THE YASH RAJ FILMS PVT. LTD, MUMBAI V. M/S. ITO (IT)-2(2), MUMBAI

ITA 4856/MUM/2008

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9268 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 31-10-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 28-07-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KUMAR
• Assessee Lawyers: Not Found
• Keywords: Double taxation relief; Services rendered outside India; Deemed to accrue or arise in india; Permanent establishment
• Section: Not Found

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L, MUMBAI BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER. I.T.A. NO. 4856/MUM/2008 ASSESSMENT YE AR : 2006-07 M/S YASH RAJ FILMS PVT. LTD., THE INCOME-TAX OFFICER, 5 SHAH INDUSTRIAL ESTATE, VS. (I.T.)-2(2), MUMBAI. VEERA DESAI ROAD, ANDHERI (W), MUMBAI 400 053. PAN AAACY 1176E APPELLANT. RESPONDENT. I.T.A. NO. 2113/MUM/2009. ASSESSMENT YEAR : 2005-06 I.T.A. NO. 4882/MUM/2008 ASSESSMENT YEAR : 2006-07 ACIT, CENTRAL CIRCLE-29/ M/S YASH RAJ FILMS PVT. LTD. ITO(IT)(TDS), RANGE-2, VS . MUMBAI. MUMBAI. APPELLANT. RESPONDENT . ASSESSEE BY : SHRI PORAS KAKA. DEPARTM ENT BY : SHRI NARENDRA KUMAR. DATE OF HEARING : 31-10-2012 DATE OF PRONOUNCEMENT : 20-12-2012. O R D E R PER P.M. JAGTAP, A.M. OUT OF THESE THREE APPEALS, TWO APPEALS BEING ITA N O. 4856/MUM/2006 AND 4882/MUM/2008 ARE CROSS APPEALS FOR ASSESSMENT YEA RS 2006-07 WHEREAS THE THIRD 2 APPEAL IS THE APPEAL FILED BY THE REVENUE FOR ASSES SMENT YEAR 2005-06. SINCE SOME COMMON AND INTERLINKED ISSUES ARE INVOLVED IN THESE APPEALS, THEY HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS SINGLE C OMPOSITE ORDER. 2. FIRST WE SHALL TAKE UP THE CROSS APPEALS FOR ASS ESSMENT YEAR 2007-08 WHICH ARE DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEA LS)-31, MUMBAI DATED 29-05- 2008. 3. THE RELEVANT FACTS OF THE CASE GIVING RISE TO TH ESE APPEALS ARE THAT THE ASSESSEE IS A COMPANY INCORPORATED IN INDIA. IT IS ENGAGED IN THE BUSINESS OF PRODUCTION OF FILMS. THE SHOOTING OF FILMS ARE OFT EN HELD OUTSIDE INDIA FOR WHICH PAYMENTS ARE MADE IN FOREIGN EXCHANGE TO VARIOUS OV ERSEAS SERVICES PROVIDERS. DURING THE YEAR UNDER CONSIDERATION, SUCH PAYMENTS WERE MADE TO FIVE PARTIES AGGREGATING TO RS.18,77,84,736/-. ON VERIFICATION, THE AO NOTICED THAT THE TAX AT SOURCE WAS NOT DEDUCTED BY THE ASSESSEE FROM THE SA ID PAYMENTS AS REQUIRED BY THE PROVISIONS OF SECTION 195 OF THE ACT. HE, THEREFORE , REQUIRED THE ASSESSEE TO OFFER ITS EXPLANATION IN THE MATTER. IN REPLY, IT WAS SUBMITT ED BY THE ASSESSEE THAT THE SAID PAYMENTS WERE MADE ON ACCOUNT OF SHOOTING EXPENSES WHICH INVOLVED ARRANGEMENT FOR TRANSPORT, GETTING PERMISSION FOR SHOOTING, HOT EL ACCOMMODATION ETC. IT WAS CONTENDED THAT THE SAID PAYMENTS CONSTITUTED BUSINE SS PROFITS OF THE OVERSEAS COMPANIES AND SINCE THEY HAD NO PERMANENT ESTABLISH MENT IN INDIA DURING THE YEAR UNDER CONSIDERATION, NO TAX WAS REQUIRED TO BE DEDU CTED AT SOURCE FROM THE SAID PAYMENTS AS THE BUSINESS PROFITS OF THE NON RESIDEN T COMPANIES WAS NOT CHARGEABLE TO TAX IN INDIA AS PER ARTICLE 7 OF THE RELEVANT DT AAS. IT WAS ALSO CONTENDED ON BEHALF OF THE ASSESSEE THAT IN THE SERVICES AVAILE D FROM THE OVERSEAS COMPANIES, NO ELEMENT OF TECHNICAL SERVICES WAS INVOLVED. IT WAS ALSO CONTENDED THAT THE AMOUNTS IN QUESTION PAID BY THE ASSESSEE TO THE OVERSEAS CO MPANIES NOT BEING CHARGEABLE TO 3 TAX IN INDIA, THERE WAS NO REQUIREMENT OF MAKING AN Y APPLICATION U/S 195(2) TO THE AO FOR AVAILING ANY BENEFIT OR CONCESSION IN THE TA X TO BE DEDUCTED AT SOURCE. 4. THE ABOVE SUBMISSIONS MADE ON BEHALF OF THE ASSE SSEE WERE NOT FOUND ACCEPTABLE BY THE AO. ACCORDING TO HIM, THE ASSESSE E WAS LIABLE TO DEDUCT TAX AT SOURCE FROM THE IMPUGNED PAYMENTS MADE TO NON RESID ENTS AS PER THE PROVISIONS OF SECTION 195(1) AND IF IT WANTED TO COME OUT OF THE SAID LAW ON THE GROUND THAT THE SAID PAYMENTS WERE CHARGEABLE TO TAX IN INDIA, THE ASSESSEE OUGHT TO HAVE MADE AN APPLICATION TO THE AO U/S 195(2). HE HELD THAT IT W AS THUS NOT OPEN TO THE ASSESSEE TO MAKE PAYMENTS TO THE NON RESIDENTS BY TAKING AN UNILATERAL DECISION THAT THE SAID PAYMENTS ARE NOT SUMS CHARGEABLE TO TAX IN INDIA WI THOUT TAKING THE CONCURRENCE OF THE AO AS PROVIDED IN SECTION 195(2). THE AO THEN P ROCEEDED TO EXAMINE AS TO WHETHER THE SAID PAYMENTS MADE BY THE ASSESSEE TO T HE NON RESIDENTS WERE IN THE NATURE OF FEES FOR TECHNICAL SERVICES AS DEFINED IN EXPLANATION 2 TO SECTION 9(1)(VII) AND ON SUCH EXAMINATION, HE RECORDED THE FOLLOWING FINDINGS IN THE ASSESSMENT ORDER : I. PAYMENTS MADE TO HYBRID ENTERPRISES: THE ASSESSEE HAS MADE TOTAL PAYMENT OF GBP 26,912 E QUIVALENT OF RS.17,67,927/- TO THE SAID NON RESIDENT FOR SHOOTIN G OF THEIR THE FILM TITLED DHOOM-2. THE COPIES OF INVOICES RAISED BY THE REM ITTEE SHOWS THAT THE PAYMENT IS FOR THE LIFE CASTING, MAKE UP AND PROSTH ETIC DESIGN AND CREATION FOR THE FILM DHOOM-2 WITH HRITIC ROSHAN AND AISHW ARYA RAI WHICH INCLUDES THREE PROSTHETIC DESIGN AND 10 TONED DOWN CHARACTERS WITH WIGS AND TEETH WORK. THUS, THE SERVICES PROVIDED BY HYBRID E NTERPRISES ARE CLEARLY IN THE NATURE OF PAYMENTS FOR FEES FOR TECHNICAL SERV ICES AS ENVISAGED IN SECTION 9(1)(VII) R.W. EXPLANATION-2. II) PAYMENTS MADE TO GRUPA FILMOVA SP. ZOO OF POLAN D : THE ASSESSEE HAS MADE TOTAL PAYMENTS AS UNDER: 4 03-11-2005 1,35,500 FILM FANNA 16-12-2005 13,65,000 -DO- 06-01-2006 1,59,25,000 -DO- 03-02-2006 1,45,20,000 -DO- 22-02-2006 73,70,748 -DO- 23-02-2006 12,10,000 -DO- 23-02-2006 21,95,000 -DO- 22-03-2006 3,14,996 -DO- 04-01-2006 1,57,50,000 SALAM NAMASTE AS PER THE COPY OF AGREEMENT FURNISHED, IT IS SEEN THAT THE SAID REMITTEE IS THE PROVIDER AND ALSO ENGAGED IN PRODUCTION OF FILMS. AS PER ARTICLE 2 OF THE SAID AGREEMENT, THE SERVICE PROVIDER HAS PROVIDED A LL TECHNICAL AND SERVICE ELEMENTS FOR SHOOTING OF FILM IN POLAND. THIS INCLU DED ARRANGING OF EXTRAS, ARRANGING FOR THE POLICE AND SECURITY, ARRANGING FO R LOCATIONS RESTORATION, PROVIDING SERVICES OF LOCAL LINE PRODUCER, LOCATION MANAGER, CONTRACTING LOCATIONS AND OBTAINING ALL NECESSARY LICENSES/PERM ITS ETC. FOR THE SHOOTING OF THE FILMS. THUS, THE SERVICES PROVIDED ARE IN THE N ATURE OF TECHNICAL SERVICES. III) PAYMENT MADE TO UTOPIA FILMS: THE ASSESSEE HAS MADE TOTAL PAYMENTS OF RS.3,28,06, 004/- DURING FUNANCIAL YEAR 2005-06 TO THIS REMITTEE FOR PRODUCTION SERVIC ES FOR THE FILM TITLED DHOOM-2 FOR SHOOTING AT RIO DE JANWIRO. THE PAYME NTS ARE MADE FOR ARRANGING OF EXTRAS, ARRANGING FOR LOCATIONS, PROVI DING ALL TECHNICAL SERVICES FOR SHOOTING OF FILM AND PROVIDING OF SERVICES OF L OCAL LINE PRODUCERS, CASTING DIRECTOR ETC. FOR SHOOTING OF FILM AT RIO DE JANEIR O. AS PER THE COPY OF AGREEMENT, THE REMITTEE WAS TO PROVIDE PRODUCTION S ERVICE WITH LOCAL CREW, TRANSPORT, WORKING MEALS, LOCATIONS, CASTING MODEL/ ACTORS, EQUIPMENT, INCLUDING COORDINATING NECESSARY LICENSES AND PERMI TS AS SPECIFIED IN THE ESTIMATED BUDGET. THE SERVICES PROVIDED BY THE REMI TTEE ARE THEREFORE, OF THE 5 NATURE OF FEES FOR TECHNICAL SERVICES AS PER DETINI TION GIVEN IN EXPLANATION-2 TO SECTION 9(1)(VII) OF THE I.T. ACT, 1961. IV) PAYMENT MADE TO OAKRIDGE PRODUCTIONS : THE ASSESSEE HAS MADE TOTAL PAYMENTS OF RS.6,19,30, 119/- FOR SHOOTING OF FILM TITLED NIEL & NIKKI AT CANADA. T HE REMITTEE COMPANY WAS TO PROVIDE SERVICES SIMILAR TO THOSE MENTIONED ABOV E IN CONNECTION WITH SHOOTING OF THEIR FILM AT CANADA. V) PAYMENTS TO M/S RAMAR MEDIA PVT. LTD. THE TOTAL PAYMENT OF RS.3,24,93,414/- FOR SHOOTING OF FILM TITLED SALAM NAMASTE. THE NATURE OF SERVICE RENDERED BUT THE REMITTEE TO THE ASSESSEE COMPANY ARE SIMILAR TO THOSE MENTIONED IN ABOVE MENTIONED CASES. 