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2016 (6) TMI 42 - ITAT DELHI

2016 (6) TMI 42 - ITAT DELHI - TMI - Expenses on account of inter-connectivity charges and usage of leased line - whether payment to M/s. Verizon Hong Kong Ltd., a resident of Hong Kong to be classified either as royalty or income attributed to a Permanent Establishment in India? - TDS liability - Held that:- DRP has not insisted upon any evidence to support the findings returned by the AO to reach at the conclusion that the assessee was provided with any technical services by the payee rather t .....

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at source. - Following the order passed by the coordinate Bench of the Tribunal in the judgment cited as Wipro Ltd. (2003 (4) TMI 223 - ITAT BANGALORE-C), we are of the considered view that the services offered and availed by the assessee company cannot be termed as technical services by any stretch of imagination and the amount in question paid by the assessee is not taxable, hence, the assessee has no liability to deduct the tax at source under section 195 of the Act. - Decided in favour .....

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n the grounds inter alia that :- 1. The learned assessing officer has made an addition of ₹ 9,37,139/- booked as an expense on account of lease line connectivity charges due to non-deduction of tax at source. The charges were paid to an overseas entity. No tax needs to be deducted at source on this expense booking as it does not fall under the purview of section 195, section 9(1)(i), section 9(1)(vi) and section 9 (1)(vii) of the Income Tax Act. The expense claimed should be allowed in ful .....

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sessee was called upon to explain as to why the said amount be not disallowed under Section 40(a)(i) of the Income-tax Act, 1961 (hereinafter the Act ) as TDS was not deducted on this amount as per provisions of section 195 of the Act. Assessee relied upon the order passed by the ITAT, Bangalore in the case of Wipro Ltd. vs. ITO - (2003) 80 TTJ (Bang) 191 in not deducting the TDS. However, the Assessing Officer has declined to accept the contentions raised by the assessee and by relying upon the .....

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g the present appeal. 4. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. 5. The ld. AR for the assessee challenging the impugned order contended inter alia that the assessee company was not liable to deduct the tax at source on the expenses booked as it does not fall within the purview of section 195; that sections 9(1)( .....

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hether the amount in question has been booked as expenses on account of interconnectivity charges and usage of leased line to M/s. Verizon Hong Kong Ltd., a resident of Hong Kong, was to be classified either as royalty or income attributed to a Permanent Establishment in India? 7. Identical issue has come up before ITAT, Bangalore C Bench in the case cited as Wipro Ltd. (supra). Operative part of which is reproduced for ready reference as under :- Income deemed to accrue or arise in India-Fees f .....

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with any technology or technical services-Therefore, the amounts paid by assesseecompany to non-resident telecom companies for downlinking and transmitting of data to the assessee's customers located outside India cannot be considered as fees for technical services' under s. 9(1)(vii), moreso when similar services offered by VSNL is not regarded as technical services- Further, no process has been made available to the assessee- Hence, there is no question of applicability of s. 9(1)(vi) .....

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net and can be downloaded by anyone and its pricing patterns are also standard with an offer for bulk discount. Ld. AR further contended inter alia that invoices by AT&T are charges for utilization of customer based circuits and are periodical in nature and each invoice has a different amount indicating varying volume of services utilized at various point of time; that there is no evidence on record that the assessee was provided with any technology or the technical services for encapsulatio .....

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for encapsulation or amplification or conversion of light signal into magnetic signal or vice versa or any evidence for hiring or utilization of satellite by the appellant, rather proceeded to decide against the assessee by relying upon Article 12(3)(b) of the India Singapore Tax Treaty and under section 9(1)(vi) and 9(1)(viii) of the Act. For facility of reference, the findings returned by the AO are reproduced as under : 3. Payment for teased line connectivity : During the financial year the .....

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ew of Sec 195 & submitted judgement of Hon'ble ITAT Bangalore in case of Wipro (2003) 80 TTJ 191. The contention of the assessee was not tenable. The assessee has failed to appreciate a recent decision of Hon'ble ITAT Chennai in case M/s Verizon Communications Singapore Pte Ltd. Vs ITO (International Taxation), Chennai wherein it was held that amounts received by the appellant from the Indian customers for the provision of international connectivity services outside India is royalty .....

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property or through or from any asset or source of income in India shall be taxable in India. In this case the leased line payment is source of Income for the payee in India These receipts for the payee even fall u/s 9(1)(vii) as they are for technical services given by the payee and which are being utilized in India. The Hon'ble ITAT Mumbai held on 21 May 2010 that the mere utilization of services in India is sufficient to attract tax liability in India and that the actual rendering of ser .....

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