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2013 (8) TMI 363 - AT - Income TaxTDS u/s 195 - Nature of payment made to parent compnay - PE - Purchases of Online advertisement space - Article 7 of DTAA with USA - Disallowance u/s 40(a)(i)(A) - Held that:- neither of the party is acting or doing the business activity on behalf of other but the transactions are independent business transaction wherein the respective margins are recover from each other. Moreover, the transaction of payment towards purchase of space on foreign website by the assessee for its client in any case does not constitute a transaction carried out by the assessee on behalf of its parent company. The assessee is doing the business transaction on behalf of its client and offering the income earned from the said business transaction which has been accepted by the AO. Therefore nothing has been brought on record by the Assessing Officer to show that the transaction of purchase of space on foreign website by the assessee from its parent company constitutes the assessee as PE - merely because one of the directors is common in both the companies does not constitute the assessee as PE - risk and reward of the business carried out by the assessee is born by the assessee which itself shows that it is the assessee who is answerable to the customers and therefore the activity of purchase of space on website from the parent company is on principle to principle basis - Decided against Revenue. Nature of payment was made towards sharing of cost for a third party server platform and use of licence - Held that:- When the payment is not towards the cost of any services or supply by the parent company to the assessee but the payment is towards the use of server platform and licence belongs to the third party. Therefore, such payment relates to the use of server and licence of third party routed through its parent company. When the Assessing Officer has disallowed this payment for none withholding of tax by invoking the provision of Section 40(a)(i)(A) then we do not agree with the contention of the assessee that this is a new issue raised by the Ld. DR. This issue requires a proper verification of the real nature of payment and withholding of tax u/s 195. - Issue remmitted back - Decided against assessee
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