Megawin Switchgear Private Limited, Salem V. ACIT, Salem

ITA 412/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9390 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 03-05-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 26-02-2015
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN JCITD R
• Assessee Lawyers: G BASKAR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , ! ' . #$ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.412/MDS./2015 / ASSESSMENT YEAR : 2011-12 M/S.MEGAWIN SWITCHGEAR PVT. LTD., 35/1 & 35/2, PERUMALMALAI ADIVARAM, NARASOTHIPATTY, SALEM 636 004. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-I, 3,GANDHI ROAD, SALEM 636 007. [PAN AAECM 4516 E ] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : MR.G.BASKAR,ADVOCATE /RESPONDENT BY : MR.P.RADHAKRISHNAN,JCIT,D.R / DATE OF HEARING : 03 - 05 - 201 6 / DATE OF PRONOUNCEMENT : 06 - 05 - 2016 , / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS),SALEM DAT ED 30.12.2014 PERTAINING TO ASSESSMENT YEAR 2011-12. ITA NO.412/MDS./2015 :- 2 -: 2. THE FIRST GROUND FOR OUR CONSIDERATION IS WITH REGARD TO DISALLOWANCE U/S.40(A)(IA) OF THE ACT ON PAYMENT MA DE TO CENTRAL POWER RESEARCH INSTITUTE OF BANGALORE, MINISTRY OF POWER, GOVERNMENT OF INDIA. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE MAIN CONTENTION OF THE LD.A.R IS THAT N OTHING IS PAYABLE AT THE END OF THE CLOSE OF THE FINANCIAL YEAR, AS SUCH THE ISSUE IS SQUARELY COVERED BY THE ORDER OF THE SPECIAL BENCH OF THE T RIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS V. ADDL. CIT [20 12] 16 ITR (TRIB) 1 (VISAKHAPATNAM) [SB]. IN OUR OPINION, THERE IS A F ORCE IN THE ARGUMENT OF THE LD.A.R AND THE SPECIAL BENCH CITED SUPRA CONSIDERED THIS ISSUE AND DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE. FURTHER, THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF S HRI N.PALANIVELU VS. ITO REPORTED IN [2015] 40 ITR (TRIB) 325 [CHENNAI] VIDE ORDER DATED 29.04.2015 WHEREIN HELD THAT:- 4. WE HAVE HEARD BOTH SIDES AND PERUSED THE MATERI AL ON RECORD. WE FIND THAT THE SPECIAL BENCH OF THE TRIBU NAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS V. ADDL. CI T [2012] 16 ITR (TRIB) 1 (VISAKHAPATNAM) [SB] AND JUDGMENT O F THE GUJARAT HIGH COURT IN THE CASE OF CIT V. VECTOR SHI PPING SERVICES (P.) LTD. IN I. T. A. NOS. 122 OF 2013 DAT ED JULY 9, 2013 [2013] 357 ITR 642 (ALL) HELD THAT SECTION 40( A)(IA) IS NOT APPLICABLE WHEN THERE IS NO OUTSTANDING BALANCE AT THE ITA NO.412/MDS./2015 :- 3 -: END OF THE CLOSE OF THE YEAR RELEVANT TO THE ASSESS MENT YEAR IN RESPECT OF THESE PAYMENTS. HOWEVER, THE ASSESSEE HAS NOT BROUGHT ON RECORD, THE DETAILS OF OUTSTANDING EXPEN SES OR SCHEDULE OF SUNDRY CREDITORS SHOWING