ACIT, New Delhi V. PCI Ltd., New Delhi

ITA 4687/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4077 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 05-05-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 27-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHARENDER KUMAR
• Keywords: Business income; Permanent establishment; Non-deduction of tax; TDS
• Section: 195; 251

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH : A NEW DELHI) (DELHI BENCH : A NEW DELHI) (DELHI BENCH : A NEW DELHI) (DELHI BENCH : A NEW DELHI) BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRES IDENT AND BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRES IDENT AND BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRES IDENT AND BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRES IDENT AND SHRI A.D. JAIN, JUDICIAL MEMMBER SHRI A.D. JAIN, JUDICIAL MEMMBER SHRI A.D. JAIN, JUDICIAL MEMMBER SHRI A.D. JAIN, JUDICIAL MEMMBER I.T.A. NO.4687/DEL./2010 I.T.A. NO.4687/DEL./2010 I.T.A. NO.4687/DEL./2010 I.T.A. NO.4687/DEL./2010 (ASSESSMENT YEAR : 2007 (ASSESSMENT YEAR : 2007 (ASSESSMENT YEAR : 2007 (ASSESSMENT YEAR : 2007- -- -08) 08) 08) 08) ACIT, CIRCLE 14(1), ACIT, CIRCLE 14(1), ACIT, CIRCLE 14(1), ACIT, CIRCLE 14(1), VS. VS. VS. VS. PCI LTD., PCI LTD., PCI LTD., PCI LTD., NEW NEW NEW NEW DELHI. DELHI. DELHI. DELHI. 19, RAJENDRA PARK, 19, RAJENDRA PARK, 19, RAJENDRA PARK, 19, RAJENDRA PARK, DELHI. DELHI. DELHI. DELHI. (PAN/GIR NO. : AAACP1565E) (PAN/GIR NO. : AAACP1565E) (PAN/GIR NO. : AAACP1565E) (PAN/GIR NO. : AAACP1565E) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SHRI DHARENDER KUMAR, AR ASSESSEE BY : SHRI DHARENDER KUMAR, AR ASSESSEE BY : SHRI DHARENDER KUMAR, AR ASSESSEE BY : SHRI DHARENDER KUMAR, AR REVENUE BY : SHRI S. MOHANTY, SR.DR REVENUE BY : SHRI S. MOHANTY, SR.DR REVENUE BY : SHRI S. MOHANTY, SR.DR REVENUE BY : SHRI S. MOHANTY, SR.DR ORDER ORDER ORDER ORDER PER A.D. JAIN, JM THIS IS DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 2007-08 CONTENDING THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF `17,73,000 MADE U/S 40(A)(I) OF THE I.T. ACT, 1961, FOR NOT DEDUCTING AND PAYING TAX AT SOURCE BEFORE MAKING PAYMENT TO FO REIGN COMPANY. 