RAYMOND LTD, MUMBAI V. DCIT (IT)- RG 2(1), MUMBAI

ITA 4050/MUM/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62543 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 08-05-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 30-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JI TENDRA YADAV
• Keywords: Double taxation relief; Services rendered outside India; Competent authority
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES L , MUMBAI BEFORE SHRI P.M.JAGTAP, AM & SHRI AMIT SHUKLA, JM ITA NO.4050/MUM/2009 ASSESSMENT YEAR: 2005-2006 RAYMOND LIMITED, NEW HIND HOUSE, NAROTTAM MORARJEE MARG, BALLARD ESTATE, MUMBAI. PAN NO.AAACR 4896 A DY. DIT(IT), RANGE-2(1), MUMBAI. APPELLANT VS. RESPONDENT APPELLANT BY : MR. NITESH JOSHI RESPONDENT BY : MR. JITENDRA YADAV DATE OF HEARING : 8 TH MAY, 2012 DATE OF PRONOUNCEMENT : 20 TH JUNE, 2012 O R D E R PER AMIT SHUKLA (J.M.) : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 29-4-2009, PASSED BY THE CIT(A)-XXXI, MUMBAI, IN RELATION TO PROCEEDINGS AND ORDER PASSED UNDER SECTION 195 FOR THE ASSESSMENT YEAR 2005-2006. THE ASSESSEE IS AGGRIEVED BY THE FINDING OF THE CIT(A) THAT THE PAYMENTS MADE TOWA RDS FEES FOR REGISTRATION OF TRADE- MARK APPLICATIONS IN UAE TO EMIRAT ES ADVOCATES, IS PAYMENT OF FEES FOR TECHNICAL SERVICES AS PER EXPLANATION 2 TO SECTION 9(1)(VII) AND, THEREFORE, THE ASSESSEE WAS LIABLE TO DEDUCT TDS AS PER SECTION 195. 2 . BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE ORDER OF THE CIT(A) IS THAT THE ASSESSEE IS A COM PANY ENGAGED IN THE MANUFACTURING OF TEXTILES AND DENIM FABRICS. FOR T HE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS ENGAGED EMIRATES AD VOCATES FOR THE PURPOSE OF ITA NO : 4050/M/09 2 REGISTRATION OF ITS CERTAIN TRADE MARK APPLICATION IN UAE FOR A FEE OF US$ 41,555. THE ASSESSEE WAS REQUI RED TO REMIT THIS AMOUNT, HENCE, IT FILED AN APPLICATION UNDER SECTION 195 BEFORE THE ASSESSING OFFICER ON 15-12-2004 FOR ISSUANCE OF NO OBJE CTION CERTIFICATE. THE ASSESSING OFFICER, HOWEVER, HELD THAT SUCH A PAYMENT WAS IN THE NATURE OF FEE FOR TECHNICAL SERVICES AS DEFINED UNDER EXPLANATION 2 TO SECTION 9(1)(VII) AND, THEREFORE, IS LIABLE TO TAX FOR WHICH TA X HAS TO BE DEDUCTED AT SOURCE UNDER SECTION 195(1). BEFORE THE ASSESSING OFFICER, IT WAS CLAIMED THAT SECTION 9(1) PROVIDES THAT ALL INCOME ACCRUED OR ARISING WHETHER DIRECTLY OR INDIRECTLY THROUGH OR FORM ANY BUSINESS CONNECTION IN INDIA OR SOURCE OF INCOME IN INDIA SHALL BE ONLY SUCH PART OF THE INCOME AS IS REASONABLY ATTRIBUTABLE TO OPERATIONS CARRIED OUT IN INDIA. HENCE, IN THIS CASE, IT WOULD NOT BE APPLICABLE AND MOREOVER PAYMENT WAS FOR PROFESSIONAL SERVICES. THE ASSESSING OFFICER REJECTED THE CONTENTION AND HELD THAT THE PAYMENT MADE BY THE ASSESSEE TO THE FOREIGN PARTIES IS FOR THE SERVICES RENDERED IN CONNECTION WITH REGISTRATION OF TRADE MARK APPLICATI ON IN UAE WHICH WOULD BE SQUARELY COVERED BY EXPLANATION 2 TO SECTION 9(1)(VII) AND MOREOVER, THE PAYEES ARE NOT ENTITLED TO THE BENEFITS OF DTAA BETWEEN INDIA AND UAE ALSO FOR ONE VERY IMPORTANT FA CT THAT EMIRATE ADVOCATES HAD NOT BEEN SHOWN TO TAX RESIDENT OF UAE AS PER THE REQUIREMENT OF ARTICLE 4(1) OF THE DTAA. ACCORDINGLY, HE HEL D THAT THE ASSESSEE IS LIABLE TO DEDUCT TDS AS PER SECTION 195. ITA NO : 4050/M/09 3 3. BEFORE THE CIT(A), IT WAS SUBMITTED BY