In The ITAT Delhi Bench ‘D’
Le Passage To India Tours & Travel (P.) Ltd. vs. DCIT, Circle 4 (1), New Delhi
Assessment Years : 2007-08 And 2008-09
T.S. Kapoor, Accountant Member And C.M. Garg, Judicial Member
IT Appeal Nos. 210 & 498 (Delhi) Of 2012, 1778 And 1989 (Delhi) Of 2013
December 19, 2014
T.S. Kapoor, Accountant Member – This is a bunch of four appeals relating to Assessment Years 2007-08 & 2008-09. I.T.A. No. 210 and 498 are cross appeals filed by assessee and revenue respectively against the order of Ld. CIT(A) dated 01.11.2011 whereas I.T.A. No. 1989 and1778 are cross appeals in Assessment Year 2008-09 filed by assessee and Revenue respectively against the order of Ld. CIT(A) dated 28.01.2013. These appeals were heard together and therefore, for the sake of convenience, a common and consolidated order is being passed. In I.T.A. No. 210, the assessee has taken only one ground of appeal which is on account of the action of Ld. CIT(A) by which he had confirmed the disallowance u/s 40(a)(i) which was made by A.O. for non deduction of TDS on payments made to non-resident persons outside India for representation charges. In I.T.A. No. 498, the Revenue is aggrieved with the action of Ld. CIT(A) by which he had deleted the addition on account of excess depreciation on computer peripherals. The Revenue is also aggrieved with the action of Ld. CIT(A) by which he had deleted the addition of Rs.1,75,49,089/- made by A.O. u/s 40(a)(i) on account of tour expenses paid by assessee without deduction of TDS. The Revenue is further aggrieved by the action of CIT(A) by which he had deleted the addition of Rs.2,77,62,022/- made by A.O. u/s 40(a)(i) on account of payments made to overseas representatives without deducting tax at source. The 1st ground of appeal in I.T.A. No. 1989 in Assessment Year 2008-09 is similar to the ground of appeal taken by assessee in I.T.A. No. 210. However the assessee has further taken ground No.2 whereby Ld. CIT(A) had confirmed the disallowance of expenditure incurred on account of commission paid to non-resident persons outside India u/s 40(a)(i) without deduction of tax at source. In I.T.A. No. 1778, the Revenue is aggrieved with the deletion of depreciation on computer peripherals which the A.O. had disallowed as excess depreciation. Revenue is also aggrieved with the action of Ld. CIT(A) by which he had deleted the addition of Rs.4,39,66,623/- made by A.O. u/s 40(a)(i) on account of tour expenses paid by assessee without deduction of tax at source. The revenue is further aggrieved with the action of Ld. CIT(A) by which he had allowed relief of Rs.2,08,45,724/- out of total addition of Rs.4,50,82,827/- made by A.O. u/s 40(a)(i) on account of payments made to overseas representatives without deduction of tax at source.
