M/s. MAHENDRA & MAHENDRA LTD., MUMBAI v. ADDL. CIT CIR. - 1, MUMBAI

ITA 2811/MUM/2003 | 1998-1999
Pronouncement Date: 28-11-2011 | Result: Allowed

Appeal Details

RSA Number 281119914 RSA 2003
Assessee PAN AAACM3025E
Bench Mumbai
Appeal Number ITA 2811/MUM/2003
Duration Of Justice 8 year(s) 7 month(s) 18 day(s)
Appellant M/s. MAHENDRA & MAHENDRA LTD., MUMBAI
Respondent ADDL. CIT CIR. - 1, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-11-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted L
Tribunal Order Date 28-11-2011
Date Of Final Hearing 23-11-2011
Next Hearing Date 23-11-2011
Assessment Year 1998-1999
Appeal Filed On 09-04-2003
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L MUMBAI BEFORE SHRI R.S.SYAL (A.M) & SHRI N.V.VASUDEVAN(J. M) ITA NO.2811/MUM/2003(A.Y. 1998-99) ITA NO.7021/MUM/2002(A.Y.1998-99) MAHINDRA & MAHINDRA LIMITED MAHINDRA TOWERS GROUND FLR. CORPORATE TAXATION WORLI ROAD NO.13 WORLI MUMBAI 18. PAN: AAACM 3025E (APPELLANT) VS. ADIT(IT)RANGE -1 / DCIT CIR. 2(1) AAYKAR BHAVAN MK ROAD MUMBAI 20. (RESPONDENT) APPELLANT BY : SHRI SANTOSH PARAB RESPONDENT BY : SHRI G.GURUSWAMI DATE OF HEARING : 23/11/2011 DATE OF PRONOUNCEMENT : 28/1 1/2011 ORDER PER N.V.VASUDEVAN J.M ITA NO.2811/M/03 IS AN APPEAL BY THE ASSESSEE AGA INST THE ORDER DATED 17/2/2003 OF CIT(A)-XXXI MUMBAI RELATING TO ASSESSMENT YEAR 1998- 99. ITA NO.7021/M/02 IS AN APPEAL BY THE ASSESSEE AGAINST ORDER DATED 4/10/02 OF CIT(A) XXXI MUMBAI RELATING TO ASSESSM ENT YEAR1998-99. 2. ITA NO.7021/M/02 IS AN APPEAL ARISING OUT OF P ROCEEDINGS UNDER SECTION 163 OF THE INCOME TAX ACT 1961 (THE ACT) WHEREBY THE ASSESSEE WAS TREATED AS AN AGENT OF A NON-RESIDENT M/S. LDV LTD. U.K.(LDV) . ITA NO.2811/M/03 ARISES OUT OF PROCEEDINGS WHEREBY ASSE SSMENT OF INCOME OF LDV WAS MADE IN THE HANDS OF THE ASSESSEE AS THE AS SESSEE WAS TREATED AS AGENT OF LDV. ITA NO.2811/MUM/2003(A.Y. 1998-99) ITA NO.7021/MUM/2002(A.Y.1998-99) 2 3. THE FACTS AND CIRCUMSTANCES UNDER WHICH THE AFOR ESAID APPEALS ARISES FOR CONSIDERATION ARE AS FOLLOWS: THE ASSESSEE IS A MANUFACTURE OF AUTOMOBILE PRODU CTS IN INDIA. LDV IS A RESIDENT OF UK AND IS ALSO IN THE BUSINESS OF MANUFACTURE OF AUTOMOBILES IN UK. THE ASSESSEE AND LDV HAD PROPOSALS FOR JOIN T VENTURE IN THE AREA OF AUTOMOBILE MANUFACTURE. AS A PRECURSOR LDV WANTED TO DO MARKET RESEARCH TO FIND OUT THE POTENTIAL MARKET FOR DIFFE RENT TYPES OF VEHICLES AND CONSUMER PREFERENCES. LDV BY ITS