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2022 (3) TMI 1064 - AT - Income TaxTDS u/s 195 - Levy of interest under 201 (1)/201 (1A) - assessee was held to the assessee-in-default for want of TDS and it was also saddled with interest for the said default - payment was predominantly towards cost of parts and small portion towards fitment and repair charges. The expenditure so incurred was reimbursed by the assessee to non-resident distributors on actual basis - HELD THAT - The services have been carried as well as utilized outside India. There is nothing on record that any of the payees has any permanent establishment in India. Therefore, as held by the bench M/s Nissan Motors India Pvt. Ltd. 2018 (3) TMI 1956 - ITAT CHENNAI there would be no obligation for assessee to deduct tax at source. We also concur with the submissions of Ld. AR that the warranty obligation being part and parcel of sales transactions and therefore, the same could not be held to be fees for technical services . Therefore, considering the fact of the case, we direct Ld. AO to delete the impugned demand as raised against the assessee. - Decided in favour of assessee.
Issues:
1. Whether the levy of interest under sections 201(1)/201(1A) of the Income Tax Act 1961 is justified? 2. Whether the expenditure for carrying out the warranty by the Distributors constitutes 'fees for technical services' requiring tax deduction at source? 3. Whether the warranty services are inextricably linked to the sale of the property and not in the nature of 'fee for technical services'? 4. Whether the payments for services rendered fully outside India are liable to tax in India? 5. Whether the payments made to non-residents for warranty services qualify as 'fees for technical services' under the Double Taxation Avoidance Agreement (DTAA) and require TDS? 6. Whether the payments made to non-residents for warranty services involve technical knowledge or assistance qualifying as 'fees for technical services'? 7. Whether the cost of replacement of parts is merely a sale of goods and not taxable in India, requiring TDS? Analysis: Issue 1: The Appellate Tribunal considered the grounds raised by the assessee against the order of the Commissioner of Income Tax (Appeals) and the Assessing Officer regarding the levy of interest under sections 201(1)/201(1A) of the Income Tax Act. The Tribunal analyzed the facts and submissions made by both parties, ultimately directing the Assessing Officer to delete the demand raised against the assessee, allowing the appeal. Issue 2-7: The Tribunal delved into the details of the warranty services provided by non-resident distributors, the nature of the payments made, and the applicability of TDS under the Income Tax Act and DTAA. The Tribunal examined the arguments put forth by the assessee, including the reimbursement of expenses, absence of technical services provided to the assessee, and the location of service utilization outside India. Relying on precedents and legal provisions, the Tribunal found that the warranty obligations were integral to sales transactions and not 'fees for technical services'. Additionally, since the services were carried out and utilized outside India, and the payees had no permanent establishment in India, the Tribunal concluded that there was no obligation for the assessee to deduct tax at source. The Tribunal allowed the appeal, directing the Assessing Officer to delete the demand against the assessee. In conclusion, the Tribunal's judgment addressed the various issues raised by the assessee, providing a detailed analysis based on legal provisions, precedents, and factual considerations, ultimately ruling in favor of the assessee and directing the deletion of the demand raised by the tax authorities.
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