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2022 (10) TMI 159 - AT - Income TaxTDS u/s 195 - Disallowance u/s 40(a)(i) - amount was paid towards use of manpower of sister concern in accepting third party projects abroad - assessee objected to the proposed disallowance by stating that the amount paid is not taxable at the hands of the AE in India - whether assessee was required to deduct tax at source u/s 195 of the Act while paying management fee to its overseas AE i.e. Everest Global Inc.? - HELD THAT:- Undisputedly, assessee is availing such services from the AE from assessment year 2010-11 onwards. It is the case of the Revenue that the services rendered by the AE to the assessee are in the nature of managerial/technical/consultancy services, hence, will fall within the scope and ambit of FTS/FIS as per the provisions of domestic law as well as under the India-USA DTAA. Notably, while considering the taxability of the corresponding receipts made at the hands of the AE viz. Everest Global Inc. in assessment years 2010-11 to 2012-13, the Tribunal [2022 (4) TMI 1062 - ITAT DELHI] has held that they are not in the nature of FTS/FIS under Article 12(4) of the India-USA DTAA. The services received by the assessee are general managerial services, hence, do not qualify the test of technical/consultancy services to satisfy the definition of FIS under Article 12(4) of the Tax Treaty. Thus, considering the fact that while considering the nature and taxability of corresponding receipts at the hands of the payee, the Tribunal has held that the amount is not taxable in India, in our considered opinion, there is no legal obligation on the assessee to withhold tax at source under Section 195 of the Act while remitting the management fee to the AE. This is so, because, section 195 itself is quite explicit in its language while providing withholding of tax in respect of any payment, which is chargeable to tax in India. Since, the management fee paid by assessee is not chargeable to tax in India in terms with Article 12(4) of India-USA DTAA, as held by the Co-ordinate Bench in case of the payee, the assessee was not required to deduct tax at source while making such payment. Therefore, we hold that the disallowance made under Section 40(a)(i) of the Act in the assessment years under dispute are unsustainable, hence, deleted. Grounds are allowed.
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