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2023 (4) TMI 840 - AT - Income TaxDeduction of TDS and credit to the Central Government - taxes deducted by the assessee and paid to the department pertaining to M/s. Gintek Eswation, South Africa with respect to payments - HELD THAT:- The matter is remanded back to the file of Assessing Officer for verification and grant relief if the assessee has deducted the tax at source and deposited the same with the Central Government with respect to M/s. Gintek Eswation, South Africa. TDS u/s 195 - payments made by the assessee to BAE Systems, USA for site testing charges - HELD THAT:- From the nature of charges paid by the assessee to the BAE Systems, USA, it is clear that charges were essentially in the nature of the ancillary and subsidiary services as the main focus of agreement was only purchase and installation of Long Range Position and Velocity Tracking Doppler Radar System. The incidental services which were referred to in invoice cannot be independently or stand alone basis be provided to the assessee by BAE Systems, as the purchase and installation of such instrument is sine qua non. In our view, the services which can independently or on stand alone basis, be provided, coupled with the fulfillment of the other requirement of Para 4(b) of the DTAA would only attract the ‘Fee for included services'. In the present case, testing and on-site training in India cannot be provided on its own, unless it is coupled with purchase of equipment and therefore, these services did not fall within the purview of “Fee for incidental services”. In the present case, the services, which are the subject matter of the dispute, do not fall under “Fee for incidental services”, hence, would not fall under Royalty and as such, not chargeable in India as per Clause 12 of DTAA, read with sections of Income Tax Act and therefore, the charges paid by the assessee to BAE Systems would not be subject to deduction of TDS. Thus, the action of lower authorities that the assessee was liable to deduct TDS while making the payment to BAE Systems is unsustainable and therefore, the same is dismissed. With respect to payment made to Syscom Instruments, Switzerland, the disallowance had been upheld being not pressed and thirdly with respect to payment made to Grintek Eswation, South Africa, the issue is remitted back to the file of Assessing Officer for verification whether taxes were deducted at source or not ? In the light of the above, ground nos. 3 and 4 are partly allowed for statistical purposes. Disallowance of Prior Period Expenses - HELD THAT:- Undoubtedly, during the year under consideration, the assessee has claimed prior period expenses and had also shown the prior period income during the year under consideration - allow the claim of the assessee. Undoubtedly, the assessee is a large organization and this kind of inadvertent pitfall, is bound to occur on account of the size and spread of the assessee. Since the assessee has shown not only the prior period expenses but also shown the prior period income, therefore, both are required to be considered for the purposes of computing the income of the assessee.
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