ACIT, Circle - 25, Kolkata, Kolkata V. Sri Subhatosh Majumder, Kolkata

ITA 2006/KOL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4166 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2020
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 08-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI CIT LD
• Assessee Lawyers: SHR; J P KHAITANM
• Keywords: Double taxation relief; Opportunity of being heard; Source of fund; Deemed to accrue or arise in india; Retrospective amendment; Advance ruling; Non-deduction of tax; Tangible material; TDS
• Section: 143(3); 195; 201; 113; 194J; 13; 22

Judgement Text

1 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER IN THE INCOME TAX APPELLATE TRIBUNAL C-SMCBENCH : KOLKATA [BEFORE SHRI A.T. VARKERY, JM & DR. ARJUN LAL SAI NI, AM ] I.TA NO. 2006/KOL/2017 A.Y 2011-12 A.C.I.T, CIR-25, KOLKATA VS. SRI SUBHATOSH MAJUMDER PAN: AGSPM 8745N APPELLANT RESPONDENT DATE OF HEARING 07-02-2020 DATE OF PRONOUNCEMENT 26.02.2020 FOR THE APPELLANT DR. P.K. SRIHARI, CIT. LD.DR FOR THE RESPONDENT S/SHRI J.P. KHAITANM SR. ADVOCA TE, & SHRI PRATYUSH JUHNJHUNWALA, ADVOCATE, LD.ARS ORDER SHRI A.T. VARKERY, JM THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAI NST THE ORDER DATED 05-05-2017 OF LD. CIT (APPEALS),- 7, KOLKATAFOR THE ASSESSMENT YEAR 2011-12. 2. THE SOLITARY GRIEVANCE OF THE REVENUE IN THIS AP PEAL IS AGAINST THE LD. CIT(A)S ACTION OF DELETING THE DISALLOWANCE OF RS.8,28,66,0 38/- MADE BY THE AO IN RESPECT OF PROFESSIONAL FEES PAID BY THE ASSESSEE TO VARIOUS F OREIGN ATTORNEYS U/S 40(A)(I) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT) ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE ON SUCH PAYMENTS U/S 195 OF THE ACT. THE GROUNDS TAKEN IN THE APPEAL ARE REPRODUCED HEREUNDER: GROUNDS OF APPEAL 1. THAT THE LD. CIT(A) HAS ERRED ACCORDING RELIEF T O THE ASSESSEE DESPITE THE FACT THAT TDS HAD NOT BEEN DEDUCTED U/S 194J OUT OF THE AMOUNTS PAYABLE AS FOREIGN ASSOCIATE FEES. 2 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER 2. THAT THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE FACT THAT THOUGH THE SERVICES WERE PERFORMED OUTSIDE INDIA, THEY WERE ES SENTIALLY FOR THE ASSESSEE'S BUSINESS/PROFESSION CARRIED OUT IN INDIA; THESE PAY MENTS MADE TO THE FOREIGN ASSOCIATES WHO ARE NON-RESIDENTS IN THE FORM OF PRO FESSIONAL FEES RESULTED IN ACCRUAL OF INCOME OF THE FOREIGN ASSOCIATES CONCERN ED IN INDIA WITHIN THE MEANING OF SECTION 9(1)(VII)(B) OF THE INCOME TAX ACT'1961 AND THE ASSESSEE WAS STATUTORILY REQUIRED TO DEDUCT TAX AT SOURCE U /S 195(1). 3. THAT THE LD. CIT(A) HAD WRONGLY OPINED THAT THE SERVICES RENDERED BY THE ASSESSEE ARE IN NATURE OF LEGAL AND PROFESSIONAL SE RVICES AND THEY ARE NOT COVERED BY PROVISIONS OF SECTION 9(1)(VII)(B) EXPLA NATION (2), THEREFORE, NO TDS WAS DEDUCTIBLE ON SUCH FOREIGN REMITTANCE AND THER EFORE, DISALLOWANCE UNDER SECTION -; 40(A)(3) IS NOT JUSTIFIED. 4. THAT THE LD. CIT(A) HAS ERRED ACCORDING RELIEF T O THE ASSESSEE DESPITE THE FACT THAT THE PROCEDURAL ACTIVITIES RELATING TO THE BUSI NESS ACTIVITY OF THE ASSESSEE I.E. GRANT OF PATENT, TRADEMARK AND DESIGN IN ABROAD ARE HIGHLY TECHNICAL WORKS WHICH REQUIRES. SPECIAL SKILLS AND KNOWLEDGE IN RE SPECT OF PARTICULAR SUBJECT OR INVENTION OR FIELDS AND THAT COULD BE MET BY TECHN ICAL EXPERT ONLY. IN INSTANT CASE OF ASSESSEE THE FOREIGN LAW ATTORNEY FIRMS HA VE GIVEN EXPERT ADVICE TO THE PATENT APPLICANTS THAT HOW APPLICATION SHOULD BE F ILED AND WHAT CRITERIA SHOULD BE FULFILLED TO OBTAIN THE REQUIRED GRANT OF THE P ATENT AND SUCH ADVICE IS GIVEN DUE TO THEIR ABILITY ABOUT THE TECHNICAL KNOWLEDGE AND SKILL IN RESPECTIVE FIELDS. FOREIGN ATTORNEYS HAD ACTUALLY ACTED AS A CONSULTA NT HAVING SKILL, ACUMEN AND KNOWLEDGE IN THE SPECIALISED FIELD OF PATENT APPLIC ATION AND ITS GRANT IN OVERSEAS. THEY ALSO MANAGE THE WHOLE AFFAIRS OF APPLICATION OF PATENTS AND TRADEMARKS AND UNDERTAKE DIFFERENT PROCEDURES AND ACTIONS IN O BTAINING THE GRANT OF PATENTS AND TRADEMARKS IN COUNTRIES ABROAD ON BEHALF OF THE ASSESSEE AND ITS CLIENTS. THUS THE SERVICES OF FOREIGN ATTORNEYS WOULD FALL IN THE REALM OF 'MANAGERIAL, TECHNICAL, OR CONSULTANCY SERVICES' WITHIN THE AMBI T OF THE TERMS 'MANAGERIAL', 'TECHNICAL' AND 'CONSULTANCY' SERVICES AS CONTEMPLA TED IN SECTION 9(1)(VII) OF THE ACT. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IS A PATENT ATTORNEY WHO RENDERS SERVICES IN THE FIELD OF INTELLECTUAL PROPE RTY RIGHTS (IPRS) TO SEVERAL MULTINATIONALS AND MAJOR CORPORATES IN INDIA. FOR THE RELEVANT YEA R THE ASSESSEE FILED HIS RETURN OF INCOME ON 30.09.2011 DECLARING TOTAL INCOME OF RS.3,59,20, 481/-. THE CASE OF ASSESSEE WAS PICKED UP FOR SCRUTINY. IN THE COURSE OF ASSESSMENT THE AO REQUIRED THE APPELLANT TO PROVIDE THE DETAILS OF FOREIGN ASSOCIATE FEES OF RS.8,28,66,038 /- PAID DURING THE YEAR ALONG WITH THE DETAILS OF TAXES DEDUCTED AT SOURCE. THE ASSESSEE P ROVIDED THE BREAK-UP OF THE FEES PAID DURING THE YEAR AND CLAIMED THAT THE PAYMENTS WERE NOT LIABLE TO TAX IN INDIA AND THEREFORE DID NOT DEDUCT TAX AT SOURCE U/S 195 BEFORE MAKING FOREIGN REMITTANCES. ACCORDING TO AO HOWEVER THE PAYMENTS MADE BY THE ASSESSEE TO THE FO REIGN ATTORNEYS WERE IN CONNECTION 3 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER WITH PROFESSION CARRIED ON BY HIM IN INDIA AND THER EFORE SHOW CAUSED THE ASSESSEE TO EXPLAIN WHY THE EXPENDITURE IN QUESTION WOULD NOT BE DISALL OWED U/S 40(A)(I) OF THE ACT IN AS MUCH AS THE ACT OF THE ASSESSEE WAS IN CONTRAVENTION OF SECTION 195 OF THE ACT. THE SUBMISSION OF THE ASSESSEE IN THIS REGARD HAS BEEN EXTENSIVELY RE PRODUCED IN THE ASSESSMENT ORDER. THE AO HOWEVER DID NOT AGREE WITH THE SUBMISSIONS OF THE A SSESSEE BECAUSE IN HIS OPINION THE PAYMENTS MADE TO FOREIGN ATTORNEYS SQUARELY FELL WI THIN THE DEFINITION OF FEES FOR TECHNICAL SERVICES, DEFINED IN SECTION 9(1)(VII)(B) READ WITH EXPLANATION 2 OF THE ACT. THE AO NOTED THAT THE ASSESSEE WAS ENGAGED BY HIS CLIENTS FOR RE NDERING SERVICES IN THE FIELD OF INTELLECTUAL PROPERTY RIGHTS (IPRS) BOTH IN INDIA AND ABROAD. IN RELATION THERETO, THE ASSESSEE HAD OBTAINED TECHNICAL INFORMATION OR CONSULTANCY SERVI CES FROM FOREIGN ATTORNEYS. THE AO OBSERVED THAT ALTHOUGH THE SERVICES WERE RENDERED B Y THE FOREIGN ATTORNEYS OUTSIDE INDIA BUT THE SERVICES WERE ESSENTIALLY CONNECTED WITH THE AS SESSEES PROFESSION CARRIED ON BY HIM IN INDIA AND THEREFORE THESE PAYMENTS WERE CHARGEABLE TO TAX IN INDIA BY WAY OF FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF SECTION 9( 1)(VII)(B) OF THE ACT. SINCE THE ASSESSEE HAD FAILED TO DEDUCT THE TAX AT SOURCE ON SUCH PAYM ENTS U/S 195 OF THE ACT, THE AO INVOKED THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT AND D ISALLOWED THE AGGREGATE FOREIGN ASSOCIATE FEES OF RS.8,28,66,038/- AND ADDED IT TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED APPEAL BEFO RE THE LD. CIT(A) WHO WAS PLEASED TO DELETE THE DISALLOWANCE BY FOLLOWING THE ORDER OF H IS PREDECESSOR DELETING SIMILAR DISALLOWANCE MADE U/S 40(A)(I) OF THE ACT WHILE DEC IDING THE APPEAL FOR AY 2009-10. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVEN UE IS NOW IN APPEAL BEFORE US. 4. ASSAILING THE ACTION OF THE LD. CIT(A), THE LD. CIT, DR APPEARING ON BEHALF OF THE REVENUE SUBMITTED THAT THE PROVISIONS OF SECTION 9( 1)(VII)(B) WERE AMENDED BY THE FINANCE ACT, 2010 W.R.E.F 01.04.1976 WHEREBY EXPLANATION TO SECTION 9(2) WAS INSERTED WHICH NOW PROVIDED THAT WHETHER OR NOT THE NON-RESIDENT HAS A RESIDENCE OR PLACE OF BUSINESS OR BUSINESS CONNECTION IN INDIA; OR WHETHER OR NOT THE NON-RESIDENT RENDERED SERVICES IN INDIA, THE FEES FOR TECHNICAL SERVICES SHALL BE DEEMED TO ACCRUE IN INDIA IF THEY ARE EITHER RENDERED OR CONSUMED IN INDIA. HE THUS SUBMITTED THAT THE DE CISION RENDERED BY THE APPELLATE AUTHORITY IN THE EARLIER YEARS WAS NO LONGER APPLIC ABLE IN THE RELEVANT AY 2011-12 SINCE AMENDED PROVISIONS OF SECTION 9(1)(VII)(B) WERE APP LICABLE IN THE YEAR UNDER APPEAL. HE FURTHER SUBMITTED THAT THE LD. CIT(A)S FINDING THA T THE LEGAL AND PROFESSIONAL SERVICES 4 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER RENDERED BY FOREIGN ATTORNEYS DID NOT CONSTITUTE F EES FOR TECHNICAL SERVICES AS DEFINED IN SECTION 9(1)(VII) WAS ERRONEOUS IN AS MUCH AS IT WA S CONTRARY TO THE INTERPRETATION OF THE TERM TECHNICAL, CONSULTANCY AND MANAGERIAL LA ID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF GVK INDUSTRIES LTD VS ITO (54 TAXMAN N.COM 347). THE LD. CIT, DR SUBMITTED THAT THE PROFESSIONAL SERVICES RENDERED B Y THE FOREIGN ATTORNEYS IN THE FIELD OF IPRS WERE SPECIALIZED SERVICES WHICH REQUIRED TECHN ICAL KNOWLEDGE AND IT COULD NOT BE SAID TO BE MERE CLERICAL OR EXECUTIONARY IN NATURE. HE F URTHER SUBMITTED THAT THE RELIANCE PLACED BY THE LD.CIT(A) ON THE CERTIFICATE ISSUED U/S 195 BY THE ADIT(IT), CIRCLE 2(1), KOLKATA ALLOWING THE ASSESSEE TO REMIT ATTORNEY FEES WITHOU T DEDUCTION OF TAX AT SOURCE WAS ALSO FACTUALLY ERRONEOUS. INVITING OUR ATTENTION TO THE CERTIFICATE DATED 09.09.2010 ISSUED BY THE ADIT(IT), KOLKATA, HE SUBMITTED THAT THE ADIT(IT), CIRCLE 2(1) KOLKATA HAD CATEGORICALLY HELD THAT THESE PAYMENTS WERE IN THE NATURE OF LEGA L & PROFESSIONAL SERVICES, WHICH QUALIFIED AS FEES FOR TECHNICAL SERVICES AS INTERPRETED BY THE HONBLE SUPREME COURT IN THE CASE OF GVK INDUSTRIES LTD VS ITO (SUPRA). HE THUS SUBMITTE D THAT THE CERTIFICATE ISSUED BY THE ADIT(IT), CIRCLE 2(1) KOLKATA PERMITTING THE ASSESS EE TO REMIT SUCH FEES WITHOUT DEDUCTION OF TAX AT SOURCE WAS UNJUSTIFIED ON FACTS AND IN LA W. THE LD. CIT, DR FURTHER ARGUED THAT THE CERTIFICATE ISSUED U/S 195 WAS NOT BINDING UPON THE APPELLATE AUTHORITIES FOR THE REASON THAT THE COMPLETE FACTS AND THE SEQUENCE OF EVENTS AS IT ACTUALLY TOOK PLACE SUBSEQUENTLY WAS NOT KNOWN TO THE OFFICER. TO BUTTRESS HIS CONTENTION, H E REFERRED TO THE CONTENTS OF THE APPLICATION U/S 195 FILED BY THE ASSESSEE BEFORE TH E AO WHEREIN THE ASSESSEE HAD WRONGLY CLAIMED THAT THE NATURE OF RELATIONSHIP BETWEEN HIM AND THE FOREIGN ATTORNEY WAS AKIN TO AN AIRLINE TICKETING AGENT AND THE AIRLINE. HE POINTED OUT THAT THERE WAS NO PRIVITY OF CONTRACT BETWEEN THE FOREIGN ATTORNEY AND THE ASSESSEES CLI ENTS. MOREOVER THE PAYMENTS MADE TO FOREIGN ATTORNEY WERE CLAIMED BY THE ASSESSEE AS HI S OWN EXPENDITURE IN HIS PROFIT & LOSS ACCOUNT AS WELL AS THE RETURN OF INCOME. THE LD. CI T, DR THUS ARGUED THAT THE FACTS AS EXPLAINED BY THE ASSESSEE BEFORE THE LOWER AUTHORIT IES BEING FACTUALLY WRONG AND THE CLAIM OF THE ASSESSEE THAT THE PAYMENTS MADE BY HIM TOWAR DS THE LEGAL AND PROFESSIONAL SERVICES RENDERED BY FOREIGN ATTORNEYS DID NOT CONSTITUTE F EES FOR TECHNICAL SERVICES U/S 9(1)(VII)(B) WAS NO LONGER TENABLE IN VIEW OF THE AMENDMENT BROU GHT IN EXPLANATION IN SECTION 9(2) BY THE FINANCE ACT, 2010. HE THUS URGED THAT THE ORDER OF THE LD. CIT(A) DESERVES TO BE REVERSED. 5 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER 5. PER CONTRA, THE LD. SR ADVOCATE APPEARING ON BEH ALF OF THE ASSESSEE VEHEMENTLY ARGUED THAT THE ISSUE AT HAND WAS SQUARELY COVERED BY THE DECISION RENDERED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER YEARS. IN PARTIC ULAR, HE RELIED ON THE DECISION OF THIS TRIBUNAL IN THE ITA NOS.2058/KOL/2009, 366 & 1629/K OL/2012 DATED 27.11.2015 FOR AYS 2006-07, 2008-09 & 2009-10. QUOTING THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF RADHASOAMI SATSANG VS CIT (193 ITR 321), THE LD. AR SUBMITTED THAT THE DECISION RENDERED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FO R EARLIER YEARS WAS BINDING ON US AND THAT IT OUGHT TO BE FOLLOWED ON THE PRINCIPLES OF CONSIS TENCY. REFERRING TO THE NOTES ON ARGUMENTS WHICH ARE PLACED AT PAGES 1 TO 60 OF THE PAPER BOOK 1, THE LD. AR SUBMITTED THAT THE ASSESSEE WASA PATENT ATTORNEY AND ACTED ON LY AS A FACILITATOR BETWEEN THE CLIENTS AND THE FOREIGN ATTORNEYS. EXPLAINING THE MODUS OPERAND I OF THE ASSESSEES PROFESSION, THE LD. AR STATED THAT THE SERVICES RENDERED BY THE ASSESSE E WERE THAT OF AN AGENT ON BEHALF OF HIS PRINCIPAL I.E. THE CLIENTS. ACCORDING TO HIM THE AS SESSEE MADE NECESSARY ARRANGEMENTS FOR GETTING THE IPRS OF THE CLIENTS REGISTERED IN FOREI GN COUNTRIES. THE ACTUAL ACTS AND DEEDS TO EXECUTE AND FILE THE PATENTS &IPRS WERE PERFORMED B Y THE FOREIGN ATTORNEYS. IN LIEU OF RENDERING THESE SERVICES AND MAKING ARRANGEMENTS FO R FILINGS IPRS IN FOREIGN COUNTRIES, THE APPELLANT WOULD CHARGE A FEE AS A PERCENTAGE OF THE FEES CHARGED BY THE FOREIGN ATTORNEYS. INVITING OUR ATTENTION TO THE SAMPLE COPIES OF INVO ICES PLACED AT PAGES 848 TO 1021 OF THE PAPER BOOK, THE LD. AR POINTED OUT THAT THE ASSESSE E WAS ONLY AN AGENT WHO WOULD COLLECT THE FEES OF FOREIGN ATTORNEYS FROM THE CLIENTS AND REIMBURSE IT TO THE LATTER AND IN THE PROCESS RETAINED HIS OWN SHARE OF FEES. ACCORDING TO THE LD . AR THEREFORE THESE PAYMENTS MADE TO FOREIGN ATTORNEYS DID NOT CONSTITUTE HIS PROFESSION AL EXPENDITURE, AND HENCE THERE WAS NO QUESTION OF MAKING DISALLOWANCE U/S 40(A)(I) FOR TH E ALLEGED DEFAULT OF NOT WITHHOLDING TAX U/S 195 THEREFROM. 6. THE LD. AR FURTHER SUBMITTED THAT THE SERVICES R ENDERED BY THE FOREIGN ATTORNEYS DID NOT QUALIFY AS FEES OF TECHNICAL SERVICES AS DEFI NED IN SECTION 9(1)(VII) OF THE ACT. ACCORDING TO HIM THE NATURE OF SERVICES RENDERED BY THE FOREIGN ATTORNEYS WAS NEITHER TECHNICAL NOR MANAGERIAL NOR CONSULTANCY. ACC ORDING TO HIM, THE TERM CONSULTANCY MEANT TO RENDER OR PROVIDE ADVICE IN A SPECIALIZED FIELD. IN THE FACTS OF THE PRESENT CASE HOWEVER THE FOREIGN ATTORNEYS DID NOT PROVIDE ANY P ROFESSIONAL ADVICE TO CLIENTS BUT EXECUTED THE TASKS AS ASSIGNED BY THE ASSESSEE ON B EHALF OF HIS CLIENTS. ACCORDING TO HIM 6 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER SUCH SERVICES WERE CLERICAL AND EXECUTIONARY IN NAT URE AND DID NOT INVOLVE ANY CONSULTING BY THE FOREIGN ATTORNEYS. HE FURTHER SUBMITTED THAT EV EN THE CORRESPONDENCE WITH THE FOREIGN ATTORNEYS INVOLVED CLARIFICATIONS OF HIS QUERIES FO R REGISTERING THE IPRS AND DID NOT INVOLVE ISSUANCE OF ANY PROFESSIONAL OR LEGAL ADVICE TO THE CLIENTS. ALTERNATIVELY THE LD. AR SUBMITTED THAT EVEN IF IT IS PRESUMED THAT THE SERV ICES RENDERED BY THE FOREIGN