ADIT CIR 2(2), MUMBAI V. WNS NORTH AMERICAL INC., MUMBAI

ITA 2944/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4107 (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 KANTU
• 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. 2944/MUM/2012 2944/MUM/2012 2944/MUM/2012 2944/MUM/2012 ( #$ #$ #$ #$ % % % % / ASSESSMENT YEAR : 2007-08) ADIT (IT)-2(2), SCINDIA HOUSE, BALLARD PIER, N. M. ROAD, MUMBAI-400038 $ $ $ $ / VS. M/S WNS NORTH AMERICA INC., 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 KANTU $ $ $ $ , ,, , - - - - / DATE OF HEARING : 29 TH JULY 2013 .% .% .% .% , ,, ,- - - - /DATE OF PRONOUNCEMENT: 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 IN THIS APPEAL: 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.68,15,1 1,339/- DID NOT SA TISFY 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.6,52,13,074/- 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 ITA NO. 2944/M/2012 WNS NORTH AMERICA INC. 2 RS.68,15,1 1,339/- AND WHICH ARE IN THE NATURE OF F EES 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.61,62,98,265/- 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. GROUND NO. 1 TO 3 REGARDING MARKETING & MANAGEME NT SERVICES HELD BY THE CIT(A) TO BE TAXED AS BUSINESS PROFITS INSTE AD OF FEES FOR TECHNICAL SERVICES HELD BY THE AO. WE HAVE HEARD THE LD. DR A S WELL AS LD. SENIOR COUNSEL FOR THE ASSESSEE AND CONSIDERED THE RELEVAN T MATERIAL ON RECORD. THE ASSESSEE IS A FOREIGN COMPANY AND TAXED RESIDEN T 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. THE AS SESSEE HAS ENTERED INTO MARKETING AND MANAGEMENT SERVICES AGREEMENT WITH WN S INDIA PURSUANT TO WHICH IT IS ENTITLED TO RECEIVE FEES AT ITS COST PLUS 10% MARK UP FOR THE MARKETING AND MANAGERIAL SERVICES RENDERED BY IT. D URING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS RECEIVED AN AMOUNT O F ` 68,15,11,339/- TOWARDS MARKETING AND MANAGEMENT SERVICES RENDERED BY IT TO WNS INDIA. SINCE THE ASSESSEES EMPLOYEES VISITED INDIA FOR PROVIDING MANAGERIAL SERVICES, THEREFORE WNS INDIA CONSTITUTE S SERVICE PE UNDER ARTICLE 5(2)(1) OF INDO-USA DTAA. ACCORDINGLY AN AM OUNT OF ` ITA NO. 2944/M/2012 WNS NORTH AMERICA INC. 3 6,52,13,074/- HAS BEEN ATTRIBUTABLE TO SUCH SERVICE PE FOR MANAGERIAL SERVICE RENDERED IN INDIA AND WHICH HAS BEEN DECLAR ED BY THE ASSESSEE IN ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATI ON. THE AO HELD THAT THE ASSESSEE RENDERS EXPERTISE AND TECHNICAL KNOWLEDGE FOR CONDUCT OF BUSINESS OF THE INDIAN CONCERN VIZ. WNS INDIA. THE AO ACCORDINGLY HELD THAT THE MARKETING AND MANAGEMENT SERVICES RENDERED BY THE ASSESSEE TO WNS INDIA IS FEES FOR INCLUDED SERVICES (FIS) UNDER ARTICLE 12(4)(B) OF INDO-US DTAA AND TAXED THE SAME AS FIS UNDER ARTICL E 12 OF INDO-US DTAA. ON APPEAL, THE CIT(A) HAS DECIDED THE ISSUE I N FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF THIS TRIBUNAL IS ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEAR. 4. AT THE OUTSET WE NOTE THAT FOR THE EARLIER ASSES SMENT YEARS 2003-04 TO 2006-07 AN IDENTICAL