Appeal Details
Counselvise Citation
[2016] 132 COUNSELVISE.COM (IT) 1490 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 6 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-07-2016
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
22-09-2015
Assessment Year
2008-2009
Appeal Filed On
14-01-2015
Judgement Text
] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KSIQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . . , , ! ' BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NOS.62 & 63/PN/2015 !$ $ / ASSESSMENT YEARS: 2008-09 & 2009-10 GERA DEVELOPMENTS PVT. LTD., 200, GERA PLAZA, BOAT CLUB ROAD, PUNE 411 001 PAN NO.AAACG6703F . / APPELLANT V/S DY. CIT , (INT. TAX) - I, P UNE . / RESPONDENT / ASSESSEE BY : SHRI S.K. TYAGI, SHRI RAMESH SONIMINDE & SHRI VISHWAS D. SHOTOLE / RESPONDENT BY : SHRI RAVI PRAKASH & SHRI ANIL KUMAR CHAWARE / ORDER PER VIKAS AWASTHY, JM : THESE TWO APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINS T THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-IT/TP, PUNE DATED 16- 08-2012 PASSED U/S.201(1) AND 201(1A) R.W.S. 195 OF THE IN COMETAX ACT (HEREINAFTER REFERRED TO AS THE ACT) COMMON FOR TH E ASSESSMENT YEARS 2008-09 AND 2009-10. SINCE THE ISSUES RAISED IN T HE PRESENT APPEALS ARE ARISING FROM SAME SET OF FACTS, THE APPEALS ARE TAKEN UP TOGETHER FOR ADJUDICATION AND ARE DISPOSED OFF VIDE THIS COMMON ORD ER. / DATE OF HEARING :26.07.2016 / DATE OF PRONOUNCEMENT:29.07.2016 2 ITA NOS.62 & 63/PN/2015 2. THESE APPEALS HAVE BEEN FILED WITH THE DELAY OF 816 DAY S. THE ASSESSEE HAS FILED AN APPLICATION FOR CONDONATION OF DELAY. TH E DELAY IN FILING OF THE PRESENT APPEALS HAS OCCURRED, AS EARLIER THE A SSESSEE HAD FILED SINGLE APPEAL IN ITA NO.1975/PN/2012 FOR THE TWO ASSE SSMENT YEARS. THE CIT(A) HAD DISPOSED OF THE APPEALS FOR A.YRS. 20 08-09 AND 2009-10 VIDE SINGLE ORDER DATED 16-08-2012. THE ASSESS EE INADVERTENTLY FILED SINGLE APPEAL AGAINST THE SAID ORDER OF T HE CIT(A). SUBSEQUENTLY, THE ASSESSEE REALISED THE MISTAKE. ON 07-0 1-2015 THE ASSESSEE SOUGHT TIME FROM THE BENCH TO FILE INDEPENDENT APPEALS FOR THE IMPUGNED ASSESSMENT YEARS. THEREAFTER, ON 14-01-20 15 THE ASSESSEE FILED THE PRESENT APPEALS. IN THE PROCESS, THER E WAS DELAY OF 816 DAYS IN FILING OF THE APPEALS. THE LD. COUNSEL FOR THE AS SESSEE SUBMITTED THAT THE ASSESSEE HAD FILED THE INITIAL APPEAL W ITHIN THE PERIOD OF LIMITATION. THE DELAY IN FILING OF THE SUBSEQUENT APPE ALS WAS NOT WILLFUL OR DELIBERATE. THE DELAY OCCURRED DUE TO BONAFIDE REASONS. 3. AFTER CONSIDERING THE FACTS, WE ARE OF THE CONSIDERED O PINION THAT THE ASSESSEE HAS BEEN ABLE TO SHOW SUFFICIENT CAUSE FOR D ELAY IN FILING OF THE APPEALS. THE DELAY IN FILING OF APPEALS HAS OCCURRED DU E TO BONAFIDE REASONS. THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF RAM NATH SAO @ RAM NATH SAHU AND OTHERS REPORTED AS 2002 (3) S CC 195 HAS HELD THAT ACCEPTANCE OF EXPLANATION FURNISHED FOR DELAY SHO ULD BE THE RULE AND REFUSAL AN EXCEPTION, MORE SO WHEN NO NEGLIGENCE OR INACTION OR WANT OF BONAFIDE CAN BE IMPUTED ON THE DEFAULTING PARTY . THE EXPLANATION FURNISHED SHOULD NOT BE REJECTED BY TAKING PE DANTIC AND HYPER TECHNICAL VIEW OF THE MATTER WHEN THE STAKES ARE HIGH AND/OR ARGUABLE POINTS OF FACTS AND LAW ARE INVOLVED IN THE CASE, CAUSING ENORMOUS LOSS AND IRREPARABLE INJURY TO THE PARTY AGAIN ST WHOM THE LIS TERMINATES EITHER BY DEFAULT OR INACTION AND DEFEATING VALUA BLE RIGHT OF 3 ITA NOS.62 & 63/PN/2015 SUCH A PARTY TO HAVE THE DECISION ON MERIT. KEEPING IN VIEW THE LAW LAID DOWN BY THE HONBLE SUPREME COURT OF INDIA WHILE CONSIDER ING THE APPLICATION FOR CONDONATION OF DELAY AND THE FACTS NARRATED BY THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE, THE DELAY OF 816 DAYS IN FILING OF THE APPEALS IS CONDONED AND THE APPEALS ARE ADMITT ED TO BE HEARD AND DISPOSED OFF ON MERITS. 4. THE BRIEF FACTS OF THE CASE AS EMANATING FROM THE RECO RDS ARE : THE ASSESSEE IN THE PRESENT APPEALS IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF LAND AND CONSTRUCTION OF BUILDINGS. THE ASSE SSEE ENTERED INTO AN AGREEMENT WITH M/S. GENSLER AND ASSOCIATES/INTERNATIONAL LTD., USA (HEREINAFTER REFERRED T O AS GENSLER) ON 17-04-2008 IN RESPECT OF ITS COMMERCIAL PROJECT IQ B USINESS PARK AT KHARADI, PUNE. THE ASSESSEE INTENDED TO DEVELOP THE S AID PROJECT AS SPECIAL ECONOMIC ZONE (SEZ). AS PER THE AGREEMENT, THE SE RVICES PROVIDED BY GENSLER WERE DIVIDED INTO TWO PHASES; (1) PROGRAMME VERIFICATION AND MASTER PLANNING FOR GOVERNME NT APPROVAL; AND (2) CONCEPTUAL DEVELOPMENT. IN THE FIRST PHASE, GENSLER WOULD EXAMINE EXISTING AND ADDIT IONAL DATA PERTAINING TO THE PROJECT GOALS AND SITE DEVELOPMEN T REQUIREMENTS OF THE ASSESSEE. THEREAFTER, GENSLER WOULD WORK TOWARDS THE SPECIFIC CLIENT OBJECTIVES AND WOULD ALSO REVIEW VARIOUS ASPECTS RE LATING TO SITE REQUIREMENTS, SURROUNDINGS OF THE SITE, EXISTING EASEMENTS, ACCESSIBILITY OF THE SITE, OPEN SPACE, PEDESTRIAN AND VEHICULA R CIRCULATION