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TMI Blog2021 (12) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... ia. Due to non fulfillment of above conditions, taxability under Article 15 does not trigger. In the present case the nonresident payee has given a certificate that there is no fixed place of business/PE in India, more particularly placed at page 40-41 of paperbook. Nothing has been brought on record by the revenue to establish that the non resident payee has any fixed place of business PE in India. In that view of the matter, the income ceases to be taxable in India. - Decided in favour of assessee. Entitled to interest on refund of tax deposited u/s 195 - Hon ble Supreme Court in case of UOI vs Tata Chemicals Ltd. [ 2014 (3) TMI 610 - SUPREME COURT] held that, deductee is entitled for interest on refund tax deposited under section 195. The Ld..AR placed reliance on CBDT Circular No.11/2016 allowing interest on refund under section 244A on excess TDS deposited under section 195 of the Act. Nothing contrary has been brought on record by the Ld.CIT DR. Respectfully following the decision of Hon ble Supreme Court, we hold that the deductee is entitled to interest on refund of tax deposited under section 195 of the Act. Taxability of payment made by assessee in India to the non reside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r TDS u/s 195. 2.0 Payments to non residents were not chargeable to tax under the DTAA 2.1 The learned CIT(A) 12, Bangalore has erred in construing legal services provided by non resident vendor as training services and further erred in applying Article 13 instead of applying Article 15 of India - Poland DTAA 2.2 The learned CIT(A) 12, Bangalore has erred in not appreciating that the payments to non residents were not chargeable to tax under the DTAA and consequently not liable for TDS u/s 195. 3.0 Rate of 20% u/s 206AA is not applicable for grossing up u/s 195A 3.1 The learned CIT(A) 12, Bangalore has erred in not appreciating that the rate of 20% as per section 206AA is not applicable for the purposes of grossing up of income and payment of TDS under section 195A. 3.2 The learned CIT(A) 12, Bangalore has erred in not appreciating that the grossing up under section 195A is required to be made at 'rates in force' and not at the rate of 20% as per section 206AA. 3.3 The learned CIT(A) 12, Bangalore has erred in not appreciating that section 206AA is not applicable in the context of section 195A as grossing up u/s 195A does not involve deduction of tax at source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 195A as grossing up u/s 195A does not involve deduction of tax at source from the amount payable to the payer. 4.0 Grant of interest on refund 4.1 The learned CIT(A) 12, Bangalore has erred in not allowing interest on refund of TDS paid by the appellant out of its own funds. 4.2 The learned CIT(A) 12, Bangalore has erred in not appreciating that interest on refund of TDS is to be allowed as per CBDT Circular No. 11 of 2016 dated 26.4.2016 read with the decision of the Supreme Court in the case of UOI v TATA Chemicals Ltd [2014] 43 taxmann.com 240 (SC) The appellant prays accordingly." Brief facts are as under: 4. The assessee is an Indian company engaged in the business of providing business process outsourcing services. It is submitted that assessee made following payments to non-residents in USA and Poland during the year under consideration. Assessee grossed the invoice amount and TDS was deducted under section 195A of the Act. Payments made to the non-resident in USA was towards retainership and site license subscription fee and, payment made to the non-resident in Poland was towards legal service rendered. Assessee deposited TDS from its own funds and the TD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re made to non-resident in the absence of permanent account number. B.1. On this, the Ld.CIT(A) observed that, as per section 248, section 206AA was not applicable in case of payments where DTAA restricted the rate of withholding to a lower rate. The Ld.CIT(A) held that assessee is entitled for a refund in respect of differential amount paid. C. Assessee also sought declaration that, assessee was entitled of refund of TDS paid, under section 195 A along with interest under section 244A of the Act. C.1. On this issue the Ld.CIT(A) observed that section 248 enables assessee to claim refund of tax based on the declaration that no tax was deductible on such income. The assessee is entitled to a refund where it has paid more taxes than the due amount required under section 195A. The Ld.CIT(A) however opined that section 214 and 244A of the Act do not contain any provision for interest in an appeal made under section 248 of the Act. He thus denied such declaration for granting refund along with interest under section 244A of the Act on the excess tax decucted. Aggrieved by the order of Ld.CIT(A) of the assessee is in appeal before us now. At the outset the Ld.AR submitted that Groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvanced by both sides in light of records placed before us. The moot issues that arise for consideration is; Whether the Partnership firm was not eligible for benefit under India Poland DTAA, on the ground that assessee was a fiscally transparent entity not liable to tax in Poland in its own right and Whether the Partners are fully taxable in respect of their shares of income in Partnership Firm as per CIT? If answer to above two issues are in affirmative then; Whether payments made to the law firm in Poland is in the nature of Fee for technical services under section 9(1) (vii) of the Act as well as Article 13 of India Poland DTAA ? The payee is a resident of Poland. It is submitted by the Ld.AR that in present facts, the law firm is a limited partnership a "fiscally transparent entity", and therefore, the payments made to the law firm are to be dealt with in accordance with Article 15- "Independent personal services" as against Article 13 being "Royalties and Fee for technical services". According to the Ld.AR since all the partners of the partnership are residents of Poland, the entire income of the Partnership is taxable in Poland and not in India as per Article 4 of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar nature'. In the present facts of the case, it will be the partners of the firm who represent the partnership in Poland. Unlike in India, the Partnership itself is taxable as per Income Tax Act. The Ld.AR has filed the Tax residency Certificate(TRC) issued by Polish Government to the partners placed at page 16-39 of paper book. Identical issue arose before coordinate bench of Mumbai Tribunal in case of Linklaters LLP v. ITO reported in (2010) 40 SOT 51. In a subsequent decision in case of Linklaters vs.DCIT reported in (2017) 79 taxman.com 12, Hon'ble Mumbai Tribunal referring to the preceeding decision observed as under: 9. We have gone through the orders passed by the AO as well as DRP and also the submissions made before us and also the orders passed by the Tribunal in case of Linklaters LLP v. ITO (IT) [2010] 40 SOT 51 (Mum.) for earlier years. With the assistance of both the parties, it was noted that this issue has cropped up in various earlier years in case of M/s. Linklaters i.e. A.Ys 1995-96, 1997- 98, 1998-99, 1999-2000 and 2001-02 wherein, the Tribunal has decided this issue in favour of Linklaters by holding that it is eligible for the benefits of India -UK D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax on that income and are thus the appropriate persons to claim the benefits of the conventions concluded by the States of which they are residents. This latter result will be achieved even if, under the domestic law of the State of source, the income is attributed to a partnership which is treated as a separate taxable entity. For States which could not agree with this interpretation of the Article, it would be possible to provide for this result in a special provision which would avoid the resulting potential double taxation where the income of the partnership is differently allocated by the two States." Further the Ld.AR placed before us information on residency for tax purposes in Poland that are as under: Poland - Information on residency for tax purposes Section 1 - Criteria for Individuals to be considered a tax resident Pursuant to the Article 3 paragraph 1a of the Personal Income Tax Act (hereinafter: PIT Act) as a polish resident is considered a person who has his/her centre of personal interests or economic interests (centre of vital interests) in Poland or is present on the territory of Poland for more than 183 days during a tax year. Generally person is a Po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration for the use of, or the right to use, any copyright including copyright of literary, artistic or scientific work including cinematograph films or tapes used for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use any industrial, commercial, or scientific equipment or for information concerning industrial, commercial or scientific experience. 4. The term "fees for technical services" as used in this Article means payments of any kind, other than those mentioned in Articles 15 and 16, as consideration for managerial or technical or consultancy services, including the provision of services of technical or other personnel. 5. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or fees for technical services, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties or fees for technical services arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right, propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at case, only so much of the income as is attributable to that fixed base may be taxed in that other State ; or (b) if his stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 183 days in the relevant "previous year" or "year of income" as the case may be; in that case, only so much of the income as is derived from his activities performed in that other State may be taxed in that other State. 2. The term "professional services" includes independent scientific, literary, artistic, educational, or teaching activities, as well as the independent activities of physicians, surgeons, lawyers, engineers, architects, dentists and accountants. Only on fulfillment of either of the two circumstances under Article 15, one could say that the money received by the non resident is taxable in India. Due to non fulfillment of above conditions, taxability under Article 15 does not trigger. In the present case the nonresident payee has given a certificate that there is no fixed place of business/PE in India, more particularly placed at page 40-41 of paperbook. Nothing has been brought on record by the revenue to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices rendered by Zintro to assessee. He submitted that, Hon'ble Supreme Court took view contrary to the view taken by the Hon'ble Karnataka High Court in the case of Samsung Electronics Co. Ltd. (supra). The Ld.CIT DR, while relying on the order of the CIT(A), pointed out that Ld.CIT(A) has not examined the end users agreement to find out nature of services and therefore the issue should be remanded to the Ld.CIT(A) for fresh consideration. We have perused the submissions advanced, and the order passed by the Ld.CIT(A). We find the issue to be decided in the grounds raised by the assessee are in relation to taxability of payment made by assessee in India to the non residents. The decision of Hon'ble Karnataka High Court in the case of Samsung Electronics Co. Ltd. (supra) on the basis of which the revenue authorities concluded that the payment to non-residents are in the nature of royalty and FTS, now stand overruled by the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd. (supra) and therefore in all fairness, the issue is to be remanded to the Ld.CIT(A) to examine the terms of the agreement under which services w ..... 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