TMI Blog2015 (4) TMI 766X X X X Extracts X X X X X X X X Extracts X X X X ..... has been established that the liability to pay the above surplus has extinguished. Even if the amount cannot be repatriated to Canada, the amount belongs to IMG Canada and it can be spent or utilized in India as per the directions of IMG Canada.s the facts and circumstances of the present case are pari materia with the case of the appellant in A. Y .2001-02, and there being no change in the facts during the year under consideration vis-a-vis the facts of AY 2001-02 with respect to the amount/liability involved in this matter, for the reasons as discussed in the aforesaid order of the CIT(A)-XXIX, New Delhi this ground of appeal is allowed. Disallowance of payment made to Tamil Nadu Tennis Association on account of non deduction of TDS - The argument of the revenue, that the disallowance is warranted u/s 40(a)(i) of the Act is misplaced as payment is made to a resident and within India and not to a non-resident or a foreign company, which is a condition precedent to invoke section 40 (a)(i) of the Act. As such the AO had not even correctly invoked section 40(a)(i) of the Act. Thus the specific ground of the revenue is that the ld CIT(A) has erred in ignoring the fact that the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essary evidences have not been produced on record. Whereas, the ld CIT(A) has followed the order for Assessment Year 2005-06 and sustained the disallowance. However, the ld AR has placed on record before us certain evidences to support the claim that expenses reimbursed were incurred wholly and exclusively for the purpose of the business of the assessee. The aforesaid evidence has not been specifically examined by any of the authorities below, therefore we consider it appropriate to remit the matter back to the file of AO, who shall decide the issue de-novo, after granting adequate opportunity to the assessee. Lest, it be stated here that such fresh examination be made, without being influenced by the disallowance made in Assessment Year 2005-06, as an independent year and the eligibility and allowability of the expenditure has to be thus examined independently in accordance with law. The ground raised by the assessee is allowed for statistical purposes. - In net, appeals are partly allowed in favour of assessee. - ITA No. 4679/Del/2011, ITA No. 525/Del/2011, ITA No. 1012/Del/2011, ITA No. 4567/Del/2011,ITA No. 686/Del/2013,ITA No. 687/Del/2013 - - - Dated:- 25-3-2015 - Shri J.S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture was disallowed u/s 40 (a)(i) of the Act. The ld CIT(A) however has held as under:- In respect of the payment of ₹ 20,30,554/- made in Foreign Currency to the Association of Tennis Professionals, it is observed that the they are in the nature of Tour Fees and Player Welfare Contribution. It is also not in dispute that the Association of Tennis Professionals is a non resident sports association in relation to a game or sport played in India under the name and style of Chennai Open. However, I am of the considered view that the impugned payment is not in the nature of royalty or fees for professional or technical services which would have attracted the provisions of section 40(a)(i) of the Act. 5. Before us the ld DR submitted that provisions of section 194E apply to the facts and therefore the ld CIT(A) was wrong in reversing the disallowance. The ld AR on the other hand, submitted that section 194E does not apply as ATP is just a governing body of sport and not a sports association. 6. Having considered the rival submissions and facts on records we find that section 194E provides that where any income referred to in section 115BBA is payable to a non-resident s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived or deemed to be received by him in India. 9. Income deemed to accrue or arise in India.-(1) The following incomes shall be deemed to accrue or arise in India- (i)all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India. Explanation.-For the purposes of this clause- (a)in the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India; (b)in the case of a non-resident, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to the purchase of goods in India for the purpose of export; (c)in the case of a non-resident, being a person engaged in the business of running a news agency or of publishing newspapers, magazines or journals, no income shall be deemed to accrue or arise in India to him th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted from such income. 194E. Payments to non-resident sportsmen or sports associations.-Where any income referred to in section 115BBA is payable to a non-resident sportsman (including an athlete) who is not a citizen of India or a non-resident sports association or institution, the person responsible for making the payment shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct Income-tax thereon at the rate of ten per cent. 194J. Fees for professional or technical services.