LETTER DATED 22 /5/96 PROPOSED TO THE ASSESEE FOR THE CONDUCT OF MARKET RESEARCH AND SHAR ING OF COSTS BETWEEN THE ASSESSEE AND LDV IN RESPECT OF THE PROPOSED MARKET RESEARCH. IN TERMS OF THE SAID LETTER LDV PROPOSED ENGAGING TWO MARKETING RESEARCH AGENCIES NAMELY RESEARCH INTERNATIONAL BOMBAY AND MARG MUMB AI. THE COST OF CONDUCTING MARKET RESEARCH WAS PROPOSED AS FOLLOWS: - VAN RESEARCH PROJECT INDIA : SUMMER 1996 VEHICLE COST DEPRECIATION ALLOWANCE : - CONVOY MINIBUS ) - CONVOY LUTON OR HI-LOADER ) LDV COST - PILOT VAN ) SHIPPING COST: - FREIGHT (UK TO BOMBAY BOMBAY TO UK) 10 250 - INSURANCE 300 LAND TRANSPORT: - UK 500 - INDIA MAHINDRA & MAHINDRA PREPARATION/REFURBISHMENT : - UK 750 - INDIA 300 CLINIC DRIVING: - FUEL ) - INSURANCE ) MAHINDRA & MAHINDRA ------ --------- TOTAL VEHICLE COST 12 100 RESEARCH COST: AS QUOTATION ALL FIELDWORK VENUE COSTS MANAGEMEN T AND REPORTING UK AND INDIA (INC. HARRIS RESEARCH R ECCE AND CLINIC ATTENDANCE) 27 750 ITA NO.2811/MUM/2003(A.Y. 1998-99) ITA NO.7021/MUM/2002(A.Y.1998-99) 3 VENUE COST CONTINGENCY (SUBJECT TO RECCE) 2 000 TOTAL RESE ARCH COST 29 750* ------ --- *RESEARCH COST BASED ON QUOTATION FROM RESEARCH INTERNATIONAL BOMBAY. FOR MARG MUMBAI ADDITIONAL RESEARCH COST IS P.S 4 000 (TO TOTAL P.S 33 750) TRAVEL AND SUBSISTENCE HARRIS RESEARCH (RECCE AND CLINIC) 9 500 LDV (RECCE AND CLINIC) 7 500 TOTAL TRAVEL AND SUBSISTENCE 17 000 -------- TOTAL PROJECT COST P.S.58 850 ------------ -- IT WAS AGREED THAT THE ASSESSEE AND LDV WILL BEAR T HE COST EQUALLY. AS PER THE AFORESAID ESTIMATE POUND STERLING 29 400 WOULD BE THE SHARE OF THE ASSESSEE PAYABLE FOR CONDUCTING OF SUCH MARKET RESE ARCH. THE ASSESSEE AGREED FOR THE AFORESAID PROPOSAL. ACCORDING TO TH E ASSESSEE THE MARKET RESEARCH HAD BEEN CARRIED OUT AND THE INVOICE RAISE D BY THE LDV ON THE ASSESSEE TOWARDS THE SHARE OF MARKET RESEARCH WAS O NLY SOME POUND STERLING 14 939. THE INVOICE DATED 9/7/97 RAISED BY LDV ON THE ASSESSEE GIVES FOLLOWING DESCRIPTION: RESEARCH PROJECT COST AS AGREED BY SR.PROJECT MANA GER MR. SARAVJIT SINGH AND TONY GROVE OF LDV THE ASSESSEE MADE REMITTANCE OF 14 939 POUND STERL ING TO LDV. NO TAX WAS DEDUCTED AT SOURCE AS ACCORDING TO THE CERTIFICATE OF THE CHARTERED ACCOUNTANT AND THE UNDERTAKING OF THE MANAGING DIRE CTOR OF THE ASSESSEE THE REMITTANCE IN QUESTION WAS ON ACCOUNT OF THE AS SESSEES SHARE OF MARKET RESEARCH COST AND THE SAME BEING IN THE NATURE OF R EIMBURSEMENT OF EXPENSES DOES NOT CONSTITUTE FEES FOR TECHNICAL SER VICES WITHIN THE MEANING OF EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT AND IS ALSO NOT FEES FOR TECHNICAL SERVICES (FTS) UNDER ARTICLE 12 OF THE D TAA BETWEEN INDIA AND UK (HEREINAFTER REFERRED TO AS DTAA). IT WAS ALSO FURTHER SUBMITTED THAT LDV DID NOT HAVE A PERMANENT ESTABLISHMENT IN INDIA WIT HIN THE MEANING OF ITA NO.2811/MUM/2003(A.Y. 1998-99) ITA NO.7021/MUM/2002(A.Y.1998-99) 4 ARTICLE 5 OF THE DTAA BETWEEN INDIA AND UK. SINCE REMITTANCES ARE NOT TAXABLE UNDER THE ACT IN THE HANDS OF LDV THERE WAS NO QUESTION OF DEDUCTION OF TAX AT SOURCES. 4. THE AO WAS HOWEVER OF THE VIEW THAT PRESENCE OF TECHNICALLY TRAINED PERSONNEL WAS NECESSARY AND SINCE LDV PERSONNEL WER E TECHNICALLY TRAINED THEY CAN OVERSEE RESEARCH PROJECT. IT HAS BEEN THE STAND OF THE ASSESSEE THAT THE EXPRESSION FEES FOR TECHNICAL SERVICES AS DEFIN ED IN THE DTAA BETWEEN INDIA AND UK WILL PREVAIL OVER THE DEFINITION OF FT S AS GIVEN IN EXPLANATION - 2 TO SECTION 9(1)(VII) OF THE ACT. THE ASSESSEE PO INTED OUT THAT AS PER ARTICLE 13(4) OF THE DTAA DEFINES THE TERMS FEES FOR TECHN ICAL SERVICES TO MEAN PAYMENT OF ANY KIND TO ANY PERSON IN CONSIDERATION FOR THE RENDERING OF ANY TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICE OF TECHNICAL OR OTHER PERSONNEL) WHICH: (A) ARE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF THE RIGHT PROPERTY OR INFORMATION FOR WHICH A PAYMENT DESCRIBED IN PARAGRAPH 3(A) OF THIS ARTICLE IS RECEIVED; OR (B) ARE ANCILLARY AND SUBSIDIARY TO THE ENJOYMENT O F THE PROPERTY FOR WHICH A PAYMENT DESCRIBED IN PARAGRAPH 3(B) OF THIS ARTICLE IS RECEIVED; OR (C) MAKE AVAILABLE TECHNICAL KNOWLEDGE EXPERIENCE SKILL KNOW-HOW OR PROCESSES OR CONSIST OF THE DEVELOPMENT AND TRANSF ER OF A TECHNICAL PLAN OR TECHNICAL DESIGN. THE ASSESSEE POINTED OUT THAT IN THE CASE OF MARKET RESEARCH THERE WAS NO QUESTION OF ANY SERVICES BEING RENDERED IN THE COUR SE OF CONDUCTING MARKET RESEARCH AS BEING ANCILLARY AND SUBSIDIARY EITHER T O THE APPLICATION OR ENJOYMENT OF ANY RIGHT PROPERTY OR IN FORMATION OR TO THE ENJOYMENT OF THE RIGHT TO USE ANY INDUSTRIAL COMMERCIAL OR SCIENTI FIC EQUIPMENT. IT WAS POINTED OUT THAT THE PAYMENT IS ALSO NOT CERTAINLY FOR DEVELOPMENT AND TRANSFER OF A TECHNICAL PLAN OR DESIGN. AS FAR AS S UB-PARAGRAPH (C) IS CONCERNED THE ASSESSEE POINTED OUT THAT THE MARKET RESEARCH HAS NOT MADE ITA NO.2811/MUM/2003(A.Y. 1998-99) ITA