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2022 (2) TMI 1085 - AT - Income TaxTDS u/s 194C - expenditure for any work or service - Disallowance u/s 40(a)(ia) - whether Payment not for doing any work or for provision of any Professional/Technical Service ? - as per assessee payments were mere reimbursement of actual costs incurred by Equinox Global Services Ltd./I-Flex Solution Ltd. (India) on behalf of the assessee and thus do not represent expenditure for any work or service in respect of which tax is deductible as per the provisions of the Act - HELD THAT - As the facts and circumstances of the present case are similar to the assessment year 2010-11 respectfully following the decision we hold that the nature of payments made by the assessee to I-Flex Solution Ltd. (India) and Equinox Global Services Ltd. are not in the nature as covered under section 194C of the Act and thus there was no liability on the assessee to deduct tax at source on such payments. Accordingly the order passed by the CIT(A) deleting the disallowance made by the Assessing Officer under section 40(a)(ia) of the Act is affirmed. - Decided in favour of assessee.
Issues Involved:
1. Withdrawal of Assessee's Appeal due to resolution under Mutual Agreement Procedure (MAP). 2. Revenue's Appeal regarding deletion of disallowance under section 40(a)(ia) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Withdrawal of Assessee's Appeal due to resolution under Mutual Agreement Procedure (MAP): The assessee filed an appeal challenging the order dated 12th February 2015, passed by the Commissioner of Income Tax (Appeals)-57, Mumbai, under section 250 of the Income-tax Act, 1961, for the assessment year 2009-10. The assessee, through its Authorized Representative, submitted a letter dated 27th January 2022, requesting the withdrawal of its appeal. The reason cited was the resolution/closure of the dispute under the Mutual Agreement Procedure (MAP) between the Competent Authorities of India and the U.S.A. for the relevant assessment year. The resolution was communicated via a letter dated 10th January 2022 by the Central Board of Direct Taxes (CBDT). The letter from CBDT detailed the computation of MAP relief and the retained Transfer Pricing (TP) adjustment, concluding that the Indian Competent Authority provided relief to the assessee. Consequently, the Tribunal accepted the request for withdrawal and dismissed the assessee's appeal as withdrawn. 2. Revenue's Appeal regarding deletion of disallowance under section 40(a)(ia) of the Income Tax Act, 1961: The Revenue filed an appeal challenging the deletion of disallowance under section 40(a)(ia) of the Act by the CIT(A). The issue arose from the assessee's business of providing Knowledge Process Outsourcing services. The assessee had entered into a "Marketing Service Agreement" with I-Flex Solutions Inc., subcontracting certain works. The assessee utilized premises, facilities, and employees of I-Flex Solution Ltd. (India) and Equinox Global Services Ltd., reimbursing them for expenses incurred on a cost-to-cost basis. The Assessing Officer (AO) disallowed the entire payment of ?4,44,96,921 under section 40(a)(ia) for non-deduction of TDS, arguing that the payments were made in pursuance of a sub-contractual relationship and were liable to TDS under section 194C. The CIT(A), following its earlier decision for the assessment year 2010-11, deleted the disallowance. During the hearing, the Departmental Representative supported the AO's order, while the assessee's representative cited the Tribunal's decision in the assessee's own case for the assessment year 2010-11, which upheld the deletion of disallowance. The Tribunal reviewed the material and found that the payments were reimbursements on a cost-to-cost basis without any profit element and thus not covered under section 194C. Consequently, there was no requirement for the assessee to deduct tax at source. The Tribunal affirmed the CIT(A)'s order, deleting the disallowance under section 40(a)(ia). Conclusion: The Tribunal dismissed both the assessee's and the Revenue's appeals. The assessee's appeal was dismissed as withdrawn due to the MAP resolution, and the Revenue's appeal was dismissed based on the Tribunal's consistent findings that the payments in question were not subject to TDS under section 194C.
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