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2022 (7) TMI 1418 - AT - Income TaxNon-deduction of TDS - Disallowance u/s 40(a)(i) - reimbursement of salary expenses made on behalf of the seconded employees as fee for technical services - HELD THAT - We note that the evidences filed by assessee has not been considered by the revenue authorities. We therefore remand this issue to the AO to consider the claim in accordance with the decision of M/s. Flipkart Internet Pvt. Ltd. 2022 (6) TMI 1251 - KARNATAKA HIGH COURT and M/s. Toyota Boshoku Automotive India Pvt. Ltd. 2022 (4) TMI 1443 - ITAT BANGALORE and Goldman Sachs Services Pvt. Ltd. 2022 (4) TMI 1444 - ITAT BANGALORE having regard to the evidences filed by the assessee. Needless to say that proper opportunity of being heard must be granted to assessee in accordance with law. Ground raised by assessee stands allowed for statistical purposes.
Issues:
1. Appeal against final assessment order for A.Y. 2014-15. 2. Classification of reimbursement of salary expenses as fees for technical service. 3. Initiation of penalty proceedings u/s 271(1)(c) of the Act. Issue 1: Appeal against final assessment order for A.Y. 2014-15 The appeal was filed by the assessee against the final assessment order dated 25/10/2018 passed by Ld.DCIT(IT), Circle – 2(1), Bangalore for A.Y. 2014-15. The grounds of appeal challenged the correctness of the order, alleging incorrect appreciation of facts and misinterpretation of the law by the Ld. AO and Ld. DRP. The primary contention was the assessment of total income at INR 19,44,19,324, contrary to the returned income of INR 12.86,35,099. The appeal also raised concerns about the classification of reimbursement of salary expenses as fees for technical services ('FTS') and the initiation of penalty proceedings u/s 271(1)(c) of the Act. Issue 2: Classification of reimbursement of salary expenses as fees for technical service The main issue before the Tribunal was the classification of reimbursement of salary expenses as fees for technical services. The Ld.AR contended that TDS was deducted on the entire salary paid to seconded employees, and the reimbursement made was only for the portion paid by the AE to the families of such employees. It was argued that the details submitted regarding salaries and TDS deductions were not considered by the authorities below. The Ld.AR relied on various decisions, including those of the Hon'ble Karnataka High Court and Tribunal, to support the contention. The Tribunal observed that the evidences submitted by the assessee were not duly considered by the revenue authorities. Consequently, the issue was remanded to the Ld.AO for reconsideration in line with the decisions cited by the assessee, granting the assessee a proper opportunity to present their case. Issue 3: Initiation of penalty proceedings u/s 271(1)(c) of the Act The appeal also challenged the initiation of penalty proceedings u/s 271(1)(c) of the Act. However, the Tribunal's decision primarily focused on the classification of reimbursement of salary expenses as fees for technical services. As the issue was remanded for reconsideration based on the evidences presented by the assessee, the appeal was allowed for statistical purposes. The Tribunal emphasized the need for the Ld.AO to review the claim in accordance with relevant legal precedents and provide the assessee with a fair opportunity to present their case. In conclusion, the Tribunal's judgment addressed the issues raised by the assessee in the appeal against the final assessment order for A.Y. 2014-15. The primary focus was on the classification of reimbursement of salary expenses as fees for technical services, leading to the remand of the issue for reconsideration by the Ld.AO. The decision highlighted the importance of considering all relevant evidences and providing the assessee with a fair hearing in line with legal requirements.
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