ETC. THE SECOND PHASE OF CONCEPTUAL DEVELOPME NT INCLUDES CONCEPTUAL DESIGNS AND DRAWINGS ETC. A FINAL SITE PLAN INDICA TING MAIN BUILDING, OPEN SPACE, PARKING, GATEWAYS, UTILITIES AND INFRASTRUC TURE SUPPORT. GENSLER WOULD ALSO PROVIDE DIAGRAMS INDICATING VISU AL, SCENIC 4 ITA NOS.62 & 63/PN/2015 & LANDSCAPE OPTIONS ETC. FOR THE AFORESAID SERVICES, IT WA S MUTUALLY AGREED BETWEEN THE PARTIES THAT THE ASSESSEE WOULD PA Y TOTAL CONSIDERATION OF US$ 5,57,500. THE ASSESSEE PAID RS.40,60,00 0/- IN F.Y. 2007-08 AND RS.2,37,48,685/- IN F.Y. 2008-09 WITHOUT DE DUCTION OF WITHHOLDING TAX. THE AO VIDE ORDER DATED 31-03-2010 P ASSED U/S.201(1) AND 201(1A) R.W.S. 195 OF THE ACT, COMMON FOR THE IMPUGNED ASSESSMENT YEARS HELD THAT THE PAYMENTS TO THE TUNE OF RS.2,78,08,685/- MADE BY THE ASSESSEE TO GENSLER WERE IN THE NATU RE OF FEE FOR TECHNICAL SERVICES/ROYALTY. THE AO COMPUTED TH AT THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE RS.55,61,736/ - U/S.201(1) ON THE PAYMENTS MADE TO GENSLER AND FURTHER CHARGED IN TEREST RS.12,03,018/- U/S.201(1A). CONSEQUENTLY, A DEMAND NOTICE FOR RS.67,64,754/- WAS ISSUED TO THE ASSESSEE. 5. AGGRIEVED BY THE ORDER PASSED U/S.201(1) AND 201(1A) R .W.S. 195 OF THE ACT, THE ASSESSEE PREFERRED APPEAL BEFORE THE CI T(A). THE CIT(A) VIDE IMPUGNED ORDER CONFIRMED THE FINDINGS OF THE AO AND HE LD THAT ARCHITECTURAL SERVICES RENDERED BY GENSLER ARE TAXABLE AS TECHNICAL OR CONSULTANCY SERVICES U/S.9(1)(VII)(B) OF THE ACT AND UNDER AR TICLE 12(4)(B) OF THE INDIA-US DTAA. AGAINST THESE FINDINGS OF THE C IT(A) THE ASSESSEE IS IN APPEAL FOR BOTH THE IMPUGNED ASSESSMENT YEARS. 6. THE ASSESSEE HAS ASSAILED THE FINDINGS OF THE FIRST APPE LLATE AUTHORITY BY RAISING FOLLOWING GROUNDS OF APPEAL : 1 . THE LEARNED (LD) CIT(A) ERRED IN CONFIRMING THE ORD ER PASSED BY THE DY.DIT(IT)-L , PUNE (ASSE S SIN G OFFICER), UNDER SECTIONS 201(1) AND 201(1A) , R . W.S.195 OF THE INCOME-TA X ACT, 1961 (THE ACT ), FOR THE FY 2007-08 , RAISING A DEMAND OF RS.9 , 13 , 500 , BY WAY OF TDS AND INTEREST THEREON , RELATING TO PAYMENT OF ARCHITECT FEES OF RS . 40 , 60 , 000 , TO U.S. COMPANY. 2. THE LD CIT(A) GROSSLY ERRED IN PLACING RELIANCE ON MOUS BETWEEN INDIA AND USA , WHICH ARE DATED MUCH BEFORE THE COMPREHENSIVE DTAA ENTERED INTO BETWEEN INDIA AND USA , VIDE NOTIFICATION NO.GSR 990(E), DATED 20.12.1990, PARTICULARLY IN VIEW OF THE FACT THAT THE SAID MOUS ARE CONTRAR Y TO THE RELEVANT PROVISIONS OF THE COMPREHENSIVE DTAA . 5 ITA NOS.62 & 63/PN/2015 3. THE LD CIT(A) GROSSLY ERRED IN PLACING RELIANCE ON TAXATION RULING, IT 2660, DATED 28 . 11.1991 , BY AUSTRALIAN TAX OFFICE (ATO) , WHICH CANNOT BE APPLIED IN THE PRESENT CASE BY ANY STRETCH OF IMAGI NATION , BECAUSE THE PRESENT CASE HAS TO BE DECIDED WITHIN THE PARAMETERS OF THE INCOM E -TA X ACT , 1961 AND THE DT AA BETWEEN INDIA AND USA . 3.1 THE LD CIT(A) GROSSLY ERRED IN PLACING RELIANC E UPON THE AFORESAID TAXATION RULING OF AUSTRALIAN TAX OFFICE, WHICH IS CONTRARY TO THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT , VIZ. BOMBA Y HIGH COURT, IN THE CASE OF DIAMOND SERVICES INTERNATIONAL PVT . LTD VS UNION OF INDIA [200B] 30 4 ITR 20 1 (BOM) . 4. THE LD CIT(A) GROSSLY ERRED IN HOLDING THAT DESI GN AND DRAWINGS PREPARED BY A US COMPANY FOR A HOUSING PROJECT IN P UNE, WERE NOT A PRODUCT AS HELD BY THE BOMBAY HIGH COURT IN THE AFORESAID JUDGEMENT, BUT THE SAME WERE ARCHITECTURAL SERVICES, BY WAY OF TECHNICAL OR CONSULTANCY SERVICES, LIABLE TO TAX UNDER SECTION 9(1)(VII) OF THE ACT . 4.1 THE LD CIT(A) GROSSLY ERRED IN HOLDING THE AFO RESAID ARCHITECTURAL SERVICES AS TECHNICAL SERVICES BASED ON A JUDGEMENT OF THE AUTHORITY FOR ADVANCE RULINGS (AAR), IN CONTRADICTION TO THE JUDG EMENT OF MADRAS HIGH COURT, IN THE CASE OF SKYCELL COMMUNICATIONS LTD VS DY . CIT [2001] 251 ITR 53 (MAD) . 4.2 THE LD CIT(A) ERRED IN NOT APPRECIATING THE LE GAL POSITION THAT THE RULING OF THE AAR HAS GOT ONLY A PERSUASIVE VALUE A ND THE SAME CANNOT BE FOLLOWED IN CONTRADICTION TO THE JUDGEMENT OF A HIG H COURT , PARTICULARLY IN VIEW OF THE RECENT JUDGEMENT OF THE SUPREME COURT , IN THE CASE OF COLUMBIA SPORTSWEAR CO. VS DIT [2012] 346 ITR 161 (SC), WHER EIN IT HAS BEEN CLEARLY HELD THAT THE AAR IS A TRIBUNAL AND THE RULING OF T HE AAR HAS TO BE CHALLENGED BEFORE A DIVISION BENCH OF THE HIGH COURT AND NOT D IRECTLY BEFORE THE SUPREME COURT. 5. THE LD CIT(A) ERRED IN HOLDING THAT THE IMPUGNE D ARCHITECTURAL SERVICES WERE COVERED UNDER ARTICLE 12(4)(B) OF THE DT AA BETWEEN INDIA AND USA, WHEN NO TECHNOLOGY WAS MADE AVAILABLE, ALONG W ITH THE SO CALLED TECHNICAL SERVICES AS HELD BY THE KARNATAKA HIGH CO URT, IN THE CASE OF CIT VS DE BEERS INDIA MINERALS (P) LTD [2012J 208 TAXMAN 4 06 (KARN) . 