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2022 (3) TMI 615 - AT - Income TaxTDS u/s 195 - disallowance u/s 40(a)(i) - non deduction of tax on payments made to CGTM France towards flight testing services - assessee submitted that the services provided by CGTM France did not satisfy the condition of ‘make available’ on technical knowledge and skill to the assessee in view of India-France treaty r.w India-Portugal treaty thus tax was not required to be deducted at source - HELD THAT:- The fees paid towards the services in question here is purely towards the testing of Shakti Engines in order to identify the issues of Air inlet distortion and installation losses. The subsequent action of the assessee to carry out the improvement based on the test results given by CGTM France cannot be considered as a basis for ‘make available’ services rendered by CGTM France to the assessee. Conducting the test and subsequent improvement to the engines based on test results are independent activities and cannot be considered together. As contended by the assessee, the test conducted by CGTM France cannot be independently carried out by the assessee without the support of engineers from CGTM France and hence does not satisfy the conditions of ‘make available’ that the services rendered by CGTM France to the assessee. It is settled law that mere rendering of services would not be taxable unless the person receiving the services is enabled to utilize such services on its own in the future without having recourse to the person providing the service. See DE BEERS INDIA MINERALS (P.) LTD. [2012 (5) TMI 191 - KARNATAKA HIGH COURT]. We are of the considered opinion that fees paid by the assessee to CGTM France is not in the nature of fees for technical services and hence does not attract the provisions of sec. 195 with regard to requirement for deduction of tax at source on payment of fees for technical services of an resident outside India. As a result, no disallowance is warranted u/s 40(a)(ia) of the expenses claimed by the assessee towards payment of service charges to CGTM France. Accordingly, we allow the appeal in favour of the assessee.
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