TMI Blog2018 (8) TMI 2086X X X X Extracts X X X X X X X X Extracts X X X X ..... ng personal about such an entity. The view that we are adopting is supported by the provision of section 40(c) and section 40A(5) of the Act. Addition of Income reflected in Form 26AS - CIT(A) held that amount incorrectly reflected in Form 26AS ought to be included in income even though it has not been received by the Appellant - HELD THAT:- CIT(A) has not even disputed the fact of lower actual receipt of interest and yet he has confirmed the interest as shown in 26AS because that is what is shown by the State Bank of India. That approach is certainly incorrect. Once the assessee produces reasonable evidence establishing a particular quantum of interest income in his hands and such evidence is not found fault with, he cannot be taxed on some other figure merely because a tax deductor states that figure. Obviously, the assessee has no control over such inputs which are clearly incorrect. In view of these discussions, in our considered view, the impugned addition must stand deleted. We order so. TDS u/s 195 - Disallowance of payments made to non-residents under section 40(a)(i) - Indian taxability of payments to US residents - connotations of 'make available' clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Respondent O R D E R Per Pramod Kumar, AM: 1. By way of this appeal, the assessee-appellant has challenged correctness of the order dated 01.02.2017, passed by the learned CIT(A)-1, Vadodara in the matter of assessment under section 143(3) of the Income-tax Act, 1961, for the assessment year 2011-12. 2. In the first ground of appeal, the assessee has raised the following grievance: Ground No 1 - Disallowance of expenditure claimed to be personal in nature a. The learned CIT(A) has erred in disallowing adhoc 7.5% of total travel and conveyance expenses incurred by the Appellant amounting to Rs.9,15,660/- on grounds that these expenses are personal in nature. 3. To adjudicate on this appeal, it is sufficient to note that, during the course of assessment proceedings, the Assessing Officer disallowed 7.5% of expenses under the head Travel Conveyance Expenses on purely adhoc basis and to take care of, what he termed as, expenditure personal in nature . When he did so, he also took note of similar disallowances made in the past. Aggrieved, assessee carried the matter in appeal before the learned CIT(A) but in vain. Not satisfied, the assessee is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Companies Act, and once such remuneration is fixed as provided in section 309 of the Companies Act, it is not possible to state that the assessee-company incurred an expenditure for the personal use of the directors, i.e., even if there was any personal use by the directors, the same was as per the terms and conditions of service and in so far as the assessee-company was concerned it was a business expenditure and not disallowable as such. There is one more aspect of the matter which requires to be considered. The assessee which is a private limited company is a distinct assessable entity as per definition of person under section 2(31) of the Act. Therefore, it cannot be stated that when the vehicles are used by the directors, even if they are personally used by the directors the vehicles are personally used by the company, because a limited company by its very nature cannot have any personal use . The limited company is an inanimate person and there cannot be anything personal about such an entity. The view that we are adopting is supported by the provision of section 40(c) and section 40A(5) of the Act. 6. Respectfully following the esteemed views of Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to deduct taxes under section 195 of the Act on expenses reimbursed to its holding company for availing various support services. b. The learned CIT (A) has erred in holding that various support services in the nature of provision of software, finance and accounting support, legal HR support, operational support etc. provided by holding company to Appellant were covered under Article 12 of India-USA Double Tax Avoidance Agreement and hence, were subject to deduction of taxes under section 195 of the Act. 15. So far as this grievance of the assessee is concerned, the relevant material facts are like this. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has made various payments, on account of MIS Services Cost Allocation, Corporate Allocation Charges and Legal Expenses, aggregating to Rs 2,47,13885 to its US based associated enterprise by the name of Berry Plastic Corporation Inc. Incidentally, in this case, a reference was made to the Transfer Pricing Officer for determination of the arm s length price, but the price so paid was duly accepted and no ALP adjustments were proposed therein. The Assessing Officer was, how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9; clause in the treaty, this issue is no longer res integra. There are at least two non-jurisdictional High Court decisions, namely Hon'ble Delhi High Court in the case of DIT Vs Guy Carpenter Co Ltd ([(2012) 346 ITR 504 (Del)] and Hon'ble Karnataka High Court in the case of CIT Vs De Beers India Pvt Ltd [(2012) 346 ITR 467 (Kar)] in favour of the assessee, and there is no contrary decision by Hon'ble jurisdictional High Court or by Hon'ble Supreme Court. In De Beers' case (supra), Their Lordships posed the question, as to what is meaning of 'make available' , to themselves, and proceeded to deal with it as follows: ......... The technical or consultancy service rendered should be of such a nature that it makes available to the recipient technical knowledge, know-how and the like. The service should be aimed at and result in transmitting technical knowledge, etc., so that the payer of the service could derive an enduring benefit and utilize the knowledge or knowhow on his own in future without the aid of the service provider. In other words, to fit into the terminology making available , the technical knowledge, skill?, etc., must remain with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of the Income Tax Act, 1961, in a case covered by a double taxation avoidance agreement entered into under section 90- as is admittedly the present case, apply only to the extent these provisions are more favourable to the assessee. Once the assessee is out of the ambit of Indian taxability thus, there is no occasion to deal with the taxability requirements under the Income Tax Act. Viewed thus, and given the fact that the reasons for holding that these services satisfy make available clause have been specifically and unambiguously rejected by us, the authorities below have not made out any case for application of tax deduction requirements on these payments. In any case, we have carefully examined the material on record and nature of each payment and we donot find any situation in which services can be said to have made available technical skill, knowledge and know how in the legal sense of make available clause as discussed above. As a matter of fact, we did ask the learned Departmental Representative to point out one case in which the make available clause can be said to be satisfied on merits, but there was no specific assistance beyond reliance on the orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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