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ITA 210/DEL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7457 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 15-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 13-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Keywords: Depreciation; Double taxation relief; Services rendered outside India; Deemed to accrue or arise in india
• Section: 5(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D , NEW DELHI) BEFORE SHRI T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI C. M. GARG, JUDICIAL MEMBER I.T.A. NOS. 210/DEL/2012 & 1989/DEL/2013 ASSESSMENT YEARS : 2007-08 & 2008-09 LE PASSAGE TO INDIA TOURS VS. DCIT, CIRCLE 4(1) , & TRAVEL (P) LTD., NEW DELHI E-29, HAUZ KHAS, NEW DELHI-110 016 GIR / PAN:AAACL8370K I.T.A. NOS. 498/DEL/2012 & 1778/DEL/2013 ASSESSMENT YEARS : 2007-08 & 2008-09 ACIT, CIRCLE 4(1), VS. LE PASSAGE TO INDIA TOURS NEW DELHI & TRAVEL (P)LTD., E-29, HAUZ KHAS, NEW DELHI- 110 016 (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI VIKRAM SAHAY, DR ASSESSEE BY : SHRI AJAY VOHRA, GAURAV JAIN, ADV. SHRI UPVAN GUPTA, CA ORDER PER T.S. KAPOOR, AM: THIS IS A BUNCH OF FOUR APPEALS RELATING TO ASSESS MENT YEARS 2007-08 & 2008-09. I.T.A. NO. 210 AND 498 ARE CROSS APPEAL S FILED BY ASSESSEE AND REVENUE RESPECTIVELY AGAINST THE ORDER OF LD. CIT(A ) DATED 01.11.2011 WHEREAS I.T.A. NO. 1989 AND1778 ARE CROSS APPEALS IN ASSESSMENT YEAR 2 ITA NOS.210,498/DEL/2012 I.T.A.NOS.1989,1778/DEL/2013 2008-09 FILED BY ASSESSEE AND REVENUE RESPECTIVELY AGAINST THE ORDER OF LD. CIT(A) DATED 28.01.2013. THESE APPEALS WERE HEARD TOGETHER AND THEREFORE, FOR THE SAKE OF CONVENIENCE, A COMMON AND CONSOLIDA TED ORDER IS BEING PASSED. IN I.T.A. NO. 210, THE ASSESSEE HAS TAKEN ONLY ONE GROUND OF APPEAL WHICH IS ON ACCOUNT OF THE ACTION OF LD. CIT(A) BY WHICH HE HAD CONFIRMED THE DISALLOWANCE U/S 40(A)(I) WHICH WAS MADE BY A.O . FOR NON DEDUCTION OF TDS ON PAYMENTS MADE TO NON-RESIDENT PERSONS OUTSID E INDIA FOR REPRESENTATION CHARGES. IN I.T.A. NO. 498, THE REV ENUE IS AGGRIEVED WITH THE ACTION OF LD. CIT(A) BY WHICH HE HAD DELETED THE AD DITION ON ACCOUNT OF EXCESS DEPRECIATION ON COMPUTER PERIPHERALS. THE R EVENUE IS ALSO AGGRIEVED WITH THE ACTION OF LD. CIT(A) BY WHICH HE HAD DELET ED THE ADDITION OF RS.1,75,49,089/- MADE BY A.O. U/S 40(A)(I) ON ACCOU NT OF TOUR EXPENSES PAID BY ASSESSEE WITHOUT DEDUCTION OF TDS. THE REVENUE IS FURTHER AGGRIEVED BY THE ACTION OF CIT(A) BY WHICH HE HAD DELETED THE AD DITION OF RS.2,77,62,022/- MADE BY A.O. U/S 40(A)(I) ON ACCOU NT OF PAYMENTS MADE TO OVERSEAS REPRESENTATIVES WITHOUT DEDUCTING TAX AT S OURCE. THE 1 ST GROUND OF APPEAL IN I.T.A. NO. 1989 IN ASSESSMENT YEAR 2008-0 9 IS SIMILAR TO THE GROUND OF APPEAL TAKEN BY ASSESSEE IN I.T.A. NO. 21 0. HOWEVER THE ASSESSEE HAS FURTHER TAKEN GROUND NO.2 WHEREBY LD. CIT(A) HA D CONFIRMED THE DISALLOWANCE OF EXPENDITURE INCURRED ON ACCOUNT OF COMMISSION PAID TO NON- RESIDENT PERSONS OUTSIDE INDIA U/S 40(A)(I) WITHOUT DEDUCTION OF TAX AT SOURCE. IN I.T.A. NO. 1778, THE REVENUE IS AGGRIEVED WITH T HE DELETION OF DEPRECIATION ON COMPUTER PERIPHERALS WHICH THE A.O. HAD DISALLOWED AS EXCESS DEPRECIATION. REVENUE IS ALSO AGGRIEVED WIT H THE ACTION OF LD. CIT(A) BY WHICH HE HAD DELETED THE ADDITION OF RS.4 ,39,66,623/- MADE BY A.O. U/S 40(A)(I) ON ACCOUNT OF TOUR EXPENSES PAID BY ASSESSEE WITHOUT 3 ITA NOS.210,498/DEL/2012 I.T.A.NOS.1989,1778/DEL/2013 DEDUCTION OF TAX AT SOURCE. THE REVENUE IS FURTHER AGGRIEVED WITH THE ACTION OF LD. CIT(A) BY WHICH HE HAD ALLOWED RELIEF OF RS. 2,08,45,724/- OUT OF TOTAL ADDITION OF RS.4,50,82,827/- MADE BY A.O. U/S 40(A)(I) ON ACCOUNT OF PAYMENTS MADE TO OVERSEAS REPRESENTATIVES WITHOUT D EDUCTION OF TAX AT SOURCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF ORGANIZING TOURS AND TRAVEL ARRANGEMENT S FOR FOREIGN TOURISTS COMING TO INDIA. THE ASSESSEE PROVIDES ALL SERVICE S FOR TOURISTS BEGINNING FROM TRAVELLING TO INDIA TILL THEIR DEPARTURE FROM INDIA SUCH AS TRAVEL IN INDIA BY ALL MODES OF TRANSPORTS LIKE AIR, RAIL, ROAD ETC . THE ASSESSEE ALSO PROVIDES BOARDING AND LODGING FACILITIES AND SITE SEEING SER VICES