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2024 (5) TMI 954
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....,56,683/- u/s 40(a)(i) of the Act for non-deduction of tax at source on shipment clearing and forwarding charges. 2. That the appellant craves leave to add, amend, alter or forego any ground/(s) of appeal either before or at the time of hearing of the appeal." 3. Briefly stated facts of the case are that the assessee filed its return of income on 30.11.2017, declaring total income at INR 49,03,960/-. The case was selected for scrutiny assessment and the assessment u/s 143(3) of the Income Tax Act, 1961 ("the Act") was framed vide order dated 26.12.2019. The Assessing Officer ("AO") while framing the assessment, noticed that the assessee had claimed an amount of INR 89,42,83,355/- towards shipment clearing and forwarding expenses. It was noticed that out of these amount, an amount of INR 33,49,56,683/- was paid overseas on which no tax was deducted by the assessee. Therefore, the AO called upon the assessee to explain as to why it failed to deduct tax in terms of section 195 of the Act. In response to the show cause notice, the assessee filed its response, stating that the amount cannot be subjected to deduction of tax. However, the AO did not accept the explanation of t....
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....e is not liable for withholding tax. 8. On the other hand, Ld. Counsel for the assessee, Shri Salil Kapoor, opposed these submissions and supported the decision of Ld.CIT(A). He submitted that the AO mis-directed himself and did not appreciate the facts in right perspective. He submitted that the entire services were rendered outside India. The payments for such services were made outside India. Therefore, the income did not arise or accrue in India, which has rightly been held by Ld.CIT(A). He submitted that if the payments were made for the services rendered outside India then how can the assessee be made liable for withholding tax. There is no provision under the Act that would mandate the assessee for deduction of tax under the facts and circumstances of the present case. Ld. Counsel for the assessee reiterated the contents of written submission and contended that even otherwise also, the issue regarding taxability of freight forwarding charges is covered in favour of the assessee by a series of decisions of Co-ordinate Benches of this Tribunal. For the sake of clarity, the relevant contents of the written submissions are reproduced as under:- * "LX Pantos India Pri....
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....ed to tax in India. Thus, the appeal was allowed in favour of Pantos India. * Pursuant to the order of CIT(A) u/s 250 of the Act, income tax department has preferred an appeal before ITAT. Our Submissions Our stand and argument * It is humbly submitted that the overseas entities' scope of work was limited to providing logistic services overseas. These services involve pick-up of goods from overseas consignor and delivery to overseas carrier and vice-versa, stuffing/ lashing/ packing of goods and clearance of goods at customs. * These services are administrative in nature involving no professional skills or knowledge. Further, the overseas entities are responsible for mere execution of the deliveries and do not engage in any sort of planning or evaluation/testing of the goods and thus there was no requirement to deduct TDS. * The section 195 of the Act provides that every person, responsible for paying any sum (which is chargeable to tax in India) to a non-resident, is required to withhold taxes at the applicable rates in force, at the time of credit or payment, whichever is earlier. * In view of the above, only paym....
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.... said word simply seeks to create a responsibility to relay the information 'as-it-is', without applying any professional or technical judgement or knowledge. The AO has erred in misconstruing the word 'advice' appearing in the contract has cherry picked the said word without looking at its meaning in the context of the agreement. * AO, while alleging that the service provide are of 'consultancy nature', has selectively cherry- picked the following single clause mentioned in the 'Co-Operation Agreement'. AO has failed to read the same in context with the complete agreement, wherein scope of work has been defined separately. Further, AO has also wrongly interpreted the judicial precedents to conclude that the subject services of general business / administrative nature (involving no professional skills or knowledge) are of a 'consultancy nature'. * After a detailed consideration of the factual and the legal aspects involved, the CIT(A) has allowed our appeals. The CIT(A) in para 5 (5.1 to 5.11), pg. 36-41 has given a detailed finding in this regard. * We shall place reliance on below mentioned judicial precedents als....
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.... 22) * UPS SCS (Asia) Ltd [2012] 50 SOT 268 (Mum) (Para 4-10, 16-18) * Expeditors International of Washington Inc. [TS-61-ITAT-2021 (DEL)] (Jurisdictional Tribunal) * Asstt. CIT v. Leaap International (P.) Ltd. [201 1 1 15 taxmann.com 251 (Chennai) * Spahi Projects (P.) Ltd., In re |2009| 183 Taxman 92 (AAR - New Delhi) * Linde A.G. v. ΙΤΟ [1997] 62 ITD 330 (Mum.) * Dy. DIT v. Samsung Engg. Co. Ltd. [2011] 43 SOT 38 (Mum.) (URO)." 9. We have heard Ld. Authorized Representatives of the parties and perused the material available on record and gone through the orders of the authorities below. The Revenue by way of the present appeal has challenged the correctness of the order of Ld.CIT(A) who had deleted the impugned addition by holding that the assessee was not liable to deduct tax u/s 195 of the Act in respect of shipment clearing and forwarding expenses paid by it to overseas parties at different countries. It is pertinent to mention here that the case of AO in sum and substance is that as per one of the terms of contract, the assessee was provided information regarding tariff etc. prevalent in that country. ....
