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TMI Blog2013 (9) TMI 689X X X X Extracts X X X X X X X X Extracts X X X X ..... the D~ failed to appreciate the Audited Financial Statement of the Indian PE, the documentary evidences and the explanation furnished during assessment including reasons for non-deduction of taxes and clarification on the fact that there was no double claim of deduction as alleged. 1. 3. The Appellant prays that the disallowance of expenses of Rs. 89, 24, 851 by the AO is unwarranted and be deleted. Ground No. 2-Non-taxability of management consultaucy fees of Rs. 32, 42, 149 for services rendered outside India 2. 1. On the facts and in the circumstances of the case and in law, the AO erred in taxing the consultancy fees of Rs. 32, 42, 149 for services rendered outside India (in Kuwait) as attributable to the Indian FE and the DRP erred in directing as Ground No. 1 their taxation on gross basis as Fees for Technical Services ('FTS') under Section 9(1)(vii) / I 15A of the Act. The AO futrher erred in not giving proper effect to the instructions of DRP in passing the final assessment order. 2. 2. The Appellant submits that the AO and DRP failed to appreciate that these services were rendered entirely outside India in Kuwait and relate to making or earning of income from a source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case and in law, the AO erred and the DRP further erred in upholding / confirming the action of AO in charging interest under Section 234B of the Act. 5. 2. The Appellant submits that it is non-resident company under the Act and is not liable to pay advance tax under Section 208 / 209 of the Act as its entire income is subject to withholding tax in India and in view of same the question of charging interest Rs. 16, 40, 696 under Section 234B of the Act does not arise. 5. 3. The Appellant prays that the charge of interest under Section 234B of the Act is unwarranted and be deleted. The Appellant craves leave to add, alter or amend the above grounds of appeal at any stage. " Diamond Management & Technology Consultants Ltd. NA. Inc(ITA. 9049/Mum/2010) Almost identical grounds of appeal have been filed by Diamond Management & Technology Consultants Ltd. NA. Inc. in ITA No. 9049/Mum/2010-the only difference is ground no. 6 which deals with charging of interest u/s. 234B of the Act. Therefore, we are adjudicating both the appeals by a common order. First, we would like to reproduce the grounds of appeal filed by the assessee: "Ground No. 1 -- Disallowance of expenses of Rs. 1, 32, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es received by it from its Indian Affiliate are at cost with no profit element embedded in it and these cannot be considered as taxable income. The Appellant submits that even if treated as attributable to the Indian PB of the Appellant, the debit and credit to the Profit and Loss account of the PB remains the same with no effect on taxable income. 3. 3. The Appellant prays that the taxation of reimbursement of expenses of Rs. 33, 82, 196 is unwarranted and be deleted. Ground No. 4 - Without prejudice Ground, no PE is constituted in India under Section 92F(iiia) of the Act for the deputation / assignment of employee as well as consultancy services rendered in India for short period and taxation of the later (i. e. consultancy fee of Rs. 55, 61, 084/- under Section 9(1)(vji) of the Act 4. 1. Under the facts and in the circumstances of the case and in law, the DRP while agreeing to the fact the Appellant has no PB in India erred in not giving specific direction with respect to Objection No. 4 of the Appellant and construing in general the income of the Appellant as FTS deemed to accrue or arise in India under Section 9(l)(vii) of the Act or as 'Fees for Included Services' under In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy Services, filed its return on 23. 07. 2008 declaring income at Rs. Nil. During the assessment proceedings, AO found that assessee had received Rs. 89. 24 lacs under International Transfer Agreement. Assessee filed objections against the draft order dated 16. 12. 2009 of the AO before Dispute Resolution Panel-1 Mumbai (DRP). It was submitted by the assessee that it did not have PE in India, that it had entered into International Transfer Agreement Consultancy Services Agreement with Diamond Management and Technology Consultant Ltd. NA. Inc, that it received a sum of Rs. 85. 71 lacs during the assessment year under consideration , that it had incurred an expenditure of Rs. 89. 24 lacs, that income earned by it was not taxable in India, that services had been rendered in Kuwait, that services were not provided by PE constituted in India, that services were not attributeable to PE, that the services fell outside the ambit of fees for technical services (FTS) under Article13 of Indo-UK DTAA. 3. After considering the submissions of the assessee and the draft assessment order, DRP held that the assessee made technology available to the Indian entity, that such services were in nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direction is received. From the plain reading of the provisions of the section it is clear that AO has no choice, but to pass an order as per the directions of the DRP. Penal consisting of three(3) Senior Commissioners of Income Tax Department, has been given powers to decide the issues raised in the draft orders submitted by the AOs. Naturally AOs, being the junior members of the departmental hierarchy, are supposed to follow the orders of the collegiums of the Commissioners. The reason behind it is not difficult to comprehend-collective wisdom of the Senior officers has to prevail over the understan -ding of an individual officer. Secondly, Panel has benefit of the submissions of the assessees also before it decides the issues. We are surprised that in spite of the clear and unambiguous mandate of the section 144C(13) of the Act, AO did not carry out the instructions of the DRP and assessed the income in the manner he wanted. On a query by bench, it was brought to our notice that assessee-company had filed an application u/s. 154 of the Act for rectification of mistakes before the AO vide letter dated 23. 11. 2010. In the said application, assessee-company had brought to the not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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