ETC. IN ORDER TO PROMOTE ITS BUSINESS IN FOREIGN COUNTRIES THE ASSES SEE HAS APPOINTED AGENTS IN VARIOUS COUNTRIES TO MARKET ITS SERVICES AND IN LIEU THEREOF, REPRESENTATION CHARGES / RETAINERSHIP FEE AND COMMISSION IS PAID T O THEM. DURING ASSESSMENT PROCEEDINGS IN ASSESSMENT YEAR 2007-08 A ND 2008-09, THE A.O. HELD THAT THE PAYMENT OF REPRESENTATION CHARGES A ND COMMISSION AND TOUR EXPENSES WERE IN THE NATURE OF PAYMENTS WHICH FELL WITHIN THE MEANING OF FEE FOR TECHNICAL SERVICES DEFINED U/S 9(1)(VII) OF THE ACT AND, THEREFORE, THE AFORESAID PAYMENTS WERE DEEMED TO ACCRUE AT ARRIVAL IN INDIA AND CONSEQUENTLY WERE LIABLE TO BE TAXED AND CONSEQUENT LY WERE LIABLE FOR TAX DEDUCTION AT SOURCE AND SINCE ASSESSEE HAD NOT DEDU CTED TAX THEREON IN INDIA. THEREFORE, THE A.O. MADE THE FOLLOWING ADDITIONS FO R VIOLATION OF THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT IN THESE TWO ASSESSMENT YEARS: 2007-08 2008-09 DISALLOWANCE ON ACCOUNT OF TOUR EXP. 1,75,49,089 4,39,66,623 DISALLOWANCE U/S 40(A)(I ) 2,77,62,022 4,50,82,8 27 4 ITA NOS.210,498/DEL/2012 I.T.A.NOS.1989,1778/DEL/2013 3. THE A.O. ALSO MADE DISALLOWANCE ON ACCOUNT OF EX CESS DEPRECIATION CHARGED ON COMPUTER PERIPHERALS AMOUNTING TO RS.1,7 3,070/- AND RS.1,26,000/- IN THE ABOVE TWO ASSESSMENT YEARS RES PECTIVELY. AGGRIEVED WITH THE ADDITIONS, THE ASSESSEE FILED APPEALS BEFO RE LD. CIT(A) AND LD. CIT(A) DELETED THE DISALLOWANCE OF EXCESS DEPRECIAT ION ON COMPUTER PERIPHERALS RELYING UPON VARIOUS CASE LAWS DECIDED BY VARIOUS COURTS. AS REGARDS THE DISALLOWANCE MADE BY A.O. ON ACCOUNT OF TOUR EXPENSES, LD. CIT(A) DELETED THE SAME IN ASSESSMENT YEAR 2007-08 BY HOLDING AS UNDER: 5.2 I DO NOT FIND MYSELF IN AGREEMENT WITH THE OB SERVATION OF THE AO THAT THE RATIO OF TRANSMISSION CORPORATION OF AP IS APPLICABLE TO THE CASE OF ASSESSEE. THE OBSERVATIONS OF THE SUPRE ME COURT IN TRANSMISSION CORPORATION OF AP (SUPRA) HAVE TO BE R EAD IN THE CONTEXT OF THE QUESTION BEFORE THE COURT I.E. WHETH ER TAX WAS DEDUCTIBLE ON THE GROSS TRADING RECEIPTS OR ONLY ON THE' PURE INCOME PROFITS'. THE COURT WAS NOT CONCERNED WITH THE CASE WHERE THE RECEIPT WAS NOT CHARGEABLE TO TAX IN THE HANDS OF THE RECIP IENT AT ALL. ON THE OTHER HAND THE OBSERVATIONS OF THE COURT MAKE IT CL EAR THAT LIABILITY TO DEDUCT TAX AT SOURCE ARISES ONLY WHEN THE SUM PAYAB LE TO THE NON- RESIDENT IS CHARGEABLE TO TAX. THIS VIEW HAS ALSO B EEN FOLLOWED BY THE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF V AN OORD ACZ INDA (P) LTD. V CIT (2010) 323 ITR 130(DEL): 189 TAXMAN 232( DEL) 230 CTR(DEL) 365. ON THE ISSUE AS TO WHETHER SECTION 19 5(1) ARISES ONLY IF THE PAYMENT IS CHARGEABLE TO TAX IN THE HANDS OF TH E RECIPIENT, 1 FIND THAT THE ISSUE IS NOW COVERED AND SETTLED BY THE JU DGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF GE INDIA TECHN OLOGY CENT. (P.) LTD. (2010) 327 ITR 456/ 193 TAXMAN 234 WHEREIN THE HON'BLE COURT REVERSED THE DECISION OF THE KARNATAKA HIGH COURT I N THE CASE OF CIT (INTERNATIONAL TAXATION) V. SAMSUNG ELECTRONICS [20 10] 302 ITR 209. THE HON'BLE SUPREME COURT HELD IN THE CASE OF GE IN DIA TECHNOLOGY CENTRE (P.) LTD. V. CIT (SUPRA) TAX DEDUCTION AT SO URCE OBLIGATIONS UNDER SECTION 195(1) ARISE ONLY IF THE PAYMENT IS C HARGEABLE TO TAX IN THE HANDS OF NON-RESIDENT RECIPIENT. THEREFORE, MER ELY BECAUSE A PERSON HAS NOT DEDUCTED TAX AT SOURCE FROM A REMITT ANCE ABROAD, IT CANNOT BE INFERRED THAT THE PERSON MAKING THE REMIT TANCE HAS 5 ITA NOS.210,498/DEL/2012 I.T.A.NOS.1989,1778/DEL/2013 COMMITTED A FAILURE IN DISCHARGING HIS TAX WITHHOLD ING OBLIGATIONS BECAUSE SUCH OBLIGATIONS COME INTO EXISTENCE ONLY W HEN RECIPIENT HAS A TAX LIABILITY IN INDIA. THE UNDERLYING PRINCIPLE IS THIS. TAX WITHHOLDING LIABILITY OF THE PAYEE IS INHERENTLY A VICARIOUS LIABILITY, ON BEHALF OF THE RECIPIENT, AND, THEREFORE, WHEN RECIP IENT DOES NOT HAVE THE PRIMARY LIABILITY TO BE TAXABLE IN RESPECT OF I NCOME EMBEDDED IN THE RECEIPT, THE VICARIOUS LIABILITY OF THE PAYER C ANNOT BUT BE INEFFECTUAL. THIS VICARIOUS TAX WITHHOLDING LIABILI TY CANNOT BE INVOKED UNLESS PRIMARY TAX LIABILITY OF THE RECIPIENT IS ES TABLISHED. THE ASSESSEE HAS TO APPLY U/S. 195 (2) ONLY IN CASE WHE RE IT HAD A DOUBT AS TO THE AMOUNT TO BE DEDUCTED AT SOURCE AND COULD AP PROACH THE ASSESSING OFFICER TO COMPUTE THE AMOUNT WHICH WAS L IABLE TO BE DEDUCTED AT SOURCE & NOT OTHERWISE IN EVERY CASE. J UST BECAUSE THE PAYER HAS NOT OBTAINED A SPECIFIC DECLARATION FROM THE REVENUE AUTHORITIES TO THE EFFECT THAT THE RECIPIENT IS NOT LIABLE TO BE TAXED IN INDIA IN RESPECT OF INCOME EMBEDDED IN PARTICULAR P AYMENT, HOWSOEVER DESIRABLE BE THAT PRACTICE, THE ASSESSING OFFICER CANNOT PROCEED ON THE BASIS THAT THE PAYER HAD 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. THAT EXERCISE WAS NOT CARRIED OUT BY THE A SSESSING OFFICER ON THE FACTS OF THIS CASE. 5.3 THE ASSESSING OFFICER HAS NOT BROUGHT ANY NEW FACTS ON RECORD TO SHOW THAT THE FOREIGN TOUR OPERATORS WERE HAVING A PERSON ACTING ON THEIR BEHALF FOR EITHER OF THE ACTIVITIES PROVID ED IN THE DEFINITION OF 'BUSINESS CONNECTION' GIVEN IN EXPLANATION 2 OF SEC TION 9 (I) OF THE ACT. IN VIEW OF THE DISCUSSION MADE ABOVE, IT IS HE LD THAT THE DISALLOWANCE OF RS.1,75,49,089/- ON ACCOUNT OF TOUR EXPENSES BEING PAYMENT MADE TO NON-RESIDENT TOUR OPERATORS BY INVO KING THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT IS NOT JU STIFIED AND THE SAME IS DELETED. AS A RESULT, GROUND OF APPEAL NO.2 IS TRE ATED AS ALLOWED.' 3.1 IN ASSESSMENT YEAR 2008-09, SIMILAR ADDITION AM OUNTING TO RS.4,39,66,623/- WAS DELETED BY FOLLOWING HIS ORDER IN ASSESSMENT YEAR 2007-08. 6 ITA NOS.210,498/DEL/2012 I.T.A.NOS.1989,1778/DEL/2013 4. AS REGARDS THE ADDITION MADE BY A.O. U/S 40(A)(I ) A TOTAL ADDITION OF RS.2,77,62,022/- WAS MADE IN ASSESSMENT YEAR 2007-0 8. LD. CIT(A) IN ASSESSMENT YEAR 2007-08 ALLOWED RELIEF TO THE EXTEN T OF RS.1,90,74,062/- AND UPHELD THE REMAINING ADDITION TO THE EXTENT OF RS.86,87,960/-. THE DELETION MADE BY LD. CIT(A) RELATED TO THE FOLLOWIN G HEADS OF EXPENDITURE:: PARTICIPATION EXPENSES 31,12,116/- COMMISSION 40,25,472/- REBATE TO FOREIGN TOUR OPERATORS 90,92,510/- REFUNDS FOR UNUTILIZED SERVICES 05,91,380/- ANNUAL MEMBERSHIP FEES 01,03,689/- REIMBURSEMENT FOR EXPENSES TO OVERSEAS REPRESENTATIVES 21,48,895/- TOTAL 1,90,74,062/- 6. THE CONFIRMATION OF ADDITION OF RS.86,87,960/- RELATED TO EXPENDITURE INCURRED BY ASSESSEE FOR RETAINER-SHIP FEE / REPRES ENTATION CHARGES. IN ASSESSMENT YEAR 2008-09, LD. CIT(A) ALLOWED RELIEF FOR ADDITION U/S 40(A)(I) TO THE EXTENT OF RS.2,08,47,724/- OUT OF T OTAL ADDITION OF RS.4,50,82,827/-. HE UPHELD THE ADDITION TO THE EX TENT OF RS.2,42,35,103/- CONSISTING OF TWO PAYMENTS ONE RELATING TO REPRESEN TATION CHARGES AMOUNTING TO RS.85,45,762/- AND ANOTHER RELATING TO COMMISSIO N OF RS.1,56,89,341/-. AGAINST THE RELIEF GIVEN BY LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. THE ASSESSEE IS IN APPEAL FOR CONFIRMATION OF ADDIT ION BY LD. CIT(A). 7. AT THE OUTSET, ARGUING THE ASSESSEES APPEAL, LD . A.R. SUBMITTED THAT IN TERMS OF PROVISIONS OF SECTION 5(2) OF THE ACT, A N ON RESIDENT IS LIABLE TO TAX IN INDIA ON INCOME WHICH ACCRUES OR ARISES IN INDIA AND IS DEEMED TO ACCRUE OR ARISE IN INDIA AND AS PER THE PROVISION OF SECTI ON 195, THE TAX ON SUCH PAYMENTS TO NON RESIDENTS IS TO BE DEDUCTED BY THE PERSON MAKING SUCH PAYMENT. IT WAS SUBMITTED THAT AS PER SECTION 195, THE DUTY CASTED UPON 7 ITA NOS.210,498/DEL/2012 I.T.A.NOS.1989,1778/DEL/2013 PAYER IS TO DEDUCT TAX IN RESPECT OF INCOME PAYABLE TO NON RESIDENTS WHICH IS CHARGEABLE UNDER T HE PROVISIONS. IT WAS SUBMITTED THAT IN CASE WHERE NO TAXABLE INCOME ARISES TO A NONRESIDENT TAX IS NOT R EQUIRED TO BE DEDUCTED AND IN THIS RESPECT, RELIANCE WAS PLACED ON THE CASE LA W OF G. E. TECHNOLOGY CENTRE PVT. LTD. VS CIT 327 ITR 456 (S.C.). IT WAS FURTHER ARGUED THAT AS PER PROVISIONS OF SECTION 40(A)(I), THE DISALLOWANC E OF EXPENDITURE CAN ONLY BE MADE WHERE TAX IS DEDUCTIBLE AT SOURCE AND, THER EFORE, IF NO TAX IS DEDUCTIBLE THEN EXPENDITURE CANNOT BE DISALLOWED U/ S 40(A)(I). IT WAS SUBMITTED THAT SINCE IN THIS CASE, THE PAYMENTS WER E MADE TO NONRESIDENT OVERSEAS AGENTS SITUATED OUTSIDE INDIA, THEREFORE, THE INCOME ACCRUING OR ARISING TO THEM, DID NOT ACCRUE OR AROSE IN INDIA. IT WAS SUBMITTED THAT SECTION 9 OF THE ACT PROVIDES