M/S. BENNETT, COLEMAN & CO. LTD, MUMBAI v. THE ITO (IT) TDS-3, MUMBAI

ITA 7315/MUM/2008 | 2007-2008
Pronouncement Date: 12-11-2014 | Result: Partly Allowed

Appeal Details

RSA Number 731519914 RSA 2008
Assessee PAN AAACB4373G
Bench Mumbai
Appeal Number ITA 7315/MUM/2008
Duration Of Justice 5 year(s) 10 month(s) 14 day(s)
Appellant M/S. BENNETT, COLEMAN & CO. LTD, MUMBAI
Respondent THE ITO (IT) TDS-3, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 12-11-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted L
Tribunal Order Date 12-11-2014
Date Of Final Hearing 28-08-2014
Next Hearing Date 28-08-2014
Assessment Year 2007-2008
Appeal Filed On 29-12-2008
Judgment Text
L IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L MUMBAI . ! ' # $ BEFORE SHRI D. KARUNAKARA RAO AM AND SHRI VIVEK VARMA JM ITA NO. : 57/MUM/2009 (ASSESSMENT YEAR: 2007-08) ITO(IT)- TDS-3 IST FLOOR SCINDIA HOUSE BALLARD PIER MUMBAI -400 038 VS M/S BENNET COLEMAN & CO. LTD. TIMES OF INDIA BLDG. D. N. ROAD FORT MUMBAI -400 001 % .: PAN: AAACB 4373 G %( (APPELLANT) )*%( (RESPONDENT) ITA NO. : 7315/MUM/2008 (ASSESSMENT YEAR: 2007-08) M/S BENNET COLEMAN & CO. LTD. TIMES OF INDIA BLDG. D. N. ROAD FORT MUMBAI -400 001 % .: PAN: AAACB 4373 G VS ITO(IT)- TDS-3 IST FLOOR SCINDIA HOUSE BALLARD PIER MUMBAI -400 038 %( (APPELLANT) )*%( (RESPONDENT) ASSESSEE-APPELLANT BY : SHRI S VENKATRAMAN RESPONDENT-REVENUE BY : SHRI S K MAHAPATRA + - /DATE OF HEARING : 28-08-2014 ./0 -/ DATE OF PRONOUNCEMENT : 12-11-2014 2 2 2 2 O R D E R ' ' ' ' # # # # . . . . . .. . PER VIVEK VARMA J.M. : INSTANT APPEALS ARE FILED AGAINST THE ORDER OF CIT( A) XXXIII MUMBAI DATED 20.08.2008. SINCE BOTH THE APPEALS EM ANATE FROM THE SAME ORDER OF THE CIT(A) WE ARE DISPOSING OFF BOTH THE APPEALS THROUGH THE COMMON AND CONSOLIDATED ORDER FOR THE S AKE OF CONVENIENCE AND BREVITY. M/S BENNET COLEMAN & CO. LTD. ITA 57/MUM/2009 ITA 7315/MUM/2008 2 2. SINCE THE GROUNDS RAISED IN BOTH THE APPEALS ARE EMERGING FROM ONE ISSUE WE ARE TAKING UP BOTH THE APPEALS TOGETH ER FOR DISPOSAL. 3. THE FACTS ARE THAT THE ASSESSEE IS A COMPANY ENG AGED IN THE BUSINESS OF PRINTING AND PUBLISHING OF NEWSPAPERS SUCH AS TIMES OF INDIA ECONOMIC TIMES NAV BHARAT TIMES ETC. IT HAS A PRINTING PRESS AT KANDIVALI IN THE SUBURBS OF MUMBAI. THE ASSESSEE HAS TO CONCLUDE THE PRINTING OF NEWSPAPERS AROUND MIDDLE OF THE NIG HT TO ENSURE DELIVERY TO THE VENDORS TO BE DELIVERED TO THE REA DERS BETWEEN 5.00 A.M. AND 7.00 A.M. IN THE MORNING. FOR THIS PURPOSE IT NEEDED A SOPHISTICATED PLANT AND MACHINERY (COMMONLY KNOWN A S MAIL ROOM EQUIPMENT) THAT COULD COLLATE THE VARIOUS PAGES OF THE NEWSPAPER WHICH ASSISTED IN PRINTING PICKING AND STACKING T HEM AND PACK THE NEWS PAPERS FOR TIMELY DELIVERY WITHIN THE SHORTEST TIME TO ITS READERS. THE MAIL ROOM EQUIPMENT THEREFORE REQUIRED A COMP LEX PLANT WITH INSTALLED MACHINERY COMPLETE WITH CONVEYOR BELT W HICH COULD COLLATE VARIOUS PAGES OF THE NEWSPAPER FOR FAST PACKING FOR DELIVERY. 4. TO ACQUIRE SUCH A PLANT AND MACHINERY THE ASSES SEE CALLED FOR GLOBAL BIDS FOR SUPPLY DELIVERY AND INSTALLATION O F THE PLANT AND MACHINERY AND TRAINING OF ITS STAFF. THE BID WAS CLOSED IN FAVOU R OF M/S FERAG AG SWITZERLAND. 5. THE ASSESSEE THEREFORE ENTERED INTO TWO CONTRA CTS ON 8 TH FEBRUARY 2005 WITH M/S FERAG AG SWITZERLAND A COM PANY REGISTERED IN SWITZERLAND AGGREGATING TO CHF 7 915 000/- (BEST PRICE APB 21) OF WHICH ONE FOR THE SUPPLY OF THE VARIOUS COMPONENTS/UNITS OF THE MAIL ROOM EQUIPMENT AND SECOND FOR INSTALLA TION AND COMMISSIONING OF THE COMPONENTS/UNITS OF THE MAIL R OOM EQUIPMENT IN THE PREMISES OF THE ASSESSEE AND TRAINING OF THE STAFF OF THE COMPANY FOR OPERATION OF THIS EQUIPMENT TO BE SUPPL IED. IN SO FAR AS M/S BENNET COLEMAN & CO. LTD. ITA 57/MUM/2009 ITA 7315/MUM/2008 3 THE INSTANT CASES ARE CONCERNED THERE IS NO DISPUT E WITH REGARD TO THE AGREEMENT CONCERNING QUANTUM OF PAYMENT CONCERNING SUPPLY OF EQUIPMENT OF MAILROOM AND ITS COMPONENTS. 6. THE ASSESSEE COMPANY PAID IN AGGREGATE CHF 664 0 00/- (SWISS FRANCS) EQUIVALENT TO RS. 2 73 32 300/- TOWARDS INS TALLATION AND COMMISSIONING OF THE VARIOUS COMPONENTS/UNITS AS W ELL AS FOR TRAINING OF THE EMPLOYEES OF THE ASSESSEE. THE ENTI RE PAYMENT WAS MADE WITHOUT DEDUCTION OF TAX AT SOURCE (TAS). THE AO CAME TO THE CONCLUSION THAT THE PAYMENTS MADE BY THE ASSESSEE WERE LIABLE TO WITHHOLDING TAX IN THE HANDS OF FERAG AG AS FEES FOR TECHNICAL SERVICES AND SINCE THE ASSESSEE FAILED TO DEDUCT T AS ON THE SAID REMITTANCE AO INVOKED THE PROVISIONS OF SECTION 20 1 READ WITH SECTION 195 OF THE INCOME TAX ACT 1961. HE THEREFORE DIR ECTED THE ASSESSEE TO PAY RS. 27 33 320/- UNDER SECTION 201(1) OF THE ACT VIDE ORDER DATED 18.02.2008 ALONG WITH INTEREST UNDER SECTION 201(1A) OF THE ACT AGGREGATING TO RS. 30 88 550/-. 