SEEDWORKS INTERNATIONAL LIMITED,HYDERABAD vs. DCIT, CIRCLE-3(1), HYDERABAD

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ITA 2049/HYD/2025Status: DisposedITAT Hyderabad22 July 2026AY 2022-2320 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the CIT(A) had failed to adjudicate certain grounds raised by the assessee and that the issue of taxability of payments to a Nepal entity was not properly examined. Both appeals were restored to the CIT(A) for fresh adjudication.

What were the facts?

The assessee made payments to foreign entities without deducting TDS. The AO disallowed these payments under Section 40(a)(i). The CIT(A) deleted one disallowance but sustained another. Both the assessee and Revenue filed appeals.

What were the issues?

Whether the CIT(A) properly adjudicated all grounds of appeal and whether payments to a foreign entity were correctly characterized under the DTAA and domestic law.

Which sections of the Income-tax Act were involved?

Section 40(a)(i),Section 195,Section 9(1)(vii),Section 143(3),Section 250(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad ‘A‘ Bench, Hyderabad

Before: Shri Ravish SoodShri Madhusudan Sawdia

Hearing: 06/07/2026

Heard together (2 matters)

ITA No.2049/Hyd/2025
ITA No.2081/Hyd/2025

Read from the judgment's own cause title. This page is filed under one of them.

आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A‘ Bench, Hyderabad �ी रिवश सूद,�ाियक सद� एवं �ी मधुसूदन साविड़या लेखा सद� सम� | Before Shri Ravish Sood, Judicial Member A N D Shri Madhusudan Sawdia, Accountant Member आ.अपी.सं /ITA No.2049/Hyd/2025 (िनधा�रण वष�/Assessment Year: 2022-23) Seedworks International Vs. Dy. CIT Ltd, HYDERABAD Circle 3(1) PAN: AAMCS5085J Hyderabad (Appellant) (Respondent) आ.अपी.सं /ITA No.2081/Hyd/2025 (िनधा�रण वष�/Assessment Year: 2022-23) (Appellant) (Respondent) Vs. Dy. CIT Seedworks International Circle 3(1) Ltd, HYDERABAD Hyderabad PAN: AAMCS5085J (Appellant) (Respondent) िनधा��रती �ारा/Assessee by: Adv. Deepak Chopra राज� व �ारा/Revenue by: Smt. Seema Meena, CIT(DR) सुनवाई की तारीख/Date of hearing: 06/07/2026 घोषणा की तारीख/Pronouncement: 22/07/2026 आदेश/ORDER Per Madhusudan Sawdia, A.M.:

These are cross appeals filed by M/s. Seedworks International Ltd (“the assessee”) and the Revenue, feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) (“Ld. CIT(A)”) dated 10.09.2025 for the A.Y. 2022-23.

2.

The brief facts of the case culled out from the records are that the assessee is a company engaged in the business of providing hybrid seeds of paddy, cotton, millet,

mustard and vegetables, which are the advanced versions of genetically produced seeds. The assessee filed its original return of income for the assessment year 2022-23 on 02.11.2022 declaring total income at ₹34,48,92,560/-. Subsequently, the assessee filed a revised return of income on 30.12.2022 declaring the same total income of ₹34,48,92,560/- . The case of the assessee was selected for scrutiny under CASS and accordingly notice under section 143(2) of the Income Tax Act, 1961 was issued by the Learned Assessing Officer (“Ld. AO”) on 01.06.2023. During the assessment proceedings, the Ld. AO observed that the assessee had made payments amounting to ₹7,22,14,983/- to M/s Straits Biotech Pte. Ltd., Singapore and ₹27,61,136/- to M/s Green Tech Nepal Pvt. Ltd., Nepal without deduction of tax at source under section 195 of the Act. Accordingly, the Ld. AO disallowed the aggregate amount of ₹7,49,76,119/- under section 40(a)(i) of the Act. Consequently, the assessment was completed by the Ld. AO under section 143(3) read with section 144B of the Act vide order dated 23.03.2024 assessing the total income of the assessee at ₹41,98,68,679/-.

3.

Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) deleted the disallowance of ₹27,61,136/- relating to payment made to M/s Green Tech Nepal Pvt. Ltd., Nepal. However, the disallowance of ₹7,22,14,983/- relating to payment made to M/s Straits Biotech Pte. Ltd., Singapore was sustained. Accordingly, the appeal of the assessee was partly allowed by the Ld. CIT (A).

4.

Aggrieved by the order of the Ld. CIT (A), both the assessee as well as the Revenue have preferred cross appeals before this Tribunal. We first proceed to adjudicate the appeal filed by the assessee.

ITA NO. 2049/HYD/2025 : (ASSESSEE’S APPEAL) 5. The assessee has raised the following grounds of appeal:

6.

The Learned Authorised Representative (“Ld. AR”) submitted that the only issue arising in the present appeal is that the Ld. CIT(A) has failed to adjudicate Ground Nos. 4 and 5 raised by the assessee before him. Inviting our attention to para no. 2 of the impugned order, the Ld. AR submitted that all the grounds raised before the Ld. CIT(A) have been reproduced therein. He further invited our attention to para no. 5.2 of the impugned order and submitted that while adjudicating the appeal, the Ld. CIT(A) has rendered findings only on certain issues and has completely omitted to adjudicate Ground Nos. 4 and 5 raised by the assessee. The Ld. AR submitted that in the absence of adjudication of Ground Nos. 4 and 5, the order of the Ld. CIT(A) is not in conformity with the mandate of section 250(6) of the Act. Accordingly, he prayed that the issue may be restored to the file of the Ld. CIT(A) for the limited purpose of adjudicating Ground Nos. 4 and 5 raised by the assessee before him.

7.

Per contra, the Learned Departmental Representative (“Ld. DR”) fairly submitted that if Ground Nos. 4 and 5 raised by the assessee before the Ld. CIT(A) have remained unadjudicated, the matter may be restored to the file of the Ld. CIT(A) for fresh adjudication of the said grounds in accordance with law.

8.

We have heard the rival submissions and perused the material available on record. The solitary grievance raised by the assessee before us is that the Ld. CIT(A) has failed to adjudicate Ground Nos. 4 and 5 raised before him. In support of the said contention, the Ld. AR has invited our attention to para no. 2 of the impugned order wherein the grounds of appeal raised before the Ld. CIT(A) have been reproduced, which is to the following effect:

9.

The Ld. AR has also drawn our attention to para 5.2 of the impugned order wherein the Ld. CIT(A) has discussed and adjudicated the ground nos. 2 to 5 raised by the assessee, which is to the following effect:

10.

On a perusal of the above, we find merit in the contention of the assessee that the Ld. CIT(A) has failed to render any finding whatsoever on Ground Nos. 4 and 5 raised by the assessee. The impugned order is completely silent on the aforesaid grounds. It is a settled proposition of law that the first appellate authority is duty-bound to adjudicate each and every ground raised before it and pass a reasoned and speaking order in terms of section 250(6) of the Act. Once a ground is raised before the appellate authority, the same cannot be left unadjudicated. In the present case, since Ground Nos. 4 and 5 raised by the assessee before the Ld. CIT(A) have admittedly remained unadjudicated, we are of the considered opinion that the matter deserves to be restored to the file of the Ld. CIT(A) for limited adjudication of the aforesaid grounds. Accordingly, we set aside the impugned order of the Ld. CIT(A) on this limited issue and restore the matter to his file with a direction to adjudicate Ground Nos. 4 and 5 raised by the assessee before him by passing a speaking order in accordance with law after providing adequate opportunity of being heard to the assessee.

11.

Further, we make it clear that we have not expressed any opinion on the merits of the issues involved in Ground Nos. 4 and 5 and all contentions available to both the parties are left open for adjudication before the Ld. CIT(A). Since we have accepted the preliminary contention of the assessee and have restored the issue to the file of the Ld. CIT(A) for fresh adjudication of Ground Nos. 4 and 5, we do not consider it necessary to adjudicate the additional grounds raised by the assessee before us. Similarly, we refrain from admitting and adjudicating the additional evidence filed by the assessee at this stage. The assessee is granted liberty to raise the additional grounds and file the additional evidence before the Ld. CIT(A), if so advised. In such an event, the Ld. CIT(A) shall consider the same in accordance with law after affording reasonable opportunity of being heard to both the parties.

