TMI Blog2016 (4) TMI 1117X X X X Extracts X X X X X X X X Extracts X X X X ..... r consideration and that which could be treated MS or otherwise. Without establishing the primary facts, he should not have decided the issue. We do not find any basis for holding that 50% of the managerial charges should be taxed. In our, opinion, matter needs further investigation and verification, as his order lacks reasoning. Therefore, in the interest of justice, we are restoring back the issue to the file of the FAA for fresh adjudication who will decide the issue afresh after affording a reasonable opportunity of hearing to the assessee. Disallowance of business loss to be set off against long-term capital gain and income from other sources - Held that:- FAA was not justified in denying the setting off of losses arising out of bad dates and leave-encashment and that assessee could avail the benefit of provisions of the Act over the provisions of the DTAA for setting off of losses. - ITA No.3138/Mum/2011, ITA No.6746/Mum/2011, ITA No.3587/Mum/2011, ITA No.6850/Mum/2011 - - - Dated:- 18-3-2016 - Sh. Rajendra, Accountant Member and Ram Lal Negi, Judicial Member For The Assessee : S/Shri S.E. Dastur, Nitesh Joshi and Vispi T.Patel For The Revenue : Shri Jasbir Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42, 92, 396/- Lloyd s Register Quality Assurance Ltd. U.K. 89, 14, 963/- 22, 40, 853/- Total 14, 78, 35, 401/- 4, 65, 33, 249/- Out of the above amount, Lloyds Register UK, offered royalty income of ₹ 14.78 crores for taxation, however ₹ 4.65crores received under the head management charges were claimed to be non chargeable in India. The AO did not agree with the assessee and held that management charges, amounting to ₹ 4, 65, 33, 249/- were taxable in India as fee for technical services(FTS)under Article-13(2)(a)(ii) of the India-UK DTAA r.w.s.9(1)(vii)of the Act. He was of the opinion that there was no arrangement before 16.7.2003, that earlier technical and managerial services(MS)were considered part of the business activity by the assessee company, that profit arising out of such activities was offered for taxation in India under the head business income. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority( FAA).Before him, it was contended that to attract section 9(1)(viii)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word managerial did not find a place in the definition of FTS under India-UK Tax Treaty, that fee paid for MS could not be regarded as FTS. He referred to the case of Temken India Ltd. and observed that the AAR had applied Article 12 of India tax treaty in respect of MS, that the provisions of India-US treaty and the India-UK DTAA were similar in respect of MS, that the MS signified service for management of affairs or services rendered in performing management functions, that it involved adoption or to carryout out policies of organization as a whole. He gave a list of services which would not qualify under the head managerial service and further held that Schedule 3 of management services proved that assessee was getting money for getting technical services rather than managerial services, that certification of machinery of product was technical service and not managerial service, that Lloyd Register s Rules and Regulations was also technical service, that similarly expenditure incurred on information technology, hardware maintenance and software maintenance could not be categorised as MS, that providing comprehensive insurance programme for third parties was not managerial f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasonable cause for taxing half of the MS, that even if portion of it was to be taxed it should have been restricted to 10-15% of the total receipt. 5. We find that the assessee had received ₹ 14, 78, 35, 401/-as royalty and ₹ 4.65 crores as MS, that it had claimed that managerial-charges, received by it, were not taxable in India, that the AO was of the view that notwithstanding two agreements entire management charges were taxable as FTS, that the FAA had held that half of the MS charges were to be taxed in India, that while deciding the appeal, he had not given any reason as to why 50% of the receipts should be treated as MS, that the asessee as an alternate plea had stated that if any addition was to be made it should have been restricted to 10-15% of the payment. We further find that the FAA had discussed a few services and has stated that same could be treated as MS. But, he has not analysed the bills that would given him a clear and fair idea as to which services were actually rendered by the asessee for the year under consideration and that which could be treated MS or otherwise. Without establishing the primary facts, he should not have decided the issue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out in India, that the said loss was claimed against the income from the other sources and capital gain as in the earlier years, that the bad debts had been offered for tax on basis of provision made, that leave encashment provisions were disallowed in the earlier years, that during the year under consideration liabilities were paid off. After considering the submission of the assessee and the assessment order, the FAA held that the business of the assessee had come to an end when it decided to discontinue its India branch and had applied to RBI for winding up business Activities, that during the year no business of the assessee was in existence, that there was no question of having business loss for the year under consideration, that question of set off of business loss from income under the other heads of income was not permissible. Upholding the order of the AO, he dismissed the appeal filed by the assessee. 10. Before us, the AR contended that losses were arising out of the earlier Activities of the assessee, that they were relatable the business of the assessee, that the provisions of Act i.e. section 71(2)were in favour of the assessee, that business losses were to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a foreign bank to its HO and branch offices abroad cannot be taken into account for the purpose of computing the income of HO liable to be taxed in India. Deciding the appeal, the Tribunal held as under: The position under the domestic law is clear that one cannot make profit out of himself and if the payment of interest made by the Indian PE to the foreign GE of which it is a part is payment to self, it cannot give rise to any income which is chargeable to tax in India as per the domestic law..Keeping in view the purpose and scope of article 11(4) of the OECD Model Convention, the provisions of which are pari materia to the provisions of article 11(6) of the Indo-Japanese treaty, the same is not applicable to the facts of the present case inasmuch as the situation as contemplated to make it applicable does not exist in the present case. In the present case, the amount is advanced by the head office of the assessee bank to its PE in India and the same represents liability of the PE in India as reflected in the balance sheet of that PE. Interest paid by the PE on such liability, therefore, cannot be regarded as interest paid in respect of debt claims forming part of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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