7. THE ASSESSEE APPROACHED THE CIT(A) BEFORE WHOM THE ASSESSEE SUBMITTED THAT THE REMITTANCE MADE TOWARDS INSTALLA TION AND COMMISSIONING OF THE COMPONENTS/UNITS OF THE MAIL R OOM EQUIPMENT AND TOWARDS TRAINING OF THE STAFF OF THE ASSESSEE HER E IN INDIA WERE NOT CHARGEABLE TO TAX IN THE HANDS OF FERAG AG. TH E ASSESSEE MADE THREE PRONGED SUBMISSIONS TO SUPPORT ITS CONTENTION S BEFORE THE CIT(A):- (A) THE SERVICES RENDERED BY FERAG AG SWITZERLAND IN REGARD TO INSTALLATION AND COMMISSIONING OF THE MAIL ROOM EQU IPMENT AND TRAINING OF THE ASSESSEES EMPLOYEES WERE INEXT RICABLY AND ESSENTIALLY LINKED TO THE SUPPLY OF THE SAID EQ UIPMENT AND HENCE THE REMITTANCE TOWARDS THE SAME CANNOT BE VIE WED IN ISOLATION SO AS TO BE SEPARATELY SUBJECTED TO TAX A S FEES FOR TECHNICAL SERVICES IN THE HANDS OF THE FERAG AG SWITZERLAND; M/S BENNET COLEMAN & CO. LTD. ITA 57/MUM/2009 ITA 7315/MUM/2008 4 (B) IN THE ALTERNATIVE THE INSTALLATION COMMISSIONING OF THE COMPONENTS/UNITS OF THE MAIL ROOM EQUIPMENT AND THE TRAINING OF THE EMPLOYEES OF THE ASSESSEE FALLS WITHIN THE E XPRESSION CONSTRUCTION ASSEMBLY OR LIKE PROJECT APPEARING IN EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT AND CONSEQUENTLY WOULD BE EXEMPT FROM CHARGEABILITY TO TAX IN THE HA NDS OF FERAG AG SWITZERLAND. (C) ASSUMING THAT THE PAYMENT MADE TOWARDS INSTALLATIO N AND COMMISSIONING OF THE COMPONENTS/UNITS OF THE MAIL R OOM EQUIPMENT AND TRAINING OF THE EMPLOYEES ARE CHARGEA BLE TO TAX UNDER THE INCOME TAX ACT IN THE HANDS OF FERAG AG SWITZERLAND THE SAID SERVICES ARE COVERED BY ARTIC LE 14 OF THE DOUBLE TAX AVOIDANCE AGREEMENT BETWEEN INDIA AND TH E SWISS CONFEDERATION AND THEREFORE WAS ONLY CHARGEAB LE TO TAX IN THE HANDS OF FERAG AG SWITZERLAND IN SWITZERLAN D. 8. THE CIT(A) WHILE NEGATING THE SUBMISSIONS ADVAN CED BY THE ASSESSEE IN THE ALTERNATIVE AS IN 7(A) AND (C) ABOV E UPHELD THE SUBMISSION AS IN PARA 7(B) ABOVE. TO COME TO THIS C ONCLUSION THE CIT(A) RELIED UPON THE DEFINITION OF THE EXPRESSION ASSEMBLY AS APPEARING IN BLACKS LAW DICTIONARY THE NEW INTERN ATIONAL WEBSTERS STUDENTS DICTIONARY AND LITTLE OXFORD DICTIONARY A ND HELD THAT THE INSTALLATION AND COMMISSIONING OF THE COMPONENTS/UN ITS OF THE MAIL ROOM EQUIPMENT WAS ASSEMBLY UNDER EXPLANATION 2 T O SECTION 9(1)(VII) OF THE ACT. IN SO HOLDING HE PLACED RELI ANCE ON THE DECISION OF THE COORDINATE BENCH OF THE ITAT HYDERABAD BENCH IN THE CASE OF ITO VS NATIONAL MINERAL DEVELOPMENT CORPORATION LTD. R EPORTED IN 42 ITD 570. HE THEREFORE CAME TO THE CONCLUSION THAT 75% OF THE REMITTANCE MADE BY THE ASSESSEE WAS TOWARDS INSTALLATION AND C OMMISSIONING AND HENCE WAS NOT FEES FOR TECHNICAL SERVICES AS DEFI NED IN EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT AND THEREFORE NO T CHARGEABLE TO TAX IN THE HANDS OF FERAG AG. BUT HE CONCLUDED THAT THE BA LANCE 25% OF THE REMITTANCE WAS TOWARDS TRAINING OF THE ASSESSEE S STAFF WHICH WAS CHARGEABLE TO TAX AS FTS. M/S BENNET COLEMAN & CO. LTD. ITA 57/MUM/2009 ITA 7315/MUM/2008 5 9. AGAINST THIS ORDER OF THE CIT(A) GIVING RELIEF T O THE ASSESSEE TO THE EXTENT OF 75% DEPARTMENT IS IN APPEAL BEFORE T HE ITAT AND THE ASSESSEE IS IN APPEAL AGAINST THE SUSTAINING ESTIMA TED 25% OF PAYMENT MADE TOWARDS TRAINING OF THE EMPLOYEES AS FTS. 10. BEFORE US THE AR MADE DETAILED SUBMISSIONS/ARG UMENTS ON THE SOLITARY ISSUE IMPUGNED IN THE TWO APPEALS. HE REF ERRED TO PAGES 1 TO 11 OF THE APB WHICH DEALT WITH THE INVITATION OF B IDS FOR SOURCING THE MAIL ROOM EQUIPMENT. AT PAGE 5 THE SCOPE OF WORK RE FERRED TO THE VARIOUS COMPONENTS/UNITS OF THE MAIL ROOM EQUIPMENT THAT WAS SUPPLIED AND WHICH COMPRISED OF THE PICKUP STATION THE GRIPPER CONVEYOR STACKERS AUTOMATIC BUNDLE ADDRESSING SYS TEM ETC. AT APB 6 BID DOCUMENT READ AS THE EQUIPMENT WILL BE INSTALLED AND COMMISSIONED B Y TRAINED AND QUALIFIED PERSONNEL FROM YOUR ORGANIZAT ION ONLY. YOU WILL ALSO PROVIDE HANDS-ON AS WELL AS CL ASSROOM TRAINING FOR OPERATION AND MAINTENANCE OF YOUR EQUIPMENT. THE AR FURTHER REFERRED TO THE QUOTATION OF THE SU PPLIER FERAG AG AT APB 12 TO 30 WHICH INCLUDED THE QUOTATION OF VA RIOUS COMPONENTS/UNITS WHICH FORMED PART OF THE MAIL ROO M EQUIPMENT. AT APB 21 REFERRED TO THE FINANCIALS IN CHF 7 915 000 /- WHICH SPECIFICALLY INCLUDED FREIGHT AND INSTALLATION. AT APB 23 THE QUOTATION UNDER THE PARA INSTALLATION REFERRED TO THE FACT THAT THE TOTAL PRICE INCLUDES THE MECHANICAL INSTALLATI ON THE COMMISSIONING THE TRAINING OF CUSTOMERS PERSONNEL AND THE PRODUCTION SUPERVISION DURING A MAXIMUM OF 2 WEEKS. 11. THE AR REFERRED TO THE RELEVANT CLAUSES OF THE AGREEMENT WHICH PERTAINED TO SUPPLY. THIS AGREEMENT WAS SIGNED ON 8 TH FEBRUARY 2005. IN THE AGREEMENT HE SPECIFICALLY REFERRED TO PARA 8 WHICH DEALT WITH THE WARRANTY AND GUARANTEE ON THE MACHINERY SUPPLIE D AND ALSO IN PARA 8.6(A) AT PAGE 42 WHICH STATED THAT :- M/S BENNET COLEMAN & CO. LTD. ITA 57/MUM/2009 ITA 7315/MUM/2008 6 THE COMPANY MAY ONLY CLAIM THE VENDORS WARRANTY I F (A) THE SUPPLIED GOODS WERE INSTALLED AND PUT INTO OPER ATION BY THE VENDOR CERTIFIED PERSONNEL. 