9911796707
TMI Blog2023 (8) TMI 1610X X X X Extracts X X X X X X X X Extracts X X X X ..... se falls under the proviso to section 147 of the Act and hence, reassessment is bad in law. 3. We have heard rival contentions on this issue and gone through facts and circumstances of the case. We noted that the assessee has not filed the details of transactions carried out with its AE's in Form No.3CEB as noted by the DRP in its order and now, it is not been controverted by the ld.counsel for the assessee. Hence, we confirm the order of DRP directing the AO to affirm the reopening and reopening is accordingly held valid. This ground of assessee is dismissed. IT(TP)A No.33/CHNY/2018 & ITA No.796/CHNY/2017 4. The next common issue in both the appeals of assessee is as regards to the TPO/DRP directing the AO to make adjustment to international transactions towards guarantee commission amounting to Rs.14,52,262/- in assessment year 2009-10 and amounting to Rs.20,61,723/- in assessment year 2012-13. 5. At the outset, the ld.counsel for the assessee stated that this issue stands covered by the decision of Hon'ble Jurisdictional High Court in the case of PCIT v. Redington (India) Ltd. (2021) 430 ITR 298, wherein the Hon'ble Madras High Court has held that the corporate guarantee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies is not exempt, the assessee needs to be excluded. So AO is directed to verify this aspect and recalculate the disallowance u/s 14A read with rule 8D. Aggrieved, now assessee is in appeal before the Tribunal. 8. We have heard rival contentions and noted that only plea of the assessee is that the assessee has interest free funds available with it for making investment and for this, the assessee has filed the details i.e., the balance sheet and availability of funds and also extract of details of investment in its paper-book. The ld.counsel for the assessee tried to show that interest free funds available are more than the investments giving rise to exempt income and the AO has nowhere proved the nexus between the interest bearing funds used for the purpose of investments giving rise to exempt income. On this, the ld.counsel stated that the issue can be re-examined by the AO viz-a-viz availability of interest free funds with that of the details of investment giving rise to exempt income. To this proposition, the ld.CIT-DR has not objected. We direct the AO to verify the interest free funds available and the investments giving rise to exempt income. The assessee will produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made to the subsidiary company. Moreover, the shareholding pattern of the so-called subsidiary company is also not available on record. In those circumstances, this Tribunal cannot conclude that the advance was made to subsidiary company. Moreover, the commercial expediency in investing the money was not established by filing necessary material before this Tribunal. In those factual circumstances, giving one more opportunity to the assessee to produce necessary material would not prejudice the interest of the Revenue. Accordingly, the orders of the lower authorities are set aside and the issue of disallowance of interest on the free loans and advances to subsidiary company is remitted back to the file of the Assessing Officer. The Assessing Officer shall reexamine the issue in the light of the material that may be filed by the assessee and thereafter decide the same in accordance with law after giving a reasonable opportunity to the assessee. 11. When these facts were confronted to ld.CIT-DR, she fairly agreed that matter can be restored back to the file of the AO. 12. After hearing both the sides and going through the facts neither the AO nor the CIT(A) has carried out any ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed in the year in which it was incurred. In respect of software licenses, the DRP found that there are two types of licenses - one is annual license and another one is permanent license. In respect of annual license, the Dispute Resolution Panel found it to be as revenue expenditure and to be allowed in the year in which it was incurred. As far as permanent license is concerned, the Dispute Resolution Panel found that there was enduring benefit to the assessee. When the assessee bought the software permanently, the initial purchase of software has to be on the capital field since the assessee earned the right over the software. Even though it was licensed to use, the license given to the assessee is exclusively for the assessee. Therefore, this Tribunal is of the considered opinion that the Dispute Resolution Panel has rightly found that the permanent license is in the capital field. As far as application of software is concerned, again we have to see whether it was temporary one or for long period. If the application software is only for a short period, then it has to be treated as revenue expenditure and it has to be allowed in the year in which it was incurred. If the applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The AO has discussed the issue in detail in his order and the same cannot be faulted with. His reliance on Board's circular as well as case laws is correct interpretation of law. The circulars quoted by the assessee have already been withdrawn in 2009. So, the assessee was required to deduct tax at source u/s 195 of the Act on such payments. However, since it has failed to do so, the AO has correctly invoked the provisions of section 40(a)(i) (AO to correct the typographical error in the order as section is incorrectly mentioned as Sec 40(a)(ia)) to disallow such amount. So the objection is not accepted." 