TaxTMI 
TaxTMI 
TaxTMI 
2017 (6) TMI 383
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....ons. For the assessment year 2005-06 they filed their return of income on October 30, 2005 declaring a total income of Rs. 2,28,89,480. During the course of assessment proceedings, the Assessing Officer found that the assessee made a payment of Rs. 32,43,977 and Rs. 11,32,585 to Patrice Dedyn (France) and Moulden Marketingh Ltd. (UK) (hereinafter for short referred to as "the non-residents") towards promotional expenses and held that such payment is covered both under section 9(1)(i) and 9(1)(vii) of the Income-tax Act (for short referred to as "the Act"). On this premise, the Assessing Officer proceeded to disallowed such an expense under section 40(a)(i) of the Act and added the same to the total income of the assessee. Aggrieved by the s....
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....o the expenditure incurred by the assessee for payments to the non-residents since such payments are not chargeable to tax under the Act and the tax at source cannot be deducted. Secondly, that since no operation of those persons are carried out in India and no part of their income is attributable to any India operations, section 9(1)(i) is not applicable. Thirdly, that the services rendered by them do not fall within the definition of technical services under the Indo French Treaty, and lastly section 40(a)(i) is not applicable to the payments made to the above two entities in view of the non discrimination clause in article 26 of the Indo French Treaty. Basing on these submissions he prayed to uphold the findings of the learned Commission....
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....the Act and there was no requirement to deduct tax at source since the service being rendered outside India and cannot be deemed to have arisen or accrued in India in terms of section 9(1)(i) of the Act, it is not open for the Assessing Officer not to consider the orders passed under section 195 of the Act for the financial years 2005-06 to 2007-08 without assigning cogent reasons. Further for subsequent years, as evidenced by the assessment orders relating to the assessment years 2006-07 to 2008-09, vide page Nos. 58 to 66 of the paper book, no disallowance was made under section 40(a)(i) of the Act. The learned Commissioner of Income-tax (Appeals) held that when there is no change of facts, in view of these orders passed under section 195....
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....iable to deduct tax at source. In view of these decisions is clear that the payment made to the non-residents is not taxable under section 9(1)(i) of the Act as such assessee is under no obligation to make any deduction at source on such payments. On this count also, the reasoning given by the learned Commissioner of Income-tax (Appeals) is sound and correct. 8. Adverting to the contention that the services rendered by the non- residents do not fall in the expression technical services and the payment is not fee for technical services under section 9(1)(vii), the assessee is resting their case on the terms and the Protocol of the Indo France DTAA. The learned Commissioner of Income-tax (Appeals) observed that in view of the decision of Sup....
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....part of the India- France Double Taxation Avoidance Agreement as well, hence the payment by an Indian company to a French company for management services would not constitute fees for technical services under the India-French Double Taxation Avoidance Agreement. While respectfully following the decisions of the Hon'ble apex court Azadi Bachao Andolan and P. V. A. L. Kulandagan Chettiar (supra) and the Hon'ble jurisdictional High Court in Steria (India) Ltd. (supra), we hold that the learned Commissioner of Income-tax (Appeals) is right in holding that the payments made to the non-residents cannot be characterised as fee for technical services and the question of any deduction of tax at source does not arise. 10. The last limb of the argume....