In a major relief for Hitachi Metglas, the Delhi Income Tax Appeal Tribunal (ITAT) ruled that IT support services cannot qualify as technical services, so TDS is not not deductible.
The rated company, M / s Hitachi Metglas (India) Pvt. Ltd. is engaged in the design and manufacture of cores and other amorphous metals or nanocrystalline soft magnetic metals used in transmission and distribution equipment and in electronic and computer products and other related products.
The appraisal agent estimated that the appraised was required to deduct TDS on the administration and network support service fee of Rs.35.60,212 / – paid by Hitachi Metglass India Pvt. Ltd. at Metglass INC USA, Hitachi Asia Ltd. Singapore and Hitachi Ltd. Japan. Since the assessor has not deducted the TDS in accordance with the provisions of section 195 of the Law; therefore, the total expense deduction of Rs.53,76,510 / – on administration and network support service charges, as claimed by the appraisee, has been denied and added to the appraiser’s total income.
The coram of the judicial member, Kul Bharat and of the accountant member, Dr BRR Kumar observed that the foreign EA (service provider) had not employed any technical or qualified person to provide a management or technical service, nor that there had been no direct interaction between the assessor and the foreigner. AE. Thus, when the whole process leading to the provision of the service is a fully automated process without human intervention, the fees paid for the provision of these services cannot be classified as FTS for the purposes of the Tax Act. returned.
ITAT has determined that the IT support services provided by the Evaluate to Hitachi Ltd., Japan, and Hitachi Asia Ltd., Singapore are standard connectivity and networking services cannot be qualified as technical services. within the meaning of Article 9 (1) (vii) of the Law. Therefore, we believe that the appraisee was not required to deduct TDS on these expenses. Consequently, the disavowal pronounced by the OA and confirmed by Ld. The CIT (A) in this case is likely to be deleted.
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