Shriram Capital Limited v. The Director of Income-tax, (International Taxation), Chennai / The Income-tax Officer, International Taxation-I(2), Chennai
[Citation -2020-LL-0313-66]

Citation 2020-LL-0313-66
Appellant Name Shriram Capital Limited
Respondent Name The Director of Income-tax, (International Taxation), Chennai / The Income-tax Officer, International Taxation-I(2), Chennai
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 13/03/2020
Judgment View Judgment
Keyword Tags deemed to accrue or arise in india • fees for technical services • deduction of tax at source • consultancy services • non-resident company • insurance business
Bot Summary: Consultancy services rendered by the Non- resident company will fall under the category Fees for Technical Services and fees payable for such Technical services, though rendered outside India will be deemed as accruing or arising in India as per Sec.9(1)(vii)(b) of the Income-tax Act., read with Explanation to Sec.9(1), substituted by Finance Act 2010 with effect from 1.6.1976. Sec.9(1) : The following income shall be deemed to accrue or arise in India-: Income by way of fees for technical services payable by- : A person, who is resident, except where the fees are payable in respect of services utilized in a business or profession carried on by such person outside India, or for the purpose of making or earning any income from any source outside India. 4965 of 2011 a person who is a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India; or a person who is a non-resident, where the fees are payable in respect of services utilised in a business or profession carried on by such person in India 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 income by way of fees for technical services payable in pursuance of an agreement made before the 1st day of April, 1976, and approved by the Central Government. As per Article 12(3)(b), the term fees for technical services as used in the said Article means payments of any kind, other than those mentioned in Articles 14 and 15 of the said Agreement as consideration for managerial or technical or consultancy services, including the provision of services of technical or other personnel. As per Article 12 of the Double Taxation Agreement, fees for technical service can be taxed in the state in which it arises and fees for technical service means payment for any managerial, technical or consultancy service. The Technical Service would include any service in connection with the engineering service as it is associated with the service provided by the person technically qualified in the field of engineering. If the service utilized by the petitioner abroad was for pre- existing business in Indonesia, the petitioner could have legitimately stated that the service provided was utilized for a business of profession carried out outside India or for the purpose of making or earning any income from any source from outside India.


W.P.No.4965 of 2011 IN HIGH COURT OF JUDICATURE AT MADRAS Reserved On 20.02.2020 Pronounced On 13.03.2020 CORAM HON'BLE MR.JUSTICE C.SARAVANAN W.P.No.4965 of 2011 and M.P.No.1 of 2011 M/s.Shriram Capital Limited, Limited Company represented by its Vice-President, Mr.N.Mani, Mookambika Complex, No.4, Lady Desika Road, Mylapore, Chennai. ... Petitioner vs. 1.The Director of Income Tax, (International Taxation), VII Floor, Annexe Building, 121, Nungambakkam High Road, Chennai 600 034. 2.The Income Tax Officer, International Taxation I(2), VII Floor, Annexe Building, 121, Nungambakkam High Road, Chennai 600 034. ...Respondent Writ Petition filed under Article 226 of Constitution of India praying to issue Writ of Certiorarified Mandamus, to call for http://www.judis.nic.in Page No 1 of 29 W.P.No.4965 of 2011 records on file respondent and quash impugned order passed by first respondent in D.C.No.112(6)/264/2010-11 dated 17.02.2011 as illegal and without jurisdiction. For Petitioner : Mr.R.Sivaraman For Respondents : M/s. Hema Muralikrishnan Standing Counsel. ORDER In this Writ Petition, petitioner has challenged impugned order dated 17.02.2011 passed by 1st respondent in D.C.No.112(6)/264/2010-11. 2. petitioner had engaged service of law firm namely M/s.Oentoeng Suria & Partners in Indonesia for acquiring insurance business in Indonesia. Therefore, petitioner filed application under 195 of Act, before second respondent Income Tax officer, for exemption from deducting tax on payment to be made to aforesaid foreign law firm for service rendered by said firm in Indonesia. request of petitioner was rejected by 2nd respondent on 29.09.2010 with following observations. ____________ http://www.judis.nic.in Page No 2 of 29 W.P.No.4965 of 2011 above services rendered by Non- resident company, with regard to proposed acquisition of Indonesian Insurance company, by M/s.Shriram Capital Limited. is in nature of "consultancy services". M/s.Shriram capital limited is not having any business activity in Indonesia, and hence proposed payments