Delhi HC Upholds ITAT Decision on Non-Deductibility of TDS for fees paid to Overseas Associated Enterprise under India-US DTAA [Read Order]

The Delhi High Court upheld the ruling of the Income Tax Appellate Tribunal ( ITAT ) on the non-deductibility of TDS for fees paid to overseas associated enterprises under the India-US Double Tax Avoidance Agreement ( DTAA ).

The case dealt with whether an Indian company was required to deduct Tax Deducted at Source ( TDS ) on payments made to its overseas associated enterprise for technical services.

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The controversy in these appeals concerns whether payments made by the assessee to its overseas associated enterprise, Ciena Communications Inc. (USA), during FY 2011-12, 2012-13, and 2014-15 were disallowable under Section 40(a)(i) of the Income Tax Act, 1961, for failure to deduct tax at source.

The Assessing Officer deemed these payments taxable as "fees for technical services" under Section 9(vii) of the Income Tax Act, 1961, and denied the benefit of the India-USA DTAA, stating that the services involved "making available" technology.

Although the assessee appealed before the Commissioner of Income Tax (Appeals ) [CIT(A)], but there were no favourable results. Aggrieved by the above order, the assessee appealed before the ITAT.

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The ITAT held that Ciena, US, provides technical on-call advisory and remote support services but does not transfer knowledge, technology, skill, or experience directly to the assessee.

The Delhi HC held that the revenue's claim that payments constitute fees for included services under Article 12 of the DTAA lacks merit, as no perversity in ITAT's factual findings was alleged.

The High Court, comprising Justices Vibhu Bakhru and Swarna Kanta Sharma, upheld ITAT's decision and dismissed the appeal filed by the revenue.

To Read the full text of the Order CLICK HERE

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