On-call advisory services provided to Indian customers in trouble-shooting couldn’t be treated FTS: ITAT

On-call advisory services provided to Indian customers in trouble-shooting couldn't be treated FTS: ITAT

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On-call advisory services provided to Indian customers in trouble-shooting couldn’t be treated FTS: ITAT

Facts:
a) The assessee was providing services of Annual Maintenance Contract (‘AMC’) and installation, commissioning services for equipments supplied by its group entities to customers.
b) It was observed that assessee made several payments to foreign companies, on which no TDS was deducted on call assistance charges paid to AE for technical on-call assistance support received.
c) The Assessing Officer made disallowance for non-deduction of TDS under section 195, read with section 40(a)(i) on payment so made.
d) CIT(A) upheld order of AO. Aggrieved-assessee filed the instant appeal before the ITAT.
The ITAT held in favour of assessee as under:
1) Services provided by AE to assessee were in nature of assistance in troubleshooting, isolating the problem and diagnosing related trouble and alarms and equipment repair services wherein the equipments had be shipped to US by assessee as and when required. It had been agreed between the parties that AE would be providing such services remotely and no on-site support services would be provided to customers of assessee.
2) As India has double taxation avoidance agreement with US, and article 12(4) of India-USA DTAA deals with ‘fee for technical services’, and to determine taxability of income received by AE for services rendered in India, it had to satisfy the requirements under article 12(4), which required technical knowledge, experience, skill, etc., to be ‘made available” to the recipient of such services.
3) Services rendered therein by AE did not satisfy the make available requirement as per article 12(4). Thus, the revenue received by AE for services rendered to assessee’s customers was not taxable in India as per article 12(4) of India US DTAA. – [2018] 98 taxmann.com 458 (Delhi – Trib.)

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