NAGPUR POWER & INDUSTRIES LTD., MUMBAI V. DCIT-3(2), MUMBAI

ITA 5808/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7944 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 23-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 26-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Double taxation relief; Permanent establishment; Revenue expenditure

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUM BAI , , , , # BEFORE SHRI R.C.SHARMA, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO. 5808/MUM/2013 & I.T.A. NO.6468/MUM/2014 ( $ % / ASSESSMENT YEAR: 2010-11 & 2011-12) M/S. NAGPUR POWER & INDUSTRIES LTD. 20 TH FLOOR, NIRMAL, NARIMAN POINT, MUMBAI - 400021 / VS. D.C.I.T. 3(2) AAYAKAR BHAVAN, MARINE LINES, MUMBAI ./ ./PAN/GIR NO. :AAACN5438N ( /APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 23.02.2017 /DATE OF PRONOUNCEMENT: 23.03.2017 / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE ABOVE MENTIONED APPEALS AGAINST THE ORDER DATED 16.08.2013 AND 14.07.2014 PASSED BY THE COMMI SSIONER OF INCOME TAX (APPEALS)-4, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y.2010-11 & 2011-12. I.T.A. 5808/MUM/2013:- 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- ASSESSEE BY : SHRI SURINDER MEHRA REVENUE BY: SHRI RAJGURU M. V. ITA NO.5808/M/2013 & 6468/M/2014 A.Y.2010-11 & 2011-12 2 1.A) THAT THE CIT(APPEALS) HAS ERRED IN UPHOLDING C APITALIZATION BY THE ASSESSING OFFICER OF RS.14,09,811/- OUT OF REPA IR AND MAINTENANCE ACCOUNT AND MAKING ADDITION OF RS.11,98 ,339/- AFTER ALLOWING DEPRECATION OF RS.2,11,471/- B) THAT ALL THE EXPENSES INCURRED ARE OF REVENUE NA TURE AND NO PART OF THE SAME IS TO BE CAPITALIZED. THE ENTIRE EXPE NSE IS INCURRED TO MAINTAIN EXISTING ASSETS AND NO NEW ASSET HAS CO ME INTO EXISTENCE. 2.A) THAT THE CIT(APPEALS) HAS ERRED IN UPHOLDING D ISALLOWANCE U/S.40(A)(IA) OF THE ACT MADE BY THE ASSESSING OFFI CER OF PROFESSIONAL FEE OF RS.3,90,025/- PAID TO MR. ARNOL D ALLEN. B) THAT UNDER ARTICLE 15 OF THE DOUBLE TAXATION AGR EEMENT BETWEEN INDIA AND U.K. THE SAID FEE IS NOT TAXABLE IN INDIA AND THE PROVISIONS OF DTA OVERRIDE PROVISIONS OF THE AC T. C) THAT THE DISALLOWANCE OF THE SAID AMOUNT OF RS.3 ,90,025/- MAY BE CANCELLED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED E-RETURN OF INCOME FOR THE A.Y.2010-11 DECLARING TOTAL INCOME T O THE TUNE OF RS.13,61,10,940/- ON 18.09.2010. THE RETURN OF INC OME WAS PROCESSED U/S.143(1) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UN DER CASS. NOTICE U/S.143(2) OF THE ACT DATED 27.09.2011 WAS ISSUED W HICH WAS DULY SERVED UPON THE ASSESSEE. THEREAFTER THE NOTICE U/S.142(1 ) OF THE ACT DATED 27.07.2012 WAS ISSUED TO THE ASSESSEE. THEREAFTER THE QUESTIONNAIRES DATED 01.10.2012 AND 09.11.2012 WERE ISSUED TO THE ASSESS EE. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF FERRO M ANGANESE, SILICO MANGANESE AND VALUE ADDED FERRO ALLOYS, FERRO MANGA NESE SLAG AND SUCH OTHER PRODUCTS. THE ASSESSING OFFICER CAPITALIZED AN AMOUNT OF RS.14,09,811/- OF REPAIR AND MAINTENANCE WHEREAS TH E SAME WAS REVENUE IN ITA NO.5808/M/2013 & 6468/M/2014 A.Y.2010-11 & 2011-12 3 NATURE AND MADE AN ADDITION TO THE TUNE OF RS.11,98 ,339/- AFTER ALLOWING THE DEPRECIATION OF AN AMOUNT OF RS.2,11,471/-. THE AS SESSING OFFICER ALSO DISALLOWED THE PROFESSIONAL FEES TO THE TUNE OF RS. 3,90,025/- PAID TO MR. ARNOLD ALLEN U/S.40(A)(IA) OF THE ACT WHEREAS THE S AID FEE WAS NOT TAXABLE IN VIEW OF THE ARTICLE 15 OF THE DOUBLE TAXATION AG REEMENT BETWEEN INDIA AND U.K. SINCE THE ASSESSEE WAS NOT SATISFIED ON T HE POINT OF THE ABOVE SAID ADDITION, THEREFORE THE ASSESSEE FILED AN APPEAL BE FORE THE CIT(A), WHO CONFIRMED THE SAID ADDITION, THEREFORE THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1:- 4. UNDER THIS ISSUE, THE ASSESSEE HAS CHALLENGED TH E ADDITION OF AMOUNT OF RS.11,98,339/- AFTER ALLOWING DEPRECIATION OF RS .2,11,471/-. INFACT, THE ASSESSEE HAS SHOWN THE REPAIR AND MAINTENANCE OF TH E ASSET TO THE TUNE OF RS.14,09,811/- BUT THE ASSESSING OFFICER DEALT THE SAME AS CAPITAL IN NATURE. THE LEARNED REPRESENTATIVE OF THE ASSESSEE HAS ARGU ED THAT THE ASSESSEE CLAIMED REPAIR AND MAINTENANCE EXPENSES IN TOTAL TO THE TUNE OF RS.27,99,980/- WHICH INCLUDES REPAIR OF PLANT AND M ACHINERY OF RS.3,44,539/-, BUILDING RS.9,00,992 AND OTHERS RS.1 5,54,449/-. OUT OF THESE SAID EXPENSE A SUM OF RS.14,09,811/- WAS PAID TO M/S. ROMI INTERIOR FOR MUMBAI OFFICE WHICH INCLUDES REPAIRING OF SLIDI NG WINDOW, PAINTING WALL AND CEILING, FIXING ROLL BLIND ON GLASS WINDOW , REMOVING WOODEN FLOORING, PROVIDING AND FIXING NEW FLOORING, SCRAPP ING THE EXISTING FLOOR AND SKIRTING, FLOORING AND SKIRTING IN PUT COATING ETC. AND THE SAID EXPENSES ARE REVENUE IN NATURE EXCEPT THE EXPENSES OF RS.1,38,694/- WHICH HAD ALREADY CAPITALIZED BY THE COMPANY SPECIFICALLY IN VIEW OF THE LAW ITA NO.5808/M/2013 & 6468/M/2014 A.Y.2010-11 & 2011-12 4 SETTLED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS/ TALATHI AND PANTHAKY ASSOCIATED PVT. LTD. REPORTED IN 343 ITR 3 09 AND CIT VS. HEDE CONSULTANCY PVT. LTD. AND ANOTHER REPORTED IN 258 I TR 380 AND HONBLE ITAT, CHANDIGARH BENCH IN THE CASE OF M/S. IDS INFO TECH LTD. VS. DCIT, CIRCLE 4(1), CHANDIGARH IN ITA NO.52/CHD/2016 FOR A .Y.2009-10 DATED 24.05.2016. HOWEVER, ON THE OTHER HAND THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS STRONGLY RELIED UPON THE ORDER P ASSED BY THE CIT(A) IN QUESTION. 