TMI Blog2022 (5) TMI 1520X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the coordinate bench of ITAT Kolkata in the case of Timken Inc, USA [ 2017 (12) TMI 299 - ITAT KOLKATA] i.e. the payee placed on record, we find that it is a detailed order analyzing the full facts and circumstances of the case dealing with the same transaction from the payee side for the same year under consideration which answers our query and covers the instant matter squarely in favor of the assessee. We find no reason to disagree with the submissions made by assessee to delete the addition made by the Ld. AO. We find that the ld. CIT(A) has rightfully deleted the addition made by the Ld. AO - Decided in favour of assessee. - ITA No. 228/Ran/2019 - - - Dated:- 9-5-2022 - Shri Rajpal Yadav, VP (KZ) Shri Girish Agrawal, AM] For the Appellant Shri K.M. Gupta, Advocate, Ld. AR For the Respondent Shri Sanjay Mukherjee, CIT/DR ORDER Per Girish Agrawal, Accountant Member: This appeal preferred by the revenue is against the order of Ld. Commissioner of Income Tax (Appeals), Jamshedpur in appeal no. 03/14-15/76/JSR/2006-07 dated 18.03.2019 for AY 2003-04 passed u/s. 250 of the Income-tax Act, 1961 (hereinafter referred to as the Act ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the earlier order dated 07.09.2017 in assessee s own case passed by the Co-ordinate Bench of ITAT, Ranchi (supra) and also by the order dated 29.11.2017 in the case of the non-resident payee company Timken Inc, USA, passed by the Co-ordinate Bench of ITAT, C Bench, Kolkata in ITA Nos. 387 398/Kol/2010, CO Nos. 32 31/Kol/2010 for the AYs 2002-03 and 2003-04. Copy of these orders is placed in the paper book. 6.1 Ld. Counsel for the assessee further submitted that these reimbursements represent expenses and actual cost of services incurred by the holding company in USA on behalf of TIL which are subsequently paid back, commonly known as chargeback payment . According to him, these expenses are primarily in the nature of travelling expenses, boarding, lodging, apartment rentals, legal/professional services, etc. and the reimbursements made by the assessee are without any mark-up or profit element. He thus contended that since no element of income is involved in these chargeback payments to Timken USA, the assessee has not deducted tax at source u/s 195 of the Act while making remittances. According to him, Ld. AO has wrongfully disallowed the deduction claimed by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second proviso to section 40(a)(ia), which provides that if the assessee is not treated as assessee in default u/s.201 of the Act for the payments made, then no addition u/s.40(a)(i) is not called for and the 1st proviso to section 201(1) provides that where the recipient has paid tax on the amount received from the assessee, no disallowance u/s 40(a)(ia) can be made. We find force in such submission of ld AR of the assessee. The sole purpose to deduct income tax from the payments made to the recipient on the amount u/s.195(2) to realise a part of the tax due from the recipient of the amount. Further, where the assessee fails to deduct TDS and the recipient of the amount has been taxed of such amount then the same amount cannot be taxed in the hands of the assessee itself as it would amount to double taxation for the same amount, which cannot be the intention of the law. Hence, we set aside the orders of the lower authorities and vacate the disallowance of Rs. Rs.47,08,040/for the assessment year 200506 and Rs.l,66,04,740/for the assessment year 200708. Regarding balance amount of Rs.2,1l,672/for the assessment year 200708, ld AR very fairly conceded that the addition should be su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31(in ITA No.398/Kol/2010) against the very same order of CIT(A). The only issue that arises for consideration in Revenue's appeals for AY 200203 2003-04 is as to whether the CIT(A) was justified in deleting an addition of Rs.87,65,928 in AY 200203 a sum of Rs.l ,65,07,400/- in AY 2003-04 on the ground that the aforesaid sums paid by Timken India Limited (TIL), a subsidiary of the Asssessee by way of reimbursement of certain expenses incurred out of India which were paid by the Assessee and which were reimbursed by TIL to the Assessee in India without any mark up. The only issue that arises for consideration in the CrossObjections filed by the Assessee is as to whether the CIT(A) was justified in taxing a sum of Rs.1,11,74,863 in AY 200203 and Rs.73, 19,280 (wrongly mentioned as Rs.l,1l,74,863. In CIT(A) s order in AY 200304 treating the same to be payment of Fees for Technical Services rendered or Fees for Included Services (FTS). In AY 200203, the Assessee has also raised issues challenging the validity of initiation of reassessment proceedings. The issues on merits will be taken up for consideration as it is common in AY 200203 200304. 3. We shall first take u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee from TIL for A Y 200203 2003-04 was Rs.87,65,928 and Rs.73,19,280 respectively. These are referred to as Charge Back Receipts in the orders of the revenue authorities as well as the submissions made before the Tribunal. 23. As mentioned earlier these expenses are for the services that are provided by various third parties who rise invoice on the Assessee directly. The same are charged back to back by the Assessee to the service recipients including TIL. The break of the reimbursement and heads under which expenses were incurred for A Y 200203 are given in Annexure3 (Pagel to 3) to this order. The kind of services that are availed by TIL inter alia, includes Legal, Inspection and survey, Global Cargo Insurance, Internet usage, courier, vehicle leasing and rental, usage of various application software, travelling etc. The Legal expense forms the major head under which most of the expenses are booked. The inhouse attorneys provide services on Indian law, antitrust advice, affiliation and assistance risks, advice on intellectual property etc. The second main head is the inspection and survey charges of cargo and vehicles, which are done by an Employment agency A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o was not permissible. Accordingly the AO brought to tax the sum of Rs.87,65,928 as fees for included services. The break of the reimbursement and heads under which expenses were incurred for A Y 200304 are given in Annexure4 (Page1 to 3 ) to this order. 26. Before CIT(A) the Assessee submitted that no services were rendered by the Assessee in consideration of the sum paid as reimbursement by TIL. The Assessee reiterated that the sum in question was merely recovery of actual expenditure incurred assessee on behalf of TIL's employees. The Assessee was not the ultimate beneficiary of the sum in question. There is no basis on which the AO came to the conclusion that the sum in question was FTS in the hands of the Assessee. Without prejudice to the above submission, the Assessee pointed out that under Article 12(4)(b) of the DTAA it is only when technical or consultancy services rendered by the assessee makes available technical knowledge, experience or skill that the sum in question can be taxed in the hands of the Assessee. Without prejudice to the above submissions, the Assessee submitted that at best the sum in question is taxable only in the hands of the persons who prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the hands of the Assessee. There is no evidence brought on record to show that the technical skill, knowledge etc., were made available to TIL by the Assessee. At best the sum in question is taxable only in the hands of the persons who provided the services to TIL and not in the hands of the Assessee. The Transfer Pricing Officer scrutinized the details of reimbursements while examining the international transaction of reimbursement by TIL to the Assessee u/s.92 of the Act and found that the Assessee made no profit on such reimbursements and that the reimbursements were at Arm's Length. All these circumstances are sufficient to conclude that the order of the CIT(A) on this issue has to be upheld. We need not go into the question whether assessment order of the AO in AY 200405 had any influence on the decision of the CIT(A) as factually we have come to the conclusion that the sums received by the Assessee in question are pure reimbursements on actual with no mark up. We therefore dismiss the appeals of the Revenue for AY 200203 200304 . [emphasis supplied by us] 8.2 In view of above detailed discussion by the Co-oordinate benches (supra) in the decisions of assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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