6. THE LD CIT(A) FAILED TO APPRECIATE THE LEGAL POSITI ON THAT INITIALLY AFTER EXAMINATION WHETHER A PAYMENT MADE TO A FOREIGN ENT ITY IS LIABLE TO TAX UNDER THE INCOME - TAX ACT, 1961 AND IN CASE IT IS SO TAXABLE, THEN ON LY ONE MOVES TO THE PROVISIONS OF THE DT AA . THE LD CIT(A) IN THE PRESENT CASE HAS TOTALLY MIXED UP THE RELEVANCE OF THE PROVISIONS OF THE INCOME - TAX ACT, 1961, VIS-A-VIS THE PROVISIONS OF THE DTAA. 7. ALL THE AFORESAID GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO ONE ANOTHER . 8. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, MO DIFY OR DELETE ANY OR ALL THE AFORESAID GROUNDS OF APPEAL . SIMILAR GROUNDS OF APPEAL HAVE BEEN RAISED BY THE ASSESSE E IN BOTH THE IMPUGNED ASSESSMENT YEARS. 6 ITA NOS.62 & 63/PN/2015 7. SHRI S.K. TYAGI APPEARING ON BEHALF OF THE ASSESSEE SUB MITTED THAT THE ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH GENSLER IN RESPECT OF ITS PROJECT IQ BUSINESS PARK AT KHARADI, PUNE. GENSLER IS AN ARCHITECTURE, DESIGN, PLANNING AND STRATEGY CONSULTING COMP ANY HAVING ITS OFFICE AT 38 LOCATIONS WORLDWIDE. GENSLER HAS PROV IDED ITS SERVICES TO THE ASSESSEE FROM ITS OFFICE IN SAN FRANCISCO. GENSLER IS NOT HAVING ANY PERMANENT ESTABLISHMENT (PE) IN INDIA. 8. THE LD. AUTHORISED REPRESENTATIVE REFERRED TO THE AGREEMENT DATED 17-04-2008 WHICH IS AT PAGES 1 TO 9 OF THE PAPER BOOK AND SUBMITTED THAT A PERUSAL OF SCOPE OF SERVICES PROVIDED B Y GENSLER TO THE ASSESSEE WOULD SHOW THAT THERE IS NO TRANSFER OF ANY TE CHNOLOGY, TECHNICAL KNOW-HOW OR TECHNICAL DESIGNS. GENSLER MADE DRA WINGS AND DESIGNS OF THE PROPOSED BUILDING BY USING AUTO CAD 2004/2 006 AND PROVIDED THE DESIGNS KEEPING IN VIEW THE REQUIREMENTS OF T HE ASSESSEE AND THE AVAILABILITY OF THE AREA. THE LD. AUTHORISED REPRE SENTATIVE POINTED THAT ALL THE DRAWINGS, SPECIFICATIONS AND DOCUMENTS, THE COMPUTER DISC, ELECTRONIC DATA OR CAD FILES PREPARED BY G ENSLER, WILL REMAIN THE PROPERTY OF THE GENSLER. THE LD. AUTHORISED RE PRESENTATIVE FURTHER CONTENDED THAT THE DESIGNS AND DRAWINGS MADE B Y GENSLER WERE PROJECT SPECIFIC AND THE ASSESSEE COULD NOT REPLICATE THO SE DESIGNS AT ANY OTHER LOCATION. 9. THE LD. AUTHORISED REPRESENTATIVE REFERRING TO THE DT AA BETWEEN INDIA AND USA SUBMITTED THAT AS PER ARTICLE 5(2)(L)(I) OF THE D TAA, THE TERM PERMANENT ESTABLISHMENT INCLUDES RENDERING OF SERV ICES, OTHER THAN INCLUDED SERVICES AS DEFINED IN ARTICLE 12 (ROYALTIES AND FEES FOR INCLUDED SERVICES), WITHIN A CONTRACTING STATE BY AN ENTE RPRISES, THROUGH EMPLOYEES AND OTHER PERSONNEL BUT ONLY IF THE ACTIVITIES OF THAT 7 ITA NOS.62 & 63/PN/2015 NATURE CONTINUE WITHIN THAT STATE FOR A PERIOD OR PERIODS AGGREGATING MORE THAN 90 DAYS WITHIN ANY 12 MONTHS PERIOD. DURING T HE RELEVANT PERIOD THE EMPLOYEES OF GENSLER HAD VISITED INDIA TWICE AND THEIR STAY IN INDIA WAS FOR 3 DAYS AND 2 DAYS RESPECTIVELY ON THOS E TWO DIFFERENT OCCASIONS. THUS, THE STAY OF EMPLOYEES OF GENSLER IN INDIA WAS FOR THE TOTAL PERIOD OF 5 DAYS. THEREFORE, THERE IS NO QUESTION O F GENSLER HAVING PE IN INDIA. 10. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT FOR TAX TR EATMENT OF THE IMPUGNED PAYMENTS, THE PROVISIONS OF DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND USA HAVE BEEN A PPLIED, AS THE PROVISIONS OF DTAA ARE MORE BENEFICIAL TO THE APPELLANT AND WOULD OVERRIDE THE PROVISIONS OF THE INCOME TAX ACT, 1961. IN SUPPORT OF HIS ARGUMENT, THE LD. AUTHORISED REPRESENTATIVE PLACED RELIANC E ON THE CBDT CIRCULAR NO.333, DATED 02-04-1982 AND THE JUDGMENT OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF UNION OF INDIA VS. AZ ADI BACHAO ANDOLAN REPORTED AS 263 ITR 706. 11. THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE PAYMENTS MADE TO GENSLER WERE IN THE NATURE OF BUSINESS PROFITS. THE LD. AUTHORISED REPRESENTATIVE CONTENDED TH AT THE EXPRESSION BUSINESS INCLUDES WITHIN ITS SCOPE PROFESSIONS AND VOCATIONS. THEREFORE, BUSINESS INCOME INCLUDES ANY INCOME FOR RENDERING PROFESSIONAL SERVICES. TO SUPPORT HIS CONTENTION S, THE LD. AUTHORISED REPRESENTATIVE PLACED RELIANCE ON THE JUDGEME NT OF HONBLE APEX COURT IN THE CASE OF BARENDRA PRASAD RAY VS. ITO REPORTED AS 129 ITR 295 (SC). 8 ITA NOS.62 & 63/PN/2015 THE LD. AUTHORISED REPRESENTATIVE CONTENDED THAT GENSLE R IS NOT HAVING ANY PE IN INDIA, HENCE, THE AFORESAID PAYMENTS WER E NOT LIABLE TO BE TAXED AS PER ARTICLE 7(1) OF THE DTAA BETWEEN INDIA AND USA. THE LD. AUTHORISED REPRESENTATIVE FURTHER CONTENDED THAT TH E PAYMENTS MADE BY THE ASSESSEE CANNOT BE TREATED AS FEE FOR INC LUDED SERVICES WITHIN THE SCOPE OF ARTICLE 12(4)(B) OF THE DTAA, EITHER. NO TECHNOLOGICAL/ KNOW-HOW, PROCESS OR SKILL WAS MADE AVAILABLE TO THE ASSESSEE BY GENSLER. THEREFORE, THE CONDITION OF MAKE AV AILABLE WAS NOT FULFILLED IN THE PRESENT CASE. 12. THE LD. AUTHORISED REPRESENTATIVE ASSERTED THAT T HE CIT(A) HAS ERRED IN HOLDING THAT DESIGNS AND DRAWINGS PREPARED BY G ENSLER FOR THE COMMERCIAL PROJECT OF THE ASSESSEE WERE ARCHITECTURAL SE RVICES AND ARE IN THE NATURE OF TECHNICAL OR CONSULTANCY SERVICES AND TH US LIABLE TO BE TAXED UNDER THE PROVISIONS OF SECTION 9(1)(VII) OF THE ACT. 13. THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE C ONTENDED THAT THE PAYMENTS FOR DESIGNS AND DRAWINGS