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UPS Jetair Express Private Limited Versus Dy. Commissioner of Income Tax -9 (3) , Mumbai and Vica-Versa

2015 (9) TMI 1175 - ITAT MUMBAI

Disallowance invoking section 40(a)(i) - non deduction of TDS on such payments made to its associated enterprise, UPSWWF USA - Held that:- Similar issue had come up before the Tribunal in assessee’s own case for A.Y.2008-09 [2015 (6) TMI 383 - ITAT MUMBAI] and the matter has been remanded back to the file of the Assessing Officer for a decision afresh. It was also a common point between the parties that in this year too, following the said precedent the matter be remanded back to the file of Ass .....

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The aforesaid factual matrix is not assailed by the Ld. Departmental Representative and the same is also borne out of the order of the Tribunal for A.Y.2008-09 [2015 (6) TMI 383 - ITAT MUMBAI]. As a consequence, we uphold the plea of the assessee and direct the Assessing Officer to allow the depreciation of ₹ 9,95,919/- claimed by the assessee and accordingly assessee succeeds on this ground. - Decided in favour of assessee.

Addition u/ s. 40(a)(i) - whether assessee and RMS we .....

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fall for taxation in India and thus, there was no obligation on the part of the assessee to deduct tax at source on such payments, which were made as reimbursement to UPSWWFUSA. Be that as it may, in our considered opinion the finding of the DRP, which we have adverted to in the earlier paras is quite unexceptional and does not require any interference from our side. No cogent reasoning or material has been brought out by the Revenue to demonstrate as to in what manner amount received by RMS-USA .....

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the Revenue. At the outset, one may observe that the Ground raised by the Revenue is quite misconceived in as much as it is based on a wrong perspective to the effect that the DRP has held the subvention income to be an operating income. As can be seen from the directions of the DRP, the subvention income has not been held to be considered as part of the operating income. Thus, this aspect of the controversy manifested in the Ground of Revenue is misconceived and liable to be dismissed. Even oth .....

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eerthiga R. Sharma and Harsh Kapadia For The Revenue: Shri Narendra Kumar Chand ORDER PER G.S. PANNU, AM: The captioned appeals preferred by the assessee, Revenue and cross objection by the assessee are directed against the order of the DRP-III, Mumbai dated 25/4/2012, pertaining to the assessment year 2009-10, passed under section 144C(5) of the Income Tax Act, 1961 ( in short the Act ). 2. The assessee before us is a company incorporated under the provisions of the Companies Act, 1956 as a Joi .....

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income filed by the assessee was subject to scrutiny assessment, whereby total income was determined by the Assessing Officer at ₹ 10,68,89,950/-, which inter-alia, included the disallowance of ₹ 19,66,297/- and ₹ 9,95,919/- representing payment made to M/s. UPS Worldwide Forwarding Inc. USA(in short UPS-WWF ) towards legal services to Titus and depreciation on assets purchased from UPS WWF respectively. 3. In the appeal of the assessee, the first issue relates to the disallowa .....

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such a payment was in the nature of Fees for Included Services in terms of Article 12(4) of Indo-US Tax Treaty and, accordingly, such sum was chargeable to tax in India. Since the assessee did not deduct tax at source on such payments made to its associated enterprise, UPSWWF USA, therefore, the said amount was disallowed by invoking section 40(a)(i)) of the Act. The said position was also approved by the Dispute Resolution Panel (DRP) in its order passed under section 144C(5) of the Act dated .....

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icle 12(4) of the Indo-US Tax Treaty, therefore, there was no withholding tax obligation on the assessee under section 195 of the Act, so as to warrant a disallowance under section 40(a)(i) of the Act. 3.2 Before us, the rival Counsels have reiterated their respective contentions, which we have noted above. So however, it was a common point between the parties that similar issue had come up before the Tribunal in assessee s own case in ITA No.3311/Mum/2013 for A.Y.2008-09, dated 27/2/2015, and t .....

