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TMI Blog2016 (1) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide their orders dated 30.12.2011 and 27.12.2010 for assessment years 2008-09 and 2004-05 respectively. First we take up Revenue s appeal in ITA No.1160/Kol/2013 A.Y.08-09 2. Only issue raised by Revenue is as regard that Ld. CIT(A) has deleted the addition of ₹ 1,59,95,287/- u/s 40(a)(ia) of the Act without appreciating the finding of Assessing Officer that assessee failed to deduct tax at source. 3. Briefly stated facts are that assessee is a private limited company and engaged into business of manufacture and sale of professional grade printed circuit boards. The assessee-company is a subsidiary of AT S Austria. AT S Austria has entered into global arrangements for various facilities and services, which are to be used by AT S Austria and its group companies located in different countries, including India. The different companies with whom such arrangements have been entered into by AT S Austria are Austrian Telecom for WAN Satellite link between Austria and India, T systems DSS GmbH for Lotus products (software), Microsoft Ireland Operations Ltd. for Microsoft products ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed case law in support of its case as under:- a) Tata Consultancy Services v. State of Andhra Pradesh 271 ITR 401 b) Nokia Networks NY [TS-700-High Court-2012 (Del)] c) B4U International Holdings Ltd case [TS-358-ITAT-2012 (Mum)] d) ITA No. 1448-1449/Kol/2008 (for AY 2002-03 2003-04) e) CIT vs. Tejaji Farasram Kharawalla Ltd. (1968) 67 ITR 95 (SC) f) Skycell Communication Ltd. v. DCIT 251 ITR 53 g) Wipro Ltd. v. ITO (2003) 80 TTJ (Bang) h) BSES Telecom Ltd. v. DCIT (ITA No. 9281/Bang/2002) i) Tata Consultancy Services v. State of Andhra Pradesh 271 ITR 401 (SC) j) Cholamandalam MS General Insurance Co. Ltd. (2009) 309 ITR 356 k) CIT v. Industrial Engineering Projects Pvt. Ltd. (1993) 202 it 1014 (Cal) l) Rolls Royce India Ltd. v. ITO (1998) 25 ITD 127 (Del) m) ACIT v. Modicon Network Pvt. Ltd. (2007) 14 SOT 204 (Del) The Ld. AR also made the reference to the model treaties issued by OECD (Organization for Economic Cooperation and Development) with regard to the payment for the computer programs. On the basis of above submission, the CIT(A) held that the expenses are out of the purview of TDS being reimbursed and also not chargeable of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss description of the assessee, it is clear that the assessee is engaged in marketing and support system of hardware and software products. The material on record do not disclose that Sun Singapore has made available to the assessee its technical knowledge, experience or skill. Under these circumstances, the Tribunal held that, as Sun Singapore is not having any permanent establishment and that Sun Singapore has not made available the technical knowledge, experience or skill, the payments made by the assessee to Sun Singapore were not required to be taxed under the head Business and is not taxable in view of article 7 of the DTAA between India and Singapore. The Revenue is challenging the said finding on the ground that the terms of the agreement provides from making available inventory physical movement and self-control process, assistance to enable, inventory transactions and management and business planning to address service level relating to the local business and customer needs. However, the assessee is not utilizing the said services in order to avoid deduction tax at source. This court had an occasions to consider this agreement in the case of CIT v. De Beers India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the said warranty expenses are nothing but reimbursement of the actual cost and consequently there is no requirement of deduction of TDS under section 195 of the Act. We have gone through the orders of the coordinate Bench of this Tribunal in the assessee s own case in ITA Nos. 1448 1449/Kol/2008 dated 24.07.2009 for AYs 2002-03 and 2003-04 and ITA No. 1450/Kol/2008 dated 31.03.2010 for the AY 2004- 05, wherein it has been held as under: 2.1. The fats of the case are that the assessee is a company which is deriving income from manufacture and sale of professional grade printed circuit boards. During the accounting year relevant to assessment year under consideration, the assessee made the payment of ₹ 45,94,291/- to M/s AT S, Austria Technology Systemtechnik, Aktiengesellschaft (hereinafter called AT S, Austria ). The above payment was made by the assessee without deduction of tax at source. Before the AO, it was explained by the assessee that the amount has been paid at cost of inter-company services received. The assessee has entered into an agreement dated 13.03.2001 with M/s AT S, Austria. In the agreement, it is stated that M/s. AT S, Austria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us service provider companies. The assessee made the payments for such services utilized by it. Therefore, in effect, the payment was made by the assessee to various service providing companies through M/S AT S. Austria. M/s. AT S. Austria was only a conduit through which payment was made. The services utilized by the assessee were highly technical and therefore, the same were within the meaning of technical services as provided u/s. 9(1)(vii) of the Act. He, therefore, submitted that the assessee was liable to deduct tax at source from the payments made by it. Since the assessee had failed to deduct tax at source, sec. 40(a)(ia) of the Act was attracted. The same should be sustained. The ld. DR also stated that the facts of various cases relied upon by the ld. Counsel for the assessee are altogether different. 