M/S SUNDARAM ASSET MANAGEMENT COMPANY LIMITED, CHENNAI V. DCIT LARGE TAX PAYER UNIT 1, CHENNAI

ITA 422/CHNY/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9512 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 05-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR M SRINIVASA RAO CIT
• Assessee Lawyers: RAGHAVAN RAMABADRAN
• Keywords: Depreciation; Double taxation relief; Earning of tax free income; Deemed to accrue or arise in india; Retrospective amendment; Permanent establishment; Non-deduction of tax; Tax effect; Revenue expenditure; Capital expenditure; TDS; Rule 8D; Set aside; Capital Gains
• Section: 143(3); 14A; 115JB; 40(a)(ia); 195; 201; 143(2); 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: CHENNAI . . . , ! '#$ % , & #' BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ! ./ ITA NOS.419 TO 422/CHNY/2018 ( )( /ASSESSMENT YEARS: 2011-12 TO 2014-15 M/S.SUNDARAM ASSET MANAGEMENT- COMPANY LTD. (FORMERLY SUNDARAM BNP PARIBAS ASSET MANAGEMENT CO. LTD),SUNDARAM TOWERS, II FLOOR, NO.46, WHITES ROAD, CHENNAI-600 034. [PAN: AAICS 4257 J] V. THE DEPUTY COMMISSIONER OF INCOME TAX, LARGE TAX PAYER UNIT-1, CHENNAI. ( *+ /APPELLANT) ( ,-*+ /RESPONDENT) ! ./ ITA NOS.465 TO 468/CHNY/2018 ( )( /ASSESSMENT YEARS: 2011-12 TO 2014-15 THE DY. COMMISSIONER OF INCOME TAX, LARGE TAX PAYER UNIT-1, CHENNAI V . M/S.SUNDARAM ASSET MANAGEMENT CO. LTD. (FORMERLY, SUNDARAM BNP PARIBAS ASSET MANAGEMENT CO. LTD), SUNDARAM TOWERS, II FLOOR, NO.46, WHITES ROAD, CHENNAI-600 034. [PAN: AAICS 4257 J] ( *+ /APPELLANT) ( ,-*+ /RESPONDENT) ASSESSEE BY : MR.RAGHAVAN RAMABADRAN, ADV. DEPARTMENT BY : DR. M.SRINIVASA RAO, CIT . / $& /DATE OF HEARING : 09.09.2019 0%) / $& /DATE OF PRONOUNCEMENT : 03.10.2019 ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 2 -: / O R D E R PER RAMIT KOCHAR , ACCOUNTANT MEMBER : THESE EIGHT APPEALS WHICH ARE CROSS APPEALS FOR AS SESSMENT YEARS (AY) 2011-12 TO 2014-15 RESPECTIVELY, FOUR APPEALS BEING FILED BY ASSESSEE FOR AY: 2011-12 TO 2014-15 , BEING ITA NOS .419-422/CHNY/2018 AND FOUR APPEALS BEING FILED BY REVENUE BEING ITA N OS. 465 TO 468/CHNY/2018 , ARE DIRECTED AGAINST COMMON APPELLA TE ORDER DATED 30.11.2017 IN ITA NOS.21/2014-15, 19/2015-16, 112 & 113/2016- 17/LTU(A)-17, PASSED BY LEARNED COMMISSIONER OF INC OME TAX (APPEALS)- 17, CHENNAI (HEREINAFTER CALLED THE CIT(A)), FOR AYS : 2011-12 TO 2014- 15, THE APPELLATE PROCEEDINGS HAD ARISEN BEFORE LEA RNED CIT(A) FROM SEPARATE ASSESSMENTS ORDERS DATED 24.03.2014, 31.03 .2015, 26.12.2016 & 26.12.2016 RESPECTIVELY PASSED BY LEARNED ASSESS ING OFFICER (HEREINAFTER CALLED THE AO) U/S.143(3) OF THE INC OME-TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) FOR AFORESAID AYS: 2011-12 TO 2014-15 RESPECTIVELY. 2. THE TWO APPEALS IN ITA NOS.467 & 468/CHNY/2018 F ILED BY REVENUE FOR AY: 2013-14 AND 2014-15 RESPECTIVELY ARE THE APPEAL S WHEREIN THE TAX EFFECT IS ADMITTEDLY LOWER THAN RS.50,00,000/- AND BOTH THESE APPEALS ARE COVERED BY CBDT CIRCULAR NO. 17/2019 DATED 08.08.2 019 AND HENCE THESE TWO APPEALS FILED BY REVENUE ARE NOT MAINTAIN ABLE BEFORE THE TRIBUNAL DUE TO LOW TAX EFFECT. THE LD.CIT-DR FAIR LY ADMITTED THAT THESE ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 3 -: TWO APPEALS FILED BY REVENUE ARE NOT COVERED/HIT BY VARIOUS EXCEPTIONS AS APPLICABLE TO AFORESAID CBDT CIRCULAR AND HENCE BOT H THESE APPEALS MAY BE DISMISSED OWING TO LOW TAX EFFECT AS THESE APPEA LS ARE NOT MAINTAINABLE BEFORE THE TRIBUNAL. THE LEARNED COUN SEL FOR THE ASSESSEE ALSO SUBMITTED THAT BOTH THESE APPEALS FILED BY REV ENUE FOR AY: 2013-14 AND 2014-15 ARE COVERED BY AFORESAID CBDT CIRCULAR AND CAN BE DISMISSED OWING TO LOW TAX EFFECT. AFTER HEARING BOTH THE PAR TIES AND PERUSING MATERIAL ON RECORD, WE DISMISS BOTH THESE APPEALS F ILED BY REVENUE BEING ITA NO. 467 & 468/CHNY/2018 FOR AY : 2013-14 AND 20 14-15 RESPECTIVELY OWING TO LOW TAX EFFECT BEING COVERED BY CBDT CIRCU LAR NO. 17/2019 DATED 08.08.2019. WE ORDER ACCORDINGLY. 3. IN THE RESULT, BOTH THE APPEALS IN ITA NOS.467 & 468/CHNY/2018 FILED BY REVENUE FOR AY: 2013-14 AND 2014-15 RESPECTIVELY ARE DISMISSED OWING TO LOW TAX EFFECT. WE ORDER ACCORDINGLY. 4. NOW, WE WILL TAKE UP CROSS APPEALS FOR AY:2011-1 2 VIZ. ITA NOS.419/CHNY/2018 FILED BY ASSESSEE & ITA NO.465/CH NY/2018 FILED BY REVENUE RESPECTIVELY. 5. THE GROUNDS OF APPEALS RAISED IN MEMO OF APPEAL FILED BY ASSESSEE AND REVENUE IN THESE TWO APPEALS ARE AS UNDER: 5.1 ASSESSEES APPEAL- GROUNDS IN ITA NO.419/CHNY/2 018 FOR AY: 2011-12: I. THAT THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ORDER OF DEPUTY COMMISSIONER OF INCOME TAX, LARGE TAX PAYER UNIT-1, BY UPHOLDING THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 (IT ACT) OF RS.26,61,071/- PAID BY THE APPELLANT TO M/S.BNP PAR IBAS INVESTMENT SINGAPORE LIMITED ('BNPP-IP'). ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 4 -: WITHOUT PREJUDICE TO THE GENERALITY OF THE FOREGOIN G: II. THE LD. CIT(A) HAS NOT PASSED A REASONED ORDER AND HELD THAT THE SAID PAYMENT CONSTITUTES FEES FOR TECHNICAL SERVICES (FT S) WITHOUT POINTING OUT AS TO (A) WHICH ELEMENT OF WHICH CLAUSE OF ARTICLE 12(3) OF THE INDIA SINGAPORE TREATY APPLIES TO THE FACTS OF THE CASE AND (B) AS TO HOW DOES IT SO APPLY TO THE FACTS. III. THE LD. CIT(A) HAS ERRED IN IMAGINING (A) THAT SOME WAS BEING PROVIDED BY M/S. BNPP-IP, WHILE FACTUALLY NO INFORMATION WAS PR OVIDED TO THE APPELLANT, (B) THAT THIS SUPPOSED INFORMATION WAS IN THE NATURE OF 'COMMERCIAL INFORMATION' WHICH IS SECRET AND NOT AVAILABLE IN OPEN MARKET AN D (C) THAT PROVISION OF SUCH INFORMATION CONSTITUTED 'PREDOMINANT NATURE' OF THE CONTRACT WHILE THE CONSIDERATION PAID BY THE APPELLANT TO M/S.BNPP-IP WAS ONLY A PLACEMENT FEE PAID FOR DISTRIBUTION OF UNITS OF FUNDS FORMULATED BY TH E APPELLANT WHICH EXCLUSIVELY DEFINES THE NATURE OF THE CONTRACT. 5.2 REVENUES APPEAL- GROUNDS IN ITA NO.465/CHNY/20 18 FOR AY:2011-12: 1. THE ORDER OF THE LEARNED CIT(A) IS CO NTRARY TO LAW AND FACTS AND CIRCUMSTANCES OF THE CASE. 2.1 THE LD. CIT(A) HAS ERRED IN DELETING THE D ISALLOWANCE MADE U/S 14A R.W. RULE 8D IGNORING THE FACT THAT THE ASSESSEE HAD NOT INCURRE D ANY EXPENDITURE FOR EARNING DIVIDEND INCOME. 2.2 THE LD. CIT(A) RELIED UPON THE DECISION OF THE ITAT IN ASSESSEE'S OWN CASE FOR A.Y.2008-09 IN ITA.NO.1774/MDS/2012 DATED 19.07 .2013. THE ABOVE DECISION OF THE ITAT WAS NOT ACCEPTED BY THE DEPARTMENT AND APPEAL TO THE HIGH COURT HAS BEEN FILED WITH REGARD TO THE DELETION OF DISALLOWANCE MADE U/S.14A OF THE ACT. 3.1 THE LD. CIT(A) HAS ERRED IN DELETING THE DISALL OWANCE OF PAYMENT MADE TO FUND QUEST U/S.40(A)(IA) OF THE ACT STATING THAT THE SAID PAYM ENT WAS NOT IN THE NATURE OF ROYALTY FALLING WITHIN THE AMBIT OF PROVISIONS OF SECTION 9 (1)(VI) OF THE ACT. 3.2 THE LD. CIT(A) RELIED ON THE DECISION OF TH E ITAT IN ASSESSEE'S OWN FOR A.Y. 2008-09 IN ITA.NO.1774/MDS/2012 DATED 19.07.2013. TH E ABOVE DECISION OF THE ITAT WAS NOT ACCEPTED BY THE DEPARTMENT AND APPEAL TO THE HIGH C OURT HAS BEEN FILED AGAINST THE DELETION OF DISALLOWANCE OF PAYMENT MADE TO FUND QU EST. 4.1 THE LD. CIT(A) HAS ERRED IN DELETING THE DISALL OWANCE OF EXPENSES IN THE NATURE OF REPAIRS / IMPROVEMENTS MADE TO LEASE HOLD RENTED PR EMISES TREATING IT AS REVENUE IN NATURE. 4.2 THE LD. CIT(A) HAS FAILED TO APPRECIATE THE JUD GEMENT OF THE HON'BLE SUPREME COURT IN BALLIMAL NAVAL KISHORE AND ANR. V CIT IN 224 ITR 41 4 AND THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF M/S.HUMAYUN PROPERTIES LTD 44 1TR 73 , HELD THAT RENOVATION TO MAKE HALLS MORE ATTRACTIVE AND COMFORTABLE BY WAY OF REPLACEME NT OF FURNITURE, SANITARY FITTINGS, ELECTRICAL INSTALLATION, ETC., ARE ONLY CAPITAL EXP ENDITURE. 5. THE LEARNED CIT(A) HAS ERRED IN DELETING THE DIS ALLOWANCE MADE TOWARDS COMMISSION & BROKERAGE PAYMENT TO MUTUAL FUND DISTRIBUTORS WITHO UT APPRECIATING THE FACT THAT THE SAME WAS IN THE NATURE OF FEES FOR PROFESSIONAL OR TECHN ICAL SERVICES U/S.194J OF THE ACT, 6. THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADD ITION OF DISALLOWANCE MADE U/S.14A WHILE COMPUTING THE BOOK PROFITS UNDER MAT PROVISION. ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 5 -: 7. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASI DE AND THAT OF THE ASSESSING OFFICER RESTORED. 6. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS AN ASSET MANAGEMENT COMPANY FOR MUTUAL FUNDS. THE ASSESSEE IS AGGRIEVED BY ADDITION MADE BY AO WHICH WERE LATER CONFIRMED BY LD.CIT(A) TO THE TUNE OF RS.37,61,716/- REPRESENTING AN AMOUNT PAID BY A SSESSEE TO M/S.BNP PARIBAS INVESTMENT SINGAPORE LTD., SINGAPORE THE A O OBSERVED DURING COURSE OF ASSESSMENT PROCEEDINGS CONDUCTED U/S 143( 3) READ WITH SECTION 143(2) OF THE 1961 ACT THAT THE ASSESSEE HAS MADE P AYMENT OF RS.37,61,716/- FOR THE PURPOSES OF INVESTMENT MANAG EMENT (MARKETING FEES) TO A NON-RESIDENT( M/S.BNP PARIBAS INVESTMENT SINGAPORE LTD.), WITHOUT DEDUCTION OF INCOME-TAX AT SOURCE U/S.195 O F THE 1961 ACT. THE ASSESSEE CLAIMED THAT THESE PAYMENTS ACCRUED OUTSID E INDIA AND THE NON- RESIDENT DOES NOT HAVE ANY PERMANENT ESTABLISHMENT( PE) IN INDIA AND HENCE THE AMOUNT IS NOT TAXABLE IN INDIA IN THE HAN DS OF M/S.BNP PARIBAS INVESTMENT SINGAPORE LTD., SINGAPORE . THE AO AFTE R CONSIDERING CONTENTIONS OF THE ASSESSEE WAS OF THE VIEW THAT TH IS AMOUNT WAS PAID BY ASSESSEE AS MANAGERIAL FEE. THE AO WAS OF THE VIEW THAT AS PER SECTION 9(1)(VII) OF THE 1961 ACT , ANY PAYMENT MADE FOR TH E PURPOSES OF RENDERING MANAGERIAL SERVICES OUTSIDE INDIA SHALL B E CONSIDERED ONLY AS PAYMENTS MADE FOR FEES FOR TECHNICAL SERVICES. THE AO REFERRED TO EXPLANATION 2 TO SECTION 9(1)(VII) OF THE 1961 ACT WHICH , INTER-ALIA, STIPULATED THAT FEES FOR TECHNICAL SERVICES MEANS A NY CONSIDERATION FOR THE ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 6 -: RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTAN CY SERVICES. THE AO OBSERVED THAT THESE ARE PAYMENTS MADE FOR TECHNICAL SERVICES AND KEEPING IN VIEW EXPLANATION TO SEC.9(1)(VII) OF THE 1961 ACT AS INTRODUCED BY THE FINANCE ACT, 2010 WITH RETROSPECTIVE EFFECT FROM 01.06.1976 WHICH STIPULATED THAT THESE PAYMENTS SHALL BE TAXABLE ONL Y IN INDIA IRRESPECTIVE OF THE PLACE WHERE THE SERVICES ARE RENDERED . THE AFORESAID EXPLANATION PROVIDED AS UNDER: '[EXPLANATION.