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2018 (2) TMI 2071 - ITAT CHENNAITDS u/s 195 - taxability of Business Development Commission - payments effected by the assessee to its principal abroad - whether payments made by the Appellant to US Parent Company towards Business development Commission (marketing services) result in income chargeable to tax in India ? - HELD THAT:- Assessee had never raised a plea before the ld. AO regarding application of DTAA between India and USA. In fact, the only finding given by the ld. Assessing Officer was that the payments effected by the assessee to its principal abroad was liable for deduction of tax at source u/s.195 of the Act. There is no specific finding by the ld. AO on the nature of the payments made by the assessee to SGS, USA nor has he given the specific reasons why he considered it to be liable for deduction of tax at source. The nature of the services rendered by its principal to the assessee is not clear from the records. Assessee did not produce the transfer pricing study nor the order of the ld. TPO, before us, which could have given a fair idea of the nature of services rendered by SGS, USA. Further, assessee also did not produce the invoices raised by SGS USA for services rendered by it, nor any communication between the said company and the assessee. Before coming to a conclusion whether services rendered by SGS USA to the assessee was of a nature which required deduction of tax at source as per Section 195 it is required to have a look on all the underlying documents. In our opinion, lower authorities should have made a thread-base study of the invoices, agreements entered between the assessee and its customers and the communication exchanged between assessee and SGS USA as well as assessee and its customers abroad. It was also necessary to verify the cost plus method followed by the assessee for its billing and verify what part of its profit were transferred to SGS USA, and whether such transfer was effectively for shifting of profits camouflaging it as commission. A wholesome view was not taken by any of the lower authorities. Coming to the judgment of Hon’ble Apex Court in the case of Hindustan Petroleum Corporation Ltd [2005 (9) TMI 624 - SUPREME COURT] relied on by the ld. Authorised Representative, the Revenue in the said case had tried to supplement the finding of the ld. Assessing Officer. In our opinion, this Tribunal being the final fact finding body, cannot be restrained from looking into all the facts that are associated with an issue raised before it, which have a bearing on the ultimate adjudication of such issue. In our opinion, the judgment relied on by the ld. Authorised Representative, will not stop this Tribunal from looking into TP study of the assessee which is very relevant in ascertaining the nature services rendered by the SGS USA. In the fitness of the things, we are of the opinion that the issue requires a fresh look by the ld. Assessing Officer. Ld. Assessing Officer has to go through all the necessary documentations and come to a decision whether the payments made by the assessee to SGS USA required deduction of tax at source under the Act and whether there was any concerted effort to shift profits by camouflaging it as commission on sales. We therefore set aside the orders of the lower authorities and remit the issue back to the ld. Assessing Officer for consideration afresh, de novo, in accordance with law. Ground of the assessee is allowed for statistical purpose Allowance of set off the loss one of the STP unit of the assessee against business income from others - HELD THAT:- The issue raised by the Revenue stands settled in favour of the assessee by the judgment of Hon’ble Apex Court in the case of CIT vs. Yokogowa India Ltd [2016 (12) TMI 881 - SUPREME COURT] we are of the opinion that ld. Commissioner of Income Tax (Appeals) was justified in directing the ld. Assessing Officer to allow the set off loss on the STP unit against income from other units. We do not find any reason to interfere with the order of the ld. Commissioner of Income Tax (Appeals) in this regard.- Decided against revenue.
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