The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that Tax Deductible at source (TDS) does not apply to regular management services relating to business administration as it is not a technical service.
Intrado EC India Private Ltd, the assessee is engaged in the business of providing reselling, conferences and collaboration services, webcasting and other related support services. The assessee filed the return of income for the AY 2016-17 on 30.11.2016 declaring a total income of Rs.4,40,18,810.
It was observed that the assessee had certain international transactions with its AE and therefore a reference to the TPO was made for the determination of ALP of the assessee’s international transaction.
The TPO made a TP adjustment towards the receipt of management services by the assessee from its AE which resulted in an adjustment of Rs.22,03,14,210. The AO passed a draft assessment order incorporating the TP adjustment. The AO also made a disallowance u/s. 40(a)(i) for non-deduction of tax at source on the same payments made by the assessee for receipt of management services by holding that the payments are in the nature of Fees for Technical Services.
It was contended that the mere presence of a condition in a clause that both parties are not to use, disclose, reproduce or dispose of any information cannot lead to the conclusion that technology was made available.
On perusal of the Service c use in the MSA, it is noticed that the service provider is providing regular management services relating to the business administration of the company and there was no technical knowledge that was imparted to the assessee.
While allowing the appeal of the assessee, a Coram comprising of Smt. Beena Pillai, Judicial Member and Ms Padmavathy S, Accountant Member held that the services rendered by the related parties to the assessee are not liable to tax deduction at source since there is no technology or technical knowledge made available to the assessee.
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