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TMI Blog2025 (3) TMI 591X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. Addition on account of incentive received from UK without properly appreciating the facts of the case that the UK Film Tax Relief is available to Film Production companies - As seen that the assessee company is entitled to receive Rs. 130 crores irrespective of success or failure of the film. Further as per business statement provided by EMIL, it is seen that the credit of tax as alleged by the AO has been received and accounted for EMIL while arriving at Net Realisation figure. Therefore, in our opinion CIT(A) has rightly deleted the addition as the same receipt cannot be added again in the hands of assessee company. TDS u/s 195 - Disallowance u/s 40(a)(i) - assessee company has reimbursed expenses to one Winford Production Ltd (UK based company) - AO held that since the Rights and Title of the movie vest with the assessee company, such payment partakes the character of fees for technical services subject to tax - CIT(A) deleted the disallowance by concluding that no TDS obligation would arise in respect of reimbursement of expense - HELD THAT:- It also cannot be said that the services have been 'made available' to the assessee to be taxable in India. Reference in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Central Circle - 4(2), Mumbai passed u/s 143(3) r.w.s 147 of the Act. The revenue has raised the following grounds of appeal: "1. On facts and circumstances of the cases and in law, the Hon'ble CIT(A) has erred in deleting the addition of Rs. 15,42,42,246/-made on account of incentive received from UK without properly appreciating the facts of the case that the UK Film Tax Relief is available to Film Production companies(FPC's) only. 2. On the facts and circumstances of the cases and in law, the Hon'ble. CIT(A) erred in deleting the addition of Rs 616968987/- made u/s 40(a)(ia) of the Act without properly appreciating the facts of the case that the payments partake the nature of royalty and fees for technical services as Rights and Title of the movie vest in the assessee company and accordingly as per provision of Income Tax Act, TDS needs to be deducted on such payment made." 2. Whereas, the assessee company has filed cross objections and challenged the validity of re-opening proceedings by raising the following grounds as under: "1. The Learned CIT(A) has erred in confirming the actions of the Learned Assessing Officer in reopening the assessment u/s. 147 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed u/s. 143(3) of the IT Act, the case of the assessee is required to be reopened u/s. 147 of the IT Act, so as to reassess the assessee's correct income for Α.Υ.2012-13. In view of the above, a proposal in the prescribed proforma for your kind perusal and necessary approval within the provisions of section 151(1) of the I.T. Act, 1961 for the issue of notice u/s. 148 of the IT Act for A.Y.2012-13 is put-up." 4. In response, the assessee company filed its return of income on 30.04.2019 and asked for the copy of reasons for reopening, which was provided to the assessee on 10.09.2019. Thereafter, notice u/s. 143(2) dt. 25.09.2019 was issued and served upon the assessee. Objections filed by the assessee were disposed off by the AO on 08.11.2019. Thereafter, AO passed order u/s 143(3) r.w.s. 147 of the Act dt. 30.12.2019, computing the income of the assessee at a loss of Rs. (-) 11,87,07,913/-. 5. The Learned Counsel for the assessee challenging the reopening proceedings submitted that the case was reopened beyond 4 years sand without any tangible material. He draws out attention to the reasons recorded which start with the sentence that "as per assessment recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after 4 years from the end of the relevant assessment year. To acquire jurisdiction post 4 years in terms of proviso to section 147, there has to be failure ascribed on part of the assessee to disclose truly and all material facts necessary for assessment. Apart from that, if the Ld. AO takes a different view subsequently from the same record which was there on record and examined, then again it would not clothe him with jurisdiction to issue notice u/s 148. The scope to reopen the completed assessment u/s 143(3) within the ambit of the proviso to section 147, the conditions and limitation provided therein has to be satisfied whether there was any failure on the part of the assessee to disclose fully and truly all material facts or not. In the case under consideration, notice u/s 148 had been issued only on 29.3.2019, that is, after four years from the end of relevant assessment year and apparently, no such failure is either evident from the assessment order or the reasons recorded by the AO nor has been pointed out before us by the ld. Department Representative. 8. Further, the law is very well settled that even if the reopening is after four years from the end of the relevant as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 143(3) of the Act is reinstated. Thus, Ground No. 1 to 3 raised by the Assessee are allowed. 12. Coming to merits of the case, wherein the revenue has raised 2 grounds. The first ground deals with addition of Rs. 15,42,42,246/- made on account of incentive received from UK without properly appreciating the facts of the case that the UK Film Tax Relief is available to Film Production companies. 