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2017 (4) TMI 917 - ITAT MUMBAI

2017 (4) TMI 917 - ITAT MUMBAI - TMI - TDS u/s 195 - Addition of reimbursement of expenses to the head office(HO)for expenses incurred on behalf of the assessee by the HO - Held that:- We find that the assessee had made payment its sister concern located in Singapore for the services rendered by that entity, that it had claimed the payments were reimbursements only without any mark up. The assessee had produced the debit note raised by the foreign entity.The invoices issued by the SGS talk about .....

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DTAA also supports the stand taken by the assessee. As relying on Steria case [2016 (8) TMI 166 - DELHI HIGH 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 .....

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ommission 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 direction to consider the said objections of the assessee and recompute the average margin of the comparables after taking into consideration the said objections. We also direct the A.O./TPO to a .....

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icial Member For The Revenue : Shri Mahesh Kumar-CIT For The Assessee : Shri Brijmohan P. Agarwal Order u/s.254(1)of the Income- tax Act,1961(Act) PER Rajendra A.M.- Challenging the order,dt.29.01.2015 of Assessing Officer(AO),passed u/s.143(3) r.w.s.144C of the Act,in pursuance of the directions of the Dispute Resolution Panel-IV(DRP),Mumbai the assessee has filed the present appeal.Assessee is a foreign company and is engaged in business of banking.It filed its return of income on 30/09/2010,d .....

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e payments represented reimbursement made to SGS and same were made for services on lease line expenses on reimbursement basis,that the payment did not contain any marked up,that the reimbursement were for data communication charges and annual Microsoft Enterprises Products billing,that the Singapore entity had incurred the true-up charges on behalf of the assessee,that TDS u/s.195 of the Act was required to be made only if the income was chargeable to tax,that the income was not chargeable,that .....

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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 Telecommuni .....

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ld fall under the definition of Royalty / FTS, that same was the position under the DTAA,that the disputed amount had been rightly taxed by the AO, that for non-deduction of TDS the entire expenses claimed by the assessee would be disallowable under Section 40(a)(i) of the Act. Finally,the panel dismissed the appeal filed by the assessee. 2.2. During the course of hearing before us,the Authorised Representative (AR)stated that payments were made by the Singapore Branch to the Singapore Telecommu .....

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ces by Singapore Telecommunication, that it was not known as to what was the exact amount, that income was embedded in the payment was also not known. 2.3. We heard the rival submission and perused the matter before us.We find that the assessee had made payment its sister concern located in Singapore for the services rendered by that entity, that it had claimed the payments were reimbursements only without any mark up, that the AO and the Panel rejected claim made by the assessee,that both the a .....

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ail of various charges paid by the assessee to the foreign entity.The Panel has not brought anything on record to controvert the entries appearing in it.Besides,Protocol 7 to the DTAA also supports the stand taken by the assessee.We would like to reproduce 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 .....

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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 Protocol, to rely upon one Convention between India and a .....

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ion the most beneficial of the provisions that may be available in another Convention between India and another OECD country. The wording of clause 7 of the Protocol makes it self-operational. Once the Double Taxation Avoidance Agreement has itself been notified, and contains the Protocol including clause 7 thereof, there is no need for the Protocol itself to be separately notified or for the beneficial provisions in some other Convention between India and another OECD country to be separately n .....

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services agreement were managerial services. It was plain that once the expression managerial services was outside the ambit of fee for technical services , the question of the assessee having to deduct tax at source from payments for the managerial services, would not arise. The payment made by the assessee to SF for the managerial services provided by the latter could not be taxed as fees for technical services and the payments were not liable to withholding of tax under section 195 of the Ac .....

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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 .....

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essee the panel held that under the DTAA the income of the non-resident was characterised under various heads,that in case of business profits income would be taxed only if the non-resident had a permanent establishment (PE)in India and the income attributable to such PE was taxable in India, that in case of banking companies interest payment was allowable, that interest received by the HO from the PE would be taxable under Article 12 of the treaty at a lower rate of taxation.Referring to the CB .....

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left the issue to the discretion of the Bench. After hearing the rival submissions, 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. 4. Last Ground of appeal is about adjustment of ₹ 67.28 lakhs to the sales credit commission earned on sale of treasury products on behalf of the AE.During the course of hearing before us,it was brought to our .....

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of derivative products on behalf of its Associated Enterprise. 11. During the year under consideration, the assessee had received commission of ₹ 21.49 crores on account of sale of fixed income and derivative products made in India on behalf of its Associated Enterprise (AE) Societe Generale (SG), Paris. It was submitted that the assessee was compensated in terms of the agreement with the SG, Paris for its performance activity whereby sales credit was paid to the assessee by SG, Paris as .....

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d 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 agains .....

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he arm s length profit at ₹ 91.91 crores and since the net profit shown by the assessee was only ₹ 25.11 crores, adjustment of ₹ 66.80 crores was proposed by the TPO. The addition on account of transfer pricing adjustment as per the order of the TPO was made by the A.O. in draft assessment issued on 15-10-2011. Against the said draft order, objections were filed by the assessee before the DRP and after considering the submissions made by the assessee in support as well as the m .....

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any relief to the assessee. Accordingly, the addition of ₹ 66.80 crores was made by the A.O. by way of TP adjustment in the final assessment order passed u/s 14393) r.w.s. 144-C(13) of the Act. 12. The ld. counsel for the assessee in support of the assessee s case on this issue raised very limited and specific contentions. He submitted that the assessee is not disputing either the TNMM followed by the TPO as most appropriate method or the OP/TC taken by him as PLI for this purpose. He sub .....

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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 .....

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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 the position that such average margin of comparables is required to be applied only to the total cost pertaining to the relevant international transactions of the assessee with its AEs to work out the ALP of the said transactions. He, however, contended that this matter should be remanded to the A.O./TPO to consid .....

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5% and the same being higher than 16.38% OP/TC of the assessee as worked out by the TPO, the TP adjustment of ₹ 66.80 crores has been made by applying the average OP/TC at 59.95% of the comparables to the total operating cost of ₹ 153.31 crores to the assessee. As contended by the ld. counsel for the assessee and accepted even by the ld. DR, the average margin of comparables is required to be applied to the total cost of the assessee relating to its relevant transactions with its AEs .....

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