Cosmic Global Ltd. Vs ACIT (ITAT Chennai)
Facts of the Case: Cosmic Global Ltd. (“the assessee”) was engaged in providing translation services through web, both by employing Indian and overseas translators.
The assessee while making payments to the resident translators complied with the provision of section 194J of the Income-tax Act, 1961. However, the assessee did not deduct tax on payments made to non-resident translators.
The case of the assessee was selected for scrutiny and notice under Section 143(2) was issued to the assessee. The Assessing Officer (AO), opined that translation services constituted “technical services” and hence payments to non-residents attracted TDS under section 195. Consequently, a disallowance of Rs. 2,63,82,202 was made under section 40(a)(i) of the Act for failure to deduct TDS.
Additionally, the AO determined that the assessee’s tax liability should be computed under section 115JB (Minimum Alternate Tax or MAT), disregarding the regular computation under normal provisions of the Income-tax Act.
The assessee’s appeal before the Commissioner of Income Tax (Appeals) was dismissed, affirming the AO’s view. Aggrieved, the assessee preferred a second appeal before the ITAT.
Contentions of the Assessee:
The assessee argued that translation work involved converting text from one language to another, which merely required proficiency in both languages and did not amount to rendering of technical, managerial, or consultancy services.
