Case Law Details
ACIT Vs Red Ice Production Pvt. Ltd. (ITAT Delhi)
ITAT Delhi held that as payments made to the non-resident service providers not chargeable to tax in India, thus disallowance u/s 40(a)(ia) of the Income Tax Act on account of non-deduction of TDS is unsustainable.
Facts- AO proceeded to make disallowance of Rs. 1,58,85,633/- on account of expenses paid/remitted abroad without TDS. Notably, AO treated the payment made outside India as Fee for Technical Services as defined under section 9(1)(vii)(b) of the Income Tax Act.
However, CIT(A) deleted the said addition. Being aggrieved, revenue has preferred the present appeal.
Conclusion- We agree with the finding of the Ld. CIT(A) that services provided by the non-resident service providers are not in the nature of managerial technical or consultancy services within the meaning of explanation 2 to section 9(1)(vii) of the Act. These are to be characterised as contract work under section 194C of the Act and thus partakes the nature of business income which is not taxable in India in the absence of a business connection or PE of the non-resident service provider in India. The Ld. CIT(A) has recorded a finding that the assessee procured similar services from same countries during the AY 2009-10, AY 2011-12, 2012-13 and AY 2015-16 the assessments for which have been completed under section 143(3) of the Act without any addition on account of the same.
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