The Director Of Income Tax, (International Taxation), Vii Floor, Annexe Building v. The Income Tax Officer, International Taxation – I(2), Vii Floor, Annexe Building

IN THE HIGH COURT OF JUDICATURE AT MADRAS Reserved On 20.02.2020Pronounced On 13.03.2020 CORAM THE HON'BLE MR.JUSTICE C.SARAVANAN W.P.No.4965 of 2011 andM.P.No.1 of 2011 M/s.Shriram Capital Limited,A Limited Company represented byits Vice-President,Mr.N.Mani,Mookambika Complex,No.4, Lady Desika Road,Mylapore, Chennai. ... Petitioner 1.The Director of Income Tax, (International Taxation), VII Floor, Annexe Building, 121, Nungambakkam High Road, Chennai – 600 034. vs. 2.The Income Tax Officer, International Taxation – I(2), VII Floor, Annexe Building, 121, Nungambakkam High Road, Chennai – 600 034. ... Respondents Writ Petition filed under Article 226 of the Constitution ofIndia praying to issue a Writ of Certiorarified Mandamus, tocall for the records on the file of the respondents and quashthe impugned order passed by the first respondent in D.C.No.112(6)/264/2010-11 dated 17.02.2011 as illegal and withoutjurisdiction and consequently direct the second respondentherein to issue NIL deduction certificate under section 195 ofthe Act. For Petitioner : Mr.R.Sivaraman For Respondents: M/s. Hema Muralikrishnan Standing Counsel. O R D E R In this Writ Petition, the petitioner has challenged theimpugned order dated 17.02.2011 passed by the 1[st] respondent inD.C.No.112(6)/264/2010-11. 2. The petitioner had engaged the service of a law firmnamely M/s.Oentoeng Suria & Partners in Indonesia for acquiringan insurance business in Indonesia. Therefore, the petitionerfiled an application under 195 of the Act, before the secondrespondent Income Tax officer, for exemption from deducting taxon the payment to be made to the aforesaid foreign law firm forthe service rendered by the said firm in Indonesia. The requestof the petitioner was rejected by the 2[nd] respondent on29.09.2010 with the following observations. “The above services rendered by the Non-resident company, with regard to the proposedacquisition of an Indonesian Insurance company,by M/s.Shriram Capital Limited. is in the natureof "consultancy services". M/s.Shriram capitallimited is not having any business activity inIndonesia, and hence the proposed payments arenot for the purpose of generation of any incomefrom abroad by M/s. Shriram Capital Limited..Hence the service rendered by the non-residentcompany are ultimately utilized by the residentcompany only. "Consultancy services" rendered by the Non-resident company will fall under the category"Fees for Technical Services" and fees payablefor such Technical services, though renderedoutside India will be deemed as accruing orarising in India as per Sec.9(1)(vii)(b) of theIncome-tax Act., read with Explanation to Sec.9(1) (vii), substituted by Finance Act 2010 witheffect from 1.6.1976. “Sec.9(1) : The following income shall be deemedto accrue or arise in India-(vii): Income by way of fees for technicalservices payable by- (b) : A person, who is resident, except wherethe fees are payable in respect of servicesutilized in a business or profession carried onby such person outside India, or for the purposeof making or earning any income from any sourceoutside India."Explanation:- For the removal of doubts, it ishereby declared that for the purposes of thissection, income of a Non -resident shall be deemed to accrue or arise in India under clausev. clause vi or clause vii of sub section (1)and shall be included in the total income of theNon-resident, whether or not. i. the non-resident has a residence or placeof business or business connection in India; or ii. the non-resident has rendered servicesin India. From the above explanation it is clear thatthe services are taxable in India, irrespectiveof the place of rendition of the services, andaccordingly the payments to the Non-residentcompany, in this case, are subjected towithholding tax @ 10%. Plus applicable surchargeand Education Cess, under normal circumstances. deemed to accrue or arise in India under clausev. clause vi or clause vii of sub section (1)and shall be included in the total income of theNon-resident, whether or not. i. the non-resident has a residence or placeof business or business connection in India; or ii. the non-resident has rendered servicesin India. From the above explanation it is clear thatthe services are taxable in India, irrespectiveof the place of rendition of the services, andaccordingly the payments to the Non-residentcompany, in this case, are subjected towithholding tax @ 10%. Plus applicable surchargeand Education Cess, under normal circumstances. But in this case the Non-resident (deductee)is not having a Permanent Account Number (PAN),as mandated U/s.206AA of the I.T.Act, 1961, andsuch payments effected to the