Payment for Evaluation of Reports and Course Content cannot said to be FTS in absence of Profit Element: Delhi HC [Read Order]

Finance Act - Delhi High Court - taxscan

In PCIT v. Modi Apollo International Group (P) Ltd, a division bench of the Delhi High Court held that the payment for evaluation of reports and course content cannot said to be fees for technical service (FTS) since there was no profit element and therefore, the same is not subject to TDS under the provisions of the Income Tax Act, 1961.

Justices S Muralidhar and Prathibha M Singh was hearing an appeal filed by the department against the order of the ITAT whereby the Tribunal deleted the additions made by the assessing officer.

Before the High Court, the revenue contended that the payment made by the Assessee to Apollo International Inc., USA (AII) for evaluation of reports and course content was fee for technical services and subject to TDS under Section 195 of the Income Tax Act. It also contended that the Assessing Officer has rightly made addition on account of royalty payment to Apollo International Inc since the same was capital in nature.

The first and second appellate authorities had concluded the issue in favour of the assessee and have held that there was no element of profit embedded in the reimbursement for the evaluation undertaken and, therefore, it was not FTS.

The ITAT also noted that no technical expertise/services were required to render assistance for identification of candidates for admission.

The bench found merit in the above findings and upheld the same.

With regard to the issue of royalty, the bench said that the Tribunal has rightly held that the payment of royalty was with reference to the gross fee collected and there was no capital element involved in it.

Read the full text of the Order below.

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