2. The brief facts of the case are that the assessee is engaged in the business of organizing tours and travel arrangements for foreign tourists coming to India. The assessee provides all services for tourists beginning from travelling to India till their departure from India such as travel in India by all modes of transports like air, rail, road etc. The assessee also provides boarding and lodging facilities and site seeing services etc. In order to promote its business in foreign countries the assessee has appointed agents in various countries to market its services and in lieu thereof, representation charges/retainership fee and commission is paid to them. During assessment proceedings in Assessment Year 2007-08 and 2008-09, the A.O. held that the payment of representation charges and commission and tour expenses were in the nature of payments which fell within the meaning of fee for technical services defined u/s 9(1)(vii) of the Act and, therefore, the aforesaid payments were deemed to accrue at arrival in India and consequently were liable to be taxed and consequently were liable for tax deduction at source and since assessee had not deducted tax thereon in India. Therefore, the A.O. made the following additions for violation of the provisions of Section 40(a)(i) of the Act in these two Assessment Years:
|Disallowance on account of tour exp.||1,75,49,089||4,39,66,623|
|Disallowance u/s 40(a)(i )||2,77,62,022||4,50,82,827|
3. The A.O. also made disallowance on account of excess depreciation charged on computer peripherals amounting to Rs.1,73,070/- and Rs.1,26,000/- in the above two Assessment Years respectively. Aggrieved with the additions, the assessee filed appeals before Ld. CIT(A) and Ld. CIT(A) deleted the disallowance of excess depreciation on computer peripherals relying upon various case laws decided by various courts. As regards the disallowance made by A.O. on account of tour expenses, Ld. CIT(A) deleted the same in Assessment Year 2007-08 by holding as under:
‘5.2 I do not find myself in agreement with the observation of the AO that the ratio of Transmission Corporation of AP is applicable to the case of assessee. The observations of the Supreme Court in Transmission Corporation of AP (supra) have to be read in the context of the question before the court i.e. whether tax was deductible on the gross trading receipts or only on the’ pure income profits’. The court was not concerned with the case where the receipt was not chargeable to tax in the hands of the recipient at all. On the other hand the observations of the court make it clear that liability to deduct tax at source arises only when the sum payable to the non-resident is chargeable to tax. This view has also been followed by the jurisdictional High Court of Delhi in the case of Van Oord ACZ Inda (P) Ltd. v. CIT  323 ITR 130/189 Taxman 232/230 CTR(Del) 365. On the issue as to whether section 195(1) arises only if the payment is chargeable to tax in the hands of the recipient, 1 find that the issue is now covered and settled by the judgment of the Hon’ble Supreme Court in the case of GE India Technology Cent. (P.) Ltd. v. CIT  327 ITR 456/193 Taxman 234 wherein the Hon’ble Court reversed the decision of the Karnataka High Court in the case of CIT(International Taxation) v. Samsung Electronics Co. Ltd.  320 ITR 209. The Hon’ble Supreme Court held in the case of GE India Technology Centre (P.) Ltd. (supra) tax deduction at source obligations under section 195(1) arise only if the payment is chargeable to tax in the hands of non-resident recipient. Therefore, merely because a person has not deducted tax at source from a remittance abroad, it cannot be inferred that the person making the remittance has committed a failure in discharging his tax withholding obligations because such obligations come into existence only when recipient has a tax liability in India. The underlying principle is this. Tax withholding liability of the payee is inherently a vicarious liability, on behalf of the recipient, and, therefore, when recipient does not have the primary liability to be taxable in respect of income embedded in the receipt, the vicarious liability of the payer cannot but be ineffectual. This vicarious tax withholding liability cannot be invoked unless primary tax liability of the recipient is established. The assessee has to apply u/s. 195 (2) only in case where it had a doubt as to the amount to be deducted at source and could approach the Assessing Officer to compute the amount which was liable to be deducted at source & not otherwise in every case. Just because the payer has not obtained a specific declaration from the revenue authorities to the effect that the recipient is not liable to be taxed in India in respect of income embedded in particular payment, howsoever desirable be that practice, the Assessing Officer cannot proceed on the basis that the payer had an obligation to deduct tax at source. He still has to demonstrate and establish that the payee has a tax liability in respect of the income embedded in the impugned payment. That exercise was not carried out by the Assessing Officer on the facts of this case.
5.3 The Assessing officer has not brought any new facts on record to show that the foreign tour operators were having a person acting on their behalf for either of the activities provided in the definition of “Business Connection” given in Explanation 2 of section 9 (i) of the Act. In view of the discussion made above, it is held that the disallowance of Rs.1,75,49,089/- on account of tour expenses being payment made to non-resident tour operators by invoking the provisions of section 40(a)(i) of the Act is not justified and the same is deleted. As a result, ground of appeal NO.2 is treated as allowed.’
3.1 In Assessment Year 2008-09, similar addition amounting to Rs.4,39,66,623/- was deleted by following his order in Assessment Year 2007-08.
