Case Law Details
Brief Facts of the Case and Question of law
Brief Facts: the assessee Company made payment of Rs. 56,54,963/- to M/s. CGS International, UAE (“CGS International”) and Rs. 37,76,863/- to M/s. Marble Arts & Crafts LLC, UAE (Marble Arts & Crafts) (aggregating to Rs. 94,31,826/-). The AO noted that no TDS had been deducted by the assessee while making the payment to the said two foreign concerns. AO required the assessee to show cause why the said expenditure should not be disallowed under Section 40(a)(i) of the Act.
The assessee did not deduct TDS on the sum of Rs. 94, 31,826/- remitted by it to CGS International and Marble Arts & Crafts. Therefore, this amount would be allowed as deduction for computing the assessee income only if it is held that the said remittances were not taxable under the Act, lest the provisions of Section 40(a)(i) be attracted and the deduction would have to be disallowed. This sum would constitute income for the two UAE entities – CGS International and Marble Arts & Crafts –which, admittedly, do not have a permanent establishment in India. Thus, for these non-residents, the provisions of Section 5(2) would be applicable, which provides that the total income of a non-resident includes, inter alia, income that is deemed to accrue or arise in India.
Question Raised:
(1) Did the ITAT believed that the payment incurred by the assessee to the extent of 94, 31,826 to the UAE concerns was not technical service in terms of Second Explanation to Section 9 (1) (vii) read with Section 194J?
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Very useful article. Thnk. U very much.