AND BUILDING PLANS CANNOT BE TREATED AS ROYALTY OR FEE FOR INCLUDED SERVICES WITHIN THE PURVIEW OF ARTICLE 12(3) OR 12(4) OF THE DTAA BETWEEN INDIA AND USA. THE LD. AUTHORISED REPRESENTATIVE REFERRED TO ARTICLE 12 OF INDO- US DTAA AND SUBMITTED THAT BY NO STRETCH OF IMAGINATION THE PAYMENTS MADE BY THE ASSESSEE FOR PROCURING DESIGNS, DRAWINGS AND BUILDING PLANS ARE IN THE NATURE OF ROYALTY OR FEES FOR INCLUDED SERVICES. THE A MOUNT PAID CAN BE TREATED AS FEES FOR INCLUDED SERVICES, WHERE T HE PAYMENT OF ANY KIND TO ANY PERSON IS IN CONSIDERATION FOR RENDERING ANY TECHNICAL OR CONSULTANCY SERVICE IF SUCH SERVICE; (1) MAKE AVAILABLE TECHN ICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HOW OR PROCESS, OR (2) CON SISTS OF DEVELOPMENT AND TRANSFER OF A TECHNICAL PLAN OR TECHNICAL DESIGN. IN THE CASE OF THE ASSESSEE, GENSLER HAS NOT MADE AVAILABLE ANY TECHNICAL 9 ITA NOS.62 & 63/PN/2015 KNOWLEDGE OR KNOW-HOW OR PROCESS TO THE ASSESSEE NOR THERE HAS BEEN ANY TRANSFER OF ANY TECHNICAL PLAN OR TECHNICAL DESIGN. IN SUPPORT HIS SUBMISSIONS THE LD. AUTHORISED REPRESENTATIVE PLACED RELIAN CE ON THE FOLLOWING DECISIONS : 1. SKYCELL COMMUNICATIONS LTD. VS. DY.CIT REPORTED AS 251 ITR 53 (MAD.) 2. ABISHEK DEVELOPERS VS. ITO REPORTED AS 110 TTJ 698 (BA NG.) 3. DY.CIT VS. FINOLEX PIPES LTD. REPORTED AS 106 TTJ 741 4. JCIT VS. HARWARD MEDICAL INTERNATIONAL USA REPORTED AS 13 ITR (TRIB.) 503 (MUM) 5. DIAMOND SERVICES INTERNATIONAL PVT. LTD. VS. UNION OF INDIA AND OTHERS REPORTED AS 304 ITR 201 (BOM.) 6. CIT VS. DE BEERS INDIA MINERALS PVT. LTD. REPORTED AS 346 ITR 467 (KARN.) 7. ADDL. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATIO N) VS. W.N.S. NORTH AMERICA INC. 30 ITR (TRIB.) 646 MUMBAI 14. PER CONTRA SHRI RAVI PRAKASH REPRESENTING THE DEPA RTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF THE CIT(A). THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT TO OVERCOME THE DIFFICULTY F ACED BY THE ASSESSEES TO DECIDE, WHETHER TAX HAS TO BE DEDUCTED O R NOT, THE LEGISLATURE OF THE ACT HAS PROVIDED A REMEDY TO THE AS SESSEE UNDER SECTION 248 OF THE ACT FOR FILING APPEAL DENYING LIABILITY TO DE DUCT TAX IN CERTAIN CASES. IN ORDER TO PROTECT ITSELF FROM THE AVOIDA BLE LITIGATION AND ITS CONSEQUENCES THE ASSESSEE COULD HAVE TAKEN THE BE NEFIT OF THE PROVISIONS OF SECTION 248 OF THE ACT. 15. THE LD. DEPARTMENTAL REPRESENTATIVE REFERRED TO THE AGREEMENT BETWEEN THE ASSESSEE AND GENSLER AND SUBMITTED THAT T HE US COMPANY HAS PROVIDED CONSULTANCY SERVICES. FEE FOR TECHNICAL SERV ICES IS EQUIVALENT TO INCLUDED SERVICES. THE TERM MAKE AVAILABLE IS DEBATABLE AND THUS NO INFERENCE CAN BE DRAWN FROM IT. TH E LD. DEPARTMENTAL REPRESENTATIVE FURTHER REFERRED TO ARTICLE 1 2(4)(B)(II) OF INDO-US DTAA AND SUBMITTED THAT IN THE CASE OF THE ASS ESSEE, IT IS TRANSFER OF TECHNICAL KNOW-HOW, TECHNICAL PLANS AND DESIGNS , THEREFORE, 10 ITA NOS.62 & 63/PN/2015 THE CONSIDERATION FOR TRANSFER OF SUCH TECHNICAL KNOW-HOW OR TECHNICAL PLANS AND DESIGNS WOULD ATTRACT THE PROVISIONS OF THE ACT . THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE ON THE PAYMENTS MAD E TO GENSLER FOR PROVIDING SUCH DESIGNS, DRAWINGS ETC. THE LD. DEPARTMENTA L REPRESENTATIVE FURTHER SUBMITTED THAT THE JUDGMENTS O N WHICH THE LD. AUTHORISED REPRESENTATIVE HAS PLACED RELIANCE ARE DISTINGU ISHABLE ON FACTS AND THUS WOULD NOT APPLY IN THE FACTS AND CIRCUM STANCE OF THE PRESENT CASE. IN SUPPORT OF HIS CONTENTIONS, THE LD. DEP ARTMENTAL REPRESENTATIVE HEAVILY RELIED ON THE DECISION OF MUMBAI BEN CH OF THE TRIBUNAL IN THE CASE OF SARGENT AND LUNDY, LLC, USA VS. AD CIT(IT) VIDE ITA NO.8986/MUM/2010 FOR A.Y. 2007-08 DECIDED ON 24-07-2013. 16. THE LD. AUTHORISED REPRESENTATIVE CONTROVERTING THE SUBMISSIONS MADE ON BEHALF OF THE DEPARTMENT SUBMITTED THAT ALTHOUGH THE DESIGNS AND SPECIFICATIONS HAVE BEEN GIVEN TO THE ASSESSEE BY GE NSLER, HOWEVER, THE TITLE OF THOSE DESIGNS AND DRAWINGS WILL REMAIN WITH GEN SLER. THE LD. AUTHORISED REPRESENTATIVE REFERRED TO THE ASSESSMEN T ORDER WHERE THE AO HAS OBSERVED THAT THE CONTENTS OF THE CD WHICH HAS BEEN PROVIDED TO THE ASSESSEE BY GENSLER CONTAINS DRAWINGS, D ESIGNS AND LAYOUT OF DIFFERENT BUILDINGS AND FACILITIES TO BE PROVIDED IN THE PROJECT IQ BUSINESS PARK AT KHARADI, PUNE. THE DESIGNS OF INTERIOR BUILDING AS WELL AS WINDOWS ETC ALONGWITH MEASUREMENT HAVE ALSO BEEN GIVEN. THIS CLEARLY SHOWS THAT IT IS ONLY THE DESIGNS AND THE DRAWIN GS WHICH HAVE BEEN RECEIVED BY THE ASSESSEE FROM GENSLER AND THERE IS NO TRANSFER OF ANY TECHNOLOGY OR KNOW-HOW. THE LD. AUTHORISED REPRESE NTATIVE FURTHER SUBMITTED THAT THE AO IS NOT CLEAR ABOUT THE NA TURE OF PAYMENT MADE BY THE ASSESSEE TO GENSLER. AT SOME PLACES IN THE ASSESSMENT ORDER HE REFERS TO THE PAYMENT AS PAYMENT FOR TECHNIC AL SERVICES AND AT OTHER PLACES HE REFERS THE PAYMENTS AS ROYALTY. 