M/s. Esm Sys Pvt. Ltd., Ahmedabad V. ITO, Ward-2(1)(1), Ahmedabad

ITA 350/AHD/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8450 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 13-02-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 13-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT JAIN
• Assessee Lawyers: MILIND MEHTA
• Keywords: Double taxation relief; TDS
• Section: 40(a)(ia); 195; 143(2); 9(1); 9(1); 9(1); 73; 13; 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH (VIRTUAL COURT) BEFORE: SHR I AMARJIT SINGH , ACCOUNTANT MEMBER AND MS. MADHUMITA ROY , JUDICIAL MEMBER M/S. ESM SYS PVT. LTD. 1, GAURANG SOCIETY, OPP. KUNDAN TENA MENT, PNT COLON Y ROAD, VASNA, AHMEDABAD - 380007 PAN: AACCE0056B (APPELLANT) VS THE IT O , WARD - 2 ( 1 )( 1 ) , AHMEDABAD (RESPONDENT) REVENUE BY : S H RI LALIT JAIN , SR. D . R. ASSESSEE BY: SHRI MILIND MEHTA , A.R. DATE OF HEARING : 17 - 0 6 - 2 020 DATE OF PRONOUNCEMENT : 09 - 07 - 2 020 / ORDER P ER : AMARJIT SINGH, ACCOUNT ANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2013 - 14 , ARI SES FROM ORDER OF THE CIT(A) - 4, AHMEDABAD DATED 01 - 12 - 2 017 , IN PROCEEDINGS UNDER SECTION 1 4 3(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE SOLITARY GROUND OF APPEAL OF THE ASSESSE I S AGAINST THE DECISION OF LD. CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING I T A NO . 350 / A HD/20 18 A SS ESSMENT YEAR 2013 - 14 I.T.A NO. 3 50 /AHD/20 18 A.Y. 2013 - 14 PAGE NO M/S. ESM SYS PVT. LTD. VS. IT O 2 EXPENSES AMOUNTING TO RS. 13 , 09 ,739/ - ON THE GROUND OF NON - DEDUCTION OF WITHHOLDING TAX ON SUCH EXPENSES. 3. ALL THE GROUNDS OF APPEAL OF THE ASSESSE A RE INTER - CONNECTED TO THE SAME ISSUE AGAINST THE DECISION OF LD. CIT(A) IN CONFIRMING THE AFORESAID DISALLOWANCE IN TREATING THE PAYMENT MADE OUTSIDE AS FEES FOR TECHNICAL SERVICES BY INVOKING SECTION 195 OF THE ACT, THEREFORE, FOR THE SAKE OF CONVENIENCE ALL THE GROUNDS OF APPEAL OF THE ASSESSE E ON THIS ISSUE ARE ADJUDICATED TOGETHER AS UNDER: - 4 . THE FACT IN BRIEF IS THAT ASSESSEE HAS FILED RETURN OF INCOME ON 18 TH SEP, 2013 DECLARING INCOME OF RS. 9 , 94 , 745/ - . SUBSEQUENTLY, THE CASE WAS SELECTED UNDER S CRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 5 TH SEP, 2014. DURING THE COURSE OF ASSES SMENT, THE ASSESSING OFFICER NOTICED THAT ASSESSE E HAS MADE PAYMENT AMOUNTING TO RS. 13 , 09 , 739/ - TO ESM - SYS - LLC, USA FOR OBTAINING THE SERVICES OF DATA PROMOTI ON, SOCIAL MEDIA MANAGEMENT AND GENERAL CONSULTING. ON QUERY, THE ASSESSE E EXPLAINED THAT ESM - SYS - LLC WAS MANAGING AND OVERSEEING THE VARIOUS ON PAGE AN D OFF PAGE ACTIVITIES WHICH DRIVE TRAFFIC TO A SPECIFIC WEBSITE. THE ASSESSING OFFICER WAS OF THE VIE W THAT THE PAYMENT S MADE BY THE ASSESSE E WERE IN THE NATURE OF