2014 (11) TMI 1109 - AT - Income Tax

TDS u/s 195 - payment made to foreign parties - make available clause - Held that - We find that CIT(A) while deleting the addition has noted that the services provided by Colardo Engineering was with respect to giving the report of correctness of calibration of assessee s meters. He has further noted that the expertise connected with testing has not been passed on to the Assessee and therefore the aggregate payment of 52, 26, 667/- cannot be treated as fee for technical services and is not covered u/s 195 of the Act. Before us Revenue has not brought any material on record to controvert the findings of CIT(A). Further the case laws relied upon by ld. D.R. are distinguishable on facts and cannot be applied to the facts in present case. We further find that in the case of Veeda Clinical Research (P.) Ltd. (2014 (1) TMI 886 - ITAT AHMEDABAD ) the Co-ordinate Bench after relying on the decision in the case of DIT v. Guy Carpenter & Co. Ltd. 2012 (5) TMI 31 - DELHI HIGH COURT and CIT v. Debeers India Minerals (P.) Ltd. 2012 (5) TMI 191 - KARNATAKA HIGH COURT has held that the condition precedent for invoking the make available clause is that the services should enable the person acquiring the services to apply technology contained therein. It further held that unless there is a transfer of technology involved in technical services the make available clause is not satisfied. Before us Revenue has not brought any binding contrary decision in its support. We therefore find no reason to interfere with the order of CIT(A) and we therefore dismiss the ground of Revenue. - Decided in favour of assessee

Summary

Issues:
Deduction of TDS on payment made to foreign parties under section 195 of the Income-tax Act.

Analysis:
The appeal was filed by the Revenue against the order of CIT(A) for the assessment year 2009-10, concerning the deduction of TDS on payments made by the Assessee to a non-resident entity for calibration and testing of equipment. The Assessing Officer (A.O) contended that the payments were in the nature of technical services and should have attracted TDS under section 195 of the Act. The Assessee argued that the services provided were not in the nature of "making available" technology, hence not covered under the India U.S.A. treaty. CIT(A) analyzed the nature of services provided by the non-resident entity and concluded that the payments made could not be treated as fees for technical services and were not coverable under section 195. The CIT(A) highlighted that the expertise related to testing was not transferred to the Assessee, and the services only involved providing a report on calibration. The CIT(A) also emphasized that for the "make available" clause to apply, the services should enable the recipient to apply the technology contained therein. The decision was supported by the findings in the case of Veeda Clinical Research (P.) Ltd. The Revenue's arguments were found to be distinguishable on facts, and no contrary binding decision was presented. Consequently, the Tribunal dismissed the appeal of the Revenue, upholding the order of CIT(A).

In summary, the Tribunal affirmed the CIT(A)'s decision to delete the addition of TDS liability on payments made to a non-resident entity for calibration and testing services. The Tribunal emphasized that the services provided did not involve transferring technology to the Assessee, and therefore did not fall under the category of technical services requiring TDS deduction under section 195 of the Income-tax Act. The Tribunal found no merit in the Revenue's arguments and dismissed the appeal, maintaining the decision in favor of the Assessee.