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2022 (9) TMI 82 - AT - Income TaxTDS u/s 195 - payments made by the assessee to NEBU of Netherland is in the nature of Royalty - HELD THAT - Perusal of the records makes it very clear that the Ld. CIT(A) has considered the Hon ble Madras High Court in the case of Verizon Communications Singapore Pte. Ltd. 2013 (11) TMI 1058 - MADRAS HIGH COURT which is considered the amended provisions of Section 9(1)(vi) with Explanation 5, gives a very expansive meaning to the term Royalty and this has a bearing on the issue s so too the various clauses in the agreements which are to be looked at in a holistic manner. The findings of the lower authorities does not require any interference. In fact the assessee s reliance in its Grounds of Appeal of Jurisdictional High Court judgment in the case of Nova Technocast Pvt. Ltd. 2018 (5) TMI 1182 - GUJARAT HIGH COURT is a judgment considering Explanation 2 of Section 9(1)(iv) and is not applicable to the facts of the present case. There is no contra judgments placed before us, on the post introduction of Explanation 5 in section 9(1)(iv) of the Act, enlarging the scope of the definition of Royalty . In the absence of the same, therefore the grounds raised by the assessee are hereby rejected and the appeal filed by the assessee is dismissed.
Issues:
1. Whether the payment made by the assessee to NEBU of Netherlands constitutes Royalty and Fees for Technical Services under the Income Tax Act, 1961. 2. Whether the assessee was liable to withhold tax at source on the payment made to NEBU. 3. Whether the appellate order upholding the action of the assessing officer treating the assessee in default under section 201 of the Income Tax Act 1961 was correct. Analysis: Issue 1: The assessing officer held that the services provided by NEBU of Netherlands to the assessee fall within the definition of Royalty and Fees for Technical Services under section 9(1)(vii) of the Income Tax Act. The CIT(A) dismissed the appeal, stating that the consideration paid for the services rendered by NEBU constituted Royalty and fee for included services, making the assessee liable to withhold tax in India. Issue 2: The assessee contended that NEBU did not have a Permanent Establishment in India and provided online tools without creating proprietary rights. However, the CIT(A) upheld the assessing officer's decision, citing judgments like Verizon Communications Singapore Pte. Ltd., which considered an expansive meaning of Royalty under the Act. The High Court decisions emphasized that any payment for technical information or services would constitute Royalty, obligating the assessee to deduct tax at source. Issue 3: The appellate order was challenged by the assessee, arguing against being treated as in default under section 201 of the Income Tax Act. Despite multiple adjournments and lack of representation by the assessee, the Tribunal upheld the lower authorities' decisions. The Tribunal noted that no contrary judgments were presented on the expanded scope of Royalty under Explanation 5 of section 9(1)(vi) of the Act, leading to the dismissal of the appeal. In conclusion, the Tribunal affirmed the assessing officer's decision that the payments made to NEBU constituted Royalty and Fees for Technical Services, making the assessee liable to withhold tax at source. The appellate order was upheld, and the appeal filed by the assessee was dismissed due to the absence of contradictory judgments on the interpretation of Royalty under the Act.
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