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2020 (3) TMI 470 - AT - Income TaxIncome accrued in India - Royalties and Fees for Technical Services - DTAA of INDO-US - amount attributable to services rendered by Vice President Manufacturing - HELD THAT:- As obvious that vice president manufacturing was having sufficient knowledge and experience of the technology and its standards used by the assessee in US. The Vice President was not an ordinary engineer but was having sufficient experience, exposure and knowledge about the technology of the assessee and was also having expertise to ensure the implementation of the standards of the assessee in India. In auto mobile industry, assembly of product and standards of company are patented/ protected technology and owner of the standards, charges Royalty for sharing the standards and assembling of products. But in the present case, no Royalty had been charged by the assessee from Indian counterpart, as the assessee had sent its employee under the agreement to India, in whom the technology/ experience for the assembly of product and knowing the standards of company , for setting the bench mark and implementing the standards of assessee in India. No transfer of technology by sending the expert technical employees of the assessee to in India, as in the present case, rather there was an agreement for erection of power generation plant in India. But in the present case, the employees who are having the technical expertise are not only managing but also ensuring due adherence to the standards of the assessee, by continuously monitoring and mentoring the production. Hence the decision of Rolls Royce is factually distinguishable. Same is the case with regard to other decisions cited by the AR. The third argument raised in support of the first ground by the assessee was the argument of consistency. We have examined the order passed by the assessing officer for the earlier years and we do not find even a whisper or examination of the fact by the assessing officer were done and conclusion was drawn that the services rendered by the vice president manufacturing was in the nature of managerial service. There was complete silence on this issue by the assessing officer and in our view , there is no purpose of perpetuating the illegality/irregularity either by the assessing officer or by the tribunal. There cannot be consistency of decisions but when there is no decision by the revenue for the earlier years, then there cannot be consistency for no-decisions. No reason to grant the benefit of consistency to the assessee. Accordingly argument of the assessee to give the benefit of consistency is devoid of merit and is accordingly dismissed.- Decided against assessee. Computing tax by applying the provision of Section 44D - services as attributable to the said permanent establishment - HELD THAT:- Benefit of Article 7(3) is subject to the limitation provided under the domestic law (44D of the Act). Section 44D of the Act clearly provides that for the purpose of computation of income by way of Royalty, FIS, etc., assessee is not entitled to any deduction. Once the domestic law prohibits allowing any deduction for the purpose of calculating ‘fees for technical services/fees for included services’, then, the same is not an allowable deduction and, therefore, the AO and the CIT(A) were right in holding that the assessee was liable to be taxed on gross basis rather than on net basis. The argument that the provision which is beneficial to the assessee should be applied, i.e. treaty provision rather than the domestic law, is in accordance with Section 90 of the Act. We are afraid that this argument is to be noted but is summarily required to be rejected for the reason that if the domestic law prohibits grant of any deduction, the same cannot be granted. There is no contradiction in the treaty provision or domestic law, rather the treaty provisions provide by incorporation the applicability of domestic laws for computing the profit of the assessee. No merit in the contention of the assessee. A plain and simple interpretation is required to be given which commands us to give the deduction to the assessee for the purpose of computing the profit if such deduction is permissible under the domestic law. Since no deduction is permissible under the domestic law, therefore, the assessee is not entitled to any deduction. In the result, ground nos. 3 and 4 raised by the assessee are dismissed. Invoking the provisions of Section 92 and adding 10% mark up on the invoices billed by the appellant to GMIL - HELD THAT:- Order passed by the TPO for the subsequent years wherein the TPO has not computed the profit by marking-up 10% on the amount received by the assessee. Further, the analysis of the TPO was not premised on the applicability or otherwise of the method provided under the rules framed under Chapter X of the Act. The authorities below have not benchmarked the transactions on the basis of any comparable instances or otherwise. This dispute is now well settled that the benchmarking of transactions need to be done by using any of the prescribed methods in Rule 10B of the Rules, which in the instant case was admittedly not done by the lower authorities. We are of the opinion that the arguments raised by the assessee in support of ground nos. 5 to 8 are in accordance with the law and we have no hesitation to allow the same. Accordingly, ground nos. 5 to 8 raised by the assessee are allowed. Applicability of Section 234B - Respectfully following the decision of the Hon'ble Jurisdictional High Court in the case of Ngc Network Asia LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT] and GE Packaged Power Inc [2015 (1) TMI 1168 - DELHI HIGH COURT] we allow the ground raised by the assessee.
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