Case Law Details
SAS Institute (India) Pvt. Ltd. Vs ACIT (ITAT Mumbai)
Conclusion: Compensation received by foreign companies from assessee for loss of business/profit would constitute business receipts in the hands of foreign companies but the same was not liable for TDS under section 195 as the foreign companies did not have permanent establishment in India.
Held: Assessee had made certain payment to the foreign companies in the form of “compensatory payment” as per agreement entered by its parent company. Since the assessee had supplied software products beyond its territory, the business and profits of the foreign companies would get affected. In order to compensate the loss in business, the agreement provided for payment of compensation. Hence, the impugned payment would constitute business receipts in the hands of foreign companies, as it was in the nature of compensation received for loss of business/profit. Since, the foreign companies did not have permanent establishment in India, impugned payments were not liable for taxation in their hands in India, in which case, assessee was not liable to deduct tax at source u/s. 195.
FULL TEXT OF THE ITAT JUDGMENT
Both the appeals filed by the assessee are directed against the order passed by the Assessing Officer in pursuance of direction given by learned DRP and they relate to A.Ys. 2011-12 and 2012-13. Both the appeals were heard together and are being disposed of by this common order, for the sake for convenience.
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