TMI Blog2023 (6) TMI 731X X X X Extracts X X X X X X X X Extracts X X X X ..... nto these transactions with the angle of the application of Section 195 we notice that in the alleged payments made by the assessee to its sister concern TASE USA, there is no element of income and it is purely reimbursement of expenses and as held in the case of GE India Technologies Pvt. Ltd. [ 2010 (9) TMI 7 - SUPREME COURT] obligation to deduct tax at source u/s 195 does not arise at the moment the payment is made to a non-resident but arises only when such remittances is a sum chargeable to Income Tax u/s 4, 5 and 9 the same ratio applies on the facts of the instant case and, therefore, no tax was deductible by the assessee company on the alleged payments. CIT(A) was justified in deleting the addition/disallowance made - Appeal of the revenue is dismissed. - I.T.A. No.473/Chny/2019 - - - Dated:- 14-6-2023 - Shri V.Durga Rao, Hon ble Judicial Member And Dr. Manish Borad, Hon ble Accountant Member For the Appellant : Mr. P.Sajit Kumar, JCIT For the Respondent : Mr. S.Sridhar, Advocate ORDER PER Dr. MANISH BORAD, AM: This appeal at the instance of Revenue is directed against the order of the Id. Commissioner of Income Tax (Appeals), Chennai dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lishment in India. In support of the claim, the assessee has submitted copy of contract containing terms and conditions, copy of invoice, copy of DTAA and nature of services rendered. The ld. CIT(A) has called for remand report from the Assessing Officer. The contents of the same are extracted below:- The appellant company (henceforth called as Supplier) entered into a product support agreement dated 24-6-2009 with Mis.Hamilton Sundstrand Corporation, No.1, Hamilton Road, Windsor Locks, CT, USA (henceforth called as Buyer). As per this agreement, the Buyer is responsible for design and sole customer interface for Product support and the Supplier is responsible for manufacturing and to provide buyer with after-sales support services as defined in the said agreement. Copies of all agreements were produced by the appellant company before the then Assessing Officer during the course of assessment proceedings. Since the assessee has paid to the non-resident company which has no permanent establishment in India and since the expenses were incurred outside India for manufacture of design etc. for sale outside India it was submitted that no TDS is required to be deducted. It is su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions are attracted. This observation is entirely against facts. In the previous paragraph under the heading, present Assessing Officer's report on the above issue , the AO has observed as below: The appellant company (henceforth called as Supplier) entered into an product support agreement dated 24-6-2009 with Mis. Hamilton Sundstrand Corporation, No.1, Hamilton Road, Windsor Locks, CT, USA (henceforth called as Buyer). As per this agreement, the Buyer is responsible for design and sole customer interface for Product support and the Supplier is responsible for manufacturing and to provide buyer with after sales support services as defined in the said agreement. Copies of all agreements were produced by the appellant company before the then Assessing Officer during the course of assessment proceedings. Having correctly observed as above, the AO went on to wrongly conclude on a wrong application of mind that the design was to be used in India and hence income earned by the relevant non-resident in developing the design in taxable in India and hence TDS provisions are attracted. The learned AO may be asked to clarify on this. 8. We have heard rival contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be invoked. So tax cannot be deducted unless the non-resident is liable to tax in India in respect of the receipt. Reliance is placed on the decision of the Supreme Court in the case of GE India Technology Center Pvt. Ltd. where the Supreme Court held that TDS obligations under Sec 195 arises only when the payment is chargeable to tax in the hands of non-resident in this regard. Further, the charge of income-tax under sub-section (1) of section 4 is on the total income of every person for a previous year at the rates enacted in the Central Act. In the case of a non-resident, sub-section (2) of section 5 enunciates that the total income of any previous year would include all income from whatever source derived, which (i) is received or is deemed to be received in India by or on behalf of such person; or (ii) accrues or arises or is deemed to accrue or arise to him in India during such year. Breaking down subsection (2) into components, it covers income of a nonresident, which (i) is received in India, (ii) accrues in India, (iii) arises in India, (iv) is deemed to be received in India, (v) is deemed to accrue in India, or (vi) is deemed to arise in India. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 195 of the Act does not arise. It arises only when such remittance is a sum chargeable to tax under the Income Tax Act under sections 4, 5 and 9 of the Act. The ratio laid down by the Karnataka High Court judgment in the cited case (320 ITR 209) has been set aside in that case. From the above, it could be seen that what is relevant is whether the payment includes any income component and if so whether the same is chargeable to tax. In the appellant's case from the facts and from the legal position discussed as above, it appears that the payment made is not liable to tax in India. Hence the payment made is treated as being not liable for TDS. No disallowance u/s 40(a)(ia) is therefore called for. This ground is therefore allowed. 9. On going through the findings of the ld. CIT(A), we notice that the ld. CIT(A) referring the judgment of the Hon ble Supreme Court in the case of GE India Technologies Pvt. Ltd. (supra) has come to a finding that since the alleged payment made by the assessee to its sister concern in US does not include any income component, therefore, the assessee cannot be held to be in default for not deduction tax at source u/s 195 of the Act. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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