PAYMENT FOR TECHNICAL OR M ANAGEMENT SERVICES OR EXECUTION OF CONTRACT ON WHICH TDS WAS LIABLE TO BE MADE U/S. 195 OF THE ACT. THE ASSESSING OFFICER HAS STATED THAT SUB - SECTION 1 TO SECTION 195 MAKES IT OBLIGATORY FOR EVERY PERSON IN INDIA TO DEDUCT TAX AT SOURCE @ SPECIFIED IN THE RELEVANT FINANCIAL ACT. THE ASSESSING OFFICER FURTHER STATED THAT ASSESSE E HAD NOT COMPLIED WITH ANY OF THE PROVISIONS CONTAINED IN SUB - SECTION (1 ),(2), I.T.A NO. 3 50 /AHD/20 18 A.Y. 2013 - 14 PAGE NO M/S. ESM SYS PVT. LTD. VS. IT O 3 (3) OF SECT ION 195, THEREFORE, IT WAS LIABLE TO BE HELD AS ASSESSEE IN DEFAULT AND SUCH EXPENSES INCURRED WITHOUT TDS WERE LIABLE TO BE DISALLOWED U/S. 40(A)(IA) OF THE I.T. ACT. THE ASSESSING OFFICER ALSO STATED THAT ASSESSE E HAS ALSO NOT FURNISHED ANY FORMS 15CA OR 15 CB WHICH WERE MANDATORY TO BE FILED FOR MAKING REMITTANCES. AFTER QUERY MADE BY THE ASSESSING OFFICER , THE ASSESSE E EXPLAINED THAT PAYMENT S MADE TO ESM - SYS - LLC WERE IN THE NATURE OF SERVICES PROVIDED FOR SITE PROMOTION ACTIVITIES. THE ASSESSE E HAS A LSO SUBMITTED COPIES OF ARTICLE NO. 7 OF AGREEMENT FOR AVOIDANCE OF DOUBLE TAXATION OF INCOME WITH USA AND ARTICLE NO.12 FOR READY REFERENCE TO THE ASSESSING OFFICER . THE ASSESSE E EXPLAINED TH AT NATURE OF SERVICES AVAILED WAS NOT IN THE NATURE OF TECHNICA L SERVICES OR ROYALTY BUT IT WAS IN THE NATURE OF BUSI NESS PROFIT AND FURTHER ESM - SYS - LLC , USA HAD NO PERM ANENT ESTABLISHMENT IN INDIA, T HEREFORE, THE SAME WAS NOT TAXABLE IN INDIA AND ACCORDINGLY, PROVISIONS OF SECTION 195 OF THE INCOME TAX ACT DID NOT A PPLY. THE ASSESSING OFFICER HAS NOT AGREED WITH THE SUBMISSION OF THE ASSESSE E AND STATED THAT THE HIRING OF SERVER AND PROVIDING OF WEB HOSTING SERVICES WERE IN THE NATURE OF TECHNICAL SERVICES AND THE PAYMENT MADE BY THE ASSESSE E WAS FOR TECHNICAL SERVI CES IN TERMS OF SECTION 9 SUB - SECTION (1)(VII) OF THE ACT WHICH REPRESENTED INCOME DEEMED TO ACCRUE OR ARISE INCOME OF THE RECIPIENT. THE ASSESSING OFFICER HAS ALSO STATED THAT THE PAYMENT MADE TO THE NON - RESIDENT ALSO FALL WITHIN THE AMBIT OF SECTION 9 (1 )(V I) OF THE ACT AS THESE WERE IN THE NATURE OF ROYALTY AS DEFINED IN EXPLANATION 2 TO SECTION 9(1)(V I) OF THE ACT. THEREFORE, THE ASSESSING OFFICER HELD THAT ASSESSE E WAS LIABLE TO DEDUCT TAX AT SOURCE FROM THE PAYMENT MADE BY IT TO THE ESM - SYS - LLC U /S. 195 BEING PAYMENT TOWARDS OBTAINING TECHNICAL AND CONSULTANCY SERVICES WHICH WERE UTILIZED BY THE ASSESSE E AND ITS CLIENT IN INDIA. ACCORDINGLY, THE I.T.A NO. 3 50 /AHD/20 18 A.Y. 2013 - 14 PAGE NO M/S. ESM SYS PVT. LTD. VS. IT O 4 EXPENSES OF RS. 13 , 09 , 739/ - TOWARDS SUCH PAYMENT ON WHICH NO TDS WAS MADE WAS DISALLOWED U/S. 40(A)(IA ) OF THE ACT . 