The Bangalore bench of Income Tax Appellate Tribunal (ITAT) recently held that marketing service rendered by the US entity in India is not taxable in India aa Fee for Technical Service (FTS). Therefore the bench deleted the addition made by the Assessing officer.
The assessee AD2PRO Media Solutions Pvt. Ltd. providing marketing services to M/s. AMSI. During the assessment proceedings AO had made an addition of Rs.11,84,47,825/- and Rs.23,03,47,626/- for Assessment Years 2016-17 and 2017-18 respectively by invoking the provisions of section 40(a)(ia) of the Income Tax Act, 1961.
The AO in the assessment order held that t agreement between M/s. AMSPL and M/s. AMSI for marketing services is in operation for the years together and these payments are made by the assessee company viz., M/s. AMSPL for marketing services to M/s. AMSI is clearly taxable in India as Fees for Technical Services (FTS).
Aggrieved, the assessee filed an appeal before the CIT(A), who held that the payments cannot be termed as FTS and directed the AO to delete the additions. The aggrieved revenue filed another appeal before the tribunal.
Praveen Karanth, the Department representative, supported the assessment order passed by the AO.
It was observed by the tribunal that, Assessment Years 2011-12 to 2017-18, the Tribunal, its consolidated order had decided the issue in favour of the assessee.The Tribunal had examined in detail the agreement entered into by the assessee with its payee and the nature of services rendered, etc. Thereafter, it was concluded by ITAT that the payments cannot be attributed as FTS and assessee cannot be made liable under Section 201 of theIncome Tax Act.
After observing the submissions of both parties the two-member bench Of Laxmi Prasad Sahu, (Accountant member) and George George K, (Vice President) confirmed the order of tribunal in assessee own case for the Assessment Years 2011-12 to 2017-18.
Thus the bench observed that “the services received by the assessee company cannot be considered as ‘royalty’ or fees for included services and the assessee was not under obligation to deduct TDS on this payment and as a consequence, the demand raised by the AO Under Section 201(1) & 201(1A) of the Income Tax Act cannot survive and the same is deleted”.
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