9911796707
TMI Blog2018 (7) TMI 1400X X X X Extracts X X X X X X X X Extracts X X X X ..... by the provisions of Sec. 195 of the IT Act. 3. Erred in confirming the disallowance of the payment made to Bayer Crop Science Ltd., for Rs. 38,72,492/- u/s 40(a)(ia) of the IT act without appreciating that the payment was mere reimbursement of appellants own share of actual cost and is not covered by the provisions of Sec. 194J of the Act. 4. Erred in confirming the additional amounting to Rs. 40,51,279/- on account of various payments u/s 40(a)(ia) of the Act. 5. Erred in confirming disallowance of the provision on scheme discount amounting to Rs. 51,91,186/- as appearing on the liability side of the balance sheet under the head 'accrued expenses and other liabilities' treating the same as expenditure not crystalized during the year. 6. Erred in confirming the disallowance of the leave travel allowance and bonus amounting to Rs. 34,90,006/- and Rs. 60,80,259/- respectively, on the ground that the assessee has not incurred the expenditure during the F.Y 2005-06, without appreciating that payment was made in April 2006, being allowable u/s 43B of the Act". 1.1 Further vide letter dated 19.06.2015, the assessee has raised the following additional ground of appeal: Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the interior designing of the said office and the warehouse done by the assessee at his own cost, can be removed. 3. The A.O observed that majority of the expenditure is towards furniture and fixtures and electrical fittings only and that the amount of leasehold improvement is only Rs. 4,18,465/-. He observed that even if this amount is to be considered it has to be considered as incurred for acquiring of fixed assets with a view to bringing into existence an asset or an advantage of enduring benefit and hence is capital in nature. He further considered the balance of expenditure also as capital in nature and allowed 5% depreciation thereon. 3.1 Further, he also observed that the assessee has made payments to various parties without deducting tax at source. He observed that assessee had made payments to: 1) Nunhems BV Rs. 63,21,003/-. 2) Bayer crop science limited Rs. 38,72,492/-. 3) To various other parties totaling to Rs. 99,41,131/- 3.2 The A.O was of the opinion that the payment made to Nunhems BV Ltd is a payment towards IT services rendered and is also a payment made to non-resident Indian and therefore, the assessee was required to deduct tax at source u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the order of the CIT(A), the assessee is in second appeal before us. 6. As regards ground No. 1, the Ld. Counsel for the assessee reiterated the submissions made before the authorities below and submitted that the expenditure incurred by the Assessee on the leasehold premises to make it fit for its working is revenue in nature and placed reliance upon the following decision in support of his contention: i. CIT Vs Shri Ram Refrigeration industries Ltd., reported in [2001] 116 Taxman 381 (Del). 6.2 The Ld. DR, on the other hand, supported the orders of the authorities below and placed reliance upon the following decisions: i. Coastal Resorts India Ltd., reported in [2014] 47 Taxmann.com 384 (Kar). ii. Tajmahal Hotel Vs CIT, reported in [1967] 66 ITR 303 (AP). iii. Surender Madan Vs ACIT, reported in [2013] 37 Taxmann.com 388 (Del). 6.3 Having regard to the rival contentions and material placed on record, we find that the expenditure which is incurred by an assessee on the leasehold premises for carrying on its business is allowable as current repairs and as revenue expenditure. In the case before us, we find that the expenditure incurred by the assessee is as follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure incurred by Nunhems BV on behalf of the assessee towards the inter-connectivity facility which was provided to the assessee at its Gurgaon facility. It was submitted that Bayor group had entered into an agreement with a party named Equant to provide global inter-connectivity to the Bayer Group in which Nunhems BV is an affiliate and that Nunhems BV has made the payment to M/s. Equant on behalf of the assessee for its usage of the facility at Gurgaon which was reimbursed by the assessee and therefore, there is no income element therein to Nunhems BV and is not taxable in India. It was also submitted that the facility provided by M/s. Equant to the assessee and its group is not a technical service and therefore, it is not liable to TDS u/s 195 of the I.T. Act. 7.1 The learned Counsel for the assessee has relied on the following decisions of in support of his contentions above: i) ITAT, Bangalore Bench, in the case of CIT vs. Torry Harris Business Solutions (P) Ltd reported in (2015) 61 Taxmann.com 235 (Bang.Trib); ii) ITAT at Delhi in the case of Bharti Airtel Ltd reported in (2016) 67 Taxmann.com 223 (Delhi Trib.); iii) Hon'ble Madras High Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of Equant u/s 9(1)(i) of the Act and the Revenue has not challenged this finding of the CIT (A). Business income of a non-resident is taxable in India, provided it has a PE in India. Admittedly, Equant has no PE in India and therefore, such income is not chargeable to tax in India. Provisions of section 195 are attracted if a payment is made to a non-resident, provided the income is chargeable to tax in India. In the decisions relied upon by the assessee, it was held that payment for bandwidth services is not royalty or FTS. For