5. ON APPRAISAL OF THE FACTS AND CIRCUMSTANCES OF T HE CASE IT SEEMS THAT THE ASSESSEE HAS INCURRED THE EXPENDITURE TO THE TU NE OF RS.14,09,811/- ON ACCOUNT OF REPAIRING OF SLIDING WINDOW, PAINTING WA LL AND CEILING, FIXING ROLL BLIND ON GLASS WINDOW, REMOVING WOODEN FLOORIN G, PROVIDING AND FIXING NEW FLOORING, SCRAPPING THE EXISTING FLOOR A ND SKIRTING, FLOORING AND SKIRTING IN PUT COATING ETC. AND THE SAID AMOUNT WA S PAID TO M/S. ROMI INTERIOR FOR THE REPAIR OF MUMBAI OFFICE. THESE EX PENDITURE FALLS IN THE CATEGORY OF REVENUE EXPENSES AS HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS/ TALATHI AND PANTHAKY ASSOCIA TED PVT. LTD. REPORTED IN 343 ITR 309 AND CIT VS. HEDE CONSULTANCY PVT. LT D. AND ANOTHER REPORTED IN 258 ITR 380 AND HONBLE ITAT, CHANDIGAR H BENCH IN THE CASE OF M/S. IDS INFOTECH LTD. VS. DCIT, CIRCLE 4(1), CH ANDIGARH IN ITA NO.52/CHD/2016 FOR A.Y.2009-10 DATED 24.05.2016. I T IS NOT IN DISPUTE THAT THE ASSESSEE WAS ALREADY HAVING THE ASSET WHIC H WAS RECONSTRUCTED AND REPAIRED. THE MATTER OF CONTROVERSY HAS DULY BEEN COVERED BY THE ABOVE SAID LAW IN WHICH SUCH KIND OF REPAIR HAS BEEN TREA TED AS REVENUE IN NATURE. IN VIEW OF THE SAID CIRCUMSTANCES WE ARE OF THE VIE W THAT THE FINDING OF THE ITA NO.5808/M/2013 & 6468/M/2014 A.Y.2010-11 & 2011-12 5 CIT(A) ON THIS ISSUE IS WRONG AGAINST LAW AND FACTS AND IS NOT LIABLE TO BE SUSTAINABLE IN THE EYES OF LAW, THEREFORE, FINDING OF THE CIT(A) ON THIS ISSUE HAS BEEN ORDERED TO BE SET ASIDE AND THE EXPENDITUR E INCURRED BY THE ASSESSEE ON ACCOUNT OF REPAIR AND RENOVATION ETC. O F THE MUMBAI OFFICE AND THE AMOUNT OF WHICH WAS PAID TO M/S. ROMI INTERIO R HAS BEEN ALLOWED AS REVENUE EXPENDITURE. ACCORDINGLY, THIS ISSUE IS DE CIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ISSUE NO.2:- 6. UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF PROFESSIONAL FEES TO THE TUNE OF RS.3,90,025/- U/S. 40(A)(IA) OF THE ACT. THE LEARNED REPRESENTATIVE OF THE ASSESSEE HAS ARGUED T HAT IN VIEW OF THE ARTICLE 15 OF THE DOUBLE TAXATION AGREEMENT BETWEEN INDIA A ND U.K. THE PROFESSIONAL FEES IS NOT TAXABLE IN INDIA, THEREFOR E, THE PROFESSIONAL FEES TO THE TUNE OF RS.3,90,025/- IS LIABLE TO BE ALLOWABLE . THE ASSESSEE COMPANY HAS PAID AN AMOUNT OF RS.3,90,025/- TO MR. ARNOLD A LLEN WHO WAS AN INDEPENDENT DIRECTOR OF THE COMPANY. THE PROFESSIO NAL FEES WAS PAID TO HIM. NO TDS WAS DEDUCTED. THE LEARNED REPRESENTAT IVE OF THE ASSESSEE HAS ARGUED THAT THE ASSESSEE COMPANY HAS PAID AN AMOUNT OF RS.3,90,025/- AS TECHNICAL FEES TO MR. ARNOLD ALLEN WHO WAS AN INDEP ENDENT DIRECTOR OF THE COMPANY WHICH IS NOT TAXABLE IN INDIA IN VIEW OF TH E SECTION 15 OF THE DOUBLE TAXATION AGREEMENT AND MR. ARNOLD ALLEN DID NOT STAY IN INDIA MORE THAN 60 DAYS AND IN THIS