9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (9) TMI 105 - AT - Income TaxTDS u/s 195 - Addition u/s 40(a)(i) - fees for technical services liable for TDS or payment for purchase of software - DTAA provisions - HELD THAT - AO has simply stated that the assessee is liable to deduct tax at source from the impugned payment made to the AE, i.e., he has not addressed the submissions made by the assessee before him that the impugned payment would not fall under the category of royalty or fee for technical services - AO has also not given any independent finding on it. AO has also not discussed about the nature of services provided by the AE to the assessee. Unless the type and nature of services are analysed vis- -vis relevant DTAA provisions, it would not be possible to come to a conclusion on this issue. Tax authorities have not examined the factual aspects properly taking into consideration the definition of the terms namely Royalty and Fee for technical services as given in DTAA. Since the impugned payment is covered by DTAA, the A.O. is required to be examined the taxability of these payments and liability to deduct tax at source in accordance with the provisions of DTAA unless it is shown by the assessee that the provisions of Indian Income Tax Act is more beneficial to it. It has been held in the case of Engineering Analysis Centre of Excellence (P) Ltd 2021 (3) TMI 138 - SUPREME COURT - we are of the view that this issue requires fresh examination at the end of the A.O - Appeal filed by the assessee is treated as allowed for statistical purposes.
Issues:
1. Disallowance u/s 40(a)(i) of the Income-tax Act, 1961 for non-deduction of tax at source on payment to Associated Enterprise (A.E.). 2. Nature of payment made to A.E. - Fee for technical services or Royalty. 3. Application of Double Taxation Avoidance Agreement (DTAA) between India and Sweden. 4. Examination of services provided by A.E. and taxability of payments under DTAA. Analysis: 1. The appellant challenged the decision of the Ld. CIT(A) confirming the addition made by the A.O. u/s 40(a)(i) of the Act for not deducting tax at source on a payment to its A.E. The A.O. issued a show cause notice regarding the disallowance, to which the assessee responded citing coverage under the India-Sweden DTAA, stating the payment was not royalty or fee for technical services. However, the A.O. disallowed the amount, and the Ld. CIT(A) upheld the disallowance. 2. The Ld. CIT(A) determined the payment as Fee for technical services, referring to a Karnataka High Court judgment. The Ld. CIT(A) directed disallowance of the payment for non-compliance with TDS provisions, considering it as fees for technical services or payment for software purchase. The appellant contended that the payment was for common infrastructure facilities, not software, and should not be categorized as royalty or fee for technical services. 3. The Ld. A.R. argued that the services were for common infrastructure facilities, not software purchase, and thus, not subject to TDS under DTAA. The Ld. A.R. also claimed the Ld. CIT(A) enhanced the disallowance without proper notice and mentioned a Supreme Court judgment overturning the High Court decision. 4. The Tribunal noted that the nature of services and agreement between the parties were not examined by tax authorities. It emphasized the importance of analyzing services vis-à-vis DTAA provisions to determine taxability. The Tribunal found that the tax authorities did not properly consider the definitions of "Royalty" and "Fee for technical services" under DTAA, requiring a fresh examination by the A.O. The appeal was allowed for statistical purposes, directing the A.O. to re-examine the issue based on the nature of services provided by the A.E. and DTAA provisions.
|