11 ITA NOS.62 & 63/PN/2015 17. THE LD. AUTHORISED REPRESENTATIVE FURTHER REFERRED T O THE OBSERVATIONS OF THE AO IN PARA 19 OF THE ORDER WHERE T HE AO HAS REFERRED TO THE JUDGMENT OF HONBLE KARNATAKA HIGH COUR T IN THE CASE OF CIT VS. SAMSUNG ELECTRONICS COMPANY LTD. REPORTED AS 32 0 ITR 209. THE LD. AUTHORISED REPRESENTATIVE CONTENDED THAT THE AFORESAID JUDGMENT OF HONBLE KARNATAKA HIGH COURT HAS BEEN SET ASIDE BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF GE TECHNOLO GIES INDIA PVT. LTD. VS. CIT REPORTED AS 327 ITR 456 (SC). THE HON BLE APEX COURT IN AN UNEQUIVOCAL TERMS HAS HELD THAT IF ANY PAYMENTS IS MADE TO THE NON- RESIDENT WHICH IS NOT CHARGEABLE TO TAX, NO TAX HAS TO BE DEDUCTED AT SOURCE ON SUCH PAYMENTS. 18. THE LD. AUTHORISED REPRESENTATIVE FINALLY SUBMITTED TH AT THE ASSESSEE BEFORE MAKING PAYMENT TO GENSLER HAD SOUGHT O PINION FROM THE INCOME TAX ADVISOR ON THE ISSUE, WHETHER ANY TAX W AS REQUIRED TO BE DEDUCTED ON THE PAYMENTS TO BE MADE TO GENSLER. T HE TAX CONSULTANT VIDE OPINION DATED 10-05-2008 ADVISED THAT : (I) PAYMENTS FOR ARCHITECTURAL SERVICES ARE NOT LIA BLE TO BE TAXED IN INDIA UNDER THE PROVISIONS OF INCOME TAX ACT, 1961. (II) THE PAYMENTS WOULD NOT BE LIABLE TO BE TAXED I N INDIA, AS PER THE DTAA BETWEEN INDIA AND USA; AND (III) NO TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE U/S.195 OF THE ACT ON THE PAYMENTS UNDER CONSIDERATION. THE ASSESSEE, IN THE LIGHT OF OPINION FROM TAX CONSULTANT PROCEEDED TO MAKE PAYMENT TO GENSLER WITHOUT DEDUCTING TAX AT SOURCE U/S.195 OF THE ACT. 19. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESE NTATIVES OF RIVAL SIDES AT LENGTH AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO TAKEN INTO CONSIDERATION THE JUDGMEN TS ON WHICH 12 ITA NOS.62 & 63/PN/2015 RIVAL SIDES HAVE PLACED RELIANCE AND THE DOCUMENTS WHICH H AVE BEEN REFERRED DURING THE COURSE OF MAKING OF SUBMISSIONS. THE ISSUE THAT HAS EMERGED BEFORE US FROM THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF THE RIVAL SIDES AND THE DOCUMENTS ON RECORD IS : WHETHER THE PAYMENTS MADE BY THE ASSESSEE IN LIEU OF D ESIGNS, DRAWINGS, PLANS MADE BY GENSLER IS IN THE NATURE OF ROYALTY /FEE FOR INCLUDED SERVICES AND THUS THE ASSESSEE WAS LIABLE TO DED UCT TAX AT THE TIME OF MAKING SUCH PAYMENTS? . 20. BEFORE WE PROCEED WITH THIS ISSUE IT WOULD BE NECESSAR Y TO REFER TO THE RELEVANT CLAUSES OF DTAA BETWEEN INDIA AND USA, A S DURING THE COURSE OF SUBMISSIONS THE LD. AUTHORISED REPRESENTATIVE O F THE ASSESSEE HAS HEAVILY PLACED RELIANCE ON THE PROVISIONS OF ARTICLE 5,7 AND 12 OF INDIA-US DTAA. THE RELEVANT EXTRACTS OF ARTICLES 5, 7 AND 12 OF THE DTAA ARE REPRODUCED HEREIN BELOW: ARTICLE 5 PERMANENT ESTABLISHMENT 1. FOR THE PURPOSES OF THIS CONVENTION, THE TERM ' PERMANENT ESTABLISHMENT' MEANS A FIXED PLACE OF BUSINESS THROUGH WH ICH THE BUSINESS OF AN ENTERPRISE IS WHOLLY OR PARTLY CARRIED ON. 2. THE TERM 'PERMANENT ESTABLISHMENT' INCLUDES ESPE CIALLY: (A) XXXXXX (B) XXXXXX (C) XXXXXX (L). THE FURNISHING OF SERVICES, OTHER THAN INCLU DED SERVICES AS DEFINED IN ARTICLE 12 (ROYALTIES AND FEES FOR INCLUDED SERVICES), WITHIN A CONTRACTING STATE BY AN ENTERPRISE THROUGH EMPLOYEES OR OTHER PERSONNEL, BUT ONLY IF: I. ACTIVITIES OF THAT N ATURE CONTINUE WITHIN THAT STATE FOR A PERIOD OR PERIODS AGGREGATING TO MORE THAN 90 DAYS WITHIN ANY T WELVE-MONTH PERIOD; OR II. THE SERVICES ARE PERF ORMED WITHIN THAT STATE FOR A RELATED ENTERPRISE (WITHIN THE MEANING OF PARAGRAPH 1 OF ART ICLE 9 (ASSOCIATED ENTERPRISES)). 13 ITA NOS.62 & 63/PN/2015 ARTICLE 7 BUSINESS PROFITS 1. THE PROFITS OF AN ENTERPRISE OF A CONTRACTING STATE SHALL BE TAXABLE ONLY IN THAT STATE UNLESS THE ENTERPRISE CARRIES ON BUSINESS I N THE OTHER CONTRACTING STATE THROUGH A PERMANENT ESTABLISHMENT SI TUATED THEREIN. IF THE ENTERPRISE CARRIES ON BUSINESS AS AFORESAID, THE PROFI TS OF THE ENTERPRISE MAY BE TAXED IN THE OTHER STATE BUT ONLY SO MUCH OF THEM AS IS ATTRIBUTABLE TO (A) THAT PERMANENT ESTABLISHMENT; (B) SALES IN THE O THER STATE OF GOODS OR MERCHANDISE OF THE SAME OR SIMILAR KIND AS THOSE SOLD THR OUGH THAT PERMANENT ESTABLISHMENT; OR (C) OTHER BUSINESS ACTIVITI ES CARRIED ON IN THE OTHER STATE OF THE SAME OR SIMILAR KIND AS THOSE EFFEC TED THROUGH THAT PERMANENT ESTABLISHMENT. ARTICLE 12 ROYALTIES AND FEES FOR INCLUDED SERVICES 1. ROYALTIES AND FEES FOR INCLUDED SERVICES ARISING IN INDIA AND PAID TO A RESIDENT OF THE USA MAY BE TAXED IN THAT OTHER STATE . 