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2020 (1) TMI 650 - AT - Income TaxTDS u/s 195 - reimbursement of demurrage expenses made to non-residents including group entities of the Appellant - HELD THAT - As decided in DEMPO CO. PVT. LTD., THE COMMISSIONER OF INCOME TAX 2016 (2) TMI 308 - BOMBAY HIGH COURT it is the recipient's position and the perspective in which the recipient's income would be taxed will have to be borne in mind. The non-resident shipping company in respect of it's income would be in a position to rely upon section 44B and consequently section 172. However, we do not see how there is an obligation to deduct tax at source on the resident assessee/Indian company before us. While computing the income of the non-resident Indian / foreign company, assistance can be derived by such non-residents from section 44B if they are in shipping business. It would also be in a position to rely upon section 172 but the responsibility of the person making payment to a non-resident in sub-section (1) of section 195 cannot be avoided in the manner set out in other cases. The scheme as above operates only to cases covered by section 172 of the IT Act and none else. We see no infirmity in the order passed by the Ld. CIT(A) in deleting the demurrage charges relating to A.Y. 2012-13 as these expenses were never debited to Profit Loss account for the assessment year under consideration i.e., A.Y. 2013-14 nor claimed as deduction from total income, in such circumstances there cannot be any disallowance u/s. 40(a)(i) of the Act. Thus, we sustain the order of the Ld.CIT(A) and reject Ground Nos. 1 2 of the grounds of appeal of the revenue. TDS u/s 192 - reimbursement of salary cost which was on account of availing personnel services from its AE s who were sent to India at secondment - HELD THAT - As decided in own case 2019 (10) TMI 972 - ITAT MUMBAI employees who were serving in India or deputed in India had already deducted tax at source u/s 192 of the Act. The provision of TDS is not applicable on reimbursement of deputation expenses to foreign AE. The CIT(A) has relied upon the decision in the case of Burt Hill Design (P) Ltd. Vs. DDIT (IT) 2017 (4) TMI 49 - ITAT AHMEDABAD he facts are not distinguishable at this stage. No law contrary to the law relied by the Ld. Representative of the assessee has been produced before us. In view of the said circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage.
Issues Involved:
1. Disallowance of reimbursement of expenses under section 40(a)(ia) of the Act. 2. Reimbursement of demurrage expenses. 3. Non-grant of credit of taxes deducted at source. 4. Levy of interest under section 234D. 5. Characterization of reimbursement of salary costs as fees for technical services (FTS). Detailed Analysis: 1. Disallowance of Reimbursement of Expenses under Section 40(a)(ia): The assessee challenged the disallowance of reimbursement of demurrage expenses made to non-residents, including group entities, on account of non-deduction of taxes at source under section 195. The Tribunal found that this issue had been decided in favor of the assessee in a previous case (A.Y. 2010-11) and followed the decision of the Hon'ble Bombay High Court in CIT v. Dempo and Co. Pvt Ltd., which held that such reimbursements are not subject to tax deduction at source as they are pure cost reimbursements without any service element. 2. Reimbursement of Demurrage Expenses: The Tribunal examined whether the reimbursement of demurrage charges amounted to fees for technical services (FTS) taxable under section 9(1)(vii) of the Act. The Tribunal referred to the decision in CIT v. Dempo and Co. Pvt Ltd., which clarified that demurrage charges are akin to freight and not FTS. The Tribunal upheld the assessee's claim, noting that the demurrage charges paid were purely reimbursements and did not involve any service element. 3. Non-grant of Credit of Taxes Deducted at Source: The assessee sought credit for taxes deducted at source amounting to INR 672. The Tribunal directed the Assessing Officer to examine the claim and grant credit as per the law. 4. Levy of Interest under Section 234D: The assessee challenged the levy of interest under section 234D amounting to INR 22,47,064. The Tribunal noted that this ground is consequential and directed the Assessing Officer to decide the matter in accordance with the law. 5. Characterization of Reimbursement of Salary Costs as Fees for Technical Services (FTS): The revenue argued that the reimbursement of salary costs for personnel seconded to India should be treated as FTS under section 9(1)(vii) and subject to tax deduction under section 195. The Tribunal referred to its earlier decision in the assessee's case for A.Y. 2010-11, where it was held that such reimbursements are not FTS but are subject to tax deduction under section 192 as salaries. The Tribunal upheld the CIT(A)'s decision, which found that the seconded employees worked under the control and supervision of the assessee in India, and the payments were reimbursements without any markup. Separate Judgments: The Tribunal delivered consistent judgments for both A.Y. 2013-14 and A.Y. 2014-15, applying the same principles and decisions to similar issues raised in both years. Conclusion: The Tribunal allowed the assessee's appeals in part, granting relief on the disallowance of demurrage expenses and reimbursement of salary costs, while directing the Assessing Officer to examine the claims for TDS credit and levy of interest under section 234D. The revenue's appeals were dismissed, with the Tribunal upholding the CIT(A)'s decisions in favor of the assessee.
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