5. AGGRIEVED ASSESSE E HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DISMISSED THE AP PEAL OF THE ASSESSEE HOLDING T HE PAYMENT MADE IS A FEE FOR TECHNICAL SERVICES AND SQUARELY COVERED UNDER THE EXPLANATION 2 TO SECTION 9(1)(VI I ) OF THE ACT . 6. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. C OUNSEL HAS SUBMITTED PAPER BOOK CONTAINING COPIES OF DOCUMENT AND SUBMISSION MADE BEFORE T HE LOWER AUTHORITIES. THE LD. C OUNSEL HAS CONTENDED THAT THE VARIOUS PROVISIONS OF INDO - USA DOUBLE TAXATION (DTAA) WAS NOT CONSIDERED BY THE LOWER AUTHORITIES. HE HAS FURTHER REFERRED PAGE NO. 74 TO 88 OF THE PAPER BOOK COMPRISING DETAIL OF WRITTEN SUBMISSION MADE BEFORE THE LD. CIT(A) DURING THE COURSE OF APPELLATE PROCEEDINGS IN WHI CH IT WAS SUBMITTED THAT THE ASSESSE E WAS ENGAGED IN THE BUSINESS OF WEB DESIGNING SERVICES, SOCIAL MEDIA MANAGEMENT ETC. IT WAS ALSO SUBMITTED THAT ESM - SYS - LLC HAS PROVIDED SERVICES WHICH WAS IN THE NATURE OF SITE PROMOTION ACTIVITIES I.E. DA TA STORAGE, DATA SECURITY, BAND WIDTH PROVIS ION SPACE MONITORING ETC. IT I S ALSO SUBMITTED THAT EQUIPMEN T/SERVER S USE D FOR PROVIDING SUCH SERVICES WERE LOCATED OUTSIDE INDIA AND THESE EQUIPMENT S WERE NOT OWNED BY ESM - SYS - LLC. IT I S ALSO SUB MITTED THAT SUCH PAYMENT MA DE WA S IN THE NATURE OF BU SINESS INCOME AND SINCE THERE WAS NO PERM ANENT ESTABLISHMENT IN INDIA, T HEREFORE, TAX WAS NOT REQ UIRED TO BE WITHHELD. THE LD. COUNSEL HAS ALSO CONTENDED THAT THE SERVICES PROVIDED BY THE ASSESSE E NOT COVERED BY THE DEFINIT ION F EES FOR TECHNICAL SERVICE S AS THE I.T.A NO. 3 50 /AHD/20 18 A.Y. 2013 - 14 PAGE NO M/S. ESM SYS PVT. LTD. VS. IT O 5 PAYEE HAS NOT MADE AVAILABLE ANY TECHNOLOGY OR KNOW - HOW TO THE PAYER. IT IS FURTHER STATED THAT THE PAYEE HAS NEVER MADE AVAILABLE ANY TECHNICAL EXPERTISE/EXPERIEN CE/SKILL/KNOW - HOW TO THE ASSESS EE SO AS TO ENABLE ASSESSE E TO APPLY THE SAME TECHNICAL EXPERTISE/EXPERIENCE/SKILL/KNOW - HOW FOR CARRYING OUT SUCH A CTIVITIES ON ITS OWN. THE LD. C OUNSEL HAS ALSO REFERRED PAGE NO. 52 TO 73 OF THE PAPER BOOK COMPRISING COPIES OF INDO - USA DOUBLE TAX AVOIDANCE AGREEMENT (DTAA) AND CO NTENDED THAT AS PER ARTICLE 12, THE PAYMENT CANNOT BE CONSIDERED AS FEES FOR INCLUDED SERVICE AS TECHNICAL KNOWLEDGE OR KNOW - HOW ARE NOT MADE AVAILABLE . THE LD. COUNSEL HAS ALSO PLACED RELIANCE ON VARIOUS JUDICIAL PRONOUNCEMENTS IN THE CASES OF ITO VS. B.A . RESEARCH INDIA PVT. LTD. (TS - 6184 - ITAT - 2015(AHMEDABAD) - O], ITO VS. CADILA HEALTH CARE LTD. [TS - 5220 - ITAT - 2017(AHMEDABAD) - O], MCKINSEY & CO. INC. (PHILIPPINES) VS. ACIT [2006] 99 ITD 549 (MUM.), PINSTORM TECHNOLOGIES (P.) LTD. VS. ITO [2012] 24 TAXMAN.C OM 345 (MUMBAI), ITO VS. RIGHT FLORISTS (P.) LTD. [2013] 32 TAXMAN.COM 99 (KOLKATA - TRIB) AND YAHOO INDIA (P.) LTD. VS. DEPUTY CIT [2011] 11 TAXMAN.COM 431 (MUMBAI) . ON THE OTHER HAND, T HE LD. DEPARTMENTAL REPRESENTATIVE HAS CONTENTED THAT THE PAYMENT MA DE BY THE ASSESSE E WAS OF THE NATURE OF TECHNICAL SERVICES RENDERED BY THE PAYEE AND PLACED RELIANCE ON THE ORDER OF A SSESSING OFFICER AND LD. CIT(A). 7. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE WAS ENGAGED IN THE BU SINESS OF WEB DESIGNING SEO SERVICES, SOCIAL MEDIA MANAGEMENT, BULK SMS, EMAIL MANAGEMENT, WEBSITE ADVERTISING, ONLINE VIDEO MANAGEMENT, MOBILE APPLICATION DESIGNING. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS MADE PAYMENT AMOUNTING TO RS. I.T.A NO. 3 50 /AHD/20 18 A.Y. 2013 - 14 PAGE NO M/S. ESM SYS PVT. LTD. VS. IT O 6 13 , 0 9 , 739/ - TO ESM SYS LLC, USA FOR OBTAINING THE SERVICES OF WEB PROMOTION ETC. THE ASSESSEE HAS EXPLAINED THAT PAYER HAS PROVIDED SERVICES WHICH WERE IN THE NATURE OF SIT E PROMOTIONAL ACTIVITY I.E. BANDWIDTH PROVISIONS, DATA STORAGE AND WEB HASTING SERVICES USING THE SERVERS LOCATED IN USA. THERE WAS NO SHARING OF KNOWLEDGE OR KNOW - HOW OR ANY TECHNOLOGY TO THE ASSESSEE DURING THE PROVISION OF W EB HOSTING SERVICES. THE ASSESSEE HAS ALSO REFERRED ARTICLE 12 OF THE INDO - USA DOUBLE TAX AVOIDANCE AGREEMENT AT THE TIME OF ASSESSMENT AND APPELLATE PROCEEDINGS STATING PAYMENT CANNOT BE CONSIDERED AS FEES FOR INCLUDED SERVICES AS TECHNICAL KNOWLEDGE OR KNOW - HOW ARE NOT MADE AVAILABLE. THE LOWER AUTHORITIES HAVE REJECTED THE SUBMISSION OF THE ASSESSEE STATING THAT PAYMENT MADE TO PAYER WAS FOR RENDERING TECHNICAL SERVICES WHICH WAS SU ST A INED BY THE LD. CIT(A) HOLDING THAT PAYMENT MADE WAS A FEE FOR TECHNICAL SERVICES AND SQUARELY COVERED UNDER THE EXPLANATION 2 TO SECTION 9(1) (VII) OF THE ACT. IT IS DISCERNED FRO M THE MATERIAL ON RECORD THAT THE ASSESSEE HAD OBTAINED THE SERVICES OF WEB PROMOTION, SOCIAL MEDIA MANAGEMENT FROM THE ESMAY LLC, USA AND THEY HAVE USED MANY TECHNIQUES SUCH AS WE B CONTENT DEVELOPMENT, SEARCH ENGINE OPTIMIZATION TO INCREASE THE SITE TR AF FIC. THE ENTIRE TRANSACTION HAS TAKEN PLACE ON INTERNET THROUGH VIRTUAL SERVER. SERVERS WERE LOCATED WORLDWIDE OUTSIDE NOT UNDER THE CONTROL OF PAYER AND IT WAS USED FOR HIRING OF SPACE FOR DOMAIN HO STING AND DISPLAY OF ADVERTISEMENT ON THE SERVER LOCAT ED WORLDWIDE. THE ASSESSEE HAD MADE PAYMENT OF RS. 13 , 09 , 739/ - TO ESM SYS LLC, USA THROUGH NORMAL BANKING CHANNEL FOR CARRYING OUT ABOVE REFERRED NATURE OF SERVICES. SECTION 195 OF THE INCOME TAX ACT REQUIRE S TO DEDUCT TDS ON PAYMENT MADE TO NON - I.T.A NO. 3 50 /AHD/20 18 A.Y. 2013 - 14 PAGE NO M/S. ESM SYS PVT. LTD. VS. IT O 7 RESIDENT ON THE SUM CHARGEABLE UNDER THE PROVISION OF THE ACT AS PRESCRIBED IN SECTION 195 OF THE ACT. THE DEFINITION OF FEE FOR TECHNICAL SERVICE S AS PROVIDED IN EXPLANATION 2 TO SECTION 9(1)(VII) IS REPRODUCED HEREUNDER: - 'EXPLANATION 2. FOR THE PURPOSES OF THIS CLAUSE, 'FEES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD 'SALARIES'.' HOWEVER, SECTION 90(1) OF THE I.T. ACT FACILITATE S ENTERING INTO AN AGREEMENT WITH THE GOVERNMENT OF ANY COUNTRY OUTSIDE INDIA FOR THE AVOIDANCE OF DOUBLE TAXATION OF INCOME UNDER THE ACT AND UNDER THE CORRESPONDING LAW IN FORCE IN THAT COUNTRY. SINCE THE PAYEE IS THE RESIDENT OF U.S.A. AND THE GOVERNME NT OF INDIA HAS ENTERED INTO DOUBLE TAX AVOIDANCE AGREEMENT (DTAA) WITH THE GOVERNMENT OF UNITED STATE OF AMERICA THEREFORE THE TAXABILITY OF THE IMPUGNED PAYMENT OF RS. 13 ,0 9 , 739/ - SHOULD BE DETERMINED IN VIEW OF THE PROVISIONS OF THE INCOME TAX ACT AND T HE PROVISIONS OF THE DTAA. HOWEVER , THE PROVISIONS OF SECTI ON 90(2) OF THE ACT PROVIDE WHER E THE CENTRAL GOVERNMENT HAS ENTERED INTO AN AGREEMENT OUTSIDE INDIA, THE PROVISIONS OF THE ACT SHALL APPLY TO THE EXTENT T HEY ARE MORE BENEFICIAL TO THE ASSESSEE. THE PROVISIONS OF SECTION 90 (2) OF THE INCOME TAX ACT IS REPRODUCED AS UNDER: - 90. (2) WHERE THE CENTRAL GOVERNMENT HAS ENTERED INTO AN AGREEMENT WITH THE GOVERNMENT OF ANY COUNTRY OUTSIDE INDIA OR SPECIFIED TERRITORY OUTSIDE INDIA, AS THE CASE MAY BE, UNDER SUB - SECTION (1) FOR GRANTING RELIEF OF TAX, OR AS THE CASE MAY BE, AVOIDANCE OF DOUBLE TAXATION, THEN, IN RELATION TO THE ASSESSEE TO WHOM SUCH AGREEMENT APPLIES, THE PROVISIONS OF THIS ACT SHALL APPLY TO THE EXTENT THEY ARE MORE BENEFICIAL TO THAT ASSESSEE. I.T.A NO. 3 50 /AHD/20 18 A.Y. 2013 - 14 PAGE NO M/S. ESM SYS PVT. LTD. VS. IT O 8 THE DEFINITION OF FEE FOR INCLUDED SERVICES AS PROVIDED UNDER ARTICLE 12(4) OF THE DOUBLE TAX AVOIDANCE AGREEMENT BETWEEN INDIA AND U.SA. IS REPRODUCED AS UNDER: - '4. FOR PURPOSES OF THIS ARTICLE, 'FEES FOR INCLUDED SERVICES' MEANS PAYMENTS O F ANY KIND TO ANY PERSON IN CONSIDERATION FOR THE RENDERING OF ANY TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THROUGH THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL) IF SUCH SERVICES : (A) ARE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR ENJ OYMENT OF THE RIGHT, PROPERTY OR INFORMATION FOR WHICH A PAYMENT DESCRIBED IN PARAGRAPH 3 IS RECEIVED ; OR (B) MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW - HOW, OR PROCESSES, OR CONSIST OF THE DEVELOPMENT AND TRANSFER OF A TECHNICAL PLAN OR TECHNICAL DESIGN.' [EMPHASIS SUPPLIED] TO COVER THE SERVICES IN THE DEFINITION OF FEE FOR INCLUDED SERVICES ACCORDING TO THE ABOVE CITED ARTICLE 12 OF THE DTAA , IT IS REQUIRED TO SATISFY EITHER OF THE FOLLOWING TWO CONDITIONS: - I) SERVICES ARE ANCI LLARY AND SUBSIDIARY TO THE APPLICATION OF RIGHT FOR WHICH ROYALTY IS PAID; OR II) SERVICES MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW - HOW, OR PROCESSES ETC. OR IF IT CONSISTS OF