2. HOWEVER, SUCH ROYALTIES AND FEES FOR INCLUDED SE RVICES MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH THEY ARISE A ND ACCORDING TO THE LAWS OF THAT STATE; BUT IF THE BENEFICIAL OWNER OF THE R OYALTIES OR FEES FOR INCLUDED SERVICES IS A RESIDENT OF THE OTHER CONTRACTING STATE, THE TAX SO CHARGED SHALL NOT EXCEED: XXXXXXXX XXXXXXXX 3. THE TERM 'ROYALTIES' AS USED IN THIS ARTICLE MEA NS: A. PAYMENTS OF ANY KIND RECEIVED AS CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF A LITERARY, ARTISTIC, OR SCIENTIFIC WORK, INCLUDING CINEMATOGRAPH FILMS OR WORK ON FILM, TAPE OR OTHER MEANS OF REPRODUCTION FOR USE IN CONNECTION WITH RADIO OR TE LEVISION BROADCASTING, ANY PATENT, TRADEMARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR INFORMATION CONCERNING IND USTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE, INCLUDING GAINS DERIVED FROM THE ALIENATION OF ANY SUCH RIGHT OR PROPERTY WHICH ARE C ONTIGENT ON THE PRODUCTIVITY, USE OR DISPOSITION THEREOF; AND B. PAYMENTS OF ANY KIND RECEIVED AS CONSIDERATION F OR THE USE OF, OR THE RIGHT TO USE, ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFI C EQUIPMENT, OTHER THAN PAYMENTS DERIVED BY AN ENTERPRISE DESCRIBED IN PA RAGRAPH 1 OF ARTICLE 8 (SHIPPING AND AIR TRANSPORT) FROM ACTIVITI ES DESCRIBED IN PARAGRAPH 2(C) OR 3 OF ARTICLE 8. 4. FOR PURPOSES OF THIS ARTICLE, 'FEES FOR INCLUDED SERVICES' MEANS PAYMENTS OF ANY KIND TO ANY PERSON IN CONSIDERATION FO R THE RENDERING OF ANY TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THROU GH THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL) IF SUCH SERVIC ES: A. ARE ANCILLARY AND SUBSIDIARY TO THE APPLICATIO N OR ENJOYMENT OF THE RIGHT, PROPERTY OR INFORMATION FOR WHICH A PAYMENT DESCRIBED IN PARAGRAPH 3 IS RECEIVED; OR 14 ITA NOS.62 & 63/PN/2015 B. MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENC E, SKILL, KNOW-HOW. OR PROCESSES, OR CONSIST OF THE DEVELOPMENT AND TRANSFER OF A TECHNICAL PLAN OR TECHNICAL DESIGN. 21. THE CIT(A) BY PLACING RELIANCE ON THE PROVISIONS OF SECT ION 9(1)(VII)(B) WHICH DEALS WITH INCOME BY WAY OF FEES FOR TECHNICAL SERVICES HELD THAT THE ASSESSEE WAS LIABLE TO DEDUCT TA X AT SOURCE ON THE PAYMENTS MADE TO GENSLER, USA AS THE PAYMENTS MAD E BY ASSESSEE WERE IN THE NATURE OF FEE FOR TECHNICAL OR CONSULTANCY SE RVICES. THE CIT(A) HAS SIMULTANEOUSLY HELD THAT THE PAYMENT MADE BY THE ASSESSEE FOR ARCHITECTURAL SERVICES RENDERED BY GENSLER-USA FALLS WIT HIN THE MEANING OF EXPRESSION FEES FOR INCLUDED SERVICES UNDER AR TICLE 12(4)(B) OF THE INDIA-USA DTAA. 22. AT THE OUTSET IT WOULD BE RELEVANT TO MENTION HERE THAT THE PROVISIONS OF SECTION 90(2) OF THE ACT, ALLOW A TAXPAYER TO AVAIL THE PROVISIONS OF DTAA TO THE EXTENT THEY ARE MORE FAVOURAB LE THAN THE PROVISIONS OF THE ACT. THE CBDT CIRCULAR NO.333 DATED 02- 04-1982 HAS FURTHER CLARIFIED THE POSITION THAT WHERE DTAA PROVIDES FOR A PARTICULAR MODE OF COMPUTATION OF INCOME, THE SAME SHOULD BE FOLLOWED, IRRESPECTIVE OF THE PROVISIONS OF THE ACT. WHERE TH ERE IS NO SPECIFIC PROVISION IN THE AGREEMENT, THE PROVISIONS OF INCOME TAX ACT WILL GOVERN THE TAXATION OF INCOME. THE HONBLE APEX COURT IN THE CASE OF AZADI BACHAO ANDOLAN (SUPRA) HAS HELD THAT CHARGING SEC TION 4, AS WELL AS SECTION 5 OF THE ACT, WHICH DEALS WITH THE PRINCIPLE OF ASCERTAINMENT OF TOTAL INCOME UNDER THE ACT, ARE SUBORDI NATE TO THE PRINCIPLE ENSHRINED U/S.90(2) OF THE ACT. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ADIT VS.WNS NORTH AMERICA INC. (SUP RA) HAS REITERATED THE PROPOSITION THAT WHERE PROVISIONS OF ARTICLE 12 (4)(B) ARE BENEFICIAL TO THE ASSESSEE IN COMPARISON WITH SECTION 9(1)(VI), THE PROVISIONS OF ARTICLE 12 SHALL APPLY IN SUPERCESSION OF SECTIO N 9(1)(VI) OF 15 ITA NOS.62 & 63/PN/2015 THE ACT. THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS ASSERTED THAT THE PAYMENTS MADE TO GENSLER-USA BY THE ASSESS EE SHOULD BE CONSIDERED UNDER THE PROVISIONS OF INDIA-USA DTAA AS TH EY ARE MORE BENEFICIAL TO THE ASSESSEE. IN THE LIGHT OF WELL SETTLED LAW A ND THE PROVISIONS OF ACT, WE ACCEPT THIS CONTENTION OF THE ASSESSEE. 23. ACCORDING TO THE ARTICLE 5(L)(I) OF DTAA, THE UNDERTAKING IS SAID TO HAVE A PERMANENT ESTABLISHMENT IN INDIA, IF ANY EMPLOYEE OR EMPLOYEES OF THE FOREIGN UNDERTAKING CARRY OUT ANY ACTIVITIES IN INDIA FOR PERIOD OF PERIODS AGGREGATING MORE THAN 90 DAYS WITHIN TOTAL PERIOD OR 12 MONTHS. UNDISPUTEDLY IN THE PRESENT CASE, THE TOTAL STA Y OF EMPLOYEES/EXECUTIVES OF GENSLER IN INDIA WAS 5 DAYS ONLY. THIS FACT HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT. NO MAT ERIAL HAS BEEN PLACED ON RECORD BY THE DEPARTMENT TO SHOW THAT THE STAY OF THE EMPLOYEES OF GENSLER, USA IN INDIA WAS FOR 90 DAYS OR MORE . IT IS NOT THE CASE OF REVENUE THAT GENSLER, USA HAS ANY BRANCH, O FFICE, WORKSHOP, PLACE OF MANAGEMENT ETC. IN INDIA TO BE CONSIDER ED AS THE PERMANENT ESTABLISHMENT OF GENSLER. THUS, IT CAN BE SAFELY CONCLUDED THAT GENSLER HAD NO PERMANENT ESTABLISHMENT IN INDIA. 24. A PERUSAL OF THE DEFINITION OF ROYALTY AS DEFINED UNDER ARTICLE 12(3) OF INDIA-USA DTAA WOULD SHOW THAT THE PAYMENT MAD E BY ASSESSEE TO GENSLER WERE NOT IN THE NATURE OF CONSIDERA TION FOR TRANSFER OF OR RIGHT TO USE ANY COPYRIGHT OF A SCIENTIFIC WORK, DESIGN OR MODEL OR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL SCIENTIFIC EXPERIENC E ETC. THE PAYMENTS MADE BY ASSESSEE TO GENSLER WERE FOR MAK ING ARCHITECTURAL DRAWINGS & DESIGNS FOR ITS PARTICULAR COMMERC IAL COMPLEX. THE DRAWINGS & DESIGNS MADE BY GENSLER WERE PROJECT SP ECIFIC AND THERE WAS NO TRANSFER OF COPYRIGHT IN SCIENTIFIC WORK. THE ASSESSEE BY 16 ITA NOS.62 & 63/PN/2015 NO MEANS COULD HAVE BENEFITTED BY COMMERCIAL EXPLOITATION O F THE DESIGNS AND DRAWINGS OF THE PARTICULAR BUILDING. 25. FURTHER, THE PAYMENTS MADE BY ASSESSEE DO NOT FA LL WITHIN THE SCOPE OF EXPRESSION FEE FOR INCLUDED SERVICES AS DEFINED U NDER ARTICLE 12(4) OF THE DTAA. THERE WAS NO TRANSFER OF ANY TECHNOLOGY OR TECHNICA L KNOW-HOW, SKILL OR PROCESS BY GENSLER. THE AO IN HIS ORDE R HAS CATEGORICALLY MENTIONED THAT THE CD WHICH WAS PASSED ON TO THE ASSESSEE BY GENSLER CONTAIN DRAWINGS, DESIGNS AND LAYOUTS OF DIFFERENT BUILDINGS AND FACILITIES. IT ALSO CONTAINED THE DESIGNS OF INTER IOR BUILDINGS, WALLS, WINDOWS ALONG WITH THE MEASUREMENTS. THE DE SIGNS, DRAWINGS, LAYOUTS OF BUILDINGS DOES NOT FALL WITHIN THE AMBIT OF TRANSFER OF TECHNICAL KNOW-HOW OR TECHNICAL DESIGNS. MERE PASSING OF PROJECT SPECIFIC ARCHITECTURAL DRAWINGS & DESIGNS WITH MEASUREMENT S DOES NOT AMOUNT TO MAKING AVAILABLE TECHNICAL KNOWLEDGE, KNOW-HOW OR PROCESS. GENSLER HAS NOT TRANSFERRED ANY TECHNICAL EXPE RTISE, SKILL OR KNOWLEDGE ALONGWITH THE DRAWINGS & DESIGNS OF THE PARTICULA R BUILDING TO THE ASSESSEE. THE ASSESSEE CANNOT INDEPENDENTLY U SE THE DRAWINGS & DESIGNS IN ANY MANNER WHATSOEVER FOR COMMERCIAL PURPOS E. SINCE, THE DRAWINGS & DESIGNS WERE PROJECT SPECIFIC, THE ASSESSE E COULD NOT HAVE USED THESE DESIGNS FOR ANY OF ITS OTHER PROJECTS. A FURTHER PERUSAL OF TERMS AND CONDITIONS OF THE AGREEME NT BETWEEN THE ASSESSEE AND GENSLER SHOW THAT ARTICLE 5 O F THE AGREEMENT CLEARLY INDICATE THAT THE DRAWINGS, SPECIFICATION AND OTHER DOCUMENTS PREPARED BY GENSLER SHALL REMAIN THE PROPERTY OF GENSLER. THE RELEVANT EXTRACT OF ARTICLE 5 OF INTERNATIONAL TERMS AND CONDITION S OF THE AGREEMENT BETWEEN THE CLIENT (ASSESSEE) AND GENSLER IS R EPRODUCED HEREINUNDER : 17 ITA NOS.62 & 63/PN/2015 5.1 THE DRAWINGS, SPECIFICATIONS, AND OTHER DOCUME NTS (COLLECTIVELY DOCUMENTS) AND ANY COMPUTER TAPES, DISKS, ELECTRONIC DATA, OR CAD FILES (COLLECTIVELY DATA) PREPARED BY GENS LER ARE INSTRUMENTS OF SERVICE AND SHALL REMAIN GENSLERS PROPERTY. 5.2 UPON COMPLETION OF THE SERVICES AND PAYMENT OF ALL AMOUNTS DUE GENSLER, CLIENT MAY RETAIN COPIES OR REPRODUCIB LE OF THE DOCUMENTS AND/OR DATA FOR INFORMATION AND REFERENCE IN CONNEC TION WITH CLIENTS USE AND OCCUPANCY OF THE COMPLETED PROJECT. 5.3 CLIENT AGREES TO INDEMNIFY AND HOLD GENSLER HA RMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LIABILITIES, SUITS, DEM ANDS, LOSSES, DAMAGES, COSTS, AND EXPENSES (INCLUDING REASONABLE ATTORNEYS FEES AND COSTS OF DEFENSE), TOGETHER WITH INTEREST THEREON, ACCRUING OR RESULTING TO ANY PERSONS, FIRMS, OR OTHER LEGAL ENTITIES, ON ACCOUNT OF ANY DAMAGES OR LOSSES TO PROPERTY OR PERSONS, INCLUDING DEATH OF ECONOMIC LOSS, ARISING OUT OF THE UNAUTHORIZED USE, RE-USE, TRANSFER OR MODIFICATION OF THE DOCUMENTS AND/OR DATA. 26. THE FACTS THAT HAVE EMERGED FROM THE ANALYSIS OF MAT ERIAL AVAILABLE ON RECORD AND THE SUBMISSIONS OF THE RIVAL SIDES ARE : (1) THE ASSESSEE IS NOT HAVING ANY PERMANENT ESTABLISHME NT IN INDIA. (2) THE SERVICES WERE RENDERED BY GENSLER FROM ITS OFFICE IN SAN FRANCISCO, USA; (3) THERE WAS NO TRANSFER OF ANY TECHNOLOGY OR TECHNICAL KNOW- HOW; (4) THERE IS NO TRANSFER OF ANY COPYRIGHTED SCIENTIFIC WORK; (5) THE DESIGNS, DRAWINGS AND LAYOUTS ARE PROJECT SPECIFIC; (6) THE OWNERSHIP ON THE DRAWINGS, SPECIFICATIONS AND DOCUMENTS HAVE NOT PASSED ON TO THE ASSESSEE AND AR E THE PROPERTY OF GENSLER; 27. THE LD. AUTHORISED REPRESENTATIVE ASSERTED THAT THE PAYMENT MADE BY ASSESSEE TO GENSLER FOR RENDERING SERVICES AND PROVIDING DRAWINGS & DESIGN FOR ITS COMMERCIAL BUILDING IS THE BUSINES S INCOME OF GENSLER. TO SUPPORT THE CONTENTION THAT BUSINESS IN CLUDES PROFESSION RELIANCE WAS PLACED ON THE DECISION OF BARENDR A PRASAD RAY VS. ITO (SUPRA). THE HONBLE APEX COURT IN THE SAID CASE WHILE EXPLAINING THE MEANING OF EXPRESSION BUSINESS CONNECTION AS USED UNDER SECTION 9 OF THE ACT HAS ALSO IN AN EXPLICIT MANNER HELD THAT 18 ITA NOS.62 & 63/PN/2015 BUSINESS DOES NOT NECESSARILY MEAN TRADE OR MANUFACT URING ONLY. IT INCLUDES WITHIN ITS SCOPE PROFESSIONS, VOCATIONS AND CALLINGS. THE RELEVANT EXTRACT OF THE FINDINGS OF HONBLE SUPREME COURT OF INDIA ARE AS UNDER : 11. IN CIT V. CURRIMBHOY EBRAHIM & SONS LTD. [1935 ] 3 ITR 395, SIR GEORGE RANKIN, SPEAKING FOR THE JUDICIAL COMMITTEE OF THE PRIVY COUNCIL, WHILE CONSTRUING THE EXPRESSION ' BUSINESS CONNECTION ' I N S. 42(1) OF THE INDIAN I.T. ACT, 1922, OBSERVED (P. 400): 'THE PHRASE 'BUSINESS CONNECTION' IS DIFFERENT FROM , THOUGH DOUBTLESS NOT UNRELATED TO, THE WORD ' BUSINESS' OF WHICH THERE I S A DEFINITION IN THE ACT.' THE EXPRESSION ' BUSINESS ' DOES NOT NECESSARILY ME AN TRADE OR MANUFACTURE ONLY., IT IS BEING USED AS INCLUDING WITHIN ITS SCO PE PROFESSIONS, VOCATIONS AND CALLINGS FROM A FAIRLY LONG TIME. THE SHORTER OXFOR D ENGLISH DICTIONARY DEFINES ' BUSINESS ' AS ' STATED OCCUPATION, PROFESSION OR TRADE ' AND ' A MAN OF BUSINESS ' IS DEFINED AS MEANING ' AN ATTORNEY ' AL SO. IN VIEW OF THE ABOVE DICTIONARY MEANING OF THE WORD ' BUSINESS ', IT CAN NOT BE SAID THAT THE DEFINITION OF BUSINESS GIVEN IN S. 45 OF THE PARTNE RSHIP ACT, 1890 (53 & 54 VICT. C. 39), WAS AN EXTENDED DEFINITION INTENDED FOR THE PURPOSE OF THAT ACT ONLY. SECTION 45 OF THAT ACT SAYS: '........... THE EXPRESSION 'BUSINESS' INCLUDES EVE RY TRADE, OCCUPATION, OR PROFESSION.' SECTION 2(B) OF THE INDIAN PARTNERSHIP ACT, 1932, ALSO DEFINES ' BUSINESS THUS: ''BUSINESS' INCLUDES EVERY TRADE, OCCUPATION AND PROFESSION.' 12. THE OBSERVATION OF ROWLATT J. IN CHRISTOPHER B ARKER & SONS V. IRC [1919] 2 KB 222, 228 (KB), ' ALL PROFESSIONS ARE BU SINESSES, BUT ALL BUSINESSES ARE NOT PROFESSIONS ...........' ALSO SUPPORTS THE VIEW THAT PROFESSIONS ARE GENERALLY REGARDED AS BUSINESSES. THE SAME LEARNED JUDGE IN ANOTHER CASE, IRC V. MARINE STEAM TURBINE CO. LTD. [1920] 1 KB 19 3, 203 (KB) HELD: 'THE WORD 'BUSINESS ', HOWEVER, IS ALSO USED IN ANO THER AND A VERY DIFFERENT SENSE, AS MEANING AN ACTIVE OCCUPATION OR PROFESSIO N CONTINUOUSLY CARRIED ON AND IT IS IN THIS SENSE THAT THE WORD IS USED IN TH E ACT WITH WHICH WE ARE HERE CONCERNED.' THE WORD ' BUSINESS ' IS ONE OF WIDE IMPORT AND IT MEANS AN ACTIVITY CARRIED ON CONTINUOUSLY AND SYSTEMATICALLY BY A PERSON BY T HE APPLICATION OF HIS LABOUR OR SKILL WITH A VIEW TO EARNING AN INCOME. W E ARE OF THE VIEW THAT IN THE CONTEXT IN WHICH THE EXPRESSION ' BUSINESS CONN ECTION ' IS USED IN S. 9(1) OF THE ACT, THERE IS NO WARRANT FOR GIVING A RESTRICTE D MEANING TO IT EXCLUDING ' PROFESSIONAL CONNECTIONS ' FROM ITS SCOPE. 19 ITA NOS.62 & 63/PN/2015 28. THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF A BISHEK DEVELOPERS VS. ITO (SUPRA) UNDER SIMILAR CIRCUMSTANCES WHE RE THERE WAS TRANSFER OF DRAWINGS AND DESIGNS, HELD THAT IT IS NOT A CASE OF RENDERING TECHNICAL SERVICES U/S.9(1)(VII). IN THE SAID CASE THE ASSESSEE WAS ENGAGED IN REAL ESTATE DEVELOPMENT. THE ASSESSEE E NTERED INTO AGREEMENT WITH ONE OF THE OVERSEAS COMPANY BASED AT S INGAPORE FOR THE DEVELOPMENT AND TRANSFER OF DESIGNS & DRAWINGS IN CONNECT ION WITH REAL ESTATE DEVELOPMENT. AS PER THE AGREEMENT ENTIRE DESIG NS AND DRAWINGS WERE TRANSFERRED AT SINGAPORE. THE ENTIRE WORK WAS CAR RIED OUTSIDE INDIA. THE ASSESSEE MADE PAYMENT TO OVERSEAS COMPANY WITHOUT DEDUCTING ANY TAX AT SOURCE. THE AO ISSUED NOTICE U/S.2 01 OF THE ACT ON THE PREMISE THAT PAYMENTS MADE BY ASSESSEE TO OVE RSEAS COMPANY WERE FEES FOR TECHNICAL SERVICES AND HENCE THE INCOME IS CHARGEABLE TO TAX IN INDIA U/S.9(1)(VII) OF THE ACT. THE ASSESSEE CARRIED T HE MATTER IN APPEAL TO CIT(A). THE CIT(A) UPHELD THE ORDER OF AO. THE M ATTER TRAVELLED TO TRIBUNAL. THE TRIBUNAL AFTER APPRECIATING THE FACTS OF CASE AND BY FOLLOWING THE DECISION OF HONBLE SUPREME COURT OF IN DIA IN THE CASE OF TRANSMISSION CORPORATION OF ANDHRA PRADESH VS. CI T REPORTED AS 155 CTR (SC) 489 AND THE MUMBAI BENCH OF TRIBUNAL IN T HE CASE OF INDIAN HOTELS COMPANY LTD. VS. ITO IN ITA NO.553/MUM/2000 DECIDED ON 14-02-2005 CONCLUDED : .THAT THE TRANSACTION IN QUESTION IS A TRANSACT ION OF SALE AND NOT A CASE OF RENDERING TECHNICAL SERVICES AS CONTEMPLATED UND ER S.9(1)(VII) OF THE ACT AND EVEN OTHERWISE NO PART OF THE SERVICE IS RENDER ED IN INDIA AND THUS, THE ASSESSEE CANNOT BE HELD TO BE AN ASSESSEE IN DEFAUL T FOR NON-DEDUCTION OF TAX AT SOURCE. THUS, THIS GROUND THE APPEAL OF THE ASS ESSEE IS ALLOWED. 29. THE LD. DEPARTMENTAL REPRESENTATIVE HAS PLACED RELIANC E ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SARG ENT & LUNDY, LLC, USA VS. ADCIT (IT) (SUPRA). WE FIND THAT THE FACT S IN THE SAID CASE ARE ENTIRELY AT VARIANCE FROM THE FACTS OF THE PRESENT CASE. 20 ITA NOS.62 & 63/PN/2015 THEREFORE, THE RATIO LAID DOWN BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SARGENT & LUNDY, LLC, USA VS. ADCIT (IT) (SUP RA) WOULD NOT APPLY IN THE FACTS OF THE PRESENT CASE. 30. THUS, FROM THE FACTS AND CIRCUMSTANCES OF THE CASE AN D DOCUMENTS ON RECORD, WE HOLD THAT THE PAYMENT MADE BY ASSESSEE TO GENSLER, USA ARE NOT IN THE NATURE OF ROYALTY OR FEE FOR TECHNICAL SERVICES. NO TECHNICAL KNOW-HOW WAS MADE AVAILABLE TO TH E ASSESSEE SO AS TO BRING THE PAYMENTS MADE BY ASSESSEE WITHIN TH E MEANING OF FEE FOR INCLUDED SERVICES. THE PAYMENTS MADE BY ASSE SSEE TO GENSLER-USA WERE MERELY FOR PROJECT SPECIFIC DRAWINGS & D ESIGNS WITHOUT TRANSFER OF TECHNOLOGY OR KNOW-HOW OR EVEN TITLE IN DRAWING & DESIGNS. THE IMPUGNED ORDER IS SET ASIDE AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 31. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 29 TH DAY OF JULY, 2016. SD/- SD/- ( R.K.PANDA ) ( VIKAS AWASTHY ) ACCOUNTANT MEMBER JUDICIAL MEMBER IQ.KS PUNE ; # DATED : 29 TH JULY, 2016. LRH'K ' (!* + / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. CIT(A) - IT/TP, PUNE 4. CIT - IT/TP, PUNE 5. ' *, *, IQ.KS / DR, ITAT, A PUNE; 6. / GUARD FILE. / BY ORDER , ' //TRUE COPY// / * / SR. PRIVATE SECRETARY *, IQ.KS / ITAT, PUNE
Mehul