DCIT vs. UPS Jetair Express Pvt. Ltd. (TS-102-ITAT-2015(Mum.)) dated March 10, 2015
Facts of the case
The assessee M/s. UPS Jetair Express Pvt. Ltd. an Indian company is a joint venture between UPS Worldwide Forwarding Inc. USA (UPS WWF) and Jetair Pvt. Ltd. engaged in the business of international express delivery services.
During the year, the assessee had obtained debtor collection services from RMS USA and legal services from TITUS an Indian firm. The payment for such services was made by M/s. UPS WWF USA and later reimbursed by the assessee to UPS WWF on cost-to-cost basis without any mark-up. No TDS was deducted on such services.
The AO contended that the assessee failed to deduct TDS u/s. 195 r.w.s. 9(1)(vii) and made the disallowance of such expenses
u/s. 40(a)(ia).
In appeal, CIT(A) rejected assessee's contention and AO's order was upheld.
Being aggrieved, the assessee preferred an appeal before Mumbai ITAT.
Issues
Whether TDS is required to be deducted on reimbursement of Debtor Collection & legal services at cost?
Held
ITAT observed that invoices issued by M/s. UPS WWF on assessee, matched back to back with the invoices raised by the RMS and thus it was a clear case of reimbursement without any profit element. It further ruled that the existence of a mere provision of services was not sufficient to bring the payment under tax net. Debtor collection services do not fall within the ambit of 'Royalties or Fees for Technical Services' under the Act as well as under Article 13 of the India-USA Tax Treaty and hence provisions of section 195 was not attracted. Accordingly, the disallowance made u/s. 40(a)(i) was deleted.
In respect of legal services, Titus the payee had already paid tax and in view of the proviso to section 40(a)(i), disallowance was not warranted in the hands of the payer. ITAT placed reliance on past cases and remanded the matter back to AO to determine whether Titus has already paid tax by including such payments in its income.
ITAT thus ruled in favour of the assessee.
Facts of the case
The assessee M/s. UPS Jetair Express Pvt. Ltd. an Indian company is a joint venture between UPS Worldwide Forwarding Inc. USA (UPS WWF) and Jetair Pvt. Ltd. engaged in the business of international express delivery services.
During the year, the assessee had obtained debtor collection services from RMS USA and legal services from TITUS an Indian firm. The payment for such services was made by M/s. UPS WWF USA and later reimbursed by the assessee to UPS WWF on cost-to-cost basis without any mark-up. No TDS was deducted on such services.
The AO contended that the assessee failed to deduct TDS u/s. 195 r.w.s. 9(1)(vii) and made the disallowance of such expenses
u/s. 40(a)(ia).
In appeal, CIT(A) rejected assessee's contention and AO's order was upheld.
Being aggrieved, the assessee preferred an appeal before Mumbai ITAT.
Issues
Whether TDS is required to be deducted on reimbursement of Debtor Collection & legal services at cost?
Held
ITAT observed that invoices issued by M/s. UPS WWF on assessee, matched back to back with the invoices raised by the RMS and thus it was a clear case of reimbursement without any profit element. It further ruled that the existence of a mere provision of services was not sufficient to bring the payment under tax net. Debtor collection services do not fall within the ambit of 'Royalties or Fees for Technical Services' under the Act as well as under Article 13 of the India-USA Tax Treaty and hence provisions of section 195 was not attracted. Accordingly, the disallowance made u/s. 40(a)(i) was deleted.
In respect of legal services, Titus the payee had already paid tax and in view of the proviso to section 40(a)(i), disallowance was not warranted in the hands of the payer. ITAT placed reliance on past cases and remanded the matter back to AO to determine whether Titus has already paid tax by including such payments in its income.
ITAT thus ruled in favour of the assessee.
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