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TMI Blog2015 (11) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... the present years the agreements entered into with agents were not on record and therefore without examination of these agreements the decision as to whether the services do not fall in managerial technical or consultancy category can not be arrived at. Therefore in view of substantial justice we are of the view that the AO should examine agreements to determine the nature of services provided by agents and if the nature of services as mentioned in the agreements is similar as in the years 2007-08 and 2008-09 and the services are not in the nature of managerial technical or consultancy services then he should allow the same as the Hon’ble Delhi High Court has upheld the decision of Hon’ble Tribunal for assessment year 2007-08 and 2008-09. - Decided in favour of assessee for statistical purposes. Disallowance of advertisement & publicity charges paid to non-resident entities without tax deduction at source - Held that:- The issue of advertisement and publicity charges will also be examined by AO afresh keeping in view the terms and conditions of the agreement of Advertisement and AO will examine the nature of services rendered by such payees. Therefore the issue of advertisement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of this addition. Ground No. 4 is for levy of interest u/s 234B which is consequential and do not require any addition. Ground No. 5 is against initiation of penalty proceedings u/s 271(1) which is premature and in view of the above ground No. 4 and 5 are dismissed. 2. The revenue is aggrieved on three deletions made by DRP. Ground No. 1 relates to deletion of addition of ₹ 5,16,542/- made by the AO for excess claim of depreciation made by Assessee on computer peripherals. 2.1 Ground N.2 relates to the action of the learned DRP by which it had deleted the addition amounting to ₹ 13,93,42,766/- which the A.O had made for non deduction of tax at source on tour expenses. 2.2 Ground No. 3 relates to the action of DRP, whereby it deleted the addition of ₹ 3,42,96,779/- made by AO u/s 40(a)(ia) on account of payment to overseas representatives without deduction of tax at source. 3. In Asst. Year 2010-11 the grounds raised by assessee vide ground No. 2 to 2.22 are similar as is ground No. 2 in assessment year 2009-10. Similarly ground raised by assessee vide ground No. 3 to 3.3 are similar to ground No. 3 in assessment year 2009-10 with the difference tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f representation charges. Ld. AR submitted that the addition on account of overseas representations charges and reimbursement of expenses to overseas representatives is covered in favour of assessee by order of Hon ble Tribunal dated 19th December, 2014 in the case of assessee itself for assessment years 2007-08 and 2008-09. 6. Ld. AR invited our attention to para 12 onwards of Tribunal order and submitted that Hon ble Tribunal after analysing the functions of agents and that of the asesseee had arrived at the conclusion that the payments made by assessee were not in the nature of managerial, technical or consultancy services and therefore were beyond the scope of section 9(i)(vii) of the Act and therefore the assessee was not required to deduct TDS. Ld. AR submitted that the above Tribunal order has been upheld by Hon ble Delhi High Court in ITA No. 489 and 491/2015 vide order dated 10th August, 2015 and in this respect filed a copy of order of Hon ble Delhi High Court. Ld. AR submitted that since the facts and circumstances remains same and therefore the addition confirmed by DRP is a covered issue in favour of assessee. 6.1. As regards transfer pricing adjustment Ld. AR su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee can be classified as B2B market whereas services handed in outbound services can be classified as B2C and obviously the expenditure in B2C marketing will be much more because of various reasons. Inviting our attention to a decision of Delhi Bench of Tribunal in the case of Destination of the World vs. ACIT (ITA No. 5534/Del/2010). Ld. AR submitted that Hon ble Tribunal held that there is a material difference between inbound and outbound services segments. In view of the above arguments the Ld AR submitted that it would be inappropriate to benchmark AMP expenses to sales ratio of the inbound segment for AMP expenses to sale ratio of outbound business. Ld. AR prayed that this issue can be sent back to AO to consider the same in accordance with law and in accordance with case law of Sony Ericson Mobile Services as decided by Hon ble Delhi High Court. 7. The learned DR, on the other hand agreed to the proposition of learned AR regarding AMP issue and submitted that matter needs to be re-adjudicated by Assessing Officer. However, as regards the issue of addition on account of non deduction of TDS he, strongly argued that each year is a different year and invited our attent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were not in the nature of managerial, technical or consultancy and therefore the case law relied upon by Ld. DR is totally distinguishable from the facts and circumstances of the present cases. Regarding the reliance placed by Ld. AR on the case law of Chennai Tribunal Ld. AR submitted that he has not argued on these lines as the issue herein is not relating to as to whether TDS is applicable on of expenses paid or expenses payable. Therefore this case law is also of no help to revenue. 