12.

In the result, the appeal filed by the assessee in ITA No. 2049/Hyd/2025 is allowed for statistical purposes.

ITA NO. 2081/HYD/2025 : (REVENUE’S APPEAL)

13.

At the outset, the Ld. DR submitted that the only issue arising out of the grounds raised by the Revenue is regarding deletion of the disallowance of ₹27,61,136/- made by the Ld. AO under section 40(a)(i) of the Act. The Ld. DR submitted that during the year under consideration the assessee had made payment of ₹27,61,136/- to M/s Green Tech Nepal Pvt. Ltd., a resident of Nepal, towards manpower services without deducting any tax at source under section 195 of the Act. Accordingly, the Ld. AO disallowed the said payment under section 40(a)(i) of the Act. The Ld. DR further submitted that the payment made by the assessee to M/s Green Tech Nepal

Pvt. Ltd. squarely falls within the ambit of Fees for Technical Services (“FTS”) as defined in Explanation 2 to section 9(1)(vii) of the Act. Therefore, according to him, the payment was chargeable to tax in India and consequently liable for deduction of tax at source under section 195 of the Act. Inviting our attention to para no. 5.3 of the order of the Ld. CIT(A), the Ld. DR submitted that the Ld. CIT(A) has treated the impugned payment as being covered under Article 7 dealing with Business Profits under the India-Nepal DTAA without assigning any reasons whatsoever for arriving at such conclusion. He submitted that the Ld. CIT(A) has failed to conduct any verification regarding the nature of payment or the applicability of Article 7 of the DTAA. According to the Ld. DR, once the payment is covered under the definition of FTS under domestic law, tax was required to be deducted under section 195 of the Act. Since the assessee failed to deduct tax, the Ld. AO was justified in making disallowance under section 40(a)(i) of the Act. Accordingly, it was prayed that the order of the Ld. CIT(A) be set aside.

14.

Per contra, the Ld. AR supported the order of the Ld. CIT(A). The Ld. AR submitted that there is no dispute regarding the fact that the payment made by the assessee to M/s Green Tech Nepal Pvt. Ltd. is covered under the definition of FTS under Explanation 2 to section 9(1)(vii) of the Act. He further submitted that there is also no dispute regarding the fact that the India-Nepal DTAA does not contain any specific Article dealing with FTS. Relying upon the order of the Ld. CIT(A), the Ld. AR submitted that in the absence of a specific Article dealing with FTS in the India-Nepal DTAA, the payment has rightly been considered by the Ld. CIT(A) under Article 7

dealing with Business Profits. He submitted that under Article 7 of the DTAA, business income of a foreign enterprise can be taxed in India only if such enterprise has a Permanent Establishment (“PE”) in India. The Ld. AR submitted that no such PE of M/s Green Tech Nepal Pvt. Ltd in India has been identified by the Revenue. Therefore, in the absence of a PE in India, the income cannot be taxed in India and consequently no obligation to deduct tax under section 195 of the Act arises. In support of his contention, the Ld. AR relied upon the decisions of Bangalore Bench of Tribunal in the case of DCIT (International Taxation) Vs. IBM India Pvt. Ltd. (100 taxmann.com 230); ITAT Ahmedabad Bench in the case of DCIT (International Taxation) Vs. Kalpataru Power Transmission Ltd. in ITA No. 35/Ahd/2021; ITAT Delhi Bench in the case of DCIT Vs. Michelin ROH Co. Ltd., SRBC & Associates LLP in ITA No. 8010/Del/2019; ITAT Mumbai Bench in the case of Booz & Company Vs. DDIT (International Taxation) in ITA No. 4063/Mum/2015 which have also been referred to by the Ld. CIT(A) at page nos. 15 to 17 of his order. The Ld. AR submitted that once the income is not chargeable to tax in India, section 195 of the Act has no application and consequently no disallowance under section 40(a)(i) of the Act can be made.

15.