are not for purpose of generation of any income from abroad by M/s. Shriram Capital Limited.. Hence service rendered by non-resident company are ultimately utilized by resident company only. "Consultancy services" rendered by Non- resident company will fall under category "Fees for Technical Services" and fees payable for such Technical services, though rendered outside India will be deemed as accruing or arising in India as per Sec.9(1)(vii)(b) of Income-tax Act., read with Explanation to Sec.9(1) (vii), substituted by Finance Act 2010 with effect from 1.6.1976. Sec.9(1) : following income shall be deemed to accrue or arise in India- (vii): Income by way of fees for technical services payable by- (b) : person, who is resident, except where fees are payable in respect of services utilized in business or profession carried on by such person outside India, or for purpose of making or earning any income from any source outside India." Explanation:- For removal of doubts, it is hereby declared that for purposes of this section, income of Non -resident shall be deemed to accrue or arise in India under clause v. clause vi or clause vii of sub section (1) and shall be included in total income of Non-resident, whether or not. i. non-resident has residence or place of business or business connection in India; or ii. non-resident has rendered services in ____________ http://www.judis.nic.in Page No 3 of 29 W.P.No.4965 of 2011 India. From above explanation it is clear that services are taxable in India, irrespective of place of rendition of services, and accordingly payments to Non-resident company, in this case, are subjected to withholding tax @ 10%. Plus applicable surcharge and Education Cess, under normal circumstances. But in this case Non-resident (deductee) is not having Permanent Account Number (PAN), as mandated U/s.206AA of I.T.Act, 1961, and such payments effected to Non-resident not having P.A.Number, will attract Tax Deduction at source at higher rate of 20%. Hence M/s Shriram Capital Limited, is hereby authorised to make payment to M/s. Oentoeng Suria & Partners, Indonesia, arising out of agreement, dated 6.9.2010, after deduction of tax @ 20% (Twenty Percent). This authorization is valid till 3103.2011 unless cancelled earlier under limitation to you. 3. petitioner preferred Revision Petition under Section 264 of Income Tax before 1st respondent. said Revision Petition has culminated in impugned order. In impugned order, 1st respondent has observed as under:- services are not rendered for purpose of business activities of assessee company abroad. Therefore it is clear that services rendered have no nexus with generation of income abroad, by assessee. Since assessee is not having any business activities in Indonesia, there is no ____________ http://www.judis.nic.in Page No 4 of 29 W.P.No.4965 of 2011 immediate possibility of earning any income from outside India also. Therefore place of utilization of services is wholly in India only. It is also possible for M/s Shriram Capital Limited, assessee to abandon proposed acquisition of Insurance Company in Indonesia, after availing consultancy/advisory services, of Non-resident company. In such situation, payments are not for purpose of earning any income from outside India event on future date, though Income-Tax Act does not specify creation of business or generation of Income outside India at future date. In such situation also, utilization of services rendered by Non-resident company is wholly in India. In both above possible circumstances, services are deemed to have been rendered in India, in terms of Section 9(1) (vii) (b) of I.T.Act. 4.The learned counsel for petitioner would submit that to deduct tax at source under Section 194 of Income Tax Act, 1961, such incomes should be either by received in India by recipient or deemed to have accrued or arise in India within meaning of Section 5(2) of Income Tax Act, 1961. He further submits that question deduction of tax at source for payment would arise only in circumstances, specifically mentioned in Section 5 of Income Tax Act, 1961, which reads as under:- Scope of total income. ____________ http://www.judis.nic.in Page No 5 of 29 W.P.No.4965 of 2011 5. (1) Subject to provisions of this Act, total income of any previous year of person who is resident includes all income from whatever source derived which (a) is received or is deemed to be received in India in such year by or on behalf of such person ; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year ; or (c) accrues or arises to him outside India during such year : Provided that, in case of person not ordinarily resident in India within meaning of sub-section (6) of section 6, income which accrues or arises to him outside India shall not be so included unless it is derived from business controlled in or profession set up in India. (2) Subject to provisions of this Act, total income of any previous year of person who is non-resident includes all income from whatever