NO.7021/MUM/2002(A.Y.1998-99) 5 AVAILABLE TECHNICAL KNOWLEDGE EXPERIENCE SKILL KNOW-HOW OR PROCESSES ETC. IT WAS POINTED THAT THE CONCEPT OF IMPLICATIO N OF TECHNICAL SERVICES BEING MADE AVAILABLE WAS EXPLAINED WITH REGARD TO PARAG RAPH 4(B) IN THE MEMORANDUM OF UNDERSTANDING CONCERNING FEES FOR IN CLUDED SERVICES IN ARTICLE 12 OF THE D.T.A.A. BETWEEN INDIA AND U.S .A. IT WAS SUBMITTED THAT ARTICLE 12(4)(B) OF THE D.T.A.A. BETWEEN INDIA AND U.S.A. ALTHOUGH IT USED THE EXPRESSION FEES FOR INCLUDED SERVICES IS PARI MATERIA WITH ARTICLE 13(4) OF THE D.T.A.A. BETWEEN INDIA AND U.K. IT WAS POIN TED OUT THAT THE SAID MEMORANDUM EXPLAINS THE TERM AS FOLLOWS: GENERALLY SPEAKING TECHNOLOGY WILL BE CONSIDERED MADE AVAILABLE WITH THE PERSON ACQUIRING THE SERVICE IS ENABLED TO APPLY THE TECHNOLOGY. THE FACT THAT THE PROVISION OF THE SERV ICE MAY REQUIRE TECHNICAL INPUT BY THE PERSON PROVIDING THE SERVICE S DOES NOT PER SE MEAN THAT TECHNICAL KNOWLEDGE SKILLS ETC. ARE MA DE AVAILABLE TO THE PERSON PURCHASING THE SERVICE. SIMILARLY THE USE O F A PRODUCT WHICH EMBODIES TECHNOLOGY SHALL NOT PER SE CONSIDERED TO MAKE THE TECHNOLOGY AVAILABLE. IN SUPPORT OF THE VALIDITY OF THIS INTERPRETATION O F MADE AVAILABLE BEING APPLICABLE IN RELATION TO THE D.T.A.A. BETWEEN INDI A AND U.K. THE ASSESSEE INVITED ATTENTION TO THE DECISION OF THE INCOME TAX APPELLATE TRIBUNAL C- BENCH MUMBAI IN THE CASE OF RAYMOND LTD. V. DCIT TDS RANGE 1(1) MUMBAI (ITA NOS. 1225 & 1226/MUM/2000) WHEREIN IT W AS HELD AS FOLLOWS: 92. WE HOLD THAT WORD WHICH OCCURRING IN THE ART ICLE AFTER THE WORD SERVICES AND BEFORE THE WORDS MAKE AVAILABLE NO T ONLY DESCRIBES OR DEFINES MORE CLEARLY THE ANTECEDENT NOUN (SERVICES ) BUT ALSO GIVES ADDITIONAL IN FORMATION ABOUT THE SAME IN THE SENSE THAT IT REQUIRES THAT THE SERVICES SHOULD RESULT IN MAKING AVAILABLE TO THE USER TECHNICAL KNOWLEDGE EXPERIENCE SKILL ETC. THUS THE NORMAL PLAIN AND GRAMMATICAL MEANING OF THE LANGUAGE EMPLOYED I N OUT UNDERSTANDING IS THAT A MERE RENDERING OF SERVICE IS NOT ROPED IN UNLESS THE PERSON UTILIZING THE SERVICES IS ABLE TO MAKE USE OF THE TECHNICAL KNOWLEDGE ETC. BY HIMSELF IN HIS BUSINESS OR FOR HIS OWN BENEFIT AND WITHOUT RECOURSE TO THE PERFORMER OF TH E SERVICES IN FUTURE. THE TECHNICAL KNOWLEDGE EXPERIENCE SKILL ETC. MUS T REMAIN WITH THE ITA NO.2811/MUM/2003(A.Y. 1998-99) ITA NO.7021/MUM/2002(A.Y.1998-99) 6 PERSON UTILIZING THE SERVICES EVEN AFTER THE RENDER ING OF THE SERVICES HAS