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7. We shall now advert to the challenge thrown by the assessee to the sustaining of the disallowance of Rs. 13,97,363/- under Sec. 40(a)(i) by the CIT(A) as regards the payment made by the assessee to M/s Thermo & Plast, Slovania towards supervision charges. We find that the lower authorities had observed that the payment to the aforementioned foreign party was made by the assessee towards consultancy charges, viz. Excel Programme P a g e |8 ITA Nos. 1036 & 1037/Mum/2016 AYs. 2011-12 & 2012-13 M/s Chemical Process Piping Pvt. Ltd. Vs. R. M. Madhavi Additional CIT-10(2) for calculation of the pipe thickness in base of TUV report, excel programme for underground pipe verification according to the relevant AWWA standard, and fabrication trading for steel moulds for construction of the bell and for coupling. The lower authorities characterising the services renderd by the said party as technical consultancy charges/testing charges, had observed that as the assessee had failed to deduct tax at source from the above payments as per the provisions of Sec. 195 of the Act, therefore, the said amount was liable to be disallowed under Sec. 40(a)(i) of the Act. The assessee tried to impress upon the lower authorities that no obligation was cast upon it to deduct tax at source in respect of the aforesaid payment of Rs.13,97,363/- made to the aforementioned foreign party. It was submitted by the assessee that as M/s Thermo & Plast which was a non-resident concern had no permanent establishment in India and the services were rendered by the aforementioned party outside India and also the end manufacturing and exports of the assessee were in a location outside India, therefore, the consultancy charges were not subject to tax in India. The assessee taking support of the aforesaid contentions claimed that no obligation was cast upon it to deduct tax at source while making the payment of Rs.13,97,363/- to the aforesaid non-resident party. We find that the CIT(A) was not persuaded to subscribe to the aforesaid claim of the assessee. The CIT(A) was of the view that pursuant to the retrospective amendment to Explanation 2 of Sec. 9(2) by the Finance Act, 2010, all the payments made to a non-resident outside India shall be taxable in India, regardless of the fact whether the services have been rendered in India or not. The CIT(A) held a conviction that it was the situs of the payer and situs of utilization of service, which pursuant to the amendment was relevant and not the situs of rendering the services. It was observed by the CIT(A) that as the payments made by the assessee to the non-resident company were squarely covered by the Explanation 2 of Clause (vii) of sub-section (1) of Sec. 9 of the Act, therefore, it was clearly a payment made for technical services rendered by the non-resident party. The explanation of the assessee that as the services rendered by the non-resident service provider (recipient P a g e |9 ITA Nos. 1036 & 1037/Mum/2016 AYs. 2011-12 & 2012-13 M/s Chemical Process Piping Pvt. Ltd. Vs. R. M. Madhavi Additional CIT-10(2) of income) were utilized by the assessee who was a resident payer for the purpose of earning income from carrying out exports, therefore, fees so paid to the non-resident service provider for earning of export income which was sourced outside India, as per Sec. 9(1)(vii)(b) would not be deemed to accrue or arise in India did not find favour with the CIT(A), who declined to accept the same. We find that the CIT(A) by taking support of the judgment of the High Court of Delhi in the case of CIT Vs. Havells India Ltd. (I.T.A. Nos. 55 & 57/2012) concluded that the export activity having taken place or having been fulfilled in India, the source of income has to be taken as located in India and not outside India. The CIT(A) further observed that Article 12 of the India-Slovania tax treaty covered supervision charges under FTS. The CIT(A) on the basis of his aforesaid observations concluded that the payment of Rs.13,97,363/- made by the assessee to M/s Thermo & Plast, Slovania was liable for deduction of tax at source under Sec.195 of the Act. On the basis of the aforesaid deliberations the lower authorities being of the view that the assessee had failed to comply with the statutory obligation of having deducted tax at source under Sec. 195 of the Act, therefore, concluded that the said amount was liable to be disallowed under Sec. 40(a)(i) of the Act.

1.1. On the facts and circumstances of the case and in law. the Hon. CIT(A) erred in upholding disallowance made for Supervision Charges of Rs. 29,67,963/- considering the same as Fees for Technical Services in respect of payment made to M/s. Thermo and Plast of Slovania. 1.2. On the facts and circumstances of the case and in law, the Hon. CIT(A) erred in upholding disallowance made for Testing Charges of Rs. 4,67,244/- considering the same as Fees for Technical Services in respect of payment made to M/s. TUV SUD Industries Services GMBH of Germany.

charges, M/s Thermo & Plast of Slovania.

(b) Disallowance of payment made for testing the Rs. 4,67,244/- charges to M/s TUV SUD Industries Services BMBH of Germany.

