TMI Blog2017 (4) TMI 917X X X X Extracts X X X X X X X X Extracts X X X X ..... GH COURT] we are of the opinion payment made by the assessee was neither royalty nor FFTS. It was case of pure and simple reimbursement. Secondly, the assessee had not made any payment to Singapore Telecommunication - Decided in favour of assessee. Not allowing the TDS credit on interest income paid to HO - Held that:- During the course of hearing before us, the AR stated the assessee had paid interest to the HO for which TDS was paid, that the departmental authorities had denied to give credit for the taxes paid,that AO should be directed to give the credit for the tax paid by it, the DR left the issue to the discretion of the Bench. Thus we are of the opinion that matter should be sent back to the file of AO.He is directed to give credit for the taxes paid after verification. Second Ground is allowed in favour of the assessee,in part. Adjustment to the sales credit commission earned on sale of treasury products on behalf of the AE - Held that:- Identical issue stands decided in favour of the assessee by the order of the Tribunal for the AY.2008-09 wherein as considered it fair and proper and in the interest of justice to set aside this matter to the A.O./TPO with a directio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee,that the services were in the nature of Royalty/fees for technical services(FFTS).He relied on the explanation (2)to sub clauses (iv)(vi) as well as explanation 3 to section 9 (1)(vi) for the meaning of the term Royalty and held the payments in question were covered by the definition of the royalty as per the provisions of Article 13(3) and 13(4) of the India France DTAA.Accordingly, he proposed to tax the amount at the rate of 10%. 2.1. Aggrieved by the proposed addition,the assessee filed objections before the DRP and made submissions.After considering the available material,the panel held invoices had been raised by Singapore Telecommunication Limited and Pacnet Global (Singapore) Pte Ltd. on SGS, that the impugned amount had been allocated to various entities including the assessee, that Singapore Telecommunication Limited has charged the assessee group for data communication lines, that the recovery also included software maintenance charges,that it was not clear as to whether any third party had maintained the software or it was the SGS itself who had provided the services, that no application under section 195(2)was made before the authorised officer for not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduce the relevant portion of the judgment of Steria (supra) and same is as under : The Protocol to the Double Taxation Avoidance Agreement between India and France (see [1994] 209 ITR (St.) 130, 157) provides that if under any Convention, Agreement or Protocol signed after September 1, 1989, between India and a third State which is a member of the OECD, India limits its taxation at source, inter alia, on fees for technical services to a rate lower or a scope more restricted than the rate of scope provided for in this Convention, the same rate or scope as provided for in that Convention Agreement or Protocol shall also apply under this Convention. There is no warrant for the restrictive interpretation placed on clause 7 of the Protocol to the Double Taxation Avoidance Agreement between India and France in such a manner that that if a reference is made to one Convention signed after September 1, 1989 between India and another OECD member State for the purposes of ascertaining if it had a more restrictive scope or a lower rate of tax, then that Convention alone has to be referred to for both purposes or that it is not permissible for the assessee, in terms of clause 7 of the Prot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment to Singapore Telecommunication.Therefore,following judgment of Steria (supra) we decide Ground no.1 in favour of the assessee. 3. Second Ground deals with not allowing the TDS credit of ₹ 1.58 lakhs on interest income paid to HO of ₹ 15,86,609/-in computation of total income.During the assessment proceedings, the AO found that the assessee had paid an amount of ₹ 15.86 lakhs as interest to HO /overseas branches on borrowings,that it had deducted the tax at source under the provisions of Section 195 of the Act.It was stated before the AO that as per provisions of Indo France Tax Treaty interest to HO was allowable expenditure, that it had deducted tax on payment of interest made to HO following a conservative approach,that it should be allowed TDS credit for the same.However, the AO held the contention of the assessee to the effect the provisions of Section 40(a)(i) of the Act were not applicable to the payments was unacceptable,that it had deducted tax of ₹ 1.58 lakhs. 3.1. Aggrieved by the order of the AO,the assessee filed objections before the DRP.After considering the proposed draft order and submission of the assessee the panel held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e SG, Paris for its performance activity whereby sales credit was paid to the assessee by SG, Paris as gross sales less counterpart risk less cost of capital. It was submitted that the same formula had been consistently applied by the assessee in the earlier years and since the same was accepted in the earlier assessments being at arm s length, the transaction should be accepted as at arm s length in the year under consideration. It was also pointed out that the commission received by the assessee as net sales credit was 64% of the total income booked in India for SG, Paris as against 66%, 43% and 61% in assessment years 2004-05, 2005-06 and 2006-07 respectively. When a reference was made by the A.O. to the TPO for determining the ALP of these international transactions of the assessee with its AEs in respect of commission received on account of sale of its fixed income and derivative products, the TPO found that the commission of 64% claimed to be received by the assessee on the income booked in India by SG, Paris was not the net profit of the assessee and it was the total value against which various expenses were standing. He, therefore, proceeded to determine the ALP of the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and even by the TPO during the course of remand proceedings. He contended that the average margin of the comparables thus is required to be recomputed after taking into consideration the said objections specifically raised by the assessee. He further contended that the average margin of the comparables as recomputed after taking into consideration the objection of the assessee is required to be applied only to the total cost of the assessee relating to its international transactions with its AEs and not to the entire cost of the assessee as done by the TPO. He submitted that the commission received by the assessee on account of sale of fixed income and derivative products to SG, Paris is only ₹ 21.49 crores and the relevant cost thereof only should be considered for applying the average margin of the comparables as recomputed. 13. The ld. D.R., on the other hand, did not dispute the position that the objections raised by the assessee before the DRP as regards the comparables selected by the TPO and their margins taken to compute the average margin at 59.95% have not been considered either by the DRP or even by the TPO in the remand proceedings. He also did not dispute ..... 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