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF IMPOR T OF TESTING AND MEASURING INSTRUMENTS, PRIMARILY FOR THE PO WER SECTOR, WHICH IT SELLS TO VARIOUS CUSTOMERS INCLUDING PSUS, STATE ELECTRICITY BOARDS, ETC. THE AO NOTICED THE ASSESSEE TO HAVE MADE P AYMENT OF `17,73,000 TO M/S SEBA WITHOUT DEDUCTION OF TAX AT SO URCE. THE ASSESSEE WAS ASKED TO SHOW AS TO WHY THE SAME BE NOT DISALLOW ED U/S 40(A)(I) OF THE ACT FOR NON-DEDUCTION OF TAX AT SOUR CE. 3. IN RESPONSE, THE ASSESSEE COMPANY CONTENDED THAT THE A MOUNTS HAD BEEN PAID TO NON-RESIDENT PARTIES; THAT IT WAS THE BUSINESS PROFIT OF NON-RESIDENT PARTY AND NOT TECHNICAL FEES; THAT THE N ON-RESIDENT PARTIES DID NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA AND THE ASSESSEE COMPANY WAS ACTING AS AN INDEPENDENT BUYER, DUE TO WH ICH, THE PROVISIONS OF SECTION 195 OF THE ACT WERE NOT APPLICAB LE ON PAYMENTS I.T.A. NO.4687/DEL./2010 (A.Y. : 2007-08) 2 MADE TO THE NON-RESIDENT PARTIES FOR IMPARTING TRAINI NG TO ITS EMPLOYEES FOR EDUCATING THEM ABOUT THE SALIENT FEATUR ES OF THE EQUIPMENT MEANT FOR SALE; THAT UNDER SIMILAR CIRCUMSTA NCES, IN ASSESSMENT YEAR 2003-04, SIMILAR PAYMENTS HAD BEEN HELD B Y THE ITAT TO BE NOT LIABLE TO BE TREATED AS FEE FOR TECHNICAL SERVICES, SINCE NO TECHNOLOGY CAPABLE OF BEING USED INDEPENDENTLY, HAD BEEN MADE AVAILABLE TO THE ASSESSEE COMPANY. 4. THE AO, HOWEVER, WAS OF THE VIEW THAT THE ASSESSEE W AS LIABLE TO MAKE TDS AS PER THE PROVISIONS OF THE ACT, AS THE PAYME NT MADE TOWARDS TRAINING EXPENSES FELL UNDER THE DEFINITION OF FEE FOR TECHNICAL SERVICES UNDER THE PROVISIONS OF SECTION 9(1)(VII) OF T HE ACT AND HAD BEEN UTILIZED FOR BUSINESS CARRIED OUT IN INDIA; AND THAT THE PAYMENT MADE ALSO FELL UNDER THE DEFINITION OF FEE FOR TECH NICAL SERVICES UNDER THE PROVISIONS OF INDO-GERMAN DOUBLE TAXATION AVOIDA NCE AGREEMENT. IT WAS, THEREFORE, THAT THE ASSESSEE WAS HEL D LIABLE TO HAVE DEDUCTED TAX AT SOURCE, WHICH HAD NOT BEEN DONE . 5. BY VIRTUE OF THE IMPUGNED ORDER, THE CIT(A), FOL LOWING HIS PREDECESSORS ORDER IN THE ASSESSEES CASE FOR ASSESSMENT YEARS 20 03- 04 & 05-06, DELETED THE ADDITION. 6. AGGRIEVED, THE DEPARTMENT IS IN APPEAL. 7. CHALLENGING THE IMPUGNED ORDER, THE LD.DR HAS CON TENDED THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF `17 ,73,000, CORRECTLY MADE U/S 40(A)(I) OF THE ACT, FOR THE REASON THAT THE ASSESSEE HAD NOT DEDUCTED AND PAID TAX AT SOURCE BEFORE MAKING THE PA YMENT TO THE FOREIGN COMPANY, THOUGH TAX WAS DEDUCTIBLE THEREON. 8. THE LD.COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, H AS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. ATTENTION HA S BEEN DRAWN TO THE TRIBUNAL ORDER DATED 27.06.08, IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2003-04, IN I.T.A. NO.1692/DEL./2007 AN D THE TRIBUNAL I.T.A. NO.4687/DEL./2010 (A.Y. : 2007-08) 3 ORDER DATED 24.4.09, IN THE ASSESSEES OWN CASE FOR ASSESSMEN T YEAR 2005-06 IN I.T.A. NO.487/DEL./09. 