-(1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of- (a)fees for professional services, or (b)fees for technical services, shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to five per cent of such sum as Income-tax on income comprised therein : Provided that no deduction shall be made under this section- (A)from an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in section 194, the principal officer and the company of which he is the principal officer does not deduct or after deducting fails to pay the tax as required by or under this Act, he or it shall, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default in respect of the tax : Provided that no penalty shall be charged under section 221 from such person, principal officer or company unless the Assessing Officer is satisfied that such person or principal officer or company, as the case may be, has without good and sufficient reasons failed to deduct and pay the tax. 10. Thereafter the Hon ble Calcutta High Court held as under:- 3. A plain reading of the aforesaid provisions of the Act makes it abundantly clear that if a foreign cricket team, by virtue of agreement among the various teams of different cricket-playing countries, participates in a cricket match played in India and an agreed amount is paid to such a team for participating in such a match in the form of prize money, such prize money, whether for winning or for losing the match, will come within the term winnings and hence, should be treated to be income w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er cannot be made liable and be declared to be an assessee-in-default. 7. In the case before us, we have already pointed out that the amount paid to the foreign team for participation in the match in India in any shape, either as prize money or as the administrative expenses, is the income deemed to have accrued in India and is taxable under section 115BBA and thus, section 194E is attracted. Thus, the said decision does not help the appellant in any way. 8. We, therefore, find no substance in the aforesaid contention of Mr. Bajoria that the prize money or the purported administrative expenses are not taxable in India and consequently, his client had no liability to deduct at source under section 194E of the Act. 11. From the above, it is evident that section 194E read with section 115 BBA apply to payments made to a non-resident sports association or an institution. In the instant case, ATP is undisputedly a governing body of the world wide men s professional Tennis Circuit responsible for ranking of its players and co-ordinating the Tennis tournament in the world. In such circumstances we are of the opinion that ATP is a non-resident sports institution and therefore Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Y .2001-02, and there being no change in the facts during the year under consideration vis-a-vis the facts of AY 2001-02 with respect to the amount/liability involved in this matter, for the reasons as discussed in the aforesaid order of the CIT(A)-XXIX, New Delhi this ground of appeal is allowed. As a result, ground of Appeal No. 3 is allowed. 14. Having considered the rival submission we feel the issue was concluded by the order of ld CIT(A) for Assessment Year 2001-02 whereby identical addition made stands deleted and the said order has been accepted by the revenue. As the issue has acquired finality we are inclined to uphold the conclusion of the ld CIT(A). The ground raised is thus rejected. 15. The additional grounds raised by the revenue relates to disallowance of payment made to Tamil Nadu Tennis Association (TNTA) of ₹ 11,00,000/- and ₹ 47,50,000/- to All India Tennis Association (AITA) u/s 40(a)(i) of the Act. 16. The AO in regard to payment to TNTA has held as under:- The assessee has not deducted tax out of payment of ₹ 11,00,000/- made to Tamil Nadu Tennis Association and has submitted a copy of letter (undated) from TNTA, stating that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is absent. Therefore we do not find any infirmity in the impugned order of the ld CIT(A) and so we dismiss the same. 21. As regards, disallowance of payment to All India Tennis Association (AITA) of ₹ 47,50,000/- under section 40(a)(i) of the Act. The AO has disallowed by stating that the assessee has not submitted any proof of tax exemption of AITA. The ld CIT(A) held that the payment to AITA is not covered under any of the specific section provide under chapter XVII B of the Act and deleted the same. 22. Having considered the rival submission we find that the payment made to AITA a resident is to obtain necessary sanction/ approval for conducting Chennai Open Tournament is not covered under any of the specific TDS provisions under Chapter XVIIB of the Act. The AO in the order has not stated any of the section under which the assessee should have withheld taxes. Therefore for the reason stated with regard to similar payment to TNTA the sum paid to AITA cannot be disallowed u/s 40(a)(ia) or even u/s 40(a)(i) of the Act and so we do not find any infirmity in the order impugned in this respect and so the appeal of revenue on this ground is dismissed. 