ADIT CIR 2(2), MUMBAI V. WNS GLOBAL SERVICES (UK) LTD, MUMBAI

ITA 2943/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4100 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 29-07-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 30-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY SHRIVASTAVA
• Assessee Lawyers: MANISH KANTH DT OF HEA
• Keywords: Business income; Transfer pricing; Double taxation relief; Services rendered outside India; Permanent establishment

Judgement Text

, IN THE IN IN THE IN IN THE IN IN THE INCOME TAX APPELLATE TRIBUNAL COME TAX APPELLATE TRIBUNAL COME TAX APPELLATE TRIBUNAL COME TAX APPELLATE TRIBUNAL L BENCH, L BENCH, L BENCH, L BENCH, MUMBAI MUMBAI MUMBAI MUMBAI . , !' !' !' !' , . BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI B. R B. R B. R B. RAMAKOTAIAH AMAKOTAIAH AMAKOTAIAH AMAKOTAIAH, AM , AM , AM , AM & && & SHRI SHRI SHRI SHRI VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO, ,, , JM JMJM JM ./ I.T.A. N I.T.A. N I.T.A. N I.T.A. NO. O.O. O. 2943/MUM/2012 2943/MUM/2012 2943/MUM/2012 2943/MUM/2012 ( #$ #$ #$ #$ % % % % / ASSESSMENT YEAR: 2007-08) ADIT (IT)-2(2), SCINDIA HOUSE, BALLARD PIER, N. M. ROAD, MUMBAI-400038 $ $ $ $ / VS. M/S WNS GLOBAL SERVICES (UK) LTD, C/O- WNS GLOBAL SERVICES P. LTD., GATE NO. 4, GODREJ AND BOYCE COMPLEX, PIROJSHANAGR, VIKHROLI (W) MUMBAI & ./ '' ./ PAN/GIR NO. : AAACW5544Q ( &( / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( )*&( / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) &( &( &( &( + + + + / APPELLANT BY : MR. AJAY SHRIVASTAVA )*&( )*&( )*&( )*&( , ,, , + + + + /RESPONDENT BY : MR. PORUS KAKA & MR. MANISH KANTH $ $ $ $ , ,, , - - - - / DT. OF HEARING : 29 TH JULY 2013 .% .% .% .% , ,, ,- - - - / DT.OFPRONOUNCEMENT: 31 ST JULY 2013 / / O R D E R PER : !' , . . / VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 27.1.2012 OF COMMISSIONER OF INCOME TAX(APPEALS) FO R THE ASSESSMENT YEAR 2007-08. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. CIT(A) ERRED IN HOLDING THAT MARKETING & MA NAGEMENT SERVICES AMOUNTING TO RS.40,98,46,959/- DID NOT SAT ISFY THE MAKE AVAILABLE CRITERIA WHEN THE NATURE OF SERVICES SHO WED OTHERWISE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE ID. CIT(A) ERRED IN HOLDING THAT MARKETING & MA NAGEMENT SERVICES AMOUNTING TO RS.1,74,11,258/- ARE TO BE TA XED AS BUSINESS PROFITS WHEN IT IS PART OF THE MARKETING & MANAGEMENT SERVICES RENDERED BY THE ASSESSEE RESULTING IN TOTA L RECEIPTS OF RS. ITA NO.2943/M/2012 WNS GLOBAL SERVICES (UK) LTD. 2 40,98,46,959/- AND WHICH ARE IN THE NATURE OF FEES FOR TECHNICAL SERVICES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE ID. CIT(A) ERRED IN DIRECTING THAT THE ASSESSEE IS HAVING SERVICE PERMANENT ESTABLISHMENT (PE) IN INDIA UNDER ARTICLE -5(2)(K) OF INDIA-US TREATY. 4. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING TH AT RECEIPTS OF RS.39,24,35,701/- TOWARDS MARKETING SERVICES IS NOT TAXABLE IN INDIA AFTER CONFIRMING THAT THE ASSESSEE HAS PE IN INDIA, IGNORING THE FACT THAT-THE SAME IS ATTRIBUTABLE TO THE SERVI CE PE IN VIEW OF THE FORCE OF ATTRACTION RULE AND HENCE LIABLE TO BE TAXED AS BUSINESS PROFITS UNDER ARTICLE 7 READ WITH ARTICLE 5 OF INDIA-USA DTAA. 3. WE HAVE HEARD THE LD. DR AS WELL AS LD. SENIOR C OUNSEL FOR THE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RE CORD. THE FACTS AND ISSUES IN THIS APPEAL OF THE REVENUE ARE IDENTICAL TO THE FACTS AND ISSUE OF THE REVENUES APPEAL IN CASE OF WNS NORTH AMERICA I NC. IN ITA NO. 2944/M/2012 EXCEPT THE TAX TREATY IN THIS CASE IS I NDO-UK DTAA INSTEAD OF INDO-US. WE HAVE DECIDED THE APPEAL OF THE REVENUE IN CASE OF WNS NORTH AMERICA INC. VIDE EVEN DATED ORDER AS UNDER: 3. GROUND NO. 1 TO 3 REGARDING MARKETING & MANAGEM ENT SERVICES HELD BY THE CIT(A) TO BE TAXED AS BUSINESS PROFITS INSTEAD OF FEES FOR TECHNICAL SERVICES HELD BY THE AO. WE H AVE HEARD THE LD. DR AS WELL AS LD. SENIOR COUNSEL FOR THE ASSESS EE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASS ESSEE IS A FOREIGN COMPANY AND TAXED RESIDENT OF UNITED STATE OF AMERICA. THE ASSESSEE IS INTER ALIA ENGAGED IN THE BUSINESS OF RENDERING, MARKETING AND MANAGEMENT SERVICES TO WNS GLOBAL SER VICES PVT. LTD. WHICH IS ITS ASSOCIATED ENTERPRISE IN INDIA. T HE ASSESSEE HAS ENTERED INTO MARKETING AND MANAGEMENT SERVICES AGRE EMENT WITH WNS INDIA PURSUANT TO WHICH IT IS ENTITLED TO RECEI VE FEES AT ITS COST PLUS 10% MARK UP FOR THE MARKETING AND MANAGERIAL S ERVICES RENDERED BY IT. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS RECEIVED AN AMOUNT OF ` 68,15,11,339/- TOWARDS MARKETING AND MANAGEMENT SERVICES RENDERED BY IT TO WNS INDIA . SINCE THE ASSESSEES EMPLOYEES VISITED INDIA FOR PROVIDING MA NAGERIAL ITA NO.2943/M/2012 WNS GLOBAL SERVICES (UK) LTD. 3 SERVICES, THEREFORE WNS INDIA CONSTITUTES SERVICE P E UNDER ARTICLE 5(2)(1) OF INDO-USA DTAA. ACCORDINGLY AN AMOUNT OF ` 6,52,13,074/- HAS BEEN ATTRIBUTABLE TO SUCH SERVICE PE FOR MANAGERIAL SERVICE RENDERED