2018 (7) TMI 2214 - AT - Income Tax

Tribunal upholds no tax liability on foreign remittances; appeal dismissed for lacking legal merit.

Deputy Commissioner of Income Tax (International Taxation), Vadodara  Versus  Sun Pharmaceutical Laboratories Ltd

Deputy Commissioner of Income Tax (International Taxation), Vadodara  Versus  Sun Pharmaceutical Laboratories Ltd - TMI Issues Involved:1. Whether there is a liability to withhold tax under Section 195 of the Income Tax Act on foreign remittances made to Aditya Acquisition Company Limited, Israel.2. Whether the appeal under Section 248 of the Act was maintainable despite the assessee not deducting tax at source or paying any taxes to the Government Account.3. Whether the CIT(A) erred in deciding the appeal without providing an opportunity of being heard to the Assessing Officer and in admitting additional evidence in contravention of Rule 46A(3) of the I.T. Rules, 1962.4. Whether the services provided by Aditya Acquisition Company Limited, Israel, resulted in imparting and making available technological skill and know-how to the assessee.5. Whether the CIT(A) correctly held that Aditya Acquisition Company Limited, Israel, merely provided supervisory and managerial services.Issue-wise Detailed Analysis:1. Liability to Withhold Tax:The appeals question the tax withholding liability under Section 195 of the Income Tax Act for payments made to Aditya Acquisition Company Limited, Israel, under a 'Manufacturing Services Agreement'. The CIT(A) directed that there was no liability to withhold tax on these foreign remittances, a direction which the appellant contends is erroneous.2. Maintainability of Appeal under Section 248:The appellant argued that the appeal under Section 248 was not maintainable as the assessee neither deducted tax at source nor paid any taxes to the Government Account. However, the Tribunal noted that Section 248 allows an appeal for a declaration that no tax was deductible if the tax was borne by the payer under an agreement and paid to the Central Government. The Tribunal found that the appellant had the obligation to bear the tax liability under the agreement and had paid the taxes, thus making the appeal maintainable.3. Opportunity for Assessing Officer and Admission of Additional Evidence:The appellant contended that the CIT(A) decided the appeal without providing an opportunity for the Assessing Officer to be heard and admitted additional evidence in contravention of Rule 46A(3). The Tribunal observed that in appeals under Section 248, where there is no specific order under Section 195, the proceedings are original, and thus, the admission of new evidence is permissible. The Tribunal rejected the appellant's grievances on this point.4. Nature of Services Provided:The CIT(A) accepted the assessee's contention that the services provided by Aditya Acquisition Company Limited, Israel, did not result in imparting and making available technological skill or know-how. The Tribunal agreed with this view, noting that the services were supervisory and consultancy in nature and did not transfer technical knowledge enabling the assessee to perform these services independently.5. Supervisory and Managerial Services:The CIT(A) held that the services provided were supervisory and managerial, not involving the transfer of technical knowledge. The Tribunal upheld this finding, stating that the services were for review, supervision, and consultancy, and did not make available technical knowledge, experience, skill, or processes to the assessee.Conclusion:The Tribunal found no infirmity in the CIT(A)'s order and dismissed the appeals, concluding that the grievances raised lacked legally sustainable merits. The Tribunal's decision was pronounced in the open court on July 11, 2019.