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TMI Blog2023 (5) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of circumstances of case, the Ld.CIT(A) has erred in holding that the director fees paid to Mr. Jean Carlier is not technical nature despite the fact that the payment is covered under professional services which include technical, management and consultancy service." 4. "Whether, in facts of circumstances of case, the Ld.CIT(A) has erred in deletion the addition made by AO despite the fact that the said payments are covered u/s 9(l)(vii) and hence ought to have been disallowed u/s 40(a)(i)." 3. Briefly stated the facts are that the assessee is a company engaged in the business of making ad films (TVC). For AY 2013-14, the assessee e-filed its return on 29.09.2013 declaring income of Rs. 85,09,790/-. The case was selected for scrutiny and statutory notices were issued and duly served upon the assessee. In response thereto, the assessee produced complete books of account and also filed all the necessary details as called for by the Ld. Assessing Officer ("AO") from time to time. The reply filed by the assessee was not found tenable by the Ld. AO who proceeded to make disallowance of Rs. 1,69,275/- under section 40(a)(ia) of the Income Tax Act, 1961 (the "Act") on account of int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to non- resident having no PE in India A detailed chart of all such payments is enclosed for your kind perusal. We are also enclosing copies of invoices received against the payment made to non-resident. 2. Regarding the non deduction of TDS on Payment to Non Resident. The person to whom the payment is made they have no permanent establishment in India It is to be submitted that we have made major payments to non-resident for ad film production services like :- a. Arranging for shooting locations, b. Obtaining necessary permits for the appellant. c. Arranging shipping & custom clearances d. Arranging for extras, shooting equipment, meals, transport etc. if required e. Rendering help in obtaining visas f Arranging for makeup of casts, if required g. Coordinating necessary licenses. 3. The said Services rendered outside India by the overseas service providers in connection with making logistic arrangement are in the nature of commercial Services and the amount received by them from the assessee for such Services constitutes their business profit which is not chargeable to tax in India in the absence of any PE in India of the said service providers. The assessee, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal amount remitted out of India, an amount of Rs. 572850/- has been paid for services of ad film director Mr. Jean Carlier. All other payments are on account of production services. This payment is made for the direction of the ad film "Dalda". This payment is covered under article 15 of the DTAA with country Malasiya. This payment is made to a non-resident individual having no PE in India and payment for ad film director is covered under "Professional Services. Film direction services cannot be termed as technical services as defined under explanation 2 to section 9(1)(vii) of the Act." 4.4 It was submitted that the AO had wrongly presumed all these payments are covered under "Fee for technical services" as defined u/s 9(1)(vii)(b) of the Act whereas these payments were made to all these persons on account of ad film production line services like a. Arranging for shooting locations, b. Obtaining necessary permits for the appellant. c. Arranging shipping & custom clearances d. Arranging for extras, shooting equipment, meals, transport etc. if required e. Rendering help in obtaining visas f. Arranging for makeup of casts, if required g. Coordinating necessary licen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee thus were remunerated for their efforts and time spent in making logistic arrangement for the assessee. The entire payments made by the assessee to the foreign service providers thus were not in the nature of fees for Technical Services within the meaning of Explanation 2 to section 9(1)(vii) and the same were not chargeable to tax in India. The assessee, therefore, was not required to deduct tax at source from payments made to the overseas service providers. 4 10 The appellant also relied on a similar view taken in the case of Yash Raj Films P. Ltd v ITO (IT) (2013) 140 ITD 625 / 23 ITR 125 (Mum.)(Trlb.) Assessee Company was engaged in business of production of films, shooting of which was often done outside India. For shooting films outside India, its production unit used to go abroad and services required in connection with work of shooting abroad were availed from various overseas providers. The assessee made payment to five such overseas service providers for services availed in connection with shooting of different films. It was held that the services rendered by overseas service providers would not fall within ambit of technical services as given in Expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices falls under 13 'work contract' as defined in Explanation to Section 194C of the IT Act. (2) The question is not dealt with because of our answer to question No. 1 (3) The payments made by the applicant to Endemol ARG for availing the line production services under the agreement is not chargeable to tax as per the provision of section 9(1)(i) of the IT Act. (4) The receipts by Endemol ARG from the applicant will not suffer withholding of tax under section 195 of the Act as the income earned is not taxable in India." 4.14 It was further submitted that the assessee is procuring similar services from same countries during the preceding and succeeding assessment years but no such addition has ever been made. The assessments for the AY 2009-10, AY 2011-12, AY 2012-13 and 2015- 16 have been completed u/s 143(3). 4.15 In view of above facts the addition on this account is deleted and the grounds of appeal are allowed." 7. The Ld. DR relied upon the order of the Ld. AO. Per contra, the Ld. AR relied upon the order of the Ld. CIT(A) and reiterated the submissions made before him. 8. We have heard the Ld. Representatives of the parties and perused the material on record. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 925000.00 Ad Film Production Services THAILAND 24 22/03/2013 Nolabel Sp.z.o.o 142200.00 Ad Film Production Services POLAND 25 07/12/2012 Nolabel Sp.z.o.o 213600.00 Ad Film Production Services POLAND TOTAL 15885633.00 9. It is also an undisputed fact that the services received by the assessee by these non-resident service providers are on account of ad film production line services like arranging for shooting locations; obtaining necessary permits for the appellant; arranging shipping & custom clearances; arranging for extras, shooting equipment, meals, transport etc.; rendering help in obtaining visas; arranging for makeup of casts; coordinating necessary licenses which are required to shooting of ad films in their respective countries and that none of the non-residents have a PE in India. These services thus essentially involve making logistic arrangement for the assessee outside India. The services are rendered and utilised outside India and the payments for these services are also received outside India. The assessee has submitted copies of invoices of payment made to non resident service providers which is placed at pages 12-32 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as technical services as defined under explanation 2 to section 9(1)(vii) of the Act and hence are not chargeable to tax in India. 11. We agree with the finding of the Ld. CIT(A) that services provided by the non-resident service providers are not in the nature of managerial technical or consultancy services within the meaning of explanation 2 to section 9(1)(vii) of the Act. These are to be characterised as contract work under section 194C of the Act and thus partakes the nature of business income which is not taxable in India in the absence of a business connection or PE of the non-resident service provider in India. The Ld. CIT(A) has recorded a finding that the assessee procured similar services from same countries during the AY 2009-10, AY 2011-12, 2012-13 and AY 2015-16 the assessments for which have been completed under section 143(3) of the Act without any addition on account of the same. 12. In view of the above, we endorse the findings of the Ld. CIT(A) that the payments made to the non-resident service providers by the assessee are not chargeable to tax in India and thus no disallowance under section 40(a)(ia) of the Act is called for on account of non-deduction of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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