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT FOR THE PURPOSES OF THIS SECTION, INCOME OF A NON-RESIDENT SHALL BE DEEMED T O ACCRUE OR ARISE IN INDIA UNDER CLAUSE (V) OR CLAUSE (VI) OR CLAUSE (VII) OF SUB-SECTION (1) A ND SHALL BE INCLUDED IN THE TOTAL INCOME OF THE NON-RESIDENT, WHETHER OR NOT, (I) THE NON-RESIDENT HAS A RESIDENCE OR PLACE OF BUSINE SS OR BUSINESS CONNECTION IN INDIA; OR (II) THE NON-RESIDENT HAS RENDERED SERVICES IN INDIA.]' THUS, THE AO BROUGHT THE AFORESAID PAYMENTS MADE B Y ASSESSEE TO BNP PARIBAS INVESTMENT SINGAPORE LIMITED, SINGAPORE WITHOUT DEDUCTION OF INCOME TAX AT SOURCE TO TAX KEEPING IN VIEW PROV ISIONS OF SEC.40(A)(I) OF THE 1961 ACT READ WITH SECTION 195 OF THE 1961 A CT, VIDE ASSESSMENT ORDER DATED 24.03.2014 PASSED BY THE AO U/S 143(3) OF THE 1961 ACT. 7. AGGRIEVED BY AN ASSESSMENT ORDER DATED 24.03.201 4 FRAMED BY AO U/S 143(3) OF THE 1961 ACT, THE ASSESSEE FILED FIRST AP PEAL BEFORE LD.CIT(A) WHO WAS PLEASED TO UPHOLD DISALLOWANCE MADE BY THE AO BY HOLDING THAT THESE ARE PAYMENTS MADE BY ASSESSEE TO BNP PARIBAS INVESTMENT SINGAPORE LIMITED, SINGAPORE TOWARDS FEE FOR TECHN ICAL SERVICES AS CONTAINED IN SEC.9(1)(VII) READ IN CONJUNCTION WITH EXPLANATIONS TO THAT SECTION AND THE SAID SERVICES ARE UTILIZED IN INDIA FOR THE BUSINESS CARRIED ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 7 -: ON BY THE ASSESSEE, THE SAME WERE HELD BY LEARNED C IT(A) TO BE TAXABLE IN INDIA AND SINCE THE ASSESSEE MADE PAYMENTS TO BNP P ARIBAS INVESTMENT SINGAPORE LIMITED, SINGAPORE WITHOUT DEDUCTION OF I NCOME-TAX AT SOURCE, THE SAID PAYMENTS WERE ALSO DISALLOWED BY LEARNED C IT(A) KEEPING IN VIEW PROVISIONS OF SECTION 40(A)(I) OF THE 1961 ACT READ WITH SECTION 195 OF THE 1961 ACT . THE LD.CIT(A) DISMISSED THE APPEAL OF T HE ASSESSEE ON THIS GROUND VIDE APPELLATE ORDER DATED 30.11.2017 BY HOL DING AS HEREUNDER: 6.3 I HAVE CONSIDERED THE FINDINGS OF THE AO AND T HE WRITTEN SUBMISSIONS MADE BY THE AR. IN SHORT, THE APPELLANT CONTENDS THAT THE SERVICES RENDERED BY BNP PARIBAS ARE NOT IN THE NATURE OF TECHNICAL SERVICES SINCE NO TECHNICAL KNO WLEDGE, SKILL OR KNOWHOW WAS 'MADE AVAILABLE' TO THEM. RELYING ON THE CASE OF INTERTEK TESTING SERVICES INDIA PVT. LTD. IN RE (307 ITR 418) (AAR), THE APPELLANT CONTENDS THAT MA NAGERIAL SERVICES ESSENTIALLY INVOLVE CONTROLLING, DIRECTING OR ADMINISTERING A BUSINESS WHICH IS NOT THE CASE WITH BNP. 6.4 AS PER THE DISTRIBUTION AGREEMENT BETWEEN THE A PPELLANT COMPANY AND BNP PARIBAS INVESTMENT PARTNERS SINGAPORE LTD. (BNPP IP SINGAPO RE), THE APPELLANT APPOINTED BNPP IP, SINGAPORE TO DISTRIBUTE UNITS OF THE FUND, FLOATED BY THE APPELLANT-COMPANY APART FROM PROVIDING SERVICES RELATED THERETO AS SET OUT IN TH E AGREEMENT. THE DISTRIBUTION OF THE UNITS, AND DOCUMENTATION ACTIVITY UNDERTAKEN BY BNP P IP SINGAPORE IN THIS REGARD IS AS FOLLOWS: 2. DISTRIBUTION OF UNITS A. APPOINTMENT OF DISTRIBUTOR: BNPP IP SINGAPORE IS HEREBY APPOINTED AS DISTRIBUT OR OF THE FUNDS AND ACCEPTS TO DISTRIBUTE, ON A NON-EXCLU SIVE BASIS, THE CLASSES AND CATEGORIES OF SHARES OR UNITS (COLLECTIVELY, 'UNITS'), AS THE CAS E MAY BE, OF THOSE SUB-FUNDS OF THE FUND LISTED IN THE ANNEXES HERETO, PROVIDED ALWAYS THAT SUCH DISTRIBUTION SHALL BE EXECUTED IN ACCORDANCE WITH ALL APPLICABLE LAWS AND REGULATIONS , THE TERMS OF THE RELEVANT DOCUMENTS. IT IS ACKNOWLEDGED THAT PURSUANT TO THIS AGREEMENT, BNPP IP SINGAPORE'S DISTRIBUTION OF THE FUND MAY BE PERFORMED DIRECTLY OR INDIRECTLY BY WAY OF COMMERCIALIZING FOREIGN DOMICILED COLLECTIVE INVESTMENT SCHEMES THAT INVEST AS FEEDER S INTO THE FUND. B. ISSUE OF UNITS : SUNDARAM HEREBY AGREES TO PROCURE, IN ACCORDANCE WITH THE TERMS OF THE PROSPECTUS AND TRUST DEED, OR ARTICLES AS TH E CASE MAY BE, THE ISSUANCE OF THE UNITS TO BNPP IP SINGAPORE'S CLIENTS TO THE EXTENT THAT T HE DISTRIBUTION IS EFFECTED IN ACCORDANCE WITH THE TERMS OF THE RELEVANT DOCUMENTS AND HEREOF AND SUBSCRIPTIONS FOR UNITS ARE EFFECTED IN ACCORDANCE WITH THE RELEVANT DOCUMENTS. BNPP IP SINGAPORE MAY USE ALL LEGALLY AVAILABLE MEA NS, INCLUDING ELECTRONIC MEDIA (E.G. INTERNET, WEBSITE, EMAIL) IN ORDER TO DISTRIBUTE TH E UNITS IN ACCORDANCE WITH THIS AGREEMENT. 3. DOCUMENTATION A. STATUTORY REPORTS : SUNDARAM SHALL PROVIDE OR MAKE AVAILABLE TO BN PP IP SINGAPORE THE PROSPECTUS, ANY SIMPLIFIED PROSPECTUS (AS APPLICABLE), PERIODIC FINANCIAL REPORTS, NOTICES CONVENING UNIT HOLDERS' MEETINGS A ND ANY OTHER MATERIAL MEANT FOR UNIT HOLDERS, AS SOON AS SUCH DOCUMENTS BECOME AVAILABLE . BNPP IP SINGAPORE SHALL PROVIDE OR ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 8 -: MAKE AVAILABLE SUCH DOCUMENTATION TO ITS CLIENTS IN ACCORDANCE WITH THE REQUIREMENTS OF LOCAL LAW AND REGULATION. B. INTERNAL INFORMATION : SUNDARAM MAY MAKE AVAILABLE TO BNPP IP SINGAPORE MATERIALS AND INFORMATION REGARDING THE FUND, WHICH ARE FOR USE BY DISTRIBUTORS OF THE FUND ONLY. ANY SUCH MATERIALS OR INFORMATION, WHICH ARE DENOTE D AS BEING FOR INTERNAL USE ONLY, SHALL BE STRICTLY FOR THE INTERNAL USE OF BNPP IP SINGAPO RE AND SHALL NOT BE FORWARDED, COPIED OR OTHERWISE DISTRIBUTED IN ANY FORM TO CLIENTS OF BNP P IP SINGAPORE. BNPP IP SINGAPORE UNDERTAKES TO ENSURE THAT SECURITY MEASURES ARE IN PLACE IN ORDER TO PROTECT SUCH INFORMATION AND ACCESS THERETO. C. MARKETING DOCUMENTATION : SUNDARAM MAY MAKE AVAILABLE TO BNPP IP SINGAPORE STANDARD MARKETING DOCUMENTATION ('MARKETING MATERI ALS') OF THE FUND, BNPP IP, SINGAPORE SHALL ENSURE COMPLIANCE WITH APPLICABLE LAWS, RULES AND REGULATIONS (INCLUDING WITHOUT LIMITATION THOSE RESTRICTING PUBLIC OFFERING OF SEC URITIES AND FUNDS) WITH RESPECT TO ITS DISTRIBUTION OF ANY SUCH DOCUMENTATION TO ITS CLIEN TS, AND SHALL ACCEPT FULL AND SOLE RESPONSIBILITY FOR ANY LIABILITY WHICH MAY ARISE PU RSUANT TO A BREACH OF THIS CLAUSE. BNPP IP, SINGAPORE MAY NOT ALTER, MODIFY, WAIVE OR CHANGE IN ANYWAY WHATSOEVER, THE TERMS OR CONDITIONS UNDER WHICH SUNDARAM OFFERS UNITS FOR SU BSCRIPTION, SHALL NOT ALTER, AMEND OR QUALITY THE MARKETING MATERIALS IN ANY WAY WITHOUT THE PRIOR WRITTEN CONSENT OF SUNDARAM AND SHALL NOT MARKET OR DISTRIBUTE UNITS ON THE BAS IS OF ANY LITERATURE OTHER THAN THE LATEST EDITIONS OF THE MARKETING MATERIALS SUPPLIED BY SUN DARAM. 6.5 THE AGREEMENT ALSO CONSISTS OF THE FOLLOWING COVENANTS: E. NO AGENCY : NOTHING CONTAINED IN THIS AGREEMENT IS INTENDED T O CREATE A RELATIONSHIP OF EMPLOYEE AND EMPLOYER, OR AGENT AND PRINCIPAL BETWEEN BNPP IP SINGAPORE AND SUNDARAM AND THE FUND. BNPP IP SINGAPORE SHALL BE AN INDEPENDENT CONTRACTOR AS TO SUNDARAM AND THE FUND, AND SHALL NOT BE AUTHORIZED IN ANY WAY TO BIND OR REPRESENT SUNDARAM OR THE FUND AS AN AGENT THEREOF. F. COMPLIANCE : BNPP IP SINGAPORE SHALL ENSURE THAT UNITS OF THE FUND ARE ONLY MARKETED AND SOLD IN JURISDICTIONS AND TO SUCH OF I TS CLIENTS IN COMPLIANCE WITH ALL APPLICABLE LAWS AND REGULATIONS, INCLUDING (BUT NOT LIMITED TO ) REGULATIONS IN ANY RELEVANT JURISDICTION RELATING TO THE MARKETING AND SELLING OF THE UNITS BY WAY OF PUBLIC OFFERS AND PRIVATE PLACEMENTS, THE TERMS OF THIS AGREEMENT AND THE REL EVANT DOCUMENT, BNPP IP SINGAPORE ACKNOWLEDGES THE RESTRICTIONS ON SALES IN COUNTRIES WHERE THE FUND IS NOT AUTHORIZED FOR PUBLIC SALE, SUCH AS THE UNITED STATES, AND AGREES TO COMPLY WITH SUCH RESTRICTIONS. BNPP IP SINGAPORE SHALL NOT SELL OR OFFER TO SELL ANY UNITS IN THE UNITED STATES, ITS TERRITORIES OR POSSESSIONS, OR REMIT ANY FUND RELATED DOCUMENTATIO N TO A 'US PERSON', AS SUCH TERM IS DEFINED IN REGULATION S OF THE UNITED STATES SECURI TIES ACT OF 1933, AS AMENDED, EXCEPT IN CONNECTION WITH TRANSACTIONS EXEMPT FROM REGISTRATI ON UNDER THE SECURITIES ACT OF 1993. ANY FAILURE TO COMPLY WITH THESE RESTRICTIONS MAY C ONSTITUTE A VIOLATION OF THE US SECURITIES LAWS. MOREOVER, IN THE EVENT OF SUBSCRIPTIONS MADE BY OR ON BEHALF OF POLITICALLY EXPOSED PERSONS, BNPP IP SINGAPORE WILL ENSURE THAT DUE DIL IGENCE ON SUCH CLIENTS (INCLUDING BUT NOT LIMITED TO FOR THE PREVENTION OF CORRUPTION) IN LIN E WITH APPLICABLE LAW AND REGULATION HAS BEEN DULY EFFECTED. BNPP IP, SINGAPORE HAS PROCEDUR ES IN PLACE TO ENSURE COMPLIANCE WITH THE AFOREMENTIONED. 6.6 AS SEEN FROM THE DISTRIBUTION AGREEMENT, BNP IP SINGAPORE IS APPOINTED TO DISTRIBUTE VARIOUS CLASSES AND CATEGORIES OF UNITS TO ITS CLIE NTS AND MAY USE ALL LEGAL MEANS, INCLUDING ELECTRONIC MEDIA (FOR EXAMPLE, INTERNET, WEBSITE, E MAIL) IN ORDER TO DISTRIBUTE THE UNITS AS PER THE AGREEMENT. THE APPELLANT WAS ALSO REQUIRED TO MAKE AVAILABLE THE MATERIALS AND INFORMATION STRICTLY FOR THE USE OF BNP IP SINGAPOR E APART FROM OTHER DOCUMENTATION WHICH COULD BE MADE AVAILABLE TO BNP IP SINGAPORE. THE AP PELLANT WAS ALSO REQUIRED TO MAKE AVAILABLE THE MARKETING MATERIALS TO BNP IP SINGAPO RE. 6.7 ACCORDING TO THE DISTRIBUTION AGREEMENT, THERE IS NEITHER A RELATIONSHIP OF AN EMPLOYER & EMPLOYEE NOR THAT OF AN AGENT & PRINCIPAL BETWEEN BNP IP SINGAPORE AND THE APPELLANT. ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 9 -: BNP IP SINGAPORE WAS BOUND TO ENSURE THAT UNITS OF THE FUNDS FLOATED BY THE APPELLANT ARE MARKETED AND SOLD BY WAY OF PUBLIC OFFERS AND PRIVA TE PLACEMENTS APART FROM ITS CLIENTS IN THEIR JURISDICTION. LAST BUT NOT LEAST, BNP IP SING APORE APPOINTS SUB-DISTRIBUTORS, WHO WILL DISTRIBUTE THE UNITS, AS BROKERS, BANKS, INSURANCE COMPANIES, ETC. 6.8 CLAUSE 3 & 4 OF ARTICLE 12 OF THE INDIA-SING APORE DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) READS AS UNDER: 3. THE TERM 'ROYALTIES' AS USED IN THIS ARTICLE MEANS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE : (A) ANY COPYRIGHT OF A LITERARY, ARTISTIC OR SC IENTIFIC WORK, INCLUDING CINEMATOGRAPH FILM OR FILMS OR TAPES USED FOR RADIO OR TELEVISION BROADCA STING, ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR INFO RMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE, INCLUDING GAINS DERIVED F ROM THE ALIENATION OF ANY SUCH RIGHT, PROPERTY OR INFORMATION; (B) ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQ UIPMENT, OTHER THAN PAYMENTS DERIVED BY AN ENTERPRISE FROM ACTIVITIES DESCRIBED IN PARAGRAP H 4(B) OR 4(C) OF ARTICLE 8. 4. THE TERM 'FEES FOR TECHNICAL SERVICES' AS USED I N THIS ARTICLE MEANS PAYMENTS OF ANY KIND TO ANY PERSON IN CONSIDERATION FOR SERVICES OF A MA NAGERIAL, TECHNICAL OR CONSULTANCY NATURE (INCLUDING THE PROVISION OF SUCH SERVICES THROUGH T ECHNICAL OR OTHER PERSONNEL) IF SUCH SERVICES : (A) ARE ANCILLARY AND SUBSIDIARY TO THE APPLICA TION OR ENJOYMENT OF THE RIGHT, PROPERTY OR INFORMATION FOR WHICH A PAYMENT DESCRIBED IN PARAGR APH 3 IS RECEIVED ; OR (B) MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIE NCE, SKILL, KNOW-HOW OR PROCESSES, WHICH ENABLES THE PERSON ACQUIRING THE SERVICES TO APPLY THE TECHNOLOGY CONTAINED THEREIN ; OR (C) CONSIST OF THE DEVELOPMENT AND TRANSFER OF A TECHNICAL PLAN OR TECHNICAL DESIGN, BUT EXCLUDES ANY SERVICE THAT DOES NOT ENABLE THE PERSO N ACQUIRING THE SERVICE TO APPLY THE TECHNOLOGY CONTAINED THEREIN. FOR THE PURPOSES OF (B) AND (C) ABOVE, THE PERSON A CQUIRING THE SERVICE SHALL BE DEEMED TO INCLUDE AN AGENT, NOMINEE, OR TRANSFEREE OF SUCH PE RSON. 6.9 FROM A PERUSAL OF ARTICLE 12(4)(A) OF THE INDIA -SINGAPORE DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA), IT IS SEEN THAT 'FEES FOR TECHNIC AL SERVICES' AS USED IN THAT ARTICLE MEANS ANY SERVICES OF MANAGERIAL, TECHNICAL OR CONSULTANC Y IN NATURE IF SUCH SERVICES ARE ANCILLARY AND SUBSIDIARY TO THE ITEMS FOR WHICH PAYMENT AS PE R ARTICLE 3 OF THE DTAA IS MADE. ARTICLE 3 DEALING WITH ROYALTIES INCLUDES PAYMENTS MADE AS A CONSIDERATION FOR THE USE OF OR RIGHT TO USE OF ANY INFORMATION CONCERNING INDUSTRIAL, CO MMERCIAL OR SCIENTIFIC EXPERIENCE. 6.10 IN THE PRESENT AGE OF TECHNOLOGY, IT IS AN UND ISPUTED FACT THAT SERVICES, INFORMATION, CONSULTANCY, MANAGEMENT, ETC. CAN BE PROVIDED WITH MODES LIKE VIDEO CONFERENCE, INTERNET, REMOTE MONITORING, E-MAIL, ETC. IT IS ALSO AN UNDIS PUTED FACT THAT THERE HAS BEEN A SHARING OF INFORMATION BETWEEN THE APPELLANT AND THE NON-RE SIDENT ENTITY, BNP IP SINGAPORE. THE ACTIVITIES RENDERED BY BNP IP SINGAPORE WERE IN THE FORM OF SHARING OR PERMITTING THE USE OF SPECIAL KNOWLEDGE, EXPERTISE AND EXPERIENCE IT H AS IN COMMERCIALIZING FOREIGN DOMICILED COLLECTIVE INCENTIVE SCHEMES SUCH AS THOSE FLOATED BY THE APPELLANT. THE PURPOSE OF MARKETING OF THE FUNDS AND AFFORDING MARKET ACCESS TO THE APPELLANT BY THE NON-RESIDENT WAS TO ENABLE THE APPELLANT-COMPANY TO COMMERCIALLY EXPLOIT THE SAME. THE ACTIVITIES UNDERTAKEN AND THE INFORMATION PROVIDED BY THE NON-RESIDENT WAS TOTALLY COMMERCIAL IN NATURE AND THE DOMINANT CHARACTER OF THE DISTRIBUTI ON AGREEMENT WAS FOR SHARING SECRET AND CONFIDENTIAL INFORMATION WITH NO ACCESS WHATSOE VER TO OUTSIDERS. THE NATURE OF INFORMATION PROVIDED WAS SUCH THAT IT INCLUDED SPEC IAL FEATURES SUCH AS EXCLUSIVE ACCESS TO THE CLIENTS OF BNP IP SINGAPORE, WHICH WERE NOT AVA ILABLE IN THE OPEN MARKET. ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 10 -: 6.11 THEREFORE, THE MOOT QUESTION FOR CONSIDERATION IN THE INSTANT CASE IS WHETHER THE ACTIVITIES UNDERTAKEN BY BNP IP SINGAPORE INVOLVE ' COMMERCIAL INFORMATION OR NOT' AND IF IT WAS HELD TO BE SO, THEN THE IMPUGNED PAYMENT WOULD BE COVERED UNDER SUB-PARAGRAPH (A) OF ARTICLE 12(4) OF THE DTAA. THE WORD 'COMMERCIAL INFORMATION' HAS NOT BEEN DEFINED IN THE TREATY AND, THEREFORE, IT HAS TO BE INTERPRETED AS IT IS UNDERSTOOD IN GENERAL SENSE. IN GENERAL, THE TERM 'INFORMATION' MEANS THE ACT OR PR OCESS OF INFORMING, COMMUNICATION OR RECEPTION OF KNOWLEDGE AND ANY INFORMATION WHICH HA S GOT A COMMERCIAL VALUE FOR THE USER CAN BE TERMED AS 'COMMERCIAL INFORMATION', FOR THE PURPOSE OF DETERMINING THE TAXABILITY OF SUCH TRANSACTION, THE NATURE OF TRANSACTION SHOULD BE ANALYZED AND CONSIDERED IN TOTALITY HAVING REGARD TO FACTS AND CIRCUMSTANCES OF EACH CA SE. 6.12 THE SUITABILITY CLAUSE OF THE DISTRIBUTION AGR EEMENT MAKE IT ABUNDANTLY CLEAR WHAT EXACTLY ARE THE SERVICES RENDERED BY BNP IP SINGAPO RE TO APPELLANT. THE CLAUSE READS AS UNDER: I. SUITABILITY : BNPP IP SINGAPORE CONFIRMS THAT IT HAS PUT IN PL ACE AND IMPLEMENTS CLIENT SUITABILITY POLICIES AND PROCEDURES IN ACCORDANCE W ITH APPLICABLE LAW, REGULATION AND MARKET PRACTICE TO ENSURE, AMONG OTHER THINGS, THAT: (I) BNPP IP SINGAPORE'S INDIVIDUAL INVESTMENT ADVISERS ARE PROPERLY TRAINED TO KNOW ITS CLIENTS AND UNDERSTAND THE INVESTMENT PRODUCT THEY RECOMMEND TO SUCH CLIENTS; (II) ANY ADVICE GIVEN BY BNPP IP SINGAPORE REGA RDING INVESTMENTS IN ANY SUB-FUND OF THE FUND IS REASONABLY SUITABLE FOR ITS CLIENTS, BY MAT CHING THE RISK RETURN PROFILE OF THE SUB- FUND WITH RELEVANT INFORMATION ON THE CLIENT (SUCH AS EDUCATION LEVEL, SOURCE OF INCOME OR EMPLOYMENT HISTORY, NET-WORTH, FINANCIAL MARKET KNOWLEDGE, INVESTMENT EXPERIENCE, INVESTMENT OBJECTIVES AND RISK TOLERANCE LEVEL); (III) ALL RELEVANT MATERIAL INFORMATION IS PROVI DED TO BNPP IP SINGAPORE'S CLIENTS TO HELP THEM MAKE INFORMED INVESTMENT DECISIONS; (IV) ANY REPRESENTATIONS MADE AND INFORMATION PR OVIDED TO BNPP IP SINGAPORE'S CLIENTS ARE ACCURATE AND NOT MISLEADING. 6.13 IT IS SEEN FROM THE ABOVE THAT BNP IP SINGAPOR E ADVISERS ARE TRAINED TO ANALYZE THE INVESTMENT PRODUCT OFFERED BY THE APPELLANT. THEY A RE IN A POSITION TO ADVISE THE NON- RESIDENT CLIENTS ON THE RISK-RETURN PROFILE OF THE SCHEMES FLOATED BY THE APPELLANT-COMPANY SO THAT THEY CAN MAKE INFORMED DECISIONS. IN THE LI GHT OF THE ABOVE/ I FIND NO MERIT IN THE ARGUMENT OF THE APPELLANT THAT THE SERVICES RENDERE D BY THEM ARE NOT TECHNICAL SERVICES AT ALL. THE INFORMATION OBTAINED FROM BNP IP SINGAPORE WAS COMMERCIAL INFORMATION BECAUSE IT WAS REQUIRED IN RAISING FUNDS A CORE ACTIVITY OF THE APPELLANT FROM THE INTERNATIONAL MARKETS. IT INDICATES CERTAIN ASSURANCE ON THE PART OF BNP IP SINGAPORE TO THE POTENTIAL INVESTORS AND THUS FACILITATES THE MARKETING/RESOUR CE MOBILIZATION EXERCISE OF THE APPELLANT- COMPANY. IT ALSO ENABLES THE APPELLANT TO ACCESS IN TERNATIONAL MARKET THROUGH THE SERVICES RENDERED BY BNP IP SINGAPORE. 6.14 CLAUSE (VII) OF SEC 9(1) OF THE INCOME TAX A CT READS AS UNDER: (VII) INCOME BY WAY OF FEES FOR TECHNICAL SERVICE S PAYABLE BY (A) THE GOVERNMENT; OR (B) A PERSON WHO IS A RESIDENT, EXCEPT WHERE THE FEES ARE PAYABLE IN RESPECT OF SERVICES UTILIZED IN A BUSINESS OR PROFESSION CARRIED ON BY SUCH PERSON OUTSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY S OURCE OUTSIDE INDIA; OR (C) A PERSON WHO IS A NON-RESIDENT, WHERE THE FEE S ARE PAYABLE IN RESPECT OF SERVICES UTILIZED IN A BUSINESS OR PROFESSION CARRIED ON BY SUCH PERSON IN INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE IN IND IA: ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 11 -: PROVIDED THAT NOTHING CONTAINED IN THIS CLAUSE SHAL L APPLY IN RELATION TO ANY INCOME BY WAY OF FEES FOR TECHNICAL SERVICES PAYABLE IN PURSUANCE OF AN AGREEMENT MADE BEFORE THE 1ST DAY OF APRIL, 1976, AND APPROVED BY THE CENTRAL GOV ERNMENT. EXPLANATION 1.FOR THE PURPOSES OF THE FOREGOING PR OVISO, AN AGREEMENT MADE ON OR AFTER THE 1ST DAY OF APRIL, 1976, SHALL BE DEEMED TO HAVE BEEN MADE BEFORE THAT DATE IF THE AGREEMENT IS MADE IN ACCORDANCE WITH PROPOSALS APPR OVED BY THE CENTRAL GOVERNMENT BEFORE THAT DATE. EXPLANATION 2.FOR THE PURPOSES OF THIS CLAUSE, 'FE ES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION ) FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PR OVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR A NY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATIO N WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD 'SALARIES'. 6.15 IN THE CASE ON HAND, THE RECIPIENTS OF THE FEE S FOR TECHNICAL SERVICES RENDERED SERVICES OUTSIDE INDIA. NEVERTHELESS, THE RELEVANT EXPLANATI ON BELOW; SECTION 9(2) READS AS FOLLOWS: EXPLANATION. FOR THE REMOVAL OF DOUBTS, IT IS HERE BY DECLARED THAT FOR THE PURPOSES OF THIS SECTION, INCOME OF A NON-RESIDENT SHALL BE DEEMED T O ACCRUE OR ARISE IN INDIA UNDER CLAUSE (V) OR CLAUSE (VI) OR CLAUSE (VII) OF SUB-SECTION ( 1) AND SHALL BE INCLUDED IN THE TOTAL INCOME OF THE NON-RESIDENT, WHETHER OR NOT,--- (I) THE NON-RESIDENT HAS A RESIDENCE OR PLACE OF BU SINESS OR BUSINESS CONNECTION IN INDIA; OR (II) THE NON-RESIDENT HAS RENDERED SERVICES IN IN DIA. 6.16 THEREFORE, AS FAR AS SECTION 9(1)(VII)(B) IS C ONCERNED, FEES FOR TECHNICAL SERVICES SHALL BE CONSIDERED AS THE INCOME OF A NON-RESIDENT IRRES PECTIVE OF RESIDENCE PLACE OF BUSINESS OR PLACE OF RENDERING OF SERVICES. THE EXCEPTIONS CARV ED OUT APPLY TO A SITUATION WHERE FEES FOR TECHNICAL SERVICES IS PAYABLE FOR SERVICES UTIL ISED FOR BUSINESS OR PROFESSION CARRIED OUT BY A RESIDENT PAYER OUTSIDE INDIA OR FOR THE PURPOS E OF MAKING OR EARNING OF INCOME BY A RESIDENT PAYER FROM A SOURCE OUTSIDE INDIA. HOWEVER , THE CLAUSE CLEARLY MANDATES THAT SERVICES UTILISED IN INDIA ARE LIABLE TO TAXATION A S FEES FOR TECHNICAL FEES, 6.17 THE LEGISLATIVE INTENT BEHIND THE ABOVE EXPLAN ATION ENACTED BY THE FINANCE ACT, 2010, WITH RETROSPECTIVE FROM 1.6.1976 HAS BEEN EXPLAINED AS UNDER: SECTION 9 PROVIDES FOR SITUATIONS WHERE INCOME I S DEEMED TO ACCRUE OR ARISE IN INDIA. 'VIDE FINANCE ACT, 1976, A SOURCE RULE WAS PROVIDED IN SECTION 9 THROUGH, INSERTION OF CLAUSES (V), (VI) AND (VII) IN SUB-SECTION (1] FOR INCOME BY WAY OF INTEREST, ROYALTY OR FEES FOR TECHNICAL SERVICES, RESPECTIVELY. IT WAS PROVID ED, INTER ALIA, THAT IN CASE OF PAYMENTS AS MENTIONED UNDER THESE CLAUSES, INCOME WOULD BE DEEM ED TO ACCRUE OR ARISE IN INDIA TO THE NON-RESIDENT UNDER THE CIRCUMSTANCES SPECIFIED THER EIN. THE INTENTION OF INTRODUCING THE SOURCE RULE WAS TO BRING TO TAX INTEREST, ROYALTY A ND FEES FOR TECHNICAL SERVICES, BY CREATING A LEGAL FICTION IN SECTION 9, EVEN IN CASES WHERE S ERVICES ARE PROVIDED OUTSIDE INDIA AS LONG AS THEY ARE UTILIZED IN INDIA. THE SOURCE RULE, THE REFORE, MEANS THAT THE SITUS OF THE RENDERING OF SERVICES IS NOT RELEVANT. IT IS THE SI TUS OF THE PAYER AND THE SITUS OF THE UTILIZATION OF SERVICES WHICH WILL DETERMINE THE TA XABILITY OF SUCH SERVICES IN INDIA. THIS WAS THE SETTLED POSITION OF LAW TILL 2007. HOWEVER, THE HON'BLE SUPREME COURT, IN THE CASE OF ISHIKAWAJIMA-HARIMA HEAVY INDUSTRIES LTD., VS DIT (2007) [288 ITR 408] HELD THAT DESPITE THE DEEMING FICTION IN SECTION 9, FOR ANY SUCH INCOME TO BE TAXABLE IN INDIA, THERE, MUST BE SUFFICIENT TERRITORIAL NEXUS BETWEEN SUCH INCOME AND THE TERRITORY OF INDIA IT FURTHER H ELD THAT FOR ESTABLISHING SUCH TERRITORIAL NEXUS, THE SERVICES HAVE TO BE RENDERED IN INDIA AS WELL AS UTILIZED IN INDIA. THIS INTERPRETATION WAS NOT IN ACCORDANCE WITH THE LEGIS LATIVE INTENT THAT THE SITUS OF RENDERING SERVICE IN INDIA IS NOT RELEVANT AS LONG AS THE SER VICES ARE UTILIZED IN INDIA, THEREFORE, TO REMOVE DOUBTS REGARDING THE SOURCE RULE, AN EXPLANA TION WAS INSERTED BELOW SUB-SECTION (2) OF SECTION 9 WITH RETROSPECTIVE EFFECT FROM 1ST JUNE, 1976 VIDE FINANCE ACT, 2007. THE ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 12 -: EXPLANATION SOUGHT TO CLARIFY THAT WHERE INCOME IS DEEMED TO ACCRUE OR ARISE IN INDIA UNDER CLAUSES (V), (VI) AND (VII) OF SUB-SECTION (2) OF S ECTION 9, SUCH INCOME SHALL BE INCLUDED IN THE TOTAL INCOME OF THE NON-RESIDENT, REGARDLESS OF WHETHER THE NON-RESIDENT HAS A RESIDENCE OR PLACE OF BUSINESS OR BUSINESS CONNECTI ON IN INDIA. HOWEVER, THE KARNATAKA HIGH COURT, IN A RECENT JUDG EMENT, IN THE CASE OF JINDAL THERMAL POWER COMPANY LTD, VS DCTT [TDS] HAS HELD THAT THE EXPLANATION, IN ITS PRESENT FORM, DOES NOT DO AWAY WITH THE REQUIREMENT OF RENDERING OF SERVICES IN INDIA FOR ANY INCOME TO BE DEEMED TO ACCRUE OR ARISE TO A NON-RESIDENT UND ER SECTION 9. IT HAS BEEN HELD THAT ON A PLAIN READING OF THE EXPLANATION, THE CRITERIA OF R ENDERING SERVICES IN INDIA AND THE UTILIZATION OF THE SERVICE IN INDIA LAID DOWN BY TH E SUPREME COURT IN ITS JUDGEMENT IN THE CASE OF ISHIKAWAJIMA-HARIMA HEAVY INDUSTRIES LTD. ( SUPRA) REMAINS UNTOUCHED AND UNAFFECTED BY THE EXPLANATION. IN ORDER TO REMOVE ANY DOUBT ABOUT THE LEGISLATIVE INTENT OF THE AFORESAID SOURCE RULE, IT IS PROPOSED TO SUBSTITUTE THE EXISTING EXPLANATION WIT H A NEW EXPLANATION TO SPECIFICALLY STATE THAT THE INCOME OF A NON-RESIDENT SHALL BE DEEMED T O ACCRUE OR ARISE IN INDIA UNDER CLAUSE (V) OR CLAUSE (VI) OR CLAUSE (VII) OF SUB-SECTION ( 1) OF SECTION 9 AND SHALL BE INCLUDED IN HIS TOTAL INCOME, WHETHER OR NOT, (A) THE NON-RESIDENT HAS A RESIDENCE OR PLACE OF BUSINESS OR BUSINESS CONNECTION IN INDIA; OR (B) THE NON-RESIDE NT HAS RENDERED SERVICES IN INDIA, 6.18 THEREFORE, THE EXPLANATION IN ITS PRESENT FORM WAS ENACTED TO REAFFIRM THE IDEA THAT THE SITUS OF RENDERING SERVICE IN INDIA IS NOT RELE VANT AS LONG AS THE SERVICES ARE UTILIZED IN INDIA. 6.19 THE CONCEPT OF SOURCE RULE HAS BEEN ELOQUENTLY EXPLAINED BY THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF GVK INDUSTRIES LTD V. INCOME TAX OFFICER (371 ITR 453)(SC) AS FOLLOWS: 23. HAVING STATED ABOUT THE 'SOURCE RULE', IT IS NE CESSARY TO APPROPRIATELY APPRECIATE HOW THE CONCEPT HAS DEVELOPED. AT THE TIME OF FORMATION OF 'LEAGUE OF NATIONS' AT THE END. OF 1920, IT COMPRISED OF ONLY 27 COUNTRIES DOMINATED B Y THE EUROPEAN STATES AND THE UNITED STATES OF AMERICA. THE UNITED 'NATIONS THAT WAS FOR MED AFTER THE SECOND WORLD WAR, INITIALLY HAD 51 MEMBERS. PRESENTLY, IT HAS 193 MEM BERS. WITH THE EFFLUX OF TIME, THERE HAS BEEN BIRTH OF NATION STATES WHICH ENJOY POLITICAL I NDEPENDENCE AND THAT HAS LED LO CROSS- BORDER AND INTERNATIONAL TRADE. THE STATE TRADE EVE NTUALLY HAS CULMINATED IN FORMULATION OF PRINCIPLES PERTAINING TO INTERNATIONAL TAXATION JUR ISDICTION. IT NEEDS NO SPECIAL EMPHASIS TO STATE THAT THE SAID TAXATION PRINCIPLES ARE PREMISE D TO PROMOTE INTERNATIONAL TRADE AND TO ALLOCATE TAXATION BETWEEN THE STATES. THESE RULES H ELP AND FURTHER ENDEAVOUR TO CURTAIL POSSIBILITY OF DOUBLE TAXATION, TAX DISCRIMINATION AND ALSO TO ADJUDICATE RESORT TO ABUSIVE TAX AVOIDANCE OR TAX EVASION PRACTICES. THE NATION STAT ES, IN CERTAIN SITUATIONS, RESORT TO PRINCIPLE OF 'TAX MITIGATION' AND IN ORDER TO PROTE CT THEIR CITIZENS, GRANT BENEFIT OF TAX ABROAD UNDER THE DOMESTIC LEGISLATION UNDER THE BIL ATERAL AGREEMENTS. 24. THE TWO PRINCIPLES, NAMELY, 'SITUS OF RESIDENCE ' AND 'SITUS OF SOURCE OF INCOME' HAVE WITNESSED DIVERGENCE AND DIFFERENCE IN THE FIELD OF INTERNATIONAL TAXATION. THE PRINCIPLE 'RESIDENCE STATE TAXATION' GIVES PRIMACY TO THE COU NTRY OF THE RESIDENCY OF THE ASSESSEE. THIS PRINCIPLE POSTULATES TAXATION OF WORLDWIDE INC OME AND WORLDWIDE CAPITAL, IN THE COUNTRY OF RESIDENCE OF THE NATURAL OR JURIDICAL PERSON. TH E 'SOURCE STATE TAXATION' RULE CONFERS PRIMACY TO RIGHT TO TAX TO A PARTICULAR INCOME OR T RANSACTION TO THE STATE/NATION WHERE THE SOURCE OF THE SAID INCOME IS LOCATED. THE SECOND RU LE, AS IS UNDERSTOOD, IS TRANSACTION SPECIFIC. TO ELABORATE, THE SOURCE STATE SEEKS TO T AX THE TRANSACTION OR CAPITAL WITHIN ITS TERRITORY EVEN WHEN THE INCOME BENEFITS BELONGS TO A NON-RESIDENCE PERSON, THAT IS, A PERSON RESIDENT IN ANOTHER COUNTRY. THE AFORESAID P RINCIPLE SOMETIMES IS GIVEN A DIFFERENT NAME, THAT IS, THE TERRITORIAL PRINCIPLE. IT IS APT TO STATE HERE THAT THE RESIDENCE BASED TAXATION IS PERCEIVED AS BENEFITING THE DEVELOPED O R CAPITAL EXPORTING COUNTRIES WHEREAS THE SOURCE BASED TAXATION PROTECTS AND IS REGARDED AS M ORE BENEFICIAL TO CAPITAL IMPORTING COUNTRIES, THAT IS, DEVELOPING NATIONS. HERE COMES THE PRINCIPLE OF NEXUS, FOR THE NEXUS OF THE RIGHT TO TAX IS IN THE SOURCE RULE. IT IS FOUND ED ON THE RIGHT OF A COUNTRY TO TAX THE INCOME EARNED FROM A SOURCE LOCATED IN THE SAID STA TE, IRRESPECTIVE OF THE COUNTRY OF THE ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 13 -: RESIDENCE OF THE RECIPIENT. IT IS WELL SETTLED THAT THE SOURCE BASED TAXATION IS ACCEPTED AND APPLIED IN INTERNATIONAL TAXATION LAW. 25. THE TWO PRINCIPLES THAT WE HAVE MENTIONED HEREI NABOVE, ARE ALSO APPLIED IN DOMESTIC LAW IN VARIOUS COUNTRIES. THE SOURCE RULE IS IN CON SONANCE WITH THE NEXUS THEORY AND DOES NOT FALL FOUL OF THE SAID DOCTRINE ON THE GROUND OF EXTRA-TERRITORIAL OPERATION. THE DOCTRINE OF SOURCE RULE HAS BEEN EXPLAINED AS A COUNTRY WHERE T HE INCOME OR WEALTH IS PHYSICALLY OR ECONOMICALLY PRODUCED, [SEE LEAGUE OF NATIONS, REPO RT ON 'DOUBLE TAXATION BY BRUINS., EINAUDI, SALIGMAN AND SIR JOSIAH STAN (1923)], APPR ECIATED ON THE AFORESAID PRINCIPLE, IT WOULD APPLY WHERE BUSINESS ACTIVITY IS WHOLLY OR PA RTLY PERFORMED IS A SOURCE-STATE* AS A LOGICAL COROLLARY, THE STATE CONCEPT WOULD ALSO JUS TIFIABLY INCLUDE THE COUNTRY-WHERE THE COMMERCIAL NEED FOR THE PRODUCT ORIGINATED, THAT IS , FOR EXAMPLE, WHERE THE CONSULTANCY IS UTILIZED, 26. 