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TMI Blog2015 (4) TMI 578X X X X Extracts X X X X X X X X Extracts X X X X ..... perform such services without recourse to the service provider. In the instant case, the payment for technical services, which was sought to be brought to tax in the hands of the assessee was in the nature of reimbursement of technical expenses to the head office. The Assessing Officer had observed that ‘the head office expenditure allocated to the Indian division was in the nature of technical and administrative expenses’. Thus, this amount was not on account of any specific technical services having been ‘made available’, in the sense in which this expression was employed in the tax treaties, the amount could not be brought to tax in the hands of the assessee under article 13 of the Indo- French tax treaty. This amount could not also be taxed in the hands of the assessee under article 7 as it was not an income ‘attributable to PE’. Hence, the taxability of the impugned sum in the assessee’s hand was indeed incorrect. The Tribunal in assessee’s own case in respect of very same year, i.e. for A.Y 2002-03, it has to be held that the aforementioned amount could not even be assessed in the hands of the assessee on account of applicability of Article -13 and 7 of DTAA. - Decided in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciating the fact that the same is reimbursement of actual expenses incurred by the head office. 1.2 The assessing officer further erred in considering the reimbursement of actual expenses as fees for technical services without considering the definition of Fees for included services as per Article 12(4) of India-USA Treaty which applies to India-France Tax Treaty as per clause 7 of the Protocol of India France Tax Treaty and CIT(A) in confirming such consideration. Grounds of appeal in ITA No.273/Mum/2008(A.Y. 2004-05): 1. The Assessing Officer has erred in disallowing u/s. 40(a)(i) the share of technical expenses of the head office of ₹ 47,75,357/- ignoring the fact that the payment is towards reimbursement of share of expenses charged to the branch on the ground that the payment is in the nature of technical fees liable to deduction of tax at source. 2 The Assessing Officer erred in disallowing foreign traveling expenses of ₹ 2,57,052/- ignoring the fact that the expenses were incurred for the purpose of business . Grounds of appeal in ITA No.2184/Mum/2009(A.Y.2006-07): 1. The Commissioner of Income Tax (Appeal) has erred in confirming the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to mention brief facts of the case. The assessee is a company incorporated in France and operated in India through its Indian Division. The Head Office of the assessee is classification society recognized by 120 National Maritime Administrator and carries out classification and a statutory survey as well as audits for implementation of International Safety Management code and issuing Documents of compliance to companies and Safety Management Certificates to Ships. The Indian branch is engaged in the business of providing services relating to shipping industries, which inter-alia includes, classification, statutory instructions and surveys of all types of ships, crafts and vessels and issuing statutory surveys in respect of surveys and inspection carried out. During the course of assessment proceedings for assessment year 2002-03 the AO noticed that Head Office of the assessee has allocated an expenditure to its Indian Division which according to AO was in the nature of technical expenditure of a sum of ₹ 50,59,019/-. According to AO the said amount represents fee for technical services and while crediting such amount to Head Office account no tax was deducted. Therefore, AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(b) of the Article-7 of India France Tax Treaty which inter- alia states that deduction will not be allowed for amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the PE to the Head Office by way of royalties, fees or other payment in return for the use of patent or other rights. 10. The AO has also held that the head office has received ₹ 50,59,019/- as fees for technical services which is taxable in India at 20% separate from other income of PE as per DTAA between India and France. The disallowance of the amount of ₹ 50,59,019/- has been confirmed above since the payment made by the branch (PE) to the head office is payment to self and is therefore not an allowable deduction. In view of this finding, the taxation of the same amount of ₹ 50,59,019/- as fees for technical services in the hands of the head office would not survive. This conclusion is also supported by the discussion in para no.26 of ABN Amro Bank NV case where it is stated that on the assumption that the PE is a different entity than its head office and the interest payment by the PE to the head office is an allowable deduction on the parity of reasoning, the rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding that the fees for technical services paid by the assessee to its head office was not taxable in India and, therefore, the assessee was not liable to deduct tax at source is the question raised in this appeal. 2. The finding of fact recorded by the Income Tax Appellate Tribunal is that the payment made by the assessee to its head office was in the nature of reimbursement of technical expenses and accordingly the amount being not taxable in India, the assessee is justified in not deducting tax at source. Consequently, no disallowance could be made on the said amount of fees for technical services paid by the assesee to its head office. 3. We see no infirmity in the order passed by the Income Tax Appellate Tribunal. The appeal is accordingly dismissed with no order as to costs. 5.1 In view of aforementioned decision of Hon ble High Court in the case of assessee itself, after hearing both the parties it has to be held that assessee was not required to deduct tax at source from the impugned payment, consequently no disallowance could be made of the said amount of fee for technical services paid by the assessee to its Head Office, therefore, disallowance under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e found in para-9 of the order. In view of aforementioned order of the Tribunal in assessee s own case in respect of very same year, i.e. for A.Y 2002-03, it has to be held that the aforementioned amount could not even be assessed in the hands of the assessee on account of applicability of Article -13 and 7 of DTAA. Therefore, findings of Ld. CIT(A) to this extend has to be vacated and the addition is deleted. 6. The other ground raised by the assessee in A.Y 2002-03 and 2006-07 relates to foreign travel expenses which was not pressed and, therefore, dismissed as not pressed. In the result, Ground No.3.1 and 3.2 for A.Y 2002-03 and Ground No.2 for assessment year 2004-05 of assessee s appeal are dismissed being not pressed. 7. In view of above discussion, so far as it relates to A.Y 2002-03 since impugned addition of ₹ 50,59,019/- is deleted, Ground No.1 1.2 are allowed and Ground No.2.1 and 2.2 become infructuous which need not to be adjudicated. The appeal of the assessee for A.Y 2002-03 is partly allowed. 8. So far as it relates to appeals of the assessee for A.Y 2003-04, 2004-05 and 2006-07, the common issue raised by the assessee is regarding similar addition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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