6.2 Since the facts of the case remain the same, there is no reason to differ with the findings of DRP for AY 2011-12, so the same are reaffirmed and the objection of the assessee is not accepted. Aggrieved, now assessee is in appeal before the Tribunal. 18. The ld.counsel for the assessee before us filed details of agency commission paid to various parties and according to him all these parties are in USA and UK and he has given details which are enclosed in assessee's paper-book at page 22. The ld.counsel for the assessee stated that in earlier assessment year 2009-10, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or (b) make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design. 5. Notwithstanding paragraph 4, "fees for included services" does not include amounts paid: (a) for services that are ancillary and subsidiary, as well as inextricably and essentially linked to the sale of property other than a sale described in paragraph 3(a) ; (b) for services that are ancillary and subsidiary to the rental of ships, aircraft, containers or other equipment used in connection with the operation of ships or aircraft in international traffic; (c) for teaching in or by educational institutions; (d) for services for the personal use of the individual or individuals making the payments; or (e) to an employee of the person m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dge is made available to the Indian company. Example 7 Facts: The Indian vegetable oil manufacturing firm has mastered the science of producing cholesterol-free oil and wishes to market the product worldwide. It hires an American marketing consulting firm to do a computer simulation of the world market for such oil and to adverse it on marketing strategies. Are the fees paid to the U.S. company for included services? Analysis: The fees would not be for included services. The American company is providing a consultancy service which involves the use of substantial technical skill and expertise. It is not, however, making available to the Indian company any technical experience, knowledge or skill, etc., nor is it transferring a technical plan or design. What is transferred to the Indian company through the service contract is commercial information. The fact that technical skills were required by the performer of the service in order to perform the commercial information service does not make the service a technical service within the meaning of paragraph 4(b).' Article 13 of the Indo-UK DTAA, in its relevant part, reads as under: Article 13 3. For the purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in Article 15 (Independent personal services) of this Convention.' It is patently clear from the foregoing that the warehousing, logistic, inventory management, marketing and other support services being provided by the foreign agents cannot be described as 'fee for included services' or, as the case may be, 'fee for technical services', as defined under the relevant DTAAs, but only as business profits. We have also examined the impugned payments from the stand-point of the same qualifying as 'royalty', to find the same as not falling within the meaning of the term as defined under the relevant Articles. The foreign agents having no PE in India, the commission (remuneration) allowed to them for the said services, is not taxable in India. There is accordingly no liability to deduct tax at source u/s. 195 of the Act thereon. Section 40(a)(i) shall, therefore, not apply in respect of the impugned payments. There is no finding with regard to the foreign agents being tax residents of USA or, as the case may be, UK; the assessee not making it's case with reference to the relevant DTAAs before the Revenue. Accordingly, subject to finding of it being so, we direct the deletion of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance of the claim of balance 50% of additional depreciation amounting to Rs.4,91,81,563/- in the current year in respect of the assets acquired in the 2nd half of preceding year." 22. We noted that the DRP rejected relying on the order for assessment year 2011-12, wherein the DRP has rejected the claim of assessee in regard to additional depreciation. At this point, the ld.counsel for the assessee relied on the Tribunal's decision for assessment year 2010-11 in ITA No.688/Mds/2015 wherein the Tribunal has already allowed the claim of assessee by holding that the balance 50% has to be allowed in the immediately next year by observing in para 17 as under:- "17. We have considered the rival submissions on either side and perused the relevant material available on record. The claim of additional depreciation was considered by the Cochin Bench of this Tribunal in Apollo Tyres Ltd. (supra). After considering the relevant decisions and judgments on the subject, the Cochin Bench found that the assessee is eligible for additional depreciation in the subsequent year since the machinery was put to use for 180 days in the earlier assessment year. In view of the decision of the Coc ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