5. ON THE BASIS OF ABOVE FINDINGS RECORDED BY HIM, THE AO CAME TO THE CONCLUSION THAT THE TOTAL PAYMENTS AMOUNTING TO RS. 18,77,84,736/- MADE BY THE ASSESSEE WERE IN THE NATURE OF FEES FOR TECHNICAL S ERVICES AS PER THE PROVISIONS OF SECTION 9(1)(VII) READ WITH EXPLANATION 2 THERETO. HE HELD THAT THE CONCERNED PAYEES HAD PROVIDED TECHNICAL SERVICES IN CONNECTIO N WITH SHOOTING OF THE FILMS WHICH IN MANY CASES HAD ALSO MADE AVAILABLE THE TEC HNICAL KNOWLEDGE TO THE ASSESSEE COMPANY. ACCORDINGLY, HE HELD THAT THE PAY MENTS MADE BY THE ASSESSEE TO THE NON RESIDENT PARTIES WERE IN THE NATURE OF FEES FOR TECHNICAL SERVICES AND REPRESENTED INCOME OF THE SAID PARTIES CHARGEABLE T O TAX IN INDIA BEING INCOME DEEMED TO ACCRUE OR ARISE IN INDIA. HE HELD THAT TH E ASSESSEE THUS WAS LIABLE TO DEDUCT TAX AT SOURCE FROM THE SAID PAYMENTS AS PER THE PROVISIONS OF SECTION 195 AND THE ASSESSEE HAVING FAILED TO MAKE SUCH DEDUCTI ON, THE AO TREATED IT AS THE ASSESSEE IN DEFAULT IN RESPECT OF TAX OF RS.5,26,73 ,614/- SO DEDUCTIBLE AS PER THE PROVISIONS OF SECTION 201. HE ALSO HELD THE ASSESSE E AS LIABLE TO PAY INTEREST AT THE 6 RATE OF 12% PER ANNUM IN RESPECT OF THE SAID TAX PA YMENT AS PER THE PROVISIONS OF SECTION 201(1A) BY AN ORDER PASSED U/S 201 AND 201( 1A) OF THE ACT ON 15-03-2007. 6. AGAINST THE ORDER OF THE AO PASSED U/S 201 AND 2 01(1A), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LEARNED CIT(AP PEALS). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(APPEAL S), ELABORATE SUBMISSIONS WERE MADE ON BEHALF OF THE ASSESSEE IN RESPECT OF E ACH AND EVERY PAYMENT MADE TO NON RESIDENT PARTIES IN THE LIGHT OF RELEVANT AGREE MENTS ENTERED INTO WITH THE SAID PARTIES AS WELL AS THE RELEVANT ARTICLES OF THE DTA A TO SHOW THAT THE PAYMENTS MADE TO THE SAID PARTIES WERE NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES CHARGEABLE TO TAX IN INDIA BUT THE SAME REPRESENTED BUSINESS PROFITS OF THE SAID NON RESIDENT PARTIES WHICH WERE NOT CHARGEABLE TO TAX I N INDIA. THE SUBMISSIONS MADE BY THE ASSESSEE IN THIS REGARD AS DISCUSSED BY THE LEARNED CIT(APPEALS) IN HIS IMPUGNED ORDER ARE REPRODUCED BELOW : 2.15 PARTY NO 1 : PAYMENT TO HYBRID ENTERPRISES UK GBP 26912. THE APPELLAN T EXPLAINED THAT THE SERVICE PROVIDER M/S HYBRID IS A COMPANY INCORPORATED IN UK AND HAS PR O VIDED THE S ERVI C E S O F ' MAKE UP' FOR THE MAIN PROT AGO NISTS OF THE M O VIE . TH E A PP EL L A NT S T A T E D TH A T TH E SE R VIC E I S PR OVID E D DUR I N G S H OO T O UT S ID E INDIA A N D TH E MAKE UP C R EW OF THE SE RVICE PROVID E R HA S NOT C O ME T O INDIA FOR PROVIDIN G ANY SUCH S E RVICE S N O R D O ES THE SERVICE PROVIDER HAVE ANY PERMANENT ESTABLIS HMENT (P.E.) IN INDIA . TH E APPELLANT SATED THAT THERE IS NOTHING TECHNICAL IN THESE SERVICES. THE APPELLANT FURNISHED THE AGREEMENT WIT H THE OVERSEAS SERVICE PROVIDER. THE PAYMENT RELATES TO THE SERVICE OF MAK E UP ETC PROVIDED BY THE SERVICE PROVIDER. THE APPELLANT STATED THAT SUCH A PA Y MENT DOES NOT TANTAMOUNT TO ' TECHNICAL S ERVICES ' . HOWEVER TH E AO HELD THAT THE SE RVICES PROVIDED BY HYBRID ENTERPRI S ES ARE IN NATURE OF PAYMENTS FOR FEES FOR TECHNICAL SERVICES AS ENVISAGED IN SECTION 9(1)(VI I) R.W. EXPLANATION 2. 2.16 T H E A PPELL A NT S TATED THAT THE P A RTY TO WHOM THE PAYMENTS AR E MADE BY TH E APP E LLANT IS A R ESI D E NT OF U K, H E NC E E NTITL E D TO TH E APPLI C ATION OF THE R E LEV A NT CL A U SES O F TH E INDO UK TR EA T Y. T H E A PP E LLANT STATED THAT THE A . O . HA S 7 NOT T A KEN CO G NI ZA NC E OF THE DOUBL E T AXA TION AVOIDANCE AGREEMENT WITH THE INDIA UK TREATY AND H AS NOT EXAMINED THE A PPLICABILITY THEREOF . THE APPELLANT STATED THAT IT IS CLEAR THAT IF PROVISIONS OF DTAA AR E BEN E FICIAL T O THE AS S ESS EE, THE SAME SHOULD PREVAIL OVER THE PROVISIONS OF I . T. ACT . 2.17 THE APPELLANT REFERRED TO THE INDIA UK TREATY WHERE THE ' FEES FOR TECHNICAL SERVICES ' IS DEFINED IN ARTICLE 12 AS UNDER : '4 . F OR TH E PURPOSE S OF PARAGRAPH 2 OF THIS ARTI C LE , AND SUBJ E CT TO PARAGRAPH 5, OF THIS ARTICLE, THE TERM ' FE E S FOR T E CHNICAL SERVICES ' MEANS PAYMENT S OF ANY KIND OF AN Y P E RSON IN CONSIDERATION F O R THE RENDERING OF ANY T E CHNI C AL OR CONSULTANC Y SE RVI CE S (IN C LUDIN G THE PROVISION OF SE RVI C ES OF A T E CHNICAL O R OTH E R P E RSONN E L) W H IC H : (A) AR E A N C ILLAR Y AND S UB S IDIARY TO TH E APPLI C ATION O R E NJOYM E NT OF TH E RI G HT , PR O P E RTY OR INFORMATI O N FOR WHICH A PAYM E NT D E S C RIB E D IN PARA G RAPH 3(A) OF THI S ARTI C L E I S R ECE IV E D ; OR 5. TH E D E FINITI O N S OF F EE S F O R T EC HNICAL S E RVI CES IN PARA G RAPH 4 OF THI S A RTI C L E S HALL N O T IN C LUD E A MOUNT S PAID : (A ) FOR SE RVI CES THAT AR E AN C ILLAR Y AND S UBSIDIARY , A S W E LL A S IN EX TRI C ABLY A N D LINK E D , TO TH E SALE OF PROPERTY , OTHER THAN PROP E RT Y D ES CRIB E D IN P A R AG RAPH 3 (A) OF THI S ARTI C L E; (E) T O AN E MPL OYEE O F TH E P E R S ON MAKIN G THE P AY M E NT S O R T O AN Y INDIVIDUAL O R PARTN E RSHIP FOR PROF ES SIONAL SE RVICE S AS D E FIN E D IN ARTI C L E 1 5 ( IND E P E ND E NT P E R S ONAL SE R V I CES) OF THI S CO NV E NTI O N . ' 2.18 T HE APPELLANT AR G U E D TH A T TH E ' M A K E UP SE R V I CES' A R E N O T IN C LUD E D AS A PA RT OF FEES FO R T E CHNIC A L S ERVICE S AS P E R THE D O UBL E TA X A V O IDANCE A G REEMENT B E TW E EN INDI A AND UK F URTH E R , NO T EC HNOL OGY I S PROVID E D T O THE APPELL A NT B Y TH E OV E R S EA S P A RTY . IN THI S R E GARD T H E A PP E LLANT A L SO DI S CU SSE D WH E TH E R TH E SA ID SE R V I CES W O ULD QU A LI F Y AS IND E P ENDEN T P E R S ON A L SE RVI CES UNDER A RTICL E 15 O F TH E INDI A U K DT AA . T H E S AID