9911796707
TMI Blog2024 (1) TMI 1005X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance under section 40(a)(i). Having heard the arguments of the ld. DR and the material on record, we hold that the MFN clause of India-Neitherland Tax Treaty has been rightly interpreted by the ld. CIT(A) and hence, we decline to interfere with order of the ld. CIT(A). Appeal of the Revenue is dismissed. - Shri Saktijit Dey, Vice President And Dr. B. R. R. Kumar, Accountant Member For the Assessee : None For the Revenue : Sh. Sanjay Kumar, Sr. DR ORDER PER DR. B. R. R. KUMAR:- The present appeal has been filed by Revenue against the order of Ld.CIT(A)-6, New Delhi dated 09.04.2019. 2. The Revenue has raised the following grounds of appeal:- 1. Whether on the facts and circumstances of the case, the ld. CIT(A) has erred in deleting the disallowance of Rs. 6,74,32,200/- u/s. 40(a)(i) for non deduction of TDS on payment to non-resident which is in nature of FTS(Fee for Technical Service)? 3. The facts of the case are that the assessee flied revised return on 28/03/2015 declaring income at NIL and current year loss was claimed at Rs. 10,77,13,660/-. 4. The assessee is engaged the business of import/export, trading, manufacturing, commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king available to the Indian company (NTL Lemnis India Pvt. Ltd.). 8. The AO held that in accordance with the provisions of section 195, the assessee was required to deduct tax at source from payments of FTS amounting to Rs. 9,85,54,700/- but the assessee deducted tax only on payments aggregating to Rs. 3,11,22,500/-. Since the assessee had failed to deduct tax at source under section 195 on payments aggregating to Rs. 6,74,32,200/- in the nature of FTS made by it to a non-resident, the same was held to be not allowable as deduction under section 40(a)i) and was disallowed and added back. It was also noted that out of the total payment of Rs. 9,85,54,700/-, payment of Rs. 69, 65,000/- had been booked by the assessee on 22/05/2013 and was not allowable as deduction for the year under consideration. In conclusion Assessment was completed at a loss of Rs. 4,02,81,460/-. 9. Aggrieved, the assessee file before the ld. CIT(A). 10. Submissions made by assessee before the ld. CIT(A) are as under: M/s NTL Lemnis India Pot. Ltd (hereinafter referred to as the Assessee or the Appellant ) is in receipt of Assessment Order u/s 143(3) dated 18/03/2016 (Copy enclosed at Annexure 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement dt: 02-04-2012. These services were also provided from outside India directly to the overseas customer (IKEA) which is also located outside India and there is no question of training or education that could have been transferred to the assessee in the course of providing such services. By their very nature, these sales and marketing support services can not be said to be FTS and also do not fulfill the make available clause. 1.7. The learned AO has erred on facts and in law in assuming that rendering of such services automatically satisfy the make available clause as required by India-Netherland Tax treaty and accordingly erred in treating the same as liable for TDS under section 195 and disallowing Rs. 6,74,32,200 under section 40(a) (i). 1.8. Services rendered by the foreign co. to the assessee neither fall in the definition of FTS nor satisfy the make available clause as per the beneficial provisions of DTAA between India and Netherlands. Whereas to tax such income in India, above both conditions must be fulfilled. 2. Para wise reply to the AO's order u/s 143(3) dated 18st March, 2016 2.1. AO has stated in para 3.4 of his order that it ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... skill, knowhow etc to the assessee without any rational logic. 2.5. AO has stated in para 3.17 of his order that Thus, in accordance with the provision of section 195 of the Act, the assessee was required to deduct.... In respect of above it is submitted that Amount received by NTL Lemnis Holding BV is for providing management and sales and marketing support services is not taxable in India as per beneficial provisions of tax treaty between India and Netherlands and hence there is no question of deducting TDS under section 195 and disallowance under section 40(a) (i). 3. DETAILED SUBMISSION OF THE ASSESSEE ON GROUNDS OF APPEAL: 3.1. The order passed by learned AO is bad in law as proper Show Cause Notice giving reasons which formed the basis of disallowance as required by CBDT Instruction No. 20/2015 dt. 29-12-2015 was not issued by the AO. Mere quoting of disallowance section doesn't amount to grong of reasons forming the basis of additions. Moreover, a reasonable opportunity was not given to reply to SCN noted on 04-03-2016, which is against principles of natural justice, CBDT Instructions and assessee was prohibited from producing additional d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature of managerial assistance and such services do not satisfy the Make available test as no training was imparted to the assessee or its personnel. 3.3.5. Sales and marketing support services were also provided from outside India directly to the overseas customer (IKEA) which is also located outside India and there is no question of training or education that could have been transferred to the assessee in the course of providing such services. By their very nature, these sales and marketing support services can not be said to be FTS and also do not fulfill the make available clause. Copy of invoices of Management and Sales Marketing Support Services are enclosed at Annexure 5. 3.3.6. NTL lemnis Holding BV is a tax resident of Netherlands and the assessee, being a domestic company is a tax resident of India. Hence India Netherlands tax treaty is applicable. The learned AO erred on facts and in law in disregarding the beneficial provisions of DTAA between India and Netherlands, particularly the Most Favoured Nation (MFN) clause. It is an admitted position that by virtue of the MFN clause in India-Netherlands tax treaty, whatever benefit is extended under India-US t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has to be read and interpreted in a holistic manner and not with regard to some specific word only. 3.3.11. Amount received by NTL Lemnis Holding BV is for providing management and sales and marketing support services is not taxable in India as per beneficial provisions of tax treaty between India and Netherlands and hence there is no question of deducting TDS under section 195 and disallowance under section 40(a)(1). From above submission, it is submitted that the learned AO has erred in facts as well as in law in adding to income Rs. 6,74,32,200/-. Your honour is kindly requested to allow the appeal delete the additions made by learned AO in the interest of equity justice. 4. Since it was apparent that the assessment order passed by the DCIT, International Taxation Circle, Noida would not have been brought to the notice of the AO, a copy of the said assessment order was forwarded to the AO for perusal and comments. Comments received from the AO are reproduced below: 2. In this connection, I submit herewith my comment on admission of additional evidence and remand report as called hereunder: 2.1 Regarding matter relating to admission of addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ational Tax), Circle, Noida is concerned, it has not discussed the merits of the case and has not dwelled upon specific provisions/clauses of act. Agreement and treaties, In absence of any detailed rationale in DCIT (International Taxation, Noida) order, the order of assessing officer (DCIT, Circle-18(2), Delhi) is more reasoned and explanatory. Moreover, both assessment proceedings are independent proceedings and AO is only bound by the provisions of law. 3.3 Under the facts and circumstances of the case as mentioned above, it may kindly be submitted that the contention of assessee is found untenable and liable to be rejected. Submitted for kind perusal and consideration. 5. A copy of the comments received from the AO was forwarded to the assessee for filing comments/ rejoinder. Comments of the assessee are reproduced below: 1. Justification on admissibility of additional evidence i.e. Order u/s 143(3) passed by DCIT International Taxation, Noida in the case of NTL Lemnis Holding BV)- Reply to Paras 2.1, 2.2 and 2.3 of remand report: Although the above order was passed on 11/03/2016 but the same was received by NTL Lemnis Holding BV (recipient of income) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d had even issued a show cause notice at. 01-03-16 requiring clarification from NTL Lemnis Holding B V as to how the impugned services do not satisfy the make available clause, which was duly complied vide letter dated 04/03/2016 (Copy of SCN and its reply are enclosed at Annexure A) and only after recording his satisfaction on order sheet, order was passed. Hence, the contention of Assessing Officer that DCIT (International Tax), Noida passed the order without any rationale is factually incorrect. Since the subject matter income has been assessed to be non-taxable in the hands of recipient, there is no question of deducting TDS u/s 195 by the remitter (appellant) and therefore it cannot be held liable for default u/s 40(a) (i). In view of above, it is kindly submitted that the contentions made by Assessing Officer in its remand report are baseless and not tenable in law and hence liable to be rejected. Your honour is kindly requested to allow the appeal delete the additions made by learned AO in the interest of equity justice. 11. Based on the above submission the ld. CIT(A) held that the amount received by NTL Lemnis Holding BV for management and sales marketi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