WHETHER THE IM PUGNED AMOUNT IS OUTSTANDING AT THE END OF THE CLOSE OF TH E PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR EITHER IN THE NAME OF THE PARTY OR OUTSTANDING EXPENSES. HENCE, IN THE IN TEREST OF JUSTICE, WE ARE REMITTING THE ISSUE BACK TO THE FIL E OF THE ASSESSING OFFICER WITH DIRECTION TO VERIFY THE CLAI M OF THE ASSESSEE AND THE ASSESSEE SHALL PLACE NECESSARY EVI DENCE IN SUPPORT OF HIS CLAIM. 5. FURTHER, WE MAKE IT CLEAR THAT IF THE IMPUGNED A MOUNT IS NOT OUTSTANDING AT THE END OF THE CLOSE OF THE ASSE SSMENT YEAR IN RESPECT OF THE EXPENSES EITHER AS OUTSTANDI NG EXPENSES OR AS SUNDRY CREDITORS, THIS AMOUNT CANNOT BE DISALLOWED. THIS GROUND IS REMITTED BACK TO THE ASS ESSING OFFICER FOR FRESH CONSIDERATION. IN VIEW OF THE ORDER OF THE TRIBUNAL, WE ARE INCLIN ED TO REMIT THIS ISSUE TO THE FILE OF THE LD. ASSESSING OFFICER WITH SIMIL AR DIRECTION. THESE GROUNDS RAISED BY THE ASSESSEE U/S.40(A)(IA) OF THE ACT IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 4. THE NEXT GROUND FOR OUR CONSIDERATION IS WITH R EGARD TO DISALLOWANCE U/S.40(A)(I) OF THE ACT ON PAYMENT MAD E TO M/S.KOREA ELECTRO TECHNOLOGY RESEARCH INSTITUTE. ITA NO.412/MDS./2015 :- 4 -: 5. BEFORE US, THE LD.A.R SUBMITS THAT THERE IS NO HUMAN INTERFACE IN CARRYING OUT THE CERTIFYING WORK AND IT WAS DONE BY THE MACHINES WITHOUT HUMAN INTERFACE OR INTERVENTION. HENCE, IT CANNOT BE CONSIDERED AS TECHNICAL SERVICES PROVIDED BY THE CONCERNED LABORATORIES AND CANNOT BE TREATED AS TECHNICAL SER VICES U/S.9(1)(VII) OF THE INCOME TAX ACT, 1961. LD.A.R RELIED ON THE FOL LOWING JUDGEMENTS:- I) IN THE CASE OF SIEMENS LIMITED VS. CIT(A) REPOR TED IN (2013) 84 DTR 0001 (MUM. TRIB) II) IN THE CASE OF ITO VS. RIGHT FLORISTS PVT. LTD ., REPORTED IN (2013) 143 ITD 0445 (KOL. TRIB) LD.A.R ALSO RELIED ON CBDTS INSTRUCTION NO.2/2014 DATED 26.02.2014 ON THE PROPOSITION IS THAT IN CASES WHERE THE ASSES SEE DOES NOT WITHHOLD TAXES U/S.195 OF THE ACT, THE AO IS REQUIR ED TO DETERMINE THE INCOME COMPONENT INVOLVED IN THE SUM ON WHICH THE W ITHHOLDING TAX LIABILITY IS TO BE COMPUTED AND THE PAYER WOULD BE CONSIDERED AS BEING IN DEFAULT FOR NOT WITHHOLDING OF TAX ONLY IN RELAT ION TO SUCH INCOME COMPONENT. FURTHER, HE SUBMITS THAT THE ISSUE IN D ISPUTE IS TO BE EXAMINED IN THE LIGHT OF THE DOUBLE TAXATION AVOIDA NCE AGREEMENT (DTAA) WITH CONTRACTING STATE. ACCORDINGLY, HE REQ UESTED THE BENCH TO REMIT THE ISSUE BACK O THE FILE OF AO FOR FRESH CON SIDERATION. ITA NO.412/MDS./2015 :- 5 -: 6. ON THE OTHER HAND, THE LD.D.R SUBMITS THAT THE SERVICES AVAILED BY THE ASSESSEE IS NOTHING BUT TECHNICAL SERVICES A ND THE FEES PAID FOR TECHNICAL SERVICES ONLY AND THE ASSESSEE IS LIABLE FOR DEDUCTION OF TDS U/S.195 OF