Karnataka High Court
The Commissioner Of Income Tax vs Isro Satellite Centre on 28 October, 2011
Bench: N.Kumar, Ravi Malimath
(BY SR1 M.V.SESHACHALA FOR SRI K.V.ARAVIND, AD._\(S.)
AND: A A
ISRO SATELLITE CENTRE,
GOVERNMENT OF INDIA,
DEPARTMENT OF SPACE,
VIMANAPURA POST, '
BANGALORE - 560 017. ~'S...REs*ROi\i;OE:i'=iT9L
(BY sR1 v.cHANDRAsHEKAR,SV__sR_1 A.SHANKAR., A
& SRI M.LAVA, ADVOCATES FO'R_S»RI D.S.~AN'IR-UDVHA,
ADVOCATE)
This 1TA filed under seétion 2«5o.AA QT I.T.Act, 1961
arising out of order" ''''dated ._T1_1.(37.._2'OO8 passed in
ITA.No.756/B.NC'/.2,DO8;__ ;fo~~r t'he'V..._..Assessment year
1991-1992,,.p'rayifng:_ to form.u|a_te{jthe substantial questions
of law stated _therein,. air!'Tov\N"the a.pp'ea| and set aside the
order '_,__pass,e'd5:.;__ Vbyf ITTAT, Bangalore in
1TA.Nc~.'756/31416/zoos, "dated. 11.07.2008 confirm the
orders7,of._the"'Ap.pei!ate,,Commissioner and Income Tax
Officer,"InternatiVonai.Taxa'tio.n, Ward--19(1), Bangalore.
1TA.No.11"17,'g 2008:".
§_E_IEN.__EEN_= "
'Vf1«..Ti:E;"OOis§iixi1,ss1ONER OF INCOME TAX
_ - _Cv.R".B_U1..I;D1N--§,
" ._ Q,UEEl'\iS__ ROAD,
1 ,__BANGALC.}RE.
THE 1'r;1cOME TAX OFFICER
.INTE'RNATIONAL TAXATION,
_ WARD-19(1),
"QUEENS ROAD,
BANGALORE. ...APPELLANTS
i/
AND:
1SRO SATELLITE CENTRE,
GOVERNMENT OF INDIA,
DEPARTMENT OF SPACE,
VIMANAPURA POST, _ ,
BANGALORE -- 560 017;' * :3. L _,__RESPONDENT
(BY SR1 V.CHANDRASHEKAR, SR1 A~..SHA~N_K_AR, & SR1 M.LAVA, ADVOCAT'E-SfFOR_'SRI 'D,S;AN1RuDHA, ADVOCATE) 2
-- . . . --._ >l<>l<>.l'~ '-
This 1TA"1Vfii'ed'~--un'd'::r'sec,tion 260-A of I.T.ACt, 1961 arising ____ _,ou't..,%V"'oT?.;__oid_e'r_dated ,fi'11.07.2008 passed in ITA.l\lo.75'7/.lE;5l\lG/ZiOO8','»._" for "the Assessment year 199291993, Spraying _to»foFm'ulate the substantial questions of law7sta«ted --th'erfein,'..aTl'l»o,w the appeal and set aside the order "1-passed" the ITAT, Bangalore in ITA,N_o.757*/BNG./2008 "dated 11.07.2008 Confirm the Orders th"e~..Appellate Commissioner and Income Tax ' Off.iCe:,.g,~,Iriternatioh'a'l'Taxation, Ward--19(1), Bangalore. ' ,.,,1'L_A_.flo'.11,,1'3../2008:
1=1..*ET\m¢'_--E_i~'_'4_:_ 'THE 'COMMISSIONER OF INCOME TAX
-.._C.R;BUi:»LD1NG, QUEENS ROAD, A a nZ.P..TEl-l#lENTNA{JI8lEfiE'TAX OFFICER INTERNATIONAL TAXATION, " "WARD--19(1), QUEENS ROAD, (BY SR1 M.V.SESHACHALA FOR SR1 i<,;1\i'..ARTA\/T1'N1'>', it I Z 1%? ?\'lA'lElll'::' 'TAX OFFICER
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WARD--19(1), QUEENS ROAD, , _ , BANGALORE. '_fm 'C v,mx _ (BY SRI M.V.SESHACHALA FOR-.SRI i<.v.ARAvIND,,ADvs.) AND: " " " ' ISRO SATELLITE CENTRE, _ GOVERNMENT OF INDIA,' '-
DEPARTMENT OF SPACE, '-
VIMANAPURA POST, "