9. THE MATTER, IT IS SEEN, IS SQUARELY COVERED BY THE A FORESAID TRIBUNAL ORDERS FOR ASSESSMENT YEARS 2003-04 AND 2005-06. VIDE ITS ORDER DATED 27.6.08, WHILE REJECTING A SIMILAR GRIEV ANCE OF THE DEPARTMENT, THE TRIBUNAL OBSERVED AS FOLLOWS: 10. GROUND NO 3 IS AGAINST DELETION OF ADDITION OF RS.41,55,712/- MADE BY THE ASSESSING OFFICER UNDER SECTIO N 40(A)(I) OF THE ACT THE ASSESSEE PAID, SUM OF RS.41,55,71 2/- UNDER THE HEAD 'TECHNICAL SERVICE CHARGES'. AN AMOUNT OF RS.40,63,237/ WAS PAID TO FOREIGN COMPANIES AND RS.92,4 75/- WAS PAID TO INDIAN COMPANIES. HOWEVER,, THE ASSESSING OF FICER DISALLOWED THE ENTIRE SUM BY INVOKING THE PROVISIONS OF SECTION 40(A)(L) OF THE ACT. TO UNDERSTAND THE CONTROVERSY, IT IS IMPERATIVE TO CONSIDER THE BUSINESS OF THE COMPANY. THE ASSESSEE IS ENGAGED IN THE MANUFACTURE AND DEALING OF TE STING & MEASURING INSTRUMENTS AND PRECISION COMPONENTS. THE ASSESSE E ALSO PURCHASES/IMPORTS TESTING AND MEASURING INSTRUMENTS AN D ALLIED PRODUCTS FROM VARIOUS ORGANIZATIONS SITUATED OUT SIDE INDIA NOTABLY FROM GERMANY AND SELLS THEM INDEPENDENTLY IN INDIA. THE ASSESSEE HAD PAID TRAINING FEES DEBITED UNDER THE HE AD 'TECHNICAL SERVICES ON TRAINING OF ITS PERSONNEL/CUSTOM ERS OUTSIDE INDIA FOR EDUCATING THEM TO EXPLAIN TO PROPO SED BUYERS THE SALIENT FEATURES OF THE PRODUCTS IMPORTED BY IT IN INDIA/TO IMPART TRAINING TO THE CUSTOMERS TO USE THE EQUIPMENT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER IT WAS SUBMITTED THAT IN VIEW OF APPLICABILIT Y OF ARTICLE 7 OF DT AA BETWEEN INDIA & GERMANY, THE TRAINING FEE PAI D CANNOT BE DEEMED TO ACCRUE OR ARISE TO THE GERMAN COMPANIES IN INDIA. AS PER ARTICLE 7 OF DT AA THE PROFIT OF AN ENTERPRISE O F A CONTRACTING STATE IS TAXABLE IN THAT STATE UNLESS THE ENTERPRISE CARR IES ON BUSINESS IN THE OTHER CONTRACTING STATE THROUGH A PERMA NENT ESTABLISHMENT SITUATED! THERE. IN THE PRESENT CASE, THE FOREIGN COMPANIES DO NOT HAVE ANY PERMANENT ESTABLISHMENT IN I NDIA IN VIEW OF WHICH THEIR PROFITS ARE NOT TAXABLE IN INDIA . THE ASSESSING OFFICER HAS QUOTED THE PROVISIONS OF SECTION 9( I )(VII ) OF THE ACT TO CONCLUDE THAT THE TRAINING FEES PAID TO THE FOREIGN COMPANIES OUTSIDE INDIA IS DEEMED TO ACC4RUE OR ARISE IN INDIA. THE ASSESSING OFFICER THEREFORE, HELD THAT SINCE THE ASSESSEE HA S NOT DEDUCTED AT SOURCE AS PER PROVISIONS OF SECTION 195 OF T HE ACT, THE AMOUNT CANNOT BE ALLOWED IN VIEW OF SECTION 40(A )(I) OF THE ACT. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIO NS OF THE I.T.A. NO.4687/DEL./2010 (A.Y. : 2007-08) 4 ASSESSEE IN PARAS. 