TaxTMI 
TaxTMI 
2021 (12) TMI 100
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.... purposes of making or earning any income from any source outside India. 1.2 The learned CIT(A) 12, Bangalore has erred in not appreciating that the payments to non residents were not deemed to accrue to arise in India u/s 9(1)(vi)/(vii) in view of the above exception and consequently not liable for TDS u/s 195. 2.0 Payments to non residents were not chargeable to tax under the DTAA 2.1 The learned CIT(A) 12, Bangalore has erred in construing legal services provided by non resident vendor as training services and further erred in applying Article 13 instead of applying Article 15 of India - Poland DTAA 2.2 The learned CIT(A) 12, Bangalore has erred in not appreciating that the payments to non residents were not chargeable to tax under the DTAA and consequently not liable for TDS u/s 195. 3.0 Rate of 20% u/s 206AA is not applicable for grossing up u/s 195A 3.1 The learned CIT(A) 12, Bangalore has erred in not appreciating that the rate of 20% as per section 206AA is not applicable for the purposes of grossing up of income and payment of TDS under section 195A. 3.2 The learned CIT(A) 12, Bangalore has erred in not appreci....
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....ction 206AA is not applicable for the purposes of grossing up of income and payment of TDS under section 195A. 3.2 The learned CIT(A) 12, Bangalore has erred in not appreciating that the grossing up under section 195A is required to be made at 'rates in force' and not at the rate of 20% as per section 206AA. 3.3 The learned CIT(A) 12, Bangalore has erred in not appreciating that section 206AA is not applicable in the context of section 195A as grossing up u/s 195A does not involve deduction of tax at source from the amount payable to the payer. 4.0 Grant of interest on refund 4.1 The learned CIT(A) 12, Bangalore has erred in not allowing interest on refund of TDS paid by the appellant out of its own funds. 4.2 The learned CIT(A) 12, Bangalore has erred in not appreciating that interest on refund of TDS is to be allowed as per CBDT Circular No. 11 of 2016 dated 26.4.2016 read with the decision of the Supreme Court in the case of UOI v TATA Chemicals Ltd [2014] 43 taxmann.com 240 (SC) The appellant prays accordingly." Brief facts are as under: 4. The assessee is an Indian company engaged in the business of providing ....
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....the opinion that the payment made by assessee came under the ambit of "Royalties and fees for technical services" as defined in para.4 of Article13. He held at the payments to nonresident in Poland was chargeable to tax in India under section 9(1)(vii) of Income tax Act, as well as Article 13(4) of DTAA between India and Poland. The Ld.CIT(A) therefore denied declaration to assessee on this issue. B. Another issue on which assesse sought declaration from the LdCIT(A) that tax deducted at higher rate under section 206AA was not applicable, when the payments were made to non-resident in the absence of permanent account number. B.1. On this, the Ld.CIT(A) observed that, as per section 248, section 206AA was not applicable in case of payments where DTAA restricted the rate of withholding to a lower rate. The Ld.CIT(A) held that assessee is entitled for a refund in respect of differential amount paid. C. Assessee also sought declaration that, assessee was entitled of refund of TDS paid, under section 195 A along with interest under section 244A of the Act. C.1. On this issue the Ld.CIT(A) observed that section 248 enables assessee to claim refund of tax based on the declarat....
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....of the partnership, irrespective of the fact that the same is taxed in the hands of the partners/shareholders. The partnership firm has to be treated as fiscal domicile of that state(Poland) as per Article 4 of India Poland DTAA. He thus submitted that, payments made to the non resident in Poland for legal services rendered is not taxable in India. On the contrary, the Ld.CIT DR submitted that services rendered by the partners of the law firm are in the nature of "Fee for technical services" as defined under para 4 of Article 13 of India Poland DTAA. We have perused the submissions advanced by both sides in light of records placed before us. The moot issues that arise for consideration is; Whether the Partnership firm was not eligible for benefit under India Poland DTAA, on the ground that assessee was a fiscally transparent entity not liable to tax in Poland in its own right and Whether the Partners are fully taxable in respect of their shares of income in Partnership Firm as per CIT? If answer to above two issues are in affirmative then; Whether payments made to the law firm in Poland is in the nature of Fee for technical services under section 9(1) (vii) of ....
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.... firm is a non taxable entity as per the domestic laws and therefore treaty benefit cannot be extended to the firm. It is clear that the Law firm is a transparent entity, and cannot be taxed in its own right, but then the profit shares pertaining to its various constituents are taxable whose hands is the question that needs to be addressed. In other words in whose representative capacity the Law firm is to be taxed, and whether those persons are fiscally domiciled in the Poland for them to be 'liable to taxation by reasons of his domicile, residence, place of management or any other criterion of similar nature'. In the present facts of the case, it will be the partners of the firm who represent the partnership in Poland. Unlike in India, the Partnership itself is taxable as per Income Tax Act. The Ld.AR has filed the Tax residency Certificate(TRC) issued by Polish Government to the partners placed at page 16-39 of paper book. Identical issue arose before coordinate bench of Mumbai Tribunal in case of Linklaters LLP v. ITO reported in (2010) 40 SOT 51. In a subsequent decision in case of Linklaters vs.DCIT reported in (2017) 79 taxman.com 12, Hon'ble Mumbai Tribunal....
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....similar position in case of ING Bewaar Maatschappij I BV vs.DCIT reported in (2019) 112 taxman.com 21. We also refer to the OECD commentary on this aspect is as under: "8.4 Where a State disregards a partnership for tax purposes and treats it as fiscally transparent, taxing the partners on their share of the partnership income, the partnership itself is not liable to tax and may not, therefore, be considered to be a resident of that State. In such a case, since the income of the partnership "flows through" to the partners under the domestic law of that State, the partners are the persons who are liable to tax on that income and are thus the appropriate persons to claim the benefits of the conventions concluded by the States of which they are residents. This latter result will be achieved even if, under the domestic law of the State of source, the income is attributed to a partnership which is treated as a separate taxable entity. For States which could not agree with this interpretation of the Article, it would be possible to provide for this result in a special provision which would avoid the resulting potential double taxation where the income of the partnership is di....
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.... Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such royalties or fees for technical services may also be taxed in the Contracting State in which they arise, and according to the laws of that State, but if the beneficial owner of the royalties, or fees for technical services, is a resident of the other Contracting State, the tax so charged shall not exceed 15per cent of the gross amount of the royalties or fees for technical services. 3. The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright including copyright of literary, artistic or scientific work including cinematograph films or tapes used for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use any industrial, commercial, or scientific equipment or for information concerning industrial, commercial or scientific experience. 4. The term "fees for technical services" as used in this Article m....
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.... Tax Act, Article 15 of India Poland DTAA is to looked into. We are therefore of the opinion that services rendered by the non resident Law firm cannot be treated as FTS under Article 13(4). ARTICLE 15 INDEPENDENT PERSONAL SERVICES 1. Income derived by an individual who is a resident of a Contracting State from the performance of professional services or other independent activities of a similar character shall be taxable only in that State except in the following circumstances when such income may also be taxed in the other Contracting State : (a) if he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in that other State ; or (b) if his stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 183 days in the relevant "previous year" or "year of income" as the case may be; 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 ter....
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....ain new analysts etc. The Ld.CIT(A) thus held that the certain services rendered by Zintro are in the nature of technical services. He relied on the decision of Hon'ble Karnataka High Court in case of Samsung Electronics reported in (2012) 345 ITR 494. The Ld.CIT(A) following the decision held that the payments made to the Zintro are taxable in India under section 9(1)(vi) (vii) and Article 12 of India US DTAA. The Ld.AR relied on agreement between assessee and Zintro placed at page 16-19. He submitted that issue needs to be analyzed in the light of principles laid down by Hon'ble Supreme Court in case of Engineering Analysis Center of Excellance Pvt.Ltd. Vs. CIT & Anr., reported in (2021) 125 taxman.com 42 and services rendered by Zintro to assessee. He submitted that, Hon'ble Supreme Court took view contrary to the view taken by the Hon'ble Karnataka High Court in the case of Samsung Electronics Co. Ltd. (supra). The Ld.CIT DR, while relying on the order of the CIT(A), pointed out that Ld.CIT(A) has not examined the end users agreement to find out nature of services and therefore the issue should be remanded to the Ld.CIT(A) for fresh consideration. We have peruse....