BANGALORE :4 56o'o17 .. 2: ...RESPONDENT (BY SRI v.CH-AN RASHEKAR, S-RI A.SHANKAR, & SRI M.LAVA,"'ADV'OCAT'ES"-FOR SR1 D.S.ANIRUDHA, ADvOCATE)--._ 1, 1- This 'ITA"'.*fi'i'e_.d"iun'd.e'r--._section 260--A of I.T.ACt, 1961 arising out of"o~rd'er__"~da'ted 11.07.2008 passed in ITA.No.76Q/BNG';'2_oo8»,_"--_,. for the Assessment year 1995_--_1996,*p_ray.i,n=g to formulate the substantial questions of law stated 'therein,V allow the appeal and set aside the ' order passed "by the ITAT, Bangalore in _ . ITA.Nov.7.60/BNG/2008 dated 11.07.2008 Confirm the ordersfovf»vth.e"Appe||ate Commissioner and Income Tax 'Off-i.Cer,' In_t.er'national Taxation, Ward--19(1), Bangalore. .121 (2003:
I BETWEEN:
1. THECOMMISSIONER OF INCOME TAX ' " '*~C.R.BUILDING, g " * QUEENS ROAD, l'»AAPi?VE"i;LAl\lTS 'V 1'
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INTERNATIONAL TAXATION, WARD--19(1), QUEENS ROAD, BANGALORE. ...APP.ELLA.NT':?s_ "
(BY SR1 M.V.SESHACHALA FOR SRI K.v.ARA,vIN---D,'ADi[S{)-7 I AND:
ISRO SATELLITE CENTRE, GOVERNMENT OF INDIA, DEPARTMENT OF SPACE, VIMANAPURA POST, _ BANGALORE - 560 01.'/".~..__ ...RESPONDENT (BY SRI V.CHANDRASHEKA'.l2,'SliI'vA_.5l?l:5..l§l.l{AR, & SR1 M.LAvA, AD\/OCA'l"E»S.fFOR_SRI D.S,'ANIRuDHA, ADVOCATE) » 'V >i<>i<>_i<, :g This ITA""fi1'i:e,dVunder'S'ec:tion.? 260-A of I.T.ACt, 1961 arising" o'ut._{Of 'i'§)'r'cle'r"».,.A"date_d 11.07.2008 passed in ITA.NO,,76_1,'BN'G/2,008,'»__ "for - the Assessment year 1996-1997,. prayi'rIg'~to"fo'rm.ulate the Substantial questions of law stated therein, »-allow the appeal and set aside the order__ pa"ssed._§ by the ITAT, Bangalore in V ITA.._i{\lo.7.61/BNG_/2008' dated 11.07.2008 Confirm the ""~._ord.ei*s;_~Of the Ap'pe'l'iate Commissioner and Income Tax ,C}f.fiCer_,' International Taxation, Ward--19(1), Bangalore. ITL.A,hI[2008:
BE_'_l'WEvEN:----:. *
1. THE COMMISSIONER OF INCOME TAX .. ,_C.R;BuILDING, 9 _ QUEENS ROAD, lg BANGALORE.
_.18...
appeal and set aside the order passed by the___ITAT, Bangalore in MP.NO.91/Bang/2008 "..(In ITA.NO.755/BNG/2008), dated 24.10.2008 confiwrm-.. the orders of the Appellate Commissioner and order passed by the Income Tax Officer,_.fInternati--onal Taxation, Ward--19(1), Bangalore. ITA.N0.154[200g:
BETWEEN:
1. THE COMMISSIONER OF*INc.OME'T.Ax ._ * C.R.BUILDING, QUEENS ROAD, BANGALORE.
2. THE INCOME TAX Oi=FIcVER'j** INTERNATIONAL TAX'ATION',.f=._ I WARD-19(1)?' C.R.BUI4l.DING", -1 h V, QUEENS F<_,GAD,"-. V " I' BANGALQRE';T;,_ I ~ ...APPELLANTS (BY sR_1 M.-\/:'SVESH:1\C_H'Al;A-;__ADVOCATE) AND:' 4' 0 3 W IsR<.;) SATELLITECTENTTRE, GO':y'ERINMENT OF'I~N--O'1A, V' DEPA.RTME'NT, OF SPACE, VIlVi/\_NA P'U.,F'<'A_'PQST, BA'l_\l,GA'LO~R_E ...RESPONDENT M.LAVA,";ADVOCATES) (BY--- sRI' VECHANDRASHEKAR, SR1 A.SHANKAR, & sRI >l<>l<* _ This ITA filed under section 260--A of I.T.Act, 1961 arising out of order dated 24.10.2008 passed in Q/, -19- MP.NO.92/Bang/2008 (In ITA.No.756/BNG/2008), for the Assessment year 1991-1992, praying to formulate, the substantial questions of law stated therein, ai'l.O:'w._'the appeal and set aside the order passed by.«~.the_"IT.AT,.