4.3, 4.3.1, 4.3.2 & 4.3.3 OF HIS ORDER , DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 11. WHEREAS THE LEARNED DR RELIED UPON THE ASSESSMENT OR DER, THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE APP ELLATE ORDER. HE ALSO SUBMITTED THAT THE ISSUE IS WELL SETTLED B Y THE DECISION OF THIS TRIBUNAL IN THE CASE DCIT VS. PARASRAMP URIA SYNTHETICS LTD., 20 SOT 249 (DEL). ON THE BASIS OF ABO VE DECISION, HE SUBMITTED THAT SINCE THE AMOUNT PAID BY W AY OF TRAINING CHARGES TO TRAIN PERSONNEL FOR OPERATION OF THE INSTRUMENTS PURCHASED, IT DOES NOT AMOUNT TO PAYMENT IN THE NATURE OF 'FEES FOR TECHNICAL SERVICES' AS DEFINED IN E XPLANATION 2 TO SECTION 9(1)(VII). THE AMOUNT IS ASSESSABLE IN THE H ANDS OF NON-RESIDENT RECIPIENTS AS BUSINESS INCOME AND SINCE ADMIT TEDLY THEY DO NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA , THE INCOME OF SUCH NON-RESIDENT IS NOT CHARGEABLE TO TAX I N INDIA. SINCE THE INCOME IS NOT CHARGEABLE-TO TAX IN INDIA, THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE UNDER SECTION 19 5 OF THE ACT. CONSEQUENTLY THE AMOUNT CANNOT BE DISALLOWED BY INVOK ING PROVISION OF SECTION 40(A)(I) OF THE ACT. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. SECTION 4 0(A)(I) PROVIDES THAT IN COMPUTING INCOME UNDER THE HEAD 'PR OFITS AND GAINS OF BUSINESS OR PROFESSION' INTER ALIA FEES FOR TECHN ICAL SERVICES WHICH IS PAYABLE OUTSIDE INDIA OR IN INDIA TO A NON- RESIDENT, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVI- B AND SUCH TAX HAS NOT BEEN DEDUCTED SHALL NOT BE ALLO WED AS DEDUCTION. UNDER EXPLANATION (B) TO SECTION 40(A)(I) , 'FEES FOR TECHNICAL SERVICES' SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT. THUS T HE PRE- REQUISITE FOR DISALLOWANCE IS THAT THE AMOUNT PAID SHOU LD BE IN THE NATURE OF 'FEES FOR TECHNICAL SERVICES' AND ON WHI CH TAX SHOULD BE DEDUCTIBLE. IN THE CASE OF PARASRAMPURIA SYN THETICS LTD. (SUPRA) ITA T DELHI BENCH TO WHICH ONE OF US (AC COUNTANT MEMBER) WAS A PARTY, HELD AS UNDER:- 'THE TERM 'FEES FOR TECHNICAL SERVICES' AS PER EXPLANAT ION 2 TO SECTION 194J MEANS AS DEFINED IN EXPLANATION 2 BEL OW CLAUSE (VII) OF SUB-SECTION (L) OF SECTION 9, EXTRACTE D HEREIN: 'FOR THE PURPOSES OF THIS CLAUSE, 'FEES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGERIAL; TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOCS NOT INCLUDE CONSIDERATION I.T.A. NO.4687/DEL./2010 (A.Y. : 2007-08) 5 FOR ANY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT CHARGEABLE UNDER THE HEAD 'SALARIES. HON'BLE MADRAS HIGH COURT IN THE CASE OF SKYCELL COMMUNICATIONS LTD, 251 IT1 53, OBSERVED THUS: 'IN THE MODERN DAY WORLD ALMOST