Case Law Details
Tractors and Farm Equipment Ltd. Vs DCIT (ITAT Chennai)
The submissions of Ld. AR are that warranty expenditure is part of overall sales obligations and the expenditure is reimbursed on actual basis. The warranty obligation being part and parcel of sales transactions and therefore, the same could not be held to be ‘fees for technical services’. Another line of argument is that services have been carried as well as utilized outside India and therefore, there is no TDS obligation on the part of the assessee in view of the fact that the payees do not have any permanent establishment in India. Finally, Ld. AR has submitted that no services have been rendered to the assessee rather the technical services, if any, has been rendered to overseas customers by the non-resident distributors.
The bench, after considering the provisions of Sec.9(1)(vii)(b) held that payment made by the assessee to a person outside India for earning income from any source outside India would not require tax at source u/s 195 since the income of recipient would be excluded from the deeming provisions of Sec.9(1) of the Act.
In this case services have been carried as well as utilized outside India. There is nothing on record that any of the payees has any permanent establishment in India. Therefore, as held by the bench, in such a case, there would be no obligation for assessee to deduct tax at source. We also concur with the submissions of Ld. AR that the warranty obligation being part and parcel of sales transactions and therefore, the same could not be held to be ‘fees for technical services’. Therefore, considering the fact of the case, we direct Ld. AO to delete the impugned demand as raised against the assessee.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
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