2016 (11) TMI 1593 - AT - Income Tax

Tribunal upholds CIT(A) decision on training fees royalty disallowance

The Tribunal upheld the CIT(A)'s decision to delete the disallowance of expenses on training fees royalty due to non-deduction of TDS under Section ... TDS u/s 195 - Disallowance of expenses on payment of training fees royalty - non-deduction of TDS - PE in India - Held that:- Tribunal order in assessee’s own case for the A.Y. 2008-09 [2015 (5) TMI 1169 - ITAT MUMBAI] wherein exactly identical issue is dealt with as regards to the payment of training fees, service fees and royalty payments for the subject matter as in the present case and Tribunal has deleted the disallowance holding that the assessee is engaged in sales and services of safety equipments installed on board marine vessels, that it would get business from the equipment manufacturers, that after completing the servicing of safety equipments it would issues a certificate to the vessels operating in International waters, that it would purchase blank certificates from equipment manufacturers, that it also undertook servicing of life boats and its lunching appliances, that to carry out the servicing of such equipments service personnel would be sent outside India for training, that the training fee included accommodation and conveyance, that both these payments were reimbursement of actual expenditure, that no TDS is required to be deducted for such payments As non-residents had no PE in India, that the assessee was not liable to deduct tax at source for these payments. - Decided in favour of assessee. Issues:Disallowance of expenses on payment of training fees royalty for non-deduction of TDS under Section 40(a)(ia) of the Income Tax Act.Analysis:The appeal by the Revenue challenged the order of CIT(A) deleting the disallowance of expenses on payment of training fees royalty due to non-deduction of TDS under Section 40(a)(ia) of the Act. The Revenue contended that the CIT(A) erred in deleting the addition made on account of non-deduction of TDS, citing a previous ITAT decision emphasizing chargeability over the source of payment. However, the assessee presented a Tribunal order in their own case for the A.Y. 2008-09, where a similar issue was addressed, and the disallowance was deleted. The Tribunal observed that the payments in question were reimbursement of actual expenditure, not covered by the provisions of Section 9, and no TDS was required to be deducted. The Tribunal further noted that the issue arose due to a retrospective amendment to the section, and the assessee cannot be held responsible for not deducting tax at the time of filing the return. The Tribunal confirmed the order of the CIT(A) based on these findings, deciding the issue in favor of the assessee.Therefore, the Tribunal, after considering the arguments and the previous Tribunal decision in the assessee's own case, upheld the order of the CIT(A) deleting the disallowance. The issue was decided in favor of the assessee, and the appeal of the Revenue was dismissed.