Non-resident nothaving a P.A.Number, will attract Tax Deductionat source at a higher rate of 20%.Hence M/s Shriram Capital Limited, is herebyauthorised to make payment to M/s. OentoengSuria & Partners, Indonesia, arising out of theagreement, dated 6.9.2010, after deduction oftax @ 20% (Twenty Percent).This authorization is valid till 3103.2011unless cancelled earlier under limitation to you. 3. The petitioner preferred a Revision Petition underSection 264 of the Income Tax before the 1[st] respondent. Thesaid Revision Petition has culminated in the impugned order. Inthe impugned order, the 1[st] respondent has observed as under:-The services are not rendered for the purpose ofthe business activities of the assessee companyabroad. Therefore it is clear that the servicesrendered have no nexus with the generation ofincome abroad, by the assessee. Since theassessee is not having any business activitiesin Indonesia, there is no immediate possibilityof earning any income from outside India also.Therefore the place of utilization of servicesis wholly in India only. It is also possiblefor M/s Shriram Capital Limited, the assessee toabandon the proposed acquisition of theInsurance Company in Indonesia, after availingthe consultancy/advisory services, of the Non-resident company. In such a situation, thepayments are not for the purpose of earning anyincome from outside India event on a future date, though the Income-Tax Act does not specifycreation of a business or generation of Incomeoutside India at future date. In such asituation also, the utilization of the servicesrendered by the Non-resident company is whollyin India. In both the above possiblecircumstances, the services are deemed to havebeen rendered in India, in terms of Section 9(1)(vii) (b) of the I.T.Act. 4.The learned counsel for the petitioner would submit thatto deduct tax at source under Section 194 of Income Tax Act,1961, such incomes should be either by received in India by therecipient or deemed to have accrued or arise in India within themeaning of Section 5(2) of the Income Tax Act, 1961. He furthersubmits that the question deduction of tax at source for paymentwould arise only in the circumstances, specifically mentionedin the Section 5 of the Income Tax Act, 1961, which reads asunder:- Scope of total income.5. (1) Subject to the provisions of this Act,the total income of any previous year of aperson who is a resident includes all incomefrom whatever source derived which—(a) is received or is deemed to be received inIndia in such year by or on behalf of suchperson ; or (b) accrues or arises or is deemed to accrue orarise to him in India during such year ; or Scope of total income.5. (1) Subject to the provisions of this Act,the total income of any previous year of aperson who is a resident includes all incomefrom whatever source derived which—(a) is received or is deemed to be received inIndia in such year by or on behalf of suchperson ; or (b) accrues or arises or is deemed to accrue orarise to him in India during such year ; or (c) accrues or arises to him outside Indiaduring such year :Provided that, in the case of a person notordinarily resident in India within the meaningof sub-section (6) of section 6, the incomewhich accrues or arises to him outside Indiashall not be so included unless it is derivedfrom a business controlled in or a professionset up in India.(2) Subject to the provisions of this Act, thetotal income of any previous year of a personwho is a non-resident includes all income fromwhatever source derived which— (a) is received or is deemed to be received inIndia in such year by or on behalf of suchperson ; or (b) accrues or arises or is deemed to accrue orarise to him in India during such year. Explanation 1.—Income accruing or arisingoutside India shall not be deemed to be receivedin India within the meaning of this section byreason only of the fact that it is taken intoaccount in a balance sheet prepared in India. Explanation 2.—For the removal of doubts, it ishereby declared that income which has beenincluded in the total income of a person on thebasis that it has accrued or arisen or is deemedto have accrued or arisen to him shall not againbe so included on the basis that it is receivedor deemed to be received by him in India. 5. To deduct tax for the payment made to a non-resident,income should be either is received or is deemed to be receivedin India in such year or on behalf of such person or accrues orarises or is deemed to accrue or arise to him in India duringsuch year. 6. The learned counsel for the petitioner further drew myattention to Section 9(1)(vii) of the Income Tax Act, 1961,which reds as under:- Section 9: Income deemed to accrue or arise inIndia:-(1) The following incomes shall be deemed toaccrue or arise in India:- (i)..................... (ii)....................(iii)..................(iv).................. (v)................... (vii) income by way of fees for technicalservices payable by— (a) the Government ; or (b) a person who is a resident, except where thefees are payable in respect of services utilisedin a business or profession carried on by suchperson outside India or for the purposes ofmaking or earning any income from any sourceoutside India; or (c) a person who is a non-resident, where thefees are payable in respect of services utilisedin a business or profession carried on by such person in India or for the purposes of making orearning any income from any source in India :[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 1.—For the purposes of theforegoing proviso, an agreement made on or afterthe 1st day of April, 1976, shall be deemed tohave been made before that date if the agreementis made in accordance with proposals approved bythe Central Government before that date.] Explanation[2].—For the purposes of this clause,"fees for technical services" means anyconsideration(includinganylumpsumconsideration) for the rendering of anymanagerial, technical or consultancy services(including the provision of services oftechnical or other personnel) but does notinclude consideration for any construction,assembly, mining or like project undertaken bythe recipient or consideration which would beincome of the recipient chargeable under thehead "Salaries".] [Explanation 1.—For the purposes of theforegoing proviso, an agreement made on or afterthe 1st day of April, 1976, shall be deemed tohave been made before that date if the agreementis made in accordance with proposals approved bythe Central Government before that date.] Explanation[2].—For the purposes of this clause,"fees for technical services" means anyconsideration(includinganylumpsumconsideration) for the rendering of anymanagerial, technical or consultancy services(including the provision of services oftechnical or other personnel) but does notinclude consideration for any construction,assembly, mining or like project undertaken bythe recipient or consideration which would beincome of the recipient chargeable under thehead "Salaries".] 7. It is submitted that the transaction which is underconsideration fell within under exception to of Section 9(1)(vii)(b) of the Income Tax Act, 1961, since the fees payable wasin respect of services utilised in a business or professioncarried by the petitioner outside India and for the purpose ofmaking or earning any income from any source outside India. 8. It is submitted that the amount which was paid byengaging services of the aforesaid law firm was for the purposeof “making or earning any income from any source outside India”within the meaning of Section 9(1)(vii)(b) of the Income TaxAct, 1961. The expenditure incurred was for service procuredfor a future business to be carried on by the petitioner inIndonesia. Therefore, the petitioner cannot made liable todeduct tax under the Income Tax Act, 1961. 9. The learned counsel for the petitioner also submits thatthe fact that Section 5(2) does not have a clause similar toclause (c) to Section 5(1). It makes it clear that when a non-resident is not liable to pay tax in India for service provided https://hcservices.ecourts.gov.in/hcservices/ outside India, as such income can neither accrue nor arise nordeemed to accrue or arise in India. 10. The learned counsel for the petitioner also referred toDouble Taxation Agreement between the Government of India andGovernment of Indonesia, notified by Notification No.S.O.1144(E)[No.17/2016 (F.No.503/4/2005-FTD-II0], dated 16.03.2016. 11. He referred to Article 12 of the aforesaid agreement. Aparticular reference was made to Article 12(3)(b) of the saidDouble Taxation Agreement. As per Article 12(3)(b), the term“fees for technical services” as used in the said Article meanspayments of any kind, other than those mentioned in Articles 14and 15 of the said Agreement as consideration for managerial ortechnical or consultancy services, including the provision ofservices of technical or other personnel. 12. The learned counsel for the petitioner further submitsthat the petitioner is not liable to pay tax in terms of Section5(2) read with Section 9(1)(vii)(b) of the Income Tax 1961. Hefurther submits that income neither accrued nor received fromIndia, the tax in resident tax in India. 13. Even otherwise, there was neither technical norconsultancy services. As per the Article 12(3)(b) of the DoubleTaxation Agreement dated 16.03.2016 of the Government of India,in other words, thus the petitioner at best non-residentialtaxable at 10% and not 20%. 14. The learned counsel for the petitioner relied on thefollowing decisions:- 12. The learned counsel for the petitioner further submitsthat the petitioner is not liable to pay tax in terms of Section5(2) read with Section 9(1)(vii)(b) of the Income Tax 1961. Hefurther submits that income neither accrued nor received fromIndia, the tax in resident tax in India. 13. Even otherwise, there was neither technical norconsultancy services. As per the Article 12(3)(b) of the DoubleTaxation Agreement dated 16.03.2016 of the Government of India,in other words, thus the petitioner at best non-residentialtaxable at 10% and not 20%. 14. The learned counsel for the petitioner relied on thefollowing decisions:- i. Evolv Cloathing Co. (P.) Ltd., Vs. AssistantCommissioner of Income Tax, Company Circle – II(1), Chennai, order dated 14.06.2018 passed bythis Court in T.C.(A).No.572 of 2013.ii.Director of Income Tax Vs. Lufthansa CargoIndia, 2015 SCC OnLine Del 9760.iii.Commissioner of Income Tax Vs. Toshoku Ltd.,1980 Supp SCC 614. iv.Commissioner of Income Tax Vs. Faizan Shoes(P.) Ltd., order dated 22.07.2014 passed bythis Court in T.C.(A).No.789 of 2013.v. Principal Commissioner of Income Tax-2 Vs.Motif India Infotech (P) Ltd., order dated16.10.2018 passed by the Hon'ble Gujarat HighCourt in T.A.No.1177 of 2018. vi.Clifford Chance Vs. Deputy Commissioner ofIncome Tax, Circle 2(6), Mumbai, (2009) 318 ITR237.vii.Commissioner of Income Tax (InternationalTaxation) Vs. Indusind Bank Ltd., (2019) 415ITR 115 (Bom).viii.Jindal Thermal Power Company Limited Vs.Deputy Commissioner of Income Tax (TDS), (2010)321 ITR 31 (Kar).ix.GVK Industries Ltd., Vs. Income Tax Officer,(2015) 11 SCC 734. 15. On the other hand, the learned counsel for therespondents would contend that as per Explanation 2 to Section 9(1)(vii)(b), “fees for technical services" means anyconsideration (including any lump sum consideration) for therendering of any managerial, technical or consultancy services(including the provision of services of technical or otherpersonnel). She submits that it does not include considerationfor any construction, assembly, mining or like projectundertaken by the recipientor consideration which would beincome of the recipient chargeable under the head "Salaries".She further submits that any amount paid by a resident to a non-resident for managerial, technical or consultancy service isconsidered to be fees for technical service and therefore thepetitioner is bound to deduct tax in India. 16. As per Article 12 of the Double Taxation Agreement, feesfor technical service can be taxed in the state in which it“arises” and fees for technical service means payment for anymanagerial, technical or consultancy service. 17. She submits that the arguments of the petitioner thatpayment does not qualify as fees for technical service since itis only made for getting legal service and does not have anytechnical component is based on a restrictive reading of the Actand the Double Taxation Agreement. They both include“consultancy” as fee for technical service as well M/s.OentoengSuria & Partners has been roped in to provide consultancy to thepetitioner in connection to the acquisition of an Indonesiancompany. Any payment made for the legal counsel therefore fallswithin the ambit of fees for technical service as per both theIncome Tax Act and Double Taxation Agreement. 18. The submission of the petitioner that the servicerendered in Indonesia only and payment was also received inIndonesia, is to be rejected as neither the Income Tax Act northe Double Taxation Agreement say that only is such a service isrendered in India can the sum be taxed here. The technical orconsultancy service can be rendered anywhere, the Income accrued https://hcservices.ecourts.gov.in/hcservices/ in India. The source of income is from the petitioner who basedin India, hence income accrued in India due to the connection. 18. The submission of the petitioner that the servicerendered in Indonesia only and payment was also received inIndonesia, is to be rejected as neither the Income Tax Act northe Double Taxation Agreement say that only is such a service isrendered in India can the sum be taxed here. The technical orconsultancy service can be rendered anywhere, the Income accrued https://hcservices.ecourts.gov.in/hcservices/ in India. The source of income is from the petitioner who basedin India, hence income accrued in India due to the connection. 19. It is submitted that the exception in Section 9(1)(vii)(b) of the Income Tax Act, 1961, does not apply because thepayment was not made for earning any income in Indonesia. It wasonly for the acquisition of an Indonesian company, which is partof the investment of the petitioner company. Hence, the paymentdoes not have any nexus with any income earned abroad but onlyfor an investment, which is part of the business of thepetitioner operated from India. 20. I have considered the arguments advanced by the learnedcounsel for the petitioner and the respondents. 21.Section 195 of the Income Tax Act, 1961 reads as under:- Other sums.195. (1) Any person responsible for paying to anon-resident, not being a company, or to aforeign company, any interest (not beinginterest referred to in section 194LB or section194LC) or section 194LD or any other sumchargeable under the provisions of this Act (notbeing income chargeable under the head"Salaries") shall, at the time of credit of suchincome to the account of the payee or at thetime of payment thereof in cash or by the issueof a cheque or draft or by any other mode,whichever is earlier, deduct income-tax thereonat the rates in force :Provided that in the case of interest payable bythe Government or a public sector bank withinthe meaning of clause (23D) of section 10 or apublic financial institution within the meaningof that clause, deduction of tax shall be madeonly at the time of payment thereof in cash orby the issue of a cheque or draft or by anyother mode :Provided further that no such deduction shall bemade in respect of any dividends referred to insection 115-O.Explanation 1.—For the purposes of this section,where any interest or other sum as aforesaid iscredited to any account, whether called"Interest payable account" or "Suspense account"or by any other name, in the books of account ofthe person liable to pay such income, suchcrediting shall be deemed to be credit of suchincome to the account of the payee and the provisions of this section shall applyaccordingly. Explanation 2.—For the removal of doubts, it ishereby clarified that the obligation to complywith sub-section (1) and to make deductionthereunder applies and shall be deemed to havealways applied and extends and shall be deemedto have always extended to all persons, residentor non-resident, whether or not the non-residentperson has— (i) a residence or place of business or businessconnection in India; or (ii) any other presence in any manner whatsoeverin India. (2) Where the person responsible for paying anysuch sum chargeable under this Act (other thansalary) to a non-resident considers that thewhole of such sum would not be income chargeablein the case of the recipient, he may make anapplication [48][in such form and manner to theAssessing Officer, to determine in such manner,as may be prescribed], the appropriateproportion of such sum so chargeable, and uponsuch determination, tax shall be deducted undersub-section (1) only on that proportion of thesum which is so chargeable. (i) a residence or place of business or businessconnection in India; or (ii) any other presence in any manner whatsoeverin India. (2) Where the person responsible for paying anysuch sum chargeable under this Act (other thansalary) to a non-resident considers that thewhole of such sum would not be income chargeablein the case of the recipient, he may make anapplication [48][in such form and manner to theAssessing Officer, to determine in such manner,as may be prescribed], the appropriateproportion of such sum so chargeable, and uponsuch determination, tax shall be deducted undersub-section (1) only on that proportion of thesum which is so chargeable. (3) Subject to rules made under sub-section (5),any person entitled to receive any interest orother sum on which income-tax has to be deductedunder sub-section (1) may make an application inthe prescribed form to the Assessing Officer forthe grant of a certificate authorising him toreceive such interest or other sum withoutdeduction of tax under that sub-section, andwhere any such certificate is granted, everyperson responsible for paying such interest orother sum to the person to whom such certificateis granted shall, so long as the certificate isin force, make payment of such interest or othersum without deducting tax thereon under sub-section (1). (4) A certificate granted under sub-section (3)shall remain in force till the expiry of the https://hcservices.ecourts.gov.in/hcservices/ period specified therein or, if it is cancelledby the Assessing Officer before the expiry ofsuch period, till such cancellation. (5) The Board may, having regard to theconvenience of assessees and the interests ofrevenue, by notification in the OfficialGazette, make rules specifying the cases inwhich, and the circumstances under which, anapplication may be made for the grant of acertificate under sub-section (3) and theconditions subject to which such certificate maybe granted and providing for all other mattersconnected therewith. (6) The person responsible for paying to a non-resident, not being a company, or to a foreigncompany, any sum, whether or not chargeableunder the provisions of this Act, shall furnishthe information relating to payment of such sum,in such form and manner, as may be prescribed. (7) Notwithstanding anything contained in sub-section (1) and sub-section (2), the Board may,by notification in the Official Gazette, specifya class of persons or cases, where the personresponsible for paying to a non-resident, notbeing a company, or to a foreign company, anysum, whether or not chargeable under theprovisions of this Act, shall make anapplication[in such form and manner to theAssessing Officer, to determine in such manner,as may be prescribed], the appropriateproportion of sum chargeable, and upon suchdetermination, tax shall be deducted under sub-section (1) on that proportion of the sum whichis so chargeable. 22. As per decision of the Hon'ble Supreme Court inG.V.K.Industries Ltd., Vs. Income Tax Officer, (2015) 11 SCC734, Section 9(1)(vii)(b) of the Income Tax Act, 1961 carves outan exception. The exception carved out in the latter part ofsub-clause (b) applies to a situation when fee is payable inrespect of services utilised for business or profession carriedout by an Indian payer outside India or for the purpose ofmaking or earning of income by the Indian assessee i.e. the https://hcservices.ecourts.gov.in/hcservices/ 22. As per decision of the Hon'ble Supreme Court inG.V.K.Industries Ltd., Vs. Income Tax Officer, (2015) 11 SCC734, Section 9(1)(vii)(b) of the Income Tax Act, 1961 carves outan exception. The exception carved out in the latter part ofsub-clause (b) applies to a situation when fee is payable inrespect of services utilised for business or profession carriedout by an Indian payer outside India or for the purpose ofmaking or earning of income by the Indian assessee i.e. the https://hcservices.ecourts.gov.in/hcservices/ payer, for the purpose of making or earning any income from asource outside India. On a studied scrutiny of the said clause,it becomes clear that it lays down the principle what isbasically known as the “source rule”, that is, income of therecipient to be charged or chargeable in the country where thesource of payment is located, to clarify, where the payer islocated. The clause further mandates and requires that theservices should be utilised in India. 23. Thus, to attract exception under Section 9(1)(vii)(b) ofthe Income Tax Act, 1961, the service should be utilized inIndia. Any payment by way of fees and technical service to anon-resident by an resident is an income deemed to have accruedor arisen in India and is thus liable to tax. The expression“Fees” for “Technical Service” has been defined in Explanation 2to Section 9(1)(vii)(b) of the Income Tax Act, 1961. 24. The expression used in Explanation 2 is “means”. Whenthe expression “means” is used, it is a hard and fast definitionand no meaning other than that which is put in the definitioncan be assigned to the same [ see: Bharat Coop. Bank (Mumbai)Ltd. Vs. Employees Union, (2007) 4 SCC 685 and P.Kasilingam Vs.P.S.G. College of Technology, AIR 1995 SC 1395]. In BharatCoop. Bank (Mumbai) Ltd. Vs. Employees Union, (2007) 4 SCC 685,it was observed that it is trite to say that when in thedefinition clause given in any statute the word “means” is used,what follows is intended to speak exhaustively. When the word“means” is used in the definition, to borrow the words of LordEsher, M.R. in Gough v. Gough, (1891) 2 QB 665, it is a “hard-and-fast” definition and no meaning other than that which is putin the definition can be assigned to the same. 25. The expression “Managerial”, “Technical” or “ConsultancyService” have not defined. The expression “Management” has beendefined in Oxford Advanced Learner's Dictionary, New 9[th] Editionpublished by the Oxford University Press reads as follows:- Management: 1. the act of running andcontrolling a business or similar organization:acarrierinmanagement,hotel/projectmanagement, a management training course. Thereport blames bad management. 2. the people whorun and control a business or similarorganization: The management is/are consideringclosing the factory. The shop is now under newmanagement, junior/middle/senior management, amanagement decision/job. My role is to act as amediator between employees and management. Mostmanagements are keen to avoid strikes. 3. thecontrolling a business or similar organization:acarrierinmanagement,hotel/projectmanagement, a management training course. Thereport blames bad management. 2. the people whorun and control a business or similarorganization: The management is/are consideringclosing the factory. The shop is now under newmanagement, junior/middle/senior management, amanagement decision/job. My role is to act as amediator between employees and management. Mostmanagements are keen to avoid strikes. 3. the act or skill of dealing with people orsituations in a successful way: classroommanagement, time management, management ofstaff. Diet plays an important role in themanagement of heart disease. 26. In Black's Law Dictionary, 10[th] Edition published byThomson Reuters, the expression “Management” has been defined asfollows:- act or skill of dealing with people orsituations in a successful way: classroommanagement, time management, management ofstaff. Diet plays an important role in themanagement of heart disease. 26. In Black's Law Dictionary, 10[th] Edition published byThomson Reuters, the expression “Management” has been defined asfollows:- Management. 1. The people in an organization whoare vested with a certain amount of discretionand independent judgment in managing its affairs. C-level management. (2001) Collectively, theofficers of an organization holding titlesprefixed by “chief”; the upper tier of topmanagement <she promoted from senior vicepresident to the c-level> - Also termed c-board.Middle management. (1941) Company employees whoexercise some discretion and independentjudgment in carrying out top management'sdirectives.Top management. (1937) A high level of companymanagement at which major policy decisions andlong-term business plans are made. - Also termedupper management.2. The act or system of controlling and makingdecisions for a business, department, etc. line management. A system of management in whichinformation and instructions are passed from oneperson to someone immediately higher or lower inrank and to no one else. 27. The expression “Technical Service” and “ConsultancyService” also have not been defined in the Act. The “TechnicalService” would include any service in connection with the“engineering service” as it is associated with the serviceprovided by the person technically qualified in the field ofengineering. The “Consultancy Service” is again very wide, itcan include the service of every nature. 28. The expression “Consultancy Service” has been defined inthe Oxford Advanced Learner's Dictionary, New 9[th] Editionpublished by the Oxford University Press, as follows:- Consultancy: 1. a company that gives expertadvice on a particular subject to othercompaniesororganizations:a https://hcservices.ecourts.gov.in/hcservices/ management/design/computer, etc. consultancy 2.expert advice that a company or person is paidto provide on a particular subject: consultancyfees. 29. Thus, the expression “Managerial”, “Technical orConsultancy Services” are wide of import. 30. In fact, from the nature of work that was to beundertaken by the Indonesian firm was purely not that of workcarried out by the law firms. These services provided by anyperson holding expertise in the relevant field. 31. Thus, if the service provided by the Indonesian law firmwas for managerial, technical or consultancy service orprovision of technical or other personnel, the petitioner wouldbe liable to deduct tax at source under Section 195 of the Act,1961. 32. The service provided by the Indonesian law firm is forthe following:- (a)Share Purchase Agreement (SPA) with appropriatewarranties and indemnities; (b)Notarial share transfer deed; (c)Assist in obtaining all necessary regulatoryapprovals for the acquisition including, butnot limited to approval from the Ministry ofFinance / Indonesian Insurance regulators. Thescope of assistance will include advising onall legal aspects of the approval applicationand process, preparation / vetting of allrelated papers / documents and accompanyingyour representative / representing you beforethe regulatory authorities as and when required; (d)Power of Attorneys (as may be required); (e)Public announcements in respect of theacquisition (as required by the Indonesiancompany law); (f)Form in respect of shares transfers (e.g.Shares certificates, shareholders register); andShares certificates, shareholders register); and(g)Amended Articles of Association of the TargetCompany.Company. 33. From the scope of work undertaken, it is evident thatthe Indonesian law firm has provided consultancy services. (d)Power of Attorneys (as may be required); (e)Public announcements in respect of theacquisition (as required by the Indonesiancompany law); (f)Form in respect of shares transfers (e.g.Shares certificates, shareholders register); andShares certificates, shareholders register); and(g)Amended Articles of Association of the TargetCompany.Company. 33. From the scope of work undertaken, it is evident thatthe Indonesian law firm has provided consultancy services. 34. In this case, the Indonesian firm has provide“Consultancy Service”. Therefore, I am of the view that it isnot open for the petitioner to state that the said service fellwithin exception provided in Section 9(1)(vii)(b) of the IncomeTax Act, 1961 or outside the Explanation 2 to said Section. 35. If the service utilized by the petitioner abroad was forpre-existing business in Indonesia, the petitioner could havelegitimately stated that the service provided was utilized for abusiness of profession carried out outside India or for thepurpose of making or earning any income from any source fromoutside India. There is no source that is existing in Indonesia. 36. In this case, there was a mere proposal for acquiringthe insurance business in privately or Indonesian InsurancePolicy. The service of the said law firm was sought for a rangeof service which are approval consultancy service. 37. In the light of the above discussion, I am of the view,decision impugned in this Writ Petition, cannot be assailed.During the period in dispute, the Double Taxation AvoidanceAgreement as notified vide Notification No.GSR 77 (E), dated04.02.1988, was in force. However, what was produced before meis the notification notifying the agreement signed on 27[th] July,2012 and notified vide Notification No.S.O. 1144(E) [No.17/2016(F.No.503/4/2005-FTD-II)], dated 16.03.2016, which is notrelevant. The Double Taxation Avoidance Agreement signed betweenIndia and Indonesia as notified vide Notification No.GSR 77 (E),dated 04.02.1988 has not been produced for my perusal. 38. In Danisco India (P.) Ltd. Vs. Union of India, 2018 SCCOnLine Del 7304, the Delhi High Court observed as follows:- 9. In this context, the ITAT in Dy. DIT Vs.Serum Institute of India Ltd., (2015) 68 SOT254/56 taxmann.com 1 (Pune – Trib.), discussedthis very issue in some detail and stated, asfollows: “………….......where section 90(2) of the Actprovides that DTAAs override domestic law incases where the provisions of DTAAs are morebeneficial to the assessee and the same also https://hcservices.ecourts.gov.in/hcservices/ 38. In Danisco India (P.) Ltd. Vs. Union of India, 2018 SCCOnLine Del 7304, the Delhi High Court observed as follows:- 9. In this context, the ITAT in Dy. DIT Vs.Serum Institute of India Ltd., (2015) 68 SOT254/56 taxmann.com 1 (Pune – Trib.), discussedthis very issue in some detail and stated, asfollows: “………….......where section 90(2) of the Actprovides that DTAAs override domestic law incases where the provisions of DTAAs are morebeneficial to the assessee and the same also https://hcservices.ecourts.gov.in/hcservices/ overrides the charging sections 4 and 5 ofthe Act which, in turn, override the DTAAsprovisions especially section 206AA of theAct which is the controversy before us.Therefore, in our view, where the tax hasbeen deducted on the strength of thebeneficial provisions of section DTAAs, theprovisions of section 206AA of the Actcannot be invoked by the Assessing Officerto insist on the tax deduction @ 20%, havingregard to the overriding nature of theprovisions of section 90(2) of the Act. TheCIT(A), in our view, correctly inferred thatsection 206AA of the Act does not overridethe provisions of section 90(2) of the Actand that in the impugned cases of paymentsmade to non-residents, assessee correctlyapplied the rate of tax prescribed under theDTAAs and not as per section 206AA of theAct because the provisions of the DTAAs wasmore beneficial. Thus, we hereby affirm theultimate conclusion of the CIT(A) indeleting the tax demand relatable todifference between 20% and the actual taxrate on which tax was deducted by theassessee in terms of the relevant DTAAs. Asa consequence, Revenue fails in its appeals.10.Having regard to the position of lawexplained in Azadi Bachao Andolan(supra) andlater followed in numerous decisions that aDouble Taxation Avoidance Agreement acquiresprimacy in such cases, where reciprocatingstates mutually agree upon acceptable principlesfor tax treatment, the provision in Section206AA (as it existed) has to be read down tomean that where the deductee i.e the overseasresident business concern conducts its operationfrom a territory, whose Government has enteredinto a Double Taxation Avoidance Agreement withIndia, the rate of taxation would be as dictatedby the provisions of the treaty. 39. Therefore, the issue as to whether the petitioner wasentitled to the benefit of any Clause in the said DoubleTaxation Avoidance Agreement as notified in Notification No.GSR77(E), dated 04.02.1988, is left open. It is for the petitionerto file appropriate application before the 2[nd] respondent withina period of thirty days from the date of receipt of a copy ofthis order. https://hcservices.ecourts.gov.in/hcservices/ 40. Accordingly, the Writ Petition is dismissed with theabove observations. No cost. Consequently, connectedMiscellaneous Petition is closed. Sd/- Assistant Registrar //True Copy// Sub Assistant RegistrarjenTo1.The Director of Income Tax, (International Taxation), VII Floor, Annexe Building, 121, Nungambakkam High Road, Chennai – 600 034.2.The Income Tax Officer, International Taxation – I(2), VII Floor, Annexe Building, 121, Nungambakkam High Road, Chennai – 600 034.+1cc to Mrs.Hema Muralikrishnan, Advocate, S.R.No.22630W.P.No.4965 of 2011and M.P.No.1 of 2011PM(co)srg 21/07/2020 https://hcservices.ecourts.gov.in/hcservices/