TMI Blog2021 (2) TMI 789X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer/DRP. We, accordingly, direct for deletion of addition . - ITA Nos. 983/Del./2016 and 3695/Del./2018 - - - Dated:- 11-2-2021 - O.P. Kant, Member (A) And K.N. Chary, Member (J) For the Appellant : Anuradha Dutt and Sachit Jolly, Advs. For the Respondents : Prabha Kant, CIT ORDER Per O. P. Kant, Member , AM These appeals by the assessee are directed against the Final Assessment Order dated 28th December, 2015 passed by the Assessing Officer and Rectification Order dated 28.03.2018 passed by the Assessing Officer for Assessment Year 2011-12. 2. These appeals are connected with the same assessment year and, therefore, same were heard together and disposed of by way of this consolidated order for the sake of convenience. ITA No. 983/Del./2016 (AY: 2011-12) 3. Firstly, we take up the appeal in ITA No. 983/Del./2016. The grounds raised in the appeal are reproduced as under: 1. On the facts, in law and in the peculiar circumstances of the present case, the Learned Dispute Resolution Panel ('Ld. DRP')/Ld. AO has grossly erred in making an addition of ₹ 25,10,56,019/- under section 40(a)(i) of the Act, by exceeding its power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. 4.5 giving incorrect findings on facts, alleging that the Appellant failed to file the requisite details. 5. On the facts, in the circumstances of the case in law, the Ld. DRP and the Ld. Transfer Pricing Officer ('Ld. TPO')/AO (following the directions of the Ld. DRP), have grossly erred on facts and in law in enhancing the income of the Appellant by ₹ 7,64,82,506 on account of: 5.1 incorrectly characterising the Appellant as a technical consultancy service provider and not appreciating the fact that the Appellant is a business development, advisory and other support service provider; 5.2 Pursuant to such incorrect re-characterization: 5.2.1 incorrectly rejecting the economic analysis and the comparable results contained in the Transfer Pricing ('TP') documentation; 5.2.2 incorrectly rejecting comparables selected by the Appellant as functionally not comparable; 5.2.3 incorrectly including the segment of a comparable company WAPCOS Ltd. even when the company as a whole was comparable to the Appellant; 5.2.4 disregarding the fresh search conducted by the Appellant with respect to alleged technical consultancy s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee on this issue. In the final Assessment order, the Assessing Officer has made disallowance of ₹ 25,10,56,019/-, observing as under: 7. Addition u/s. 40a(a)(i) of Income Tax Act, 1961 Further, the DRP vide his order directed the AO, the direction(s) of the DRP are reproduced as under: Considering the facts and judicial decisions on this subject, this expenditure toward salaries and allowances and travel expenses etc, amounting to ₹ 31,73,75,430/- constitutes Fees for Included Services chargeable to tax in India, in terms of Article 12(4) of the India US DTAA. The payments covered by the India UD DTAA and the India Australia DTAA are also taxable in terms of these DTAAs. These payments are fees for Technical Services in terms of section 9(1)(vii) read with Explanation 2, of the Income Tax Act and are chargeable to tax in the hands of the recipients. The assessee failed to deduct tax at source on this expenditure therefore, disallowance under section 40(a)(i) is required. Fees for Technical Services are taxed @10% under section 115A. CBDT circular No. 03/2015 dated 12.02.2015 has clarified that for the purpose of making disallowance of other sum char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., Boeing Korea LLC and whether the salary paid to expatriates has been included in the total salary. Further, the assessee was asked to explain the work performed by the expatriates. The assessee was asked to explain the reimbursement of expenses to Boeing company USA, Boeing International Corporation Korea and Boeing Defence Australia. The assessee furnished necessary details. It was explained that reimbursement of salary cost to expatriate employees is not taxable as FIS, both under the provisions of the Act and relevant DTAA, and no withholding tax was required on the same. 23. It was further explained that the assessee was a real and economic employer of expatriate employees, as these employees were under the control of the company without any relation/connection with the AEs and salary expenses have been borne by the assessee on which the appropriate taxes were duly deducted and deposited u/s. 192 of the Act. It was strongly contended that reimbursement of cost charges of salary of expatriate employees is not taxable as FTS/FIS. 24. The Assessing Officer was not convinced with the submissions of the assessee and referring to the terms of secondment agreement and dra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employees cannot make available any knowledge. Further reliance was placed on the decision of the coordinate bench in the case of AT T Communication Services India Pvt. Ltd. 101 Taxmannn.com 105 [Delhi Trib] 29. Per contra, the Ld. DR strongly supported the findings of the lower authorities and placed strong reliance on the decision of the Hon'ble High Court in the case of Centrica India Offshore Put Ltd. [supra]. 30. We have given thoughtful consideration to the orders of the authorities below. We have also carefully perused the salary reimbursement agreement, which is placed at pages 296 onwards of the paper book, and as per clause 1.1, it is provided that the secondees have expressed their willingness to be deputed to BIPICL [the 20 appellant] and TBC [AE] have agreed to release these employees to BIPICL. It is provided that TBC will facilitate payment of salaries in secondees home country on behalf of BICIPL. Under the head employment status, it is provided that the secondees shall be working for BICIPL and will be under supervision, control and management of BICIPL as an employee of BICIPL. 31. It is clear from the afore-stated relevant clauses that the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sending the remand report, the Assessing Officer has admitted that the identical disallowance were being made from Assessment Year 2011-12 onwards. 4.4. In view of the identical issue involved in the year under consideration, respectfully following the finding of the Tribunal (supra), we delete the disallowance made in the impugned order. The Grounds No. 1 to 4 of ITA No. 983/Del./2016 are accordingly allowed. 5. Hence, appeal is allowed. ITA No. 3695/Del./2018 (AY: 2011-12) 6. Now, we take up the appeal in ITA No. 3695/Del./2018. The grounds raised by the assessee in the appeal are reproduced as under: 1. In law, on facts and peculiar circumstances of the present case, the issuance of notice under section 154 of the Act to access the amount of ₹ 6,63,19,411/- as income of the Appellant and passing of order under section 154/143 of the Act dated March 28, 2018 are illegal, void ab-initio, bad in law and therefore, may kindly be ordered to be quashed. 2. On the facts, in the circumstances of the case and in law, the Ld. AO grossly erred in making an adjustment of ₹ 6,63,19,411/- to the returned income of the Appellant, treating the same as fee fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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