TMI Blog2022 (11) TMI 419X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of agreement between the assessee and M/s.SSG Technologies, LLC, comes under FTS as per Explanation-2 to Sec.9(1)(vii) - Since, the services rendered by marketing partner is in the nature of FTS, the assessee ought to have deducted TDS in terms of Sec.195 - Since, the assessee has failed to deduct TDS when payment made to non-resident, the AO has rightly disallowed said payment u/s.40(a)(i) of the Act. The Ld.CIT(A) after considering relevant facts rightly upheld addition made by the AO. Hence, we are inclined to uphold the findings of Ld.CIT(A) and reject the ground taken by the assessee. - ITA No. 2791/Chny/2019 - - - Dated:- 2-11-2022 - SHRI V. DURGA RAO , HON BLE JUDICIAL MEMBER AND SHRI G. MANJUNATHA , HON BLE ACCOUNTANT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of sec.40(a)(i) wherein sub-clause (B) clearly excludes the foreign company from the purview of sec.40(a)(i) of the Act and hence it can be safely concluded that sum retained by the foreign party is not the income chargeable to tax in India. Once an income ii hot chargeable to tax in India then the question of deducting TDS under the provision u/s 195 of the Act does not arise. 6. The appellant craves leave to file additional grounds. 3. The brief facts of the case are that the assessee company is in the business of providing software solutions and services to diversified industries. The assessee company had entered into marketing agreement with M/s.SSG Technologies, LLC, Dubai, w.e.f.01.01.2015 for marketing its product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid for rendering marketing services outside India and further, said services is a simpliciter marketing services, does not come under FTS as per Explanation-2 to Sec.9(1)(vii) of the Act. The assessee further contended that out of sum of Rs.61,66,565/- paid by the assessee also includes reimbursement of expenditure like rent, salary, commission, travel expenditure, accommodation, etc. The Ld.CIT(A) after considering relevant submissions of the assessee and also on analysis of agreement between the parties opined that services rendered by the marketing partner to sell assessee s products in terms of the agreement between the parties is in the nature of FTS as per Explanation-2 to Sec.9(1)(vii) of the Act, and thus, upheld the findings of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, supporting the very same marketing agreement between the assessee and channel partner submitted that if you go through terms conditions, and scope of agreement between the parties definitely services rendered by marketing partner comes under FTS, because, in order to give pre-sale and post-sale services to product, the partner requires expertise in products manufactured by the assessee and thus, said services definitely comes under FTS. Therefore, the AO has rightly disallowed said expenditure and their orders should be upheld. 7. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. As per Explanation-2 to Sec.9(1)(vii) of the Act, FTS means any consideration (in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uires technical expertise and knowledge. Therefore, when the marketing partner provides pre-sale services and post-sale services to customers, the employees of marketing partner should be expertise in technical knowledge of the products. Therefore, we are of the considered view that the AO has rightly held that services rendered by marketing partner in terms of agreement between the assessee and M/s.SSG Technologies, LLC, comes under FTS as per Explanation-2 to Sec.9(1)(vii) of the Act. Since, the services rendered by marketing partner is in the nature of FTS, the assessee ought to have deducted TDS in terms of Sec.195 of the Act. Since, the assessee has failed to deduct TDS when payment made to non-resident, the AO has rightly disallowed s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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