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2020 (5) TMI 704 - AT - Income TaxTP Adjustment to the transaction of software development services - exclusion of comparable namely M/s Infosys Ltd. - HELD THAT:- Respectfully, following the view taken by the Coordinate bench in assessment year 2008-09, we direct the Ld AO/TPO to exclude M/s Infosys Technologies Ltd. from the final set of the comparables. The ground No. 1 to 10 of the appeal of the assessee are accordingly allowed. TDS u/s 195 - Disallowance of the export commission on account of non-deduction of the tax at source - disallowance u/s 40(a)(i) - AO concluded that there existed a business connection between G&D Egypt and G & D India - HELD THAT:- We find that for having business connection in India the business operations carried out side India and inside India must have relationship as to contribute the business operations as a whole. In the instant case, M/s GD Egypt is responsible for marketing and sales for assessee in the region of middle east and north Africa and has procured sales for the assessee. The business operation of the M/s GD Egypt of procuring sales order for the assessee and its entire activity has been carried out from outside India and no part of the business activity has been carried out in the India by M/s GD Egypt. The business connection has to be looked into the business operations of M/s GD Egypt in India and not business connection between the operation of the GD Egpyt and business of the assessee in India, because any workfor which the assessee is making payment will always be associated and part of the business of the assessee. Obviously, in the instant case no business connection exist and thus the finding of the learned DRP on the issue is set aside. DRP has held that the services rendered by M/s GD Egypt require expertise and knowledge in the specific area of work and such expertise cannot be developed overnight, but it is the result of long period of the work in this line of activities coupled with accumulated experience of operations and therefore the payment made by the assessee to GD Egypt partakes the character of the FTS under domestic law. In the instant case, the assessee has not invoked any Double Taxation Avoidance Agreement (DTAA) and therefore we are examining only the FTS under domestic law - As decided in M/S. EVERGREEN INTERNATIONAL LTD. [2018 (4) TMI 81 - ITAT DELHI] payment made for procuring of export sale order for Indian taxpayer by any foreign entities from outside India cannot be held as Fee for Technical Services. In view of holding that payment for services of GD Egypt are not in the nature of Fee for Technical Services (FTS) , the other finding of the learned DRP of the applicability of explanation below section 9(2) i.e. there is no requirement of rendering services in India for income deemed to accrue or arise in India as per section 9(1)(vii) of the act, are rendered merely academic, and we are not required to examine applicability of the same in the year under consideration. The payment made by the assessee is not chargeable under the provisions of the Act in the hands of GD Egypt, no tax is required to be deducted in terms of section 195 of the Act and consequently no disallowance could be made under section 40(a)(i) of the Act for non-deduction of the tax at source.- Decided in favour of assessee. Disallowance of bad debt written off - HELD THAT:- No documentary evidence in support of the claim that income pertaining to such write off had been offered to tax as required under the provisions of the Act. In view of the above circumstances, we feel it appropriate to restore this issue back to the file of the learned Assessing Officer with the direction to the assessee to produce all necessary documents in support of its claim before the Assessing Officer, who then will decide the issue in accordance with law. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard.
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