Appeal Details
Counselvise Citation
[2017] 127 COUNSELVISE.COM (IT) 8543 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 year(s) 6 month(s) 1 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
21-09-2017
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
I
Next Hearing Date
13-06-2017
Assessment Year
2008-2009
Appeal Filed On
20-03-2015
Judgement Text
ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 1 OF 27 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND RAJPAL YADAV JM] ITA NO.633/AHD/2015 & CO NO.102/AHD/2015 ASSESSMENT YEAR: 2008-09 THE DEPUTY COMMISSIONER OF INCOME-TAX ........ ..........APPELLANT CIRCLE-1(2), BARODA VS. M/S. ASTRAL PHARMACEUTICAL INDUSTRIES ........................RESPONDENT & 911, GIDC, CROSS-OBJECTOR MAKARPURA, BARODA-390010 [PAN : AADFA 9845 N] APPEARANCES BY: VK SINGH FOR THE APPELLANT MILIN MEHTA FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 19.09.2017 DATE OF PRONOUNCING THE ORDER : 21.09.2017 O R D E R PER PRAMOD KUMAR AM: 1. THIS APPEAL AND THE CROSS-OBJECTION ARE DIRECTED AGAINST THE ORDER DATED 14.11.2014 PASSED BY THE CIT(A)-II, BARODA IN THE M ATTER OF ASSESSMENT UNDER SECTION 143(3) R.W.S. 163 OF THE INCOME-TAX A CT, 1961 FOR THE ASSESSMENT YEAR 2008-09. 2. THE CROSS-OBJECTION FILED BY THE ASSESSEE IS NOT PRESSED AND ACCORDINGLY DISMISSED SUMMARILY. 3. SO FAR AS THE APPEAL FILED BY THE REVENUE IS CON CERNED, THE GRIEVANCES OF THE ASSESSING OFFICER ARE AS FOLLOWS:- 1 ON THE FACTS AND CIRCUMSTANCES OF THE OF THE CAS E AND IN LAW, THE LD. CIT(APPEALS) ERRED IN LAW IN DELETING THE DISALLOWA NCE OF RS.24,28,001/- MADE U/S 40(A)(IA) OF THE ACT WITHOUT APPRECIATING THE F INDINGS OF ASSESSING OFFICER IN THE ASSESSMENT ORDER. 2. THE LD. CIT(APPEALS) HAS FAILED IN APPRECIATING THAT THE ASSESSEE DID NOT APPLY BEFORE THE AO U/S 195(2) OF THE ACT, THOUGH I T WAS OBLIGATION OF THE ASSESSEE. 3. THE LD. CIT(APPEALS) ERRED IN LAW IN ALLOWING T HE CLAIM OF THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT ASSESSEE ITSELF HAS DEDUCTED SERVICE TAX ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 2 OF 27 FROM THE PAYMENTS MADE TO M/S. URJA INTERNATIONAL, USA WHICH PROVES THAT THE ASSESSEE ITSELF HAS ADMITTED THAT THEIR AGENT IS PR OVIDNG SERVICES IN INDIA AND HENCE THE AMOUNT PAID TO THE PARTY IS LIABLE TO BE TAXED IN INDIA. 4. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE BEFORE US IS A MANUFACTURER OF PHARMACEUTICAL PRODUCTS. D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE A SSESSEE HAS PAID COMMISSION OF RS.35,69,928/- TO M/S. URJA INTERNATIONAL, USA, WIT HOUT WITHHOLDING ANY TAX FROM THE RELATED PAYMENTS. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE FROM THE COMMISSION PAY MENTS SINCE THE COMMISSION SO PAID IS EXIGIBLE TO TAX UNDER THE HANDS OF THE R ECIPIENT IN INDIA. THE STAND OF THE ASSESSEE THAT THE SERVICES HAVE BEEN RENDERED ABROA D AND AS SUCH NO PART OF THE INCOME EMBEDDED IN THE COMMISSION PAID TO THE USA B ASED ENTITY CAN BE BROUGHT TO TAX WAS SIMPLY BRUSHED ASIDE. THE ASSESSING OFFICER OBSERVED THAT ON VERIFICATION OF THE BILLS OF M/S. URJA INTERNATIONAL, USA, THERE IS NO MENTION OF SERVICE TAX COMPONENT IN THE BILLS, BUT ASSESSEE HAS SEPARATELY DEBITED THE SERVICE TAX LIABILITY ON THE COMMISSION EXPENSES AND PAID TO THE DEPARTME NT. IT PROVES THAT THE ASSESSEE ITSELF HAD ADMITTED THAT THEIR AGENT IS PR OVIDING SERVICES IN INDIA. IT WAS BASED ON THIS REASONING THAT THE ASSESSING OFFICER DECIDED THAT COMMISSION IS TAXABLE IN INDIA. HE ALSO OBSERVED THAT THE ASSESSEE CANNOT TAKE ONE STAND FOR SERVICE TAX AND A DIFFERENT STAND FOR THE PURPOSE O F INCOME-TAX ACT. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER PROCEEDED TO DI SALLOW RS.24,28,001/-, WHICH PERTAINED TO COMMISSION PAID DURING THE RELEVANT PR EVIOUS YEAR, UNDER SECTION 40(A)(IA) OF THE ACT. AGGRIEVED, INTER ALIA, BY THE DISALLOWANCE SO MADE, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). LEARNED CIT(A), FOLLOWING DECISIONS OF VARIOUS BENCHES OF THIS TRIBUNAL ON TH IS ISSUE, HELD THAT SALES COMMISSION IN THE HANDS OF NON-RESIDENT CANNOT BE B ROUGHT TO TAX IN INDIA AS THE RELATED SERVICES WERE NOT PERFORMED IN INDIA. WHIL E DOING SO, HE, INTER ALIA, OBSERVED AS FOLLOWS:- 3.3.1. I HAVE CONSIDERED THE SUBMISSIONS OF THE LE ARNED AUTHORIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFIC ER. SINCE THE NON-RESIDENT AGENTS DO NOT HAVE A PE IN INDIA, NO PART OF THE CO MMISSION INCOME OF THE AGENTS CAN BE SAID TO ACCRUE OR ARISE IN INDIA. THE RE IS NO DISPUTE THAT THE FOREIGN PARTIES TO WHOM THE COMMISSION WAS PAID DID NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA. THE SERVICES REND ERED BY THE COMMISSION AGENTS WERE OUTSIDE INDIA. THE ASSESSEE HAS PAID TO TAL SALES COMMISSION OF RS.1,32,96,193/- TO URJA INTERNATIONAL, USA ON ITS EXPORT SALES. I FIND THAT THERE IS A CONSIDERABLE FORCE IN THE APPELLANT'S ARGUMENT IN AS MUCH AS COMMISSION PAID BY APPELLANT TO THE NON RESIDENT COMMISSION AG ENTS IS NOT CHARGEABLE TO TAX UNDER THE PROVISIONS OF INCOME-TAX ACT, SINCE T HE AGENT IS A NON RESIDENT & IS OPERATING HIS BUSINESS ACTIVITIES OUTSIDE INDIA, THE COMMISSION IS PAID RELATED TO SERVICES PROVIDED OUTSIDE INDIA, THE AGE NT DOES NOT HAVE ANY PERMANENT ESTABLISHMENT OR BUSINESS PLACE IN INDIA AND THE COMMISSION WAS REMITTED TO THE AGENT DIRECTLY OUTSIDE INDIA, THE C OMMISSION PAID TO NON RESIDENT AGENT IS NOT TAXABLE IN INDIA AND CONSEQUE NTLY SECTION 9 & 195 OF THE INCOME-TAX ACT DOES NOT APPLY TO THE PAYMENT OF THE COMMISSION. THE EXPLANATION TO SECTION 9(2) INSERTED BY FINANCE ACT , 2010 WITH RETROSPECTIVE ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 3 OF 27 EFFECT I.E. 01.06.1976 IS APPLICABLE TO INCOME BY W AY OF INTEREST, ROYALTY AND FEES FOR TECHNICAL SERVICES AND NOT TO BUSINESS INC OME. 3.3.2. ON ANALYZING THE GROUND OF APPEAL AS WELL AS THE ASSESSMENT ORDER AS WELL AS CASE LAWS CITED BY THE AUTHORIZED REPRESENT ATIVE OF THE APPELLANT IN SUPPORT OF THE APPELLANT'S CASE, THE ONLY ISSUE PER TAINS TO THE DISALLOWANCE OF COMMISSION PAYMENTS MADE TO FOREIGN AGENTS CLAIMED BY THE RS.77,44,774/- WHICH PERTAIN TO AY. 2011-12. THE SALES COMMISSION OF RS. 55,51,419/- IS PAID BETWEEN 18.11.2009 TO 15.03.2010, AND PERTAINS TO A.Y. 2010-11 AND THE DISALLOWANCE OF THIS AMOUNT HAS BEEN CONFIRMED BY M E IN SUBSEQUENT PARA. THE ASSESSING OFFICER HAS NOT DOUBTED THE GENUINENE SS OF THE PAYMENTS MADE TO THE COMMISSION, AGENTS LOCATED IN FOREIGN C OUNTRIES BASED ON THE CONFIRMATION LETTER AS WELL AS LETTER RECEIVED FROM THE FOREIGN AGENTS WHO HAD NO PE OR PLACE OF BUSINESS IN INDIA. THE APPELLANT HAD FILED TAX-RESIDENCY CERTIFICATES ALONG WITH CERTIFICATES OF INCORPORATI ON OF URJA INTERNATIONAL, USA WHICH IS NOT DOUBTED BY THE ASSESSING OFFICER. THE FOREIGN AGENT HAD DONE THE SERVICES IN FOREIGN COUNTRY AND RECEIVED COMMIS SION PAYMENTS FOR THE SERVICES RENDERED BY IT THAT-COUNTRY FOR GETTING OR DERS TO THE APPELLANT. THE OPERATION OF THE SECTION 195 OF THE INCOME-TAX ACT COMES INTO FORCE FOR DEDUCTING TDS ON FOREIGN PAYMENTS PAID BY THE RESID ENT ASSESSEE TO NON- RESIDENT AGENTS ONLY WHEN THEIR INCOME IS CHARGEABL E UNDER INDIAN INCOME TAX LAW. IN THE INSTANT CASE, THE TDS LIABILITY DOE S NOT ARISE ON SUCH COMMISSION PAYMENTS WHICH IS AN OFFSHOOT FROM ITS C HARGEABILITY TO INCOME TAX U/S. 5(2) OF THE INCOME-TAX ACT. VARIOUS COURT DECISIONS HAVE HELD THAT IN SUCH TYPE OF SITUATIONS, THE PROVISIONS OF DEDUCTIN G TAX WILL NOT ARISE AS THE OVERSEAS COMMISSION INCOME OF A FOREIGN AGENT IS NO T TAXABLE IN INDIA IN THE ABSENCE OF 'BUSINESS CONNECTION'. A COMMISSION AGE NT WORKING OUTSIDE INDIA FOR OBTAINING EXPORT ORDERS DOES NOT CARRY OUT ANY BUSINESS OPERATION IN INDIA AND, THEREFORE, NO INCOME IS STATED TO ACCRUE OR AR ISE IN INDIA. THE CBDT CIRCULARS CLARIFYING THIS PROVISION HAVE BEEN WITHD RAWN BUT IT HAS NOT CHANGED THE FUNDAMENTAL PRINCIPLES. IF THE COMMISSION AGENT ACTING AS A SELLING AGENT OUTSIDE INDIA WHO IS NOT CHARGEABLE TO TAX IN INDIA AND THE RECEIPT IN INDIA OF THE SALE PROCEEDS REMITTED BY THE PURCHASERS FROM A BROAD DID NOT AMOUNT TO AN OPERATION CARRIED OUT BY THE NON-RESIDENT COMMIS SION AGENT IN INDIA AS CONTEMPLATED BY CLAUSE (A) OF THE EXPLANATION TO 9( 1) OF THE ACT, THEN THERE IS NO QUESTION OF DEDUCTING TAX ON SUCH PAYMENTS. THE APEX COURT IN THE CASE OF CIT VS TOSHOKU LTD [1980] 125 ITR 525(SC) HAS CA TEGORICALLY HELD THAT THE COMMISSION AMOUNTS WHICH WERE EARNED BY THE NON-RES IDENT FOR SERVICES RENDERED OUTSIDE INDIA COULD NOT BE DEEMED TO BE IN COME WHICH HAD EITHER ACCRUED OR ARISEN IN INDIA. 3,3.3. HON'BLE APEX COURT, IN THE CASE OF GE INDIA TECHNOLOGY CEN. (P.) LTD. [2010] 327 ITR 456(SC) HAS HELD THAT THE EXPRESSION 'CHARGEABLE UNDER THE PROVISIONS OF THE ACT IN SEC.195(1)' SHOWS THAT THE REMITTANCE HAS TO BE OF TRADING RECEIPT, THE WHOLE OR PART OF WHICH, IS LIA BLE TO TAX IN INDIA. IF TAX IS NOT SO ASSESSABLE, THERE IS NO QUESTION OF TAX AT SOURC E BEING DEDUCTED. SIMILAR VIEW HAS BEEN TAKEN BY HON'BLE MADRAS HIGH COURT IN A RECENT DECISION IN THE CASE OF CIT VS FAIZAN SHOES (P.) LTD. [2014] 367 IT R 155 (MADRAS). LD. ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 4 OF 27 AUTHORIZED REPRESENTATIVE HAS ALSO RELIED ON SOME R ECENT DECISIONS WHICH ARE DIRECTLY ON THIS ISSUE AND SUPPORT THE CLAIM OF THE APPELLANT. THESE ARE : (I) GUJARAT RECLAIM AND RUBBER PRODUCTS LTD. ITA NO. 8868/MUM/2010 (MUMTRIB.) (II) DCIT VS DIVI'S LABORATORIES LTD. - (2011-TII- 182-ITAT-HYD-INTL) (III) EXOTIC FRUITS (P) LTD VS ITO [2013] 40 TAXMAN N.COM 348 (BANG. TRIB.) (IV) CIT VS EON TECHNOLOGY (P) LTD. (2012) 246 CTR 40 (DELHI) (HIGH COURT) (V) SOUTHERN BOREWELLS VS CIT [2014] 43 TAXMANN.CO M 378 (HC-KERALA) (VI) ITO VS TRIDENT EXPORTS [2014] 44 TAXMANN.COM 297 (CHENNAI - TRIB.) (VII) CIT VS MODEL EXIMS (2014) 42 TAXMANN.COM 446 (ALLAHABAD) 33.4. CONSIDERING THE VARIOUS JUDICIAL PRECEDENTS A S MENTIONED ABOVE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN DISALLOWING T HE COMMISSION PAYMENTS MADE ABROAD ON THE GROUND THAT NO TDS WAS DEDUCTED. IN VIEW OF THE VARIOUS CASE LAWS MENTIONED SUPRA AND RESPECTFULLY FOLLOWIN G THEM, I AM OF THE CONSIDERED VIEW THAT THE CLAIM OF THE APPELLANT IS IN ACCORDANCE WITH LAW. SOME OTHER RECENT DECISIONS WHICH ARE DIRECTLY ON T HE ISSUE OF SALES COMMISSION TO NON-RESIDENTS AND WHERE FACTS ARE ALS O SIMILAR TO THE PRESENT CASE NEEDS TO BE MENTIONED HERE WITH A NOTE THAT CO NTROVERSY, IF ANY, IS IN RESPECT OF (I) FEES FOR TECHNICAL SERVICES, (II) IN TEREST AND (III) ROYALTY. THESE IS, HOWEVER NO CONTROVERSY IN RESPECT OF PAYMENT OF SAL ES COMMISSION TO NON- RESIDENTS AS CAN BE SEEN FROM THE FOLLOWING DIRECT DECISIONS: ACIT VS RAPID PACK ENGG.