13. Before us, The Learned DR relied upon the assessment order and argued that assessee company is entitle for 25% of the cost incurred at UK as incentive, since it is a Film Production Company which was not offered to tax as per the findings given by the AO. 14. On the other hand, the learned AR of the assessee submitted that the issue is with regard to production of film 'Ra One' and the assessee company has given all the rights to Eros International Media Ltd(EIML) as per agreement available on page 36-56 of paper book for a total consideration of Rs. 130 Crore and the same was duly considered as receipt in the hands of assessee company. Reference was also drawn to page 10 & 12 of the paperbook which was the business receipt statement of Film RA. One given by EIML to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses and all other expenses incurred by the Assignee for exhibition, exploitation and distribution of all said rights of the said film." 16. Further, the Addendum Agreement dt. 21.10.2011 entered into between the assessee company and EIML, the same reads as follows:- "As Mutually agreed between the parties the clause 12(i) (b) of the said Agreement shall be modified and read as under; (b) Net Realization in clause 12(i)(a) shall mean all revenues accrued from the exploitation of all rights of the said Film plus net tax credit/rebate received/receivable of the said Film less all taxes including entertainment taxes, exhibitor's share and all costs, charges, expenses including but not limited to expenses towards prints, publicity, advertising freight and transportation expenses and all other expenses incurred by the Assignee for exhibition, exploitation and distribution of all said rights of the said film. The Parties hereby agree that this First Addendum Agreement shall form part of the Said Agreement. Save and except any changes that have been carried out in this First Addendum, all other terms and conditions of the said Agreement remain unchanged/unaltered and fully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls of expenses which primarily consists arrangement of shooting locations, obtaining necessary permits/ licenses, arranging for customs clearance, make up cost and local commuting, food & lodging, hire of local artist. He has stated that as agreed upon between the parties the payments will be charged without mark up or the company shall directly compensate. He also submitted that as per agreement amount payable as production fee of GBP 50,000/- was remitted to them after deducting TDS which is an undisputed fact. 21. The learned AR has emphasized that in the absence of making available any technical knowledge; know how, the payment does not fall within the Article 13 of Indo-UK DTAA. Alternatively, the learned AR has submitted that even in case the payment are not treated as reimbursement the same are not taxable in India as business profits in the absence of P.E in India. He has also relied upon the following decisions: * CIT Vs De Beers India Minerals (P.) Ltd. 346 ITR 467 (Kar.) * CIT Vs Siemens Aktiongesellschaft 310 * ACIT Vs CMS (India) Operations & Maintenance Co. (P.) * Abbey Business Services (India) (P.) Ltd. Vs DCIT 23 Taxman 346 (Bang.) * ITO Vs ISE Securitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of place in a contract for providing technical services. Article II as we have already seen contains eight clauses outlining the duties and obligations of the seconded employee. Article VI provides for indemnification which has also been earlier noticed by us. We are inclined to agree with the submission that these two articles are out of place in a contract for providing technical services. For example, Cls. (A) to (C) of art II make the seconded employee responsible and subservient to the assessee company which cannot be the case if the agreement is for providing technical services by IDS act as officer or authorized signatory or nominee or in any other lawful personal capacity for the assessee company, would also be out of place in the agreement for rendering technical services as it cannot be imagined that a technical person would also be required to act in non-technical capacities under an agreement for rendering technical services. Clause (H) on which considerable reliance was placed by the Department to contend that the agreement is one for rendering technical services, is merely a clause ensuring secrecy and confidentiality of the information accessed by the seconded employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endering of any technical or consultancy services which make available technical knowledge, experience, skill, know-how or process, or consist of development and transfer of technical plan or technical design shall be treated as fee for technical services. An identical issue has been considered by the Hon'ble Karnataka High court in case of CIT vs. De Beers India Minerals (P.) Ltd.(supra) in par 22 as under: "22. What is the meaning of 'make available'. The technical or consultancy service rendered should be of such a nature that it 'makes available to the recipient technical knowledge, know- how, and the like. The service should be aimed at and result in transmitting technical knowledge, etc, so that the prayer of the service could derive on enduring benefit and utilize the knowledge or know-how on his own in future without the aid of the service provider. In other words, to fit into the terminology 'making available' the technical knowledge, skills, etc, must remain with the person receiving the services even after the Marks and Spencer Reliance India particular contract comes to an end. It is not enough that the services offered are the product of inten ..... X X X X Extracts X X X X X X X X Extracts X X X X
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