12. THE AR THEN REFERRED TO THE AGREEMENT OF INST ALLATION COMMISSIONING AND TRAINING (CALLED SERVICE CONTRACT ) WHICH WAS ALSO SIGNED ON 8 TH FEBRUARY 2005 WHICH FORMED PART OF THE APB AT PA GES 56 TO 79. HE SPECIFICALLY REFERRED TO PARAS 3.2 AND 3.3 AT APB 60 WHICH REFERRED TO THE ACTIVITY OF INSTALLATION AND COMMISSIONING IN THE FOLLOWING WORDS: BRINGING AND POSITIONING THE VARIOUS COMPONENTS OF THE EQUIPMENT; PROPERLY ALIGNING THE ENTIRE EQUIPMENT; PROPERLY CONNECTING THE INDIVIDUAL UNITS; ENSURING THAT UNNECESSARY VIBRATIONS HEAT GENERATI ON IS AVOIDED; ENSURING THAT ALL SAFETY FEATURES PROVIDED BY THE V ENDOR ARE PROPERLY ERECTED AND FOUND TO BE DELIVERING THE DESIRED RESU LTS; TESTING THE MECHANICAL ELECTRICAL AND CONTROL FUNC TIONS TO ENSURE THAT : ALL THE COMPONENTS ARE WORKING IN UNISON AS PER TH E DESIGN OF THE VENDOR; INDIVIDUALLY AND COLLECTIVELY THE COMPONENTS ARE WO RKING TO THE MAXIMUM RATED CAPACITY; THE POWER DRAWN BY THE VARIOUS COMPONENTS ARE WITHI N THE LIMITS PRESCRIBED; TO UNDERTAKE THE NECESSARY WHITE PAPER RUNS ARE WOR KING OPTIMALLY; AND TO UNDERTAKE THE NECESSARY TEST RUNS WITH PRINTED P APER TO ENSURE PROPER FUNCTIONING OF THE EQUIPMENT. 13. THE AR THEREAFTER REFERRED TO PARA 3.6 AT APB 61 WHICH DEFINED INSTALLATION AND COMMISSIONING AS FOLLOWS: INSTALLATION AND COMMISSIONING SHALL EXTEND FROM T HE POSITIONING OF THE CONSIGNMENTS AT THE SPECIFIED LO CATIONS IN THE COMPANYS SITE TO THE TIME THE EQUIPMENT IS HANDED OVER TO THE COMPANY AFTER SUCCESSFUL COMPLETION OF ACCEPTANCE T EST. 14. BASED ON THE ABOVE THE AR SUBMITTED THAT A CO NJOINT AND HARMONIOUS READING OF THE INVITATION TO BID THE QUOTATION AND BOTH THE AGREEMENTS WOULD SHOW THAT BOTH THE AGREEMENTS WERE PART AND PARCEL OF ONE ACTIVITY I.E. SUPPLY INSTALLATION COMMISS IONING AND TRAINING. THE SUPPLY OF MAIL ROOM EQUIPMENT WAS ENTIRELY DEP ENDENT UPON ITS INSTALLATION AND COMMISSIONING BY THE BIDDER I.E. FERAG AG. BUT FOR M/S BENNET COLEMAN & CO. LTD. ITA 57/MUM/2009 ITA 7315/MUM/2008 7 WHICH IT WOULD NOT BE POSSIBLE FOR THE ASSESSEE TO CLAIM WARRANTIES AND SPECIFIC GUARANTEES PAGE 42 OF APB PARA 8.6 (A) OF THE SUPPLY AGREEMENT. IT WAS THEREFORE ARGUED THAT THE INSTAL LATION AND COMMISSIONING AND TRAINING OF THE STAFF WAS INEXTRI CABLY AND ESSENTIALLY LINKED TO THE SOLE PURPOSE AND DESIRE O F THE ASSESSEE TO MODERNISE THE MAIL ROOM EQUIPMENT. THEREFORE THE T WO AGREEMENTS WERE ACTUALLY ONE COMPREHENSIVE ACTIVITY AND COULD NOT BE SEPARATED AS SUPPLY AND FTS . IN THIS FACTUAL BACKGROUND THE AR PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: CIT VS SUNDWIGER EMFG & CO. (262 ITR 110) (AP HIGH COURT) MAHINDRA FORGINGS LTD. VS ADIT (INTL. TAX)-1 PUNE ITAT (ITA NOS.2563 64 & 65/PN/2012) 15. THE AR TO EXPLAIN HIS CASE REFERRED TO THE DE FINITION OF FEES FOR TECHNICAL SERVICES APPEARING IN EXPLANATION 2 TO S ECTION 9(1)(VII) OF THE ACT AS FOLLOWS: EXPLANATION (2) - FOR THE PURPOSES OF THIS CLAUSE FEES FOR TECHNICAL SERVICES MEANS ANY CONSIDERATION (INCLUD ING ANY LUMP SUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGER IAL TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION ASSEMBLY MINING OR LIKE PROJ ECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE IN COME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD SALARIES. 16. THE AR SUBMITTED THAT VARIOUS COMPONENTS/UNITS THAT FORMED PART OF THE MAIL ROOM EQUIPMENT WERE POSITIONED AL IGNED AND PROPERLY CONNECTED INDIVIDUALLY KEEPING IN MIND THAT SAFETY IS TO BE ENSURED SO THAT VIBRATIONS CEASED TO EXIST AND THE POWER CO NSUMPTION WAS NOT COMPROMISED WHEN THE MACHINES AND COMPONENTS WERE T O BE INDIVIDUALLY AND/OR COLLECTIVELY WORKING TO MAXIMUM CAPACITY. THE DETAILED ACTIVITY WAS PROTOTYPED BY THE ENGINEERS D EPUTED BY FERAG AG AS ENUMERATED IN PARAS 3.2 AND 3.3 OF THE CONTR ACT OF SERVICE. THE ENTIRE ACTIVITY WAS CARRIED OUT OVER A PERIOD OF 10 6 DAYS. HE THEREFORE M/S BENNET COLEMAN & CO. LTD. ITA 57/MUM/2009 ITA 7315/MUM/2008 8 SUBMITTED THAT THE SERVICES CARRIED OUT BY FERAG AG BY WAY OF INSTALLATION AND COMMISSIONING WERE IN THE NATURE O F CONSTRUCTION ASSEMBLY AS APPEARING AS THE EXCLUSIONS IN THE DEF INITION OF FEES FOR TECHNICAL SERVICES UNDER EXPLANATION 2 TO SECTION 9(1)(VII) OF THE INCOME TAX ACT AND HENCE THE CONSIDERATION PAID TO FERAG AG WAS NOT CHARGEABLE TO TAX AS FTS. 17. IN THIS CONNECTION THE AR RELIED UPON THE DECI SION OF THE HONBLE ITAT HYDERABAD BENCH IN THE CASE OF ITO VS NATIONAL MINERAL DEVELOPMENT CORPORATION LTD. REPORTED IN 42 ITD 57 0. HE ARGUED THAT THE FACTS IN THE SAID CASE WERE IDENTICAL AS THAT O F THE ASSESSEE AND REFERRED TO THE FOLLOWING PARA APPEARING AT PAGE 58 0 OF THE DECISION: FROM THE FACTS AND CIRCUMSTANCES BEFORE US IT CANN OT BE SAID THAT THE NR SIMPLY AGREED TO PROVIDE SERVICE OF ITS TECHNICAL PERSONNEL ONLY.IT HAD UNDERTAKEN TO COMPLETE ERECTI ON COMMISSIONING AND MAINTENANCE. ERECTING A CONVEYOR BELT IS A FORM OF CONSTRUCTION. THERE IS NOTHING TO SUGGEST W HAT TYPE OF CONSTRUCTION IS CONTEMPLATED BY THAT WORD USED IN S ECTION 9(1)(VII). IF LOOSE PARTS OF A MACHINERY ARE ASSEMB LED IT CAN ALSO BE CALLED AS CONSTRUCTION OF THE MACHINE. IN THIS S ECTION BOTH CONSTRUCTION AS WELL AS ASSEMBLY WAS USED. EVEN IF THESE WORDS LIKE CONSTRUCTION AND ASSEMBLING ARE TO BE UNDERSTO OD AS PER EJUSDEM GENERIS RULE TO ASSEMBLE OR TO CONSTRUCT A CONVEYOR BELT IS ITSELF A PROJECT OF A BIG MAGNITUDE. THE COST OF THE CONVEYOR BELT AS GIVEN IN ANNEXURE-I TO THE AGREEMENT DATED 17.1. 