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2016 (3) TMI 735 - BOMBAY HIGH COURT

2016 (3) TMI 735 - BOMBAY HIGH COURT - TMI - Tds u/s 195 - Held that:- As no income has accrued or arisen to the non-resident sub-arrangers in India, the question of deduction of tax under section 195 of the Act will not arise. This is in addition to a possible view on facts taken by the impugned order that the services rendered by non-resident sub-arrangers to the Respondent Assessee would not fall within the category of managerial, technical or consultancy services in terms of the Explanatio .....

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of the Apex Court in Taparia Tools Ltd. v/s Joint CIT, reported in (2015 (3) TMI 853 - SUPREME COURT ) wherein on application of the principle of matching concept upheld the view of the Assessing Officer to spread the interest paid in the very first year over a period of five years because the term of the debt was five years and the Assessee therein had itself in its books of account amortized the interest over a period of five years. In Appeal, the Apex Court while reversing the decision of thi .....

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e. It is not so in this case. The Apex Court held that once the return has been filed making a particular claim, then the Assessing Officer was bound to carry out assessment by applying provisions of the Act and he could not go beyond the return. - Decided in favour of assessee - INCOME TAX APPEAL NO.2120 OF 2013 - Dated:- 22-2-2016 - M.S. SANKLECHA AND B.P. COLABAWALLA JJ. For the Appellant : Mr Tejveer Singh For The Respondent : Mr P.S. Pardiwalla, Sr. Counsel with Mr Atul Jasani P.C.:- 1. Thi .....

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due to the Revenue's additional ground of consequential disallowance u/s 14A ? (2) Without prejudice, if this Court decides that the interest earned on NOSTRO A/c is not taxable, then, consequential disallowance u/s 14A may be directed ? (3) Whether on the facts and circumstances of the case and law, the Tribunal was correct in holding that the provisions of section 40(a)(i) were not applicable as the assessee was not obliged to withhold taxes u/s 195 of the I.T. Act, 1961 ? (4) Whether on t .....

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xpenses amortized were directly due to the benefit received by assessee as long term deposit from SBI for 5 years ? 3. Re : Question Nos.(1) and (2) :- Mr Tejveer Singh, learned counsel for the Revenue very fairly states that both these questions stand concluded against the Revenue by the order of this Court dated 17th June 2015 passed in Income Tax Appeal No.1430 of 2013 (Director of Income Tax (IT)-I, Mumbai v/s M/s Credit Agricole Indosuez). In view of the above statement of Mr Tejveer Singh, .....

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mobilized deposits worth ₹ 1235.8 crores and SBI accordingly provided it a long term deposit of ₹ 617.9 crore for a period of 5 years. Besides, the Respondent - Assessee received a sum of ₹ 22.19 crores from SBI as Arranger fees and commission. It in turn paid an amount of ₹ 37.07 crores to the sub-arrangers by way of sub-arranger fees and commission. An amount of ₹ 26.75 crores out of ₹ 37.07 crores was paid by way of sub-arranger fees and commission to non- .....

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under section 9(1)(vii) of the Act. (b) Being aggrieved, the Respondent - Assessee preferred an appeal to Commissioner of Income Tax (Appeals) (CIT(A)). In Appeal, the CIT(A) held that the amount paid to the non-resident sub-arranger was in the nature of commission / brokerage and not fees for technical services in terms of section 9(1) (vii) of the Act. Consequently, he held that there was no question of deducting tax at source and deleted the disallowance of ₹ 26.75 crores paid as sub-a .....

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t passed by the CIT(A). The Tribunal further analyzed the nature of services being rendered by the sub-arrangers to the Respondent - Assessee and in the context of section 9(1)(vii) of the Act viz. whether these services are managerial, technical and consultancy services. Before the Tribunal, the learned counsel for the Revenue very fairly conceded that the services rendered by the non-resident sub-arrangers were not in the nature of consultancy services. So far as technical services were concer .....

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siness would mean a person not only directly participates or engages in the management of the business but also one who indirectly controls its management through the managerial staff, from behind the scenes. Management includes the act of managing by direction, or regulation or administration or control or superintendence of the business. In the present case, the Tribunal, on examination of the services rendered by the sub-arrangers to the Respondent - Assessee concluded that the services rende .....

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esident. In terms of section 5 of the Act, a nonresident is chargeable to tax received or deemed to be received in India or accrued or arising in India. Section 9 of the Act describes income which is deemed to accrue or arise in India. The impugned order examined the nature of fees in the context of section 9(1)(vii) of the Act to hold that it is not a technical service as defined therein. This view of the Tribunal in the context of the services being rendered by the sub-arrangers is a factual d .....

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can be said to accrue or arise in India where payment is made for service by non-resident outside India. The CBDT had issued a Circular No.786 of 2000 dated 7th February 2000 reiterating the view of the Apex Court in Toshoku Ltd.'s case (supra). No change in law has been shown to us which would warrant taking a view different from the view taken by the Apex Court in Toshoku Ltd. (supra). In the above view, as no income has accrued or arisen to the non-resident sub-arrangers in India, the qu .....

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stantial question of law. Thus not entertained. 5. Re: Question No.(4) (a). Mr Tejveer Singh, learned counsel for the Revenue, very fairly states that the aforesaid question was also subject matter of consideration in an Appeal filed by the Revenue in respect of AY 1997-98 being Income Tax Appeal No.1430 of 2013 (Director of Income Tax (IT)-I Mumbai v/s M/s Credit Agricole Indosuez) wherein by order dated 17th June 2015 an identical question was not entertained by this Court. No change in facts .....

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as fees and commission from SBI for services rendered as arranger. The Respondent - Assessee had in turn paid an amount of ₹ 37.07 crores by way of sub-arranger fes and commission to the subarrangers appointed. In the above view, the Respondent - Assessee claimed as expenditure an amount of ₹ 14.87 crores to determine its taxable income for the subject Assessment Year. However, in its books of account, the Respondent - Assessee amortized the above expenditure of ₹ 14.87 crores .....

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ubject Assessment Year. (b). Being aggrieved, the Respondent - Assessee carried the issue in appeal to the CIT(A). The CIT(A) by his order dated 4th October 2004, did not disturb the order of the Assessing Officer and held that only a sum of ₹ 99.16 lakhs being the amortized portion for the subject year was deductable as expenditure to arise as the taxable income upholding the view of the Assessing Officer. (c). Being aggrieved, the Respondent - Assessee carried the issue in Appeal to the .....

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er holds that the expenditure which had been incurred in making payment to sub-arrangers had no relation whatsoever to any event which was post getting deposits under the Scheme. (d) We find that the issue is no longer res integra in view of the decision of the Apex Court in Taparia Tools Ltd. v/s Joint CIT, reported in 372 ITR 605 (SC). In the aforesaid case, the issue for consideration was whether the liability to pay interest is allowable as deduction in the first year itself or it be spread .....

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