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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI SUNIL KUMAR YADAV & SHRI ABRAHAM P. GEORGE
Per Sunil Kumar Yadav, Judicial Member
These are appeals preferred by the assessee against the common order dated 15.12.2014 of the CIT(Appeals)-12, Bangalore for the assessment years 2007-08 to 2009-10 inter alia on the common grounds and for the sake of reference, we extract hereunder the grounds raised in IT(IT)A No.11/Bang/2015 :-
IT(IT)A Nos.11 to 13/Bang/2015 Page 2 of 21 “1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
2. The appellant denies itself liable to be considered as an assessee in default in terms of Sec. 201 [1] of the Act and charged for the alleged failure to deduct tax u/s. 195 of the Act under the facts and in the circumstances of the appellant's case and therefore, the learned CIT [A] ought to have cancelled the tax and consequential interest levied.
3. Without prejudice to the above, the learned CIT [A] is not justified in holding that the payments made by the appellant to M/s. MJR CONSULTANCY PTE LTD., Singapore, was fees for Technical Services within the meaning of Section 9[1][vii] of the Act as well as Article 12 of the Double Taxation Avoidance Agreement [DTAA] between India and Singapore and therefore, the appellant was required to deduct tax at source u/s. 195 of the Act before making the payment under the facts and in the circumstances of the appellant's case. 3.1 The learned ClT [A] failed to appreciate that the payments made by the appellant to M/s. MJR CONSULTANCY PTE LTD., Singapore, was not in the nature of fees for technical services since, there was no technical service rendered by the said company and the payments so made by the appellant could only be regarded as business profits of the said company in terms of Article 7 of the DTAA since, there was no such income was chargeable to tax in India in the hands of the said company, which is a resident of Singapore having no permanent establishment in India and therefore, there was no requirement to deduct tax at source. 3.2 Without prejudice to the above, the learned ClT [A] failed to appreciate that even if the payments made to M/s. MJR CONSULTANCY PTE LTD., Singapore, were regarded as fees for technical services, the same was not taxable in India as the payments made could. not be regarded as fees for technical services within the meaning of Article 12 of the DTAA and thus, there was no requirement to deduct tax at source before making the payment since, there was no income chargeable to tax and thus, the demand raised on the appellant is misconceived and on erroneous appreciation of the position of law and facts.
IT(IT)A Nos.11 to 13/Bang/2015 Page 3 of 21
4. Without prejudice to the above, the order passed by the learned A.O. is barred by limitation and requires to be cancelled.
5. Without prejudice to the above, the extent of tax demanded from the appellant u/s. 201 [1] of the Act is highly excessive and the same is liable to be reduced substantially. 6. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies itself liable to be charged to interest u/s. 201 [1A] of the Act amounting to Rs. 5,71,248/- on the tax payable of Rs. 5,95,050/-, which under the facts and in the circumstances of the appellant's case is unwarranted and hence, the levy deserves to be cancelled. 7. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs."
Though various grounds are raised in these appeals, but they all relate to the liability of tax deduction at source (TDS) on payment made to foreign constituents i.e., M/s. MJR Consultancy Pte Ltd., Singapore, u/s. 195 of the Income-tax Act, 1961 [“the Act”].
3. According to the Assessing Officer, as per the provisions of section 195 of the Act, any person responsible for making payment to a non- resident, not being a company, or to a foreign company, any interest or any other sum chargeable under the provisions of the Act (not being the income chargeable under the head salaries) shall at the time of credit of such income to the account of the payee or at the time of payment thereof in IT(IT)A Nos.11 to 13/Bang/2015 Page 4 of 21 cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force. Further, as per the provisions of section 201(1) of the Act, if any person fails to deduct tax as required by or under the Act, he shall be deemed to be an assessee in default in respect of the tax.