2. The A.O while framing assessment made a disallowance Rs. 1,90,623/-

under Sec. 40A(2)(b) of Rs.13,66,982/- which was scaled down by the CIT(A).

The assessee being aggrieved with the order of the CIT(A) had carried the matter in appeal before us. We shall first advert to the disallowance of Rs.29,67,963/- sustained by the CIT(A) in respect of payments made by the assessee to M/s Thermo & Plast, Slovania. We find that as a similar issue had been adjudicated upon by us while disposing off the Ground of appeal No. 2 in the assessee‟s own case for A.Y 2011-12 in ITA No. 1036/Mum/2016, therefore, said order in context of the issue under consideration shall mutatis mutandis apply in respect of the ground of appeal No. 1 raised by the assessee before us in the present appeal.

15. We shall now advert to the disallowance under Sec. 40(a)(i) of Rs.4,67,244/- paid by the assessee towards testing charges to M/s TUV SUD Industries Services GMBH of Germany. We find that the contention of the assessee that as per the provision of Sec. 9 of the Act, any payment made for rendering services outside India for earning income outside India is not taxable in India, did not find favour with the lower authorities. Rather, it was observed by the A.O that as per the retrospective amendment in Explanation of Sec. 9(2) of the Act by the Finance Act, 2010, payment made to a non-resident outside India shall be taxable in India, regardless of the fact that whether the services have been rendered in India or not. The A.O on the basis of his aforesaid observations concluded that as the payment made by the assessee to the aforesaid foreign party, viz. TUV SUD Industries P a g e | 14 ITA Nos. 1036 & 1037/Mum/2016 AYs. 2011-12 & 2012-13 M/s Chemical Process Piping Pvt. Ltd. Vs. R. M. Madhavi Additional CIT-10(2) Services BMBH, Germany was clearly as per Sec. 9(1)(vii) and Article 12 of India-Germany tax treaty towards "fees for technical services", therefore, on the failure on the part of the assessee to deduct tax at source under Sec. 195 on the payment made to the foreign party, the same was liable to be disallowed under Sec.40(a)(i) of the Act. We have deliberated on the facts pertaining to the issue under consideration and the orders of the lower authorities. The ld. A.R submitted before us that the payment made by the assessee to the aforesaid foreign party, viz. TUV SUD Industries Services GMBH, Germany, as per Explanation 2 of Sec. 9(1)(vii) was not in the nature of "fees for technical services". The ld. A.R further averred that as per CBDT circular No. 3/2015, dated 12.02.2015, the Board referring to its earlier Instruction No. 02/2014, dated 26.02.2014 had clarified that in cases where tax is not deducted at source under Sec.195 of the Act, the A.O shall determine the appropriate portion of the sum chargeable to tax, as mentioned in Subsection (1) of Sec.195, in order to ascertain the tax liability on which the deductor shall be deemed to be an assessee in default under Sec. 201 of the Act. The ld. A.R taking support of his aforesaid contention submitted that in the aforesaid circular it has been clarified that for the purpose of disallowance under Sec. 40(a)(i) which is interlinked with the sum chargeable under the Act as mentioned in Sec. 195, only appropriate portion of such sum which is chargeable to tax under the Act shall be disallowed under the aforesaid statutory provision. It was thus the contention of the ld. A.R that the lower authorities had erred in making/sustaining the disallowance under Sec.40(a)(i) of the entire amount of payment under consideration. We have deliberated on the aforesaid contentions of the ld. A.R and are unable to persuade ourselves to subscribe to the same. We find that the aforesaid Circular No. 3/2015, dated 12.02.2015 was issued by the CBDT in order to dispel doubts as regards the scope of disallowance contemplated under Sec. 40(a)(i) of the Act in context of "other sum" chargeable under the Act, which are payable outside India or in India to a non-resident, not being a company, or to foreign company. We are of the considered view that as disallowance under Sec. 40(a)(i) in the P a g e | 15 ITA Nos. 1036 & 1037/Mum/2016 AYs. 2011-12 & 2012-13 M/s Chemical Process Piping Pvt. Ltd. Vs. R. M. Madhavi Additional CIT-10(2) case of the present assessee is in context of the amounts paid by it towards „fees for technical services‟ to the aforesaid party, and not towards „other sum‟ chargeable under the Act, therefore, the aforesaid CBDT circular would not be of any assistance for its case. The contention of the assessee thus fails in terms of our aforesaid observations. We thus being of the considered view that as there is no reason for us to dislodge the well reasoned order of the CIT(A) in context of the issue under consideration, therefore, uphold the disallowance made under Sec. 40(a)(i) of Rs. 4,67,244/- as had been sustained by him. The Ground of appeal No. 1 is partly allowed in terms of our aforesaid observations.