TaxTMI 
TaxTMI 
2020 (9) TMI 668
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Inc. USA are covered as fees under the India-USA double taxations avoidance agreement (DTAA) and hence taxable under Article 12 of DTAA. 03. That the Ld. CIT(A) has erred in confirming the addition of Ld. ITO (TDS) that the services provided in USA and payments made in USA are covered u/s 195/201 of the I.T. Act. 04. That the Ld. CIT(A) has erred in holding that the services provided by Systems Integrations in USA is considered as making technology available as per the service agreement. 05. The claim of the appellant about non deductibility of TDS be allowed and the order of the Ld. CIT(A) be quashed. 06. The appellant craves to add, alter, delete and amend any of the grounds of appeals. ITA No.449/Ind/2019 A.Y.2016-17 01. That the Learned CIT(A)-13 erred in maintaining the order of the Ld. ITO(IT&TP) Bhopal in respect of applicability of section 195/201 of the Income Tax Act. 02. That on the facts and circumstances of the case the Ld. CIT(A) has erred in confirming the action of the Ld. ITO by holding that services provided by System Integration Inc. USA are covered as fees under the India-USA double taxations avoidance agreement (DTAA) and hence taxable under Articl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. Date of remittance Gross up amount as per Section 195A of the Act Default of TDS @25.75% incl. cess Interest thereon u/s 201(1A) till date 1 Systems Integrations Inc, USA. 15,82,000/- 27.02.15 21,09,333/- 5,43,153/- 97,768/- 2 Systems Integrations Inc, USA. 2,16,000/- 24.01.15 2,88,000/- 74,160/- 14,090/- Total 17,98,000/- 23,97,333/- 6,17,313/- 1,11,858 Financial Year 2015-16 S.No. Name of Recipient Total Amount remitted in Rs. Date of remittance Gross up amount as per Section 195A of the Act Default of TDS @25.75% incl. cess Interest thereon u/s 201(1A) till date 1 Systems Integrations Inc, USA. 24,20,000/- 22.12.15 32,26,667/- 8,30,867/- 66,469/- 2 Systems Integrations Inc, USA. 17,94,000/- 12.10.15 23,92,000/- 6,15,940/- 61594/- Total 42,14,000/- 56,18,667/- 14,46,807/- 1,28,063/- 5. Aggrieved assessee preferred appeal before Ld. CIT(A) but failed to succeed. Though assessee made necessary submission that the nature of services are not in nature of "technical services" but is the payment for procurement of orders. Once the orders are procured then the assessee provides necessary services to the client. The No....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ive vehemently argued supporting the orders of both the lower authorities. 9. We have heard rival contentions, perused the records placed before us and carefully gone through the decisions referred and relied by the assessee. In the instant appeal for Assessment Year 2015-16 and Assessment Year 2016-17 though the assessee has raised various grounds of appeal but the sole issue for adjudication is that whether the Ld. CIT(A) erred in confirming the action of the Ld. A.O by holding that the payments made for services provided by SII, USA were in the nature of technical services liable for deduction of tax at source u/s 195 of the Act. 10. The assessee company is engaged in the business of export of software services. It has entered into an agreement with the U.S.A based company M/s. System Integration Inc (SII) which agreed for providing of consulting services, procurement of orders and other tasks given. This fact is not in dispute that the Non resident company do not have any permanent establishment in India nor having any business connection in India and the income of such Non resident company i.e. SII can be deemed to accrued or arise in India only if the payments are of the na....
X X X X Extracts X X X X
X X X X Extracts X X X X
....22033 (609)-662-0145 February 19th 2020 TO-WHOM-IT--MAY CONCERN - This is to certify that we, Systems Integrations Inc. have acted as a Liaison and procurement agent between Snap Computer Systems Pvt LTD and clients based in USA. We have not provided any technical or managerial services. We were only working as an interface to get order. All the work was done by the Snap Systems team by connecting to the clients' network using VPN (Virtual Private Network) and VDI (Virtual Desktop Image). 14. The above certificate makes the picture very clear that "SII" has only have acted as a Liaison and procurement agent between assessee and clients based in USA. SII was working only as an interface to procure orders and hand over the same to the assessee who in turn was to carry out the work through its team by connecting to the clients network using Virtual Private Network and Virtual Desktop Image. There remains no dispute to the fact that apart from the work of procurement orders for the assessee no other services were rendered by "SII". Software services were rendered by the assessee directly to the customers by logging in directly with the clients network. Though in the agre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cipient or consideration which would be income of the recipient chargeable under the head "Salaries" Explanation after Sec. 9(2) For the removal of doubts, it is hereby declared that for the purpose of this section, income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub- section(1) and shall be included in the total income of the non- resident, whether or not - (i) The non-resident has a residence or place of business connection in India; or A. (ii) The non-resident has rendered services in India.] 16. Section 9(1)(vii) provides for accrual of income only for the "fee for technical services" which includes specialized services like managerial, technical and consultancy. But in the instant case "SII" has not rendered any technical or managerial services to the assessee but is merely project work procurement agent. In the case of Dr. Reddy Laboratories Ltd (supra) it has been held that service fees payable by the applicant to DRL Russia under the agreement for promotion of goods cannot be regarded as fees for technical services under section 9(1)(vii) or under article 12 of the India- Russia treaty. 17. In....