IN INDIA AND WHICH HAS BEEN DECLARED BY THE ASSESSEE IN ITS RETURN OF INCOME FOR THE YEA R UNDER CONSIDERATION. THE AO HELD THAT THE ASSESSEE RENDER S EXPERTISE AND TECHNICAL KNOWLEDGE FOR CONDUCT OF BUSINESS OF THE INDIAN CONCERN VIZ. WNS INDIA. THE AO ACCORDINGLY HELD THA T THE MARKETING AND MANAGEMENT SERVICES RENDERED BY THE A SSESSEE TO WNS INDIA IS FEES FOR INCLUDED SERVICES (FIS) UND ER ARTICLE 12(4)(B) OF INDO-US DTAA AND TAXED THE SAME AS FIS UNDER ARTICLE 12 OF INDO-US DTAA. ON APPEAL, THE CIT(A) HAS DECID ED THE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF THIS TRIBUNAL IS ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT Y EAR. 4. AT THE OUTSET WE NOTE THAT FOR THE EARLIER ASSES SMENT YEARS 2003-04 TO 2006-07 AN IDENTICAL ISSUE HAS BEEN CONS IDERED AND DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. WE FURTHER NOTE THAT IN THE ASSESSMENT YEARS 2004-05 AND 2005-06 TH E ORDER OF THIS TRIBUNAL HAS BEEN CONFIRM BY THE HONBLE JURIS DICTION HIGH COURT. IN THE LATEST DECISION DATED 14.12.2012 FOR THE ASSESSMENT YEAR 2006-07 IN ITA NO. 8621/M/2011 THE TRIBUNAL HA S AGAIN CONSIDERED AND DECIDED THIS ISSUE IN PARA 2.4 TO 2. 6 AS UNDER: 2.4. HAVING HEARD THE RIVAL SUBMISSIONS ON THE POI NT AND CONSIDERED THE RELEVANT MATERIAL ON RECORD, WE DO N OT FIND ANY FORCE IN THE ARGUMENTS PUT FORTH ON BEHALF OF T HE REVENUE PAR TWO REASONS. FIRSTLY- THE ASSESSING OFF ICER TREATED THIS AMOUNT AS FEES FOR INDUCED SERVICES UNDER ARTICLE 12(4)(B) OF THE DTAA BY RELYING ON SIMILAR VIEW TAKEN BY HIM IN EARLIER YEAR. SUCH EARLIER YEARS ORDER P ASSED BY THE A.O. HAS BEEN EVENTUALLY CONSIDERED AND OVERTUR NED BY THE TRIBUNAL. IN THIS ORDER IT HAS BEEN HELD BY THE TRIBUNAL THAT THE AMOUNT IS NOT TAXABLE AS FIS UNDER ARTICLE 12(4)(B). THERE IS ABSOLUTELY NO DIFFERENCE IN THE FACTS AND LEGAL POSITION PREVAILING IN THE EARLIER YEAR VIS-A-VIS T HE CURRENT YEAR. AS SUCH, THERE CAN BE NO QUESTION OF DEVIATIN G FROM THE VIEW TAKEN BY THE TRIBUNAL IN SUCH EARLIER YEAR , WHICH WE FULLY SUBSCRIBE TO. 2.5. THE SECOND REASON FOR NOT ACCEPTING THE LEARNE D DEPARTMENTAL REPRESENTATIVES CONTENTION FOR CONSID ERING THE ISSUE AS PER SECTION 9(1)(VII) OF THE ACT IS TH AT PRIMARILY THE AO IN THE IMPUGNED ORDER HAS RELIED ON ARTICLE 12 OF THE DTAA TO HOLD THE AMOUNT AS FIS. NOWHERE DID HE REFE R TO SECTION 9, DIRECTLY OR INDIRECTLY TO FIX THE TAXABI LITY OF THIS AMOUNT AS FIS UNDER THE PROVISIONS OF THE ACT. HOWE VER, WITH A VIEW TO PROVIDE COMPLETENESS TO