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2017 (9) TMI 33 - AT - Income TaxTDS u/s.195 - addition u/s.40(a)(i) - belated remittance of the TDS made u/s.195 - non-discriminating Clause provided in DTAA with Indo-US Treaty - PE in India - Held that:- Similar payments in residents does not attract the disallowance in the event of non-deduction of tax at source. Thus, taxing the amount u/s.40(a)(i) for non-deduction of tax at source on similar amounts tantamount to discrimination. Therefore, the DTAA and the decision relied upon by the assessee in in the case of Millennium Infocom Technologies Ltd. vs. ACIT [2008 (1) TMI 437 - ITAT DELHI-E] for non-discrimination clause squarely applicable in the assessee’s case and accordingly, we held that the disallowance u/s.40(a)(i) would not be applicable in the case of the assessee. - Decided in favour of assessee. Server maintenance and testing and development charges - permanent establishment - DTAA - whether payment made not for FTS? - Held that:- AO and Ld.CIT(A) did not bring any material to show human involvement in the activities explained by the assessee. From the above facts it is observed that the assessee is merely using the technology provided by the parent company and no managerial, consultancy and technical services are provided by the parent company. Therefore, we are of the considered opinion that the payment made is not for FTS and the decisions cited in the above cases relied upon by the Ld.AR are squarely applicable in the assessee’s case and we agree with the assessee that the payment was for reimbursement of expenses and in reimbursement of expenses, no tax is deductible u/s.195 of IT Act as held by this Tribunal in Cairn Energy Pvt. Ltd. v. Assistant Commissioner of Income tax [2009 (2) TMI 259 - ITAT CHENNAI]. Accordingly, we delete the addition made by the AO and set-aside the orders of lower authorities. The assessee’s appeal on server maintenance charges is allowed. In respect of testing and development charges, the payment was made to Hutchinson Italy for the services rendered in the Vendor location in Italy. For establishing such territorial nexus, the services have to be rendered in India as well as utilized in India. The explanation to section 9(2) was introduced by Finance Act 2007 w.e.f.1976 and as on the date of assessment there was no provision to tax the FTS rendered outside India and hence we agree with the Ld.A.R that no tax is deductible u/s 195 and consequent disallowance is not called for. We hold that the payment made by the assessee for FTS for the services rendered outside India are not taxable under section 9(1)(vii) of I.T. Act in the assessment year under consideration and the disallowance is not called for and we delete the addition made by the AO and set-aside the lower authorities orders. The assessee’s appeal on this issue is allowed.
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