Case Law Details
Sunsmart Technologies Pvt. Ltd Vs ACIT (ITAT Chennai)
As per Explanation-2 to Sec.9(1)(vii) of the Act, FTS means any consideration (including in lump sum consideration) for the rendering of any managerial, technical or consultancy services, but does not include consideration for any construction, assembling, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head ‘salaries’. Further, as per Explanation-2 to Sec.9(2) of the Act, income of a non-resident shall be deemed to accrue or arise in India under Clause (v) or Clause (vi) or Clause (vii) of sub-section (1) and shall be included in the total income of the non-resident whether or not –
(i) the non-resident has a residence or a place of business or business connection in India; or
(ii) the non-resident has rendered services in India.
If we examine the nature of services rendered by a marketing partner in terms of the agreement between the parties in light of above legal position, we are of the considered view that services rendered by M/s.SSG Technologies, LLC, definitely comes under ‘FTS’ as defined under Explanation-2 to Sec.9(1)(vii) of the Act, because, the scope of agreement clearly specifies the nature of services to be rendered by marketing partner and as per said agreement, the assessee will train the resources of marketing partner to provide pre-sale and after sale product services to the customers. Since, the assessee is in the business of providing software solutions and services to various industries, in our considered view, said services definitely requires technical expertise and knowledge. Therefore, when the marketing partner provides pre-sale services and post-sale services to customers, the employees of marketing partner should be expertise in technical knowledge of the products. Therefore, we are of the considered view that the AO has rightly held that services rendered by marketing partner in terms of agreement between the assessee and M/s.SSG Technologies, LLC, comes under FTS as per Explanation-2 to Sec.9(1)(vii) of the Act. Since, the services rendered by marketing partner is in the nature of FTS, the assessee ought to have deducted TDS in terms of Sec.195 of the Act. Since, the assessee has failed to deduct TDS when payment made to non-resident, the AO has rightly disallowed said payment u/s.40(a)(i) of the Act. The Ld.CIT(A) after considering relevant facts rightly upheld addition made by the AO.
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