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TMI Blog2021 (2) TMI 789X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,56,019/- under section 40(a)(i) of the Act, by exceeding its powers as detailed under section 1440(8) of the Act by directing an addition on an issue which neither arose out of the assessment proceedings, nor was in relation to proposed variation by the Ld. AO and hence for this reason alone, it is prayed that the addition so made, may be ordered to be deleted. 2. Without prejudice to the above, on the facts, in the circumstances of the case & in law, the Ld. AO as well as Ld. DRP grossly erred in making an adjustment of Rs. 25,10,56,019/- to the returned income of the Appellant, treating the same as fees for technical services ('FTS') as per the provisions of section 9(1)(vii) of the Act and Fee for Included services/FTS/Royalty under Article 12(4) of India-US Tax Treaty/Article 12(4) of India-UK Tax Treat/Article 12(3) of India Australia Tax Treaty respectively and holding that the same is to be disallowed under section 40(a)(1) of the Act for failure on the part of the Appellant in deducting the taxes thereof. 3. On the facts, in the circumstances of the case & in law, the Ld. AO as well Ld. DRP failed to appreciate that the payment of Rs. 25,10,56,019/- was on ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsultancy services performed by the Appellant. 6. On the facts, in the circumstances of the case and in law, the Ld. DRP and business and commercial reality that the Appellant undertakes minimal comparable companies that are full-fledged risk taking entrepreneurs, adjustment to the Appellant on account of this fact. 7. On the facts, in the circumstances of the case and in law, the Ld. DRP and Ld. TPO/AO have grossly erred in computing the transfer pricing adjustment by considering even unrelated party transactions of the Appellant 8. On the facts, in the circumstances of the case and in law, the assessment order passed by the Ld. AO pursuant to the directions of Ld. DRP is bad in law and void ab-initio. 9. On the facts, in law and in peculiar circumstances of the case, the Ld. DRP/Ld. AO erred in not giving the appellant proper or sufficient opportunity to have it say or make necessary compliance of the reasons relied upon by Ld. DRP/Ld. AO in making the addition/adjustments under the Act in the present case. 10. On the facts, in the circumstances of the case and in law, the Ld. AO erred in levying consequential interest under section 234B of the Act on the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) of the I.T. Act, 1961, the appropriate portion of the sum which is chargeable to tax under the Act shall form the basis of such disallowance". This circular also refers to similar CBDT Instruction No. 2/2014 dated 26.02.2014. The AO is directed to compute the disallowance under section 40(a)(i) in accordance with the CBDT circular. The above will result in an enhancement of income as compared to the draft assessment order. This is within the statutory powers of the DRP u/s. 144C(8). The assessee has been given the opportunity to explain why the above expenditure be not disallowed and income accordingly enhanced and its reply has been duly considered." As per the direction given by the DRP, the Assessing Officer verified the amount of Rs. 31,73,75,430/-. The same constitutes expenditure towards Salaries and other allowances of employees of Rs. 25,10,56,019/- expenditure towards Travelling Expenses of employees of Rs. 6,42,34,233/- and other expenses of Rs. 20,85,178/-. During the verification of various submission and ledger submitted by the AR of the assessee, it is found that the assessee failed to deduct tax at source on the expenditure towards Salaries and other allowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Centrica India Offshore India Ltd. 364 ITR 336 and further referring to various judicial decisions, the Assessing Officer finally came to the conclusion that the assessee has failed to deduct tax at source on the expenditure towards salaries and other allowances and invoking the provisions of section 40(a)(i) of the Act, the Assessing Officer made disallowance of Rs. 56,58,19,799/-. 25. Objections were raised before the DRP but were of no avail. 26. Before us, the Ld. counsel for the assessee vehemently stated that the assessee has deducted tax at source/s 192 of the Act, and, therefore, there should not be any disallowance u/s. 40(a)(i) of the Act. Reliance was placed on the decision of the co-ordinate bench in the case of Neemrana Hotels Pvt. Ltd. ITA No. 98/DEL/2017 order dated 10.07.2019. It is the say of the Ld. counsel for the assessee that since tax has been deducted u/s. 192 of the Act, provisions of section 195 will not apply. 27. Distinguishing the decision of Centrica India Offshore India Ltd. [supra], the Ld. counsel for the assessee vehemently stated that the decision in the case of Centrica India Offshore India Ltd. was based upon entirely different set of fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying salaries at the home country of the secondees and, therefore, there was reimbursement by the appellant. These facts clearly show that the assessee has been paying to its own employees and this fact alone clearly distinguishes the facts of the decision in the case of Centrica India Offshore Ltd. [supra]. 32. The co-ordinate bench in the case of AT & T Communication Services India Pvt. Ltd. [supra], distinguishing the decision of the Hon'ble Delhi High Court in the case of Centrica India Offshore Pvt. Ltd. [supra], has held as under: "30. The DRP has affirmed the decision of the Ld. AO by holding that the assessee has deducted withholding tax on 21 substantial payments and yet argued that the tax is not deductible u/s. 195 of the act and provision of section 40(a)(i) cannot be invoked in the case of said payment. 31. The DRP has affirmed the decision of the AO by holding that the assessee has deducted withholding tax on substantial payments and yet argued that the tax is not deductible u/s. 195 of the act and provision of section 40(a)(i) cannot be invoked in the case of said payment. 32. The Special Auditors in their Audit Report have worked out particulars of payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) of India US Tax Treaty/Article 12(4) of India UK Tax Treaty/Article 12(3) of India Australia Tax Treaty respectively, grossly ignoring the fact that the said amount represent pure reimbursement without any income element and holding that the same is to be disallowed under section 40(a)(i) of the Act for failure on the part of the Appellant in deducting the taxes thereof. 3. On the facts, in the circumstances of the case & in law, the Ld. AO erred in not appreciating the fact that such reimbursement of travelling expense and other expense cannot be considered as making available technical knowledge in terms of Article 12(4) of India US Tax Treaty/Article 12(4) of India UK Tax Treaty/Article 12(3) of India Australia Tax Treaty respectively. 4. On the facts, in the circumstances of the case and in law, the Ld. AO erred in granting short credit of taxes paid amounting to Rs. 9,44,12,220 instead of Rs. 10,94,12,220 while computing the tax payable by the Appellant while passing the order under section 154/143(3) of the Act. 5. On the facts, in the circumstances of the case and in law, the Ld. AO erred in levying consequential interest under section 234B of the Act. 7. We find ..... X X X X Extracts X X X X X X X X Extracts X X X X
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