENT SHALL NOT BE AUTHORIZED TO ENTER INTO A CONTRACT OR OTHERWISE TO BIND THE PRINCIPAL. THE PRINCIPAL SHALL BE FREE TO CONCLUDE, OR TO REFU SE THE CONCLUSION OF A CONTRACT NEGOTIATED BY THE AGENT. 2.2 WHILE NEGOTIATING CONTRACTS OF SALE THE AGENT S HALL ACT IN CONFORMITY WITH ALL THE CONDITIONS AND PARTICULARLY OF DELIVER Y AND PAYMENT AS FIXED BY THE PRINCIPAL. 2.3 THE AGENT SHALL BE RESPONSIBLE FOR NEGOTIATING WITH ALL PARTIES IN THEIR TERRITORY (AREA). THE AGENT SHALL TRAVEL IN T HEIR TERRITORY (AREA) REGULARLY TO VISIT CUSTOMERS, AND IS BOUND TO KEEP CONCLUDED CONTRACTS SECRET. THE AGENT SHALL ALWAYS KEEP THE PRINCIPAL I NFORMED ABOUT THEIR ACTIVITIES AND SHALL SUPPLY THE PRINCIPAL, AT LEAST ONCE EVERY QUARTER, WITH REPORTS ON ECONOMIC DEVELOPMENTS AND MARKET CO NDITIONS IN THE TERRITORY (AREA) AND AT THE SAME TIME, CONVEY TO TH E PRINCIPAL, THE AGENT'S OBSERVATIONS WITH RESPECT TO ACTIVITIES OF COMPETITORS. THE AGENT SHALL REPORT IMMEDIATELY ON PARTICULAR PROFIT ABLE BUSINESS POSSIBILITIES AND EXTRAORDINARY EVENTS. 2.4. THE AGENT SHALL ABSTAIN FROM ANY COMPETITION W HATSOEVER AGAINST THE PRINCIPAL AND SHALL NOT PROMOTE COMPETITION BY THIRD PERSONS. IN PARTICULAR, THE AGENT SHALL NOT ACT FOR COMPETITIVE FIRMS AS A COMMERCIAL AGENT, COMMISSION MERCHANT OR DISTRIBUTOR, NOR SHAL L THE AGENT ASSOCIATE DIRECTLY OR INDIRECTLY WITH COMPETITIVE F IRMS. THE AGENT SHALL NOT, FOR ALL TIME EXPLOIT OR DISCLOSE TO OTHER PERS ONS ANY BUSINESS AND ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 26 OF 29 PRODUCTION SECRETS OF THE PRINCIPAL THAT HAVE BEEN COMMUNICATED TO THEM OR WHICH THEY HAVE OTHERWISE COME TO KNOW, IRR ESPECTIVE OF WHETHER OR NOT THE CONTRACT IS STILL IN FORCE. 2.5 THE AGENT SHALL OBSERVE THE RULES OF FAIR COMPE TITION AND BE RESPONSIBLE FOR ANY VIOLATION OF THE SAME. 2.6 THE AGENT IS NOT AUTHORIZED TO ACCEPT PAYMENTS DIRECTLY IN THEIR OWN NAME BUT SHALL ASSIST THE PRINCIPAL IN COLLECTI NG OUTSTANDING PAYMENTS. THE AGENT IS ALSO AUTHORIZED TO ACCEPT NO TIFICATION OF DEFECTS BY A CUSTOMER, AS WELL AS THE STATEMENT OF A CUSTOM ER THAT HE WILL THE GOODS AT THE DISPOSABLE OF THE PRINCIPAL OR ANY SIM ILAR STATEMENT BY WHICH THE CUSTOMER EXERCISES HIS RIGHTS RESULTING F ROM DEFECTIVE DELIVERY. THE AGENT SHALL IMMEDIATELY II PRINCIPAL AND SHALL SEE TO IT THAT THE NECESSARY EVIDENCE IN FAVOUR OF THE PRINCIPAL I S OBTAINED. 2.7 THE AGENT SHALL ESTABLISH BUSINESS RELATIONS ON LY WITH SUCH CUSTOMERS WHOSE SOLVENCY IS SATISFACTORY TO THE BES T OF THE KNOWLEDGE AND BELIEF OF THE AGENT. 