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M. K. CHATURVEDI, J. M. :

These cross-appeals are directed against the order of the CIT(A), XVIII, Mumbai, and pertain to the asst. yr. 1984-85.

2. The assessee is a company existing under the laws of Denmark. It has its principal place of office at Nymollevej 55, DK-2800 Lungby, Denmark. By an agreement dt. 15th Feb., 1981 (paper book pages 20 to 180), it entered into a contract with Rashtriya Chemicals and Fertilisers Ltd. (hereinafter referred to as "RCF") a company registered in India under the Companies Act, 1956. It has its registered office at Administrative Building, Chembur, Mumbai-400 074, India. The agreement was for rendering consultancy services in relation to the design engineering, erection and commission of a chemical fertiliser complex. The Assessing Officer (AO) found that the following three payments received for rendering the services by the assessee, were in the nature of the management charges :

9. Sri Dastur submitted that it is an accepted rule of interpretation of documents, that the mere use of a particular word or words is not conclusive on the issue and the real nature of the transaction has to be determined by reading and construing the agreement as a whole. If the agreement is read as a whole, the only conclusion that is possible that that assessee was not rendering "management services" but were acting as consultants only. In the area of construction of RCFs plant, the role of the assessee was that of assisting RCF in the preparation of necessary technical documents (such as the list of qualified contractors and bid documents for tendering by various contractors; bid evaluation, selection of contractors who were to perform the actual construction/erection work and preparation of work order; and the proper putting up of the plant through supervision and co-ordination of the actual construction/erection, pre-commissioning and commissioning work which was to be done departmentally by RCF or by other contractors appointed directly by RCF.

10. All monetary aspects were settled directly between RCF and the contractors in question. The assessee acted throughout as "Consultants" only and not as managers. The management of the project remained with RCF. The role of the assessee was limited to supplying the technology and know-how and assisting RCF in the putting up of the plant by rendering technical, engineering and allied technological services by way of supervision of the work of other contractors. The assessee was not responsible for the management or the day-to-day running of any plant or business of RCF. The assessee did not have any powers which a manager can exercise. The involvement of the assessee was only till the completion of plant and commencement of production. The question that the assessee was running the plant or managing it, could not, therefore, arise at all. All the managerial activities were carried out by RCF. Thus, it is obvious that the services covered by Arts. 4.06 and 4.07 of the agreement are not management services but are technical services.

16. Shri Tilakchand, the learned senior Departmental Representative, appeared before us. It was vehemently contended that the amounts received in question by the assessee were of the nature of the management charges. These cannot be construed to be the charges for technical services. The assessee-company rendered to RCF project management services. Our attention was invited on the various clauses of the agreement to demonstrate that the amounts in question were actually paid for the managerial services and not for the technical services. According to the learned Departmental Representative, the totality of fact is to be taken into consideration. The responsibility of the Danish company as listed in the agreement proves beyond the shadow of doubt that these amounts were received for managing the installation work in India. The assessee-company had the managerial expertise.