A RTI C L E 1 5 STA T ES AS FOLLOWS: I ND E PEND E N T P E RSONA L SE R V I CES - I . IN C OM E D E RIV E D BY A N IN DIVID U A L , W H E T HER IN HI S OWN CAPA C IT Y OR AS A M E MB E R O F A PA RTN E RSHIP , W H O I S A R ESIDE NT OF A CO N TRAC T IN G STATE I N RESPEC T OF P R O F ESS ION A L SE R V I CES O R OTH E R I NDE P E ND E NT AC TI V ITI ES OF A SIMILAR CHARACT E R MA Y BE T AXED IN TH AT STATE. SUC H IN C OM E MAY ALSO BE TAXED IN T H E OTH E R CONTRACTING STA T E I F S U C H SE R V I CES A R E P E R F ORM E D IN TH A T O TH E R S T ATE AND I F : (A) H E IS PRESENT I N T H A T O TH E R STA T E FO R A P E RIOD O R PE R IODS AGGR E GATING TO 90 DAY S IN T HE RE L EVANT F I SCA L YEA R . . OR 8 (B) H E , OR T HE PA RTN ERS HIP , HA S A FIX E D BASE R EG UL A RL Y AVAILAB L E TO HI M , OR IT , IN THA T O T HE R S T A T E F O R TH E PURPO SE OF P E RFORMIN G HI S AC TI V IT IES . . BUT IN EACH CASE O NL Y SO MUCH OF TH E INCOM E A S IS ATTRIBUT A BL E T O TH OS E SERVICES . 2. FOR TH E P URPOSE S OF PARAGRAPH I OF THIS ARTI C L E A N INDIVIDUAL W H O I S A M E MB E R OF A PA RTN E R S HIP SHALL B E R EG ARD E D AS BEING PR E S E NT IN TH E O TH E R S T A T E D U R IN G DAYS O N W HI C H , ALTHOU G H H E I S NOT PRESENT , ANOTH E R INDIVI D U A L M E MB ER OF TH E PA RT NE R S HIP IS SO PR ESE NT AND PERFORM S PR O F ESS ION A L SE R V I CES O R O TH E R IND E PE N DE NT AC TI V ITI ES O F A S IMILAR CHARACT E R IN TH A T S TAT E . 3. THE T E RM ' P ROF ESS IONAL S E RVICES ' INCLUDES IND E P E ND E NT , SCIE NT IFIC , L IT E RAR Y , A RT ISTIC, E DU C ATIONAL OR T E ACHING ACTIVITIES AS W E LL AS TH E IND EPE ND E NT AC T IV I TI ES OR PHYS I CI A NS, S URG E ONS , LAWYERS , ENGIN EE R S, A R C HIT EC T S , DE NT IS T S AND ACCO UNT A NT S . 2.19 THE APPE LL AN T STATED THAT AS P E R T H E A B O VE E X PLAN A TION , TH E FEES P AID TO I ND I VIDUAL C AN A T THE M OS T BE TR EA T E D AS F E ES FOR INDEPENDENT PERSONAL SER V I CES BUT CA N NOT BE H E L D T O B E TAXAB L E I N I NDI A AS TH E CONDITIONS STIPULATED IN THE SAID ARTI C L E 15 A RE N O T F UL F ILL E D . THU S IN VIEW OF THE SAI D C IRCUMSTAN C ES THE APPELLANT ST A T E D TH AT THE AO HAS WR O N G L Y CO N S I DE R E D T H E SE R V I C ES OF MAKE UP AS FEES FO R TE CHNI CA L SERV IC ES AND HAS A L SO ERR E D IN N OT CO N S ID E RIN G TH E APPLICABILITY OF TH E INDIA - U.K. OTAA 2. 20 P A RT Y NO 2 : PAYMENT TO UTOPIA F ILM S BRAZIL O F R S. 3. 28 CROR ES . T H E A P PE LL ANT STATED T H A T TH E PAY M E NT W AS M A D E FOR THE S E RVICES UTIL I Z E D IN TH E S H OOTI N G OF TH E F IL M 'D H OO M 2 ' W HI C H WAS SHOT IN ABROAD . THE APPELLANT ST A TED THAT P AY M E NT S A R E M ADE F O R ARRA N G I N G EX TR AS, A RR A N G IN G F OR LOC A TIONS AND OTHER RELAT E D AC TIVITI E S. 2.2 1 TH E A PPELLA N T P R OD U CED B EFO R E ME T H E A G RE E MENT WITH M I S U T OPIA FILM S , TH E R E L EVA N T CLAU SES O F W H ICH ARE R E PR O DU CED BE L OW :- 1 PR O DU C TION S E R VICE COMPANY W I L L PROV I DE P R ODU C T ION S E RVI CE WITH L OC AL C R E W , TR A N S PORT , WO RKI NG M E A L S , LO C ATIONS, CASTIN G, MOD E L S/ A C T O R S , EQ UIPM E NT , IN C L UDING COOR DIN A T ING N E CES S ARY LICE N SES AND P E RMITS 2. PRODU C T I ON SE R VICE COMPA N Y AG R E ES T O P R OVI D E F UL L L O CA L IN S UR A N C E F O R LO C A L C R E W / TAL E N T / EQU I PM E NT / VE H I C L E / LOCA T IO N S PE R .L O C AL LAW S AN D R E QU I R E M E NT S. 2.22 T H E A PPELL A NT S UBMITTED TH A T THE MOVIE DHOOM 2 WAS SHOT ON THE LOCATION OF BR AZ IL . T H E A PP E LL A NT S T A T E D TH A T TH E O VER S EAS COMPAN Y ONL Y PROVIDED THE SAID TEAM FROM INDI A, T H E TRA N S P OR T , M EA L , A C C O MMODATION INSURANCE AND OTHER DAY TO D A Y REQUIREM E NT DURIN G TH E S T AY O F 45 D AYS FO R P E RI O D OF SHOOTING AS IN ORDER 9 TO S UCCESSFUL L Y SHOOT IT W AS N E CE S SA R Y T O H A V E TH E S UPPORT OF A LOCAL COMPANY. THE APPELLANT ARGUED TH A T THE SE S E R V I CE PR O VIDER S, PROVIDE S E RVICES OUTSIDE INDIA , AND DO NOT COME TO INDIA FOR THE S A M E N O R D O TH EY H A V E A N Y PERMANENT ESTABLISHMENT ( P . E. ) IN INDIA . THE AR AR G U E D TH A T TH E P AY M E NT S MADE T O O V E R S EAS S E RVICE PROVIDERS FOR SHOOTING FILMS ABROAD AR E NOT IN TH E N A TUR E OF F EES FOR TE C HNI C AL S E RVICES . THE APPELLANT STATED THAT TH E OVERSEAS C O MP A N Y H AS N O T R E ND E R E D A N Y T E CHNIC A L OR CONSULTANCY SERVICES AND THAT NONE OF THE C ON CE RN E D P AY M E NT S CO ULD B E TR E ATED A S FEES FOR TECHNICAL SERVICES AS THEY WERE PAYM E NT S F O R A RR A N G IN G FOR EXTRA S, ARR A NGING POLICE SECURITY IN FOREIGN LOCATIONS, ARRANGIN G NE C ES S AR Y P E RMI SS I O N S, ARRAN G IN G MAKE UP OF ST A RS ETC. THE APPELLANT STATED THAT SINCE THE SE AR E N O T IN TH E N A TUR E O F FE ES FOR TECHNICAL SERVICES AND SINCE NONE OF THE RECIPIENT S H A D A P. E. IN I N DIA , TH E SA M E AR E IN THE NATURE OF ' BUSINESS PROFITS ' AND HENCE CANNOT B E TA X ED IN INDI A . T H E AR THU S A R G U E D THAT AS A CONSEQUENCE, NO TAX WAS REQUIR E D T O B E D E DU C T E D A T SOUR CE A S N O O N E FROM THE ' PRODUCTION SERVICE COMPANY' M/ S UTOPIA H AS V I S IT E D INDI A, O R PR O VID E D AN Y SERVICES FROM OVERSEAS TO INDIA . M/S UTOPIA H AS PR O VID E D O NL Y L O C A L S E R V I CE IN TH E IR H O M E COUNTR Y . 2.23 T H E A P P E LL A NT FURTHER AR G U E D THAT M/S UTOPIA IS A RE S IDENT OF BRAZIL , DUE T O WHI C H TH E R E L E VA NT C L A U S ES O F TH E IND O BR AZ IL TR EA T Y WO UL D B E A PP L I CA BL E A ND T H AT IF P R O VI S I ONS OF D T AA A R E BE N E FI C I A L T O TH E A S SES S E E, TH E S A M E S H O ULD PR EV AIL O V E R TH E P R OVI S I O N S OF I . T . A C T . T H E A PP E LL A NT S T A T E D TH A T THE DT AA WITH BRAZIL DOES NOT HAV E A SEPAR A T E ARTI C L E F O R F EES F O R T E CHNIC A L SERVI C E S; HENCE TH E ACTIVITY OF M/S UTOPI A WOULD FALL UND E R TH E AR TI C L E 7 R E L A TIN G TO ' BU S IN ESS PROFIT . ' ARTICL E 7 RE A D S A S F O LLOW S A R T I C L E 7 : B U S IN ES S P R OFI T S _ 1. TH E PR O FI T S OF A N E NT E RPRI SE OF A C ONTRA C TIN G S TAT E S HALL B E T AX ABL E O NL Y I N TH A T S T A T E U NL ESS TH E E NT E R P RI SE CA RRI E S ON BU S IN ES S IN TH E O TH E R C ONTRA C T I N G STA T E TH ROU G H P E R M AN E NT ES T AB L I S HM E N T S I TU A T E D TH E R E I N . IF TH E ENTE R P RI SE C AR R I ES O N B USIN E SS AS AFO R E S A I D , T H E P R OF IT S O F TH E E NT E RPR I SE M AY B E T A XED IN T H E O TH ER STATE BUT ONLY SO ' M U C H O F TH E M AS I S AT T R I BU T A BL E T O TH A T P E RM A N E N T ESTABLISH M E NT. 2 . S UBJ EC T T O TH E PROVISI O N S OF PARA G RAPH 3, WH E RE AN E NT E RPRI SE O F A CO NTR AC TIN G STAT E C ARRI ES ON BU S INE S S IN TH E OTH E R C ONTRACTIN G STAT E THROU G H A P E RMAN E NT E STABLISHM E NT S ITUAT E D TH E REIN , THER E SHALL IN EACH CONTRA C TIN G S TAT E B E ATTRIBU T E D TO THAT P E RMAN E NT E STABLISHM E NT THE PROFITS WHICH IT MIGHT B E EX P EC T E D T O M A K E IF IT WE R E A DISTINCT AND SEPARATE ENT E RPRISE E NGAGED IN THE SAME OR SIMILAR ACTIVITI E S UND E R TH E S AME OR S IMILAR CONDITIONS AND DEALING 10 WHOLLY INDEP E NDENTLY WITH TH E E NT E RPRI SE O F WHI C H IT I S A P E RMANENT E STABLISHM E NT . 