| The Tax Publishers2023 TaxPub(DT) 1170 (Del-Trib) INCOME TAX ACT, 1961
Secrion 195
Payment was for communication costs to the non-resident company and such company provided inbound and outbound facility to the appellant. The entire process was automated and did not involve any human intervention. Also, article 12(4)(b) of Indo-US DTAA clearly states that for service to be classified as an included service, the technical knowledge should be made available to the recipient so as to enable him to apply the technology to be used. In the instant case communication charges were paid for inter communication services. These could, in no manner, be said to make available knowledge to the recipient of the service, i.e., the assessee appellant in this case. In the absence of any knowledge being made available the consideration paid could not fall within the definition of fee for included services. Therefore, payment was not taxable in the hands of non-resident either under section 9(1)(vii) or under article 12(4)(b) of Indo-US DTAA and, therefore, no TDS under section 195 was called for.
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Tax deduction at source - Under section 195 - Communication charges paid to non-resident treated as fee for technical services by AO -
Assessee claimed deduction of 'communication charges' paid to TATA Communications/USA Inc [TATA INC]. AO treated the payment as fee for technical services/ fee for included services and thus disallowed deduction for want of TDS under section 195. Held: Payment was for communication costs to the non-resident company and such company provided inbound and outbound facility to the appellant. The entire process was automated and did not involve any human intervention. Also, article 12(4)(b) of Indo-US DTAA clearly states that for service to be classified as an included service, the technical knowledge should be made available to the recipient so as to enable him to apply the technology to be used. In the instant case communication charges were paid for inter-communication services. These could, in no manner, be said to make available knowledge to the recipient of the service, i.e., the assessee appellant in this case. In the absence of any knowledge being made available, the consideration paid could not fall within the definition of fee for included services. Therefore, payment was not taxable in the hands of non-resident either under section 9(1)(vii) or under article 12(4)(b) of Indo-US DTAA and, therefore, no TDS under section 195 was called for.
Followed:CIT, TDS, Bangalore v. Vodafone South Ltd. 2016 (72) Taxmann.com 347 (Karn-HC) : 2016 TaxPub(DT) 3679 (Karn-HC) and CIT (TDS) v. Tata Teleservices Ltd. in ITA 1417/2018 vide order dated 30-5-2022 : 2022 TaxPub(DT) 6330 (Del-HC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2016-17
INCOME TAX ACT, 1961
Section 32(1)
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