TaxTMI 
TaxTMI 
TaxTMI 
2018 (4) TMI 866
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....IBS America without deduction of TDS u/s. 195 of the I.T. Act. Therefore the Assessing Officer treated the assessee as an assessee in default u/s. 201(1) of the I.T. Act and which was confirmed by the CIT(A). 4. Against this the assessee is in appeal before us. The Ld. AR argued that argued that IBS America was a wholly owned subsidiary of the assessee company IBS India and during AY 2010-11, the assessee had reimbursed certain expenditure pertaining to salary and overhead costs in relation to IBS Projects and therefore the assessee was not liable to deduct tax u/s. 195 of the I.T. Act. The Ld. AR submitted that "Section 195 of the Act to be made applicable to a transaction, wherein the underlying payment qualifies as a 'sum that is chargeable to tax in India' under the Act. In other words, there should be an element of income embedded in the payment for it to be made liable for tax withholding under section 195 of the Act. 4.1 The Ld. AR submitted that in the instant case IBS America had incurred certain expenditure on behalf of IBS India and IBS America raised debit notes on a cost to cost basis for reimbursement of the said expenses from IBS India. 4.2 The Ld. AR relied on th....
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....nt of expenses. b) The impugned expenses are of the nature that do not attract TDS liability. According to the Ld. DR from the limited details of payments available with the debit notes, like business development, production etc. it was inferred that IBS America had provided services which are specialized and technical in nature. The Ld. DR submitted that since the assessee failed to deduct tax on the same u/s. 195 of the IT Act, the assessee is laible for consequences as per provisions of sec. 201(1) and 201(1A) of the I.T. Act. 6. We have heard the rival submissions and perused the material on record. The main contention of the assessee's Counsel is with regard to reimbursement of expenditure pertaining to salary and overhead costs in relation to IBS Projects and does not include any element of profit so as to deduct TDS u/s. 195 of the Act. However, the assessee has not substantiated the veracity of the claim by producing the agreement entered into with IBS, America. It is the primary duty of the assessee to show that it is a reimbursement of expenditure. The assessee has not produced the relevant documents to prove that it was reimbursement of expenditure. Therefore, in the....
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.... assent of the President of India only from 08 May 2010. It was submitted that the law amended was undoubtedly retrospective in nature but so far as tax withholding liability is concerned, it depends on the law as it existed at the point of time when payments were made Hence, it was submitted that it is practically not possible to withhold taxes based on retrospective amendment of the provisions of the Act. 9.1 The Ld. DR on the other hand submitted that from the: "business cooperative agreement" entered between the appellant and Avient Solutions Limited, UK, it is seen that Avient is specialized in providing software services in the area of supporting flight operations functions of airlines and airports. The Ld. DR further submitted that as per the agreement Avient is not only marketing the products of IBS as envisaged but also provided technology consultancy services and therefore the payments made to Avient was nothing but fees for technical services and therefore taxable in India. The Ld. DR further submitted that Avient is a company in UK specialized in providing software services to support flight operations and functions of airlines and airports. The assessee company had en....
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....d by IBS. The Ld. DR submitted that it was also evident from clause 2(v) of the agreement, Avient Solutions Limited was to provide training to IBS staff for which fees can be charged. The Ld. DR submitted that from the above facts it was clear that the assessee company had received marketing consultancy services from the UK company and the technical knowledge, skill etc were made available to the resident company and therefore it is covered under Article 13(4) of India-UK tax treaty. In the above circumstances, the Ld. DR submitted that the assessee is liable to deduct tax u/s. 195 for the payment of Rs. 3.15,75,700/- to M/s. Avient Solutions Limited, UK and since the assessee had failed to deduct tax on the same u/s.195 of the Act, the assessee is liable for consequence u/s.201(1) and 201(1A) of the IT Act. 10. We have heard the rival submissions and perused the record. The main contention of the assessee is that the Explanation to section 9(1)(vii) came into force with retrospective effect from the year 1976 vide Finance Act, 2010, whereas the provisions involved in the present case ended on 31/03/2010. As such the assessee cannot be called upon to comply with the provisions not....
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....treaty and hence the payment is not chargeable to tax in India. The Ld. AR submitted that the lawyer services rendered by SG is specifically covered under Article 14 of the India-New Zealand tax treaty. The Ld. AR submitted that the partnership firms in New Zealand has a pass through status as per the domestic provisions of New Zealand. Accordingly, it was submitted that the income of partnership firms are taxed in the hands of individual partners and not in the hands of the firm. Hence, it was submitted that the individual partners can avail the benefit of India-New Zealand tax treaty for the said payment. It was further submitted that once a service is covered by the provisions of independent personnel services (IPS) under Article 14, then the question as to whether the said services would fall under FTS as per Article 12 would not arise. Without prejudice to the above and even if the said payments are not construed as IPS, the Ld. AR submitted that the same is to be categorized under Article 7 business profits of the India-New Zealand tax treaty. The nature of the services rendered by a legal firm can be construed as business profits, only if it pertains to business activities i....
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....h of the income is attributable to that fixed base may be taxed in that other state: or b)if his stay in the other contracting stale is for a period or periods amounting to or exceeding in the aggregate 183 days in any consecutive twelve-month period: in that case, only so much of the income as is derived from his activities performed in that other state may be taxed in that other state. 2.The term "professional services" includes independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, surgeons, lawyers, engineers, architects, dentists and accountants." 14.1 The Ld. DR submitted that M/s. Simpson and Grierson is a law firm providing legal services to the assessee by representing the company in a suit filed by M/s. Air New Zealand. It is a professional service as far as the individual members of the firm are concerned, whereas, for the firm, it is only a specialized service which is of technical/consultancy in nature. 14.2 The Ld. DR submitted that from the Article 14 of India-New Zealand DTAA it deals with only independent personnel services and the payment made to the individuals for rendering pro....
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....issue." The Ld. AR also relied on the judgment of the Supreme Court in the case of GVK Industries Ltd. vs. ITO (371 ITR 453) wherein it was held that legal fee cannot fall under the purview of sec. 9(1)(vii) of the Act. 14.4 The Ld. DR drew our attention to Explanation 2 to sec. 9(1)(vii) which reads as follows: (vii) income by way of fees for technical services" payable by - (a) the government; or (b) a person who is a resident except where the fees are payable in respect of services utilized in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India; (c) a person who is a non-resident, where the fees are payable in respect of services utilized in a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India; Provided that nothing contained in this clause shall apply in relation to any income by way of fees for technical services payable in pursuance of an agreement made on or after the 1st day of April, 1976 and approved by the Central Government. "Explanation 2 For the purposes of this clause, "f....