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TMI Blog2020 (6) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 2616/- in respect of payment made to Buhler AG Swittzerland of Rs. 38093/- during the year under consideration and al so interest charged by the A. O. u/s 201/20I(IA) of the Income Tax Act of Rs. 654/- without properly appreciating the facts of the case and submissions made before her even when the assessee was not liable to deduct TDS on this payment. 02. The assessee reserve its right to add, alter, modify or amend the grounds of appeal as and when required. ITA No.744/Ind/2018 A.Y.2016-17 01. That on the facts and in the circumstances of the case the Learned CIT( A) erred in confirming the action of the assessing officer by treating the Assessee company as assessee in default in respect of non-deduction of Tax at Source u/s 195 of the Income Tax Act of Rs. 19,463/- in respect of payment made to Buhler AG Swittzerland of Rs. 283438/- during the year under consideration and al so interest charged by the A. O. u/s 201/20I(IA) of the Income Tax Act of Rs. 3892/- without properly appreciating the facts of the case and submissions made before her even when the assessee was not liable to deduct TDS on this payment. 02. The assessee reserve its right to add, alter, modify o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it rate on the amount remitted. Default of TDS @ 41.2% is calculated on the gross amount for the two payments made at Rs. 38,093/- and Rs. 2,83,438/- during March 2015 and August 2015 during financial year 2014-15 and 2015-16 respectively in the following manner:- F.Y 2014-15 Name of Recipient Total amount remitted in Rs. Amount of Profit 10% of amount remitted Gross up amount as per section 195A of the Act Default of TDS @ 41.2% incld. Cess Date of remittance Interest thereon u/s 201(1A) Buhler Switzerland 38093 3809 6349 2616 March 15 654 F.Y 2015-16 Name of Recipient Total amount remitted in Rs. Amount of Profit 10% of amount remitted Gross up amount as per section 195A of the Act Default of TDS @ 41.2% incld. Cess Date of remittance Interest thereon u/s 201(1A) Buhler Switzerland 283438 28344 47240 19463 August 15 3892 5. Aggrieved assessee preferred appeals before Ld. CIT(A) but failed to succeed and now the assessee is in appeal before the Tribunal on the common issues raised in both the years. 6. Ld. Counsel for the assessee referred to the following written submissions which are reproduced below :- 01]. The Brief Facts of the case are tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S u/s 195 on purchase of Capital Goods from Foreign Supplier of Goods hence there was no liability towards withholding tax u/s 195 on said payment made to non-residents 04] The Ld. Income Tax Officer has not appreciated the facts placed before him and has passed an order u/s 201(1)/201(1A) of the Act on 28.03.2017 wherein he was of the view that payment made by the Assessee company to M/s Bhuler AG , Switzerland towards purchase of Spare Parts for Old Machines and Flour Milling Machine is governed by the provisions of Sec. 9(1) of the Act and on which no withholding Tax u/s 195 of the Act was deducted. Hence he has considered the assesse as assesse in default and created the demand in his case. S.No. Particulars Amount paid Gross up amount Default of TDS Interest u/s 201(1A) 01 Payment to M/s Buhler AG Switzerland 38,093 6,349 2,616 654 02 Payment to M/s Buhler AG Switzerland 2,83,438 47,240 19,463 3,892 Total 22079 4546 05] That on perusal of the Purchase Order and Invoices Your Honours will appreciate that Assessee company has basically purchased Spare parts for Old Machines and Flour Milling Machine from the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... always extended to all persons, resident or non-resident, whether or not the non-resident person has- (i) a residence or place of business or business connection in India; or (ii) any other presence in any manner whatsoever in India. (2) .......... (3) .......... (4) .......... (5) .......... Section 5 in The Income- Tax Act, 1995 5.(1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which- (a) is received or is deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year; or (c) accrues or arises to him outside India during such year: Provided that, in the case of a person not ordinarily resident in India within the meaning of sub- section (6) of section 6, the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India. (2) Subject to the provisions of this Act, the total income of any previous year of a person who is a non- resident includes all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers in India of those non- Resident. The detail of the same as mentioned by the Ld. A.O. is as under:- S.No. Name of Recipient Name of Agent/Broker through which order is placed 01 Buhler AG Switzerland Buhler India Pvt. Ltd Bangalore 8.2] In this respect the assessee has already clarified to Ld. ITO that assessee Company has purchased Spare parts for Old Machines and Flour Milling Machine from the above Non Resident party. 8.3] That to purchase the said items the company floats enquiries to various foreign suppliers and obtains technical specification and rates of same from them. Subsequently it places the Purchase Order to the respective party who meet out the Quality specification which is also competitive in terms of price. 8.4] That the payment to said party was towards purchase of Capital Goods being Spare parts for Old Machines and Flour Milling Machine and the assesse has placed order to the Non Resident supplier directly. 8.5] That as per Expl. 2 to Sec. 9(1)(a) M/s Buhler India Pvt. Ltd. has not acted as an agent for its Non Resident Principal Company M/s Buhler AG Switzerland. The Assessee company has purchased the Material on Principal to Principal Basis. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the business of manufacturing of wheat products. It intended to purchase spare parts for its old flour mill machines. The assessee after making necessary enquiry finally purchased goods from M/s Buhler AG, Switzerland vide invoice dated 24.3.2015 and 11.8.2015. In order to make payments to the supplier, form 15CA/15CB of I.T. Rules was not filed on the ground that no such forms needs to be filed online and need not be provided to bank in case of purchase of capital goods/spare parts of machineries. 