TMI Blog2019 (10) TMI 1580X X X X Extracts X X X X X X X X Extracts X X X X ..... essee company, the question of deduction of tax does not arise. The assessee also made a statement at the bar that the Revenue has accepted the decision of the Tribunal and has not filed any appeal before the Hon'ble High Court. We, therefore, dismiss the ground raised by the Revenue challenging the deletion made by the Assessing Officer for non-deduction of tax from the payments made to Outotec Oyj. The ground raised by the Revenue is accordingly dismissed. - R.K. PANDA, MEMBER (A) AND SUCHITRA KAMBLE, MEMBER (J) For the Appellant : G.C. Srivastava, Suvinay Kumar Dash, Advocates and Prichay Solanki, CA For the Respondents : Nidhi Sharma, Sr. DR ORDER R.K. PANDA, MEMBER (A) 1. ITA No. 320/Del/2016 filed by the assessee is directed against the order dated 23.11.2015 of the Assessing Officer passed u/s. 143(3) r.w.s. 144C(1)/144C(5)/144C(13) of the IT Act, 1961 and ITA No. 6587/Del/2015 filed by the Revenue is directed against the order dated 15th October, 2015 of the DRP, Panel-2, New Delhi, relating to assessment year 2011-12. 2. For the sake of convenience these were heard together and are being disposed of by this common order. 3. Facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25.25 3. Concept Communication Ltd. 4.49 4. Crystal Hues Ltd. 7.23 5. Cyber Media Research Ltd. (IDC India Ltd.) 10.71 6. DHFL Property Services Ltd. 12.04 7. Global Procurement Consultants Ltd. 30.99 8. ICRA Management Consulting Services Ltd. 15.32 9. Info Edge (India) Ltd. 46.25 10. MMTV Ltd. 32.49 11. India Exposition Mart Limited 13.52 12. Quadrant Communications Ltd. 14.58 13. TSR Darashaw Ltd. 36.56 Average 19.29 5. The Assessing Officer, in the draft order, accordingly proposed the adjustment of Rs. 56,78,697/- as suggested by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrect. He referred the provisions of section 195 of the Act, according to which any person responsible for paying to any non-resident not being a company or to a foreign company any interest or any other sum chargeable under the provisions of this Act shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of cheque or draft or by any other mode whichever is earlier deduct income-tax thereon at the rates in force. The payment made to Outotec Oyj is 'fee for technical services' and such services are chargeable to tax as per source rule within the meaning of section 9 of the Act. Therefore, the assessee was liable to deduct TDS on this payment under the provisions of section 195 of the Act. Since the assessee has not deducted any tax, the Assessing Officer, invoking the provisions of section 40(a)(i) has made an addition of Rs. 1,62,88,677/-. He accordingly determined the total income of the assessee at Rs. 1,47,51,420/-. The assessee approached the DRP who deleted the addition made by the Assessing Officer of Rs. 1,62,88,677/- u/s. 40(a)(i) of the Act. So far as the comparables are concerned, the Ld. DRP d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition made by the AO on account of payment of Rs. 1,62,88,677/- made to Outotex Oyj which was chargeable to tax in India and was liable for TDS under the provisions of section 195 and the assessee had failed to deduct TDS u/s. 195 of the IT Act in view of the provisions of section 40a(i) read with section 9 and section 195 of the Income Tax Act, 1961. 3. The Appellant craves to be allowed to add any fresh ground (s) of appeal and/or delete or amend any of the ground (s) of appeal. 10. The Ld. counsel for the assessee submitted that Ground Nos. 1, 2 and 4 are general in nature. So far as ground No. 3 is concerned, he submitted that the assessee is only challenging the following four comparables, namely, (i) Aptico Ltd.; (ii) Info Edge (India) Ltd.; (iii) MMTV Ltd.; and (iv) TSR Darashaw Ltd. 11. The Ld. counsel drew the attention of the Bench to page 2 of the TPO's order and submitted that the TPO in his order itself has mentioned that the company was primarily engaged in the provision of market support and manpower design services to AEs and rendering engineering services to third parties. Referring to page 3 of the TPO's order, he drew the attent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 162 ITD 541 and submitted that the Tribunal at para 8.8 of the order has held that the amounts received by the assessee from Outotec India Pvt. Ltd. does not qualify as FTS as per the DTAA. He submitted that when the payee is not liable to tax, there is no question of any TDS by the assessee company. He further submitted that the Revenue has accepted the decision of the Tribunal and has not preferred any appeal, therefore, on this very issue the assessee company is not liable to any TDS from the payments made to Outotec Oyj and, therefore, the ground raised by the Revenue should be dismissed. 12. The Ld. DR, on the other hand, heavily relied on the order of the A.O./TPO/DRP. She submitted that the various decisions relied on by the Ld. counsel are not applicable since the functions performed by them are not exactly similar to that of the assessee and, therefore, those decisions cannot be relied. Further, the assessee has not given all the requisite details before the TPO. She accordingly submitted that the order of the A.O./TPO should be upheld. 