2.24 ON TH E OTHER HAND THE AO CAME TO THE CONCLUSION THAT AS PE R THE AGREEMENT , TH E SERVICES PROVIDED BY THE OVERSEAS COMPANY ARE NATU RE OF FEES FOR TECHNICAL SERVICES AS PER DEFINITION GIVEN IN E XPLANATION 2, TO SECTION 9(I)(VII). THE AUTHORIZED REPRESENTATIVE ARGUED THA T THE S E SERVICES DO NOT AMOUNT TO 'TECHNICAL SERVICES ' AS ENVISAGED UNDER EXPLANATION 2 , TO SECTION 9(1)(VII). THE AR ALSO ARGUED THAT THE OVERSEAS COM PANY UTOPIA FILMS, DOE S NOT HAVE ANY PERMANENT ESTABLISHMENT OR OFFICES IN INDIA , NOR HA S THE AO THI S FACT . HENCE THIS AMOUNT CANNOT BE CHARGEABLE TO TAX IN IN DIA UNDER THE HEAD BUSINE SS PROFITS ALSO . HENCE, AS PER THE APPELLANT THE AO HAS WRONGLY CONSIDERED THE SERVIC E S OF MAKE UP AS FEES FOR TECHNICAL SERVICES AND HA S ALSO ERRED IN IGNORING THE APPLICABILIT Y OF THE INDIA BRAZIL DTAA . 2.25 PARTY NO 3 : PAYMENT TO OAKBRIDGE PROD UCTION - CANADA OF RS. 6.19 CRORES THE APPELLANT STATED THAT THE PA Y MENT WAS MADE FOR SERVICES REQUIRED DURIN G TH E MAKIN G OF ' NEAL N NIKKI ' FILM . THE PAYMENTS ARE MADE TO THE OVER SEA S SE RVIC E PROVIDER FOR ARRANGING EXTRAS ARRAN G ING FOR LOCATIONS AND OTHER ACTIVITIE S IN THE F O REI G N LOCATION WH E RE THE FILM WAS SHOT . THE AGREEMENT WITH M /S OAKBRIDGE PRODUCTI O N S W AS FOR PR O VIDING S ERVICES OF LOCAL CREW , TRAN S PORT , WORKING M E AL S , L OCA TI O N S, CAS TIN G , M O DEL S/AC TOR S , EQUIPMENT, INCLUDIN G C O ORDINATION OF NECE SS ARY LI C EN S E S A ND P E RMIT S. THE APP E LLANT STATED THAT THE SERVIC ES PR O VIDED BY M I S OAKBRIDGE PRODUCTION S A R E N O T A T ALL IN THE NATURE O F FEE S FOR TECHNI C AL SE RVIC ES. THE MOVIE NEAL N NIKKI WAS TOTALLY SH O T ON TH E LOC A TION OF C A NADA . . TH E AR AR G U E D THAT THESE S ERVICE PROVID E R S, PR O VID E SE RVIC ES O UT S ID E INDI A, AND AL S O T H EY D O N O T H A VE A N Y PERM A N E NT ES T A BLI S HM E NT ( P . E . ) I N INDI A . M O R EO V E R , TH E SE RVIC ES A R E N O T R E ND E R E D IN INDIA . THU S TH E A R A R G U E D TH A T TH E REMITT A N CE S M A DE TO OVERSEAS S ERVIC E PR O VID E R S FOR S HOOTIN G FILM S ABRO A D AR E N O T IN TH E N A TURE OF ' FEE S F O R IN C LUDED S ERVI CES' AS E NVI SAG ED IN A R TI C L E 1 2 OF TH E INDI A CA N A D A D T AA A S TH E S ERVICE S S O R E ND E RED D O N O T ' M A KE A V A ILABL E ' T EC HNI CA L KN O WL E D GE, EX P E RI E N CE, S KILL , K N O W H O W OR PR OCE S SES O R CO N S I S T O F D E V E L O PM EN T A N D TRAN S F E R OF TECHNICAL PLAN OR TECHNICAL DESIGN. SUCH SERVICES WOULD THUS FALL UNDER ARTICLE 7 ' BU S IN E S S PROFIT '. THE APPELLANT 11 STATED THAT IF PROVISI O N S O F DT AA ARE BENEFI C IAL TO TH E ASSESSE E , TH E SAME SHOULD PREVAIL OVER THE PROVISION S OF I . T . A C T . TH E R E F O R E, TH E APPE L LA NT PL EA D E D TH A T NON E O F THE C O N C ERNED PAYMENTS COULD B E TR EATE D AS FEES FOR TEC HNI CA L SE RVI CES AS THEY WERE P A YMENT S FOR ARRANGING FOR E X TRAS , ARRAN G IN G PO L ICE SEC U RITY I N F O R EIG N LOCATIONS , ARRANGING NE C E S SAR Y PERMI SS ION S, A RRAN G IN G M AKE U P OF STA R S ETC. SI NCE THE S E ARE NOT IN THE NATURE OF FEES FOR T E CHNI C AL SE RVI CES A ND S IN CE N O N E OF THE RECI PIENTS HAVE A P . E . IN INDIA, THE SAME ARE IN THE N A TURE OF ' BUSIN ESS PR OF IT S' AND H E N CE C A NNOT BE TAXED IN INDIA . AS A CONSEQUENCE, NO TA X WAS REQUIR E D TO BE DEDU C T E D AT SO URCE. 2.26 THE APPELLANT ARGUED THAT THAT M/S OAKBRIDGE PRODUCTIONS IS A RESIDENT OF C A NAD A, DU E TO WHICH THE RELEVANT CLAUSES OF THE INDIA CANADA T REATY WOULD BE APPLIC A BL E. T H E DTAA WITH CANADA HAS A SEPARATE ARTICLE FOR FEES FOR INCLUDED SERV I CE S ' WHI C H STA T ES AS F OLLOWS: ARTICLE 12 4. FOR THE PURPO SE S OF THIS ARTI C LE , ' F EES F O R IN C LUD E D SE R VICES MEANS PAYMENTS OF AN Y KIND TO ANY PER S ON IN CO N S ID E RATION F O R TH E R ENDERING OF ANY TECHNICAL OR CONSULTAN CY SE R V I CE S ( IN C LUDIN G THR OUGH TH E PROVISION OF SER V IC E S OF T E CHNICAL OR OTH E R P E R S ON NE L ) I F SUC H SE R VICES : (A) ARE AN C ILLARY AND SUBSIDIAR Y TO TH E APPLI C ATI O N O R E N JOY M ENT OF THE RI G HT, PROPERTY OR INFORMATION FOR W HI C H A PAY M ENT D E SCRIB E D IN PARAGRAPH 3 I S R ECE IV E D ; O R (B) MAKE AVAILABLE TECHNICAL KNOWL E D GE, E XP E RI E N CE, S KILL , KNOW- HOW, OR PROCESSES OR CONSIST OF THE D E V E LOPM E NT A ND T RANSF E R OF A TECHNICAL PLAN OR TECHNICAL D E SI G N . 5. NOTWITHSTANDIN G PARAGRAPH 4 , ' F EES F OR IN C LU DED SERVICES' DOES NOT IN C LUDE AMOUNT PAID : (A) FOR S E RVI C E S TH A T AR E A N C ILLAR Y AND SU BS I DIARY, AS WE LL AS I N EX T RI C ABL Y AND ESSE NT IA LL Y LINK ED, TO T H E SA L E OF P R OPE R TY O TH E R T HAN A S AL E D ESCRI B ED IN PARAGRAPH 5(A) ; H E N CE TH E AO H AS W R O N G L Y C ON S ID E R ED T H E SE RVI CES OF MAK E UP A S F EE S F OR T EC HNI CA L SE R V I CES AND HA S AL SO ER R ED IN M A KIN G NO R EFE R EN C E TO 12 INDI A C AN A D A DTAA . 2.27 O N TH E O TH E R H A ND TH E AO CAM E T O TH E CO NCLU S I O N TH A T A S P E R TH E AG R EE M E NT , T HE SE R VICES PR OV ID E D B Y THE OVER SEAS PART Y A R E IN THE N A TUR E O F 'FEES FO R T EC H NICA L SE R VICES' AS PER DEFINITIO N G I VE N IN EX P L A N A TI O N 2, TO SECTION 9(1)( VII) (T H E AO ME NTI O N ED THAT T H ESE SE R VICES A R E S IMIL A R T O SE R VICES PR OVI D E D B Y U T O PI A F ILM S) . H OWE V E R , TH E A P PE LL ANT ARGUED THAT UND ER N O C IRCUM S T A N CES, IT C A N B E UND E R S T OO D TH A T TH ESE SE R V I CES MAK E AVA IL AB L E T EC HNI CA L KN O WLEDGE , E XP E RI E N CE, SKI LL , KNOW- H OW, O R P R OCESSES O R CO N SIST OF THE DEVE L OP M E NT A ND TR A NSF E R O F A T EC HNI CA L PL A N O R T EC HN ICA L D ES I G N . HE N CE TH E S E P AY M E NT S D O N O T FALL UNDER TH E CLAUSE OF ' FEES FOR INCLUD E D SE R VICES'. TH E AR F URTH E R A R G U E D TH A T AS M/ S OAKBRIDGE PRODUCTIONS DO NOT H A V E A N Y P E RM A N E NT ES T A BLI S HM E NT ( P .E. ) IN INDI A H E NCE ARTICLE 7 OF THE INDIA CANADA DTAA WOULD N O T B E A PPLIC A BL E T O O. H E NC E TH E AR ARGUED THAT SINCE THESE PAYMENTS ARE NOT IN TH E N A TUR E OF 'F EES F O R IN C LUDED SE RVICES ' AND SINCE THE SAME ARE IN THE NATURE OF ' BUSIN ESS PROFIT S'; TH E Y CA NN O T B E T A X E D IN INDIA AS NONE OF THE RECIPIENTS HAVE A P . E . IN INDI A AS A CO N SE QU E N CE OF W HI C H , N O T AX WAS REQUIRED TO BE DEDUCTED AT SOURCE . 