4-5. As regards the addition made by A.O. u/s 40(a)(i) a total addition of Rs.2,77,62,022/- was made in Assessment Year 2007-08. Ld. CIT(A) in Assessment Year 2007-08 allowed relief to the extent of Rs.1,90,74,062/-and upheld the remaining addition to the extent of Rs.86,87,960/-. The deletion made by Ld. CIT(A) related to the following heads of expenditure:
|Rebate to foreign tour operators||90,92,510/-|
|Refunds for unutilized services||05,91,380/-|
|Annual membership fees||01,03,689/-|
|Reimbursement for expenses to overseas representatives||21,48,895/-|
6. The confirmation of addition of Rs.86,87,960/- related to expenditure incurred by assessee for retainer-ship fee/representation charges. In Assessment Year 2008-09, Ld. CIT(A) allowed relief for addition u/s 40(a)(i) to the extent of Rs.2,08,47,724/- out of total addition of Rs.4,50,82,827/-. He upheld the addition to the extent of Rs.2,42,35,103/-consisting of two payments one relating to representation charges amounting to Rs.85,45,762/- and another relating to Commission of Rs.1,56,89,341/-. Against the relief given by Ld. CIT(A), the Revenue is in appeal before us. The assessee is in appeal for confirmation of addition by Ld. CIT(A).
7. At the outset, arguing the assessee’s appeal, Ld. A.R. submitted that in terms of provisions of Section 5(2) of the act, a non resident is liable to tax in India on income which accrues or arises in India and is deemed to accrue or arise in India and as per the provision of Section 195, the tax on such payments to non residents is to be deducted by the person making such payment. It was submitted that as per Section 195, the duty casted upon payer is to deduct tax in respect of income payable to non residents which is chargeable under t he provisions. It was submitted that in case where no taxable income arises to a nonresident tax is not required to be deducted and in this respect, reliance was placed on the case law of G. E. Technology Centre (P.) Ltd. v. CIT  327 ITR 456/193 Taxman 234/7 taxmann.com 18 (SC). It was further argued that as per provisions of Section 40(a)(i), the disallowance of expenditure can only be made where tax is deductible at source and, therefore, if no tax is deductible then expenditure cannot be disallowed u/s 40(a)(i). It was submitted that since in this case, the payments were made to nonresident overseas agents situated outside India, therefore, the income accruing or arising to them, did not accrue or arose in India. It was submitted that Section 9 of the Act provides that such payment will deem to have accrued in the hands of the non-resident and therefore, will be chargeable to tax in India and consequently, payer will be liable to deduct tax therefrom. It was submitted that such income as mentioned in section 9(1)(vii) of the Act is income by way of fee for technical services which are payable by resident to a nonresident. It was submitted that the category of income specified in Section 9(i)(vii) services rendered by nonresident person must be of managerial, technical or consultancy in nature. Explaining the meaning of managerial, consultancy and technical services as explained by courts/Tribunals, Ld. A.R. submitted that none of the services rendered by nonresident agents of the assessee fell into managerial, consultancy or technical services and in this respect, our attention was invited to paper book pages 98-101 and 119-122 where a copy of agreement entered into by assessee with non-resident agents of USA and UK were placed. From the contents of these agreements, the Ld. A.R. submitted that the nature of services to be provided by these agents are in the nature of marketing and promotion of the assessee’s business outside India in order to attract foreign tourists travelling to India. The marketing services do not involve any supervision or administration of any business carried out by the appellant. It was submitted that the said services do not involve imparting of any advice or consultation by nonresident appellant In India which can be used by assessee. It was submitted that the services rendered by overseas agents were meant for foreign tourists, which were utilized by assessee to promote its business and, therefore, the activities of nonresident person did not fall into consultancy services also. It was further submitted that these services also do not fall under technical services as rendering of such services do not involve application of individual sciences. Therefore, it was submitted that none of the activities of nonresident agents fall into the services as defined u/s 9(i)(vii) of the Act. Ld. A.R. relied upon the case law of DIT (International Taxation v. Panalfa Autoelektrik Ltd.  49 taxmann.com 412 (Delhi) decided by Hon’ble Delhi High Court wherein the Hon’ble court had explained the meaning of the words managerial, technical and consultancy as mentioned in Section 9(i)(vii) of the Act and had held that sales and marketing services rendered by an overseas commission agent do not fall within the meaning of technical services as envisaged by Section 9(i)(vii). Therefore, it was argued that commission paid to these persons cannot be deemed to have accrued in India and therefore, was not liable to tax in India. In support of the explanation that sale and marketing expense do not fall within the meaning of fee for technical services, as defined u/s 9(i)(vii), Ld. A.R. further relied upon following case laws:
(i) DIT v. Sheraton International Inc.  313 ITR 267/178 Taxman 84 (Delhi.)
