Jeans Knit (P.) Ltd v DCIT [ITA No: 19 & 23 (BANG.) OF 2010] (Bangalore ITAT) Background: The assessee is a 100% export oriented undertaking and is engaged in the business of manufacturing and export of garments. During the relevant financial year, the assessee made remittances to M/s Sharp Eagle International Ltd. (SEL), a non-resident company incorporated in Hongkong. The AO observed that the assessee made these remittances without deduction of tax at source as per provision of sec. 195(1) read with sec. 9(i)(vii) of the Act. The assessee submitted that SEL was acting on directions of the assessee for inspection of fabrics, timely dispatch of material etc. and for these services, the assessee paid 12.5% of imported value as charges to the non- resident company. The AO held that the charges paid to the non-resident company are fees for technical services (FTS) as defined in explanation 2 to sec. 9(1)(vii) and therefore, held the assessee to be defaulter u/s 201(1A) for non deduction of tax.  The assessee filed an appeal before the CIT(A) and the CIT(A) also upheld the order of the AO.

Payment to overseas agent is not FTS – Bangalore ITAT

Abbey Business Services (India) (P.) Ltd v DCIT [2012] 23 taxmann.com 346 (Bangalore – Trib.) Facts of the case: The assessee-Indian company(Abbey India) incorporated on 22-1-2004 under the Companies Act, 1956 entered into an agreement for secondment of staff with its overseas parent company (Abbey National Plc., UK) on 4-2-2004. The secondment agreement contained inter alia the following clauses 3.2 to 3.6 3.2 Particular Secondments Abbey India and Abbey UK shall complete, sign and date a Secondment Term Sheet in respect of each employee agreed between them to be seconded to Abbey India in accordance with the terms of this Agreement.

Secondment is not “rendering of services”, if the other entity is their ‘real and economic ...

DCIT v TVS Electronics Ltd IT Appeal NO. 811 (MDS.) of 2010 (Chennai ITAT) Facts of the case The assessee made payment to M/s Rosewell Group Services Ltd. based in Mauritius for market survey, qualitative consumer measurement, retail store site information, etc. without deducting tax at source under section 195 of the Act The AO concluded that the payment made was nothing but fees for technical services relying on Explanation 2 to Section 9(1)(vii) of the Act. 

In the absence of FTS clause in India-Mauritius DTAA, FTS under the Act to be ...

DDIT v Toyo Engineering Corpn [2012] 22 taxmann.com 18 (MUM. – ITAT) The assessee was an engineering company incorporated in and tax resident of Japan. During the year it was, inter alia engaged in executing certain Project Management Contracts with MRPL, HPL and CFCL. On the perusal of these services, it can be seen that the assessee received consideration towards project management contracts on an overall basis towards (i) Project Management Services ; (ii) Local engineering supervision ; (iii) Construction management and supervision services and ; (iv) Start-up assistance services. 

Project Management Charges are FTS u/s 9(1)(vii) and detailed explanation on business profits under Article ...

CIT v Havells India Ltd (Del HC) [ITA No. 55/2012 & ITA No. 57/2012] The assessee, an Indian company, paid Rs. 14.71 lakhs to a US company for ‘KEMA’ certification which was necessary to enable it to sell its products in the European markets. The assessee claimed that though the said amount was ‘fees for technical services’ u/s 9(1)(vii), it was paid “for the purpose of earning income from a source outside India” (i.e. the exports) and so it was not taxable in India u/s 9(1)(vii)(b). The AO & CIT (A) rejected the claim though the Tribunal upheld it. On appeal by the department, HELD reversing the Tribunal: 

S. 9(i)(viib): Export sales is not a “source of income outside India”