'FROM THE AFORESAID, IL IS QUITE VIVID THAT THE CONCEPT OF INCOME SOURCE IS MULTIFACETED AND HAS THE POTENTIALITY TO TAKE DIFFERENT FORMS [S EE KLAUS VOGEL, WORLD-WIDE V. SOURCE TAXATION OF INCOME - REVIEW AND REVISION OF ARGUMEN TS (1988)]. THE SAID RULE HAS BEEN JUSTIFIED BY ARVID A. SKAAR IN PERMANENT ESTABLISHM ENT; EROSION OF TAX TREATY PRINCIPLE ON THE GROUND THAT PROFITS OF BUSINESS ENTERPRISE ARE MAINLY THE YIELD OF AN ACTIVITY, FOR CAPITAL IS PROFITABLE TO THE EXTENT THAT IT IS ACTIVELY UTI LISED IN A PROFITABLE MANNER. TO THIS EXTENT NEITHER THE ACTIVITY OF 'BUSINESS ENTERPRISE NOR TH E CAPITAL MADE, DEPENDS ON RESIDENCE. 27. THE PURPOSE OF ADVERTING TO THESE ASPECTS IS ON LY TO HIGHLIGHT THAT THE SOURCE RULE HAS BEEN ACCEPTED BY THEM IN THE UN COMMENTARIES AND TH E ORGANISATION OF ECONOMIC CORPORATION AND DEVELOPMENT (OECD) COMMENTARIES. IT IS WELL KNOWN THAT WHAT IS PROHIBITED BY INTERNATIONAL TAXATION LAW IS IMPOSIT ION OF SOVEREIGN ACT OF A STATE ON A SOVEREIGN TERRITORY. THIS PRINCIPLE OF FORMAL TERRI TORIALITY APPLIES IN PARTICULAR TO ACTS INTENDED TO ENFORCE INTERNAL LEGAL PROVISIONS ABROA D. [SEE THE INTRODUCTION IN KLAUS VOGEL ON DOUBLE TAXATION CONVENTION., SOUTH ASEAN, REPRIN T. EDITION (2007)]. THEREFORE, DEDUCTION OF TAX AT SOURCE WHEN MADE APPLICABLE, IT HAS TO BE ENSURED THAT THIS PRINCIPLE IS NOT VIOLATED. 6.20 COMING TO THE INSTANT CASE, IT IS EVIDENT THAT FEES FOR TECHNICAL SERVICES HAVE BEEN PAID TO NON-RESIDENT, AND, IT IS ALSO SEEN THAT THE PAYMENT MADE WOULD BE COVERED UNDER THE EXPRESSION 'FEES FOR TECHNICAL SERVICES' AS CON TAINED IN SECTION 9(1)(VII)(B) READ IN CONJUNCTION WITH THE EXPLANATION THERE UNDER. SINCE THE FEES FOR TECHNICAL SERVICES PAID BY THE APPELLANT WAS IN RESPECT OF SERVICES UTILIZED I N A BUSINESS CARRIED ON IN INDIA, THE FEES PAYABLE IS SUBJECT TO TAX AS PER THE PROVISIONS OF SEC.9(1)(VII)(B). ACCORDINGLY, I FIND THAT THERE IS TERRITORIAL NEXUS WITH INDIA, AS FAR AS TH E SERVICES RENDERED BY THE NON-RESIDENTS TO THE BUSINESS OF THE APPELLANT IS CONCERNED. 6.21 THE HON'BLE SUPREME COURT OF INDIA, IN THE CAS E OF TRANSMISSION CORPORATION OF ANDHRA PRADESH LTD. VS CIT (SC)(239 ITR 587) DECLAR ED THAT ANY PERSON MAKING PAYMENTS TO A NON-RESIDENT WOULD BE LIABLE TO DEDUCT TAX WHE N THE PAYMENT SO MADE IS CHARGEABLE TO TAX UNDER THE INCOME TAX ACT, 1961. 6.22 IN VIEW OF THE ABOVE, THE DISALLOWANCE MADE FO R NON-DEDUCTION OF TAX ON TECHNICAL SERVICES U/S.40(A)(IA) BY THE ASSESSING OFFICER IS SUSTAINED IN RESPECT OF THE ASSESSMENT YEARS UNDER CONSIDERATION. THE APPELLANT FAILS ON T HIS GROUND. 8. AGGRIEVED BY AN APPELLATE ORDER DATED 30.11.2017 PASSED BY LEARNED CIT(A), THE ASSESSEE HAS NOW FILED AN APPEAL BEFORE THE TRIBUNAL . THE CONTENTIONS ARE RAISED BY LEARNED COUNSEL FOR THE A SSESSEE THAT THE ASSESSEE HAS MADE PAYMENTS TO M/S.BNP PARIBAS INVES TMENT SINGAPORE ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 14 -: LTD., SINGAPORE AS DISTRIBUTION FEE FOR ARRANGING S UBSCRIPTION FOR THE UNITS . REFERENCE WAS DRAWN TO THE DTAA ENTERED INTO BETWEE N INDIA AND SINGAPORE. IT WAS SUBMITTED THAT THE SAID DTAA HAS A CLAUSE THAT TECHNICAL KNOW HOW IS BE MADE AVAILABLE TO BE COVER ED UNDER THE FEE FOR TECHNICAL SERVICES(FTS) AND SINCE IN THE INSTANT CA SE , TECHNICAL KNOW HOW WAS NOT MADE AVAILABLE TO THE ASSESSEE AND THE SAME CANNOT BE UTILIZED BY THE ASSESSEE AFTER CONTRACTS ARE COMPLETED . IT WAS SUBMITTED THAT THE UNITS/INVESTMENT PRODUCTS OFFERED BY ASSESSEE ARE S IMPLY DISTRIBUTED BY SAID BNP PARIBAS INVESTMENT SINGAPORE LTD., SINGAPO RE , NO ADDITIONS ARE WARRANTED IN THE HANDS OF THE ASSESSEE AS THE SAID INCOME OF BNP PARIBAS INVESTMENT SINGAPORE LIMITED, SINGAPORE IS NOT TAXA BLE IN INDIA AND HENCE THERE WAS NO REQUIREMENT ON THE PART OF THE A SSESSEE TO DEDUCT INCOME-TAX AT SOURCE (TDS) WHILE MAKING AFORESAID P AYMENT . OUR ATTENTION WAS DRAWN TO PARA 6.8 OF THE APPELLATE OR DER PASSED BY LEARNED CIT(A). 8.2. THE LD.CIT-DR ON THE OTHER HAND DREW OUR ATTEN TION TO PARA NO.6.5 OF THE LD.CIT(A) APPELLATE ORDER. HE DREW OUR ATTEN TION TO CLAUSE (E) OF THE DISTRIBUTION AGREEMENT. IT WAS SUBMITTED THAT THIS CLAUSE WAS BROUGHT TO CIRCUMVENT THE LAW. IT WAS SUBMITTED THAT BNP PA RIBAS HAS RENDERED MANAGERIAL SERVICES TO THE ASSESSEE. IT WAS SUBMITT ED THAT THESE ARE TECHNICAL SERVICES RENDERED BY BNP PARIBAS, SINGAPO RE TO ASSESSEE. HE DREW OUR ATTENTION TO THE AAR RULING IN REFERENCE I N THE CASE OF M/S. INTERTEK TESTING SERVICES INDIA (P.) LTD., REPORTED IN (2008)175 TAXMANN ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 15 -: 375 (AAR) AND SUBMITTED THAT THESE ARE INVESTMENT INFORMATION WHICH WAS GIVEN BY M/S.BNP PARIBAS INVESTMENT SINGAPORE L TD., TO THE ASSESSEE AND INCOME-TAX HAS TO BE DEDUCTED AT SOURCE BY ASSE SSEE BEFORE REMITTING PAYMENT TO BNP PARIBAS. HE DREW OUR ATTENTION TO P ARA 6.9 , 6.13 , 6.19 AND 6.20 OF THE APPELLATE ORDER PASSED BY LD.CIT(A) AND SUBMITTED THAT IN VIEW OF THE DECISION IN THE CASE OF M/S.TRANSMISSIO N CORPORATION OF A.P LTD V. CIT REPORTED IN (1999) 239 ITR 587 (SC) WHEN THE PAYMENT ARE MADE TO NON-RESIDENT, THE ASSESSEE OUGHT TO HAVE DEDUCTE D INCOME-TAX AT SOURCE BEFORE REMITTING PAYMENT TO BNP PARIBAS. THE LEARNED CIT-DR SUBMITTED THAT WHILE DISTRIBUTING INVESTMENT PRODUC TS OF THE ASSESSEE, BNP PARIBAS IS RENDERING SERVICES AS IT HAS TECHNIC AL EXPERTISE IN MOBILIZING FUNDS AND HENCE THESE ARE TECHNICAL SERVICES. 8.3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED IN REJOINDER THAT ADDITIONS HAD BEEN MADE UNDER THE HEAD FEE FOR TEC HNICAL SERVICES AND THE PAYMENTS WERE NOT IN THE NATURE OF ROYALTY. IT WAS SUBMITTED THAT THESE SERVICES DID NOT MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE OR KNOW- HOW TO THE ASSESSEE AND AS PER SINGAPORE DTAA , IT IS REQUIRED THAT THE TECHNICAL KNOW-HOW SHOULD BE MADE AVAILABLE WHICH C OULD BE APPLIED TO COME WITHIN THE AMBIT OF DEDUCTION OF INCOME-TAX AT SOURCE. IT WAS SUBMITTED THAT ARRANGEMENT BETWEEN ASSESSEE AND BNP PARIBAS IS ON PRINCIPAL TO PRINCIPAL BASIS. ATTENTION WAS DRAWN T O INDIA-SINGAPORE DTAA. IT WAS SUBMITTED EVEN IF THERE IS AN PRINCIPAL TO A GENCY RELATIONS BETWEEN ASSESSEE AND BNP PARIBAS, IT WOULD NOT MADE ANY DIF FERENCE AS EVEN THEN, ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 16 -: THE ASSESSEE WAS NOT LIABLE TO DEDUCT INCOME-TAX AT SOURCE BEFORE REMITTING PAYMENT TO BNP PARIBAS. 9. WE HAVE HEARD BOTH THE RIVAL PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING CITED CASE LAWS. WE HAVE OBSERVED THAT ASSESSEE IS AN ASSET MANAGEMENT COMPANY FOR MUTUAL FUNDS. THE A SSESSEE MADE PAYMENTS THROUGH REMITTANCE SENT ABROAD IN FOR EIGN CURRENCY TO M/S BNP PARIBAS INVESTMENT SINGAPORE LIMITED, SI NGAPORE TO THE TUNE OF ` 37,61,716/- FOR THE PURPOSES OF INVESTMENT MANAGEM ENT (MARKETING FEES) TO A NON RESIDENT WITHOUT DEDUCTIN G INCOME-TAX AT SOURCE U/S 195 OF THE 1961 ACT. THE SAID FEE WAS PA ID FOR DISTRIBUTION OF ASSESSEES UNITS OF MUTUAL FUNDS OR SHARES ABROAD BY SAID BNP PARIBAS, SINGAPORE. THE SAID BNP PARIBAS I NVESTMENT SINGAPORE LIMITED, SINGAPORE ADMITTEDLY DID NOT HAD ANY PE IN INDIA OR FIXED PLACE OF BUSINESS DURING THE YEAR UNDER CO NSIDERATION. IT IS ALSO ADMITTED POSITION THAT SAID BNP PARIBAS, SINGA PORE RENDERED AFORESAID SERVICES FROM ABROAD. THE ASSESSEE HAS AD MITTEDLY SENT PAYMENTS ABROAD BY REMITTANCES IN FOREIGN CURRENCY AND NO PART OF THE PAYMENTS ARE MADE BY ASSESSEE IN INDIA OR TO AN Y PERSON IN INDIA ON BEHALF OF BNP PARIBAS, SINGAPORE. WE HAV E OBSERVED THAT AS PER DTAA ENTERED INTO BETWEEN INDIA AND SINGAPOR E, THE FEES FOR TECHNICAL SERVICES CAN BE BROUGHT TO TAX IN INDIA U NDER ARTICLE 12 , CLAUSE 4 OF INDIA-SINGAPORE DTAA , IF TECHNICAL KNO W HOW IS MADE AVAILABLE WHICH ENABLES PERSON ACQUIRING THE SAID T ECHNICAL KNOW ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 17 -: HOW OR TECHNICAL KNOWLEDGE TO APPLY THE TECHNOLOGY CONTAINED THEREIN , WHILE WE HAVE OBSERVED THAT IN THE INSTAN T CASE BNP PARIBAS , SINGAPORE DID NOT MADE AVAILABLE ANY TECH NICAL KNOWLEDGE , KNOW HOW , EXPERIENCE, SKILL OR PROCESSES TO THE ASSESSEE WHICH COULD ENABLE THE ASSESSEE TO APPLY TECHNOLOGY CONTA INED THEREIN RATHER THE FEE IS PAID TOWARDS SERVICES RENDERED BY BNP PARIBAS, SINGAPORE FOR DISTRIBUTION OF FUNDS BEING UNITS OR SHARES ON BEHALF OF THE ASSESSEE. THE AFORESAID PAYMENTS MADE BY THE ASSESSEE IN OUR CONSIDERED VIEW DID NOT FALL WITHIN THE AMBIT O F ARTICLE 3 AND 4 OF INDO-SINGAPORE DTAA AND THUS CANNOT BE CATEGORIZED AS ROYALTY PAYMENTS OR FEES FOR TECHNICAL SERVICES. THESE ARE PAYMENTS MADE FOR MANAGERIAL SERVICES RENDERED BY BNP PARIBAS, SI NGAPORE TO ASSESSEE FOR DISTRIBUTION OF UNITS OF MUTUAL FUND AND NO TECHNICAL KNOW HOW OR KNOWLEDGE IS MADE AVAILABLE TO THE ASSE SSEE BY THE SAID BNP PARIBAS, SINGAPORE WHICH COULD ENABLE ASSE SSEE TO APPLY THE SAID TECHNICAL KNOW HOW CONTAINED THEREIN. MORE OVER, THE SERVICES WERE RENDERED ABROAD BY PAYEE AND PAYMENTS WERE ALSO MADE BY ASSESSEE BY REMITTING PAYMENT ABROAD IN FOR EIGN CURRENCY. KEEPING IN VIEW AFORESAID PROVISIONS/CLAUSES AS ARE CONTAINED IN INDIA-SINGAPORE DTAA, THESE PAYMENTS CANNOT BE HELD TO BE TAXABLE IN INDIA AND CONSEQUENTLY ASSESSEE WAS NOT REQUIRED TO DEDUCT INCOME-TAX AT SOURCE U/S 195 OF THE 1961 ACT WHILE REMITTING PAYMENT ABROAD TO SAID BNP PARIBAS, SINGAPORE. IT I S WELL ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 18 -: ESTABLISHED PRINCIPLE IN TAX-MATTERS THAT TAXING ST ATUTE PROVISIONS UNDER DOMESTIC LAW OR TREATY PROVISIONS WHICHEVER A RE BENEFICIAL TO THE ASSESSEE SHALL BE APPLICABLE. THE TREATY PROVIS ION IN THE INSTANT CASE CONTAINS MAKE AVAILABLE CLAUSE, WHILE BNP PARI BAS DID NOT MADE AVAILABLE ANY TECHNICAL KNOW HOW OR KNOWLEDGE TO THE ASSESSEE WHICH COULD ENABLE ASSESSEE TO APPLY TECHN ICAL KNOWLEDGE CONTAINED THEREIN. THE DECISION OF HONBLE KARNATA KA HIGH COURT IN THE CASE OF CIT V. DE BEERS INDIA MINERALS PRIVATE LIMITED REPORTED IN (2012) 21 TAXMANN.COM 214(KAR.) IS RELEVANT. THU S, UNDER THESE CIRCUMSTANCES, WE ORDER DELETION OF THE ADDITIONS M ADE BY THE AO WHICH STOOD LATER CONFIRMED BY LEARNED CIT(A) TO TH E TUNE OF PAYMENT OF ` 37,61,716/- MADE BY THE ASSESSEE THROUGH REMITTANC E ABROAD IN FOREIGN CURRENCY TO BNP PARIBAS, SINGAPO RE. UNDER THESE CIRCUMSTANCES, WE ARE INCLINED TO DELETE AFORESAID ADDITIONS TO THE TUNE OF ` 37,61,716/- MADE BY THE AO BY INVOKING PROVISIONS OF SECTION 40(A)(I) OF THE 1961 ACT READ WITH SECTION 195 OF THE 1961 ACT WHICH STOOD LATER CONFIRMED BY LEARNED CIT(A). IN OUR CONSIDERED VIEW, IF THE SAID PAYMENTS ARE NOT TAXABLE IN INDIA IN THE HANDS OF THE NON-RESIDENT RECIPIENT , THEN PROVISIONS OF SE CTION 195 SHALL HAVE NO APPLICABILITY. IT IS RELEVANT TO REFER TO T HE DECISIONS OF HONBLE MADRAS HIGH COURT IN THE CASE OF EVOLV CLOT HING COMPANY PRIVATE LIMITED V. ACIT REPORTED IN (2018) 407 ITR 72(MAD.) AND IN THE CASE OF CIT V. FARIDA LEATHER COMPANY IN TAX CA SE APPEAL NO. ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 19 -: 484 OF 2015 . IT IS ALSO RELEVANT TO REFER TO THE DECISIONS OF HONBLE GUJARAT HIGH COURT IN THE CASE OF PCIT V. FERROMATI C MILACRON INDIA PRIVATE LIMITED (2018) 99 TAXMANN.COM 154(GUJ.) AND IN THE CASE OF PCIT V. NOVA TECHNOPLAST PRIVATE LIMITED (2018) 94 TAXMANN.COM 322( GUJ.). THE ASSESSEE SUCCEEDS ON THIS GROUND IN ITS APPEAL FILED WITH TRIBUNAL . WE ORDER ACCORDINGLY. 9 IN REVENUES APPEAL, IT IS AGGRIEVED BY DELETION MADE BY LEARNED CIT(A) OF ADDITIONS/DISALLOWANCES EARLIER MADE BY AO BY IN VOKING PROVISIONS OF SECTION14A OF THE 1961 ACT READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962. THE ASSESSEE HAD EARNED DIVIDEND INCOME FROM MUTUAL FUNDS TO THE TUNE OF RS.92,63,481/- WHICH WAS CLAIMED AS AN EXEMPT INCOME U/S.10 OF THE ACT. THE ASSESSEE DID NOT MADE ANY D ISALLOWANCE OF EXPENSES INCURRED IN RELATION TO EARNING OF THE AB OVE DIVIDEND INCOME WHICH WAS CLAIMED AS AN EXEMPT INCOME. THE ASSESSE E SUBMITTED THAT NO EXPENDITURE WAS INCURRED IN RELATION TO EARNING OF DIVIDEND INCOME WHICH WAS CLAIMED AS AN EXEMPT INCOME AND HENCE NO DISALL OWANCE OF EXPENDITURE ARE WARRANTED U/S 14A OF THE 1961 ACT. THE AO HELD THAT ASSESSEE HAS INVESTED SUBSTANTIAL AMOUNTS IN THE MU TUAL FUNDS WHICH WERE HELD AS LONG TERM INVESTMENTS, THE TOTAL VALUE OF WHICH AS ON 31.03.2010 WAS RS.13.75 CRORES WHICH INCREASED DUR ING THE YEAR TO RS.14.81 CRORES AS ON 31.03.2011. THE AO OBSERVED T HAT ASSESSEE WAS ENGAGED IN SUBSTANTIAL PURCHASE AND SALE OF CURRENT INVESTMENTS VIZ. MUTUAL FUNDS. THE AO OBSERVED THAT TOTAL INVESTMENT S AS ON 31.03.2010 ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 20 -: WAS ` 25.58 CRORES WHICH STOOD AT RS.21.31 CRORES AS ON 31.03.2011. THE AO OBSERVED THAT ASSESSEE IS ACTIVELY ENGAGED IN TH E FIELD OF INVESTMENT IN SHARES AND MUTUAL FUNDS . THE AO OBSERVED THAT TOTA L ASSETS OF THE ASSESSEE AS ON 31.03.2011 WAS RS.65.02 CRS. THE ASS ESSEE HAS ALSO CONTENDED BEFORE AO THAT OUT OF TOTAL INVESTMENTS O F ` 21.30 CRORES HELD BY ASSESSEE AS ON 31.03.2011, NO DIVIDEND WAS RECEI VED ON INVESTMENTS TO THE TUNE OF ` 17.50 CRORES AND HENCE SUCH INVESTMENTS SHOULD NOT BE CONSIDERED FOR COMPUTING DISALLOWANCE U/S 14A READ WITH RULE 8D OF THE 1962 RULES. THE AO REJECTED THE CONTENTIONS OF THE ASSESSEE THAT NO EXPENSES WERE INCURRED BY THE ASSESSEE FOR EARNING OF AN EXEMPT INCOME. THE AO OBSERVED THAT PART OF ADMINISTRATIVE OVERHEA D AND EXPENSES ON SALARY , TRAVEL ETC. FOR TOP MANAGEMENT EXECUTIVES WHO ARE INVOLVED IN INVESTMENT PORTFOLIO ARE TO BE DISALLOWED. THE AO A LSO OBSERVED THAT ALL INVESTMENTS , INCOME FROM WHICH DOES NOT OR SHALL N OT FORM PART OF THE TOTAL INCOME SHALL BE CONSIDERED FOR DISALLOWANCE U /S. 14A OF THE 1961 ACT READ WITH RULE 8D OF THE 1962 RULES. THE AO ALSO RE FERRED TO CBDT CIRCULAR NO. 5 / 2014 DATED 11.02.2014. THE AO APPL IED RULE 8D OF THE INCOME-TAX RULES, 1962 AND MADE DISALLOWANCE U/S.14 A R.W.R.8D(2)(III) OF THE 1962 RULES WHEREIN THE AMOUNT OF RS.11,72,157/- WAS DISALLOWED UNDER NORMAL COMPUTATION OF INCOME AND SIMILAR DIS ALLOWANCE WAS ALSO MADE WHILE COMPUTING BOOK PROFITS U/S.115JB , AS PE R CLAUSE (F) TO SECTION 115JB OF THE 1961 ACT. ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 21 -: 10. AGGRIEVED BY AN ASSESSMENT FRAMED BY THE AO U/S 143(3) OF THE 1961 ACT, THE ASSESSEE FILED FIRST APPEAL BEFORE LEARNED CIT(A) WHO WAS PLEASED TO DELETE DISALLOWANCE OF EXPENSES MADE U/S.14A REA D WITH RULE 8D OF THE 1962 RULES FOR COMPUTING BOOK PROFITS U/S 115JB OF THE 1961 ACT BY FOLLOWING SPECIAL BENCH DECISION OF DELHI-TRIBUNAL IN THE CASE OF M/S. VIREET INVESTMENT PVT. LTD. 165 ITD 27(DEL-TRIB. SB). SO FAR AS ADDITIONS MADE U/S 14A OF THE 1961 ACT READ WITH RULE 8D OF THE 19 62 RULES FOR COMPUTING INCOME ARE CONCERNED, THE LD.CIT(A) DELET ED THE ADDITIONS VIDE APPELLATE ORDER DATED 30.11.2017 BY HOLDING AS UND ER: 4.3 I HAVE CONSIDERED THE FINDINGS OF THE AO AN D THE WRITTEN SUBMISSIONS MADE BY THE AR. THE VERY SAME ISSUE WAS CONSIDERED VIDE ORDER I N ITA NO. 39/2014-15 /LTU(A)-17 DATED 02.11.2017 FOR THE A.Y. 2008-09. HENCE, THE AO IS DIRECTED TO FOLLOW THE DIRECTIONS GIVEN BY THE HON'BLE ITAT AND RE-COMPUTE THE DIS ALLOWANCE MADE U/S.14A AFTER DUE VERIFICATION AND IN ACCORDANCE WITH LAW IN RESP ECT OF THE ASSESSMENT YEARS UNDER CONSIDERATION, IT GOES WITHOUT SAYING THAT AN OPPOR TUNITY OF BEING HEARD SHOULD BE GIVEN TO THE APPELLANT BEFORE ANY SUCH DISALLOWANCE IS MADE. THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 11. AGGRIEVED BY AN APPELLATE ORDER DATED 30.11.201 7 PASSED BY LEARNED CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNA L . THE LD.CIT-DR FAIRLY SUBMITTED THAT TRIBUNAL HAS PASSED AN ORDER IN ITA NO.1774/MDS/2012 DATED 19.07.2013 FOR AY: 2008-09. HOWEVER, NOW LAW HAS PROGRESSED AND KEEPING IN VIEW DECISION IN THE CASE OF M/S.MAX OPP INVESTMENT LTD V. CIT (SUPRA), THE PURPOSES FOR WHICH SHARES/UNITS IN MUTUAL FUNDS ARE HELD ARE IRRELEVANT AND DISALLOWANCE OF EXPENDITURE INCU RRED IN RELATION TO EARNING OF AN EXEMPT INCOME IS TO BE MADE KEEPING I N VIEW PROVISIONS OF SECTION 14A OF THE 1961 ACT. ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 22 -: 12. THE LD.COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND SUBMITTED THAT SHORT TERM CAPITAL GAINS ARE SUBJECT TO INCOME-TAX AND HENCE ALL SUCH INVESTMENT IN WHICH SHORT TERM CAPITAL GAINS AROSE SHOULD BE EXCLUDED WHILE COMPUTING DISALLOWANCE OF EXPENSES U/S 14A OF THE 1961 ACT. THE ASSESSEE WAS CONFRONTED BY THE BENCH WITH DECISION OF HONBLE SUPREME COURT IN THE CASE OF M/S. MAXOPP INVESTMENT LTD V. CIT (2018) 402 ITR 640(SC). 13. WE HAVE CONSIDERED RIVAL CONTENTIONS AND HAVE PERUSED THE MATERIAL ON RECORD INCLUDING CITED CASE LAWS WE HAVE OBSERV ED THAT ASSESSEE IS AN ASSET MANAGEMENT COMPANY FOR MUTUAL FUND. THE ASSES SEE HAS INVESTMENTS IN MUTUAL FUND AND OTHER INVESTMENTS, T HE ASSESSEE HAS RECEIVED DIVIDEND INCOME FROM MUTUAL FUND TO THE TU NE OF RS.92,63,481/- WHICH WAS CLAMED AS AN EXEMPT INCOME U/S.10 OF THE 1961 ACT. THE ASSESSEE HAS CLAIMED THAT HE HAS NOT INCURRED ANY E XPENDITURE IN RELATION TO EARNING OF AN EXEMPT INCOME. HOWEVER, AO HAS INV OKED PROVISIONS OF SEC.14A R.W.R. 8D(2)(III) OF THE 1962 RULES TO MAKE TOTAL DISALLOWANCE OF RS.11,72,157/- @ 0.5% OF THE AVERAGE INVESTMENTS. THE INVESTMENT MADE BY ASSESSEE AS ON 31.03.2010 WAS RS.25.58 CRS. WHEREAS IT WAS RS.21.30 CRS. AS ON 31.03.2011. THE ASSESSEE HAS C LAIMED THAT SHORT TERM INVESTMENTS CANNOT BE CONSIDERED FOR THE PURPO SE OF MAKING DISALLOWANCE U/S.14A OF THE 1961 ACT OWING TO FACT THAT SHORT TERM CAPITAL GAINS EARNED ON THESE INVESTMENTS HAD SUFFERED TAXA TION. WE ARE NOT IN AGREEMENT WITH ASSESSEE SO FAR AS THIS CONTENTION I S CONCERNED AND REJECT ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 23 -: THIS CONTENTION OF THE ASSESSEE KEEPING IN VIEW DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LIMI TED(SUPRA) WHEREIN IT WAS HELD THAT DOMINANT PURPOSE OF MAKING INVESTM ENT HAS NO RELEVANCE WHILE COMPUTING DISALLOWANCE OF EXPENDITURE INCURRE D IN RELATION TO EARNING OF AN EXEMPT INCOME. HOWEVER, THE ASSESSEE ALSO CLAIMED THAT ONLY THOSE INVESTMENT WHICH ACTUALLY YIELDED DIVIDE ND INCOME WHICH WAS CLAIMED AS AN EXEMPT INCOME SHOULD BE CONSIDERED FO R THE PURPOSE OF MAKING DISALLOWANCE OF EXPENDITURE U/S 14A OF THE 1 961 ACT. WE ARE IN AGREEMENT WITH THIS CONTENTIONS OF THE ASSESSEE KEE PING IN VIEW DECISION OF SPECIAL BENCH OF DELHI TRIBUNAL IN THE CASE OF M /S. VIREET INVESTMENT PVT. LTD.(SUPRA) THAT ONLY THOSE INVESTMENTS WHICH ACTUALLY YIELDED EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION S HOULD BE CONSIDERED FOR MAKING DISALLOWANCE U/S 14A OF THE 1961 ACT, AN D HENCE WE ARE RESTORING THIS ISSUE TO FILE OF THE AO WITH DIRECTI ON TO COMPUTE DISALLOWANCE U/S.14A R.W.R.8D(2)(III) BY TAKING INTO ACCOUNT ONL Y THOSE INVESTMENTS WHICH ACTUALLY YIELDED DIVIDEND INCOME DURING THE Y EAR UNDER CONSIDERATION, KEEPING IN VIEW RATIO OF DECISION OF SPECIAL BENCH OF DELHI TRIBUNAL IN THE CASE OF VIREET INVESTMENT(SUPRA). THUS, WITH THESE OBSERVATIONS, WE SET ASIDE THIS MATTER BACK TO THE FILE OF THE AO FOR RE- DETERMINATION OF DISALLOWANCE OF EXPENDITURE INCURR ED IN RELATION TO EARNING OF AN EXEMPT INCOME U/S.14A OF THE 1961 ACT . THIS GROUND IN REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE S. WE ORDER ACCORDINGLY. ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 24 -: 14. THE NEXT GRIEVANCE OF THE REVENUE IS WITH RESPE CT TO RELIEF GRANTED BY LEARNED CIT(A) BY DELETING THE DISALLOWANCE OF PAYM ENTS OF ` 15,51,269/- TOWARDS SUB-ADVISORY FEE MADE TO FUND QUEST U/S.40( A)(I) OF THE ACT. IT WAS OBSERVED BY THE AO THAT ASSESSEE HAD MADE PAYME NT IN FOREIGN CURRENCY TO M/S.FUND QUEST TOWARDS OF SUB-ADVISORY FEES . THE ASSESSEE SUBMITTED BEFORE AO THAT SERVICES WERE RENDERED OUT SIDE INDIA HENCE SAME WILL NOT FALL UNDER THE PURVIEW OF SECTION 195 OF THE 1961 ACT AS PER CBDT CIRCULAR NUMBER 786. THE ASSESSEE ALSO RELIED UPON INDO- FRENCH DTAA AND SUBMITTED BEFORE AO THAT SINCE NO TECHNICA L KNOWLEDGE WAS MADE AVAILABLE TO THE ASSESSEE AND HENCE AFORESAID INCOME IS NOT CHARGEABLE TO INCOME-TAX IN INDIA WHICH IS A PRE-R EQUISITE FOR TAXING THE FEE FOR THE TECHNICAL SERVICES AND HENCE NO INCOME -TAX WAS DEDUCTED AT SOURCE WHILE MAKING REMITTANCE IN FOREIGN CURRENCY TO ABOVE PARTY. 14.2 THE AO OBSERVED THAT SAID M/S.FUND QUEST HAS R ENDERED FOLLOWING SERVICES VIDE ARTICLE III OF THE AGREEMENT ENTERED INTO BY ASSESSEE WITH SAID FUND QUEST: 'THE INVESTMENT ADVISOR SHALL GIVE ADVICE, EXTEND A SSISTANCE, RENDER SERVICES AND FURNISH INFORMATION, DATA AND REPORTS IN RESPECT OF THE ACC OUNT TO THE MANAGER OR TO SUCH OTHER ENTITY AS THE MANAGER MAY DIRECT, IN THE MANNER, FO RM AND WHEN REQUIRED BY THEM IN CONNECTION WITH THE INVESTMENT ACTIVITIES OF THE MA NAGER IN RESPECT OF THE ACCOUNT. THE ACTIVITIES OF THE INVESTMENT ADVISOR AS REFERRE D TO IN THE FOREGOING SECTION MAY, WITHOUT LIMITATION, INCLUDE: A. PROVIDING RESEARCH REPORTS, MACRO AND MICRO ECO NOMIC ANALYSIS AND OTHER FINANCIAL ADVISORY SERVICES; B. RECOGNISE SOURCES FOR VALUE CREATION; C. ADVISING ON INVESTIGATION, STRUCTURING, MONITORI NG OF PORTFOLIO SECURITIES AS THE CASE MAY BE; ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 25 -: D. ASSIST IN FORMULATION AND EVALUATION OF STRATEGI ES FOR INVESTMENT AND DISINVESTMENT INCLUDING PROVIDING ANALYSIS AND INVE STIGATIONS OF POTENTIAL DISPOSITIONS OF PORTFOLIO SECURITIES, E. UNDERTAKE DUE DILIGENCE OF INVESTMENT OPPORTUNIT IES AND SUBMIT REPORTS AND RECOMMENDATIONS; F. ADVISING ON THE TIMING, CONSIDERATION, TERMS, MO DE AND MANNER OF INVESTMENTS AND/OR DIVESTMENTS; G. FURNISHING OTHER COMMERCIAL/PROPRIETARY INFORMAT ION TO THE MANAGER WITH REGARD TO THE INVESTMENT AND / OR DIVESTMENT OPPORTUNITIES ; H. ANY OTHER ADVISORY SERVICES AS MAY BE DESIRED BY THE MANAGER RELATING TO THE MANAGEMENT OF THE ACCOUNT AND AS AGREED BETWEEN THE PARTIES FROM TIME TO TIME.' II) IT CAN BE VERY CLEARLY SEEN FROM THE ABOVE FACT S THAT THE ASSESSEE AVAILED THE ABOVE MENTIONED ADVISORY SERVICES FROM M/S.FUND QUEST, WH ICH HAS BEEN IN TURN UTILIZED BY THE ASSESSEE FOR ITS INVESTMENTS PURPOSE IN ABROAD IN O RDER TO GET THE MAXIMUM RETURN FROM THE INVESTMENT WITH LESS MARKET RISK. IT IS FURTHER NOTABLE THAT THE M/S.FUND QUEST DID ELABORATE MARKET RESEARCH ON THE INVESTMENTS PORTFO LIO AND IT DEVELOPED THE DATA FOR INVESTING IN THE MARKET WITH LESS RISK AND TO GET M AXIMUM RETURN FROM THE SAME. THUS, THE DATA BASE DEVELOPED BY M/S.FUND QUEST IS CLEARLY A VALUE ADDED PRODUCT PREPARED ON THE BASIS OF ENORMOUS EXPERIENCE OF THE ABOVE NON-RESID ENT IN THE FIELD OF THE INVESTMENT PORTFOLIO. THEREFORE, FEES PAID BY THE ASSESSEE COM PANY TO M/S.FUND QUEST FOR PROVIDING THE ABOVE COMMERCIAL INFORMATION SHALL BE CONSIDERE D AS ROYALTY BOTH AS PER THE PROVISIONS OF SECTION 9(1)(VI) OF THE INCOME-TAX ACT AND ALSO AS PER THE ARTICLES OF INDO FRENCH DTAA. FOR BETTER CLARITY, THE RELEVANT PART OF THE DTAA I S REPRODUCED AS UNDER: 'ARTICLE 13 - ROYALTIES AND FEES FOR TECHNICAL SERV ICES AND PAYMENTS FOR THE USE OF EQUIPMENT - 1. ROYALTIES, FEES FOR TECHNICAL SERVIC ES AND PAYMENTS FOR THE USE OF EQUIPMENT ARISING IN A CONTRACTING STATE AND PAID T O A RESIDENT OF THE OTHER CONTRACTING STATE MAY BE TAXED IN THAT OTHER CONTRA CTING STATE. [2. HOWEVER, SUCH ROYALTIES, FEES AND PAYMENTS MAY ALSO BE TAXED IN THE CONTRACTING STATE, IN WHICH THEY ARISE AND ACCORDIN G TO THE LAWS OF THAT CONTRACTING STATE, BUT IF THE RECIPIENT IS THE BENEFICIAL OWNER OF THESE CATEGORIES OF INCOME, THE TAX SO CHARGED SHALL NOT EXCEED 10 PER CENT OF THE GROSS AMOUNT OF SUCH ROYALTIES, FEES AND PAYMENTS.] 