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2023 (2) TMI 174 - HC - Income TaxTDS u/s 195 - assessee in default - payroll services rendered by IBM Philippines to the assessee - As held by tribunal it is not Technical Services but constitute business profits and hence Section 195 is not attracted - HELD THAT:- It is not in dispute that under the companion agreement, IBM India Pvt. Ltd., has entered into an agreement with P&G India. The said work has been outsourced to IBM Philippines. IBM Philippines is carrying out the work described in the agreement between IBM India and P&G India. Hence, IBM Philippines was not rendering any technical service and therefore, the income in the hands of IBM Philippines is a business income. Whether ITAT was right in holding that DTAA does not define FTS? - Revenue has taken a specific contention that FTS was absent under the India-Philippines Treaty. Further, it is also not in dispute that under the agreement, IBM Philippines was rendering service in the field of payroll, data management etc., in connection with the work/assignment described in the agreement between IBM India and P&G India. ITAT has, in our considered view rightly recorded that as per Article 7(1) of Indian Philippines DTAA, the business profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. Admittedly, there is no permanent establishment of IBM Philippines in India. As per Article 23 of DTAA, the business profit of IBM Philippines shall be taxable in that State only. Further, the CIT(A) has also held that the transactions between the assessee and IBM Philippines were in the course of its business and the same has not been disputed by the Revenue. Hence, the payments received by IBM Philippines shall not be liable for TDS under Section 195 of the IT Act. Therefore, assessee cannot be deemed as an 'assessee in default'. - Decided in favour of assessee.
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