ATTORNEYS QUALIFIED AS FEES OF TECHNICAL SERVICES AS DEFINE D IN SECTION 9(1)(VII) OF THE ACT BUT SUCH SERVICES FELL WITHIN THE EXCEPTION CARVED OUT IN SE CTION 9(1)(VII)(B) OF THE ACT WHICH READ AS UNDER: A PERSON WHO IS A RESIDENT, EXCEPT WHERE THE FEES ARE PAYABLE IN RESPECT OF SERVICES UTILISED IN A BUSINESS OR PROFESSION CARRI ED ON BY SUCH PERSON OUTSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE OUTSIDE INDIA. (EMPHASIS SUPPLIED) 7. ACCORDING TO THE LD. AR, THE SERVICES RENDERED B Y THE FOREIGN ATTORNEYS RESULTED IN CREATION OF SOURCE OF INCOME OUTSIDE INDIA FOR THE CLIENTS OF THE ASSESSEE AND THEREFORE THE PAYMENTS MADE IN CONNECTION THEREWITH WERE NOT TAXA BLE IN INDIA. REFERRING TO THE RELEVANT IPR LAWS OF THE FOREIGN COUNTRIES, HE SUBMITTED THA T SERVICES OF FOREIGN ATTORNEYS WERE AVAILED BY THE CUSTOMERS TO OBTAINED IPR PROTECTION IN THE RESPECTIVE COUNTRIES. IN CASE OF INFRINGEMENT OF THEIR IPR IN THE FOREIGN COUNTRY, T HE CLIENT WOULD BE ABLE TO INSTITUTE SUITS IN THE FOREIGN COURT AND CLAIM DAMAGES ON THE FOREIGN SOIL. ACCORDINGLY, IT WAS THE LD. ARS CONTENTION THAT THE CASE OF THE ASSESSEE SQUARELY F ELL IN THE EXCEPTION SET OUT IN SECTION 9(1)(VII)(B) OF THE ACT. 8. THE LD. AR FURTHER DREW OUR ATTENTION TO THE SEV ERAL NOCS GRANTED U/S 195 BY THE REVENUE AUTHORITIES IN SUBSEQUENT YEARS PERMITTING THE ASSESSEE TO REMIT THE FEES OF FOREIGN ATTORNEYS WITHOUT DEDUCTING TAX AT SOURCE U/S 195 O F THE ACT. HE ALSO DREW OUR ATTENTION TO THE ORDERS FRAMED U/S 143(3) IN SUBSEQUENT YEARS IN ASSESSEES OWN CASE AS WELL AS HIS DAUGHTER, SMT. AMRITA MAJUMDARS CASE WHEREIN THE A OS DID NOT DISALLOW THE PAYMENTS MADE TO FOREIGN ATTORNEYS WITHOUT DEDUCTION OF TAX AT SOURCE U/S 195 OF THE ACT. HE THUS CONTENDED THAT THE REVENUE HAD IN PRINCIPLE ACCEPTE D THE ASSESSEES CLAIM THAT THE SERVICES RENDERED BY THE FOREIGN ATTORNEYS DID NOT QUALIFY A S FEES OF TECHNICAL SERVICES AS DEFINED IN SECTION 9(1)(VII)(B) OF THE ACT AND THEREFORE NOT L IABLE TO TAX IN INDIA. 7 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER 9. WITHOUT PREJUDICE TO THE ABOVE CONTENTIONS, THE LD. AR FURTHER ARGUED THAT EVEN IN CASE THE SERVICES RENDERED BY THE FOREIGN ATTORNEYS ARE HELD TO BE LIABLE TO TAX UNDER THE PROVISIONS OF THE ACT, THE PAYMENTS WOULD STILL FAL L OUTSIDE THE CHARGE OF TAX IN INDIA UNDER THE BENEFICIAL PROVISIONS OF THE DTAAS WHICH INDIA HAS WITH THE RESPECTIVE FOREIGN COUNTRIES TO WHICH THE PAYMENTS HAVE BEEN REMITTED. HE THEREFORE SUBMITTED THAT VIEWED FROM ANY ANGLE, THE DISALLOWANCE MADE BY THE AO WAS UNTENABLE ON FACTS AND IN LAW AND THAT THE LD. CIT(A) HAD RIGHTLY DELETED THE DISALLO WANCE MADE U/S 40(A)(I) OF THE ACT. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS & PERUSED T HE WRITTEN NOTES ON ARGUMENTS FURNISHED BY BOTH THE PARTIES. WE HAVE ALSO CAREFUL LY GONE THROUGH THE JUDICIAL DECISIONS ON WHICH RELIANCE WAS PLACED BY THE PARTIES IN SUPPORT OF THEIR RESPECTIVE PLEADINGS. WE HAVE ALSO EXAMINED THE ORDERS OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER YEARS IN WHICH SIMILAR ISSUE WAS DECIDE D IN HIS FAVOUR. HAVING CONSIDERED THESE DOCUMENTS, WE SHALL NOW DEAL WITH RESPECTIVE CONTEN TIONS PUT FORTH BY THE PARTIES. 11. IN THE PRESENT CASE THE ASSESSEE IS A PATENT AT TORNEY WHO RENDERS LEGAL SERVICES IN HIS CAPACITY AS AN ADVOCATE IN INDIA. THE ASSESSEE HAS A WIDE CLIENT BASE WHICH INTER ALIA INCLUDES MULTI-NATIONAL CORPORATIONS AS WELL AS REP UTED CORPORATE HOUSES OF THE COUNTRY. THE CLIENTS OF THE ASSESSEE HOLD VALUABLE IPRS WHICH NE ED REGISTRATIONS WITH THE PATENT OR IP AUTHORITIES SO THAT IPRS ARE PROTECTED FROM UNAUTHO RIZED USE BY OTHERS. SINCE THE CLIENTS OF THE ASSESSEE HAVE MARKETS BEYOND THE BOUNDARIES OF INDIA, THEY SEEK ASSESSEES ASSISTANCE FOR OBTAINING REGISTRATIONS UNDER THE PATENT LAWS O F THE FOREIGN COUNTRIES WHERE PRODUCTS OF THE CUSTOMERS ARE MARKETED UNDER THEIR IPRS. IN ORD ER TO COMPLY WITH THE LEGAL FORMALITIES ASSOCIATED WITH REGISTRATION OF IPRS WITH THE PATEN T AUTHORITIES OF THE RESPECTIVE COUNTRIES, THE ASSESSEE SEEKS ASSISTANCE OF IP ATTORNEYS CARRY ING ON SIMILAR PROFESSIONAL ACTIVITIES IN THE RESPECTIVE COUNTRIES WHERE THE IP REGISTRATIONS ARE SOUGHT TO BE OBTAINED. FOR THE SERVICES RENDERED BY THE FOREIGN PATENT ATTORNEYS, THE FEES ARE PAID BY THE ASSESSEE BECAUSE THEIR SERVICES ARE ENGAGED BY HIM. IT IS THE ASSESSEES P RIMARY CONTENTION THAT THE FEES CHARGED BY THE FOREIGN ATTORNEYS WERE REIMBURSED BY HIS CLIENT S ALONG WITH HIS OWN FEES. IT WAS THEREFORE HIS CONTENTION THAT SINCE THE AMOUNTS PAI D BY THE ASSESSEE WERE IN THE NATURE OF PURE REIMBURSEMENTS, NO INCOME ELEMENT WAS INVOLVED IN THE REMITTANCES MADE TO FOREIGN 8 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER ATTORNEYS AND THEREFORE NO DISALLOWANCE UNDER SECTI ON 40(A)(I) READ WITH SECTION 195 OF THE ACT WAS WARRANTED IN HIS CASE. 12. WHILE SUPPORTING THE ORDER OF THE LD. CIT(A), T HE LD. AR OF THE ASSESSEE PUT MUCH EMPHASIS ON THE FACT THAT IN THE ASSESSEES OWN CAS E FOR THE AYS 2006-07, 2008-09 & 2009- 10, THE DISALLOWANCE U/S 40(A)(I) WAS MADE BUT THE SAME WAS DELETED BY THIS TRIBUNAL IN ITS ORDER DATED 27.11.2015. THE LD. AR THEREFORE VEHEME NTLY CLAIMED ON THE PRINCIPLE OF JUDICIAL CONSISTENCY ALONE, THE ORDER OF THE LD. CI T(A) DESERVED TO BE UPHELD SINCE HE HAD GRANTED THE RELIEF TO THE ASSESSEE BY FOLLOWING THE ORDER OF HIS PREDECESSOR WHICH WAS UPHELD BY THE TRIBUNAL. AFTER DUE CONSIDERATION OF THE SUB MISSIONS AND PERUSING THE ORDER OF THIS TRIBUNAL FOR AYS 2006-07, 2008-09 & 2009-10, WE ARE UNABLE TO AGREE WITH THE CONTENTION PUT FORTH BY THE ASSESSEE. IT IS SETTLED LEGAL PROP OSITION THAT THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE IN TAX PROCEEDINGS. AT THE SAME TIME, PR INCIPLE OF JUDICIAL CONSISTENCY IS ALSO EQUALLY APPLICABLE IN THE TAX PROCEEDINGS PROVIDED THAT THERE IS NO CHANGE EITHER IN THE FACTUAL MATRIX OR IN THE RELEVANT LEGAL PROVISIONS GOVERNING THE TRANSACTION DURING THE INTERVENING PERIOD. IN THIS REGARD, USEFUL REFERENC E CAN BE MADE TO THE FOLLOWING OBSERVATIONS OF THE HONBLE SUPREME COURT IN THE CA SE OF RADHASOAMI SATSANG VS CIT (SUPRA) : 13. WE ARE AWARE OF THE FACT THAT STRICTLY SPEAKIN G RES JUDICATA DOES NOT APPLY TO INCOME-TAX PROCEEDINGS. AGAIN, EACH ASSESSMENT YEAR BEING A UNIT, WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR BUT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT AL L APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. 