2024 (7) TMI 715

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....irming the disallowance of Rs. 54,65,508/- paid to Everest global Inc., made by the Id. AO by Invoking the provisions of Section 40(a)(1) read with Section 195 of the Act. (ii) On the facts and circumstances of the case the Learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the payment made for software training services not being chargeable to tax in India. (iii) Even otherwise, the same being not taxable as per the DTAA, the provisions of Section 195 and 40 (a)(i) will not be applicable to the same. 3. The appellant craves leave to add, amend or alter any of the grounds of appeal. 3. The brief case of the assessee is that assessees company is a limited company engaged in the business of Software development. The company provides the software related services such as software designing engineering, software training and consultancy services. Certification and management services. These services are in the areas of CMMI, PCMM, COPC, six cigma, Project Management, Innovation etc. The assessee company has filed the return of income of 30.11.2013, declaring an income Rs. 8561870/-. The case was selected for ....

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.... Adrian Leach, the addition is deleted. These grounds of appeal are partly ruled in favour of the appellant. 5. Before us at the outset Ld DR supported the order and submitted that the assessee company has been described as professional which used to charge fees for providing software training to Raya Contact Centre Egypt but no details of software training has been mentioned in the work order dated 01-09-2012. He has further submitted that paper work has been fabricated to avoid the tax. He has also submitted that in the instant case even though the source of receipt may be outside of India but source of income was in India so the assessee was bound to deduct the tax at source, which was not deducted. Therefore, he submitted that the order of CIT(A) be up held. 6. The Ld. Counsel for assessee has submitted that project has been carried out, outside of India and services have been utilized outside India, thus income of non-resident is not liable for deduction of tax at source in India as per the provision of section 9(1) (vii)(b) of the Act. He has further submitted that the source of income was located outside India and the payments have been made in respect of services outs....

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.... or business connection in India; or any other presence in any manner whatsoever in India. Mere requirement of permanent establishment in India was thus done away with. Nevertheless, the basic principle that requirement of deduction of tax at source would arise only in a case where the payment made to a non resident was taxable, still remains. It was observed in a decision dated 9th April 2018 rendered in Tax Appeal No. 200 of 2018 by the Division Bench of this Court, as under: "It can thus be seen that while confirming the order of CIT (A), the Tribunal relied on judgment off the Supreme Court in the case of G.E India Technology Centre P. Limited vs. Commissioner of Income Tax & Anr., reported in (2010) 327 ITR 456 (SC). In such judgment, it was held and observed that the most important expression in Section 195 [1] of the Act consists of the words. "chargeable under the provisions of the Act". It was observed that, "A person paying interest or any other sum to a non-resident is not liable to deduct tax if such sum is not chargeable to tax under the Act." Counsel for the Revenue, however, drew our attention to the Explanation 2 to sub-section [1] of Section 195 of the Act....

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....i) xx xx xx (vii) income by way of fees for technical services payable by (a) the Government or (b) a person who is resident, except where the fees are payable in respect of service utilized in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India: or ...." As per clause (b) thus, the income by way of fees for technical services payable by a person who is a resident would be deemed to accrue or arise in India. However, this clause contains two explanations namely where the fees are payable in respect of services utilized in a business or profession carried on by such person outside India, or for the purpose of making or earning any income from any source outside India. In other words, therefore, if the assessment of an assessee falls in either of these two clauses, the income by way of fees or technical services paid by the assessee would still not be covered within the deeming clause of sub-section [1] of Section 9. In the present case, the Commissioner (Appeals) and the Tribunal have accepted assessee's factual assertion that the p....