the sake of clarity and ready reference, the relevant paragraphs are reproduced hereunder: i) T-3 Energy Services India (P) Ltd - para 23 to 25 "23. The assessee on the other hand, has relied on the decision in WNS North America Inc. Vs. ADIT (supra) i.e. decision of Mumbai Bench of Tribunal, which has been approved by the Hon'ble High Court in DIT Vs. WNS UK Ltd. (2013) 214 taxman 317 (Bom). The issue before the Hon'ble High Court of Delhi was in the hands of recipient of lease line charges. The assessee therein had recovered internal telecommunication charges from WNS charges and the Tribunal held the amount in question was received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efined and it does not cover any such services availed and payment made and hence, there is no merit in the stand of Revenue in this regard and the same is dismissed. In any case, the privity of contract is between Qwest Communications Inc, the service provider and T-3, USA, who in turn had received bandwidth and passed on the services to various entities of group on cost to cast basis. The assessee as recipient of services had reimbursed the same and in the absence of profit / income element, there is no liability to deduct tax at source. Hence, the assessee cannot be held to be in default". ii) Kotak Securities Ltd (Paras 9 & 10) "9. There is yet another aspect of the matter which, in our considered view, would require a specific notice. The service made available by the Bombay Stock Exchange [BSE Online Trading (BOLT) System] for which the charges in question had been paid by the appellant - assessee are common services that every member of the Stock Exchange is necessarily required to avail of to carry out trading in securities in the Stock Exchange. The view taken by the High Court that a member of the Stock Exchange has an option of trading through an alternative mode is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of the assessee was denied by the AO for want of deduction of tax at source. Payments made by the assessee were undisputedly for purchasing inter-net band width. DRP had relied on the definition of 'royalty' given in Explanation-2to section (9)(1)(vi) of the Act and held that royalty included payments effected for use of any process. Reliance was also placed on Explanation-6 inserted below Sec.9(1)(vi), through Finance Act, 2012 with retrospective effect from 1-4- 1961 which mentions that process. used need not be secret and will include transmission by Satellite Cable, optic fiber or any other similar technology. However, we find that Hon'ble Delhi High Court in the case of M/s Arathi Cellular Ltd., (supra) had held under at paras-10 to 21 of its judgment; 10. Sec. 194J which relates to 'fees for professional or technical services', so much as is relevant, reads as under : "194J. (1) Any person, not being an individual or an HUF, who is responsible for paying to a resident any sum by way of-- (a) fees for professional services, or (b) fees for technical services, ............... shall, at the time of credit of such sum to the account of the payee or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rendering of any managerial, technical or consultancy services'. It is only if the payments made by the respondents/ assessees to MTNL/other companies in respect of interconnect/port access charges fall within the ambit of this expression that the said payments could be regarded as fees for technical services as contemplated under s. 194J of the said Act. 12. In Skycell (supra), a learned Single Judge of the Madras High Court noted that installation and operation of sophisticated equipments with a view to earn income by allowing customers to avail of the benefit of the user of such equipment does not result in the provision of technical service to the customer for a fee. It was also held that technical service referred to in Expln. 2 to s. 9(1)(vii)contemplated the rendering of a 'service' to the payer of the fee and that mere collection of a 'fee' for use of a standard facility provided to all those willing to pay for it did not amount to the fee having been received for technical services. We find ourselves to be in agreement with the views expressed by the learned Single Judge of the Madras High Court in Skycell (supra). However, we still have to deal wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vious that the expression 'manager' and consequently 'managerial service' has a definite human element attached to it. To put it bluntly, a machine cannot be a manager. 14. Similarly, the word 'consultancy' has been defined in the said Dictionary as 'the work or position of a consultant; a department of consultants.' 'Consultant' itself has been defined, inter alia, as 'a person who gives professional advice or services in a specialized field.' It is obvious that the word 'consultant' is a derivative of the word 'consult' which entails deliberations, consideration, conferring with someone, conferring about or upon a matter. Consult has also been defined in the said dictionary as 'ask advice for, seek counsel or a professional opinion from; refer to (a source of information); seek permission or approval from for a proposed action'. It is obvious that the service of consultancy also necessarily entails human intervention. The consultant, who provides the consultancy service, has to be a human being. A machine cannot be regarded as a consultant. 