14. ON THESE REASONINGS IN THE ABSENCE OF ANY MATER IAL CHANGE JUSTIFYING THE REVENUE TO TAKE A DIFFERENT VIEW OF THE MATTERAND IF THERE WAS NO CHANGE IT WAS IN SUPPORT OF THE ASSESSEE WE DO NOT THINK THE QUESTION SHOULD HAVE BEEN REOPENED AND CONTRARY TO WHAT HAD BEEN DECIDED BY T HE COMMISSIONER IN THE EARLIER PROCEEDINGS, A DIFFERENT AND CONTRADICTORY STAND SHOULD HAVE BEEN TAKEN. (EMPHASIS SUPPLIED) 9 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER 13. ON EXAMINATION OF THE PROVISIONS OF SECTION 9(1 )(VII) OF THE ACT READ WITH EXPLANATION TO SECTION 9(2) WHICH WAS SUBSTITUTED B Y THE FINANCE ACT, 2010, WE NOTE THAT PRIOR TO THE AMENDMENT IN ORDER TO ATTRACT THE RIGO RS OF SECTION 195 REQUIRING TAX DEDUCTION AT SOURCE FROM FEES FOR TECHNICAL SERVICES, IT WA S NECESSARY FOR THE REVENUE TO SHOW THAT THE TECHNICAL SERVICES AS DEFINED IN SECTION 9(1)(V II) OF THE ACT WERE RENDERED AS WELL AS CONSUMED IN INDIA. SINCE IN THE EARLIER YEARS, THE TRIBUNAL FOUND AS A MATTER OF FACT THAT NO SERVICES WERE RENDERED BY THE FOREIGN ATTORNEYS IN INDIA, IT WAS HELD THAT AS PER THE LAW, WHICH EXISTED AT THE TIME WHEN THE ASSESSEE MADE PA YMENTS TO FOREIGN ATTORNEYS, HE HAD NO OBLIGATION TO DEDUCT TAX UNDER SECTION 195 OF THE A CT. CONSEQUENTLY THEREFORE NO DISALLOWANCE WAS WARRANTED U/S 40(A)(I) OF THE ACT. WE HOWEVER FIND THAT AT THE TIME WHEN THE MATTER WAS HEARD BY THE TRIBUNAL, AMENDMENT TO SECTION 9(2) OF THE ACT, WAS ALREADY IN FORCE. TAKING JUDICIAL NOTE OF THE AMENDMENT WHICH, WIDENED THE SCOPE OF TDS PROVISIONS QUA THE PAYMENTS MADE TO FOREIGN ATTORNEYS, THE TRI BUNAL HAD OBSERVED AS FOLLOWS: 20. FROM THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO PRECEDENTS CITED ABOVE, WE ARE OF THE VIEW THAT TILL AMENDMENT IN EXPLANATION TO SEC. 9(2) OF THE ACT, THE PREVAILING LEGAL POSITION WAS THAT UNL ESS THE TECHNICAL SERVICES WERE RENDERED IN INDIA, THE FEES FOR SUCH SERVICES COULD NOT BE BROUGHT TO TAX UNDER SECTION 9(1)(VII) OF THE ACT. THE LAW AMENDED WAS U NDOUBTEDLY RETROSPECTIVE IN NATURE BUT SO FAR AS TAX WITHHOLDING LIABILITY IS C ONCERNED, IT DEPENDS ON THE LAW AS IT EXISTED AT THE POINT OF TIME WHEN PAYMENTS, F ROM WHICH TAXES OUGHT TO HAVE BEEN WITHHELD, WERE MADE. THE TAX DEDUCTOR IS NOT E XPECTED TO KNOW HOW THE LAW WILL CHANGE IN FUTURE. A RETROSPECTIVE AMENDMENT IN LAW DOES CHANGE THE T AX LIABILITY IN RESPECT OF AN INCOME, WITH RETROSPECTI VE EFFECT, BUT IT CANNOT CHANGE THE TAX WITHHOLDING LIABILITY, WITH RETROSPECTIVE E FFECT. THE TAX WITHHOLDING OBLIGATIONS FROM PAYMENTS TO NON-RESIDENTS, AS SET OUT IN SECTION 195 OF THE ACT, REQUIRE THAT THE PERSON MAKING THE PAYMENT 'AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT PAYEE OR AT THE TIME OF PAYMENT THER EOF 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'. WHEN THESE OBLIGATI ONS ARE TO BE CHARGED AT THE POINT OF TIME WHEN PAYMENT IS MADE OR CREDITED, WHI CHEVER IS EARLIER, SUCH OBLIGATIONS CAN ONLY BE DISCHARGED IN THE LIGHT OF THE LAW AS IT STANDS THAT POINT OF TIME. SECTION 40(A)(I) OF THE ACT PROVIDES THAT INTER ALIA, NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIONS 30 TO 38 OF TH E ACT, ANY AMOUNT PAYABLE OUTSIDE INDIA, OR PAYABLE IN INDIA TO A NON-RESIDEN T, SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PRO FITS AND GAINS OF BUSINESS OR PROFESSION' ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND 10 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER SUCH TAX HAS NOT BEEN DEDUCTED. ACCORDINGLY, THE AS SESSEE CANNOT BE FAULTED FOR NOT DEDUCTING TDS AND CONSEQUENTLY, THE DELETION OF DISALLOWANCE BY CIT(A) IS CONFIRMED. THIS COMMON ISSUE OF ALL THE THREE APPEA LS OF REVENUE IS DISMISSED. 14. FROM THE FOREGOING FINDINGS OF THE TRIBUNAL, IT IS QUITE EVIDENT THAT THE TRIBUNAL HAD UPHELD THE ASSESSEES CLAIM FOR NON-DEDUCTION OF TA X AT SOURCE HAVING REGARD TO THE PRE- AMENDED PROVISIONS OF SECTION 9(1)(VII) READ WITH S ECTION 9(2) OF THE ACT EVEN AFTER TAKING NOTE OF THE FACT THAT AMENDMENT OF 2010 WAS MADE RE TROSPECTIVELY. IN THE SAID DECISION THERE WAS EXPLICIT ADMISSION THAT THE DECISION WAS RENDER ED BECAUSE OF PROVISIONS OF LAW DURING PRE-AMENDED ERA AND THEREFORE THE SAME WOULD NOT HO LD GOOD ONCE THE AMENDED PROVISIONS OF LAW CAME IN FORCE AND THE AMENDED PROVISIONS OF SECTION 9(1)(VII) WERE APPLICABLE DURING THE YEAR BEFORE US. AS RIGHTLY POINTED OUT BY THE L D. CIT, DR, THE AMENDED PROVISIONS WERE BROUGHT IN THE STATUTE ON 08.05.2010 AND THEREFORE IT WAS APPLICABLE TO THE PAYMENTS MADE BY THE ASSESSEE TO FOREIGN ATTORNEYS DURING THE PRE VIOUS YEAR RELEVANT TO AY 2011-12. IN THE CIRCUMSTANCES THEREFORE THE ASSESSEE COULD NOT AVAI L BENEFIT OF THE ORDER OF THIS TRIBUNAL WHICH WAS RENDERED IN THE CONTEXT OF PRE- AMENDED P ROVISIONS OF SECTION 9(1)(VII) READ WITH SECTION 9(2) OF THE ACT. WE THEREFORE FIND THAT THE LD. CIT(A) WAS LEGALLY NOT JUSTIFIED IN FOLLOWING THE ORDER OF HIS PREDECESSOR FOR AY 2006- 07 WHEN THE LEGAL POSITION WAS MATERIALLY DIFFERENT. 15. THE SECOND LIMB OF THE LD. ARS ARGUMENT WAS TH AT THE PAYMENTS WHICH THE ASSESSEE MADE TO FOREIGN PATENT ATTORNEYS DID NOT COME WITHI N THE AMBIT OF THE TERM FEES FOR TECHNICAL SERVICES. ACCORDING TO LD. AR, THE SERVI CES PERFORMED BY THE FOREIGN ATTORNEYS WERE MERE CLERICAL OR EXECUTIONARY IN NATURE WHICH DID NOT INVOLVE ANY SPECIALIZED KNOWLEDGE NOR IT INVOLVED RENDERING OF ANY ADVISORY SERVICE. IN ORDER TO UNDERSTAND THE ISSUE, IT IS FIRST NECESSARY TO SET OUT THE RELEVAN T PROVISIONS OF SECTION 9(1)(VII) OF THE ACT, WHICH DEFINE THE TERM FEES FOR TECHNICAL SERVICES . INCOME BY WAY OF FEES FOR TECHNICAL SERVICES PAYAB LE BY (A) THE GOVERNMENT ; OR 11 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER (B) A PERSON WHO IS A RESIDENT, EXCEPT WHERE THE FE ES ARE PAYABLE IN RESPECT OF SERVICES UTILISED IN A BUSINESS OR PROFESSION CARRI ED 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 FEES ARE PAYABLE IN RESPECT OF SERVICES UTILISED IN A BUSINESS OR PROFESSION CARRI ED ON BY SUCH PERSON IN INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FR OM ANY SOURCE IN INDIA : 16. FROM THE FOREGOING DEFINITION, IT IS NOTED THAT ANY PAYMENT WHICH IS MADE FOR RENDERING OF TECHNICAL, CONSULTANCY OR MANAGERIAL S ERVICES, SUCH PAYMENT IS REGARDED AS FEES FOR TECHNICAL SERVICES AND THE INCOME EMBEDD ED THEREIN IS DEEMED TO ACCRUE OR ARISE IN INDIA. IN THE PRESENT CASE, ADMITTEDLY PAYMENTS WERE MADE TO FOREIGN ATTORNEYS WHO WERE PROFESSIONALLY QUALIFIED TO RENDER LEGAL SERVICES. IT IS ALSO WELL KNOWN FACT THAT UNDER THE RELEVANT PATENT / IP LAWS, THE APPLICANT OR ATTORNE Y REPRESENTING HIM IS REQUIRED TO COMPLY WITH THE TECHNICAL FORMALITIES AS WELL AS LEGAL PRO CEDURES CONTAINED IN RELEVANT LAWS, RULES AND REGULATIONS OF THE COUNTRIES WHERE THE PATENT/I PR IS SOUGHT TO BE REGISTERED. AS SUCH, HAVING KNOWLEDGE, EXPERIENCE AND EXPERTISE IN THE S PECIALIZED FIELD OF IP LAWS IS AN ESSENTIAL PRE-REQUISITE FOR RENDERING THE SERVICES. IN FACT PRACTICING IP LAWS IS ONE OF THE SPECIALIZED BRANCH OF LEGAL PRACTICE AND ONLY FEW A TTORNEYS ARE WELL VERSED WITH THE INTRICACIES OF THE IP LAWS AS ALSO WITH REGULATIONS AND TECHNICALITIES OF THE PROCEDURES GOVERNING REGISTRATIONS TO SUCH RIGHTS. THE BONE OF CONTENTION HOWEVER IN THE PRESENT CASE IS WHETHER THE SERVICES RENDERED WERE IN THE NATURE OF CONSULTANCY. IT WAS VEHEMENTLY ARGUED BY THE LD. AR THAT THE SERVICES RENDERED BY THE FOR EIGN ATTORNEYS WERE NOT EVEN CONSULTANCY IN NATURE BUT PURELY CLERICAL OR EXEC UTIONARY IN NATURE AND THEREFORE DID NOT COME WITHIN THE AMBIT OF SECTION 9(1)(VII) OF THE A CT. ON THE OTHER HAND, IT WAS THE LD. CIT, DRS CONTENTION THAT HAVING REGARD TO THE NATURE OF SERVICES, THE FOREIGN ATTORNEY DID RENDER NOT ONLY CONSULTANCY SERVICES BUT ALSO INVOLVED A TECHNICAL ELEMENT WHICH ENABLED THE ASSESSEE AND HIS CLIENTS TO COMPLY WITH THE IP LAWS OF THE RELEVANT COUNTRY AND OBTAIN IPR REGISTRATIONS IN CONFORMITY WITH THE RELEVANT RULES AND REGULATIONS OF THAT COUNTRY. BUT FOR PROVISION OF ADVISORY AND EXECUTION SERVICES BY THE FOREIGN ATTORNEYS, THE ASSESSEE COULD NOT HAVE SUCCESSFULLY PROVIDED TO HIS CLIENTS IP REGIST RATIONS IN THE RESPECTIVE COUNTRIES WHERE PATENTS/IPRS WERE REGISTERED. 