Since the assessee has not complied with the provisions of section 195 of the Act, proceedings u/s. 201(1) were initiated against the assessee and in response to the show cause notice, it was submitted that it cannot be treated as defaulter u/s. 201(1) as the payments in question are not covered under Article 7, 9 or 12.
The AO asked the assessee to explain as to why the above payments to M/s. MJR Consultancy Pte Ltd., Singapore towards consultancy charges for the above financial years should not be treated as fees for technical services as per the provisions of section 9(1)(vii) of the Act. It was also asked to furnish full details of payments and in response thereto, the assessee has filed the complete details. Having examined the details furnished by the assessee and the Singapore treaty, the AO was not convinced with the contentions of the assessee and has held the assessee to be in default in respect of tax not deducted at source in respect of fees
IT(IT)A Nos.11 to 13/Bang/2015 Page 5 of 21 for technical services payable to M/s. MJR Consultancy Pte Ltd., Singapore for the AYs 2007-08 to 2009-10. The relevant observations of the AO are extracted hereunder for the sake of reference:-
“ From the above discussion, it has been proved that the payments made by the assessee to MJR Consultancy Pte. Ltd., Singapore during the F.Y.s 2006-07, 2007-08 and 2008-09 in terms of the Consultancy Agreement entered into between the two parties constitute fees for technical services both under Sec.9(1)(vi) of the Income Tax Act, 1961, and under the Double Taxation Avoidance Agreement between India and Singapore and is chargeable to tax in India. Sec.195 of the Income Tax Act, 1961, casts an obligation on the person making payment of the sums chargeable to tax to a foreign company to deduct tax at the time of making such payment, or at the time of crediting the amount, whichever is earlier. But no tax had been deducted by the assessee thereon either at the time of crediting or subsequently. As the assessee has failed to discharge its Obligation to deduct tax at source as stipulated u/s.195 of the Income Tax Act, 1961, for the Financial Year 2006-07,07- 8,08-09, I am holding the assessee as assessee in default in respect of tax not deducted at source in respect of Fees for Technical Services payable to MJR Consultancy Pte Ltd., Singapore for the assessment years 2007-08, 08-09 & 09-10 as per the provisions of Sec.201(1} of the Income Tax Act, 1961. It is liable to pay the tax deductible in this regard along with the interest u/s. 201(lA) for these assessment years.”
5. Aggrieved, the assessee preferred an appeal before the CIT(Appeals) and placed the consultancy agreement. It was also contended that the assessee is an Indian company engaged in the business of dairy products. It entered into agreement with M/s. MJR Consultancy Pte Ltd., Singapore towards the consultancy charges for the purpose of providing advice to the assessee on various matters of strategic
IT(IT)A Nos.11 to 13/Bang/2015 Page 6 of 21 and operational importance through phone calls and personal meetings held in various centres like Bangkok, Singapore and Bangalore and the assessee made payment to Singapore company towards the consultancy charges. Since the assessee has not paid fees for technical services, he was not under obligation to deduct tax at source as required by the Act. Therefore, the order of the AO holding assessee to be in default u/s. 201(1) of the act is bad in law.