THE ASSESSEE THAT THE AMOUNTS REMITTED TO EMIRATE ADVOCATES ARE IN RESPECT OF SERVICES RENDERED OUTSIDE INDIA AND NO PART OF SERV ICES WERE CARRIED OUT IN INDIA BY THEM AND, THEREFORE, NO INCOME CAN BE SAID TO HAVE BEEN ACCRUED OR ARISEN IN INDIA. IT WAS ALSO SUBMITTED THAT THE ADVOCATES MERELY CARRIED OUT THE WORK FOR REGISTRATION OF TRADE MARK AND SUCH SERVICES CAN NOT BE REGARDED AS TECHNICAL SERV ICES. RELIANCE WERE ALSO PLACED ON CBDT CIRCULAR NO.23, DATED 23-7-1969 AND CIRCULAR 786, DATED 7-2- 2000. REGARDING ASSESSING OFFICERS OBS ERVATION THAT THE PAYEES ARE NOT ENTITLED TO THE BENEF IT OF DTAA BETWEEN INDI A AND UAE, SINCE THEY ARE NOT TAX RESIDENT OF UAE AS PER AR TICLE 4(1) OF THE DTAA, IS WITHOUT ASSIGNING OF ANY REASON AS THE ADVOCATES ARE THE PERSONS RESIDENTS IN UAE WITHIN THE MEANING OF ARTICLE 4 OF THE TREATY. IN SUPPORT OF THIS, A COPY OF THE CERTIFICATE FROM E MIRATES ADVOCATES ABOUT RESIDENCY IN UAE AND ABOUT NOT HAVING FIXED BASE IN INDIA OR NOT HAVING ANY STAY OF PARTNERS IN EXCESS OF 183 DAYS IN INDIA, WERE ALSO FILED. SUCH A CONTENTION OF THE ASSESSEE WAS REJECT ED BY THE CIT(A) HOLDING THAT THE REMITTANCE WAS FOR REGISTRATION OF TRADE-MARK APPLICATION, WHICH COMES WITHIN THE MEANING OF FEES FOR CONSULTANCY SERVICES RENDERED, AND, THEREFORE, AS PER THE EXPLANATION 2 TO SECTION 9(1)(VII), SITUS OF SERVICE PROVIDED IS IMMATERIAL. IF THE SERV ICES HAVE BEEN UTILIZED WITHIN INDIA AND ANY PAYMENT WAS MADE FOR THOSE SERVICES THEN INCOME WOULD BE DEEMED TO HAVE BEEN ACCRUED OR ARISEN IN INDIA. HE ALSO INCORPORATED THE DEBIT NOTE ISSUED IN THE NAME OF AZB PARTNERS AND MR. KAIZAD ITA NO : 4050/M/09 4 HAZARI, WHICH SHOWS THAT CONTRACT WAS ENTERED BY THE INDIAN CONCERNS/INDIVIDUAL WHO IN TURN TOOK SERVICES OF EMIRATES ADVOCATES. FROM THE ABOVE DEBIT NOTES, HE DREW T HE CONCLUSION THAT IT WAS FEES FOR TECHNICAL SERVICES WHICH ACCRUED IN INDIA AND SOURCED FROM INDIA AND THEREFORE, SAME WAS TAXABLE WI THIN THE MEANING OF SECTION 5(1) R.W.S. 9(1)(VII). THE OTHER IMPORTANT FINDING GIVEN BY HIM IS THAT THE COPY OF RESIDENCY CERTIFICATE FROM EMIRATES ADVOCATES WERE NOT FILED AND HAS NOT BEEN PROCURED BY MINI STRY OF FINANCE AND INDUSTRY, GOVERNMENT OF UAE AND, THEREFORE, TAX RESIDENCY CERTIFICATE IS NOT ESTABLISHED. ACCORDINGLY, HE DISMISSED THE ASSESSEES APPEAL. 4 . BEFORE US, LEARNED AR SUBMITT ED THAT THE SERVICES HAVE BEEN RENDERED IN UAE BY THE EMIRATES ADVOCATES, WHO ARE RESIDENTS OF UAE AND WAS PURELY FOR PROFESSIONAL SERVICES AND NOT FOR ANY KIND OF CONSULTANCY SERVICES. HE REFERRED TO PROVISION OF SECTION 194J(1) THAT PROFESSIONAL SERVICES AND TECHNICA L SERVICES HAVE BEEN TREATED TO BE SEPARATE, SO THIS ANALOGY SHOULD BE READ IN SECTION 9(1)(VII) ALSO. BEING A LEGAL FIRM OF UAE, THE ADVOCATES HAVE RENDERED PROFESSIONAL SERVICES AND NOT CONSULTANCY SERV ICES AS STIPULATED UNDER SECTION 9(1)(VII). HE ALSO RELIED UPON THE LETTER DATED 1-7-2007 WRITTEN BY THE EMIRATES ADVOCATES THAT THEY DO NOT HAVE ANY FIX BASE IN INDIA AND HAVE BEEN ESTABLISHED/INCORPORATED UNDER THE LAWS WITH THE DEPARTMENT OF ECONOMIC DEVELOPM ENT AND FURTHER THEY CARRYING THE BUSINESS UNDER THE PROFESSIONAL LICENC E. IN RESPONSE TO OUR QUERY, AT ITA NO : 4050/M/09 5 THE TIME OF HEARING, WHETHER ANY TAX RESIDENCY CERTIFICATE WAS PRODUCED, ISSUED BY THE GOVERNMENT OF UAE, TO WHICH IT WAS