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2021 (10) TMI 675 - AT - Income TaxIncome accrued in India - Addition being reimbursement of expenses - FTS - Non offering to tax of travel cost - assessee is a company incorporated in the United States of America (USA) and is a tax resident of that country - as per assessee travel cost not being in the nature of fees for technical services (FTS) and purely reimbursement of expenditure incurred, is not taxable either under the provisions of the Act or under the India-USA Double Taxation Avoidance Agreement (DTAA) - Whether travel cost received by the assessee by way of reimbursement can be regarded as FTS? - HELD THAT:- While ignoring the decisions of the Tribunal has relied upon the observations of the higher departmental authorities. This, in our view, is most undesirable - though,DRP has acknowledged that in assessment years 2009-10 and 2010-11, the Tribunal has decided the issue in favour of the assessee; however, relying upon a solitary amendment made to the agreement between the parties and distinguishing the decisions of the Tribunal in assessee’s own case, learned DRP has upheld the addition made by the assessing officer. On a careful perusal of the amended clause 1.2 of the agreement as referred to by learned DRP, we do not find much difference, except, the mode and manner of quantification of the FTS. Thus, in our considered opinion, the spirit of the old clause 1.2 has not undergone any substantial change by the amendment. Be that as it may, even after the amendment to the agreement was effected from 01-04-2012, the Tribunal has consistently decided the issue in favour of the assessee from assessment years 2009-10 onwards. In the latest order passed for assessment year 2015-16 [2020 (4) TMI 752 - ITAT MUMBAI], the Tribunal following its order in assessee’s own case in assessment year 2014-15 has deleted the addition - Thus we delete the addition made by the assessing officer. This ground is allowed. Rate of tax u/s 115A - Incorrect tax rate applied by the assessing officer on the income offered by the assessee - As there are certain conditions set out in section 115A(1); however, it has to be considered whether such conditions are mandatorily required to be fulfilled, even, in a case where specific approval is neither required nor contemplated as per the extant rules/regulations/guidelines of RBI or Central Government. In case, the Government has not laid down any guidelines or procedure for approval for the subject transaction, the assessee cannot be expected perform an impossible task - if strict and literal interpretation of a statutory provision leads to undesirable consequences and not only renders it unworkable but also causes harassment to the taxpayer, then, it has to be avoided and the provision has to be construed harmoniously to make it workable - it is a fact on record that all these aspects have not been examined either by the assessing officer or by learned DRP while deciding the disputed issue. No merit in contention of learned departmental representative that the 10% rate would be applicable from assessment year 2017-18, we do not find any merit in such submission - Undisputedly, by way of Finance Act, 2015, the applicable tax rate of 10% in place of 15% has been brought to the statute w.e.f. 01-04-2016 - the tax rate of 10% would be applicable from assessment year 2016-17 onwards. As regards the contention of learned Departmental Representative that the master direction of RBI speaks of consultancy services, hence, would not be applicable, we find such argument thoroughly misconceived. A reading of Explanation (a) to section 115A(1)(b)(B) makes it clear that FTS would have the same meaning as in Explanation 2 section 9(1)(vii) of the Act. As per Explanation 2 to section 9(1)(vii) of the Act, FTS would include consideration for managerial, technical or consultancy services. Thus, consultancy services would also come within the definition of FTS. It is relevant to observe, in course of hearing, learned counsel for the assessee submitted that in all other assessment years, similar payment received by the assessee has been taxed @10% as per section 115A(1)(b) of the Act. If that is so, applicability of rule of consistency also needs to be examined - We restore the issue to the assessing officer for fresh adjudication keeping in view the discussion made herein before. The assessing officer should not only take note of the master direction of RBI and any other rules and regulations issued/framed by the RBI/Central Government but must also examine the applicability of decisions to be relied upon by the assessee - This ground is allowed for statistical purposes.
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