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TMI Blog2020 (11) TMI 1090X X X X Extracts X X X X X X X X Extracts X X X X ..... n amount, inter alia that :- "1. On the facts and circumstances of the case & in law, the Ld. CIT(A) erred in upholding corporate tax disallowance (Rs.22,16,37,000 & Rs.30,84,53,598 for AYs 2012-13 & 2013- 14) made by Ld. AO under section 40(a)(i) of the Income Tax Act, 1961 ('the Act') for not withholding' taxes at source, by erroneously treating the reimbursement of salaries and other expenses as fees for technical services ('ITS') under section 9(1)(vii) of the Act and Fees for Included Services ('FIS')/Royalty under relevant Articles of Indo-USA and Indo- Australia Tax Treaties. 2. In doing so, the Ld. AO as well as the Ld. CIT(A) failed to appreciate that: 2.1 the aforesaid payments were not chargeable to tax in India since they pertained to seconded employees of Associated Enterprises ('AEs') working for the Appellant and, were under its control and supervision. 2.2 taxes were duly withheld under section 192 of the Act on salaries paid to the seconded employees of the AEs of the Appellant. . 3. On the facts, in the circumstances of the case & in law, the Ld. Transfer Pricing Officer ('TPO')/ CIT(A) erred in enhancing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain expatriate employees from its AEs. The aforesaid expatriate employees employed by the AEs have been released and taken into employment by the taxpayer. 4. During the year under assessment, the taxpayer taken into employment the expatriate employees from US and Australia on the salary to be paid by the taxpayer in India which was accounted for as expense under "Salaries & Wages" in the books of account of the taxpayer and appropriate taxes on such salaries & wages were deducted and deposited by the taxpayer under section 192 of the Income-tax Act, 1961 (for short 'the Act'). 5. The Assessing Officer (AO) observed that the taxpayer has entered into international transactions pertaining to reimbursement of expenses paid to its AEs to the tune of Rs.40,97,62,682/-. On submitting the details, the taxpayer was called upon to explain why the disallowance be not made u/s 40(a)(i) as no TDS (Tax deducted at source) has been deducted on payments which are actually in the nature of 'Fee for technical services (FTS)'. The taxpayer explained that since the expatriate employees were under its control without any relation/connection with the AEs and salary expenses have been borne by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax in India being pertaining to said employees of AEs working for the taxpayer under its control and supervision; that taxes were duly deducted by the taxpayer u/s 192 of the Act on salaries paid to the said employees of the AEs; that identical issue has already been decided in favour of the taxpayer by the coordinate Bench of the Tribunal vide order dated 17.08.2020 passed in ITA No.9765/Del/2019 for Assessment Year 2015-16 in its own case by distinguishing the decision of Hon'ble Delhi High Court passed in case of Centrica India Offshore P. Ltd. (supra) and also relied upon the decisions rendered by Hon'ble Delhi High Court in cases of CIT, Delhi II vs. Karl Storz Endoscopy India (P) Ltd. in ITA No.13 of 2008 order dated 13.09.2010 & Director of Income-tax vs. HCL Infosystems Ltd. 274 ITR 261 (Del.) and coordinate Bench of the Tribunal in the cases of HCL Infosystems Ltd. vs. DCIT in ITA Nos.4068 to 4077/Del/2020 order dated 26.02.2002, AT&T Communication Services ((India) P. Ltd. in ITA Nos.354/Del/2017 & 1653/Del/2016 order dated 31.10.2018 & Addl.DIT (International Taxation) vs. Mark and Spencer Reliance India P. Ltd. (2013) 27 ITR (Trib) 448 (Mumbai). 11. However, on the oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bursement 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 drawing support from the decision of the Hon'ble High Court in the case of CentricaIndia Offshore India Ltd 364ITR 336 and further referring to various judicial decisions, the Assessing Officer finally came to the conclusion that the assessee has failed to deduct tax at source on the expenditure towards salaries and other allowances and invoking the provisions of section 40(a)(i) of the Act, the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 clause1.1, it is provided that the secondees have expressed their willingness to be deputed to BIPICL [the 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 secondees were, in fact, in employment of the appellant and as per the terms, the 'A' was paying salaries at the home country of the secondees and, therefore, there was reimbursement by the appellant. These facts clearly show that the assessee has been paying to its own employees and this fact alone clearly distinguishes the facts of the decision in the case of Centrica India Offshore Ltd [supra]. 32. The co-ordinate bench in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alary or fee for technical services to foreign technicians was placed at the disposal of the taxpayer and held that taxpayer has rightly considered the payment as salary and had rightly deducted tax at source u/s 192 of the Act and Explanation to section (9)(1)(vii) is not applicable in case of salary" by returning following findings:- " The Income-tax Department after a lapse of six years issued notices requiring the assessee to show cause why the remittances made by it to Hewlett Packard (USA) in respect of salaries paid by HP (USA) on behalf of the assessee to four 'foreign technicians /I /expatriates, be not treated as 'fee for technical services" and why the assessee should not be treated as an assessee-in-default for not deducting tax from the said payment under section 195 of the Income-tax Act, 1961. Considering the documents placed on record and various other documents, the Income-tax Appellate Tribunal arrived at the conclusion that the remittances were by way of "salaries" and were not 'fee for technical services" as claimed by the Revenue. It was specifically observed by the Tribunal that the presumption raised by the Commissioner (Appeals) could not be su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts were clear, as these, there was no illegality in the order of the Commissioner of Income Tax (Appeals) which was maintained by the Tribunal. The appeal of the Revenue was rightly dismissed by the Tribunal." 16. Coordinate Bench of the Tribunal in case of AT&T Communication Services (India) P. Ltd. vs. DCIT in ITA No.354/Del/2017 & ITA No.1653/Del/2016 order dated 31.10.2018 also decided the identical issue by observing that, "When the payment to non-resident entity is in the nature of payment consisting of income chargeable under the head 'salary' the taxpayer does not have any tax withholding applications under section 195 of the Act. So, when the salary is subjected to TDS u/s 192 of the Act, section 195 has no application." 17. In view of what has been discussed above, following the decisions rendered by the coordinate Bench of the Tribunal in taxpayer's own case for AY 2015-16 in the identical facts and circumstances and by following the decisions rendered by Hon'ble Delhi High Court in the cases of Centrica India Offshore P. Ltd. vs. CIT, Director of Income-tax vs. HCL Infosystems Ltd. 274 ITR 261 (Del.) (supra), Hon'ble High Court of Judicature at Bombay in case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A). 20. When undisputedly identical issue has already been decided by the TPO in favour of the taxpayer by not imputing any interest on outstanding receivables, the TPO in the instant case has no option except to follow the rule of consistency, as has been held by the Hon'ble Supreme Court in case of CIT vs. Shiv Sagar Estate (supra) that when the Revenue has accepted the contention of the applicant in the earlier year, it would not be entitled to challenge that contention in subsequent years by returning following findings :- "Having regard to the fact that no appeal has been carried against the orders of identical assessment for the previous year, the civil appeals and special leave petitions are dismissed." 21. Similarly, in case of UOI vs. Kaumudini Narayan Dalal & Anr. (supra), Hon'ble Supreme Court has held that if the Revenue has accepted the point raised by the taxpayer it is subsequently barred from challenging the same point by returning following findings :- "The order under challenge in this appeal by the Revenue followed the earlier judgment of the same High Court in the case of Pradip Ramanlal Sheth us. Union of India [1993] 204 ITR 866. Learned counsel for th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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