TMI Blog2018 (4) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited UK u/s. 201 - Held that:- As such the assessee cannot be called upon to comply with the provisions not in force at the relevant time but introduced later by retrospective amendment so as to deduct TDS on the impugned payments. In our opinion, the assessee cannot be required to comply with the provisions as this was not in the statute book at the time of incurring the impugned payments. To that extent, the Ld. AR’s argument is justified. However, if the services are rendered in India or payee has residence or business or business connection in India or services utilized in India, then the assessee is liable to deduct TDS. There is no finding in the order of the lower authorities whether the service is rendered in India or utilized in India with regard to the impugned payments. Withholding tax on payment of legal representation charges to Simpson & Grierson, New Zealand u/s. 201 - Held that:- In our opinion the assessee has to prove that the services were rendered outside India and the same was utilized outside India and the payee is having no business or business connection in India. Hence in the interest of natural justice, we remit this issue to the file of the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat, when a particular amount of expenditure is incurred and that sum is reimbursed as such, that cannot be considered as having any part of it in the nature of income. Further, according to the Ld. AR, reimbursement of expenses does not have the income element and hence cannot assume the character of income deemed to accrue or arise in India and hence reimbursement is not liable for withholding tax. The Ld. AR submitted that the said principle has also been affirmed by multiple higher Courts. 5. On the other hand, the Ld. DR submitted that assessee was required to furnish relevant agreements entered with IBS America pertaining to the above payments and also to furnish evidence to prove that the payments were only reimbursements that were made on cost to cost basis. However, it was submitted that the assessee could not produce any agreement entered into in this regard but produced a few sample debit notes as proof for reimbursement of expenses. It was submitted that on perusal of the sample debit notes and the ledger account copies it was not clear as to whether the payments were made at cost to cost basis. The Ld. DR submitted that since the assessee had not furnished sufficien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee to prove the same. Hence, this ground raised by the assessee is remitted to the file of the Assessing Officer for fresh consideration. He shall make necessary enquiry on this issue to find out the nature of expenditure whether it is revenue expenditure. This ground of appeal of the assessee is allowed for statistical purposes. 7. The next ground is that the CIT(A) has erred in computing withholding taxes on marketing support charges paid to Avient Solutions Limited UK u/s. 201 of the Act at ₹ 3,15,75,700/-/- 8. The facts of the issue are that the Assessing Officer observed that the assessee had paid a total sum of ₹ 3,15,75,700/- during the FY 2006-07 to another non-resident company namely, Avient Solutions Limited, UK without deducting tax at source u/s,195 of the IT Act. Therefore the Assessing officer treated the assessee as an assessee in default u/s.201(1) of the I.T. Act. 9. The Ld. AR submitted that the above payment of ₹ 3,15,75,700/- was consultancy charges paid towards project management services rendered by Avient Solutions Limited, UK and the non-resident company was providing marketing consultancy services to IBM India in Europ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, service and professional services in the sales territory and Avient also had the responsibility of providing support to software products and also provided technical consultancy services. According to the Ld. DR these facts were also supported by the following specific clauses of the agreements: Clause 2. Avient shall have the responsibility of providing support to software product titled top air' as per the terms and conditions mentioned in Clause 3.1: Avient, utilizing its existing sales organization and sales channels, will organize within itself a line of business (IBS Europe) to take, up the responsibility of promoting IBS products and services in Europe. Clause 3.2: IBS Europe will he reporting to the Managing Director of Avient There will be corresponding organization (Business Services - Europe) within IBS that would support IBS Europe to achieve significant business growth in Europe. Clause 3.3 Avient will have a business development manager for IBS Europe reporting to the Managing Director of Avient. The business development manager will be initially deputed by IBS. As and when required parties can agree to have a small sales team to prom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o deduct TDS on the impugned payments. In our opinion, the assessee cannot be required to comply with the provisions as this was not in the statute book at the time of incurring the impugned payments. To that extent, the Ld. AR s argument is justified. However, if the services are rendered in India or payee has residence or business or business connection in India or services utilized in India, then the assessee is liable to deduct TDS. There is no finding in the order of the lower authorities whether the service is rendered in India or utilized in India with regard to the impugned payments. Hence, to examine these facts, and decide thereupon, we remit this issue to the file of the Assessing Officer for fresh consideration. Hence, this ground of appeal is allowed for statistical purposes. 11. The next ground is with regard to computing withholding tax onpayment of legal representation charges to Simpson Grierson, New Zealand u/s. 201 of the Act at ₹ 5,93,70,042/-.. 12. The facts of the case are that it was observed by the Assessing officer that during the FY 2009-10, the assessee company had made payment towards legal charges amounting to ₹ 5,93,70,042/- to a no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that as per the provisions of the Act, legal services rendered by SG is outside the purview of section 9(1)(vii) of the Act and the legal services shall not come within the ambit of technical/consultancy services as defined under section 9(1)(vii)) of the Act as professional services (including legal services) is defined separately under section 194J of the Act. It was submitted that the income of a non-resident shall be taxable in India as per the provisions of section 5 read with sect ion 9 of the Act only if the income: - is received or deemed to be received in India: or - Accrues or is deemed to accrue or arise in India (includes income arising from a business connection in India) 13.3 Accordingly, it was submitted that in the absence of a business connection for SG in India, the said payments shall not be taxable in India. It was further submitted that section 195 of the Act shall apply only for sums chargeable to tax in India. Therefore, the Ld. AR pleaded that the services rendered by SG is not liable to tax in India as the same is not managerial, technical or consultancy in nature, but the same is mere representation services before the New Zealand court of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eas in the assessee s case, the service was provided by the firm and the payment was made only to the firm and not to the individual members of the firm. The Ld. DR submitted that since the payment was made to a non-resident firm for rendering services being technical/consultancy in nature, the payment is covered by the Article 12(4) of the India-New Zealand treaty and these payments being in the nature of fee for technical services, it is taxable in India as per the provisions of section 9(1)(vii) of the IT Act. t. Accordingly the Ld. DR submitted that the retrospective amendment of explanation to section 9(1)(vii) is squarely applicable to the assessee ss case and the assessee is liable to deduct tax u/s 195 of the IT Act. In the above circumstance it was submitted that the assessee had not deducted tax u/s.195 for the payment of ₹ 5,93 70,042/- to M/s. SG, New Zealand, the assessee was liable for consequence as per the provisions of section 201(1) and 201(1A) of the IT Act. 14.3 The Ld. AR relied on the decision of the ITAT, Chennai Bench in the case of Brakes India Ltd. vs. DCIT reported in (2017) 82 taxmann.com 238 (Chennai.Trib.) wherein it was held as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes of this clause, fees for technical services means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head Salaries . 15. We have heard the rival submissions and perused the record. In our opinion the assessee has to prove that the services were rendered outside India and the same was utilized outside India and the payee is having no business or business connection in India. Hence in the interest of natural justice, we remit this issue to the file of the Assessing Officer for fresh consideration. 15.1 The other grounds raised by the assessee are with regard to levy of interest u/s. 201(1A) of the Act which is consequential in nature and does not require adjudication. S.P. No.03/Coch/2018 16. Since we have disposed of the appeal itself, the Stay Petition filed by the assessee has become infructuous and the same is dism ..... X X X X Extracts X X X X X X X X Extracts X X X X
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