EVERY FACET OF ONE'S LIFE IS LINKED TO SCIENCE AND TECHNOLOGY INASMUCH AS NUMEROUS THINGS USED OR RELIED UPON IN EVERY DAY LIFE IS THE RE SULT OF SCIENTIFIC AND TECHNOLOGICAL DEVELOPMENT. EVERY INSTR UMENT OR GADGET THAT IS USED TO MAKE LIFE EASIER IS THE RESULT OF SCIENTIFIC INVENTION OR DEVELOPMENT AND INVOLVE THE USE OF TECHNOLOGY. ON THAT SCORE, EVERY PROVIDER OF EVERY INSTRUMENT OR FACILITY USED BY A PERSON CANNOT BE REGA RDED AS PROVIDING TECHNICAL SERVICE. ' 'WHEN A PERSON HIRES A TAXI TO MOVE FROM ONE PLACE TO ANOTHER, HE USES A PRODUCT OF SCIENCE AND TECHNOLOGY, VIZ. AN AUTOMOBILE. IT CANNOT ON THAT GROUND BE SAID THAT THE TAX DRIVER WHO CONTROLS THE VEHICLE AND MONITORS ITS MOVEMENT IS RENDERING A TECHNICAL SERVICE TO THE PERSO N WHO USES THE AUTOMOBILE. SIMILARLY, WHEN A PERSON TRAV ELS BY TRAIN OR IN AN AEROPLANE, IT CANNOT BE SAID THAT THE RAILWAYS OR AIRLINES IS RENDERING A TECHNICAL SERVICE T O THE PASSENGER AND, THEREFORE, THE PASSENGER IS UNDER AN OBLIGATION TO DEDUCT TAX AT SOURCE ON THE PAYMENTS MA DE TO THE RAILWAY OR THE AIRLINE FOR HAVING USED IT FOR TRAVELING FROM ONE DESTINATION TO ANOTHER. WHEN A PERSON TRAVEL S BY BUS, IT CANNOT BE SAID THAT THE UNDERTAKING WHICH OWN S THE BUS SERVICES RENDERING TECHNICAL SERVICE TO THE PASSENGER AND, THEREFORE, THE PASSENGER MUST DEDUCT TAX AT SOURCE ON THE PAYMENT MADE TO THE BUS SERVICE PROVIDER FOR HAVING USED THE BUS. THE ELECTRICITY SUPPLIED TO A CONSUMER CANNOT, ON THE GROUND THAT GENERATORS ARE USE D TO GENERATE ELECTRICITY, TRANSMISSION LINES TO CARRY TH E TRANSFORMERS TO REGULATE THE FLOW OF CURRENT, METERS T O MEASURE THE CONSUMPTION, BE REGARDED AS AMOUNTING TO PROVISON OF TECHNICAL SERVICES TO THE CONSUMER RESULTING IN THE CONSUMER HAVING TO DEDUCT TAX AT SOURCXE ON THE PAYMENT MADE FOR POWER CONSUMED AND REMIT THE SAME TO THE REVENUE. INSTALLATION AND OPERATION OF SOPHISTICATED EQUIPMENTS WITH A VIEW TO EARN INCOME BY ALLOWING CUSTOMERS TO AVAIL OF THE I.T.A. NO.4687/DEL./2010 (A.Y. : 2007-08) 6 BENEFIT OF THE USER OF SUCH EQUIPMENT DOES NOT RESULT I N THE PROVISION OF TECHNICAL SERVICE TO THE CUSTOMER FOR A F EE. WHEN A PERSON DECIDES TO SUBSCRIBE TO A CELLULAR TELEPH ONE SERVICE IN ORDER TO HAVE THE FACILITY OF BEING ABLE TO COMMUNICATE WITH OTHERS HE DOES NOT CONTRACT TO RECEI VE A TECHNICAL SERVICE. WHAT HE DOES AGREE TO IS TO PAY FOR THE USE OF THE AIRTIME FOR WHICH HE PAYS A CHARGE. THE FA CT THAT THE TELEPHONE SERVICE PROVIDER HAS INSTALLED SOPHISTICAL TECHNICAL EQUIPMENT IN THE EXCHANGE TO ENSURE CONNECTIVITY TO ITS SUBSCRIBER, DOCS NOT ON THAT SCORE, MAKE IT