Payments made to non-residents for routine repair and replacement of spare parts, in the absence of transfer of technical knowledge or presence of a Permanent Establishment, do not qualify as 'Fees for Technical Services' and are exempt from TDS liability under the Act and DTAA.

ORDER

PER YOGESH KUMAR, U.S. JM:

This appeal is filed by the assessee pertaining to Assessment Year 2011-12 challenging the order of Commissioner of Income Tax (Appeals)-26, New Delhi dated 04/07/2023.

2. The grounds of Appeal are as under:-

“1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. ITO, Ward Int. Tax-2(1)(1) in passing the impugned order u/s 201(1)/201(1A) and that too without assuming jurisdiction as per law by holding that payment made by the assessee was in the nature of fee for technical services.

2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. ITO, Ward Int. Tax-2(1)(1) in treating the assessee company as "assessee in default" for non-deduction of TDS u/s 201(1)/201(1A) and that too without any basis, material and evidence available on record and by recording incorrect facts and findings.

3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. ITO, Ward Int. Tax-2(1)(1) in raising demand of Rs.16,80,590/- u/s 201(1)/201(1A) on the alleged ground that the assessee has not deducted TDS on the amount of Rs.1,07,28,734/-, more so when there is no requirement to deduct TDS as per law.

4. That in any case and in any view of the matter, action of Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. ITO, Ward Int. Tax-2(1)(1) in raising the demand of Rs. 16,80,590/- u/s 201(1)/201(1A), is bad in law and against the facts and circumstances of the case and the same is outside the purview of the said section.

5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. ITO. Ward Int. Tax-2(1)(1) in charging the interest amounting to Rs.6,07,717/- u/s 201(1A) and raising demand of Rs.10,72,873/- u/s 201(1) on the alleged ground that the assessee failed to deduct TDS within the prescribed time limit, more so when there is no requirement to deduct TDS as per law and the assessee has complied with all the necessary conditions in accordance with law.

6. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. ITO, Ward Int. Tax-2(1)(1) in charging the interest amounting to Rs.6,07,717/- u/s 201(1A) and raising demand of Rs. 10,72,873/- u/s 201(1), is bad in law and against the facts and circumstances of the case and the same is outside the purview of the said section.

7. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. ITO, Ward Int. Tax-2(1)(1) in raising aggregate demand of Rs. 16,80,590/- (Rs.6,07,717/- + Rs. 10,72,873/-) u/s 201(1)/201(1A) by treating the assessee company as "assessee in default" and passing the impugned order dated 15-02-2022 is illegal, bad in law, void ab-initio, and against the facts and circumstances of the case and is in violation of principles of natural justice and barred by limitation also.

8. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.”

3. Brief facts of the case as mentioned in the order of the Ld. CIT(A) are as under:-

‘Information available in the ITBA showed that the assessee has made remittance to foreign countries and in respect of some of the remittances tax at source had not been deducted by the assessee company. As per Central Action