12 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER 17. IN OUR CONSIDERED VIEW, THE MOOT POINT TO BE AD JUDICATED IN THE PRESENT APPEAL THEREFORE IS WHETHER THE LEGAL SERVICES RENDERED BY THE FOREIGN ATTORNEYS COULD BE CLASSIFIED AS 'CONSULTANCY SERVICES' SO AS TO BRING THESE PAYM ENTS WITHIN THE AMBIT OF SECTION 9(1)(VII) OF THE ACT. IN THIS REGARD, WE NOTE THAT THE TERM CONSULTANCY SERVICE IS NOT DEFINED IN THE ACT. IN THE CIRCUMSTANCES ONE MUST UNDERSTAND THE T ERM AS UNDERSTOOD IN NORMAL COMMERCIAL PARLANCE. AS PER OXFORD DICTIONARY, THE MEANING OF THE WORD 'CONSULTANCY' IS A PROFESSIONAL PRACTICE THAT GIVES EXPERT ADVICE WITH IN A PARTICULAR FIELD. FURTHER, WIKIPEDIA DEFINES 'CONSULTANT' AS A PROFESSIONAL WHO PROVIDES EXPERT ADVICE IN A PARTICULAR AREA SUCH AS SECURITY (ELECTRONIC OR PHYSICAL), MANAGEMENT, EDUC ATION, ACCOUNTANCY, LAW , HUMAN RESOURCES, MARKETING (AND PUBLIC RELATION), FINANCE , ENGINEERING, SCIENCE OR ANY OF MANY OTHER SPECIALISED FIELDS. APPLYING THESE DEFINITIO NS, WE NOTE THAT THE ASSESSEES SERVICES WERE ENGAGED BY HIS CLIENTS HAVING REGARD TO HIS SP ECIALIZED KNOWLEDGE AND EXPERIENCE DEALING WITH IP LAWS AS WELL AS PROCEDURES INVOLVED IN OBTAINING IPR REGISTRATIONS. THE IP LAWS OF EACH COUNTRY CONTAIN SPECIAL PROVISIONS AND THE REGULATIONS THERE UNDER PRESCRIBE DETAILED TECHNICAL AND BUREAUCRATIC PROCEDURES WHIC H NEED TO BE COMPLIED WITH BEFORE PATENT OR IPR REGISTRATIONS ARE GRANTED. IT IS A WE LL-ESTABLISHED FACT THAT THE PATENTS OR IP REGISTRATIONS ONCE GRANTED BY THE AUTHORITY, CONFER ON THE HOLDER VERY VALUABLE INTANGIBLE RIGHTS WHICH SUBSTANTIALLY ADD TO THE VALUE OF THE BUSINESS CARRIED ON BY THE HOLDER. SINCE THE LAWS CONFERRING IP RIGHTS ON THE PARTIES ARE CO MPLEX IN NATURE, RENDERING OF SERVICES IN THE FIELD OF IP LAWS, CONSTITUTES SPECIALIZED BRANC H IN THE FIELD OF LEGAL SERVICE. WE THEREFORE FIND THAT THE ASSESSEE AS WELL AS THE FOREIGN ASSOC IATES APPOINTED BY HIM ENJOYED EXPERTISE AND SPECIALIZED KNOWLEDGE IN THE FIELD OF IP LAWS A ND PROCEDURES ASSOCIATED WITH OBTAINING LEGAL PROTECTIONS OR REGISTRATIONS UNDER THE RELEVA NT LAWS GOVERNING IP RIGHTS IN THE RESPECTIVE COUNTRIES. IT IS WITH THE USE AND AID OF THE ADVICE GIVEN BY THE FOREIGN PATENT ATTORNEYS THAT THE ASSESSEE AND/OR HIS CLIENTS WERE ABLE TO PREPARE TECHNICALLY INTRICATE DOCUMENTATION, NECESSARY FOR FILING PATENTS AND OTH ER IP RIGHTS APPLICATIONS IN THE FOREIGN COUNTRIES IN COMPLIANCE WITH THEIR RESPECTIVE IP LA WS. THE FOREIGN ATTORNEYS NOT ONLY ADVISED THE ASSESSEE IN PREPARING THE DOCUMENTATION NECESSARY FOR SUBMISSION OF APPLICATIONS BUT ALSO REPRESENTED THE APPLICANTS BE FORE THE PATENT/IP AUTHORITIES AND PROVIDED CLARIFICATIONS AND EXPLANATIONS NECESSARY FOR GRANT OF REGISTRATION. WE THEREFORE NOTE THAT ON 13 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER THE GIVEN FACTS OF THE CASE, BUT FOR THE CONSULTANC Y OR ADVISORY SERVICES RENDERED BY FOREIGN ATTORNEYS, THE ASSESSEE OR HIS CLIENTS WOULD NOT HA VE BEEN ABLE TO OBTAIN THE PATENTS OR IP REGISTRATIONS IN THE FOREIGN COUNTRIES. 18. WE ALSO FIND IT RELEVANT TO HOLD THAT THE LD. C IT, DR RIGHTLY RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GVK INDUST RIES LTD VS ITO (SUPRA), WHEREIN MEANING OF THE TERM CONSULTANCY SERVICE FOR THE P URPOSES OF SECTION 9(1)(VII) AFTER ITS AMENDMENT IN 2010 WAS EXPLAINED BY THE HONBLE SUPR EME COURT. IN THE SAID JUDGMENT THE HONBLE COURT OBSERVED AS FOLLOWS:- 34. IN THE CASE AT HAND, WE ARE CONCERNED WITH THE EXPRESSION 'CONSULTANCY SERVICES'. IN THIS REGARD, A REFERENCE TO THE DECIS ION BY THE AUTHORITY FOR ADVANCE RULING P. NO. 28 OF 1999, IN RE [2000] 242 ITR 208/ [1999] 105 TAXMAN 218 (AAR - NEW DELHI), WOULD BE APPLICABLE. THE OBSERVA TIONS THEREIN READ AS FOLLOWS: 'BY TECHNICAL SERVICES, WE MEAN IN THIS CONTEXT SER VICES REQUIRING EXPERTISE IN TECHNOLOGY. BY CONSULTANCY SERVICES, WE MEAN IN THI S CONTEXT ADVISORY SERVICES. THE CATEGORY OF TECHNICAL AND CONSULTANCY SERVICES ARE TO SOME EXTENT OVERLAPPING BECAUSE A CONSULTANCY SERVICE COULD ALS O BE TECHNICAL SERVICE. HOWEVER, THE CATEGORY OF CONSULTANCY SERVICES ALSO INCLUDES AN ADVISORY SERVICE, WHETHER OR NOT EXPERTISE IN TECHNOLOGY IS REQUIRED TO PERFORM IT.' 35. IN THIS CONTEXT, A REFERENCE TO THE DECISION IN CIT V. BHARTI CELLULAR LTD. [2009] 319 ITR 139/[2008] 175 TAXMAN 573 (DELHI), W OULD BE APPOSITE. IN THE SAID CASE, WHILE DEALING WITH THE CONCEPT OF 'CONSU LTANCY SERVICES', THE HIGH COURT OF DELHI HAS OBSERVED THUS: 'SIMILARLY, THE WORD 'CONSULTANCY' HAS BEEN DEFINED IN THE SAID DICTIONARY AS 'THE WORK OR POSITION OF A CONSULTANT; A DEPARTMENT OF CONSULTANTS.' 'CONSULTANT' ITSELF HAS BEEN DEFINED, INTER ALIA, AS 'A PERSON W HO GIVES PROFESSIONAL ADVICE OR SERVICES IN A SPECIALIZED FIELD.' IT IS OBVIOUS THA T THE WORD 'CONSULTANT' IS A DERIVATIVE OF THE WORD 'CONSULT' WHICH ENTAILS DELI BERATIONS, CONSIDERATION, CONFERRING WITH SOMEONE, CONFERRING ABOUT OR UPON A MATTER. CONSULT HAS ALSO BEEN DEFINED IN THE SAID DICTIONARY AS 'ASK ADVICE FOR, SEEK COUNSEL OR A PROFESSIONAL OPINION FROM; REFER TO (A SOURCE OF IN FORMATION); SEEK PERMISSION OR APPROVAL FROM FOR A PROPOSED ACTION'. IT IS OBVIOUS THAT THE SERVICE OF CONSULTANCY ALSO NECESSARILY ENTAILS HUMAN INTERVEN TION. THE CONSULTANT, WHO 14 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER PROVIDES THE CONSULTANCY SERVICE, HAS TO BE A HUMAN BEING. A MACHINE CANNOT BE REGARDED AS A CONSULTANT.' 36. IN THIS CONTEXT, WE MAY FRUITFULLY REFER TO THE DICTIONARY MEANING OF 'CONSULTATION' IN BLACK'S LAW DICTIONARY, EIGHTH ED ITION. THE WORD 'CONSULTATION' HAS BEEN DEFINED AS AN ACT OF ASKING THE ADVICE OR OPINION OF SOMEONE (SUCH AS A LAWYER). IT MEANS A MEETING IN WHICH A PARTY CONSUL TS OR CONFERS AND EVENTUALLY IT RESULTS IN HUMAN INTERACTION THAT LEADS TO RENDERIN G OF ADVICE. 37. AS THE FACTUAL MATRIX IN THE CASE AT HAND, WOUL D EXPOSIT THE NRC HAD ACTED AS A CONSULTANT. IT HAD THE SKILL, ACUMEN AND KNOWLEDG E IN THE SPECIALIZED FIELD I.E. PREPARATION OF A SCHEME FOR REQUIRED FINANCES AND T O TIE-UP REQUIRED LOANS. THE NATURE OF ACTIVITIES UNDERTAKEN BY THE NRC HAS EARL IER BEEN REFERRED TO BY US. THE NATURE OF SERVICE REFERRED BY THE NRC, CAN BE S AID WITH CERTAINTY WOULD COME WITHIN THE AMBIT AND SWEEP OF THE TERM 'CONSUL TANCY SERVICE' AND, THEREFORE, IT HAS BEEN RIGHTLY HELD THAT THE TAX AT SOURCE SHO ULD HAVE BEEN DEDUCTED AS THE AMOUNT PAID AS FEE COULD BE TAXABLE UNDER THE HEAD 'FEE FOR TECHNICAL SERVICE'. ONCE THE TAX IS PAYABLE/PAID THE GRANT OF 'NO OBJEC TION CERTIFICATE' WAS NOT LEGALLY PERMISSIBLE. ERGO, THE JUDGMENT AND ORDER P ASSED BY THE HIGH COURT ARE ABSOLUTELY IMPREGNABLE. 