2 . 28 PARTY NO 4 PAYMENT TO M/S ROWMAR MEDIA - AUSTRALIA OF RS. 3.25 CR O R ES. T H E AP P EL L A NT S T A T E D THAT TH E T O T A L P AY MENT T O M IS ROWMAR M E DI A I S F O R SE R VI CE S OBTAI N ED F R O M T H E SA ID SE R VICE PR O VID E R DUR I N G TH E S H OO TIN G OF TH E F IL M 'SALAA M NAMASTE' . T H E P AY M E NT S W E R E M A D E F O R ARR A NGIN G EXTR AS, A RR A N G IN G FO R L OCATI O N S A ND O TH E R I N CI D E NTAL A CTIVITI ES . T H E F ILM W A S S H O T IN AUSTR A LI A. T H E AG R EE M E NT W I T H M/ S R O WM A R M E DIA I S FOR S ERVI CES IDENTIC A L TO THOSE PR O VID E D B Y O TH E R OVER S EA S CO MP A NI ES D I SC U SSE D IN TH E PR ECE DIN G PAR AS I . E . PR OV IDIN G OF F OO D , TR A N S P O RT , ACCO MM O D A TI O N , AND OTHER EXTRAS REQUIRED IN THE MOVIE . HEN C E TH E SE RVI CE PR O VI DED B Y TH E ROWM A R M E DIA IS NOT AT A LL IN THE NATURE OF FEES FOR T EC HNI CA L SE R V I CES . 2.29 T H E A P PE LL A NT A L SO S TAT E D THAT TH E DTA A WITH AU S TRALI A D OES N OT H AVE A SE P A R ATE AR T I C L E F O R FEES FO R TEC HNI CA L S ERVICE S, H E N CE TH E AC TIVIT Y O F ' R OW M A R M E DI A WILL FA LL UN DER THE A R T I C L E 7 ' BUS IN ESS PR O FIT ' W HI C H R EADS AS FO LL OWS : ' I . TH E PR O FI T S OF AN ENTERP R I SE OF ON E O F TH E C ONTRACTIN G ST A T E S S H A LL B E T A X ABL E ONLY IN T HAT ST A T E UN L E SS TH E E N T E RPRI SE C ARRI E S O N BU S IN E S S I N TH E O TH E R C ONTRA C TIN G S T A T E 13 THROU G H A P E R M ANE NT ES T ABLISHM E NT SI TU A T E D T HE R E IN . I F TH E E N T E RP R IS E C ARRI ES O N BU S IN ESS A S AFO R ESA I D, T H E PROFI T S OF TH E E NT ERP R ISE M AY BE T AXED IN T H E O TH E R STAT E B ILL O NL Y S O III L 1 C H OF T H E M AS IS A T TRIBU T AB L E TO : (A)T H A T P E RMAN E NT E STABL I SHM E NT , O R (B) SA L ES WI THIN TH A T OT HE R CO NTR AC T ING S T A T E OF GOODS O R M E R C H A N D I SE OF T HE SAM E OR A SI MIL A R K I N D AS TH OSE SO LD , O R O TH E R BUSI N ESS AC TI V ITI ES O F TH E SA M E OR A SIMILAR K I ND A S T HOSE CA R R I E D O N , THR O U G H TH A T PE R MANEN T ES T A BLI S HM E NT . ' 2.30 ON THE OTHER HAND THE AO CAME TO THE CONCLUSIO N T H AT AS P E R TH E AGREEMENT , TH E SERVICES PROVIDED BY THE OVERSEAS PA R TY A R E IN THE N ATU R E OF FEES FO R T ECHNICAL SERVI CES A S PER DEFINITION GIVEN IN EXP L ANATION 2, TO SECTION 9( 1 )(VI I ) ( H E ME N TIONED THAT TH ES E SERVICES ARE SIMILAR TO THOSE MENTIONED IN ABOVE M E N TIONE D CASES) . T H E APPE L LANT ST A T E D TH A T NONE OF THE CO N CERNE D PAYMENTS CO ULD B E TR EA T E D AS FEES FOR T EC HN ICAL SE RVI CES AS THEY WERE PAYME N TS FOR A RR A N G I NG FO R EX TR AS, ARRAN GI NG POLI CE SEC URI TY I N FO R EIGN LO C ATIO N S, AR R ANG IN G N ECESSA R Y P E R M I SSIO N S, A RRAN G IN G M A K E UP OF STA R S ETC. THE APPE LL A N T S T ATE D T H A T TH E O V E RS EAS COMPANY ROWMAR M E DIA D OES N OT H AVE ANY PER M A N ENT ES T A BLI S HM E NT OR O F FI CE IN INDIA ; HENCE NO AMOUNT CAN B E C H ARGEA BL E TO TAX IN IND IA . AS A CO N SE QU E N CE, N O T AX WA S R E QUIR E D T O B E D E DU C T E D AT SO UR CE. THE APPE LL A N T A L SO STATE D T H AT IF PR O VI S I O N S OF DT A A AR E B E N EF ICI A L TO TH E ASSESSEE, T HE SAME SHOU LD P REVA I L OVE R T H E P R OVISIO N S OF 1 . T. ACT . T H E A R FURTHE R A R G U E D THAT THE AO HA S WRONG L Y CONSIDERE D T H E SE R VICE~ OF MAKE UP AS FEES FO R TE CHNI CAL SERV I CES AND HA S AL SO ERRED IN MAKIN G NO REFERENCE TO I N DIA AUST R A L IA DT AA. 2.3 1 PA R TY N O .5 : P A YM E NT TO GRUPA FILMOVA - POLANT R S . 5 .88 CROR ES THE APPELLAN T STA T E D THAT T HE FILM F A N AA WAS P RO DU CE D IN TH E POL A ND . T H E AR STATED THAT M/S GRUPA F I LMOWA B EI N G TH E SE RV ICE PR OVI D ER I S A CO MP ANY ENGAGE D I N B U SINE SS OF P R O DU CTIO N OF F ILM S A N D A D VERTISE M E N T FI LM S . T H E PAY M ENTS WERE MADE TO MI S G RU PA F ILM OVA FO R A RR ANG IN G EX TR AS ARR A N G IN G FO R L OCA TION S, PR OV I DING OF PO L ICE SEC URIT Y, O BT A ININ G A LL L OCA L N E C ESSA R Y PERMI SS I O N AND OTH E R AC T I VITI ES . T H ESE KIND OF SE R V I CES PR OV ID E D B Y TH E G R UPA F I LMOWA IS NOT AT ALL IN T H E NATU R E O F FE ~ S FOR TEC HNI CAL SE R V I CES AS A LL EGE D BY AO . 2.32 . H E APP E LLANT A L S O REF E RR E D TO TH E DTAA W I T H TH E POLA N D W HI C H HAS A SEPA R ATE ARTIC L E 13 FOR ' FEES FOR TEC HN ICA L SE R VICES; THE SAME IS RE PR OD U CED AS FO L LOWS: ' A RTI C L E 13 (A) 4. 4 TH E T E RM 'F E ES FOR T EC HNI C AL SE RVI C ES' AS USED IN THI S ARTI C L E M E A N S PA Y M E NT S OF A N Y AMOUNT T O AN Y P E R S ON OTH E R THAN PA Y M E NTS TO AN 14 E MPL O YE E OF A P E RSON MAK IN G P AY M E NT S , IN CO N S I D E R A TI O N FOR TH E S ERV I CE S O F A M A N AG E RI A L , T EC HNI CAL O R C O N S ULTAN CY N A TU R E, I N C L UD I N G T HE P RO V I S I O N O F SE RV I CES OF T EC HN I C A L OR O T H E R P E R SO NN E L . 2.33 THE APPELLANT STATED THAT THE SECOND HALF OF T HE MOVIE FANAA WA S E X T E N S IV E L Y T O T A LL Y SHOT ON THE LOCATION OF POLAND . THE OVERSEAS COMPANY ONLY PROVID E D THE T EA M FR O M INDIA THE TRANSPORT, MEAL, ACCOMMODATION INSURANCE AND OTHER DAY TO DAY REQUIREMENT DURIN G THE STAY O F SHO O TING . THE A PPELLANT FURTHER STATED THAT THESE S ERVI C E PR O VID E R S, PROVID E SE R V I CES OUTSID E INDIA , A ND THEY DO NOT HAVE AN Y PERMANENT ESTABLI S HM E NT (P . E . ) IN INDI A A ND NONE OF THE SERVICES ARE RENDERED IN INDIA . THE AR S UBMITT E D TH A T THE REMITTANCES MADE TO OVERSEAS SERVICE PROVIDER S FOR SH O OTING FILM S ABR O AD AR E N O T IN THE NATUR E OF FEES FOR TECHNICAL SERVICES. SINCE THESE SERVICE S ARE NOT IN THE NATURE OF F E ES FOR TECHNICAL SERVICES AND SINCE SUCH SERVICES WOULD QUALIF Y FOR BEIN G ' BUSIN ESS PROFIT ' THEY CANNOT BE TAXED IN INDIA AS NONE OF THE RECIPI ENTS HAVE A P .E. IN INDI A . A S A CONSEQUENCE, NO TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE . THE APP E LLANT ALSO STATED THAT IF PROVISIONS OF INDIA POLAN D DT AA ARE BENEFICIAL TO TH E A SS E SS E E, THE S A M E SHOULD PREVAIL OVER THE PROVISIONS OF I . T . ACT . 