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th law after providing the assessee a reasonable opportunity of being heard. Thus, on this aspect assessee succeeds for statistical purposes. 4. The second issue raised by the assessee is with respect to a disallowance of depreciation of ₹ 9,95,919/- on fixed assets purchased from UPS-WWF in the previous year relevant to the assessment year 2008-09. 4.1 In this context, the brief facts are that in the previous year relevant to the earlier assessment year 2008-09, assessee had claimed depre .....

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ssessee. 4.2 In this background, the claim of the Ld. Representative for the assessee was that the depreciation of ₹ 9,95,919/- claimed by the assessee in this year deserves to be allowed since the depreciation on the same assets in the earlier assessment year stands allowed. The aforesaid factual matrix is not assailed by the Ld. Departmental Representative and the same is also borne out of the order of the Tribunal dated 27/02/2015(supra). As a consequence, we uphold the plea of the asse .....

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e addition of ₹ 60,72,596/- made by the Assessing Officer u/ s. 40(a)(i) of the LT. Act without appreciating the fact that the assessee and RMS were in contractural relationship? 2. Whether on the facts and in the circumstances of the case and in law, the Hon'ble Dispute Resolution Panel has erred in holding that the payment made to RMS as professional charges cannot be taxable in India due to its non-resident status without appreciating the fact that RMS was appointed as a collection .....

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y the Assessing Officer by invoking section 40(a)(i) of the Act. In this context, brief facts are that assessee had made payment to its associated enterprise UPS-WWF Inc. USA as reimbursement for engaging RMS,USA for Debtor Collection Services. The services of RMS, USA were availed for follow up, and monthly collection of dues from the overseas debtors of the assessee company. The assessee had explained before the lower authorities that for administrative convenience, initially payments to RMS, .....

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unts paid to UPS-WWF as the said payments are not taxable in India for the reason that they are in the nature of mere reimbursement of actual cost without any element of profit and even otherwise, the services rendered by RMS, USA did not fall within the scope of Fees for Included Services as per Article 12(4) of the Indo-USA Tax Treaty 5.3 The Assessing Officer disagreed with the assessee in the draft assessment order and assessee carried its objection before the Dispute Resolution Panel(DRP). .....

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n India. For the aforesaid reasons, the DRP upheld the stand of the assessee that there was no liability on the assessee company to withhold taxes on the payment made to the RMS-USA, even if, it was routed through its associated enterprise UPSWWF-USA. As a consequence of the aforesaid directions by the DRP, the Assessing Officer did not make the disallowance of ₹ 60,72,597/- in the final assessment order. The aforesaid decision of the DRP is sought to be challenged by the Revenue in its ap .....

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year 2008-09 considered similar transaction and held that the payments made to RMS-USA for Debtor collection services did not fall for taxation in India and thus, there was no obligation on the part of the assessee to deduct tax at source on such payments, which were made as reimbursement to UPSWWFUSA. 5.5 Be that as it may, in our considered opinion the finding of the DRP, which we have adverted to in the earlier paras is quite unexceptional and does not require any interference from our side. .....

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le computing the arm's length price of the international transactions entered into by the assessee with its associated enterprise. 6.1 Briefly put, the relevant facts and background giving rise to the afore-sated Ground of appeal can be summarized as follows. Before the Transfer Pricing Officer, assessee had claimed that on account of adverse business and economic condition it had incurred losses, which were exceptional in nature. The assessee explained that after prolonged negotiations, its .....

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urn of income filed for the said assessment year, assessee offered the said income and included the same while computing its net profit margin for the purposes of carrying out its comparability analysis with other comparable concerns for determining its arm's length price. In other words, the subvention income received by the assessee was considered as a part of its operating income. The Transfer Pricing Officer differed with the assessee on the treatment of subvention income as a part of th .....

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that to the extent such subvention income had been offered to tax, the lower profit as per transfer pricing analysis has been made up. In other words, as per DRP the proposed transfer pricing adjustment determined by the Transfer Pricing Officer can be said to have been partly met by the additional income offered by the assessee to the extent of such subvention income. Following operative part of the order of the DRP is relevant in this text:- The subvention income was received with reference t .....

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