THE ACT. FOR THIS PROPOSITION, HE RELIE D ON THE JUDGMENT OF DELHI HIGH COURT IN THE CASE OF M/S.HAVELLS (INDIA) LTD., REPORTED IN 352 ITR 376 WHEREIN HELD THAT THE FEES PAID BY THE ASSESSEE TO THE US COMPANY ON ACCOUNT OF TESTING AND CERTIFICATION SER VICES IS TAXABLE IN THE HANDS OF THE US COMPANY IN INDIA AND ASSESSEE W AS LIABLE TO DEDUCT TAX AT SOURCE WHILE MAKING PAYMENT THEREOF, SINCE THE EXPORT ACTIVITIES HAVE BEEN FULFILLED IN INDIA, SOURCE OF INCOME WAS LOCATED IN INDIA AND NOT OUTSIDE INDIA, AND THE MERE FACT THAT EXPORT PROCEEDS EMANATED FROM PERSONS SITUATED OUTSIDE INDIA DID NO T CONSTITUTE THEM AS SOURCE OF INCOME. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, THE ISSUE IS SQUARELY COVER ED BY THE JUDGMENT OF DELHI HIGH COURT IN THE CASE OF M/S.HAVELLS (IND IA) LTD. CITED SUPRA WHEREIN AFTER ELABORATE DISCUSSIONS HELD AS FOLLOWS :- 11. THE JUDGMENT OF THE MADRAS HIGH COURT CERTAINL Y SUPPORTS THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. IN AN EARL IER JUDGMENT IN CITV. ANGLO FRENCH TEXTILES [1993] 199 ITR 785 (MAD), A DIVISION BENCH OF THE MADRAS HIGH COURT HAD AN OCCASION TO CONSIDER A SOMEWHAT S IMILAR QUESTION ARISING UNDER SECTION 9 OF THE ACT. IN THAT CASE, THE ASSES SEE WAS A COMPANY INCORPORATED UNDER THE FRENCH LAWS WHICH WERE APPLI CABLE TO POSSESSIONS IN ITA NO.412/MDS./2015 :- 6 -: PONDICHERRY IN INDIA. IT HAD A TEXTILE MILL IN PONDI CHERRY AND ITS ACTIVITY CONSISTED IN THE MANUFACTURE OF YARN AND TEXTILES AS WELL AS EXPORT OF TEXTILES FROM PONDICHERRY. THE ENTIRE BUSINESS OPERATIONS WERE CO NFINED TO THE TERRITORY OF PONDICHERRY. AFTER THE MERGER OF PONDICHERRY WITH I NDIA IN AUGUST, 1962, THE INCOME-TAX ACT WAS EXTENDED TO PONDICHERRY WITH EFFE CT FROM APRIL 1, 1963. TILL THEN, THE FRENCH LAW RELATING TO INCOME-TAX WAS IN FORCE IN PONDICHERRY. DURING THE PERIOD WHEN THE FRENCH TAX LAW WAS IN FORCE, TH E ASSESSEE SURRENDERED CERTAIN RAW COTTON IMPORT AND MACHINERY IMPORT ENTI TLEMENT AND RECEIVED PAYMENTS FROM THE TEXTILE COMMISSIONER (BOMBAY). TH E QUESTION AROSE AS TO THE TAXABILITY OF THE INCOME REFERABLE TO THE IMPOR T ENTITLEMENTS. WHILE THE INCOME-TAX DEPARTMENT TOOK THE STAND THAT THE INCOM E ACCRUED TO THE ASSESSEE OUTSIDE PONDICHERRY AND WAS, THEREFORE, TAXABLE UND ER THE ACT, THE ASSESSEE MAINTAINED THAT THE RECEIPTS WERE ONLY IN PONDICHER RY AND SINCE THE EXPORTS WERE MADE FROM PONDICHERRY, THE INCOME ACCRUED OR AR OSE TO THE ASSESSEE IN THE TERRITORY OF PONDICHERRY WHICH WAS OUTSIDE THE P URVIEW OF THE ACT. THE MADRAS HIGH COURT OBSERVED THAT THE IMPORT ENTITLEM ENTS AROSE OUT OF THE EXPORT ACTIVITY WHICH WAS CARRIED ON BY THE ASSESSE E ONLY IN PONDICHERRY, THAT NO PART OF THE MANUFACTURING OR SELLING ACTIVITY