2010 (2) TMI 1168 - AT - Income Tax

Summary

Issues involved: The appeal and cross objection arise from the order of the ld. CIT(A) dated 1.4.2009 for assessment year 2003-04.

Revenue's Appeal:
The Revenue contended that the addition of Rs. 71,21,298/- was wrongly deleted by the CIT(A) based on a previous ITAT decision without considering the failure to deduct proper Tax at Source on payment made to the parent company in Germany, which was deemed a technical fee under section 40(a)(i).

The AO noted a payment made to the German company for technical services, where inadequate TDS was deducted. The AO disallowed the balance amount of technical fees for non-deduction of TDS, considering it as taxable income. The assessee argued that the payment was for a deputed employee's salary, reimbursed to the German company on a cost basis, not for technical services. The CIT(A) referred to previous ITAT decisions in favor of the assessee and directed the deletion of the addition.

The Tribunal upheld the CIT(A)'s decision based on previous precedents, concluding that the payment was a reimbursement of salary, not fees for technical services, thus not attracting section 40(a)(i). The Revenue's appeal was dismissed.

Cross Objection by Assessee:
The assessee supported the CIT(A)'s order, which was upheld by the Tribunal. The Cross Objection was deemed infructuous and dismissed.

In conclusion, the appeal by the revenue was dismissed, and the cross objection by the assessee was also dismissed as infructuous.