TaxTMI 
TaxTMI 
2022 (4) TMI 1498
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..... The learned CIT(A) and the AO have erred in concluding that web hosting charges paid is in the nature of fees for technical service (-FTS") under the India - USA and India - Australia Double Tax Avoidance Agreement treaty ("tax treaty"). c. The learned CIT(A) has erred in not adjudicating the fact that the web hosting services do not involve 'human intervention' and accordingly cannot be considered as fees for technical service. d. The learned CIT(A) and the learned AO ought to have appreciated that the web hosting services also does not make available technical knowledge, skill, know how or experience to the Appellant and accordingly not subject to withholding of taxes under the tax treaty. e. The learned CIT(A) ought to have taken cognizance of the various judicial precedents which have held that payments made towards web hosting services cannot be considered as fees for technical services. f. The learned CIT(A) has failed to appreciate that the web hosting charges are merely standard services obtained over Internet and as such no technical inputs are provided by the service provider to the Appellant. 2. Disallowance of Provi....
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.... CIT(A) has erred in holding that services of recruitment would fulfil the 'make available' test without assigning any reasons. The appellant craves leave to add, alter and modify the above grounds during the course of the appeal. For the above and any other grounds which may be raised at the time of hearing, it is prayed that the order of the Assessing officer be set aside." ITA 2129/Bang/2018 (A.Y. 2013-14) "1. Disallowance of software payment - Rs,10,59,229 a. The learned CIT(A) has erred in disallowing the entire payment in relation to software capitalized during the year for non-deduction of tax as against the disallowance of depreciation made by the learned AO. b. The learned C1T (A) has erred in not giving the Appellant an opportunity of being heard while making the disallowance. c. The learned CIT(A) has erred in not appreciating the fact that depreciation is not covered under section 40(a)(ia) of the Act. d. The learned CIT(A) has erred in not following the jurisdictional Tribunal Ruling on the disallowance of depreciation. e. The learned CIT(A) has erred in alleging that the Appellant had capitalize....
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....ered as royalty. Payment considered as Service Permanent Establishment a. The learned CIT(A) further erred in concluding that nonresident service provider has a Service Permanent Establishment in India without any basis or bringing any facts on record. 3. Disallowance of consultancy fee paid- Rs. 3,64,72,144 a. The learned CIT(A) erred in affirming the disallowance of consultancy fee paid for non-deduction of tax at source under section 40(a)(i). b. The learned CIT(A) ought to have appreciated that the expenses have been incurred for earning income from a source outside India and therefore not liable to tax under the provisions of section 9(1)(vii) of the Act. c. The learned CIT(A) failed -to 'appreciate that the payments made in relation to consultancy services provided by various vendors falls under Article 12 / Article 14 of the respective tax treaties as given below: Service provider Amount Country Article reference Eyal Mekler 6,11,601 Australia Article 12 & Article 14 of India- Australia DTAA Nicholas King 15,38,265 Australia Article 12 & Article 14 of India- Australia DTAA ....
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....jing Randstad HR Services Co Ltd 1,71,148 China Article 12 of India-China DTAA Big Wave Digital Pty Limited 15,71,032 Australia Article 12 of India- Australia DTAA Michael Page International 20,73,260 Singapore Article 12 of India- Singapore DTAA Total 38,75,435 c. The learned CIT(A) has failed fo adjudicate how the income of non-resident have accrued in India and has summarily held that the appellant was duty bound to deduct taxes on recruitment charges. d. The learned CIT(A) has erred in concluding that it is mandatory for an assessee to approach the tax officer for the clearance in case where the Appellant is of the belief that withholding of taxes is not required. The appellant craves leave to add, alter and modify the above grounds during the course of the appeal. For the above and any other grounds which may be raised at the time of hearing, it is prayed that the order of the Assessing officer be set aside." 2. Both sides submitted that, the most of the disallowances made during years under consideration, are identical on similar facts and circumstances. We shall ....
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....was also observed that the provision created at the end of the year was reversed on the first day of the subsequent year. The Ld.AO disallowed the said provision and added back Rs. 29,39,905/- to income, as he was of the view that, since provisions are the nature of un-crystallised liability, the same are not allowable expenses in the hands of the assessee for year under consideration. 3.5 The Ld.AO further observed that, the assessee incurred Rs. 1,59,450/- as professional services, for establishment of its subsidiary in Australia. It was the view of the Ld.AO that, the assessee should have capitalized the said expenditure. The Ld.AO, thus, added the same back to the income of assessee. 3.6 The Ld.AO observed that, during the year assessee paid Rs. 11,57,540/- to M/s. People search PTE., of Singapore, for recruitment of business development head in south-east Asia. It was also observed that assessee made payments to M/s. DLA Piper UK in Beijing, towards advisory services amounting to Rs. 12,13,580/-. The Ld.AO did not agree with the submissions of the assessee, and was of the opinion that, the fee paid by the assessee falls within the definition of "fee for technical service....