OF THE ASSESSEE WAS CARRIED ON OUTSIDE PONDICHERRY, THAT THE IMPORT ENTITLEMENTS W ERE RELATABLE ONLY TO THE EXPORT PERFORMANCE WHICH TOOK PLACE IN PONDICHERRY A ND THAT ON THE FULFILLMENT OF THE EXPORT ACTIVITY, A RIGHT TO RECEIVE THE EXPO RT INCENTIVE ACCRUED IN FAVOUR OF THE ASSESSEE IN THE TERRITORY OF THE PONDICHERRY. T HE ARGUMENT OF THE DEPARTMENT WAS THAT THE INCENTIVE WAS QUANTIFIED AN D SENT FROM BOMBAY FROM THE OFFICE OF THE TEXTILE COMMISSIONER AND, THEREFO RE, THE INCOME AROSE WITHIN THE TAXABLE TERRITORIES. THIS ARGUMENT WAS REJECTED BY THE MADRAS HIGH COURT BY HOLDING THAT 'THE RIGHT TO RECEIVE THE IMPORT ENTIT LEMENTS AROSE WHEN THE EXPORT COMMITMENT WAS FULFILLED BY THE ASSESSEE IN PONDICH ERRY, THOUGH SUCH AMOUNT WAS SUBSEQUENTLY ASCERTAINED OR QUANTIFIED'. IT WAS ALSO ARGUED ON BEHALF OF THE REVENUE BEFORE THE HIGH COURT THAT THE IMPORT E NTITLEMENT SHOULD BE REGARDED AS A SOURCE OF INCOME IN THE TAXABLE TERRI TORIES AND UNDER SECTION 9(1) OF THE ACT, THE INCOME ARISING OUT OF THE ENCASHMEN T OF THE IMPORT ENTITLEMENTS SHOULD BE DEEMED TO ACCRUE OR ARISE IN THE TAXABLE TERRITORIES. THIS ARGUMENT WAS ALSO REJECTED BY THE MADRAS HIGH COURT WHICH HE LD (PAGE 795) : 'EQUALLY, IT IS DIFFICULT TO REGARD THE IMPORT ENTI TLEMENTS AS A SOURCE OF INCOME WHICH SHOULD BE LOOKED AT FROM A PRACTICAL VIEW-POI NT AND NOT MERELY AS AN ABSTRACT LEGAL CONCEPT. WE ARE, THEREFORE, UNABLE T O AGREE WITH THE CONTENTION OF THE LEARNED COUNSEL FOR THE REVENUE THAT THE IMP ORT ENTITLEMENTS CONSTITUTED ITA NO.412/MDS./2015 :- 7 -: A SOURCE OF INCOME WITHIN THE MEANING OF SECTION 9 OF THE ACT AS TO DEEM THE IMPORT ENTITLEMENTS AS HAVING ACCRUED OR ARISING IN INDIA.' THIS EARLIER JUDGMENT OF THE MADRAS HIGH COURT DOES NOT APPEAR TO HAVE BEEN BROUGHT TO THE NOTICE OF THE DIVISION BENCH WHICH D ECIDED THE LATER CASE. THE OBSERVATIONS OF THE MADRAS HIGH COURT IN THE EARLIE R CASE, WHICH WE HAVE QUOTED ABOVE, CLEARLY SUGGEST THAT THE EXPORT ACTIV ITY OR EXPORT SALES WERE THE SOURCE OF THE IMPORT ENTITLEMENTS AND THE EXPORT AC TIVITY TOOK PLACE IN PONDICHERRY AND IT WAS ONLY ON FULFILMENT OF THE EX PORT ACTIVITY THAT A RIGHT TO RECEIVE THE IMPORT ENTITLEMENT/INCENTIVE ACCRUED IN FAVOUR OF THE ASSESSEE. SINCE THE EXPORT ACTIVITY WAS FULFILLED IN PONDICHER RY, THE SOURCE OF INCOME WAS LOCATED IN PONDICHERRY. APPLYING THIS JUDGMENT TO T HE FACTS BEFORE US IN THE PRESENT CASE, WE HAVE TO CONCLUDE THAT THE EXPORT A CTIVITY HAVING TAKEN PLACE OR HAVING BEEN FULFILLED IN INDIA, THE SOURCE OF INCOM E WAS LOCATED IN INDIA AND NOT OUTSIDE. MOREOVER, JUST AS IN THE MADRAS CASE IT WA S HELD THAT THE MERE FACT THAT THE IMPORT ENTITLEMENTS WHICH HAD THEIR SOURCE IN B OMBAY, DID NOT CONSTITUTE A SOURCE OF INCOME WITHIN THE MEANING OF SECTION 9 OF THE ACT, WE HAVE ALSO TO HOLD IN THE PRESENT CASE THAT THE MERE FACT THAT TH E EXPORT PROCEEDS EMANATED FROM PERSONS SITUATED OUTSIDE INDIA DID NOT CONSTIT UTE THEM AS THE SOURCE OF INCOME. 