17. THUS AS CAN BE SEEN FROM THE ABOVE, ALL THE TER MS DO INDICATE THAT THE SAID COMPANY WAS ONLY ACTING AS AN AGENT ON COM MISSION BASIS AND HAS NOT BEEN PROVIDING ANY MANAGERIAL/TECHNICAL SERVICES. FURTHER THERE IS NO EVIDENCE ON RECORD THAT THEY ARE PROVID ING ANY TECHNICAL/MANAGERIAL SERVICES. THE SAID COMPANY WAS RESPONSIBLE FOR ARRANGING TIMELY PAYMENT FROM THE CUSTOMERS AND COM MISSION WAS PAID ONLY AFTER THE SALES AMOUNT WAS RECEIVED. SINC E THE SERVICES WERE RENDERED OUTSIDE INDIA, THE PROVISIONS OF SECTION 5 CANNOT BE APPLIED TO THE COMMISSION PAID SO AS TO MAKE IT TAXABLE IN IND IA. 18. THIS ASPECT CAN ALSO BE EXAMINED IN ANOTHER WAY AS ALREADY GIVEN A FINDING BY THE BENCH EARLIER AND WHICH IS ALSO NO T IN DISPUTE, THAT THE FOREIGN COMPANY DOES NOT HAVE ANY PE IN INDIA. THER EFORE, THE COMMISSION PAID TO THE FOREIGN COMPANY WHICH HAS TO BE CONSIDERED AS BUSINESS INCOME AND CANNOT BE TAXED IN INDIA AS PER THE DTAA BETWEEN INDIA AND UK. THE DEFINITION OF 'FEE FOR TE CHNICAL SERVICES' BETWEEN UK AND INDIA DOES NOT INCLUDE MANAGERIAL SE RVICES. HOWEVER, NEITHER THE ASSESSING OFFICER NOR THE CIT (A) CONSI DERED THE ISSUE OF DTAA, EVEN THOUGH ASSESSEE MENTIONED THE SAME IN IT S SUBMISSIONS BEFORE THE AUTHORITIES. THE DEFINITION OF TECHNICAL SERVICES AS PER THE INCOME TAX ACT IS AS UNDER: '9.(1) THE FOLLOWING INCOMES SHALL BE DEEMED TO ACC RUE OR ARISE IN INDIA: (I) & (VI )** ** ** (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 FEES ARE PAYABLE IN RESPECT OF SERVICES UTILIZED IN A BUSINE SS OR PROFESSION ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 27 OF 29 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 FEE S ARE PAYABLE IN RESPECT OF SERVICES UTILIZED IN A BUSINE SS OR PROFESSION CARRIED ON BY SUCH PERSON IN INDIA OR FOR THE PURPO SES OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE IN INDIA : [PROVIDED THAT NOTHING CONTAINED IN THIS CLAUSE SHA LL APPLY IN RELATION TO ANY INCOME BY WAY OF FEES FOR TECHNICAL SERVICES PA YABLE IN PURSUANCE OF AN AGREEMENT MADE BEFORE THE 1ST DAY OF APRIL, 1 976, AND APPROVED BY THE CENTRAL GOVERNMENT.] [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 AG REEMENT IS MADE IN ACCORDANCE WITH PROPOSALS APPROVED BY THE CENTRA L GOVERNMENT BEFORE THAT DATE.] EXPLANATION [2].FOR THE PURPOSES OF THIS CLAUSE, ' FEES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATION (INCLUDING ANY LU MP SUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SE RVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION ASSEMBLY, MINING OR LIKE PROJECT UNDER TAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD 'SALARIES'. 19. AS CAN BE SEEN FROM THE ABOVE SECTION 9(1)(VII) (B), FEE PAYABLE FOR THE PURPOSES OF MAKING OR EARNING INCOME FROM ANY S OURCE OUTSIDE INDIA IS NOT INCLUDED IN THE DEFINITION. THE AMOUNT HAS TO BE CONSIDERED AS BUSINESS INCOME. SINCE THE SERVICES ARE RENDERED OUTSIDE INDIA, THAT AMOUNT IS NOT TAXABLE AS IT DOES NOT ACCRUE OR ARISE IN INDIA. THE SAME VIEW WAS CONSIDERED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CEAT INTERNATIONAL S.A. V. CIT237 ITR 859, WHERE CERTAIN EXPORT COMMISSION WAS PAID TO A NON-RESIDENT COMPAN Y AND IT WAS HELD THAT THE ASSESSEE DID NOT IMPART ANY INFORMATI ON CONCERNING TECHNICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNO WLEDGE EXPORTS OR SKILL, NOR RENDERED ANY MANAGERIAL TECHNICAL