ISSUE HAS BEEN CONSIDERED A ND DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. WE FURTHER NOTE THAT IN THE ASSESSMENT YEARS 2004-05 AND 2005-06 THE ORDER OF THIS TRIBUNA L HAS BEEN CONFIRM BY THE HONBLE JURISDICTION HIGH COURT. IN THE LATEST DECISION DATED 14.12.2012 FOR THE ASSESSMENT YEAR 2006-07 IN ITA N O. 8621/M/2011 THE TRIBUNAL HAS AGAIN CONSIDERED AND DECIDED THIS ISSU E 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 THE R EVENUE PAR TWO REASONS. FIRSTLY- THE ASSESSING OFFICER TREATED THI S AMOUNT AS FEES FOR INDUCED SERVICES UNDER ARTICLE 12(4)(B) OF THE DTAA BY RELYING ON SIMILAR VIEW TAKEN BY HIM IN EARLIER YEA R. SUCH EARLIER YEARS ORDER PASSED BY THE A.O. HAS BEEN EVENTUALLY CONSIDERED AND OVERTURNED BY THE TRIBUNAL. IN THIS ORDER IT HA S BEEN HELD BY THE TRIBUNAL THAT THE AMOUNT IS NOT TAXABLE AS FIS UNDER ARTICLE ITA NO. 2944/M/2012 WNS NORTH AMERICA INC. 4 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 DEVIATING FROM TH E VIEW TAKEN BY THE TRIBUNAL IN SUCH EARLIER YEAR, WHICH WE FULLY S UBSCRIBE 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 THAT P RIMARILY THE AO IN THE IMPUGNED ORDER HAS RELIED ON ARTICLE 12 OF THE DTAA TO HOLD THE AMOUNT AS FIS. NOWHERE DID HE REFER TO SECTION 9, DIRECTLY OR INDIRECTLY TO FIX THE TAXABILITY OF THIS AMOUNT AS FIS UNDER THE PROVISIONS OF THE ACT. HOWEVER, WITH A VIEW TO PROV IDE COMPLETENESS TO THIS ORDER, WE WOULD LIKE TO NOTE T HAT THE SCOPE OF SECTION 9(1)(VII) IS SOMEWHAT DIFFERENT IN COMPARIS ON WITH THE ARTICLE 12(4)(B). IN ORDER TO ROPE IN ANY AMOUNT WI THIN THE PURVIEW OF FIS UNDER THE ARTICLE 12(4)(B) OF DTAA, WHICH HA S BEEN INVOKED BY THE AO, IT IS ESSENTIAL THAT THE PAYMENT SHOULD BE TO MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, K NOW-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 MANAGERI AL, TECHNICAL OR CONSULTANCY SERVICES. SIMPLE RENDITION OF SUCH SERVICES IS SUFFICIENT, IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE MADE AVAILABLE SOME MANAGERIAL, TECHNICAL OR CONSUL TANCY SERVICE TO WNS INDIA. EVEN IF WE CONSIDER FOR A MOMENT THAT THE MARKETING AND MANAGEMENT SERVICES RENDERED BY THE ASSESSEE WE RE IN THE NATURE OF TECHNICAL SERVICES AS PER SECTION 9(1)(VI I), THE SAME WOULD NOT BECOME FIS AS PER THE DTA BECAUSE OF THE LANGUAGE OF ARTICLE 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 TECHNICAL K NOWLEDGE, EXPERIENCE, SKILL ETC. TO WNS INDIA, IN OUR CONSIDE RED OPINION, THE SAME CANNOT BE SUBJECTED TO TAX BY CONSIDERING THE PROVISIONS OF SECTION 9(1)(VI) ON STAND ALONE BASIS. WE WILL DISC USS INFRA IN A LITTLE MORE DETAIL THAT THE PROVISION OF THE ACT OR THE RELEVANT DOUBLE TAXATION AVOIDANCE AGREEMENT, WHICHEVER IS M ORE BENEFICIAL TO THE ASSESSEE, SHALL APPLY. AS THE PRO VISIONS OF ARTICLE 12(4)(B) ARE BENEFICIAL TO THE ASSESSEE IN COMPARIS ON WITH SECTION 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, TH EREFORE, HELD THAT THE MARKETING AND MANAGEMENT SERVICES RENDERED BY T HE ASSESSEE TO WNS INDIA ARE NOT CHARGEABLE TO TAX AS