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2022 (10) TMI 404 - AT - Income TaxAddition u/s. 40(a)(ib) - non-charging of Equalization levy when the conditions prescribed as per the provisions of section 165 were fulfilled - case was selected for complete scrutiny under CASS for “ Foreign remittance” and notice u/s. 143(2) was issued - assessee is engaged in the business of providing support services of online advertisement, digital marketing and web designing and receives consultancy charges for such services rendered - AO made the disallowance of this amount contending that nowhere in the provisions of section 165 it is provided that equalization levy will not be attracted if the residential person makes a payment to non-resident for specified service out of the amount received by him from a non-resident or the targeted customers of the advertisement campaign are located outside India - HELD THAT:- Here in this case no operation are carried out in India. Only the services of id and wallet creation is rendered for which the assessee has already paid the tax in India and is rendering of the services and its reasonableness is not under dispute. Only the payment made to Google Singapore for which there is no income which accrue or arise in India based on the provision of section 9 and section 165 of EL. In view of that contention of the assessee that the consideration paid to Google Singapore is not amenable to equalization levy was rejected by the AO stating that as it is noticed from the factual matrix present in this case that the payment has been made to a Non Resident (Google Singapore) by the assessee for advertisement purposes in the digital mode on behalf of his clients and that no tax was deducted as equalization levy on the payment made to the non-resident. The above transaction carried out by the assessee clearly attract the provisions of sec. 165(1) of the Finance Bill, 2016 as the condition specified therein are clearly satisfied by the facts present in this case. Further the assessee's case does not fall within the exception provided u/s 165(2) of the Finance Act. Therefore, the facts present in the assessee case clearly lead to the conclusion that equalization levy is attracted in the payment made by the assessee to Google Singapore. Therefore, the provisions of Sec.40(a)(ib) of the Act which provide that "any consideration paid or payable to non-resident for a specified service on which equalization levy is deductible under the provisions of Chapter VIII of the Finance Act 2016 and such levy has not been deducted or after deduction, has not been paid on or before the due date specified in sub section (1) of section 139 of the Act and thus he disallowed 100 % of the sum paid to Google Singapore, a non-resident having no PE in India. Whether the online advertisement which are of non-jurisdictional area for which the assessee has claimed the expense are subjected to EL or not? - To relates the client as well as cluster or area of the ultimate advertisement both are undisputedly out of India but since the assessee has made the payment outside India and claimed as expenses the ld. AO is of the view that the assessee is subjected to EL and since the levy is not collected it attract disallowance u/s. 40(a)(ib) of the Act at 100 % of the payment made. Revenue has failed to show us that how these specified services are provided to a resident in India. The ld. AR of the assessee further submitted that on this issue he has not only persuaded these facts to the CIT(A) but also to the ld. AO on the issue and there are no contrary findings placed on record by the revenue and the DR in this proceeding. Thus, when the intention of levy is related to the targeted audience and party paying the online advertisement has no relation in India, EL is not attracted in the set of present facts and circumstance placed before us and we see no reason to interfere in the reasoned findings given by the ld. National Faceless Appeal Center as revenue did not controvert any of the factual aspect related this case. Therefore, the order passed by the learned National Faceless Appellate Center could not be found fault with and therefore, we see no reason to intervene in the findings of the learned National Faceless Appellate Center. Based on these facts we hold the view of the learned National Faceless appeal Centre as correct and appeal of the revenue is dismissed.
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