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TMI Blog2025 (3) TMI 706X X X X Extracts X X X X X X X X Extracts X X X X ..... es) carries out different meaning therefore a clarity is must on this aspect also. Therefore, we restore the matter to the file of the AO for examining a fresh in accordance with law, with a liberty to assessee to file documentary evidences in support of this issue. So far as the reliance placed by the assessee on the certificate 195 is concerned it is observed that the same is not relevant for the impugned year. Whether subcontracting charges/ testing charges are in the nature of royalty? - We observe that the CIT(A) in its order has held that though appellant has paid separate royalty for the use of trade mark to its other AE, yet the testing charges are also in the nature of royalty. We are of the view that this aspect also would be examined afresh by the AO. It is the contention of the assessee that it has paid royalty charges to UL Switzerland after deducting the TDS. However, the assessee failed to elaborate as to why the testing is done by UL USA and trademark uses charges are paid to Switzerland. We observe that the customers are entitled for using the trademark charges only after the process of testing from UL USA. All these facts require fresh consideration at the end o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has erred in treating the Appellant as 'an assessee in default' within the section 201(1)/201(1A) of the Act and consequently erred in raising a tax demand. Non-deduction of withholding taxes on payment of testing charges 4. The Learned AO & CIT(A) have erred in not appreciating that section 195 of the Act requires withholding of taxes only if the payments are liable to tax in India. 5. The Learned AO & CIT(A) have erred in concluding that the payments towards testing charges constitutes FTS/FIS despite the fact that testing services provided by the payees do not make available any technical knowledge, experience, skills or know how as required by the relevant Tax Treaties for the payment to qualify as FTS/FIS. 6. The Learned AO has erred by making references and relying on various judicial precedents, which are not applicable to the facts of the Appellant, to conclude that the payments qualify as FTS/FIS under the relevant Tax Treaties. Further, the Learned AO & CIT(A) have failed to appreciate that the Appellant has borrowed principles from various judicial precedents which have similar factual matrix and instead disregarded them on the basis that the facts are c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that even though the Appellant has benefited from the management services, it does not mean that technical knowledge or skill was made available to the Appellant, merely because the services offered involves technical knowledge and experience. 17. The Learned AO & CIT(A) have failed to appreciate that the Appellant has borrowed principles from various judicial precedents which have similar factual matrix, instead disregarded them on the basis that the facts are completely different. Erroneous levy of interest under section 201(1A) of the Act 18. The Learned AO and CIT(A) has erred in levying interest under section 201(1A) of the Act amounting to INR 1,52,20,444 which is consequential in nature. The Appellant craves leave to add, alter, rescind and modify the grounds herein above or produce further documents, fact and evidence before or at the time of hearing of this appeal. 4. Facts of the case emerging from the impugned order are that M/s. UL India Private Limited, the assessee, is a domestic company and is into the business of providing testing services in various areas including air, water and chemical emission testing etc. The assessee is a subsidiary company of M/S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utilized by the assessee company in its business operations in India. The AO therefore held the payment to be taxable as FTS under the provisions of the Act as well as the India-USA DTAA. Alternatively the AO also observed that the charges paid are taxable as royalty. 4.2 During the relevant year relevant, the assessee had also made foreign remittances under the head "Fees for management services" to the parent entity M/s. UL USA. Management is the process of planning, organizing, leading and controlling the effects of organization members and of using all other organizational resources to achieve the stated organizational goals. 4.3 The knowledge is accumulated through study, experience and experimentation. The scientific knowledge produces impersonal results and it can be empirically tested and universally applied. Therefore, the knowledge which was accumulated through study, experience and experimentation with regard to management, finance, risk, etc. of a particular business is nothing but a technical knowledge. In the era of technology transformation, the information/experience gathered by US resident company relating to financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and successful completion of testing of customers products. Therefore, the above said services in the nature of fees for technical services were made available to the assessee company, and the same was used by the assessee company in its business activities. Therefore, the management fees payments are taxable in India both under the provisions of section 9(1)(vii) of the IT Act and Article 12(4) of the India USA DTAA. 8.5 Further for the successive assessment years, the assessee itself had deducted taxes u/s 195 of the IT Act, on the similar management fees paid to UL USA. For the AY 2012-13 alone management fees payments were not subjected to TDS u/s 195 of the IT Act." 4.5 In the back drop of the above facts, the AO held that the payment made towards management fee charges would be in the nature of FTS and hence chargeable to tax in India. 4.6 Aggrieved with the order of AO, the assessee preferred appeal before the ld. CIT(A) and has made following submissions: a) That though the amount of testing charges was in the nature of fee for included services yet the same are not taxable in India since the service provider has not made available the technical knowledge embedded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue. 6. Ld. D.R. appearing on behalf of the revenue read out the order of ld. CIT(A) and laid emphasis on the terms of corporate service agreement between the assessee and the parent companies i.e. ULLC Inc. and Under Writers LLC Inc. 7. We have heard the rival submissions and perused the materials available on record, we have also read the synopsis filed by the assessee. Ld counsel for the assessee in order to rebut the observations of the AO has vehemently argued that the test results of the sub-contracting services provided by the non-resident entities do not enable the appellant to carry out the exact activities in India subsequently and on each occasion the appellant engages requests the non-resident entities to carry out such activities thereby demonstrating that the technical knowledge/skill is not made available to the non-resident, when the bench asked for the documentary evidences in support of this contention the counsel for the assessee admitted that such documents were not placed before the authorities below. Considering the totality of the facts, we are of the firm view that some more facts in the light of documentary evidences are required to be examined to look int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning global standard. 10. Ld DR relied on the orders of the authorities below. 12. We have heard the rival submissions and perused the material on record the AO has recorded the findings on this issue in para 8.4 of his order and the CIT(A) has recorded his findings in Para 7.2.3. Perusal of the both the orders would show that the assessee has not raised the alternate plea that is reimbursement of global cost before the AO and the CIT(A) has not dealt the alternative plea in a judicious manner. Therefore, in the interest of justice we restore this issue also to the file of AO for examining a fresh. Assessee is also at liberty to file documentary evidence before the AO vis-à-vis alternate plea. 13. The findings recorded by us would apply mutatis mutandis to ITA Number 1135/Bang/2023 & 1158/Bang/2023. ITA no 29 of the 2024(Departmental Appeal) 14. The solitary issue of this appeal is regarding the taxability of software payments paid by the appellant to UL Inc. The assessing officer was of the view that the payments made by the assessee towards reimbursement of software cost are covered in the realm of royalty and therefore the assessee would have deducted the TDS on thes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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