THIS ORDER, WE WO ULD LIKE TO NOTE THAT THE SCOPE OF SECTION 9(1)(VII) IS SOME WHAT DIFFERENT IN COMPARISON WITH THE ARTICLE 12(4)(B). IN ORDER TO ITA NO.2943/M/2012 WNS GLOBAL SERVICES (UK) LTD. 4 ROPE IN ANY AMOUNT WITHIN THE PURVIEW OF FIS UNDER THE ARTICLE 12(4)(B) OF DTAA, WHICH HAS BEEN INVOKED BY THE AO, IT IS ESSENTIAL THAT THE PAYMENT SHOULD BE TO MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HOW OR PROCESSES, OR CONSIST OF THE DEVELOPMENT AND TRANSF ER OF A TECHNICAL PLAN OR TECHNICAL DESIGN. ON THE CONTRAR Y, THERE IS NO SUCH REQUIREMENT OF MAKING AVAILABLE ANY MANAG ERIAL, TECHNICAL OR CONSULTANCY SERVICES. SIMPLE RENDITIO N OF SUCH SERVICES IS SUFFICIENT, IT IS NOT THE CASE OF THE R EVENUE THAT THE ASSESSEE MADE AVAILABLE SOME MANAGERIAL, TECHNI CAL OR CONSULTANCY SERVICE TO WNS INDIA. EVEN IF WE CONSID ER FOR A MOMENT THAT THE MARKETING AND MANAGEMENT SERVICES RENDERED BY THE ASSESSEE WERE IN THE NATURE OF TECH NICAL SERVICES AS PER SECTION 9(1)(VII), THE SAME WOULD N OT BECOME FIS AS PER THE DTA BECAUSE OF THE LANGUAGE OF ARTIC LE 12(4)(B) WHICH MANDATES THAT SUCH SERVICES MUST HE MADE AVAILABLE TO THE PAYER OF THE CONSIDERATION. AS THE ASSESSEE IN THE INSTANT CASE HAS NOT MADE AVAILABLE ANY TECH NICAL KNOWLEDGE, EXPERIENCE, SKILL ETC. TO WNS INDIA, IN OUR CONSIDERED OPINION, THE SAME CANNOT BE SUBJECTED TO TAX BY CONSIDERING THE PROVISIONS OF SECTION 9(1)(VI) ON S TAND ALONE BASIS. WE WILL DISCUSS INFRA IN A LITTLE MORE DETAI L THAT THE PROVISION OF THE ACT OR THE RELEVANT DOUBLE TAXATIO N AVOIDANCE AGREEMENT, WHICHEVER IS MORE BENEFICIAL T O THE ASSESSEE, SHALL APPLY. AS THE PROVISIONS OF ARTICLE 12(4)(B) ARE BENEFICIAL TO THE ASSESSEE IN COMPARISON WITH S ECTION 9(1)(VI), IT IS THE PRESCRIPTION OF ARTICLE 12, WHI CH SHALL APPLY IN SUPERSESSION OF SECTION 9(1)(VI) OF THE ACT. WE, THEREFORE, HELD THAT THE MARKETING AND MANAGEMENT SERVICES REN DERED BY THE ASSESSEE TO WNS INDIA ARE NOT CHARGEABLE TO TAX AS FIS UNDER ARTICLE 12 OF THE DTAA. THE IMPUGNED ORDE R IS, THEREFORE, REVERSED TO THIS EXTENT. 2.6. AS WE HAVE HELD IN THE FOREGOING PA THAT THE A MOUNT OF ` 41.02 CRORE CANNOT BE CONSIDERED AS FIS, NATURALL Y THE AMOUNT RECEIVED BY THE ASSESSEE ON THIS SCORE NEEDS IT BE EXAMINED FROM THE ANGLE OF TAXABILITY UNDER OTHER PROVISIONS. IT IS IMPORTANT TO NOTE THAT THE ASSESS EE FILED ITS RETURN DECLARING TOTAL INCOME OF ` 2,38,78,407 BY I NTER ALIA TREATING THE SUM OF ` 4.11 CRORE BEING THE CONSIDER ATION FOR THE PROVISION