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TMI Blog2024 (6) TMI 1215X X X X Extracts X X X X X X X X Extracts X X X X ..... ally verifying assessee s claim. TDS u/s 195 - payments have been made to non-residents without deducting tax at source - Disallowance made u/s 40(a)(i) - as submitted by assessee repair and maintenance work was carried out outside India and no part of it was carried out in India - also in absence of Permanent Establishment (PE) of such non-resident companies in India, business profit cannot be taxed in India - HELD THAT:- AO has failed to demonstrate with cogent evidence that the make available condition enshrined in the concerned treaties are satisfied. In fact, learned first appellate authority has recorded a categorical factual finding that in course of rendition of service technical knowledge, know-how, skill, etc. has not been made available to the service recipient by the service provider. Thus, in absence of any contrary material brought on record by the Revenue, we concur with the view expressed by learned first appellate authority. Once the payments do not qualify as FTS under the respective treaty provisions, in terms with section 90(2) of the Act, treaty provisions being more beneficial would override the provisions contained in the domestic law. That being the legal po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was carried out through any PE in India. When, the entire repair and maintenance of helicopter parts was carried out outside India and nothing was done in India by the non-resident payees, in our view, the payments made to the non-residents are not chargeable to tax in India. Therefore, there was no obligation on the assessee to withhold tax under section 195 - Decided in favour of assessee. Disallowance of advances written off - addition made as assessee failed to furnish adequate evidence in support of its claim - CIT(A) deleted addition - HELD THAT:- Commissioner (Appeals) after examining the facts and materials on record has recorded that the amount in dispute represents the advances given earlier by the assessee in its normal course of business for purchase of spare consumables, repairs and maintenance, freight clearing forwarding charges, lodging boarding charges, etc. The amount has become irrecoverable owing to nonfulfillment of certain conditions. Advances were pertaining to two to three years prior to assessment year 2011-12 and that no expenses were booked by the assessee. Revenue has not brought any contrary materials on record to disturb the aforesaid factual finding o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent of each other, and after reducing current year s profit by the lesser of the two for the purpose of carry forward to the next year, the closing balance of the immediately preceding year was required to be treated as opening balance of the succeeding year. Accordingly, the Assessing Officer recomputed the lower of brought forward loss or unabsorbed depreciation and allowed deduction for an amount of Rs.32,29,19,988/- in terms of clause (iii) of Explanation 1 to section 115JB of the Act. While deciding assessee s appeal on the issue, learned Commissioner (Appeals) did not interfere. 4. Before us, learned counsel appearing for the assessee submitted that the difference between the revised deduction claimed by the assessee of Rs.51,20,83,841/- and the deduction allowed by the Assessing Officer of Rs. 32,29,19,988/- is Rs.18,91,63,853/-. He submitted, the differential figure of Rs. 18,91,63,853/- comprises of following : 5. He submitted, the difference arose on account of miscalculation by the Assessing Officer and there was no legal basis to reconsider the additions/deductions made by the assessee in its return of income for preceding years while calculating book profits for the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of providing helicopter services in India for offshore transportation, exploration of oil and gas etc. by adhearing to the guidelines issued by the Director General of Civil Aviation (DGCA). In terms with the said guidelines, the assessee was required to keep the helicopters owned/operated by it in airworthy condition. For keeping them so, the assessee has to incur expenses towards maintenance, repairs and overhaul charges towards the spare parts etc., which were debited in the profit and loss account. The major part of the expenses incurred was towards payment made to non-residents. In course of assessment proceedings, the Assessing Officer, having noticed that the payments have been made to non-residents without deducting tax at source under section 195 of the Act, called upon the assessee to show-cause as to why the payments made should not be disallowed under section 40(a)(i) of the Act. In reply to the show-cause notice, the assessee submitted that part of the payment was towards purchase of materials/spare parts, whereas, the balance amount was towards repair and maintenance charges. It was further submitted that repair and maintenance work was carried out outside India a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot taxable in India. Hence, there is no obligation on the part of the assessee to deduct tax at source. Accordingly, he decided the appeals in favour of the assessee. 14. Before us, learned Departmental Representative strongly relied upon the observations of the Assessing Officer and submitted that certain services rendered by the assessee to nonresident entities are technical in nature, hence, payments made are to be treated as FTS. 15. Learned counsel for the assessee submitted, in respect of the payments made to residents of USA, UK, Canada and Singapore, in terms with the provisions contained in DTAAs entered by India with these countries, to treat the payment as FTS/FIS, make available condition has to be satisfied. He submitted, the Assessing Officer has failed to demonstrate that in course of rendition of services, the non-resident entities have made available technical knowledge, know-how, skill, etc. to the assessee to use them independently without the aid and assistance of the non-resident service providers. Thus, he submitted, the payments made to the residents of the aforesaid countries, under no circumstances, can be treated as FTS/FIS. 16. Insofar as payment made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DT), he submitted that as per the said circular, the activities of repair and maintenance are in the nature of works contract, hence, exigible to deduction of tax under section 194C of the Act. Thus, he submitted, the receipts, if at all, can be considered as the business income of the nonresidents and in absence of a PE in India, are not taxable. Therefore, there was no requirement for deduction of tax at source while making payment to the non-residents. 18. We have considered rival submissions in the light of decisions relied upon and perused the materials on record. Undisputedly, in the assessment years under dispute, the assessee had made payments to certain non-residents towards repair and maintenance of helicopter parts. As per the process followed by the assessee for repair and maintenance, it s engineering department identifies helicopter parts required for or are due for maintenance/overhaul in terms with DGCA guidelines. Once the engineering department identifies the helicopter parts required for maintenance/overhaul, it puts up a request to the Procurement Department. On receipt of request, the Procure Department issues repair orders and sends the parts to be repaired to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herlands, Spain and France can be put in as the definition of FTS in the treaties are wider in scope and do not contain make available clause. iii. In the third category UAE can be put as in the treaty with UAE there is no provision concerning FTS. 21. Insofar as the countries falling in the first category, such as, USA, UK, Australia, Canada and Singapore, admittedly, the treaty provisions have make available clause. Therefore, to treat a particular receipt to be in the nature of FTS, it has to be demonstrated that in course of rendition of services, the service provider had made available technical knowledge, know-how, skill etc. to the service recipient so as to enable him to perform such services in future independently without any assistance of the service provider. 22. In the facts of the present appeal, the Assessing Officer has failed to demonstrate with cogent evidence that the make available condition enshrined in the concerned treaties are satisfied. In fact, learned first appellate authority has recorded a categorical factual finding that in course of rendition of service technical knowledge, know-how, skill, etc. has not been made available to the service recipient by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent outside India for repair/overhaul and the repair/overhaul is carried out outside India. The repaired/overhauled parts are sent back to India to be fixed in the helicopters. In fact, learned Commissioner (Appeals) has given a categorical factual finding to the aforesaid effect. The Revenue has failed to bring any material on record to demonstrate that any non-resident technical personnel visited to render any technical service in India or the repair and maintenance work was carried out through any PE in India. When, the entire repair and maintenance of helicopter parts was carried out outside India and nothing was done in India by the non-resident payees, in our view, the payments made to the non-residents are not chargeable to tax in India. Therefore, there was no obligation on the assessee to withhold tax under section 195 of the Act. Accordingly, we uphold the decision of learned Commissioner (Appeals). 25. The only other surviving issue is in respect of ground no. 2 of ITA No. 1482/Del/2020. In the said ground, the Revenue has challenged deletion of disallowance of Rs.62,62,516/- representing advances written off. 26. Briefly the facts are, in the financial year relevant to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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