TaxTMI 
TaxTMI 
2010 (11) TMI 956
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....public limited company engaged in the business of manufacturing switch-gears and transformers and other instruments for generating and transmitting electric power. A survey was conducted on 28.11.2002, in the office of the assessee-company wherein it was noticed that the assessee-company had made various payments to its holding company M/s. Alstom Holdings, France but no deductions of tax at source were made. On the basis of the activities carried on by the assessee and the services availed by the assessee-company, the Assessing Officer came to the conclusion that the assessee-company was liable for non deduction of tax at source and for interest thereon. The orders were passed accordingly. The assessee took up the matter before the C.I.T.(....
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.... Alstom Holdings, France for networking services provided by M/s. Equant, UK by virtue of an agreement entered into between M/s.Alstom Holdings, France and M/s. Equant, UK. M/s. Equant had to provide networking facilities to various subsidiary units of M/s. Alstom Holdings spread over in different countries. The holding company, M/s. Alstom Holdings, France had procured a communication software by name "lotus notes" which is to support the wide area network (WAN) commissioned by M/s. Alstom Holdings, France for transmitting data and information within the group companies around the world. This communication software helped M/s. Alstom Holdings, France and its subsidiaries in different countries including the assessee to have instant online ....
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....e or technique which is necessary for the business carried on by the assessee-company. M/s. Equant, UK had not provided any such technical or intellectual services necessary for the business carried on by the assessee. As far as the assessee-company is concerned, the payment was made for availing a common business service for networking and the expenditure incurred by the assessee was in the nature of business expenditure. If the payment made by the assessee was in the nature of business expenditure and thereby M/s. Equant, UK had earned an element of income, the same could be considered only as business income. For that matter, it is necessary to establish that M/s. Equant, UK had a permanent establishment (PE) in India . No such case is c....
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....d not liable to deduct the tax at source. 10. If we examine the present case in the above exposition of law, we find that there is justification for the assessee's conviction at the time of payment that no tax was deductible at source. It was neither a composite payment. The payment could not be held as made for technical services, as argued by the Revenue. Neither it is a case of royalty. Therefore, we find that the assessee was not bound to deduct tax at source for the disputed payment and therefore, as rightly held by the C.I.T.(Appeals), there was no justification to pass the orders under sec.201(1) and 201(1A). 11. While disposing the second appeal in first round, the Tribunal had made a passing reference that the relevant contra....