Apurva Goswami Vs DDIT (International Taxation) (ITAT Delhi)
Facts- From 15CA/CB certificates filed by the assessee, the Ld. AO noted that the assessee has remitted amounts to various parties outside India without deducting tax at source.
It was pointed out that the Global Business Affiliates (GBA), as per the terms and conditions of the agreement were entitled to fixed compensation and further additional commission on orders procured for the assessee. It was further stated that the nature of services as rendered by non resident agent who is carrying out business activities in other contracting state falls squarely within the scope of Article 7 of DTAA. As per Article 7 the profits of an enterprise of other State would be taxable in India if there was a PE of such enterprise in India.
The explanation of the assessee was not acceptable to the ld. AO. According to him the impugned payments were made to the consultant which are covered under section 9(1)(vii) and not to the agent as claimed. The assesee was liable to deduct tax at source from fee paid for consultancy services.
Conclusion- Held that the payments made to the GBAs/ BDAs are not FTS but business profits not taxable in the hands of GBAs/BDAs in India in the absence of PE by virtue of the Article 7 of the DTAA, no tax is required to be deducted at source on such payments. In the case of GE India Technology Centre Pvt. Ltd. vs. CIT (2010-TMI-77380-SC) the Hon’ble Supreme Court held that obligation under section 195(1) to withhold tax arrives only if the payment is chargeable to tax in the hands of non-resident recipient. Therefore, merely because a person has not deducted tax at source from a remittance abroad, it cannot be inferred that the person making a remittance has committed a failure in discharging his tax withholding obligations because such obligations come into existence only when recipient has a tax liability in India. Thus, the payments made to the GBAs/ BDAs are not subject to any withholding tax, such payments being not chargeable to tax in India.
FULL TEXT OF THE ORDER OF ITAT DELHI
The above three appeals by the assessee are directed against the consolidated order dated 23.03.2016 passed by the Commissioner of Income Tax (Appeals)-43 New Delhi (“CIT(A)”) pertaining to the assessment years (“AY”) 2010-11, 2011-12 and 2012-13. Since common issues are involved in them, they were heard together and are being disposed of by this common order.
2. The assessee is an individual. He is proprietor of M/s. Quantum Solutions India which is a contract research organisation and specializes in the area of pharmacovigilance (drug safety) services.
2.1 From 15CA/CB certificates filed by the assessee, the Ld. Assessing Officer (“AO”) noted that the assessee has remitted amounts to various parties outside India without deducting tax at source. He tabulated details thereof as under :-
AY 2010-11