12. THE QUESTION AS TO WHAT IS A SOURCE OF INCOME H AS BEEN DEALT WITH IN SOME AUTHORITATIVE PRONOUNCEMENTS. THE JUDICIAL COMMITTE E IN RHODESIA METALS LTD. (LIQUIDATOR) V. CIT [1941] 9 ITR (SUPPL.) 45 (PC) OB SERVED THAT A 'SOURCE' MEANS NOT A LEGAL CONCEPT BUT ONE WHICH A PRACTICAL MAN WOULD REGARD AS A REAL SOURCE OF INCOME. THIS OBSERVATION WAS ADOPTED BY M ALIK J. IN HIS SEPARATE BUT CONCURRING JUDGMENT IN THE CASE OF RANI AMRIT KUNWA R V. CIT [1946] 14 ITR 561 (ALL) [FB], A DECISION OF THE FULL BENCH OF THE AL LAHABAD HIGH COURT. A SOURCE OF INCOME WAS DESCRIBED BY R. S. PATHAK J. (A S HE THEN WAS) IN THE FOLLOWING WORDS IN SETH SHIV PRASAD V. CIT [1972] 84 ITR 15 (ALL) AT PAGE 18 : 'A SOURCE OF INCOME, THEREFORE, MAY BE DESCRIBED AS THE SPRING OR FOUNT FROM WHICH A CLEARLY DEFINED CHANNEL OF INCOME FLOWS. IT IS THAT WHICH BY ITS NATURE AND INCIDENTS CONSTITUTES A DISTINCT AND SEPARATE O RIGIN OF INCOME, CAPABLE OF CONSIDERATION AS SUCH IN ISOLATION FROM OTHER SOURC ES OF INCOME, AND WHICH BY THE MANNER OF DEALING ADOPTED BY THE ASSESSEE CAN B E TREATED SO.' 13. THE OBSERVATIONS OF THE JUDICIAL COMMITTEE (SUP RA) AS TO WHAT IS A SOURCE OF INCOME HAVE BEEN APPROVED BY THE SUPREME COURT IN C IT V. LADY KANCHANBAI ITA NO.412/MDS./2015 :- 8 -: [1970] 77 ITR 123 (SC). THE LOCATION OR SITUS OF A SOURCE OF INCOME IS ANOTHER ASPECT. THE THIRD ASPECT IS THE ACCRUAL OF THE INCO ME. THOUGH IT IS TRUE, AS HELD BY KANIA C. J., SPEAKING FOR A CONSTITUTION BENCH O F THE SUPREME COURT IN CIT V. AHMEDBHAI UMARBHAI AND CO. [1950] 18 ITR 472 (SC) AT PAGE 479, THAT THE PLACE WHERE THE SOURCE OF INCOME IS LOCATED MAY NOT NECESSARILY BE THE PLACE WHERE THE INCOME ALSO ACCRUES, THAT QUESTION IS NOT MATERIAL IN THE PRESENT CASE BECAUSE HEREIN WE ARE CONCERNED ONLY WITH THE QUEST ION AS TO THE LOCATION OF THE SOURCE. THE REAL QUESTION IS WHETHER THE EXPORT SALES PROCEEDS RECEIVED FROM GOODS MANUFACTURED AND EXPORTED FROM INDIA CON STITUTE A SOURCE INSIDE OR OUTSIDE INDIA. TO DECIDE THE SAME WE HAVE TO TAKE A PRAGMATIC AND A PRACTICAL VIEW AND NOT APPROACH THE QUESTION FROM A THEORETIC AL PERSPECTIVE. 