Sasken Technologies Ltd. Vs ACIT (ITAT Bangalore)
Bengaluru ITAT: ‘Make Available’ Test Not Satisfied – No TDS on Payments to US Software Contractors
The Bengaluru ITAT held that no tax was deductible under section 195 on payments of ₹10.09 crore made by an Indian software company to overseas contractors through its US branch, since although the payments were for technical services, they did not satisfy the “make available” test under Article 12 of the India–US DTAA. The Tribunal observed that the subcontractors rendered onsite software development services and interacted with clients, but the Revenue failed to establish that the services transferred technical knowledge, skill or know-how enabling the assessee to perform the same functions independently in future. Merely rendering technical services or sharing work products does not amount to making technical knowledge available. Consequently, the payments were not chargeable to tax in India, and the disallowance under section 40(a)(i) was deleted.
The Tribunal, however, upheld the disallowance of ₹7.13 lakh paid to Forrester Research Ltd., UK, holding that the payment was royalty for the right to access and use copyrighted content, branding and logos, and therefore attracted tax deduction at source. It also deleted the section 14A disallowance after holding that the Assessing Officer had failed to record the mandatory satisfaction under section 14A(2) before invoking Rule 8D. Further, following earlier Tribunal decisions, it held that although CSR expenditure is not allowable as a business deduction under section 37(1), deduction under section 80G cannot be denied if the statutory conditions are otherwise fulfilled. For AY 2020-21, the Tribunal restored to the Assessing Officer the issue relating to payment made to Tangent International, UK, directing fresh examination after the assessee furnishes the scope of work. Accordingly, the appeals were partly allowed.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. These two appeals have been filed by the assessee for different assessment years. Since they involve common issues and both parties advanced common arguments, they are disposed of together by this common order.
