The Income Tax Appellate Tribunal (ITAT), Bangalore Bench deleted disallowance under Section 40(a)(ai) of the Income Tax Act, 1961 on the ground that no availability of technical knowledge, experience, skill on services provided by non-residents.
The appeal filed by the assessee is directed against the final order of assessment of National e-Assessment Centre (NFAC), Delhi, passed under Section 143(3) read with Section 144C(13) of the Income Tax Act, 1961 (Act) in relation to AY 2016-2017.
The case of the assessee, M/s. Tyco Fire and Security India Private Limited, is that in terms of Article 12(4)(b) of the Indo US treaty, which is applicable to the present case, only rendering of technical or consultancy services as ‘make available’ technical knowledge, experience, skill or know-how etc can be taxed in India in the hands of iRunway Inc.
In other words, in order to attract the taxability of an income under Article 12(4)(b), not only the payment should be in consideration for rendering of technical or consultancy services, but in addition to the payment being consideration for rendering of technical services, the services so rendered should also be such that ‘make available’ technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design.
In Raymond’s case, the Tribunal held that rendering of technical services cannot be equated with making available the technical services. In the case of CESC Ltd. v. DCIT also the question regarding the scope of expression making available came up for the consideration of the Tribunal. In that case, the Tribunal was dealing with the scope of Article 13(4)(c) of the Indo-UK tax treaty which is admittedly in pari materia with Article 12(4) of the India-USA tax treaty with which we are presently concerned.
Deleting the disallowance under Section 40(a)(ai) of the Income Tax Act, the Bench comprising Chandra Poojari, Accountant Member and NV Vasudevan, Vice President observed that “In our view the services rendered were purely managerial services and by no stretch of imagination can be considered as making available any technical knowledge, experience, skill, know-how or processes, to the assessee.”
“In view of the fact that the services provided by non-residents, did not make available any technical knowledge, experience, skill, know-how or processes to the assessee, the same cannot be regarded as taxable in India. Consequently, there was no obligation on the part of the assessee to deduct tax at source at the time of making payment” the Tribunal noted.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