Bangalore in MP.NO.92/Bang/2008 ITA.No.756/BNG/2008), dated 24.10.2008' "con.fi'rm the orders of the Appellate Commiss.i.oner _and""-co.nfi'rrn.. the order passed by the Income "fax Off.ice_r,-1'In_tern,atioVna«' Taxation, Ward--19(1), Bangalore-"=9 ITA.NO.155[ 20Q9:
BETWEEN:
1. THE COMMISSIONER..OF INCOMETAX C.R.BUILDING, " 1 QUEENS ROAD, V BANGALORE.
2. THE INC.O-ME§T_AX ~OjEE1:cER___.-- 1;: A INTERNATIONAL.TA'><ATION--, WA_R_D--1~9("1)7;._;.,v C,R.BUIA.L.[:»1NG:;gV"' _ Q'U_EE.l\l--SVRC3AD,'<» A BA'NGAaLORE.'~. " ...APPELLANTS (BYVSVRI M';v.sEsVH.AC--HAL'A, ADVOCATE) V ., A. ..... .. W vIs'_RO 'sATE'LE'ITE CENTRE, " ._GO__\/«ERN'M.ElxlT"OF INDIA, DEPARTM'E"NT OF SPACE, v1MAN--.APuRA POST, BANGALORE. ...RESPONDENT (BYESRI V.CHANDRASHEKAR, SRI A.SHANKAR, E ".&"S'RI M.LAVA, ADVOCATES) *>l<* V
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(BY SRI M.V.SESHACHALA, ADVOCATE) AND:
ISRO SATELLITE CENTRE, GOVERNMENT OF INDIA, DEPARTMENT OF SPACE, VIMANAPURA POsT, _ * = A ;
BANGALORE -- 560 017. ~' ...R~ESP.ONpvE'NT'---_ (BY SRI v.CHAN0RAsHEKAR,'E-..,,sRI"~,A,sHAN.KAR,~--~.&' sRI'-T' M.LAVA,ADVOCATES) >l<*>l< This ITA filed un'der--.seCt3i--oh 250.-,A-,.or I.T.Act, 1961 arising out of order '-dated :24..,1'O;',2QD8 passed in MP.NO.97/Bang/2008 ;('In" ITA.N.o;761'/BNG/2008), for the Assessment ,ye'a.r,,I"1996<:97', "pray'i'P.g._....1to formulate the substantial.--q-u4esti_o.nsv ,.o_flaw-._'sLtated therein, allow the appeal and set»."aside"'--t,he"---o.rdei: "passed by the ITAT, Bangalore 3:.;§:r_i_ ._"MP,.N_Q,.97/Bang/2008 (In ITA.N0.76V1/B,lilG/23008),»._"dated 24.10.2008 confirm the ordersa_of._ the"A'p_pell,ate*Co'mmissioner and confirm the order passed -by'~'the"--I__ri\:.ome Tax Officer, International Taxation,'*--Vl/ard-19(1),=l3a_.ngalore. . «.r._BE:TWE.Emz _____ _ THE"COMM_IssIONER OF INCOME TAX " ._ ._C«.R;'I3UI_Lo_I'r\'lG, ' .,_QuEE.N's-ROAD, 'BAN.(;AL'ORE.
_ 2,-THE 'INCOME TAX OFFICER
" " '_ INTERNATIONAL TAXATION,
'wAR0--19(1),
I C.R.BUILDING,
-28-
AND:
COMMISSIONER OF INCOME TAX-
(INTERNATIONAL TAXATION) &
INCOME TAX OFFICER (INTERNATIONAL TAXATION) 6TH FLOOR, NRUPATHUNGA ROAD, A BANGALORE.
(BY sRI M.V.SESHACHALA Fo.R°sRI K.Cv.VARA\'/INO;AOv:s.) This ITA filed un'V_d*e_r section" .250"-~A of I.T.Act, 1961 arising out of order-~ d.at-e_d§. :.21';0f7,20_10 passed in ITA.No.424 to 437/Bang/2008,' for:'~thef_'Assessment Year 2000-01, 2001-2002 &'"2'00'2-20:03, pra\/"ing to formulate the substantial'U}J,§3stiO.nsgofllawp state_d.§ therein, allow the appeal and.wseti';ja_s.ideorders passed by the ITAT, Bangalore: in,-4"RITA';-No§4'24'«to "3437/Bang/2008 dated 21.07.2010"~by"'he;lVdjr»g_"'that"therefis reasonable Cause for delay Eh filvihgfappeials tothe CI.T(A).
