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TMI Blog2013 (12) TMI 1096X X X X Extracts X X X X X X X X Extracts X X X X ..... head "Reimbursement of manpower cost". M/s CMS RDC had deputed some of its employees to India to work for the assessee. Expenses for the deputed employees incurred by M/s CMS RDC were reimbursed by the assessee. Assessee had not deducted tax at source on the payments effected to M/s CMS RDC for any year upto and including assessment year 2006-07. For those years, Assessing Officer took a view that assessee having not deducted tax at source, as stipulated under Section 195 of the Act, rigours of Section 40(a)(ia) of the Act was attracted. He had disallowed the claim of expenditure for assessment year 2002-03 to assessment year 2006-07. Appeals were filed by the assessee, against such disallowance, and it was successful. According to CIT(Appeals), agreement between assessee and M/s CMS RDC was one for reimbursement and there was no supplementary agreement for transfer of technical knowhow. Revenue had moved in appeal before this Tribunal for all these years against the directions of the CIT(Appeals) to allow the claim of the assessee and this Tribunal, vide its order dated 9th February, 2012, held at paras 8 to 13 as under:- "8. We have perused the orders and heard the rival content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Years, assessee also produced a copy of the agreement dt.01.06.2003 between assessee and CMS RDC and relevant articles 2, 4 & 5 of the said agreement read as follows: "Article II-Scope : 2.1. This Agreement covers the deputation of the Employee by RDC to O&M and the terms and conditions thereof. Article IV - Deputation of Employee : 4.1. The Employee deputed shall make his Services available to O&M (the Assessee Company) in connection with the operation maintenance of electric power plant in their respective fields of specialization. Article V - Reimbursement of Expenses : 5.1. O & M shall reimburse RDC on actual basis remuneration paid or payable to the employee deputed by the RDC including associated costs paid to and/or incurred in respect of Employee deputed by RDC. For these purposes, "associated costs" shall include salary and other related cost. 5.2. O & M shall also reimburse on actual basis the expenses incurred towards traveling living including accommodation and medical during the period of deputation. 5.3. No other fee shall be payable to RDC as services fees for the deputation of the Employee in pursuance of the Agreement except the salary and reimbursable exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest or any other sum chargeable under the provisions of the Act. 11. Applying this position of law to the facts here, if the payments effected were salaries, no doubt by virtue of sec.192, which does not make any differentiation between resident or non-resident recipient, assessee was bound to deduct tax. But here admittedly the persons involved were not employees of the assessee and there was no employee -employer relations between the assessee and the said persons. Ld. Assessing Officer himself has noted this at para-12 of assessment order for Assessment Year 2002-03. Ld. C.I.T.(A) has given a finding in his order that the expatriates had filed their tax returns in India and M/s.CMS RDC had deducted tax at source on payment of salaries effected to these persons who were on their rolls. This has not been rebutted. The persons were thus in the payroll of CMS RDC and thus could only be considered as employee of CMS RDC. This leaves us with question whether the payments would fall under sec.195. 12. To fall under section195, the payment should be a sum chargeable under the provisions of the Act. No doubt if it was fees for technical services, it would definitely fall u/s.9(1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced hereunder for brevity. "26. A pertinent question was raised by the learned Departmental Representative as to who decides whether the payment bears any income character or not. In his view, it could be either the Assessing Officer or a chartered accountant as prescribed by the Board, but certainly not the assessee (the payer). The role of the chartered accountant comes into play in the alternative procedure prescribed by the Board and to which we shall advert to it a little later. However, we are not in agreement with the learned Departmental Representative that the assessee (i.e. the payer) has no role to play. The IT Act is enacted to levy taxes on income earned by a person. It is the statutory obligation of the person earning income to prepare his tax return, determine his tax liability, pay the same and furnish the return. He also pays tax in advance during the financial year as he earns income. All these obligations are on the person earning the income and he is to fulfill these obligations according to his understanding of the various provisions of the Act. The question is, if he is expected to know that income is taxable or not taxable in his own case, why can't he d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e making any payment to a non-resident. 27. Having visualized the various situations let us consider the fallout of each situation and how the interests of both, the taxpayer as well as the tax collector are safeguarded under the Act. (a) If the bona fide belief of the payer is that no part of the payment has any portion chargeable to tax, he will not enter into any procedure under s.195. However, if the Department is of the view that the payer ought to have deducted tax at source, it will have recourse under s.201 of the Act. Thus, here the interest of the Revenue is protected. In the proceedings under s.201, the Assessing Officer will determine the portion chargeable to tax according to the provisions of the Act and determine the tax payable by the payer. The Assessing Officer is bound to determine the income chargeable to tax in accordance with the provisions of the Act for two reasons. Firstly, because it is the mandate of the Supreme Court in the case of Transmission Corporation (supra) as observed at p.595 of 239 ITR. Secondly, the Delhi High Court has held in the case of Delhi Development Authority Vs.ITO (supra) that an order passed under s.201(1) is an assessment order a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... To repeat, the payer is an assessee under the Act and the order under s.201 is an assessment order. Therefore, the payer has the right to get his liability determined as per the provisions of the Act despite the entire exercise being tentative in nature. The ultimate result would depend on what is determined in the assessment of the recipient. The ultimate result would depend on what is determined in the assessment of the recipient. The ultimate result in the case of the recipient will determine whether the payer can be treated as an assessee in default or not. Yet, the entire tentative exercise described above may have to be undergone. This has been held in a recent decision (so far unreported) of the Delhi High Court in the case of Van Oord Acz India (P) Ltd Vs. C.I.T. (IT Appeal No.439 of 2008) decided on 15th Marh, 2010 [since reported at (2010) 230 CTR (Del) 365: (2010) 36 DTR (Del) 425-ED.]." 13. In our opinion the circumstances here were such that the assessee could be justified in reaching a bona fide impression that payments effected by it to CMS RDC was not sums on which tax was chargeable in India. The view taken by the Special Bench has been reinforced by the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders and heard the rival submissions. In our opinion, Section 248 does enable an assessee to file an appeal even after deduction of tax at source claiming that no tax was required to be deducted at source since such appeal is only for a declaration regarding tax liability, if any. We cannot find fault with CIT(Appeals) entertaining such appeal of the assessee. 7. Insofar as merits of the case is concerned, in our opinion, the matter stands covered in favour of assessee by virtue of order of this Tribunal in I.T.A. Nos. 1048 to 1052/Mds/2011 dated 9th February, 2012, for assessment years 2002-03 to 2006-07, pertinent parts of which have been reproduced at para 3 above. Of course, the said order was on a disallowance under Section 40(a)(ia) of the Act. However, there is a clear finding in favour of assessee that no tax was deductible at source on payments effected by it to M/s CMS RDC. We are, therefore, of the opinion that CIT(Appeals) was justified in holding the assessee to be not liable to deduct tax at source on such payments. We do not find any reason to interfere with the order of CIT(Appeals). 9. In the result, appeal filed by the Revenue stands dismissed. The order was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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