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TMI Blog2018 (12) TMI 1965X X X X Extracts X X X X X X X X Extracts X X X X ..... s in Germany and the holding company of the entire group is BASF SE, Germany. As can be seen from the facts on record, the assessee entered into a cost sharing agreement with BASF SE w.e.f. 1st January 2010. As per the terms of the said agreement, the assessee was required to remit U.S. $ 3,401,060, to BASF SE, Germany, towards reimbursement of common cost allocated to the assessee as per the cost sharing agreement for assessment year 2014-15. Similarly, the assessee was required to remit an amount of U.S. $ 35,51,860, to BASF SE, Germany, in assessment year 2015-16. Since, the assessee was of the view that the remittance to BASF SE, Germany is in the nature of reimbursement of cost and it is not an income chargeable to tax in India in the hands of the recipient i.e., BASF SE, Germany, it made applications under section 195(2) of the Act seeking permission for remitting the amount in question without deducting tax at source for both the assessment years. The Assessing Officer after examining the applications of the assessee, however, was of the view that remittances to be made by the assessee to BASF SE, Germany, are in the nature of fees for technical services, therefore, he direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since May 2000, however, the assessee became a part of the agreement w.e.f. 1st January 2010, explaining the reason why the assessee was not a party to the agreement in May 2000. He submitted, the assessee was receiving benefits of cost sharing agreement before it joined into the pool in 2010. He submitted, prior to 2010, though CSA costs were allocated to the assessee but were not charged to it. Instead, assessee's portion of CSA cost was borne by BASF SE as a matter of internal management decision. However, subsequently, due to certain contingencies arising due to CSA audit by German tax authorities requiring charging of costs to all companies which have a benefit of cost sharing activity, the assessee joined the cost sharing agreement in January 2010. Taking us through the cost sharing agreement placed in the paper book the learned Sr. Counsel for the assessee submitted, the nature of services provided in the agreement cannot be termed as fee for technical services. Further, he submitted, the cost sharing agreement makes it clear that the services are actually provided by the other group companies (pool members) and not by BASF SE. Drawing our attention to Explanation-2 to secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the Transfer Pricing Officer has disallowed the reimbursement of cost with the observation that the assessee has not availed any services. Thus, the learned Sr. Counsel submitted, if it is the case of Transfer Pricing Officer that the assessee has not availed any services, the Assessing Officer while rejecting assessee's application under section 195(2) of the Act could not have concluded that services rendered are in the nature of fees for technical services. The learned Sr. Counsel submitted, in case of another sister concern located in India, which is also a party to the cost sharing agreement with BASF SE, the Assessing Officer has passed an order under section 195(2) of the Act permitting the company to make remittances to BASF SE without deducting any tax at source. Thus, he submitted, the Department cannot take contradictory stand in respect of payment made by two Indian companies under the same cost sharing agreement. Thus, the learned Sr. Counsel submitted, tax deducted at source and paid to the Government account should be refunded to the assessee. 6. Shri Lovish Kumar, learned Departmental Representative, opposing the contentions raised on behalf of the assessee subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment as reimbursement, it cannot lose its character as fees for technical services. In support of his contention, the learned Departmental Representative reliedupon the following decisions:- i) Centrica India Offshore Pvt. Ltd. v/s CIT, W.P.(C) no.6807/ 2012, dated 25.04.2014; ii) GVK Industries v/s ITO, [1997] 228 ITR 564; and iii) U.S. Technology Resources Pvt. Ltd. v/s ACIT, ITA no.99-104/Coch./2017, dated 29.01.2018. 7. In rejoinder, the learned Sr. Counsel submitted,BASF AG as appearing in the cost sharing agreement has subsequently been renamed as BASF SE, hence, they are not different entities. As regards the contention of the learned Departmental Representative that the report of the German Auditor, Deloitte cannot be relied upon, the learned Sr. Counsel specifically drawing our attention to Page-63 of the paper book submitted that BASF SE has engaged the auditor to audit the provision and invoicing and activities between BASF SE and pool members under the cost sharing agreement for the period from 1st January to 31st December 2012. Thus, he submitted, the apprehension of the learned Departmental Representative is misplaced. In support of his contention, the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... May 2000. As regards the observations of the learned Commissioner (Appeals) that nature of services rendered is managerial and technical, there is absolutely no reasoning on what basis the learned Commissioner (Appeals) has come to such conclusion. Though, he has stated that such conclusion is arrived at after going through the cost sharing agreement, however, the order passed by the learned Commissioner (Appeals) does not reveal whether he has examined and analyzed the nature of services rendered by the pool members to term the payment made as fees for technical services. Further, only because the assessee became party to the agreement in December 2010, it cannot be said that the payment made by the assessee for services are in the nature of fees for technical services. It is necessary to observe, the assessee has furnished before us a number of documentary evidences, some of which for the first time by way of additional evidences, to demonstrate that the payment made to BASF SE is actually relating to services rendered by different pool members on cost to cost basis without any mark-up. Learned Sr. Counsel for the assessee with the aid of the aforesaid documentary evidences had ..... 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