ITA.No.4:1.9 Z BETWEEN; - _ ISRQ 'SAATELLI'TE.._.CENT:RE " * _INLIIAN,_---SPACE RE'sEARCH ,C)R_GANIS_/--\T4ION, _ OLO" 'AI'RRO»IRTI__RoAD, "I/_I'MANA'RuR_A'POST, BANGALORE. 560 017. ...APPELLANT sRI \:.CHANORAsHEKAR, ADVOCATE ._Fo.R__sRI'C A.SHANKAR & sRI M.LAvA, ADVOCATES) l/ _34_ TAXATION) GT" FLOOR, NRUPATHUNGA ROAD, , 4, ~ ;
BANGALORE. \_ " ....__RESP'QN"DE'i\lT' (BY SRI M.V.SESHACHALA FORTSRI l<.v.ARAvI=ND,, ADVS.) This ITA filed undier SeCt,io.n"~~2'6.,0¥A_ of I.T.ACt, 1961 arising out of order jdatied" 2_1;i'07..,2'0.10 passed in ITA.No.433/Bang/2008,..for-theA,Sse;Ssrn--en't Year 2000-01, 2001-02 & 200.2-'O3, iprayinsg .tvo'~~.fo.rrnu'i:ate the Substantial questions ofi._»law?'Stat,e'd therei_n,».a'l!o'w""the appeal and set aside the?orders'?'..__pasS-edwby fife' ITAT, Bangalore in ITA.No.433,{Ba.n:g/2008.. da'ted"'21.'07.2010 by holding that there «isl"reaS"onabilfie'-Cause flor"'dO--lay in filing appeals to the CIT(A). ' ' 'V - I ITA.Ng' .426z--2o1'o;
BETWEENILV ISRO SATELLI'TE_CEN._TRE INp{IAN'R.SPACE. RESEARCH ORGANISATION, " _ OLD A_I.R|~'QRT ROAD,"
, 'V.I,Mr'\NA,F»'U4RAV POST, "BAl\lG"A|_OR'E., --"--'36 I D N oo17. ...APPELLANT (BY ,SR,I'Vv.LH-.ANDRASHEKAR, ADVOCATE "FOR SRI'A;_S.!*lANKAR & SRI M.LAVA, ADVOCATES) COM"M.,I_.'5SIONER OF INCOME TAX- * (INTERNATIONAL TAXATION) & * INCOME TAX OFFICER (INTERNATIONAL
-TAXATION), 6TH FLOOR, ENRUPATHUNGA ROAD, " BANGALORE. ...RESPONDENT\/ _40_ Company was with reference with the launch of INS/\Tg 3A- 3E satellites. The assessee was required to satellites to the location of the launch "
of the French Company. Arianespace to V' launch the satellite into geostatio'ina;¥§i}transfer shared Ariane launch whereV:""t.he lla'uncher's: 'p:a'yVl~oajd is"? made up of the assesses Sparcec'rga.ft"--»aAnd spacecraft of a third party customeroftitrianespace, on its part, was to no-tjfy the type of launch the two satellites.
The Services, except for Post--/a:unc.'7.be -'deemed to be completed by Arianespace WV/lvéni the has taken place." In terms of tlje" agreement, Arianespace rendered several services Ziasxset out .in=-the agreement to the assessee. Arianespace "p.€(y.!_i_de;""'..certain general range support like tralnspo-.rtati'on, payload, preparation analysis and V",'ope__ratiVo"ns for pre--launch and various miscellaneous "a_Vctivities. All the activities are highly sophisticated and \/u
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involve a complex nature of technologies. Therefore, the Assessing Authority held that the payments receiv'e_d'~._hy M/s.Arianespace from the assessee are technical services as per the definition in_--'Sectio_':n'V9{1).(vi.i)""
of the Income Tax Act (for shortihereinafter._'r'eferr'etj"~e,,_go"i'as the Act). The Assessing 'A_u't.h.ority'v.a--lso rie:fer{r'ed.,,,to:
DTAA between India and ___ll:5ra:nce, feestforli technical services, where fees"'-for, 'tecifi'nicalVjV"~services defined as under:-- A . ,.."iThe:t:errn ':'~'f_ees for tjechnical services" as used .,in-iitlhe Artic/eirrnea/is payment of any kind per3so'n,"'~n.therutnavn payments to an 'employee"of_ti:e"p,e'rson making the payments andgto any iridividuai for independent personal ~..services.u "mentioned in Article 15, in if isoyns/deratioriwrfor services of a managerial, " ~ --t_e'ch'nic'al or consultancy nature."
-.''''''In view of the aforesaid clause, the Assessing A.u_thori"ty was of the view that the services rendered by "'._A'r'ia'nespace clearly fall within the aforesaid definition of V -42- technical services. Accordingly, payment madev'~.b,y4.,l_lt~hve assessee to Arainespace and M/s.Intelsat_.3i_s""fee--«._ffo.r_x'T. technical services/fees for ancillary sen/i'ce--s:'_wvwh.ich, is chargeable to Indian Income--tax recipient. Thus, the Indian -Phayeé/.t_h'e have deducted taxes at the intgterms of the respective DTAA/'S;e'ctior.i_VAd.t;.:Sl}T«.__i'eVa*d.withvléection 195 of the Act, which has
4. 2, also entered into an agre.e.m_e'i1.t:"w'i1i';ha«n_American Company for the purpose of and command support chargesifor savtél-!i:t"es' by the assessee. It is also a _h;ig"i.l.y soprhistivcated"technical work, which is being by thevflltmerican Company. The technical input made available by M/s.Intelsat to the ads'-s_ess_e'e used by the assessee to control the Amoveménts and other functions of the satellite. These are the technical services and it would squarely fall within k/
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7. When the appeal preferred by the assessee before the Commissioner of Income Tax (Appeavl.sf).i_l'wVas dismissed, the assessee paid the entire surn*..du4e"-ajs---i demand notice dated 13.07.2_0Q1_._ Assessing Officer charged interest from 01.07.2001 to O8.02:g20..Q2 'bytisauiinéiA"':??'i"i«sd.emand*VJ notice on 22.02.2002,.' whichy__yyVas_'s:3rvec.j--g.mwh§ifiassessee in March, 2002. Tho0g.h:"thei--V_asselssee'challenged the main order of the Appellate1Q0:01misVsi«§%.ger..'divsmissing the appeal affirming Authority, the assessee against this demand for leyy _ I period up to the date of payment alsol'ey,iliofsiénlterest under Section 220(2) of the4..~§c't.c.. He.Vfil»e,d'V'a'ppe'als after a lapse of five years with an ""'apvp'iicaEtion:V%:for condonation of delay before the CIT(A). A2"'$i'rriilarly"'--t.hefAs'sessing Officer levied interest in respect of the"«..ord,.__er -passed on 13.07.2001. The assessee for these :."',!ea'rs also filed appeal along the condonation of delay.