10. When the matter was taken by the Ld. A.O, necessary details were called and it was revealed that M/s Buhler AG, Switzerland is having group company's office in Bangalore working in the name of Buhler India Pvt. Ltd (In short 'BIPL') wherein 99.99% equity share is held with M/s Buhler AG, Switzerland. Ld. A.O also came across the correspondences through e-mail between the assessee company and BIPL, Bangalore showing that the orders for supply of spare parts were finalised between these two companies based in India and finally the orders were placed to M/s Buhler AG, Switzerland who had issued the invoice. On the basis of these information Ld. A.O was of the view that as per provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find herewith attached revised quotation for the part required by you, kindly go through the same and send your confirmation for our further process looking forward for your valuable order. Thanks and regards. Buhler India Put. Lid. Bangalore. Assessee to Buhler: India Banqalore- We require below, items: .Material Qty ........... (Details Provided)............................. Buhler India Banqalore to Assessee- Please find herewith attached quotation for the part required by you kindly go throuqh. the same and send your confirmation; for our further process, Looking forward for your valuable order. Thanks and regards . ...............". 8.1 There is apparent contradiction in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vendor confirm the payment* Vendor send the schedule of dispatch of goods like by Air/Sea and other detail* We have given contract for clearance of goods to CHA* CHA clear Goods from custom for completing all legal compliance* CHA send goods to our factory premises* *Mail communications between appellant company and Buhler (India) Pvt. Ltd clearly indicates that appellant company was in conversation with Buhler (India) Pvt. Ltd till finalisation and confirmation of order. 8.2 Further the Ld. AO has issued notice u/s.133 (6) of the I.T. Act, 1961 to 8IPL to which reply has been received from BIPL, extract of which is available at page-5 of the assessment order. To summarize, BIPL has stated that its role is confined to identity customers , liaison with customers on requirement and product specification and handling their inquiries, and thereafter forwarding enquiries to its AE Le. Buhler AG. However on perusal of the fact s as well correspondences between appellant and B1PL, I am not inclined to agree with the reply received by the Assessing Officer pursuant to notice u/s 133(6), It clearly emanates that SIPL is actually providing very vital services till the confirmation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny business activity carried out through a, person who, acting on behalf of the non resident,- (a) has and habitually exercises in India, an authority to conclude contracts on behalf of the nonRresident, unless his activities are limited to the purchase of goods or merchandise for the non-resident; or (b) has HO such authority, but habitually maintains in India a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the non-resident; or (c) habitually secures orders in India, mainly or wholly for the non-resident or for that: non.-resident and other non-residents controlling, controlled by, or subject to the same common control, as that non-resident: Provided that such: business connection shall not include any business activity carried out through a broker, general commission agent or any other agent having un independent status, if such broker, general commission u{lent or arty other agent hawing all independent status is acting in the ordinary course of his business:: Provided further that where such broker, general commission agent or any other agent works mainly or wholly on behalf of (1 non resident (hereafter in this provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oup of companies in India and evidences on records go to show that it actually does much more than the services as conveyed. Considering the above factual position, I find no reason to interfere with the findings of the Assessing Officer. In my considered view, therefore, the BAGS indeed has a business connection in India by 'way of its Indian subsidiary BIPL which is acting for furtherance of the business interests of the BAGS in India remaining closely connected. Further, the fact whether the parent company gets any kind of business from the Indian subsidiary would also be relevant in determining whether there exists a business connection in India. In this context, there is a judgment in the case of CIT v Remington Typewriter Co (Bombay) Ltd 5 ITR 177 (PC), which is summarized below: An American company formed a subsidiary company in Bombay for carrying on in Bombay the American company's business of selling its products. Although no contractual obligation existed with the Bombay company, the flow of business between the two companies was secured by the; fact that the ultimate and complete control of the Bombay company was vested in the American company which owned al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2017 through e-mail to the A.O and the same reads as follows:- "We refer to your letter dated 12.01.17 which was received by us on 17.01.17 calling for information with respect to proceedings u/s 201(1)/201(1A) of the Act in the case of Sanghvi Foods Pvt. Ltd Indore TAN BPLS01258F for FY 2014-15 and FY 2015-16. In this regard we humbly submitted that Buhler India is primarily engaged in the business of manufacture and trade in food processing machineries (Particularly Rice and Flour Milling Machines) and its spare and components. Company also provides repair and maintenance services engineering services etc. It also provides marketing supporting services to some of the group companies including Buhler AG Switzerland. Provision of marketing support services to Buhler AG Switzerland, inter alia, covers the following activity: a. Identifying customers interested in the products b. Liaison with customers on their requirement and product specification as well as handling customer enquiries relating to the product. c. Forwarding customer enquiries to Buhler AG and quotation from Buhler AG to the prospective customers" 14. The above reply of BIPL leaves no confusion that BI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivity of receiving order was carried though an Indian agent who along with the non resident company in question provided services to many other companies also and thus was not "wholly" working for the non resident company. The fact is also different since in the case of agent through which the transaction was carried in the case of Hind Energy & Coal Benefication (India) Ltd was not a subsidiary/group company of non resident company whereas in the instant case the activity of supply of goods/providing quotation/confirming orders have been carried through the Indian subsidiary i.e. BIPL. Therefore the decision of the Hind Energy & Coal Benefication (India) Ltd (supra) is not applicable in the instant case. 17. Therefore in the given facts and circumstances of the case and series of facts brought on record, we are of the view that since the non resident supplier Buhler AG, Switzerland has carried out the transaction of sale of goods to the assessee company through its subsidiary/group company BIPL, Bangalore "business connection" is established and therefore Section 9 of the Act dealing with "Income deemed to accrue or arise in India" comes into operation and thus the transaction ne ..... 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