Pramod Kumar, A.M. - (1.) THIS appeal is directed against order dt. 6th July, 1998, passed by learned CIT(A)-XI, Kolkata, in the matter of ascertainment of withholding tax liability from remittance made by the assessee to Mr. Frank Rusinko, an American scientist, on account of consultancy charges.
(2.) The assessee's grievance is that the authorities below ought to have held that the remittance in question did not fasten any withholding tax liability on the assessee inasmuch as, on the peculiar facts of this case, the same is covered by the scope of expression 'independent personal services' under Article 15 of Indo-US Double Taxation Avoidance Agreement (DTAA). As a corollary to this proposition, the assessee has also assailed the action of the authorities below in holding that the remittance in question is covered by the scope of expression 'fees for included services' appearing in Article 12 of Indo-US DTAA. Although the assessee has taken seven grounds of appeal, these grounds are, in substance, only arguments in support of these propositions. As a matter of convenience, therefore, we will take all these grounds of appeal together. Briefly, the facts. The assessee, is an Indian company engaged, Inter alia, in the business of manufacturing and/or marketing of graphite electrodes, anodes and other miscellaneous carbon and graphite products. The assessee had appointed one Mr. Frank Rusinko Jr., a resident of the United States of America as is its consultant on retainer basis. As to the scope of Mr. Rusinko's primary work, para. 2 of the appointment letter dt. 28th March, 1996 (duly acknowledged copy placed before us at pp. 7 and 8 of the paper book) states as follows : "During the continuance of your appointment hereunder, you shall advise the company's accredited representative(s) in the USA or, if required, send to the company by post, documentation on matters concerning technology upgradation and development of new products in the field of carbon and graphite, and, without limitation on the generality of the foregoing, shall render to the company consultancy services for improvement of electrodes and nipples quality, particularly in large diameter UHP grade, development of fine grain Isotrophic Graphite, EDM Graphite and other Carbon/Graphite Speciality Products." Paras. 6 and 7 of the appointment letter had further imposed the following obligations on Mr. Rusinko : "6. You shall forthwith communicate to the company and transfer to it the exclusive benefits of and absolute right to all inventions, improved process of manufacture, designs, secret materials, formulas of mixing, improvements in addition to or further inventions relating to the patents or processes of manufacture or products manufactured or being developed by the company or otherwise relating to the business and affairs of the company which you may produce, make, invent or discover or which may come to your knowledge or be communicated to you during the continuance of your appointment hereunder relating to any of the company's business or products and will give to the company full information as to exact mode of working and using the same and also all such explanations and instructions to the officers and workmen of the company as may be necessary to enable them effectually to work the same and shall from time to time at the expense of the company furnish it with fill necessary plans, drawings, models and information for enabling the company to register in its own name any such improvement, invention or additions as the company shall think fit. 7. You shall agree that any and all improvements, intentions and discoveries, whether or not capable of being patented, which you may make either alone or in conjunction with others during your appointment hereunder relating to or in anyway pertaining to or connection with any of the products of the company or manufacturing process thereof shall become the sole and exclusive property of the company and that whenever required to do so by the company whether during or after the termination or earlier determination of your appointment hereunder, you shall, at the cost of the company, execute and sign any and all applications, assignments and other instruments which the company may deem necessary or advisable in order to apply for and obtain letters patent design registration or other forms of protection for the said improvements, inventions and discoveries in such countries as the company may direct and to vest in the company alone or in any such person or persons as the company may direct, the whole right, title and interest thereto."
(3.) ON 25th Aug., 1997, the assessee moved an application to the AO seeking permission to make the remittance of two quarterly instalments of the consultancy fees payable to the aforesaid Mr. Rusinko. The assessee submitted that consultancy services for which the remittance in question was being made was covered by the scope of expression 'independent personal services' in Article 15 of Indo-US DTAA. It was also submitted that since neither Mr. Rusinko had a 'fixed based regularly available to him in India for the purpose of performing his activities' nor did he 'stay in India for a period or periods amounting to or exceeding in aggregate 90 days in the relevant taxable year', Mr. Rusinko's income from such independent personal services was not exigible to tax in India. Accordingly, the assessee's case was that, the assessee did not have any obligation to withhold taxes from this remittance. These submissions, however, did not find any favour with the AO. He was of the view that the services rendered by the foreign consultant are covered by the scope of fees for technical services, which are termed as 'fees for included services' in the Article 12(4) of Indo-US DTAA, and accordingly, the assessee should have deducted tax from the remittance. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. Still aggrieved, the assessee is in second appeal before us.;