(ii) CLSA Ltd. v. ITO (International Taxation)  56 SOT 254/31 taxmann.com 5 (Mum.)
(iii) WNS North America Inc. v. Asstt. CIT  141 ITD 117/ 28 taxmann.com 173 (Mum.)
(iv) Asstt. CIT v. Model Exim  64 SOT 4 (URO)/45 taxmann.com 140 (Luck.)
(v) Dy. CIT v. Farida Prime Tannery (P.) Ltd.  64 SOT 145 (URO)/45 taxmann.com 174 (Chennai)
(vi) Cushman & Wakefield (s) Pte. Ltd., In re  305 ITR 208/172 Taxman 179 (New Delhi)
8. In view of the facts and circumstances of the present cases and in view of the ratio emanating from various decisions of the Hon’ble Courts, Ld. A.R. submitted that sales promotion and marketing services rendered outside India were not in the nature of fee for technical services and, therefore, assessee was not liable to deduct tax therefrom. Further arguing, the Ld. A.R. submitted that the manner of calculation and consideration for availing such services does not matter which can be paid by a fixed commission on the basis of sales or which can be based upon fixed payment and therefore, the manner of calculation of consideration cannot come in the way of determining whether the payments were fee for technical services or not. Ld. A.R. has relied upon the following case laws with the proposition that where consideration was paid lump sum for availing marketing services instead of commission with reference to percentage of sales/profits, the payments were held not to be in the nature of fee for technical services:
(i) Rich Graviss Producs (P.) Ltd. v. Addl. CIT  49 taxmann.com 531/66 SOT 24 (URO) (Mum.).
(ii) CLSA Ltd. (supra).
(iii) Dy. CIT v. I.M. Gears (P.) Ltd.  65 SOT 303/49 taxmann.com 175 (Chennai).
(iv) Farida Prime Tannery (P.) Ltd. (supra).
(v) ITO v. Trident Exports  149 ITD 361/44 taxmann.com 297 (Chennai).
(vi) Real Resourcing Ltd., In re  322 ITR 558/190 Taxman 151 (AAR-New Delhi).
9. Without prejudice to the above arguments, Ld. A.R. submitted that even otherwise taking into account the provisions of DTAA the assessee was not liable to deduct tax at source as the provisions of DTAA overrides the provisions of income tax act. It was submitted that the provisions of DTAA if are beneficial to nonresident, i.e. which goes to reduce the liability of non-resident vis a vis provisions contained in the act, then provisions of DTAA are applicable. Inviting our attention to Annexure-1 attached with the synopsis, Ld. A.R. submitted that all payments were made to residents of countries with which India had DTAA. Inviting our attention to Article 12 of Indo-US DTAA, it was submitted that para 4 of such article states that fee for services includes consideration for rendering technical consultancy services for such services which make available technical knowledge, experience, skill, know-how, or processes or consist of the development and transfer of a technical plan or technical design to the person availing services. It was submitted that these technical knowledge, skill/know-how etc. is considered to have been made available by service provider when the recipient thereof can independently apply the technology without assistance of the service provider. It was submitted that the provisions of services provided by overseas agents get result into increase in business of the assessee and do not make available any technical knowledge, experience, skill or know-how etc. Without prejudice to the above, Ld. A.R. submitted that vide Circular 23 dated 23.07.1966, and Circular No.786 dated 7/2/2000 issued by CBDT, the assessee was not liable to deduct TDS from payments for services rendered by non-resident agens. It was submitted that during the year under consideration, certain payments were made by assessee without deduction of tax at source relying upon those circulars. Reliance in this respect was placed on Hon’ble Delhi High Court decision in the case of CIT v. EON Technology (P.) Ltd.  343 ITR 366/ 203 Taxman 266/15 taxmann.com 391 where it has been held that assessee was not liable to deduct tax at source form payment to nonresident for carrying out any operation in India by applying the provision of Circulars 23 and 786. Ld. A.R. has relied upon a number of case laws as mentioned in page 10 of his synopsis. It was submitted that above circulars were withdrawn by Circular No.7/2009 which fell in Assessment Year 2010-2011 and therefore, in these two years, the circulars were very much in existence and its withdrawal was not retrospective as held by Hon’ble Delhi High Court in the case of CIT v. Angelique International Ltd.  359 ITR 9/219 Taxman 104/38 taxmann.com 425 wherein it was held that withdrawal of circular was prospective. In view of all alternative arguments, Ld. A.R. submitted that the assessee was not liable to deduct TDS and therefore, disallowance u/s 40(a)(i) was not warranted.
