The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) directed readjudication on the issue that the Assessing Officer failed to consider the documents with respect to a tax deduction on FTS under India UK DTAA.
The Centralized Processing Cell (CPC) passed an order under Section 154 of the Income Tax Act, 1961 after taking into consideration the TDS/TCS statement filed by the assessee.
The statement filed by the assessee under Section 200A of the Income Tax Act in TRACES (TDS Reconciliation Analysed and Correction Enabling System) was processed by the TDS CPC Ghaziabad by raising demand of Rs.7,24,810/- towards short deduction/collection to the amount of Rs.647,15,780/- and interest of short deduction/collection of Rs.77,652/-.
The assessee recorded inter-company management fees of Rs.66,71,734/-payable to its group company Spark44 Limited, UK. As per Section 195 of the Income Tax Act, tax is required to be deducted at source by any person while paying to a non-resident on any sum chargeable under the Income Tax Act.
The assessee deducted tax under Section 195 of the Income Tax Act read with Section 115A(1)(b)(B) of the Income Tax Act of Rs.66,71,734/- being 10.30% i.e Rs.6,87,189/- and paid the same along with the interest for delay in payment.
The assessee referred to India U.K. DTAA provisions which say that services renders are FTS only if they make available technical knowledge experience etc. It is further submitted that the definition of FTS only includes technical or consultancy services and managerial services are excluded from the ambit of FTS in the tax treaty.
It was further submitted that as per Section 206AA of the Income Tax Act in the absence of PAN of the non-resident payee TDS can be levied at 20%. The assessee referred income tax simplification committee recommendation to exempt non-residence having tax identification number from the applicability of TDS at a high rate under Section 206AA of the Income Tax Act.
The Two-member bench comprising of Aby T Varkey (Judicial member) and Amarjit Singh (Accountant member) held that the facts pertaining to FTS under the India U.K. DTAA provisions were not considered at the time of processing of the statement by the CPC.
The case was restored to the file of the Assessing Officer for deciding afresh after verification of the relevant supporting document and submission made by the assessee. Therefore, the appeal of the assessee was allowed for statistical purposes.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
