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2019 (10) TMI 990 - ITAT DELHITDS u/s 195 - assessee in default for non deduction of Tax at Source in respect of payment made by the assessee company to various non residents recipients which are in the nature of Royalty/FTS and is chargeable to tax in India as per the AO - Non deduction of Tax at Source in respect of reimbursement of expenses - HELD THAT:- Assessee company entered into an agreement with London Air Charter Centre Ltd. (UK) and Air Partner PLC (UAE) both non-resident and made payments during the relevant assessment years towards the hiring of aircraft. The payment made by assessee company to the non-resident by availing a standard facility offered by the payee i.e. non-resident company. All transactions entered into by the assessee company with the non-resident payees are of similar character and cannot classified as Royalty as held by the Assessing Officer. The payment is for chartered plane hire outside India paid to non-resident outside India. Thus, the said income does not deemed to have accrued or arise in India and hence not liable for tax in India. Therefore, there is no need to interfere with the findings of the CIT(A). Payment made for survey of aircraft and routine service - Whether payment made to ‘White & Case’, the consultancy firm, is not in the nature of FTS but failing to appreciate Article 15(1) of the Indo-UK Treaty - DTAA agreement in between India and UK - HELD THAT:- As per the agreement between the assessee company and General Dynamic Aviation Services (GDAS), the latter has rendered Aircraft/Records and Condition Survey services to the assessee company. GDAS only exercises its skill and knowledge in conducting the survey of the aircraft and issues a report to the assessee company expressing its opinion on the basis of the survey. The said company does not transfer or make available the skill or knowledge required for conducting the survey and generating the report to assessee company. Thus, the concerned remittance cannot be termed as “Fees for Technical Services” as per the relevant DTAA and is exempt from withholding of taxes. The payments made to GDAS are towards the reports to be issued by them to the assessee company. The reports so issued do not involve any transfer of commercial interest or the right to use its experience to the assessee company. There is also no transfer of my skill or knowledge of GDAS to assessee company in the issuance of reports. The payments received is not the one for the use or the right to use experience, but is instead one for the application of experience by the non-resident payee The payments cannot be classified to be in the nature of Fees for technical services as per the Act or under Article 12 of the relevant DTAA. Therefore remittance to GDAS, USA is exempt from withholding of tax as per Article 7 of the DTAA with USA and India. Payment made for aircraft maintenance - DTAA between India and Canada - HELD THAT:- The crew services obtained by the assessee to fly aircraft as the said crew member has not rendered any knowledge, skill or know – how that may enable DLF to fly the aircraft on its own in future. Therefore, the CIT(A) has rightly held that such services do not fall under the definition of make available as per clause (b) to Article 12(4) of the DTAA between India and Canada. Payment made for advertisement rights of the circlet ground - Whether cannot be characterized as Royalty but at the same time failing to appreciate that the assessee used such ground rights for finding sponsors for the India- Pakistan friendly match and such payment would fall within the precincts of section 9(i)(vi) of the Act and the Article 12 of the Indo-UAE DTAA? - HELD THAT:- The assessee company was to make payment to the said company for securing the ground rights of the matches from Board of Cricket Control of India. The assessee company made payment to Percept D Mark Gulf LLC towards publicity expenses during the year which was for securing the ground rights which enabled it to find any other sponsors for the event. Thus, the payment in this respect does not come under the purview of the definition of Royalty as provided under Section 9(1)(vi) of the Act. The payment made by the assessee company merely enabled it to find a sponsor for the event in order to share the ground. Thus, no income was received or deemed to be received in India or accrues or arises or is deemed to accrue or arise in India to the Non-Resident payee in terms of Section 5(2) read with Section 9 of the Act. There is no income chargeable to tax within the scope of total income as per Section 4 and Section 5 of the Act. Thus, tax cannot be deductible, since payee is resident of UAE and does not have PE in India. Therefore, the CIT(A) was right in deleting the said addition. Payment made as a security deposit - Whether such amount was received back by the assessee in the subsequent year, accordingly it is not an expenditure on the part of the assessee? - HELD THAT:- From the perusal of records it can be seen that the assessee company entered into an agreement with M/s Control Risk Group PTE, Singapore. The assessee company was to make payment outside India to control risk for securing the business & personnel security services in IPO. Thus, the assessee company made payment during the relevant assessment years towards providing business & personnel security consultancy services for IPO. Thus, income cannot be deemed to have accrued or arise in India and hence the same is not liable for tax in India as M/s Control Risk Group PTE, Singapore does not have any PE in India. Thus, the CIT(A) rightly deleted this addition. There is no need to interfere with the findings of the CIT(A). Hence, Ground is dismissed.
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