2015 (3) TMI 1052 - AT - Income Tax

Non-resident payments for services not technical fees under Income Tax Act

The Income-tax Officer(Intl. Taxn.) Vadodara Versus M/s Denial Measurement

The Appellate Tribunal upheld the CIT(A)'s decision, ruling that payments to a non-resident entity for calibration and testing services did not qualify as ... Non deduction of tds on technical work and related to engineering - submission of the Assessee that the Services provided by the non- resident were not in the nature of “making available” hence Article 12 of India U.S.A. treaty were not applicable - CIT(A) deleted the addition - Held that:- CIT(A) while deleting the addition has noted that the services provided by Colardo Engineering was with respect to giving the report of correctness of calibration of assessee’s meters. He has further noted that the expertise connected with testing has not been passed on to the Assessee and therefore the aggregate payment of ₹ 52,26,667/- cannot be treated as fee for technical services and is not covered u/s 195. Before us Revenue has not brought any material on record to controvert the findings of CIT(A). Further the case laws relied upon by ld. D.R. are distinguishable on facts and cannot be applied to the facts in present case. We further find that in the case of ITO vs. Veeda Clinical Research (2014 (1) TMI 886 - ITAT AHMEDABAD) the Co-ordinate Bench after relying on the decision in the case of DIT vs. Guy Carpenters and Company Ltd. [2012 (5) TMI 31 - DELHI HIGH COURT ] and CIT vs. Debeers India Pvt. Ltd. [2012 (5) TMI 191 - KARNATAKA HIGH COURT ] has held that the condition precedent for invoking the “make available” clause is that the services should enable the person acquiring the services to apply technology contained therein. It further held that unless there is a transfer of technology involved in technical services the “make available” clause is not satisfied. Before us Revenue has not brought any binding contrary decision in its support. We therefore find no reason to interfere with the order of CIT(A) and we therefore dismiss the ground of Revenue. - Decided in favour of assessee. Issues:Deduction of TDS on payment made to foreign parties.Analysis:The appeal pertains to a case where the Revenue challenged the order of the CIT(A) regarding the deduction of TDS on payments made by the Assessee to a non-resident entity for calibration and testing services. The Assessing Officer (A.O) contended that the payments were in the nature of technical services and should have been subject to TDS under Section 195 of the Income Tax Act. The Assessee argued that the services provided did not fall under the definition of 'making available' as per the India-U.S.A. treaty. The CIT(A) analyzed the nature of services provided by the non-resident entity and concluded that the payments were not for technical services as defined under Section 9(1)(vii) of the Act. The CIT(A) emphasized that the non-resident entity only provided a report on the calibration without transferring the underlying technology to the Assessee. Citing relevant case laws, the CIT(A) held that the payments could not be treated as fees for technical services and were not covered under Section 195. The Revenue challenged this decision before the Appellate Tribunal.The Appellate Tribunal considered the arguments presented by both parties. The Revenue contended that the payments should be considered as fees for technical services under the India-U.S.A. DTAA. However, the Tribunal noted that the services provided were limited to testing and calibration reports without transferring any technology to the Assessee. The Tribunal observed that the condition precedent for invoking the 'make available' clause in technical services is the transfer of technology, which was absent in this case. The Tribunal highlighted that the case laws cited by the Revenue were not applicable to the facts of the present case. Ultimately, the Tribunal found no reason to interfere with the CIT(A)'s order and dismissed the appeal of the Revenue.In conclusion, the Appellate Tribunal upheld the CIT(A)'s decision, ruling that the payments made to the non-resident entity for calibration and testing services did not qualify as fees for technical services under Section 195 of the Income Tax Act. The Tribunal emphasized the absence of technology transfer in the services provided and dismissed the Revenue's appeal, affirming the order of the CIT(A).