DEVELOPMENT AND TRANSFER OF ANY TECHNICAL PLAN OR TECHNICAL DESIGN. IN THE LIGHT OF THE ABOVE FACTS AND LEGAL PROVISIONS, IT IS OBSERVED THAT LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE IN A GENERAL MANNER HOLDING THAT SERVICES PROVIDED IS COVERED BY DEFINITION OF FEE FOR TECHNICAL SERVICES AS PER THE PRO VISION OF EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT AND W ITHOUT ANY REASONS STATED THAT HE DID NOT AGREE WITH THE SUBMISSION OF THAT ASSESSEE FOR NOT TO DEDUCT TAX AS PER ARTICLE 12 OF THE DTAA. WE OBSERVE D THAT THE ENORMOUS WRITTEN SUBMISSION, PROVI SIONS OF THE DTAA AND JUDICIAL PRONOUNCEMENTS REFERRED BY THE ASSESSEE WERE NOT CONTROVERTED . IT IS IMPLICIT FROM THE ARTICLE 12(4) OF THE DTAA AS CITED ABOVE THAT SERVICES WHICH ARE TECHNICAL IN NATURE CAN BE SAID TO BE FEE FOR INCLUDED SERVICES O NLY WHEN IT HAS MADE AVAILABLE TECHNICAL KNOWLEDGE OR SKILL TO THE RECIPIENT OF SERVICES. SIMILAR RULING S AND OBSERVATION S WERE MADE IN THE FOLLOWING JUDICIAL PRONOUNCEMENTS: - (I) ITO VS. B.A. RESEARCH INDIA PVT. LTD. (TS - 6184 - ITAT - 2015(AHMEDABAD) - O] I.T.A NO. 3 50 /AHD/20 18 A.Y. 2013 - 14 PAGE NO M/S. ESM SYS PVT. LTD. VS. IT O 9 (II) IT O VS. CADILA HEALTH CARE LTD. [TS - 5220 - ITAT - 2017(AHMEDABAD) - O] (III) MCKINSEY & CO. INC. (PHILIPPINES) VS. ACIT [2006] 99 ITD 549 (MUM.) (IV) PINSTORM TECHNOLOGIES (P.) LTD. VS. ITO [2012] 24 TAXMAN.COM 345 (MUMBAI) (V) ITO VS. RIGHT FLORISTS (P.) LTD. [2013] 32 TAXMAN.COM 99 (KOLKATA - TRIB) (VI) YAHOO INDIA (P.) LTD. VS. DEPUTY CIT [2011] 11 TAXMAN.COM 431 (MUMBAI) IN THE CASE OF PINSTORM TECHNOLOGIES (P.) LTD. VS. ITO, IT IS HELD THAT PAYMENT MADE TO NON - RESIDENT FOR UPLOADING AND DISPLAY OF BANNER A DVERTISEMENT ON ITS PORTAL, IN ABSENCE OF ANY PE OF NON - RESIDENT IN INDIA WOULD NOT BE CHARGEABLE TO TAX IN INDIA. IN THE CASE OF ITO VS. RIGHT FLORIST, IT IS HELD THAT FEES FOR ONLINE ADVERTISEMENT COULD NOT BE CONSIDERED AS FEES FOR TECHNICAL SERVICES IN VIEW OF PROVISION OF TAX TREATIES WITH U.S.A. IN THE LIGHT OF THE FACTS AND JUDICIAL FINDINGS AS ELABORATED SUPRA, WE CONSIDER THAT THERE WAS NO SHARING OF KNOWLEDGE OR KNOW - HOW OR ANY TECHNOLOGY TO THE ASSESSEE AS PROSCRIBED IN THE ARTICLE 12 OF THE DTAA BETWEEN INDIA AND U.SA., THEREFORE, WE FIND SUBSTANCE IN THE ASSERTION OF THE ASSESSEE THAT TAX WAS NOT DEDUCTED U/S. 195 OF THE ACT SINCE THE PAYMENT MADE WAS NOT TAXABLE IN INDIA. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. 8. IN THE RES ULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 09 - 07 - 20 20 SD/ - SD/ - ( MADHUMITA ROY ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 09 /07 /2020 I.T.A NO. 3 50 /AHD/20 18 A.Y. 2013 - 14 PAGE NO M/S. ESM SYS PVT. LTD. VS. IT O 10 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,