2019 (7) TMI 534 - AT - Income Tax

Penalty u/s.271(1)(c) - Reimbursement of cost inclusion in the total income of the assessee, addition on account of Receipt for IT Support and Managerial services - HELD THAT - Quantum appeal of the assessee came up for consideration before the Tribunal in 2019 (7) TMI 402 - ITAT PUNE which has been disposed off vide a separate order by holding that Reimbursement of cost cannot be included in the total income of the assessee. Similarly, the other addition on account of Receipt for IT Support and Managerial services has also been deleted by holding that the same is not includible in the total income of the assessee either as Royalty or Fees for technical services. Thus, it is seen that both the additions made in the assessment order stand deleted. Since the second addition, forming bedrock of the extant penalty, does not survive anymore, there remains no question of any penalty thereon. As such, we uphold the impugned order deleting the penalty. Fees for technical services (FTS) - reimbursement received by the assessee from Faurecia Technology Center India Pvt. Ltd. towards part of salary paid by it to the expatriate which was treated by the AO as and included in the total income - HELD THAT - This ground are similar to those of the preceding year. In the order passed for the A.Y. 2011-12, the Tribunal has held that the amount received by the assessee for rendering of IT support services and Managerial services can neither be construed as Royalty nor as Fees for technical services. Following the same view, we direct to delete the addition. Treating income from providing IT support services taxed as Royalty as well as fees for technical services (FTS) - HELD THAT - It is observed from the Costs Allocation Agreement between the assessee and Faurecia Technology Center India Pvt. Ltd. a resident of France, rendered services to the Indian entity which have been narrated in Exhibit-1 of the agreement. On going through the nature of services, it is seen that these are similar to the Technical services provided by Faurecia Automotive Holding, France, to Faurecia Technology Center India Pvt. Ltd., which the Tribunal has dealt with in its order for the A.Yrs. 2011-12 and 2012-13. The Tribunal has held that such services are not in the nature of Royalty/FTS and accordingly deleted the addition. The ld. DR fairly admitted that the Technical services discussed in the case of M/s. Faurecia Automotive Holding are similar to those rendered by the instant assessee. We order to delete the addition.

Summary

Issues:
1. Penalty imposed under section 271(1)(c) for assessment year 2011-12.
2. Addition of reimbursement and IT support services as income for assessment year 2011-12.
3. Interest levied under sections 234B and 234C for assessment year 2011-12.
4. Addition of reimbursement and IT support services as income for assessment year 2012-13.
5. Taxation of IT support services as Royalty and FTS for assessment year 2012-13.
6. Treatment of income from IT support services as Royalty and FTS for assessment year 2011-12.

Analysis:
1. The judgment deals with three appeals involving common issues for the assessment years 2011-12 and 2012-13. The penalty under section 271(1)(c) for the assessment year 2011-12 was deleted by the CIT(A), and the Tribunal upheld this decision as the additions made by the Assessing Officer were deleted in a separate order for the same year. Consequently, the penalty did not stand, leading to the dismissal of the appeal.

2. For the assessment year 2011-12, the AO made additions related to reimbursement of salary and IT support services as income of the assessee. However, the Tribunal, in a separate order, ruled that these additions were not includible in the total income. As a result, the appeal by the Revenue against the deletion of penalty and additions was dismissed.

3. The interest levied under sections 234B and 234C for the assessment year 2011-12 became academic due to the deletion of additions, resulting in the dismissal of the related grounds.

4. In the appeal for the assessment year 2012-13, similar issues arose regarding the addition of reimbursement and IT support services as income. Following the precedent set for the previous year, the Tribunal ordered the deletion of these additions, leading to the allowance of the appeal for this year.

5. Another issue in the appeal for the assessment year 2012-13 was the taxation of IT support services as both Royalty and Fees for Technical Services (FTS). The Tribunal, based on its decision for the previous year, ruled that such services did not fall under Royalty or FTS, and consequently, the addition was deleted, resulting in the allowance of the appeal.

6. For the assessment year 2011-12, the appeal focused on the treatment of income from providing IT support services as Royalty and FTS. The Tribunal examined the nature of services provided by the assessee, which were found to be similar to those in a previous case. Following the precedent, the Tribunal deleted the addition, partially allowing the appeal for this year.