2015 (5) TMI 1236

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..... d. The assessee is engaged in the business of software development/ITES. The assessee has branches in USA and Japan. The AO noticed that the assessee has incurred various types of expenditures at its branches in USA and Japan but did not deduct tax at source from the said payment as required under the provisions of Income Tax and hence the AO disallowed the expenses to the tune of Rs. 23.12 lakhs by invoking the provisions of section 40(a)(i) of the Act. The ld.CIT(A) deleted the disallowance by following the decision rendered by him in assessment year 2002-03. Aggrieved by the order of ld.CIT(A), the revenue has preferred this appeal before us. 3. At the time of hearing the ld. AR submitted that the revenue had preferred an appeal before .....

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..... foreign countries namely Japan, UK and USA had made payments to the foreign suppliers for services received by them in foreign countries. Now, question arises as to whether the assessee was required to deduct TDS u/s. 195 of the Act on the said payments made to the foreign suppliers for services rendered by them to assessee's foreign branches abroad. On perusal of section 195 of the Act, we observe that TDS is required to be deducted on the payments made/credited to a non-resident only if, said payment is chargeable to tax under provisions of Income Tax Act. During the course of hearing learned DR referred provisions of section 5(2)(b) read with section 9(1) of the Act to state that income of said nonresident suppliers in respect of paymen .....

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..... who is a resident, except where the interest is payable in respect of any debt incurred, or moneys borrowed and used, for the purposes of a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India ; 16. On perusal of the above provision, we observe that fees for technical services paid by a resident in respect of services utilised in a business carried on by the resident outside India or for the purposes of earning any income from any source outside India, does not constitute an income liable to tax under the Act as it falls in the exception to clause (b) of section 9(i)(vii) of the Act. Further, there is no dispute to the fact that rent has also been .....

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