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TMI Blog2015 (9) TMI 1175X X X X Extracts X X X X X X X X Extracts X X X X ..... rtmental Representative and the same is also borne out of the order of the Tribunal for A.Y.2008-09 [2015 (6) TMI 383 - ITAT MUMBAI]. As a consequence, we uphold the plea of the assessee and direct the Assessing Officer to allow the depreciation of ₹ 9,95,919/- claimed by the assessee and accordingly assessee succeeds on this ground. - Decided in favour of assessee. Addition u/ s. 40(a)(i) - whether assessee and RMS were in contractural relationship - Held that:- Assessing Officer in the draft assessment order, we find that the decision of the DRP cannot be faulted. It is also noticed that the Assessing Officer has invoked section 40(a)(i) of the Act on the basis of his stand for earlier assessment year 2008-09 [2015 (6) TMI 383 - ITAT MUMBAI]. The Tribunal in its order for assessment year 2008-09 considered similar transaction and held that the payments made to RMS-USA for Debtor collection services did not fall for taxation in India and thus, there was no obligation on the part of the assessee to deduct tax at source on such payments, which were made as reimbursement to UPSWWFUSA. Be that as it may, in our considered opinion the finding of the DRP, which we have advert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernational Integrated Transportation Services, which involves delivery of documents, parcels and other items from one country to another. For the year under consideration, it filed a return of income on 30/09/2009 declaring a loss of ₹ 16,91,64,634/-,which was subsequently revised on 28/3/2011 declaring an income of ₹ 10,39,27,730/-. The return of income filed by the assessee was subject to scrutiny assessment, whereby total income was determined by the Assessing Officer at ₹ 10,68,89,950/-, which inter-alia, included the disallowance of ₹ 19,66,297/- and ₹ 9,95,919/- representing payment made to M/s. UPS Worldwide Forwarding Inc. USA(in short UPS-WWF ) towards legal services to Titus and depreciation on assets purchased from UPS WWF respectively. 3. In the appeal of the assessee, the first issue relates to the disallowance of ₹ 19,66,297/- made by the Assessing Officer by invoking section 40(a)(i) of the Act. In this context, brief facts are that the said payments were claimed to be amount reimbursed to its associated enterprise, UPS-WWF with respect to the sums payable to DT Exim Pvt. Ltd. (Titus) for their legal services provided to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation of ₹ 9,95,919/- on fixed assets purchased from UPS-WWF in the previous year relevant to the assessment year 2008-09. 4.1 In this context, the brief facts are that in the previous year relevant to the earlier assessment year 2008-09, assessee had claimed depreciation on assets imported from its associated enterprise, UPSWWF of a value of ₹ 42,98,028/-, the assets being, Computers, Scanners, Printers; etc. In assessment year 2008-09 Assessing Officer disallowed the claim of depreciation primarily on the ground that assessee did not furnish any evidence in the form of Customs Clearance Certificate, Bill of Entry, etc. The said dispute travelled to the Tribunal and vide its order dated 27/02/2015(supra), the Tribunal has allowed the claim of the assessee. 4.2 In this background, the claim of the Ld. Representative for the assessee was that the depreciation of ₹ 9,95,919/- claimed by the assessee in this year deserves to be allowed since the depreciation on the same assets in the earlier assessment year stands allowed. The aforesaid factual matrix is not assailed by the Ld. Departmental Representative and the same is also borne out of the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility to deduct tax under section 195 of the Act was on the assessee. 5.2 On this aspect, the plea of the assessee was that it was not under any obligation to deduct taxes under section 195 of the Act from the amounts paid to UPS-WWF as the said payments are not taxable in India for the reason that they are in the nature of mere reimbursement of actual cost without any element of profit and even otherwise, the services rendered by RMS, USA did not fall within the scope of Fees for Included Services as per Article 12(4) of the Indo-USA Tax Treaty 5.3 The Assessing Officer disagreed with the assessee in the draft assessment order and assessee carried its objection before the Dispute Resolution Panel(DRP). As per DRP, RMS-USA was a non-resident and would thus, be entitled to the benefits available under the Indo-USA Tax Treaty. As per the DRP, the Debtor Management Services do not come within the purview of Fee for Included Services in terms of Article-12(4) of the Indo-USA Tax Treaty and instead the same would be taxable as business profits and in the absence of the RMS-USA having any Permanent Establishment in India, no part of its income earned from services rendered over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion it had incurred losses, which were exceptional in nature. The assessee explained that after prolonged negotiations, its associated enterprise, UPSWWF-USA agreed to support the assessee by paying an amount of ₹ 27,30,92,364/- as subvention amount based on the profit margins of the assessee company and that of its comparable concerns. The said subvention amount was negotiated during the financial year 2010-11 and in that period assessee recorded the same as Prior Period income. However, since the said amount of income related to the assessment year under consideration i.e. assessment year 2009-10, in its return of income filed for the said assessment year, assessee offered the said income and included the same while computing its net profit margin for the purposes of carrying out its comparability analysis with other comparable concerns for determining its arm's length price. In other words, the subvention income received by the assessee was considered as a part of its operating income. The Transfer Pricing Officer differed with the assessee on the treatment of subvention income as a part of the operating income. The Transfer Pricing Officer excluded such subventio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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