19. APPLYING THE RATIO LAID DOWN IN THE JUDGMENT (S UPRA), WE ARE OF THE VIEW THAT THE SERVICES WHICH THE FOREIGN ATTORNEYS RENDERED TO TH E ASSESSEE SQUARELY CAME WITHIN THE AMBIT OF SECTION 9(1)(VII) OF THE ACT. IN HIS REBUTTAL, T HE LD. AR SOUGHT TO DISTINGUISH THE JUDGMENT OF THE HONBLE SUPREME COURT STATING THAT THE FACTS OF THE ASSESSEES CASE WERE DISTINGUISHABLE BECAUSE UNLIKE IN THE CASE BEFORE T HE HONBLE APEX COURT, THE NON-RESIDENT ATTORNEYS HAD MERELY PERFORMED EXECUTIONARY FUNCTIO NS WHICH WERE RENDERED ABROAD AND ALSO UTILIZED OUTSIDE INDIA. WE ARE HOWEVER UNABLE TO PERSUADE OURSELVES TO AGREE WITH THE CONTENTION PUT FORTH BY THE LD. AR OF THE ASSESSEE. IN THE FIRST INSTANCE, THE HONBLE SUPREME COURT IN THE CASE OF GVK INDUSTRIES LTD (SU PRA) DEFINED THE EXPRESSION CONSULTANCY SERVICES IN THE CONTEXT OF SECTION 9( 1)(VII) AND THE SERVICES RENDERED BY FOREIGN ATTORNEYS SQUARELY COME WITHIN THE AMBIT OF SUCH DEFINITION. THIS POINT HAS NOT BEEN NEGATED BY THE LD. AR IN HIS SUBMISSIONS. INSTEAD THE CASE MADE OUT BY THE LD. AR IS THAT THE SERVICES WERE RENDERED ABROAD AND UTILIZED ABRO AD AND THEREFORE FELL WITHIN THE EXCEPTION CARVED OUT WITHIN SECTION 9(1)(VII)(B) OF THE ACT.W E THEREFORE HOLD THAT THE RATIO LAID DOWN IN THE SAID JUDGMENT IS VERY MUCH RELEVANT IN DECID ING THE PRESENT APPEAL. 15 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER 20. WE NOTE IN ASSESSEES CASE HIS SERVICES WERE EN GAGED BY THE INDIAN CLIENTS FOR OBTAINING REGISTRATION OF PATENTS AND IPRS OWNED BY THEM IN FOREIGN JURISDICTIONS. HAVING OBTAINED THE MANDATE FROM HIS CLIENTS FOR OBTAINING THE PATENT REGISTRATIONS IN FOREIGN JURISDICTIONS, IT WAS ENTIRELY AT THE DISCRETION OF THE ASSESSEE TO FIND WAYS AND MEANS TO COMPLETE THE JOB ENTRUSTED BY THE CLIENTS. INSTEAD OF PROVIDING SERVICES ON HIS OWN, THE ASSESSEE APPOINTED FOREIGN ASSOCIATES FOR SERVICES SUCH AS FILING OF PATENT APPLICATIONS, MAKING REPRESENTATIONS BEFORE IP AUTHORITIES, OBTAI NING REGISTRATIONS FROM STATUTORY AUTHORITIES OF THE RESPECTIVE FOREIGN COUNTRIES ETC . THE FACT HOWEVER REMAINS THAT THE SERVICES OF THE FOREIGN ATTORNEYS WERE ENGAGED SOLE LY AT THE BEHEST OF THE ASSESSEE FOR FULFILLING HIS OWN COMMITMENTS TO HIS CLIENTS WHILE CARRYING ON HIS PROFESSIONAL WORK IN INDIA. THE SOURCE OF INCOME IN THE ASSESSEES HANDS WAS SOLELY LOCATED IN INDIA AND FOR THE PURPOSE OF EARNING INCOME FROM THE INDIAN SOURCE, T HE ASSESSEE HAD CALLED UPON HIS FOREIGN ASSOCIATES TO RENDER CERTAIN SERVICES FOR WHICH PAY MENTS WERE MADE BY HIM. WE THEREFORE FIND THAT THE PAYMENTS MADE TO THE FOREIGN ATTORNEY S WERE USED BY THE ASSESSEE WHILE DISCHARGING HIS PROFESSIONAL COMMITMENTS IN INDIA A ND THEREFORE THE CONDITIONS PRESCRIBED IN SECTION 9(1)(VII) WERE SATISFIED. 21. AS REGARDS THE LD. ARS CONTENTION THAT THE ASS ESSEE HAD ACTED ONLY AS A FACILITATOR OR PASS THROUGH ENTITY WHILE MAKING PAYMENTS TO THE FO REIGN ATTORNEY AND ON THAT GROUND THE PAYMENT MADE WERE IN THE NATURE OF PURE REIMBURSEME NT. IN SUPPORT OF THIS AVERMENT THE LD. AR REFERRED TO THE PAGES 499 TO 1121 OF PAPERBOOK 3 & 4, WHICH CONTAINED APPOINTMENT LETTERS ISSUED BY THE CLIENTS TO THE ASSESSEE, ASSE SSEES LETTERS OF ENGAGEMENT ISSUED TO THE FOREIGN ASSOCIATES, CORRESPONDENCES BETWEEN THE ASS ESSEE AND HIS CLIENTS AS ALSO BETWEEN THE ASSESSEE AND THE FOREIGN ASSOCIATES. THE ASSESSEE A LSO FURNISHED COPIES OF THE INVOICES RAISED BY HIM ON HIS CLIENTS IN INDIA AS ALSO THE COPIES O F THE INVOICES WHICH THE ASSESSEE RECEIVED FROM FOREIGN ASSOCIATES, COPIES OF THE PAYMENT INST RUCTIONS ETC. ON SCRUTINY OF THE DOCUMENTS FURNISHED IT HOWEVER APPEARED THAT THERE WAS NO TANGIBLE MATERIAL AVAILABLE IN THESE DOCUMENTS WHICH SUBSTANTIATED THE LD. ARS CO NTENTION THAT THE PAYMENTS WHICH THE ASSESSEE MADE TO THE FOREIGN ASSOCIATES WAS IN THE NATURE OF PURE REIMBURSEMENT. IN FACT IT APPEARED THAT MOST OF THE DOCUMENTS FURNISHED IN TH E PAPER BOOK DID NOT PERTAIN TO THE 16 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER TRANSACTIONS OF THE RELEVANT YEAR. IN VIEW OF THESE FACTS, THE ASSESSEES CASE WAS RE-FIXED FOR CLARIFICATION ON 07.02.2020 AND THE ASSESSEE WAS SP ECIFICALLY REQUESTED TO FURNISH DOCUMENTS FOR THE RELEVANT YEAR INTER ALIA INCLUDING THE AUDI TED FINANCIAL STATEMENTS FOR THE FY 2010-11, LETTERS OF APPOINTMENT ISSUED BY CLIENTS FOR THE WO RK PERFORMED DURING THE RELEVANT YEAR, LETTERS OF ENGAGEMENT ISSUED TO FOREIGN ASSOCIATES IN THE RELATION TO THE PAYMENTS MADE TO THEM DURING THE RELEVANT YEAR, CORRESPONDING COPIES OF COMMUNICATIONS BETWEEN THE ASSESSEE AND CLIENTS AS ALSO BETWEEN THE ASSESSEE A ND FOREIGN ASSOCIATES AND OTHER RELEVANT DOCUMENTS WHICH WOULD SUBSTANTIATE THAT THE PAYMENT S MADE WERE IN THE NATURE OF PURE REIMBURSEMENT WHICH WOULD PROVE THAT THERE WAS EXIS TED PRIVITY OF CONTRACT BETWEEN THE CLIENT AND THE FOREIGN ASSOCIATES. IN RESPONSE THE LD. AR OF THE ASSESSEE FURNISHED PAPER BOOK 5 CONSISTING OF PAGES 1122 TO 1185 AND A CON VENIENCE COMPILATION COMPRISING OF 113 PAGES. ON SCRUTINY OF THE DOCUMENTS SO FURNISHE D IT WAS HOWEVER NOTED THAT ALTHOUGH THE ASSESSEE HAS FURNISHED COPIES OF COMMUNICATIONS BETWEEN THE ASSESSEE AND CLIENTS AS ALSO BETWEEN THE ASSESSEE AND FOREIGN ASSOCIATES AL ONG WITH SUPPORTING INVOICES, THERE IS NOTHING DISCERNIBLE IN THESE DOCUMENTS ON THE BASIS OF WHICH IT CAN BE HELD THAT THERE EXISTED DIRECT AND PROXIMATE NEXUS BETWEEN THE CLIENTS AND THE FOREIGN ASSOCIATES FOR RENDERING SERVICES AND THE ASSESSEE WAS TO ACT ONLY AS AN INT ERMEDIARY. WE DID NOT FIND ANY LETTERS OF APPOINTMENT ISSUED BY THE CLIENTS IN RELATION TO TH E SCOPE OF WORK TO BE PERFORMED ON THE BASIS OF WHICH WE COULD HOLD THAT THE APPOINTMENT O F FOREIGN ASSOCIATES WAS MADE BY THE ASSESSEE ON THE SPECIFIC INSTRUCTIONS OR REQUEST OF THE ASSESSEE AND FOR WHICH THE ASSESSEE COULD BE HELD TO BE A MERE AGENT REQUIRING HIM ONLY TO FACILITATE PAYMENT. WE ALSO NOTE FROM THE COPIES OF THE INVOICES RAISED BY THE FOREI GN ASSOCIATES THAT THE PRIVITY OF WORK WAS BETWEEN THE ASSESSEE AND THE FOREIGN ASSOCIATES AND THE WORK WAS PERFORMED BY THEM IN TERMS OF THE APPOINTMENT MADE BY THE ASSESSEE. FROM THE COPIES OF THE INVOICES AS ALSO THE COMMUNICATION BETWEEN THE PARTIES, IT WAS NOT DISCE RNIBLE THAT THE FOREIGN ASSOCIATES WAS HAVING ANY DIRECT CONTACT WITH THE CLIENT OF THE AS SESSEE SO AS TO HOLD THAT THE ASSESSEE ACTED ONLY AS AN INTERMEDIARY. 