10. Ld. D.R. on the other hand submitted that in the present cases, remuneration for nonresident agents was fixed and was not depending upon business procured by them. Therefore, these services provided by overseas nonresident agents was in the form of managerial services who were managing the offices of assessee and therefore the provisions of such services were covered in the fee for technical services as defined in Section 9(i)(vii) of the Act. Inviting our attention to Ld. CIT(A)’s order, Ld. D.R. submitted that Ld. CIT(A) has extensively discussed the provisions of DTAA and, therefore, all arguments of Ld. A.R. were taken care of by Ld. CIT(A) for disposing off the appeals.
11. In his rejoinder, Ld. A.R. submitted that agents were not managing the business of the assessee and they were just procuring the business on behalf of the assessee and it was submitted that in the case law of Adidas Sourcing Ltd. definition of managerial services has been discussed. As regards the discussion by Ld. CIT(A) with respect to DTAA, the Ld. A.R. submitted that Ld. CIT(A) has held that Act was amended with retrospective effect and therefore DTAA was not applicable, which was not correct as the provisions of DTAA always overrides the provisions of the Act. As regards revenue’s appeals, Ld. D.R. relied upon the order of A.O. whereas Ld. A.R. relied upon the order of Ld. CIT(A).
12. We have heard rival contentions and have perused the submissions made by the parties in detail. The main issue for consideration in assessee’s appeals are as to whether the consideration paid by assessee to overseas nonresident agents can be categorized as FTS u/s 9(i)(vii) of the Act and accordingly be taxed under the provisions of the Act. Explanation (2) to Section 9(i)(vii) defines FTS as under:
‘For the purpose of this clause, FTS means any consideration including any consideration for rendering any managerial, technical or consultancy services (including the provisions of services of technical or other personnel) but does not include consideration for any construction assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head “salaries”.’
13. It is evident that for a particular item of income to be categorized as FTS, it is necessary that some sort of managerial, technical or consultancy services should have been rendered by payees. The terms managerial, technical and consultancy do not find mention in the I. T. Act, 1961 and it is a settle law that they need to be interpreted based on their understanding in common parlance. Hon’ble Delhi High Court, in J.K. (Bom.) Ltd. v. CBDT  118 ITR 312 referred an article on Management Services wherein it is stated that the Management action includes at least the following: (a) Discovering, developing, defining and evaluating the goals of the organization and the alternative policies that will lead towards the goals; (b) Getting the organization to adopt the policies; (c) Scrutinizing the effectiveness of the policies that are adopted and (d) Initiating steps to change policies when they are judged to be less effective than they ought to be. Management thus pervades all organizations. Technical: In the case of Skycell Communications Ltd. v. Dy. CIT  251 ITR 53/119 Taxman 496 (Mad.), the Hon’ble High Court had held that the popular meaning associated with the word ‘technical’ is involving or concerning applied and industrial science. Consultancy: is generally understood to mean an advisory service. Further, it may be fair to state that not all kinds of advisory could qualify as technical services. For any consultancy to be treated as technical services, it would be necessary that a technical element is involved in such advisory. Thus, the consultancy should be rendered by someone who has special skills and expertise in rendering such advisory. Let us examine the contract entered into by assessee with a few overseas nonresident agents. The agreements demonstrate that assessee was to pay commission and retention charges for advancement of business of the assessee. The primary services to be provided to assessee by the overseas agent Mr. Ashok Sultan as placed in paper book pages 98-101 is reproduced below:
“6. Responsibilities of LPTI:
To comment of Mr. Sultan’s suggestions & reports without undue delay.
