ACIT, CHENNAI vs. NCS PEARSON(INDIA) P LTD, NEW DELHI

आदेश /O R D E R

PER MAHAVIR SINGH, VICE PRESIDENT:

2010-11 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’), vide order dated 24.03.2014.

40(a)(i) of the Act. For this, Revenue has raised various grounds from ground Nos.2 to 2.7, which was argumentative, exhaustive and factual and hence, need not be reproduced.

position, title or status. The clients of NCS USA include companies with Information Technology ("IT”) certification exams and professional associations with licensing exams. NCS USA uses its own technology and software which makes it possible for its clients to have their exams provided on-demand via computer based testing at third party Authorised Testing Centers (“ATC") (such as Jetking) around the globe. Each ATC access the software and takes responsibility for administering the exams when test takers come to the centre. NCS USA has entered into a service agreement with NCS India wherein NCS India renders technical support to the third party ATC if the test administration software has not been properly installed or activated and collects the test fee paid by the candidates/customers who appear for the examination at the third party ATC's and remits the same to NCS USA. NCS India is remunerated for the services rendered on a cost plus basis of 15 percent which is duly offered for taxation in its return of income.

4.1 According to the AO from the very agreement i.e., service agreement with NCS Pearson Inc, USA and NCS Pearson India Pvt. Ltd., (the assessee company) and is dated 06.06.2002, the technical and provisional services which were provided by NCS USA in India is through NCS India only and the entire income was India, therefore it is liable to TDS u/s.195 of the Act. Hence, the assessee is failed to deduct TDS u/s.195 of the Act, the AO disallowed this amount of Rs.12,50,16,167/-.

4.2 We noted that when the matter was carried in appeal before CIT(A), the assessee contended that the assessee never made claim of any expenditure and this is a part of support services, the assessee facilitated collection and remission of examination fees collected by third party authorized collection centre from candidates / customers who appears for examination to NCS USA. There is no expenditure claimed by assessee in regard to this and this is only a support service rendered for which there is cost plus 15% markup which was declared as income of the assessee and accepted by the Department. The CIT(A) accordingly followed the decisions of Hon’ble Bombay High Court in the case of CIT vs. Dedicated Healthcare Services (TPA) India (P.) Ltd., [2018] 408 ITR 36 and the Delhi Tribunal in the case of Delhi Tourism and Transport Development Corporation Ltd., vs. DCIT in allowed the claim of assessee by observing as under: 4.10 The AO further argues that the amount collected by the appellant on behalf of the US Company should be treated as a receipt in the hands of the appellant Company. This contention of the AO is out of order and untenable, as the said case was also subject to Transfer Pricing Audit. The Transfer Pricing officer has not given any finding on treating such receipts as income of the Appellant. Further, on perusal of the agreement between NCS India and NCS US, it is NCS India is being remunerated on cost plus 15% mark up basis and no separate consideration is charged for its revenue. Whatever fees that are collected from Third party administrators are purely on behalf of NCS US and in cannot partake the characteristic of being an income for the appellant.

4.11 In view of the discussion above, it is held that since the remittance itself was not claimed as a expenditure, provisions of Section 40(a)(i) cannot be triggered. Hence the AO is hereby instructed to delete the said addition.

Order pronounced in the open court on 17th May, 2023 at Chennai.