source derived which (a) is received or is deemed to be received in India in such year by or on behalf of such person ; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year. Explanation 1. Income accruing or arising outside India shall not be deemed to be received in India within meaning of this section by reason only of fact that it is taken into account in balance sheet prepared in India. ____________ http://www.judis.nic.in Page No 6 of 29 W.P.No.4965 of 2011 Explanation 2. For removal of doubts, it is hereby declared that income which has been included in total income of person on basis that it has accrued or arisen or is deemed to have accrued or arisen to him shall not again be so included on basis that it is received or deemed to be received by him in India. 5. To deduct tax for payment made to non-resident, income should be either is received or is deemed to be received in India in such year or on behalf of such person or accrues or arises or is deemed to accrue or arise to him in India during such year. 6. learned counsel for petitioner further drew my attention to Section 9(1)(vii) of Income Tax Act, 1961, which reds as under:- Section 9: Income deemed to accrue or arise in India:- (1) following incomes shall be deemed to accrue or arise in India:- (i)..................... (ii).................... (iii).................. (iv).................. (v)................... (vii) income by way of fees for technical services payable by (a) Government ; or ____________ http://www.judis.nic.in Page No 7 of 29 W.P.No.4965 of 2011 (b) person who is resident, except where fees are payable in respect of services utilised in business or profession carried on by such person outside India or for purposes of making or earning any income from any source outside India; or (c) person who is non-resident, where fees are payable in respect of services utilised in business or profession carried on by such person in India or for 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 income by way of fees for technical services payable in pursuance of agreement made before 1st day of April, 1976, and approved by Central Government.] [Explanation 1. For purposes of foregoing proviso, agreement made on or after 1st day of April, 1976, shall be deemed to have been made before that date if agreement is made in accordance with proposals approved by Central Government before that date.] Explanation [2]. For purposes of this clause, "fees for technical services" means any consideration (including any lump sum consideration) for rendering of any managerial, technical or consultancy services (including provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by recipient or consideration which would be income of recipient chargeable under head "Salaries".] ____________ http://www.judis.nic.in Page No 8 of 29 W.P.No.4965 of 2011 7. It is submitted that transaction which is under consideration fell within under exception to of Section 9(1)(vii)(b) of Income Tax Act, 1961, since fees payable was in respect of services utilised in business or profession carried by petitioner outside India and for purpose of making or earning any income from any source outside India. 8. It is submitted that amount which was paid by engaging services of aforesaid law firm was for purpose of making or earning any income from any source outside India within meaning of Section 9(1)(vii)(b) of Income Tax Act, 1961. expenditure incurred was for service procured for future business to be carried on by petitioner in Indonesia. Therefore, petitioner cannot made liable to deduct tax under Income Tax Act, 1961. 9. learned counsel for petitioner also submits that fact that Section 5(2) does not have clause similar to clause (c) to Section 5(1). It makes it clear that when non-resident is not liable to pay tax in India for service provided outside India, as such income can neither ____________ http://www.judis.nic.in Page No 9 of 29 W.P.No.4965 of 2011 accrue nor arise nor deemed to accrue or arise in India. 10. learned counsel for petitioner also referred to Double Taxation Agreement between Government of India and Government of Indonesia, notified by Notification No.S.O.1144(E) [No.17/2016 (F.No.503/4/2005-FTD-II0], dated 16.03.2016. 11. He referred to Article 12 of aforesaid agreement. particular reference was made to Article 12(3)(b) of said Double Taxation Agreement. As per Article 12(3)(b), term fees for technical services as used in said Article means payments of any kind, other than those mentioned in Articles 14 and 15 of said Agreement as consideration for managerial or technical or consultancy services, including provision of services of technical or other personnel. 12. learned counsel for petitioner further submits that petitioner is not liable to pay tax in terms of Section 5(2) read with Section 9(1)(vii)(b) of Income Tax 1961. He further submits that income neither accrued nor received from India, tax in resident tax in ____________ http://www.judis.nic.in Page No 10 of 29 W.P.No.4965 of 2011 India. 