14. SECTION 9(1)(VII)(B) CONTEMPLATES A SOURCE LOCA TED OUTSIDE INDIA. IT IS DIFFICULT TO CONCEPTUALISE THE PLACE/SITUS OF THE P ERSON WHO MAKE PAYMENT FOR THE EXPORT SALES AS THE SOURCE LOCATED OUTSIDE INDI A FROM WHICH ASSESSEE EARNED PROFITS. THE EXPORT CONTRACTS OBVIOUSLY ARE CONCLUDED IN INDIA AND THE ASSESSEE'S PRODUCTS ARE SENT OUTSIDE INDIA UNDER SU CH CONTRACTS. THE MANUFACTURING ACTIVITY IS LOCATED IN INDIA. THE SOU RCE OF INCOME IS CREATED AT THE MOMENT WHEN THE EXPORT CONTRACTS ARE CONCLUDED IN I NDIA. THEREAFTER, THE GOODS ARE EXPORTED IN PURSUANCE OF THE CONTRACT AND THE EXPORT PROCEEDS ARE SENT BY THE IMPORTER AND ARE RECEIVED IN INDIA. THE IMPORTER OF THE ASSESSEE'S PRODUCTS IS NO DOUBT SITUATED OUTSIDE INDIA, BUT HE CANNOT BE REGARDED AS A SOURCE OF INCOME. THE RECEIPT OF THE SALE PROCEEDS EMANATE FROM HIM FROM OUTSIDE INDIA. HE IS, THEREFORE, ONLY THE SOURCE OF THE MONIES RECEIVED. THE INCOME COMPONENT OF THE MONIES OR THE EXPORT RECEIP TS IS LOCATED OR SITUATED ONLY IN INDIA. WE ARE MAKING A DISTINCTION BETWEEN THE SOURCE OF THE INCOME AND THE SOURCE OF THE RECEIPT OF THE MONIES. IN ORD ER TO FALL WITHIN THE SECOND EXCEPTION PROVIDED IN SECTION 9(1)(VII)(B) OF THE A CT, THE SOURCE OF THE INCOME, AND NOT THE RECEIPT, SHOULD BE SITUATED OUTSIDE IND IA. THAT CONDITION IS NOT SATISFIED IN THE PRESENT CASE. THE TRIBUNAL, WITH R ESPECT, DOES NOT APPEAR TO HAVE EXAMINED THE CASE FROM THIS ASPECT. ITS CONCLU SION THAT THE TECHNICAL SERVICES WERE NOT UTILISED FOR THE ASSESSEE'S BUSIN ESS ACTIVITY OF PRODUCTION IN INDIA DOES NOT BRING THE ASSESSEE'S CASE WITHIN THE SECOND EXCEPTION IN SECTION 9(1)(VII)(B) OF THE ACT. IT DOES NOT BRING THE CASE UNDER THE FIRST EXCEPTION EITHER, BECAUSE IN ORDER TO GET THE BENEFIT OF THE FIRST EXCEPTION IT IS NOT SUFFICIENT FOR THE ASSESSEE TO PROVE THAT THE TECHN ICAL SERVICES WERE NOT UTILISED FOR ITS BUSINESS ACTIVITIES OF PRODUCTION IN INDIA, BUT IT IS FURTHER NECESSARY FOR THE ASSESSEE TO SHOW THAT THE TECHNICAL SERVICES WE RE UTILISED IN A BUSINESS ITA NO.412/MDS./2015 :- 9 -: CARRIED ON OUTSIDE INDIA. THEREFORE, WE CANNOT ALSO APPROVE OF THE TRIBUNAL'S CONCLUSION IN PARAGRAPH 29 OF ITS ORDER TO THE EXTE NT IT SEEMS TO SUGGEST THAT THE ASSESSEE SATISFIES THE CONDITION NECESSARY FOR BRINGING ITS CASE UNDER THE FIRST EXCEPTION. BE THAT AS IT MAY, AS WE HAVE ALRE ADY POINTED OUT, SINCE THE SOURCE OF INCOME FROM THE EXPORT SALES CANNOT BE SA ID TO BE LOCATED OR SITUATED OUTSIDE INDIA, THE CASE OF THE ASSESSEE CANNOT BE B ROUGHT UNDER THE SECOND EXCEPTION PROVIDED IN THE SECTION. ACCORDINGLY, WE FIND THAT THERE IS NO REASON TO REM IT THIS ISSUE TO THE FILE OF AO AS LD.CIT(A) FOLLOWED THE ABOVE JUDGEMEN T OF DELHI HIGH COURT WHILE DECIDING THE ISSUE AGAINST THE ASSESSEE . THUS, THE GROUND RAISED BY THE ASSESSEE IS REJECTED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH MAY, 2016, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 06 TH MAY, 2016 K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 4. - 1 / CIT 2. / RESPONDENT 5. /23- 4 / DR 3. - 1-!' / CIT(A) 6. 3&-5 / GF