1985 IS 25 70 400 DM FOB. SUCH HEAVY MACHINERY COSTING CROR ES OF RUPEES WERE ASSEMBLED AT THE PROJECT SITE AND AN IN TEGRATED CONVEYOR BELT WAS CONSTRUCTED AT THE PROJECT SITE A T A COST OF 1 07 000 DM. UNDER THESE CIRCUMSTANCES CAN WE SAY T HAT THE CHARGE FOR ASSEMBLING OR CONSTRUCTION OF THE CONVEY OR BELT IS SIMPLY FOR SUPERVISING THE ACT OF CONSTRUCTION OR A SSEMBLING OR FOR SETTING UP OF THE CONVEYOR BELT? IT IS NO DOUBT TH AT THE NR ITSELF WAS NOT ENGAGED IN ANY MINING WORK. BUT THAT BY IT SELF DOES NOT MAKE THE ERECTION OF A HUGE CONVEYOR BELT COSTING C RORES OF RUPEES IN A PROJECT AREA CANNOT ITSELF BE CALLED A PROJECT . THEREFORE WE HAVE NO HESITATION TO HOLD THAT THE ASSESSEE IS ENG AGED IN A PROJECT OF EITHER CONSTRUCTING A CONVEYOR BELT OR A SSEMBLING A CONVEYOR BELT AT THE PROJECT SITE WHICH IS INTENDED TO CONVEY THE IRON ORE MINED IN BAILADILA MADHYA PRADESH. THEREF ORE WE HOLD THAT THE ASSESSEE WOULD COME WITHIN EXPLANATION-2 T O SECTION 9(1)(VII) AND THE PAYMENTS SOUGHT TO BE FOR WHICH N O OBJECTION M/S BENNET COLEMAN & CO. LTD. ITA 57/MUM/2009 ITA 7315/MUM/2008 9 CERTIFICATES WERE SOUGHT TO BE OBTAINED FOR ASSESSM ENT YEARS 1985-86 AND 1986-87 CANNOT BE SAID TO BE FEES FOR T ECHNICAL SERVICES. IN VIEW OF THE ANDHRA PRADESH HIGH COURT S DECISION IN HINDUSTAN SHIPYARDS CASE CITED SUPRA THESE AMOUNT S WHICH ARE SOUGHT TO BE SENT FOR ASSESSMENT YEARS 1985-86 AND 1986- 87 CANNOT ALSO BE CONSIDERED AS INCOME EARNED IN IN DIA BY THE NR. IT IS SIGNIFICANT THAT UNDER THE EXPLANATION TO SECTION 44D OR THE EXPLANATION PROVIDED UNDER SECTION 115A IT IS SAID THAT THE WORDS FEES FOR TECHNICAL SERVICES SHOULD BEAR THE SAME MEANING AS WAS GIVEN IN EXPLANATION 2 TO SECTION (1 )(VII). 18. SUBMITTING FURTHER THE AR PLEADED ASSUMING W ITHOUT ADMITTING THAT THE CONSIDERATION WAS CHARGEABLE TO TAX AS FEES FOR TECHNICAL SERVICES UNDER THE ACT THE SAID SERVICES FELL WITHIN THE AMBIT OF INDEPENDENT PERSONAL SERVICES AS DEFINED I N ARTICLE 14 OF THE DTAA BETWEEN THE GOVERNMENT OF INDIA AND THE SWISS CONFEDERATION AS NOTIFIED ON 21 ST APRIL 1995. HENCE THE SAID CONSIDERATION WAS ONLY TAXABLE IN SWITZERLAND AND NOT IN INDIA. 19. HE THEREFORE DREW OUR ATTENTION TO THE SAID T REATY APPEARING AT PAGES 80 TO 91 OF THE PAPER BOOK. PARA (5) OF ARTICLE 12 OF THE SAID TREATY APPEARING AT PAGE 85 READ AS FOLLOWS: NOTWITHSTANDING PARAGRAPH 4 FEES FOR TECHNICAL S ERVICES DOES NOT INCLUDE AMOUNTS PAID: A) FOR TEACHING IN OR BY EDUCATIONAL INSTITUTIONS; B) FOR SERVICES COVERED BY ARTICLE 14 OR ARTICLE 15 AS THE CASE MAY BE. 20. RELYING ON THE ABOVE THE AR SUBMITTED THAT TH OUGH THE SERVICES RENDERED BY FERAG AG TOWARDS INSTALLATION COMMISSIONING AND TRAINING WOULD FALL WITHIN THE EXPRESSION FEES FOR TECHNICAL SERVICES AS DEFINED IN PARA (4) OF ARTICLE 12 OF THE TREATY BUT IN VIEW OF PARA (5)(B) OF ARTICLE 12 THE DEFINITION OF THE TERM FEES FOR TECHNICAL SERVICES DID NOT COVER SUCH SERVICES AS STATED IN ARTICLE 14. 21. THE AR THEN REFERRED TO ARTICLE 14 OF THE TRE ATY APPEARING AT APB 86 WHICH READ AS FOLLOWS: M/S BENNET COLEMAN & CO. LTD. ITA 57/MUM/2009 ITA 7315/MUM/2008 10 ARTICLE 14 INDEPENDENT PERSONAL SERVICES 1. INCOME DERIVED BY A RESIDENT OF A CONTRACTING S TATE IN RESPECT OF PROFESSIONAL SERVICES OR OTHER ACTIVITIES OF AN IND EPENDENT CHARACTER SHALL BE TAXABLE ONLY IN THAT STATE EXCEPT IN THE F OLLOWING CIRCUMSTANCES WHEN SUCH INCOME MAY ALSO BE TAXED IN THE OTHER CON TRACTING STATE : (A) IF HE HAS A FIXED BASE REGULARLY AVAILABLE TO HIM I N THE OTHER CONTRACTING STATE FOR THE PURPOSE OF PERFORMING HIS ACTIVITIES; IN THAT CASE ONLY SO MUCH OF THE INCOME AS IS ATTRIBUTABLE TO THAT FIXED BASE MAY BE TAXED IN THAT OTHER STATE; OR (B) IF HIS STAY IN THE OTHER STATE IS FOR A PERIOD OR P ERIODS AGGREGATING TO 183 DAYS OR MORE IN ANY 12 MONTH PERIOD COMMENCING OR ENDING IN THE FISCAL YEAR CONCERNED; IN THAT CASE ONLY SO MU CH OF THE INCOME AS IS DERIVED FROM HIS ACTIVITIES PERFORMED IN THAT OTHER STATE MAY BE TAXED IN THAT OTHER STATE. 2. THE TERM PROFESSIONAL SERVICES INCLUDES ESPECI ALLY INDEPENDENT SCIENTIFIC LITERARY ARTISTIC EDUCATI ONAL OR TEACHING ACTIVITIES AS WELL AS THE INDEPENDENT ACTIVITIES OF PHYSICIANS LAWYERS ENGINEERS ARCHITECTS SURGEONS DENTISTS AND ACCOUNTANTS. 22. BASED ON THE ABOVE DEFINITION OF THE TERM PROFESSIONAL SERVICES APPEARING IN PARA 2 OF ARTICLE 14 OF THE TREATY TH E AR ARGUED THAT PROFESSIONAL SERVICES ALSO INCLUDED INDEPENDENT ACT IVITIES OF ENGINEERS. FERAG AG BEING AN ENGINEERING CONCERN IT WAS SUBM ITTED THAT THE SERVICES OF INSTALLATION COMMISSIONING OF THE MAIL -ROOM EQUIPMENT AND THE TRAINING OF THE EMPLOYEES OF THE ASSESSEE C ONSTITUTED INDEPENDENT ACTIVITIES OF ENGINEERS CARRIED OUT BY THE SAID SWISS ENTITY AND THEREFORE FELL WITHIN THE EXTENDED DEF INITION OF PROFESSIONAL SERVICES . THE AR FURTHER SUBMITTED THAT SINCE FERAG AG DID NOT HAVE A FIXED BASE IN INDIA AND ALSO THAT SINCE THE ENGINEERS DEPLOYED BY THEM FOR INSTALLATION AND COMMISSIONING OF THE M AIL-ROOM EQUIPMENT AS WELL AS TRAINING STAYED IN INDIA FOR AN AGGREGATE PERIOD OF 106 DAYS IN THE 12 MONTH PERIOD THE CONSIDERATI ON PAID BY THE ASSESSEE TO FERAG AG TOWARDS THESE PROFESSIONAL SE RVICES WAS ONLY TAXABLE IN SWITZERLAND IN TERMS OF PARA (1) OF ART ICLE 14 OF THE TREATY. 23. THE AR THEN REFERRED TO THE OBSERVATIONS OF THE EMINENT AUTHORS DR. S. RAJARATNAM AND MR. B.V. VENKATARAMIAH IN TH EIR COMMENTARY M/S BENNET COLEMAN & CO. LTD. ITA 57/MUM/2009 ITA 7315/MUM/2008 11 ON DOUBLE TAX TREATIES TO SUBSTANTIATE THAT THE ENG INEERING SERVICES RENDERED BY FERAG AG WOULD FALL UNDER ARTICLE 14 OF THE TREATY AND NOT UNDER ARTICLE 12 :- AN ENGINEER MAY OFFER ENGINEERING SERVICES WHICH IS ORDINARILY UNDERSTOOD AS A TECHNICAL SERVICE BUT AS LONG AS T HE ASSIGNMENT IS A PROFESSIONAL ONE IN THE NATURE OF INDEPENDENT SERVI CE IT WILL MORE READILY FALL UNDER THIS ARTICLE THAN THE ARTICLE RE LATING TO TECHNICAL SERVICE ESPECIALLY IN THE CONTEXT OF TECHNICAL SER VICE BEING UNDERSTOOD AS PARTING WITH TECHNOLOGY. 24. AS REGARDS THE APPEAL FILED BY THE ASSESSEE AGA INST THE FINDING OF THE CIT(A) THAT 25% OF THE CONSIDERATION IS ATTRIBU TABLE TOWARDS TRAINING AND HENCE EXIGIBLE TO TAX AS FEES FOR TECHNICAL SERVICES THE AR SUBMITTED THAT THE ESTIMATION MADE BY THE CIT(A) OF 25% OF CHF 664 000/- TOWARDS TRAINING WAS HIGHLY EXCESSIVE. IN THIS CONNECTION THE AR FILED THE BREAK-UP OF CHF 664 000/- GIVEN BY FERAG AG ACCORDING TO WHICH ONLY CHF 17 500/- WAS THE ATTRI BUTABLE TOWARDS TRAINING. BASED ON THIS FACT AS PER THE AGREEMENTS AND THE DETAILS AS PROVIDED BY FERAG AG THAT AT THE MOST THE AMOUNT O F CHF 17 500/- COULD ONLY BE QUALIFIED TOWARDS TRAINING. 25. THE AR THEREFORE SUBMITTED THAT IN SO FAR AS THE DELETION OF 75% OF THE AMOUNT ADDED THE ORDER OF THE CIT(A) WA S CORRECT AND NO INFIRMITY COULD BE SEEN BUT IN SO FAR AS THE SUSTA INING THE 25% OF TRAINING AMOUNT THE AR PLEADED THAT THOUGH THE SUM IS NOT SUSTAINABLE BUT IF AT ALL THE ADDITION HAS TO BE M ADE THEN 25% OF CHF 17 500/- COULD ONLY QUALIFY FOR SUCH AN ADDITIO N. 26. ON THE OTHER HAND THE DR WHILE SUPPORTING THE ORDER PASSED UNDER SECTION 201 READ WITH SECTION 195 BY THE AO SUBMITTED THAT THE SCOPE OF THE SERVICES OF INSTALLATION COMMISSI ONING AND TRAINING WERE NARRATED IN A SEPARATE CONTRACT WHICH CLEARLY SHOWED THAT THE PAYMENT MADE WAS IN THE NATURE OF FEES FOR TECHNICAL SERVICES. HE M/S BENNET COLEMAN & CO. LTD. ITA 57/MUM/2009 ITA 7315/MUM/2008 12 SUBMITTED THAT THE CONTRACT FOR SERVICES BEING A SE PARATE CONTRACT HAS TO BE CONSIDERED INDEPENDENTLY FROM THE CHARGEABILI TY PERSPECTIVE. 27. THE DR ALSO SUBMITTED HIS WRITTEN SUBMISSIONS D URING THE COURSE OF THE PROCEEDINGS RELYING UPON VARIOUS CASE LAWS IN SUPPORT OF THE STAND TAKEN BY THE AO. IN THE WRITTEN SUBMISSIO NS IT WAS ALSO ARGUED THAT ARTICLE 14 OF THE TREATY WITH THE SWISS CONFEDERATION DID NOT SUPPORT THE ASSESSEES STAND THEREFORE UNLIKE COMMERCIAL OR BUSINESS ACTIVITIES WHERE CAPITAL REQUIREMENT IS S IGNIFICANT AND CRITICAL INDEPENDENT PERSONAL SERVICES AS IN THE INSTANT SCENARIO DO NOT REQUIRE HUGE CAPITAL BUT HIGH AMOUNT OF INTELLE CTUAL AND PERSONNEL EXPERTISE. IN THIS CONNECTION IT WAS SUBMITTED THA T IN BOTH SUB-PARAS (A) AND (B) OF PARA 1 OF ARTICLE 14 THERE WAS THE USE THE PHRASE HE AND HIS AND IN THIS CONTEXT IT WAS URGED FOLLOWING THE DEC ISION OF THE MUMBAI ITAT IN CHRISTIANI & NIELSEN REPORTED IN 39 ITD 355 THAT ON INDEPENDENT PERSONAL SERVICES ARTICLE 14 GETS A TTRACTED ONLY WHEN AN INDIVIDUAL RENDERS SERVICES AND NOT OTHERWISE. 28. THE AR IN HIS REJOINDER REFERRED TO THE FOLLO WING CASE LAWS RELIED UPON BY THE DR IN HIS NOTE. (A) CGG VERITAS SERIVES SA VS ADDL. DIT (INT. TAXATION) (50 SOT 335); (B) JINDAL TRACTEBAL POWER CO. LTD. VS DCIT (106 ITD 22 7); (C) AEG AKTIENGESSELSCHAFT VS IAC (48 ITD 359); 29. THE AR FILED COPIES OF THE ABOVE DECISIONS DURI NG THE COURSE OF THE HEARING AS RELIED UPON BY THE DR AND SOUGHT TO DISTINGUISH THE SAME AS FOLLOWS: (A) IN CGG VERITAS SERVICES SA. VS ADDL. DIT (INTL. TA XATION) THE RECIPIENT OF THE CONSIDERATION WAS ENGAGED IN PROV IDING GEOLOGICAL AND GEO-PHYSICAL SERVICES IN THE FORM OF SEISMIC SU RVEYS IN THE OFFSHORE WATERS UNDER CONTRACT WITH ONGC. THE CONSI DERATION M/S BENNET COLEMAN & CO. LTD. ITA 57/MUM/2009 ITA 7315/MUM/2008 13 RECEIVED BY THE RECIPIENT WAS HITHERTO TAXED UNDER SECTION 44BB OF THE ACT BUT HOWEVER IN THE ASSESSMENT YEAR INVOLV ED THE AO INVOKED EXPLANATION 2 TO SECTION 9(1)(VII) OF THE A CT AND SOUGHT TO TAX THE CONSIDERATION AS FEES FOR TECHNICAL SERVICES. THE ASSESSEE IN THE SAID CASE HAD TAKEN SHELTER THAT THE PROJECT BEING A MINING PROJECT IT FELL WITHIN THE EXCEPTION PROVIDED UNDE R EXPLANATION 2 OF SECTION 9(1)(VII) OF THE ACT. THE AR INVITED POINTE D OUT THAT IN PARA 21 OF THE ORDER IN WHICH THE REASON AS TO WHY THIS ARGUMENT DID NOT FIND FAVOUR WITH THE BENCH WAS INDICATED. FROM THE SAME THE AR ARGUED THAT IT WAS APPARENT THAT THOUGH THE ASSESSE E IN THE SAID CASE CARRIED ON A MINING PROJECT THE ADDITIONAL CO NDITION THAT PROJECT SHOULD BE UNDERTAKEN BY THE ASSESSEE WAS NOT SATISFIED IN ORDER TO AVAIL OF THE EXCEPTION. IN THE PRESENT CAS E THE AR SUBMITTED THAT THE PROJECT OF ASSEMBLING THE MAIL-R OOM EQUIPMENT WAS IN FACT UNDERTAKEN BY FERAG AG AND CONSEQUEN TLY THE CONDITIONS I.E. ASSEMBLING INSTALLATION AND TRAIN ING OF PERSONAL WAS THE INDIVISIBLE PART OF THE PROJECT BEING UNDER TAKEN BY FERAG AG AND THEREFORE THE REFERRED CASE BY THE DR WAS INAPPLICABLE. (B) THE AR REFERRED THE CASE OF JINDAL TRACTEBAL POWER CO. LTD. VS DCIT REPORTED IN 106 ITD 227 RELIED UPON BY THE DR AND SUBMITTED THAT THE DR BASED HIS ARGUMENTS ON PARA 3 WHICH GAVE THE FACTS OF THE CASE. IT WAS SUBMITTED THAT IT WAS ONLY SUPPLY OF EQUIPMENT AND START-UP WAS INVOLVED AND THERE WAS N O ASSEMBLY OR CONSTRUCTION OR MINING PROJECT INVOLVED. THE AR PO INTING OUT THE DISTINCTION REFERRED TO PARA 7.2 OF THE SAID DECIS ION WHEREIN THE COORDINATE BENCH ALSO NOTED THE CLAIM FELL WITHIN T HE EXCEPTION OF EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT. HE THEREFORE SUBMITTED THAT THIS DECISION WAS ALSO INAPPLICABLE . (C) IN AEG AKTIENGESSELSCHAFT VS IAC REPORTED IN 48 IT D 359 ALSO FROM PARA 2 IT COULD BE SEEN THAT NO CONSTRUCTION ASSEM BLY WAS INVOLVED M/S BENNET COLEMAN & CO. LTD. ITA 57/MUM/2009 ITA 7315/MUM/2008 14 AND HENCE IN PARA 7.2 THE BENCH NEGATIVED THE ARGUM ENT THAT IT WAS NOT FEES FOR TECHNICAL SERVICES. 29. AS REGARDS THE DRS RELIANCE ON THE DECISION OF THE MUMBAI ITAT IN CHRISTIANI & NIELSEN REPORTED IN 39 ITD 355 TH AT ARTICLE 14 OF THE DTAA APPLIED ONLY TO INDIVIDUALS THE AR DREW THE A TTENTION TO THE FACT THAT ARTICLE 14 OF THE TREATY BETWEEN INDIA AND DEN MARK WHICH WAS CONSIDERED BY THE HONBLE MUMBAI ITAT WHILE REFERRI NG TO INDEPENDENT PERSONNEL SERVICES SPECIFIED THAT IT ONLY APPLIED TO INCOME DERIVED BY AN INDIVIDUAL . HOWEVER IN THE PRESENT INSTANCE ARTICLE 14 OF THE TREATY BETWEEN INDIA AND SWISS CO NFEDERATION USED THE EXPRESSION INCOME DERIVED BY A RESIDENT OF A CONTRACTING STAT E. FURTHER IN PARA 3 OF ARTICLE 4 OF THE SWISS TREATY SPECIFICALLY STATES THAT WHERE A PERSON OTHER THAN AN INDIVIDUAL IS A RESID ENT OF BOTH CONTRACTING STATES THEN IT SHALL BE DEEMED TO BE A RESIDENT OF THE CONTRACTING STATE IN WHICH ITS PLACE OF EFFECTIVE M ANAGEMENT IS SITUATED. IT WAS THEREFORE ARGUED BY AR THAT ARTICLE 14 OF T HE SWISS TREATY APPLIED NOT ONLY TO INDIVIDUALS AS ARGUED BY DR B UT TO ALL RESIDENTS OF A CONTRACTING STATE. IN THIS CONNECTION HE RELIED UPON THE DECISION OF THE MUMBAI ITAT IN MSEB VS DY. CIT REPORTED IN 90 ITD 793 WHERE AT PAGES 802 AND 803 THE COORDINATE BENCH OF THE IT AT INTERPRETED SIMILAR PROVISIONS OF THE ERSTWHILE INDIA UK TREATY TO HOLD THAT THE RELEVANT ARTICLE WAS APPLICABLE TO ALL RESIDENTS OF A CONTRACTING STATE. 30. IN THE CIRCUMSTANCES THE AR SUBMITTED THAT IN ACCORDANCE WITH INDIA SWISS TREATY ARTICLE 14 APPLIED TO FERAG AG AND CONSEQUENTLY THE CONSIDERATION PAID TOWARDS INSTAL LATION COMMISSIONING AND TRAINING QUALIFIED AS INDEPENDENT PERSONAL SERVICES AND WAS THEREFORE TAXABLE ONLY IN SWITZERLAND. M/S BENNET COLEMAN & CO. LTD. ITA 57/MUM/2009 ITA 7315/MUM/2008 15 31. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIALS ON RECORD. IT IS UNDISPUTED THAT THE MAILROOM EQUIPMENT COMPRISED OF VARIOUS UNITS AND WAS HENCE A COMPLEX EQUIPMENT. THE BID DOCUMENT CLEARLY STIPULATED THAT THE UNITS/COMPONENTS OF THE MAILROOM EQUIPMENT WOULD HA VE TO BE INSTALLED AND COMMISSIONED BY TRAINED AND QUALIFIED PERSONNEL OF THE SUPPLIER WHO SHALL THEN PROVIDE TRAINING TO THE A SSESSEES EMPLOYEES ON THE OPERATION AND MAINTENANCE OF MAILROOM EQUIPM ENT. THE PRICE QUOTED INCLUDED INSTALLATION COMMISSIONING AND TRA INING. THE MERE FACT THAT BOTH THE CONTRACTS I.E. FOR SUPPLY OF THE MAI LROOM EQUIPMENT AND ITS INSTALLATION COMMISSIONING AND TRAINING WERE ENTERED INTO ON THE SAME DATE WOULD NOT LEAD TO AN AUTOMATIC CONCLUSION THAT THEY SHOULD BE READ IN ISOLATION WITH THE OTHER. IN THIS CONNEC TION WE CAN SAFELY TAKE THE ADVANTAGE OF THE OBSERVATIONS OF THE HONB LE SUPREME COURT AT PAGE 429 IN ISHIKAWAJIMA-HARIMA HEAVY INDUSTRIE S VS DIRECTOR OF INCOME TAX REPORTED IN 288 ITR 408 WHEREIN THE HO NBLE SUPREME COURT OBSERVED THE CONTRACT IS A COMPLEX ARRANGEMENT. PETRONET AN D THE ASSESSEE ARE NOT THE ONLY PARTIES THERETO THERE ARE OTHER MEMBE RS OF THE CONSORTIUM WHO ARE REQUIRED TO CARRY OUT DIFFERENT PARTS OF TH E CONTRACT. THE CONSORTIUM INCLUDED AN INDIAN COMPANY. THE FACT THA T IT HAS BEEN FASHIONED AS A TURNKEY CONTRACT BY ITSELF MAY NOT B E OF MUCH SIGNIFICANCE. THE PROJECT IS A TURNKEY PROJECT. THE CONTRACT MAY ALSO BE A TURNKEY CONTRACT BUT THE SAME BY ITSELF WOULD NOT MEAN THAT EVEN FOR THE PURPOSE OF TAXABILITY THE ENTIRE CONTRACT MUST BE CONSIDERED TO BE AN INTEGRATED ONE SO AS TO MAKE THE ASSESSEE TO PAY TA X IN INDIA. THE TAXABLE EVENTS IN EXECUTION OF A CONTRACT MAY ARISE AT SEVERAL STAGES IN SEVERAL YEARS. THE LIABILITY OF THE PARTIES MAY ALS O ARISE AT SEVERAL STAGES. THE OBLIGATIONS UNDER THE CONTRACT ARE DIST INCT ONES. THE SUPPLY OBLIGATION IS DISTINCT AND SEPARATE FROM THE SERVIC E OBLIGATION. THE PRICE FOR EACH OF THE COMPONENT OF THE CONTRACT IS SEPARA TE. SIMILARLY OFFSHORE SUPPLY AND OFFSHORE SERVICES HAVE SEPARATELY BEEN D EALT WITH. THE PRICES IN EACH OF THE SEGMENT ARE ALSO DIFFERENT. THE VERY FACT THAT IN THE CONTRACT THE SUPPLY SEGM ENT AND SERVICE SEGMENT HAVE BEEN SPECIFIED IN DIFFERENT PARTS OF T HE CONTRACT IS A POINTER TO SHOW THAT THE LIABILITY OF THE ASSESSEE THEREUNDER WOULD ALSO BE DIFFERENT. M/S BENNET COLEMAN & CO. LTD. ITA 57/MUM/2009 ITA 7315/MUM/2008 16 32. IN THE INSTANT CASE IN HAND WE CANNOT IGNORE T HE GROUND REALITY THAT IN FACT THE ASSESSEE HAS ENTERED INTO TWO CON TRACTS ONE FOR THE SUPPLY AND ONE FOR THE SERVICES. THE PRICE FOR SUPP LY IS SEPARATELY INDICATED IN THE CONTRACT FOR SUPPLY AND THAT FOR T HE SERVICES IN THE CONTRACT FOR SERVICES. THE OBLIGATIONS UNDER THE CO NTRACT FOR SERVICES ARE DISTINCT. FURTHER IN THE CONTRACT FOR SUPPLY PARA 8.6 LAYS DOWN THAT THE WARRANTY CAN BE CLAIMED BY THE ASSESSEE ON LY IF THE MAILROOM EQUIPMENT WERE INSTALLED AND PUT INTO OPERATION BY VENDOR CERTIFIED PERSONNEL. IN OTHER WORDS THE EQUIPMENT COULD BE I NSTALLED BY ANYBODY WITH THE ONLY REQUIREMENT THAT THE PERSON WHO INSTALLS THE EQUIPMENT SHOULD BE CERTIFIED BY THE VENDOR AS QU ALIFIED TO INSTALL THE SAME. THIS IS NOT THE SAME AS SAYING THAT QUALIFIED PERSONNEL OF THE VENDOR SHOULD INSTALL THE EQUIPMENT AS IS ONLY INDI CATED IN THE BID DOCUMENT AND NOT IN THE CONTRACT SIGNED BY THE ASSE SSEE. IN THE CIRCUMSTANCES THE FIRST CONTENTION OF THE AR THAT THE SERVICES RENDERED BY FERAG AG BY WAY OF INSTALLATION COMMI SSIONING OF THE MAILROOM EQUIPMENT AND THE TRAINING OF THE ASSESSEE S EMPLOYEES AS INEXTRICABLY AND ESSENTIALLY LINKED TO THE SALE OF THE MAILROOM EQUIPMENT AND HENCE NOT TAXABLE SEPARATELY AS FEES FOR TECHNICAL SERVICES CANNOT BE ACCEPTED. 33. THE NEXT CONTENTION OF THE ASSESSEE WAS THAT TH E CONSIDERATION TOWARDS INSTALLATION AND COMMISSIONING OF THE MAILR OOM EQUIPMENT AND TRAINING OF THE EMPLOYEES OF THE ASSESSEE DOES NOT FALL WITHIN THE DEFINITION OF THE EXPRESSION FEES FOR TECHNICAL SERVICES UNDER EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT. THIS ARGUMENT OF THE AR IS BASED ON THE VIEW THAT THE SERVICES RENDERED BY FER AG AG WILL FALL WITHIN THE PURVIEW OF THE WORD ASSEMBLY APPEARING IN THE EXPRESSION CONSTRUCTION ASSEMBLY OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT. THIS ARGUMENT FOUND FAVOUR WITH THE CIT(A). IN SUPP ORT OF THE SAME M/S BENNET COLEMAN & CO. LTD. ITA 57/MUM/2009 ITA 7315/MUM/2008 17 THE AR HAS HEAVILY RELIED ON THE DECISION OF THE CO ORDINATE BENCH AT HYDERABAD IN NATIONAL MINERAL DEVELOPMENT CORPORAT ION LTD. (SUPRA) . THE CIT(A) WHILE UPHOLDING THIS ARGUMENT OF THE ASS ESSEE RELIED UPON THE DEFINITION OF THE EXPRESSION ASSEMBLY APPEARING IN BLACKS LAW DICTIONARY AND IN THE NEW INTERNATIONAL WEBSTERS S TUDENTS DICTIONARY AND THE LITTLE OXFORD DICTIONARY. 34. THE SERVICES ENUMERATED IN PARAS 3.2 AND 3.3 OF THE AGREEMENT FOR SERVICES INDICATE VERY CLEARLY THAT THE SCOPE I NVOLVED WAS BRINGING AND POSITIONING VARIOUS COMPONENTS PROPERLY ALIGNI NG THEM CONNECTING THE INDIVIDUAL UNITS ENSURING THAT VIBR ATIONS AND HEAT GENERATION IS AVOIDED SAFETY FEATURES ARE PROPERLY ERECTED TESTING THE MECHANICAL ELECTRICAL AND CONTROL FUNCTIONS WITH A VIEW TO ENSURING THAT ALL THE COMPONENTS ARE WORKING IN UNISON BOTH INDIVIDUALLY AND COLLECTIVELY AS PER THE DESIGN AND AT MAXIMUM CAPA CITY AND THAT THE POWER CONSUMED IS AS PRESCRIBED. FERAG AG HAD IN FACT SUPPLIED A PICKUP STATION A GRIPPER CONVEYOR STACKER AND AUT OMATIC BUNDLE ADDRESSING SYSTEM PLASTIC FILM WRAPPERS AND STRAPP ERS. ALL THESE UNITS AND COMPONENTS HAD TO BE FITTED TOGETHER IN A MANNE R THAT THEY WERE PROPERLY POSITIONED ALIGNED AND CONNECTED TO ENSU RE OPTIMUM FUNCTIONING IN THE SHORTEST DURATION. THIS ACTIVIT Y CAN CERTAINLY BE CALLED ASSEMBLY. THE DEFINITION OF THE WORD ASSEMBLY DOES NOT APPEAR IN THE ACT AND HENCE THE WORD HAS TO BE INTE RPRETED AS UNDERSTOOD IN COMMON PARLANCE. THE DICTIONARY MEANI NGS RELIED UPON BY THE CIT(A) ALSO GO TO SUPPORT THE ABOVE VIEW. WH EN A COLLECTION OF UNITS OR COMPONENTS ARE ALIGNED AND POSITIONED AFTE R BEING PUT TOGETHER SO AS TO ENSURE THEIR PROPER OPERATION AND FUNCTIONING IT WOULD CERTAINLY QUALIFY AS ASSEMBLY. THIS CONTENTION OF THE ASSESSEE WHICH ALSO FOUND FAVOUR WITH THE CIT(A) IS THEREFO RE UPHELD. HOWEVER THE SERVICES RENDERED BY FERAG AG TOWARDS TRAINING THE EMPLOYEES OF M/S BENNET COLEMAN & CO. LTD. ITA 57/MUM/2009 ITA 7315/MUM/2008 18 THE ASSESSEE CAN BY NO STRETCH OF IMAGINATION BE SAID TO FALL WITHIN THE AMBIT OF THE EXPRESSION ASSEMBLY. CONSEQUENTLY INSOFAR AS THE CONSIDERATION PAID TO FERAG AG RELATED TO INSTALLA TION AND COMMISSIONING OF THE UNITS AND COMPONENTS OF THE MA ILROOM EQUIPMENT THE SAME WILL NOT FALL WITHIN THE PURVIE W OF FEES FOR TECHNICAL SERVICES AS DEFINED IN EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT. 35. WE FIND THAT THE SERVICES RENDERED BY FERAG AG TOWARDS INSTALLATION AND COMMISSIONING OF THE MAILROOM EQUI PMENT AND TRAINING ARE FEES FOR TECHNICAL SERVICES AS DEFINED UNDER THE ACT THE CONSIDERATION PAID TOWARDS THESE SERVICES ARE ONLY TAXABLE IN SWITZERLAND IN THE HANDS OF FERAG AG BY VIRTUE OF THE PROVISIONS OF ARTICLE 14 OF THE DTAA BETWEEN INDIA AND THE SWISS CONFEDERATION. IT IS SEEN THAT THOUGH THE TREATY BETWEEN INDIA AND S WISS CONFEDERATION IN ARTICLE 12(4) DEFINES FEES FOR TECHNICAL SERVICES AS INCLUDING THE SERVICES RENDERED BY FERAG AG TOWARDS INSTALLATION AND COMMISSIONING AND TRAINING ARTICLE 12(5) PROVIDES THAT SERVICES COVERED UNDER ARTICLE 14 OF THE TREATY WILL NOT QUA LIFY FOR FEES FOR TECHNICAL SERVICES. ARTICLE 14 OF THE TREATY THOUGH OVERRIDES ARTICLE 12(4) WHILE DEFINING THE TERM PROFESSIONAL SERVICES INCLUDES INDEPENDENT ACTIVITIES OF ENGINEERS. SUCH INDEPENDE NT ENGINEERING ACTIVITIES WOULD NOT COVER TRAINING GIVEN TO THE EM PLOYEES OF THE ASSESSEE. THOUGH A TRAINING ACTIVITY MAY BE CONNECT ED TO AN ENGINEERING CONCERN THAT BY ITSELF WOULD NOT CONS TITUTE TRAINING TO BE AN ENGINEERING ACTIVITY SO AS TO FALL WITHIN PROFESSIONAL SERVICES UNDER ARTICLE 14 OF THE TREATY. 36. IT IS ALSO COMMON GROUND THAT FERAG AG DOES NO T HAVE A FIXED BASE IN INDIA FOR PERFORMING ITS ENGINEERING ACTIVI TIES AND THAT THE M/S BENNET COLEMAN & CO. LTD. ITA 57/MUM/2009 ITA 7315/MUM/2008 19 ENGINEERS SENT FROM ABROAD STAYED IN INDIA FOR TRAI NING PURPOSES FOR AN AGGREGATE PERIOD OF 106 DAYS HENCE TAXABLE. THE A RGUMENT OF THE DEPARTMENT THAT ARTICLE 14 APPLIES ONLY TO INDIVID UALS IS MISCONCEIVED IN THE LIGHT OF THE WORDING IN THE TREATY BETWEEN I NDIA AND SWISS CONFEDERATION THAT REFERS TO RESIDENTS OF A CONTRACTING STATE AND HENCE IT IS NOT RESTRICTED TO INDIVIDUALS AS WAS TH E CASE IN THE INDIA DENMARK TREATY THAT CAME UP FOR CONSIDERATION BEFOR E THE MUMBAI ITAT IN CHRISTIANI & NIELSEN (SUPRA) . 37. CONSEQUENTLY THE ARGUMENT OF THE AR THAT ARTIC LE 14 OF THE TREATY APPLIES TO THE SERVICES RENDERED BY FERAG AG AND THE CONSIDERATION RELATING TO INSTALLATION AND COMMISSI ONING OF UNITS OF THE MAILROOM EQUIPMENT IS TAXABLE IN SWITZERLAND IS UP HELD. 38. ON THE ISSUE OF CIT(A) ESTIMATING 25% OF CHF 6 64 000/- AS ATTRIBUTABLE TOWARDS TRAINING THE EMPLOYEES OF THE ASSESSEE WOULD CONSTITUTES FEES FOR TECHNICAL SERVICES THIS WE FIND IS ON AHIGHER SIDE AND ALSO AGAINST THE FACTS AS SUBMITTED BY TH E AR IN THE COURSE OF HEARING AND WHICH HAS NOT BEEN CONTROVERTED BY T HE DR. WE THEREFORE ACCEPT THAT TRAINING PART COSTED ONLY CH F 17 500/- AS GIVEN IN THE BREAK UP PROVIDED BY THE VENDOR. 39. KEEPING IN MIND THE FACT THAT THE TRAINING PERI OD WOULD NOT HAVE BEEN SUBSTANTIAL AND THAT TOO NOT ESSENTIALLY SHOP FLOOR TRAINING AS TO HOW TO OPERATE THE MAIL ROOM EQUIPMENT WHICH WOULD HAVE BEEN TRAINING ON THE MACHINE ARTICLE 12 SHALL APPLY ON CLASS ROOM TRAINING. IN THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT AN ESTIMATE OF 25% OF CHF 17 500/- AS ATTRIBUTABLE TO TRAINING WOULD BE REASONABLE. 40. KEEPING IN VIEW THE COMMON OBSERVATIONS IN BOTH THE CASES AS IMPUGNED BEFORE US WE HOLD THAT M/S BENNET COLEMAN & CO. LTD. ITA 57/MUM/2009 ITA 7315/MUM/2008 20 THE APPEAL OF THE REVENUE IS DISMISSED AND THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH NOVEMBER 2014. SD/- SD/- ( . ) ( ' #) (D. KARUNAKARA RAO) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATE: 12 TH NOVEMBER 2014 )-/ COPY TO:- 1) %(/ THE APPLICANT. 2) )*%(/ THE RESPONDENT. 3) THE CIT (A)-33/XXXIII MUMBAI. 4) THE DIT-(INT. TAX) MUMBAI. 5) '45)-+ A THE D.R. A BENCH MUMBAI. 6) 5#6 COPY TO GUARD FILE. 2+ / BY ORDER / / TRUE COPY / / [ 7/89 DY. / ASSTT. REGISTRAR I.T.A.T. MUMBAI *;<8+ .+. * CHAVAN SR. PS