2018 (8) TMI 2160 - AT - Income Tax

TDS in respect of royalty income - HELD THAT - As assessee claims that Panasonic Carbon India deducted tax it is not known for which year the tax was deducted and whether the corresponding income was declared by the assessee for taxation during the year under consideration need to be examined by the AO. Therefore, this Tribunal is of the considered opinion that as rightly submitted by the Ld. D.R., the fact needs to be verified by the AO. Accordingly, the order of the Assessing Officer is set aside and the issue of TDS credit by Panasonic Carbon India and royalty is remitted back to the file of the AO for reconsideration. AO shall re-examine the matter in the light of the material that may be filed by the assessee and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee. Treating sum as income of the assessee without allowing corresponding tax deducted at source - HELD THAT - If the tax was deducted at source in respect of income for the year under consideration, it is not known why the tax deducted was not given credit? Therefore, this Tribunal is of the considered opinion that the matter needs to be re-examined by the AO Accordingly, the order of the AO is set aside and the issue is remitted back to the file of the AO to re-examine whether the income is taken as income by the assessee. It also needs to be verified whether tax was deducted at source in respect of the income. Royalty receipts - Year of assessment - as submitted that the royalty income is taxable on receipt basis as per Article 12(4) of DTAA between India and Japan and assessee has already disclosed the income during the assessment year 2015-16 - HELD THAT - As reported the royalty payable to the assessee in Form 3CEB. Correspondingly, the assessee has reported the same in Form 3CEB. The assessee claimed before the AO that a provision was made by M/s Panasonic Appliances India Co. Ltd. and no tax was deducted on the said sum. These details have not been verified by the AO. Therefore, this Tribunal is of the considered opinion that the AO has to re-examine the issue afresh. Accordingly, the order of the AO is set aside and the entire issue is remitted back to the file of the AO. AO shall re-examine the matter and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee. Reimbursement of employee cost / secondment of employee - HELD THAT - AO as well as DRP could not be controverted by the assessee by producing necessary material before this Tribunal. In view of the fact that the employees of Panasonic Corporation Japan are all senior technical / managerial position who reported to the President and Vice President who, in turn, was expected to report to the assessee herein, the seconded employees have to work as per the direction, control and supervision of the Panasonic Corporation Japan. Since the employees deputed by the assessee are high level technical executives and they are rendering highly technical services to Panasonic Corporation India Pvt. Ltd., the payments for such services would fall within the ambit of fee for technical services as defined in Explanation 2 to Section 9(1)(vii) - as rightly observed by the Assessing Officer, the technology was made available to the subsidiary in India, therefore, there is no need for the employees of the assessee to come again. Hence, this Tribunal do not find any reason to interfere with the order of the lower authorities and accordingly the same is confirmed.

Summary

Issues Involved:
1. Failure of the Assessing Officer to give TDS credit for royalty income of Rs. 1,15,84,022/-.
2. Treating Rs. 7,14,097/- as income without allowing corresponding TDS credit.
3. Assessment of Rs. 1,49,48,380/- received as royalty from M/s Panasonic Appliances India Co. Ltd.
4. Reimbursement of employee cost/secondment of employees.

Detailed Analysis:

1. Failure of the Assessing Officer to give TDS credit for royalty income of Rs. 1,15,84,022/-:

The appellant argued that M/s Panasonic Carbon India deducted tax at source while making payment towards royalty, amounting to Rs. 1,15,84,022/-. However, the Assessing Officer did not provide any credit for this deduction. The Tribunal noted that it was unclear for which year the tax was deducted and whether the corresponding income was declared by the assessee for taxation during the year under consideration. Therefore, the Tribunal remitted the issue back to the Assessing Officer to verify the facts and re-examine the matter in light of the material that may be filed by the assessee, and then decide the issue afresh in accordance with the law, after giving a reasonable opportunity to the assessee.

2. Treating Rs. 7,14,097/- as income without allowing corresponding TDS credit:

The appellant contended that tax was deducted to the extent of Rs. 73,734/- at source, which was reflected in Form 26AS. However, the Assessing Officer did not give credit for the tax deducted. The Tribunal found that if the tax was deducted at source for the income of Rs. 7,14,097/- for the year under consideration, it was unclear why the tax credit was not given. Consequently, the Tribunal set aside the order of the Assessing Officer and remitted the issue back for re-examination. The Assessing Officer was directed to verify whether the income was taken as income by the assessee and whether tax was deducted at source, and then decide the issue afresh in accordance with the law, after giving a reasonable opportunity to the assessee.

3. Assessment of Rs. 1,49,48,380/- received as royalty from M/s Panasonic Appliances India Co. Ltd.:

The appellant argued that the royalty income of Rs. 1,49,48,380/- was taxable on a receipt basis as per Article 12(4) of the Double Taxation Avoidance Agreement between India and Japan and had already been disclosed during the assessment year 2015-16. Therefore, it should not be assessed for the year under consideration. The Departmental Representative countered that M/s Panasonic Appliances India Co. Ltd. disclosed the payment details in Form 3CEB, and the Assessing Officer rightly brought it to tax during the year under consideration. The Tribunal observed that the details had not been verified by the Assessing Officer and remitted the issue back for re-examination. The Assessing Officer was directed to re-examine the matter and decide the issue afresh in accordance with the law, after giving a reasonable opportunity to the assessee.

4. Reimbursement of employee cost/secondment of employees:

The appellant contended that M/s Panasonic Corporation Japan deputed some of its employees to M/s Panasonic India Pvt. Ltd., and the salary paid to these employees was reimbursed by M/s Panasonic India Pvt. Ltd. The appellant argued that since it was only a reimbursement, it could not be taxed as income. The Tribunal noted that the Transfer Pricing Officer found no adjustment necessary for the value of the international transaction entered into by the assessee. However, the Assessing Officer disallowed the claim on the ground that the assessee received a fee for technical services and did not deduct tax while making payment to the employees in India. The Dispute Resolution Panel (DRP) also held that the payment received was for technical services and that the technology was made available to the Indian subsidiary. The Tribunal upheld the findings of the lower authorities, concluding that the payments for such services fell within the ambit of fee for technical services as defined in Explanation 2 to Section 9(1)(vii) of the Act. Therefore, the Tribunal confirmed the order of the lower authorities.

Conclusion:

The Tribunal partly allowed the appeal for statistical purposes and remitted the issues regarding TDS credits and royalty income back to the Assessing Officer for re-examination and fresh decision in accordance with the law. The Tribunal upheld the lower authorities' decision regarding the reimbursement of employee costs, confirming that it constituted fee for technical services.