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2024 (1) TMI 1232 - TELANGANA HIGH COURTApplication for NIL rate TDS deduction certificate u/s 197 - Taxability of income in India - income accruing/arising or deemed to accrue/arise in India - taxability in source state - taxability of income from the Bangladesh project - PE in India - expenditure regarding the consultancy services rendered by the petitioner in Bangladesh - as petitioner is rendering services to the Indian lead Partner and hence, the Assessing Officer has come to the conclusion that the payments in foreign currency by the Indian entity i.e., ICT to the petitioner is the fees for technical services received in India as contemplated under Section 5(2) of the Act, 1961 and that such amounts would be deemed to be income accruing in India under Section 9(1) of the Act. HELD THAT:- Subject project is being undertaken in Bangladesh and no part of the said project is situated in India. The amounts payable to ICT in respect of above project are being paid in Bangladesh by the Government of Bangladesh. The services for the said project are being rendered by the petitioner herein to ICT and the same is governed by DTAA. As per Article 12 of the DTAA, only fees for ‘included services’ are taxable in the source State and not the fees for the technical services, which is in question in the present proceedings. Further, as per Article 7(1) of the DTAA, the business profits of an enterprise of a contracting State shall only be taxable in the State unless the enterprise carries out the business in other contracting State through a PE. In the present case, no material is placed on record to show that PE of the petitioner company, having office at Hyderabad, is involved in any manner in the above project. In the above factual background, and in the absence of any material placed before this Court, it can be inferred that no taxable event has taken place in India and thus, petitioner company cannot be subjected to TDS for payments made by ICT to the petitioner company. Though, petitioner has got an alternative remedy of revision before the appellate authority under Section 264 of the Income Tax Act against the impugned order, this Bench is not inclined to relegate the petitioner to appellate authority in the absence of any strong material warranting to hold the petitioner liable to pay TDS. Writ Petition is allowed and the respondents are directed to consider granting nil rate TDS deduction certificate to the petitioner under Section 197 of the Income Tax Act, 1961, within a period of eight weeks from the date of receipt of copy of this order.
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