Case Law Details
Infosys Limited Vs DCIT (ITAT Bangalore)
Conclusion: The applicable rate of TDS on subcontracting charges paid to Infosys China should be considered at 10% as per the India-China DTAA instead of 20% as per section 206AA.
Held: Assessee was an Indian company, engaged in the business of development and export of computer software and related services. Infosys China was a company incorporated in China. It was a wholly owned subsidiary of the assessee. Pursuant to sub- contracting agreement, assessee sub-contracted certain overseas work in China to Infosys China. During the year under consideration, assessee made payment of sub-contracting charges to Infosys China. The said payments were made without deduction of tax at source. Assessee’s contention was that the payments were not chargeable to tax under the Act; or under the relevant Double Taxation Avoidance Agreement (DTAA). It was held in the case Nagarjuna Fertilizders and Chemicals Ltd. v. ACIT reported in (2017) 78 taxmann.com 264, if rate of tax applicable under DTAA was lower than 20% tax rate prescribed u/s 206AA, TDS had to be deducted at such lower rate even if non-resident deductee failed to furnish its PAN. Further, the Hon’ble Delhi High Court in the case of Danisco India P. Ltd. v. UOI reported in (2018) 90 taxmann.com 295 (Delhi) had held that provisions of DTAA override section 206AA. Hence, the applicable TDS on subcontracting charges paid to Infosys China should be considered at 10% as per the India-China DTAA instead of 20% as per section 206AA of the IT Act. It was noted that while passing the order u/s 20 1(1) and 201(1A) for assessment year 2012-2013, AO had calculated TDS liability at 10% as per the Indo-China DTAA.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
These appeals at the instance of the assessee are directed against two orders of the CIT(A) and are pertaining to assessment years 2011-2012 and 2012-2013 (for assessment year 2011-2012, the CIT(A)’s order is dated 28.11.2013 and for assessment year 2012-2013, the CIT(A)’s order is dated 24.03.2014). The orders of the CIT(A) arise out of orders passed u/s 201(1) and 201(1A) of the I.T.Act. Common issues are raised in these appeals, hence, they were heard together and are being disposed of by this consolidated order.
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