22. IN THE COURSE OF HEARING ON 7.02.2020, IN RESPO NSE TO THE QUERY, THE ASSESSEE HIMSELF CLARIFIED THAT THERE MAY BE INSTANCES WHERE THE APP OINTMENT LETTERS WERE ISSUED BY THE CLIENTS IN THE EARLIER YEARS BUT THE WORK WAS PERFORMED IN THE RELEVANT YEAR AND THEREFORE THERE MAY 17 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER NOT BE ANY DIRECT EVIDENCE OF APPOINTMENT WHICH IS DATED IN THE PERIOD 01.04.2010 TO 31.3.2011. IN LIGHT OF THE FOREGOING THEREFORE TO A SCERTAIN THE NATURE OF RELATIONSHIP BETWEEN THE PARTIES, WE MAY REFER TO THE LETTER OF APPOINTM ENT ISSUED BY M/S ITC LIMITED TO THE ASSESSEE (PAGE 525 OF PAPER BOOK) ENGAGING HIM TO R EGISTER THEIR PATENT IN SEVERAL COUNTRIES: 23. FROM THE ABOVE ENGAGEMENT LETTER, IT IS EVIDENT THAT M/S ITC LIMITED HAD ENGAGED THE SERVICES OF THE ASSESSEE FOR FILING APPLICATION FOR REGISTRATION OF TRADE MARKS CHECKERS AND ACE IN SEVERAL FOREIGN COUNTRIES. FROM THE TE RMS OF APPOINTMENT, IT IS EVIDENT THAT NOWHERE THE ASSESSEES CLIENT HAD EVEN SUGGESTED TH AT FOR EXECUTING THE SAID WORK, THE ASSESSEE SHOULD ENGAGE SERVICES OF ANY PARTICULAR F OREIGN ATTORNEY OR THAT THE INDIAN CLIENT HAD IDENTIFIED ANY PARTICULAR FOREIGN ATTORNEY WITH WHOM THE ASSESSEE WAS REQUIRED TO COORDINATE WITH FOR FULFILLING HIS PROFESSIONAL COM MITMENT. IN WHAT MANNER THE ASSESSEE WAS TO PERFORM AND FULFILL THE ASSIGNED TASKS WAS LEFT TO THE SOLE DISCRETION OF THE ASSESSEE. WE THEREFORE FIND THAT THE CONTRACTUAL TERMS BETWEEN T HE ASSESSEE AND HIS CLIENT NOWHERE PRESCRIBED THAT THE CLIENT WOULD BE REIMBURSING THE COSTS AND EXPENSES INCURRED BY THE ASSESSEE WHILE DISCHARGING HIS OBLIGATIONS UNDER TH E TERMS OF ENGAGEMENT. WE THEREFORE DO 18 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER NOT FIND ANY MATERIAL AVAILABLE IN THE RECORDS FROM WHICH WE CAN INFER THAT THERE WAS DIRECT PRIVITY OF CONTRACT BETWEEN THE CLIENTS AND THE FOR EIGN ATTORNEYS AND THE ASSESSEE MERELY ACTED AS A PASS THROUGH FACILITATING THE PAYMENT TO THE FOREIGN ATTORNEYS. IN THIS FACTUAL BACKGROUND THEREFORE WE ARE UNABLE TO ACCEPT THE PL EA OF ASSESSEE THAT THE PAYMENTS MADE BY HIM TO HIS FOREIGN ASSOCIATES WERE IN THE NATURE OF PURE REIMBURSEMENT AND CONSEQUENTLY TDS PROVISIONS WERE NOT APPLICABLE. ON THE CONTRARY , WE FIND THAT THE FOREIGN ATTORNEYS PERFORMED THE SERVICES AT THE BEHEST OF THE ASSESSE E FOR WHICH THE REQUISITE INVOICES WERE RAISED ON THE ASSESSEE AND THESE WERE PAID BY HIM. IT IS FOR THIS REASON THAT THE INVOICED AMOUNTS WERE DEBITED BY WAY OF ASSESSEES OWN EXPEN DITURE IN HIS PERSONAL PROFIT & LOSS ACCOUNT. WE ALSO NOTE THAT PRIOR TO MAKING THE REMI TTANCES TO THE FOREIGN ATTORNEYS, THE ASSESSEE HAD FILED CERTIFICATES WITH HIS BANKER IN PRESCRIBED FORM 15CB CERTIFIED BY CHARTERED ACCOUNTANT. IN THE SAID CERTIFICATE, THES E PAYMENTS WERE CHARACTERIZED AS FEES FOR PROFESSIONAL SERVICES. IN THE FORM A2 ACCOMPANYING THE REMITTANCE INSTRUCTION, THE PURPOSE OF PAYMENT WAS DESCRIBED AS ASSOCIATE FEE. WE THU S NOTE THAT THE PLEA OF THE ASSESSEE THAT THESE PAYMENTS WERE IN THE NATURE OF PURE REIMBURS EMENTS AND HENCE DID NOT REQUIRE TAX DEDUCTION U/S 195 OF THE ACT DUE TO ABSENCE OF INCO ME ELEMENT STANDS DISPROVED BY THE CONTEMPORANEOUS DOCUMENTS WHICH THE ASSESSEE HIMSEL F PRODUCED BEFORE US. 24. THE LD. AR FURTHER SOUGHT TO AVAIL THE BENEFIT OF THE EXCEPTION CARVED OUT IN SECTION 9(1)(VII)(B) OF THE ACT ON THE PREMISE THAT BY OBTA INING PATENTS/IPR REGISTRATIONS ABROAD, THE CLIENTS OF THE ASSESSEE CREATED SOURCES OF INCOME O UTSIDE INDIA AND SINCE THE SERVICES WERE RENDERED BY THE FOREIGN ATTORNEYS IN CONNECTION WIT H SUCH FOREIGN SOURCE, THE INCOME DID NOT DEEM TO ACCRUE OR ARISE IN INDIA WARRANTING DEDUCTI ON OF TAX U/S 195 OF THE ACT. AS WE OBSERVED IN THE PRECEDING PARAGRAPH 20, THE SERVICE S OF THE FOREIGN ATTORNEYS WERE NOT ENGAGED BY THE ASSESSEES CLIENTS IN WHOSE FAVOUR T HE PATENTS OR IPRS WERE REGISTERED IN FOREIGN COUNTRIES. INSTEAD THE SERVICES WERE ENGAGE D BY THE ASSESSEE WHILE IN DISCHARGE OF HIS PROFESSIONAL OBLIGATIONS IN INDIA. AS SUCH, THE SOURCE OF INCOME IN CONNECTION WITH WHICH THE SERVICES OF FOREIGN ATTORNEYS WERE USED, WAS LOCATED IN INDIA. WE ALSO NOTE THAT THE MERE FACT THAT THE PATENTS OR IPS REGISTRATIONS IN FOREIGN COUNTRIES GRANTED PROTECTION TO THE INDIAN CLIENTS WITHIN THE FOREIGN TERRITORIES, DID NOT CREATE ANY SOURCE OF INCOME FOR SUCH CLIENTS OUTSIDE INDIA. THE PROTECTION UNDER TH E FOREIGN IP LAWS DID NOT BY ITSELF 19 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER CONSTITUTE SOURCE OF ANY INCOME IN A FOREIGN COUN TRY. NOTHING HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE TO SHOW THAT THE CLIENTS ON WHOSE B EHALF THESE PATENTS/IP WERE REGISTERED HAD ESTABLISHED PES/BRANCH ETC. IN SUCH FOREIGN COUNTRI ES SO AS TO HOLD THAT THE PAYMENTS WERE MADE IN RELATION TO SOURCE OF INCOME LOCATED OUTSID E INDIA. VIEWED FROM ANY ANGLE THEREFORE WE ARE UNABLE TO AGREE WITH THE LD. ARS SUBMISSION S THAT THE PAYMENT MADE TO FOREIGN ATTORNEYS FELL WITHIN THE EXCEPTION CARVED OUT SECT ION 9(1)(VII)(B) OF THE ACT. 25. THE LD. AR PLACED HEAVY RELIANCE ON THE FACT TH AT THE ADIT(IT)-2(1), KOLKATA HAD GRANTED A CERTIFICATE U/S 195 OF THE ACT AUTHORIZIN G THE ASSESSEE TO PAY LEGAL & PROFESSIONAL FEES TO MERCHANT & GOULD, UNITED TRADEMARK & PATENT SERVICES, SABA& CO., ELISABET BERBERY & WUESTHOFF & WUESHOFF WITHOUT DEDUCTION OF TAX ON 09.09.2010. SINCE THE SAID CERTIFICATE WAS ISSUED AFTER THE AMENDMENT IN SECTI ON 9(2) OF THE ACT BY THE FINANCE ACT, 2010 CAME IN FORCE, THE LD. AR CLAIMED THAT THE REV ENUE HAD IN PRINCIPLE ACCEPTED THE ASSESSEES CONTENTION THAT HE HAD NO OBLIGATION TO DEDUCT TAX U/S 195 BEFORE REMITTING THE FOREIGN ATTORNEY FEES. THE LD. AR THEREFORE ARGUED THAT BY THE PRINCIPLE OF ESTOPPEL, THE AO WAS PRECLUDED FROM MAKING DISALLOWANCE U/S 40(A)(I) BECAUSE THE ALLEGED DEFAULT OF NON- DEDUCTION OF THE TAX U/S 195 WAS NOT ATTRIBUTABLE T O THE ASSESSEE. THE LD. CIT, DR PLACED BEFORE US THE SUBMISSIONS FILED BY THE ASSESSEE IN THE COURSE OF PROCEEDINGS U/S 195 OF THE ACT WHEREIN THE ASSESSEE HAD INTER ALIA CLAIMED THA T THE PAYMENT WAS IN THE NATURE OF PURE REIMBURSEMENT HAVING NO INCOME ELEMENT. IN THE SAID LETTER, THE ASSESSEE HAD COMPARED HIMSELF WITH AN AIRLINE AGENT WHO ISSUES AIR TICKET S IN FAVOUR OF HIS CUSTOMERS. THE LD. CIT, DR THEREFORE SUBMITTED THAT SINCE THE ASSESSEE DID NOT FAIRLY AND CORRECTLY SET OUT THE TRUE AND CORRECT FACTS THE CERTIFICATE U/S 195 WAS ERRON EOUSLY GRANTED. HE SUBMITTED THAT WHILE ADJUDICATING THE APPEAL, THE TRIBUNAL SHOULD DECIDE THE ISSUE TAKING INTO CONSIDERATION TRUE AND CORRECT FACTS AND APPLICABLE LEGAL PROVISIONS O F THE ACT. HAVING CONSIDERED THE MATERIAL FACTS AND EVIDENCES BEFORE US, WE NOTE THAT ASSESSE ES CONTENTION THAT THE PAYMENTS MADE BY HIM TO FOREIGN ATTORNEYS WERE IN THE NATURE OF PUR E REIMBURSEMENTS IS FOUND TO BE FACTUALLY INCORRECT. WE NOTE THAT THE CERTIFICATE U/S 195 WAS ISSUED BY THE ADIT(IT)-2(1), KOLKATA ONLY IN RESPECT OF PAYMENTS OF USD 3722.28, USD 381 5.00, USD 380.00, USD 3793.85&EURO 10217.00 TO MERCHANT & GOULD, UNITED T RADEMARK & PATENT SERVICES, SABA& CO., ELISABET BERBERY AND WUESTHOFF & WUESHO FF RESPECTIVELY. IN OUR CONSIDERED 20 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER OPINION, NO DISALLOWANCE UNDER SECTION 40(A)(I) WAS WARRANTED IN RESPECT OF THE AFORESAID THREE PAYMENTS FOR WHICH THE ASSESSEE HAD OBTAINED NIL CERTIFICATES U/S 195 OF THE ACT FROM THE ADIT(IT)-2(1), KOLKATA. HOWEVER THE MERE FACT T HAT THE ASSESSEE OBTAINED CERTIFICATES U/S 195 OF THE ACT IN RELATION TO THREE SPECIFIC PA YMENTS BY ITSELF DID NOT GRANT BLANKET IMMUNITY TO THE ASSESSEE IN RESPECT OF OTHER REMITT ANCES MADE TO THE FOREIGN ATTORNEYS. IN ADJUDICATING THE QUESTION OF ALLOWABILITY OF THE EX PENDITURE, WHERE TAX WAS ADMITTEDLY NOT DEDUCTED U/S 195 NOR CERTIFICATE U/S 195 WAS OBTAIN ED, WE NEED TO TAKE INTO CONSIDERATION THE RELEVANT FACTS AND APPLICABLE LEGAL PROVISIONS. AS RIGHTLY STATED BY THE LD. CIT, DR; THERE IS NO ESTOPPEL IN LAW AND THEREFORE MERELY BECAUSE IN FEW CASES THE DEPARTMENT HAD ISSUED NIL TAX DEDUCTION CERTIFICATE U/S 195 CANNOT BE THE SOLE REASON FOR CLAIMING THAT EVERY PAYMENT MADE BY THE ASSESSEE TO FOREIGN ATTORNEYS W AS NOT LIABLE TO TAX IN INDIA. 