TMI Blog2019 (12) TMI 441X X X X Extracts X X X X X X X X Extracts X X X X ..... ince the services rendered are not technical services, this Tribunal is of the considered opinion that the payment received by the non-residents from the assessee is not taxable in India. In IMP Power Ltd. [ 2006 (1) TMI 171 - ITAT BOMBAY-E] found that even legal fees paid in U.K. is not taxable in India. Hence, there cannot be any disallowance. Therefore, the assessee is not liable to deduct tax as required under Section 195. The Apex Court has also examined this issue in Transmission Corporation of A.P. Ltd. v. CIT [ 1999 (8) TMI 2 - SUPREME COURT] and found that when the payment made to non-resident is not taxable in India, it is not necessary to deduct tax under Section 195 of the Act. Therefore, there cannot be any disallowance under Section 40(a)(ia) of the Act We are unable to uphold the orders of the CIT(Appeals) in respect of the payment made to non-residents who are in USA and UK. In respect of payments made to non-residents at Germany and Spain, we confirm the order of the AO not on the ground on which the CIT(Appeals) deleted the disallowance but on the ground that such payments made by the assessee to non-residents at Germany and Spain are not liable for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the Assessing Officer is deleted. - ITA No.2189/Chny/2017, ITA No.598/Chny/2017 - - - Dated:- 11-10-2019 - Shri N.R.S. Ganesan, Judicial Member And Shri S. Jayaraman, Accountant Member For the Assessee : Shri S. Sridhar, Advocate For the Revenue : Dr. M. Srinivasa Rao, CIT ORDER PER N.R.S. GANESAN, JUDICIAL MEMBER: Both the Revenue and the assessee have filed the appeals against the very same order of the Commissioner of Income Tax (Appeals), Puducherry, dated 27.01.2017 and pertain to the assessment year 2011-12. Therefore, we heard both the appeals together and disposing the same by this common order. 2. There was a delay of 146 days in filing the appeal by the Revenue in I.T.A. No.2189/Chny/2017. The Revenue has filed application for condonation of delay. Having heard the Ld. D.R. and the Ld.counsel for the assessee, this Tribunal finds that there was a reasonable cause for not filing the appeal by the Revenue within the prescribed time before this Tribunal. Therefore, the delay of 146 days in filing the appeal before this Tribunal is condoned and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was no transfer of technical services. Hence, according to the Ld. D.R., the question of make available theory is not applicable at all. The CIT(Appeals) found that the non-residents have provided technical services. Since the technology was not made available to the assessee by the non-residents at USA UK, so that the assessee could perform those services independently, he deleted the disallowance made by the Assessing Officer by citing provisions in the Double Taxation Avoidance Agreement between India USA and India United Kingdom. In respect of the payment made to the non-residents at Germany and Spain, the CIT(Appeals) found that even though the services rendered by the non-residents at Germany and Spain were technical services, the make available clause is not available in the Double Taxation Avoidance Agreement between India Germany and India Spain. Therefore, he confirmed the disallowance made by the Assessing Officer in respect of non-resident at Germany and Spain. 6. According to the Ld. D.R., the Department has filed the appeal against the order of the CIT(Appeals) in respect of the payment made to the non-residents at USA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to deduct tax under Section 195 of the Act since the payments made to them are not taxable in India. According to the Ld. counsel, all the nonresidents are foreign nationals and they are residing outside India. The services were also rendered outside India. The non-residents, who rendered service, have not visited India at any point of time. The non-residents who rendered services have no permanent establishment or business connection in India. According to the Ld. counsel, the services rendered by the non-residents are copy editing, indexing and proof reading which are all essentially non-technical services. It cannot also be considered to be professional services as defined under Section 9 of the Act and under respective Double Taxation Avoidance Agreements. The Chartered Accountants certified that the payments made to non-residents are not taxable in India and such certificates were filed before the respective bankers before remitting the payments. 7. Referring to the assessment order, more particularly at page 3, the Ld.counsel for the assessee submitted that copy editing is nothing but formatting, style and accuracy of tex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lter the designs in such a manner that the requirement of author or publisher is fulfilled. For all these services referred above, according to the Ld. counsel, the service provider need not have any knowledge about the subject of the text. The service provider need not understand the material being copy edited or indexed or subjected to proof reading. According to the Ld. counsel, it is only a clerical work carried on by the assessee through outsourcing from the individuals / corporate body outside the country. The services rendered by the non-resident, such as editing, indexing, proof reading, etc., are not technical service. Moreover, no technology also involved. Therefore, the payment made to them by the assessee is not taxable in India. Hence, according to the Ld. counsel, the assessee is not liable to deduct any tax at the time of payment. 