TDS not to be done on IT support charges paid to foreign company: ITAT

M/S. Hitachi Metglas (India) Pvt. … vs Dcit, New Delhi (ITA No. 3694/Del/2016)

Facts:

1. The assessee had paid admin and Network Support service charges of Rs.35,60,212/- to Metglass INC USA, Hitachi Asia Ltd. Singapore and Hitachi Ltd. Japan. 

2. Since the assessee did not deduct TDS as per provisions of the section 195 and so expenditure on Admin and Network Support service charges as claimed by the assessee was disallowed and added back to the total income. 

ITAT held as below:

1. The foreign AE (service provider) has neither employed any technical or skilled person to provide managerial or technical service nor there was direct interaction between the assessee and the foreign AE. 

2. Where the entire process resulting in provisioning of service is a fully automated process with no human intervention, charges paid for provision of such services cannot be classified as FTS for the purpose of the Income Tax Act.