OR CONSULTANC Y SERVICES. THE COMMISSION ATTRIBUTABLE TO THE SERVICES RENDERED CA NNOT BE REGARDED AS ROYALTY OR FEES FOR TECHNICAL SERVICES AND IT WA S HELD THAT THE SAME WAS NOT TAXABLE UNDER SECTION 9(1)(VII). SIMILAR IS SUE WAS ALSO CONSIDERED BY THE HON'BLE DELHI HIGH COURT IN THE C ASE OF DIRECTOR OF INCOME TAX V. SHERATON INTERNATIONAL INC.313 ITR 26 7 WHERE CERTAIN PAYMENTS FOR ADVERTISING, PUBLICITY AND SALES PROMO TION SERVICES WERE CONSIDERED AND HELD THAT THOSE PAYMENTS CANNOT BE C ONSIDERED AS EITHER ROYALTY OR FOR TECHNICAL SERVICES. SINCE THE NON-RESIDENT DOES NOT HAVE ANY PE IN INDIA, SUCH INCOME WHICH IS TO B E CONSIDERED AS BUSINESS INCOME WAS NOT TAXABLE IN INDIA.' 41. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS S O EXPRESSED BY THE COORDINATE BENCH. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ITA NO. 1825/AHD/2017 ACIT VS. INDO COLCHEM PVT LTD ASSESSMENT YEAR : 2014-15 PAGE 28 OF 29 ENTIRETY OF THE CASE, WE UPHOLD WELL REASONING FIND INGS OF THE LEARNED CIT(A) THAT THE COMMISSION PAYMENTS MADE TO THE NON-RESIDE NT AGENTS DID NOT HAVE ANY TAXABILITY IN INDIA, EVEN UNDER THE PROVISIONS OF THE DOMESTIC LAW I.E. SECTION 9. ONCE WE COME TO THE CONCLUSION THAT THE INCOME EMBEDDED IN THESE PAYMENTS DID NOT HAVE ANY TAX IMPLICATIONS IN INDIA, NO FAULT CAN BE FOUND IN NOT DEDUCTING TAX AT SOURCE FROM THESE PAY MENTS OR, FOR THAT PURPOSE, EVEN NOT APPROACHING THE ASSESSING OFFICER FOR ORDE R UNDER SECTION 195. IN OUR CONSIDERED VIEW, THE ASSESSEE, FOR THE DETAILED REASONS SET OUR ABOVE, DID NOT HAVE TAX WITHHOLDING LIABILITY FROM THESE PAYME NTS. AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CE NTRE (P.) LTD. V. CIT [2010] 327 ITR 456/193 TAXMAN 234/7 TAXMANN.COM 18, PAYER IS BOUND TO WITHHOLD TAX FROM THE FOREIGN REMITTANCE ONLY IF TH E SUM PAID IS ASSESSABLE TO TAX IN INDIA. THE ASSESSEE CANNOT, THEREFORE, BE FA ULTED FOR NOT APPROACHING THE ASSESSING OFFICER UNDER SECTION 195 EITHER. AS REGARDS THE WITHDRAWAL OF THE CBDT CIRCULAR HOLDING THAT THE COMMISSION PAYME NTS TO NON-RESIDENT AGENTS ARE NOT TAXABLE IN INDIA, NOTHING REALLY TUR NS ON THE CIRCULAR, AS DE HORS THE AFORESAID CIRCULAR, WE HAVE ADJUDICATED UPON TH E TAXABILITY OF THE COMMISSION AGENT'S INCOME IN INDIA IN TERMS OF THE PROVISIONS OF THE INCOME TAX ACT AS ALSO THE RELEVANT TAX TREATY PROVISIONS. 4. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE COORDINATE BENCH. IN THIS VIEW OF THE MATTER, AND, RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF WE LSPUN CORPORATION LIMITED (SUPRA), WE DECLINE TO INTERFERE IN THE MATTER. ACC ORDINGLY, RELIEF GRANTED BY THE CIT(A) STANDS CONFIRMED AND APPROVED. 5. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOU NCED IN THE OPEN COURT TODAY ON THE 30 TH APRIL, 2019. SD/- SD/- MS. MADHUMITA ROY PRA MOD KUMAR (JUDICIAL MEMBER) (VICE PRESIDENT) AHMEDABAD, THE 30 TH DAY OF APRIL, 2019 *BT COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD