2023 (11) TMI 390 - ITAT DELHI

TDS u/s 195 - disallowances u/s 40(i)(a) - payments made to Dubai Leading Technologies - whether India-UAE DTAA has no clause on Fee for Technical Services? - HELD THAT:- We do not find any infirmity in the order of the Ld. CIT(A) and uphold his finding that the payments made to Dubai Leading Technologies cannot be brought to tax under Article 22 in the absence of a specific clause for FTS in the India-UAE DTAA. The impugned payments are in the nature of business income which are not chargeable to tax in India in the absence of a PE of the payee/remittee in India. We further uphold the finding of the Ld. CIT(A) that there is no obligation to deduct tax at source under section 195 of the Act as the impugned payments are not chargeable to tax in India as held by the Hon’ble Apex Court in GE India Technology Centre (P) Ltd. [2010 (9) TMI 7 - SUPREME COURT] and hence the disallowance made by the Ld. AO under section 40(a)(i) of the Act is erroneous.

Disallowance u/s 40(a)(i) - payment made to Brain Point Consultants, UAE - contention of the Revenue is that the impugned payments made by the assessee for rendering marketing and sales support services are in the nature of FTS and in the absence of a specific clause on FTS under the India-UAE DTAA, the impugned payments should be taxed under the provisions of Article 22 on “other income” which is residuary clause under the India-UAE DTAA - HELD THAT:- As abundantly clear that the Ld. CIT(A) after considering the impugned issue in detail has given his finding that invocation of the provisions of section 40(a)(i) of the Act by the Ld. AO is erroneous for the reason that the income of a non-resident agent from provision of marketing and sales support services rendered for overseas client cannot be included under section 5(1) of the Act as the same does not deem to accrue or arise in India based on the decision of Eon Technology P. Ltd. [2011 (11) TMI 20 - DELHI HIGH COURT] and further holding that in the absence of a specific clause on FTS under the India-UAE DTAA, provisions of Article 22 on residuary/ other income cannot be invoked based on the decision in the case of Kingfisher Airlines Ltd. [2019 (11) TMI 689 - ITAT BANGALORE] we are inclined to uphold the order of the Ld. CIT(A). Accordingly ground No. 2 of the Revenue is dismissed.

Disallowance u/s 40(a)(i) - payment made to OIT Managed Services Mauritius - assessee entered into an agreement with OIT Managed Services Mauritius for provision of Amazon Web Service, Hosting Service, Identity and Access Management, Virtual Private Cloud, Virtual Machine Services to the assessee - HELD THAT:- Web hosting services availed by the assessee do not constitute royalty or FTS and hence payments made by the assessee to OIT Managed Services Mauritius in consideration of such services are not chargeable to tax in India consequent to which the assessee is not required to withhold any tax on the impugned payments. Having said so, we also hold that the impugned payments are not taxable in India in the absence of any specific clause on FTS in India-Mauritius DTAA for the year under consideration for the reasons recorded in para 8, 8.1, 8.2 and 10 above. Accordingly, ground of the Revenue is dismissed.