Assessee was engaged in business of manufacturing of welding electrodes. AO observed that assessee in order to search engineer for new product development contacted Head Hunting Concern located in South Korea. Agreement was entered with this Korean concern for supply of engineers as per job description which will be employed by assessee company. No tax was deducted under section 195 on payment made to such company. Assessee submitted that alleged payment was made to Non Resident having no permanent establishment in India and payment was not in the nature of any technical services. However, AO held that alleged payment was the fees for technical services and thus liable for tax deduction at source under section 195 and also levied interest under section 201(1A). Held: Section 9(1)(vii) Explanation 2 provides that fees for technical services means any consideration for the rendering of any managerial, technical or consultancy services but did not include consideration for any construction, assembly, mining or like project undertaken by recipient or consideration which would be income of the recipient chargeable under the head 'Salaries'. After examining the agreement, nature of services provided by Korean company to the assessee and the provisions of section 9(1)(vii), services taken by assessee company from Korean company do not fall under the category of technical services and it was merely fee paid for placement services which by no canon require any technical expertise. Therefore, there was no liability of the assessee to deduct tax at source under section 195.
IN THE ITAT, INDORE BENCH
KUL BHARAT, J.M. & MANISH BORAD, A.M.
D & H Secheron Electrodes (P) Ltd. v. ITO
I.T.A. No. 104/Ind/2018
6 March, 2020
Assessee by: S.N. Agrawal & Pankaj Mogra, ARs
Revenue by: R.S. Ambedkar, Sr. DR
Manish Borad, A.M.
The above captioned appeal filed at the instance of the assessee pertaining to assessment year 2016-17 is directed against the orders of learned Commissioner (Appeals)-3 (in short 'Ld. CIT(A)'], Ahmedabad dated 17-1-2018 which is arising out of the order under section 250 of the Income Tax Act, 1961 (in short the 'Act') dated 20-1-2016 framed by ITO (IT & TP), Bhopal.
2. The assessee has raised following grounds of appeal :--
01. That on the facts and in the circumstances of the case the learned. Commissioner (Appeals) erred in confirming the action of the assessing officer by treating the assessee company as assessee in default in respect of non-deduction of Tax at Source under section 195 of the Income Tax Act of Rs. 1,55,009 in respect of payment made to M/s. Korea Search of Rs. 6,01,974 during the year under consideration and also interest charged by the assessing officer under section 201/201(1A) of the Income Tax Act of Rs. 22,718 without properly appreciating the facts of the case and submissions made before her even when the assessee was not liable to deduct TDS on this payment.