THAT SUCH PAYMENT WIL L DEEM TO HAVE ACCRUED IN THE HANDS OF THE NON-RESIDENT AND THEREFORE, WIL L BE CHARGEABLE TO TAX IN INDIA AND CONSEQUENTLY, PAYER WILL BE LIABLE TO DED UCT TAX THEREFROM. IT WAS SUBMITTED THAT SUCH INCOME AS MENTIONED IN SECTION 9(1)(VII) OF THE ACT IS INCOME BY WAY OF FEE FOR TECHNICAL SERVICES WHICH A RE PAYABLE BY RESIDENT TO A NONRESIDENT. IT WAS SUBMITTED THAT THE CATEGORY OF INCOME SPECIFIED IN SECTION 9(I)(VII) SERVICES RENDERED BY NONRESIDENT PERSON MUST BE OF MANAGERIAL, TECHNICAL OR CONSULTANCY IN NATURE. EX PLAINING THE MEANING OF MANAGERIAL, CONSULTANCY AND TECHNICAL SERVICES AS E XPLAINED BY COURTS/TRIBUNALS, LD. A.R. SUBMITTED THAT NONE OF T HE SERVICES RENDERED BY NONRESIDENT AGENTS OF THE ASSESSEE FELL INTO MANAGE RIAL, CONSULTANCY OR TECHNICAL SERVICES AND IN THIS RESPECT, OUR ATTENTI ON WAS INVITED TO PAPER BOOK PAGES 98-101 AND 119-122 WHERE A COPY OF AGREEMENT ENTERED INTO BY ASSESSEE WITH NON-RESIDENT AGENTS OF USA AND UK WER E PLACED. FROM THE CONTENTS OF THESE AGREEMENTS, THE LD. A.R. SUBMITTE D THAT THE NATURE OF 8 ITA NOS.210,498/DEL/2012 I.T.A.NOS.1989,1778/DEL/2013 SERVICES TO BE PROVIDED BY THESE AGENTS ARE IN THE NATURE OF MARKETING AND PROMOTION OF THE ASSESSEES BUSINESS OUTSIDE INDIA IN ORDER TO ATTRACT FOREIGN TOURISTS TRAVELLING TO INDIA. THE MARKETING SERVIC ES DO NOT INVOLVE ANY SUPERVISION OR ADMINISTRATION OF ANY BUSINESS CARRI ED OUT BY THE APPELLANT. IT WAS SUBMITTED THAT THE SAID SERVICES DO NOT INVOLVE IMPARTING OF ANY ADVICE OR CONSULTATION BY NONRESIDENT APPELLANT IN INDIA W HICH CAN BE USED BY ASSESSEE. IT WAS SUBMITTED THAT THE SERVICES RENDE RED BY OVERSEAS AGENTS WERE MEANT FOR FOREIGN TOURISTS, WHICH WERE UTILIZE D BY ASSESSEE TO PROMOTE ITS BUSINESS AND, THEREFORE, THE ACTIVITIES OF NONR ESIDENT PERSON DID NOT FALL INTO CONSULTANCY SERVICES ALSO. IT WAS FURTHER SUB MITTED THAT THESE SERVICES ALSO DO NOT FALL UNDER TECHNICAL SERVICES AS RENDER ING OF SUCH SERVICES DO NOT INVOLVE APPLICATION OF INDIVIDUAL SCIENCES. THEREF ORE, IT WAS SUBMITTED THAT NONE OF THE ACTIVITIES OF NONRESIDENT AGENTS FALL I NTO THE SERVICES AS DEFINED U/S 9(I)(VII) OF THE ACT. LD. A.R. RELIED UPON THE CASE LAW OF PANALFA AUTOELEKTRIK LTD. IN I.T.A. NO. 292/2014 DECIDED BY HON'BLE DELHI HIGH COURT WHEREIN THE HONBLE COURT HAD EXPLAINED THE M EANING OF THE WORDS MANAGERIAL, TECHNICAL AND CONSULTANCY AS MENTIONED IN SECTION 9(I)(VII) OF THE ACT AND HAD HELD THAT SALES AND MARKETING SERVI CES RENDERED BY AN OVERSEAS COMMISSION AGENT DO NOT FALL WITHIN THE ME ANING OF TECHNICAL SERVICES AS ENVISAGED BY SECTION 9(I)(VII). THEREF ORE, IT WAS ARGUED THAT COMMISSION PAID TO THESE PERSONS CANNOT BE DEEMED T O HAVE ACCRUED IN INDIA AND THEREFORE, WAS NOT LIABLE TO TAX IN INDIA. IN SUPPORT OF THE EXPLANATION THAT SALE AND MARKETING EXPENSE DO NOT FALL WITHIN THE MEANING OF FEE FOR TECHNICAL SERVICES, AS DEFINED U/S 9(I)(VII), LD. A .R. FURTHER RELIED UPON FOLLOWING CASE LAWS: I) DIT VS SHERATON INTERNATIONAL 313 ITR 267 (DEL. ) 9 ITA NOS.210,498/DEL/2012 I.T.A.NOS.1989,1778/DEL/2013 II) CLSA LTD. VS ITO 56 SOT 254 (MUM.) III) WNS NORTH AMERICA INC. VS ACIT 141 ITD 17 (M UM) IV) ACIT VS MODEL EXIM: 64 SOT 4 (LUCK.) V) DCIT VS FARIDA PRIME TANNERY (P) LTD. 64 SOT 14 5 (CHENN.) VI) CUSHMAN AND WAKEFIELD(S) PTE. LTD., IN RE: 305 ITR 208 (AAR) 8. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PR ESENT CASES AND IN VIEW OF THE RATIO EMANATING FROM VARIOUS DECISIONS OF THE HONBLE COURTS, LD.A.R. SUBMITTED THAT SALES PROMOTION AND MARKETIN G SERVICES RENDERED OUTSIDE INDIA WERE NOT IN THE NATURE OF FEE FOR TEC HNICAL SERVICES AND, THEREFORE, ASSESSEE WAS NOT LIABLE TO DEDUCT TAX TH EREFROM. FURTHER ARGUING, THE LD. A.R. SUBMITTED THAT THE MANNER OF CALCULATI ON AND CONSIDERATION FOR AVAILING SUCH SERVICES DOES NOT MATTER WHICH CAN BE PAID BY A FIXED COMMISSION ON THE BASIS OF SALES OR WHICH CAN BE BA SED UPON FIXED PAYMENT AND THEREFORE, THE MANNER OF CALCULATION OF CONSIDE RATION CANNOT COME IN THE WAY OF DETERMINING WHETHER THE PAYMENTS WERE FEE FO R TECHNICAL SERVICES OR NOT. LD. A.R. HAS RELIED UPON THE FOLLOWING CASE L AWS WITH THE PROPOSITION THAT WHERE CONSIDERATION WAS PAID LUMP SUM FOR AVAI LING MARKETING SERVICES INSTEAD OF COMMISSION WITH REFERENCE TO PERCENTAGE OF SALES / PROFITS, THE PAYMENTS WERE HELD NOT TO BE IN THE NATURE OF FEE F OR TECHNICAL SERVICES: I) RICH GRAVISS PRODUCS (P) LTD., VS ADDL. CIT: 49 TAXMAN.COM 531 (MUM.) II) CLSA LTD. VS ITO 56 SOT 254 (MUM) III) DCIT VS I.M. GEARS (P) LTD. 65 SOT 303 (CHENNA I) IV) DCIT VS FARIDA PRIME TANNERY P. LTD. 64 SOT 145 (CHENNAI) V) ITO VS TRIDENT EXPORTS 149 ITD 361 (CHENNAI) VI) REAL RESOURCING LTD. VS DIT 322 ITR 558 (AAR) 9. WITHOUT PREJUDICE TO THE ABOVE ARGUMENTS, LD. A. R. SUBMITTED THAT EVEN OTHERWISE TAKING INTO ACCOUNT THE PROVISIONS O F DTAA THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE AS THE PROVISION S OF DTAA OVERRIDES THE 10 ITA NOS.210,498/DEL/2012 I.T.A.NOS.1989,1778/DEL/2013 PROVISIONS OF INCOME TAX ACT. IT WAS SUBMITTED THA T THE PROVISIONS OF DTAA IF ARE BENEFICIAL TO NONRESIDENT, I.E. WHICH GOES T O REDUCE THE LIABILITY OF NON- RESIDENT VIS A VIS PROVISIONS CONTAINED IN THE ACT, THEN PROVISIONS OF DTAA ARE APPLICABLE. INVITING OUR ATTENTION TO ANNEXURE -1 ATTACHED WITH THE SYNOPSIS, LD. A.R. SUBMITTED THAT ALL PAYMENTS WERE MADE TO RESIDENTS OF COUNTRIES WITH WHICH INDIA HAD DTAA. INVITING OUR ATTENTION TO ARTICLE 12 OF INDO-US DTAA, IT WAS SUBMITTED THAT PARA 4 OF SU CH ARTICLE STATES THAT FEE FOR SERVICES INCLUDES CONSIDERATION FOR RENDERING T ECHNICAL CONSULTANCY SERVICES FOR SUCH SERVICES WHICH MAKE AVAILABLE TEC HNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HOW, OR PROCESSES OR CONSIS T OF THE DEVELOPMENT AND TRANSFER OF A TECHNICAL PLAN OR TECHNICAL DESIGN TO THE PERSON AVAILING SERVICES. IT WAS SUBMITTED THAT THESE TECHNICAL KN OWLEDGE, SKILL/ KNOW-HOW ETC. IS CONSIDERED TO HAVE BEEN MADE AVAILABLE BY S ERVICE PROVIDER WHEN THE RECIPIENT THEREOF CAN INDEPENDENTLY APPLY THE TECHN OLOGY WITHOUT ASSISTANCE OF THE SERVICE PROVIDER. IT WAS SUBMITTED THAT THE PROVISIONS OF SERVICES PROVIDED BY OVERSEAS AGENTS GET RESULT INTO INCREAS E IN BUSINESS OF THE ASSESSEE AND DO NOT MAKE AVAILABLE ANY TECHNICAL KN OWLEDGE, EXPERIENCE, SKILL OR KNOW-HOW ETC. WITHOUT PREJUDICE TO THE AB OVE, LD. A.R. SUBMITTED THAT VIDE CIRCULAR 23 DATED 23.07.1966, AND CIRCULA R NO.786 DATED 7/2/2000 ISSUED BY CBDT, THE ASSESSEE WAS NOT LIABLE TO DEDU CT TDS FROM PAYMENTS FOR SERVICES RENDERED BY NON-RESIDENT AGENS. IT WA S SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, CERTAIN PAYMENTS WERE MAD E BY ASSESSEE WITHOUT DEDUCTION OF TAX AT SOURCE RELYING UPON THOSE CIRCU LARS. RELIANCE IN THIS RESPECT WAS PLACED ON HON'BLE DELHI HIGH COURT DECI SION IN THE CASE OF CIT VS EON TECHNOLOGY P. LTD. 343 ITR 356 WHERE IT HAS BEEN HELD THAT ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FOR M PAYMENT TO NONRESIDENT 11 ITA NOS.210,498/DEL/2012 I.T.A.NOS.1989,1778/DEL/2013 FOR CARRYING OUT ANY OPERATION IN INDIA BY APPLYING THE PROVISION OF CIRCULARS 23 AND 786. LD. A.R. HAS RELIED UPON A NUMBER OF C ASE LAWS AS MENTIONED IN PAGE 10 OF HIS SYNOPSIS. IT WAS SUBMITTED THAT ABO VE CIRCULARS WERE WITHDRAWN BY CIRCULAR NO.7/2009 WHICH FELL IN ASSES SMENT YEAR 2010-2011 AND THEREFORE, IN THESE TWO YEARS, THE CIRCULARS WE RE VERY MUCH IN EXISTENCE AND ITS WITHDRAWAL WAS NOT RETROSPECTIVE AS HELD BY HON'BLE DELHI HIGH COURT IN THE CASE OF ANGILIQUE INTERNATIONAL LTD. 3 59 ITR 9 WHEREIN IT WAS HELD THAT WITHDRAWAL OF CIRCULAR WAS PROSPECTIVE. IN VIEW OF ALL ALTERNATIVE ARGUMENTS, LD. A.R. SUBMITTED THAT THE ASSESSEE WAS NOT LIABLE TO DEDUCT TDS AND THEREFORE, DISALLOWANCE U/S 40(A)(I) WAS NO T WARRANTED. 10. LD. D.R. ON THE OTHER HAND SUBMITTED THAT IN TH E PRESENT CASES, REMUNERATION FOR NONRESIDENT AGENTS WAS FIXED AND W AS NOT DEPENDING UPON BUSINESS PROCURED BY THEM. THEREFORE, THESE SERVIC ES PROVIDED BY OVERSEAS NONRESIDENT AGENTS WAS IN THE FORM OF MANAGERIAL SE RVICES WHO WERE MANAGING THE OFFICES OF ASSESSEE AND THEREFORE THE PROVISIONS OF SUCH SERVICES WERE COVERED IN THE FEE FOR TECHNICAL SERV ICES AS DEFINED IN SECTION 9(I)(VII) OF THE ACT. INVITING OUR ATTENTION TO LD . CIT(A)S ORDER, LD. D.R. SUBMITTED THAT LD. CIT(A) HAS EXTENSIVELY DISCUSSED THE PROVISIONS OF DTAA AND, THEREFORE, ALL ARGUMENTS OF LD. A.R. WERE TAKEN CARE OF BY LD. CIT(A) FOR DISPOSING OFF THE APPEALS. 