We have heard the rival submissions and perused the material available on record including the case laws relied upon. The solitary issue arising for our consideration is whether the Ld. CIT(A) was justified in deleting the disallowance of ₹27,61,136/- made by the Ld. AO under section 40(a)(i) of the Act in respect of payments made by the assessee to M/s Green Tech Nepal Pvt. Ltd., Nepal. The case of

the Revenue is that the payment made by the assessee towards manpower services is in the nature of FTS within the meaning of Explanation 2 to section 9(1)(vii) of the Act and, therefore, tax was liable to be deducted at source under section 195 of the Act. The case of the assessee, on the other hand, is that though the payment may fall within the ambit of FTS under the domestic law, the India–Nepal DTAA does not contain any specific Article dealing with FTS and, therefore, the same is liable to be examined under Article 7 dealing with Business Profits and, in the absence of any PE of the recipient in India, the income is not taxable in India. In this regard, we have gone through para no. 5.3 of the order of the Ld. CIT (A), which is to the following effect:

16.

On perusal of the above, we find that the Ld. CIT(A), after noticing that the India–Nepal DTAA does not contain any

specific Article dealing with FTS, proceeded to hold that the payment made to M/s Green Tech Nepal Pvt. Ltd. is covered under Article 7 of the DTAA and, since the recipient does not have a PE in India, the same is not taxable in India and consequently no tax was deductible at source under section 195 of the Act. We further observe that no reasons have been assigned as to how and on what basis the impugned payment has been characterized as Business Profits falling under Article 7 of the India–Nepal DTAA. We also find that no factual verification has been undertaken regarding the precise nature of services rendered by M/s Green Tech Nepal Pvt. Ltd., the terms governing such services, and the characterization of the resultant income under the provisions of the DTAA. In our considered opinion, merely because the India–Nepal DTAA does not contain a specific Article dealing with FTS, it does not automatically follow that every payment for services would necessarily fall under Article 7 of the DTAA. The absence of a specific FTS Article in the DTAA only necessitates a further examination as to the correct characterization of the income under the treaty. Therefore, it becomes necessary to first determine under which Article of the DTAA the impugned payment falls. Only after such characterization is undertaken and an appropriate finding is recorded regarding the applicable treaty provision can the issue of taxability of such income in India and the consequential obligation to deduct tax at source under section 195 of the Act be examined. We find that neither the Ld. AO nor the Ld. CIT(A) has undertaken the said exercise in the manner required under law. In this regard, we have gone through the para no. 7(b) of the order of the Ld. AO, which is to the following effect:

17.

On perusal of the above, we find that the Ld. AO proceeded on the premise that the impugned payment was taxable as FTS under the provisions of the Act and rejected the assessee’s contention that the payment was governed by Article 7 of the India–Nepal DTAA. However, the assessment order does not reveal any comprehensive examination of the specific Article of the DTAA under which the impugned payment is liable to be characterized. Consequently, the treaty characterization of the income has not been examined in the manner contemplated under the DTAA. At the same time, we find that the Ld. CIT(A), without undertaking such characterization exercise, directly concluded that the payment was governed by Article 7 of the India–Nepal DTAA. In the absence of any discussion regarding the nature of services rendered, the relevant provisions of the DTAA and the basis for bringing the income within the ambit of Article 7, we are unable to sustain the conclusion reached by the Ld. CIT(A).

18.

As regards the reliance placed by the assessee on various decisions of the coordinate benches of the Tribunal, we find no quarrel with the proposition laid down therein that where income is governed by Business Profit under Article 7 of the applicable DTAA, such income cannot ordinarily be taxed in India in the absence of a PE in India. However, the applicability of the said proposition would arise only after it is first established that the impugned income is liable to be characterized as Business Profits under Article 7 of the India– Nepal DTAA. Since no such exercise has been undertaken by the Ld. CIT(A), the aforesaid decisions do not conclusively determine the issue at the present stage. There is no dispute among the parties regarding the fact that the India–Nepal DTAA does not contain a separate Article dealing with FTS. However, that fact alone is not determinative of the issue. The real question is whether, on the facts of the present case, the impugned payment is liable to be characterized as Business Profits under Article 7 or under any other applicable Article of the DTAA. Such an exercise necessarily requires an examination of the nature of services rendered, the rights and obligations arising under the agreement between the parties and the relevant provisions of the DTAA, which has not been undertaken by the authorities below in the manner required under law.