REGARD THE COPY OF CH ARTERED ACCOUNTANT IS ON RECORD, THEREFORE, IN THE SAID CIRCUMSTANCES THE SAID AMOUNT IS NOT TAXABLE IN INDIA AND THIS MATTER OF CONTROVERSY HAS ALSO BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN VIEW OF THE DECISION OF T HE HONBLE ITAT, ITA NO.5808/M/2013 & 6468/M/2014 A.Y.2010-11 & 2011-12 6 CHANDIGARH BENCH IN THE CASE OF M/S. IDS INFOTECH L TD. VS. DCIT, CIRCLE 4(1), CHANDIGARH IN ITA NO.52/CHD/2016 FOR A.Y.2009 -10 DATED 24.05.2016. HOWEVER, ON THE OTHER HAND THE LEARNED REPRESENTATIVE OF THE DEPARTMENT HAS RELIED UPON THE ORDER PASSED BY THE CIT(A) IN QUESTION. BEFORE GOING FURTHER IT IS NECESSARY TO ADVERT THE ARTICLE 15 OF THE DOUBLE TAXATION AGREEMENT BETWEEN INDIA ON RECORD:- ARTICLE 15 INDEPENDENT PERSONAL SERVICES 1. INCOME DERIVED BY AN INDIVIDUAL, WHETHER IN HIS OWN CAPACITY OR AS A MEMBER OF A PARTNERSHIP, WHO IS A RESIDENT OF A CONTRACTING STATE IN RESPECT OF PROFESSIONAL SERVICES OR OTHER INDEPENDENT ACTIVITI ES OF A SIMILAR CHARACTER MAY BE TAXED IN THAT STATE. SU CH INCOME MAY ALSO BE TAXED IN THE OTHER CONTRACTING STATE IF SUCH SERVICES ARE PERFORMED IN THAT OTHER STATE AND IF: (A) HE IS PRESENT IN THAT OTHER STATE FOR A PERIOD OR PERIODS AGGREGATING TO 90 DAYS IN THE RELEVANT FISC AL YEAR; OR (B) HE OR THE PARTNERSHIP, HAS A FIXED BASE REGULARLY AVAILABLE TO HIM, OR IT, IN THAT OTHER STATE FOR TH E PURPOSE OF PERFORMING HIS ACTIVITIES; BUT IN EACH CASE ONLY SO MUCH OF THE INCOME AS IS ATTRIBUTABLE IN THOSE SERVICES. ITA NO.5808/M/2013 & 6468/M/2014 A.Y.2010-11 & 2011-12 7 2. FOR THE PURPOSE OF PARAGRAPH 1 OF HIS ARTICLE AN INDIVIDUAL WHO IS A MEMBER OF A PARTNERSHIP SHALL B E REGARDED AS BEING PRESENT IN THE OTHER STATE DURIN G DAYS ON WHICH, ALTHOUGH HE IS NOT PRESENT, ANOTHER INDIVIDUAL MEMBER OF THE PARTNERSHIP IS SO PRESENT AND PERFORMS PROFESSIONAL SERVICES OR OTHER INDEPENDENT ACTIVITIES OF A SIMILAR CHARACTER IN THAT STATE. 3. THE TERM PROFESSIONAL SERVICES INCLUDES INDEPENDENT SCIENTIFIC, LITERARY, ARTISTIC, EDUCATIONAL OR TEAC HING ACTIVITIES AS WELL AS THE INDEPENDENT ACTIVITIES OF PHYSICIANS, SURGEONS, LAWYERS, ENGINEERS, ARCHITECT S, DENTISTS AND ACCOUNTANTS. 7. IT IS NOT IN DISPUTE THAT THE APPELLANT HAS PAID PROFESSIONAL FEES TO THE TUNE OF RS.3,90,025/- TO M/S. ARNOLD ALLEN WHO WAS THE CHARTERED ACCOUNTANT AND WAS RESIDING IN U.K. HE WAS NOT RES IDING IN INDIA AND NOT STAYED IN INDIA FOR MORE THAN 90 DAYS. IN THIS REG ARD MR. ARNOLD ALLEN HAS ALSO GAVE AN UNDERTAKING WHICH IS AT PAGE 34 OF THE PAPER BOOK. THE ASSESSING OFFICER TOOK UP THE MATTER IN VIEW OF THE ARTICLE 17 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT WHICH IS REPROD UCED AS UNDER:- ARTICLE 17 DIRECTORS FEES DIRECTORS FEES AND SIMILAR PAYMENTS DERIVED BY A RE SIDENT OF A CONTRACTING STATE IN HIS CAPACITY AS A MEMBER OF TH E BOARD OF DIRECTORS OF A COMPANY WHICH IS A RESIDENT OF THE OTHER CONTRACTING STATE MAY BE TAXED IN THAT OTHER STATE. ITA NO.5808/M/2013 & 6468/M/2014 A.Y.2010-11 & 2011-12 8 ON APPRAISAL OF THE ARTICLE 17 WE ARE OF THE VIEW T HAT THE SAME IS NOWHERE APPLICABLE IN THE PRESENT CASE BEING MR. ARNOLD ALL EN NOWHERE RECEIVED THE SAID AMOUNT IN THE CAPACITY AS A MEMBER OF BOARD OF DIRECTOR OF THE COMPANY. HE RECEIVED THE SAID AMOUNT ON ACCOUNT OF SERVICE RENDERED BY HIM WHICH IS PROFESSIONAL IN NATURE. NO DOUBT THE SAID PAYMENT FALLS IN VIEW OF ARTICLE 15 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT. HOWEVER, IN THIS REGARD IT IS ALSO CLEARED BY THE H ONBLE SUPREME COURT OF INDIA IN CASE OF CIT VS. P.V.A.L. KULANDAGAN CHETTI AR 267 ITR 654 (SC) IN WHICH IT IS SPECIFICALLY HELD THAT THE PROVISION OF DOUBLE TAXATION AVOIDANCE AGREEMENT WAS HAVING THE OVERRIDING FACT OVER NORMAL PROVISIONS OF THE ACT. THE PAYMENT WAS CERTIFIED B Y THE CHARTERED ACCOUNTANT BY ISSUANCE OF CERTIFICATE TO MR. ARNOLD ALLEN, ON ACCOUNT OF HIS PROFESSIONAL SERVICES. IN THIS REGARD WE FOUND SUPPORT OF CASE DECIDED BY THE HONBLE ITAT, CHANDIGARH BENCH IN THE CASE O F M/S. IDS INFOTECH LTD. VS. DCIT, CIRCLE 4(1), CHANDIGARH IN ITA NO.52 /CHD/2016 FOR A.Y.2009-10 DATED 24.05.2016. THE ASSESSING OFFICE R WAS ALSO OF THE VIEW THAT MR. ARNOLD ALLEN IS HAVING FIXED PLACE IN INDIA. IN THIS REGARD THE ARTICLE 5 OF THE DOUBLE TAXATION AVOIDANCE AGREEMEN T BETWEEN INDIA AND U.K. DESCRIBED ABOUT THE PERMANENT ESTABLISHMENT WH ICH MEANS ABOUT THE FIX PLACE OF BUSINESS THROUGH WHICH BUSINESS ON AN ENTERPRISE WAS WHOLLY AND PARTLY CARRIED OUT. THERE IS NO IOTA OF EVIDE NCE ON RECORD TO WHICH IT CAN BE ASSUMED THAT MR. ARNOLD ALLEN WAS HAVING FIX ED PLACE IN INDIA. IN THIS REGARD THE FINDING GIVEN BY THE HONBLE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH IN ITA NO.2353/MUM/2006 FOR A.Y.2002-03 IN THE CASE TITLED AS M/S.RHEINBRAUN ENGINEERING UND W ASSER GMBH (NOW CHANGED TO RE EMBH) VS. DY. DIRECTOR OF INCOME TAX (INTL. TAXATION) ITA NO.5808/M/2013 & 6468/M/2014 A.Y.2010-11 & 2011-12 9 2(1) DATED 04.03.2016 ARE ON RECORD AND PARA 7 SPEA KS ABOUT THE PERMANENT ESTABLISHMENT IN INDIA, WHICH REPRODUCED AS FOLLOWS :- 7. IN OUR OPINION, IN THE CASE UNDER CONSIDERATION THE BASIC ISSUE TO BE DECIDED IS AS TO WHETHER THE ASSESSEE HAD PE IN INDIA OR NOT. IF IT HAD RENDERED SERVICES IN INDIA FOR MORE THAN 6 MONTHS CONTINUOUSLY, IT HAS TO BE HELD THAT IT HAD PE IN INDIA. THEREFORE, IT WOULD BE USEFUL TO FIND OUT AS WHAT S ERVICES WERE RENDERED BY THE ASSESSEE IN INDIA. WE FIND TH AT THE ASSESSEE HAD ISSUED 10 INVOICES (PAGE NO.49-58 OF T HE PAPER BOOK) TO THREE INDIAN PARTIES, THAT ONLY ONE INVOIC E WAS ISSUED TO GIPCL, TWO TO NLC AND BALANCE SEVEN TO MNBECL. A CLOSE SCRUTINY OF THE INVOICES PROVE THAT THE ASSES SEE HAD RENDERED SERVICES THAT WERE OF CONSULTANCY NATURE A ND THEREFORE SAME ARE GOVERNED BY THE PROVISIONS OF AR TICLE 12 OF THE DTAA. IN OUR OPINION, FOR COMPUTING CONTINU OUS STAY FOR PE PURPOSE ACTUAL STAY OF EMPLOYEES HAS TO BE C ONSIDERED AND NOT THE ENTIRE CONTRACT PERIOD. WE WOULD LIKE TO REFER TO THE MATTER OF J RAY MCDERRMOTT EASTER HEMISPHERE LT D. (54 SOT 363). IN THAT MATTER IT WAS HELD THAT PERIOD O F STAY IN INDIA FOR A NON RESIDENT ENTITY HAS TO BE COUNTED F ROM THE ACTUAL DATE OF COMMENCEMENT AND COMPLETION OF THE C ONTRACT, THAT THE DATE ON WHICH INVOICES WERE RAISED WERE NO T DECISIVE FACTORS TO DECIDE THE EXISTENCE OF PE. WE FIND THA T THE ASSESSEE HAD DEPUTED ONE OF ITS EMPLOYEE. DR.DITTR ICH IN INDIA AND HE HAD NOT STAYED IN INDIA FOR MORE THAN 180 DAYS. ITA NO.5808/M/2013 & 6468/M/2014 A.Y.2010-11 & 2011-12 10 THE ASSESSEE HAD INFORMED THE AO THAT DR.DITTRICH H AD VISITED INDIA IN PURSUANCE OF THE AGREEMENTS ENTERE D INTO WITH NLC AND MNBCEL (PG. 46 OF THE PB). IT IS ALSO A FA CT THE IN TOW OF THE CONTRACTS NO SUPERVISORY CHARGES WERE BO OKED BY THE ASSESSEE FOR THE YEAR UNDER APPEAL, THAT THE AS SESSEE HAD OFFERED ITS INCOME UNDER THE HEAD FTS IN ITS RETURN . ARTICLE 12(4) DEALS WITH FTS AND TALKS OF SERVICES OF MANAG ERIAL, TECHNICAL OR CONSULTANCY NATURE. CONSIDERING THE A BOVE, WE ARE OF THE OPINION THAT PAYMENTS RECEIVED BY THE AS SESSEE SHOULD BE ASSESSED AS PER THE PROVISIONS OF ARTICLE 12 AND NOT AS PER ARTICLE 7 OF THE INDO-GERMAN DTAA. THERE IS ONE MORE ASPECT TO THE PE. PROTOCOL TO T HE DTAA HAS PROVIDED AS UNDER: WITH REFERENCE TO ARTICLE 7 A. . B. INCOME DERIVED FROM A RESIDENT OF A CONTRACTING STA TE FROM PLANNING, PROJECT CONSTRUCTION OR RESEARCH ACTIVITI ES AS WELL AS INCOME FROM TECHNICAL SERVICES EXERCISED IN THAT ST ATE IN CONNECTION WITH A PERMANENT ESTABLISHMENT SITUATED IN THE OTHER CONTRACTING STATE, SHALL NOT BE ATTRIBUTED TO THAT PERMANENT ESTABLISHMENT SO, EVEN IF IT IS ASSUMED THAT THE ASSESSEE HAD PE IN INDIA FOR THE YEAR UNDER CONSIDERATION, IT WILL NOT BE GO VERNED BY ARTICLE 7 OF THE TAX TREATY. WE HAVE GONE THROU GH THE ITA NO.5808/M/2013 & 6468/M/2014 A.Y.2010-11 & 2011-12 11 ORDER OF BIRLA CORPORATION LTD. (SUPRA). WE FIND T HAT THE ISSUE IN THAT MATTER WAS ABOUT INSTALLATION AND COMMISSIONING OF PROJECTS AND IT DID NOT DEAL WITH THE ISSUE BEFORE US. SO, IN OUR OPINION THE DECISION I S OF NO HELD TO ADJUDICATE THE ISSUE. IN THESE CIRCUMSTANC ES, REVERSING THE ORDER OF THE FAA, WE HOLD THAT THE PAYMENTS RECEIVED BY THE ASSESSEE FROM GIPCL, NCL AND MNBECL HAVE TO BE TAXED @ 10% AND THAT THE PROVISIONS OF SECTION 115A WOULD NOT BE APPLICABLE. EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE. 8. IN VIEW OF THE SAID CIRCUMSTANCES, IT IS QUITE C LEAR THAT THE SAID FEES IS NOT LIABLE TO BE CONSIDERED UNDER THE ARTIC LE 17 WHEREAS THE FEES IS LIABLE TO BE CONSIDER IN VIEW OF THE ARTICLE 15 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT AND ACCORDINGLY, THIS PAYMENT IS NOT LIABLE TO BE TAXED IN INDIA. ACCORDINGLY, THIS ISS UE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ITA NO.6438/MUM/2014:- 9. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1.A) THAT THE CIT(APPEALS) HAS ERRED IN UPHOLDING D ISALLOWANCE U/S.40(A)(IA) OF THE ACT MADE BY THE ASSESSING OFFI CER OF PROFESSIONAL FEE OF RS.3,81,200/-. ITA NO.5808/M/2013 & 6468/M/2014 A.Y.2010-11 & 2011-12 12 B) THAT UNDER ARTICLE 15 OF THE DOUBLE TAXATION AGR EEMENT BETWEEN INDIA AND U.K. THE SAID FEE IS NOT TAXABLE IN INDIA AND THE PROVISIONS OF DTA OVERRIDE PROVISIONS OF THE AC T. C) THAT THE CIT(A) HAS ERRED IN REFERRING TO THE EX PLANATION TO SECTION 9 FOR DISALLOWING APPEAL OF THE APPELLANT C OMPANY ON THIS ISSUE. THE EXPLANATION TO SECTION 9 IS APPLIC ABLE ONLY TO SPECIFIC CLAUSES THAT IS CLAUSE (V), CLAUSE (VI) AN D (VII) OF SUB- SECTION (1) OF SECTION 9 OF THE ACT WHICH RELATE TO PAYMENT OF INTEREST, PAYMENT OF ROYALTY AND PAYMENT OF FEE FOR TECHNICAL SERVICES. THE SAID EXPLANATION HAS NO APPLICATION WHATSOEVER TO PROFESSIONAL FEES PAID BY THE APPELLANT COMPANY. A S SUCH THE UPHOLDING OF THE DISALLOWANCE BY THE CIT(A) IS NOT IN ORDER AND THE SAID DISALLOWANCE MAY BE CANCELLED. D) THAT THE DISALLOWANCE OF THE SAID AMOUNT OF RS.3 ,81,200/- MAY BE CANCELLED 10. THE BRIEF FACTS OF THE CASE ARE QUITE SIMILAR T O THE FACTS MENTIONED ABOVE IN ITA NO.5808/M/2013, HOWEVER, FIG URES ARE DIFFERENT. THEREFORE, THERE IS NO NEED TO REPEAT T HE SAME. THE ISSUE RAISED IN THE PRESENT APPEAL IS ALSO THE SAME WHICH HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE WHILE DECIDING THE APPEAL OF THE ASSESSEE IN ITA NO.5808/M/2013. ACCORDINGLY, THE ABOVE SAID IS SUE IS ALSO DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVEN UE. 11. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE HEREBY ORDERED TO BE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MARCH, 2017 . SD/- SD/- (R.C.SHARMA) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 23 RD ! $% , 2017 MP ITA NO.5808/M/2013 & 6468/M/2014 A.Y.2010-11 & 2011-12 13 &! '%! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. - , - , / DR, ITAT, MUMBAI 6. , .% / GUARD FILE. / BY ORDER, # # //TRUE COPY// / /(DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI