ACIT v Celltick Mobile (India) P. Ltd. (2023) 103 ITR 77 (SN)(Mum)(Trib)

S. 40(a)(i) : Amounts not deductible-Deduction at source-Non-resident-Payment of licence fee to holding company-Assessee submitted Certificate from Chartered Accountant and return and computation of income of payee which Showed that payee had disclosed payment in its return and paid taxes thereon-Held, as per Indo-Israel DTAA Income in question not chargeable to tax in India in hands of Non-Resident-No disallowance can be made-DTAA-India-Israel.[S. 201]

The assessee-company was a wholly owned subsidiary of C Ltd. of Israel. During the assessment proceedings, for AYs 2016-17, 2017-18 and 2018-19 it was found that the assessee-company had paid licence fee to C Israel. The AO held that the payment made by the assessee to C Israel was in the nature of royalty taxable in India and since, the assessee had not deducted tax at source while making the said payment, he disallowed the sum under section 40(a)(i) of the Act. The ITAT observed that the assessee had filed the certificate from the chartered accountant in form 26A, ROI and computation of income of the payee before the CIT(A) in support of its submission that C Israel had disclosed the payment in its return of income and paid the taxes due thereon. The ITAT followed the decision of the ITAT in the assessee’s own case for AY 2014-15 to the effect that that the payee had declared the income and claimed refund of the withholding tax because the income earned by the payee was not chargeable to tax in India as per the Indo-Israel DTAA. Thus, there was no infirmity in the order passed by the CIT(A). (AY.2016-17, 2017-18, 2018-19)