26. IN THIS REGARD, USEFUL REFERENCE CAN BE MADE TO THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS BOVIS LEND LEASE ( I) LTD (208 TAXMAN 168) WHEREIN THE HONBLE HIGH COURT WHILE HOLDING THAT THE CERTIFICA TE GRANTED U/S 195/197 IN ONLY APPLICABLE TO THE CONSIDERATION PAYABLE FOR WHICH SUCH CERTIFI CATE IS OBTAINED ALSO HELD THAT SUCH CERTIFICATE DOES NOT PRECLUDE THE ASSESSING OFFICER TO RE-EXAMINE THE CHARGEABILITY OF INCOME IN A REGULAR ASSESSMENT PROCEEDINGS. THE REL EVANT OBSERVATIONS ARE EXTRACTED BELOW: 15. UNDER THE AFORESAID PROVISION, THERE IS NO OBL IGATION ON THE PART OF THE PAYER TO PAY TAX AS LONG AS THE SAID CERTIFICATE IS IN FORCE AND REST CANCELLED. EVEN IF TAX IS PAYABLE UNDER THE ACT, THE PAYER CAN NOT BE TREATED AS AN ASSESSEE IN DEFAULT. IF IN A REGULAR ASSESSMENT, AN ORDER IS PASSED HOLDING THAT THE SAID INCOME IS LIABLE TO TAX, THE ISSUE OF SUCH A CERTIF ICATE UNDER THE AFORESAID PROVISION WOULD NOT COME IN THE WAY OF LEVYING AND COLLECTING TAX. HOWEVER, THE PAYER CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT A ND HE CANNOT BE PROCEEDED WITH. IT IS BECAUSE AS LONG AS THE SAID CERTIFICATE STANDS, THE PAYER SHALL NOT MAKE ANY PAYMENT AND SHALL NOT DEDUCT FROM THE CONSIDERA TION PAYABLE TO THE RECIPIENT. HOWEVER, THE SAID CERTIFICATE IS TENTATI VE OR PROVISIONAL OR INTERIM IN NATURE. IT DOES NOT HAVE ANY EFFECT BEYOND PROVIDIN G IMMUNITY UNDER SECTION 201 OF THE ACT. THE IMMUNITIES STOP AT THAT STAGE. IT D OES NOT PRECLUDE THE ASSESSING OFFICER TO EITHER REEXAMINE THE CHARGEABILITY OF IN COME IN A REGULAR ASSESSMENT PROCEEDINGS OR TO RECOVER TAXES FROM THE PAYER IN H IS REPRESENTATIVE CAPACITY. IT IS ONLY IN THE NATURE OF A PROTECTION AGAINST THE C ONSEQUENCES THAT MAY FOLLOW OUT OF NON-DEDUCTION. 21 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER 27. SAME VIEW IS EXPRESSED BY THE HONBLE DELHI HIG H COURT IN THE CASE OF NATIONAL PETROLEUM CONSTRUCTION COMPANY VS DY. CIT (W.P. 852 7/2019) DATED 20.12.2019. 28. AS FAR AS THE LD. ARS RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF DIT VS PANALFA AUTO ELECTRIK LTD (49 TAXMAN N.COM 412) AND THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF CREDIT LYONNAIS VS ADIT(IT) (80 TTJ 191) IS CONCERNED, IT IS NOTED THAT IN THE DECIDED CASES THE ISSUE BEFORE TH E JUDICIAL FORUMS WAS WHETHER COMMISSION OR FEE PAID TO MARKETING AGENTS FALL WITHIN THE SCO PE OF FEES FOR TECHNICAL SERVICES AS DEFINED IN SECTION 9(1)(VII) OF THE ACT WHICH IS NO T THE ISSUE INVOLVED IN THE ASSESSEES CASE. ACCORDINGLY THE JUDGMENTS RELIED UPON BY THE LD. AR ARE FOUND TO BE FACTUALLY DISTINGUISHABLE. 29. WE HAVE ALSO GONE THROUGH THE DECISIONS OF THE COORDINATE BENCHES OF THE TRIBUNAL IN THE CASES OF WIPRO LTD VS ACIT REPORTED IN 80 TT J 191, AJAPPA INTEGRATED PROJECT MANAGEMENT CONSULTANTS (P.) LTD. VS ACIT REPORTED I N 52 SOT 612 AND AQUA OMEGA SERVICES (P.) LTD VS ACIT REPORTED IN 141 ITD 134; RELIED UPON BY THE LD. AR OF THE ASSESSEE. IT IS NOTED THAT THE NATURE OF SERVICES A ND FACTS INVOLVED IN THESE CASES ARE NOT SIMILAR WITH THAT OF THE ASSESSEES CASE. MOREOVER THESE DECISIONS HAVE BEEN RENDERED IN THE CONTEXT OF THE PRE-AMENDED SECTION 9(1)(VII) OF THE ACT AS IT STOOD PRIOR TO THE INSERTION OF EXPLANATION (2) BY THE FINANCE ACT, 2010 AND THEREF ORE THE RATIO LAID DOWN THEREIN ARE NOT APPLICABLE IN THE RELEVANT YEAR IN CONSIDERATION. 30. FOR THE REASONS SET OUT IN THE FOREGOING PARAGR APHS THEREFORE, WE HOLD THAT THE PAYMENTS WHICH THE ASSESSEE MADE TO HIS FOREIGN ASS OCIATES OR FOREIGN ATTORNEYS CAME WITHIN THE AMBIT OF SECTION 9(1)(VII) OF THE ACT IN TERMS OF WHICH THE INCOME BY WAY OF FEES FOR TECHNICAL SERVICES DEEMED TO ACCRUE OR ARISE IN INDIA AND CONSEQUENTLY THEREFORE THE ASSESSEE HAD OBLIGATION TO DEDUCT TAX AT SOURCE UND ER THE PROVISIONS OF THE DOMESTIC TAX LAWS. THE LD. AR OF THE ASSESSEE HOWEVER RAISED AN ALTERNATE CONTENTION THAT IF UNDER THE DOMESTIC TAX PROVISIONS, THE PAYMENTS ARE HELD TO I N THE NATURE OF FEES FOR TECHNICAL SERVICES, EVEN THEN THE ASSESSEE DID NOT HAVE OBLI GATION TO DEDUCT TAX SOURCE SINCE THESE 22 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER PAYMENTS DID NOT COME WITHIN CHARGING PROVISIONS OF THE DTAAS WITH THE RESPECTIVE COUNTRIES OF WHICH THE FOREIGN ATTORNEYS WERE RESID ENTS. THE LD. AR SUBMITTED THAT THE RELEVANT DTAAS CONTAINED SPECIFIC PROVISIONS DEFINI NG THE TERMS SUCH AS FEES FOR TECHNICAL SERVICES, FEES FOR INCLUDED SERVICES, INDEPENDE NT PERSONAL SERVICES ETC. AND THE PAYMENTS MADE BY THE ASSESSEE COULD FALL UNDER DIFFERENT CAT EGORIES DEFINED IN DTAAS AND CONSEQUENTLY THEREFORE PAYMENTS MADE DID NOT INCLUD E ELEMENT OF INCOME CHARGEABLE TO TAX IN INDIA, REQUIRING DEDUCTION OF TAX U/S 195 OF THE ACT. THE LD. AR SUBMITTED THAT IN ACCORDANCE WITH THE PROVISIONS OF THESE DTAAS, THE PAYMENTS MADE BY THE ASSESSEE TO FOREIGN ATTORNEYS WERE LIABLE TO BE ASSESSED ONLY I N THE COUNTRY OF RESIDENCE AND THEREFORE INDIA BEING SOURCE COUNTRY DID NOT HAVE RIGHT TO TA X SUCH PAYMENTS UNDER THE RESPECTIVE DTAAS. HAVING CONSIDERED THE SAID ALTERNATE PLEA OF THE LD. AR, WE FIND MERIT IN THE SAME. WE HOWEVER NOTE THAT BEFORE THE LD. CIT(A)/AO THIS ASPECT WAS NEITHER RAISED BY THE ASSESSEE NOR CONSIDERED AND ADJUDICATED BY THE LD. CIT(A)/AO. IN THE CIRCUMSTANCES THEREFORE, TO MEET THE ENDS OF JUSTICE, WE DEEM IT FIT AND PROPER TO RESTORE THIS ALTERNATE PLEA RAISED FOR THE FIRST TIME BEFORE US TO THE FILE OF THE AO. HE IS DIRECTED TO EXAMINE THE ASSESSEES PLEA THAT PAYMENTS WERE NON-TAXABLE IN I NDIA BECAUSE OF THE BENEFICIAL PROVISIONS OF THE DTAAS WITH RESPECTIVE COUNTRIES. WHILE DOING SO, THE AO SHALL GRANT ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND WILL ALSO PERMIT HIM TO FURNISH NECESSARY DOCUMENTS AND EVIDENCES IN SUPPORT OF HIS CLAIM. 31. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 26TH FEBRUARY, 2020 SD/- SD/- (ARJUN LAL SAINI) (ABY. T. VARKEY ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE D 26 -02-2020 PP(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT/DEPARTMENT: THE ACIT, CIR-25, KOLKATA 1 ST FLOOR, AAYKAR BHAWAN, DAKSHIN, 2 GARIAHAT ROAD (S), KOLKATA-68. 2 RESPONDENT/ASSESSEE: SRI SUBHATOSH MAJUMDER, 5 HARI SH MUKHERJEE ROAD, KOLKATA-25. 23 ITA NO. 2006/KOL/2017 A.Y 2011-12 SRI SUBHATOSH MAJUMDER 3. CIT, 4. CIT(A), KOLKATA. 5. DR, KOLKATA BENCHES, KOLKATA **PP/SPS TRUE COPY BY BY ORDER ASSISTANT REGISTRAR ITAT KOLKATA