FIS UNDER ARTICLE 12 OF THE DTAA. THE IMPUGNED ORDER IS, THER EFORE, 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, NATURALLY 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 ITA NO. 2944/M/2012 WNS NORTH AMERICA INC. 5 NOTE THAT THE ASSESSEE FILED ITS RETURN DECLARING T OTAL INCOME OF ` 2,38,78,407 BY INTER ALIA TREATING THE SUM OF ` 4.1 1 CRORE BEING THE CONSIDERATION FOR THE PROVISION OF MARKETING AND MA NAGEMENT SERVICES IN INDIA AS FALLING UNDER ARTICLE 7. THE A O HAS TREATED THE ENTIRE AMOUNT OF ` 41.02 CRORE AS FIS AND THUS COMP UTED THE TOTAL INCOME BY IGNORING THE INCOME OFFERED BY THE ASSESS EE. AS SUCH THE BUSINESS INCOME SHOWN BY THE ASSESSEE AS PER AR TICLE 7 SHALL REVIVE AND BECOME TAXABLE. THE AO IS DIRECTED TO IN CLUDE SUCH AMOUNT IN THE TOTAL INCOME OF THE ASSESSEE. IN SO F AR AS THE REMAINING RECEIPTS OF ` 36.18 CRORE, BEING THE CONS IDERATION FOR THE PROVISION OF MARKETING AND MANAGEMENT SERVICES OUTS IDE INDIA IS CONCERNED, THE SAME CANNOT BE SUBJECTED TO TAX IN I NDIA BECAUSE SUCH INCOME CANNOT BE SAID TO HAVE ACCRUED OR ARISE N TO THE ASSESSEE OR DEEMED TO HAVE BEEN ACCRUED OR ARISEN T O THE ASSESSEE IN INDIA. EVEN THE EXISTENCE OF THE SERVIC E PE IN INDIA WILL NOT MAKE IT TAXABLE BECAUSE OF NO INVOLVEMENT OF SU CH PE IN EARNING THIS INCOME FOR WHICH THE SERVICES WERE REN DERED OUTSIDE INDIA. FOLLOWING THE EARLIER ORDERS OF THIS TRIBUNAL AS W ELL 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 FO R MARKETING SERVICE TREATED AS BUSINESS INCOME AND NOT AS FIS THEN THE SAME ARE TAXABLE IN INDIA AS ATTRIBUTABLE TO THE SERVICE PE IN VIEW OF THE FORCE OF ATTRACTION RULE. HE HAS FURTHER SUBMITTED THAT EVEN TREATING T HE RECEIPTS TOWARDS MARKETING SERVICES AS BUSINESS PROFITS THE SAME ARE LIABLE TO BE TAXED UNDER ARTICLE 7 R.W. ARTICLE 5 OF INDO-US DTAA. THE LD. DR HAS CONTENDED THAT THERE IS A COMPOSITE AGREEMENT UNDER WHICH THE ASSESSEE HAS PROVIDED MARKETING AND MANAGEMENT SERVICES TO WNS I NDIA 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 THE COMPOSITE SERVICE PROVIDED OUTSIDE INDIA IS ALSO ATTRIBUTABLE TO THE SERVICE P E IN VIEW OF THE FORCE OF ITA NO. 2944/M/2012 WNS NORTH AMERICA INC. 6 ATTRACTION RULE. SINCE THIS ISSUE HAS NOT BEEN CONS IDERED BY THIS TRIBUNAL AS WELL AS BY THE HONBLE HIGH COURT IN THE EARLIER YEARS THEREFORE, THE REVENUE HAS RAISED THIS ISSUE AS AN ALTERNATIVE PLE A. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DECISION OF THIS TRIBUNAL IN CASE OF HINDALCO INDUSTRIES LTD. VS ACIT 94 ITD 242 AND SUB MITTED THAT THE TRIBUNAL IN THE SAID CASE HAS OBSERVED THAT WHEN PR INCIPLE TRANSACTION ITSELF IS SUCH THAT IT INVOLVES TAXABILITY IN SOURC E COUNTRY, THE TRANSACTIONS SUBSIDIARY AND INTEGRAL TO SUCH A TRANSACTION ALSO GIVE RISE TO THE TAXABILITY OF SUBSIDIARY TRANSACTIONS IN THE SOURCE COUNTRY. T HE LD. DR HAS FURTHER SUBMITTED THAT THE BENEFIT OF SERVICES IS RECEIVED IN INDIA, THEREFORE THE SERVICES ARE DEEMED TO HAVE BEEN RENDERED OR MADE A VAILABLE IN INDIA. 