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TMI Blog2019 (6) TMI 992X X X X Extracts X X X X X X X X Extracts X X X X ..... w and on facts in confirming the action of Ld. AO in making disallowance of Rs. 20,02,770/- u/s 40(a)(i) of the Act on account of non deduction of TDS on payment made to two non-residents i.e. J2S Inc, USA and Navos B.V.B.A., Belgium and in invoking the provisions of section 195 of the Act. 2. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making disallowance of Rs. 20,02,770/- u/s 40(a)(i) for non deduction of tax on payment made to two non-residents i.e. J2S Inc, USA and Navos B.V.B.A., Belgium, is bad in law and against the facts and circumstances of the case. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct were rendered by the above parties and hence provisions of section 9(l)(vii) will not be attracted. Even otherwise, such services when rendered will fall under the exception clause of sub-clause (b) of clause (vii) of sub-section (1) of section 9 as such service are for the purpose of making or earning any income from the customers outside India. Even then, the Assessing Officer has considered these payments in the nature of royalties and fees for technical services within the meaning of Section 9(1 )(vii) of the I.T. Act and has made disallowance of Rs. 20,02,767/- U/s 40(a)(i) of the I.T. Act and assessed the income at Rs. 20,02,767/- as against the returned income of Rs. 14,63,886/-. While arriving at the assessed income of Rs. 20,02, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d order procurement services outside India which is their business activity. Invoices received from the parties also show that services rendered by them were sales procurement services and not fees for technical services or royalties. The Ld. AR submitted that the Assessing Officer wrongly alleged in Para 2.3 of his order that services rendered by the above parties where from royalties or fee for technical services. It shows that the Assessing Officer himself was not show as to whether the income received by non residence was royalty or fee for technical services. In Para 2.4 of his order, the Assessing Officer quoted Article 12 of the DTAA between India and Belgium which has given the definition of both royalty and fees for technical servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot in India. The Ld. AR submitted that as per provisions of Section 90(2) provisions of DTAA shall be applicable with regard to applicability in the hands of non-resident in as held by the Apex Court in Azadi Bachao Andolan 263 ITR 706 according to which the provisions of DTAA over rights income tax in any cases where the DTAA is beneficial to non residence. The Ld. AR relied upon the following judicial decisions (i) Gama Industries Coimbatur Ltd. Vs. CIT (2012) 54 SOT 104 (Che. Tri.) (ii) Grasim Industries Ltd. & ors Vs. CIT(A) (2011) 332 ITR 276 (ii) ACIT Vs. Paradigim Geo Physical Pvt. Ltd. (2008) 11 DTR 174 (Del. Tri.). 6. The Ld. AR further submitted that the Assessing Officer was not correct in attracting provisions of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onresident will not be taxable in India. In such a situation, neither Section 9 is attracted nor Section 195 of the Act. Therefore, the Ld. AR submitted that no TDS is required to be deducted on the payments made to non residence by the assessee company and thus question of disallowance u/s 40(a)(ia) does not arise. 7. The Ld. DR submitted that the CIT(A) as well as the Assessing Officer was correct in making addition. The Ld. DR submitted that it is evident from the terms of the agreement that consulting services are the running theme in the agreements drawn up with the non-residents. The services provided is in the nature of advisory services based upon the skills of the non-resident. The agreements clearly are in the nature of end to en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies also show that services rendered by them were sales procurement services and not fees for technical services or royalties. The contention of the Ld. DR that the services provided is in the nature of advisory services based upon the skills of the non-resident, is contrary to the terms and conditions of the agreements. In the previous year relevant to the Assessment Year 2012-13 only the retainer fee as per the agreement was paid and no order procurement services in real terms were materialized by the said non-resident. Thus, the Explanation Clause of Section 9 (vii) of the Act will not be applicable on the ground that income was from the source outside India. Both the non-resident assessee derived their income as their business activity ..... X X X X Extracts X X X X X X X X Extracts X X X X
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