COME TO AN END. A TRANSMISSION OF THE TECHNICAL KNOWLEDGE EXPERIENCE SKILL ETC. FROM THE PERSON RENDERING T HE SERVICES TO THE PERSON UTILIZING THE SAME IS CONTEMPLATED BY THE AR TICLE. SOME SORT OF DURABILITY OF PERMANENCY OF THE RESULT OF THE REND ERING OF SERVICES IS ENVISAGED WHICH WILL REMAIN AT THE DISPOSAL OF THE PERSON UTILIZING THE SERVICES. THE FRUITS OF THE SERVICES SHOULD REMAIN AVAILABLE TO THE PERSON UTILIZING THE SERVICES IN SOME CONCRETE SHAP E SUCH AS TECHNICAL KNOWLEDGE EXPERIENCE SKILLS ETC. 94. THE MEMORANDUM OF UNDERSTANDING APPENDED TO T HE DTA WITH USA AND THE SINGAPORE DTA CAN BE LOOKED INTO AS AID S TO THE CONSTRUCTION OF THE UK DTA. THEY DEAL WITH THE SAM E SUBJECT (FEES FOR TECHNICAL SERVICES REFERRED TO IN THE US AGREEMEN T AS FEES FOR INCLUDED SERVICES). AS NOTED EARLIER IT CANNOT BE SAID THAT DIFFERENT MEANINGS SHOULD BE ASSIGNED TO THE US AGREEMENTS ME RELY BECAUSE OF THE MOU DESPITE THE FACT THAT THE SUBJECT MATTER DE ALT WITH IS THE SAME AND BOTH HAVE BEEN ENTERED INTO BY THE SAME CO UNTRY ON ONE SIDE (INDIA). THE MQU SUPPORTS THE CONTENTION OF TH E ASSESSEE REGARDING THE INTERPRETATION OF THE WORDS MAKE AVA ILABLE. THE PORTIONS OF THE MOU EXPLAINING PARA 4(B) OF THE REL EVANT ARTICLE WHICH WE HAVE EXTRACTED EARLIER IN OUR ORDER WHILE ADVERT ING TO THE CONTENTIONS OF THE ASSESSEE FULLY SUPPORT ITS INTE RPRETATION. THE ASSESSEE SUBMITTED THAT THE MARKETING RESEARCH SERVICES DID NOT MAKE AVAILABLE TECHNICAL KNOWLEDGE EXPERIENCE SKILL ET C. FOR BEING APPLIED IN ITS MANUFACTURING OPERATIONS. THE ASSESSEE HIGHLIGHTED THAT THE RESULTS OF MARKET SURVEY IF AT ALL WERE MEANT TO ENABLE LDV TO TAKE A DECISION AS TO THEIR UNDERTAKING THE MANUFACTURE OF THEIR PRODUCTS FOR MARKETING IN INDIA. IT WAS ALSO SUBMITTED THAT EVEN IN COMMON PARLANCE ALSO THE MARKET RESEARCH FOR GAUGING THE PROSPECTS OF MARKETING CER TAIN GOODS IN INDIA COULD NEVER BE VISUALIZED AS MAKING AVAILABLE ANY TECHNIC AL KNOWLEDGE EXPERIENCE SKILL KNOW-HOW ETC. IT WAS EMPHASIZED THAT THE SE RVICES FOR WHICH COST WAS SHARED BY THE ASSESSEE WITH THE AFORESAID U.K. COMP ANY CONSTITUTED COMMERCIAL SERVICES BY WAY OF MARKET RESEARCH AND D ID NOT PARTAKE OF THE CHARACTER OF TECHNICAL SERVICES WITHIN THE MEANING OF THE TERM AS MENTIONED IN THE D.T.A.A. BETWEEN INDIA AND U.K. ITA NO.2811/MUM/2003(A.Y. 1998-99) ITA NO.7021/MUM/2002(A.Y.1998-99) 7 4. THE CIT(A) HOWEVER MADE A REFERENCE TO A NOTE DA TED 23/7/1996 BY EXECUTIVE VICE PRESIDENT OF THE ASSESSEE ONE MR. J. P.BANERJEE. IN THE SAID NOTE THERE WAS A REFERENCE TO THE FACT THAT LDV WAS HAVING CORE COMPETENCE IN BODY BUILDING AND THE ASSESSEE COULD TIE UP WIT H THEM. THE NOTE FURTHER DESCRIBE THAT A JOINT MARKET SURVEY COULD BE DONE W ITH LDV TO ASSESS THE ACCEPTABILITY AND POSSIBLE MARKET FOR LDV PRODUCTS TO TAKE ADVANTAGE OF LDVS CORE COMPETENCE IN BODY BUILDING AND ALSO LEA RN FROM LDV ABOUT DEVELOPMENT AND MANUFACTURING OF NICHE PRODUCTS. THE NOTE ALSO DISCUSSES ABOUT DEVELOPMENTS OF MARKETING PLAN OF SOME OF ITS EXISTING PRODUCTS. THERE WAS ALSO REFERENCE TO BUSINESS PLAN OF USING SOME OF LDVS CONVOY VAN SIDE PANELS ON EXISTING PRODUCTS OF THE ASSESSE E AFTER PROPER ENGINEERING DESIGN INPUT CHANGE IN ASSEMBLY AND PAINTING PROCE SS TOOLS ASSEMBLING FIXTURES AND WELDING EQUIPMENT. THE NOTE ALSO RE COMMENDS IMMEDIATE JOINT VENTURE AND TECHNICAL ASSISTANCE IN LDV. 5. THE CIT(A) AFTER REFERRING TO THE ABOVE NOTE HEL D AS FOLLOWS: IT IS CLEAR FROM THE ABOVE NOTE THAT M&M HAS GOT A DIFFERENT UNDERSTANDING WITH LDV NOT CONFINED ONLY TO DOING SOME MARKET SURVEY BUT TO PROVIDE THE TECHNICAL ASSISTANCE IN I MPROVING THE QUALITY OF THEIR MINIBUS AND TO MOVE TOWARDS FULLY ENGINEER ED MINIBUS. AS NOTED BY THE EXECUTIVE VICE PRESIDENT IN HIS NOTE THE STRATEGIC FIT BETWEEN M&M AND LDV IS PLANNED TO LEARN FROM LDV A BOUT DEVELOPMENT AND MANUFACTURING OF NICHE PRODUCTS. T HE SENIOR PROJECT MANAGER MR. SARVAJIT SINGH HAS ADMITTED THE UTILITY OF THE MARKET RESEARCH REPORT TOWARDS THIS END AS IS EVIDENT FRO M THE FOLLOWING EXTRACT OF HIS LETTER DATED 4TH NOVEMBER 1996. RESEARCH FINDINGS BASED ON THE ABOVE CLINIC WERE P RESENTED TO US AT LDV LIMITED HO AT BIRMINGHAM UK ON 24TH OCT OBER 1996. COMPLETE MARKETING RESEARCH REPORT WAS ALSO G IVEN TO US AT THIS INSTANCE AND HAS BEEN FOUND TO BE VERY USEF UL AS IT HAS REVEALED THE AVAILABILITY OF A NICHE MARKET FOR HIG H VALUE MM- BUSES AND VANS WHICH WE CAN EXPLOIT. 5.4 THUS FROM SEEING THINGS IN TOTALITY IN THE AFO RESAID CONTEXT THE POSITION CLEARLY EMERGES THAT THE IMPUGNED PAYMENT OF GBP 14 939 BY ITA NO.2811/MUM/2003(A.Y. 1998-99) ITA NO.7021/MUM/2002(A.Y.1998-99) 8 M&M TO LDV IS PART OF-FEES FOR RENDERING TECHNICAL SERVICES BY LDV. SINCE LDV HAS ALSO GOT ITS INTEREST IN DEVELOPING BUSINESS RELATIONS WITH M&M IN INDIA IT MIGHT HAVE CHARGED A LESSER A MOUNT TOWARDS THIS END WHICH IS BEING STATED AS SHARING OF 50% E XPENSES BUT NEVERTHELESS IT REMAINS A PAYMENT TOWARDS RENDERING OF TECHNICAL SERVICES. THE EMPHASIS BY THE APPELLANT THAT IT DID NOT MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE EXPERIENCE SKILL ETC. TO M&M IS NOT CORRECT AND NOT BORNE OUT OF THE FACTS OF THE CASE. THE TRA NSACTION HAS NOT TO BE SEEN IN ISOLATION BUT IN TOTALITY. THEREFORE IN THESE CIRCUMSTANCES I HOLD THAT THE IMPUGNED PAYMENT OF GBP 14 939 EQUIVA LENT TO RS.12 55 390/- HAS RIGHTLY BEEN TAXED AS FEES FOR TECHNICAL SERVICES AND THE APPELLANTS GROUNDS OF APPEAL FAIL. 5. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE HA S PREFERRED ITA NO.2811/M/03 BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE WHO REITERATED THE STAND OF THE ASSESSEE AS WAS PUT FORTH BEFORE THE REVENUE AUTHORITIES. THE LD. D.R RELIED ON THE ORDER OF TH E REVENUE AUTHORITIES. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN OU R VIEW THE CONCLUSION OF THE REVENUE AUTHORITIES CANNOT BE SUSTAINED. IN OUR VIEW THE UNDERSTANDING BETWEEN LDV AND THE ASSESSEE IN THE L ETTER DATED 22/5/96 REFERRED TO BY THE CIT(A) DOES NOT CONTRADICT EA CH OTHER. THE NOTE RUNS IN CONSONANCE WITH THE LETTER DATED 22/5/96. THERE WA S ONLY A REFERENCE TO THE USE OF SOME OF THE ASPECTS OF LDVS PRODUCT IN THE EXISTING PRODUCT OF THE ASSESSEE SUBJECT TO CERTAIN CHANGE. THIS WAS ONLY A BUSINESS PLAN. THE CONTENT OF THE NOTE REFERS TO MARKET RESEARCH AND M ARKET RESEARCH ON ACCEPTABILITY OF POSSIBLE MARKET FOR LDV PRODUCTS. THUS WHAT WAS DONE WAS ONLY MARKET RESEARCH. IN FACT THE RESEARCH REPORT WAS DISCUSSED IN LDVS OFFICE AT UK ON 24/10/96 AND IT WAS FOUND THAT THER E WAS AVAILABILITY OF NICHE MARKET FOR HIGH MINI BUSES AND VANS IN INDIA. WE ARE OF THE VIEW THAT THIS WAS THE WHOLE PURPOSE OF THE AGREEMENT IN THE FORM OF A LETTER DATED 22/5/96 BETWEEN LDV AND THE ASSESSEE. WE FAI L TO SEE HOW THE CIT(A) ITA NO.2811/MUM/2003(A.Y. 1998-99) ITA NO.7021/MUM/2002(A.Y.1998-99) 9 BASED ON THE NOTE REFERRED TO IN HIS ORDER CAN CONC LUDE THAT LDV PROVIDED TECHNICAL ASSISTANCE IN IMPROVING THE QUALITY OF AS SESSEES MINI BUS AND MOVE FULLY ENGINEERED MINIBUS. IN OUR VIEW THE PAY MENT IN QUESTION WAS A REIMBURSEMENT OF EXPENSES AND WAS NOT IN THE NATURE OF FTS AS CONTENDED BY THE REVENUE. THE LAW IS WELL SETTLED THAT IN RE SPECT OF REIMBURSEMENT OF EXPENSES THERE IS NO OBLIGATION TO DEDUCT TAX AT SO URCE AS HELD IN THE FOLLOWING DECISIONS. 