SUBMITTED BY THE LD. AR THAT SAME WAS NOT READILY AVAILABLE AT THE TIME OF PROCEEDINGS BEFORE THE AUTHORITIES BELOW AND ASSESSEE IS READY TO FILE BEFORE THE ASSESSING OFFICER IF MATTER IS RESTORED BACK TO ASSESSING OFFICER. FINALLY, HE PLACED RELIANCE ON THE DECISION IN THE CASE OF HINDUSTAN PETROLEUM CORPORATION LIMITED, REPORTED IN (2010) 36 SOT 120 AND DECISION FO THE ITAT MUMBAI BENCH IN THE CASE OF SHRI CHANDERSEN JATWANI VS . ITO(IT), PASSED IN ITA NO.3548/2010 , IN SUPPORT OF HIS CASE. 5 . ON THE OTHER HAND, LEARNED SENIOR DR SUBMITTED THAT NATURE OF SERVICE RENDERED BY THE EMIRATES ADVOCATES, IS HIGHLY TECHNICAL LOOKING TO THE FACT THAT THEY ARE DEALING IN PATENTS, TRADE-MARK, WHICH IS HIGHLY TECHNICAL AND REQUIRES LO T OF CONSULTANCY AND DOCUMENTATION. HENCE, THESE SERVICES ARE TO BE CLASSIFIED UNDER TECHNICAL AND CONSULTANCY SERVICES ONLY UNDER SECTION 9(1)(VII). REGARDING THE RESIDENCY CERTIFICATE ISSUED BY EMIRA TES ADVOCATES HE SUBMITTED IT IS SELF SERVING DOCUMENT AND, SUCH A CE RTIFICATE CANNOT BE TREATED AS TAX RESIDENCY CERTIFICATE WITHIN THE MEANING OF ARTICLE 4 OF INDO UAE TREATY. 6 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL ON RECORD. THE ASSESSEE FIRST OF ALL SEEKS TO GET THE BENEFIT UNDER THE PROVISIONS OF INDO UAE DTAA TREATY ON THE ITA NO : 4050/M/09 6 GROUND THAT PAYEES WERE RESIDENTS OF UAE AS PER ARTICLE 4(1). THE OTHER LIMB OF ITS CASE IS THAT THE PAYMENT OF FEES FOR REGISTRATION OF TRADE-MARK TO ADVOCATES IN EMIRATES WERE NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES IN VIEW OF T HE SECTION 9(1)(VII) BUT WAS PURELY FOR PROFESSIONAL SERVICES. NOWHERE FROM THE RECORDS IT CAN BE FOUND AS TO WHAT WAS THE NATURE OF SERVICES WHICH WERE RENDERED BY EMIRATES ADVOCATES TO THE ASSESSEE FOR WH ICH THE PAYMENT OF FEES OF US$ 41,555 WAS MADE. MERELY STATING THAT THIS WAS FOR THE PURPOSE OF REGISTRATION OF TRADE-MARK APPLICATION AND, THEREFORE, IT IS IN THE NATURE OF PROFESSIONAL SERVICES, CANNOT BE UPHELD. THE EXACT NATURE OF SERVICES HAS TO BE SEEN FROM THE DOC UMENT. EVEN IF THE BENEFIT HAS TO BE TAKEN UNDER ARTICLE 4 OF THE INDO UAE TREATY, THEN IT IS ESSENTIAL THAT TAX RESIDENCY CERTIFICATE I SSUED BY THE COMPETENT AUTHORITY OF GOVT. OF UAE IS REQUIRED AND NOT ANY CERTIFICATE FROM THE PAYEE ITSELF. SUCH A TAX RESIDENCY CERTIFICAT E HAS NOT BEEN FILED BEFORE THE AUTHORITIES BELOW. THUS, UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE FEEL THAT THE MATTER NEEDS TO BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICE TO EXAMINE THE ISSUE AFRESH AND FOR DE NOVO VERIFICATION REGARDING THE NATURE OF SERVICES RENDERED BY THE EMIRATES ADVOCATES AND ALSO TO CONSIDER THE TAX RESIDENCY CE RTIFICATE ISSUED BY THE COMPETENT AUTHORITY OF UAE IF THE ASSESSEE CHOOSES TO FILE SO. THUS, THE ENTIRE MATTER IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER TO DEAL AND DECIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW. THE ITA NO : 4050/M/09 7 ASSESSING OFFICER WILL PROVIDE DUE AND EFFECTIVE OPPORTUNITY TO THE ASSESSEE TO REPRESENT ITS CASE. 7 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 20 TH DAY OF JUNE, 2012. SD/- SD/- (P.M.JAGTAP) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT: 20 TH JUNE, 2012 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, B - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI PKM