No Requirement of Deduct TDS When Condition of Make Available is not Satisfied

THE RELEVANT TEXT OF THE ORDER IS AS FOLLOWS:

54. The first issue raised vide grounds of appeal No.1 to 3 is against relief given by CIT(A) vis-à-vis the payments made towards repairs and maintenance and other services and whether tax was deductible. The details of aforesaid payments are available at page 47 of CIT(A)’s order. The assessee claims to have made payment of ₹ 18,16,940/- to Core Link AB. The assessee claimed that the said payments included payments for material purchase or machinery part charges. The CIT(A) has directed the Assessing Officer to verify the claim of assessee and if the payments were made for material purchase or machinery part charges, then there was no requirement to deduct tax at source and for such non deduction of tax at source, no disallowance can be made. We find no merit in the grounds of appeal raised by Revenue in this regard as the CIT(A) has asked the Assessing Officer to make necessary verification and decide the issue. The grounds of appeal No.1 to 3 raised by Revenue are thus, dismissed.

55. Now, coming to the next issue vide grounds of appeal No.4 to 6, which is against applicability of provisions of section 206AA of the Act. The Revenue in assessment year 2009-10 had also raised similar issue vide grounds of appeal No.4 to 6 and our decision in the paras above would apply mutatis mutandis.

56. Similarly, grounds of appeal No.7 to 9 raised by Revenue are against issue of grossing up. We have also decided similar issue of grossing up in the appeal filed by Revenue in assessment year 2009-10 vide grounds of appeal No.7 to 9. Our decision would apply mutatis mutandis to this year and the grounds of appeal No.7 to 9 raised by Revenue are dismissed.

57. Now, coming to appeal of assessee in ITA No.1866/PUN/2014, relating to assessment year 2011-12.

58. The grounds of appeal No.1.1 to 1.5 are against disallowance of payments made to AB Tetra Pak, Sweden, which are in respect of purchase of copyrighted software. The Assessing Officer was of the view that the aforesaid payments were in the nature of royalty and for non deduction of tax at source, the assessee was held to be liable and demand was raised under section 201(1) of the Act and interest was charged under section 201(1A) of the Act. We have already decided this issue in assessment year 2009-10 with regard to grounds of appeal No.1.1 to 1.3 raised by assessee. Our decision in the said paras would apply mutatis mutandis and the grounds of appeal No.1.1 to 1.5 raised by assessee stands allowed.

59. Similarly, the issue raised vide ground of appeal No.2 is against payments made for software licenses purchased from other associated enterprise entities and the Assessing Officer and CIT(A) had held the assessee in default for non deduction of tax at source on the ground that the said payments were in the realm of royalty and in the absence of deduction of tax at source, the assessee was in default. The said issue also is similar to the grounds of appeal No.1.1 to 1.5 raised by assessee for the instant assessment year and our decision would apply mutatis mutandis, in turn, we place reliance on earlier decision of Pune Bench of Tribunal in John Deere India Pvt. Ltd. Vs DDIT (International Taxation) (2019) 70 ITR (Trib) 73 (Pune), wherein it was held that no TDS is required to be deducted on purchases of copyrighted software licenses. Accordingly, there was no requirement to deduct any tax out of such payments. The ground of appeal No.2 raised by assessee is thus, allowed.

60. The issue raised vide grounds of appeal No.3 to 3.4 is against training charges paid by assessee to Tetra Pak group companies, wherein the Assessing Officer and CIT(A) were of the view that there was requirement to deduct tax at source, hence the demand was raised under section 201(1) of the Act and interest was charged under section 201 (1A) of the Act. We have already deliberated upon this issue and have decided the same while deciding the grounds of appeal No.2.1 to 2.5 relating to assessment year 2009-10 and given directions in respect of entities based in different countries ranging from category I to III. The Assessing Officer is directed to apply the said decision and re-compute the demand, if any, under section 201(1) and 201(1A) of the Act. The grounds of appeal No.3 to 3.4 are thus, allowed.

61. The ground of appeal No.4 raised by assessee is not pressed, hence the same is dismissed as not pressed.

62. Now, coming to Revenue’s appeal in ITA No.1859/PUN/2014 relating to assessment year 2011-12.

63. The ground of appeal No.1 raised by Revenue is against deleting the addition made on account of IT support services.

64. The learned Authorized Representative for the assessee pointed out that as per agreement entered into between assessee and AB Tetra Pak, Sweden, IT support services were provided by the said associated enterprise, copy of agreement is placed at pages 91 to 107 of Paper Book. The learned Authorized Representative for the assessee stated that the aforesaid support services provided by associated enterprise do not satisfy the condition of ‘make available’ in DTAA between India and Sweden and hence, there was no requirement to deduct tax at source.

65. The issue stands covered by the decision of Pune Bench of Tribunal in John Deere India Pvt. Ltd. Vs DDIT (International Taxation) (supra) and applying the said ratio to the present case, we uphold the order of CIT(A) in holding that there was no requirement to deduct tax at source as the said support services do not make available any technology to the assessee. The DTAA is between India and Sweden and we have in the paras above already referred to the provisions of DTAA between two countries and it falls in  category No.III. In the absence of satisfying the condition of ‘make available’, there was no requirement to deduct tax at source. Accordingly, we dismiss the ground of appeal No.1 raised by Revenue.

66. The second issue raised by Revenue is against order of CIT(A) in allowing relief on account of training charges. The learned Authorized Representative for the assessee pointed out that this ground of appeal is infructuous as no such relief has been given by the CIT(A). On perusal of records, we find merit in the plea of learned Authorized Representative for the assessee. Hence, the ground of appeal No.2 is also dismissed.

67. Now, coming to the issue raised vide ground of appeal No.3 i.e. in respect of other payments. The first issue is with regard to payment of ₹ 30,81,728/- on account of repairs and maintenance. The CIT(A) vide para 2.7.21 at page 52 of the appellate order has given directions to Assessing Officer to verify the claim of assessee and held that no TDS was required to be deducted out of separate payments for material purchase or machinery part charges. In view thereof, we find no merit in the ground of appeal No.3.1 raised by Revenue in this regard.

68. Now, coming to ground of appeal No.3.2 i.e. another payment i.e. for design charges, wherein in respect of some payments TDS was deducted and the CIT(A) vide para 2.7.24 has directed the Assessing Officer to verify the claim of assessee, in case TDS has already been deducted and paid, then the assessee cannot be held to be in default. Further, the CIT(A) has also held that in respect of balance payments, the same are not taxable as they do not satisfy the condition of ‘make available’.

69. The learned Departmental Representative for the Revenue has failed to controvert the findings of CIT(A) and consequently, we find no merit in the ground of appeal No.3.2 raised by Revenue and the same is dismissed.

70. Now, coming to grounds of appeal No.4 to 6 which are against applicability of provisions of section 206AA of the Act. We have already decided the said issue in the paras above in assessment year 2009-10 and applying the same simile, this ground of appeal raised by Revenue is dismissed.

71. The last issue raised vide grounds of appeal No.7 to 9 is against grossing up of various payments, which has also been decided by us in assessment years 2009-10 and 2010-11. Following the same simile of reasoning, we dismiss the grounds of appeal No.7 to 9 raised by Revenue.

72. In the result, all the appeals of assessee are partly allowed and all the appeals of Revenue are dismissed.

Order pronounced on this 9^th day of September, 2019.

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Tags : Judgement, Appellant Tribunal