15. From the above discussion, it is apparent that both the words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this principle of interpretation had received the approval of the Supreme Court in an earlier decision in Rainbow Steels Ltd. vs. CST (1981) 2 SCC 141. The Supreme Court also noted that earlier, indiscriminate application of this rule was doubted in the case of The State of Bombay vs. The Hospital Mazdoor Sabha AIR 1960 SC 610. However, after referring to the said decision (Hospital Mazdoor Sabha), the Supreme Court in Godfrey Phillips India Ltd. & Anr. (supra) observed that they did not read the said decision as excluding the application of the principle of noscitur a sociis to the case before them inasmuch as it had been amply demonstrated that the word 'luxury' in Entry 62 was doubtful and had been defined and construed in different senses. The Supreme Court further observed as under : "81. We are aware that the maxim of noscitur a sociis may be a treacherous one unless the 'societas' to which the 'socii' belong, are known. The risk may be present when there is no other factor except contiguity to suggest the 'societas'. But where there is, as here, a term of wide denotation which is not free from ambiguity, the addition of the words such as &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;ores' and not just 'ores'. The Supreme Court held that these three words taken together are intended to encompass all that may be extracted from the earth. Consequently, the Supreme Court held that all minerals extracted from the earth, granite included, must, therefore, be held to be covered by the provisions of sub-s. (2)(b) of s. 80HHC, and the exporter thereof was, therefore, disentitled to the benefit of that section. 19. From this decision, it is apparent that the Supreme Court employed the doctrine of noscitur a sociis and held that the word 'minerals' took colour from the words 'mineral oil' which preceded it and the word 'ores' which succeeded it. A somewhat similar situation has arisen in the present appeals where the word 'technical' is preceded by the word 'managerial' and succeeded by the word 'consultancy'. Therefore, the word 'technical' has to take colour from the word 'managerial' and 'consultancy' and the three words taken together are intended to apply to those services which involve a human element. This concludes our discussion on the applicability of the principle of nosc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not warranted. Such a disallowance stands deleted. Ground no.13 of the assessee is allowed. Respectfully following the same, we do not see any reason to interfere with the order of the CIT(A). Ground No.2 is accordingly rejected". 7.5 In the case of Bharati Airtel Ltd, also, the ITAT "A" Bench of Delhi at Paras 19 to 44 has held as under: "19. The grounds in the assessees' appeal are summarized as follows:- i). Whether the assessee is liable to be treated as the assessee in default u/s. 201(1). ii) Whether inter-connected agreements between the assessee and the FTOs are in the nature of revenue sharing arrangements. iii) Whether the payment made by the assessee to Foreign Telecom Operators under inter-connection agreements are taxable in India as FTS. iv) Whether payment made by the assessee to FTOs, can be deemed to accrue or arise in India u/s. 9(1)(vi) & 9(1)(vii) of the Act. v) Whether beneficial rate provided under DTAA would override the provisions of section 206AA. 20. We summarize the grounds in the Revenue's Appeals as follows:- i) Whether the payment made by the Assessee to FTOs are taxable as royalty for the use of process under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed full flexibility to offer all types of bearer services from an integrated platform. ILD service providers will provide bearer services so that end-to-end tele-services such as voice, data, fax, video and multi-media etc. can be provided by Access Providers to the customers. .... ILD service providers would be permitted to offer international bandwidth to other operators. ILD service provider shall not access the subscribers directly which should be through NLD service provider or the Access Provider. Resellers are not permitted." Clause 1 of the "DEFINITIONS AND INTERPRETATIONS' of the said license defines Access Providers as follows: "ACCESS PROVIDERS" means Basic, Cellular, and cable service providers who have a direct access with the subscribers. 8.2 Thus, ILD business is nothing but provision of connectivity to the subscriber for international portion of a call, which may or may not originate domestically. The local connectivity [within India] is provided by Access Providers and National Long Distance (NLD) operators, and the international leg of the connectivity is provided by the ILD operator in conjunction with a foreign telecom operator(s), who provide th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y transfer the call to the Access Provider, (if the two are different), who may transport it to the customer. As can be observed from the above, the role of ILD operator is to transport the call from outside India till the first landing station in India. As submitted earlier, the ILD operator is not allowed to transport calls within India. c) Carrying calls from a telecom service provider in one country outside India to another telecom service provider and its subscriber in a third country (Hubbing'): To illustrate, the subscriber of a US telecom service provider, in New York wants to make a call to Singapore. The call will originate at the local network of the US telecom subscriber which telecom network will carry the calls for interconnect to the landing station of the appellant in New York. Here the call is transported to the ILD network. The call will then be automatically carried on the network of the ILD operator to Singapore and then transported to the local operator in Singapore. The ILD operator will earn income from the US telecom service provider but will have to pay the IUC/access charges to the local Singaporean telecom service provider. 8.3 It may be n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s: The Assessee, as part of its ILD Telecom Services business, is responsible for providing services to its subscribers in respect of calls originated/terminated outside India. Thus, for the provisions of ILD services, the Assessee is required to obtain the services of FTOs for provision of Carriage Connectivity Services over the last leg by the communication channel i.e. the lack of communication channel where the assessee does not have a Licence/ capacity to provide connectivity services. Thus, the ILD business is the provisions of connectivity to the subscribers for international portion of the call, which may or may not originate domestically. The local connectivity within India is provided by the Access Providers and the National Long Distance Operators (NLD operators) and the International connectivity by the ILD Operators interconnection with FTO, who provide the last mile connectivity. An international call has to be routed through NLD/ILD using the International Gate way. For termination of the international calls in India, ILD have commercial arrangements with foreign carriers who deliver the Traffic using the international connectivity and calls are delivered to the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. The consultant, who provides consultancy service, has to be a human being. A machine cannot be regarded as a consultant. From the above discussion, it is apparent that both the words 'manaqerial" and 'consultancy' involve a human element. And, both, managerial service and consultancy service, are provided by humans. Consequently, applying the rule of noscitur a soccis, the word 'technical' as appearing in Expln. 2 to s. 9(1)(vii) would also have to be construed as involving a human element. But, the facility provided by MTNL/ other companies for interconnect/ port access is one which is provided automatically by machines. It is independently provided by the use of technology and that too, sophisticated technology, but that does not mean that MTNL/ other companies which provide such facilities are rendering any technical services as in Expln. 2 to s. 9(l)(vii). This is so because the expression 'technical services' takes colour from the expressions 'managerial services' and 'consultancy services' which necessarily involve a human element or, what is nowadays fashionably called, human interface. In the facts of the present appeals, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal service', the individual meanings of the words 'technical' and 'service' have to be shed and only the meaning' of the whole-expression 'technical services' has to, be seen. * The services rendered qua interconnection/ port access do not involve any human interface and, therefore, the same cannot be regarded as 'technical services' as contemplated under s. 194J." 28. The phraseology of Fees for Technical Services covers only such technical services provided for Fees. There should be a direct co-relation between the Services which are on technical nature and the consideration received in lieu of rendering the services. The services can be said to be of technical nature is the special skills and knowledge relating to technical field which required for the provisions of such services. These are required to be rendered by humans. The services provided by machines and robust do not fall within the ambit of technical services as provided u/s. 9(1)(vii) of the Act. 29. On appeal by the Revenue, the Hon'ble Supreme Court in the case reported as CIT vs. Bharti Cellular Ltd. (2011) 330 ITR 239 upheld the proposition of law laid down by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e into. It is the contention of Respondent No.1 herein that Interconnect Agreement between, let us say, M/s. Bharti Cellular Limited and BSNL in these cases is based on obligations and counter obligations, which is called a "revenue sharing contract". According to Respondent No.1, Section 194J of the Act is not attracted in the case of "revenue sharing contract". According to Respondent No.1, in such contracts there is only sharing of revenue and, therefore, payments by revenue sharing cannot constitute "fees" under Section 194J of the Act. This submission is not accepted by the Department. We leave it there because this submission has not been examined by the Tribunal. In short, the above aspects need reconsideration by the Assessing Officer. We make it clear that the assessee(s) is not at fault in these cases for the simple reason that the question of human intervention was never raised by the Department before the CIT. It was not raised even before the Tribunal; it is not raised even in these civil appeals. However, keeping in mind the larger interest and the ramification of the issues, which is likely to recur, particularly, in matters of contracts between Indian Companies and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in such communication service. Hence the issue to be considered is narrow and based on evidence collected by the Revenue post the Hon'ble Supreme Court judgment. All other issues are no more res-integra. 