TMI Blog2020 (9) TMI 668X X X X Extracts X X X X X X X X Extracts X X X X ..... rds the charges for procurement or orders and reimbursement of expenses and are not in the nature of fees for technical services and thus do not fall in the ambit of Section 9 of the Act and thus Section 195 of the Act is not applicable in these payments - Decided in favour of assessee. - ITA No. 448 & 449/Ind/2019 - - - Dated:- 16-9-2020 - SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER Appellant by : Shri S. S. Deshpande, C.A Revenue by : Shri Ashish Porwal, Sr. DR ORDER PER MANISH BORAD, AM The above captioned appeals filed at the instance of assessee pertaining to Assessment Year 2015-16 and 2016-17 are directed against the orders of Ld. Commissioner of Income Tax (Appeals)13 (in short Ld.CIT ], Ahmedabad dated 15.02.2019 which is arising out of the order u/s 201 of the Income Tax Act 1961(In short the Act ) dated 26.07.2016 framed by ITO (Intl. Taxn.), Bhopal. 2. Assessee has raised following grounds of appeal; ITA No.448/Ind/2019 A.Y.2015-16 01. That the Learned CIT(A)-13 erred in maintaining the order of the Ld. ITO(IT TP) Bhopal in respect of applicability of section 195/201 of the Income Tax Act. 02. That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces. The assessee is responsible for deducting tax at source under Chapter XVII of the Income Tax Act. The assessee made payments of ₹ 17,98,000/- and ₹ 42,14,000/- to Non resident company namely M/s System Integration Inc, USA (In short SII) during Financial Year 2014-15 and Financial Year 2015- 16 respectively. The payments were made without deducting tax at source u/s 195 of the Act treating the amount as not eligible for deduction of tax at source. Ld. A.O subsequently on going through the Form 15CB issued by the Chartered Accountant wherein it was mentioned that the payments were made towards consultancy services and also on perusal of the invoices raised by the Non resident company for the services rendered, came to the conclusion that the alleged amount is towards payment of fees for technical services . Ld. A.O further applying the provisions of Section 9 of the I.T. Act framed order u/s 201(1)/201(1A) r.w.s. 195 of the Act treating the assessee in default for not deducting the tax at source and computed the default of TDS at ₹ 6,17,313/- and ₹ 14,46,807/- along with levying interest u/s 201(1A) of the Act at ₹ 1,11,858/- and ₹ 1,28,06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ole to play except of procuring orders and refer them to the assessee company. However Ld. CIT(A) did not find any merit in the submissions and he after referring to the relevant clauses of the agreement as well as the Article 12(4)(b) of the Tax Treaty between India and USA confirmed the finding of Ld. A.O and dismissed the assessee s appeal. 6. Now the assessee is in appeal before the Tribunal challenging the finding of Ld. CIT(A) confirming the action of Ld. A.O for treating assessee in default for non deduction of tax at source u/s 195 of the Act on the payments made to SII, USA during Financial Year 2014-15 and Financial Year 2015-16. 7. Ld. Counsel for the assessee by referring to the paper book dated 29.01.2020 running from page 1 to 55, submission dated 17.02.2020 and also strongly supporting the letter issued by the Non resident Company namely SII, USA dated 19.2.2020 to the Registrar, Income Tax Appellate Tribunal, Indore submitted that SII has certified that their company has acted as a liaison and procurement agent between the assessee company namely Snap Computer Pvt. Ltd and client based in USA and further certified that SII has not provided any technical or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by both the parties that the issue which finally needs to be adjudicated is whether the payment made to the SII was for providing technical services or was it for the procurement of orders. 12. As far as service agreement dated 1.2.2015 is concerned which is at page 24 to 30 of the paper book, reference is made to Exhibit-1 of the service agreement. For better understanding this exhibit-1 is reproduced below:- Attachment I to the Services Agreement by and between SYSTEMS INTEGRATIONS INC. and Snap Computer system Pvt. Ltd. dated 01/02/2015 1. DUTIES OF !NTEGRATOR -In General SYSTEMS INTEGRATIONS INC. Consulting Services, project work procurement and any other task given to consultant by Snap Computer Systems Pvt. Ltd. 2. COMPENSATION AND EXPENSES A. For tile performance of its duties and services hereunder, Integrator shall be paid based upon actual time and materials used in the performance of its duties hereunder. Charges for services performed within the scope of the Agreement are as follows: Vaishali Paranjpe $. 48/hour (01/02/2015) 3. DURATION OF AGREEMENT A. Either party may terminate this agreement upon giving one month prior writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payment is nomenclated as consulting services but it is only paid as a commission for procuring orders from the customers. SII has not rendered any service except directing the customers to the assessee for supply of software services. SII do not have any interface in supplying such services. There is no evidence to show that SII was having any role of providing technical services in the work performed between assessee and its clients. For getting the orders the agent normally gets commission and reimbursement of expenses on the basis of actual time spent. In short SII simply obtains the orders on the basis of nature of services to be provided by the assessee and nature of services required by the client. Once both these things are matched the orders are procured and communicated to the assessee who thereafter develops the software in India as per the need of the client. In view of the above discussions we are of the considered view that Non resident company M/s System Integration Inc. has not provided any technical services to the assessee and the alleged amount received by it were only for the commission and incidental expenses for liaison work and procurement order. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia- Russia treaty. 17. In light of above discussion and in the given facts and circumstances of the case we are of the considered view that the alleged payment made by the assessee to Non resident company SII is not for any fee for technical services and the payment was only towards commission for procurement of orders and reimbursement of incidental charges incurred. Since the payment was not for fees for technical services and further the payment was made to the Non residential company having no permanent establishment or business connection in India, the alleged payment for procurement of orders are not subject to deduction of tax at source u/s 195 of the Act. Thus Ld. CIT(A) erred in confirming the action of the Ld. A.O. We set aside the finding of Ld. CIT(A) and allow the grounds raised by the assessee by holding that the alleged payments of ₹ 17,98,000/- and ₹ 42,14,000/- to SII in USA during Financial Year 2014-15 and 2015-16 respectively are only towards the charges for procurement or orders and reimbursement of expenses and are not in the nature of fees for technical services and thus do not fall in the ambit of Section 9 of the Act and thus Section 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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