(P) LTD. [2014] 46 TAXMA NN.CO 330 (MUMBAI TRIB.) PRITHVI INFORMATION SOLUTIONS LTD. VS (TO (TDS) [ 2014]G5 SOT 89 (HYDERBAD TRIB) (URO) RICH GRAVIS PRODUCTS (P.) LTD. VS ADDL.CIT [2014] 49 TAXMANN.COM 531(MUMBAI-TRIB.) PANKAJ A SHAH VS ITO, W-1, BARODA [2014] 65 SOT 39 (AHD.-TRIB.) WHICH IS BASED ON THE DECISION OF THE AHMEDABAD TRIBUNAL IN THE CASE OF DY. CIT V. PANCHMAHAL STEEL LTD. IN ITA NO.8/AHD/2010 AND ITA NO. 1443 & 1444/AHD/2010. LAST REFERRED DECISIONS OF PANKAJ A SHAH AND PANCHM AHAL STEEL LTD. ARE BINDING BEING DECISIONS OF JURISDICTIONAL TRIBUNAL. RESPECTFULLY FOLLOWING THESE DECISIONS AND OTHER DECISIONS CITED SUPRA, THE ASSE SSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.77,44,774/- IN RESPECT OF A.Y. 2011-12 AND RS.24,28,001/- IN RESPECT OF A.Y. 2008-09 MADE BY H IM DUE TO NON DEDUCTION OF TAX AT SOURCE ON SALES COMMISSION PAID TO NON-RE SIDENTS WHOSE INCOME IS NOT TAXABLE IN INDIA. THIS GROUND OF APPEAL IS ALL OWED. 5. THE ASSESSING OFFICER IS AGGRIEVED WITH THE RELI EF SO GRANTED BY THE CIT(A) AND IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF APPLIC ABLE LEGAL POSITION. ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 5 OF 27 7. WE FIND THAT, AS LEARNED REPRESENTATIVES FAIRLY AGREE, THE ISSUE IN QUESTION IS COVERED, IN FAVOUR OF THE ASSESSEE, BY THE DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF DCIT VS. WELSPUN CORP LTD [(2017) 55 ITR (T RIB) 405 (AHD)] WHEREIN THE TRIBUNAL HAS OBSERVED AS FOLLOWS:- 31. THE SCHEME OF TAXABILITY IN INDIA, SO FAR AS T HE NON-RESIDENTS, ARE CONCERNED, IS LIKE THIS. SECTION 5 (2), WHICH DEALS WITH THE TAXABILITY OF INCOME IN THE HANDS OF A NON-RESIDENT, PROVIDES THAT 'THE TOT AL INCOME OF ANY PREVIOUS YEAR OF A PERSON WHO IS A NON-RESIDENT INCLUDES ALL INCO ME FROM WHATEVER SOURCE DERIVED WHICH (A) IS RECEIVED OR IS DEEMED TO BE R ECEIVED IN INDIA IN SUCH YEAR BY OR ON BEHALF OF SUCH PERSON; OR (B) ACCRUES OR A RISES OR IS DEEMED TO ACCRUE OR ARISE TO HIM IN INDIA DURING SUCH YEAR'. THERE I S NO DISPUTE THAT SINCE NO PART OF THE OPERATIONS OF THE RECIPIENT NON-RESIDENTS IS CARRIED OUT IN INDIA, NO INCOME ACCRUES TO THESE NON-RESIDENTS IN INDIA. THE CASE O F THE REVENUE HINGES ON INCOME WHICH IS 'DEEMED TO ACCRUE OR ARISE IN INDIA '. COMING TO THE DEEMING PROVISIONS, WHICH ARE SET OUT IN SECTION 9, WE FIND THAT THE FOLLOWING STATUTORY PROVISIONS ARE RELEVANT IN THIS CONTEXT: 'SECTION 9- INCOMES DEEMED TO ACCRUE OR ARISE IN IN DIA (1) THE FOLLOWING INCOMES WILL BE DEEMED TO ACCRUE OR ARISE IN INDIA: (I) ALL INCOME ACCRUING OR ARISING, WHETHER DIRECTL Y OR INDIRECTLY, THROUGH OR FROM ANY BUSINESS CONNECTION IN INDIA, OR THROUGH O R FROM ANY PROPERTY IN INDIA, OR THROUGH OR FROM ANY ASSET OR SOURCE OF IN COME IN INDIA, EXPLANATION: FOR THE PURPOSE OF THIS CLAUSE [I.E. 9 (1)(I)], (A) IN THE CASE OF A BUSINESS OF WHICH ALL THE OPER ATIONS ARE NOT CARRIED OUT IN INDIA, THE INCOME OF THE BUSINESS DEEMED UNDER THIS CLAUSE TO ACCRUE OR ARISE IN INDIA SHALL BE ONLY SUCH PART OF THE INCOM E AS IS REASONABLY ATTRIBUTABLE TO THE OPERATIONS CARRIED OUT IN INDIA ; (B) (C) (D)** ** **' (VII) INCOME BY WAY OF FEES FOR TECHNICAL SERVICES PAYABLE BY- (A)** ** **' (B) A PERSON WHO IS A RESIDENT, EXCEPT WHERE THE FE ES ARE PAYABLE IN RESPECT OF SERVICES UTILISED IN A BUSINESS OR PROFESSION CA RRIED ON BY SUCH PERSON OUTSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARN ING ANY INCOME FROM ANY SOURCE OUTSIDE INDIA; OR (C)** ** **' EXPLANATION 1-.* EXPLANATION 2.- FOR THE PURPOSES OF THIS CLAUSE, 'F EES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATION (INCLUDING ANY LUMP SUM CON SIDERATION) FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTAN CY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PER SONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBL Y, MINING OR LIKE PROJECT ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 6 OF 27 UNDERTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD' SALARIES'.' * NOT RELEVANT FOR OUR PURPOSES 32. SO FAR AS DEEMING FICTION UNDER SECTION 9(1)(I) IS CONCERNED, IT CANNOT BE INVOKED IN THE PRESENT CASE SINCE NO PART OF THE OP ERATIONS OF THE RECIPIENT'S BUSINESS, AS COMMISSION AGENT, WAS CARRIED OUT IN I NDIA. EVEN THOUGH DEEMING FICTION UNDER SECTION 9(1)(I) IS TRIGGERED ON THE F ACTS OF THIS CASE, ON ACCOUNT OF COMMISSION AGENT'S BUSINESS CONNECTION IN INDIA, IT HAS NO IMPACT ON TAXABILITY IN THE HANDS OF COMMISSION AGENT BECAUSE ADMITTEDLY NO BUSINESS OPERATIONS WERE CARRIED OUT IN INDIA, AND, THEREFORE, EXPLANAT ION 1 TO SECTION 9(1)(I) COMES INTO PLAY. 33. THERE ARE A COUPLE OF RULINGS BY THE AUTHORITY FOR ADVANCE RULING, WHICH SUPPORT TAXABILITY OF COMMISSION PAID TO NON-RESIDE NTS UNDER SECTION 9(1)(I), BUT, NEITHER THESE RULINGS ARE BINDING PRECEDENTS FOR US NOR ARE WE PERSUADED BY THE LINE OF REASONING ADOPTED IN THESE RULINGS. AS FOR THE AAR RULING IN THE CASE OF SKF BOILERS & DRIERS (P.) LTD. IN RE [2012] 343 ITR 385/206 TAXMAN 19/18 TAXMANN.COM 325 (AAR - NEW DELHI) , WE FIND THAT THIS DECISION MERELY FOLLOWS THE EARLIER RULING IN THE CASE OF RAJIV MALHOTRA, I N RE [2006] 284 ITR 564/155 TAXMAN 101 (AAR - NEW DELHI) WHICH, IN OUR CONSIDERED VIEW, DOES NOT TAKE INTO ACCOUNT THE IMPACT OF EXPLANATION 1 TO SECTION 9(1)(I) PROPERLY. THAT WAS A CASE IN WHICH THE NON-RESIDENT COMMISSION AGENT WOR KED FOR PROCURING PARTICIPATION BY OTHER NON-RESIDENT ENTITIES IN A F OOD AND WINE SHOW IN INDIA, AND THE CLAIM OF THE ASSESSEE WAS THAT SINCE THE AGENT HAS NOT CARRIED OUT ANY BUSINESS OPERATIONS IN INDIA, THE COMMISSION AGENT WAS NOT CHARGEABLE TO TAX IN INDIA, AND, ACCORDINGLY, THE ASSESSEE HAD NO OBLIGA TION TO DEDUCT TAX AT SOURCE FROM SUCH COMMISSION PAYMENTS TO THE NON-RESIDENT A GENT. ON THESE FACTS, THE AUTHORITY FOR ADVANCE RULING, INTER ALIA, OPINED TH AT 'NO DOUBT THE AGENT RENDERS SERVICES ABROAD AND PURSUES AND SOLICITS EXHIBITORS THERE IN THE TERRITORY ALLOTTED TO HIM, BUT THE RIGHT TO RECEIVE THE COMMISSION ARI SES IN INDIA ONLY WHEN EXHIBITOR PARTICIPATES IN THE INDIA INTERNATIONAL FOOD & WINE SHOW (TO BE HELD IN INDIA), AND MAKES FULL AND FINAL PAYMENT TO THE APPLICANT I N INDIA' AND THAT 'THE COMMISSION INCOME WOULD, THEREFORE, BE TAXABLE UNDE R SECTION 5(2)(B) READ WITH SECTION 9(1)(I) OF THE ACT'. THE AUTHORITY FOR ADVA NCE RULING ALSO HELD THAT 'THE FACT THAT THE AGENT RENDERS SERVICES ABROAD IN THE FORM OF PURSUING AND SOLICITING PARTICIPANTS AND THAT THE COMMISSION IS REMITTED TO HIM ABROAD ARE WHOLLY IRRELEVANT FOR THE PURPOSE OF DETERMINING SITUS OF HIS INCOME'. WE DO NOT CONSIDER THIS APPROACH TO BE CORRECT. WHEN NO OPERA TIONS OF THE BUSINESS OF COMMISSION AGENT IS CARRIED ON IN INDIA, THE EXPLAN ATION 1 TO SECTION 9(1)(I) TAKES THE ENTIRE COMMISSION INCOME FROM OUTSIDE THE AMBIT OF DEEMING FICTION UNDER SECTION 9(1)(I), AND, IN EFFECT, OUTSIDE THE AMBIT OF INCOME 'DEEMED TO ACCRUE OR ARISE IN INDIA' FOR THE PURPOSE OF SECTIO N 5(2)(B). THE POINT OF TIME WHEN COMMISSION AGENT'S RIGHT TO RECEIVE THE COMMIS SION FRUCTIFIES IS IRRELEVANT TO DECIDE THE SCOPE OF EXPLANATION 1 TO SECTION 9(1 )(I), WHICH IS WHAT IS MATERIAL IN THE CONTEXT OF THE SITUATION THAT WE ARE IN SEIS IN OF. THE REVENUE'S CASE BEFORE US HINGES ON THE APPLICABILITY OF SECTION 9(1)(I) A ND, IT IS, THEREFORE. IMPORTANT TO ASCERTAIN AS TO WHAT EXTENT WOULD THE RIGOUR OF SEC TION 9(1)(I) BE RELAXED BY ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 7 OF 27 EXPLANATION 1 TO SECTION 9(1)(I). WHEN WE EXAMINE T HINGS FROM THIS PERSPECTIVE, THE INEVITABLE CONCLUSION IS THAT SINCE NO PART OF THE OPERATIONS OF THE BUSINESS OF THE COMMISSION AGENT IS CARRIED OUT IN INDIA, NO PA RT OF THE INCOME OF THE COMMISSION AGENT CAN BE BROUGHT TO TAX IN INDIA. IN THIS VIEW OF THE MATTER, VIEWS EXPRESSED BY THE HON'BLE AAR, WHICH DO NOT FETTER O UR INDEPENDENT OPINION ANYWAY IN VIEW OF ITS LIMITED BINDING FORCE UNDER S . 245S OF THE ACT, DO NOT IMPRESS US, AND WE DECLINE TO BE GUIDED BY THE SAME . THE STAND OF THE REVENUE, HOWEVER, IS THAT THESE RULINGS, BEING FROM SUCH A H IGH QUASI-JUDICIAL FORUM, EVEN IF NOT BINDING, CANNOT SIMPLY BE BRUSHED ASIDE EITH ER, AND THAT THESE RULINGS AT LEAST HAVE PERSUASIVE VALUE. WE HAVE NO QUARREL WIT H THIS PROPOSITION. WE HAVE, WITH UTMOST CARE AND DEEPEST RESPECT, PERUSED THE A BOVE RULINGS RENDERED BY THE HON'BLE AUTHORITY FOR ADVANCE RULING. WITH GREA TEST RESPECT, BUT WITHOUT SLIGHTEST HESITATION, WE HUMBLY COME TO THE CONCLUS ION THAT WE ARE NOT PERSUADED BY THESE RULINGS. 34. COMING TO SECTION 9(1)(VII)(B), THIS DEEMING FI CTION- WHICH IS FOUNDATIONAL BASIS FOR THE ACTION OF THE ASSESSING OFFICER, INTE R ALIA, PROVIDES THAT THE INCOME BY WAY OF TECHNICAL SERVICES PAYABLE BY A PERSON RE SIDENT IN INDIA, EXCEPT IN CERTAIN SITUATIONS- WHICH ARE NOT ATTRACTED IN THE PRESENT CASE ANYWAY, ARE DEEMED TO BE INCOME ACCRUING OR ARISING IN INDIA. E XPLANATION 2 TO SECTION 9(1)(VII) DEFINES 'FEES FOR TECHNICAL SERVICES' AS ANY CONSIDERATION (INCLUDING ANY LUMPSUM CONSIDERATION) FOR THE RENDERING OF ANY MAN AGERIAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISIONS OF S ERVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR A NY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEA D 'SALARIES' [RELEVANT PORTION HIGHLIGHTED BY UNDERLINING]'. 35. IN THE LIGHT OF THE ABOVE LEGAL POSITION, WHAT WE NEED TO DECIDE AT THE OUTSET IS WHETHER THE AMOUNTS PAID BY THE ASSESSEE TO THE NON-RESIDENT AGENTS COULD BE TERMED AS 'CONSIDERATION FOR THE RENDERING OF AN Y MANAGERIAL, TECHNICAL AND CONSULTANCY SERVICES'. AS WE DO SO, IT IS USEFUL TO BEAR IN MIND THE FACT THAT EVEN GOING BY THE STAND OF THE ASSESSING OFFICER, AT BES T SERVICES RENDERED BY THE NON-RESIDENT TO THE AGENT INCLUDED TECHNICAL SERVIC ES BUT IT IS FOR THIS REASON THAT THE AMOUNTS PAID TO THESE AGENTS, ON ACCOUNT OF COM MISSION ON EXPORTS, SHOULD BE TREATED AS FEES FOR TECHNICAL SERVICES. EVEN PRO CEEDING ON THE ASSUMPTION THAT THESE NON-RESIDENT AGENTS DID RENDER THE TECHN ICAL SERVICES, WHICH, AS WE WILL SEE A LITTLE LATER, AN INCORRECT ASSUMPTION AN YWAY, WHAT IS IMPORTANT TO APPRECIATE IS THAT THE AMOUNTS PAID BY THE ASSESSEE TO THESE AGENTS CONSTITUTED CONSIDERATION FOR THE ORDERS SECURED BY THE AGENTS AND NOT THE SERVICES ALLEGED RENDERED BY THE AGENTS. THE EVENT TRIGGERING CRYSTA LLIZATION OF LIABILITY OF THE ASSESSEE, UNDER THE COMMISSION AGENCY AGREEMENT, IS THE EVENT OF SECURING ORDERS AND NOT THE RENDITION OF ALLEGED TECHNICAL S ERVICES. IN A SITUATION IN WHICH THE AGENT DOES NOT RENDER ANY OF THE SERVICES BUT S ECURES THE BUSINESS ANYWAY, THE AGENT IS ENTITLED TO HIS COMMISSION WHICH IS CO MPUTED IN TERMS OF A PERCENTAGE OF THE VALUE OF THE ORDER. IN A REVERSE SITUATION, IN WHICH AN AGENT RENDERS ALL THE ALLEGED TECHNICAL SERVICES BUT DOES NOT SECURE ANY ORDER FOR THE PRINCIPAL I.E. THE ASSESSEE, THE AGENT IS NOT ENTIT LED TO ANY COMMISSION. CLEARLY, THEREFORE, THE EVENT TRIGGERING THE EARNINGS BY THE AGENT IS SECURING THE BUSINESS ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 8 OF 27 AND NOT RENDITION OF ANY SERVICES. IN THIS VIEW OF THE MATTER, IN OUR CONSIDERED VIEW, THE AMOUNTS PAID BY THE ASSESSEE TO ITS NON-R ESIDENT AGENTS, EVEN IN THE EVENT OF HOLDING THAT THE AGENTS DID INDEED RENDER TECHNICAL SERVICES, CANNOT BE SAID TO BE CONSIDERATION FOR RENDERING OF ANY MANAG ERIAL, TECHNICAL OR CONSULTANCY SERVICES (EMPHASIS BY UNDERLINING SUPPL IED BY US)'. THE SERVICES RENDERED BY THE AGENTS, EVEN IF THESE SERVICES ARE HELD TO BE IN THE NATURE OF TECHNICAL SERVICES, MAY BE TECHNICAL SERVICES, BUT THE AMOUNTS PAID BY THE ASSESSEE ARE NOT FOR THE RENDITION OF THESE TECHNIC AL SERVICES NOR THE QUANTIFICATION OF THESE AMOUNTS HAVE ANY RELATION W ITH THE QUANTUM OF THESE TECHNICAL SERVICES. THE KEY TO TAXABILITY OF AN AMO UNT UNDER SECTION 9(1)(VII) IS THAT IT SHOULD CONSTITUTE 'CONSIDERATION' FOR RENDI TION OF TECHNICAL SERVICES. THE CASE OF THE REVENUE FAILS ON THIS SHORT TEST, AS IN THE PRESENT CASE THE AMOUNTS PAID BY THE ASSESSEE ARE 'CONSIDERATION' FOR ORDERS SECURED BY THE ASSESSEE IRRESPECTIVE OF HOW AND WHETHER OR NOT THE AGENTS H AVE PERFORMED THE SO CALLED TECHNICAL SERVICES. 36. LET US SUM UP OUR DISCUSSIONS ON THIS PART OF T HE SCHEME OF SECTION 9, SO FAR AS TAX IMPLICATIONS ON COMMISSION AGENCY BUSINESS C ARRIED OUT BY NON-RESIDENTS FOR INDIAN PRINCIPALS IS CONCERNED. IT DOES NOT NEE D MUCH OF A CEREBRAL EXERCISE TO FIND OUT WHETHER THE INCOME FROM THE BUSINESS CA RRIED ON BY A NON-RESIDENT ASSESSEE, AS A COMMISSION AGENT AND TO THE EXTENT I T CAN BE SAID TO DIRECTLY OR INDIRECTLY ACCRUING THROUGH OR FROM ANY BUSINESS CO NNECTION IN INDIA, IS REQUIRED TO BE TAXED UNDER SECTION 9(1)(I) OR UNDER SECTION 9(1)(VII), OF THE INCOME TAX ACT, 1961. THE ANSWER IS OBVIOUS. DEEMING FICTION U NDER SECTION 9(1)(I) READ WITH PROVISO THERETO, AS WE HAVE SEEN IN THE EARLIE R DISCUSSIONS, HOLDS THE KEY, AND LAYS DOWN THAT ONLY TO THE EXTENT THAT WHICH TH E OPERATIONS OF SUCH A BUSINESS IS CARRIED OUT IN INDIA, THE INCOME FROM S UCH A BUSINESS IS TAXABLE IN INDIA. WHEN NO OPERATIONS OF THE BUSINESS ARE CARRI ED ON INDIA, THERE IS NO TAXABILITY OF THE PROFITS OF SUCH A BUSINESS IN IND IA EITHER. THE QUESTION THEN ARISES WHETHER IN A SITUATION IN WHICH, IN THE COUR SE OF CARRYING ON SUCH BUSINESS, THE ASSESSEE HAS TO NECESSARILY RENDER CE RTAIN SERVICES, WHICH ARE OF SUCH A NATURE AS COVERED BY EXPLANATION 2 TO SECTIO N 9(1)(VII), AND EVEN THOUGH THE ASSESSEE IS NOT PAID ANY FEES FOR SUCH SERVICES PER SE, ANY PART OF THE BUSINESS PROFITS OF THE ASSESSEE CAN BE TREATED AS 'FEES FOR TECHNICAL SERVICES' AND TAXED AS SUCH UNDER SECTION 9(1)(VII). THIS QUE STION DOES NOT POSE MUCH DIFFICULTY EITHER. IN THE LIGHT OF THE DISCUSSIONS IN THE FOREGOING PARAGRAPH, UNLESS THERE IS A SPECIFIC AND IDENTIFIABLE CONSIDERATION FOR THE RENDITION OF TECHNICAL SERVICES, TAXABILITY UNDER SECTION 9(1)(VII) DOES N OT GET TRIGGERED. THEREFORE, IRRESPECTIVE OF WHETHER ANY TECHNICAL SERVICES ARE RENDERED DURING THE COURSE OF CARRYING ON SUCH AGENCY COMMISSION BUSINESS ON BEHA LF OF INDIAN PRINCIPAL, THE CONSIDERATION FOR SECURING BUSINESS CANNOT BE TAXED UNDER SECTION 9(1)(VII) AT ALL. THIS PROFITS OF SUCH A BUSINESS CAN HAVE TAXABILITY IN INDIA ONLY TO THE EXTENT SUCH PROFITS RELATE TO THE BUSINESS OPERATIONS IN I NDIA, BUT THEN, AS ARE THE ADMITTED FACTS OF THIS CASE, NO PART OF OPERATIONS OF BUSINESS WERE CARRIED OUT IN INDIA. THE COMMISSION AGENTS EMPLOYED BY THE ASSESS EE, THEREFORE, DID NOT HAVE ANY TAX LIABILITY IN INDIA IN RESPECT OF THE C OMMISSION AGENCY BUSINESS SO CARRIED OUT. ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 9 OF 27 37. ON A MORE FUNDAMENTAL NOTE, HOWEVER, IT IS ALSO A SETTLED LEGAL POSITION BY NOW THAT THE SERVICES OF THE NATURE RENDERED BY THE SE COMMISSION AGENTS CANNOT ANYWAY BE TREATED AS FEES FOR TECHNICAL SERV ICES ANYWAY. VIEWED THUS, EVEN THE DISCUSSION ON WHETHER THE AMOUNTS IN QUEST ION COULD BE TREATED AS 'CONSIDERATION' FOR TECHNICAL SERVICES, MAY BE REND ERED ACADEMIC IN EFFECT. LEARNED CIT(A) HAS VERY WELL SUMMARIZED THE JUDICIA L PRECEDENTS IN SUPPORT OF THIS LINE OF REASONING, AND, IN AN ERUDITE AND EXTE NDED DISCUSSION, DEALT WITH EACH LIMB OF THE DEFINITION OF TECHNICAL SERVICES. THESE FINDINGS ARE REPRODUCED BY US EARLIER IN THIS ORDER. WHILE, FOR THE SAKE OF BREVITY, WE NEED TO REPEAT EACH OF THESE REASONS ANALYSED BY THE LEARNED CIT(A), SU FFICE TO SAY THAT WE APPROVE HIS WELL-REASONED FINDINGS AND LINE OF REASONING, A ND WE WILL ALSO BRIEFLY TOUCH UPON THIS ASPECT OF THE MATTER. BEFORE WE DO SO, WE MAY TAKE NOTE OF SOME OF THE CLAUSES IN A TYPICAL COMMISSION AGREEMENT ENTER ED INTO BY THE ASSESSEE WITH ITS COMMISSION AGENTS. THE KEY PROVISIONS IN T HIS AGREEMENT, A COPY OF WHICH IS PLACED BEFORE US AT PAGES 103 TO 109 OF TH E PAPER-BOOK, ARE AS FOLLOWS: ARTICLE 5 - AGENT'S OBLIGATION THE AGENT SHALL CARRY OUT ALL THE DUTIES NORMALLY R ENDERED BY AN AGENT INCLUDING BUT NOT LIMITED TO THE FOLLOWING: 5.1 TO ACT EXCLUSIVELY ON BEHALF OF THE PRINCIPAL A ND NOT SOURCE, PROCURE OR MARKET PRODUCTS OF SIMILAR TYPE MANUFACTURED BY COMPETITIVE COMPANIES WITHOUT PRIOR WRITTEN CONSENT OF THE PRINCIPAL. 5.2 TO USE ITS BEST ENDEAVORS AND FACILITIES TO DEV ELOP, EXPAND AND PROMOTE DILIGENTLY, THE SALE AND THE MARKET FOR THE PRODUCT S. THE AGENT WILL BE RESPONSIBLE OF MAKING THE NECESSARY MARKET PLANS AN D ESTABLISH THE MARKETING NETWORK OF REPRESENTATIVES TO HELP PROMOT E WELSPUN PRODUCTS . 5.3 TO PROVIDE THE PRINCIPAL WITH INFORMATION SUCH AS MARKER DEVELOPMENTS, ACTIVITIES OF COMPETITORS, INTENTIONS AND PLANS OF CLIENTS TO THE MAXIMUM OF HIS KNOWLEDGE. 5.4 ENDEAVOR TO PROVIDE THE PRINCIPAL PROMPT ADVANC E INFORMATION REGARDING TENDERS. TO FORWARD TO THE PRINCIPAL TEND ER DOCUMENTS, INQUIRIES ETC, WITH FULL TECHNICAL SPECIFICATIONS W ELL AHEAD - AS MUCH AS HE CAN - OF TENDER CLOSING. 5.5 THE AGENT ON BEHALF OF THE PRINCIPAL, WILL PURC HASE TENDER DOCUMENTS AND FORWARD THE SAME TO THE PRINCIPAL WEL L AHEAD - AS MUCH AS HE CAN - OF TENDER CLOSING. THE COST OF PURCHASE OF SUCH TENDER DOCUMENTS SHALL BE REIMBURSED BY THE PRINCIPAL TO T HE AGENT. 5.6 TO ASSIST FOR CLAIMS AND COMPLAINTS (IF SAY) TH AT MAY ARISE FROM THIRD PARTIES AND HELP TO REACH APPROPRIATE SETTLEMENT IN CLOSE CO-ORDINATION WITH THE PRINCIPAL. 5.7 THE AGENT WILL NOT ENTER INTO AGREEMENTS OR CON TRACTUAL OBLIGATIONS &. CREATE ANY FINANCIAL LIABILITIES ON BEHALF OF THE P RINCIPAL, WITHOUT THE PRINCIPAL'S PRIOR WRITTEN CONSENT. ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 10 OF 27 5.8 THE AGENT HEREBY NOMINATES MR. HOSSAM KAWASH AS THEIR CONTACT POINT WHO WILL BE TOTALLY RESPONSIBLE FOR THE PRINC IPAL'S BUSINESS FOR CLARITY OF COMMUNICATION & EXPEDITIOUS ACTION. 5.9 TO ASSIST THE PRINCIPAL IN ALL POSSIBLE WAY, AS AND WHEN REQUESTED BY THE PRINCIPAL FOR THE FULFILLMENT OF ITS OBLIGATION S, IN CASE OF A CONTRACT WITHIN THE TERRITORY. IT INCLUDES ASSISTING THE PRI NCIPAL IN IDENTIFYING SUBCONTRACTORS LIKE LOGISTICS, SHIPPERS, CARGO HAND LING AGENCIES FOR SMOOTH EXECUTION OF SUCH CONTRACTS. 5.9A TO SEND THE PRINCIPAL PERIODIC REPORTS ON BUSI NESS ACTIVITY. 5.9B TO KEEP THE PRINCIPAL CONTINUOUSLY APPRISES OF ALL RELEVANT POLITICAL/ ECONOMIC CHANGES WHICH WOULD AFFECT TIE BUSINESS, 5.9C TO UNDERTAKE NOT TO DIVULGE SALES DOCUMENTS, C ATALOGUES, PRICES ETC. TO COMPETITORS AND THEIR AGENTS AND ASSOCIATES. ARTICLE 7 PRINCIPAL'S OBLIGATIONS DURING THE CONTINUANCE OF THIS AGREEMENT THE PRINCI PAL AGREES : 7.1 TO GIVE THE AGENT FULL SUPPORT FOR PROMOTING AN D CREATING MARKET FOR THE PRODUCTS OF THE PRINCIPAL IN THE TERRITORY. 7.2 TO INFORM THE AGENT ON RECEIPT OF AN INQUIRY FR OM THE TERRITORY REQUIRING DIRECT SUPPLY . 7.3 THE AGENT SHALL BE ENTITLED TO COMMISSION AS AG REED UPON IN THE CONTRACT. 7.4 TO TAKE INTO CONSIDERATION THE RECOMMENDATIONS MADE BY THE AGENT WHILE MAKING THE OFFER. 7.5 TO PROVIDE ALL INFORMATIVE DATA, CATALOGUES AND TECHNICAL MATERIAL (ALL IN THE ENGLISH LANGUAGE) REGARDING THE PRINCIPAL'S PRO DUCTS AND ACTIVITIES AND KEEP THE AGENT INFORMED ABOUT ALL RELEVANT CHAR GES. 7.6 TO OFFER COMPETITIVE PRICES AS FAR AS POSSIBLE TO ENABLE THE SALE OF THE PRODUCTS AS THE AGENT IS ONLY ENTITLED FOR COMMISSI ONS AND NOT FIXED SALARY ON HIS WORK. 7.7 THE PRINCIPAL NOMINATES MR. RANJIT LALA AS THE CONTACT PERSON WITH THE AGENT FOR ALL CORRESPONDENCES AND COMMUNICATION S. ARTICLE 9 - TERMINATION. 9.1 THIS AGREEMENT SHALL REMAIN VALID FOR A PERIOD OF ONE YEAR FROM THE DATE OF SIGNING. THE SAID AGREEMENT CAN ALSO BE TERMINAT ED BY EITHER PARTY ANYTIME GIVING NOTICE TO THE OTHER PARTY OF AT LEAS T 90 DAYS IN ADVANCE BY FAX AND FOLLOWED BY REGISTERED LETTER STATING REASONS F OR THE TERMINATION. THE AGREEMENT CAN BE REINSTATED FOR A FURTHER PERIOD OF TWO YEARS BASED ON MUTUAL AGREEMENT AND THEN AFTER ITS TERMINATION ANO THER PERIOD OF FIVE YEARS. 9.2 IN THE EVENT OF THE TERMINATION, THE AGENT WILL FURNISH ALL THE RELEVANT INFORMATION TO THE PRINCIPAL AND WILL BE RESPONSIBL E FOR REALIZATION OF PAYMENTS OUTSTANDING TILL DATE WITHIN THE TERRITORY . ALSO THE AGENT SHALL RETURN ALL THE CUSTOMERS RECORDS AND OTHER DA TA RELATING TO THE COMPANY'S BUSINESS OR SERVICES WHICH MAY BE IN HIS POSSESSION. ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 11 OF 27 9.3 IN THE EVENT OF TERMINATION, IF ANY CONTRACT IS CONCLUDED AFTER THE TERMINATION DATE, BUT THE EXERCISE HAS COMMENCED PR IOR TO THE TERMINATION DATE, THE AGENT IS ENTITLED FOR THE APPLICABLE COMM ISSIONS. SALES COMMISSION FOR THE SONATRACH GK3 PROJECT WELSPUN WILL PAY GLOBAL SYNERGY INTERNATIONAL LTD. IN ITS CAPACITY AS AGENT FOR WELSPUN A SALES COMMISSION, B ASED ON THE FOB MILL SALES PRICE FOR THE GK 3 PROJECT EQUAL TO: (I) 2% OF THE FOB MILL VALUE IN U.S. DOLLARS FOR THE OR DERED QUANTITY. ALL SALES COMMISSIONS SHALL BE PAID IN U.S. DOLLARS TO THE BANK ACCOUNT TO BE ADVISED BY GLOBAL SYNERGY, DETAILS OF WHICH WILL BE PROVIDED BY THE AGENT. THE SALES COMMISSION SHALL BE PAYABLE BY WEL SPUN TO GLOBAL SYNERGY INTERNATIONAL LTD. AS INTERIM PAYMENTS ON P RORATE BASIS AFTER REALIZATION OF THE PAYMENTS RECEIVED BY THE P RINCIPAL WITHIN A REASONABLE TIME BUT NOT EXCEEDING 30 DAYS FROM RECE IPT OF PAYMENT BY THE PRINCIPAL. SALES COMMISSION FOR THE SONATRACH GK3 PROJECT BY THE VIRTUE OF THIS ADDENDUM, WELSPUN AGREE TO PA Y GLOBAL SYNERGY INTERNATIONAL LTD., IN ITS CAPACITY AS AGEN T FOR WELSPUN, A SALES COMMISSION, BASED ON THE FOB MILL SALES PRI CE FOR THE GK 3 PROJECT EQUAL TO: (I) 4.10% OF THE FOB MILL VALUE IN U.S. DOLLAR FOR THE QUANTITY SHIPPED IS LAST (18') SHIPMENT. (A) GLOBAL SYNERGY INTERNATIONAL LTD AGREES TO UNC ONDITIONALLY TO FULFILL THE SCOPE SET THEREIN BY THE VIRTUE OF THIS ADDENDUM. (B) THIS COMMISSION IS OVER THE ABOVE THE COMMISSION PA YABLE BY WELSPUN TO GLOBAL SYNERGY AS SPECIFIED IN ANNEXURE- 1 OF AGENCY AGREEMENT DATED 29TH DAY OF JUNE, 2008. ALL SALES COMMISSION SHALL BE PAID IN U.S. DOLLARS TO THE BANK ACCOUNT TO BE ADVISED BY GLOBAL SYNERGY, DETAILS OF WHICH ARE AVA ILABLE WITH WELSPUN. UNLESS OTHERWISE AGREED, THE SALES COMMISS ION SHALL BE PAYABLE BY WELSPUN TO GLOBAL SYNERGY INTERNATIONAL LTD., AS INTERIM PAYMENTS ON PRORATE BASIS AFTER REALIZATION OF THE PAYMENTS RECEIVED BY THE PRINCIPAL WITHIN A REASONABLE TIME BUT NOT E XCEEDING 30 DAYS FROM RECEIPT OF PAYMENT BY WELSPUN. 38. AS IS CLEAR FROM THE ABOVE PROVISIONS OF THE AG REEMENT, THE WORK THAT THE AGENT HAS TO DONE UNDER THIS AGREEMENT, AS IS STATE D UNAMBIGUOUSLY IN THE AGREEMENT ITSELF, IS TO 'CARRY OUT ALL THE DUTIES N ORMALLY RENDERED BY AN AGENT' INCLUDING BUT NOT LIMITED TO THE ACTIVITIES SPECIFI ED THEREIN. THE CONSIDERATION FOR WHICH THE PAYMENT MADE TO THE COMMISSION AGENT IS O BTAINING OF THE ORDERS AND NOT ANY SERVICES PER SE. THE CONSIDERATION IS COMPU TED ON THE BASIS OF BUSINESS PROCURED. OBVIOUSLY, IF THERE ARE NO BUSINESS GENER ATED FOR THE PRINCIPAL, THE AGENT GETS NOTHING. QUITE CLEARLY, WHAT IS DONE BY THE AGENT IS NOT A RENDITION OF ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 12 OF 27 SERVICE BUT PURE ENTREPRENEURIAL ACTIVITY. THE WORK ACTUALLY UNDERTAKEN BY THE AGENT IS THE WORK OF ACTING AS AGENT AND SO PROCURI NG BUSINESS FOR THE ASSESSEE BUT AS THE CONTEMPORARY BUSINESS MODELS REQUIRE THE WORK OF AGENT CANNOT SIMPLY AND ONLY BE TO OBTAIN THE ORDERS FOR THE PRO DUCT, AS THIS OBTAINING OF ORDERS IS INVARIABLY PRECEDED BY AND FOLLOWED BY SE VERAL PREPARATORY AND FOLLOW UP ACTIVITIES. THE DESCRIPTION OF AGENT'S OBLIGATIO N SETS OUT SUCH COMMON ANCILLARY ACTIVITIES AS WELL BUT THAT DOES NOT OVER RIDE, OR RELEGATE, THE CORE AGENCY WORK. THE CONSIDERATION PAID TO THE AGENT IS ALSO BASED ON THE BUSINESS PROCURED AND THE AGENCY AGREEMENTS DONOT PROVIDE FO R ANY INDEPENDENT, STANDALONE OR SPECIFIC CONSIDERATION FOR THESE SERV ICES. THE SERVICES RENDERED UNDER THE AGREEMENT CANNOT, THEREFORE, BE CONSIDERE D TO BE TECHNICAL SERVICES IN NATURE OR CHARACTER. THE SERVICES RENDERED IN THE C OURSE OF RENDERING AGENCY SERVICES ARE ESSENTIALLY BUSINESS SERVICES AND TO O BTAIN THE BUSINESS. WE HAVE ALSO NOTED THAT, SO FAR AS RENDITION OF TECHNICAL S ERVICES IS CONCERNED, ONE OF THE MAIN POINTS IN THE CASE OF THE REVENUE, AS EVIDENT FROM A PLAIN READING OF THE IMPUGNED ORDER UNDER SECTION 201, IS THAT 'MANUFACT URING OF SPECIALIZED PIPE WAS A HIGHLY TECHNICAL ACTIVITY INVOLVING VERY COMP LEX TECHNICAL EXERCISE OF TECHNOLOGY AND SKILLED LABOUR AND FINEST GRADE OF R AW MATERIAL' AND THAT 'OBVIOUSLY, TO PROCURE THE ORDERS, THE ASSESSEE COM PANY WILL NEED SPECIALIST AGENTS WHO CAN UNDERSTAND THE NITTY GRITTY OF THE A SSESSEE'S BUSINESS AND CAN DEMONSTRATE THE ASSESSEE'S BUSINESS PROFILE AND QUA LITY OF PRODUCTS OF THE ASSESSEE TO THE POTENTIAL CLIENTS TO CONVINCE THEM TO ENTER INTO A CONTRACT WITH THE ASSESSEE COMPANY JUST BECAUSE A PRODUCT IS HIGH LY TECHNICAL DOES NOT CHANGE THE CHARACTER OF ACTIVITY OF THE SALE AGENT. WHETHER A SALESMAN SELLS A HANDCRAFTED SOUVENIR OR A TOP OF THE LINE LAPTOP, H E IS SELLING NEVERTHELESS. IT WILL BE ABSURD TO SUGGEST THAT IN THE FORMER CASE, HE IS SELLING AND THE LATTER, HE WILL BE RENDERING TECHNICAL SERVICES. THE OBJECT OF THE SALESMAN IS TO SELL AND FAMILIARITY WITH THE TECHNICAL DETAILS, WHATEVER BE THE WORTH OF THOSE TECHNICAL DETAILS, IS ONLY TOWARDS THE END OF SELLING. IN A T ECHNOLOGY DRIVEN WORLD THAT WE LIVE IN, EVEN SIMPLEST OF DAY TO DAY GADGETS THAT W E USE ARE FAIRLY TECHNICAL AND COMPLEX. UNDOUBTEDLY WHEN A TECHNICAL PRODUCT IS BE ING SOLD, THE PERSON SELLING THE PRODUCT SHOULD BE FAMILIAR WITH TECHNICAL SPECI FICATIONS OF THE PRODUCT BUT THEN THIS ASPECT OF THE MATTER DOES NOT ANYWAY CHAN GE THE ECONOMIC ACTIVITY. NOTHING, THEREFORE, TURNS ON THE DETAILS OF THE PRO DUCTS BEING TECHNICAL. IT WAS ALSO NOTED THAT BY THE ASSESSING OFFICER THAT 'IT I S A VERY TECHNICAL EXERCISE TO OBTAIN THE CONTRACTS SINCE IT INVOLVES COMPLEX PROC ESS REQUIRING ELABORATE DISCUSSION, TECHNICAL EXPERTISE AND PRESENT OF COMP LEX TECHNICAL PRESENTATION, ON BEHALF OF THE ASSESSEE, WHICH CAN ONLY BE DONE B Y A SPECIALIST IN THIS FIELD SO AS TO CONVINCE THE CLIENTS ABOUT WELSPUN'S SUITABIL ITY TO THE CONTRACT'. THIS AT BEST SIGNIFIES COMPLEXITY IN THE BUSINESSES AND THE NEED OF TECHNICAL INPUTS IN THE PROCESS OF BUSINESSES, PARTICULARLY WHEN THE PR ODUCTS BEING DEALT WITH ARE TECHNICAL PRODUCTS, BUT THEN MERELY BECAUSE TECHNIC AL INPUTS ARE NEEDED IN CARRYING OUT BUSINESS ACTIVITY, IT DOES NOT BECOME A TECHNICAL SERVICE RATHER THAN A BUSINESS ACTIVITY. AT THE COST OF REPETITION, WE MUST EMPHASIZE THE IMPORTANT DISTINCTION BETWEEN A BUSINESS ACTIVITY, REQUIRING UNDERSTANDING OF RELATED TECHNOLOGY, AND RENDITION OF TECHNICAL SERVICES SIM PLICTOR. IN ANY CASE, WHAT HAS BEEN DESCRIBED AS A TECHNICAL SERVICE IS THE SERVIC E BEING RENDERED TO THE BUYER BUT THE PAYMENT RECEIVED BY THE COMMISSION AGENTS I S NOT FOR THIS SERVICE PER SE BUT FOR GENERATING BUSINESS ORDERS FOR THE ASSESSEE . GENERATING BUSINESS OR ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 13 OF 27 SECURING ORDERS IS AN ENTREPRENEURIAL ACTIVITY AND CANNOT, BY ANY STRETCH OF LOGIC, BE TREATED AS A TECHNICAL SERVICE PER SE. THE SAME IS THE POSITION WITH REGARD TO ASSISTANCE WITH RESPECT OF LOGISTICS, SUCH AS SHIPP ING AND HANDLING SERVICES, WITH RESPECT TO SALE FORECASTING, WITH RESPECT TO GATHER ING INFORMATION ON MARKETS, BUSINESS ENVIRONMENT AND ON SPECIFIC BUYERS AND WIT H RESPECT TO DEVELOPMENT OF SALES NETWORK. ALL THESE SERVICES ARE ESSENTIALL Y INTEGRAL PART OF, AND ARE THUS AIMED AT, DEVELOPING BUSINESS FOR THE ASSESSEE AND SECURING ORDERS FOR THE ASSESSEE FROM THE RIGHT PERSONS. NEITHER THESE SERV ICES CAN BE VIEWED ON A STANDALONE BASIS DIVORCED FROM THE ECONOMIC ACTIVIT Y OF SECURING ORDERS, NOR ANY PAYMENT CAN BE SAID TO BE FOR RENDITION OF THESE SE RVICES INASMUCH AS IT IS NOT THE RENDITION OF THESE SERVICES BUT SECURING BUSINE SS OF THE ASSESSEE WHICH TRIGGERS THE INCOME ACCRUING TO THE NON-RESIDENT AG ENTS OF THE ASSESSEE AND IT IS SECURING OF BUSINESS FOR THE ASSESSEE WHICH IS THE PROXIMATE CAUSE OF THE INCOME ACCRUING TO THE ASSESSEE. THIS ISSUE IS ALSO COVERED, IN FAVOUR OF THE ASSESSEE, BY A COORDINATE BENCH DECISION IN THE CAS E OF DY. CIT V. TROIKAA PHARMACEUTICALS LTD. [IT APPEAL NO. 2028/AHD/13 AND CO NO 13/AHD/14] AND VICE VERSA, WHEREIN IT HAS BEEN, INTER ALIA, OBSERV ED AS FOLLOWS: '5. AS REGARDS THE REFERENCES TO SECTION 9(1)(VII), AS MADE BY THE ASSESSING OFFICER AND THE LEARNED DEPARTMENTAL REPRESENTATIVE , WE FIND THAT ASPECT OF THE MATTER IS ALSO COVERED, IN FAVOUR OF THE ASSESS EE, BY A LARGE NUMBER OF JUDICIAL PRECEDENTS- INCLUDING HON'BLE MADRAS HIGH COURT'S JUDGMENT IN THE CASE OF CIT V. FARIDA LEATHER CO. [(2016) 66 TAXMAN N.COM 321 (MADRAS) ], WHEREIN THEIR LORDSHIPS HAVE, INTER ALIA, OBSERVED AS FOLLOWS: 5. THE MAIN CONTENTION OF THE LEARNED COUNSEL FOR T HE ASSESSEE/RESPONDENT IS THAT THE AGENCY COMMISSION/SALES COMMISSION PAID BY THE ASSESSEE TO NON-RESIDENT AGENTS, FOR THE SERVICES RENDERED BY T HEM, OUTSIDE INDIA, IN PROCURING EXPORT ORDERS FOR THE ASSESSEE, WOULD NOT ATTRACT OR PARTAKE THE CHARACTER OF 'FEES FOR TECHNICAL SERVICES' AS EXPLA INED IN THE CONTEXT OF 9(1)(VII) OF THE ACT AND THEREFORE, THERE IS NO SCO PE FOR THE APPLICATION OF THE PROVISIONS OF SECTION 195 OF THE ACT (TAX DEDUCTED AT SOURCE). IT IS ALSO CONTENDED THAT AS THE NON-RESIDENT AGENTS HAVE NEIT HER BUSINESS CONNECTION IN INDIA NOR THEY HAVE PERMANENT ESTABLI SHMENT IN INDIA, THEY ARE LIABLE TO BE TAXED IN INDIA. 5.1 YET ANOTHER CONTENTION OF THE LEARNED COUNSEL F OR THE ASSESSEE IS THAT: (A) THE ASSESSEE PAID THE AMOUNT BY WAY OF COMMISSI ON TO FOREIGN AGENTS FOR THE SERVICES RENDERED OUTSIDE INDIA; (B) THE TA X DEDUCTION AT SOURCE (TDS) IS REQUIRED TO BE MADE ON ALL PAYMENTS TO NON -RESIDENTS, ONLY IF SUCH PAYMENTS ARE LIABLE TO BE TAXED IN INDIA. (C) FOLLO WING THE DECISION OF THIS COURT, CIT V. FAIZAN SHOES (P.) LTD. [2014] 367 ITR 155/226 TAXMAN 115/48 TAXMANN.COM 48 (MAD.) , THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE, WHEN THE NON-RESIDENT AGENT PROVIDES SERVIC ES OUTSIDE INDIA ON PAYMENT OF COMMISSION. 5.2 THE CONTENTION OF THE REVENUE IS THAT SUCH SERV ICES ARE ATTRACTED BY EXPLANATION (2) TO SECTION 9 (1) (VII) OF THE ACT A ND THEREFORE TDS CERTIFICATE IS ESSENTIAL. 6. WHETHER THIS CONTENTION IS CORRECT, IS THE ISSUE TO BE DECIDED. ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 14 OF 27 7. IN ORDER TO APPRECIATE THIS CONTENTION, IT IS NE CESSARY TO CONSIDER THE RELEVANT PROVISIONS OF THE ACT: (I) SECTION 40(A)(I) OF THE ACT : 'SECTION 40 - AMOUNTS NOT DEDUCTIBLE: NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION S 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCO ME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSI ON', (A) IN THE CASE OF ANY ASSESSEE (I) ANY INTEREST (NOT BEING INT EREST ON A LOAN ISSUED FOR PUBLIC SUBSCRIPTION BEFORE THE 1ST DAY OF APRIL, 1938), ROYALTY, FEES F OR TECHNICAL SERVICES OR OTHER SUM CHARGEABLE UNDER THIS ACT, WHICH IS PAYAB LE, (A) OUTSIDE INDIA; OR (B) IN INDIA TO A NON-RESIDENT, NOT BEING A COM PANY OR TO A FOREIGN COMPANY, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVIIB AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTIO N 139: PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED DURING TH E PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECIFIED IN SUB-SECTION (1 ) OF SECTION 139, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE IN COME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. EXPLANATION: FOR THE PURPOSES OF THIS SUB-CLAUSE, (A) 'ROYALTY' SHALL HAVE THE SAME MEANING AS IN EXPLANA TION 2 TO CLAUSE (VI) OF SUB-SECTION (1) OF SECTION 9: (B) 'FEES FOR TECHNICAL SERVIC ES' SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION (1) OF SECTION 9: (IA) THIRTY PER CENT OF ANY SUM PAYABLE TO A RESIDE NT, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVIIB AND SUCH T AX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139. PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED DURING TH E PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECIFIED IN SUB-SECTION (1 ) OF SECTION 139 THIRTY PER CENT OF, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION I N COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAI D. PROVIDED FURTHER THAT WHERE AN ASSESSEE FAILS TO DE DUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS O F CHAPTER XVII-B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEF AULT UNDER THE FIRST PROVISO TO SUB-SECTION (1) OF SECTION 201, THEN, FO R THE PURPOSE OF THIS SUB- CLAUSE, IT SHALL BE DEEMED THAT THE ASSESSEE HAS DE DUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN THE SAID PROVISO.' (II) EXPLANATION 2 TO SECTION 195(1) OF THE ACT : ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 15 OF 27 'SECTION 195 - OTHER SUMS: (1) ANY PERSON RESPONSIB LE FOR PAYING TO A NON- RESIDENT NOT BEING A COMPANY, OR TO A FOREIGN COMPA NY, ANY INTEREST (NOT BEING INTEREST REFERRED TO IN SECTION 194LB OR SECT ION 194LC) OR SECTION 194LD OR ANY OTHER SUM CHARGEABLE UNDER THE PROVISI ONS OF THIS ACT (NOT BEING INCOME CHARGEABLE UNDER THE HEAD 'SALARIES') SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE O R AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAF T OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATES IN FORCE : PROVIDED THAT IN THE CASE OF INTEREST PAYABLE BY TH E GOVERNMENT OR A PUBLIC SECTOR BANK WITHIN THE MEANING OF CLAUSE (23D) OF S ECTION 10 OR A PUBLIC FINANCIAL INSTITUTION WITHIN THE MEANING OF THAT CL AUSE, DEDUCTION OF TAX SHALL BE MADE ONLY AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE : PROVIDED FURTHER THAT NO SUCH DEDUCTION SHALL BE MA DE IN RESPECT OF ANY DIVIDENDS REFERRED TO IN SECTION 115-O. [EXPLANATION 1] :...................... [EXPLANATION 2.- FOR THE REMOVAL OF DOUBTS, IT IS H EREBY CLARIFIED THAT THE OBLIGATION TO COMPLY WITH SUB-SECTION (1) AND TO MA KE DEDUCTION THEREUNDER APPLIES AND SHALL BE DEEMED TO HAVE ALWAYS APPLIED AND EXTENDS AND SHALL BE DEEMED TO HAVE ALWAYS EXTENDED TO ALL PERSONS, R ESIDENT OR NON- RESIDENT, WHETHER OR NOT THE NON-RESIDENT PERSON HA S (I) A RESIDENCE OR PLACE OF BUSINESS OR BUSINESS CONNEC TION IN INDIA; OR (II) ANY OTHER PRESENCE IN ANY MANNER WHATSOEVER IN INDI A.' EXPLANATION 4 TO SECTION 9 (1) (I) OF THE ACT: 'SECTION 9 - INCOME DEEMED TO ACCRUE OR ARISE IN IN DIA (1) THE FOLLOWING INCOMES SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA : (I) ALL INCOME ACCRUING OR ARISING, WHETHER DIRECTLY OR IND IRECTLY, THROUGH OR FROM ANY BUSINESS CONNECTION IN INDIA, OR THROUGH OR FRO M ANY PROPERTY IN INDIA, OR THROUGH OR FROM ANY ASSET OR SOURCE OF INCOME IN IN DIA, OR THROUGH THE TRANSFER OF A CAPITAL ASSET SITUATE IN INDIA. ** ** ** EXPLANATION 4.- FOR THE REMOVAL OF DOUBTS, IT IS HE REBY CLARIFIED THAT THE EXPRESSION 'THROUGH' SHALL MEAN AND INCLUDE AND SHA LL BE DEEMED TO HAVE ALWAYS MEANT AND INCLUDED ''BY MEANS OF', 'IN CONSE QUENCE OF' OR 'BY REASON OF'.' 7.1 SECTION 40 OF THE ACT SPELLS OUT WHAT AMOUNTS A RE NOT DEDUCTIBLE FROM THE INCOME CHARGED TO TAX UNDER THE PROFITS AND GAI NS OF BUSINESS OR PROFESSION. 7.2 SECTION 40(A)(I) OF THE ACT DEALS WITH INTEREST AND OTHER SUMS PAYABLE OUTSIDE INDIA. THE PROVISIONS OF THIS SUB-CLAUSE MA DE APPLICABLE TO INTEREST HAVE BEEN EXTENDED TO PAYMENT OF ROYALTY, TECHNICAL FEES AND ANY OTHER SUM CHARGEABLE UNDER THIS ACT. THE SECTION PROVIDES THAT THE SUMS COVERED ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 16 OF 27 BY THE SUB-CLAUSE, WHICH ARE CHARGEABLE UNDER THE A CT AND ARE PAYABLE OUTSIDE INDIA, SHALL NOT BE ALLOWED AS AN EXPENDITU RE TO THE ASSESSEE, UNLESS TAX IS PAID THEREON OR IS DEDUCTED THEREFROM UNDER CHAPTER XVII-B OF THE ACT. 7.3 SECTION 195(1) OF THE ACT DEALS WITH DEDUCTION OF TAX FROM PAYMENT TO NON-RESIDENTS AND FOREIGN COMPANIES. SECTION 195(1) OF THE ACT COMES INTO PLAY AT A STAGE WHERE THE PAYER, WHO IS ENJOINED TO DEDUCT THE TAX, EITHER CREDIT SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR M AKE PAYMENT THEREOF, WHETHER IN CASH / CHEQUE / DRAFT OR ANY OTHER MODE. THE TAXABILITY OF SUCH AMOUNT IN THE HANDS OF THE PAYEE OR OCCASIONING OF THE TAXABLE EVENT IS ALIEN FOR THE PURPOSE OF SECTION 195(1) OF THE ACT. 7.4 SECTION 195(2) IS AN ENABLING PROVISION, ENABLI NG AN ASSESSEE TO FILE AN APPLICATION BEFORE THE ASSESSING OFFICER TO DETERMI NE THE APPROPRIATE PROPORTION OF THE SUM CHARGEABLE AND UPON SUCH DETE RMINATION, THE TAX HAS TO BE DEDUCTED UNDER SECTION 195(1) OF THE ACT. THE PAYMENT IS MADE CREDITED TO THE ACCOUNT OF THE PAYEE. 8. THE QUESTION NOW IS, WHETHER THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE AS CONTEMPLATED UNDER SECTION 195 OF THE ACT , WHEN THE ASSESSEE PAID COMMISSION TO FOREIGN AGENT. 9. THIS QUESTION HAS BEEN ANSWERED BY THE HON 'BLE SUPREME COURT, IN THE CASE OF G.E.INDIA TECHNOLOGY CENTRE (P.) LTD. (SUPR A), IN WHICH, IT IS VERY CATEGORICALLY HELD THAT THE TAX DEDUCTED AT SOURCE OBLIGATIONS UNDER SECTION 195(1) OF THE ACT ARISES, ONLY IF THE PAYMENT IS CH ARGEABLE TO TAX IN THE HANDS OF THE NON-RESIDENT RECIPIENT. 9.1 THEREFORE, MERELY BECAUSE A PERSON HAS NOT DEDU CTED TAX AT SOURCE OR A REMITTANCE ABROAD, IT CANNOT BE INFERRED THAT THE P ERSON MAKING THE REMITTANCE, NAMELY, THE ASSESSEE, IN THE INSTANT CA SE, HAS COMMITTED A DEFAULT IN DISCHARGING HIS TAX WITHHOLDING OBLIGATI ONS BECAUSE SUCH OBLIGATIONS COME INTO EXISTENCE ONLY WHEN THE RECIP IENT HAS A TAX LIABILITY IN INDIA. 9.2 THE UNDERLYING PRINCIPLE IS THAT, THE TAX WITHH OLDING LIABILITY OF THE PAYER IS INHERENTLY A VICARIOUS LIABILITY ON BEHALF OF TH E RECIPIENT AND THEREFORE, WHEN THE RECIPIENT / FOREIGN AGENT DOES NOT HAVE TH E PRIMARY LIABILITY TO BE TAXED IN RESPECT OF INCOME EMBEDDED IN THE RECEIPT, THE VICARIOUS LIABILITY OF THE PAYER TO DEDUCT TAX DOES NOT ARISE. THIS VICARI OUS TAX WITHHOLDING LIABILITY CANNOT BE INVOKED, UNLESS PRIMARY TAX LIABILITY OF THE RECIPIENT / FOREIGN AGENT IS ESTABLISHED. IN THIS CASE, THE PRIMARY TAX LIABI LITY OF THE FOREIGN AGENT IS NOT ESTABLISHED. THEREFORE, THE VICARIOUS LIABILITY ON THE PART OF THE ASSESSEE TO DEDUCT THE TAX AT SOURCE DOES NOT EXIST. 10. FURTHER, JUST BECAUSE, THE PAYER / ASSESSEE HAS NOT OBTAINED A SPECIFIED DECLARATION FROM THE REVENUE AUTHORITIES TO THE EFF ECT THAT THE RECIPENT IS NOT LIABLE TO BE TAXED IN INDIA, IN RESPECT OF THE INCO ME EMBEDDED IN THE PARTICULAR PAYMENT, THE ASSESSING OFFICER CANNOT PR OCEED ON THE BASIS THAT THE PAYER HAS AN OBLIGATION TO DEDUCT TAX AT SOURCE . HE STILL HAS TO ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 17 OF 27 DEMONSTRATE AND ESTABLISH THAT THE PAYEE HAS A TAX LIABILITY IN RESPECT OF THE INCOME EMBEDDED IN THE IMPUGNED PAYMENT. 11. IN THE INSTANT CASE, IT IS SEEN, ADMITTEDLY THA T THE NONRESIDENT AGENTS WERE ONLY PROCURING ORDERS ABROAD AND FOLLOWING UP PAYMENTS WITH BUYERS. NO OTHER SERVICES ARE RENDERED OTHER THAN THE ABOVE . SOURCING ORDERS ABROAD, FOR WHICH PAYMENTS HAVE BEEN MADE DIRECTLY TO THE NON-RESIDENTS ABROAD, DOES NOT INVOLVE ANY TECHNICAL KNOWLEDGE OR ASSISTANCE IN TECHNICAL OPERATIONS OR OTHER SUPPORT IN RESPECT OF ANY OTHER TECHNICAL MATTERS. IT ALSO DOES NOT REQUIRE ANY CONTRIBUTION OF TECHNICAL KNOW LEDGE, EXPERIENCE, EXPERTISE, SKILL OR TECHNICAL KNOW-HOW OF THE PROCE SSES INVOLVED OR CONSIST IN THE DEVELOPMENT AND TRANSFER OF A TECHNICAL PLAN OR DESIGN. THE PARTIES MERELY SOURCE THE PROSPECTIVE BUYERS FOR EFFECTING SALES BY THE ASSESSEE, AND IS ANALOGOUS TO A LAND OR A HOUSE / REAL ESTATE AGENT / BROKER, WHO WILL BE INVOLVED IN MERELY IDENTIFYING THE RIGHT PROPERT Y FOR THE PROSPECTIVE BUYER / SELLER AND ONCE HE COMPLETES THE DEAL, HE GETS TH E COMMISSION. THUS, BY NO STRETCH OF IMAGINATION, IT CANNOT BE SAID THAT T HE TRANSACTION PARTAKES THE CHARACTER OF 'FEES FOR TECHNICAL SERVICES' AS EXPLA INED IN THE CONTEXT OF SECTION 9(1)(VII) OF THE ACT. 12. AS THE NON-RESIDENTS WERE NOT PROVIDING ANY TEC HNICAL SERVICES TO THE ASSESSEE, AS HELD ABOVE AND AS HELD BY THE COMMISSI ONER OF INCOME TAX (APPEALS), THE COMMISSION PAYMENT MADE TO THEM DOES NOT FALL INTO THE CATEGORY OF 'FEES OF TECHNICAL SERVICES' AND THEREF ORE, EXPLANATION (2) TO SECTION 9(1)(VII) OF THE ACT, AS INVOKED BY THE ASS ESSING OFFICER, HAS NO APPLICATION TO THE FACTS OF THE ASSESSEE'S CASE. 13. IN THIS CASE, THE COMMISSION PAYMENTS TO THE NO N-RESIDENT AGENTS ARE NOT TAXABLE IN INDIA, AS THE AGENTS ARE REMAINING O UTSIDE, SERVICES ARE RENDERED ABROAD AND PAYMENTS ARE ALSO MADE ABROAD. 14. THE CONTENTION OF THE LEARNED COUNSEL FOR THE R EVENUE IS THAT THE TRIBUNAL OUGHT NOT TO HAVE RELIED UPON THE DECISION G.E.INDIA TECHNOLOGY'S CASE, CITED SUPRA, IN VIEW OF INSERTION OF EXPLANAT ION 4 TO SECTION 9(1)(I) OF THE ACT WITH CORRESPONDING INTRODUCTION OF EXPLANAT ION 2 TO SECTION 195(1) OF THE ACT, BOTH BY THE FINANCE ACT, 2012, WITH RETROS PECTIVE EFFECT FROM 01.04.1962. 15. THE ISSUE RAISED IN THIS CASE HAS BEEN THE SUBJ ECT MATTER OF THE DECISION, IN THE RECENT CASE, CIT V. KIKANI EXPORTS (P.) LTD. [2014] 369 ITR 96/[2015] 232 TAXMAN 255/49 TAXMANN.COM 601 (MAD.) WHEREIN THE CONTENTION OF THE REVENUE HAS BEEN REJECTED AND ASS ESSEE HAS BEEN UPHELD AND THE RELEVANT OBSERVATION READS AS UNDER: '... THE SERVICES RENDERED BY THE NON-RESIDENT AGEN T COULD AT BEST BE CALLED AS A SERVICE FOR COMPLETION OF THE EXPORT COMMITMEN T AND WOULD NOT FALL WITHIN THE DEFINITION OF 'FEES FOR TECHNICAL SERVIC ES' AND, THEREFORE, SECTION 9 WAS NOT APPLICABLE AND, CONSEQUENTLY, SECTION 195 D ID NOT COME INTO PLAY. THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING O FFICER TOWARDS EXPORT COMMISSION PAID BY THE ASSESSEE TO THE NON-RESIDENT WAS RIGHTLY DELETED.' ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 18 OF 27 16. WHEN THE TRANSACTION DOES NOT ATRACT THE PROVIS IONS OF SECTION 9 OF THE ACT, THEN THERE IS NO QUESTION OF APPLYING EXPLANAT ION 4 TO SECTION 9 OF THE ACT. THEREFORE, THE REVENUE HAS NO CASE AND THE TAX CASE APPEAL IS LIABLE TO BE DISMISSED. 6. CLEARLY, THEREFORE, THE PAYMENT OF COMMISSION IN THE HANDS OF THE NON- RESIDENT AGENT, AS LONG AS SUCH AN AGENT CARRIES OU T ITS ACTIVITIES OUTSIDE INDIA, DOES NOT RESULT IN TAXABILITY IN THE HANDS O F THE AGENT IN INDIA.' 39. AS WE DEAL WITH THIS ASPECT OF THE MATTER, WE M AY ALSO TAKE NOTE OF THE FOLLOWING ANALYSIS, IN THE CASE OF UPS SCS ASIA LTD . V. ASSTT. DIT, (INTERNATIONAL TAXATION) [2012] 50 SOT 268/18 TAXMANN.COM 302 (MUM .) , ABOUT THE SCOPE OF MANAGERIAL, CONSULTANCY AND TECHNICAL SERVICES WHIC H THE SERVICES RENDERED MUST FULFIL SO AS TO LEAD TO TAXABILITY AS FEES FOR TECHNICAL SERVICES: '5. A BARE PERUSAL OF THE ABOVE QUOTED PROVISION IN DICATES THAT THE 'FEES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATION FOR REN DERING OF ANY 'MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES' BUT DOES NOT INCLUDE THE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY ETC. T HE LEARNED CIT(A) HAS HELD THE SERVICES RENDERED BY THE ASSESSEE AS FEES FOR TECHNICAL SERVICES' COMING WITH IN THE SWEEP OF 'MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES'. ON THE CONTRARY, THE CONTENTION OF THE ASSESSEE HAS REMAINED BEFORE THE AUTHORITIES BELOW AS WELL AS US THAT THE SUCH SERVI CES DO NOT FALL WITHIN THE AMBIT OF ANY OF THE CATEGORIES TAKEN NOTE OF BY THE AUTHORITIES BELOW. WE WILL EXAMINE AS TO WHETHER THE SERVICES SO PROVIDED BY T HE ASSESSEE FALL WITHIN THE SCOPE OF 'MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES' AS PER EXPLANATION 2 TO SECTION 9(1)(VII). 6. IN ORDER TO APPRECIATE THE NATURE OF SERVICES MO RE ELABORATELY, IT IS RELEVANT TO CONSIDER THE TERMS OF THE AGREEMENT ENT ERED INTO BETWEEN THE ASSESSEE AND MENLO INDIA EXECUTED ON NOVEMBER 7, 20 06 WITH EFFECT FROM 1ST JUNE, 2005, A COPY OF WHICH IS AVAILABLE ON PAG E 1 ONWARDS OF THE PAPER BOOK. THE SCOPE OF SERVICES HAS BEEN GIVEN IN CLAUS E 1.1. IN THE RECITAL CLAUSE IT HAS BEEN PROVIDED THAT THE ASSESSEE COMP ANY MAY REQUIRE MENLO INDIA TO PERFORM LOGISTICS SERVICES SUCH AS TRANSPO RT, PROCUREMENT, CUSTOM CLEARANCE, SORTING, DELIVERY, WAREHOUSING AND PICKI NG UP SERVICES (LOCAL SERVICES) WITHIN INDIA (LOCAL OPERATING AREA). IT H AS FURTHER BEEN PROVIDED THAT MENLO INDIA MAY ALSO SEEK SIMILAR SERVICES FRO M THE ASSESSEE COMPANY SUCH AS TRANSPORT, PROCUREMENT, CUSTOMS CLE ARANCE, SORTING, DELIVERY, WAREHOUSING AND PICK UP SERVICES (INTERNA TIONAL SERVICES) OUTSIDE INDIA. IN THE PRESENT APPEAL WE ARE CONCERNED WITH THE 'INTERNATIONAL SERVICES' PROVIDED BY THE ASSESSEE TO MENLO OUTSIDE INDIA. THESE SERVICES COMPRISE OF TRANSPORT, PROCUREMENT, CUSTOMS CLEARAN CE, SORTING, WAREHOUSING AND PICK UP SERVICES ON THE CARGO EXPOR TED BY MENLO ON BEHALF OF ITS CUSTOMERS. HAVING NOTED THE NATURE OF SERVIC ES PROVIDED BY THE ASSESSEE OUTSIDE INDIA, FOR WHICH MENLO INDIA MADE THE PAYMENT, LET US CONSIDER IF THESE CAN BE DESCRIBED AS MANAGERIAL OR TECHNICAL OR CONSULTANCY SERVICES. ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 19 OF 27 7. FIRST WE WILL CONSIDER THE AMBIT OF 'MANAGERIAL SERVICES' TO TEST WHETHER THE INSTANT SERVICES CAN QUALIFY TO BE SO CALLED. O RDINARILY THE MANAGERIAL SERVICES MEAN MANAGING THE AFFAIRS BY LAYING DOWN C ERTAIN POLICIES, STANDARDS AND PROCEDURES AND THEN EVALUATING THE AC TUAL PERFORMANCE IN THE LIGHT OF THE PROCEDURES SO LAID DOWN. THE MANAG ERIAL SERVICES CONTEMPLATE NOT ONLY EXECUTION BUT ALSO THE PLANNIN G PART OF THE ACTIVITY TO BE DONE. IF THE OVERALL PLANNING ASPECT IS MISSING AND ONE HAS TO FOLLOW A DIRECTION FROM THE OTHER FOR EXECUTING PARTICULAR J OB IN A PARTICULAR MANNER, IT CANNOT BE SAID THAT THE FORMER IS MANAGING THAT AFF AIR. IT WOULD MEAN THAT THE DIRECTIONS OF THE LATTER ARE EXECUTED SIMPLICITY WI THOUT THERE BEING ANY PLANNING PART INVOLVED IN THE EXECUTION AND ALSO TH E EVALUATION OF THE PERFORMANCE. IN THE ABSENCE OF ANY SPECIFIC DEFINIT ION OF THE PHRASE 'MANAGERIAL SERVICES' AS USED IN SECTION 9(1)(VII) DEFINING THE 'FEES FOR TECHNICAL SERVICES', IT NEEDS TO BE CONSIDERED IN A COMMERCIAL SENSE. IT CANNOT BE INTERPRETED IN A NARROW SENSE TO MEAN SIM PLY EXECUTING THE DIRECTIONS OF THE OTHER FOR DOING A SPECIFIC TASK. FOR INSTANCE, IF GOODS ARE TO BE LOADED AND SOME WORKER IS INSTRUCTED TO PLACE TH E GOODS ON A CARRIER IN A PARTICULAR MANNER, THE ACT OF THE WORKER IN PLACING THE GOODS IN THE PRESCRIBED MANNER, CANNOT BE DESCRIBED AS MANAGING THE GOODS. IT IS A SIMPLE DIRECTION GIVEN TO THE WORKER WHO HAS TO EXE CUTE IT IN THE WAY PRESCRIBED. IT IS QUITE NATURAL THAT SOME SORT OF A PPLICATION OF MIND IS REQUIRED IN EACH AND EVERY ASPECT OF THE WORK DONE. AS IN THE ABOVE EXAMPLE WHEN THE WORKER WILL LIFT THE GOODS, HE IS EXPECTED TO BE VIGILANT IN PICKING UP THE GOODS MOVING TOWARDS THE CARRIER AND THEN PLACING THEM. THIS ACT OF THE WORKER CANNOT BE DESCRIBED AS MANAGING T HE GOODS BECAUSE HE SIMPLY FOLLOWED THE DIRECTION GIVEN TO HIM. ON THE OTHER HAND, 'MANAGING' ENCOMPASSES NOT ONLY THE SIMPLE EXECUTION OF A WORK , BUT ALSO CERTAIN OTHER ASPECTS, SUCH AS PLANNING FOR THE WAY IN WHICH THE EXECUTION IS TO BE DONE COUPLED WITH THE OVERALL RESPONSIBILITY IN A LARGER SENSE. THUS IT IS MANIFEST THAT THE WORD 'MANAGING' IS WIDER IN SCOPE THAN THE WORD 'EXECUTING'. RATHER THE LATER IS EMBEDDED IN THE FORMER AND NOT VICE VE RSA. 8. ADVERTING TO THE FACTS OF THE INSTANT CASE IT IS OBSERVED THAT THE ASSESSEE PERFORMED FREIGHT AND LOGISTICS SERVICES OUTSIDE IN DIA IN RESPECT OF CONSIGNMENTS ORIGINATING FROM INDIA UNDERTAKEN TO B E DELIVERED BY MENLO INDIA. THE ROLE OF THE ASSESSEE IN THE ENTIRE TRANS ACTION WAS TO PERFORM ONLY THE DESTINATION SERVICES OUTSIDE INDIA BY UNLOADING AND LOADING OF CONSIGNMENT, CUSTOM CLEARANCE AND TRANSPORTATION TO THE ULTIMATE CUSTOMER. IN OUR CONSIDERED OPINION, IT IS TOO MUCH TO CATEGO RIZE SUCH RESTRICTED SERVICES AS MANAGERIAL SERVICES. WE, THEREFORE, JET TISON THIS CONTENTION RAISED ON BEHALF OF THE REVENUE. 9. NOW WE TAKE UP THE NEXT COMPONENT OF THE DEFINIT ION OF 'FEES FOR TECHNICAL SERVICES', BEING 'CONSULTANCY SERVICES', WHICH HAS BEEN PRESSED INTO SERVICE BY THE LEARNED CIT(A) TO FORTIFY HIS VIEW THAT THE AMOUNT RECEIVED BY THE ASSESSEE IS COVERED WITHIN SECTION 9(1)(VII). THE W ORD 'CONSULTANCY' MEANS GIVING SOME SORT OF CONSULTATION DE HORS THE PERFOR MANCE OR THE EXECUTION OF ANY WORK. IT IS ONLY WHEN SOME CONSIDERATION IS GIV EN FOR RENDERING SOME ADVICE OR OPINION ETC., THAT THE SAME FALLS WITHIN THE SCOPE OF 'CONSULTANCY ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 20 OF 27 SERVICES'. THE WORD 'CONSULTANCY' EXCLUDES ACTUAL ' EXECUTION'. THE NATURE OF SERVICES, BEING FREIGHT AND LOGISTICS SERVICES PROV IDED BY THE ASSESSEE TO MENLO INDIA HAS NOT BEEN DISPUTED BY THE AUTHORITIE S BELOW. THERE IS NOTHING LIKE GIVING ANY CONSULTATION WORTH THE NAME. RATHER SUCH PAYMENT IS WHOLLY AND EXCLUSIVELY FOR THE EXECUTION IN THE SHAPE OF T RANSPORT, PROCUREMENT, CUSTOMS CLEARANCE, DELIVERY, WAREHOUSING AND PICKIN G UP SERVICES. THAT BEING THE POSITION, WE OPINE THAT THE PAYMENT IN LI EU OF FREIGHT AND LOGISTICS SERVICES CANNOT BE RANKED AS CONSULTANCY SERVICES. 10. THE ONLY LEFT OVER COMPONENT OF THE DEFINITION OF 'FEES FOR TECHNICAL SERVICES' TAKEN NOTE OF BY THE LD. CIT(A) IS 'TECHN ICAL SERVICES'. HE OBSERVED THAT THE ASSESSEE'S BUSINESS STRUCTURE IS TIME BOUN D SERVICE COUPLED WITH CONTINUOUS REAL TIME TRANSMISSION OF INFORMATION BY USING AND ALSO MAKING AVAILABLE ITS TECHNOLOGY IN THE FORM OF SOPHISTICAT ED EQUIPMENTS AND SOFTWARE ETC. THE LEARNED CIT(A) HAS HELD THAT : 'I N ORDER TO ENSURE EFFICIENT AND TIMELY DELIVERY AND TO PROVIDE CONTINUOUS REAL TIME INFORMATION, THE APPELLANT IS REQUIRED TO USE SOPHISTICATED TECHNOLO GY FOR WHICH THE INDIAN ENTITY IS ALSO EQUALLY INVOLVED AND TO WHOM THE APP ELLANT IS COMMITTED TO PROVIDING THE REQUISITE SOFTWARE AND EQUIPMENT'. TH E LEARNED CIT(A) HAS ALSO ACCENTUATED ON THE CLAUSE 2 OF THE AGREEMENT W HICH READS AS UNDER: '2. CONTRACTOR SHALL SEPARATELY EXECUTE A TECHNOLOG Y AND SOFTWARE LICENSE AGREEMENT FOR THE PROVISION OF COMPUTER EQUIPMENT A ND SOFTWARE SUPPLIED BY SCS. CONTRACTOR SHALL SEPARATELY EXECUTE A TRADE MARK LICENSE AGREEMENT FOR THE USE OF ANY MARKS OR BRANDS OWNED BY UNITED PARCEL SERVICE OF AMERICA, INC. THE FEE PAYABLE BY CONTRAC TOR UNDER PARAGRAPH 3.1 WILL NOT INCLUDE ANY ROYALTY AMOUNT RELATING TO THE USE OF INTANGIBLE PROPERTY OR INFORMATION.' 11. ON GOING THROUGH CLAUSE 2 OF THE AGREEMENT, IT IS OBVIOUS THAT MENLO INDIA SHALL 'SEPARATELY EXECUTE A TECHNOLOGY AND SO FTWARE LICENSE AGREEMENT' FOR THE PROVISION OF COMPUTER EQUIPMENT AND SOFTWARE SUPPLIED BY THE ASSESSEE. IT IS NOBODY'S CASE THAT THE CONSI DERATION IN QUESTION RELATES TO THE SUPPLY OF ANY COMPUTER EQUIPMENT AND SOFTWARE BY THE ASSESSEE TO MENLO INDIA. WE FAIL TO APPRECIATE AS T O HOW THIS CLAUSE 2 MAKES THE SERVICES PROVIDED BY THE ASSESSEE AS 'TEC HNICAL'. RATHER CLAUSE 2 MANDATES TO EXECUTE A SEPARATE TECHNOLOGY AND SOF TWARE LICENSE AGREEMENT FOR THE PROVISION OF COMPUTER EQUIPMENT A ND SOFTWARE. HOW IS IT THAT THE CONSIDERATION FOR THE SERVICES CAN BE ATTR IBUTED TO A PROPOSED AGREEMENT, WHICH HAS YET TO SEE THE LIGHT OF THE DA Y. 12. THE LEARNED CIT(A) HAS ALSO HARPED ON 'TRANSPOR TATION OF TIME SENSITIVE PACKAGES' WITH A VIEW TO BRING THE SERVICES PROVIDE D BY THE ASSESSEE WITHIN THE FOLD OF 'TECHNICAL SERVICES'. IN REACHING THIS CONCLUSION THE LEARNED CIT(A) ALSO RELIED ON THE ORDER PASSED BY THE MUMBA I BENCH OF THE TRIBUNAL IN BLUE DART EXPRESS LIMITED V. JCIT. LET US EXAMIN E THE FACTS OF THAT CASE. THE ASSESSEE THERE CLAIMED DEDUCTION U/S 80O IN RE SPECT OF ITS FOREIGN EXCHANGE EARNINGS FOR RENDERING TECHNICAL / PROFESS IONAL SERVICES TO A US MULTI INTERNATIONAL COMPANY. DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE A.O. REQUIRED THE ASSESSEE TO FURNISH THE NATUR E OF SERVICES RENDERED ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 21 OF 27 AND ALSO THE CALCULATION OF DEDUCTION. THE ASSESSEE DID IT. ON BEING SATISFIED THE A.O. GRANTED DEDUCTION U/S 80O. BY E XERCISING THE POWER U/S 263, THE LEARNED CIT HELD THE ASSESSMENT ORDER TO B E ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE TO THE E XTENT OF GRANTING DEDUCTION U/S 800. WHEN THE MATTER CAME UP BEFORE THE TRIBUN AL, IT WAS OBSERVED THAT THE ISSUE IS DEBATABLE AND HENCE OUTSIDE THE A MBIT OF SECTION 263. APART FROM THAT, IT WAS ALSO OBSERVED THAT THE ASSE SSEE WAS ENGAGED IN INTEGRATED AIR AND GROUND TRANSPORTATION OF TIME SE NSITIVE PACKAGES TO VARIOUS DESTINATIONS RENDERING COMMERCIAL SERVICES. IT WAS IN THIS CONTEXT THAT THE ASSESSEE WAS HELD TO BE ELIGIBLE FOR DEDUC TION U/S 80O. AT THIS JUNCTURE IT WILL BE USEFUL TO NOTE THAT AT THE MATE RIAL TIME SECTION 80O PROVIDED FOR DEDUCTION ON ANY 'INCOME BY WAY OF ROY ALTY, COMMISSION, FEES OR ANY SIMILAR PAYMENT RECEIVED BY THE ASSESSEE FRO M THE GOVERNMENT OF A FOREIGN STATE OR A FOREIGN ENTERPRISE IN CONSIDERAT ION FOR THE USE OUTSIDE INDIA OF ANY PATENT, INVENTION, MODEL, DESIGN, SECR ET FORMULA OR PROCESS, OR SIMILAR PROPERTY RIGHT, OR INFORMATION CONCERNING I NDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL MADE AVAI LABLE OR PROVIDED OR AGREED TO BE MADE AVAILABLE OR PROVIDED TO SUCH GOV ERNMENT OR ENTERPRISE BY THE ASSESSEE, OR IN CONSIDERATION OF TECHNICAL O R PROFESSIONAL SERVICES RENDERED OR AGREED TO BE RENDERED OUTSIDE INDIA TO SUCH GOVERNMENT OR ENTERPRISE BY THE ASSESSEE'. FROM THE ABOVE QUOTED PART OF SEC. 80O, IT CAN BE SEEN THAT THE DEDUCTION AT THAT TIME WAS AVA ILABLE NOT ONLY IN RESPECT OF INCOME AS A CONSIDERATION FOR THE USE OF 'TECHNI CAL OR PROFESSIONAL SERVICES' BUT ALSO ANY 'COMMERCIAL....KNOWLEDGE EXP ERIENCE OR SKILL'. THESES TWO SOURCES ARE DISTINCT FROM EACH OTHER AS CAN BE SEEN FROM THE EMPLOYMENT OF WORD 'OR' BETWEEN THEM. IN ORDER TO Q UALIFY FOR DEDUCTION UNDER THIS SECTION, THE INCOME COULD HAVE RESULTED FROM THE RENDERING OF 'TECHNICAL OR PROFESSIONAL SERVICES' OR COMMERCIAL KNOWLEDGE, EXPERIENCE OR SKILL ETC. WHEN THE TRIBUNAL IN BLUE DART EXPRESS L IMITED (SUPRA) HELD THE ASSESSEE TO BE ENTITLED TO DEDUCTION, IT WAS CONSID ERING ALL THE SPECIES OF THE SERVICES SET OUT IN SECTION 80O AND NOT ONLY ' TECHNICAL OR PROFESSIONAL SERVICES'. IT WAS IN THE LIGHT OF SUCH LANGUAGE OF THE PROVISION THAT THE TRIBUNAL HELD THE ASSESSEE TO BE ELIGIBLE FOR RELIE F U/S 80O. WE ARE CURRENTLY DEALING WITH SECTION 9(1)(VII), BEING THE 'FEES FOR TECHNICAL SERVICES' AND THE DEFINITION OF SUCH EXPRESSION IS RESTRICTED ONLY TO 'MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES' AND DOES NOT HAV E ANY SUCH ELEMENTS AS ARE THERE IN SECTION 80O. THE DECISION IN THE CASE OF BLUE DART EXPRESS LIMITED (SUPRA) CAME UP FOR CONSIDERATION BEFORE TH E MUMBAI BENCH OF THE TRIBUNAL IN DAMPSKIBSSELSKABET AF 1912 V. ADDL. DIT (INTERNATIONAL TAXATION) [(2011) 51 DTR 148] (TO WHICH ONE OF US, NAMELY, THE LD. JM IS PARTY) IN WHICH IT HAS BEEN HELD THAT THE RATIO LAI D DOWN IN THAT CASE CANNOT BE UNIVERSALLY APPLIED. DUE TO MATERIAL DIFFERENCE IN THE LANGUAGE OF SECTIONS 9(1)(VII) AND 80O AS DISCUSSED ABOVE, WE HOLD THAT THE DECISION IN BLUE DART EXPRESS LIMITED (SUPRA), CAN NOT BE HELD TO BE SUPPORTING THE CASE OF THE REVENUE. 13. THE LD. CIT(A) IN REACHING THE CONCLUSION THAT THE ASSESSEE RENDERED 'TECHNICAL SERVICES' ALSO OBSERVED THAT ITS 'BUSINE SS STRUCTURE IS TIME BOUND SERVICE COUPLED WITH CONTINUOUS REAL TIME TRANSMISS ION OF INFORMATION BY ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 22 OF 27 USING AND ALSO MAKING AVAILABLE ADVANCED TECHNOLOGY IN THE FORM OF SOPHISTICATED EQUIPMENT AND SOFTWARE.' HE WAS SWAYE D BY THE CONTENTION OF THE ASSESSEE THAT THE MANLO INDIA OR THE ULTIMATE C USTOMER COULD TRACK THE MOVEMENT OF CARGO WITH THE HELP OF COMPUTERS. WE HA VE NOTED SUPRA THAT THE CONSIDERATION RECEIVED BY THE ASSESSEE DID NOT INCLUDE ANY CONSIDERATION FOR THE SUPPLY OF ANY EQUIPMENT TO MA NLO INDIA. NOW WE WILL EXAMINE AS TO WHETHER THE USE OF COMPUTER IN ANY MA NNER FOR KNOWING THE LOCATION OF THE CARGO AT A PARTICULAR TIME, CAN BE HELD AS TECHNICAL SERVICE. 14. EXPLANATION TO SECTION 9(1)(VII) DEFINES THE EX PRESSION 'FEES FOR TECHNICAL SERVICES' AS CONSIDERATION FOR RENDERING 'MANAGERIA L, TECHNICAL OR CONSULTANCY SERVICES'. IT IS SEEN THAT THERE IS NO DEFINITION OF THE TERM 'TECHNICAL SERVICES' IN THE ACT. 15. THE PRINCIPLE OF NOSCITUR A SOCIIS MANDATES THA T THE MEANING OF A WORD IS TO BE JUDGED BY THE COMPANY OF OTHER WORDS WHICH IT KEEPS. THIS RULE IS WIDER IN SCOPE THAN THE RULE OF EJUSDEM GENERIS. IN ORDER TO DISCOVER THE MEANING OF A WORD WHICH HAS NOT BEEN DEFINED IN THE ACT, THE HON'BLE SUPREME COURT HAS APPLIED THE PRINCIPLE OF NOSCITUR A SOCIIS IN SEVERAL CASES INCLUDING ARAVINDAPARAMILA WORKS V. CIT [(1999) 237 ITR 284 (SC) ]. AS NOTED ABOVE THE WORD 'TECHNICAL' HAS BEEN SANDWICHE D BETWEEN THE WORDS 'MANAGERIAL' AND 'CONSULTANCY' IN EXPLANATION 2 TO SEC. 9(1)(VII) AND NO DEFINITION HAS BEEN ASSIGNED TO THE 'TECHNICAL' SER VICES IN THE RELEVANT PROVISION, WE NEED TO ASCERTAIN THE MEANING OF THE 'TECHNICAL SERVICES' FROM THE OVERALL MEANING OF THE WORDS 'MANAGERIAL' AND ' CONSULTANCY' SERVICES BY APPLYING THE PRINCIPLE OF NOSTICUR A SOCIIS. IT HAS BEEN HELD ABOVE THAT THE 'MANAGERIAL SERVICES' AND 'CONSULTANCY SERVICES' PR ESUPPOSE SOME SORT OF DIRECT HUMAN INVOLVEMENT. THESE SERVICES CANNOT BE CONCEIVED WITHOUT THE DIRECT INVOLVEMENT OF MAN. THESE SERVICES CAN BE RE NDERED WITH OR WITHOUT ANY EQUIPMENT, BUT THE HUMAN INVOLVEMENT IS INEVITA BLE. MOVING IN THE LIGHT OF THIS RULE, THERE REMAINS NO DOUBT WHATSOEVER THA T THE TECHNICAL SERVICES CANNOT BE CONTEMPLATED WITHOUT THE DIRECT INVOLVEME NT OF HUMAN ENDEAVOR. WHERE SIMPLY AN EQUIPMENT OR A STANDARD FACILITY AL BEIT DEVELOPED OR MANUFACTURED WITH THE USE OF TECHNOLOGY IS USED, SU CH A USER CANNOT BE CHARACTERIZED AS USING 'TECHNICAL SERVICES'. 16. COMING BACK TO THE FACTS OF THE PRESENT CASE, E VEN IF WE ACCEPT THE LEARNED FIRST APPELLATE AUTHORITY'S POINT OF VIEW T HAT THE COMPUTER COULD BE USED IN TRACING THE MOVEMENT OF THE GOODS, SUCH USE OF COMPUTER, THOUGH INDIRECT, REMOTE AND NOT NECESSARY, CAN NOT BRING T HE PAYMENT FOR FREIGHT AND LOGISTICS SERVICES WITHIN THE PURVIEW OF 'TECHN ICAL SERVICES'. THE ESSENCE OF THE CONSIDERATION FOR THE PAYMENT IS REN DERING OF SERVICES AND NOT THE USE OF COMPUTER. IF INCIDENTALLY COMPUTER I S USED AT ANY STAGE, WHICH IS OTHERWISE NOT NECESSARY FOR RENDERING SUCH SERVI CES, THE PAYMENT FOR FREIGHT AND LOGISTICS WILL NOT PARTAKE OF THE CHARA CTER OF FEES OF 'TECHNICAL SERVICES'. WE, THEREFORE, REPEL THIS CONTENTION RAI SED ON BEHALF OF THE REVENUE. 17. THUS IT CAN BE NOTICED THAT THE PAYMENT MADE TO THE ASSESSEE IN QUESTION IS NOT A CONSIDERATION FOR MANAGERIAL OR T ECHNICAL OR CONSULTANCY ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 23 OF 27 SERVICES. THAT BEING THE POSITION, IT CANNOT FALL W ITHIN THE AMBIT OF SECTION 9(1)(VII).' 40. WE MAY ALSO TAKE NOTE OF ANOTHER DECISION OF A COORDINATE BENCH DEALING WITH MATERIALLY SIMILAR QUESTION DEALING WITH TAXAB ILITY OF INCOME IN THE HANDS OF NON-RESIDENT COMMISSION AGENTS, REPRESENTING INDIAN PRINCIPAL, IN WHICH SIMILAR ACTIVITIES WERE SAID TO HAVE BEEN PERFORMED. IN THE CASE OF ARMYESH GLOBAL V. ASSTT. CIT [2012] 51 SOT 564/21 TAXMANN.C OM 130 (MUM.) , THE COORDINATE BENCH HAS, INTER ALIA, OBSERVED AS FOLLO WS: '16. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE FACTS ON RECORD. THE LEARNED ASSESSING OFFICER TRIED TO INVOKE THE DEFIN ITIONS OF TECHNICAL SERVICES ON THE COMMISSION PAID TO THE FOREIGN COMPANY. THE REASON BEING THAT COMMISSION PAYMENT TO NON-RESIDENT IS NOT COVERED B Y THE PROVISIONS OF SECTION 40(A)(IA), AS IT HAS ONLY APPLICABLE TO ANY INTEREST ROYALTY, FEES FOR TECHNICAL SERVICES OR OTHER SUM CHARGEABLE UNDER TH IS ACT WHICH PAYABLE OUTSIDE INDIA ON WHICH TAX IS DEDUCTIBLE AT SOURCE BUT HAS NOT BEEN DEDUCTED. THE ASSESSING OFFICER MADE OUT A CASE THA T THE COMMISSION PAID IS TEES FOR TECHNICAL SERVICES' WITHOUT SPECIFYING WHAT ARE THE TECHNICAL/MANAGERIAL SERVICES RENDERED BY THE SAID COMPANY TO THE ASSESSEE. ASSESSEE INDEED ENTERED INTO AN AGREEMENT FOR PROPAGATION OF ITS HANDICRAFT PRODUCTS WITH THE NON-RESIDENT COMPANY. THE COPIES OF THE AGREEMENT HAVE BEEN PLACED BEFORE THE AUTHORITIES. THE AGREEMENT CLEARLY SHOWS THAT THE NON-RESIDENT COMPANY WAS TO GET COMM ISSION FOR PROMOTING THE PRODUCTS OF THE ASSESSEE COMPANY AND RENDERING INCIDENTAL SERVICES ON SALES SUCH AS RECOVERY ETC. FOR DOING EXPORT SALES. IT IS ALSO RESPONSIBILITY OF THE NON-RESIDENT COMPANY TO DISSEMINATE THE INFORMA TION AND INQUIRE ABOUT VARIOUS IMPORTERS IN VARIOUS COUNTRIES SO THAT ASSE SSEE EXPORTS CAN BE INCREASED. THE AGREEMENT CLEARLY SHOWS THAT NON-RES IDENT COMPANY WAS TO GET THE COMMISSION FOR PROMOTING THE PRODUCT OF ASS ESSEE COMPANY AFTER SALES PROCEEDS ARE RECEIVED. THE DETAILED TERMS OF THE AGREEMENT ARE AS UNDER: 'AGENCY AGREEMENT IN THIS AGREEMENT BETWEEN M/S ARMAYESH GLOBAL, KAMA NWALA CHAMBERS, 2ND FLOOR, SIR P.M. ROAD, FORT, MUMBAI 400 001, IND IA HEREINAFTER REFERRED TO AS 'PRINCIPAL' AND INDIJACK LIMITED, 99 BRECK NO CK ROAD, LONDON N19 5 AB, U.K. HEREINAFTER REFERRED TO AS 'AGENT' THE FOLLOWING IS AGREED UPON: - ARTICLE 1- OBJECT OF AGREEMENT 1.1. THE PRINCIPAL ENTRUSTS THE AGENT WITH THE NON EXCLUSIVE AGENCY FOR THE FOLLOWING CONTRACTUAL TERRITORY (AREA): WORLDWIDE 1.2. THE PRINCIPAL ALSO HAS THE RIGHT TO OPERATE AC TIVELY' IN HE AFOREMENTIONED TERRITORY (AREA). 1.3. THE AGENCY COVERS THE FOLLOWING PRODUCTS: HAND EMBROIDERED PRODUCTS OF ANY AND ALL KINDS. 1.4. THE AGENT COVENANTS AND AGREES TO REPRESENT TH E PRINCIPAL ON A COMMISSION BASIS. ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 24 OF 27 ARTICLE 2 DUTIES OF THE AGENT 2.1 IT SHALL BE THE AGENT'S DUTY TO NEGOTIATE CONTR ACTS WITH THE OVERSEAS PARTY. FURTHERMORE, THE AGENT SHALL ACT ON THE PRIN CIPAL'S BEHALF IN CONFORMITY WITH PROVISIONS HEREINAFTER ENUMERATED. THE AGENT S HALL NOT BE AUTHORIZED TO ENTER INTO A CONTRACT OR OTHERWISE TO BIND THE P RINCIPAL. THE PRINCIPAL SHALL BE FREE TO CONCLUDE, OR TO REFUSE THE CONCLUSION OF A CONTRACT NEGOTIATED BY THE AGENT. 2.2 WHILE NEGOTIATING CONTRACTS OF SALE THE AGENT S HALL ACT IN CONFORMITY WITH ALL THE CONDITIONS AND PARTICULARLY OF DELIVERY AND PAYMENT AS FIXED BY THE PRINCIPAL. 2.3 THE AGENT SHALL BE RESPONSIBLE FOR NEGOTIATING WITH ALL PARTIES IN THEIR TERRITORY (AREA). THE AGENT SHALL TRAVEL IN THEIR T ERRITORY (AREA) REGULARLY TO VISIT CUSTOMERS, AND IS BOUND TO KEEP CONCLUDED CONTRACTS SECRET. THE AGENT SHALL ALWAYS KEEP THE PRINCIPAL INFORMED ABOUT THEI R ACTIVITIES AND SHALL SUPPLY THE PRINCIPAL, AT LEAST ONCE EVERY QUARTER, WITH REPORTS ON ECONOMIC DEVELOPMENTS AND MARKET CONDITIONS IN THE TERRITORY (AREA) AND AT THE SAME TIME, CONVEY TO THE PRINCIPAL, THE AGENT'S OBSERVAT IONS WITH RESPECT TO ACTIVITIES OF COMPETITORS. THE AGENT SHALL REPORT I MMEDIATELY ON PARTICULAR PROFITABLE BUSINESS POSSIBILITIES AND EXTRAORDINARY EVENTS. 2.4. THE AGENT SHALL ABSTAIN FROM ANY COMPETITION W HATSOEVER AGAINST THE PRINCIPAL AND SHALL NOT PROMOTE COMPETITION BY THIR D PERSONS. IN PARTICULAR, THE AGENT SHALL NOT ACT FOR COMPETITIVE FIRMS AS A COMMERCIAL AGENT, COMMISSION MERCHANT OR DISTRIBUTOR, NOR SHALL THE A GENT ASSOCIATE DIRECTLY OR INDIRECTLY WITH COMPETITIVE FIRMS. THE AGENT SHA LL NOT, FOR ALL TIME EXPLOIT OR DISCLOSE TO OTHER PERSONS ANY BUSINESS AND PRODUCTI ON SECRETS OF THE PRINCIPAL THAT HAVE BEEN COMMUNICATED TO THEM OR WH ICH THEY HAVE OTHERWISE COME TO KNOW, IRRESPECTIVE OF WHETHER OR NOT THE CONTRACT IS STILL IN FORCE. 2.5 THE AGENT SHALL OBSERVE THE RULES OF FAIR COMPE TITION AND BE RESPONSIBLE FOR ANY VIOLATION OF THE SAME. 2.6 THE AGENT IS NOT AUTHORIZED TO ACCEPT PAYMENTS DIRECTLY IN THEIR OWN NAME BUT SHALL ASSIST THE PRINCIPAL IN COLLECTING O UTSTANDING PAYMENTS. THE AGENT IS ALSO AUTHORIZED TO ACCEPT NOTIFICATION OF DEFECTS BY A CUSTOMER, AS WELL AS THE STATEMENT OF A CUSTOMER THAT HE WILL TH E GOODS AT THE DISPOSABLE OF THE PRINCIPAL OR ANY SIMILAR STATEMENT BY WHICH THE CUSTOMER EXERCISES HIS RIGHTS RESULTING FROM DEFECTIVE DELIVERY. THE AGENT SHALL IMMEDIATELY II PRINCIPAL AND SHALL SEE TO IT THAT THE NECESSARY EV IDENCE IN FAVOUR OF THE PRINCIPAL IS OBTAINED. 2.7 THE AGENT SHALL ESTABLISH BUSINESS RELATIONS ON LY WITH SUCH CUSTOMERS WHOSE SOLVENCY IS SATISFACTORY TO THE BEST OF THE K NOWLEDGE AND BELIEF OF THE AGENT. 17. THUS AS CAN BE SEEN FROM THE ABOVE, ALL THE TER MS DO INDICATE THAT THE SAID COMPANY WAS ONLY ACTING AS AN AGENT ON COMMISS ION BASIS AND HAS NOT BEEN PROVIDING ANY MANAGERIAL/TECHNICAL SERVICE S. FURTHER THERE IS NO EVIDENCE ON RECORD THAT THEY ARE PROVIDING ANY TECH NICAL/MANAGERIAL SERVICES. THE SAID COMPANY WAS RESPONSIBLE FOR ARRA NGING TIMELY PAYMENT ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 25 OF 27 FROM THE CUSTOMERS AND COMMISSION WAS PAID ONLY AFT ER THE SALES AMOUNT WAS RECEIVED. SINCE THE SERVICES WERE RENDERED OUTS IDE INDIA, THE PROVISIONS OF SECTION 5 CANNOT BE APPLIED TO THE CO MMISSION PAID SO AS TO MAKE IT TAXABLE IN INDIA. 18. THIS ASPECT CAN ALSO BE EXAMINED IN ANOTHER WAY AS ALREADY GIVEN A FINDING BY THE BENCH EARLIER AND WHICH IS ALSO NOT IN DISPUTE, THAT THE FOREIGN COMPANY DOES NOT HAVE ANY PE IN INDIA. THEREFORE, T HE COMMISSION PAID TO THE FOREIGN COMPANY WHICH HAS TO BE CONSIDERED AS B USINESS INCOME AND CANNOT BE TAXED IN INDIA AS PER THE DTAA BETWEEN IN DIA AND UK. THE DEFINITION OF 'FEE FOR TECHNICAL SERVICES' BETWEEN UK AND INDIA DOES NOT INCLUDE MANAGERIAL SERVICES. HOWEVER, NEITHER THE A SSESSING OFFICER NOR THE CIT (A) CONSIDERED THE ISSUE OF DTAA, EVEN THOUGH A SSESSEE MENTIONED THE SAME IN ITS SUBMISSIONS BEFORE THE AUTHORITIES. THE DEFINITION OF TECHNICAL SERVICES AS PER THE INCOME TAX ACT IS AS UNDER: '9.(1) THE FOLLOWING INCOMES SHALL BE DEEMED TO ACC RUE OR ARISE IN INDIA: (I) & (VI )** ** ** (VII) INCOME BY WAY OF FEES FOR TECHNICAL SERVICES PAYABLE BY (A) THE GOVERNMENT; OR (B) A PERSON WHO IS A RESIDENT, EXCEPT WHERE THE FEES A RE PAYABLE IN RESPECT OF SERVICES UTIL IZED IN A BUSINESS OR PROFESSION CARRIED ON BY SUCH PERSON OUTSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARN ING ANY INCOME FROM ANY SOURCE OUTSIDE INDIA ; OR (C) A PERSON WHO IS A NON- RESIDENT, WHERE THE FEES ARE PAYABLE IN RESPECT OF SERVICES UTILIZE D IN A BUSINESS OR PROFESSION CARRIED ON BY SUCH PE RSON IN INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE IN INDIA : [PROVIDED THAT NOTHING CONTAINED IN THIS CLAUSE SHA LL APPLY IN RELATION TO ANY INCOME BY WAY OF FEES FOR TECHNICAL SERVICES PAYABL E IN PURSUANCE OF AN AGREEMENT MADE BEFORE THE 1ST DAY OF APRIL, 1976, A ND APPROVED BY THE CENTRAL GOVERNMENT.] [EXPLANATION 1.FOR THE PURPOSES OF THE FOREGOING P ROVISO, AN AGREEMENT MADE ON OR AFTER THE 1ST DAY OF APRIL, 1976, SHALL BE DEEMED TO HAVE BEEN MADE BEFORE THAT DATE IF THE AGREEMENT IS MADE IN A CCORDANCE WITH PROPOSALS APPROVED BY THE CENTRAL GOVERNMENT BEFORE THAT DATE.] EXPLANATION [2].FOR THE PURPOSES OF THIS CLAUSE, ' FEES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATION (INCLUDING ANY LU MP SUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR C ONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TECHNICAL O R OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION ASSE MBLY, MINING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATIO N WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD 'SALARIE S'. 19. AS CAN BE SEEN FROM THE ABOVE SECTION 9(1)(VII) (B), FEE PAYABLE FOR THE PURPOSES OF MAKING OR EARNING INCOME FROM ANY SOURC E OUTSIDE INDIA IS NOT INCLUDED IN THE DEFINITION. THE AMOUNT HAS TO BE CO NSIDERED AS BUSINESS INCOME. SINCE THE SERVICES ARE RENDERED OUTSIDE IND IA, THAT AMOUNT IS NOT TAXABLE AS IT DOES NOT ACCRUE OR ARISE IN INDIA. TH E SAME VIEW WAS ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 26 OF 27 CONSIDERED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CEAT INTERNATIONAL S.A. V. CIT237 ITR 859 , WHERE CERTAIN EXPORT COMMISSION WAS PAID TO A NON-RESIDENT COMPANY AND IT WAS HELD THAT THE ASSESSEE DID NOT IMPART ANY INFORMATION CONCERNING TECHNICAL, INDUST RIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE EXPORTS OR SKILL, NOR RENDERED ANY MANAGERIAL TECHNICAL OR CONSULTANCY SERVICES. THE COMMISSION ATTRIBUTABL E TO THE SERVICES RENDERED CANNOT BE REGARDED AS ROYALTY OR FEES FOR TECHNICAL SERVICES AND IT WAS HELD THAT THE SAME WAS NOT TAXABLE UNDER SECTIO N 9(1)(VII). SIMILAR ISSUE WAS ALSO CONSIDERED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX V. SHERATON INTERNATIONAL INC.313 ITR 267 WHERE CERTAIN PAYMENTS FOR ADVERTISING, PUBLICITY AND SALES PROMO TION SERVICES WERE CONSIDERED AND HELD THAT THOSE PAYMENTS CANNOT BE C ONSIDERED AS EITHER ROYALTY OR FOR TECHNICAL SERVICES. SINCE THE NON-RE SIDENT DOES NOT HAVE ANY PE IN INDIA, SUCH INCOME WHICH IS TO BE CONSIDERED AS BUSINESS INCOME WAS NOT TAXABLE IN INDIA.' 41. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS S O EXPRESSED BY THE COORDINATE BENCH. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE UPHOLD WELL REASONING FINDINGS OF T HE LEARNED CIT(A) THAT THE COMMISSION PAYMENTS MADE TO THE NON-RESIDENT AGENTS DID NOT HAVE ANY TAXABILITY IN INDIA, EVEN UNDER THE PROVISIONS OF T HE DOMESTIC LAW I.E. SECTION 9. ONCE WE COME TO THE CONCLUSION THAT THE INCOME EMBE DDED IN THESE PAYMENTS DID NOT HAVE ANY TAX IMPLICATIONS IN INDIA, NO FAUL T CAN BE FOUND IN NOT DEDUCTING TAX AT SOURCE FROM THESE PAYMENTS OR, FOR THAT PURP OSE, EVEN NOT APPROACHING THE ASSESSING OFFICER FOR ORDER UNDER SECTION 195. IN OUR CONSIDERED VIEW, THE ASSESSEE, FOR THE DETAILED REASONS SET OUR ABOVE, D ID NOT HAVE TAX WITHHOLDING LIABILITY FROM THESE PAYMENTS. AS HELD BY HON'BLE S UPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE (P.) LTD. V. CIT [201 0] 327 ITR 456/193 TAXMAN 234/7 TAXMANN.COM 18 , PAYER IS BOUND TO WITHHOLD TAX FROM THE FOREIGN REMITTANCE ONLY IF THE SUM PAID IS ASSESSABLE TO TA X IN INDIA. THE ASSESSEE CANNOT, THEREFORE, BE FAULTED FOR NOT APPROACHING T HE ASSESSING OFFICER UNDER SECTION 195 EITHER. AS REGARDS THE WITHDRAWAL OF TH E CBDT CIRCULAR HOLDING THAT THE COMMISSION PAYMENTS TO NON-RESIDENT AGENTS ARE NOT TAXABLE IN INDIA, NOTHING REALLY TURNS ON THE CIRCULAR, AS DE HORS TH E AFORESAID CIRCULAR, WE HAVE ADJUDICATED UPON THE TAXABILITY OF THE COMMISSION A GENT'S INCOME IN INDIA IN TERMS OF THE PROVISIONS OF THE INCOME TAX ACT AS AL SO THE RELEVANT TAX TREATY PROVISIONS. 42. IN VIEW OF THESE DISCUSSIONS, WE UPHOLD THE REL IEF GRANTED BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 8. WE SEE NO REASON TO TAKE ANY OTHER VIEW OF TH E MATTER THAN THE VIEW SO TAKEN BY THE CO-ORDINATE BENCH. WE, THEREFORE, HOLD THAT, IN PRINCIPLE, THE COMMISSION PAID TO A NON-RESIDENT, WHO HAS NOT PERFORMED ANY SERVICES IN INDIA, IS NOT EXIGIBLE TO TAX IN INDIA. ONCE WE HOLD SO, CLEARLY NO DISALLOWANCE ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE CAN BE MADE IN RESPECT OF COMMISSION PAYM ENTS. WE ALSO REFER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF G. E.INDIA TECHNOLOGY CENTRE (P.) LTD. (SUPRA). ITA NO. 633 & CO 102/AHD.2015 ASSESSEE - ASTRAL PHARMACEUTICAL IND. ASSESSMENT YEAR: 2008-09 PAGE 27 OF 27 9. AS REGARDS THE ASSESSING OFFICERS OBSERVATION T HAT THE PAYMENT OF SERVICE TAX IN RESPECT OF THESE SERVICES CONSTITUTE ASSESSE ES ADMISSION TO THE FACT THAT SERVICES WERE RENDERED IN INDIA, WE MAY ONLY ADD TH AT AS PER THE SERVICE TAX LAW, EVEN WHEN THE SERVICES ARE UTILIZED IN INDIA, SERVI CE TAX IS TO BE LEVIED IN RESPECT OF SUCH SERVICES RENDERED BY NON-RESIDENT ON REVERSE C HARGE BASIS. MERE PAYMENT OF THE SERVICE CHARGES ON REVERSE CHARGE BASIS, IN RES PECT OF SERVICES RENDERED BY THE NON-RESIDENT AGENT, CANNOT BE CONSTRUED AS, ANY STR ETCH OF LOGIC, TO BE AN ADMISSION THAT SERVICES WERE RENDERED IN INDIA. NOTHING, THE REFORE, TURNS ON THE PAYMENT OF SERVICE TAX IN RESPECT OF SERVICES RENDERED BY THE COMMISSION AGENT, IN INDIA. IN VIEW OF THE THESE DISCUSSIONS, AS ALSO BEARING IN M IND ENTIRETY OF THE CASE, WE SEE NO REASONS TO INTERFERE IN THE CONCLUSIONS ARRIVED AT BY THE LD. CIT(A). WE CONFIRM THE SAME AND DECLINE TO INTERFERE IN THE MATTER. 10. IN THE RESULT, APPEAL, THE APPEAL AND CROSS-OBJ ECTION, BOTH ARE DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 21 ST DAY OF SEPTEMBER, 2017. SD/- SD/- RAJPAL YADAV PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 21 ST DAY OF SEPTEMBER, 2017 **BT COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION: ........19.09.2017 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ... 20.09.2017........ 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S.: 21.09.2017....... . 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: .. 21.09.2017....... 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : ... 25.09.2017... 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: ..
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