2015 (10) TMI 384 - AT - Income Tax

ITAT directs reevaluation for fair hearing under DTAA, emphasizing comprehensive reassessment

M/s. Permasteelisa (India) Pvt. Ltd., Versus Deputy Commissioner of Income-tax, Circle 12 (2), Bangalore.

M/s. Permasteelisa (India) Pvt. Ltd., Versus Deputy Commissioner of Income-tax, Circle 12 (2), Bangalore. - TMI Issues:1. Whether the assessee is liable to make TDS before making payment to the non-resident holding company under sec.40(a)(ia) of the Income Tax Act, 1961.Analysis:The appeal was filed by the assessee against the order of the CIT(A)-III, Bangalore, for the assessment year 2008-09. The dispute arose when the AO held that the assessee should have deducted tax at source before making payments to its non-resident holding company, invoking sec.40(a)(ia) of the Act. The CIT(A) upheld this decision, leading to the appeal before the ITAT Bangalore.The assessee, engaged in manufacturing and installation of structural glazing works in India, had a management services agreement with its holding company. The AO considered the payment made to the holding company as 'Fees for Technical Services' and demanded TDS, resulting in a dispute.The assessee argued that the services received did not fall under 'Fees for Technical Services' as per the DTAA between India and Singapore. The counsel highlighted the need to consider treaty provisions favoring the assessee, especially regarding the term 'made available' in defining technical services.The ITAT observed that the AO did not consider the DTAA provisions and failed to determine which provisions were beneficial to the assessee. The CIT(A) based its decision on the mention of 'design' in an invoice, concluding that technical services were provided. However, the assessee presented evidence contradicting this claim, emphasizing the need for verification by the AO.The ITAT set aside the issue to the AO for reevaluation, directing a thorough examination of DTAA provisions, additional grounds raised by the assessee, and evidence submitted. The AO was instructed to decide the matter in accordance with law, ensuring the assessee's right to a fair hearing.Ultimately, the ITAT allowed the assessee's appeal for statistical purposes, emphasizing the need for a comprehensive reassessment by the AO based on all available information and legal precedents.This detailed analysis of the judgment highlights the intricate legal arguments, the importance of treaty provisions, and the necessity for a thorough examination of facts and evidence in resolving the TDS dispute between the assessee and the tax authorities.