IBM Philippines not liable for TDS under IT Act: Karnataka HC
Bengaluru, Feb 11: The High Court of Karnataka has ruled that IBM Philippines "shall not be liable for TDS under Section 195 of the Income Tax Act." It has therefore dismissed four appeals filed by the IT Department against IBM India Private Limited.
The appeals were in relation to four different assessment years starting from 2008-09. All the four appeals were filed in 2014 and were disposed of on January 16, 2023.
IBM USA had a global arrangement with Procter and Gamble, USA for rendering payroll related services.
In a companion agreement, IBM India entered into a pact with P&G India. IBM India outsourced this work as well as some human resource services to IBM Philippines.
The IT Department's Assessing Officer in 2012 recorded that IBM India had not deducted tax at source in payments made to IBM Philippines. Therefore, IBM India was assesse in default'. Both the Assistant Commissioner of Income Tax and Commissioner of Income Tax confirmed it.
The company challenged this before the Income Tax Appellate Tribunal (ITAT). The ITAT allowed the company's appeal and held that the payments by IBM India was not chargeable to tax under the India-Philippines Double Tax Avoidance Agreement (DTAA).
The IT Department challenged this before the High Court. Justice PS Dinesh Kumar and Justice TG Shivashankare Gowda heard the four appeals filed by the Director of Income Tax and Deputy Director of Income Tax against IBM India.
The High Court said that, "The said work has been outsourced to IBM Philippines. IBM Philippines is carrying out the work described in the agreement between IBM India and P&G India. Hence, IBM Philippines was not rendering any technical service and therefore, the income in the hands of IBM Philippines is a business income."
The High Court also upheld the ITAT as per the DTAA, business profit of IBM Philippines is taxable only in that State. "The ITAT has, in our considered view rightly recorded in its order that as per Article 7(1) of India Philippines DTAA, the business profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein".
"Since there was no permanent establishment of IBM Philippines in India, the business profit of IBM Philippines shall be taxable in that State only," the High Court said.
Dismissing the four appeals, the High Court said, "The payments received by IBM Philippines shall not be liable for TDS under Section 195 of the IT Act. Therefore, assessee cannot be deemed as an assessee in default.
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If you have a conscience, apologize to the people: R Ashoka slams Yathindra over Nalwadi comparison
Bengaluru: Leader of the Opposition R. Ashoka launched a scathing attack on MLC Dr. Yathindra, demanding that he retract his controversial statement comparing Chief Minister Siddaramaiah to the late Maharaja Nalwadi Krishnaraja Wadiyar. Ashoka urged Yathindra to apologize to the people of Karnataka if he had even a shred of conscience and any respect for the Mysuru royal lineage.
In a strongly worded social media post on Sunday, Ashoka stated, “Comparing Siddaramaiah to Nalwadi Krishnaraja Wadiyar is nothing short of absurd. Where is Nalwadi, who was bestowed the title of ‘Rajarshi’ by Mahatma Gandhi himself, and where is Siddaramaiah, who has stooped to being a puppet in the hands of fake Gandhis for the sake of power?”
He continued his critique by contrasting the enduring legacy of Nalwadi, remembered fondly by Kannadigas for his people-centric development, with what he termed as Siddaramaiah’s failure to manage Karnataka’s economy, burdening every household with debt.
Ashoka highlighted several stark differences, while Nalwadi built Mysore University over a century ago, Siddaramaiah is shutting down nine universities due to lack of funds. Nalwadi famously sold his family’s gold to build the KRS dam, whereas Siddaramaiah is accused of grabbing 14 sites meant for the public. Nalwadi established Bhadravati Iron & Steel Plant, Sandalwood Soap Factory, and Mysore Paper Mills. In contrast, Ashoka claimed Siddaramaiah's governance drove away industries, investors, and entrepreneurs. Nalwadi pioneered reservations for the backward classes long before it became mainstream. Siddaramaiah, Ashoka alleged, is reducing social justice to a gimmick by sticking labels on doors in the name of surveys.
While acknowledging Yathindra’s emotional attachment to his father, Ashoka emphasized that comparing Siddaramaiah to a visionary like Nalwadi was “laughable, baseless, and a gross insult” to the late king.
In his concluding remarks, Ashoka slammed the government for ignoring farmers’ needs despite an early monsoon. He accused the administration of being caught up in internal power struggles and negligence, forcing farmers into despair. “This government will not be spared from the curse of the farmers,” he warned.