13. Even otherwise, there was neither technical nor consultancy services. As per Article 12(3)(b) of Double Taxation Agreement dated 16.03.2016 of Government of India, in other words, thus petitioner at best non-residential taxable at 10% and not 20%. 14. learned counsel for petitioner relied on following decisions:- i. Evolv Cloathing Co. (P.) Ltd., Vs. Assistant Commissioner of Income Tax, Company Circle II(1), Chennai, order dated 14.06.2018 passed by this Court in T.C.(A).No.572 of 2013. ii. Director of Income Tax Vs. Lufthansa Cargo India, 2015 SCC OnLine Del 9760. iii. Commissioner of Income Tax Vs. Toshoku Ltd., 1980 Supp SCC 614. iv. Commissioner of Income Tax Vs. Faizan Shoes (P.) Ltd., order dated 22.07.2014 passed by this Court in T.C.(A).No.789 of 2013. ____________ http://www.judis.nic.in Page No 11 of 29 W.P.No.4965 of 2011 v. Principal Commissioner of Income Tax-2 Vs. Motif India Infotech (P) Ltd., order dated 16.10.2018 passed by Hon'ble Gujarat High Court in T.A.No.1177 of 2018. vi. Clifford Chance Vs. Deputy Commissioner of Income Tax, Circle 2(6), Mumbai, (2009) 318 ITR 237. vii.Commissioner of Income Tax (International Taxation) Vs. Indusind Bank Ltd., (2019) 415 ITR 115 (Bom). viii.Jindal Thermal Power Company Limited Vs. Deputy Commissioner of Income Tax (TDS), (2010) 321 ITR 31 (Kar). ix. GVK Industries Ltd., Vs. Income Tax Officer, (2015) 11 SCC 734. 15. On other hand, learned counsel for respondents would contend that as per Explanation 2 to Section 9(1)(vii)(b), fees for technical services" means any consideration (including any lump sum consideration) for rendering of any managerial, technical or consultancy services (including provision of services of technical or other personnel). She submits that it does not include consideration for ____________ http://www.judis.nic.in Page No 12 of 29 W.P.No.4965 of 2011 any construction, assembly, mining or like project undertaken by recipient or consideration which would be income of recipient chargeable under head "Salaries". She further submits that any amount paid by resident to non-resident for managerial, technical or consultancy service is considered to be fees for technical service and therefore petitioner is bound to deduct tax in India. 16. As per Article 12 of Double Taxation Agreement, fees for technical service can be taxed in state in which it arises and fees for technical service means payment for any managerial, technical or consultancy service. 17. She submits that arguments of petitioner that payment does not qualify as fees for technical service since it is only made for getting legal service and does not have any technical component is based on restrictive reading of Act and Double Taxation Agreement. They both include consultancy as fee for technical service as well M/s.Oentoeng Suria & Partners has been roped in to provide consultancy to petitioner in connection to acquisition of Indonesian ____________ http://www.judis.nic.in Page No 13 of 29 W.P.No.4965 of 2011 company. Any payment made for legal counsel therefore falls within ambit of fees for technical service as per both Income Tax Act and Double Taxation Agreement. 18. submission of petitioner that service rendered in Indonesia only and payment was also received in Indonesia, is to be rejected as neither Income Tax Act nor Double Taxation Agreement say that only is such service is rendered in India can sum be taxed here. technical or consultancy service can be rendered anywhere, Income accrued in India. source of income is from petitioner who based in India, hence income accrued in India due to connection. 19. It is submitted that exception in Section 9(1)(vii)(b) of Income Tax Act, 1961, does not apply because payment was not made for earning any income in Indonesia. It was only for acquisition of Indonesian company, which is part of investment of petitioner company. Hence, payment does not have any nexus with any income earned abroad but only for investment, which is part of business of ____________ http://www.judis.nic.in Page No 14 of 29 W.P.No.4965 of 2011 petitioner operated from India. 20. I have considered arguments advanced by learned counsel for petitioner and respondents. 21.Section 195 of Income Tax Act, 1961 reads as under:- Other sums. 195. (1) Any person responsible for paying to non- resident, not being company, or to foreign company, any interest (not being interest referred to in section 194LB or section 194LC) or section 194LD or any other sum chargeable under provisions of this Act (not being income chargeable under head "Salaries") shall, at time of credit of such income to account of payee or at time of payment thereof in cash or by issue of cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at rates in force : Provided that in case of interest payable by Government or public sector bank within meaning of clause (23D) of section 10 or public financial institution within meaning of that clause, deduction of tax shall be