9. We have heard the parties and have gone through the material placed on record. The appeals were originally heard on 24.8.2015. However at the time of dictation it was felt that agreements entered into by assesee with overseas agents were not on record. The Hon ble Tribunal vide its decision dated 19th December, 2014 had concluded the issue in favour of assessee after examining the terms and conditions of agreements with overseas agents and since the agreements were not found in the paper books therefore the cases were refixed for clarification and was finally heard on 3.9.2015. During rehearing the Ld. AR filed copies of agreements with various agents in the form of paper book and argued tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r statistical purposes. 10. Ground No. 4 and 5 in assessment year 2009-10 and ground No. 7 and 8 in assessment year 2010-2011 are against the levying of interest u/s 234B and initiating of penalty proceedings. These Grounds are consequential and premature respectively, therefore, these are dismissed. 10.1 As regards ground 4 in assessment year 2010-11 we find that AO had disallowed an amount of ₹ 13,52,224/- as advertisement publicity charges paid to non-resident entities without tax deduction at source. The issue of advertisement and publicity charges will also be examined by AO afresh keeping in view the terms and conditions of the agreement of Advertisement and AO will examine the nature of services rendered by such payees. Therefore the issue of advertisement of publicly expenses is restored to A.O for re-adjudication. As regards amount paid amounting to ₹ 19,39,692/- representing AMC for computer software we find that the payment is clearly for provision of technical services and therefore the payments were liable for tax deduction at source, in view of the judgment of Hon ble Delhi High Court in the case of Havells India 21 taxman.com. 476 and therefore th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s down that the income may be deemed to accrue or arise in India in case income is received, directly or indirectly from a: i. business connection in India, ii. property in India, iii. asset or source of income in India, iv. from transfer of capital asset situated in India Hon ble Supreme Court in the matter of CIT vs. Aggarwal Co. (R.D.) [56 ITR 20], has held that the definition of the expression business connection given in the Act is an inclusive one. The expression undoubtedly means some things more than business . A business connection is not equivalent to carrying on of a business but involves a relation between a business carried on by a nonresident which yields profits or gains and some activity carried out in the taxable territories which contributes directly or indirectly to the earning of those profits or gains. It predicates an element of continuity between the business of the non- resident and the activity in the taxable territories. A stray or isolated transaction is normally not to be regarded as a business connection. Business connection may take several forms. It may include carrying on a part of the main business or activity incidental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olds that the payments made by the taxpayer do not cover all the ingredients of section 40(a)(i) of the Act and therefore, the taxpayer was not liable to deduct tax at source. The action of the AO is accordingly, not upheld. 11.4 In assessment year 2007-08 2008-09, the Hon ble Tribunal vide its order dated 19.12.2014 had dismissed the appeals of Revenue on similar issues which have been upheld by the Hon ble Delhi High Court in its order dated 10.08.2015. In view of the above respectfully following the above orders we do not find any infirmity in the order of the DRP. Therefore, Ground No.2 is dismissed. 11.5 Now coming to ground No. 3 we find that assessee had claimed an amount of ₹ 3,42,96,779/- on account of following expenses :- S.No. Particulars Amount(rs.) 1. Travelling Expenses-Staff 72,21,402 2. Participation expenses 41,40,902 3. Overseas Representation charges 1,90,80,872 4. Reimbursement of expense to overseas Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missed. Revenue s appeal for the assessment year 2010-11 12. Ground No. 1 is regarding action of DRP by which it deleted addition of ₹ 10,47,14,264/- made by AO u/s 40(a)(i) of the Act. In fact the correct amount is Rs, 10,17,14,264/-. We find that A.O had disallowed the amount of ₹ 10,17,14,264/-claimed by assesses as tour expenses. Ld. DRP has held that amounts paid by assessee to various entities in different countries were transactions representing principle to principle basis and therefore no taxable income arose out of those expenses. Similar issue of Tour Expenses has been considered by Hon ble Tribunal in its order dated 19.12.2014, which has been upheld by Hon ble Delhi High Court vide its order dated 10.08.2015. Respectfully following the above, Ground No.1 is dismissed. 12.1 In Ground No. 2 the revenue is aggrieved with the action of Ld. DRP by which it had reduced the amount of disallowance from ₹ 3,76,59,563/- to ₹ 1,23,01,374/-. The relevant finding of Ld. DRP are contained in para from 6.1 to 6.2. We find that amount of ₹ 3,76,59,563/- consists of payments made by assessee under six heads namely travelling expenses (staff an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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