9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (5) TMI 2033 - AT - Income TaxTDS u/s 195 - applicability of Indo US treaty to the receipt in question - payment to M/s. CSA International ISA for the purpose of obtaining witness testing of ACT contractor as part of CB report and KEMA certification - applicability of provision of section 40(a)(ia) - HELD THAT - As per Memorandum Of Understanding dated 15.05.1989 of the DTAA with respect to Article 12(4), it is stated that generally speaking technology will be considered made available' when the person acquiring the service is enabled to apply the technology. The fact that the provision of the services may required technical input by the person providing those services does not per se mean that the technology or technical knowledge etc are made available‟ to the persons purchasing that services. The identical issue has been considered by the coordinate bench in NQA Quality Systems Registrar Ltd Vs. DCIT 2004 (12) TMI 323 - ITAT DELHI-F where the UK company was authorized to issue ISO Certification and it was held that such services does not result in making available‟ those services to the recipient. The revenue could not show that how the assessee would be able to make such certification on its own. We are also of the view that as assessee is not an accredited institute to carry out such activities on its own as provider of the services has not made such services available to the assessee. It does not satisfy the criteria laid down under Article 12(4)(b) as fees for included services according to Indo US DTAA, hence, services are not chargeable to tax in India. Accordingly, no tax should have been deducted thereon, and hence, no disallowance u/s 40(a)(i) of the Act can be made. Hence, we direct the ld AO to delete the disallowance u/s 40(a)(i) - Appeal of the assessee is allowed.
Issues:
Applicability of Indo US treaty to the receipt in question and consequent applicability of provision of section 40(a)(ia) of the Act. Analysis: The appeal was remanded back by the Hon'ble Delhi High Court for Assessment Year 2005-06 regarding the applicability of the Indo US treaty and the provision of section 40(a)(ia) of the Act. The issue arose when the assessee paid a sum to a US company for witness testing of ACT contractor as part of CB report and KEMA certification. The Assessing Officer disallowed the sum under section 40(a)(ia) of the Act. The coordinate bench initially deleted the addition, stating that the technical services were utilized for earning income from a source outside India. However, the Hon'ble Delhi High Court held that the sum was chargeable to tax as fees for technical services in the hands of the US company. The High Court directed the ITAT to examine the applicability of the treaty and consequently the disallowance under section 40(a)(ia) of the Act. The assessee argued that as per the double taxation avoidance agreement between India and the USA, if fees for technical services are not made available, they are not chargeable to tax in India. The assessee relied on decisions of the coordinate bench to support this claim. On the other hand, the Revenue contended that while the coordinate bench did not address the DTAA, the CIT(A) had discussed the issue in detail. After considering the contentions and the High Court's direction, it was observed that the services provided were for obtaining certifications required for exporting products outside India. These certifications were crucial for trading within the European Union and complying with relevant directives. The services did not fall under the definition of fees for included services as per the Indo US DTAA. The services did not "make available" technical knowledge to the recipient, as the recipient could not independently perform the activities without the service provider. Referring to a similar case, it was concluded that the services did not satisfy the criteria under the DTAA, and thus, were not chargeable to tax in India. Consequently, no tax deduction or disallowance under section 40(a)(ia) of the Act was warranted. The AO was directed to delete the disallowance amount. In conclusion, the appeal of the assessee was allowed, and the disallowance under section 40(a)(ia) of the Act was directed to be deleted.
|
