By Geeta Jani | Dhishat B. Mehta
Chartered Accountants
7. TS-177-ITAT-2019 (Bang) Wifi Networks P. Ltd. vs. DCIT ITA No.: 943/Bang/2017 A.Y.: 2011-12 Dated: 5th April, 2019
Articles 12 and 14 of India-Uganda DTAA –
Where services provided by non-resident individuals outside India were covered
under Article 14 (which is specific in nature), Article 12 (which is general in
nature) could not apply; hence, the payments were not chargeable to tax in
India
FACTS
The assessee, an Indian company, had engaged
certain non-resident individuals for providing certain technical services
outside India. The assessee had made payments to them without withholding tax
from such payments.
The AO held that the payments were in the
nature of Fee for Technical Services (FTS) under the Act. Since the assessee
had not withheld tax u/s. 195, the AO disallowed the payments u/s. 40(a)(i) of
the Act.
Aggrieved, the assessee appealed before the
CIT(A) who upheld the order of the AO on the ground that the payments qualified
as FTS under the Act as well as DTAA, and hence, tax should have been withheld
from the payments. Thus, CIT(A) upheld the order of the AO.
Aggrieved, the assessee appealed before the
Tribunal.
HELD
- Perusal of the order of
CIT(A) shows that his conclusion is based only on Article 12 of the
India-Uganda DTAA and section 9(1)(vii) of the Act. He had not considered
Article 14 of the India-Uganda DTAA.
- Article 14 applies in case
of professional services performed by independent individuals. Article 12(3)(b)
of the India-Uganda DTAA specifically excludes from its ambit payments made for
services mentioned in Articles 14 and 15. Reliance was placed on the decision
of Poddar Pigments Ltd. vs. ACIT (ITA Nos. 5083 to 5086/Del (2014) dated
23.08.2018) wherein it was held that specific or special provisions in DTAA
should prevail over the general ones. Hence, Article 12 which is broader in
scope and general in nature, will be overridden by Article 14 which
specifically applies to professional services provided by individuals.
- As per the terms of the
agreement between the assessee and the payees, and considering the scope of
their services, the services rendered by the payees were professional services
covered under Article 14. Professional services covered under Article 14 could
be technical in nature but merely because they were technical in nature it
cannot be said that Article 14 was not applicable.
-
Further, having regard to specific exclusion in Article 12(3)(b) in respect of
services covered in Article 14, the payments made by the assessee would be
covered by Article 14 and on non-satisfaction of conditions specified therein,
such income was taxable only in Uganda. Hence, tax was not required to be
withheld from such payments.
