2018 (1) TMI 670 - AT - Income Tax

Consideration for administrative support functions received by appellant - whether services involved in the agreement satisfy the make Available criteria or not? - Held that - In the present case, the assessee has not provided adequate details before the Assessing Officer as well as before the ld DRP. Before us, also, no evidences were laid but assessee attempted to press upon only the legal arguments. Before laying down the facts of a case reliance on judicial precedents becomes an exercise in futile. Therefore, as assessee has not provided the complete details, in the interest of justice, we set aside the whole issue back to the file of ld Assessing Officer for deciding whether the services involved in the agreement satisfy the make Available criteria or not. We also direct assessee to provide complete details about the services showing their nature, manner of rendering and demonstrate before the AO that the services are of such a nature that recipient would not be able to perform them on its own. Needless to say, that proper opportunity of adducing information as well as the hearing shall be granted to assessee before deciding the issue. In the result ground, No. 1 of the appeal of the assessee is allowed with above direction. Grossing up the above services by the amount of tax deduction at source - Held that - As we have already set aside the whole issue of determination of fees for technical services back to the file of the ld Assessing Officer the issue of grossing up of those services is related to that issue only, in the interest of justice, we also set aside ground No. 2 of the appeal of the assessee to the file of Assessing Officer. Charging of interest u/s 234B - Held that - The issue is squarely covered in favour of the assessee by the decision of the Hon ble Delhi High Court in case of DIT (International Taxation) Vs. GE Packaged Power Inc. (2015 (1) TMI 1168 - DELHI HIGH COURT), wherein, it has been held that where assessee is non-resident company, entire tax to be deducted at source at payments made by the payers to it and there was no question nof payment of advance tax by the assessee, therefore, revenue could not charge any interest u/s 234B.

Summary

Issues Involved:
1. Taxation of administrative support functions as Fees for Technical Services (FTS) under Article 12 of the India-Singapore Tax Treaty.
2. Addition of tax deducted at source (TDS) on account of grossing up of administrative support fees.
3. Levy of interest under section 234B of the Income Tax Act.
4. Initiation of penalty proceedings for furnishing inaccurate particulars of income.

Detailed Analysis:

Issue 1: Taxation of Administrative Support Functions as FTS
The primary issue was whether the consideration for administrative support functions received by the assessee from CEVA Freight India Pvt Ltd (CEVA India) is taxable as Fees for Technical Services (FTS) under Article 12 of the India-Singapore Tax Treaty. The assessee argued that the services provided did not "make available" any technical knowledge, skills, or expertise to CEVA India, referencing judicial precedents and other tax treaties. The Assessing Officer (AO) and the Dispute Resolution Panel (DRP) concluded that the services did make available technical knowledge, thus falling under FTS as per the treaty. The Tribunal noted that the assessee provided scanty details, such as eight emails, which were mostly basic queries and templates. The Tribunal directed the assessee to provide comprehensive evidence to the AO to demonstrate that the services rendered did not make available technical knowledge to CEVA India. The matter was remanded back to the AO for a fresh determination.

Issue 2: Addition of TDS on Account of Grossing Up
The second issue was the addition of tax deducted at source (TDS) on the grossing up of administrative support fees. The assessee referred to clause 6 of the agreement, arguing that the TDS should be on the account of the first party. The Tribunal, noting the interrelation with the first issue, remanded this matter back to the AO for reconsideration along with the primary issue of FTS determination.

Issue 3: Levy of Interest under Section 234B
The third issue concerned the levy of interest under section 234B of the Income Tax Act. The assessee contended that as a non-resident whose entire income was subject to TDS, no advance tax was payable, and hence, interest under section 234B should not be applicable. The Tribunal agreed, referencing the Delhi High Court's decision in DIT (International Taxation) Vs. GE Packaged Power Inc., which held that non-residents whose income is fully subjected to TDS are not liable for advance tax and thus not subject to interest under section 234B. Consequently, this ground was decided in favor of the assessee.

Issue 4: Initiation of Penalty Proceedings
The final issue was the initiation of penalty proceedings for furnishing inaccurate particulars of income under section 271(1)(c). The Tribunal deemed this issue premature and dismissed it.

Conclusion
The appeal was partly allowed for statistical purposes, with the primary issue of FTS determination and related TDS grossing up remanded back to the AO for fresh consideration. The levy of interest under section 234B was decided in favor of the assessee, and the initiation of penalty proceedings was dismissed as premature.