9911796707
TMI Blog2012 (2) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... he Petitioner made a payment of Rs. 1.56 crores to its U.S. based principal. This, according to the Petitioner, was a reimbursement for costs incurred for providing Group Management, Finance and Benefits, Training and Professional Development, Information Resources and allocations of human resources services to the Petitioner. On 12 October 2004, the Petitioner filed an application under Section 195(2) to the Deputy Commissioner of Income Tax, CircleI( 2), International Taxation, New Delhi. The application sought a no objection certificate authorising the Petitioner to remit the amount to its U.S. principal without deduction of tax at source. According to the Petitioner, the amount was not chargeable to tax in India as it represented reimbursement of expenses incurred on behalf of the Petitioner. The Petitioner filed a return of income on 1 November 2004 for Assessment Year 200405 declaring a total income of Rs.1.53 crores. The computation of total income disclosed expenses allocated by a Group Company on which tax has not been deducted at source in the amount of Rs. 1.56 crores. Note 4 appended to the return of income contained the following disclosure: "4. The company has filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner under Section 195(2) by which the Petitioner was authorised to remit a total sum of Rs. 1.74 crores to the U.S. Company without deducting withholding tax on the amount which represented reimbursement of expenditure incurred by the Payee for providing support services to the Petitioner. The Petitioner filed a revised return of income on 1 April 2005. In the revised return, an amount of Rs. 1.56 crores was claimed as a deduction. In the original return of income that amount had been added back and had been treated as a disallowance of expenditure in Note 4 which has been adverted to above. In the revised computation, the amount of Rs. 1.56 crores was not added back. A covering letter was filed with the revised return dated 23 March 2005 stating that in the original return of income, the amount of Rs.1.56 crores was recorded as disallowance for reasons explained in Note4. Following the receipt of an order under Section 195, the amounts which had been disallowed earlier were claimed as allowable expenditure against the taxable income computed. 4. During the course of the assessment proceedings, the Petitioner furnished an explanation on 14 September 2005 explaining the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount mentioned in the certificate also does not tally with the amount credited/paid by the assessee for the period under consideration for which the certificate has been issued." The Petitioner submitted objections to the reopening of the assessment which have been disposed of by an order dated 27 July 2011. 7. Counsel appearing on behalf of the Petitioner submitted that (i) The reopening of the assessment, beyond a period of four years in the present case, is based on a mere change of opinion; (ii) There was no failure on the part of the Petitioner to disclose fully and truly all material facts necessary for assessment, nor is it even alleged that there was any failure of that nature; (iii) The only basis on which the assessment is sought to be reopened is that the certificate that was issued under Section 197 was not valid. This is fallacious because, in the first place, the certificate was sought and given under Section 195. Moreover, the certificate which has been issued to the Petitioner continues to remain valid and has not been revoked; (iv) In the reasons which have been furnished to the Petitioner, there is not even a reference as to how the payment which is made by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the certificate does not tally with the amount credited or paid by the Petitioner. Now, reading the reasons as they stand, it is evident that there is not even an allegation to the effect that there was a failure on the part of the Petitioner to fully and truly disclose all material facts necessary for the assessment. But for the purposes of the present discussion, it is not necessary to rest the view which we are inclined to take, merely on the absence of any averment that there was a failure to disclose on the part of the Petitioner. The record before the Court indicates that even when the original return was filed, the Petitioner had in the note (Note4) annexed to the return of income, expressly clarified that the Petitioner had filed an application under Section 195 in respect of the corporate allocation payable to its principal. The Note indicated that the principal provided administrative and management support services and the costs which were incurred were allocated at actuals to various subsidiaries globally that benefited from the service provided. The Petitioner stated that the costs which were allocated were reimbursed to the foreign principal at actuals and that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 197 would be valid only for payment or credit made after the issuance of the certificate; and (iii) Since the Petitioner had already credited an amount in its books, the certificate was not valid. The Assessing Officer has, in our view, erroneously proceeded on the basis that the certificate was issued under Section 197. The certificate, as a matter of fact, was issued on an application that was filed under Section 195(2) and was a certificate under that provision. But perhaps more fundamental is the fact that the provisions of Section 195 are attracted where any person is responsible for paying to a nonresident "any interest or any other sum chargeable" under the provisions of the Act. It is in such cases that the requirement of deducting income tax at the time of credit of such income to the account of the Payee or at the time of payment arises. The Assessing Officer has, in the reasons which have been recorded, made no reference at all to whether the payment which was effected to the foreign principal represented income chargeable under the provisions of the Act. The contention of the Petitioner all along has been that this payment represented only a reimbursement of ..... 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