23. In respect to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee did not provide any vouchers or debit note in relation to this payment, therefore the AO in absence of any proof disallowed the said expenditure. The ld CIT(A) has not given any specific finding while allowing the claim of the assessee. The DRP in Assessment Year 2007-08 while considering an identical claim has observed that it needs to be appreciated that any payment to the head office of the assessee, source of which is the PE would also be considered as income of the assessee, taxable in India and it has been concluded as under:- As such, payment of ₹ 10,85,541/- by PE to HP and receipt of such amount by HO cancel each other while computing the taxable income of the PE. Thus, even if assessee's argument that it was payment to self and, therefore, not liable to withholding tax is accepted in view of the decision of Hon'ble ITAT in the case of ABN Amro Bank (supra), it would not help the assessee as the assessee cannot be allowed deduction of an amount paid to self. Moreover, the amount of ₹ 10,85,514/- was taxable in the hands the assessee as income of its HO. As such, payment of ₹ 10,85,541/- made by PE of the assessee to its HO cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deducted at source on interest payment, it is to be taken as one bank and no deduction is to be made as sought to be made by the learned counsel for the appellant. Such contentions are totally unfounded in our opinion. The permanent establishment and the head office have to be taken as separate entities for all purposes. But in the making of payment of interest no tax has to be deducted under section 195(1), for the reasons above. Therefore, if no tax is deductible under section 195(1) section 40(a)(i) of the Act will not come in the way of the appellant claiming such deduction as from its income. Therefore, in the circumstances the appellant would be entitled to deduct such interest paid, as permitted by the convention or agreement, in the computation of its income. 27. We therefore uphold the claim of the assessee to this extend. As a result, ground raised by the revenue is dismissed for Assessment Year 2006-07 to the extent of the aforesaid payments. And ground no. 2 of the assessee for Assessment Year 2007-08 is allowed. 28. The next issue relates payments made to Tamil Nadu Tennis Association (TNTA) and AITA. 29. Having considered the rival submission we have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be fulfilled are that the expenditure in issue should not be of a capital nature, and that it should have been expended wholly for the purposes of business. It is well-settled that the expression 'for the purposes of business' in section 37 of the Act has been held to mean an expenditure which is voluntary in nature and commercially expedient. In the present case the Assessing Officer has given a finding of fact that the assessee-company has not been able to prove that the reimbursement of expenses to the Associated Enterprises were made in the course of business or on account of commercial expediency. I also feel that if at all the appellant's claim is bona fide, it could have produced documents in the form of audited financials and the assessment order completed in the name of its Associated enterprises showing the inclusion of ₹ 1,21,54,146/- being the reimbursement received from the appellant. In the absence of any clear evidence towards this, I am of the considered view that the Assessing Officer was justified in coming to the conclusion that the impugned expenses are disallowable for being non business in nature and also under the provisions of section 40(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 for Mr Ravi Krishnan for the subject A Y on page no. 58 to 59 of paper book). Health insurance charges of Mr Ravi Krishnan (Rs 368,496) - Such expense incurred on Ravi Krishnan for the period when he stayed in India for business purposes, was initially paid by International Management Group (UK) Ltd and cross charged to Appellant. Copy of debit note received with respect to health insurance charges of Mr Ravi Krishnan is enclosed on page no. 57 of paper book. Travel expenses of Mr Ravi Krishnan (Rs 334,751) - Such expenses incurred on travel of Ravi Krishnan for business purposes of the Appellant were initially paid by IMG Overseas Hong Kong, and cross charged to the Appellant. The details for such expenses along with the copy of third party invoices on sample basis has been enclosed on page DO. 60 to 67 of paper book. Travel expenses (Simon Lock) (Rs 182,569) - The expenses incurred on account of air ticket of Simon Lock for attending Lakme Fashion Week event were initially paid by IMG America Pty Ltd and cross charged to the Appellant. The event is an event of the Appellant and all income there from has been offered to tax. This expense was clearly incurred in connection ..... X X X X Extracts X X X X X X X X Extracts X X X X
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