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....echnical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration of any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under head salaries." 5.2. A bare perusal of the above quoted provision indicates that the fees for technical services means any consideration for rendering of any managerial, technical and consultancy services but does not include the consideration for any construction, assembly etc. The AO has held the services rendered by the non resident payee parties as fee for technical services coming within the sweep of consultancy services. On the contrary, the contention of the assessee is that such services do not fall within the ambit of any of the categories as envisages u/s.9 (1)(vii) of I.T.Act. 5.3 In order to appreciate the nature of services more elaborately, it is relevant to consider the terms of the agreement entered into between the assessee and Pantos Logistics (S) Co.Ltd. The scope of services has been given in clause 1.1, wherein it is provided that the non-resident party ha....
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....er sense. Thus it is manifest that the word 'managing' is wider in scope than the word executing'. Rather the later is embedded in the former and not vice versa. 5.5 Adverting to the facts of the instant case it is observed that the assessee performed freight and logistics services outside India in respect of consignments originating from India undertaken to be delivered by the assessee. The role of the parties in the entire transaction was to perform only the destination services outside India by unloading and loading of consignment, custom clearance and transportation to the ultimate customer. In my considered opinion, it is too much to categorize such restricted services as managerial services. 5.6 Now I take up the next component of the definition of "fees for technical services", being consultancy services', which has been pressed into service by the AO to fortify his view that the amount paid by the assessee is covered within section 9(1)(vii). The word "consultancy" means giving some sort of consultation de hors the performance or the execution of any work. It is only when some consideration is given for rendering some advice or opinion etc.....
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.... direct involvement of man. These services can be rendered with or without any equipment, but the human involvement is inevitable. Moving in the light of this rule, there remains no doubt whatsoever that the technical services cannot be contemplated without the direct involvement of human endeavor. Where simply an equipment or a standard facility albeit developed or manufactured with the use of technology is used, such a user cannot be characterized as using 'technical services'. 5.9. Thus it can be noticed that the payment made to overseas parties in question is not a consideration for managerial or technical or consultancy services. That being the position, it cannot fall within the ambit of section 9(1)(vii) of I.T. Act. 5.10 Section 4 provides that the income tax shall be charged on the total income of any assessee of the previous year for any assessment year at the rates in accordance with and subject to the provisions of this Act. Scope of total income of any person has been enshrined in section 5. Section 5(2) mandates that the total income of a non-resident includes the income from whatever source derived which is received or is deemed to be receiv....
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....accrue or arise in India and there is no doubt about such income having not been received or deemed to be received or accruing or arising in India, the taxability of such income fails. I, therefore, hold that the amount in question cannot be charged to tax." 10. Ld.CIT(A) has elaborately discussed and dealt with the objection of AO by giving finding on facts. The sole basis of the AO for rejecting the submissions of the assessee is that it was also advised by the overseas parties on change into tariff ratio etc. The AO tried to find support from one of terms of the Contract executed between the assessee and non-resident. We find merit into the contention of the assessee, such advise would not partake character of rendering consultancy service. Merely, providing information of such nature in our considered view would not be sufficient for treating the entire services as managerial or consultancy services. If the view of the AO is accepted then any information received by the assessee from non-residents during the coruse of business would be treated as rendition of consultancy services by the non-resident. Looking to the context of providing information, it cannot be deduced such ....
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....hat from the sum which is chargeable under section 4 for levy and collection of Indian tax, the payer should deduct tax at the rates if the amount is to be paid to non-resident. They are meant for tentative deduction of Income-tax subject to regular assessment. Special Bench of the ITAT in the case of Prasad Production [3 ITR Trib. 58] has held that it is only when the Revenue establishes that the sum payable to the non-resident is taxable under the provisions of the Act, the provisions of section 40(a)(i) can be invoked. This proposition of law has been approved by the Hon'ble Supreme Court in the case of GE India Technology Centre (P) Vs. CIT dated 09.09.2010. Since the payment of Rs. 3,22,042/- is not chargeable to tax in India under section 9(1)(vii) read with section 195 of the Act, provisions of section 40 (a) (i) will not be applicable. Accordingly, we do not find any infirmity in the order of the ld. CIT (A) deleting the addition." 11. In the light of binding precedent (supra), we do not see any infirmity into the decision of Ld.CIT(A) holding "Since the income cannot be described as deemed to accrue or arise in India and there is no doubt about such income having no....