PROVISION OF TECHNICAL SERVICE TO THE' SUBSCRIBER. T HE SUBSCRIBER IS NOT CONCERNED WITH THE COMPLEXITY OF THE EQUIPMENT INSTALLED IN THE EXCHANGE OR THE LOCATION OF THE BASE STATION. ALL THAT HE WANTS IS THE FACILITY OF USING THE TELEPHONE WHEN HE WISHES TO, AND BEING ABLE TO GET CONNECTED TO THE PERSON AT THE NUMBER TO WHICH HE DE SIRES TO BE CONNECTED WHAT APPLIES TO CELLULAR MOBILE TELE PHONE IS ALSO APPLICABLE IN' FIXED TELEPHONE SERVICE. NEITH ER SERVICE CAN BE REGARDED AS 'TECHNICAL SERVICE' FOR THE PURPOSE OF SECTION 194J OF THE ACT ,. IN THE PRESENT CASE, IT IS SEEN THAT THERE MAY BE USE OF SERVICES OF TECHNICALLY QUALIFIED PERSONS TO RENDER THE SERVICES BUT THAT ITSELF DO NOT BRING THE AMOUNT PAID AS 'FEES FOR TECHNICAL SERVICES' WITHIN THE MEANING OF EXPLANATION 2 TO SECTION 9(1 )( VII). THE AMOUNTS PA ID ARC TOWARDS ANNUAL MAINTENANCE CONTRACT OF CERTAIN MACHI NERY OR FOR CONVERTING POY INTO TEXTURED/TWISTED YARN TH E TECHNOLOGY OR THE TECHNICAL KNOWLEDGE OF THE PERSONS IS NOT MADE AVAILABLE TO THE ASSESSEE BUT ONLY BY USING SUCH TECHNICAL KNOWLEDGE SERVICES, I.E., RENDERED TO THE ASSESSEE. IN SUCH A CASE, IT CANNOT BE SAID THAT THE AMOUN T IS PAID AS 'FEES FOR TECHNICAL SERVICES'. RENDERING SERV ICES BY USING TECHNICAL KNOWLEDGE OR SKILL IS DIFFERENT THA N CHARGING FEES FOR TECHNICAL SERVICES. IN A LATTER CASE, THE TECHNICAL SERVICES ARE MADE AVAILABLE DUE TO WHICH TH E ASSESSEE ACQUIRED CERTAIN RIGHT WHICH CAN BE FURTHER USE D. IN THE PRESENT CASE, IT IS NOT SO. THE PERSONS RENDERING CERTAIN SERVICES HAS ONLY MAINTAINED MACHINERY OR CONVERTED YAM BUT THAT KNOWLEDGE IS NOT NOW VESTED WI TH THE ASSESSEE BY WHICH ITSELF IT CAN DO RESEARCH WORK. IN THE CIRCUMSTANCES, THE AMOUNT PAID CANNOT BE CONSIDERED AS FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF SECT ION 194J OF THE ACT.' I.T.A. NO.4687/DEL./2010 (A.Y. : 2007-08) 7 APPLYING THE ABOVE DECISION TO THE PRESENT SET OF FACT S, WE FIND THAT WHAT WAS PAID BY THE ASSESSEE WAS BY WAY OF TRAINING FEES FOR TRAINING ITS PERSONNEL OR CUSTOMERS TO EXPLAIN THE PROPOSED BUYERS THE SILENT FEATURES OF THE PRODUCTS IMPORTED BY THE ASSESSEE IN INDIA AND TO IMPARTING TRAINING TO THE CUSTO MERS TO USE THE EQUIPMENT. THUS, IT CANNOT BE SAID THAT THE AM OUNT WAS PAID FOR AVAILING TECHNICAL SERVICES BUT BY USING THE TECHNICAL KNOWLEDGE THE SERVICES WERE RENDERED TO THE ASSESSEE. THE TECHNOLOGY WAS NEVER MADE AVAILABLE TO THE ASSESSEE REND ERING SERVICES BY USING TECHNICAL KNOWLEDGE OR SKILL IS DIFFER ENT THAN CHARGING FEES FOR TECHNICAL SERVICES. THE PERSONS RENDER ING THE .SERVICES HAVE