TaxTMI 
TaxTMI 
2016 (6) TMI 42
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....ng officer has made an addition of Rs. 9,37,139/- booked as an expense on account of lease line connectivity charges due to non-deduction of tax at source. The charges were paid to an overseas entity. No tax needs to be deducted at source on this expense booking as it does not fall under the purview of section 195, section 9(1)(i), section 9(1)(vi) and section 9 (1)(vii) of the Income Tax Act. The expense claimed should be allowed in full. 3. The assessee company craves leave to add to amend the above objections at the time before or during the hearings." 2. Briefly stated, the facts of this case are : during the scrutiny of return of income filed by the assessee qua the assessment year 2008-09. Assessee made payment of Rs. 10,22,179/- fo....
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....er contended inter alia that the assessee company was not liable to deduct the tax at source on the expenses booked as it does not fall within the purview of section 195; that sections 9(1)(i), 9(1)(vi) and 9 (1)(vii) are not applicable in this case as the assessee has only reimbursed the leased line interconnectivity charges to its group entity in Hong Kong and relied upon the order passed by ITAT, Bangalore Bench in the case of Wipro Ltd. (supra) and Director of Income Tax vs. WNS Global Services (UK) Ltd. - (2013) 32 taxmann.com 54 (Bombay). On the other hand, ld. DR relied upon the order passed by the AO/DRP. 6. Now, the question arises for determination in this case is "as to whether the amount in question has been booked as expenses ....
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....r the Act, the clause in the DTAA cannot bring the charge-Hence, there was no liability to deduct tax under s.195." 8. Undisputedly, the assessee has paid the amount in question for services in accordance with the agreement to use standard facility provided as set out in the master service agreement. The ld. AR for the assessee contended that the standard format refers to menu of services which can be utilized by the customers, available on internet and can be downloaded by anyone and its pricing patterns are also standard with an offer for bulk discount. Ld. AR further contended inter alia that invoices by AT&T are charges for utilization of customer based circuits and are periodical in nature and each invoice has a different amount indic....
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....is amount be disallowed u/s 40(a)(i) as TDS was not deduction on this amount as per provisions of Sec 195. In reply to which the assessee submitted that such payment does not fall in purview of Sec 195 & submitted judgement of Hon'ble ITAT Bangalore in case of Wipro (2003) 80 TTJ 191. The contention of the assessee was not tenable. The assessee has failed to appreciate a recent decision of Hon'ble ITAT Chennai in case M/s Verizon Communications Singapore Pte Ltd. Vs ITO (International Taxation), Chennai wherein it was held that amounts received by the appellant from the Indian customers for the provision of international connectivity services outside India is royalty for the use of equipment and related services under Article 12(3)....
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....urnished inaccurate particulars of his income & concealed actual income, penalty proceedings u/s 271(1)(c) of the Income Tax Act,1961 are being initiated separately." 10. Ld. DRP has also not insisted upon any evidence to support the findings returned by the AO to reach at the conclusion that the assessee was provided with any technical services by the payee rather the assessee has made reimbursement of the amount in question to the group company as leased line interconnectivity charges. Furthermore, since there was no contract or the agreement between the assessee and M/s. Verizon Hongkong Ltd., a resident of Hongkong, and the leased line interconnectivity charges were reimbursed to Meridian IQ Asia Limited, Hongkong, which was invoiced b....