Page Contents
FACTS
The assessee had built a high capacity submarine optic fiber telecommunications link cable system and had sold the capacity in the said cable system to various landing parties including VSNL in India under capacity sales agreements.
The Construction and Maintenance Agreement (C&MA) was separately entered between the parties in terms of which the FLAG cable system was to be jointly operated and maintained in efficient working condition along with FLAG and landing parties signatories.
In the year under consideration, the assessee received certain sum from VSNL on account of provision of standby maintenance activities. ]
The Assessing Officer held that receipts from standby maintenance services/charges were in the nature of ‘fees for technical services’ within the meaning of section 9(1)(vii) and, hence, it was to be taxed accordingly in India.
On appeal, the Commissioner (Appeals) upheld the order of the Assessing Officer.
It is not in dispute that the standby charge is a fixed annual charge, which is payable not for providing or rendering services albeit for arranging standby maintenance arrangement, which is required for a situation whenever some repair work in undersea cable or terrestrial cable is actually required to be performed or rendered.
It is a facility or infrastructure maintained for ready to use for rendering the technical services or for repairing services, if required.
There is no actual rendering of the services qua the standby maintenance charges. It is not the case of the Assessing Officer or the Commissioner (Appeals) that standby maintenance charge is on account of actual repair or maintenance carried out by the assessee.
Hence, following the earlier years’ precedence, the receipt on account of standby maintenance charges is not chargeable as ‘fees for technical services’ within the scope of section 9(1)(vii).
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