Appeal details
Counselvise Citation
[2018] 121 COUNSELVISE.COM (IT) 7218 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
04-05-2018
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
Not Allotted
Assessment Year
2010-2011
Appeal Filed On
11-04-2016
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L , MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD , JUDICIAL MEMBER ITA NOS. 2084 & 2085/MUM/2016 : (A.Y S : 20 10 - 11 & 2011 - 12 ) RELIANCE GLOBALCOM LIMITED, BERMUDA C/O. SUNIL V. DOSHI, 602, NEELKANTH BUILDING, 98, MARINE DRIVE, NEXT TO ROC, MUMBAI 400 002. (APPELLANT) PAN : AAACF4015D VS. ADDL. DIT (INTL. TAX) - 2, MUMBAI (RESPONDENT) ITA NOS. 2618 & 2619/MUM/2016 : (A.Y S : 20 10 - 11 & 2011 - 12 ) DCIT (INTL. TAX) - 4(1)(1), MUMBAI ( APPELLANT ) VS. RELIANCE GLOBALCOM LIMITED, BERMUDA C/O. SUNIL V. DOSHI, 602, NEELKANTH BUILDING, 98, MARINE DRIVE, NEXT TO ROC, MUMBAI 400 002. ( RESPONDENT ) PAN : AAACF4015D ASSESSEE BY : SHRI JITENDRA SANGHAVI REVENUE BY : SHRI M.V. RAJGURU DATE OF HEARING : 08 / 02/ 201 8 DATE OF PRONOUNCEMENT : 04 /0 5 /201 8 O R D E R PER G.S. PANNU , AM : THE CAPTIONED ARE FOUR APPEALS RELATING TO THE SAME ASSESSEE FOR ASSESSMENT YEARS 2010 - 11 AND 2011 - 12 AND SINCE THEY INVOLVE CERTAIN 2 ITA NOS. 2084 & 2085/MUM/2016 RELIANCE GLOBALCOM LTD. COMMON ISSUES, THEY HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. SINCE THE DISPUTE IN THE TWO ASSESSMENT YEARS STAND ON AN IDENTICAL FOOTING, THE CROSS - APPEALS FOR ASSESSMENT YEAR 2010 - 11 ARE TAKEN - UP AS THE LEAD YEAR. THE APPEALS IN ITA NOS. 2084 & 2619/MUM/2016 ARE DIRECTED AGAINST THE ORDER OF CIT(A) - 58 , MUMBAI D ATED 11.01.2016 , WHICH IN TURN HAS ARISEN FROM THE ORDER DATED 30.04.2013 PASSED BY THE ASSESSING OFFICER, MUMBAI UNDER SECTION 143(3) R.W.S. 144C(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 3. THE GROUNDS RAISED BY THE REVENUE AND ASSESSEE IN TH EIR RESPECTIVE CROSS - APPEALS FOR ASSESSMENT YEAR 2010 - 11 ARE AS UNDER : - ITA NO. 2619/MUM/2016 ( REVENUES APPEAL ) 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONCLUDING THAT THE AMOUNT OF RS. 6,24,92, 883/ - RECEIVED BY ASSESSEE AS STANDBY MAINTENANCE CHARGES WAS NOT IN NATURE OF 'FEE FOR TECHNICAL SERVICES' UNDER SECTION 9(1)(VII) OF THE INCOME TAX ACT, 1961 ON THE GROUND THAT NO SERVICES WERE RENDERED DURING THE YEAR, IGNORING THE INVOICE AVAILABLE ON RECORD INDICATING CHARGES PAID TOWARDS SUCH SERVICES AND WITHOUT APPRECIATING THAT BY INCURRING COST ON MAINTAINING INFRASTRUCTURES FOR CO - ORDINATION AND SETTING UP CONDITIONS FOR EFFICIENT RENDERING OF SERVICES IN RELATION TO MAINTENANCE AND REPAIRS OF CA BLE SYSTEM THE ASSESSEE RENDERED MANAGERIAL AND TECHNICAL SERVICE IN THE FORM OF COMMERCIAL ADVANTAGE TO ASSIGNEES BY ENSURING THAT THE CABLE SYSTEM WAS IN SEAMLESS OPERATIONAL CONDITION AT ALL TIMES AND IN CASE OF ACTUAL NEED FOR THE REPAIRS AND MAINTENAN CE, THE SAME COULD BE CARRIED WITHIN LEAST TIME. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONCLUDING THAT THE AMOUNT RECEIVED BY ASSESSEE AS STANDBY MAINTENANCE CHARGES WERE NOT OF THE NATURE OF 'FEE FOR TECHNICAL SERVICES' UNDER 3 ITA NOS. 2084 & 2085/MUM/2016 RELIANCE GLOBALCOM LTD. SECTION 9(1)(VII) OF THE ACT ON THE GROUND THAT SERVICE WAS NOT RENDERED WHILE HOLDING AT THE SAME TIME THAT WHENEVER PAYMENT IS RECEIVED ON ACCOUNT OF ACTUAL REPAIR OR MAINTENANCE CARRIED OUT, THEN SAME WOULD DEFINITELY FALL WITHIN THE AMBIT OF FTS CHARGEABLE TO TAX U/S 9(1)(VII). THE LD. CIT(A) SHOULD HAVE APPRECIATED THAT STANDBY MAINTENANCE SERVICE WAS ONLY A PRELUDE AND PART OF THE FINAL RESPONSIBILITY OF FLAG FOR CARRYING REPAIRS AND MAINTENANCE OF CABLE SYSTEM. 3. WHET HER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONCLUDING THAT THE AMOUNT RECEIVED BY ASSESSEE AS STANDBY MAINTENANCE CHARGES WERE NOT OF THE NATURE OF FEE FOR TECHNICAL SERVICES UNDER SECTION 9(1)(VII) OF THE A CT ON THE GROUND THAT THEY WERE IN NATURE OF REIMBURSEMENT WITHOUT ANY PROFIT ELEMENT OR MARK UP WITHOUT APPRECIATING THAT STANDBY MAINTENANCE WAS TO ENSURE THE SEAMLESS OPERATION OF THE CABLE SYSTEM, WHICH WAS PART OF THE RESPONSIBILITY OF ASSESSEE UNDER THE C&MA. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) BE SET ASIDE ON THE ABOVE GROUND(S) BE SET ASIDE AND THE OF THE ASSESSING OFFICER RESTORED. ITA NO. 2084/MUM/2016 ( ASSESSEES APPEAL ) 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [THE CIT(A)] ERRED IN HOLDING THAT THE ENTIRE TURNOVER (RECEIPTS) OF STANDBY MAINTENANCE CHARGES FROM INDIAN PARTY, TATA COMMUNICATIONS LTD. (TCL) (FORMERLY VSNL) IS TAXABLE IN INDIA AS BUSINESS INCOME. YOUR APPELLANT SUBMITS THAT THE TURNOVER (RECEIPTS) OF STANDBY MAINTENANCE CHARGES FROM TCL THAT IS ATTRIBUTABLE TO INDIA HAS TO BE CALCULATED ON THE BASIS OF THE PROPORTION OF CABLE LENGTH IN INDIA VIS - A - VIS WORLDWIDE CABLE LENGTH. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT CHARGING OF INTEREST UNDER SECTION 234B IS CONSEQUENTIAL TO TAX DEMAND AND PAYMENT OF TAX. YOUR APPELLANT SUBMITS THAT THE INTEREST UNDER SECTION 234B CANNOT BE CHARGED AS THE RECEIPTS OF STANDBY MAINTENANCE CHARGES FROM TCL IS SUBJECTED TO WITHHOLDING TAX UNDER SECTION 195 AND THE APPELLANT HAS NO LIABILITY TO PAY ANY ADVANCE TAX. 4 ITA NOS. 2084 & 2085/MUM/2016 RELIANCE GLOBALCOM LTD. 4. BEFORE WE PROCEED TO ADDRESS THE RESPECTIVE GROUNDS OF APPEAL RAISED, A BRIEF BACKGROUND OF TH E DISPUTE CAN BE SUMMARISED AS FOLLOWS. AT THE OUTSET, IT WAS A COMMON GROUND BETWEEN THE PARTIES THAT A SOMEWHAT SIMILAR DISPUTE CAME - UP BEFORE THE TRIBUNAL IN VARIOUS ASSESSMENT YEARS STARTING FROM ASSESSMENT YEAR 1998 - 99. THE TRIBUNAL VIDE A COMMON OR DER IN ITA NOS. 6254/MUM/2003 AND OTHERS DATED 06.02.2015 PERTAINING TO ASSESSMENT YEARS 1998 - 99 TO 2000 - 01 HAS DECIDED SOMEWHAT SIMILAR ISSUES. SIMILARLY, THE TRIBUNAL VIDE ITS ORDER IN ITA NOS. 2255/MUM/2006 AND OTHERS DATED 15.06.2015 REITERATED THE EA RLIER DECISION FOR ASSESSMENT YEARS 2001 - 02 TO 2008 - 09 . IN THIS BACKGROUND, WE MAY NOW CULL OUT THE ISSUES IN THE PRESENT APPEAL . 5. THE ASSESSEE BEFORE US IS A COMPANY INCORPORATED IN BERMUDA AND OWNS HIGH CAPACITY FIBRE OPTIC TELECOMMUNICATION CABLE US ED FOR PROVIDING DATA AND VOICE SERVICES. THE ASSESSEE - COMPANY IS A TAX RESIDENT OF BERMUDA AND ITS FIBRE OPTIC TELECOMMUNICATION CABLE, WHICH IS LAID UNDER SEA, PROVIDES A TELECOMMUNICATION LINK BETWEEN U.K AND JAPAN. AT THE TIME OF HEARING, IT WAS EXPL AINED THAT A MAJOR PART OF THE CABLE SYSTEM IS INSTALLED OUTSIDE THE TERRITORIAL WATERS OF THE RESPECTIVE COUNTRIES AND THE CABLE HAS TO COME ASHORE, WHICH IS CALLED AS LANDING POINTS , IN CERTAIN COUNTRIES IN ORDER TO PROVIDE CONNECTION WITH THE DOMESTIC TELECOMMUNICATION SYSTEMS. TO ACHIEVE THIS, ASSESSEE - COMPANY HAS CONTRACTED WITH THE DOMESTIC TELECOMMUNICATIONS COMPANIES OF THE RESPECTIVE COUNTRIES IN WHICH THE CABLE LANDS, AND SUCH CONCERNS ARE TERMED AS LANDING PARTIES . SO FAR AS THE DISPUTE BEF ORE US IS CONCERNED, IT WOULD SUFFICE TO KNOW THAT THE CABLE LANDS IN INDIA AT MUMBAI AND THE LANDING PARTY IN INDIA IS TATA COMMUNICATIONS LTD. (TCL). AS PER THE TERMS OF AGREEMENT WITH THE TELECOMMUNICATION 5 ITA NOS. 2084 & 2085/MUM/2016 RELIANCE GLOBALCOM LTD. COMPANIES WORLDWIDE OR THE LANDING PARTIES , ASSESSEE AGREED TO PROVIDE MAINTENANCE ON BEHALF OF SUCH COMPANIES TO KEEP THE CABLE SYSTEM IN PROPER WORKING CONDITION AT ALL TIMES. SUCH SERVICES ARE PROVIDED BY THE ASSESSEE BY CONTRACTING WITH CONCERNS IN THIS BEHALF WITH A VIEW TO MINIMALISING INTERR UPTIONS TO THE USE OF NETWORK CAPACITY CONTAINED IN THE CABLE SYSTEM. THE MAINTENANCE ACTIVITY SO UNDERTAKEN BY THE ASSESSEE IS A PART OF ITS NORMAL BUSINESS ACTIVITY WHICH, INTER - ALIA , CONSISTS OF ARRANGING FOR A STANDBY FACILITY. THE STANDBY FACILITY IS BY WAY OF TWO CABLE SHIPS AVAILABLE IN THE SEA TO RESPOND AND REPAIR ANY BREAKDOWNS. SUCH STANDBY FACILITY CARRIES OUT MAINTENANCE OR ARRANGE S MAINTENANCE OF CABLE CROSSING VARIOUS COUNTRIES AND SAME ALSO, INTER - ALIA , INVOLVE S SURVEILLANCE AND CO - ORDINATION CENTRE FOR CABLE SYSTEM, ETC. ASSESSEE RECOVERED STANDBY MAINTENANCE