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TMI Blog2019 (4) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... ntives earned by the assessee at any point of time. Thus, charging of mark up on support service charges which were billed to AGNSI was not correct on part of the Assessing Officer. Besides that, the issue is squarely covered in assessee’s own case for A.Y. 2010-11[2018 (4) TMI 33 - ITAT DELHI]. Hence, Ground No. 2 is allowed. Addition on account of non deduction of TDS on reimbursement of salary - HELD THAT:- The employees seconded to the assessee company are working as the employees of the assessee company, their salary is subject to TDS u/s 192 of the Act and, therefore, provisions of section 195 are not applicable on the facts of the case in hand. Thus, the issue is squarely covered by the order of the Tribunal in assessee’s own case [2018 (11) TMI 130 - ITAT DELHI]. Hence, Ground No. 3 is allowed. - ITA No.6703 /DEL/2018 Along with S.A No. 753/DEL/2018 - - - Dated:- 28-3-2019 - Shri R. K. Panda, Accountant Member And Ms Suchitra Kamble, Judicial Member For the Appellant : Sh. Kanchan Kaushal, AR For the Respondent : Sh. Sanjay Goyal, CIT DR ORDER PER SUCHITRA KAMBLE, JM This appeal and Stay Application are filed by the assessee against the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciating that both the Appellant and AGNSI are profit making entities and hence, there was no incentive / tax saving for either of the parties in entering into such cost recharge arrangement. 2.3. On the facts, in circumstances of the case and in law, the aforesaid addition on account of mark-up not charged to AGNSI is grossly incorrect, as the same is squarely covered in favour of the appellant by the order of Hon'ble IT AT in its own case for AY 2010-11. 3. Disallowance on account of non-deduction of tax at source on reimbursement made to AT T World Personnel Services Inc. ('AWPS') 3.1. On the facts, in the circumstances of the case and in law, Ld. AO/DRP erred in disallowing an amount of INR 2,11,84,268/- (reimbursed to AWPS for salaries paid to the employees seconded to Appellant) on account of nondeduction of tax at source under section 40(a)(i) of the Income-tax Act, 1961 ( the Act ). 3.2. On the facts, in the circumstances of the case and in law, Ld. AO/DRP failed to appreciate that the impugned payment remitted to AWPS does not constitute Fees for Included Services/Fees for Technical Services in terms of India-US Double taxation Avoidan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anaged Network Services For the Assessment Year ('AY') under consideration, the Assessee filed its original return of income on November 28, 2014 declaring an income of ₹ 97.87 crores. As against this return of income, the Assessing Officer passed the assessment order u/s 144C read with section 143(3) ( the impugned order ) on 25.09.2018 assessing a total income of ₹ 100.64 crores and raised a demand of ₹ 1.49 cr. From a review of the final assessment order passed by the Assessing Officer and the computation of tax and interest demand attached thereto, it was noticed that short TDS credit of ₹ 21,079 was granted by the Assessing Officer as claimed by the Assessee in its return of income. The Assessee filed a rectification application before the Assessing Officer on October 09, 2018 against the final assessment order with the Assessing Officer, which is pending for disposal. A summary of the additions made is as under:- Sl No. Additions Ground No. of ITA Amount (Rs.) Returned Income 97,87,15,770 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase cited as Rotork Controls India (P) Ltd. (supra) decided the identical issue in favour of the taxpayer by returning the following findings :- Held, reversing the decision of the High Court, that the valve actuators, manufactured by the assessee, were sophisticated goods and statistical data indicated that every year some of these were found defective; that valve actuator being a sophisticated item no customer was prepared to buy a valve actuator without a warranty. Therefore, the warranty became an integral part of the sale price; in other words, the warranty stood attached to the sale price of the product. In this case the warranty provisions had to be recognized because the assessee had a present obligation as a result of past events resulting in an outflow of resources and a reliable estimate could be made of the amount of the obligation. Therefore, the assessee had incurred a liability during the assessment year which was entitled to deduction under section 37 of the Income-tax Act, 1961. The present value of a contingent liability, like the warranty expense, if Properly ascertained and discounted on accrual basis can be an item of deduction under section 37. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant to the said assessment year, the assessee had accounted all the expenses relatable to the subject Financial Year for which bills/invoices would have been received/paid after close of the Financial Year by way of year ending accruals. Thus, the issue is identical in the present assessment year as well, hence Ground No. 1 is allowed. 8. As regards Ground No.2 relating to addition on account of non-charging of mark up on support services charges able to AGNS amounting to ₹ 64,45,195/-. The Ld. AR submitted that this issue is also covered by the order of the Tribunal in assessee s own case for Assessment Year 2010-11 being ITA No. 1016/Del/2015 order dated 15/2/2018. 9. The Ld. DR relied upon the assessment order and the order of the CIT (A). 10. We have heard both the parties and perused the material available on record. The Tribunal in A.Y. 2010-11 held as under: 14. Issue of non-charging of mark up on support services being built up to AGNSI has come up in the appeal for AGNSI for AY 2008-09 to AY 2011-12 wherein the Revenue has raised a ground that such support services expenditure should be disallowed in the books of account of AGNSI. 15. The coo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid judicial precedents, we find that where the appellant has actually incurred the aforesaid support services cost and no evidence has been brought by the department to controvert the same, such expenditure cannot be disallowed merely on suspicion. We affirm the finding of the ld DRP on this issue. In view of the above, the appeal of the revenue on this ground is dismissed. 16. So, in the instant case also, the Revenue has failed to controvert the invoices, the details of payment made and evidencing the payments thereof to dispute the genuineness of the expenses and the fact that the taxpayer as well as AGNSI are profit making entities and there was no tax incentives for the purpose to deflate the revenues earned by the taxpayer, the Revenue has based its decision on commercial consideration. Moreover, in case of both the resident parties, terms and conditions of the arrangement cannot be questioned by the Revenue unless specifically provided under the Act. In case of a contract by both the parties who are admittedly resident Indian entities, they make the law for themselves which cannot be interfered unless contract is unlawful or specially barred by the law of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer is misplaced inasmuch as the seconded employees of AWPS were not taking forward the business of AWPS in India, but, were effectively working under the control and supervision of the assessee company and by no means can be said to be rendering services on behalf of AWPS. Whereas in the case of Centrica (supra), it was established only to provide services to the overseas entity to ensure that the services to be rendered to the overseas entities by the Indian vendor are properly coordinated. We are, therefore, of the considered view that reimbursement made by the appellant company cannot be classified as FTS/FIS under the provisions of the Act and Indo-US DTAA. It would not be out of place to mention here that total tax deducted by the assessee u/s 192 of the Act is ₹ 1,97,36,176/- which is much higher than the withholding tax sought to be levied by the Assessing Officer which comes to 10% of ₹ 4,17,56,851/-. Considering the facts in totality, we direct the Assessing Officer to delete the impugned addition. Ground No. 6 is allowed. In the present year as well, the employees seconded to the assessee company are working as the employees of the assessee com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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