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TMI Blog2017 (3) TMI 1515X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause admittedly whatever has been paid to Burt Hill Inc USA is, in turn, paid by Burt Hill Inc UA to its employees seconded to the assessee. There cannot be any profits, therefore, in the hands of the Service PE, and what is taxable in the hands of the PE under article 7(1) is not the gross receipt but the profits attributable to the PE. The existence of service PE, in the present case, will be wholly academic inasmuch as whatever is the aggregate of receipts said to be attributable to the PE, is exactly the same as aggregate of expenditure attributable to the PE. As for the payments made by the assessee being in nature of the fees for technical services, this stand of the Assessing Officer is equally frivolous. There is not even an effort to show as to how any technical knowledge, skills, knowhow or processes etc are “made available” by these services inasmuch as these services can be performed by the assessee without any recourse to the service provider. Unless this condition, under make available clause under article 12(4)(b), is satisfied the fees for technical services cannot be brought to tax in India in the hands of entities fiscally domiciled in United States. It is ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es who have been seconded to BHD from BHI, though these employees remain the employees of BHI and their salary etc paid by BHI only , that BHD, on behalf of BHI, pays the housing allowance, advance of salary, loan in local currency and that BHD reimburses the salary etc paid by BHI to the employees deputed/ seconded to BHD . The Assessing Officer further noted that the list of seconded employees has been perused and placed on record. The assessee deducted tax at source under section 192, in respect of income in the hands of the recipient seconded employees, from the reimbursements so made to BH Inc- so far as assessment years 2008-09, 2010-11 and 2011-12 were concerned, and the assessee had duly deposited advance tax on behalf of such seconded employees. It was also explained that there was no loss of revenue inasmuch as taxes due from salaries so paid to the seconded employees were duly paid and the assessments completed on that basis. It was explained by the assessee that these are reimbursements plain and simple, and that these payments did not involve any profit element taxable in the hands of BH Inc. It was also explained the payments were in the nature of salaries, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as payments made by him for the assessment year 2009-10 are concerned. The credit was, however, directed to be given for the advance tax deposited by the assessee on behalf of the seconded employees. Learned CIT(A) therefore, upheld the tax withholding demands to the extent indicated above for the assessment year 2009- 10. None of the parties are satisfied by the stands so taken by the CIT(A), and both the parties are in appeal before us. Grievances raised by the parties are as follows: (a) Common grievances raised by the Assessing Officer for all the assessment years before us: (i) The CIT(A) has erred in law and on facts on relying on the decision of CIT(A)-VI and not adjudicating on the issue of Permanent Establishment of the assesses in India in light of facts discussed by the AO in the order u/s 201 r.w.s. 201(1A) of the Act dated 26.02.2013. (ii) The Ld. CIT(A) has erred in law and on facts in not appreciating the facts of the case and relying on the decision of CIT(A)-VI and holding that the income of the assessee is not attributable to PE and is not taxable in India as business income. (iii) The Ld. CIT(A) has erred in law and on facts in not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Apex court in Hindustan Coca Cola beverage p. Ltd vs CIT (293 ITR 2226) and holding that where payee has paid tax then payer cannot be asked to pay tax once again. 4. Without prejudice the Ld. CIT(A) erred in holding that recovery u/s 201(1) of the Act should not be made to the extent of tax deposited by the appellant in the form of advance tax and consequently interest charged u/s 201(1A) of the Act should be reduced. (b) Common grievances raised by the assessee for all the assessment years before us: 1. The Id. CIT(A) has erred in law and on the facts of the case in holding that the Appellant was required to deduct tax at source u/s 195 of the Act on payment made to Non-Resident without appreciating that the payment made by the appellant to non-resident is not at all taxable in India. 2. The Id. CIT(A) has erred in law and on the facts of the case in not holding that because there was no liability to deduct tax at source u/s 195 of the Act, the assessee could not have been treated as assessee in default u/s 201 and consequently not liable to TDS and any interest thereon u/s 201 r.w.s. 201(1A) of the Act. 3. The Id. CIT(A) has erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifferent nature for the assessment year 2009-10 just because the assessee, rather than deducting tax at source under section 192, paid the advance taxes on behalf of the seconded employees in that particular assessment year. It is not the fact of tax deduction under section 192, but the nature of income embedded in related payments which is relevant for deciding whether or not section 195 will come into play. Of course, there are separate set of consequences for not discharging tax withholding obligations under section 192. However, the assessee has discharged these obligations and there are no pending issues about the same. Whether the seconded employees continue to be in employment of the foreign entities or not is wholly irrelevant for this purpose. What is relevant is that the income embedded in the payments in question is taxable in India under the head Salaries , and if that be so, there are no tax withholding obligations under section 195. That precisely is the undisputed position on the facts of this caseas duly accepted by the income tax authorities. The income embedded in the impugned payments being in the nature of income chargeable to tax under the head income from sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bedded in a payment is not taxable under the Income Tax Act, 1961, the tax withholding liability does not get triggered at all. This is what Hon ble Supreme Court has also held in the case of G E Technology Centre Pvt Ltd Vs CIT [(2010) 327 ITR 456(SC)] . While holding so, Their Lordships have, inter alia, observed as follows: .The said expression in Section 195(1) shows that the remittance has got to be of a trading receipt, the whole or part of which is liable to tax in India. The payer is bound to deduct tax at source only if the tax is assessable in India. If tax is not so assessable, there is no question of tax at source being deducted. [See: Vijay Ship Breaking Corporation and Others Vs. CIT 314 ITR 309] . 9. One more aspect needs to be highlighted. Section 195 falls in Chapter XVII which deals with collection and recovery. Chapter XVII-B deals with deduction at source by the payer. On analysis of various provisions of Chapter XVII one finds use of different expressions, however, the expression sum chargeable under the provisions of the Act is used only in Section 195. For example, Section 194C casts an obligation to deduct tax at source in respect of any su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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