To communicate marketing and sales leads to Mr. Sultan for follow up and execution,
To keep Mr. Sultan properly and promptly informed on policies, rats and status. A Bi-weekly booking forecast to be supplied to Mr. Sultaln.
To keep and confirm booking as and made by Mr. Sultan based on the availability.
To supply ,Mr. Sultan with sales aids, tariffs & brochures free of charge, custom charge paid.
To include Mr. Sultan’s name, address, telephone & fax number in its advertising in the areas covered by LPTI.
– To provide complimentary services for travel agents, tour operators as recommended by Mr. Sultan based on availability,
7. SPECIAL ARR.ANGEMENTS. \VHICH CAN BE UNDERTAKEN ON COST BASIS ON PRIOR SANCTION FROM UTI HQS TN NEW DELHI
Special mailing on request.
Cost of promotional functions .
Advertising, media planning & media placing.
Construction & staffing of exhibition booths. ,
Assistance at travel trade shows & full time-dedicated participation by Mr Sultan.
– Assistance with legal affairs
Execution of dedicated sales blitzes on behalf of-the client.
Printing of material.
Marketing &. Managerial time.
Personal sates calls as mentioned. travel expenses within the area other than transport by air/train to distance places & to Canada, Mexico &. Caribbean,
Mr. Sultan will be paid a monthly retainer ship of USD 3000/- (USS THREE THOUSAND) per month. payable, always in the middle of each month,
In addition to this amount he would’ be paid monthly up to USD 700/ (USD SEVEN HUNDRED) towards Communications telephone answering service, office telephone, cel1phone, charges for internet. Normal office material (excluding printing), Postal charges,’ electricity, reasonable entertainment etc. on an actual basis. Local bus transport etc on actual basis Bus/train and car rental expenses on actual basis for making sales calls within the tri state area (New York. New Jersey &. Connecticut).”
14. Similarly, the area of activities to be performed by another agent Mr. Naresh Sarvaria as placed in paper book pages 119-122 are reproduced below:
“Functions of Mr. Naresh Sarvaria:
Mr. Naresh Sarvaria will conduct regular direct e-mailing campaigns to key clients tour operators and incentive houses in JK, Scotland and Ireland markets for Le Passage to India Tours and Travels Pvt. Ltd. Mr. Naresh Sarvaria will conduct regular direct e-mailing campaigns to key clients tour operators and incentive houses in JK, Scotland and Ireland market as and make sales calls on them as required.
Mr. Naresh Sarvaria will follow up his sales calls as result of the e-mailing comparing and will pass on to the Le Passage to India Tours and Travels Pvt. Ltd. the full e-mail correspondence file for canvassing the sales leads into firm bookings.
Mr. Naresh Sarvaria will respond to buyers for information and literature and also assist Le Passage to India Tours & Travels Pvt. Ltd. With distribution of their brochures in the tour operations and MIC (Meetings Incentives, Congresses) market place. Cost of mailing will be billed separately.
Mr. Naresh Sarvaria will represent Le Passage to India Tours and Travels Pvt. Ltd. during specified UK Scotland and Ireland Travel Trade Fairs as agreed mutually, cost and out of pocket and travel expenses will be billed by him separately.
Mr. Naresh Sarvaria will promote Le Passage to India Tours & Travels Pvt. Ltd. through the media and will assist Le Passage to India Tours and Travels Pvt. Ltd. with press releases, editorials, interviews etc.