made only at time of payment thereof in cash or by issue of cheque or draft or by any other mode : Provided further that no such deduction shall be made in respect of any dividends referred to in section 115-O. ____________ http://www.judis.nic.in Page No 15 of 29 W.P.No.4965 of 2011 Explanation 1. For purposes of this section, where any interest or other sum as aforesaid is credited to any account, whether called "Interest payable account" or "Suspense account" or by any other name, in books of account of person liable to pay such income, such crediting shall be deemed to be credit of such income to account of payee and provisions of this section shall apply accordingly. Explanation 2. For removal of doubts, it is hereby clarified that obligation to comply with sub-section (1) and to make deduction thereunder applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not non-resident person has (i) residence or place of business or business connection in India; or (ii) any other presence in any manner whatsoever in India. (2) Where person responsible for paying any such sum chargeable under this Act (other than salary) to non-resident considers that whole of such sum would not be income chargeable in case of recipient, he may make application 48[in such form and manner to Assessing Officer, to determine in such manner, as may be prescribed], appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of sum which is so chargeable. (3) Subject to rules made under sub-section (5), any person entitled to receive any interest or other sum ____________ http://www.judis.nic.in Page No 16 of 29 W.P.No.4965 of 2011 on which income-tax has to be deducted under sub- section (1) may make application in prescribed form to Assessing Officer for grant of certificate authorising him to receive such interest or other sum without deduction of tax under that sub-section, and where any such certificate is granted, every person responsible for paying such interest or other sum to person to whom such certificate is granted shall, so long as certificate is in force, make payment of such interest or other sum without deducting tax thereon under sub-section (1). (4) certificate granted under sub-section (3) shall remain in force till expiry of period specified therein or, if it is cancelled by Assessing Officer before expiry of such period, till such cancellation. (5) Board may, having regard to convenience of assessees and interests of revenue, by notification in Official Gazette, make rules specifying cases in which, and circumstances under which, application may be made for grant of certificate under sub-section (3) and conditions subject to which such certificate may be granted and providing for all other matters connected therewith. (6) person responsible for paying to non- resident, not being company, or to foreign company, any sum, whether or not chargeable under provisions of this Act, shall furnish information relating to payment of such sum, in such form and manner, as may be prescribed. ____________ http://www.judis.nic.in Page No 17 of 29 W.P.No.4965 of 2011 (7) Notwithstanding anything contained in sub- section (1) and sub-section (2), Board may, by notification in Official Gazette, specify class of persons or cases, where person responsible for paying to non-resident, not being company, or to foreign company, any sum, whether or not chargeable under provisions of this Act, shall make application [in such form and manner to Assessing Officer, to determine in such manner, as may be prescribed], appropriate proportion of sum chargeable, and upon such determination, tax shall be deducted under sub-section (1) on that proportion of sum which is so chargeable. 22. As per decision of Hon'ble Supreme Court in G.V.K.Industries Ltd., Vs. Income Tax Officer, (2015) 11 SCC 734, Section 9(1)(vii)(b) of Income Tax Act, 1961 carves out exception. exception carved out in latter part of sub-clause (b) applies to situation when fee is payable in respect of services utilised for business or profession carried out by Indian payer outside India or for purpose of making or earning of income by Indian assessee i.e. payer, for purpose of making or earning any income from source outside India. On studied scrutiny of said clause, it becomes clear that it lays down principle what is basically known as source ____________ http://www.judis.nic.in Page No 18 of 29 W.P.No.4965 of 2011 rule , that is, income of recipient to be charged or chargeable in country where source of payment is located, to clarify, where payer is located. clause further mandates and requires that services should be utilised in India. 23. Thus, to attract exception under Section 9(1)(vii)(b) of Income Tax Act, 1961, service should be utilized in India. Any payment by way of fees and technical service to non-resident by resident is income deemed to have accrued or arisen in India and is thus liable to tax. expression Fees for Technical Service has been defined in Explanation 2 to Section 9(1)(vii)(b) of Income Tax Act, 1961. 