IMPARTED KNOWLEDGE AS TO HOW THE MACHIN ERIES .WILL BE L1SED. HENCE THE AMOUNT DOES NOT COME WITHIN THE DEFINITION OF 'FEES FR TECHNICAL SERVICES' AS DEFINED I N EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT. SINCE THE AMOUNT PAID IS NOT IN THE NATURE OF FEES OR TECHNICAL SERVICES, SECTION 40(A) (I) IS NOT ATTRACTED THEREFORE, THERE IS NO ERROR IN THE ORDER OF THE LEARNED CII(A). 10. FOR ASSESSMENT YEAR 2005-06, THE TRIBUNAL, VIDE ITS AFORESAID ORDER DATED 22.4.09, AGAIN REJECTED A SIMILAR CONTEN TION ON BEHALF OF THE DEPARTMENT, FOLLOWING THE AFORESAID TRIBUNAL ORD ER FOR ASSESSMENT YEAR 2003-04 IN THE ASSESSEES OWN CASE. 11. UNDER CIRCUMSTANCES SIMILAR TO THOSE PREVAILING FOR THE YEAR UNDER CONSIDERATION, (THE FACTS HEREIN ARE IN PARI M ATERIA WITH THOSE OF THOSE ORDERS), THE TRIBUNAL, FOLLOWING DCIT VS. PARAS RAMPURIA SYNTHETICS LTD., 20 SOT 249(DEL.), WHEREIN THE TRIB UNAL HAD FOLLOWED THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF SKYCELL COMMUNICATIONS LTD., 251 I.T.R. 53 (MAD.), HELD THA T WHAT WAS PAID BY THE ASSESSEE WAS BY WAY OF TRAINING FEE FOR TRAINING ITS PERSONNEL OR CUSTOMERS TO EXPLAIN TO ITS PROPOSED BUYERS, THE SALIENT FEATURES OF THE PRODUCTS IMPORTED BY THE ASSESSEE IN INDIA AND TO ENABLE THE CUSTOMERS TO USE THE EQUIPMENT, DUE TO WHICH, THE PAYM ENT COULD NOT HAVE BEEN MADE FOR AVAILING TECHNICAL SERVICES; THAT THE TECHNOLOGY WAS NEVER MADE AVAILABLE TO THE ASSESSEE; THAT RENDERING SERVICES BY USING TECHNICAL KNOWLEDGE OR SKILL IS DIFFERENT FROM C HARGING FEE FOR TECHNICAL SERVICES; THAT THE KNOWLEDGE IMPARTED WAS AS TO HOW TO USE I.T.A. NO.4687/DEL./2010 (A.Y. : 2007-08) 8 THE MACHINERY; THAT THEREFORE, THE AMOUNT DID NOT F ALL WITHIN DEFINITION OF FEE FOR TECHNICAL SERVICE, AS DEFINED IN EXPLANA TION 2 TO SECTION 9(1)(VII) OF THE ACT; AND THAT SO, SECTION 40(A)(I) OF THE ACT HAD NO APPLICATION. 12. TO REITERATE, THE FACTS UNDER THE YEAR CONSIDERAT ION ARE NO DIFFERENT FROM THOSE PRESENT BEFORE THE TRIBUNAL EITH ER FOR ASSESSMENT YEAR 2003-04 OR FOR ASSESSMENT YEAR 2005-06. THAT BEIN G SO, RESPECTIVELY FOLLOWING THE AFORESAID TRIBUNAL ORDERS, THE GRIEVANCE SOUGHT TO BE RAISED BY THE DEPARTMENT IS FOUND TO BE W ITHOUT MERIT AND IS REJECTED AS SUCH. 13. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T STANDS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 05.05.2011. SD/- SD/- (G.E. VEERABHADRAPPA) (A.D. JAIN) VICE PRESIDENT JUDICIAL MEMBER DATED: MAY 05, 2011. *SKB* COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A)-XVII, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. AR/ITAT