PCIT Vs Ciena Communications India Pvt. Ltd. (Delhi High Court)
Delhi High Court held that provision of service by associated enterprise doesn’t include the element of ‘make available’ of technology to the assessee. Thus, benefit of Article 12 of India-USA DTAA available to such payment and hence TDS not deductible on the same.
Facts- The Revenue has filed the present appeals. The controversy in the said appeals relates to whether the payments made by the respondent/ assessee to an overseas associated enterprise having its principal place of business in Maryland was liable to be disallowed by virtue of Section 40(a)(i) of the Income Tax Act, 1961. AO made addition assuming that the payments made to Ciena, US were chargeable to tax, u/s. 9(vii) of the Act, being fees for technical services. AO also proceeded on the basis that the benefit of Article 12 of the India-USA Double-Taxation Avoidance Treaty Agreement would not be available, as the services rendered, for which the aforesaid payments were made, included the element of “make available” of technology to the Assessee.
Conclusion- ITAT had noted that Ciena, US provides technical on-call advisory services. Ciena, US remotely provides support services through call centres, to the customers of the Assessee, in case of problems of outage, or where emergency technical support is required in cases where a system is compromised. However, in cases where the equipment develops any defect and requires repair, the same has to be shipped overseas to Ciena, US for the repairs. It is also relevant to note that Ciena, US is the manufacturer of the equipment supplied to customers in India, and the agreement between the Assessee and Ciena, US, is essential to ensure that the support services are provided to the customers in India.
