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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K’taka HC judge whose controversial remarks triggered controversy expresses regret before open court
Bengaluru: Karnataka High Court judge, Justice V Srishananda, on Saturday expressed regret in open court after facing backlash over his controversial remarks in his recent court hearings, reported Bar and Bench.
Two purported video clips from Justice V Srishananda’s court hearing that show him making inappropriate comments went viral across social media platforms.
On Saturday, Justice Srishananda invited members of the Advocates Association, Bengaluru, and senior lawyers to his courtroom at 2:30 PM, where he read out a note expressing regret for inappropriate comments.
Quoting Advocates Association President Vivek Subba Reddy, Bar and Bench wrote, “He expressed regret for the comments and clarified that it was not his intention to offend any community or members of the Bar. He also requested the association to relay this message to all members of the Bar.”
Reddy further stated, “We also advised him to encourage young lawyers in the courtroom and refrain from making any irrelevant remarks during hearings.”
Another senior lawyer present during the session confirmed to the legal news portal that Justice Srishananda also addressed comments directed at a woman lawyer, who was seen in one of the videos being reprimanded by the judge. The judge Justice Srishananda clarified that his remarks were not intended to target her (woman lawyer) specifically, but rather pertained to the appellant she was representing. “He explained that his comment was meant to imply that the appellant seemed to know a lot about the other party,” said the lawyer.
In addition, Justice Srishananda assured those present that he would avoid making such comments in the future.
The controversy came to light on September 19, when a video clip from an August 28 Court hearing surfaced on social media, showing Justice Srishananda referring to a Muslim-majority sub-locality in Bengaluru’s Goripalya as "Pakistan." Hours later, another video from the same courtroom emerged, in which the judge was seen making a gender-insensitive remark.
Following outrage over the viral videos, a Supreme Court bench led by Chief Justice of India DY Chandrachud, along with Justices Sanjiv Khanna, BR Gavai, Surya Kant, and Hrishikesh Roy, on September 20 took a suo motu cognizance and sought a report from the Karnataka High Court Registrar General in connection with the viral video.