OF MARKETING AND MANAGEMENT SERVICES IN INDIA AS FALLING UNDER ARTICLE 7. THE AO HAS TREATE D THE ENTIRE AMOUNT OF ` 41.02 CRORE AS FIS AND THUS COMPUTED TH E TOTAL INCOME BY IGNORING THE INCOME OFFERED BY THE ASSESS EE. AS SUCH THE BUSINESS INCOME SHOWN BY THE ASSESSEE AS P ER ARTICLE 7 SHALL REVIVE AND BECOME TAXABLE. THE AO I S DIRECTED TO INCLUDE SUCH AMOUNT IN THE TOTAL INCOME OF THE A SSESSEE. IN SO FAR AS THE REMAINING RECEIPTS OF ` 36.18 CROR E, BEING THE CONSIDERATION FOR THE PROVISION OF MARKETING AN D ITA NO.2943/M/2012 WNS GLOBAL SERVICES (UK) LTD. 5 MANAGEMENT SERVICES OUTSIDE INDIA IS CONCERNED, THE SAME CANNOT BE SUBJECTED TO TAX IN INDIA BECAUSE SUCH IN COME CANNOT BE SAID TO HAVE ACCRUED OR ARISEN TO THE ASS ESSEE OR DEEMED TO HAVE BEEN ACCRUED OR ARISEN TO THE ASSESS EE IN INDIA. EVEN THE EXISTENCE OF THE SERVICE PE IN INDI A WILL NOT MAKE IT TAXABLE BECAUSE OF NO INVOLVEMENT OF SUCH P E IN EARNING THIS INCOME FOR WHICH THE SERVICES WERE REN DERED OUTSIDE INDIA. FOLLOWING THE EARLIER ORDERS OF THIS TRIBUNAL AS WE LL AS HONBLE HIGH COURT WE DECIDE THIS ISSUE AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 5. GROUND NO. 4 REGARDING FORCE OF ATTRACTION RULE. THE LD. DR HAS SUBMITTED THAT WHEN THE RECEIPTS TOWARDS THE FEE FOR MARKETING SERVICE TREATED AS BUSINESS INCOME AND NO T AS FIS THEN THE SAME ARE TAXABLE IN INDIA AS ATTRIBUTABLE TO TH E SERVICE PE IN VIEW OF THE FORCE OF ATTRACTION RULE. HE HAS FURTHE R SUBMITTED THAT EVEN TREATING THE RECEIPTS TOWARDS MARKETING SERVIC ES AS BUSINESS PROFITS THE SAME ARE LIABLE TO BE TAXED UNDER ARTIC LE 7 R.W. ARTICLE 5 OF INDO-US DTAA. THE LD. DR HAS CONTENDED THAT THER E IS A COMPOSITE AGREEMENT UNDER WHICH THE ASSESSEE HAS PR OVIDED MARKETING AND MANAGEMENT SERVICES TO WNS INDIA AND ONCE THE SERVICES PROVIDED IN INDIA ARE HELD TO BE TAXABLE B ECAUSE OF THE SERVICE PE IN INDIA THEN THE SIMILAR AND PART OF TH E COMPOSITE SERVICE PROVIDED OUTSIDE INDIA IS ALSO ATTRIBUTABLE TO THE SERVICE PE IN VIEW OF THE FORCE OF ATTRACTION RULE. SINCE THIS ISSUE HAS NOT BEEN CONSIDERED BY THIS TRIBUNAL AS WELL AS BY THE HONBLE HIGH COURT IN THE EARLIER YEARS THEREFORE, THE REVENUE H AS RAISED THIS ISSUE AS AN ALTERNATIVE PLEA. IN SUPPORT OF HIS CON TENTION HE HAS RELIED UPON THE DECISION OF THIS TRIBUNAL IN CASE O F HINDALCO INDUSTRIES LTD. VS ACIT 94 ITD 242 AND SUBMITTED TH AT THE TRIBUNAL IN THE SAID CASE HAS OBSERVED THAT WHEN PRINCIPLE T RANSACTION ITSELF IS SUCH THAT IT INVOLVES TAXABILITY IN SOURCE COUNT RY, THE TRANSACTIONS SUBSIDIARY AND INTEGRAL TO SUCH A TRAN SACTION ALSO GIVE RISE TO THE TAXABILITY OF SUBSIDIARY TRANSACTIONS I N THE SOURCE COUNTRY. THE LD. DR HAS FURTHER SUBMITTED THAT THE BENEFIT OF SERVICES IS RECEIVED IN INDIA, THEREFORE THE SERVIC ES ARE DEEMED TO HAVE BEEN RENDERED OR MADE AVAILABLE IN INDIA. 