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2015 (10) TMI 384 - AT - Income TaxDisallowance u/s 40(a)(ia) - liability to make TDS before making payment to the non-resident holding company - Fees for Technical Services - Held that:- AO has only considered the applicability of the definition of the term ‘Fees for Technical Services’ u/s 9(1)(vii) of the Income-tax Act and has not considered the applicability of the definition of ‘Fees for Technical Services’ under the DTAA between India and Singapore and has not examined as to which of the provisions is beneficial to the assessee. It has been held by various courts that where there is a DTAA between India and the country in which the other transacting company is located and there is a variance between the provisions of the DTAA and the Indian Income-tax Act, then the provisions which are beneficial to the assessee are to be applied. As regards the appeal before the CIT(A), we find that the CIT(A) has only gone on the premise that mention of the word ‘design’ in the invoice proved that the holding company has provided designs to the assessee and therefore, it satisfies the phrase of ‘make available’ in the definition of ‘Fees for Technical Services’ in the treaty between India and Singapore. Before us, the assessee has filed documents to claim that no services relating to ‘design’ were rendered by the holding company to the assessee. In our opinion, all these documents need verification by the AO. Further, the additional grounds raised by the assessee are also legal grounds which need adjudication on the basis of facts on record. Before us, no facts are available to come to a conclusion as to whether the payment is reimbursement of expenses or payment for services rendered by the holding company. As regards the applicability of TDS provisions only on payment basis also, we find that no facts are available on record. In view of the same, we are of the opinion that the issue needs re-consideration by the AO in the light of the details available in the records of the AO as well as those filed before us and the judicial precedents on the issue. The issue is, therefore, set aside to the file of the AO with a direction to examine the applicability of the definition of ‘Fees for Technical Services’ under the DTAA between India and Singapore and apply the same in accordance with law. The AO shall also consider the additional grounds of appeal raised by the assessee as well as the additional evidence filed by the assessee before us and decide the issue in accordance with law. Needless to mention that the assessee shall be given a fair opportunity of hearing. - Decided in favour of assessee for statistical purposes.
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