The CIT(Appeals) examined the claim of the assessee in the light of various judicial pronouncements at page Nos. 3 to 39 of his order and has finally concluded that the Singapore company as a consultant made available to the assessee technical knowledge in the form of expertise and operation of business which was in its possession along with experience, skill and know-how. Thus, the assessee was under obligation to deduct tax at source as it made the payment for technical services. The relevant observations of the CIT(Appeals) is extracted hereunder for the sake of reference:-
“6. I have considered the facts and circumstances of the case, it is clear from the agreement that the services rendered are in the capacity of a consultant who has skill, knowledge & expertise and is a professional in the concerned field. Passing on knowledge, expertise and skill in matter of strategic and operational importance as well as any other issues, connected with the business of the assessee company is certainly of technical nature. As per the agreement, it is' the duty of the consultant to use the skill and knowledge in its possession to provide professional services being technical in nature to the assessee company. Moreover such technical expertise passed on IT(IT)A Nos.11 to 13/Bang/2015 Page 7 of 21 is retained by the assessee, even after the agreement expires. After considering various decisions as reproduced above, I find that the reasoning of all apply to the assessee's case and that the assessee's case is very similar on facts to the case decided by the Authority of Advance Rulings in Intertek Testing Services (supra). In fact on perusal of a report filed by Mr. M.J, Raycraft, Director of the Singapore Consultant, which is placed on record, it is evident that he has provided a similar set of a professional services as in this case decided by AAR. The following observations of the AAR reproduced from above (Perfetti Van Melle Holding case) are directly related and can be fully applied to the case at hand :- “It was held in Intertek Testing Services (India) (P.) Ltd., In Re [2008] 307 ITR 418 / 175 Taxmann 375 (AAR-New Delhi), by the Authority that the expression ‘technical services’ cannot be construed in a narrow sense. It has been observed therein that the term ‘technical’ ought not to be confined only to technology relating to engineering, manufacturing or other applied sciences. Professional service imbued with expertise could be regarded as technical service. Hence, these services giving knowledge and experience of the confectionary industry to Perfetti India are technical in nature, more so, in view of the fact that the agreement clearly brings out the intention of the parties to assist Perfetti India by applying the experience of its sister concerns and group companies. The services are provided under the heads of accounting, budgeting and reporting, forex management, Global credit facility administration and co-ordination of global funding, organization of International Finance managers meetings, human resource services, support in co- ordination and local strategy, support in financial controlling, corporate secretarial and legal support, environment health and safety and support on risk management. ………………………. The expression ‘make available’ only means that the recipient of the service should be in a position to derive an enduring benefit and be in a position to utilize the knowledge or know-how in future on his own. “By making available the technical skills or know- how, the recipient of the service will get equipped with IT(IT)A Nos.11 to 13/Bang/2015 Page 8 of 21 that knowledge or expertise and be able to make use of it in future, independent of the service provider.” See Intertek Testing Services India (P) Ltd. In re (supra). So when the expertise in running the industry run by the group is provided to the Indian entity in the group to be applied in running the business, the employees of the Indian entity get equipped to carry on that business model or service model on their own without reference to the service provider, when the service agreement comes to an end. It is not as if for making available, the recipient must also be conveyed specifically the right to continue the practice put into effect and adopted under the service agreement on its expiry.” 6.1 Thus, it is held that the Singapore company as a consultant made available to the assessee company technical knowledge in the form of expertise in operation of business which was in its possession along with experience, skill and know-how. In the agreement, this has been classified as professional services. It is not open to the assessee to take refuge behind cryptic clauses of the agreement to establish that there is no transfer of technical knowledge, skill, experience, etc.”
Aggrieved, the assessee has preferred appeals in all the three years before the Tribunal. Besides assailing the orders on merit, the assessee has also raised a new ground that the order passed by the AO is barred by limitation and requires to be cancelled.
The ld. counsel for the assessee has submitted on the point of limitation that the order u/s. 201(1) was not passed in reasonable time prescribed under the Act. In support of his contention, he has placed reliance upon sub-section (3) of section 201(1) of the Act with the submission that the legislature has fixed the time frame within which the order u/s. 201(1) has to be passed. As per sub-section (3), no order shall
IT(IT)A Nos.11 to 13/Bang/2015 Page 9 of 21 be made under sub-section (1) deeming the person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of seven years from the end of the financial year in which payment is made or credit is given. This amendment was made w.e.f. 1.10.2014 and at the relevant point of time, no time limit was specified and various authorities have held that reasonable time should be four years and thereafter no action can be taken u/s. 201(1).