29.2 This aspect as to whether a human element is involved in such interconnect services or not, has been examined by different Benches of the Tribunal based on the evidence collected by the AO in the above stated setaside proceedings. The facts that are on record are the same as the facts and evidence which have been examined by various Coordinate Benches of the Tribunal. These include the statement of experts recorded by the Assessing Officer and the cross examination done by the Representative of the Company. For the sake of brevity, we do not extract the statement and cross examination etc. of the various experts, as these were considered in detail by the Coordinate Benches and it was held as follows: 29.3 The Kolkata Bench of the Tribunal in the case of Vodafone East Ltd. vs. Addl. CIT in ITA No. 243/Kol/2014, vide order dated 15.9.2015 held as follows:- "From the aforesaid statement recorded from technical experts pursuant to the directions of the Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not require any human intervention and charges received or paid on account of this is not fees for technical services as envisaged in Section 194J read with Section 9(1)(vii) read with Explanation-2 of the Act. In case before us, the assessee has paid roaming charges i.e. IUC charges to various operators at Rs. 10,18,92,350/-. Respectfully following above judicial precedents, we hold that these charges are not fees for rendering any technical services as envisaged in Section 194J of the Act. Therefore, we reverse the order of the ld CIT(A) and assessee's appeal is allowed on this ground also." 31. The AO as well as the Ld. CIT(A) has recorded that there is no human intervention when the call is successfully completed. It is also not disputed that there is no difference in the technology, system and methodology used by Telecom Companies in providing inter-connection of domestic calls or of international calls. So what decision is applicable for use of local calls also applies to "IUC" of international calls. Thus the view taken on the deductibility of TDS on IUC charges paid for local inter connectivity service would on all fours apply to charges paid for "IUC" for inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery, whenever the system breakdown, to set right the same, human intervention is required. However, for connecting roaming call, no human intervention is required except initial configuration in system. This Tribunal is of the considered opinion that human intervention is necessary for routine maintenance of the system and machinery. However, no human intervention is required for connecting the roaming calls. Therefore, as held by the Apex Court in Bharti Cellular Limited (supra), the roaming connections are provided without any human intervention and therefore, no technical service is availed by the assessee. Therefore, TDS is not required to be made in respect of roaming charges paid to other service providers." 33. All the Benches of the Tribunal are unanimous in their view on this issue. We see no reason whatsoever to deviate from these views. Hence consistent with the view taken in the above referred orders, we hold that the payment in question cannot be characterized as Fee for Technical Services u/s. 9(1)(vii) of the Act. There is no manual or human intervention during the process of transportation of calls between two networks. This is done automatically. Human interventi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ork is a standard facility and the and FTO in question does not render any technical services to the assessee under interconnect agreement. 36. The Hon'ble High Court of Delhi in the case of CIT vs. Estel Communications (P) Ltd. (2008) 217 CTR (Del) 102 held as follows:- "Tribunal considered the agreement that had been entered into by the assessee with T and came to the conclusion that there was no privity of contract between the customers of the assessee and T. In fact, the assessee was merely paying for an internet bandwidth to T and then selling it to its customers. The use of internet facility may require sophisticated equipment but that does not mean that technical services were rendered by T to the assessee. It was a simple case of purchase of internet bandwidth by assessee from T. Under the circumstances, the Tribunal came to the conclusion that there were no technical services provided by T to the assessee and, therefore, the provisions of s. 9(l)(vii) did not apply. Tribunal has rightly dismissed the appeal after taking into consideration the agreement between the assessee and T and the nature of services provided by T to the assessee. It was a simple case of pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility of s. 9(l)(vi) too-So long as the amount paid is not taxable under the Act, the clause in the DTAA cannot bring the charge-Hence, there was no liability to deduct tax under s. 195" 39. In view of the above discussions, respectfully following the binding judgment of the Hon'ble Supreme Court of India, we have no hesitation in upholding the submissions of the Ld. Counsel of the Assessee that, the payment in question cannot be considered as "Fee for Technical Services" in terms of section 9(1)(vii) read with Expln. 