TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 1498
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....hat 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 Provisions- Rs. 29,39,905 a. The learned CIT(A) has erred in not providing the Appellant w....
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....r 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 capitalized the software costs to avoid deduction of tax at source without any basis. f. The learned CIT(A) ought to have observed that out of the total software purchase of Rs.10,59,229, invoice pertaining to Rs. 825,746 fell w....
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....id- 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 Edvaldo Acir 37,59,010 Brazil Article 14 of India- Brazil DTAA Joao Paulo Pereira Corian 5,31,513 Brazil Article 14 of India- Brazil DTAA Patricia Lorenzino 13,29,381 Brazil Article 14 of India- Brazil DTAA Thiago De Andrade 4,22,082 Brazil Article 14 of India- Brazil DTAA Careerwin Executive Search 2,42,019 China Articl....
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....T(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 consider the facts for Assessment Year 2012-13. 3. Brief facts of the case are as under: 3.1 The assessee is engaged in the business of re-targeting, that is, targeting the customers, based on their movements on customers website, social media etc. It is submitted that, retargeting is an exercise that refers to online ad placement or display ads which targets users who have interacted with assessee's customers in a specific way. It is submitted that, once a visitor enters the customers website, clicks on a product or takes a certain action that the company wants them to take, ....
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....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 services", under the Act, as defined in, Explanation 2 to section 9(1)(vii) of the Act. The Ld.AO, thus disallowed the entire payment under section 40(a)(ia) of the Act. 3.7 Aggrieved by the additions made, the assessee preferred appeal before the Ld. CIT(A). 4. The Ld.CIT(A) sustained the disallowance of web hosting charges on the ground that the service provider, had, made available knowledge, expertise relating to web hosting services to the assessee. The Ld.CIT(A) however allowed certain deductions of payment made by assessee to the vendors in following countries for the following reasons: Co....
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....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' of technical knowledge, experience, skill, know-how or process or consistent of development and transfer of technical plan or technical design. He placed reliance on the decision of Hon'ble Karnataka High Court in case of CIT vs D Beers India Minerals Pvt.Ltd., reported (2012) 21 taxman.com 214 and DIT vs Sun Microsystems India Private Ltd., reported in (2014) 48 taxman.com 93. 9.5 It is the submission of the Ld.AR that, in the present case the vendors do not "make available" any technical skill, knowledge, know-how, experience etc., or technology to assessee, while providing the web hosting services as there is no human interactions. 9.6 On the contrary, ....
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....nder 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 decisions relied by both sides. In our view, characterisation of payments for digital goods/services has always been a contentious issue. Sharing of data on world wide web/Internet has become an important marketing tool for the present-day business trend. As observed herein above, there are various decisions on this aspect which are rendered based on the peculiar facts. We note that, the payees are tax residents of various countries with whom India has DTAA. Therefore, in view of Section 90(2) of the Act the provisions of the Act or the DTAA whichever is more beneficial to the assessee shall apply. 15. In our view, the conclusions with regard to payment for 'right to use' software will equally apply to these types of payments and these has to be analysed in the light of the agreements entered into betwe....
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....ot 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 various parties having regard to the benefits, available to the assessee under the respective treaties. The assessee is directed to file all requisite details in support of its contention. The Ld.AO shall consider the evidence is filed in accordance with law by granting proper opportunity of being heard to the assessee. The Ld.AO shall take a view considering various decisions passed by this Tribunal as well as Hon'ble Supreme Court and High Court. Accordingly, Ground No.4 for assessment in 2012-13 and Ground No.3 for assessment year 2013-14 stands allowed for statistical purposes. 19. Disallowance of Software payment: This issue is relevant for assessment year 2013-14 only. 19.1 The assessee claimed depreciation of Rs. 3,61,107 on purchase of computer software amounting to Rs. 10,29,822/-. The Ld.AO disallowed ....
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....port 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: Disallowance of provision for assessment year 2012-13 20.1 The assessee created provision of Rs. 29,39,905/- towards advertisement charges for assessment year 2012-13. The provision created was in respect of services that was received by the assessee, which was reversed on the 1st day of subsequent year. The Ld.AO disallowed the provision by holding that, they were uncrystallised liability. This view was sustained by the Ld. CIT(A). 20.2 Before this Tribunal, the Ld.AR submitted that, the assessee regularly follows mercantile system of accounting and business income was computed accordingly. It was submitted that, there is no income attributable to the payee and the provisions are reversed at the very beginning of the next accounting year and therefore the TDS provisions are not applicable. In support, he placed reliance on the decision of Hon'ble Kar....