TDS Not Applicable to Payments made to Non-Residents: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT) Chennai bench held that Tax Deduction at Source not applicable to payment made to Non-Residents.

Assessee Turbo Energy Private Limited company is a manufacturer of turbochargers and components for engine application in passenger cars, commercial vehicles, off highway vehicles and industrial engines. After filing the income tax return Assessing officer disallowed additions under section 40(a) (i) of the Income Tax Act 1961 towards logistic service a payment for non-deduction of TDS under section 195 of the Act. Against the order assesse filed appeal before CIT (A).CIT (A) deleted the addition made towards disallowance u/s. 40(a)(i) of the Income Tax Act 1961 for non-deduction of TDS on payment made to non-resident.Aggrieved revenue appeal before ITAT.

The counsel for the revenue R. Bhoopathi contented that payment made by the assessee to non-resident service provider is in the nature of managerial service which comes under the provisions of section 9(1) (vii) of theIncome Tax Act 1961 .If the assessee has failed to deduct TDS on payment to non-resident under section 195 of the Income Tax Act 1961, the Assessing Officer has disallowed said payment under section 40(a) (i) of the Income Tax Act 1961.

Counsel for the assessee R. Vijayaraghavan contended that Services rendered by the non-resident are liasoning services but not the managerial and technical services. Further he argued that even if the services rendered outside India are to be taxable, it is taxable as business profits in which case, only the profits required to be brought to tax if there is a permanent establishment or business connection in India.

After considering the contention of the both sides, the ITAT bench comprising G. Manjunatha, Vice President and V. Durga Rao, Judicial Member deleted additions made towards disallowance of payment made to non-resident service providers.

Support our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.