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II. Direct Tax Case Laws:
1. DIT Vs. M/s Lufthansa Cargo India, I.T.A. No. 95/2005, Date of Order: 27.05.2015, High Court of Delhi
Whether
the ITAT is right in holding that payments made by the assessee to the
non-residents for component overhaul and maintenance are not fee for
technical services within the meaning of Section 9(1)(vii) of the Income
Tax Act, 1961 so as to oblige the assessee to deduct tax at source
under Section 195 of the Act from such payments?
Held No.
The ITAT
concluded that Technik performed the entire work on “an inanimate body
without any involvement or participation of assessee’s personnel”. It
also held that managerial or physical exertion by Technik‟s engineers on
the assessee‟s components did not render such services managerial,
technical and consultancy services within the meaning of Section
9(1)(vii)(d).
Hon’ble
Delhi High Court held that the ITAT was unduly influenced by all the
regulatory compulsions which the assessee had to face. Besides
international convention and domestic law that mandated aircraft
component overhaul, the manufacturer itself – as a condition for the
continued application of its warranty, and in order to escape any
liability for lack of safety, required periodic overhaul and maintenance
repairs. Unlike normal machinery repair, aircraft maintenance and
repairs inherently are such as at no given point of time can be compared
with contracts such as cleaning etc. Component overhaul and maintenance
by its very nature cannot be undertaken by all and sundry entities. The
level of technical expertise and ability required in such cases is not
only exacting but specific, in that, aircraft supplied by manufacturer
has to be serviced and its components maintained, serviced or overhauled
by designated centres. It is this specification which makes the
aircraft safe and airworthy because international and national domestic
regulatory authorities mandate that certification of such component
safety is a condition precedent for their airworthiness. The exclusive
nature of these services cannot but lead to the inference that they are
technical services within the meaning of Section 9(1)(vii) of the Act.
The ITAT‟s findings on this point are, therefore, erroneous.
(Please click here for judgment)
2. CIT Vs. M/s. Grup Ism P. Ltd., I.T.A. No. 325/2014, Date of Order: 29.05.2015, High Court of Delhi
Whether
the payment incurred by the assessee to laisonong agent i.e. the UAE
concerns wast technical service in terms of Second Explanation to
Section 9 (1) (vii) read with Section 194J?
Held No
It is
evident that in the transaction between the assessee and Marble Arts
& Crafts, the former (non-resident) acted as an agent of the
assessee for the purposes of the latter‟s dealings with the Works
Department, Abu Dhabi, which included coordinating with the authorities
in the said department and handling invoices for the assessee. As far as
CGS International is concerned, it acts as a liaisoning agent for the
assessee, and receives its remuneration from each client that it
successfully solicits for the assessee.
Facially,
such services cannot be said to be included within the meaning of
„consultancy services‟, as that would amount to unduly expanding the
scope of the term „consultancy‟. Therefore, this Court does not accept
the revenue‟s contention that the services provided were in the nature
of „consultancy services‟. Consequently, the remittances made by the
assessee would not come within the scope of the phrase „fees for
technical services‟ as employed in Section 9(1)(vii) of the Act. This
question is answered against the revenue and in favour of the assessee.
(Please click here for judgment)
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