19.

Coming to the observations regarding PE, we find that on a perusal of para no. 7(b) of the assessment order, the Ld. AO had not accepted the assessee’s contention that the payments made to M/s Green Tech Nepal Pvt. Ltd. were in the nature of Business Profits governed by Article 7 of the India– Nepal DTAA. Therefore, once the Ld. AO himself did not accept

the characterization of the impugned receipts as Business Profits, there was no occasion for him to examine the existence or otherwise of a PE of the recipient in India. The issue of PE becomes relevant only after it is first established that the income falls within Article 7 of the DTAA. We further find that while adjudicating the appeal, the Ld. CIT(A) observed in para no. 5.3 of his order that the Ld. AO had failed to establish the existence of a PE of the recipient in India. However, having recorded such an observation, the Ld. CIT(A) proceeded to conclude that the impugned payments were governed by Article 7 of the India–Nepal DTAA and consequently not taxable in India, without first undertaking the foundational exercise of determining the correct treaty characterization of the income and without recording any independent finding regarding the existence or otherwise of a PE in India. In our considered view, the reasoning adopted by the Ld. CIT(A) suffers from an inherent inconsistency. Once the Ld. CIT(A) accepted the assessee’s contention that the impugned income was governed by Article 7 of the India–Nepal DTAA, it became incumbent upon him, first, to record cogent reasons for characterizing the income as Business Profits and, secondly, to examine the foundational requirement regarding the existence or otherwise of a PE in India. Merely observing that the Ld. AO had failed to establish the existence of a PE cannot, by itself, lead to the conclusion that the income is not taxable in India, particularly when no independent finding has been recorded either on the characterization of the income or on the existence of a PE.

20.

Considering the entirety of the facts and circumstances of the case, we are of the view that the issue has not been examined from the correct legal perspective either by

the Ld. AO or by the Ld. CIT(A). Therefore, in the interest of justice, we deem it appropriate to restore the matter to the file of the Ld. CIT(A) for fresh adjudication. The Ld. CIT(A) shall first determine the correct characterization of the impugned payments having regard to the provisions of the India–Nepal DTAA and thereafter examine their taxability in accordance with the provisions of the Act read with the applicable provisions of the DTAA. If the payments are ultimately held to be in the nature of Business Profits governed by Article 7 of the DTAA, the Ld. CIT(A) shall examine and record a categorical finding regarding the existence or otherwise of a PE of the recipient in India during the relevant previous year and thereafter adjudicate the issue afresh in accordance with law after providing adequate opportunity of being heard to both the parties. We make it clear that we have not expressed any opinion on the merits of the controversy and all contentions available to both the parties are left open.

21.

In the result, the appeal filed by the Revenue in ITA No. 2081/Hyd/2025 is allowed for statistical purposes.

22.

To sum up, both the appeals filed by the assessee and the Revenue are allowed for statistical purposes.

Order pronounced in the Open Court on 22nd July, 2026.

Sd/- Sd/-

(RAVISH SOOD) (MADHUSUDAN SAWDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, dated 22nd July, 2026. Vinodan/sps

Copy to:

S.No Addresses 1 M/s. Seedworks International Ltd, Sy. No.530/A Gowdavally Village, Medchal, SO Medchal, Hyderabad 501403 2 Dy. CIT, Circle 3(1), Room No. 433, C Block, 4th Floor, IT Towers, AC Guards, Masab Tank, Hyderabad 500004 3 Pr. CIT , Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File

By Order

TUMMALACHARLA Digitally signed by TUMMALACHARLA LAKSHMI NARAYANA DN: cn=TUMMALACHARLA LAKSHMI LAKSHMI NARAYANA, c=IN, o=INCOME TAX APPELLATE TRIBUNAL, ou=INCOME TAX NARAYANA APPELLATE TRIBUNAL, CHENNAI BENCH Date: 2026.07.22 15:39:13 +05'30'

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