13. The Ld. counsel, in his rejoinder, submitted that in the case of Adobe Systems India Pvt. Ltd., the Tribunal while deciding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... converted by the Ld. DR. Since the above company is engaged in the business of television broadcasting and related operations and it has got significant intangibles, therefore, we hold that this company cannot be compared with that of the assessee company. The order of the DRP is accordingly upheld. ............................................................................................... 29. So far as Apitco Limited is concerned, we find this company was rejected by the Tribunal in assessee's own case for assessment year 2009-10. Similarly, the DRP has rejected this company from the list of comparables in assessment year 2013-14. Since the company provides technical consultancy services which is evident from the page 27 of the annual report and it fails the export turnover filter having 0.57%, therefore, we uphold the order of the DRP in holding that this is a functionally different entity and hence does not make a good comparable to the assessee in MSS function. 30. So far as Global Procurement Consultants Limited is concerned, we find this company is engaged in procurement related advisory services and financial audit for projects in India and abroad which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h as recruitment related, real estate related, matrimonial related services and owns significant Rolls Royce India Private Limited v. DCIT ITA No. 6636 Del 2015 A.Y. 2011-12 intangibles/websites such as naukri.com, 99 acre.com etc. Therefore this company is functionally different as it is providing an advertisement space as well as online portal based on subscription by the buyer and seller of the services compared to services provided by the assessee of marketing support services. In view of this we direct Ld. TPO for exclusion of this comparable. 41. Similarly, the Tribunal in the case of Linkedin Technology Information Private Limited (supra) has directed the TPO to exclude this company from the list of comparable. 42. Following the above two decisions and considering the fact that the functions of Info Edge (India) Limited is different from that of the case of the assessee, we hold that the above company is not a comparable. We accordingly direct the Assessing Officer/TPO to exclude this company from the list of comparables. 16. We find, following the above decision the coordinate Bench of the Tribunal in the case of Teijin India Pvt. Ltd. (supra) and various other d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ....................................................... 40. After hearing both the sides, we find the Info Edge (India) Ltd. was included by the TPO holding that it is functionally comparables which has been upheld by the DRP. WE find the Tribunal in the case of Rolls-Royce India Pvt. Ltd. (supra) while directing the TPO to exclude this company as comparable from the market support services segment has observed as under:- 21. Regarding Infoedge India Pvt. Ltd. we are of the view that this company has been included by the TPO holding that it is functionally comparable. Assessee contended before the Ld. TPO as well as DRP that this company is functionally not comparable in view of it engaged in management of online portals and also has major sources of revenue as advertisement income. Both the lower authorities rejected the contention of the assessee. We have carefully considered the rival contentions. It is apparent that the comparable selected by TPO is engaged in online portal activities such as employment website, matrimonial website and its major revenue is advertisement and subscriptions. It has diversified services such as recruitment related, real estate related, matrim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... echnical Services Pvt. Ltd., (Supra). 11. The Ld. DR of the revenue could not point out any difference in facts in the present case and in that case i.e. of M/s. Adidas Technical Services Pvt. Ltd., (Supra). Para-8.3 of this Tribunal order is reproduced below. The Tribunal in that case held to exclude three companies i.e. M/s. Aptico Ltd., M/s. Global Procurement Consultants Ltd., and M/s. TSR Darashaw Ltd. 8.3. We first take up the case of Apitco Ltd., (a) Apitco Ltd.:-Apitco Ltd. is a Public Sector Undertaking providing various support services for the development of tourism industry. Later the functional profile of the company had undergone a change, and it is now engaged in providing technical consultancy relating to asset reconstruction companies, management services, micro enterprise development, skill development etc. This is a government company. The fact that its operations are mainly based on the policy requirements of the government and the fact that it is a preferred company of the Government of India for entrustment of works, cannot be ignored. Be it as it may, in our considered opinion, the functional profile of this company is different from that of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Procurement Limited is not a 100% Government of India owned company and that it is being promoted by export import bank of India, as a private sector company in partnership with Leading corporate groups like MECON, ICCI, TCE Consulting Engineers Ltd. etc. She submitted that the functional profile is that of specialized support services, which required high profile skill and timely delivery of quality services, which is comparable with the functional profile of the assessee. 