1. CIT VS. SIEMENS AKTIONGESELLSCHAFT 310 ITR 320 ( BOM) 2. ABB LTD-INRE 322 ITR 564 AAR 3. ITO (INTL. TAXATION) VS. PRASAD PRODUCTIONS LTD.12 5 ITD 263 (CHENNAI) (SB) WE ALSO NOTICE THAT WHILE HOLDING THAT THE PAYMENT IN QUESTION WAS FEES FOR TECHNICAL SERVICES THE CIT(A) HAS NOT ANSWERED THE ARGUMENTS RAISED ON BEHALF OF THE ASSESSEE THAT EVEN ASSUMING THAT THE PAYMENT IN QUESTION WAS FTS NOTHING WAS MADE AVAILABLE TO THE ASSESSEE AS UNDERSTOOD IN SEVERAL DECIDED CASES INCLUDING THE DECISION OF THE MUMBAI BENCH OF ITAT IN THE CASE OF RAYMOND LTD.(SUPRA). WE ARE OF THE VIEW TH AT THIS ASPECT WILL NOT BE REQUIRED TO BE CONSIDERED BECAUSE OF OUR CONCLUSION THAT REMITTANCE IN QUESTION IS REIMBURSEMENT EXPENSES INCURRED BY LDV ON BEHALF OF THE ASSESSEE. EVEN OTHERWISE WE ARE OF THE VIEW THAT THE SUM IN QUESTION CANNOT BE TREATED AS FTS BECAUSE NOTHING WAS MADE A VAILABLE TO THE ASSESSEE. FOR THE REASONS STATED ABOVE WE HOLD THA T THE REMITTANCES BY THE ASSESSEE ARE NOT CHARGEABLE TO TAX IN THE HANDS OF THE LDV. CONSEQUENTLY THE ASSESSMENT OF THE SUM IN QUESTION IN THE HANDS OF THE ASSESSEE AS AGENT OF LDV IS HELD TO BE NOT CORRECT. CONSEQUENTLY THE RE WILL BE NO LIABILITY TO CHARGE INTEREST UNDER SECTION 234B OF THE ACT. THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IN THIS REGARD TO THE EFFECT THAT T HE ASSESSEE BEING A NON- RESIDENT AND ALL PAYMENTS TO THE ASSESSEE BEING S UBJECT TO TDS THERE CANNOT BE ANY LIABILITY TO INTEREST U/S.234B OF THE ACT DOES NOT REQUIRE ANY CONSIDERATION. WE THEREFORE ALLOW THE APPEAL IN ITA NO.2811/M/2003. IN ITA NO.2811/MUM/2003(A.Y. 1998-99) ITA NO.7021/MUM/2002(A.Y.1998-99) 10 VIEW OF OUR CONCLUSION AS ABOVE WE ARE OF THE VIEW THAT THE GRIEVANCE OF THE ASSESSEE BEING TREATED AS AN AGENT OF THE NON-RESID ENT IN TERMS OF SECTION 163 OF THE ACT DOES NOT REQUIRE ANY ADJUDICATION. 8. CONSEQUENTLY ITA NO.2811/M/2003 IS ALLOWED WHIL E ITA NO.7021/M/2002 IS DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON THE 28 TH DAY OF NOV. 2011. SD/- SD/- (R.S.SYAL ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED. 28 TH NOV .2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RL BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR I TAT MUMBAI BENCHES MUMBAI. VM. ITA NO.2811/MUM/2003(A.Y. 1998-99) ITA NO.7021/MUM/2002(A.Y.1998-99) 11 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 23/11/11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 24/11/11 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER