6 April 2022 4:26 PM GMT
The Delhi Bench of ITAT, consisting of members N. K. Choudhry (Judicial Member) and Anil Chaturvedi (Accountant Member), has upheld the order passed by the CIT (A) deleting additions of over Rupees 67 Lakhs made to Lenskart's taxable income for non-deduction of TDS on marketing expenses paid by it to Facebook Ireland Inc. The Bench noted that the CIT (A) had concluded that that there...
The Delhi Bench of ITAT, consisting of members N. K. Choudhry (Judicial Member) and Anil Chaturvedi (Accountant Member), has upheld the order passed by the CIT (A) deleting additions of over Rupees 67 Lakhs made to Lenskart's taxable income for non-deduction of TDS on marketing expenses paid by it to Facebook Ireland Inc.
The Bench noted that the CIT (A) had concluded that that there was no liability to deduct tax on payments made for advertising services to Facebook Ireland Inc. since the latter has no permanent establishment in India.
The Assessee M/s Lenskart Solution (P) Ltd had e-filed its income tax return. The Assessing Officer passed an order under Section 143(3) of Income Tax Act, 1961 making additions of over Rupees 67 Lakhs to Lenskart's income on account of non-deduction of TDS with respect to payment of marketing expenses made by it to Facebook Ireland Inc. Against the additions made in the Assessment Order, Lenskart filed an appeal before the Commissioner of Income Tax (Appeals) (CIT (A)) who allowed the appeal. The Revenue department filed an appeal against the order of the CIT(A) before the ITAT.
The Assessee Lenskart contended before the ITAT that Facebook Ireland Inc. did not have any permanent establishment in India, therefore the payments made to Facebook Ireland by the Assessee for advertisement services were not chargeable to tax in India in view of Article 7 of the India-Ireland DTAA. Lenskart placed reliance on the case of Yahoo India Pvt Ltd versus DCIT (2011), wherein the ITAT Mumbai had held that in the absence of any permanent establishment of the deductor, the deductee is not liable to deduct tax at source from the payments made for online advertisement services. The Assessee submitted that the equalization levy, which was introduced to tax the income accruing to foreign e-commerce companies from India, required a person who made payments exceeding Rupees one lakh in a year to a non-resident who had no permanent establishment in India, to withhold tax at 6% of the gross amount. However, the Assessee averred that the equalization levy came into effect from 01.06.2016 only, and prior to that payment for online advertisement services were not subjected to deduction of tax at source.
The ITAT observed that the CIT(A) while considering the appeal of the Assessee had held that the DTAA between India and Ireland provides that the profits of the foreign enterprise shall be taxable in India only if it had carried on business in India through a permanent establishment situated therein. The CIT (A) also noted that Facebook Ireland Inc. had certified that it has no permanent establishment in India and that it is a resident of Ireland for taxation purposes. The CIT(A) therefore concluded that there was no liability to deduct tax on payments made by Lenskart for advertising services to Facebook Ireland Inc.
The ITAT ruled that there was no reason to take a contrary view against the conclusions made by the CIT (A).
The ITAT therefore, dismissed the appeal filed by the Revenue Department.
Case Title: Addl. Commissioner of Income Tax, New Delhi versus M/s Lenskart Solution (P) Ltd.
Dated: 30.03.2022 (ITAT Delhi)
Representative for the Appellant: Kumar Pranav, Sr. DR
Representative for the Respondent: K.M. Gupta, CA
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