TMI Blog2019 (9) TMI 1683X X X X Extracts X X X X X X X X Extracts X X X X ..... alty. Vide para 101, it was further held that where it is case of reimbursement of expenses, there is no requirement to deduct tax at source. Hon'ble Supreme Court also in DIT (IT) Vs. A.P. Moller Maersk A S [ 2017 (2) TMI 993 - SUPREME COURT] and BNP Paribas SA [ 2018 (3) TMI 1987 - BOMBAY HIGH COURT] have held that when it is case of reimbursement of expenses, then there is no requirement of deduction of tax from such payments. Accordingly, we hold that there is no merit in the orders of authorities below in holding the assessee liable for such non deduction of tax at source. Reversing the same, we allow the claim of assessee and disallowance made under section 40(a)(i) of the Act is thus, deleted. The ground of appeal No.2 raised by assessee is thus, allowed. Unabsorbed depreciation in the hands of assessee - HELD THAT:- As assessee pointed out that the same was consequential to the decision in earlier years. So, we direct the Assessing Officer to verify the plea of assessee in this regard and re-work the unabsorbed depreciation to be adjusted against current year s income. Assessee pointed out that there is double disallowance made by AO, that there are no brou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act 6. erred in initiating penalty proceedings under section 271(1)(c) of the Act. Any consequential relief, to which the Appellant may be entitled under the law in pursuance of the aforesaid grounds of appeal, or otherwise, may thus be granted. 3. The ground of appeal No.1 raised by assessee is general and hence does not require any adjudication. 4. Coming to ground of appeal No.2 which is against the disallowance made under section 40(a)(i) of the Act by re-characterizing the reimbursement of expenses paid by assessee to its associated enterprise as royalty and disallowing the said claim under section 40(a)(i) of the Act for non deduction of tax at source. 5. Briefly, in the facts of the case, the assessee had filed return of income declaring income of ₹ 16.04 crores. The assessee was engaged in the manufacturing and trading of various types of resistors and capacitors used in electronic application / products. The facilities of assessee were located in Domestic Tariff Area (DTA), Export Oriented Unit (EOU) and Software Technology Park (STP). The assessee was also engaged in rendering outsourcing services to the overseas Vishay group. The case of assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 4.35 crores. As far as last disallowance of unabsorbed depreciation is concerned, the DRP directed the Assessing Officer to verify, who in turn, disallowed sum of ₹ 53,07,389/-. 6. The assessee is in appeal vide ground of appeal No.2 against disallowance made under section 40(a)(i) of the Act. 7. The learned Authorized Representative for the assessee explained that the assessee was an Indian company and had one associated enterprise in Singapore, to which payment of ₹ 4.35 crores was made. The holding company of assessee was Vishay Intertechnology Inc, USA, which entered into various agreements for providing leaseline and also for provision of data transmission. The cost incurred by associated enterprise was apportioned to various entities across the world; for Asia Pacific Region, Vishay Intertechnology Asia Pte Ltd. allocated the cost. He stressed that there was no markup on the reimbursement made by assessee; it was a pure case of reimbursement. The learned Authorized Representative for the assessee explained that leaseline charges were paid on the basis of bandwidth used by entities. He stressed that same payment was made to same entities in earlier years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her pointed out that Pune Bench of Tribunal in M/s. T-3 Energy Services India Pvt. Ltd. Vs. JCIT in ITA No.826/PUN/2015, relating to assessment year 2010-11, order dated 02.02.2018 had decided the said issue. He further relied on the decision of Pune Bench of Tribunal in the case of John Deere India Pvt. Ltd. (2019) 70 ITR (Trib) 73 (Pune) with special reference to para 96, wherein on similar payments for leaseline charges, it was held that it was not royalty and no obligation to deduct tax at source. Further, in para 100 it was held that leaseline charges were not equivalent to equipment royalty. In para 101, the Tribunal held it to be reimbursement of expenses. He stressed that there is retrospective amendment to Income Tax Act but provision of DTAA was not amended, then there was no liability to deduct tax. 8. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of authorities below and he stressed that right to use facility was royalty and he placed heavy reliance on the observations of DRP in this regard. 9. We have heard the rival contentions and perused the record. The assessee was an Indian company, wherein the holdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Act widening the scope of royalty. 11. Further, vide para 100 it was held that payment of leaseline charges is not equipment royalty. Vide para 101, it was further held that where it is case of reimbursement of expenses, there is no requirement to deduct tax at source. 12. Further, the Hon'ble Supreme Court also in DIT (IT) Vs. A.P. Moller Maersk A S (supra) and the Hon ble Bombay High Court in CIT Vs. BNP Paribas SA (supra) have held that when it is case of reimbursement of expenses, then there is no requirement of deduction of tax from such payments. Accordingly, we hold that there is no merit in the orders of authorities below in holding the assessee liable for such non deduction of tax at source. Reversing the same, we allow the claim of assessee and disallowance made under section 40(a)(i) of the Act is thus, deleted. The ground of appeal No.2 raised by assessee is thus, allowed. 13. Now, coming to the next issue raised vide ground of appeal No.3 i.e. claim of unabsorbed depreciation in the hands of assessee. The learned Authorized Representative for the assessee pointed out that the same was consequential to the decision in earlier years. So, we di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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