TMI Blog2023 (5) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore is not required to withhold tax from the payments made to the non-resident service providers. We agree with the finding of the Ld. CIT(A) that services provided by the non-resident service providers are not in the nature of managerial technical or consultancy services within the meaning of explanation 2 to section 9(1)(vii) of the Act. These are to be characterised as contract work under section 194C of the Act and thus partakes the nature of business income which is not taxable in India in the absence of a business connection or PE of the non-resident service provider in India. We endorse the findings of the Ld. CIT(A) that the payments made to the non-resident service providers by the assessee are not chargeable to tax in India and thus no disallowance under section 40(a)(ia) of the Act is called for on account of non-deduction of tax at source thereof - Appeal of the Revenue is dismissed. - ITA No. 8061/Del/2019 - - - Dated:- 8-5-2023 - Shri G.S. Pannu, Hon ble President And Ms. Astha Chandra, Judicial Member For the Assessee : Shri Sanjay Gupta, CA For the Department : Shri Sanjay Kumar, Sr. DR ORDER PER ASTHA CHANDRA, JM The appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal income of assessee for AY 2013-14 at Rs. 2,88,26,740/- vide assessment order dated 29.02.2016 passed under section 143(3) of the Act. 4. Dissatisfied, the assessee carried the matter before the Ld. CIT(A). The Ld. CIT(A) deleted all the additions made by the Ld. AO on account of disallowance of interest paid to NBFC, disallowance of expenses paid/remitted abroad; disallowance of 3/4th of website development charges and disallowance on account of apportionment of indirect expenses towards WIP. 5. The Revenue is aggrieved by the deletion by the Ld. CIT(A) of the disallowance of Rs. 1,58,85,633/- on account of expenses paid/remitted abroad without withholding of tax on such payments and all the grounds raised by the Revenue before the Tribunal relate thereto. 6. During the appellate proceedings, before the Ld. CIT(A) the assessee filed detailed submissions against the finding of the Ld. AO who treated the payment of Rs. 1,58,85,633/- made outside India as Fee for Technical Services (FTS) as defined under section 9(1)(vii)(b) of the Act. The submissions of the assessee are incorporated in para 4.1 of the appellate order of the Ld. CIT(A). The Ld. CIT(A) observed and record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entire payments made by the assessee to the foreign service providers thus were not in the nature of fees for Technical Services within the meaning of Explanation 2 to section 9(1)(vii) and the same were not chargeable to tax in India. The assessee, therefore, was not required to deduct tax at source from the payments made to the overseas service providers. 5. As submitted above, the assessee is engaged in the business of production of ad films for telecasting. In this connection, it is relevant to refer to definition of work as given in section 194C which is reproduced here :- (iv) Work shall include (a) ..... (b) Broadcasting and telecasting including production of programme for such broadcasting or telecasting 6. Where the payment was made for production of telecasting of programme, it was covered by provisions of section 194C. The assessee was the exclusive owner of the programme to be produced. Therefore the payment for carrying out the work of producing programme on behalf of assessee was in the nature of work as defined in section 194C of the Act and the same could not be treated as fees for technical services or royalty under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the payments for the services rendered are also received outside India. There is no business connection in India. In such circumstances the income of the non-resident company is not taxable in India. 4.6 Regarding the applicability of Explanation 2 to section 9(1)(vii, relied upon by the AO giving the definition of the term fees for technical services it was submitted that the services rendered by the overseas providers in connection with logistic arrangements were not in the nature of managerial, technical or consultancy services. The said service partook the character of commercial services and could not be termed as technical, managerial or consultancy services. 4.7 It was further submitted that the said Services rendered outside India by the overseas service providers in connection with making logistic arrangement are in the nature of commercial Services and the amount received by them from the assessed or such Services constitutes their business profit which is not chargeable to tax in India in the absence of any PE in India of the said service providers. The assessee, therefore, was liable to deduct tax at source from the said payments. India has DTAA with al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the coordinate benches of this Tribunal discussed above and having regard to the nature of the services rendered by the overseas service providers to the assessee as spelt out in the relevant agreements, we are of the view that the said services cannot be treated as technical services within the meaning given in Explanation 2 to section 9(1)(vii). We are in agreement with the learned CIT(Appeals) that the said services rendered outside India by the overseas service providers in connection with making logistic arrangement are in the nature of commercial services and the amount received by them from the assessee for such services constitutes their business profit which is not chargeable to tax in India in the absence of any PE in India of the said service providers. The assessee, therefore was not liable to deduct tax at source from the said payments and the AO was not justified in treating the assessee as in default u/s. 4.12 Further in the case of Endemol India (P) Ltd. In re(2013) 40 taxmann.com 340/(2014) 97 DTR 51/361 ITR 361(AAR), it is held that In view of CBDT's Circular No. 715, dated 8-8-1995, services rendered by Non-resident for production of programmes for pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the ad-film production line services rendered by these non-residents except two payments amounting to Rs. 5,72,850/- made to Mr. Jean Carlier for rendering ad film director services. S. No. Date of Payment Name of Remittee Amount Paid in INR Nature of services Country 1 12/04/2012 Prisana Trachai 1534566.00 Ad Film Production Services THAILAND 2 21/04/2012 Jean Carlier 318150.00 Director Fees MALAYSIA 3 28/05/2012 Jean Carlier 254700.00 Director Fees MALAYSIA 4 29/05/2012 Pumpkin Pictures Sdn Bhd 823888.00 Ad Film Production Services MALAYSIA 5 22/05/2012 Pumpkin Pictures Sdn Bhd 1388750.00 Ad Film Production Services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 272813.00 Ad Film Production Services POLAND 20 01/03/2013 Nolabel Sp.z.o.o 296020.00 Ad Film Production Services POLAND 21 14/03/2013 Marco Pinesii Production Service 860250.00 Ad Film Production Services MALAYSIA 22 25/03/2013 Marco Pinesi Production Service 862500.00 Ad Film Production Services MALAYSIA 23 18/03/2013 Prisana Trachai 1925000.00 Ad Film Production Services THAILAND 24 22/03/2013 Nolabel Sp.z.o.o 142200.00 Ad Film Production Services POLAND 25 07/12/2012 Nolabel Sp.z.o.o 213600.00 Ad Film Production Services POLAND ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abroad and services required in connection with work of shooting abroad were availed from various overseas service providers. The assessee made payment to five such overseas service providers for services availed in connection with shooting of different films. The Tribunal having regard to the nature of the services rendered by the overseas service providers held that such services cannot be treated as technical services within the meaning given in explanation 2 to section 9(1)(vii) of the Act and that the said services rendered outside India by the overseas service providers in connection with making logistic arrangements are in the nature of commercial services and the amount received for such services constitutes business profit which is not chargeable to tax in India in the absence of any PE of the said service providers. As regards payments made to Mr. Jean Carlier for the direction of the ad film, the contention of the assessee is that these payments are covered by Article 15 of the India- Malaysia DTAA and cannot be termed as technical services as defined under explanation 2 to section 9(1)(vii) of the Act and hence are not chargeable to tax in India. 11. We agree with th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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