TMI Blog2020 (11) TMI 1090X X X X Extracts X X X X X X X X Extracts X X X X ..... triate employees and the taxpayer have been established in view of the Secondment Agreement duly discussed in order passed in taxpayer s own case for AY 2015-16 (supra) and that taxpayer has duly deducted full tax u/s 192 of the Act being on the income chargeable under the head salaries , section 195 of the Act has no applicability. Moreover, when expatriate employees seconded to the taxpayer have worked as employees of the taxpayer company, their salary has been rightly subjected to section 192 of the Act and Explanation to section 9(1)(vii) of the Act which apparently makes it clear that salary would not fall within the expression fee for technical services has no applicability to the facts and circumstances of the case. Consequently, addition made by the AO and confirmed by the ld. CIT (A) on account of disallowance under section 40(a)(i) of the Act is not sustainable in the eyes of law and hence ordered to be deleted. Grounds determined in favour of the taxpayer. Adjustment u/s 92CA of the Act on account of outstanding receivables from AEs - HELD THAT:- When undisputedly identical issue has already been decided by the TPO in favour of the taxpayer by not imputing any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 income of the Appellant on account of outstanding receivables from AEs and failed to appreciate that the outstanding receivables and payables of the Appellant were in accordance with the arm's length standard. 4. On the facts, in the circumstances of the case in law, the Ld. TPO/ CIT(A) erred in not appreciating that interest on receivables is not a separate international transaction as the interest proposed to be charged is already built in the price charged for services rendered. 5. On the facts, in the circumstances of the case in law, the Ld. CIT(A) erred in not app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hort 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 the taxpayer on which tax has been deducted u/s 192 of the Act, the same cannot be disallowed being fee for technical services . Declining the contentions raised by the taxpayer, the AO after referring to the Secondment Agreement and by relying upon the decision rendered by Hon ble Delhi High Court in case of Centrica India Offshore P. Ltd. vs. CIT (2014) 364 ITR 336 (Delhi) proceeded to invoke the provisions contained u/s 40(a)(i) of the Act by holding that the taxpayer has failed to deduct the tax at source on salary other allowances amounting to Rs.32,47,18,234 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 other hand, ld. DR for the Revenue to repel the arguments addressed by the ld. AR for the taxpayer contended inter alia that since it is a case for fee for technical services (FTS), there is no escape route for the taxpayer to deduct tax u/s 192 of the Act; that coordinate Bench of the Tribunal in taxpayer s own case for AY 2015-16 decided vide order dated 17.08.2020 has not appreciated the real facts canvassed by the Revenue and has referred to para 31 of the order (supra). However, the ld. DR for the Revenue has failed to bring on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trongly 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 Officer made disallowance of Rs. 56,58,19,799/-. 25. Objections were raised before the DRP but were of no avail. 26. Before us, the ld. counsel for the assessee vehemently stated that the assessee has deducted tax at source/s 192 of the Act, and, therefore, there should not be any disallowance u/s 40(a)(i) of the Act. Reliance was placed on the decision of the coordinate bench in the case of Neemrana Hotels Pvt Ltd ITA No. 98/DEL/2017 order dated 10.07.2019. It is the say of the ld. counsel for the assessee that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead 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 case of AT T Communication Services India Pvt Ltd. [supra], distinguishing the decision of the Hon'ble Delhi High Court in the case of Centrica India Offshore Pvt Ltd [supra], has held as under: 30. The DRP has affirmed the decision of the Ld. AO by holding that the assessee has deducted withholding tax on substantial payments and yet argued that the tax is not deductible u/s 195 of the act and provision of section 40(a)(i) cannot be invoked in the case of said payment. 31. The DRP h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ett 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 sustained 'in view of the fact that in so far as HP (USA) was concerned, the fee for technology transfer and for the transfer of know-how by HP (USA) to HP (India) had already been quantified and separately received. The technicians were deputed and the services were placed at the disposal of the assessee during the deputation period, The assessee was not only liable to pay the salary but to pay the tax thereon. On appeal to the High Court: Held, dismissing the appeal, tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of Director of Income-tax (International Taxation)-II, Mumbai vs. M/s. Marks Spencer Reliance India Pvt. Ltd. coordinate Bench of the Tribunal in AT T Communication Services (India) P. Ltd. vs. DCIT (supra), when relationship of employer and employees between expatriate employees and the taxpayer have been established in view of the Secondment Agreement duly discussed in para 31 of the order passed in taxpayer s own case for AY 2015-16 (supra) and that taxpayer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the Revenue states that the papers before us suggest that a special leave petition was preferred against that judgment but he has no instructions as to what happened thereafter. Learned counsel for the respondents states that their enquiries with the Registry reveal that no appeal against that judgment was preferred by the Revenue. If the Revenue did not accept the correctness of the judgment in the case of Pradip Ramanlal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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