6. ON THE OTHER HAND, THE LD. SENIOR COUNSEL HAS S UBMITTED THAT THE ISSUE IN THE CASE OF HINDALCO INDUSTRIES LTD. (SUPR A) WAS WHETHER THE PAYMENT FOR TRAINING FEE WAS PART OF SALE OF KNOW-H OW AND THEREFORE THE SAID DECISION IS NOT APPLICABLE IN THE FACTS OF THE CASE OF THE ASSESSEE WHEREIN THE PRINCIPLE TRANSACTION 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 INDI AN CONCERN IS A RELATED ENTERPRISE THEREFORE THE VISIT OF THE EMPLOYEES OF THE ASSESSEE TO INDIA CONSTITUTE THE INDIAN CONCERN VIZ. WNS INDIA AS SER VICE PE. HE HAS REFERRED THE ASSESSMENT ORDER AND SUBMITTED THAT THE AO HAS MENTIONED IN PARA 2 THAT THE EMPLOYEES OF ASSESSEE VISITED INDIA DURING THE ASSESSMENT YEAR UNDER CONSIDERATION FOR MORE THAN ONE DAY AND THERE FORE AS PER ARTICLE ITA NO. 2944/M/2012 WNS NORTH AMERICA INC. 7 5(2)(L) OF INDO-US DTAA, THE EXISTENCE OF EMPLOYEES CONSTITUTES A SERVICE PE IN INDIA. THUS, THE LD. SENIOR COUNSEL HAS SUBMI TTED THAT AS PER THE AGREEMENT FOR PROVIDING THE MARKETING AND MANAGEMEN T SERVICES TERRITORY MEANS THE NORTH AMERICA AND EUROPEAN REGI ON, THEREFORE THE PRINCIPLE ACTIVITY AS PER THE AGREEMENT WAS TO PROV IDE THE MARKETING AND MANAGEMENT SERVICES IN NORTH AMERICA AND EUROPEAN R EGION AND NOT IN INDIA. THUS, THE DECISION OF THIS TRIBUNAL IN CASE OF HINDALCO INDUSTRIES LTD. IS NOT APPLICABLE. HE HAS FURTHER CONTENDED THAT TH E FORCE OF ATTRACTION RULE APPLIES ONLY WHEN APART FROM THE BUSINESS THRO UGH PE IF THE ASSESSEE CARRIES ON BUSINESS ACTIVITY IN THE OTHER CONTRACTI NG STATE OF SAME OR SIMILAR KIND AS THOSE AFFECTED THROUGH THE PERMANEN T ESTABLISHMENT. HE TOOK US TO ARTICLE 7 OF INDO-US DTAA AND SUBMITTED THAT AS GENERAL RULE THE PROFITS OF AN ENTERPRISE OF A CONTRACTING STATE SHALL BE TAXABLE ONLY IN THAT STATE UNLESS THE BUSINESS IS CARRIED ON IN THE OTHER CONTRACTING STATE THROUGH PE SITUATED THEREIN. THEREFORE, ONLY EXCEPT IONAL IS THAT 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 COUNSEL T HEN POINTED OUT THAT THE FORCE OF ATTRACTION RULE APPLIES ONLY IN A SITUATIO N WHEN AN ENTERPRISE OF THE CONTRACTING STATE CARRIES ON BUSINESS THROUGH P E AS WELL AS DIRECT BUSINESS ACTIVITY IN THE OTHER STATE WHERE THE PERM ANENT ESTABLISHMENT SITUATED AND THE BUSINESS ACTIVITY CARRIED ON DIREC TLY IS SAME OR SIMILAR KIND AS THOSE EFFECTED THROUGH PERMANENT ESTABLISHM ENT. THE LD. SENIOR COUNSEL THUS ADVANCED HIS ARGUMENTS THAT IN THE CAS E OF THE ASSESSEE THE ITA NO. 2944/M/2012 WNS NORTH AMERICA INC. 8 MARKETING AND MANAGEMENT SERVICES PROVIDED OUTSIDE INDIA CANNOT BE BROUGHT UNDER ARTICLE 7 IN THE CATEGORY OF THE BUSI NESS ACTIVITIES CARRIED ON OF THE SAME OR SIMILAR KIND AS THOSE EFFECTED TH ROUGH THE PE. ACCORDINGLY, HE HAS VEHEMENTLY OPPOSED THE ALTERNAT IVE GROUND RAISE BY THE REVENUE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT OUT OF TOTAL MARKETING AND MANAGEMENT FEE OF ` 8,15,11,339/- RECEIVED FROM WNS INDIA ONLY A SUM OF ` 6,52,13,074/- HAS BEEN ATTRIBUTED TO SUCH PE BECA USE THE SERVICES WERE RENDERED IN INDIA. THE REMAINING AMOUNT OF MARKETIN G AND MANAGEMENT FEE RECEIVED BY THE ASSESSEE IS REGARDING THE SERVI CES RENDERED OUTSIDE INDIA. THE LD. DR HAS CONTENDED THAT SINCE THE SERV ICES WHICH WERE RENDERED IN INDIA AND OUTSIDE INDIA ARE SAME OR SIM ILAR IN NATURE AND AS PER THE COMPOSITE AGREEMENT THEREFORE, THE ENTIRE S ERVICE IS ATTRIBUTABLE TO THE SERVICE PE IN INDIA BY APPLYING THE FORCE OF ATTRACTION RULE. WE DO NOT FIND MERIT IN THE CONTENTION 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 CA RRIES ON BUSINESS IN THE OTHER CONTRACTING STATE THROUGH A PERMANENT ESTABLISHMENT SITUATED THEREIN. IF THE ENTERPRISE CARRIES ON BUSI NESS AS AFORESAID, THE PROFITS OF AN ENTERPRISE MAY BE TAXED IN THE OT HER STATE BUT ONLY SO MUCH OF THEM AS 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 T HAT PERMANENT ESTABLISHMENT: OR (C) OTHER BUSINESS ACTIVITIES CAR RIED ON IN THE OTHER STATE OF THE SAME OR SIMILAR KIND AS THOSE EF FECTED THROUGH THAT PERMANENT ESTABLISHMENT. ITA NO. 2944/M/2012 WNS NORTH AMERICA INC. 9 8. THE PLAIN READING OF ARTICLE 7(1) MAKES IT CLEAR THAT ONLY IN CASE WHEN ENTERPRISE OF CONTRACTING STATE CARRIES ON BUS INESS IN THE OTHER CONTRACTING STATE THROUGH ITS PE AS WELL AS OTHERWI SE AND BOTH THE ACTIVITIES ARE OF SAME OR SIMILAR KIND THEN THE BUS INESS ACTIVITIES CARRIED ON NOT THROUGH PE SHALL ALSO BE TREATED AS ATTRIBUT ABLE TO THE PE AND THE PROFIT OF THE ENTERPRISE 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 ARTICLE 7(1) GIVES A CLEAR UNDERSTANDING THAT THE F ORCE OF ATTRACTION RULE APPLIED ONLY IN RESPECT OF THE BUSINESS CARRIED ON BY AN ENTERPRISE OF CONTRACTING STATE IN THE OTHER CONTRACTING STATE TH ROUGH PE AS WELL AS WITHOUT INVOLVEMENT OF PE. THEREFORE, THE TWO ESSEN TIAL CONDITIONS EMERGE FOR APPLYING THE FORCE OF ATTRACTION RULE ARE (I) T HE BUSINESS ACTIVITY CARRIED ON SHOULD BE IN THE OTHER STATE WHERE THE PE IS SIT UATED (II) THE BUSINESS ACTIVITY CARRIED ON MUST BE OF THE SAME OR SIMILAR KIND AS THOSE EFFECTED THROUGH PE. IN THE CASE IN HAND THE CONDITION OF BU SINESS ACTIVITY CARRIED ON IN THE OTHER STATE WHERE THE PE IS SITUATED IS N OT SATISFIED BECAUSE THE MARKETING AND MANAGEMENT SERVICES IN QUESTION ARE P ROVIDED BY THE ASSESSEE OUTSIDE INDIA. SINCE THE SAID ISSUE OF PRO VIDING THE SERVICES OUTSIDE INDIA HAS BEEN DECIDED TIME AND AGAIN BY TH IS TRIBUNAL AS WELL AS BY THE HONBLE HIGH COURT IN ASSESSEES OWN CASE TH EREFORE IN VIEW OF THE FINDING ON THE GROUND NO. 1 TO 3 THERE IS NO NEED F OR FURTHER DELIBERATION/DISCUSSION ON THE SAME. HAVING HELD TH AT THE MARKETING AND MANAGEMENT SERVICES IN QUESTION WERE RENDERED OUTSI DE INDIA AND INCOME OF SUCH SERVICES CANNOT BE SAID TO HAVE ACCR UED OR ARISEN TO THE ITA NO. 2944/M/2012 WNS NORTH AMERICA INC. 10 ASSESSEE OR DEEMED TO HAVE ACCRUED OR ARISEN TO ASS ESSEE IN INDIA, THE EXISTENCE OF SERVICE PE IN INDIA WOULD NOT MAKE IT TAXABLE UNDER ARTICLE 7 OF INDO-US DTAA. 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. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 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