24. expression used in Explanation 2 is means . When expression means is used, it is hard and fast definition and no meaning other than that which is put in definition can be assigned to same [ see: Bharat Coop. Bank (Mumbai) Ltd. Vs. Employees Union, (2007) 4 SCC 685 and P.Kasilingam Vs. P.S.G. College of ____________ http://www.judis.nic.in Page No 19 of 29 W.P.No.4965 of 2011 Technology, AIR 1995 SC 1395]. In Bharat Coop. Bank (Mumbai) Ltd. Vs. Employees Union, (2007) 4 SCC 685, it was observed that it is trite to say that when in definition clause given in any statute word means is used, what follows is intended to speak exhaustively. When word means is used in definition, to borrow words of Lord Esher, M.R. in Gough v. Gough, (1891) 2 QB 665, it is hard-and- fast definition and no meaning other than that which is put in definition can be assigned to same. 25. expression Managerial , Technical or Consultancy Service have not defined. expression Management has been defined in Oxford Advanced Learner's Dictionary, New 9th Edition published by Oxford University Press reads as follows:- Management: 1. act of running and controlling business or similar organization: carrier in management, hotel/project management, management training course. report blames bad management. 2. people who run and control business or similar organization: management is/are considering closing factory. shop is now under new management, junior/middle/senior management, management decision/job. My role is ____________ http://www.judis.nic.in Page No 20 of 29 W.P.No.4965 of 2011 to act as mediator between employees and management. Most managements are keen to avoid strikes. 3. act or skill of dealing with people or situations in successful way: classroom management, time management, management of staff. Diet plays important role in management of heart disease. 26. In Black's Law Dictionary, 10th Edition published by Thomson Reuters, expression Management has been defined as follows:- Management. 1. people in organization who are vested with certain amount of discretion and independent judgment in managing its affairs. C-level management. (2001) Collectively, officers of organization holding titles prefixed by chief ; upper tier of top management - Also termed c-board. Middle management. (1941) Company employees who exercise some discretion and independent judgment in carrying out top management's directives. Top management. (1937) high level of company ____________ http://www.judis.nic.in Page No 21 of 29 W.P.No.4965 of 2011 management at which major policy decisions and long-term business plans are made. - Also termed upper management. 2. act or system of controlling and making decisions for business, department, etc. line management. system of management in which information and instructions are passed from one person to someone immediately higher or lower in rank and to no one else. 27. expression Technical Service and Consultancy Service also have not been defined in Act. Technical Service would include any service in connection with engineering service as it is associated with service provided by person technically qualified in field of engineering. Consultancy Service is again very wide, it can include service of every nature. 28. expression Consultancy Service has been defined in Oxford Advanced Learner's Dictionary, New 9th Edition published by Oxford University Press, as follows:- Consultancy: 1. company that gives expert advice ____________ http://www.judis.nic.in Page No 22 of 29 W.P.No.4965 of 2011 on particular subject to other companies or organizations: management/design/computer, etc. consultancy 2. expert advice that company or person is paid to provide on particular subject: consultancy fees. 29. Thus, expression Managerial , Technical or Consultancy Services are wide of import. 30. In fact, from nature of work that was to be undertaken by Indonesian firm was purely not that of work carried out by law firms. These services provided by any person holding expertise in relevant field. 31. Thus, if service provided by Indonesian law firm was for managerial, technical or consultancy service or provision of technical or other personnel, petitioner would be liable to deduct tax at source under Section 195 of Act, 1961. 32. service provided by Indonesian law firm is for ____________ http://www.judis.nic.in Page No 23 of 29 W.P.No.4965 of 2011 following:- (a) Share Purchase Agreement (SPA) with appropriate warranties and indemnities; (b) Notarial share transfer deed; (c) Assist in obtaining all necessary regulatory approvals for acquisition including, but not limited to approval from Ministry of Finance / Indonesian Insurance regulators. scope of assistance will include advising on all legal aspects of approval application and process, preparation / vetting of all related papers / documents and accompanying your representative / representing you before regulatory authorities as and when required; (d) Power of Attorneys (as may be required); (e) Public announcements in respect of acquisition (as required by Indonesian company law); (f) Form in respect of shares transfers (e.g. Shares certificates, shareholders register); and (g) Amended Articles of Association of Target Company. 