Case Law Details
M/s Knight Frank (India) (P) Ltd. Vs ACIT (ITAT Mumbai)
As the foreign agency by using its skill, business acumen and knowledge which was acquired by it for its own benefit, was only referring customers to the assessee, therefore, it cannot be said that it was providing any consultancy services to the assessee. In fact, the term consultant refers to a person, who is consulted and who advises or from whom information is sought. In our considered view, the foreign concern had not provided any consultation or advise to the assessee, but in fact was only referring or introducing customers to it. Accordingly, we are of the considered view, that as the foreign concern was not providing any consultancy services to the assessee, therefore, the referral fees received by the assessee cannot be held as consultancy fees.
On the basis of our aforesaid observations, we are of the considered view, that as the referral fees received by the foreign concern viz. Newmark & Company Real Estate Inc., New York, USA, from the assessee, was neither towards managerial, technical or consultancy services, hence the same cannot be characterised as receipt of income towards „fees for technical services‟ by the said foreign concern.
We thus are of the considered view, that as the income received by the foreign concern viz. Newmark & Company Real Estate Inc., New York, USA, from the assessee was neither income in the nature of „interest‟ as set out in Sec. 9(1)(v) of the Act; or income in the nature of „royalty‟ as set out in Sec. 9(1)(vi) of the Act; or income by way of „fees for technical services‟ as set out in Sec. 9(1)(vii) of the Act, therefore, the “Explanation” to Sec. 9(2), as had been made available on the statute vide the Finance Act, 2010, w.r.e.f 01.06.1976, would not come into play. Accordingly, we are of the considered view that as the referral fees received by the foreign concern from the assessee does not fall within the realm of the scope of “total income” of the said foreign concern viz. Newmark & Company Real Estate Inc., New York, USA, as envisaged in Sec. 5(2) of the Act, therefore, no obligation u/s 195 was cast upon the assessee to have deducted tax at source on the referral fees of Rs. 24,62,367/- that was paid to the said foreign concern.
Alternatively, we find that no obligation was cast upon the assessee to deduct tax at source on the amount of Rs. 24,62,357/-that was paid to the foreign concern viz. Newmark & Company Real Estate Inc., New York, USA, towards referral fees, for the reason viz. (i) that, as the services rendered by the foreign concern for introducing a client did not did not “make available” any technical knowledge, experience, skill, know-how or processes to the assessee, therefore, the same did not fall within the realm of “Fees for included services” as envisaged in Article 12 of the India-USA, DTAA; and (ii). that, as the aforesaid payment made to the foreign concern for the services which were rendered entirely in USA, constituted its business profits within the meaning of Article 7 of the India-USA DTAA, therefore, in the absence of any Permanent Establishment (for short „PE‟) of the said foreign concern in India, the said amount could only be brought to tax in USA. As such, we are of the considered view, that even as per Sec. 90(2) of the Act, in pursuance of the beneficial provisions of the India-USA DTAA, as the referral fees received by the foreign concern was not taxable in India, therefore, no obligation was cast upon the assessee to have deducted any tax at source on the said payment. Accordingly, for the said reason also no disallowance u/s 40(a)(i) of the referral fees of Rs. 24,62,357/- was called for in the hands of the assessee.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
