TMI Blog2020 (8) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... - Dated:- 9-7-2020 - Shri Amarjit Singh, Accountant Member And Ms. Madhumita Roy, Judicial Member For the Assessee : Shri Milind Mehta, A.R. For the Revenue : Shri Lalit Jain, Sr. D.R. ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- This assessee s appeal for A.Y. 2013-14, arises from order of the CIT(A)-4, Ahmedabad dated 01-12-2017, in proceedings under section 143(3) of the Income Tax Act, 1961; in short the Act . 2. The solitary ground of appeal of the assesse is against the decision of ld. CIT(A) in confirming the action of the assessing officer in disallowing expenses amounting to ₹ 13,09,739/- on the ground of non-deduction of withholding tax on such expenses. 3. All the grounds of appeal of the assesse are inter-connected to the same issue against the decision of ld. CIT(A) in confirming the aforesaid disallowance in treating the payment made outside as fees for technical services by invoking section 195 of the Act, therefore, for the sake of convenience all the grounds of appeal of the assessee on this issue are adjudicated together as under:- 4. The fact in brief is that assessee has filed return of income on 18th Sep, 2013 decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (1)(vii) of the Act which represented income deemed to accrue or arise income of the recipient. The assessing officer has also stated that the payment made to the non-resident also fall within the ambit of section 9(1)(vi) of the act as these were in the nature of royalty as defined in explanation 2 to section 9(1)(vi) of the Act. Therefore, the assessing officer held that assessee was liable to deduct tax at source from the payment made by it to the ESM-SYS-LLC u/s. 195 being payment towards obtaining technical and consultancy services which were utilized by the assessee and its client in India. Accordingly, the expenses of ₹ 13,09,739/- towards such payment on which no TDS was made was disallowed u/s. 40(a)(ia) of the Act. 5. Aggrieved assessee has filed appeal before the ld. CIT(A). The Ld. CIT(A) has dismissed the appeal of the assessee holding the payment made is a fee for technical services and squarely covered under the Explanation 2 to section 9(1)(vii) of the Act. 6. During the course of appellate proceedings before us, the ld. counsel has submitted paper book containing copies of document and submission made before the lower authorities. The ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered by the payee and placed reliance on the order of assessing officer and ld. CIT(A). 7. We have heard both the sides and perused the material on record. The assessee was engaged in the business of web designing SEO services, Social Media Management, Bulk SMS, email management, Website Advertising, Online Video Management, Mobile Application Designing. During the year under consideration, the assessee has made payment amounting to ₹ 13,09,739/- to ESM SYS LLC, USA for obtaining the services of Web Promotion etc. The assessee has explained that payer has provided services which were in the nature of site promotional activity i.e. bandwidth provisions, data storage and web hasting services using the servers located in USA. There was no sharing of knowledge or know-how or any technology to the assessee during the provision of Web Hosting Services. The assessee has also referred Article 12 of the Indo-USA Double Tax Avoidance Agreement at the time of assessment and appellate proceedings stating payment cannot be considered as fees for included services as technical knowledge or know-how are not made available. The lower authorities have rejected the submission of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90(2) of the Act provide where the Central Government has entered into an agreement outside India, the provisions of the Act shall apply to the extent they are more beneficial to the assessee. The provisions of section 90(2) of the Income Tax Act is reproduced as under:- 90. (2) Where the Central Government has entered into an agreement with the Government of any country outside India or specified territory outside India, as the case may be, under subsection (1) for granting relief of tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee. The definition of fee for included services as provided under Article 12(4) of the Double Tax Avoidance Agreement between India and U.SA. is reproduced as under:- 4. For purposes of this Article, fees for included services means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services : (a) are ancillary and s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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