Refuting the contention of the assessee, the ld. DR submitted that time limit has been prescribed to the resident in India and not to the non- residents. The object behind is that payments made to residents of India can be traced or identified within a reasonable time, but in the case of non- residents time limit was not specifically prescribed by the legislature as it is not clear as to when such type of persons can be identified. Therefore, time limit prescribed under sub-section (3) to section 201(1) cannot be applied in the case of non-residents.
Having carefully examined the rival submissions and the material on record, we find that the legislature has consciously used the word “resident in India”. Had it been the intention of the legislature to prescribe the time period for the non-residents, they would have comfortably used the word “payee”, but they have used the word ‘resident in India’. Therefore, the IT(IT)A Nos.11 to 13/Bang/2015 Page 10 of 21 intention of the legislature is very clear that they do not want to fix the time limit for initiating action u/s. 201(1) for non-residents. In the light of these facts, we are of the view that the assessment is not barred by limitation as no time frame has been specified for initiating action u/s. 201(1) of the Act against the non-residents.
So far as the merits of the case is concerned, we have carefully examined the order of the authorities below and agreement executed between the assessee and foreign constituent i.e., MJR Consultancy Pte Ltd., Singapore. Copy of the agreement is available at pages 9 to 11 of the compilation of the assessee. Since certain clauses of the agreement are relevant in order to adjudicate the controversy raised before us, we extract the consultancy agreement as under:-
“AGREEMENT executed December 18, 2006 between The Nilgiri Dairy Farm Private Limited ("NILGIRIS"), a company incorporated in India with its registered office at 171, Brigade Road, Bangalore - 560025, India, and MJR CONSULTANCY PTE. LTD, a company incorporated in Singapore, having offices at 73A, Kheam Hock Road, Singapore 298850 ("CONSULTANT"), The above parties desire to set forth the terms and conditions upon which NILGIRIS may from time to time obtain CONSULTANT's services, and the parties agree as follows: 1) Services. While this Agreement is in effect and as requested by NILGIRIS, CONSULTANT, through its personnel shall provide professional services (the "Services") as more described below:
IT(IT)A Nos.11 to 13/Bang/2015 Page 11 of 21 a) Attending Board meetings of NILGIRIS in Bangalore and spending time with the NILGIRIS management; b) Advising the CEO of NILGIRIS on various matters of strategic and operational importance; c) Advising the management of NILGIRIS on any other issues in connection with the business of NILGIRIS. 2) Acceptance of the Work. Acceptance of the work ("Acceptance") shall be based on NILGIRIS' reasonable satisfaction with the Services performed. 3) Term. This Agreement shall be effective from October 1, 2006 (the "Effective Date"). This Agreement will conclude on September 30, 2009; provided, however, this Agreement may be concluded by either party by giving fifteen (15) days written notice to the other party. This Agreement may, at NILGIRIS' sole option, be extended for additional term(s) via a written Addendum executed by both parties. CONSULTANT may conclude this Agreement by giving NILGIRIS written notice, such termination to be effective upon completion of any and all outstanding Statements of Work. 4) Fees and Payment Terms. CONSULTANT shall be compensated on a Fixed Price basis for the Services to be performed under this agreement. a) CONSULTANT shall be compensated at a rate equal to US $85,000 (Eighty Five thousand U.S. Dollars) per annum, for a minimum of 21 (Twenty One) days per annum, and CONSULTANT's annual fee shall be deposited in U.S. funds into the following bank account and shall be payable in equal monthly instalments: i) Bank Name: Overseas Chinese Banking Corporation Ltd, 65 Chulia Str, OCBC Centre, Singapore 049513 ii) Account Number: 621837111001 iii) SWIFT Code: OCBC SG SG
The first monthly fee payment will be made to CONSULTANT in January 2007, for Services provided
IT(IT)A Nos.11 to 13/Bang/2015 Page 12 of 21 during the months of October - December 2006; thereafter, monthly fee payments will be made in the first week of every month until expiration of the Term, with the final monthly payment to be made on September 30, 2009. The total fee that will be paid to CONSULTANT during the full Term is not to exceed US $255,000 (Two hundred and Fifty-five thousand U.S. Dollars). b) Further, the CONSULTANT shall be reimbursed for reasonable and necessary expenses, including office supplies and reasonable phone expenses that are required in order for CONSULTANT to complete the Services assigned. CONSULTANT shall also be reimbursed for travel costs to and from Singapore and India, or as otherwise designated by the Managing Director of NILGIRIS. Travel and lodging expense must have NILGIRIS' concurrence. CONSULTANT will provide copies of receipts / vouchers for all expenditures, along with an invoice / statement, when requesting reimbursement. All invoices should be sent by CONSULTANT directly to: NILGIRIS Dairy Farm Private Limited, Finance Department, 171, Brigade Road, Bangalore - 560 025. Such reimbursements will be settled within 30 (thirty) days of receipt by NILGIRIS. c) CONSULTANT agrees that no compensation will be due from NILGIRIS beyond what has been expressly outlined herein.