10. Referring to the decision of this Bench of the Tribunal in Cosmic Global Ltd. v. ACIT (2014) 34 ITR(Trib) 114, the Ld.counsel for the assessee submitted that translation work was held to be not a technical service. According to the Ld. counsel, this decision was distinguished by the CIT(Appeals) as not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferring to page 26 of the assessment order, more particularly para 6, the Ld.counsel for the assessee submitted that the Assessing Officer in categorical term found that the nature of service rendered by the non-residents does not involve any technical service. According to the Ld. counsel, provisions of Section 9(1)(vii) of the Act will apply only in the case of application of technology and if such technology is made available to the assessee so as to enable to function independently. According to the Ld. counsel, the Assessing Officer specifically found that since there is no technology involved, the provisions of Section 9(1)(vii) of the Act may not apply to all the above services. The only observation of the Assessing Officer at para 6, according to the Ld. counsel, was that certificates in Form 15CA and 15CB were not obtained and filed. The Assessing Officer further found that forms were not filed in Form 15CA and 15CB, the assessee was required to deduct tax on payment made to the non-residents for the above services. According to the Ld. counsel, when the Assessing Officer himself found that the services rendered by the non-residents are not technical services, it cannot no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to various individuals and corporate bodies outside the country, has observed as follows at para 6 on page 26 of his order. For the purpose of convenience, we are reproducing the para 6, which reads as follows:- 6. From the foregoing, the very intention of the Act is clear that there should not be any omission to deduct tax at source on the pretext that the person is not having a residence or place of business or business connection in India or any other presence in any manner whatsoever in India. As per DTAA, the term professional services defined as independent activities of scientific, literary, artistic, educational or teaching activities as well as individual activities of physicians, surgeons, lawyers, engineers, architects, dentists and accountants. The question arises whether all the above services would be taxable as income by way of fees for technical services as defined in Explanation to Sec. 9(1)(vii). As seen from the nature of services rendered by the non resident individuals, the work of translation, copy editing and indexing do not involve any technology. Provisions of Section 9(1)(vii) will apply only in case of application of technology and if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT(Appeals), after examining the services rendered by the non-residents, found that the non-residents who rendered services do not have any permanent establishment in India. The CIT(Appeals) also found that there was no business connection within the meaning of Section 9(1)(i) of the Act. Therefore, the CIT(Appeals) found that Section 9(1)(i) of the Act has no application to this case and payments received by the non-residents cannot be assessed as their business income in India under Section 9(1)(i) of the Act. This finding of the CIT(Appeals) was not challenged or disputed by the Revenue. For the purpose of convenience, we are reproducing the finding recorded by the CIT(Appeals) at pages 22 and 23 at para 7.7 which reads as follows:- 7.7 It is seen that the A.O. invoked S 9(1)(i) and its Explanation with reference to business connection and held that there is business connection and so the payments are taxable in the hands of non-residents in India. To the assessee in India, the non-residents rendered services abroad and not in India. In the instant case, it cannot be said that the non-residents carried out their business activity through a person in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Mumbai Bench of this Tribunal found that even legal fees paid in U.K. is not taxable in India. Hence, there cannot be any disallowance. Therefore, the assessee is not liable to deduct tax as required under Section 195 of the Act. The Apex Court has also examined this issue in Transmission Corporation of A.P. Ltd. v. CIT (1999) 239 ITR 587 and found that when the payment made to non-resident is not taxable in India, it is not necessary to deduct tax under Section 195 of the Act. Therefore, there cannot be any disallowance under Section 40(a)(ia) of the Act 20. In view of the above, we are unable to uphold the orders of the CIT(Appeals) in respect of the payment made to non-residents who are in USA and UK. However, in respect of payments made to non-residents at Germany and Spain, we confirm the order of the Assessing Officer not on the ground on which the CIT(Appeals) deleted the disallowance but on the ground that such payments made by the assessee to non-residents at Germany and Spain are not liable for taxation in India. In other words, the non-residents in Germany and Spain also not rendered any technical service. Hence, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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