Sigma Electric Manufacturing Corporation Private Limited Vs ITO (ITAT Pune)
The case involved Sigma Electric Manufacturing Corporation Private Limited, which had filed its income tax return for Assessment Year 2020-21. The return was initially processed by the CPC under Section 143(1)(a) of the Act, leading to a disallowance of Rs. 18,48,488/-. This disallowance was made on the grounds of alleged non-deduction of tax at source (TDS) on payments made to two foreign entities, M/s. UL LLC and CSA Group Testing & Certification Inc. The CPC’s adjustment stemmed from observations noted in the assessee’s Tax Audit Report, which were automatically captured by the system.
Aggrieved by this intimation order, Sigma Electric Manufacturing Corporation Private Limited lodged an appeal before the Commissioner of Income-tax (Appeals) [CIT(A)]. However, during the pendency of this appeal, a crucial development occurred: the assessee’s case was selected for detailed scrutiny assessment.
During these scrutiny proceedings, the Assessing Officer (AO) specifically examined the very issue that had led to the CPC’s disallowance – the taxability of payments made to the foreign certification bodies. The assessee submitted a comprehensive reply to the AO, explaining that the payments were for product certification services essential for selling products in the USA and Canadian markets, akin to ISO certification. To substantiate its claim that no withholding tax was required, the company furnished various documents, including Tax Residency Certificates (TRC), Form 15CB, Permanent Establishment (PE) Certificates, and undertakings from its India office.