2 of the Act. 40. The second aspect of the issue are before us, is without prejudice to the finding under the Domestic Law, whether the payment to FTOs for "IUC" is fee for technical services under the DTAA, wherever 'make available clause' is found in these agreements. In view of our finding that the payment is not fee for technical services under the Act, it would be an academic exercise to examine whether the payment in question would be fee for technical services under DTAA's. Suffice to say wherever treaties contain "making available" clause, then in terms of the judgment of the Hon'ble Karnataka High Court in the case of CIT & Ors. vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income sought to be taken out from the business profits, for whatever reason, then it follows that the particular item of income should continue to remain under art. 7. In light of the above discussion, the amount received by the assessee company from RIL under the contract did not represent consideration for any technical services rendered to RIL which made available technical knowledge, experience, skill, etc. or consisted of the development and transfer of any technical plan or design within the meaning of art. 12(3)(g) of the Indo Australian Treaty. The consideration will continue to be viewed as business profits under art. 7 of the treaty and since the assessee had no PE in India the business profits cannot be taxed in India." 43. Similarly, the Hon'ble Bombay High Court in the case of CIT vs. Siemens Aktiongesellschaft(2009) 310 ITR 320 (Bom) "Double taxation relief Agreement between India' and' Federal Republic of Germany-Royalty vis-avis industrial and commercial profits-Even though s. 9 would apply, provisions of DTAA, if more beneficial, would prevail- Assessee having no PE in India, amount of royalty, sought to be assessed as industrial or commercial profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO held that the services rendered by Bayor Crop Science Ltd are "fees for technical services" and therefore, the assessee was to deduct the tax at source. Before the CIT (A), the assessee submitted that there was a cost sharing agreement between the assessee and the Bayor, which was primarily entered for economies of cost and due to paucity of experienced resources at the assessee's level and that the agreement specifically provides that Bayor would not be providing any services to the assessee. It is also submitted that there is no profit element included in the reimbursement of cost and therefore, there was no income chargeable to tax and TDS provisions are not applicable. The CIT (A) however, held that the Lotus Note is a highly technical I.T tool which includes Data Base Management and complicated set of programming code to be written and it is not a simple sharing of facility as internet facility shared by Nunhems BV and the assessee. Therefore, he held that the assessee was provided technical services by Bayor and the payments are subject to the TDS and since the assessee failed to deduct TDS, it was to be disallowed under section 40(a)(ia) of the Act. Aggrieved, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The concept of "accrual of income" to the vendor is a very important factor in determining the liability of the payer to deduct taxes at source under the provisions of the Act. Mere crediting in the books of account as a provision in expense payable or other payable account does not mean that actual accrual of liability or income especially until such time as the bill or invoice is received and duly passed for payment followed by an entry in the books of account". 8.4 The learned Counsel for the assessee reiterated the submissions made before the authorities below and we find that the agents who are entitled to the commission are identified and that the commission is paid only after receipt of the payment against the supplies made. Therefore, the ultimate recipients are ascertainable and hence the assessee ought to have made the TDS at the time of crediting the said a/c. Therefore, we see no reason to interfere with the order of the CIT (A) on this issue and the Ground of appeal No.4 is accordingly rejected. 8.5 As regards Ground No.5, we find that the assessee had offered the scheme discount amounting to Rs. 51,91,186 to various distributors and retailers and that the discoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed the expenditure. Since the details of the said expenditures are not before us, we deem it fit and proper to remand this issue to the file of the AO for verification and reconsideration in accordance with law. 12. As regards Ground No.3 and 3.1, against the mark up of 10% margin on the reimbursement of receipts from AE, it is submitted by the learned Counsel for the assessee that there is no profit element in the reimbursement of the expenses and therefore, there cannot be any mark-up on such reimbursement. We find that this issue is covered in favour of the assessee by various decisions of the ITAT wherein it has been held that where there is no profit element in the reimbursement of the expenses, there cannot be any unilateral mark up on the same. Therefore, this issue is also remanded to the file of the AO to verify whether there is any profit element in the reimbursement of the expenditure and if it is found that there is no such element, then we hold that there can be no mark up on such reimbursement. This ground of appeal is accordingly treated as allowed for statistical purposes. 13. In the result, the assessee's appeal for the A.Y 2008-09 is partly allowed for statist ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
