M/s.US Technology Resources P. Ltd, Trivandrum V. The ACIT, Trivandrum

ITA 136/COCH/2019

AI Insights

The case involves US Technology Resources Pvt. Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals), Thiruvananthapuram, concerning disallowances made in the assessment year 2010-11. The primary issues were the disallowance under section 40(a)(ia) for non-deduction of TDS on payments made to US Technology International Private Ltd., and the disallowance under section 40(a)(i) for subscription fees paid to Gartner Ireland Limited. The Tribunal upheld the disallowance under section 40(a)(ia) based on previous rulings and the prospective application of the second proviso to section 40(a)(ia). However, it reversed the disallowance under section 40(a)(i), citing that the payments were for accessing standardized online databases and did not qualify as technical services or royalty.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 134589 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 13-12-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 13-02-2019
• Other Referred Cases: Thomas George Muthoot vs. CIT, Infosys Technologies Ltd., Engineering Analysis Centre of Excellence Pvt. Ltd. Vs. CIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M. RAJASEKHAR LD
• Assessee Lawyers: RAJAKANNAN LD
• Keywords: TDS
• Section: 2

Judgement Text

आयकर अपीलीय अिधकरण, कोचीन पीठ, कोचीन म । IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN माननीय %ी सतबीर िसंह गोदारा, -ाियक सद. एवं माननीय %ी मनोज कु मार अ3वाल ,लेखा सद. के सम6। BEFORE HON’BLE SHRI SATBEER SINGH GODARA, J.M AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, A.M आयकर अपील सं./ ITA No.136/Coch/2019 (िनधा@रण वष@ / Assessment Year: 2010-11) US Technology Resources Pvt. Ltd. 721, Nila, Technopark Campus, Kariyavattom, Trivandrum-695 581. बनाम / V s. ACIT Circle-2(1), Trivandrum. थायी लेखा सं./जीआइ आर सं./P AN /GI R No . AAAC U - 6 0 8 5 - C (अपीलाथ /Appellant) : ( थ / Respondent) अपीलाथ की ओरसे/ Appellant by : Shri Rajakannan (Advocate)- Ld. A.R थ की ओरसे/Respondent by : Shri M. Rajasekhar (CIT) – Ld. DR सुनवाई की तारीख/Date of Hearing : 10-11-2022 घोषणा की तारीख /Date of Pronouncement : 30-11-2022 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2010-11 arises out of the order of learned Commissioner of Income Tax, (Appeals), Thiruvananthapuram [CIT(A)] dated 06-12-2018 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143(3) of the Act on 27-03-2013. The grievance of the assessee is two-fold – (i) disallowance u/s 40(a)(ia); (ii) disallowance of subscription ITA No.136/Coch/2019 - 2 - fee u/s 40(a)(i). The remaining grounds are consequential in nature which do not require any specific adjudication on our part. 2. The Ld. AR advanced arguments supporting the case of the assessee which has been controverted by Ld. CIT-DR. Having heard rival submissions, the appeal is disposed-off as under. 3. Disallowance u/s 40(a)(ia) 3.1 The assessee made certain payment under an agreement to other domestic entity i.e., US Technology International Private Ltd. (USTIPL). The payment was in the nature of reimbursement of salary and support costs and rent on cost-to-cost basis. Since, no tax was deducted on the same, Ld. AO invoking the provisions of Sec.40(a)(ia), made disllowance of Rs.15.84 Crores. 3.2 The Ld. CIT(A) noted that similar issue stood against the assessee for AYs 2011-12 and 2012-13 by the decision of this Tribunal in ITA Nos. 475/Coch/2016 & 134/Coch/2016 dated 23.05.2018 wherein it was held that TDS provisions would apply to such payments. The alternative plea seeking benefit of second proviso to Sec.40(a)(ia) was dismsised by Ld. CIT(A) on the ground that the proviso would be prospective in nature as held by Hon’ble High Court of Kerala in Thomas George Muthoot vs. CIT (63 Taxmann.com 99). Therefore, the benefit of the same would not be available in AY 2010-11. Aggrieved, the assessee is in further appeal before us. 3.3 We find that the findings of Ld. CIT(A) remain uncontroverted before us. The Tribunal, in its order for AYs 2011-12 & 2012-13 held that the assessee was obligated to deduct TDS on such payments. The alternative plea seeking beneift of second proviso to Sec.40(a)(ia) stood against the assessee by the cited decision of Hon’ble High Court ITA No.136/Coch/2019 - 3 - of Kerala which has held that second proviso would be prospective in nature i.e., applicable from AY 2013-14. Therefore, this issue is decided agianst the asssessee and the findings of Ld. CIT(A) stand confirmed. 4. Disallowance u/s 40(a)(i) 4.1 The assessee paid amount of Rs.17.16 Lacs as subscription fees to Gartner Ireland Limited to access standarised online databases. The Ld. AO held the same to be Technical services u/s 9(1)(vii) Explanation-2 and since no tax was deducted against the same, disallowance was made u/s 40(a)(i). 4.2 The Ld. CIT(A), considering the decision of Hon’ble Karnataka High Court in Infosys Technlogies Ltd. (51 Taxmann.com 417) held that TDS would be required on such payments and accordingly, decided this issue against the assessee. 4.3 We find that the payment is in the nature of accessing online data bases which are standard in nature. No specific technical service has been provided by the payee. Such payment could not be considered as royalty as per the latest decision of Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. Vs. CIT [2021] SCC Online SC 159 (SC). Such payment could also be not considered as fees for technical services since the same are in the nature of subscription fees to access standardized online databases. Therefore, the impugned addition stand deleted. ITA No.136/Coch/2019 - 4 - 5. The appeal stand partly allowed. Order pronounced on 30 th November, 2022. Sd/- (SATBEER SINGH GODARA) -ाियक सद. /JUDICIAL MEMBER Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद. / ACCOUNTANT MEMBER िदनांक / Dated : 30-11-2022 EDN/- Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) -NFAC, Delhi 4. The CIT - 5. The DR, ITAT, Cochin 6. Guard File