Tribunal Confirms No TDS Default for Payments to Member Companies, Secondees, and Foreign Agents; Revenue Appeals Dismissed.

ITO, TDS-III (3) Versus M/s. Petroleum India International, Mumbai

ITO, TDS-III (3) Versus M/s. Petroleum India International, Mumbai - [2024] 111 ITR (Trib) 365 (ITAT [Mum]) Issues Involved:
1. Deletion of demand raised under sections 201(1) and 201(1A) of the IT Act for non-deduction of tax at source under sections 194J and 195.
2. Determination of whether the payments made to member companies, resident secondees, non-resident secondees, and foreign agents are subject to TDS.

Summary:

1. Deletion of Demand Raised under Sections 201(1) and 201(1A):
The Revenue sought to set aside the CIT(A)'s order deleting the demand raised by the AO under sections 201(1) and 201(1A) for the assessment years 1996-97, 1997-98, and 1998-99. The AO had raised the demand based on the non-deduction of tax at source under sections 194J and 195 for payments made by the assessee.

2. Payments to Member Companies:
The AO contended that the payments to member companies for providing technical personnel should be considered as "fees for technical services" under section 9(1)(vii) and thus subject to TDS under section 194J. However, the CIT(A) found that the member companies were reimbursed on a no-profit basis and did not render technical services to the assessee. The CIT(A) concluded that the reimbursement of Indian salary and benefits did not constitute "fees for technical services," and the assessee was not in default.

3. Payments to Resident Secondees:
The AO argued that payments to resident secondees should be subject to TDS under section 194J. The CIT(A) held that since the secondees were working abroad for less than 182 days and the payments were akin to salary, section 194J did not apply. The CIT(A) also noted that there was no employer-employee relationship between the assessee and the secondees, making the assessee not responsible for TDS under section 204.

4. Payments to Non-Resident Secondees:
The AO claimed that payments to non-resident secondees were subject to TDS under section 195 as the income accrued in India. The CIT(A) disagreed, stating that the services were rendered outside India, and thus the income did not accrue in India. The CIT(A) concluded that section 195 did not apply, and the assessee was not in default.

5. Payments to Foreign Agents:
The AO asserted that payments to foreign agents for services rendered outside India were subject to TDS under section 195. The CIT(A) found that the agents performed their services wholly outside India, and no part of the income was chargeable to tax in India. The CIT(A) relied on CBDT Circular No. 786, which clarified that TDS was not required for payments to foreign agents operating outside India.

Conclusion:
The Tribunal upheld the CIT(A)'s findings, concluding that the assessee was not in default under sections 201(1) and 201(1A) for non-deduction of tax at source under sections 194J and 195. The appeals filed by the Revenue were dismissed.