TaxTMI 
TaxTMI 
2026 (8) TMI 1333
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....relation to the final assessment order passed by the Income-tax Officer, National Faceless Assessment Centre ('AO') under section 143(3) rws 144B of the Act is bad in law and is contrary to the facts and circumstances of the present case. 2. Disallowance of expenses under section 40(a)(i) of the Act (Adjustment amounting to INR 3,86,73,151-Tax impact-INR 1,33,84,004) 2.1 The learned AO and CIT(A) errored in disallowing the corporate charges paid to Anixter Singapore Pte Ltd ('Anixter Singapore') amounting to INR 3,86,73,151 by invoking the provisions of section 40(a)(i) of the Act for non-withholding of taxes under section 195 of the Act. 2.2 The Ld. AO and the Ld. CIT(A) erred in law by failing to appreciate that the subject corporate charges are not taxable in India in the hands of the Anixter Singapore under the India Singapore Double Taxation Avoidance Agreement ('DTAA'). 2.3 The Ld. CIT(A) erred in law by concluding that overseas entity with which the appellant company had transaction, has a Permanent Establishment ('PE') in India. 2.4 The Ld. AO erred in concluding that the said payment shall be taxa....
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....ness profits to the recipient and not taxable in the hands of the recipient in the absence of a permanent establishment (PE) in India. However, the AO didn't accept the contention of assessee and instead concluded that the ibid payment shall be covered as 'Fee for technical service/FTS' under section 9(i)(vii) of the Act without considering the applicability of the relevant provisions of DTAA. 5. Aggrieved the assessee preferred an appeal before the Ld.CIT(A) who confirmed the action of the AO by following his predecessor who decided the case of assessee for earlier AY 2017-18, by holding as under: - The reply filed by the appellant is considered. Similar issue was present in the appellant's case for AY 2017-18. While deciding that appeal the Ld. CIT(A) had observed that, "In this case, the AO had relied upon the premise that, the appellant company had transaction, was Permanent Establishment. OME TAX DEPARlling under the definition of Permanent Establishment." In the case of Commissioner of Income-tax International Taxation 2 v. Mitsui and Co. [2025] 170 taxmann.com 828 (SC), the Honorable Supreme Court of India had upheld the observations made by....
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....in accordance with the laws in force in The Singapore, and it was engaged in the business of same field of the appellant. Therefore, Anixter Singapore was competant enough to persuade the client, complete the process of online registration, and provide after sale service to the clients based at worldwide. All these facts suggested that, Anixter Singapore was acting as the Permanent Establishment of the appellant company. Therefore, I am of the opinion that, the AO's action of invoking provision of Section of 201 of IT Act is justified. As a result, all the grounds raised by the appellant in this regard are 6. Aggrieved by the aforesaid action of the Ld.CIT(A), the assessee is before us. 7. At the outset, the Ld.AR of the assessee pointed out that in assessee's case for earlier year AY 2017-18, [ITA no 3630/Chny/2025, Tribunal order dated 16.01.2026] the AO did the same action which got confirmed by Ld CIT(A), which was deleted by this Tribunal accepting the assessee's explanation for justifying non-deduction of taxes while making the payment to M/s Anixter Singapore Pvt. Ltd and hence prayed for similar action by Tribunal. Per Contra, the Ld DR couldn't controver....
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....submitted that it is settled law that section 195 applies only where the sum paid to a non-resident is chargeable to tax in India. If the payment itself is not taxable, there can be no withholding obligation and, consequently, no disallowance under section 40(a) (i). He further, pleaded that in the present case, the corporate charges paid to Anixter Singapore are not taxable in India. The authorities below have wrongly characterised these payments as Fees for Technical Services. Under Article 12 of the India-Singapore DTAA, services are taxable only if they "make available" technical knowledge or skill to the recipient. The services here are routine intra-group managerial and administrative support services. There is no transfer of technical knowledge, no enduring benefit, and no ability in the hands of the assessee to apply any technical expertise independently. Therefore, the "make available" test is clearly not satisfied. Once the DTAA applies, section 90 mandates that the treaty provisions override domestic law. Since the payment is not taxable under the DTAA, section 195 simply does not get triggered. The Ld.CIT(A) has applied section 195 mechanically, which is impermissible i....
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....dependently in future. Therefore, the payments do not qualify as Fees for Technical Services within the meaning of Article 12 of the IndiaSingapore DTAA. Once the DTAA is applicable, the provisions of the treaty, being more beneficial to the assessee, override the provisions of the Act by virtue of section 90 of the Act. Since the impugned payments are not taxable as FTS under the DTAA, the same can at best be regarded as business profits in the hands of the recipient. 10. As regards the finding of the Ld.CIT(A) that Anixter Singapore constituted a Permanent Establishment in India, we find that the said conclusion is not supported by cogent material on record. There is no evidence to establish the existence of a fixed place PE, nor is there any material to demonstrate that Anixter Singapore was carrying on business in India through a dependent agent satisfying the conditions prescribed under the India-Singapore DTAA Mere rendering of support services from outside India or coordination activities cannot, by itself, give rise to a Permanent Establishment. The finding of PE recorded by the Ld.CIT(A) is thus unsustainable and based on surmises and conjectures. In the absence o....