Case Law Details
Hindustan Aeronautics Limited Vs DCIT (ITAT Bangalore)
ITAT Bangalore held that payment made towards service charges to CGTM France doesn’t fall under the category of ‘fees for technical service’. Accordingly, TDS u/s 195 of the Income Tax Act not deductible.
Facts- M/s. Hindustan Aeronautics Limited (HAL) having its registered office at Bangalore, is engaged in the business of design and development of engines of flights & helicopters. HAL entered into an agreement with Turbomeca for designing Dhurve/Shakti engine. The Shakti engine was co-developed by Turbomeca (company based at France) and HAL and the assistance for conducting flight tests were provided by CGTM, France a subsidiary of Turbomeca.
On verification, it was noticed that HAL has made the payments to CGTM, France for providing technical assistance for Shakti Air Flight Test without deduction of TDS.
The payments made by the assessee company to CGTM, France for providing technical assistance was covered by the definition of FTS as defined in Section 9(l)(vii) of the Act. The sum paid by the assessee company to the CGTM, France is therefore chargeable to tax under the Act. As the Assessee Company had not complied with the provisions of Sec. 195 of the Act on remittances made to CGTM, France, proceedings under Section 201 of the Act were initiated and the assessee company was asked to show cause by issue of Notice on 17-12-2014 as to why it should not be treated as an Assessee in default for failure to deduct tax at source in respect of the aforesaid payments.
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