Taxes, Benefits and Licenses. CONSULTANT agrees that CONSULTANT is solely responsible for the following: a) the payment of all federal, state, and local taxes and all appropriate deductions or withholdings, unless otherwise provided for in Exhibit A to this Agreement; b) the payment or provision of any unemployment insurance benefits, state disability benefits, vacation, overtime or holiday pay, health, medical, dental or group insurance or any pension or profit sharing; c) obtaining any applicable business or other commercial licenses; and IT(IT)A Nos.11 to 13/Bang/2015 Page 13 of 21
d) the hiring, supervising, conclusion of employment and payment of compensation or other benefits to any agent, independent contractor, employee or assistant engaged by CONSULTANT (with the approval of NILGIRIS' Project Manager / Managing Director) to perform any Work. 6) Status of Parties, Insurance. CONSULTANT shall be, and at all times during this Agreement shall remain independent vis- a-vis NILGIRIS, including employees of the CONSULTANT, if any. Contract of agency employment is not intended under this agreement. CONSULTANT shall maintain such public liability insurance in as may be necessary. CONSULTANT shall comply with all applicable laws in India. 7) Duties. CONSULTANT'S duties shall include, as applicable, the use of skill and knowledge in completing the Services referred to earlier herein and reasonable documentation as shall be required by NILGIRIES. 8) Intellectual Property. CONSULTANT shall immediately assign, transfer, and set over to NILGIRIS all right, title and interest of CONSULTANT in and to any product, improvement, or process which may directly or indirectly be utilized in connection herewith, which CONSULTANT may contribute to or develop during performance of Work on NILGIRIS' time or at the expense of NILGIRIS and CONSULTANT shall do all documentation necessary in this connection. CONSULTANT may not use any such work for any other purposes without prior NILGIRIS concurrence. 9) CONSULTANT shall hold Confidential Information of NILGIRIS, its customers, and licensors in confidence, and without written permission from NILGIRIS will not disclose to any person or use any such information. "Confidential Information" includes computer software programs developed or licensed by NILGIRIS, any other information identified by NILGIRIS as proprietary or confidential, or which would reasonably be understood under the circumstances to be confidential. All Confidential Information shall remain the sole property of NILGIRIS.
IT(IT)A Nos.11 to 13/Bang/2015 Page 14 of 21 a) CONSULT ANT agrees that, during the time that CONSULTANT is retained by NILGIRIS, CONSULTANT will not engage in India in any business activity directly related to the business in which NILGIRIS is now involved or becomes involved, if such agreement would in any manner negatively impact NILGIRIS. CONSULTANT also agrees that he will not issue a press release or other public statement regarding CONSULTANT's relationship with NILGIRIS or this Agreement without clearance of NILGIRIS. b) This Agreement shall be governed by and interpreted under the laws of India."
