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2023 (5) TMI 472 - AT - Income TaxTDS u/s 195 - non deduction of TDS on expenses paid/remitted abroad - AO who treated the payment made outside India as Fee for Technical Services (FTS) as defined u/s 9(1)(vii)(b) - HELD THAT:- The assessee has submitted copies of invoices of payment made to non resident service providers which is placed at pages 12-32 of the Paper Book to substantiate its claim that the payments have been made on account of ad film production services. The payments made by the assessee to the foreign service providers are thus not in the nature of FTS within the meaning of explanation 2 to section 9(1)(i) of the Act and not chargeable to tax in India. The assessee characterised these services as ‘contract work’ under section 194C of the Act and therefore it is to be treated as business income of the non-resident which is not taxable in India in the absence of a Permanent Establishment (PE) in India of the said service providers in terms of Article 7 of the relevant Double Taxation Avoidance Agreement (DTAA) between India and the respective countries of the non-resident service providers. The assessee therefore is not required to withhold tax from the payments made to the non-resident service providers. We agree with the finding of the Ld. CIT(A) that services provided by the non-resident service providers are not in the nature of managerial technical or consultancy services within the meaning of explanation 2 to section 9(1)(vii) of the Act. These are to be characterised as contract work under section 194C of the Act and thus partakes the nature of business income which is not taxable in India in the absence of a business connection or PE of the non-resident service provider in India. We endorse the findings of the Ld. CIT(A) that the payments made to the non-resident service providers by the assessee are not chargeable to tax in India and thus no disallowance under section 40(a)(ia) of the Act is called for on account of non-deduction of tax at source thereof - Appeal of the Revenue is dismissed.
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