2.4 In the rejoinder, it is stated by the ld. Counsel that the various service providers had an agreement with M/s. AT S. Austria and not with the assessee-company. Therefore, the contention of the revenue that the payment is made by the assessee to the service providers through the conduit of M/s. AT S. Austria is actually incorrect. As per the agreement with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Wartung my SAP.com 1N6 3 181,794 22,388 Yes 5 Services provided by 1BM Osterreich GmBH International Buromaschinen Gessels chaft A. SAP maintenance. Charges will be passed on the number of SAP users per legal entity mySAP.com Lizenzvertrag 1N7 3 20,315 2,502 No SAP R/3 Lizenzgebuhr 1N8 3 84,417 10,396 No SAP R/3 Einfuhurung 1N9 3 108,693 13,386 No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subsidiary concerns. It was for the sharing of the expenses of the research which was utilized by the subsidiaries as well as the head office organization that the payments were made by the Indian company and received by the assessee-company. The fact that after the termination what was to happen to the information gathered was not mentioned, indicated that it could not be anything but sharing of the expenses. But the fact that the technical data was jointly obtained and the expenses were shared together indicated that it could not be treated as income. The act that only 0.67 per cent of the turnover was allowed as research contribution to the assessee-company, was because of the restrictions imposed by the Government. Therefore the amounts received by the assessee-company did not constitute income assessable to tax. The above decision of Hon'ble jurisdictional High Court was also relied upon by the Authority for Advance Rulings in the case of Cholamandalam Ms Generai insurance Co. Ltd. (supra), wherein their Lordships held as under:- That the amount paid by the applicant could not be said to be in the nature of consideration for offering the services of I. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) erred in upholding the action of the Ld. AO by confirming that, the aforesaid payment was in the nature of fees for technical services under section 9(1)(vii) of the Act and accordingly, taxes are required to be deducted at source. 4. That the Ld. CIT(Appeals) erred in confirming the order of the AO holding that, tax was required to be deducted at source from the impugned payment by applying the provisions of section 40(a)(ia) of the Act. 5. That the Ld. CIT(Appeals) and the Ld. AO erred in not following the decision of the Hon'ble Kolkata ITAT in Appellant s own case (ITA No.s 1448 1449(Kol) of 2008 dated July 24,2009) for AY 2002-03 and AY 2003-04, wherein it was held that reimbursement of Information technology costs does not result in income in the hands of the recipient an hence, the payments are allowable deductions and not fall within the mischief of section 40(a)(i) read with section 195. 4. That the Ld. AO erred in consequently levying interest under section 234B of the Act. 8. Briefly stated facts are that the assessee has claimed the expenses of ₹ 1,01,28,788/- in the form of reimbursement cost incurred by AT S Austria towa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide the distribution, management and logistic services. We further noticed that in the said order the Tribunal has taken into consideration the decision of the Hon ble Jurisdictional High Court in the case of CIT v. Dunlop Rubber Co. Limited (1983) 142 ITR 493 (Cal) and in the similar circumstances that of the assessee to hold that the reimbursement of the expenditure does not generate any income in the hands of the recipient and consequently there was no requirement of deduction of TDS and consequently the provisions of section 40(a)(ia) could not be invoked. The facts being identical for this assessment year, respectfully following the decision of Coordinate Bench of this Tribunal in the assessee s own case for the assessment years 2002-03 and 2003-04 referred to supra, finding of CIT(A) stands reversed and the disallowance as made by the Assessing Officer in respect of the reimbursement of the payments made to AT S Austria to the extent of ₹ 1,50,44,031/- stands deleted. This issue of assessee s appeal is allowed. Since the matter is already covered in favour of assessee in its own case by this Tribunal, we conclude the appeal in favour of assessee. 11. In the ..... 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