INCOME TAX ACT, 1961

--Income deemed to accrue or arise in India under section 9(1)(vii)--Business connection Fees for technical services vis-a-vis consideration received under buying agency services--The original return of income was filed on 4-3-2008 wherein the total income was declared. Subsequently, a revised return of income was filed by ASL on 5-3-2008 wherein a mistake in relation to claim of credit for tax deducted at source was rectified by the assessee. Thereafter, a second revised return was filed by ASL increasing the income which was on account of rectification of an inadvertent mistake at the time of grossing up of tax paid on behalf of the appellant. For the year under consideration, ASL received buying commission from AIMPL for the services provided by ASL to AIMPL. Such buying commission was not offered to tax by ASL in the return of income. During the course of the assessment proceedings, assessing officer held that the buying commission income received by the assessee is in the nature of Fees for Technical Services ('FTS') and the same should be taxable in India in the hands of ASL. Accordingly, the same was considered to be taxable on gross basis @ 30% in the assessment order on the ground that the agreement for providing such services was entered on 18-6-1999. DRP confirmed with the view of the assessing officer. Though assessee was acting on behalf of AIMPL, it did not have any authority to enter into any binding commitment on behalf of AIMPL. The invoice would be raised by the manufacturers on ASL for the sake of administrative convenience as services included assessee act as AIMPL's paying agent. The agreement specifically provided that AIMPL shall retain for itself the final decision on selection of manufacturers, pricing, delivery and other such related matters. At the time of filing the return of income, the appellant did not offer the income received from AIMPL for providing sourcing services to tax since the appellant does not have a place of business in India from where such sourcing services are provided to AIMPL. Further, no employee of the appellant visited India during the year for providing such services to AIMPL, i.e., the services were provided by the appellant from outside India. In these circumstances and a catena of judicial pronouncements, assessee was under bona fide belief that the payment received by it for rendering sourcing services is not in the nature of FTS as it is not managerial, technical or consulting in nature, on certain considerations. The services provided by ASL to AIMPL are not in the nature of managerial, technical and consultancy. Held:The copies of the Buying Agency Services agreement are placed on record, the nature of services have not been disputed. Department has only interpreted them to be amounting to 'Fees for Technical Services', these are not technical services but routine services offered in the procurement assistance. Applying the principles and case laws to the facts of the present case, the services rendered by the assessee in this case were purely in the nature of procurement services and cannot be characterized as 'managerial', 'technical' or 'consultancy' services. Accordingly, the consideration received by the assessee was appropriately classified as 'commission' as against 'fees for technical services'.