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....(a)(ia) of the Act in respect of the amount paid to non resident for nondeduction of TDS. 9.3 The Ld.AR submitted that, as per the provisions of the Act, 'fee for technical services' is defined under Explanation 2 to section 9 (1) (vii) of the Act to mean, "any consideration (including any lump-sum consideration) for the rendering of any managerial, technical or consultancy services." It is submitted that, in the case of the assessee, there is no human touch or intervention or involvement in providing the advertising services and it is merely the use of standard facility of technology that provided services. It is submitted that the payments made by the assessee is towards online advertisement that cannot be treated as fee for technical services. The Ld.AR placed reliance on following decisions of this Tribunal: • Decision of Hon'ble Kolkotta Tribunal in case of ITO vs Right Florists (P.) Ltd reported in (2013) 32 taxman.com 99 • Decision of Hon'ble Mumbai Tribunal in case of eBay International AG vs ADIT .reported (2012) 25 taxman.com 500 9.4 The Ld.AR, further submitted that, as per India US DTAA, FTS is taxable only when, there is, 'make available....
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....services 'make available' technology to the assessee, the payment made to these vendor's cannot be treated as 'fee for technical services', under the Indo-US DTAA. The revenue pleaced reliance on the decision of Hon'ble Chennai Tribunal in case of Foster Wheeler France USA reported in 67 taxman.com 120 and decision of Hon'able Cochin Tribunal in case of US Technology Resources Pvt.Ltd. vs ACIT reported in 39 taxman.com 23. 12. We note that, the Ld.AO categorised the above payments for A.Y. 2012-13 to be in the nature of "fee for technical services", whereas, the Ld.CIT(A) characterises the payments to be also in the nature of 'royalties'. The Ld.CIT(A) further holds that, there is a service PE under Article 5, in India in respect of the vendor's, and the same is taxable as business income under the relevant DTAA. 13. In our view, the payment made by assessee to the vendor's can either be FTS or royalty, under relevant DTAA, or could be categorised to be business income under Article 7, in case there exists permanent establishment in India. All 3 characters cannot be attributed to the same kind of payment made by the assessee of the vendor's. 14. We have perused the decisio....
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....technical or consultancy services (including the provision of services of technical or other personal) 18.2 The Ld.AR placed reliance on various provision in the respective treaties in order to support its contention that, no tax is to be deducted on such payments. 18.3 On the contrary, the Ld.CIT.DR relied on orders passed by authorities below. It is submitted that assessee paid to various consultants in Australia, Brazil, Japan, Singapore and USA towards the services rendered by the parties. The Ld.CIT.DR submitted that, for assessment in 2013-14 the assessee paid recruitment charges amounting to Rs. 1,08,69,631/-, out of which Rs. 38,75,435/- was paid without deducting TDS. 18.4 We have perused submissions advanced by both sides in light of records placed before us. 18.5 We note that, the revenue has not considered the agreements between the assessee and various parties located in different jurisdictions qua the DTAA, in order to ascertain the real character of the payment made. In the interest of justice, we remand these issues for both years under consideration back to the Ld.AO to consider it de novo in the light of the agreements entered into by the assessee with....
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....ion 32 of the Act is not in respect of the amount paid or payable which is subjected to TDS, but as a statutory deduction on an asset which is otherwise eligible for deduction of depreciation. The Ld.AR emphasised that, depreciation is not an outgoing expenditure, and therefore, the provisions of section 40(a)(i)/(ia) of the Act are not attracted. 19.5 On the contrary, the Ld.CIT.DR relied on orders passed by authorities below. 19.6 We have perused submissions advanced for both sides in light of records placed before us. 19.7 In the facts of the present case, admittedly, the assessee capitalised the cost of the software purchased, on which no tax was deducted at source. It is also an admitted fact that, depreciation is not an outgoing expenditure, and therefore, provisions of section 40 (a)(i)/(ia) cannot be attracted. We draw support from the decision of Coordinate Bench of this Tribunal in case of, Kawasaki Microelectronics vs. DDIT reported in (2015) 9 TMI 9. 19.8 We therefore direct the Ld.AO to delete the addition made in the hands of the assessee. Accordingly this ground raised by assessee for assessment year 2013-14 stands allowed. 20. Ground No.2: Disallow....
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....ions were made at the end of the year and the same was reversed in the beginning of the next accounting year which was allowed. 20.7 In the present facts of the case, we note that, the provision was in respect of a contingent liability for which invoices had not received. 20.8 Under such situation, there is no accrual of income in the hands of the payee and that assessee immediately reverses it on the 1st day of the next accounting year even before the amount accrued to the payee. Therefore, in our view the ratio laid down by Hon'ble Karnataka High Court in case of Karnataka Power Transmission Corporation (supra), squarely applies to the present facts of the case. 20.9 Respectfully following the same, way direct the Ld.AO to delete the disallowance made in respect of the provision, that was made on the last day of the financial year relevant to assessment year under consideration, that stood reversed on the 1st day of next accounting year. Accordingly, Ground no.2 raised by assessee for assessment in 2012-13 stands allowed. 21. Ground No. 3: Disallowance of subsidiary for assessment year 2012-13. 21.1 The assessee incurred Rs. 1,59,450/- towards professional fees ....