Mr. Naresh Sarvaria will keep Le Passage to India Tours and Travels Pvt. Ltd. informed about the key industry trends, opportunities and developments in the UK, Scotland & Ireland markets, tour operators, and MIC Planners meetings, incentives, congresses.
Mr. Naresh Savaria wil be at the disposal of Le Passage to India Tours and Travels Pvt. Ltd. Mr. Naresh Sarvaria will track and justify all costs, including pre approved out of pocket expenses and communication costs directly linked to the marketing of Le Passage to India Tours and Travels Pvt. Ltd.
Mr. Naresh Sarvaia will if requested by Le Passage to India Tours and Travel Pvt. Ltd. conduct an educational tour form the UK, Scotland and Ireland markets to India at the time and convenience of Le Passage to India Tours and Travels Pvt. Ltd. Out of pocket and travel expenses are to be billed by him separately.
Mr. Naresh Sarvaria will support Le Passage to India Tours and Travels Pvt. Ltd.’s work and assists requests and answers whenever needed.
Mr. Naraesh Sarvaria will not represent any other Destination Management Company form India. In the same manner Le Passage to India Tours and Travels Pvt. Ltd. will not appoint any other representative in the same country.
Mr. Naresh Sarvaria will report on a monthly basis his actions towards Le Passage to India Tours and Travels Pvt. Ltd.,”
15. From the nature of services to be performed by the overseas agents, we are of the view that services rendered by the agents in this case are purely in the nature of advancement of business of the assessee company and cannot be categorized as managerial/technical/consultancy services. Accordingly, the consideration paid by the assessee cannot be classified as fee for technical services (FTS).
16. We further find that Hon’ble Delhi High Court in the case of Panalfa Autoelektrik Ltd. while explaining meaning of the word managerial, technical or consultancy services falling under the scope of FTS u/s 9(i)(vii) of the Act held that sales and marketing services made by an overseas commission agent do not fall within the meaning of aforesaid words and, therefore, the payment of commission made to such agent will not be deemed to accrue or arise in India and consequently, would not be liable to tax in India. Similarly, in a number of case laws relied upon by Ld. A.R. as noted in his synopsis page 5, we find that various courts have held that sales and marketing services rendered outside India do not fall within the meaning of FTS u/s 9(i)(vii) of the Act. Therefore, keeping in view the facts and circumstances of the present case and on the basis of various case laws relied upon by the assessee, we hold that the amount of retainer-ship charges and commission paid by the assessee to an overseas nonresident agent is not in the nature of FTS and, therefore, was not liable to be taxed in India and in consequence, assessee was not required to deduct tax therefrom. Ld. CIT(A) himself in Assessment Year 2007-08 has allowed relief to the assessee on account of non-deduction of TDS on commission payments as noted by us at page 6 of our order. Therefore, keeping in view all facts and circumstances and keeping in view the case laws relied upon by Ld. A.R. we hold that representation charges and commission paid by assessee were not liable to be taxed in India and consequently no tax was required to be deducted and therefore disallowance u/s 40(a)(i) was not warranted. Since, we have decided the issue in favour of the assessee based upon the first limb of the arguments advanced by the Senior Counsel we do not deem it necessary to deal with other two limbs of arguments advanced by the senior counsel. In view of above, appeals filed by the assessee are allowed.
17. Now, coming to the appeals filed by the revenue, we find that as regards payment of tour expenses and other expenses paid without deduction of TDS, Ld. CIT(A) has passed a very elaborate and speaking order and Ld. D.R. was unable to controvert any of his findings, therefore, we do not find any infirmity in the same. Similarly, Ld. CIT(A) has allowed depreciation on computer peripherals based upon various decisions of the courts wherein we do not find any infirmity.
18. In view of above, the appeals filed by the Revenue are dismissed.
19. In nutshell, appeals filed by the assessee are allowed and appeals filed by the Revenue are dismissed.
[Citation : 369 ITR 109]