46. CIT(IT) vs. IndusInd Bank
Ltd.; [2019] 415 ITR 115 (Bom.) Date of order: 22nd April, 2019;
Sections 9(1)(vii)(b) and 195 of ITA 1961 – TDS – Income deemed to
accrue or arise in India – Non-resident – TDS from payment to non-resident –
Payment made to non-resident for agency services as global coordinator and lead
manager to issue of global depository receipt – Services neither rendered nor
utilised in India and income arising wholly outside India from commercial
services rendered in course of carrying on business wholly outside India – Tax
not deductible at source
The assessee was engaged in banking business. For
its need for capital, the bank decided to raise capital abroad through the
issuance of global depository receipts. The assessee engaged the A bank,
incorporated under the laws of the United Arab Emirates and carrying on
financial services, for providing services of obtaining global depository
receipts. The assessee bank raised USD 51,732,334 by way of the gross proceeds
of global depository receipts issued. The agency would be paid the agreed sum
of money which was later on renegotiated. The assessee paid a sum of USD
20,09,293 as agency charges which in terms of Indian currency came to Rs. 90.83
lakhs. The AO held that tax was deductible at source on such payment.
The Tribunal allowed the assessee’s claim that
there was no liability to deduct tax at source.
On appeal by the Revenue, the Bombay High Court
upheld the decision of the Tribunal and held as under:
‘i) The
assessee had engaged the A bank for certain financial services. The payment was
made for such financial services rendered by the A bank. The global depository
receipts were issued outside India. The services were rendered by the A bank
outside India for raising such funds outside India. It was, in this context,
that the Tribunal had come to the conclusion that the services rendered by the
A bank were neither rendered in India nor utilised in India and the character
of income arising out of such transaction was wholly outside India emanating
from commercial services rendered by the bank in the course of carrying on business wholly outside India.
ii) The Tribunal
was, therefore, correctly of the opinion that such services could not be
included within the expression “technical services” in terms of
section 9(1)(vii)(b) read with Explanation to section 9. Tax was not deductible
at source from such payment.’
