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TMI Blog2021 (6) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... resident And Ravish Sood, Member (J) For the Appellant : Vasanti Patel For the Respondents : S.S. Iyangar ORDER Pramod Kumar, Vice President 1. By way of these appeals, the assessee appellant has challenged corrections of consolidated order dated 30th January 2014 in the matter of tax withholding demands under section 201 r.w.s. 195 of the Income Tax Act 1961, for the assessment years 2005-06 to 2012-13 2. When these appeals came up for hearing, learned counsel for the assessee pointed out that the very taxability of payments, in respect of which impugned tax withholding demands are raised, have been negated in the hands of the recipient, i.e. Braitrim UK Ltd., by a coordinate bench. A copy of the related order dated 21st August 2019 (in Braitrim UK Ltd. vs. DCIT; ITA Nos. 1750 to 1753/Mum/2015) was also placed before us. In this order, the coordinate bench has, inter alia, observed as follows:- 13. We have carefully considered the rival submissions and perused the material on record. We find that the assessee is required to give a rebate/discount to the retailers based on the volume/units of sales to garment suppliers achieved by the Braitrim group. Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly bring out that the transaction in question cannot be construed to be 'royalty' as understood by the income-tax authorities. This becomes even more pertinent once the nature of such payments by BIPL to the assessee has been admitted as such in the assessment of BIPL for assessment year 2007-08 16. Pertinently, the assessee stated that the transaction for reimbursement of administrative charges by BIPL to the assessee was subject to transfer pricing proceedings during the assessment year 2007-08, wherein the TPO questioned the commercial expediency of the transaction of payment for administration charges and determined the arm's length price as 'Nil', which was effectuated accordingly by Assessing Officer in the draft assessment order. 17. Before the DRP, BIPL raised objections against the draft assessment order, which was based on the order of the Transfer Pricing Officer. The DRP held as under:- The DRP has carefully considered the order of the TPO, submissions of the taxpayer and objections of the taxpayer. The main issue here is that the assessee has paid to its AEs an amount of ₹ 1,87,30,339 slating that these charges are paid a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces recorded by BIPL. The TPO, in response to the remand report called for by the DRP, as directed by this Tribunal, had accepted the contentions of BIPL and found the same to be in order. 18. From the aforesaid, it follows that for the assessment year 2007-08 there is a concurrent acceptance of the claim of BIPL that the payments are in the nature of reimbursement by all the authorities, viz. the TPO, the DRP and the Tribunal. Therefore, in the face of such concurrent acceptance of the nature of payment as being a mere reimbursement, it is untenable for the Revenue to contend in the captioned cases that the nature of the amount is otherwise. Therefore, what follows is that the expenses have been incurred by the assessee on behalf of BIPL and the same were merely reimbursed to the assessee. Ostensibly, the contractual responsibility of the rebates to be paid to retailers lies with the assessee. However, since the sales are made by BIPL, the commercial prudence postulates that BIPL bears the ultimate responsibility of such rebates in respect of India sales, and thus the payment of such reimbursements. Admittedly, the liability is definite and crystallised in the books of BIPL, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAA. The Hon'ble Supreme Court, dismissing the appeal held as under:- ....... the facts that the assessee had its information technology system, that the assessee had appointed agents in various countries for booking of cargo and servicing customers in those countries, preparing documentation, etc., through these agents, that for the sake of convenience of all these agents, a centralised system was maintained to avoid unnecessary cost, that the system comprised booking and communication software, hardware and a data communications network and was, thus, an integral part of the international shipping business of the assessee and ran on a combination of mainframe and non-mainframe servers located in Denmark, that the expenditure incurred for running this business was shared by all the agents and that the systems enabled the agents to co-ordinate cargos and ports of call for its fleet were findings of fact. Once these were accepted, by no stretch of imagination, could the payments made by the agents be treated as fees for technical services. The payments were in the nature of reimbursement of cost whereby the three agents paid their proportionate share of the expenses incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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