Binani Cement Limited Mercantile Chambers v. Deputy Director Of Income Tax, (International Taxation), Room

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 158 / 2017 Binani Cement Limited Mercantile Chambers, 12, J.N. Heredia Marg, Ballard Estate, Mumbai. ----Appellant Versus Deputy Director of Income Tax, (international Taxation), Room No.304-B, Central Revenue Buildings Statue Circle, Jaipur 302001, Rajasthan. ----Respondent _____________________________________________________ For Appellant(s) : Mr. Ashish Kumar Singh For Respondent(s) : Mr. R.B. Mathur _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYASJudgment 12/12/2017 1.By way of this appeal, the appellant has assailed thejudgment and order of the tribunal whereby tribunal has allowedthe appeal of the assessee for statistical purposes. 2.This Court while admitting the appeal on 23.8.2017 framed following substantial question of law:- “(A) Whether in the facts and in thecircumstances of the case and in law theTribunal was right in holding that theAppellant was required to deduct taxunder Section 195 of the Act onpayments made to the Contractor i.e.M/s Jiangsu Jinma Engineering Co. Ltd.,for carrying on the activity of dismantlingof power plant in China. (B)Whether in the facts and in thecircumstances of the case and in law the Tribunal was right in holding that theactivity of dismantling of power plantcarried on by the Contractor, i.e. M/sJiangsu Jinma Engineering Co. Ltd. wouldcome within the ambit of “fees fortechnical services” as defined undersection 9(1)(vii) of the Act or underarticle 12(4) of India-China DoubleTaxation Avoidance Agreement?” 3.The facts of the case are that the assessee is engaged inmanufacturing of cement and has set up power plants for captiveconsumption of power. The appellant had purchased a power plantfrom China and it had engaged M/s. Jiangsu Engineering CompanyLtd. for the purpose of dismantling of 55MW circulating fluidizedbed (CFB) coal fired power plant, unit #5 from Luoyang LongyuHongguang Power plant located in Houzhuange village, XuncunTown, Yiyang Country, henan Province, China and transportationby road to Liangyungang/Xingang Sea Port. For this purpose, awork order was given by the appellant to the said party on17.05.2010 for these services. As per authorities below, anamount of 7,41,227 USD was paid on which the assessee wasrequired to deduct the tax. In the assessment proceedings alsothe AO was of the view that on this amount the assessee wasrequired to deduct tax under section 195 of the Income Tax Act,1961 (hereinafter referred to as the Act) on the ground that theservices rendered by the contractor was in the nature of technicalservices and hence the assessee was required to deduct tax. 4.Counsel for the appellant has taken us to the provisions ofSection 9(1)(vii)(c) alongwith proviso thereto and Explanation 2 Sub Section (2) of Section 9 of the Income Tax Act which reads as under:- “Section 9 Income deemed to accrue orarise in India (1) all income accruing or arising, whetherdirectly or indirectly , through or from anybusiness connection in India, or through orfrom any property in India, or through or fromany asset or source of income in India, [* * *]or through the transfer of a capital assetsituate in India. (vii) income by way of fees for technicalservices payableby— a…… b…… (c) a person who is a non-resident, where thefees are payable in respect of services utilisedin a business or profession carried on by suchperson in India or for the purposes of makingor earning any income from any source inIndia: [Provided that nothing contained in this clauseshall apply in relation to any income by way offees for technical services payable in pursuanceof an agreement made before the 1st day ofApril, 1976, and approved by the CentralGovernment.] (vii) income by way of fees for technicalservices payableby— a…… b…… (c) a person who is a non-resident, where thefees are payable in respect of services utilisedin a business or profession carried on by suchperson in India or for the purposes of makingor earning any income from any source inIndia: [Provided that nothing contained in this clauseshall apply in relation to any income by way offees for technical services payable in pursuanceof an agreement made before the 1st day ofApril, 1976, and approved by the CentralGovernment.] Explanation [2].—For the purposes of thisclause, "fees for technical services" means anyconsideration (including any lump sumconsideration) for the rendering of anymanagerial, technical or consultancy services(including the provision of services of technicalor other personnel) but does not includeconsideration for any construction, assembly,mining or like project undertaken by therecipient or consideration which would beincome of the recipient chargeable under thehead "Salaries".] (2) Notwithstanding anything contained in sub-section (1), any pension payable outside Indiato a person residing permanently outside Indiashall not be deemed to accrue or arise in India,if the pension is payable to a person referred toin article 314 of the Constitution or to a personwho, having been appointed before the 15th day of August, 1947, to be a Judge of theFederal Court or of a High Court within themeaning of the Government of India Act, 1935,continues to serve on or after thecommencement of the Constitution as a Judgein India. [Explanation.—For the removal of doubts, it ishereby declared that for the purposes of thissection, income of a non-resident shall bedeemed to accrue or arise in India under clause(v) or clause (vi) or clause (vii) of sub-section(1) and shall be included in the total income ofthe non-resident, whether or not,— (i) thenon-resident has a residence or place ofbusiness or business connection in India; or (ii)the non-resident has rendered services inIndia.] “ 5.He also taken us to the two judgments of the tribunal one by Hyderabad Bench in Additional Director of Income Tax(International Taxation)-I, Hyderabad vs. M/s. Bhel-Ge-GasTurbine Servicing (P) Ltd., reported in (2012) 53 SOT 460 (Hyd)and another judgment of Kolkata Bench in Income Tax Officer(International Taxation), Kolkata vs. Emami Paper Mills Ltd.reported in (2017) 163 ITD 212 (Kol). 6.The reference of the judgment by Hyderabad Tribunal is inthe judgment of the tribunal which was subsequently followed byKolkata tribunal. 7.In that view of the matter, even first judgment of Hyderabadwhich has been referred but not discussed by the tribunal, in ourconsidered opinion, the tribunal being Coordinate Bench, they arerequired to follow the decisions and if they do not follow the same,they have to refer it to larger Bench which is settled principle ofjurisprudence and since the same has not been done, we set asidethe order of the tribunal and remit the matter back to the tribunal and tribunal will decide the same in accordance with law afterhearing both the parties. It will be open for the parties to argue all the issues. The appeal stands allowed. (VIJAY KUMAR VYAS) J. (K.S. JHAVERI)J. Brijesh 55.