Clearwater Technology Services (P.) Ltd. v. ITO

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The Tax Publishers2013 TaxPub(DT) 0088 (Bang-Trib) : (2013) 050 (II) ITCL 0278 : (2012) 139 ITD 0479 INCOME TAX ACT, 1961 --Business expenditure--Disallowance under section 40(a)(i)Voice charges payment to non-resident--Assessee was engaged in Income Tax enabled services. Assessee made payment towards voice charges to a as company without TDS. The assessing officer applying provision of section 40(a)(i) disallowed entire expenditure on the ground that payment was in the nature of fee for technical charges. Held: US company had not rendered any managerial technical, or consultancy services and the payment which it was received was towards service charges for which no TDs was required. Disallowance under section 40(a)(i) was therefore, not justified. As claimed by the assessee, the non-resident - Novatel - had not rendered any services of managerial, technical or consultancy in nature which expressly did not cover under the expression 'fees for technical services'. The Income Tax or the DTAA for that matter had not defined the term managerial, technical or consultancy. According to well established dictionaries the meaning for managerial relates to 'a manager or management, managerial responsibilities/decisions/skills etc.' However, in the present case, the payment made to a non-resident in respect of telecom voice services availed outside India cannot be termed as 'fees for technical services'. [Para 4.12] Assessee had no obligation whatsoever to deduct tax at source when the payments made to N and as such, no disallowance under section 40(a)(i) was called for. It is ordered accordingly. Since the issue has been decided in favour of the assessee, the additional ground sought to be raised by the assessee became superfluous and as such the same has not been addressed to. [Para 4.19] Income Tax Act, 1961 Section 40(a)(i) Income Tax Act, 1961 Section 195 DTAA between India & USA Article 12 INCOME TAX ACT, 1961 --Deduction under section 10BAllowability Treatment of brought forward losses--assessing officer allowed deduction under section 10B after setting off of earlier year losses and determined allowable deduction at certain sums. Held: ,/i>,/b>Not rightly so. Earlier years brought forward losses would not be reduced while allowing deduction under section 10B. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 0088 (Bang-Trib) : (2013) 050 (II) ITCL 0278 : (2012) 139 ITD 0479

INCOME TAX ACT, 1961

--Business expenditure--Disallowance under section 40(a)(i)Voice charges payment to non-resident--Assessee was engaged in Income Tax enabled services. Assessee made payment towards voice charges to a as company without TDS. The assessing officer applying provision of section 40(a)(i) disallowed entire expenditure on the ground that payment was in the nature of fee for technical charges. Held: US company had not rendered any managerial technical, or consultancy services and the payment which it was received was towards service charges for which no TDs was required. Disallowance under section 40(a)(i) was therefore, not justified.

As claimed by the assessee, the non-resident - Novatel - had not rendered any services of managerial, technical or consultancy in nature which expressly did not cover under the expression 'fees for technical services'. The Income Tax or the DTAA for that matter had not defined the term managerial, technical or consultancy. According to well established dictionaries the meaning for managerial relates to 'a manager or management, managerial responsibilities/decisions/skills etc.' However, in the present case, the payment made to a non-resident in respect of telecom voice services availed outside India cannot be termed as 'fees for technical services'. [Para 4.12] Assessee had no obligation whatsoever to deduct tax at source when the payments made to N and as such, no disallowance under section 40(a)(i) was called for. It is ordered accordingly. Since the issue has been decided in favour of the assessee, the additional ground sought to be raised by the assessee became superfluous and as such the same has not been addressed to. [Para 4.19]

Income Tax Act, 1961 Section 40(a)(i)

Income Tax Act, 1961 Section 195

DTAA between India & USA Article 12

INCOME TAX ACT, 1961

--Deduction under section 10BAllowability Treatment of brought forward losses--assessing officer allowed deduction under section 10B after setting off of earlier year losses and determined allowable deduction at certain sums. Held: ,/i>,/b>Not rightly so. Earlier years brought forward losses would not be reduced while allowing deduction under section 10B.