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Income Tax Appellate Tribunal, “L”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM
आदेश / O R D E R PER R.C.SHARMA (A.M): These are the appeals filed by the assessee against the order of CIT(A)-10, Mumbai dated 28/02/2014 for the Assessment Year 2009-10 in the matter of order passed u/s.248 of the IT Act. 2. The grounds taken by the assessee reads as under:-
1. 1. The learned CIT(A) erred in holding that the payment of USD 18,10,632/- made by the appellant to AMAS Bank would be taxable as fees for technical services under section 9(1)(vii)(b) of the Act.
2. The learned CIT(A) erred in holding that the payment made by the appellant to AMAS Bank would be taxable as per relevant provision of the India- UAE Tax Treaty. He erred in not appreciating the fact that the India-UAE does not have any article dealing with 'fees for technical service' and as AMAS Bank does not have Permanent Establishment in India, the payment made would not be taxable as per Article 7 of the Tax Treaty.
2 & 5229/Mum/2014 Industrial Bank Ltd., 3. The learned CIT(A) erred in not adjudicating alternate contention of the appellant that where the India-UAE Tax Treaty does not have clause relating to fees for technical services, the same would not be taxable even as per Article 22 of the Tax Treaty.
Rival contentions have been heard and record perused.
Facts in brief are that the assessee is a scheduled Bank duly registered and carrying on the business of banking under the Reserve Bank of India Act and Banking Regulation Act of India. For the purpose of expanding its banking business activities and also for meeting other capital needs, the Bank felt the need to raise capital abroad through the issuance of Global Depository Receipts (GDRs). After considering various option and evaluating the cost as well as benefits of raising such capital through GDRs the assessee decided to engage Amas Bank (Middle East) Ltd. (Amas Bank for short) incorporated and carrying on Financial Services business in the United Arab Emirates '(U.A.E.) as a licensed entity by Dubai Financial Services Authority ("DFSA"), for providing the services as sole Book-runner, Global coordinator and Lead-Manager to the abovementioned GDR offer. The proposed transaction was aimed at raising initially around USD 100 million through issuance of GDRs on the Luxembourg Stock Exchange's Euro MTF Market. It was agreed that for their services Amas Bank shall be paid a fee equal to 3.5% of the gross proceeds of the GDR issue, the payment of fees being net of withholding tax).
In pursuance of the assignment, Amas Bank were successful in raising an aggregate amount of USD 51,732,334 by way of the gross proceeds of 3 & 5229/Mum/2014 Industrial Bank Ltd., GDR issued. The fees at 3.5% of the gross proceeds worked out to approximately USD 18,10,632. The said fees were adjusted from the proceeds of GDR and transferred to an escrow account on 25/06/2008. Pursuant to this remittance, the assessee on the due date of payment of tax being 7/7/2008 paid income tax thereon under section 195 of the Income Tax Act (the Act) in the amount of Rs.90,83,185.' (Copy of receipted challan enclosed - Annexure - 2). In accordance with the procedure for foreign remittances prescribed with reference to section 195 of the Act, certificate of Chartered Accountants, M/ s B.K Khare & Co. was obtained dated 4/7/2008. Although the certificate in item (4) therein mentioned and certified deduction of tax at source of USD 2,13,722 equivalent to Rs.90,83,185/- being the amount of tax grossed up @ 10.5575%, the assessee contended that no tax was payable at all under section 195 of the Act.
In view of the above discussion, we do not find anything wrong in asessee’s denial of its liability to pay tax u/s.195 of the IT Act. In respect of the amount payable to AMAS Bank UAE, we also found that the services rendered by Amas Bank were purely of a commercial nature and bore the character of income arising to it wholly outside India, emanating from commercial services rendered by the Bank in the course of carrying on of its business wholly outside India. Services under the Agreement with Amas Bank were neither rendered in India nor utilized in India. In this view of the matter, the services did not partake of the character of fees for technical services as defined in the Explanation to Section 9(1)(vii)(b) of