-"CIT(A) and Tribunal declined to condone the delay and h/.
_51...
the income by way of technical services payable to a.__non-- resident, the payee i.e., the assessee shou_ld._::'-have deducted tax at source. The Tribunal was__--in be:-.+gro[i holding that the service rendered isgnot a tec'h"ni:calservice, l"
but it is only hire charge which isV'con%;rary te'rriis."6f:
the contract and material o;n'4--.._recordV. and 't,heVr.efo.re,3 he 2 L' submits that the said order requires to be.setl_a.sidg},
9. Per contra,H%ffgounsel for the assessee submitted. th:e:"l'1fi\r.st_:Wpflace the services rendered do not fall within the mischiefof Even otherwise, as understo_od amendment, unless the said service is r_en~d_ere"d in India, the assessee was not ton:deductV"'ta->4-«from the income paid to the non-
ilw.,'resi'de,n"t,:_"That*-apart in view of the agreement between India'héand'V'VoIthrer countries of the world, when the word la_,technical':service as defined in the said covenant, has been A f"gi,ve"ri«_.a restricted meaning to the effect that only in the event of make available or transfer the technology used for l/ _52..
rendering technical service, the said income is regarded as fee for technical service and chargeable to tax in_4vI.n:d~i_al;-._v If there is no liability to pay tax under law(_.-§the'ref:'i~sT' no' obligation to deduct tax at source__as is"Cl'ea'r.t'i'on1.V it wordings of Section 195(1) of the :_d'I'n.c:onfie_' therefore, he submits that th_e«.ultind"a~te'finding' Crjelcofded the Tribunal that there is cannot be found fault with. It that the orders have been passed afte--r~:.1Q yleairgs cases i.e., for 88.89 to 9.9V.b:o by limitation.
1' facts and the rival conte'ntion.s,AV"thVe,_ 'ques_ti'on_s- of law that arises for our consideration are: ,\ ' "(a) iiwhejthler the service rendered by a non- ..resident'is a technical service? _ I:/ii/hether the remuneration paid in lieu of .. technical service is liable to tax under the ' -.:"'Act and if so, whether the assessee is liable to deduct tax under Section 195 (1 ) of the Act?
12.
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The entire claim is based on Section <_3__(1)(vii) of the Act, which reads as unden-
"9.(1) The following ""
deemed to accrue or arise in India.'_+~~-~ .-- _
(vii) ( a)
(b) xxxxx xxxxx income by wa_y"'-of fees:
services payable V 2 V the Gover"n.[_nen_t;"ore-Iii' V A a person is'at.§i»'e'sident,.VLe:<cept where the. fees.~"'avr-éf pa.ya_b'.'e'i_ " respect of business or profession"-{¢ari'ie'd by such person a, India the purposes of oi*i._ea-r_r:in-lg any income from any " 'fndia; or _ a" peivason who is a non--resident, where the--~.,f_ees are payable in respect of _ "s_ervices utilised in a business or lVVp,ro~fession carried on by such person in 'v'vie:'i_'fndia or for the purposes of making or ' earning any income from any source in India:
[Provided that nothing contained in this clause shall apply in relation to any {/
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income by way of fees for technical services payable in pursuance of agreement made before the 15' April, 1976, and approved by the':jCe/7tra.l Government.] _ [Explanation 1 . - For of ' ~ .. ' foregoing proviso',-._an agreemenitfimadej on or after the VH15.'_V":'d,e_2Vy of April, t;976, shall be. "'deemed'_'t'et_hvave been "made before that _e_'date.ii'»Vi§' V'*_,ag.r_eement is made in.-"accfordance with proposals Government ]._- .--.'-'or the purposes of this clausé}. "fe'esa for technical services" imeans Aanytconsideration (including any personnel) but sum consideration) for the rendering of any managerial, technical or consultancy services (including the V ' --. provision of services of technical or other does not include consideration for any construction assembly, mining or like undertaken by the project recipient or V vVG'o.ve_rnm'evn(t'~--.__ of India Act,
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consideration which would be income o_f the recipient chargeable under the hVea:d7._V "Salaries ] (2) Notwithstanding anything.V-corrta/nerd.) I in sub-section (1), any penvsion-:'pa_ya_b.le"'V"h outside India to person"
permanently outs:-dge India shall"'i=.iot,..,be~3 deemed to accrue°o_r'arise irilndia, if the pension is ~ ..pa yable " " person I referred to in article'3'14'theitfonstitution or to a p.erson:.-'w*h.o, ii.=1'ving"'_bee.n' appointed serge} the 13"' dayj'o'l"'A--z,'gust, 1947, to I Federal Court or of a e._yiiligliI:;,Court-._with*in....the meaning of the 1 935, " Icontiii.ues"---.to'«'serve on or after the comnven-cement of the Constitution as a Judge___ in. India.
Exp/anation.- For the removal of doubts, his hereby 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) or clause (vi) or clause (vii) of sub--section (1) and shall be included in the total {X -57- France and India for the avoidance of double taxation with respect to taxes on income and on capitai, the undeis,i_g~nVed agreed on the provisions which form an Convention. Clause 7 reads as under;--
"7. In respect (Dividends), 12 (Interest) and'.1.3 (Royfa,lties,_:"; I fees for technical serviicies and'*--p_ay'ment's for the use of equipgrr.---c~*n..'t_),"'*~-.1'.f under ./Eany Convention, Ag-rxeement2.j_>' :Vor'fvPriotoco/ signed after 1" Septemlqer :betwee.r;V--.India and a third State_- .which iisfxa aenibei or the OECD, In d/fa" "t'aj_;;.a;tion '---atjfsoVL_/rce on dividends, interest-, ro,yali'ies,VA'fees_:for technical services or :,VipaymeIn_ts_Afo,r thefuse of equipment to a rate "lower or a'«s'cope.°m,otfe restricted than the rate ofhhscope provided:_".for in this Convention on the ' "said items' of income, the same rate or scope as providedhhhfor in that Convention, Agreement _ "or'P.rotocol on the said items income shall also Qvnvder this Convention, with effect from .th'e-date on which the present Convention or " the relevant Indian Convention, Agreement or Protocol enters into force, whichever enters into force later. " \{/ _58-
15. The Double Taxation Avoidance--- with USA at Clause 4 of Article 12_ reads a_s.Vu'nd:;>T;,.; "4. For purposes of' tféis'~arti'c!e; ..l'iTee'=[l""«.VlA:lA for Included services f'. 'means " payrn en.t's"' of 'any; kind to any person in"s«t.Vco.nsider'a.tion.?forv_ the rendering of any techn/'cal""-»or consultancy services (including _Atié2ro:jgh"prov/s/on of services of technical or otfzfer-'pers~on.rie/) if such Servicesiq .
(a) _ .,_an.d :fvsub.s/diary to the Z',_appfication.odor' enjoyment of the right, information for which a = ' in paragraph 3 is 4' .receivéd; it ..,(b) hnake available technical knowledge, eXperi'en-Ce, skill, know--how, or
--..,A:pro__cesses, or consist of the development transfer of a technical plan or . l " j_1echnica/ design. "
.16'. The Government of India, Ministry of Finance oi"-..vhas..i"issued a Memorandum of Understanding concerning l/i
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Fees for included services in Article 12 between India and USA. The relevant paragraph reads as under:--
"Paragraph 4(b) of article 12 'V' technical or consultancy services available to the person acquiring the sen/_ice"' technical knowledge, expei'ien.ce",( skill! how, or processes, *-.._Vor consist of..<...tl,7,e..3 development and transuferiof a tecirnical plan or technical desigri~..,_to such '(Forbthis purpose, the person service shall be deemed to:,inclucle'--an._a'gent".nominee, or transfe'ree;.t:,of st/ch: " category is nar.é*owe'r V"'th-an categoiy described in _,oa.ragraph*1s§(a)».be.cause«.it. excludes any service '.,_that. do'e's_techno/ogy available to the person 'acqjuiriiig_A""'.the service. Generally _ spea«.l<ing,. Vtechnology will be considered "made avai/able'5.,Vwhen the person acquiring the is enabled to apply the technology. or taCt_i.~that the provision of the service may technical input by the person providing gt 'the.'s.ervice does not per se mean that technical knowledge, skills, etc., are made available to the person purchasing the service, within the meaning of paragraph 4(b). Similarly, the use '/ _6o._ of a product which embodies'--tech;no/ogyliv not per se be considered;'_"to' make' tilde----._°7l technology avai/ab/e.f': ' 'A V 2
17. The conltract lvvbetyjveen the assessee and the provides for the nature of it very clear that it is not ai the satellite from the "-It'-istcerta_i'ri'iy"§not hiring the facilities to the delivers the satellites for launchinlg'-the Vsa.mAe.V_"i'n.to the orbit, as is clear from the te_jri'«ns__gofVVy_the 'agre.e«ment, a series of complex technical ' ..opera't.io'ns'-.h"ave to be conducted by the French Company "w.h'ich ia'lVsoV..a1'includes launching the satellite into orbit. Thei'.efo_reV, the finding recorded by the Tribunal that the A ireinuneration paid by the assessee to Arianespace is in the Vgnature of hire charges, on the face of it, cannot be accepted. The remuneration paid is for technical services rendered by the Arianespace to the assessee for launching i/i "';_V'irre'spective of the fact whether the non-resident has l/ _62_ rendered by the Courts holding that to attrahctg the aforesaid provision, the technical services been rendered in India, the Parliamerit~._:inse'rted " it explanation making its intentio;.iAcl'ea«r, F._Ti'ieAlV:ex_plariation inserted by the Finance Act 20i'Q lingsubs1;'irtijt~io'nlV provision inserted by Financ:e"'-iAct,.2--0O7-:rnaVkesmit very' clear. The said provvision rea'd's'*asjr iinnd._er:-- ' "Exp/anation.i.¥Forv ren-7.o;vair".of doubts, it is hereby deciaredt: that}-for V-the" purposes of this rsé,ctic;:n,., /'nCorr}erV of__.-.3' jjnoiierésident shall be deéme€i':.Vto arise in India under vi'ci'aus¢j;(E;-r--cia.qse ('ii/i)"or clause (vii) of sub- '..section be included in the total income of th'eVr'n.o'h-xrexsident, whether or not, - ii" (_i) Fthé non-resident has a residence or E_p;/ac_e ofV"Vb:-A-!si.*iess or business connection in _ VIndia_*-or the non-resident has rendered services in India. "
In the light of the aforesaid explanation _.63._ rendered any service in India or not, the income accrued to such non~resident falls within the aforesaid However, as the contract in questions is__-'bet4w'e."eniA{thew-,» Indian Company and the Foreign,sCompa--ny;" §evcti'on'_19O;of"» the Act comes into operation.
20. Chapter 9 deals"*wit'h Double'Ta:<ativonWReliefs.V Section 90 provides 'for gra'nti'n.:g rje"l.i.ef inlvrespect of the income which has been plaidfolotvh _.u_n'dAerp_th.e Act as well as in the countryqto. wliiichi the belongs to and the said::' "g-i;\}}es--.._ajn"'--:overriding effect to the provisi'o'ns-a.of:'the:fiAct["The Apextourt in the case of Union of India iistndo/an and another reported in 263_ITRV'/"~0i6"(SC_) id-.ea'l~ing with this provision has held as A... . . . . . .. N :':"Ta.xation of foreign companies and other if no/"7;re,sident taxpayers:
' ' 43. Tax treaties generally contain a " provision to the effect that the laws of the two contracting States will govern the taxation of income in the respective State except when 1/ _65_ notification issued under section 90, is no longer res integra. V b' XXXXX A survey of the aforesaid cases -makets' "it clear that the judicial consensus inV"]'i7diaVi';as.g been that section 90 is specifically'intended. f enable and empower the Central Gov'ern'mentp"* V' to issue a notification for-.imp/einer;tat/'on"~of"the' terms of a doubled..ta:~:ation' '--.avoid7ance agreement. ' intliat._h'"happenAs,VA the provisions of such-caniagreemhen't,,hh_wtith respect to cases to whbich' ':fw'.h:ere-.V_theyr:apply, would operate the provisions of €the--:j_44_fnco.me+:taX_- Act; we a,DProve of the ~"reasoifiiingbifiiz decisions which we have V1,noticed.:V"fjlf".it"was not the intention of the Legislature . a departure from the
-- ., geneial principles. of chargeability to tax under gsection '"4-------and the general principle of .tVasuce_rtainment of total income under section 5 1"'voF._Z_ti2Ae~Act, then there was no purpose in _rnak'ing those sections "subject to the ~ provisions" of the Act. The very object of 'grafting the said two sections with the said clause is to enable the Central Government to ._67._ legislation like the Central Excise Act and Sales Tax Act, there are provisions for exemptionie.' from the levy of tax (see section 5A Central Excise Act, 1944, and section"~4tS(5)eo'f" _4 the Central Sales Tax Act,_1.956). we are unable to accept :=the,contentio'n'- A the delegate of a legislative?"-powerii;cannotf exercise the power Vof_:exemp'tion' statute. " . A
21. In the light of judgment of the Apex Court, havellil seelj--'.,_yvll1e'i;h"er there is any inconsiste:_n'c',/..i_n;:.th'-e"d«efini*tion"s technical service in the Act an.dl.tth_a'x't'~.i_ln it 22'."'e._ In the_'4VDTA~.A:.."'read with protocol as per Article
12.«.§which deals'-~wit_htvroyalty and technical services, etc., A the serv.i,ce_Sé"vare called FTS only if such services make 'availab'le."."gt.ec:h'nical knowledge, experience, skill, know- how,.0"r_processes or consists of development and transfer ofiitechlnical plan or a technical design. Therefore, a non- laresildent could be charged only if the technical service '/ _59_ DTAA with France. Therefore, unless the technical knowledge, experience, skill, know--how or proces.s'es'-are transferred to the assessee, the liability i'n--at:
arise. The said favourable clauses. in the"D'"l'A.A. protocol override the provisionsfof the the matter of ascertainment 'of__charg-eability_to{_incorne tax» ' and ascertainment of tota_l_V_u_l:V"in:co.rne _3extent of inconsistency with thVe'4-t.e'rms_
23. in dispute that the TEITIUTl?lficil:i~QV|:]'::.§"éf.:9r1MI rendered on a foreign soil. paid, the foreign company has not made avai.lAa'bl'e technical knowledge to the assessee nor"a,ny technical knowledge is transferred to the ass'ess'ee _an,_d therefore, the income derived out of .re.r._derivng.,,g'tecfhriical services is not liable to tax. If there is 0bgligat'i~osn cast on the assessee to deduct tax at source.
no"-.lialqilityf"to pay tax by a non-resident, there is no _.'70_
24. The Supreme Court in the case of G._E_ India Technology Centre P. Ltd., vs. Commissioner of"Injcome- Tax and another reported in [2010] 327 held as under:--
"Section 195( expression "sum chargea'ble "under ' the provisions of the We .need to;
give weightage V.i-itoiithose vvordsif:
Further, Section 3.1915 ; Ll.S'P:Sn'b'?.,e word 'pa yer' and__n_ot»._tn~e_ vii/oi7o'» , "assjessee The"«,oa'verl_is inrit 'an' 'Tassesfsee. The §.pa"yerh:be--comes;' an assessee-in--defau/t only ~ fails to fulfill the 's'tva.jt_i./tony' «obligation under Section it.195(1)."':~.ji'~..tlreiV.-payment does not Vcontain. theelement of income the payergllvcaniiot be made liable. He "cannot bedeclared to be an assessee-- " A " in::c'1e.fau/t. "
Z 25, lxxsimilarly even in respect of the services which 'AA'-otlthechnology or making available the technology which it 'is' rendered by the American Company, there is no transfer V
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was used by them in detecting the satellite_.b'éforé*.V:iVtv. brought under the control of the assessee. if it A
26. In that view of that the technical servicesV>re:'n'd_ered" by 't.hés:eVV':tw'o"'foreign' A companies to the assesseeAged-ounctis-atisfytthe definition of the technical services""a:s_.'presscri:be.d'di.nA'.éVthes. DTAA. As such it is not liableto was justified in setting-' by the Appellate Comm.i.s$,io'Vner' afigl..tli-etAssess:ing}Authority though, not for the for the reasons we have given in"'these once there is no liability to pa\/ita>i<~, the gu'~est_i_on.s of charging interest would not arise. A :As_Vinte'i=est:"was charged, it was paid. When the tax is btelvrefunded, even the interest also requires to belt.-mtrldlegi.
27. The order passed by the Tribunal setting aside it "the order of the Appellate Commissioner is confirmed. The l/ _-72..
order of the Tribunal directing the revenue to refund the interest collected is also confirmed. Thus, all th:e.r:e«vénVue appeals, in view of the reasoning above, ate éidisim-ilsgsegdl-.g and the substantial questions of" law favour of the assessee and against thee r-'ev'er_iu'e_.'" "
28. In so far as are concerned, the Appelliate committed a serious error in.gdismis»si-ng:~Vsi">t filed by the assessee on ufiive years ignoring the fact that thge challenging the liablliil' As these pertains to additional levy the orders passed which are subjectggmatter of '1rev'V'enue appeal in this batch. In view of revenue appeal the additional levy of interest wigl-E nots-iivrvive-"and the appeals are accordingly allowed. the condonation of delay and the orders are for 1/, #29:'. In respect of eight other appeals the issue is
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different periods (other than the period revenue appeals). In these eighitmappeapls" . with the cause shown and we co=ndo:ri'e./thléedelay"a'n:dA.._Vren_iit the matter back to the CI'T(A) accordance with the direction's«.cont_ain--ed «.Vin_the_%connected appeals disposed off' " ' 2'
30. the following:--
""" it filled by the revenue in ITA at 1/ NQVs;'532,'V200s--, f'S33f;*2'008, 534/20$\?1114/2008 to
- .. 152/21009 to 161/2009 are dismissed. /:'l:1:)fvl4he'v:Eappeals in ITA Nos. ITA.Nos.416/2010, 418/2010, 422/2010, 423/2010 and 1.44124/2010 are allowed and the interest levied are deleted.
(c) The appeals in ITA Nos. 419/2010, 420/2010, 421/2010, 425/2010, 426/2010, 427/2010, A/, C twanmbecs O"o'C'1(',"6 ak 53,; [2008] Cgwcrecfaog. \/,L(1€; ' 1 oiaieri 03.401 ~20lZ.
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428/2010 and 429/2010 are remandedétojtVhe4:'fi.i'e« pr the Commissioner (Appeals) by condoh_:i'ngjV'et.hVe' in filing the appeals. The :CIT(A). si'1a||_;ciis'Vpo\sVe'off the hi' it appeals within three month's'f:r--.r>_iVrA'ri the'_;ia"te of"
of a copy of this Prs*