CHARGES FROM VARIOUS LANDING PARTIES, INCLUDING FROM TCL. THE STAND OF THE ASSESSEE WAS THAT THE INCOME F ROM SUCH STANDBY MAINTENANCE ACTIVITY, IF ANY, WAS TAXABLE IN INDIA UNDER THE PROVISIONS OF SEC. 9(1)(I) OF THE ACT BECAUSE OF EXISTENCE OF THE CABLE SYSTEM IN INDIA ALSO. AS ONLY A PORTION OF THE CABLE SYSTEM WAS LOCATED IN INDIA, ASSESSEE CONTENDED THAT ONLY A REASONABLE PORTION OF THE NET INCOME FROM STANDBY MAINTENANCE ACTIVITY COULD BE TAXED IN INDIA. THEREFORE, IN THE COMPUTATION OF INCOME ANNEXED TO THE RETURN, ASSESSEE DETERMINED THE STANDBY MAINTENANCE REVENUES RECEIVED IN RESPECT OF THE CAPACITY IN THE NETWORK CABLE SYSTEM AND THEREAFTER DETERMINED THE PROFITS ATTRIBUTABLE TO INDIA BASED ON THE LENGTH OF THE CABLE IN THE TERRITORIAL WATERS OF INDIA VIS - A - VIS THE LENGTH OF CABLE WORLDWIDE. THE REVENUES SO ATTRIBUTABLE TO INDIA WERE FURTHER REDUCE D BY ALL RELATED EXPENSES AND THE RESULTANT WAS SOUGHT TO BE DETERMINED AS THE PROFIT OR LOSS DEEMED TO ACCRUE OR ARISE IN INDIA IN TERMS OF SEC. 9(1)(I) OF THE ACT. NOTABLY, IN TERMS OF THE COMPUTATION ANNEXED WITH THE RETURN, A LOSS OF 6 ITA NOS. 2084 & 2085/MUM/2016 RELIANCE GLOBALCOM LTD. RS.1,66,486/ - WAS DETERMINED AS LOSS ATTRIBUTABLE TO INDIA ON STANDBY MAINTENANCE ACTIVITY. THE RETURN OF INCOME WAS FILED AT A TOTAL INCOME OF RS.8,17,000/ - AFTER TAKING INTO CONSIDERATION THE INTEREST ON INCOME TAX REFUND OF RS. 9,8 3 ,489 / - . HOWEVER, THE ASSESSING OFFICE R WAS NOT SATISFIED WITH THE STAND OF THE ASSESSEE IN THE COURSE OF THE ASSESSMENT PROCEEDINGS AS, ACCORDING TO HIM, THE AMOUNTS RECEIVED BY THE ASSESSEE FROM TCL WERE IN THE NATURE OF FEE FOR TECHNICAL SERVICES AS DEFINED IN EXPLANATION - 2 TO SEC TION 9(1 )(I) OF THE ACT AND, THEREFORE, HE BROUGHT TO TAX THE SAME @ 20% IN TERMS OF SEC. 115A OF THE ACT. MOREOVER, THE ASSESSING OFFICER BROUGHT TO TAX THE ENTIRE STANDBY MAINTENANCE SERVICE REVENUE RECEIVED ON GROSS BASIS FROM TCL, WHICH WAS CONTRARY TO ASSESS EES ASSERTION OF ATTRIBUTING SUCH REVENUE ON THE BASIS OF THE LENGTH OF THE CABLE IN INDIAN TERRITORIAL WATERS. THE ASSESSEE HAD SOUGHT DETERMINATION OF REVENUE BY APPLYING PROPORTION OF CABLE LENGTH IN INDIA VIS - A - VIS TOTAL CABLE LENGTH WORLDWIDE. IN T HIS MANNER, THE ASSESSING OFFICER BROUGHT TO TAX THE STANDBY MAINTENANCE CHARGES AS FEES FOR TECHNICAL SERVICES AT RS. 6,24,92,883 / - WHICH WAS TAXED @ 20% U/S 115A OF THE ACT. 6. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO DISAGREED WITH THE STAND OF THE ASSESSING OFFICER THAT THE IMPUGNED AMOUNT WAS FEE FOR TECHNICAL SERVICES. INSTEAD, AS PER THE CIT(A), THE AMOUNTS DO NOT REPRESENT FEE FOR TECHNICAL SERVICES AND THAT THE SAME WAS LIABLE TO BE TAXED AS BUSINESS INCOME , BUT ON LY TO THE EXTENT OF ITS REFERENCE TO THE BUSINESS CONNECTION IN INDIA. THIS ASPECT OF THE DECISION OF CIT(A) IS CHALLENGED BY THE REVENUE IN ITS APPEAL BEFORE US. 7 ITA NOS. 2084 & 2085/MUM/2016 RELIANCE GLOBALCOM LTD. 7. AFTER TREATING THE AMOUNTS TO BE IN THE NATURE OF BUSINESS INCOME, THE CIT(A) HELD THAT THE SAME ARE LIABLE TO BE TAXED IN INDIA VIS - A - VIS THE TURNOVER ARISING T O THE ASSESSEE WITH REFERENCE TO THE INDIAN BUSINESS CONNECTION. THE CIT(A) NOTICED THAT IN THE COMPUTATION MADE BY THE ASSESSEE, IT HAD NOT INCLUDED THE TOTAL RECEIPTS FROM TCL AS ITS TURNOVER WHILE COMPUTING THE GAIN/LOSS. OSTENSIBLY, THE ASSESSEE HAD OFFERED THE REVENUES FROM THIS ACTIVITY BY HOLDING THAT ONLY A PORTION OF THE TOTAL RECEIPTS FROM TCL COMPUTED IN THE RATIO OF THE LENGTH OF CABLE IN INDIAN TERRITORIAL WATERS VI S - A - VIS THE TOTAL LENGTH WORLDWIDE IS ATTRIBUTABLE TO OPERATION S IN INDIA . THE CIT(A) DIFFERED WITH THE ASSESSEE ON TREATING THE LENGTH OF CABLE AS A REASONABLE BASIS FOR APPORTIONING OF TURNOVER BETWEEN THE INDIAN BUSINESS CONNECTION VIS - A - VIS THE TOTAL RECEIPTS FROM WORLDWIDE LENGTH OF CABLE. AS PER THE CIT(A), THE STANDBY MAINTENANCE CHARGES DO NOT HAVE ANY CONNECTION WITH THE LENGTH OF CABLE AND, IN FACT, THEY REPRESENT FIXED AND RUNNING COSTS WITH REFERENCE TO MAINTAINING THE STANDBY FACILITY. HE, T HEREFORE, UPHELD THE STAND OF THE ASSESSING OFFICER THAT THE ENTIRE TURNOVER, I.E. GROSS RECEIPTS FROM THE INDIAN LANDING PARTY, I.E. TCL, WAS LIABLE TO BE TREATED AS TURNOVER FOR THE PURPOSE OF COMPUTING THE INCOME ATTRIBUTABLE TO BUSINESS CONNECTION IN I NDIA. AGAINST SUCH A DECISION OF THE CIT(A), ASSESSEE IS IN APPEAL BEFORE US ON THE AFORESTATED GROUNDS OF APPEAL. 8. IN THIS MANNER, THE RIVAL COUNSELS HAVE MADE THEIR SUBMISSIONS. WE FIND THAT THE ISSUE REGARDING THE NATURE OF SERVICES CAME - UP BEFORE THE TRIBUNAL FOR THE FIRST TIME IN ASSESSMENT YEARS 1998 - 99 TO 2000 - 01, AND VIDE ORDER DATED 06.02.2015 IT WAS HELD THAT THE SAME ARE NOT IN THE NATURE OF FEE FOR TECHNICAL SERVICES. SUBSEQUENTLY, FOR ASSESSMENT YEARS 2001 - 02 TO 2008 - 09, THE MATTER AGAI N CAME - UP BEFORE THE TRIBUNAL, AND VIDE ORDER 8 ITA NOS. 2084 & 2085/MUM/2016 RELIANCE GLOBALCOM LTD. DATED 15.06.2015, THE AMOUNT HAS BEEN HELD NOT TO BE IN THE NATURE OF FEE FOR TECHNICAL SERVICES U/S 9(1)(VII) OF THE ACT. THE RELEVANT DISCUSSION IN THE ORDER OF THE TRIBUNAL DATED 06. 02. 2015 (SUPRA) IS AS UNDER : - 68. THE SECOND ISSUE RELATES TO TAXABILITY OF STANDBY MAINTENANCE CHARGES AS FEES FOR TECHNICAL SERVICES U/S 9(1)(VII), AS RAISED BY THE ASSESSEE IN GROUND NO. 4. AS STATED EARLIER, THE ASSESSEE ALONG WITH CONSORTIUM OF OTHER PARTIES HAS BUILT THE SUBMARINE FIBRE OPTIC CABLE PROVIDING TELECOMMUNICATION LINK BETWEEN UK AND JAPAN. UNDER THE TERMS OF C&MA THE FLAG CABLE SYSTEM IS TO BE JOINTLY OPERATED AND MAINTAINED IN EFFICIENT WORKING CONDITION OR ALONG WITH THE FOUNDING SIGNATORY I.E. FLAG AND THE LANDING PARTY SIGNATORIES. THE OPERATION AND MAINTENANCE DUTIES AND RIGHTS HAS BEEN ELABORATED IN PARA 10 ALONG WITH VARIOUS SUB CLAUSES. THE ENTIRE CABLE SYSTEM IS TO BE OPERATED AND MAINTAINED BY FOUNDING SIGNATORY IN CO - ORDINATION WITH RELEVANT LAN DING PARTY SIGNATORY. FLAG NETWORK OPERATION CENTRE (FNOC) HAS TO PROVIDE OVERALL NETWORK SERVICE SURVEILLANCE AND OVER ALL CO - ORDINATION OF MAINTENANCE AND REPAIR OPERATIONS OF FLAG CABLE SYSTEM. THE FLAG HAS TO CO - ORDINATE THE DEPLOYMENT OF THE VESSELS F OR REPAIRS AND MAINTENANCE OPERATION IN ACCORDANCE WITH THE PROCEDURE DEFINED. PARA 11 ALONG WITH VARIOUS SUB CLAUSES PROVIDES THE RESPONSIBILITY FOR OPERATION AND MAINTENANCE COST. CLAUSE 11.11 GIVES THE DETAILS OF ACTIVITIES, EXPENSES AND COST INCURRED. THE RELEVANT CLAUSE READS AS UNDER: - 11.1 THE COST OF STANDBY MAINTENANCE OF SEGMENTS S.X - 1 AND X - 2, INCLUDING, BUT NOT LIMITED TO, THE MAINTENANCE OF SEGMENTS S X - 1 AND X - 2, THE FNOC, THE PROCUREMENT OF CABLE SHIP SERVICES COVERING, INTER ALIA, SHIP DEPRECIATION, SHIP RETROFIT, CREW, INSURANCE (E XCEPT INSURANCE AT SEA), IN - PORT EXPENSES, THE STORAGE OF SUBMERSIBLE PLANT, REMOTELY OPERATED VEHICLES AND OTHER DEVICES WHEN INCLUDED IN THE WET MAINTENANCE ZONE AGREEMENT STANDBY CHARGES, SHALL BE RECOVERED BY THE FOUNDING SIGNATORY THROUGH FIXED CHARGE S PAYABLE BY THE SIGNATORIES AND OTHER HOLDERS OF ASSIGNABLE CAPACITY, IN ACCORDANCE WITH SCHEDULES H - 1 THROUGH H - 55 AND J. ADJUSTED TO REFLECT INFLATION. 9 ITA NOS. 2084 & 2085/MUM/2016 RELIANCE GLOBALCOM LTD. 11.2 THE COST OF RUNNING CHARGES, WHICH SHALL BE LIMITED TO RECOVERY THE DIRECT INCREMENTAL COSTS I NCURRED IN CONNECTION WITH A REPAIR OPERATION INVOLVING SEGMENT S OR SEGMENT X - 1 OR SEGMENT X - 2, INCLUDING, BUT NOT LIMITED TO, THE COST OF FUEL, AT SEA INSURANCE, ADDITIONAL CREW AT SEA, CREW OVERTIME, VICTUAL LING, TELECOMMUNICATIONS, MOBILIZATION AND DE - MOBILIZATION EXPENSES, CONSUMABLES, REPLENISHED EQUIPMENT, AND REMOTELY OPERATED VEHICLES, THE EXTENT NOT INCLUDED IN THE WET MAINTENANCE AGREEMENT STANDBY CHARGES, SHALL BE APPORTIONED AMONG SIGNATORIES (EXCLUDING THE FOUNDING SIGNATORY) AND OTHER HOLDER S OF ASSIGNABLE CAPACITY ON THE AFFECTED SEGMENT S OR SEGMENT X - 1 OR SEGMENT X - 2 IN ACCORDANCE WITH SCHEDULE F. 69. THUS, UNDER THE C&MA THE RESPONSIBILITY OF MAINTENANCE AND REPAIRS BELONGS TO BOTH, ASSESSEE AND THE LANDING PARTIES. THE MAINTENANCE ACTI VITIES UNDER TAKEN BY THE ASSESSEE FOR THE PURPOSE OF STANDBY MAINTENANCE WHICH IS THE IMPUGNED ISSUE, WAS FOR THE ARRANGEMENT FOR STANDBY COVER AND MAINTENANCE AND OPERATION OF FNOC. SO FAR AS STANDBY MAINTENANCE CHARGES IS CONCERNED, IT IS NOT IN RESPECT OF ANY ACTUAL RENDERING OF SERVICES BUT TO MAINTAIN INFRASTRUCTURES FOR CO - ORDINATION AND SETTING UP CONDITIONS FOR EFFICIENT RENDERING OF SERVICES IN RELATION TO MAINTENANCE AND REPAIRS OF CABLE SYSTEM. THERE IS A SEPARATE CHARGE FOR REPAIR AND MAINTENAN CE UNDER THE C&MA WHEREBY, THE ASSESSEE IS ACTUALLY REQUIRED TO UNDERTAKE REPAIR AND MAINTENANCE AND FOR WHICH THE ASSESSEE SEPARATELY CHARGES. SUCH A REPAIR AND MAINTENANCE IS SEPARATE FROM STANDBY MAINTENANCE COST, WHICH IS IN THE NATURE OF REIMBURSEMENT OF FIXED COST. THE STANDBY MAINTENANCE IS A FIXED ANNUAL CHARGE WHICH IS PAYABLE NOT FOR PROVIDING OR RENDERING SERVICES BUT FOR ARRANGING STANDBY MAINTENANCE ARRANGEMENT WHICH IS REQUIRED FOR A SITUATION WHENEVER SOME REPAIR WORK IN THE UNDERSEA CABLE OR TERRESTRIAL CABLE IS ACTUALLY TO BE PERFORMED OR RENDERED. IT IS A FACILITY OR INFRASTRUCTURE MAINTAINED FOR READY TO USE OR RENDER THE TECHNICAL SERVICES OR REPAIR SERVICES, IF REQUIRED. ON THESE FACTS WE HAVE TO EXAMINE WHETHER ASSESSEE IS PROVIDING ANY SERVICE TO VSNL IN RESPECT OF STANDBY MAINTENANCE. 70. EXPLANATION 2 TO SECTION 9(1)(VII) DEFINES FEES FOR TECHNICAL SERVICES IN THE FOLLOWING MANNER: - 10 ITA NOS. 2084 & 2085/MUM/2016 RELIANCE GLOBALCOM LTD. EXPLANATION (2) - FOR THE PURPOSE OF THIS CLAUSE, FEES FOR TECHNICAL SERVICES MEANS ANY CONSIDE RATION (INCLUDING ANY LUMP SUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICE OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MIN ING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD SALARIES. FROM THE ABOVE DEFINITION IT IS EVIDENT THAT IF THE INCOME IS TO BE CHARACTERIZED AS FTS, THEN IT HAS TO BE NECE SSARILY FROM THE SERVICES PROVIDED FOR THE FOLLOWING TYPES, VIZ; MANAGERIAL, TECHNICAL OR CONSULTANCY. ANOTHER VERY IMPORTANT PHRASE PRECEDING THE WORD MANAGERIAL, TECHNICAL AND CONSULTANCY SERVICES IS, RENDERING. THE WORD RENDERING QUALIFIES THE OTHER TERMS USED FOR THE FTS. THE WORD RENDERING CONNOTES TO PROVIDE OR DELIVER OR TO DO SOMETHING. THUS, RENDERING SERVICES MEAN SOME KIND OF ACTUAL SERVICES IS BEING PROVIDED OR DELIVERED WHICH ARE IN THE NATURE OF MANAGERIAL TECHNICAL OR CONSUL TANCY. THE WORD MANAGERIAL HAS TO BE UNDERSTOOD IN THE CONTEXT OF RUNNING AND MANAGING THE BUSINESS OF THE CLIENT OR ONE WHO IS IN CHARGE FOR MANAGEMENT AND CONTROL OF ITS BUSINESS. HERE THE PAYMENT MADE BY VSNL IS NOT IN THE NATURE OF MANAGERIAL. AGAIN THE TERM CONSULTANCY HAS TO BE UNDERSTOOD AS ADVISORY SERVICES WHEREIN NECESSARY ADVICE AND CONSULTATION IS GIVEN TO THE CLIENT FOR THE PURPOSE OF CLIENTS BUSINESS. IT IS ACT OF CONSULTING OR GIVING ADVICE OR GUIDANCE. AGAIN HERE - IN - THIS CASE THERE IS N O CONSULTANCY SERVICES. THE WORD TECHNICAL SERVICES CONNOTE SERVICES WHICH ARE PROVIDED IN TECHNICAL FIELD OR BY THE PERSON WHO HAS SKILL, KNOWLEDGE EXPERTISE IN THE AREA OF TECHNICAL OR SCIENCE. HERE - IN - THIS CASE IF THE ASSESSEE IS PROVIDING SOME KIND O F REPAIR SERVICES IN THE CABLE SYSTEM, THEN IT CAN BE TERMED AS TECHNICAL SERVICES, HOWEVER, IF THERE IS NO ACTUAL RENDERING OF SERVICES, BUT MERE COLLECTION OF ANNUAL CHARGE TO RECOVER THE COST OF STANDBY FACILITY, AGREED BY ALL THE MEMBERS OF THE CONSORT IUM ON PROPORTIONATE COST BASIS, THEN IT CANNOT BE HELD THAT IT IS PROVIDING ANY KIND OF TECHNICAL SERVICES. HERE THE MOST CRUCIAL POINT WHICH HAS TO BE SEEN IS FIRSTLY, WHETHER THERE IS ANY ACTUAL RENDERING OF SERVICES; SECONDLY, IS THERE ANY MARK UP OR E LEMENT OF PROFIT IN THE CHARGE RECEIVED FOR STANDBY 11 ITA NOS. 2084 & 2085/MUM/2016 RELIANCE GLOBALCOM LTD. MAINTENANCE; AND LASTLY WHETHER IT IS IN THE NATURE OF FIXED ANNUAL CHARGE WHICH IS TO BE RECOVERED AS PROPORTIONATE COST OF MAINTAING THE STANDBY FACILITY READY FOR CARRYING OUT ANY MAINTENANCE OR REPAIR SERVICES. THIS CHARGE IS DIFFERENT FROM AN ANNUAL MAINTENANCE CONTRACT, WHEREBY REPAIRS AND MAINTENANCE IS COVERED FOR A CERTAIN PERIOD OR SERVICES. IN THE PRESENT CASE AS EVIDENT FROM THE CLAUSE 11.1, THAT SO FAR AS STANDBY MAINTENANCE CHARGES IS CONCERN ED, IT IS IN THE FORM OF FIXED ANNUAL CHARGE WHICH IS IN THE NATURE OF REIMBURSEMENT. IT HAS BEEN ALSO BROUGHT ON RECORD THAT ONLY ACTUAL COST INCURRED HAS BEEN RECOVERED FROM VSNL IN PROVIDING THE STANDBY MAINTENANCE SERVICES. THERE IS NO PROFIT ELEMENT O R MARK UP INVOLVED. THE ASSESSEE HAS ALSO PROVIDED THE DETAILS OF RECEIPT AND COST INVOLVED IN PROVIDING STANDBY MAINTENANCE SERVICES TO VSNL FOR A.YS. 1998 - 99, 1999 - 2000 AND 2000 - 01 WHICH ARE AS UNDER: - PARTICULARS AMOUNT IN US$ A.Y. 1998 - 99 A.Y. 1999 - 00 A.Y. 2000 - 01 REVENUES FROM STANDBY MAINTENANCE CHARGES 512,955 1,226,860 2,072,453 TOTAL COSTS INCURRED (AS PER AUDITORS CERTIFICATE) (857,093) (2,0,77,219) (2,800,495) PROFIT/(LOSS) FROM STANDBY MAINTENANCE ACTIVITIES (344,138) (850,359) (728,042) IT HAS BEEN CONTENDED THAT THERE IS A LOSS IN THIS ACCOUNT. 71. THUS, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LOOKING TO THE NATURE OF STANDBY MAINTENANCE COST, WE HOLD THAT THE RECEIPTS FROM STANDBY MAINTENANCE CHARGES FROM VSN L CANNOT BE TAXED AS FTS, WITHIN THE DEFINITION AND MEANING OF SECTION 9(1)(VII) AS THERE IS NO RENDERING OF SERVICES. HOWEVER, WHENEVER PAYMENT IS RECEIVED ON ACCOUNT OF ACTUAL REPAIR OR MAINTENANCE CARRIED OUT, THEN SAME WOULD DEFINITELY FALL WITHIN THE AMBIT OF FTS CHARGEABLE TO TAX U/S 9(1)(VII). ACCORDINGLY THE ORDER OF THE CIT(A) IS SET ASIDE AND ASSESSEES G ROUND ON THIS SCORE IS ALLOWED. 9. THEREFORE, FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER YEARS, SO FAR AS TH E GROUNDS RAISED BY THE REVENUE ARE 12 ITA NOS. 2084 & 2085/MUM/2016 RELIANCE GLOBALCOM LTD. CONCERNED, WE FIND NO REASONS TO INTERFERE WITH THE DECISION OF THE CIT(A), WHICH IS IN LINE WITH THE PRECEDENTS IN ASSESSEES OWN CASE BY WAY OF ORDERS OF THE TRIBUNAL (SUPRA). AT THE TIME OF HEARING, IT WAS ALSO A COM MON GROUND BETWEEN THE PARTIES THAT THE SAID DECISIONS OF THE TRIBUNAL CONTINUE TO HOLD THE FIELD AND HAVE NOT BEEN ALTERED BY ANY HIGHER AUTHORITY. THEREFORE, FOLLOWING THE PRECEDENTS, QUA THE GROUNDS RAISED BY THE REVENUE, THE ORDER OF CIT(A) IS AFFIRME D AND REVENUE FAILS IN ITS APPEAL. 10. INSOFAR AS THE APPEAL OF THE ASSESSEE IS CONCERNED, IT PRIMARILY RELATES TO DETERMINATION OF BUSINESS INCOME TAXABLE IN INDIA ON ACCOUNT OF STANDBY MAINTENANCE CHARGES RECEIVED FROM THE INDIAN LANDING PARTY, I.E. TCL . 11. ON THIS ASPECT, THE STAND OF THE ASSESSEE IS THAT THE TURNOVER (RECEIPTS OF STANDBY MAINTENANCE CHARGES FROM TCL) THAT IS ATTRIBUTABLE TO THE OPERATIONS CARRIED OUT IN INDIA HAS TO BE CALCULATED ON THE BASIS OF APPORTIONMENT OF CABLE LENGTH IN INDIA VIS - A - VIS THE WORLDWIDE CABLE LENGTH. ON THE CONTRARY, THE STAND OF THE REVENUE IS THAT THE TURNOVER OF THE ASSESSEE DERIVED FROM STANDBY MAINTENANCE CHARGES HAS NO CONNECTI ON WITH THE LENGTH OF THE CABLE LAID IN INDIA . AS PER THE REVENUE, THE STANDBY MAINTENANCE CHARGES RELATE TO EXPENDITURE INCURRED BY THE ASSESSEE IN MAINTAINING THE STANDBY FACILITY AND NETWORK OPERATING CENTRE (NOC) FOR A QUICK RESPONSE TO REPAIR THE INT ERRUPTIONS AND CO - ORDINATION OF MAINTENANCE. THE SAID FACILITY IS MAINTAINED AND CAN BE MOBILISED AT SHORT NOTICE FOR RENDERING ANY REPAIR WORK WHATEVER AND WHEREVER NEEDED. THEREFORE, AS PER THE REVENUE, THE STANDBY MAINTENANCE CHARGES ARE RELATABLE TO THE CABLE CAPACITY ASSIGNED TO VARIOUS LANDING PARTIES AND NOT THE LENGTH OF THE CABLE . IN OTHER WORDS, AS PER THE REVENUE, ONCE SUCH 13 ITA NOS. 2084 & 2085/MUM/2016 RELIANCE GLOBALCOM LTD. EXPENSES ON STANDBY MAINTENANCE CHARGES IS ALLOCATED TO TCL, I.E. THE INDIAN LANDING PARTY, WITH REFERENCE TO THE CAPACIT Y USED, IT CANNOT BE FURTHER APPORTIONED BASED ON THE LENGTH OF THE CA BLE SO AS TO DETERMINE PROFIT OF THE ASSESSEE ATTRIBUTABLE TO THE BUSINESS CONNECTION IN INDIA. 12. THE LEARNED REPRESENTATIVE, HOWEVER, POINTED OUT THAT THE INCOME OF THE ASSESSEE, WHICH IS TO BE TAXED IN INDIA, CAN BE APPROPRIATELY CALCULATED ONLY AFTER APPORTIONING THE REVENUE ON THE BASIS OF LENGTH OF CABLE IN THE TERRITORIAL WATERS OF INDIA FOR WHIC H THE STANDBY FACILITY IS BEING MAINTAINED BY THE ASSESSEE. THEREFORE, ACCORDING TO HIM, IT IS ONLY SUCH PART OF THE TOTAL REVENUE RECEIVED FROM TCL WHICH IS PROPORTIONATE TO THE LENGTH OF CABLE IN THE TERRITORIAL WATERS OF INDIA WHICH CAN BE CONSIDERED T O COMPUTE ASSESSEES INCOME TAXABLE IN INDIA AND THE SAME HAS BEEN CORRECTLY DONE BY THE ASSESSEE IN ITS RETURN OF INCOME. 13. AT THIS STAGE, WE MAY ALSO REFER TO THE ADDITIONAL GROUND OF APPEAL NO. 2 WHICH HAS BEEN RAISED BEFORE US AND WHICH READS AS U NDER : - 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE RECEIPTS FROM INDIAN PARTIES IS TO BE TREATED S TURNOVER FOR THE PURPOSE OF TAXATION IN INDIA IGNORING THE FACT THAT NO OPERATIONS ARE CARRIED OUT IN INDIA. THE APPELLANT SUBMITS THAT CONSIDERING CLAUSE (A) OF EXPLANATION 1 TO SECTION 9(1)(I) THE RECEIPTS FROM INDIAN PARTIES IS NOT LIABLE TO TAX IN INDIA. 14. BY WAY OF THE SAID ADDITIONAL GROUND OF APPEAL, ASSESSEE HAS SOUGHT TO CANVASS THAT N O PART OF THE RECEIPT FROM INDIAN LANDING PARTY, I.E. TCL, IS LIABLE TO BE TREATED FOR THE PURPOSE OF DEDUCING ASSESSEES INCOME 14 ITA NOS. 2084 & 2085/MUM/2016 RELIANCE GLOBALCOM LTD. ATTRIBUTABLE TO BUSINESS CONNECTION IN INDIA BECAUSE NO SUCH OPERATIONS ARE INDEED CARRIED OUT IN INDIA. IN OTHER WORDS, AS PE R THE ASSESSEE, THE STANDBY MAINTENANCE CHARGES RECOVERED FROM TCL ARE FOR MAINTENANCE OF STANDBY FACILITY, I.E. THE SHIPS, WHICH ARE NOT IN THE INDIAN TERRITORIAL WATERS AND, THEREFORE, NO PART OF THE SAME CAN BE TREATED AS PART OF INCOME TAXABLE IN INDIA . 15. AT THE TIME OF HEARING, IT WAS BROUGHT TO THE NOTICE OF THE ASSESSEE THAT THE AFORESAID PLEA RAISED IN THE ADDITIONAL GROUND IS DIRECTLY CONTRARY TO THE STAND OF THE ASSESSEE TAKEN IN THE RETURN OF INCOME AND, IN RESPONSE, THE LEARNED REPRESENTATIVE SUBMITTED THAT THE SAID GROUND BE TAKEN AS WITHDRAWN. WE HOLD SO. 16. INSOFAR AS THE OTHER ADDITIONAL GROUNDS OF APPEAL NOS. 1 & 3 ARE CONCERNED, WHICH READ AS UNDER, THE SAME ARE PRIMARILY IN SUPPORT OF THE ORIGINAL GROUNDS RAISED IN THE MEMO OF APPEAL . 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE L EARNED COMMISSIONER OF INCOME TAX (APPEALS) 58, MUMBAI (THE CIT(A)) ERRED IN HOLDING THAT THE ENTIRE TURNOVER (RECEIPTS FROM THE INDIAN PARTIES) IS LIABLE TO BE TREATED AS TURNOVER FOR THE PURPOSE OF TAXATION IN INDIA. THE APPELLANT SUBMITS THAT THE SAID RECEIPT OF STANDBY MAINTENANCE CHARGES FROM TCL CANNOT BE TREATED AS TURNOVER FOR TAXATION PURPOSE IN INDIA. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A ) ERRED IN HOLDING THAT THE ENTIRE TURNOVER (RECEIPTS FROM THE INDIAN PARTIES) OF STANDBY MAINTENANCE CHARGES FROM TCL IS TURNOVER FOR THE PURPOSE OF TAXATION IN INDIA WITHOUT GIVING NOTICE FOR ENHANCEMENT OR OPPORTUNITY TO THE APPELLANT. 15 ITA NOS. 2084 & 2085/MUM/2016 RELIANCE GLOBALCOM LTD. THE APPELLANT SU BMITS THAT THE CIT(A) OUGHT NOT TO HAVE HELD THAT THE ENTIRE TURNOVER (RECEIPT FROM THE INDIAN PARTIES) IS LIABLE TO BE TREATED AS TURNOVER FOR THE PURPOSE OF TAXATION IN INDIA. 17. ON THIS ASPECT, THE SHORT DISPUTE RELATES TO THE MANNER IN WHICH THE INC OME FROM STANDBY MAINTENANCE CHARGES TAXABLE IN INDIA U/S 9(1)(I) OF THE ACT IS TO BE COMPUTED. SAID CHARGES HAVE BEEN RECEIVED BY THE ASSESSEE FROM TCL AND, AS PER THE ASSESSEE, PORTION THEREOF WHICH IS RELATABLE TO THE LENGTH OF CABLE IN INDIAN TERRITOR IAL WATERS VIS - A - VIS THE LENGTH OF CABLE WORLDWIDE BE TAKEN AS THE TOTAL REVENUE DEEMED TO ACCRUE OR ARISE IN INDIA FROM WHICH RELATABLE EXPENSES ARE TO BE REDUCED SO AS TO COMPUTE THE INCOME ACCRUING OR ARISING IN INDIA U/S 9(1)(I) OF THE ACT. ON THE CON TRARY, THE STAND OF THE CIT(A) IS THAT THE ENTIRE AMOUNT OF REVENUE RECEIVED ON THIS SCORE FROM TCL SHOULD BE CONSIDERED. 18. AS THE AFORESAID DISCUSSION SHOWS, THE DISPUTE REVOLVES AROUND COMPUTATION OF THE INCOME FROM STANDBY MAINTENANCE ACTIVITIES AT TRIBUTABLE IN INDIA. ON THIS ASPECT, BEFORE PROCEEDING FURTHER, WE NOTICE THAT IN ASSESSMENT YEARS 2001 - 02 TO 2008 - 09, THE TRIBUNAL VIDE ORDER DATED 15.06.2015 (SUPRA) HAS DEALT WITH SIMILAR ISSUE, OF COURSE QUA THE REVENUES EARNED FROM RESTORATION SERVI CES. ON THIS ASPECT, THE TRIBUNAL HELD SUCH RECEIPTS TO BE IN THE NATURE OF BUSINESS INCOME, AND AFTER HOLDING SO, THE TRIBUNAL WENT ON TO DEDUCE THE METHOD IN TERMS OF WHICH THE REVENUE COULD BE APPORTIONED TO INDIA OPERATIONS IN ORDER TO DETERMINE TH E INCOME TAXABLE IN INDIA. ON THIS ASPECT, THE TRIBUNAL DEEMED IT FIT TO APPORTION THE REVENUE ON THE BASIS OF LENGTH OF CABLE IN THE TERRITORIAL WATERS OF INDIA. THOUGH THE DECISION HAS BEEN RENDERED WITH RESPECT TO THE RESTORATION ACTIVITY, SO 16 ITA NOS. 2084 & 2085/MUM/2016 RELIANCE GLOBALCOM LTD. HOWEVER, THE METHODOLOGY WHICH HAS BEEN FOUND TO BE REASONABLE BY THE TRIBUNAL IS BASED ON THE FRACTION OF LENGTH OF ENTIRE CABLE SYSTEM CONNECTED TO INDIA IN ITS TERRITORIAL WATERS . DRAWING AN ANALOGY FROM THE SAME, IN THE INSTANT CASE TOO, WE FIND THAT THE STAN DBY MAINTENANCE CHARGES RECOVERED BY THE ASSESSEE FROM TCL ONLY QUA THE LENGTH OF CABLE IN THE TERRITORIAL WATERS OF INDIA NEEDS TO BE CONSIDERED FOR COMPUTING THE PROFITS OR INCOME ACCRUING TO THE ASSESSEE U/S 9(1)(I) OF THE ACT. THE REASONING ADVANCED BY THE REVENUE TO THE EFFECT THAT THE STANDBY MAINTENANCE CHARGES ARE LINKED TO THE CABLE CAPACITY IS OF NO CONSEQUENCE FOR THE PRESENT INASMUCH AS WHAT IS REQUIRED TO BE DECIDED IS THE INCOME ATTRIBUTABLE TO THE BUSINESS CONNECTION IN INDIA, WHICH POSSIBLY IS THE LENGTH OF THE CABLE IN THE TERRITORIAL WATERS OF INDIA. THEREFORE, IN OUR VIEW, IT IS ONLY THE REVENUE FROM TCL WHICH IS ON ACCOUNT OF STANDBY MAINTENANCE CHARGES PROPORTIONATE TO THE CABLE LENGTH IN INDIA THAT DESERVES TO BE CONSIDERED FOR COMPUTING THE PROFIT OR LOSS FROM STANDBY MAINTENANCE ACTIVITY ATTRIBUTABLE TO INDIA IN TERMS OF SEC. 9(1)(I) OF THE ACT. THEREFORE, ON THIS ASPECT, WE UPHOLD THE PLEA OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO VERIFY THE CALCUL ATION MADE BY THE ASSESSEE IN THIS REGARD IN ITS COMPUTATION OF INCOME AND RECOMPUTE THE INCOME ACCORDINGLY. THUS, ON THIS ASPECT, ASSESSEE SUCCEEDS AS ABOVE. 1 9 . THE OTHER ONLY ISSUE IS WITH REGARD TO THE CHARGING OF INTEREST U/S 234B OF THE ACT. ON THIS ASPECT, THE LEARNED REPRESENTATIVE POINTED OUT THAT IT IS A SETTLED PROPOSITION IN TERMS OF THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF NGC NETWORK A SIA LLC, 313 ITR 187 (BOM.) THAT THERE WOULD BE NO CHARGEABILITY OF INTEREST U/S 234B OF THE ACT AS THE RECEIPTS ON ACCOUNT OF STANDBY MAINTENANCE CHARGES FROM TC L ARE SUBJECTED TO WITHHOLDING TAX U/S 195 OF THE ACT. ON THIS ASPECT, IT WAS ALSO A COMMON P OINT BETWEEN THE 17 ITA NOS. 2084 & 2085/MUM/2016 RELIANCE GLOBALCOM LTD. PARTIES THAT THE SAID PROPOSITION HAS ALSO BEEN AFFIRMED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN THE ORDERS DATED 06.02.2015 (SUPRA) AND ALSO 15.06.2015 (SUPRA). THUS, ON THIS ASPECT, ASSESSEE SUCCEEDS. 20 . IN THE RESULT, WHEREAS THE A PPEAL OF THE ASSESSEE IS PARTLY ALLOWED, THAT OF THE REVENUE IS DISMISSED. 2 1 . IT WAS A COMMON POINT BETWEEN THE PARTIES THAT SO FAR AS THE FACTS AND CIRCUMSTANCES IN ASSESSMENT YEAR 2011 - 12 ARE CONCERNED, THEY STAND ON AN IDENTICAL FOOTING TO THOSE CONSI DERED BY US IN THE APPEAL FOR ASSESSMENT YEAR 2010 - 11 IN THE EARLIER PARAS, THEREFORE, OUR DECISION THEREIN SHALL APPLY MUTATIS MUTANDIS TO THE SAID CROSS - APPEAL S ALSO . 2 2 . RESULTANTLY, WHEREAS THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED, THOSE OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 T H MAY, 2018. SD/ - SD/ - ( RAVISH SOOD ) JUDICIAL MEMBER (G.S. PANNU) ACCOUNTANT MEMBER MUMBAI, DATE : 4 T H MAY , 201 8 *SSL* 18 ITA NOS. 2084 & 2085/MUM/2016 RELIANCE GLOBALCOM LTD. COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, L BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI
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