2.34 ON THE OTHER HAND THE AO CAME TO THE CON C LUSION THAT AS PER THE AGREEMENT , TH E SERVICES PROVIDED BY THE OVERSEAS PARTY ARE IN THE NATURE OF FEES FOR TE C HNICAL SERVIC ES. TH E APPELLANT SUBMITTED THAT THE AO HAS WR O N G LY CON S IDERED TH E S ERVIC ES O F M A K E UP A S FEES FO R TECHNI C AL SERVICES AND HAS ALSO E RRED IN M AK IN G N O R E F E R E N CE T O INDI A POLAND DTAA . BASED ON THE ABOVE SUBMISSIONS, IT WAS CONTENDED ON BEHALF OF THE ASSESSEE BEFORE THE LEARNED CIT(APPEALS) THAT THE IMPUGNED PAYMENTS MADE BY IT TO THE NON RESIDENT PARTIES NOT BEING CHARGEABLE TO TAX IN IND IA, IT WAS NOT REQUIRED EITHER TO DEDUCT TAX AT SOURCE FROM THE SAID PAYMENTS OR TO M OVE AN APPLICATION U/S 195(2) BEFORE THE AO SEEKING ANY CONCESSION IN THE MATTER OF SUCH TDS. 7. THE LEARNED CIT(APPEALS) FOUND MERIT IN THE SUBM ISSIONS MADE ON BEHALF OF THE ASSESSEE. ACCORDING TO HIM, THE IMPUGNED PAYMEN TS MADE BY THE ASSESSEE TO VARIOUS SERVICE PROVIDERS WERE NOTHING BUT FOR REND ERING SERVICES IN ORDER TO MAKE LOGISTIC ARRANGEMENT TO FACILITATE THE ASSESSEE TO SHOOT ITS FILMS ABROAD. HE NOTED FROM THE RELEVANT AGREEMENTS BETWEEN THE ASSESSEE C OMPANY AND THE SAID NON RESIDENTS THAT THE SERVICE PROVIDED BY THEM WERE OF THE FOLLOWING NATURE ; I) ARRANGEMENT FOR SHOOTING LOCATIONS, 15 II) OBTAINING NECESSARY PERMITS FOR THE ASSESSEE III) ARRANGEMENT FOR SHIPPING AND CUSTOM CLEARANCE S. IV) ARRANGING FOR EXTRAS, SHOOTING EQUIPMENT, ME ALS, TRANSPORT ETC. V) RENDERING HELP IN OBTAINING VISAS. VI) ARRANGING FOR MAKE-UP OF CASTS AND VII) COORDINATING NECESSARY LICENSES. 8. THE LEARNED CIT(APPEALS) HELD THAT THE ABOVE SER VICES WERE IN THE NATURE OF PURELY COMMERCIAL SERVICES AND THE AMOUNTS PAID FOR SUCH SERVICES WOULD FALL IN THE CATEGORY OF BUSINESS PROFIT TAXABLE IN INDIA ON LY IF THE FOREIGN SERVICE PROVIDERS HAD A PERMANENT ESTABLISHMENT IN INDIA. ON PERUSAL OF THE RELEVANT AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH THE SERVICE PROVI DERS, HE HELD THAT THE SERVICE PROVIDED BY THEM WERE IN THE FORM OF MAKING LOGISTI C ARRANGEMENT FOR THE ASSESSEE AND THERE WAS NO CONSULTANCY SERVICES THAT COULD BE SAID TO BE PROVIDED BY THEM TO THE ASSESSEE. HE HELD THAT THE SAID SERVICES WERE P URELY OF COMMERCIAL NATURE AND COULD NOT BE TERMED AS TECHNICAL SERVICES OR MANAGE RIAL SERVICES. HE HELD THAT THE FOREIGN SERVICES PROVIDERS IN THE CASE OF THE ASSES SEE THUS WERE REMUNERATED FOR THEIR EFFORTS AND TIME SPENT IN MAKING LOGISTIC ARR ANGEMENT FOR THE ASSESSEE AND THEY HAD NOTHING TO DO WITH RENDERING OF ANY TECHNI CAL, MANAGERIAL OR CONSULTANCY SERVICES TO THE ASSESSEE. HE HELD THAT THE ENTIRE P AYMENTS MADE BY THE ASSESSEE TO THE FOREIGN SERVICE PROVIDERS THUS WERE NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF EXPLANATION 2 TO SEC TION 9(1)(VII) AND THE SAME WERE NOT CHARGEABLE TO TAX IN INDIA. HE HELD THAT T HE ASSESSEE, THEREFORE, WAS NEITHER REQUIRED TO MAKE AN APPLICATION TO THE AO U /S 195(2) OR TO DEDUCT TAX AT SOURCE FROM THE PAYMENTS MADE TO THE OVERSEAS SERVI CE PROVIDERS. HAVING HELD THAT 16 THE PAYMENTS IN QUESTION MADE BY THE ASSESSEE TO TH E OVERSEAS SERVICE PROVIDERS WERE NOT CHARGEABLE TO TAX IN INDIA AS PER THE DOME STIC LAW, THE LEARNED CIT(APPEALS) TREATED THE OTHER ISSUES RAISED BY THE ASSESSEE REGARDING APPLICABILITY OF DTAAS AS ACADEMIC AND DID NOT ADJUDICATE UPON TH E SAME. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEALS), THE REVENUE AND ASSESSEE BOTH ARE IN APPEAL BEFORE THE TRIBUNAL. 9. THE COMMON ISSUE RAISED IN GROUND NO. 1 AND 2 OF THE REVENUES APPEAL IS THAT THE LEARNED CIT(APPEALS) ERRED IN HOLDING THAT THE ASSESSEE WAS NOT REQUIRED TO MAKE AN APPLICATION U/S 195(2). AS AGREED BY THE LE ARNED REPRESENTATIVES OF BOTH THE SIDES, THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GE INDIA TECHN OLOGY CENTRE P. LTD. VS. CIT 327 ITR 456 WHEREIN IT WAS HELD THAT IF THE RELEVAN T PAYMENT DOES NOT CONTAIN THE ELEMENT OF INCOME TAXABLE IN INDIA, THE PAYER CANNO T BE MADE LIABLE TO MAKE AN APPLICATION U/S 195(2). RESPECTFULLY FOLLOWING THIS DECISION OF HONBLE APEX COURT, WE DISMISS GROUND NO. 1 AND 2 OF REVENUES A PPEAL. 10. IN GROUND NO. 3 TO 6, THE REVENUE HAS CHALLENGE D THE ACTION OF THE LEARNED CIT(APPEALS) IN HOLDING THAT THE PAYMENTS MADE BY T HE ASSESSEE TO THE OVERSEAS SERVICE PROVIDERS ARE NOT IN THE NATURE OF FEES FO R TECHNICAL SERVICES CHARGEABLE TO TAX IN INDIA. 11. THE LEARNED DR, AT THE OUTSET, INVITED OUR ATTE NTION TO PAGE 21 OF THE AOS ORDER TO SHOW THAT THE PAYMENTS WERE MADE BY THE AS SESSEE TO M/S HYBRID ENTERPRISES, FOR CASTING, MAKE UP AND PROSTHETIC DE SIGN. HE CONTENDED THAT GOING BY THE NATURE OF THESE SERVICES, IT BECOMES CLEAR T HAT TECHNICAL EXPERTISE WAS REQUIRED TO RENDER THE SAME. HE SUBMITTED THAT SIMI LARLY THE PAYMENTS WERE MADE BY THE ASSESSEE TO M/S GRUPA FILMVO S.P. 200 OF POL OND FOR ARRANGING OF EXTRAS, 17 ARRANGING FOR THE POLICE AND SECURITIES, ARRANGING FOR LOCATION, PROVIDING SERVICES OF LOCAL LINE PRODUCER, LOCATION MANAGER ETC. HE SUBMI TTED THAT THE ELEMENT OF MANAGERIAL CAPACITY WAS INVOLVED IN THE RENDERING O F ALL THESE SERVICES AND THE SERVICE PROVIDERS WERE REQUIRED TO USE THEIR MANAGE RIAL SKILLS FOR PROVIDING THE SAID SERVICES. HE SUBMITTED THAT SIMILARLY FOR OBTAINING OF THE LICENSES AND PERMITS FOR THE SHOOTING OF THE FILMS, KNOWLEDGE OF LOCAL LAW W AS REQUIRED. RELYING ON THE DECISION OF MUMBAI BENCH OF ITAT IN THE CASE OF DDI T VS. TISCO 34 SOT 83, HE CONTENDED THAT LEGAL SERVICES PROVIDED ARE HELD TO BE IN THE NATURE OF FEES FOR TECHNICAL SERVICES BY THE TRIBUNAL HE ALSO FILED CO PIES OF INVOICES RAISED BY THE OVERSEAS SERVICE PROVIDERS ON THE ASSESSEE AND SUBM ITTED THAT GOING BY THE DESCRIPTION OF SERVICES GIVEN THEREIN, IT CANNOT BE SAID THAT THE NATURE OF SERVICES RENDERED BY THEM WAS PURELY OF MAKING LOGISTIC ARRA NGEMENT. HE CONTENDED THAT THE PAYMENTS MADE BY THE ASSESSEE TO ALL THE OVERSE AS SERVICE PROVIDERS THUS WERE IN THE NATURE OF FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF EXPLANATION 2 TO SECTION 9(1)(VII) AS RIGHTLY HELD BY THE AO AND THE SAME BEING CHARGEABLE TO TAX IN INDIA, THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT S OURCE FROM THE SAID PAYMENTS. 12. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, SUBMITTED THAT THE PAYMENTS IN QUESTION WERE MADE BY THE ASSESSEE TO T HE OVERSEAS SERVICE PROVIDERS BASICALLY FOR PROVIDING SERVICES IN CONNECTION WITH LOGISTIC ARRANGEMENTS MADE OUTSIDE INDIA. HE SUBMITTED THAT FOR THE PURPOSE OF SHOOTING THE FILMS ABROAD, SOME LOCAL AGENCY IS REQUIRED TO HELP THE PRODUCTION WOR K. HE INVITED OUR ATTENTION TO THE COPY OF ONE OF THE AGREEMENTS ENTERED INTO BY THE A SSESSEE PLACED AT PAGE NO.1 TO 7 OF HIS PAPER BOOK AND SUBMITTED THAT GOING BY THE S COPE OF SERVICES DEFINED THEREIN, IT BECOMES CLEAR THAT THE SERVICES WERE RE NDERED IN CONNECTION WITH PROVIDING LOGISTIC AND COORDINATING ACTIVITIES. HE CONTENDED THAT RENDERING OF SUCH SERVICES AT THE MOST MAY INCLUDE MANAGEMENT SKILL W HICH IS ENTIRELY DIFFERENT FROM 18 MANAGERIAL SERVICES REFERRED TO IN EXPLANATION 2 TO SECTION 9(1)(VII). HE SUBMITTED THAT THE ENTIRE PRODUCTION UNIT INCLUDING TECHNICIA NS GO ABROAD FOR SHOOTING OF THE FILMS AND ALONG WITH MAIN EQUIPMENT AND WHAT THEY R EQUIRE AND AVAIL FROM THE LOCAL COMPANIES THERE IS THE HELP FOR ARRANGING AND COORDINATING THE LOGISTIC. HE CONTENDED THAT THE ASSESSEE IS IN THE BUSINESS OF F ILM PRODUCTION FOR LAST 50 YEARS AND HAS SHOT THE FILMS ABROAD ON REGULAR BASIS, B UT NO SUCH ORDER U/S 201/201(1A) HAS BEEN PASSED IN ITS CASE FOR ANY OTHER YEAR. HE ALSO TOOK US THROUGH THE OTHER AGREEMENTS BETWEEN THE ASSESSEE COMPANY AND OVERSEA S SERVICE PROVIDERS TO CONTEND THAT THE SERVICES RENDERED BY THE OVERSEAS SERVICE PROVIDERS AS SPECIFIED THEREIN ARE MAINLY IN CONNECTION WITH LOGISTIC ARRA NGEMENTS AND THEY ARE NOT IN THE NATURE OF TECHNICAL, MANAGERIAL OR CONSULTANCY SERV ICES WITHIN THE MEANING OF EXPLANATION 2 TO SECTION 9(1)(VII). HE ALSO CONTEND ED THAT NEITHER THE AO NOR THE LEARNED CIT(APPEALS) HAS EXAMINED THIS ISSUE WITH R EFERENCE TO THE DOUBLE TAX AVOIDANCE AGREEMENT ENTERED INTO BY INDIA WITH THE RESPECTIVE COUNTRIES. HE SUBMITTED IN THIS REGARD THAT THE TREATY BETWEEN IN DIA AND AUSTRALIA DO NOT HAVE ANY TECHNICAL SERVICE CLAUSE AND IN THE ABSENCE OF THE SAME, THE AMOUNT IN QUESTION WOULD BE BUSINESS PROFIT WHICH IS NOT CHARGEABLE TO TAX IN INDIA IN THE HANDS OF THE OVERSEAS PARTIES FROM THE SAID COUNTRIES WITHOUT TH ERE BEING ANY PE OF THAT PARTIES IN INDIA. 13. IN SUPPORT OF THE CASE OF THE ASSESSEE ON THIS ISSUE, THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF COORDINATE B ENCH OF THIS TRIBUNAL IN THE CASE OF URS-SCS (ASIA) LTD. VS. ADIT 18 TAXMANN.COM. 302 (COPY FILED) AND SUBMITTED THAT A SIMILAR ISSUE INVOLVING SIMILAR FA CTS AND CIRCUMSTANCES HAS BEEN DECIDED THEREIN IN FAVOUR OF THE ASSESSEE. HE ALSO RELIED ON THE DECISION OF ITAT IN THE CASE OF DY. CIT VS. PARASRAMPURIA SYNTHETICS 20 SOT 248 (DELHI) AND IN THE CASE OF STOCK ENGINEERS & CONTRACTORS 27 SOT 45 2 (MUM.). 19 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE ASSESSE E COMPANY IN THE PRESENT CASE IS ENGAGED IN THE BUSINESS OF PRODUCTION OF FILMS, THE SHOOTING OF WHICH IS OFTEN DONE OUTSIDE INDIA. FOR SHOOTING THE FILMS OUTSIDE INDIA , ITS PRODUCTION UNIT GOES ABROAD AND THE SERVICES REQUIRED IN CONNECTION WITH THE WO RK OF SHOOTING ABROAD ARE AVAILED FROM THE VARIOUS OVERSEAS SERVICE PROVIDERS . DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD PAID A TOTAL AMOUNT OF RS.18,77,84,736/- TO FIVE SUCH OVERSEAS SERVICE PROVIDERS FOR THE SERVICES AV AILED IN CONNECTION WITH THE SHOOTING OF DIFFERENT FILMS WHICH MAINLY INCLUDED A RRANGING FOR EXTRAS, ARRANGING FOR THE SECURITY, ARRANGING FOR LOCATIONS, ARRANGIN G FOR THE ACCOMMODATION OF CAST AND CREW, ARRANGING FOR NECESSARY PERMISSIONS FROM LOCAL AUTHORITIES, ARRANGING FOR MAKEUP OF THE STARS, ARRANGING FOR INSURANCE COVER ETC. THE AO HELD THAT THESE SERVICES PROVIDED BY THE CONCERNED OVERSEAS SERVICE PROVIDERS WERE IN THE NATURE OF TECHNICAL SERVICES AND THE PAYMENTS MADE BY THE ASSESSEE FOR SUCH SERVICES BEING IN THE NATURE OF THE FEES FOR TECHNICAL SERVI CES WITHIN THE MEANING GIVEN IN EXPLANATION 2 TO SECTION 9(1)(VII), THE AMOUNTS SO PAID WERE CHARGEABLE TO TAX IN THE HANDS OF THE CONCERNED OVERSEAS SERVICE PROVIDE RS IN INDIA. HE HELD THAT THE ASSESSEE, THEREFORE, WAS LIABLE TO DEDUCT TAX AT SO URCE FROM THE SAID PAYMENTS AS REQUIRED BY THE PROVISIONS OF SECTION 195 AND SINCE THE ASSESSEE HAD FAILED TO DO SO, HE HELD THE ASSESSEE TO BE IN DEFAULT U/S 201 OF TH E ACT AND ALSO LEVIED INTEREST U/S 201(1A). A PERUSAL OF THE ASSESSMENT ORDER PASSED B Y THE AO, HOWEVER, SHOWS THAT HE HAS NOT GIVEN ANY COGENT REASONS OR BASIS IN SUP PORT OF ITS CONCLUSION THAT THE SERVICES PROVIDED BY THE CONCERNED OVERSEAS SERVICE PROVIDERS WERE IN THE NATURE OF FEES FOR TECHNICAL SERVICES. 15. THE LEARNED CIT(APPEALS), ON THE OTHER HAND, HA S DISCUSSED THE NATURE OF SERVICES RENDERED BY EACH OF THE FIVE SERVICE PROVI DERS IN THE LIGHT OF AGREEMENTS 20 ENTERED INTO BY THE ASSESSEE WITH THEM AND FINALLY SUMMARIZED THE NATURE OF SUCH SERVICES IN PARAGRAPH NO. 4.11 OF HIS IMPUGNED ORDE R AS UNDER : ON A CAREFUL CONSIDERATION OF THE AGREEMENTS ENTER ED INTO BY THE APPELLANT WITH VARIOUS SERVICE PROVIDERS, AND THE MATERIAL ON RECORD, THE PAYMENTS MADE BY THE APPELLANT TO VARIOUS SERVICE PROVIDERS IS NOTHING BUT A PAYMENT FOR SERVICE FOR MAKING LOGISTICS ARRANGEMENT FOR TH E APPELLANT TO FACILITATE THE SHOOTING OF FILMS ABROAD. IN ALL THE T IT IS SEEN T HAT THE SERVICES TO BE PROVIDED BY THE SERVICE PROVIDER WAS OF THE FOLLOWING NATURE : I. ARRANGING FOR SHOOTING LOCATIONS II. OBTAINING NECESSARY PERMITS FOR THE APPELLANT. III. ARRANGING SHIPPING & CUSTOM CLEARANCES IV. ARRANGING FOR EXTRAS, SHOOTING EQUIPMENT, MEALS, TRANSPORT ETC. IF REQUIRED V. RENDERING HELP IN OBTAINING VISAS VI. ARRANGING FOR MAKEUP OF CASTS, IF REQUIRED VII. COORDINATING NECESSARY LICENSES. KEEPING IN VIEW THE NATURE OF SERVICES RENDERED BY THE OVERSEAS SERVICE PROVIDERS TO THE ASSESSEE AS MENTIONED ABOVE, THE LEARNED CIT (APPEALS) HAS COME TO A CONCLUSION THAT THEY ARE PURELY COMMERCIAL SERVICES FALLING IN THE CATEGORY OF LOGISTIC ARRANGEMENT SERVICES, THE PAYMENTS FOR WHI CH WOULD CONSTITUTE BUSINESS PROFITS OF THE CONCERNED OVERSEAS SERVICE PROVIDERS . HE HELD THAT SINCE THE SAID SERVICE PROVIDERS HAD NO PERMANENT ESTABLISHMENT IN INDIA DURING THE YEAR UNDER CONSIDERATION, THE BUSINESS PROFIT WAS NOT TAXABLE IN INDIA IN THEIR HANDS AS PER THE RELEVANT ARTICLE OF APPLICABLE DTAAS. 16. IT IS OBSERVED THAT THE LEARNED CIT(APPEALS) HA S ALSO CONSIDERED THE ISSUE RELATING TO APPLICABILITY OF EXPLANATION 2 TO SECTI ON 9(1)(VII) RELIED UPON BY THE AO GIVING THE DEFINITION OF THE TERM FEES FOR TECHNIC AL SERVICES AND HELD IN THIS REGARD THAT THE SERVICES RENDERED BY THE OVERSEAS P ROVIDERS IN CONNECTION WITH LOGISTIC ARRANGEMENTS WERE NOT IN THE NATURE OF MAN AGERIAL, TECHNICAL OR 21 CONSULTANCY SERVICES. HE HELD THAT THE SAID SERVICE S PARTOOK THE CHARACTER OF COMMERCIAL SERVICES AND COULD NOT BE TERMED AS TECH NICAL, MANAGERIAL OR CONSULTANCY SERVICES. AFTER HAVING PERUSED THE TERM S AND CONDITIONS OF THE RELEVANT AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH THE CO NCERNED SERVICE PROVIDERS AND KEEPING IN VIEW THE NATURE OF SERVICES RENDERED BY THE SAID PROVIDERS TO THE ASSESSEE, WE FIND OURSELVES IN AGREEMENT WITH THE C ONCLUSION ARRIVED AT BY THE LEARNED CIT(APPEALS). 