33. From scope of work undertaken, it is evident that ____________ http://www.judis.nic.in Page No 24 of 29 W.P.No.4965 of 2011 Indonesian law firm has provided consultancy services. 34. In this case, Indonesian firm has provide Consultancy Service . Therefore, I am of view that it is not open for petitioner to state that said service fell within exception provided in Section 9(1)(vii)(b) of Income Tax Act, 1961 or outside Explanation 2 to said Section. 35. If service utilized by petitioner abroad was for pre- existing business in Indonesia, petitioner could have legitimately stated that service provided was utilized for business of profession carried out outside India or for purpose of making or earning any income from any source from outside India. There is no source that is existing in Indonesia. 36. In this case, there was mere proposal for acquiring insurance business in privately or Indonesian Insurance Policy. service of said law firm was sought for range of service which are ____________ http://www.judis.nic.in Page No 25 of 29 W.P.No.4965 of 2011 approval consultancy service. 37. In light of above discussion, I am of view, decision impugned in this Writ Petition, cannot be assailed. During period in dispute, Double Taxation Avoidance Agreement as notified vide Notification No.GSR 77 (E), dated 04.02.1988, was in force. However, what was produced before me is notification notifying agreement signed on 27th July, 2012 and notified vide Notification No.S.O. 1144(E) [No.17/2016 (F.No.503/4/2005-FTD-II)], dated 16.03.2016, which is not relevant. Double Taxation Avoidance Agreement signed between India and Indonesia as notified vide Notification No.GSR 77 (E), dated 04.02.1988 has not been produced for my perusal. 38. In Danisco India (P.) Ltd. Vs. Union of India, 2018 SCC OnLine Del 7304, Delhi High Court observed as follows:- 9. In this context, ITAT in Dy. DIT Vs. Serum Institute of India Ltd., (2015) 68 SOT 254/56 taxmann.com 1 (Pune Trib.), discussed this very issue in some detail and stated, as follows: ____________ http://www.judis.nic.in Page No 26 of 29 W.P.No.4965 of 2011 .......where section 90(2) of Act provides that DTAAs override domestic law in cases where provisions of DTAAs are more beneficial to assessee and same also overrides charging sections 4 and 5 of Act which, in turn, override DTAAs provisions especially section 206AA of Act which is controversy before us. Therefore, in our view, where tax has been deducted on strength of beneficial provisions of section DTAAs, provisions of section 206AA of Act cannot be invoked by Assessing Officer to insist on tax deduction @ 20%, having regard to overriding nature of provisions of section 90(2) of Act. CIT(A), in our view, correctly inferred that section 206AA of Act does not override provisions of section 90(2) of Act and that in impugned cases of payments made to non-residents, assessee correctly applied rate of tax prescribed under DTAAs and not as per section 206AA of Act because provisions of DTAAs was more beneficial. Thus, we hereby affirm ultimate conclusion of CIT(A) in deleting tax demand relatable to difference between 20% and actual tax rate on which tax was deducted by assessee in terms of relevant DTAAs. As consequence, Revenue fails in its appeals. 10.Having regard to position of law explained in Azadi Bachao Andolan(supra) and later followed in numerous decisions that Double Taxation Avoidance Agreement acquires primacy in such cases, where reciprocating states mutually agree upon acceptable principles for tax treatment, provision in Section 206AA (as it existed) has to be read down to mean that where deductee i.e overseas resident business concern conducts its ____________ http://www.judis.nic.in Page No 27 of 29 W.P.No.4965 of 2011 operation from territory, whose Government has entered into Double Taxation Avoidance Agreement with India, rate of taxation would be as dictated by provisions of treaty. 39. Therefore, issue as to whether petitioner was entitled to benefit of any Clause in said Double Taxation Avoidance Agreement as notified in Notification No.GSR 77(E), dated 04.02.1988, is left open. It is for petitioner to file appropriate application before C.SARAVANAN, J. jen 2nd respondent within period of thirty days from date of receipt of copy of this order. 40. Accordingly, Writ Petition is dismissed with above observations. No cost. Consequently, connected Miscellaneous Petition is closed. 13.03.2020 Internet :Yes/No jen ____________ http://www.judis.nic.in Page No 28 of 29 Shriram Capital Limited v. Director of Income-tax, (International Taxation), Chennai / Income-tax Officer, International Taxation-I(2), Chennai
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