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TMI Blog2022 (10) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... non-existent company and accordingly, void ab initio, making all subsequent proceedings non-est, ignoring the fact that final assessment order has been passed in the name of the new entity as per the directions of Hon'ble DRP. 2. Whether on facts and in circumstances of the case and also on the prevailing law, Hon'ble ITAT is justified in deleting addition of Rs.22,16,059/- on account of receivables, which in contravention of the judgment of Hon'ble Delhi High court in the case of Kusum Healthcare. 3. Whether on facts and in the circumstances of the case and also on the prevailing law, Hon'ble ITAT is justified in allowing the appeal of the assessee on disallowance u/s 40A(i) of the Income Tax Act, 1961 ignoring the facts that the matter has been decided in favour of Revenue in the case of Centrica India Offshore India Ltd. 364 ITR 336 before the Hon'ble High Court." 3. Learned counsel for the appellant states that ITAT has erred in allowing the appeal of the assessee on the ground that the draft order framed under Section 144C(1) of the Income Tax Act, 1961 ('the Act') was issued in the name of a non-existing company and was accordingly void ab-initio making all subsequent p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the authorities below. The undisputed fact is that the assessee is a debt free company. It is also not in dispute that no interest was paid to the creditor/supplier nor any interest has been earned from unrelated party. Moreover, being a 100% captive service provider, the revenue of the assessee is 100% from its AEs. In our considered opinion, the question of receiving any intererest on receivables does not arise. Considering the facts of the assessee in hand, in totality, we do not find any merit in the TP adjustment of Rs.22.16 lakhs and the same is, accordingly, directed to be deleted." 7. On similar facts, the ITAT, Delhi Bench I-2 in ITA No.1478/Del/2015 titled 'Bechtel India Pvt. Ltd. vs. DCIT' dated 21st December, 2015 has held that "It is brought to our notice that the assessee is a debt free company. In such circumstances it is not justifiable to presume that, borrowed funds have been utilized to pass on the facility to its AE's. The revenue has also not brought on record that the assessee has been found paying interest to its creditors or suppliers on delayed payments." 8. Upon the said matter being carried forward in an appeal, the Division Bench of this Court in Prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax at source under Section 192 of the Act. This Court is in agreement with the opinion of the ITAT that Section 195 of the Act has no application once the nature of payment is determined as salary and deduction has been made under Section 192 of the Act. 12. This Court is further of the view that the judgment in Centrica India Offshore Pvt. Ltd (supra) has no application to the present case as the ITAT has returned a finding that the real employer of the seconded employees continues to be the Indian entity and not the overseas entity. 13. In Director of Income Tax (IT)-I vs. A.P.Moller Maersk A S, the Supreme Court in Civil Appeal No.8040/2015 decided on 17th February, 2017 has held as under:- "11. Aforesaid are the findings of facts. It is clearly held that no technical services are provided by the assessee to the agents. Once these are accepted, by no stretch of imagination, payments made by the agents can be treated as free for technical service. It is in the nature of reimbursement of cost whereby the three agents paid their proportionate share of the expenses incurred on these said systems and for maintaining those systems. It is reemphasized that neither the AO nor the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the following findings were arrived at by the Tribunal holding that the aforesaid payment would be treated as salary to Mr.Peter Laser. "10. The foreign company had deputed one of its employees to look after the affairs of the Indian Company. The salary payable to this employee was to be borne by the foreign company. The Indian company was to reimburse this salary at cost, i.e. without any mark-up. Thus, it was merely the question of payment of salary to Mr. Peter Laser. There is no question of any technical fees being paid to the foreign company. Assuming for the sake of argument that it was in the nature of technical fees paid to the foreign company; then, as rightly pointed out by the learned counsel, Article 12.4 was applicable and not Article 13.4 as contended by the learned DR. Even if Article 12.4 was applicable, the said Article specifically excludes payments mentioned in Article 15. Article 15 states that salaries, wages and other similar remuneration derived by a resident of a Contracting State (Germany) in respect of an employment shall be taxable in the other Contracting State (Indian) only if the employment is exercised there. In other words, salaries paid to such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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