17. BEFORE US, THE LEARNED DR HAS NOT DISPUTED THE NATURE OF SERVICES RENDERED BY THE CONCERNED SERVICE PROVIDERS TO THE ASSESSEE. HE, HOWEVER, HAS CONTENDED THAT FOR PROVIDING THE SAID SERVICES, MANAGERIAL SK ILL WAS ALSO REQUIRED AND EVEN THE KNOWLEDGE OF LOCAL LAW WAS ALSO USED BY THE CONCERN ED SERVICE PROVIDER. IN OUR OPINION, MERELY BECAUSE SOME MANAGERIAL SKILL IS RE QUIRED TO RENDER THE SERVICES, IT WOULD NOT MAKE THE SERVICES TO BE MANAGERIAL SERVIC ES AS ENVISAGED IN EXPLANATION 2 TO SECTION 9(1)(VII). SIMILARLY, THE REQUIREMENT OF KNOWLEDGE OF LOCAL LAWS ON THE PART OF THE SERVICE PROVIDERS TO RENDER THE SERVICE S SUCH AS OBTAINING THE PERMISSIONS FOR SHOOTING FROM THE LOCAL AUTHORITIES OR FOR ARRANGING INSURANCE OF THE CREW MEMBERS AND SHOOTING EQUIPMENTS WOULD NOT CHANGE THE BASIC NATURE OF THE SERVICES WHICH OTHERWISE ARE COMMERCIAL SERVICE S AS HELD BY THE LEARNED CIT(APPEALS). 18. IN THE CASE OF UPS SCS (ASIA LTD.) (2012) 18 TA XMANNCOM. 302 (MUM.), SERVICES RENDERED AS PER THE TERMS OF THE RELEVANT AGREEMENT WERE IN THE NATURE OF FREIGHT AND LOGISTIC SERVICES SUCH AS, TRANSPORT, P ROCUREMENT, CUSTOM CLEARANCE, SORTING, DELIVERY, WAREHOUSING AND PICKING UP SERVI CES OUTSIDE INDIA IN RESPECT OF EXPORT CONSIGNMENT OF M AND THE FEES PAID BY M OF S UCH SERVICES WAS HELD TO BE TAXABLE IN INDIA BY THE REVENUE AUTHORITIES AS FEE S FOR TECHNICAL SERVICES U/S 9(1)(VII) BEING IN THE NATURE OF MANAGERIAL, TECHNI CAL OR CONSULTANCY SERVICES. THE 22 TRIBUNAL, HOWEVER, HELD THAT IT WAS TOO MUCH TO CAT EGORIZE SUCH RESTRICTED SERVICES AS MANAGERIAL SERVICES. IT WAS ALSO HELD BY THE TRI BUNAL THAT THERE WAS NOTHING LIKE GIVING ANY CONSULTANCY WORTH THE NAME AND, THEREFOR E, PAYMENT IN LIEU OF FREIGHT AND LOGISTIC SERVICES COULD NOT BE RANKED AS CONSUL TANCY SERVICES. IN THE CASE OF PARASRAMPURIA SYNTHETICS LTD. 20 SOT 248 CITED BY T HE LEARNED COUNSEL FOR THE ASSESSEE, THE ASSESSEE HAD MADE CERTAIN PAYMENT TO CONTRACTOR IN RESPECT OF INSPECTION AND MAINTENANCE SUPPORT, FABRICATION OF WATER LINE, THERMAL INSULATION/ERECTION ETC. AND IT WAS HELD BY THE TRI BUNAL THAT SUCH PAYMENT COULD NOT BE TREATED AS FEES FOR TECHNICAL SERVICES MERELY BE CAUSE THE SERVICES WERE RENDERED BY USING TECHNICAL KNOWLEDGE WHEN TECHNOLOGY OR TEC HNICAL KNOWLEDGE OF THE PERSON RENDERING THE SERVICES WAS NOT MADE AVAILABL E TO THE ASSESSEE. IN THE CASE OF TATA IRON AND STEEL CO. LT. 34 SOT 83 (MUM.), IT WA S HELD BY THE TRIBUNAL THAT THE MANAGEMENT COMMISSION, SELLING COMMISSION, UNDERWRI TING COMMISSION ETC. IN RESPECT OF GDR ISSUE WAS NOT INCOME BY WAY OF FEES FOR TECHNICAL SERVICES BECAUSE ALTHOUGH THE LEAD MANAGERS HAD RENDERED TECHNICAL, MANAGERIAL OR CONSULTANCY SERVICES FOR BRINGING OUT THE GDR ISSUE, SUCH SERVI CES ARE NOT MADE AVAILABLE TO THE ASSESSEE INASMUCH AS IT ONLY DERIVED THE BENEFI T OF THE TECHNICAL SERVICES PROVIDED BY THE LEAD MANAGERS WITHOUT GETTING ANY T ECHNICAL KNOWLEDGE, EXPERIENCE OR SKILL IN ITS POSSESSION FOR USE AS IT S OWN. IT WAS HELD THAT SUCH COMMISSION IN RESPECT OF GDR ISSUE PAID TO THE LEAD MANAGERS, THEREFORE, WAS IN THE NATURE OF BUSINESS PROFIT AND SINCE THE NON-RES IDENT LEAD MANAGER WAS HAVING NO PE IN INDIA, THE SAME WAS OUTSIDE THE AMBIT OF T AX IN INDIA AS PER ARTICLE 7 OF DTAA. 19. KEEPING IN VIEW THE RATIO OF THE VARIOUS DECISI ONS OF THE COORDINATE BENCHES OF THIS TRIBUNAL DISCUSSED ABOVE AND HAVING REGARD TO THE NATURE OF THE SERVICES RENDERED BY THE OVERSEAS SERVICE PROVIDERS TO THE A SSESSEE AS SPELT OUT IN THE 23 RELEVANT AGREEMENTS, WE ARE OF THE VIEW THAT THE SA ID SERVICES CANNOT BE TREATED AS TECHNICAL SERVICES WITHIN THE MEANING GIVEN IN EXPL ANATION 2 TO SECTION 9(1)(VII). WE ARE IN AGREEMENT WITH THE LEARNED CIT(APPEALS) T HAT THE SAID SERVICES RENDERED OUTSIDE INDIA BY THE OVERSEAS SERVICE PROVIDERS IN CONNECTION WITH MAKING LOGISTIC ARRANGEMENT ARE IN THE NATURE OF COMMERCIAL SERVICE S AND THE AMOUNT RECEIVED BY THEM FROM THE ASSESSEE FOR SUCH SERVICES CONSTITUTE S THEIR BUSINESS PROFIT WHICH IS NOT CHARGEABLE TO TAX IN INDIA IN THE ABSENCE OF AN Y PE IN INDIA OF THE SAID SERVICE PROVIDERS. THE ASSESSEE, THEREFORE, WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FROM THE SAID PAYMENTS AND THE AO WAS NOT JUSTIFIED IN TREAT ING THE ASSESSEE AS IN DEFAULT U/S 201. GROUND NO. 3 TO 6 OF THE REVENUES APPEAL ARE ACCORDINGLY DISMISSED. 20. IN ITS CROSS APPEAL FOR ASSESSMENT YEAR 2006-07 , ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 1. ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT ADJUDICATING THE GROUND IF APPEAL NO. 4 RELATING TO APPLICABILITY OF PROVISIONS OF DOUBLE TAX AVOIDANCE AGREEMENT FOR PA YMENTS MADE TO NON RESIDENT COMPANIES. 2. ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT ADJUDICATING THE ISSUE RELATING TO PAYMENTS MADE TO PARTY OF POLOND OF RS.5.88 CRORES. 21. AS REGARDS GROUND NO. 1, IT IS OBSERVED THAT TH E ISSUE RAISED THEREIN HAS BECOME ACADEMIC AS A RESULT OF OUR DECISION RENDERE D ABOVE WHILE DISPOSING OF REVENUES APPEAL UPHOLDING THE DECISION OF THE LEAR NED CIT(APPEALS) THAT THE PAYMENT MADE BY THE ASSESSEE TO OVERSEAS SERVICE PR OVIDERS ARE NOT CHARGEABLE TO TAX IN INDIA AS PER THE DOMESTIC LAW. GROUND NO. 1 OF THE ASSESSEES APPEAL IS ACCORDINGLY DISMISSED. 24 22. AS REGARDS GROUND NO.2, THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PRESSED THE SAME SAYING THAT THE ISSUE THEREIN HAS BECOME I NFRUCTUOUS. GROUND NO. 2 OF ASSESSEES APPEAL IS ACCORDINGLY DISMISSED AS NOT P RESSED. 23. AS REGARDS REVENUES APPEAL FOR ASSESSMENT YEAR 2005-06 BEING ITA NO. 2113/MUM/2009 WHICH IS DIRECTED AGAINST THE ORDER O F LEARNED CIT(APPEALS) CENTRAL-V, MUMBAI DATED 05-01-2009, IT IS OBSERVED THAT THE SOLITARY ISSUE INVOLVED THEREIN RELATING TO TAXABILITY OF PAYMENT MADE BY THE ASSESSEE TO OVERSEAS SERVICE PROVIDERS IN INDIA IS SIMILAR TO THE ONE IN VOLVED IN REVENUES APPEAL FOR ASSESSMENT YEAR 2006-07 WHICH HAS BEEN DECIDED BY U S IN THE FOREGOING PORTION OF THIS ORDER. FOLLOWING OUR DECISION RENDERED IN ASSE SSMENT YEAR 2006-07, WE UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) GIVI NG RELIEF TO THE ASSESSEE ON THIS ISSUE AND DISMISS THIS APPEAL OF THE REVENUE. 24. IN THE RESULT, ALL THE THREE APPEALS ARE DISMIS SED. ORDER PRONOUNCED ON THIS 20 TH DAY OF DEC., 2012. SD/- SD/- (VIJAY PAL RAO) (P.M. JAGTAP) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI, DATED: 20 TH DEC., 2012. 25 COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, L-BENCH. (TRUE COPY) BY ORD ER ASSTT. REGI STRAR, ITAT, MUMBAI BENCHES, MUMBAI. WAKODE