3. THE TERM 'ROYALTIES' AS USED IN THIS ARTICLE MEA NS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITERARY, ARTISTIC OR SCIENTIFIC WORK INCLUDING CINEMATOGRAPH FILMS, OR FILMS OR TAPES USED FOR RADIO OR TELEVISION BROADCASTING, ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR INFORMATION CONCE RNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE'. 14.3 THE AO RELIED UPON THE DECISION OF MUMBAI-TRIB UNAL IN THE CASE OF M/S ESSAR OIL LIMITED V. JCIT (2005) 4 SOT 161.THE AO OBSERVED THAT DATA BASE DEVELOPED BY M/S.FUND QUEST HAS BEEN FURN ISHED TO THE ASSESSEE LOCATED IN INDIA AND THE SAME HAS BEEN UTI LIZED BY ASSESSEE TO GET MAXIMUM PROFITS ON INVESTMENTS MADE ABROAD. THU S, THE AO WAS OF ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 26 -: THE VIEW THAT THE DATA BASE DEVELOPED BY M/S FUND Q UEST WAS MADE AVAILABLE BY IT TO ASSESSEE . THE AO REFERRED TO AR TICLE III OF THE AGREEMENT WHICH STIPULATED AS UNDER: 3.4 THE INVESTMENT ADVISOR WILL MAKE AVAILABLE TO THE MANAGER THE USE OF ITS NAME AND ITS LOGO IN ANY DOCUMENTATION P REVIOUSLY APPROVED BY THE INVESTMENT ADVISOR WHICH THE MANAGE R PRODUCES IN RESPECT OF THE ADVICE CONTEMPLATED HEREIN. 14.4 THUS , THE AO HELD THAT THE ASSESSEE MADE PAYM ENTS FOR RECEIPT OF TECHNICAL KNOWLEDGE. THE AO OBSERVED THAT THE DATA BASE DEVELOPED BY FUND QUEST WAS GIVEN TO THE ASSESSEE WHO IS LOCATED IN INDIA AND THESE WERE NOT SERVICES RENDERED BY NON RESIDENT OUTSIDE INDIA NOR AS OUTRIGHT PURCHASE OF THE ABOVE DATA BASE , SINCE THE DATA BA SE RECEIVED CANNOT BE SHARED WITH ANY BODY NOR SOLD TO THE THIRD PERSON B Y THE ASSESSEE AS PER ARTICLE VII OF THE AGREEMENT ENTERED BY THE ASSESSE E WITH M/S FUND QUEST. THE AO OBSERVED THAT CBDT CIRCULAR NO. 786/2000 REL IED UPON BY THE ASSESSEE IS NOT APPLICABLE IN THE INSTANT CASE. THE AO RELIED UPON DECISION OF HONBLE AAR RULING IN THE CASE OF STEFFEN ROBERT SON AND KIRSTEN CONSULTING ENGINEERS AND SCIENTISTS V. CIT (1998) 2 30 ITR 206 WHEREIN IT WAS HELD THAT WHAT IS CRUCIAL FOR BRINGING TO TAX S AID FEE FOR TECHNICAL KNOW HOW IS PLACE WHERE THE SAID SERVICES ARE UTILIZED A ND NOT THE PLACE WHERE THE SERVICES WERE RENDERED.THE LEARNED AO WAS ALSO OF THE VIEW THAT EXPLANATION TO SECTION 9(1)(VII) INSERTED BY FINANC E ACT, 2010 WITH RETROSPECTIVE EFFECT FROM 01.06.1976 CLEARLY STATES THAT THE ABOVE PAYMENTS FOR THE PURPOSES OF ROYALTY OR FEES FOR TE CHNICAL SERVICES SHALL BE TAXABLE IN INDIA IRRESPECTIVE OF PE OF THE NON R ESIDENT AND IRRESPECTIVE OF THE PLACE IN WHICH THE SERVICES WAS RENDERED, WH ICH READ AS UNDER: '[EXPLANATION.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT FOR THE PURPOSES OF THIS SECTION, INCOME OF A NON-RESIDENT SHALL BE DEEMED T O ACCRUE OR ARISE IN INDIA UNDER CLAUSE (V) OR CLAUSE (VI) OR CLAUSE (VII) OF SUB-SECTION (1) A ND SHALL BE INCLUDED IN THE TOTAL INCOME OF THE NON-RESIDENT, WHETHER OR NOT, (I) THE NON-RESIDENT HAS A RESIDENCE OR PLACE OF BUSINE SS OR BUSINESS CONNECTION IN INDIA; OR ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 27 -: (II) THE NON-RESIDENT HAS RENDERED SERVICES IN INDIA.]' 14.5 THUS, THE AO DISALLOWED THE AFORESAID PAYMENT MADE BY ASSESSEE VIDE FOREIGN REMITTANCE OF ` 15,51,269/- TO FUND QUEST , FRANCE WITHOUT DEDUCTING OF INCOME-TAX AT SOURCE WHICH STOOD ADDED BY THE AO TO THE INCOME OF THE ASSESSEE AS PER PROVISIONS OF SECTION 40(A)(I) READ WITH SECTION 195 OF THE 1961 ACT,VIDE ASSESSMENT ORDER D ATED 24.03.2014 PASSED BY THE AO U/S 143(3) OF THE 1961 ACT 15 THE ASSESSEE BEING AGGRIEVED BY AN ASSESSMENT FR AMED BY THE AO FILED FIRST APPEAL BEFORE THE LD.CIT(A), WHO WAS PLEASED TO ALLOW APPEAL OF THE ASSESSEE BY FOLLOWING DECISION OF THE TRIBUNAL IN A SSESSEES OWN CASE IN ITA NO.1774/MDS/2012 DATED 19.07.2013 FOR AY: 2008- 09, WHEREIN IT WAS HELD BY THE LD.CIT(A) AS UNDER: .5.1 THE AO FOUND THAT THE APPELLANT MADE PAY MENTS TOWARDS SUB-ADVISORY FEES TO FUND QUEST, FRANCE, FOR SERVICES RENDERED ABROAD. THE APPELLANT SUBMITTED THAT FUND QUEST COMPILES THE RESEARCH DATA WHICH IS PUBLICLY AVAILABLE AND TRANSMITS THE INFORMATION IN THE FORM OF INVESTMENT REPORTS TO THE APPELLANT. HOWEVER, THE AO HELD THAT THE PAYMENTS ARE IN THE NATURE OF 'ROYALTY' WHICH IS DE EMED TO ACCRUE OR ARISE IN INDIA AS DEFINED IN EXPLANATION (2) OF SEC.9(1)(VI) AND AS S UCH LIABLE TO TAX IN INDIA. HENCE, THE AO DISALLOWED THE PAYMENTS MADE TO FUND QUEST U/S.40(A )(IA) OF THE ACT ON THE GROUND OF NON-DEDUCTION OF TAX AT SOURCE U/S.195 OF THE ACT. 5.2 THE APPELLANT SUBMITTED THAT THIS ISSUE WAS DEC IDED IN FAVOUR OF THE APPELLANT IN ITS OWN CASE BY THE HON'BLE ITAT VIDE OR DER IN ITA NO. L774/MDS/2012 DATED 19.07.2013 FOR THE A.Y. 2008-09 WHICH IS AS FOLLOWS: EXTRACTED FROM ITATS ORDER DATED 19.07.2013 III. THE THIRD GROUND IN THE APPEAL RELATES TO DIS -ALLOWANCE U/S. 40(A)(IA). THE ASSESSEE IS INTO INVESTMENT BUSINESS. THE ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH M/S. FUND QUEST (FRANCE) ON 13-07-2007, TO PRO VIDE INVESTMENT ADVICE FOR THE INVESTMENTS TO BE CARRIED OUTSIDE INDIA. M/S. FUND QUEST HAS BEEN PROVIDING ADVISORY SERVICES. FOR THE SERVICES RENDERED, THE A SSESSEE PAID FEE IN ACCORDANCE WITH MUTUAL AGREEMENT. IN THE COURSE OF PROVIDING A DVISORY SERVICES, M/S. FUND QUEST IS PROVIDING CERTAIN DATA OF THE COMPANIES WH ICH FACILITATES THE ASSESSEE TO MAKE INVESTMENT DECISIONS. THE INFORMATION PROVIDED TO THE ASSESSEE BY FUND QUEST IN THE FORM OF DATABASE IS PUBLISHED INFORMAT ION WHICH IS AVAILABLE IN PUBLIC DOMAIN. M/S. FUND QUEST HAS MERELY COMPILED THE INF ORMATION AND TRANSMITTED THE SAME TO ASSESSEE. THE AUTHORITIES BELOW TERMED THE PAYMENTS MADE BY THE ASSESSEE TO M/S. FUND QUEST FOR THE SERVICES AND DA TA PROVIDED AS ROYALTY. WE ARE OF THE CONSIDERED OPINION THAT SUCH PAYMENTS CANNOT BE TERMED AS ROYALTY AS DEFINED UNDER THE PROVISIONS OF THE ACT. THE TER M ROYALTY HAS BEEN DEFINED IN ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 28 -: EXPLANATION (2) TO SECTION-9, SUB-SECTION-1, CLAUSE -(VI) WHICH IS RE-PRODUCED HERE IN BELOW: EXPLANATION 2.FOR THE PURPOSES OF THIS CLAUSE, 'RO YALTY' MEANS CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION BUT EXCLUDING ANY CONSIDERATION WHICH WOULD BE THE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS') FOR (I) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING TH E GRANTING OF A LICENCE) IN RESPECT OF A PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY ; (II) THE IMPARTING OF ANY INFORMATION CONCERNING TH E WORKING OF, OR THE USE OF, A PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY ; (III) THE USE OF ANY PATENT, INVENTION, MODEL, DESI GN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY ; (IV) THE IMPARTING OF ANY INFORMATION CONCERNING TE CHNICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL ; [(IVA) THE USE OR RIGHT TO USE ANY INDUSTRIAL, COMM ERCIAL OR SCIENTIFIC EQUIPMENT BUT NOT INCLUDING THE AMOUNTS REFERRED TO IN SECTION 44 BB;] (V) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING TH E GRANTING OF A LICENCE) IN RESPECT OF ANY COPYRIGHT, LITERARY, ARTISTIC OR SCIENTIFIC WOR K INCLUDING FILMS OR VIDEO TAPES FOR USE IN CONNECTION WITH TELEVISION OR TAPES FOR USE IN CONNECTION WITH RADIO BROADCASTING, BUT NOT INCLUDING CONSIDERATION FOR T HE SALE, DISTRIBUTION OR EXHIBITION OF CINEMATOGRAPHIC FILMS ; OR (VI) THE RENDERING OF ANY SERVICES IN CONNECTION WI TH THE ACTIVITIES REFERRED TO IN SUB-CLAUSES (I) TO [(IV), (IVA) AND](V). THUS, A PERUSAL OF THE TERM OF ROYALTY AS DEFINED IN THE ACT SHOWS THAT IT DOES NOT INCLUDE ANY INFORMATION PROVIDED IN THE COURSE OF A DVISORY SERVICES. WE DO NOT AGREE WITH THE FINDINGS OF THE CIT(APPEALS) ON THE ISSUE. SINCE, PAYMENTS MADE TO M/S. FUND QUEST ARE NOT IN THE NATURE OF ROYALTY AND THE SERVICES WERE RENDERED ABROAD, NO PART OF INCOME HAD ACCRUED OR ARISEN IN INDIA. THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE ON THE PAYMENTS SO MADE. TH E FINDINGS OF THE CIT(APPEALS) ON THIS ISSUE ARE SET ASIDE AND THIS GROUND OF APPE AL OF THE ASSESSEE IS ALLOWED. 5.3 I HAVE CONSIDERED THE FINDINGS OF THE AO AND TH E WRITTEN SUBMISSIONS MADE BY THE AR. RESPECTFULLY FOLLOWING THE ABOVE DECISION O F THE HON'BLE ITAT, THE AO IS DIRECTED TO DELETE THE DISALLOWANCE MADE U/S.40(A)( IA) OF THE PAYMENT MADE TO FUND QUEST. THE APPELLANT SUCCEEDS ON THIS GROUND F OR THE ASSESSMENT YEARS UNDER CONSIDERATION. 16. AGGRIEVED BY DECISION OF LEARNED CIT(A), THE RE VENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD.CIT-DR RELIED ON THE A SSESSMENT ORDER PASSED BY THE AO AND SUBMITTED THAT THE SAID ORDER PASSED BY TRIBUNAL IN ITA NO. 1774/MDS/2012 DATED 19.07.2013 FOR AY: 2008 -09 IS NOT ACCEPTED BY REVENUE AND APPEAL HAS BEEN FILED WITH HONBLE M ADRAS HIGH COURT. ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 29 -: OUR ATTENTION WAS DRAWN TO PAGE 13-15 OF THE PB WHE REIN THE ORDER OF THE TRIBUNAL IN ITA NO. 1774/MDS/2012 IS PLACED. THE LD .COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, SUBMITTED BEFORE THE T RIBUNAL THAT THE ISSUE IS SQUARELY COVERED BY DECISION OF THE TRIBUNAL. 17. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSE D THE MATERIAL ON RECORD INCLUDED CITED CASE LAWS. WE HAVE OBSERVED T HAT THE ASSESSEE HAS REMITTED ABROAD AN AMOUNT OF ` 15,51,269/- IN FOREIGN CURRENCY TO M/S FUND QUEST, FRANCE TOWARDS SUB-ADVISORY FEES WITHOU T DEDUCTING INCOME- TAX AT SOURCE U/S 195 OF THE 1961 ACT WHICH LED AO TO MAKE ADDITIONS IN THE HANDS OF THE ASSESSEE BY INVOKING PROVISIONS OF SECTION 40(A)(I) OF THE 1961 ACT BY HOLDING THAT THE SAID PAYMENTS WERE MAD E TOWARDS ROYALTY . THE LEARNED CIT(A) WAS PLEASED TO DELETE THE ADDITI ONS BY FOLLOWING ITAT, CHENNAI BENCHES, DECISION IN ASSESSEES OWN CASE FO R AY: 2008-09 IN ITA NO. 1774/MDS/2012 DATED 19.07.2013. THE LEARNED CIT -DR HAS BROUGHT TO THE NOTICE OF THE BENCH THAT AN APPEAL AGAINST AFOR ESAID APPELLATE ORDER PASSED BY ITAT WAS FILED BY REVENUE BEFORE HONBLE MADRAS HIGH COURT U/S 260-A OF THE 1961 ACT WHICH IS PENDING FOR DISP OSAL BEFORE HONBLE MADRAS HIGH COURT. THE LEARNED COUNSEL DID NOT CONT ROVERT THE PRESENT STATUS OF APPEAL FILED BY REVENUE WITH HONBLE MADR AS HIGH COURT WHICH IS STATED TO BE PENDING FOR DISPOSAL. THE CHENNAI TRIB UNAL IN AFORESAID ORDER IN ASSESSEES OWN CASE FOR AY: 2008-09, HELD AS UND ER: III. THE THIRD GROUND IN THE APPEAL RELATES TO DIS -ALLOWANCE U/S. 40(A)(IA). THE ASSESSEE IS INTO INVESTMENT BUSINESS. THE ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH M/S. FUND QUEST (FRANCE) ON 13-07-2007, TO PRO VIDE INVESTMENT ADVICE FOR THE ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 30 -: INVESTMENTS TO BE CARRIED OUTSIDE INDIA. M/S. FUND QUEST HAS BEEN PROVIDING ADVISORY SERVICES. FOR THE SERVICES RENDERED, THE A SSESSEE PAID FEE IN ACCORDANCE WITH MUTUAL AGREEMENT. IN THE COURSE OF PROVIDING A DVISORY SERVICES, M/S. FUND QUEST IS PROVIDING CERTAIN DATA OF THE COMPANIES WH ICH FACILITATES THE ASSESSEE TO MAKE INVESTMENT DECISIONS. THE INFORMATION PROVIDED TO THE ASSESSEE BY FUND QUEST IN THE FORM OF DATABASE IS PUBLISHED INFORMAT ION WHICH IS AVAILABLE IN PUBLIC DOMAIN. M/S. FUND QUEST HAS MERELY COMPILED THE INF ORMATION AND TRANSMITTED THE SAME TO ASSESSEE. THE AUTHORITIES BELOW TERMED THE PAYMENTS MADE BY THE ASSESSEE TO M/S. FUND QUEST FOR THE SERVICES AND DA TA PROVIDED AS ROYALTY. WE ARE OF THE CONSIDERED OPINION THAT SUCH PAYMENTS CANNOT BE TERMED AS ROYALTY AS DEFINED UNDER THE PROVISIONS OF THE ACT. THE TER M ROYALTY HAS BEEN DEFINED IN EXPLANATION (2) TO SECTION-9, SUB-SECTION-1, CLAUSE -(VI) WHICH IS RE-PRODUCED HERE IN BELOW: EXPLANATION 2.FOR THE PURPOSES OF THIS CLAUSE, 'RO YALTY' MEANS CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION BUT EXCLUDING ANY CONSIDERATION WHICH WOULD BE THE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS') FOR (I) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING TH E GRANTING OF A LICENCE) IN RESPECT OF A PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY ; (II) THE IMPARTING OF ANY INFORMATION CONCERNING TH E WORKING OF, OR THE USE OF, A PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY ; (III) THE USE OF ANY PATENT, INVENTION, MODEL, DESI GN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY ; (IV) THE IMPARTING OF ANY INFORMATION CONCERNING TE CHNICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL ; [(IVA) THE USE OR RIGHT TO USE ANY INDUSTRIAL, COMM ERCIAL OR SCIENTIFIC EQUIPMENT BUT NOT INCLUDING THE AMOUNTS REFERRED TO IN SECTION 44 BB;] (V) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING TH E GRANTING OF A LICENCE) IN RESPECT OF ANY COPYRIGHT, LITERARY, ARTISTIC OR SCIENTIFIC WOR K INCLUDING FILMS OR VIDEO TAPES FOR USE IN CONNECTION WITH TELEVISION OR TAPES FOR USE IN CONNECTION WITH RADIO BROADCASTING, BUT NOT INCLUDING CONSIDERATION FOR T HE SALE, DISTRIBUTION OR EXHIBITION OF CINEMATOGRAPHIC FILMS ; OR (VI) THE RENDERING OF ANY SERVICES IN CONNECTION WI TH THE ACTIVITIES REFERRED TO IN SUB-CLAUSES (I) TO [(IV), (IVA) AND](V). THUS, A PERUSAL OF THE TERM OF ROYALTY AS DEFINED IN THE ACT SHOWS THAT IT DOES NOT INCLUDE ANY INFORMATION PROVIDED IN THE COURSE OF A DVISORY SERVICES. WE DO NOT AGREE WITH THE FINDINGS OF THE CIT(APPEALS) ON THE ISSUE. SINCE, PAYMENTS MADE TO M/S. FUND QUEST ARE NOT IN THE NATURE OF ROYALTY AND THE SERVICES WERE RENDERED ABROAD, NO PART OF INCOME HAD ACCRUED OR ARISEN IN INDIA. THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE ON THE PAYMENTS SO MADE. TH E FINDINGS OF THE CIT(APPEALS) ON THIS ISSUE ARE SET ASIDE AND THIS GROUND OF APPE AL OF THE ASSESSEE IS ALLOWED. AS IS REPRODUCED ABOVE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR AY: 2008-09, WE HAVE OBSERVED THAT ISSUES CONCERNING PA YMENTS MADE BY ASSESSEE BY REMITTING ABROAD IN FOREIGN CURRENCY TO THE SAME PARTY FUND ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 31 -: QUEST, FRANCE WAS DECIDED BY CHENNAI- TRIBUNAL IN A SSESSEES OWN CASE FOR AY: 2008-09 IN ITA NO. 1774/MDS/2012 BY HOLDING IN FAVOUR OF THE ASSESSEE AS REPRODUCED ABOVE AND RESPECTFULLY FOLLO WING AFORESAID DECISION OF THE ITAT, CHENNAI BENCHES, WE DISMISS T HIS GROUND RAISED BY REVENUE . WHILE DISMISSING THIS GROUND RAISED BY RE VENUE, WE ARE GUIDED BY PRINCIPLES OF JUDICIAL DISCIPLINE AND PRINCIPLES OF CONSISTENCY IN TAXING- STATUTE AS LAID DOWN BY HONBLE SUPREME COURT IN TH E CASE OF RADHA SOAMI SATSANG V. SATSANG (1992) 193 ITR 321(SC). W E ORDER ACCORDINGLY. 18. THE NEXT ISSUE IN REVENUES APPEAL CONCERNS I TSELF WITH DECISION OF LEARNED CIT(A) IN DELETING THE DISALLOWANCE OF EXPE NSES MADE BY THE AO W.R.T. TO EXPENSES INCURRED BY ASSESSEE IN THE NATU RE OF REPAIRS AND IMPROVEMENT MADE TO LEASEHOLD BUILDING NOT OWNED B Y ASSESSEE WHICH WAS USED FOR OFFICE PREMISES , TO THE TUNE OF ` 43,63,256/- WHICH WERE CLAIMED BY ASSESSEE AS REVENUE EXPENDITURE IN THE R ETURN OF INCOME FILED WITH REVENUE. THE AO HAD OBSERVED THAT THESE EXPENS ES WERE ON ACCOUNT OF IMPROVEMENT OF RENTED BUILDING USED AS OFFICE PR EMISES. THE ASSESSEE CLAIMED THAT THESE EXPENSES WERE INCURRED IN THE LE ASE HOLD PREMISES WHICH ARE NEITHER IN THE NATURE OF CURRENT REPAIRS NOR IN THE NATURE OF CAPITAL EXPENDITURE . THE ASSESSEE CLAIMED THAT THE SE EXPENSES ARE ALLOWABLE AS REVENUE EXPENSES U/S 37 OF THE 1961 AC T AND CANNOT BE CAPITALIZED . ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 32 -: 19. THE AO OBSERVED THAT ASSESSEE HAD INCURRED THES E EXPENSES EXCLUSIVELY TOWARDS INTERIOR DECORATION, EXTENSION AND RENOVATION OF THE OFFICE PREMISES LEADING TO IMPROVEMENTS IN RENTED B UILDINGS AND TREATED THE SAME AS CAPITAL IN NATURE. THE AO REFERRED TO AMENDED PROVISIONS OF SECTION 32 AND 30 OF THE 1961 ACT, WHEREIN EXPENDIT URE INCURRED ON LEASE HOLD PREMISES NOT OWNED BY TAX-PAYER TOWARDS CONSTR UCTION OF STRUCTURE OR DOING OF ANY WORK IN OR IN RELATION TO RENOVATIO N OR IMPROVEMENT IS CONSIDERED TO BE CAPITAL EXPENDITURE AND DEPRECIATI ON WILL BE ALLOWED ACCORDINGLY. THE AO OBSERVED THAT THIS AMENDMENT WA S EFFECTIVE FROM AY: 1988-89 AND THUS DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. MADRAS AUTO SERVICES PRIVATE LIMITED 233 ITR 468 RE LIED UPON BY ASSESSEE SHALL NOT BE RELEVANT AS THE SAME DEALS WITH PRE-AM ENDED LAW. THE AO OBSERVED THAT ABOVE EXPENDITURE INCURRED BY THE ASS ESSEE IS NOT FOR PURPOSES OF CURRENT REPAIRS BUT TO GET A NEW ADVANT AGE BY WAY OF INTERIOR DECORATION, EXTENSION AND RENOVATION OF OFFICE PREM ISES. THUS, AS PER AO THE ABOVE EXPENDITURE IS CAPITAL IN NATURE AS IT WI LL LEAD TO BENEFIT OF ENDURING NATURE TO THE ASSESSEE . THE AO RELIED UPO N DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF BIGJOS INDIA LIMITE D V. CIT REPORTED IN 293 ITR 170(DEL.). THUS, THE AO HELD THAT THESE EXPENS ES INCURRED FOR INTERIOR DECORATION , EXTENSION AND RENOVATION OF THE OFFICE PREMISES PROVIDES ASSESSEE WITH ENDURING BENEFIT AND HENCE THESE EXPE NSES CANNOT BE ALLOWED AS REVENUE EXPENSE WHICH ARE TO BE CAPITALI ZED AND DEPRECIATION ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 33 -: U/S 32 OF THE 1961 ACT IS TO BE ALLOWED , VIDE ASSE SSMENT ORDER DATED 24.03.2014 PASSED BY THE AO U/S 143(3) OF THE 1961 ACT. 20. BEING AGGRIEVED BY AN ASSESSMENT FRAMED BY AO U/S 143(3) OF THE 1961 ACT, THE ASSESSEE FILED FIRST APPEAL WITH LD. CIT(A) WHO WAS PLEASED TO ALLOW THE APPEAL OF THE ASSESSEE VIDE APPELLATE ORDER DATED 30.11.2017 BY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE AS SESSEES OWN CASE IN ITA NO.1774/MDS/2012 DATED 19.07.2013 FOR AY: 2008-09, WHEREIN IT WAS HELD BY LEARNED CIT(A) AS UNDER: 7.3 THE APPELLANT SUBMITTED THAT THIS ISSUE WAS DE CIDED IN FAVOUR OF THE APPELLANT IN ITS OWN CASE BY THE HON'BLE ITAT VIDE ORDER IN ITA NO.1 774/MDS/2012 DATED 19.07.2013 FOR THE A.Y. 2008-09 WHICH IS AS FOLLOWS: EXTRACTED FROM ITATS ORDER DATED 19.07.2013 IV. THE FOURTH GROUND OF APPEAL OF THE ASSESSEE REL ATES TO REPAIRS OF LEASE-HOLD PREMISES. THE ASSESSEE HAS PLACED ON RECORD AT PAGE NO. 42 OF THE PAPER BOOK, THE NATURE OF WORK CARRIED OUT BY THE ASSESSEE IN THE LEASED OFFICE PR EMISES. THE ASSESSEE HAS CLAIMED THE EXPENDITURE ON CIVIL WORK WHICH INCLUDES DEMOLITION , PAINTING, FLOORING AND PARTITION ETC., AMOUNTING TO RS.2,06,61,216/- AS REVENUE EXPENDITUR E. THE AUTHORITIES BELOW HAVE HELD THE SAME TO BE CAPITAL EXPENDITURE. THE ASSESSEE HA S TAKEN OFFICE BUILDING ON LEASE FOR THE PERIOD OF THREE YEARS WITH AN OPTION TO EXTEND WITH THE CONSENT OF BOTH PARTIES. AN EXPLANATION 1 TO SECTION 32(1) CLEARLY SPELLS OUT T HAT WHERE THE BUSINESS OR PROFESSION OF THE ASSESSEE IS CARRIED ON IN A BUILDING NOT OWNED BY HIM, IN RESPECT OF WHICH THE ASSESSEE HOLDS A LEASE OR OTHER RIGHTS OF OCCUPANCY, ANY CAP ITAL EXPENDITURE IS INCURRED BY THE ASSESSEE FOR THE PURPOSE OF THE BUSINESS OR PROFESS ION ON THE CONSTRUCTION OF ANY STRUCTURE OR DOING OF ANY WORK IN OR IN RELATION TO AND BY WA Y OF RENOVATION OR EXTENSION OR IMPROVEMENT TO THE BUILDING, THEN THE PROVISIONS OF THIS CLAUSE SHALL APPLY AS IF THE SAID STRUCTURE OR WORK IS BUILDING OWNED BY THE ASSESSEE . HOWEVER, THE AFORESAID PROVISIONS ARE APPLICABLE WHERE NEW ASSET HAS COME INTO EXISTENCE. THE ASSESSEE IN SUPPORT OF HIS CONTENTIONS HAS RELIED ON THE ORDER OF THE CO-ORDIN ATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. SUNDARAM BNP PARIBAS ASSET MANAGEMENT COMPANY LTD., VS. ACIT (SUPRA), THE TRIBUNAL IN THE AFORESAID ORDER HAS HELD AS UNDER: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERU SAL OF THE BREAK UP OF THE EXPENSES WHICH HAVE BEEN DISALLOWED CLEARLY SHOWS T HAT THE EXPENDITURES ARE ON THE INTERIOR DECORATIONS AND CREATION OF THE OFFICE ATMOSPHERE. THE EXPENDITURE HAS NOT RESULTED IN ANY BUILDING COMING INTO EXISTENCE NOR HAS THE EXISTING BUILDING BEEN MODIFIED OR THE STRUCTURE ALTERED. AS THE EXIS TING BUILDING HAS NOT BEEN ALTERED AND THERE IS NO CHANGE TO ITS STRUCTURE AS A RESULT OF THE EXPENDITURE INCURRED BY THE ASSESSEE, IT CANNOT BE SAID THAT THE EXPENDITUR E INCURRED BY THE ASSESSEE IS IN THE CAPITAL FIELD. FURTHER A PERUSAL OF THE EXPENDI TURE CLEARLY SHOWS THAT IT IS IN THE REVENUE FIELD. IN THE CIRCUMSTANCES WE ARE OF THE V IEW THAT THE EXPENDITURE ON THE REPAIRS AND MAINTENANCE IN THE FORM OF ELECTRICAL F ITTINGS, ELECTRIFICATION, CABINET, WORK STATION, PARTITION, CUPBOARD, STAND ETC. ARE L IABLE TO BE TREATED AS A REVENUE EXPENDITURE. IN THE CIRCUMSTANCES, THE ORDERS OF TH E LEARNED CIT(A) AND THE ASSESSING OFFICER ARE REVERSED ON THIS ISSUE AND TH E ASSESSING OFFICER IS DIRECTED TO ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 34 -: GRANT THE ASSESSEE THE CLAIM OF REVENUE EXPENDITURE IN REGARD TO THE SAID EXPENDITURE. CONSEQUENTLY, THE DEPRECIATION AS ALLO WED BY THE ASSESSING OFFICER ON THE SAID EXPENDITURE WHICH HAS BEEN CAPITALIZED WOU LD STAND REVERSED. WHETHER THE EXPENDITURE INCURRED ON RENOVATION OF A BUILDING IS CAPITAL OR REVENUE, IS A QUESTION OF FACT. THE SAME HAS TO BE DECIDED O N THE FACTS OF EACH CASE. WE FIND THAT THE FACTS OF THE CASE OF THE ASSESSEE ARE SIMI LAR TO THE ONE ADJUDICATED BY THE TRIBUNAL MENTIONED ABOVE. THE CIVIL WORK RELATES TO THE INTERIOR DECORATION AND CREATION OF THE OFFICE ATMOSPHERE. RESPECTFULLY FOL LOWING THE DECISION OF THE CO- ORDINATE BENCH OF THE TRIBUNAL, THIS GROUND OF APPE AL OF THE ASSESSEE IS ALLOWED AND THE EXPENDITURE INCURRED BY THE ASSESSEE IN MODIFYI NG THE INTERIORS OF A BUILDING INTO OFFICE ARE HELD TO BE REVENUE IN NATURE. 7.4 I HAVE CONSIDERED THE FINDINGS OF THE AO AND TH E WRITTEN SUBMISSIONS MADE BY THE AR. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HO N'BLE ITAT, THE AO IS DIRECTED TO TREAT THE EXPENDITURE AS REVENUE IN NATURE SINCE THE FACT S RELATED TO THIS ISSUE REMAIN THE SAME. THE APPELLANT SUCCEEDS ON THIS GROUND. 21. THE REVENUE IS AGGRIEVED BY DECISION OF LEARNED CIT(A) AND HAS FILED AN APPEAL WITH THE TRIBUNAL. THE LD.CIT-DR SUBMITT ED THAT THE ISSUE IS DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY:2008-09 IN ASSESSEES FAVOUR AND THE REVENUE IS IN APPEAL BEFO RE HONBLE MADRAS HIGH COURT. THIS POSITION WAS NOT CONTROVERTED BY LEARNED COUNSEL FOR THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE AMOUNT SPENT TOWARDS PAINTING ,INTERIOR DECORATION, ETC., IS TOWARDS CURRENT REPAIRS AND IS REVENUE IN NATURE. THE LEARNED COUNSEL FOR T HE ASSESSEE PRAYED THAT RELIEF BE GRANTED TO THE ASSESSEE. 22. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSE D THE MATERIAL ON RECORD INCLUDING CITED CASE LAWS. WE HAVE OBSERVED THAT ASSESSEE HAS INCURRED EXPENDITURE ON REPAIRS AND RENOVATION OF O FFICE PREMISES WHICH WAS TAKEN ON LEASE BY THE ASSESSEE AND WAS NOT OWNE D BY ASSESSEE. THE AO HAS COME TO CONCLUSION THAT THESE ARE EXPENSES I NCURRED FOR INTERIOR DECORATION, EXTENSION AND RENOVATION OF THE OFFICE PREMISES LEADING TO ENDURING BENEFIT TO THE ASSESSEE , WHILE THE ASSES SEE IS CLAIMING IT TO BE ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 35 -: REVENUE IN NATURE . THESE ARE FACTUAL ISSUES DEPEND ING UPON NATURE OF EXPENSES INCURRED AND WHETHER THESE EXPENSE HAD BRO UGHT BENEFIT OF ENDURING NATURE TO THE ASSESSEE. EACH YEAR IS A SEP ARATE UNIT AND THE FACTS MAY VARY FROM YEAR TO YEAR. THE LEARNED CIT(A ) FOLLOWED THE DECISION OF TRIBUNAL FOR EARLIER YEAR VIZ. AY: 2008 -09. WE HAVE OBSERVED THAT DETAILED INVESTIGATION OF EACH OF THESE EXPENS ES WERE NOT DONE BY AUTHORITIES BELOW TO ARRIVE AT DECISION WHETHER BEN EFIT OF ENDURING NATURE WAS DERIVED BY ASSESSEE BY INCURRING THESE EXPENSES .WE ARE INCLINED TO RESTORE THIS ISSUE BACK TO FILE OF THE AO TO LOOK I NTO NATURE OF EACH OF THESE EXPENSES AND THEN TO ARRIVE AT DECISION WHETHER THE SE EXPENSES ARE TO BE CAPITALIZED OR TO BE HELD TO BE REVENUE IN NATURE, AFTER CONSIDERING THE AMENDED PROVISIONS OF SECTION 30 AND 32 OF THE 1961 ACT. THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. ETA TRAVEL AGENCY PRIVATE LIMITED REPORTED IN (2019) 109 TAXMANN.COM 66(MADRA S) , CIT V. VISWAMS REPORTED IN (2019) 105 TAXMANN.COM 289(MADR AS) AND DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF RPG ENT ERPRISES LIMITED V. DCIT REPORTED IN (2016) 386 ITR 401(BOM.) ARE RELEV ANT. THE ASSESSEE IS DIRECTED TO PROVIDE DETAILS OF EACH OF THESE EXPENS ES INCURRED BY IT TO ENABLE AUTHORITIES TO ARRIVE AT DECISIONS WHETHER T HE EXPENSES WERE INCURRED ON CAPITAL FIELD OR WERE REVENUE IN NATURE . NEEDLESS TO SAY THAT THE AO SHALL PROVIDE WITH PROPER AND EFFECTIVE OPPO RTUNITY OF HEARD TO THE ASSESSEE IN ACCORDANCE WITH PRINCIPLES OF NATURAL J USTICE IN ACCORDANCE WITH LAW IN THE DENOVO SET ASIDE ASSESSMENT PROCEED INGS.THIS GROUND OF ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 36 -: APPEAL FILED BY REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. WE ORDER ACCORDINGLY. 23. THE NEXT ISSUE RAISED BY REVENUE IN ITS APPEAL CONCERNS ITSELF WITH PAYMENT MADE TOWARDS COMMISSION AND BROKERAGE TO MU TUAL FUND DISTRIBUTORS WITHOUT DEDUCTION OF INCOME-TAX AT SOU RCE U/S 194J OF THE 1961 ACT . IT IS CLAIMED THAT THIS ISSUE IS COVERE D BY DECISION OF TRIBUNAL IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE IN IT A NO. 1774/MDS/2012 FOR AY: 2008-09 , VIDE APPELLATE ORDER DATED 19.07. 2013, WHEREIN LD.CIT(A) VIDE APPELLATE ORDER DATED 30.11.2017 HAS HELD AS UNDER: ISSUE NO.5: DISALLOWANCE U/S.194J OF COMMISSION & BROKERAGE PAID : 2011-12 & 2012-13; 8.1 THE APPELLANT HAD MADE COMMISSION PAYMENTS TO M UTUAL FUND DISTRIBUTORS FOR PROMOTION AND MARKETING OF THE MUTUAL FUND SCHEMES OF SUNDARAM MUTUAL FUND AND AS IT IS PAYMENTS MADE IN RESPECT OF SECURITIES WHICH HAS BEEN SPECIFICALLY EXCLUDED FROM THE PURVIEW OF SEC.194H OF THE ACT. HOWEVER, THE AO HAD DISALLOWED THE SAME AS BEING IN THE NATURE OF FEES FOR 'PROFESSIONAL OR TECHNICAL SERVI CES' U/S.194J OF THE ACT AND MADE DISALLOWANCE U/S.40(A)(IA) OF THE ACT, 8.2 THE APPELLANT SUBMITTED THAT THIS ISSUE WAS DEC IDED IN FAVOUR OF THE APPELLANT IN ITS OWN CASE BY THE HON'BLE ITAT VIDE ORDER IN ITA NO.1774/MDS/2012 DATED 19.07.2013 FOR THE A.Y. 2008-09 WHICH IS AS FOLLOWS: EXTRACTED FROM ITATS ORDER DATED 19.07.2013: VII. THE SEVENTH GROUND OF APPEAL RELATES TO PAYMEN TS MADE TO MUTUAL FUND DISTRIBUTORS AMOUNTING TO RS.16,41,14,706/- DISALLOWED U/S.40(A) (IA). THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE ON THE PAYMENT OF THE BROKERAGE/COMMI SSION PAID TO THE MUTUAL FUND DISTRIBUTORS ON THE GROUND THAT COMMISSION AND BROK ERAGE DOES NOT INCLUDE ANY PAYMENT MADE DIRECTLY OR INDIRECTLY ON SECURITIES. THE REVENUE HAS TERMED THE PAYMENTS MADE TO THE BRO KERS AS FEES FOR PROFESSIONAL & TECHNICAL SERVICES AND HELD THAT THE ASSESSEE WAS L IABLE TO DEDUCT TAX UNDER THE PROVISIONS OF SECTION 194J. THE PROVISIONS REGARDING DEDUCTION OF TAX AT SOURCE ON COMMISSION AND BROKERAGE ARE CONTAINED IN SECTION 194H OF THE ACT. THE RELEVANT EXTRACT OF THE SECTION IS REPRODUCED HEREIN BELOW: 194H. ANY PERSON, NOT BEING AN INDIVIDUAL OR A HIND U UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING, ON OR AFTER THE 1ST DAY OF JUNE, 2001, TO A RESIDENT, ANY INCOME BY WAY OF COMMISSION (NOT BEING INSURANCE COMMISSION REFERRED TO IN SECTION 194D) OR BROKERAGE, SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT OF SUCH INCOME IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATE OF [TEN] PER CENT: ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 37 -: THE TERMS COMMISSION AND BROKERAGE AND SECURITIES A RE DEFINED IN EXPLANATION TO SECTION 194H. THE SAME ARE EXTRACTED HEREIN UNDER: EXPLANATION I) COMMISSION OR BROKERAGE INCLUDES ANY PAYMENT R ECEIVED OR RECEIVABLE, DIRECTLY OR INDIRECTLY, BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR SERVICES RENDERED (NOT BEING PROFESSIONAL SERVICES) OR FOR ANY SERVICES IN THE C OURSE OF BUYING OR SELLING OF GOODS OR IN RELATION TO ANY TRANSACTION RELATING TO ANY ASSET, VALUABLE ARTICLE OR THING, NOT BEING SECURITIES; II) XXXXXXXXXXXXXXXXXXXX (III) THE EXPRESSION 'SECURITIES' SHALL HAVE THE ME ANING ASSIGNED TO IT IN CLAUSE (H) OF SECTION 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) ; (IV) WHERE ANY INCOME IS CREDITED TO ANY ACCOUNT, W HETHER CALLED 'SUSPENSE ACCOUNT' OR BY ANY OTHER NAME, IN THE BOOKS OF ACCOUNT OF THE PERS ON LIABLE TO PAY SUCH INCOME, SUCH CREDITING SHALL BE DEEMED TO BE CREDIT OF SUCH INCO ME TO THE ACCOUNT OF THE PAYEE AND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY. ] SECTION 2(H) OF THE SECURITIES CONTRACTS (REGULATIO N) ACT, 1956 DEFINES SECURITIES AS : 2(H) SECURITIES INCLUDE (I) SHARES, SCRIPS, STOCKS, BONDS, DEBENTURES, DEBE NTURE STOCK OR OTHER MARKETABLE SECURITIES OF A LIKE NATURE IN OR OF ANY INCORPORAT ED COMPANY OR OTHER BODY CORPORATE; (IA) DERIVATIVE; (IB) UNITS OR ANY OTHER INSTRUMENT ISSUED BY ANY CO LLECTIVE INVESTMENT SCHEME TO THE INVESTORS IN SUCH SCHEMES; (IC) SECURITY RECEIPT AS DEFINED IN CLAUSE (ZG) OF SECTION 2 OF THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT,2002; (ID) UNITS OR ANY OTHER SUCH INSTRUMENT ISSUED TO T HE INVESTORS UNDER ANY MUTUAL FUND SCHEME; (IE) XXXXXX FROM THE PERUSAL OF AFORESAID PROVISIONS OF SECTION 194H AND THE DEFINITION OF SECURITIES AS DEFINED UNDER SECURITIES CONTRACT REGULATION ACT, I T IS CLEARLY EVIDENT THAT SECURITIES INCLUDE MUTUAL FUNDS AND THE PROVISIONS OF SECTION 194H EXC LUDES COMMISSION OR BROKERAGE PAID ON SECURITIES. THE AUTHORITIES BELOW HAVE HELD THAT THE ASSESSEE S HOULD HAVE DEDUCTED TAX ON COMMISSION/BROKERAGE U/S. 194J OF THE ACT AS THE SE RVICES RENDERED BY THE BROKERS ARE PROFESSIONAL AND/OR TECHNICAL SERVICES. PROFESSION AL SERVICES ARE DEFINED IN EXPLANATION(A) TO SECTION 194J AS UNDER: EXPLANATION. (A) 'PROFESSIONAL SERVICES' MEANS SERVICES RENDERED BY A PERSON IN THE COURSE OF CARRYING ON LEGAL, MEDICAL, ENGINEERING OR ARCHITECTURAL PRO FESSION OR THE PROFESSION OF ACCOUNTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DECORATION OR ADVERTISING OR SUCH OTHER PROFESSION AS IS NOTIFIED BY THE BOARD FOR THE PURPOSES OF SECTION 4 4AA OR OF THIS SECTION; A PERUSAL OF THE ABOVE DEFINITION MAKES IT ABUNDANT LY CLEAR THAT SERVICES RENDERED BY MUTUAL FUND BROKERS DO NOT FALL WITHIN THE TERM PR OFESSIONAL SERVICES. THE SERVICES OF ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 38 -: MUTUAL FUND BROKERS CANNOT BE TERMED AS TECHNICAL S ERVICES AS WELL, AS THE BROKERS DO NOT REQUIRE ANY SPECIAL QUALIFICATION IN THE FIELD OF L AW, ENGINEERING, ACCOUNTANCY OR TECHNICAL CONSULTANCY. EVEN AN ORDINARY GRADUATE FROM HUMANIT IES GROUP CAN BE A BROKER. THE BROKERS DO NOT PROVIDE ANY TECHNICAL KNOW-HOW EITHE R, THUS SERVICES RENDERED BY THEM CANNOT BE TERMED AS TECHNICAL SERVICES. WE DO NOT CONCUR WITH THE FINDINGS OF CIT(APPEALS) ON THE ISSUE FOR THE AFORESAID REASONS. ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 8.3 I HAVE CONSIDERED THE FINDINGS OF THE AO AND TH E WRITTEN SUBMISSIONS MADE BY THE AR. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HO N'BLE ITAT, THE AO IS DIRECTED TO DELETE THE ADDITION MADE U/S 40(A)(IA) ON ACCOUNT OF PAYME NTS MADE TO MUTUAL FUND DISTRIBUTORS FOR THE ASSESSMENT YEARS UNDER CONSIDERATION, THE A PPELLANT SUCCEEDS ON THIS GROUND FOR THE A.YS. 2011-12~& 2012-13. BOTH THE RIVAL PARTIES HAVE AGREED BEFORE THE BENC H THAT THIS ISSUE IS SQUARELY COVERED BY DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.1774/MDS/2012 DATED 19.07.2013 FOR AY: 2008- 09. HOWEVER, IT WAS SUBMITTED BY LD.CIT-DR THAT REVENUE HAS NOT ACC EPTED THE AFORESAID DECISION OF THE TRIBUNAL AND APPEAL IS FILED BY REV ENUE BEFORE HONBLE MADRAS HIGH COURT. THIS POSITION COULD NOT BE CONT ROVERTED BY LEARNED COUNSEL FOR THE ASSESSEE. THUS, AFTER CONSIDERING T HE ENTIRE MATERIAL ON RECORD, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSES SEE BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.1774/MDS/2012 DATED 19.07.2013 FOR AY: 2008-09 BY CONFIRMING THE APPELLATE ORDER PASSED BY LEARNED CIT(A) AND DISMISS THIS GROUND RA ISED BY REVENUE . WHILE DISMISSING THIS GROUND RAISED BY REVENUE, WE ARE GUIDED BY PRINCIPLES OF JUDICIAL DISCIPLINE AND PRINCIPLES OF CONSISTENCY IN TAXING- STATUTE AS LAID DOWN BY HONBLE SUPREME COURT IN TH E CASE OF RADHA SOAMI SATSANG V. SATSANG (1992) 193 ITR 321(SC). W E ORDER ACCORDINGLY. THE REVENUE FAILS ON THIS GROUND. WE O RDER ACCORDINGLY. ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 39 -: 24. THE NEXT ISSUE RAISED BY REVENUE IN ITS APPEAL FILED WITH TRIBUNAL IS AGAINST DELETION OF DISALLOWANCE OF EXPENSES U/S 14 A OF THE 1961 ACT READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962, WHILE C OMPUTING BOOK PROFITS U/S 115JB OF THE 1961 ACT. THIS ISSUE IS NOW SETTLE D BY SPECIAL BENCH OF DELHI-TRIBUNAL IN THE CASE OF ACIT V. M/S.VIREET IN VESTMENT PVT. LTD. (2017) 82 TAXMANN.COM 415(DEL-TRIB.)(SB) , WHEREIN SPECIAL BENCH HELD THAT DISALLOWANCE OF EXPENDITURE INCURRED IN RELATI ON TO EARNING OF AN EXEMPT INCOME IS TO BE MADE WITHOUT RESORTING TO PR OVISION OF SECTION 14A OF THE 1961 ACT READ WITH RULE 8D OF THE 1962 RULE. THUS, THIS ISSUE NEEDS TO BE SET ASIDE AND RESTORED TO THE FILE OF THE AO TO COMPUTE BOOK PROFITS U/S.115JB AFTER MAKING DISALLOWANCE OF EXPENDITURE INCURRED IN RELATION TO EARNING OF AN EXEMPT INCOME BY FOLLOWING THE DECISI ON OF THE SPECIAL BENCH IN THE CASE OF M/S.VIREET INVESTMENT PVT. LTD .(SUPRA). THIS GROUND OF APPEAL RAISED BY REVENUE IS ALLOWED FOR STATISTI CAL PURPOSES. WE ORDER ACCORDINGLY. 25. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE (ITA NO. 419/CHNY/2018) AND THE REVENUES APPEAL FOR AY: 201 1-12(ITA NO. 465/CHNY/2018) ARE PARTLY ALLOWED AS INDICATED ABOV E. 26. SINCE, SIMILAR ISSUES ARE INVOLVED IN APPEALS F ILED BY ASSESSEE FOR AY: 2012-13 TO 2014-15 AND OUR AFORESAID DECISION FOR A Y: 2011-12 SHALL APPLY MUTATIS MUTANDIS TO APPEAL FILED BY ASSESSEE FOR AY: 2012-13 TO 2014-15 RESPECTIVELY . THUS APPEALS FILED BY ASSESS EE FOR AY: 2012-13 TO ITA NOS.419-422/CHNY/2018 & ITA NOS.465-468/CHNY/2018 :- 40 -: 2014-15 IN ITA NO. 420-422/CHNY/2018 ARE PARTLY ALL OWED AS INDICATED ABOVE. ON THE OTHER HAND REVENUES APPEAL IN ITA NO . 467- 468/CHNY/2018 FOR AY: 2013-14 AND 2014-15 ARE DISMI SSED OWING TO LOW TAX EFFECT AS DETAILED ABOVE IN PRECEDING PARAS OF THIS ORDER, WHILE REVENUES APPEAL FOR AY: 2012-13 IN ITA NO. 466/CHN Y/2018 IS PARTLY ALLOWED AS SIMILAR ISSUES ARE INVOLVED IN REVENUES APPEAL FOR AY : 2012- 13 AS WERE THERE IN AY: 2011-12 AND OUR DECISION IN REVENUES APPEAL IN AY: 2011-12 SHALL APPLY MUTATIS MUTANDIS TO REVENUE S APPEAL IN AY: 2012-13 . WE ORDER ACCORDINGLY. ORDER PRONOUNCED ON THE 03 RD OCTOBER, 2019, IN CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( '#$ % ) ( RAMIT KOCHAR ) & /ACCOUNTANT MEMBER /CHENNAI, 1! /DATED:03 RD OCTOBER, 2019. TLN / ,$'2 32)$ /COPY TO: 1. *+ /APPELLANT 4. . 4$ /CIT 2. ,-*+ /RESPONDENT 5. 2 5 ,$ /CIT-DR 3. . 4$ ( ) /CIT(A) 6. ( 8 /GF