12.8 On a careful consideration of these arguments, we are of the considered opinion that this company should be taken as a comparable for the following reasons: a) This is not a 100% Government owned company as claimed by the assessee. Under the head corporate synergy it is stated that this company is co-promoted by the Export Import Bank of India as private sector Company along with a number of other Private Companies. b) The functional profile of this company is rendering of highly specialized procurement support services. The quality of service, the skills are comparable with the quality and skill of support services provided by the assessee, though in functionally different areas. As the Ld. Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y provided in India, the company is a correct comparable. He also held that the assessee had not gone into the verticals or high end or low end distinctions while selecting the comparables and has selected companies operating in various verticals. The TPO has also selected comparables which are broadly engaged in the field of marketing support services which has similar to the services provided by the assessee. The Ld. Counsel for the assessee on the other hand submitted that the company is not functionally comparable. It is contended that there can be no comparison between a specific pay roll service rendered and marketing support service provided. It was contended that TSR Darashaw Ltd. is a broking and investment banking house and as 57.4% of its income is from the share registry services segment and hence not a comparable. Reliance is placed on the following decisions. i. Microsoft Corporation P. Ltd. vs. DCIT in ITA No. 5766/Del/2011; ii. Premier Exploration Services P. Ltd. vs. ITO in ITA No. 4935/Del/2011. In our considered opinion TSR Darashaw Ltd. cannot be taken as a comparable as 57.4% of its income is from share registry services segment. This shows the func ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omparables. The grounds raised by the assessee are accordingly allowed and the ground of appeal No. 1 raised by the Revenue is accordingly dismissed. 19. So far as the ground of appeal No. 2 of the Revenue is concerned, it relates to the order of the DRP in directing to delete the addition of Rs. 1,62,88,677/- made by the Assessing Officer on account of non-deduction of tax from the payment made to Outotec Oyj. We find the Ld. DRP while directing to delete the addition made by the Assessing Officer has observed as under:- 6.0 Finding: 6.1 DRP has duly examined the issue. Article 13(4) of Indo-Finland DTAA (1984) provides as under: 4. The term fees for technical services as used in this Article means payments of any kind to any person, other than payments to an employee of the person making the payments and to any individuals for independent personal services mentioned in Article 15, in consideration for services of a managerial, technical or consultancy nature, including the provision of services of technical or other personnel. Indo-Finland Protocol (1998) amended Article 13(4) as under: 4. For the purposes of paragraph 2, and subject to paragraph 5, the te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement services are not included in definition of FTS and also definition of FTS is subject to 'make available' clause. 6.3 As per provisions of section 195 of the Act, liability to deduct tax arises if any payment made to non-resident is chargeable to tax in India in hands of payee. In present case, majority of services provided by Outotee Oyj are in nature of management services as per Annexure 1 to service agreement dated 01.07.2009. In any case, there is 'make available' clause in definition of FTS which has not been satisfied in present case. There is no provision for training in service agreement. The AO has simply taken a position that meaning given to 'make available' in Indo-USA treaty cannot be imported in Indo-Finland treaty is not correct as per various judicial authorities on the issue. In view of above, the panel is of considered view that payment made by the assessee to Outotee Oyj is not in nature of FTS and hence not chargeable to tax in India in absence of PE of Outotee Oyj in India. Therefore, provisions of section 195 are not attracted and hence disallowance u/s. 40a(i) is not warranted. 6.4 The panel has further noted that delivery ..... X X X X Extracts X X X X X X X X Extracts X X X X
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