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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
(A.Y. 2016-17) Spark44 Demand Creation Vs. Assistant Commissioner Partners Private Limited of Income Tax, 91 Springboard Business Centralized Processing Hub Pvt. Ltd., 175, Cell-TDS Kagalwala House, 2nd TDS CPC, Aayakar Floor, Vidyanagri Marg, Bhawan, Sector -3, Kalina, Santacruz (E) Vaishali, Ghaziabad, Mumbai – 400098 UP- 401010 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAWCS3113M Appellant .. Respondent [ Appellant by : Nimit Vora Respondent by : Ram Krishna Kedia Date of Hearing 05.07.2023 Date of Pronouncement 20.07.2023 आदेश / O R D E R Per Amarjit Singh (AM): This appeal filed by the assesse is directed against the order passed by the ld. CIT(A) NFAC, dated 17.02.2023 for A.Y. 2016-17. The assessee has raised the following grounds before us: “1. The ld. CIT(A) has erred in upholding the action of the Assistant Commissioner of Income Tax, Centralized Processing Cell TDS (hereinafter referred to as 'ld. AO') in determining TDS liability @ 20% on amount payable to non-resident payee towards inter-company management fees by applying provisions of section 206AA r.w.s. 195 of the Act in the absence of PAN of non-resident payee.
2. The Id. CIT(A) has erred in not appreciating the following:
P a g e | 2 Spark44 Demand Creation Partners Pvt Ltd. Vs. ACIT, CPC, TDS 2.1 In terms of India-UK DTAA, tax was not required to be deducted in respect of services availed from the non-resident payee as no technical services were made available to the appellant. 2.2 The provisions of India UK DTAA, being more beneficial, no tax should have been deducted at source. However, as a matter of abundant caution, the appellant deducted and deposited tax at 10.30% u/s 115A(1)(b)(B) read with section 195 of the Act. 2.3 The action of the Id. AO in applying TDS rate of 20% without considering the provisions of India-UK DTAA and consequent adjustment while framing the intimation u/s 200A is beyond the scope of the said provision. The appellant craves leave to add, amend, modify, rescind, supplement or alter the grounds taken hereinabove either before or at the time of hearing of this appeal.”
Fact in brief is that the CPC, has passed order u/s 154 of the Act on 15.02.2017 after taking into consideration the TDS/TCS statement filed by the assessee for the 4th quarter of the financial year 2015-16. The above referred statement filed by the assesse u/s 200A of the Act in TRACES (TDS Reconciliation Analysed and Correction Enabling System) was processed by the TDS CPC Ghaziabad by raising a demand of Rs.7,24,810/- towards short deduction/collection to the amount of Rs.647,15,780/- and interest of short deduction/collection of Rs.77,652/-. The rectification application filed by the assessee was rejected.
Aggrieved, the assesse filed the appeal before the ld. CIT(A) and submitted that the assessing officer CPC Ghaziabad has rejected the rectification application filed by the assessee u/s 154 of the Act without considering the application of the assessee on merit. The ld. CIT(A) has dismissed the appeal of the assesse holding that rectification u/s 154 of the Act can only be made then there is no debatable question.
Heard both the sides and perused the material on record. During the financial year 2015-16 the assesse recorded inter-company management fees of Rs.66,71,734/-payable to its group company Spark44 Limited, UK (Spark44 UK). As per Sec. 195 of the Act, tax is P a g e | 3 ITA No.1294/Mum/2023 Spark44 Demand Creation Partners Pvt Ltd. Vs. ACIT, CPC, TDS required to be deducted at source by any person while paying to a non- resident (including a foreign company) on any sum chargeable under the Act. During the year assessee has availed following support services from Spark44 UK:
“a. Human resource support services. b. Accounts and finance support services. c. IT support and infrastructure. d. E mail system. e. Video conferencing facility etc.” The assesse deducted tax u/s 195 of the Act r.w.s 115A(1)(b)(B) of Rs.66,71,734/- being 10.30% i.e Rs.6,87,189/- and paid the same along with the interest for delay in payment. The assesse referred India U.K. DTAA provisions which say that services renders is FTS only if they make available technical knowledge experience etc. It is further submitted that the definition of FTS only includes technical or consultancy services and managerial services are excluded from the ambit of FTS in the tax treaty. It is also submitted that in view of the provisions of India UK DTAA no tax should have been deducted at source, however, as matter of abundant caution the assesse deducted and deposited tax at 10.30% u/s 115A(1)(b)(B) r.w.s 195 of the Act. Further, the assesse has submitted that as per Sec. 206AA of the Act in the absence of PAN of the non-resident payee TDS can be levied at 20%. In this regard, the assesse referred income tax simplification committee recommendation to exempt non-residence having tax identification number from the applicability of TDS at high rate u/s 206AA of the Act. It is also mentioned that amendment was made in Sec. 206AA(7) by Finance Act 2016 w.e.f 01.06.2016 and new Rule 37BC of the Income Tax 1962, whereby the provisions of Sec. 206AA will not apply on payment of FTS to non-resident deductee, who do not have PAN in India Provided requisite details mentioned in Rule 37BC i.e TRC Form 10F have been furnished.