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2014 (4) TMI 160 - AT - Income TaxWithholding Tax (TDS) u/s 195 - FTS u/s 9(1)(vii) - Levy of demand u/s 201 and 201(1A) of the Act – Payments made to foreign companies – Held that:- The payments received by it from foreign clients for exactly the similar work executed by it have not been subjected to withholding tax nor was it called upon to file its return by the several countries from the residents of which assessee received payments for services rendered by it -there was no element of any Technical Services in the production of animation films nor in the production of a part or certain episodes of an animation film so to attract the provision of Section 9(1) (vii) read with Section 5(2)(b) of the Act - just because such expertise, knowledge, technology and experience is possessed by the said party and the same has been utilized for rendering the services, it cannot be said that the services so rendered are in the nature of technical and consultancy services without making any technology available to the other party - The payment paid by the assessee-company or any part could not be treated as 'fees for included services' within the meaning of 'fees for technical services' defined in section 9(1)(vii) of the Act". The AO’s attempt to raise demands u/s 201 is not correct - Even explanation-1 to section 9(1) excludes the income pertaining to operations carried out outside India - The foreign parties have not done any activity in India nor they have any PE in India - As there is no liability to deduct tax on the amounts paid u/s 195, it is not correct on the part of AO to raise demands - The AO it seems had issued notice u/s 201 (1) in respect of payments by assessee to TV Arts also and on explanation by the assessee that it was the payments resulted in income from business, the proceedings were dropped - The submission of the assessee that regard to T.V. Arts relied on Article 7 of DTAA between India & Philippines which applies to business income of non-residents i.e T.V. Arts and submitted that tax was not deducted as it was not taxable is accepted - Non-liability to TDS was not because of lack of article for FTS in DTAA, but because of application of Article 7 – the order of the CIT(A) upheld – Decided against Revenue.
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