In this agreement, the nature of services and duties of the Consultant have been specified. The responsibility of the Consultant with respect to intellectual property has also been specified. Though assessee has contended that no technical know-how was made available to the assessee while rendering the consultancy services by the Consultant and therefore it cannot be held that fees for technical services were paid by the assessee; but the ld. DR invited our attention to various clauses with the submissions that whatever consultancy services were required under different field and whatever consultancy input was given to the assessee, it was used by the assessee even after the termination of the contract and assessee has the privity of all the information, consultancy or opinions received in respect of the operation and business management, etc.
During the course of hearing, our attention was invited to the following judicial pronouncements:-
IT(IT)A Nos.11 to 13/Bang/2015 Page 15 of 21 i) CIT v. De Beers India Minerals P. Ltd., 346 ITR 467 (Karn) ii) DIT v. Guy Carpenter and Co. Ltd., 346 ITR 504 (Delhi) iii) DCIT v. Boston Consulting Group P. Ltd., 280 ITR (AT) 1 (Mumbai) iv) DCIT v. Anadaman Sea Food Pvt. Ltd., dated 19.6.2012. v) ACIT v. Viceroy Hotels Ltd., ITA No.401/Hyd/2007 & Ors. dated 27.05.2011.
In all these judgments, we find that emphasis was made on an issue as to whether technical know-how was made available to the assessee. In the case of De Beers India Minerals P. Ltd. (supra), Their Lordships have observed that in view of section 90 the definition of fees for technical services contained in the agreement overrides the statutory provisions contained in the Act. In the latest decision in the case of Andaman Sea Food Pvt. Ltd. (supra), the meaning of the word “make available” is explained. According to the aforesaid decision, fees for technical services means payments of any kind to any person in consideration for services of a managerial, technical or consultancy nature, if services make available technical knowledge, experience, skill, know-how or processes, which enables the person acquiring the services to apply the technology contained therein. It has further been observed by the Hon'ble jurisdictional High Court in the case of De Beers India Minerals P. Ltd. (supra) that the technical or consultancy services rendered should be of such nature that it makes available to the recipient technical knowledge,
IT(IT)A Nos.11 to 13/Bang/2015 Page 16 of 21 know-how and the like. The service should be aimed at and result in transmitting technical knowledge, etc. so that the payer of the service could derive an enduring benefit and utilize the knowledge or know-how on his own in future without the aid of the service provider. In other words, to fit into the terminology “making available” the technical knowledge, skills, etc., must remain with the person receiving the services even after the particular contract comes to an end. It is not enough that the services offered are the product of intense technological effort and lot of technical knowledge and experience of the service provider have gone into it. The relevant observations of the Hon'ble jurisdictional High Court are extracted hereunder:-
“21. What is the meaning of "make available". The technical or consultancy service rendered should be of such a nature that it "makes available" to the recipient technical knowledge, know- how and the like. The service should be aimed at and result in transmitting technical knowledge, etc., so that the payer of the service could derive an enduring benefit and utilize the knowledge or know-how on his own in future without the aid of the service provider. In other words, to fit into the terminology "making available", the technical knowledge, skills, etc., must remain with the person receiving the services even after the particular contract comes to an end. It is not enough that the services offered are the product of intense technological effort and a lot of technical knowledge and experience of the service provider have gone into it. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. Technology will be considered "made available" when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service that may require technical knowledge, skills, etc., does not mean that technology is made available to IT(IT)A Nos.11 to 13/Bang/2015 Page 17 of 21 the person purchasing the service, within the meaning of paragraph (4)(b). Similarly, the use of a product which embodies technology shall not per se be considered to make the technology available. In other words, payment of consideration would be regarded as "fee for technical/included services" only if the twin test of rendering services and making technical knowledge available at the same time is satisfied.”
The Hon’ble Delhi High Court in the case of DIT v. Guy Carpenter and Co. Ltd., 346 ITR 504 (Delhi) has also expressed similar views. In the case of DCIT v. Anadaman Sea Food Pvt. Ltd. (supra) and Viceroy Hotels Ltd. (supra), the Tribunal has also held that rendering technical or consultancy services or services make available means that technical or consultancy services rendered should be of such nature that ‘makes available’ to the recipient technical knowledge, know-how and the like. The service should be aimed at and result in transmitting the technical knowledge, etc. so that the payer of services could derive an enduring benefit and utilize the knowledge or know-how in future on its own without the aid of the service provider. By making available technical skills or know-how, the recipient of service will get equipped with that knowledge or expertise and be able to make use of it in future, independent of the service provider.
Having carefully examined the aforesaid judgments, we find that it has been reiterated by various judicial authorities one after the other, that wherever technical or consultant services are rendered and made available to the assessee or the recipient, and the assessee derives an enduring
IT(IT)A Nos.11 to 13/Bang/2015 Page 18 of 21 benefit and utilizes the knowledge or know-how in future on its own without the aid of the service provider. By making available technical skills or know- how, the recipient of know-how will get equipped with the knowledge or expertise and will be able to make use of it in future independent of the service provider. The services offered may be the product of intense technological effort and a lot of technical knowledge and experience of the service provider would have gone into it. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in future without depending on the provider.
In light of this proposition, if we examine the facts of the case in hand, we would find from the consultancy agreement that the assessee entered into agreement with the foreign constituent, i.e., MJR Consultancy Pte Ltd., a company incorporated in Singapore for rendering the following services:-
1) Attending Board meetings of NILGIRIS in Bangalore and spending time with the NILGIRIS management; 2) Advising the CEO of NILGIRIS on various matters of strategic and operational importance; 3) Advising the management of NILGIRIS on any other issues in connection with the business of NILGIRIS. 4) Under the head ‘Duties’, the Consultant’s duty shall include, as applicable, the use of skill and knowledge in completing the services referred to earlier and reasonable documentation as shall be required by NILGIRIS.
IT(IT)A Nos.11 to 13/Bang/2015 Page 19 of 21
5) Under the head ‘Intellectual Property’, the Consultant shall immediately assign, transfer and set over to NILGIRIS all right, title and interest of Consultant in and to any product, improvement, or process which may directly or indirectly be utilized in connection therewith, which Consultant may contribute to or develop during performance of work on NILGIRIS’s time or at the expense of NILGIRIS and Consultant shall do all documentation necessary in this connection.
From a careful reading of this agreement, we find that the Consultant was required to render consultancy services on different issues by applying his technical know-how and whatever services are rendered, advisories were issued to the assessee, the Consultant shall immediately assign and transfer the rights in that consultancy services to the assessee and the assessee would be able to use that services for its enduring benefit in the succeeding years without any assistance of the Consultant. Though it has not been spelt out the specific nature of the consultancy services rendered by the Consultant, but from a careful perusal of this agreement and documents available on record, it appears that whatever consultancy services were rendered by the Consultant, it was made available to the assessee for its enduring benefit and the same consultancy advisories, opinions or services received by the assessee can be used by the assessee for its business purposes in the succeeding years without any aid and assistance of the Consultant. Therefore, in the light of these facts, we are of the view that the consultancy services having been made available to the assessee, the Revenue has rightly held that the Singapore company
IT(IT)A Nos.11 to 13/Bang/2015 Page 20 of 21 as a Consultant has made available to the assessee company technical knowledge in the form of expertise in the operation of its business which was in its possession along with experience and know-how and the same technical know-how can be used by the assessee for its enduring benefit and thus since the assessee has made the payment for fees for technical services, it was required to deduct tax at source and for non-deduction of the same, he can be declared to be an assessee in default. Accordingly, we confirm the order of the CIT(Appeals) and dismiss the appeals of the assessee.
In the result, the appeals of the assessee are dismissed.
Pronounced in the open court on this 12th day of August, 2016.