The assessee made an application under section\u00a0195(2)\u00a0of the Act requesting for permission to remit the cost-to-cost reimbursements to be made without deduction of tax at source. The application was rejected. On a writ petition challenging the order of rejection, the Court held that that the recourse to section\u00a0195(2)\u00a0was perfectly in consonance with the object of section\u00a0195. It was maintainable. The article 12(1) of Double Taxation Avoidance Agreement between India and the United States of America provides for taxation of royalties and fees for included services arising in a contracting State and paid to a resident of the other contracting State. Further, article 12(2) provides that royalties and fees for included services may also be taxed in the contracting State in which they arise. \u201cFees for included services\u201d is defined in article 12(4). Section\u00a0195(2)\u00a0of the Act, placed an obligation on the assessee to make deduction of tax under sub-section (1) where payment of any sum chargeable under this Act was being made to a non-resident. The words \u201cchargeable under this Act\u201d if read in conjunction with provisions of article 12(4) of the Double Taxation Avoidance Agreement and the obligation under section\u00a0195(2), it becomes clear that the definition of \u201cfees for included services\u201d under article 12(4) was more beneficial to the assessee in so far as its obligation to deduct the tax was concerned. Accordingly, article 12(4) was to be applied to determine the liability to deduct tax. In terms of article 12(4)(b) for the purpose of construing fees for included services, it is necessary that the rendering of technical or consultancy services must make available technical knowledge, experience, skill, know-how or processes. Further, it may also consist of development and transfer of a technical plan or technical design. It is not a mere rendering of technical or consultancy services, but the requirement of make available in terms of article 12(4)(b) that has to be fulfilled. The master services agreement, if subjected to scrutiny as regards the aspect of secondment did not reveal the satisfaction of the requirement of \u201cmake available\u201d which is a sine qua non for being fees for included services. The fact that the employees seconded has the requisite experience, skill or training capable of completing the services contemplated in secondment by itself was insufficient to treat it as fees for included services de hors the satisfaction of the \u201cmake available\u201d clause. The \u201cmake available\u201d requirement that is mandated under article 12(4) granted benefit to the assessee and accordingly, the question of falling back on the provisions of section\u00a09\u00a0of the Act did not arise. On this score alone, the conclusion in the order of the payment for the service falling within the description under section\u00a09\u00a0of the Act as \u201cdeemed income\u201d, had to be rejected. The only order that could now be passed was of one granting \u201cnil tax deduction at source\u201d. The court clarified that the finding as regards deduction of tax at source under section\u00a0195\u00a0of the Act is tentative and the question of liability of the recipient was to be decided subsequently. Accordingly, there was no question of prejudice to the Revenue at the stage of the section\u00a0195\u00a0order.\u00a0 The Court held that the application under section\u00a0195\u00a0is at the instance of the person making the payment, while the application under section\u00a0197\u00a0is at the instance of the recipient. Relied on Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT (2021) 432 ITR 471 (SC) (AY.2020-21)<\/p>\n","protected":false},"excerpt":{"rendered":"
S. 195 : Deduction at source-Non-resident-Other sums-Double taxation avoidance-Reimbursement of employees of American company-Provisions of the Double Taxation Avoidance Agreement are more beneficial than the provisions of the Act, it is the Agreement that should be treated as the law that requires to be followed and applied-Certificate for deduction at lower rate or nil deduction-The application under section 195 is at the instance of the person making the payment, while the application under section 197 is at the instance of the recipient-DTAA-India-USA. [S. 40(a))(ia), 90(2), 195(2), 197, Art. 12] <\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-31366","post","type-post","status-publish","format-standard","hentry","category-income-tax-act"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-89U","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/31366","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=31366"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/31366\/revisions"}],"predecessor-version":[{"id":31367,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/31366\/revisions\/31367"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=31366"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=31366"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=31366"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}