6. ON THE OTHER HAND, THE LD. SENIOR COUNSEL HAS S UBMITTED THAT THE ISSUE IN THE CASE OF HINDALCO INDUSTRIES L TD. (SUPRA) WAS WHETHER THE PAYMENT FOR TRAINING FEE WAS PART OF SA LE OF KNOW-HOW AND THEREFORE THE SAID DECISION IS NOT APPLICABLE I N THE FACTS OF THE CASE OF THE ASSESSEE WHEREIN THE PRINCIPLE TRANSACT ION OF MARKETING AND MANAGEMENT SERVICES WAS OUTSIDE INDIA AND ONLY BECAUSE THE EMPLOYEES OF THE ASSESSEE VISITED INDIA FOR MORE THAN ONE DAY WNS INDIA IS TREATED AS SERVICE PE IN VIEW OF ARTICLE 5(2)(L)(II) OF INDO-US DTAA. SINCE THE INDIAN CONCE RN IS A RELATED ENTERPRISE THEREFORE THE VISIT OF THE EMPLOYEES OF THE ASSESSEE TO ITA NO.2943/M/2012 WNS GLOBAL SERVICES (UK) LTD. 6 INDIA CONSTITUTE THE INDIAN CONCERN VIZ. WNS INDIA AS SERVICE PE. HE HAS REFERRED THE ASSESSMENT ORDER AND SUBMITTED THAT THE AO HAS MENTIONED IN PARA 2 THAT THE EMPLOYEES OF ASSES SEE VISITED INDIA DURING THE ASSESSMENT YEAR UNDER CONSIDERATIO N FOR MORE THAN ONE DAY AND THEREFORE AS PER ARTICLE 5(2)(L) O F INDO-US DTAA, THE EXISTENCE OF EMPLOYEES CONSTITUTES A SERVICE PE IN INDIA. THUS, THE LD. SENIOR COUNSEL HAS SUBMITTED THAT AS PER TH E AGREEMENT FOR PROVIDING THE MARKETING AND MANAGEMENT SERVICES TERRITORY MEANS THE NORTH AMERICA AND EUROPEAN REGION, THEREF ORE THE PRINCIPLE ACTIVITY AS PER THE AGREEMENT WAS TO PROV IDE THE MARKETING AND MANAGEMENT SERVICES IN NORTH AMERICA AND EUROPEAN REGION AND NOT IN INDIA. THUS, THE DECISIO N OF THIS TRIBUNAL IN CASE OF HINDALCO INDUSTRIES LTD. IS NOT APPLICABLE. HE HAS FURTHER CONTENDED THAT THE FORCE OF ATTRACTION RULE APPLIES ONLY WHEN APART FROM THE BUSINESS THROUGH PE IF THE ASSE SSEE CARRIES ON BUSINESS ACTIVITY IN THE OTHER CONTRACTING STATE OF SAME OR SIMILAR KIND AS THOSE AFFECTED THROUGH THE PERMANEN T ESTABLISHMENT. HE TOOK US TO ARTICLE 7 OF INDO-US D TAA AND SUBMITTED THAT AS GENERAL RULE THE PROFITS OF AN EN TERPRISE OF A CONTRACTING STATE SHALL BE TAXABLE ONLY IN THAT STA TE UNLESS THE BUSINESS IS CARRIED ON IN THE OTHER CONTRACTING STA TE THROUGH PE SITUATED THEREIN. THEREFORE, ONLY EXCEPTIONAL IS TH AT IN CASE THE BUSINESS CONDUCTED THROUGH THE PE SHALL BE TAXABLE IN