11. IN HIS REJOINDER, LD. A.R. SUBMITTED THAT AGEN TS WERE NOT MANAGING THE BUSINESS OF THE ASSESSEE AND THEY WERE JUST PRO CURING THE BUSINESS ON BEHALF OF THE ASSESSEE AND IT WAS SUBMITTED THAT IN THE CASE LAW OF ADIDAS SOURCING LTD. DEFINITION OF MANAGERIAL SERVICES HAS BEEN DISCUSSED. AS REGARDS THE DISCUSSION BY LD. CIT(A) WITH RESPECT T O DTAA, THE LD. A.R. SUBMITTED THAT LD. CIT(A) HAS HELD THAT ACT WAS AME NDED WITH RETROSPECTIVE 12 ITA NOS.210,498/DEL/2012 I.T.A.NOS.1989,1778/DEL/2013 EFFECT AND THEREFORE DTAA WAS NOT APPLICABLE, WHICH WAS NOT CORRECT AS THE PROVISIONS OF DTAA ALWAYS OVERRIDES THE PROVISIONS OF THE ACT. AS REGARDS REVENUES APPEALS, LD. D.R. RELIED UPON THE ORDER O F A.O. WHEREAS LD. A.R. RELIED UPON THE ORDER OF LD. CIT(A). 12. WE HAVE HEARD RIVAL CONTENTIONS AND HAVE PERUSE D THE SUBMISSIONS MADE BY THE PARTIES IN DETAIL. THE MAIN ISSUE FOR CONSIDERATION IN ASSESSEES APPEALS ARE AS TO WHETHER THE CONSIDERATION PAID BY ASSESSEE TO OVERSEAS NONRESIDENT AGENTS CAN BE CATEGORIZED AS FTS U/S 9( I)(VII) OF THE ACT AND ACCORDINGLY BE TAXED UNDER THE PROVISIONS OF THE AC T. EXPLANATION (2) TO SECTION 9(I)(VII) DEFINES FTS AS UNDER: FOR THE PURPOSE OF THIS CLAUSE, FTS MEANS ANY CONS IDERATION INCLUDING ANY CONSIDERATION FOR RENDERING ANY MANAGERIAL, TECHNIC AL OR CONSULTANCY SERVICES (INCLUDING THE PROVISIONS OF SERVICES OF T ECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUC TION ASSEMBLY, MINING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDE RATION WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD SALARIES. 13. IT IS EVIDENT THAT FOR A PARTICULAR ITEM OF INC OME TO BE CATEGORIZED AS FTS, IT IS NECESSARY THAT SOME SORT OF MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES SHOULD HAVE BEEN RENDERED BY PAYEES. THE TERMS MANAGERIAL, TECHNICAL AND CONSULTANCY DO NOT FIND MENTION IN TH E I. T. ACT, 1961 AND IT IS A SETTLE LAW THAT THEY NEED TO BE INTERPRETED BASED ON THEIR UNDERSTANDING IN COMMON PARLANCE. HON'BLE DELHI HIGH COURT, IN J.K. (BOM.) LIMITED VS CBDT AND ANOTHER 118 ITR 312 (DEL.) REFERRED AN ART ICLE ON MANAGEMENT SERVICES WHEREIN IT IS STATED THAT THE MANAGEMENT A CTION INCLUDES AT LEAST THE FOLLOWING: (A) DISCOVERING, DEVELOPING, DEFINING AN D EVALUATING THE 13 ITA NOS.210,498/DEL/2012 I.T.A.NOS.1989,1778/DEL/2013 GOALS OF THE ORGANIZATION AND THE ALTERNATIVE POLIC IES THAT WILL LEAD TOWARDS THE GOALS; (B) GETTING THE ORGANIZATION TO ADOPT TH E POLICIES; (C) SCRUTINIZING THE EFFECTIVENESS OF THE POLICIES THAT ARE ADOPTED AND (D) INITIATING STEPS TO CHANGE POLICIES WHEN THEY ARE JUDGED TO BE LESS EFF ECTIVE THAN THEY OUGHT TO BE. MANAGEMENT THUS PERVADES ALL ORGANIZATIONS. TECHNICAL: IN THE CASE OF SKYCELL COMMUNICATIONS LTD. VS DCIT, THE HON'BLE HI GH COURT HAD HELD THAT THE POPULAR MEANING ASSOCIATED WITH THE WORD TECHNICAL IS INVOLVING OR CONCERNING APPLIED AND INDUSTRIAL SCIENCE. CONSULT ANCY: IS GENERALLY UNDERSTOOD TO MEAN AN ADVISORY SERVICE. FURTHER, I T MAY BE FAIR TO STATE THAT NOT ALL KINDS OF ADVISORY COULD QUALIFY AS TECHNICA L SERVICES. FOR ANY CONSULTANCY TO BE TREATED AS TECHNICAL SERVICES, IT WOULD BE NECESSARY THAT A TECHNICAL ELEMENT IS INVOLVED IN SUCH ADVISORY. TH US, THE CONSULTANCY SHOULD BE RENDERED BY SOMEONE WHO HAS SPECIAL SKILL S AND EXPERTISE IN RENDERING SUCH ADVISORY. LET US EXAMINE THE CONTRA CT ENTERED INTO BY ASSESSEE WITH A FEW OVERSEAS NONRESIDENT AGENTS. T HE AGREEMENTS DEMONSTRATE THAT ASSESSEE WAS TO PAY COMMISSION AND RETENTION CHARGES FOR ADVANCEMENT OF BUSINESS OF THE ASSESSEE. THE PRIMA RY SERVICES TO BE PROVIDED TO ASSESSEE BY THE OVERSEAS AGENT MR. ASHO K SULTAN AS PLACED IN PAPER BOOK PAGES 98-101 IS REPRODUCED BELOW: 6. RESPONSIBILITIES OF LPTI: TO COMMENT OF MR. SULTANS SUGGESTIONS & REPORTS WI THOUT UNDUE DELAY. TO COMMUNICATE MARKETING AND SALES LEADS TO MR. SUL TAN FOR FOLLOW UP AND EXECUTION, TO KEEP MR. SULTAN PROPERLY AND PROMPTLY INFORMED O N POLICIES, RATS AND STATUS. A BI-WEEKLY BOOKING FORECAST TO BE SUP PLIED TO MR. SULTALN. TO KEEP AND CONFIRM BOOKING AS AND MADE BY MR. SULT AN BASED ON THE AVAILABILITY. 14 ITA NOS.210,498/DEL/2012 I.T.A.NOS.1989,1778/DEL/2013 TO SUPPLY ,MR. SULTAN WITH SALES AIDS, TARIFFS & B ROCHURES FREE OF CHARGE, CUSTOM CHARGE PAID. TO INCLUDE MR. SULTAN'S NAME, ADDRESS, TELEPHONE & FAX NUMBER IN ITS ADVERTISING IN THE AREAS COVERED BY LPTI. -TO PROVIDE COMPLIMENTARY SERVICES FOR TRAVEL AGENT S, TOUR OPERATORS AS RECOMMENDED BY MR. SULTAN BASED ON AVAILABILITY, 7. SPECIAL ARR.ANGEMENTS. \VHICH CAN BE UNDERTAKEN ON COST BASIS ON PRIOR SANCTION FROM UTI HQS TN NEW DELHI SPECIAL MAILING ON REQUEST. COST OF PROMOTIONAL FUNCTIONS . ADVERTISING, MEDIA PLANNING & MEDIA PLACING. CONSTRUCTION & STAFFING OF EXHIBITION BOOTHS. , ASSISTANCE AT TRAVEL TRADE SHOWS & FULL TIME-DEDICA TED PARTICIPATION BY MR SULTAN. -ASSISTANCE WITH LEGAL AFFAIRS EXECUTION OF DEDICATED SALES BLITZES ON BEHALF OF-T HE CLIENT. PRINTING OF MATERIAL. MARKETING &. MANAGERIAL TIME. PERSONAL SATES CALLS AS MENTIONED. TRAVEL EXPENSES WITHIN THE AREA OTHER THAN TRANSPORT BY AIR/TRAIN TO DISTANCE PLACE S & TO CANADA, MEXICO &. CARIBBEAN, 8. CHARGES: MR. SULTAN WILL BE PAID A MONTHLY RETAINER SHIP OF USD 3000/- (USS THREE THOUSAND) PER MONTH. PAYABLE, ALWAYS IN THE M IDDLE OF EACH MONTH, IN ADDITION TO THIS AMOUNT HE WOULD' BE PAID MONTH LY UP TO USD 700/ (USD SEVEN HUNDRED) TOWARDS COMMUNICATIONS TELEPHON E ANSWERING SERVICE, OFFICE TELEPHONE, CEL1PHONE, CHA RGES FOR INTERNET. NORMAL OFFICE MATERIAL (EXCLUDING PRINTING), POSTAL CHARGES,' ELECTRICITY, REASONABLE ENTERTAINMENT ETC. ON AN AC TUAL BASIS. LOCAL BUS TRANSPORT ETC ON ACTUAL BASIS BUS / TRAIN AND C AR RENTAL EXPENSES ON ACTUAL BASIS FOR MAKING SALES CALLS WITHIN THE T RI STATE AREA (NEW YORK. NEW JERSEY &. CONNECTICUT). 15 ITA NOS.210,498/DEL/2012 I.T.A.NOS.1989,1778/DEL/2013 14. SIMILARLY, THE AREA OF ACTIVITIES TO BE PERFORM ED BY ANOTHER AGENT MR. NARESH SARVARIA AS PLACED IN PAPER BOOK PAGES 119-1 22 ARE REPRODUCED BELOW: FUNCTIONS OF MR. NARESH SARVARIA: MR. NARESH SARVARIA WILL CONDUCT REGULAR DIRECT E-M AILING CAMPAIGNS TO KEY CLIENTS TOUR OPERATORS AND INCENTIVE HOUSES IN JK, SCOTLAND AND IRELAND MARKETS FOR LE PASSAGE TO INDIA TOURS AND T RAVELS PVT. LTD. MR. NARESH SARVARIA WILL CONDUCT REGULAR DIRECT E-M AILING CAMPAIGNS TO KEY CLIENTS TOUR OPERATORS AND INCENTIVE HOUSES IN JK, SCOTLAND AND IRELAND MARKET AS AND MAKE SALES CALLS ON THEM AS R EQUIRED. MR. NARESH SARVARIA WILL FOLLOW UP HIS SALES CALLS AS RESULT OF THE E- MAILING COMPARING AND WILL PASS ON TO THE LE PASSAG E TO INDIA TOURS AND TRAVELS PVT. LTD. THE FULL E-MAIL CORRESPONDENC E FILE FOR CANVASSING THE SALES LEADS INTO FIRM BOOKINGS. MR. NARESH SARVARIA WILL RESPOND TO BUYERS FOR INFO RMATION AND LITERATURE AND ALSO ASSIST LE PASSAGE TO INDIA TOUR S & TRAVELS PVT. LTD. WITH DISTRIBUTION OF THEIR BROCHURES IN THE TO UR OPERATIONS AND MIC (MEETINGS INCENTIVES, CONGRESSES) MARKET PLACE. COST OF MAILING WILL BE BILLED SEPARATELY. MR. NARESH SARVARIA WILL REPRESENT LE PASSAGE TO IN DIA TOURS AND TRAVELS PVT. LTD. DURING SPECIFIED UK SCOTLAND AND IRELAND TRAVEL TRADE FAIRS AS AGREED MUTUALLY, COST AND OUT OF POC KET AND TRAVEL EXPENSES WILL BE BILLED BY HIM SEPARATELY. MR. NARESH SARVARIA WILL PROMOTE LE PASSAGE TO INDI A TOURS & TRAVELS PVT. LTD. THROUGH THE MEDIA AND WILL ASSIST LE PASSAGE TO INDIA TOURS AND TRAVELS PVT. LTD. WITH PRESS RELEAS ES, EDITORIALS, INTERVIEWS ETC. MR. NARESH SARVARIA WILL KEEP LE PASSAGE TO INDIA T OURS AND TRAVELS PVT. LTD. INFORMED ABOUT THE KEY INDUSTRY TRENDS, O PPORTUNITIES AND DEVELOPMENTS IN THE UK, SCOTLAND & IRELAND MARKETS, TOUR OPERATORS, AND MIC PLANNERS MEETINGS, INCENTIVES, CONGRESSES. MR. NARESH SAVARIA WIL BE AT THE DISPOSAL OF LE PAS SAGE TO INDIA TOURS AND TRAVELS PVT. LTD. MR. NARESH SARVARIA WIL L TRACK AND JUSTIFY ALL COSTS, INCLUDING PRE APPROVED OUT OF POCKET EXP ENSES AND COMMUNICATION COSTS DIRECTLY LINKED TO THE MARKETIN G OF LE PASSAGE TO INDIA TOURS AND TRAVELS PVT. LTD. 16 ITA NOS.210,498/DEL/2012 I.T.A.NOS.1989,1778/DEL/2013 MR. NARESH SARVAIA WILL IF REQUESTED BY LE PASSAGE TO INDIA TOURS AND TRAVEL PVT. LTD. CONDUCT AN EDUCATIONAL TOUR FO RM THE UK, SCOTLAND AND IRELAND MARKETS TO INDIA AT THE TIME A ND CONVENIENCE OF LE PASSAGE TO INDIA TOURS AND TRAVELS PVT. LTD. OU T OF POCKET AND TRAVEL EXPENSES ARE TO BE BILLED BY HIM SEPARATELY. MR. NARESH SARVARIA WILL SUPPORT LE PASSAGE TO INDI A TOURS AND TRAVELS PVT. LTD.S WORK AND ASSISTS REQUESTS AND A NSWERS WHENEVER NEEDED. MR. NARAESH SARVARIA WILL NOT REPRESENT ANY OTHER D ESTINATION MANAGEMENT COMPANY FORM INDIA. IN THE SAME MANNER LE PASSAGE TO INDIA TOURS AND TRAVELS PVT. LTD. WILL NOT APPOI NT ANY OTHER REPRESENTATIVE IN THE SAME COUNTRY. MR. NARESH SARVARIA WILL REPORT ON A MONTHLY BASIS HIS ACTIONS TOWARDS LE PASSAGE TO INDIA TOURS AND TRAVELS PVT. LTD., 15. FROM THE NATURE OF SERVICES TO BE PERFORMED BY THE OVERSEAS AGENTS, WE ARE OF THE VIEW THAT SERVICES RENDERED BY THE AG ENTS IN THIS CASE ARE PURELY IN THE NATURE OF ADVANCEMENT OF BUSINESS OF THE ASS ESSEE COMPANY AND CANNOT BE CATEGORIZED AS MANAGERIAL / TECHNICAL / C ONSULTANCY SERVICES. ACCORDINGLY, THE CONSIDERATION PAID BY THE ASSESSEE CANNOT BE CLASSIFIED AS FEE FOR TECHNICAL SERVICES (FTS). 16. WE FURTHER FIND THAT HON'BLE DELHI HIGH COURT I N THE CASE OF PANALFA AUTOELEKTRIK LTD. WHILE EXPLAINING MEANING OF THE W ORD MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES FALLING UNDER THE SCOPE OF FTS U/S 9(I)(VII) OF THE ACT HELD THAT SALES AND MARKETING SERVICES M ADE BY AN OVERSEAS COMMISSION AGENT DO NOT FALL WITHIN THE MEANING OF AFORESAID WORDS AND, THEREFORE, THE PAYMENT OF COMMISSION MADE TO SUCH A GENT WILL NOT BE DEEMED TO ACCRUE OR ARISE IN INDIA AND CONSEQUENTLY , WOULD NOT BE LIABLE TO TAX IN INDIA. SIMILARLY, IN A NUMBER OF CASE LAWS RELIED UPON BY LD. A.R. AS NOTED IN HIS SYNOPSIS PAGE 5, WE FIND THAT VARIOUS COURTS HAVE HELD THAT SALES 17 ITA NOS.210,498/DEL/2012 I.T.A.NOS.1989,1778/DEL/2013 AND MARKETING SERVICES RENDERED OUTSIDE INDIA DO NO T FALL WITHIN THE MEANING OF FTS U/S 9(I)(VII) OF THE ACT. THEREFORE, KEEPIN G IN VIEW THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND ON THE BASIS OF VARIOUS CASE LAWS RELIED UPON BY THE ASSESSEE, WE HOLD THAT THE AMOUNT OF RE TAINER-SHIP CHARGES AND COMMISSION PAID BY THE ASSESSEE TO AN OVERSEAS NONR ESIDENT AGENT IS NOT IN THE NATURE OF FTS AND, THEREFORE, WAS NOT LIABLE TO BE TAXED IN INDIA AND IN CONSEQUENCE, ASSESSEE WAS NOT REQUIRED TO DEDUCT TA X THEREFROM. LD. CIT(A) HIMSELF IN ASSESSMENT YEAR 2007-08 HAS ALLOW ED RELIEF TO THE ASSESSEE ON ACCOUNT OF NON-DEDUCTION OF TDS ON COMM ISSION PAYMENTS AS NOTED BY US AT PAGE 6 OF OUR ORDER. THEREFORE, KEE PING IN VIEW ALL FACTS AND CIRCUMSTANCES AND KEEPING IN VIEW THE CASE LAWS REL IED UPON BY LD. A.R. WE HOLD THAT REPRESENTATION CHARGES AND COMMISSION PAI D BY ASSESSEE WERE NOT LIABLE TO BE TAXED IN INDIA AND CONSEQUENTLY NO TAX WAS REQUIRED TO BE DEDUCTED AND THEREFORE DISALLOWANCE U/S 40(A)(I) WA S NOT WARRANTED. SINCE, WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BASED UPON THE FIRST LIMB OF THE ARGUMENTS ADVANCED BY THE SENIOR COUNSEL WE DO NOT DEEM IT NECESSARY TO DEAL WITH OTHER TWO LIMBS OF ARGUMENTS ADVANCED BY THE SENIOR COUNSEL. IN VIEW OF ABOVE, APPEALS FILED BY THE AS SESSEE ARE ALLOWED. 17. NOW, COMING TO THE APPEALS FILED BY THE REVENUE , WE FIND THAT AS REGARDS PAYMENT OF TOUR EXPENSES AND OTHER EXPENSES PAID WITHOUT DEDUCTION OF TDS, LD. CIT(A) HAS PASSED A VERY ELABORATE AND SPEAKING ORDER AND LD. D.R. WAS UNABLE TO CONTROVERT ANY OF HIS FINDINGS, THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE SAME. SIMILARLY, LD. CIT(A) H AS ALLOWED DEPRECIATION ON COMPUTER PERIPHERALS BASED UPON VARIOUS DECISION S OF THE COURTS WHEREIN WE DO NOT FIND ANY INFIRMITY. 18. IN VIEW OF ABOVE, THE APPEALS FILED BY THE REVE NUE ARE DISMISSED. 18 ITA NOS.210,498/DEL/2012 I.T.A.NOS.1989,1778/DEL/2013 19. IN NUTSHELL, APPEALS FILED BY THE ASSESSEE ARE ALLOWED AND APPEALS FILED BY THE REVENUE ARE DISMISSED. 20. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH DEC., 2014. SD./- SD./- (C. M. GARG ) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 19 TH DEC., 2014 SP COPY FORWARDED TO:- THE APPELLANT THE RESPONDENT THE CIT THE CIT (A)-, NEW DELHI. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER