The JCIT, Special Range-1, Visakhapatnam V. M/s Voest Alpine Industrial Services Rep by RINL, Visakhapatnam

ITA 92/VIZ/2000

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0635 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 10 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-04-2010
• Assessment Year: 1996-1997
• Appeal Filed On: 30-03-2000
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Double taxation relief; Opportunity of being heard; Deemed to accrue or arise in india; Retrospective amendment; TDS; Set aside
• Section: 234B

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH: VISAKHAPATNAM BEFORE: SRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO. ASSESSMENT YEAR NAME OF ASSESSEE PAN/ GIR NO. RESPONDENT 70/VIZAG/98 1994-95 DCIT, SR-1, VISAKHAPATNAM V.43 VOEST ALPHINE INDUSTRIAL SERVICES REP.BY RINL VSP, VISAKHAPATNAM 90/VIZAG/00 1993-94 JCIT, SR-1, VISAKHAPATNAM V.43 VOEST ALPHINE INDUSTRIAL SERVICES REP.BY RINL VSP, VISAKHAPATNAM 91/VIZAG/00 1995-96 JCIT, SR-1, VISAKHAPATNAM V.43 VOEST ALPHINE INDUSTRIAL SERVICES REP.BY RINL VSP, VISAKHAPATNAM 92/VIZAG/00 1996-97 JCIT, SR-1, VISAKHAPATNAM V.43 VOEST ALPHINE INDUSTRIAL SERVICES REP.BY RINL VSP, VISAKHAPATNAM 370/VIZ/00 1997-98 ADD.CIT, SR-1, VISAKHAPATNAM V.43 VOEST ALPHINE INDUSTRIAL SERVICES REP.BY RINL VSP, VISAKHAPATNAM O R D E R PER SHRI B.R. BASKARAN, ACCOUNTANT MEMBER : THE APPEALS OF THE REVENUE ARE DIRECTED AGAINST TH E ORDERS OF LD CIT (A) VISAKHAPATNAM AND THEY RELATE TO THE ASSESSMENT YEA RS 1993-94 TO 1997-98. SINCE SOME OF THE ISSUES AGITATED IN THESE APPEALS ARE IDENTICAL IN NATURE, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS COMMON ORDER. WE SHALL TAKE UP THE APPEALS YEAR WISE. APPELLANT BY : SHRI SUBRATA SARKAR, CIT (DR) RESPONDENT BY : SHRI .V. RAMACHANDRAN, ADVOCATE 2 (A) ITA NO.90/VIZAG/2000 RELATING TO ASSESSMENT YE AR 1993-94. A.1 FOLLOWING THREE ISSUES ARE CONTESTED IN THIS AP PEAL FILED BY THE REVENUE. A) WHETHER THE REMUNERATION EXPENSES CLAIMED B Y THE ASSESSEE IS ALLOWABLE B) WHETHER LD CIT (A) IS JUSTIFIED IN HOLDING THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE SHOULD NOT BE ALLOWED U/S 58 (1) (III) OF THE ACT. C) WHETHER THE LD CIT (A) IS JUSTIFIED IN DELETING THE INTEREST CHARGES U/S 234B OF THE ACT. A.2. THE FACTS RELATING TO THE ISSUE ARE STATED IN BRIEF. THE ASSESSEE HEREIN IS A NON RESIDENT COMPANY INCORPORATED IN AUSTRIA AND IS REPRESENTED BY M/S RASHTRIYA ISPAT NIGAM LTD. (RINL). THE ASSESSEE CO MPANY ENTERED INTO AN AGREEMENT ON 14.2.92 WITH RINL FOR RENDERING TRAINI NG AND TECHNICAL SERVICES. THE RETURNS OF INCOME WERE FILED BY THE RINL IN ITS CAPACITY AS THE REPRESENTATIVE OF THE ASSESSEE. OUT OF THE TOTAL SERVICES PROVIDE D BY THE ASSESSEE COMPANY TO THE RINL, 70% WAS TREATED AS ATTRIBUTABLE TO SERVIC ES RENDERED IN INDIA. THERE IS NO DISPUTE BETWEEN THE PARTIES ON THIS ASPECT. AGAI NST THE INCOME ATTRIBUTABLE TO INDIAN ACTIVITIES THE ASSESSEE CLAIMED EXPENDITURE PERTAINING TO REMUNERATION OF ITS EMPLOYEES, ON THE BASIS OF CERTIFICATES ISSUED BY THE INDEPENDENT AUDITORS OF AUSTRIA AND ACCORDINGLY THE RETURN OF INCOME WAS FI LED. A.3 IN ASSESSMENT YEAR 1993-94, THE AO DISALLOWED THE CLAIM OF REMUNERATION FOR THE FOLLOWING REASONS:- (A) THE ASSESSEE COMPANY WOULD HAVE PAID REMUNERATION TO ITS EMPLOYEES EVEN IF THEY HAD NOT BEEN DEPLOYED IN IND IA. HENCE THE SAID EXPENDITURE CANNOT BE TAKEN AS INCURRED IN INDIA. (B) THE ASSESSEE SHOULD HAVE DEDUCTED T DS FROM THE PAYMENT OF SALARIES AS PER CHAPTER XVII-B OF THE ACT AND THE A SSESSEE HAD FAILED TO SO DEDUCT TDS. HOWEVER, LD CIT (A) DELETED THE SAID DISALLOWANCE BY ACCEPTING THE CONTENTION OF THE ASSESSEE THAT, AS PER ARTICLE VII OF THE DOU BLE TAXATION AVOIDANCE 3 AGREEMENT (DTAA) THE EXPENSES ARE ALLOWABLE AND FUR THER TDS IS NOT REQUIRED TO BE DEDUCTED FROM SALARY PAYMENTS. THE AO HAD CHARGE D INTEREST U/S 234 B OF THE ACT AND THE SAME WAS ALSO DELETED BY THE LD CIT (A) . HENCE THE REVENUE IS IN APPEAL BEFORE US. A.4 THERE IS NO DISPUTE WITH REGARD TO THE FACT THE EMPLOYEES OF ASSESSEE COMPANY HAS RENDERED SERVICES IN INDIA, BECAUSE OF WHICH THE ASSESSEE COMPANY HAD EARNED THE INCOME. HENCE THE PROPORTIO NATE SALARY ATTRIBUTABLE TO THE SERVICES RENDERED IN INDIA SHOULD BE TAKEN AS H AVING BEEN INCURRED IN INDIA. ON THIS ISSUE, WE AFFIRM THE ORDER OF LD CIT(A). A.5. WITH REGARD TO THE ISSUE OF SECTION 58(1)(III) OF THE INDIAN INCOME TAX ACT, THE ASSESSEE HAS PLACED HEAVY RELIANCE ON ARTICLE V II OF DOUBLE TAXATION AVOIDANCE AGREEMENT (HEREINAFTER DTAA) BETWEEN IND IA AND AUSTRIA. THE SAID ARTICLE VII READS AS UNDER: AMOUNTS PAID BY AN ENTERPRISE OF ONE OF THE TERRIT ORIES FOR TECHNICAL SERVICES FURNISHED BY AN ENTERPRISE OF TH E OTHER TERRITORY SHALL NOT BE SUBJECT TO TAX BY THE FIRST-MENTIONED TERRITORY EXCEPT IN SO FAR AS SUCH AMOUNTS ARE ATTRIBUTABLE TO ACTIV ITIES ACTUALLY PERFORMED IN THE FIRST MENTIONED TERRITORY. IN COMPUTING THE INCOME SO SUBJECT TO TAX, THERE SHALL BE ALLOWED AS DEDUCTIONS THE EXPENSES INCURRED IN THE FIRST-MENTI ONED TERRITORY IN CONNECTION WITH THE ACTIVITIES PERFORM ED IN THAT TERRITORY THE CONTENTION OF THE ASSESSEE IS THAT THE EXPENSES INCURRED BY THE ASSESSEE IN INDIA SHALL BE FULLY ALLOWED AS PER ARTICLE VII CIT ED ABOVE AND HENCE NO DISALLOWANCE IS CALLED FOR U/S 58 (1) (III) OF THE ACT. FOR THE PROPOSITION THAT THE DTAA OVERRIDES THE PROVISIONS OF INDIAN INCOME TAX ACT, THE ASSESSEE HAS RELIED UPON THE FOLLOWING CASE LAWS: UNION OF INDIA VS. AZADI BACHAO ANDOLAN (263 ITR 7 06 (SC)) CIT V P.V.A.L. KULANDAGAM CHETTIAR (267 ITR 654 (S C)) CIT V VISAKHAPATNAM PORT TRUST (144 ITR 146 (AP)) 4 IN ADDITION TO THE ABOVE, THE ASSESSEE HAS ALSO DRE W OUR ATTENTION TO THE CIRCULAR NO.333 DATED 2.4.1982 ISSUED BY THE CBDT, WHEREIN I T WAS CLARIFIED THAT THE DTAA SHALL OVERRIDE THE PROVISIONS OF THE ACT. THU S WE AGREE WITH THE CONTENTION OF THE ASSESSEE ON THIS POINT AND HENCE IT STANDS C LARIFIED NOW THAT THE ARTICLES OF DTAA SHALL OVERRIDE THE PROVISIONS OF INCOME TAX AC T, WHENEVER THERE IS CONFLICT BETWEEN THE DTAA AND THE INDIAN INCOME TAX ACT. NO W LET US SEE WHETHER THERE IS ANY CONFLICT BETWEEN DTAA AND INDIAN INCOME TAX ACT WITH REGARD TO THE ISSUE OF TAX DEDUCTION AT SOURCE AND SECTION 58(1)(III) O F THE ACT. A.6 WE HAVE GONE THROUGH THE DTAA WHICH IS PLACED I N PAGES 51 TO 67 OF THE PAPER BOOK COMPILED BY THE ASSESSEE FOR THE ASSESSM ENT YEAR 1994-95. WE NOTICE THAT AS PER ARTICLE XVII OF DTAA, THE LAWS I N FORCE IN EITHER OF THE TERRITORIES WILL CONTINUE TO GOVERN THE ASSESSMENT AND TAXATION OF INCOME IN THE RESPECTIVE TERRITORIES EXCEPT WHERE EXPRESS PROVISION TO THE CONTRARY IS MADE IN THAT CONVENTION. IN FACT, THERE IS NO CONTRADICTION BETWEEN THE DT AA AND THE INDIAN INCOME TAX ACT THAT THE EXPENDITURE INCURRED IN CONNECTION WITH THE EARNING THE INCOME IS DEDUCTIBLE. HOWEVER, THE CASE OF THE ASSESSING OFFICER WAS THAT THE ALLOWANCE OF SAID EXPENDITURE, WHICH I S IN THE NATURE OF SALARY PAYMENT, IS ALSO SUBJECT TO THE PROVISIONS OF SEC.5 8 (1) (III) OF THE ACT. AS PER THE SAID SECTION ANY PAYMENT WHICH IS CHARGEABLE UN DER THE HEAD SALARIES, IF IT IS PAYABLE OUTSIDE IN INDIA, SHALL BE ALLOWED ONLY IF TAX HAS BEEN PAID THEREON OR DEDUCTED THEREFROM UNDER CHAPTER XVII-B. A.7. ON A CAREFUL PERUSAL OF THE ARTICLE VII RE PRODUCED ABOVE; WE NOTICE THAT THOUGH IT PROVIDES FOR DEDUCTION OF EXPENSES, HOWEV ER, IT DOES NOT CLARIFY THE POSITION WITH REGARD TO THE DEDUCTION OF TAX AT SOU RCE FROM THE SALARY PAYMENT. WE DO NOT FIND ANY OTHER ARTICLE IN THE DTAA WHICH CLARIFIES THE POSITION WITH REGARD TO THE DEDUCTION OF TAX AT SOURCE. ON THE CONTRARY, ARTICLE XIV PROVIDES FOR TAXATION OF REMUNERATION DERIVED BY AN INDIVIDU AL AS AN EMPLOYEE. THE CLAUSE 2 OF ARTICLE XIV, WHICH IS APPLICABLE TO THE FACTS OF THE PRESENT CASE, READS AS UNDER: 5 (2) AN INDIVIDUAL WHO IS A RESIDENT OF AUSTRIA SHA LL NOT BE TAXED IN INDIA ON PROFITS OR REMUNERATION REFERRED TO IN PAR AGRAPH (1) IF- A) HE IS TEMPORARILY PRESENT IN INDIA FOR A PERIOD OR PERIODS NOT EXCEEDING IN THE AGGREGATE 183 DAYS DURING THE RELE VANT PREVIOUS YEAR. B) THE SERVICES ARE RENDERED FOR OR ON BEHALF OF A RES IDENT OF AUSTRIA, C) THE PROFITS OR REMUNERATION ARE SUBJECT TO AUSTRIAN TAX, AND D) THE PROFITS OR REMUNERATION ARE NOT DEDUCTED IN CO MPUTING THE PROFITS OF AN ENTERPRISE CHARGEABLE TO INDIAN TAX. THUS ARTICLE XIV PROVIDES FOR TAXATION OF SALARY IN COME, OF COURSE, SUBJECT TO THE CONDITIONS PROVIDED THEREIN. A.8 NOW, AS PER ARTICLE XVII DISCUSSED ABOVE, THE LAWS OF THE COUNTRY WILL GOVERN THE ASSESSMENT, WHERE EXPRESS PROVISION TO T HE CONTRARY IS NOT MADE IN THE DTAA. HENCE THE PROVISIONS OF CHAPTER XVII-B R ELATING TO TAX DEDUCTION AT SOURCE SHALL APPLY TO THE PAYMENTS MADE BY THE ASSE SSEE COMPANY SINCE NO EXPRESS PROVISION TO THE CONTRARY IS AVAILABLE IN D TAA. A.9 ON A CAREFUL READING OF ARTICLE XIV DISCUSSE D ABOVE, IT CAN BE SEEN THAT THE ENTIRE SALARY PAYMENT MADE BY THE ASSESSEE COMPANY TO THE RESIDENT OF AUSTRIA IS NOT SUBJECTED TO TAX IN INDIA. ARTICLE XIV PRES CRIBES CERTAIN CONDITIONS FOR BRINGING THE SALARY PAYMENT UNDER THE SCOPE OF INDI AN INCOME TAX ACT. IN OUR VIEW, WHEN THERE IS NO LIABILITY FOR TAXATION IN IN DIA AS PER DTAA ON THE SALARY RECEIVED BY AN EMPLOYEE, THE QUESTION OF DEDUCTION OF TAX AT SOURCE ON THAT SALARY PAYMENT WOULD NOT ARISE. IN THIS REGARD USEF UL REFERENCE MAY BE MADE TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF VAN OORD ACZ INDIA (P) LTD., V. CIT 323 ITR 130. HOWEVER, THE ASSESSING O FFICER WAS UNDER THE IMPRESSION THAT THE ENTIRE SALARY PAYMENT WOULD BE LIABLE FOR DEDUCTION OF TAX AT SOURCE WHICH IS NOT CORRECT, IN THE FACTS AND CIRCU MSTANCES OF THE CASE. THUS THE ACTUAL LIABILITY ON THE PART OF THE ASSESSEE TO DED UCT TDS FROM SALARIES IS REQUIRED TO BE DETERMINED BY APPLYING THE PROVISIONS OF DTAA TO THE FACTS OF THE CASE. IN 6 THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE MA TTER NEEDS TO BE EXAMINED AFRESH IN THE LIGHT OF PRINCIPLES ENUNCIATED ABOVE. ACCORDINGLY WE SET ASIDE THE ORDER OF THE CIT (A) ON THIS ISSUE AND REMIT THE MA TTER TO THE FILE OF THE AO WITH A DIRECTION TO CONSIDER THE QUESTION OF DEDUCTION O F TAX AT SOURCE AS PER ARTICLE XIV OF DTAA VIS--VIS SEC.58 (1) (III) OF THE INCOM E TAX ACT. A.10 THE NEXT DISPUTE RELATES TO THE INTEREST C HARGEABLE U/S 234B. THE ASSESSEE HAD DECLARED INCOME OF RS.49,53,303/- ON W HICH, A SUM OF RS.14,85,991/- WAS PAYABLE AS INCOME TAX. THE PAYE R OF THE INCOME, M/S RINL, HAD DEDUCTED THE SAID AMOUNT AT SOURCE AND HENCE TH E ASSESSEE WAS NOT REQUIRED TO PAY TAX ON SELF ASSESSMENT BASIS WHILE FILING ITS RETURN OF INCOME. SINCE THE AO DISALLOWED THE CLAIM OF EXPENDITURE, T HE TOTAL INCOME GOT ENHANCED RESULTING IN ADDITIONAL TAX DEMAND OVER AND ABOVE T HE TAX DEDUCTED AT SOURCE. THE AO CHARGED INTEREST U/S 234B ON THE ADDITIONAL TAX DEMAND SO RAISED. THE LD CIT(A) DELETED THE SAID INTEREST ON THE GROUND T HAT THERE WAS NO LIABILITY FOR THE ASSESSEE TO PAY ANY ADVANCE TAX. A.11 LD COUNSEL FOR THE ASSESSEE PLACED HIS REL IANCE ON THE DECISION OF HONBLE UTTARANCHAL HIGH COURT IN THE CASE OF CIT VS. SEDCO FOREX INTERNATIONAL DRILLING CO. LTD. (264 ITR 320), WHERE IN IT WAS HELD THAT T HE TDS THAT WOULD BE DEDUCTIBLE HAS TO BE REDUCED FROM THE ADVANCE TAX THAT WAS ES TIMATED ON THE CURRENT INCOME AND HENCE FOR THE PURPOSES OF SECTIO N 234B THE TDS SO DEDUCTIBLE SHOULD ALSO BE TAKEN INTO ACCOUNT, EVEN IF THE TAX WAS NOT ACTUALLY DEDUCTED BY THE PAYER OF INCOME. HOWEVER, IN THE P RESENT CASE, THE TAX DEDUCTIBLE AT SOURCE ON THE INCOME ESTIMATED BY THE ASSESSEE FOR THE PURPOSES OF ADVANCE TAX WAS ACTUALLY DEDUCTED AT SOURCE AND THE CREDIT FOR THE SAME WAS ALSO ALLOWED BY THE AO. HENCE, IN OUR VIEW, THE SA ID DECISION OF HONBLE UTTARACHAL HIGH COURT IS NOT APPLICABLE TO THE FACT S OF THE INSTANT CASE. A.12. AS NOTICED BY THE HONBLE UTTARANCHAL HIG H COURT IN THE ABOVE CITED CASE, THE INTEREST LEVIED U/S 234B IS COMPENSATORY IN NATURE AND IT IS NOT A 7 PENALTY. THE DISALLOWANCE, IF ANY, MADE OUT OF THE EXPENSES CLAIMED BY THE ASSESSEE WOULD INCREASE THE TOTAL INCOME OF THE ASS ESSEE AND CONSEQUENTLY INCREASING THE ASSESSED TAX AS DEFINED IN EXPLAN ATION 1 TO SECTION 234B. IN THAT CASE, IF THERE IS NO PAYMENT/SHORT PAYMENT OF ADVANCE TAX AS PRESCRIBED IN SECTION 234B, THE ASSESSEE IS LIABLE TO PAY INTERES T U/S 234B, SINCE IT IS COMPENSATORY IN NATURE. A.13. IN THE INSTANT CASE, THE ISSUE REGARDING DISALLOWANCE OF SALARY PAYMENT VIS--VIS SECTION 58(1)(III) HAS BEEN SET ASIDE TO THE FILE OF AO. CONSEQUENTLY, THE ISSUE REGARDING THE CHARGEABILITY OF INTEREST U/S 2 34B, WHICH IS CONSEQUENTIAL IN NATURE, IS ALSO SET ASIDE TO THE FILE OF AO. ACCOR DINGLY THE ORDER OF LD CIT(A) ON THIS ISSUE IS ALSO SET ASIDE. (B) ITA NO.70/VIZAG/1998 RELATING TO THE ASSESSMENT YEAR 1994-95. B.1 IN THIS APPEAL, FOLLOWING TWO ISSUES ARE CO NTESTED BY THE REVENUE. A) WHETHER LD CIT (A) IS JUSTIFIED IN HOL DING THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE SHOULD NOT BE ALLOWED U/S 58 (1) (I II) OF THE ACT. B) WHETHER THE LD CIT (A) IS JUSTIFIED I N DELETING THE INTEREST CHARGES U/S 234B OF THE ACT. B.2 THE FACTS AND CIRCUMSTANCES SURROUNDING TH E ABOVE SAID ISSUES ARE IDENTICAL WITH THE ONE DECIDED FOR THE ASSESSMENT Y EAR 1993-94, SUPRA. CONSISTENT WITH THE VIEWS TAKEN THEREIN, WE SET ASI DE BOTH THE ISSUES TO THE FILE OF THE ASSESSING OFFICER WHO IS DIRECTED TO DECIDE BOTH THE ISSUES IN THE LIGHT OF THE PRINCIPLES EXPLAINED IN THE ASSESSMENT YEAR 199 3-94, SUPRA. (C) ITA NO.91/VIZAG/2000 RELATING TO THE ASSESSMEN T YEAR 1995-96. C.1 IN THIS APPEAL, FOLLOWING TWO ISSUES ARE CO NTESTED BY THE REVENUE: A) WHETHER THE REMUNERATION EXPENSES CLAIM ED BY THE ASSESSEE IS ALLOWABLE 8 B) WHETHER LD CIT (A) IS JUSTIFIED IN HO LDING THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE SHOULD NOT BE ALLOWED U/S 58 (1) (I II) OF THE ACT. C.2 THE FACTS AND CIRCUMSTANCES SURROUNDING THE ABOVE SAID ISSUES ARE IDENTICAL WITH THE ONE DECIDED FOR THE ASSESSMENT Y EAR 1993-94, SUPRA. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE DECIDE T HE FIRST ISSUE AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. WE ALSO SET ASIDE RELATING TO DISALLOWANCE OF EXPENDITURE U/S 58(1)(III) OF THE A CT TO THE FILE OF THE ASSESSING OFFICER WHO IS DIRECTED TO DECIDE THE ISSUE IN THE LIGHT OF THE PRINCIPLES EXPLAINED IN THE ASSESSMENT YEAR 1993-94, SUPRA. (D) ITA NO.92/VIZAG/2000 RELATING TO THE ASSESSMENT YEAR 1996-97 & ITA NO.370/VIZAG/2000 RELATING TO THE ASSESSMENT Y EAR 1997-98. D.1 IN THESE TWO APPEALS, FOLLOWING ISSUES ARE CON TESTED BY THE REVENUE. A) WHETHER THE REMUNERATION EXPENSES CLAIME D BY THE ASSESSEE IS ALLOWABLE B) WHETHER LD CIT (A) IS JUSTIFIED IN HOLD ING THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE SHOULD NOT BE ALLOWED U/S 58 (1) (I II) OF THE ACT. C) WHETHER THE LD CIT (A) IS JUSTIFIED IN DELETING THE INTEREST CHARGES U/S 234B OF THE ACT. D) WHETHER LD CIT(A) IS JUSTIFIED IN DELETING T HE ASSESSMENT OF INCOME RELATING TO THE BACKUP TECHNICAL SERVICES RENDERED IN AUSTRIA. D.2 THE FACTS AND CIRCUMSTANCES SURROUNDING THE F IRST THREE ISSUES ARE IDENTICAL WITH THE ONE DECIDED FOR THE ASSESSMENT YEAR 1993-9 4, SUPRA. CONSISTENT WITH THE VIEWS TAKEN THEREIN, WE DECIDE THE FIRST ISSUE AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. WE ALSO SET ASIDE THE ISSU ES RELATING TO DISALLOWANCE OF EXPENDITURE U/S 58(1)(III) OF THE ACT AND CHARGEABI LITY OF INTEREST U/S 234B TO THE 9 FILE OF THE ASSESSING OFFICER WHO IS DIRECTED TO DE CIDE THE ISSUE IN THE LIGHT OF THE PRINCIPLES EXPLAINED IN THE ASSESSMENT YEAR 1993-94 , SUPRA. D.3 WE SHALL DEAL WITH THE FOURTH ISSUE, WHICH D ID NOT ARISE IN THE EARLIER YEARS. THE ASSESSING OFFICER TREATED THE SUM OF ATS 2,99,4 0,000 (EQUIVALENT TO RS.10,13,65,613/-) RECEIVED TOWARDS BACK UP TECHNIC AL SERVICES AS TAXABLE IN INDIA DURING THE ASSESSMENT YEAR 1996-97. SIMILARL Y A SUM OF RS.11,04,32,830/- WAS RECEIVED BY THE ASSESSEE TOWARDS BACK-UP SERVIC ES DURING THE ASSESSMENT YEAR 1997-98. THE ASSESSEE CONTENDED THAT THE SAID SUM WAS NOT TAXABLE AS THE BACK UP TECHNICAL SERVICES HAVE BEEN RENDERED FROM AUSTRIA. IN THIS REGARD, THE ASSESSEE ALSO RELIED UPON THE PROVISIONS OF ARTICLE 7 OF THE DTAA. THE CONTENTION OF THE ASSESSEE WAS ACCEPTED BY LD CIT(A) AND ACCOR DINGLY THE ASSESSMENT OF THE ABOVE SAID AMOUNT WAS CANCELLED. D.4 WE NOTICE THAT THE EXPLANATION OCCURRING AF TER SUB SECTION (2) OF SECTION 9 OF THE INDIAN INCOME TAX ACT, 1961 WAS AMENDED BY T HE FINANCE ACT, 2010 WITH RETROSPECTIVE EFFECT FROM 1 ST DAY OF JUNE, 1976. THE AMENDED EXPLANATION READS AS UNDER: EXPLANATION:- FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT FOR THE PURPOSES OF THIS SECTION, INCOME OF A NON-RESIDENT SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA UNDER CLAUSE (V) OF CLAUSE (VI) OR C LAUSE (VII) OF SUB-SECTION (1) AND SHALL BE INCLUDED IN THE TOTAL INCOME OF THE NON-RE SIDENT, WHETHER OR NOT,-- (I) THE NON-RESIDENT HAS A RESIDENCE OR PLACE OF B USINESS OR BUSINESS CONNECTION IN INDIA; OR (II) THE NON-RESIDENT HAS RENDERED SERVICES IN IND IA. IT MAY BE NOTED THAT CLAUSE (VII) OF SUB SECTION (1 ) OF SECTION DEALS WITH THE INCOME BY WAY OF FEE FOR TECHNICAL SERVICES. IN VI EW OF THE AMENDMENT CITED ABOVE, IT IS NOT NECESSARY THAT THE SERVICES SHOULD BE RENDERED IN INDIA, MEANING THEREBY THE SERVICES MAY BE RENDERED FROM ANY PLACE . IN VIEW OF THE ABOVE CITED 10 AMENDMENT, IN OUR VIEW, THIS ISSUE REQUIRES FRESH E XAMINATION AND ACCORDINGLY WE REVERSE THE ORDER OF LD CIT(A) ON THIS ISSUE IN BOTH THE YEARS AND SET ASIDE THE ISSUE IN BOTH THE YEARS TO THE FILE OF THE AO F OR EXAMINATION DE-NOVO IN THE LIGHT OF AMENDMENT CITED ABOVE AFTER AFFORDING NECE SSARY OPPORTUNITY OF BEING HEARD. E. IN THE RESULT, THE APPEALS OF THE REVENUE FO R ALL THE ASSESSMENT YEARS UNDER CONSIDERATION ARE TREATED AS ALLOWED FOR STATISTICA L PURPOSES. PRONOUNCED ACCORDINGLY ON 22 ND JUNE, 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE : 22-06-2010. A COPY OF THIS ORDER IS FORWARDED TO : 01 THE DY.COMMISSIONER OF INCOMETAX, SR-1, 3 RD FLOOR, AAYAKAR BHAVAN, VISAKHAPATNAM 02 THE JT. COMMISSIONER OF INCOME TAX, SR-1, VISAKH APATNAM. 03 THE ADD.COMMISSIONER OF INCOME TAX, SR-1, VISAKH APATNAM 04 M/S VOEST ALPHINE INDUSTRIAL SERVICES, REP.BY RI NL, ADM. BUILDING, VISAKHAPATNAM STEEL PLANT, VISAKHAPATNAM 05 THE CIT, VISAKHAPATNAM 06 THE CIT (A), VISAKHAPATNAM 07 THE DR, ITAT, VISAKHAPATNAM 08 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY ITAT, VISAKHAPATNAM BENCH