THE OTHER CONTRACTING STATE OTHERWISE THE PROFITS OF THE ENTE RPRISE SHALL BE TAXABLE IN THE STATE OF RESIDENCE. THE LD. SENIOR C OUNSEL THEN POINTED OUT THAT THE FORCE OF ATTRACTION RULE APPLI ES ONLY IN A SITUATION WHEN AN ENTERPRISE OF THE CONTRACTING STA TE CARRIES ON BUSINESS THROUGH PE AS WELL AS DIRECT BUSINESS ACTI VITY IN THE OTHER STATE WHERE THE PERMANENT ESTABLISHMENT SITUATED AN D THE BUSINESS ACTIVITY CARRIED ON DIRECTLY IS SAME OR SI MILAR KIND AS THOSE EFFECTED THROUGH PERMANENT ESTABLISHMENT. THE LD. SENIOR COUNSEL THUS ADVANCED HIS ARGUMENTS THAT IN THE CAS E OF THE ASSESSEE THE MARKETING AND MANAGEMENT SERVICES PROV IDED OUTSIDE INDIA CANNOT BE BROUGHT UNDER ARTICLE 7 IN THE CATEGORY OF THE BUSINESS ACTIVITIES CARRIED ON OF THE SAME OR S IMILAR KIND AS THOSE EFFECTED THROUGH THE PE. ACCORDINGLY, HE HAS VEHEMENTLY OPPOSED THE ALTERNATIVE GROUND RAISE BY THE REVENUE . 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE TH AT OUT OF TOTAL MARKETING AND MANAGEMENT FEE OF ` 8,15,11,339/- REC EIVED FROM WNS INDIA ONLY A SUM OF ` 6,52,13,074/- HAS BEEN AT TRIBUTED TO SUCH PE BECAUSE THE SERVICES WERE RENDERED IN INDIA . THE REMAINING AMOUNT OF MARKETING AND MANAGEMENT FEE RE CEIVED BY THE ASSESSEE IS REGARDING THE SERVICES RENDERED OUT SIDE INDIA. THE LD. DR HAS CONTENDED THAT SINCE THE SERVICES WHICH WERE RENDERED IN INDIA AND OUTSIDE INDIA ARE SAME OR SIMILAR IN N ATURE AND AS PER THE COMPOSITE AGREEMENT THEREFORE, THE ENTIRE SERVI CE IS ATTRIBUTABLE TO THE SERVICE PE IN INDIA BY APPLYING THE FORCE OF ITA NO.2943/M/2012 WNS GLOBAL SERVICES (UK) LTD. 7 ATTRACTION RULE. WE DO NOT FIND MERIT IN THE CONTEN TION OF LD. DR BECAUSE THE FORCE OF ATTRACTION RULE GERMANE UNDER ARTICLE 7(1) OF THE INDO-US DTAA WHICH READS AS UNDER: 1. THE PROFITS OF AN ENTERPRISE OF A CONTRACTING S TATE SHALL BE TAXABLE ONLY IN THAT STATE UNLESS THE ENTERPRISE CARRIES ON BUSINESS IN THE OTHER CONTRACTING STATE THROUGH A P ERMANENT ESTABLISHMENT SITUATED THEREIN. IF THE ENTERPRISE C ARRIES ON BUSINESS AS AFORESAID, THE PROFITS OF AN ENTERPRISE MAY BE TAXED IN THE OTHER STATE BUT ONLY SO MUCH OF THEM A S IS ATTRIBUTABLE TO (A) THAT PERMANENT ESTABLISHMENT (B ) SALES IN THE OTHER STATE OF GOODS OR MERCHANDISE OF THE SAME OR SIMILAR KIND AS THOSE SOLD THROUGH THAT PERMANENT ESTABLISHMENT: OR (C) OTHER BUSINESS ACTIVITIES CAR RIED ON IN THE OTHER STATE OF THE SAME OR SIMILAR KIND AS THOS E EFFECTED THROUGH THAT PERMANENT ESTABLISHMENT. 8. THE PLAIN READING OF ARTICLE 7(1) MAKES IT CLEAR THAT ONLY IN CASE WHEN ENTERPRISE OF CONTRACTING STATE CARRIES O N BUSINESS IN THE OTHER CONTRACTING STATE THROUGH ITS PE AS WELL AS OTHERWISE AND BOTH THE ACTIVITIES ARE OF SAME OR SIMILAR KIND THE N THE BUSINESS ACTIVITIES CARRIED ON NOT THROUGH PE SHALL ALSO BE TREATED AS ATTRIBUTABLE TO THE PE AND THE PROFIT OF THE ENTERP RISE MAY BE TAXED IN THE OTHER STATE SO MUCH OF THEM AS ITS IS ATTRIBUTABLE TO PE. THERE IS NO SCOPE OF ANY AMBIGUITY AS THE ARTIC LE 7(1) GIVES A CLEAR UNDERSTANDING THAT THE FORCE OF ATTRACTION RU LE APPLIED ONLY IN RESPECT OF THE BUSINESS CARRIED ON BY AN ENTERPR ISE OF CONTRACTING STATE IN THE OTHER CONTRACTING STATE TH ROUGH PE AS WELL AS WITHOUT INVOLVEMENT OF PE. THEREFORE, THE TWO ES SENTIAL CONDITIONS EMERGE FOR APPLYING THE FORCE OF ATTRACT ION RULE ARE (I) THE BUSINESS ACTIVITY CARRIED ON SHOULD BE IN THE O THER STATE WHERE THE PE IS SITUATED (II) THE BUSINESS ACTIVITY CARRI ED ON MUST BE OF THE SAME OR SIMILAR KIND AS THOSE EFFECTED THROUGH PE. IN THE CASE IN HAND THE CONDITION OF BUSINESS ACTIVITY CARRIED ON IN THE OTHER STATE WHERE THE PE IS SITUATED IS NOT SATISFIED BEC AUSE THE MARKETING AND MANAGEMENT SERVICES IN QUESTION ARE P ROVIDED BY THE ASSESSEE OUTSIDE INDIA. SINCE THE SAID ISSUE OF PROVIDING THE SERVICES OUTSIDE INDIA HAS BEEN DECIDED TIME AND AG AIN BY THIS TRIBUNAL AS WELL AS BY THE HONBLE HIGH COURT IN AS SESSEES OWN CASE THEREFORE IN VIEW OF THE FINDING ON THE GROUND NO. 1 TO 3 THERE IS NO NEED FOR FURTHER DELIBERATION/DISCUSSION ON T HE SAME. HAVING HELD THAT THE MARKETING AND MANAGEMENT SERVICES IN QUESTION WERE RENDERED OUTSIDE INDIA AND INCOME OF SUCH SERV ICES CANNOT BE SAID TO HAVE ACCRUED OR ARISEN TO THE ASSESSEE O R DEEMED TO HAVE ACCRUED OR ARISEN TO ASSESSEE IN INDIA, THE EX ISTENCE OF SERVICE PE IN INDIA WOULD NOT MAKE IT TAXABLE UNDER ARTICLE 7 OF INDO-US DTAA. ITA NO.2943/M/2012 WNS GLOBAL SERVICES (UK) LTD. 8 9. IN VIEW OF THE ABOVE DISCUSSION WE DO NOT FIND A NY MERIT OR SUBSTANCE IN THE ALTERNATIVE PLEA RAISED IN GROUND NO. 4 OF THE REVENUES APPEAL. THE SAME IS DISMISSED. IN VIEW OF OUR FINDINGS IN THE CASE OF WNS NORTH A MERICA INC. WE FIND NO MERIT IN THE APPEAL OF THE REVENUE. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DAY OF JULY 2013 / , .% 0 1$2 31 ST ' , 3 SD/- SD/- ( . ) (B. RAMAKOTAIAH) ACCOUNTANT MEMBER ( !' ) # (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 31 ST JULY 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI