2017 (1) TMI 1084 - ITAT AHMEDABAD

TDS u/s 195 - default under section 201(1) & 201(1A) of the Act for not deducting tax while making remittance to non-residents - withholding of tax - PE in India - commission paid to export commission agents - Held that:- Commission payments made to the non resident agents did not have any taxability in India, even under the provisions of the domestic law i.e. Section 9. Once we come to the conclusion that the income embedded in these payments did not have any tax implications in India, no fault can be found in not deducting tax at source from these payments or, for that purpose, even not approaching the Assessing Officer for order under section 195.

In our considered view, the assessee, for the detailed reasons set our above, did not have tax withholding liability from these payments. As held by Hon’ble Supreme Court in the case of GE India Technology Centre Pvt Ltd Vs CIT [2010 (9) TMI 7 - SUPREME COURT OF INDIA] payer is bound to withhold tax from the foreign remittance only if the sum paid is assessable to tax in India. The assessee cannot, therefore, be faulted for not approaching the Assessing Officer under section 195 either. As regards the withdrawal of the CBDT circular holding that the commission payments to non resident agents are not taxable in India, nothing really turns on the circular, as de hors the aforesaid circular, we have adjudicated upon the taxability of the commission agent’s income in India in terms of the provisions of the Income Tax Act as also the relevant tax treaty provisions.

TDS on payments are for subscription fees for specialized database containing copyright material - Held that:- We find that as the treaty provision unambiguously requires, it is only when the use is of the copyright that the taxability can be triggered in the source country. In the present case, the payment is for the use of copyrighted material rather than for the use of copyright. The distinction between the copyright and copyrighted article has been very well pointed out by the decisions of Hon’ble Delhi High Court in the case of DIT Vs Nokia Networks OY [2012 (9) TMI 409 - DELHI HIGH COURT ]. In this case all that the assessee gets right is to access the copyrighted material and there is no dispute about. Even during the course of hearing before us, learned Departmental Representative could not demonstrate as to how there was use of copyright. In our considered view, it was simply a case of copyrighted material and therefore the impugned payments cannot be treated as royalty payments. - Decided in favour of the assessee.

Supervision charges paid to Buck Subish Millan Company Limited (Trinidad) as Fees for Technical Services both under section 9(1)(vii) of the Act as well as Article 12(3)(b) of DTAA between India and Trinidad - Held that:- Learned counsel has a very limited argument on this issue as he fairly submits that the issue is covered by decision of a coordinate bench of this Tribunal, in the case of DCIIT Vs Virola International [2014 (2) TMI 653 - ITAT AGRA] to the extent that so far as remittances before 8th May 2010 are concerned, the assessee cannot be expected to deduct tax at source from these payments inasmuch as the amendment under section 9(1)(vii) was effected on that day and the assessee could not be expected to give effect to the law, while discharging his tax withholding obligations, prior to that date. Learned Departmental Representative also fairly accepts this legal position even as he relies upon the stand of the authorities below.

Thus we remit the matter to the file of the Assessing Officer for exclusion of the cases, if any, of remittances having been made before 8th May 2010 which shall remain uninfluenced by the amendment in section 9(1)(vii) with effect from this date.

Grossing up the amount of remittances made for the purpose of section 195A of the Act by applying the rates mentioned in section 206AA - Held that:- We find that so far as the treaty provisions are concerned, the grossing up does not come into play. There is no dispute or controversy about this position, nor, in a treaty situation, the provisions of the domestic law, unfavourable to the assessee, can be pressed into service- as is the unambiguous legal position under section 90(2) of the Act. The provisions of Section 206AA cannot also be, for the same reasons, pressed into service either. - Decided in favour of the assessee.