Case Law Details
Mastek Ltd Vs DCIT (ITAT Ahmedabad)
ITAT Ahmedabad held that tax deduction at source doesn’t apply to service which are neither availed nor rendered and not even utilized in India. Accordingly, disallowance u/s 40(a)(ia) unjustified.
Facts- During the course of assessment, AO observed that the UK branch of the assessee made payment on certain professional and consultancy services to U.K. resident companies on which no tax was deducted. During the course of assessment proceedings, the assessee submitted that the U.K. branch of the assessee was a separate legal entity formed under the U.K. regulations. It was submitted that the services availed by the U.K. branch, non-residents had been rendered and utilised outside India. Accordingly, in view of the exception provided in sub-clause “C” of section 9(1)(vii) of the Act, no tax is required to be deducted on such payment. However the AO made disallowance u/s. 40(a)(ia) of the Act.
CIT(A) deleted the addition. Being aggrieved, revenue has preferred the present appeal.
Conclusion- ITAT in assessee’s own case has held that The UK branch of the assessee has availed services of non-resident consultants. These services were provided from outside India. And these services have also been utilized outside India. Since the services in question were neither “availed” nor “rendered” and even not “utilised” in India, therefore no tax was required to be deducted at source.
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