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<h1>Fixed monthly payments with mark-up to Singapore entity require TDS deduction under Section 195</h1> <h3>BYK Asia Pacific Pte Ltd., India Branch Versus ACIT (IT), Circle – 1, Pune</h3> BYK Asia Pacific Pte Ltd., India Branch Versus ACIT (IT), Circle – 1, Pune - TMI Issues Involved:1. General grounds of appeal.2. Non-prosecution of certain grounds.3. Rendering of technical services under India-Singapore tax treaty and reimbursement of cost without markup.4. Non-deduction of tax at source under Section 195 of the Income Tax Act.Summary:1. General Grounds of Appeal:The first ground was general in nature and required no adjudication.2. Non-Prosecution of Certain Grounds:The assessee did not wish to prosecute grounds 2, 2.1, and 2.2, leading to their dismissal as not pressed.3. Rendering of Technical Services and Reimbursement of Cost:The primary issue involved was whether the payment for IT expenses constituted reimbursement without markup, thus not warranting disallowance for non-deduction of tax at source under Section 195 of the Income Tax Act. The Tribunal noted that the issue was in its second round of litigation, having been remanded previously for examination of the true nature of the transactions. The Tribunal had earlier found that the assessee failed to demonstrate that the allocation of IT expenses to the Indian Branch Office (BO) was without any markup. The AO, upon re-examination, concluded that the services rendered by BYK Germany were highly technical and not mere BPO services, thus constituting 'fees for technical services' under Section 9(1)(vii) of the Act and Article 12 of the DTAA with Germany. The AO rejected the assessee's contention that the payments were reimbursements, noting the lack of supporting evidence and the nature of the services provided.4. Non-Deduction of Tax at Source:The Tribunal reiterated that the burden of proving an expenditure as reimbursement lies on the assessee. The assessee failed to provide necessary evidence, such as the relevant agreement and accounting statements, to support its claim. The Tribunal upheld the AO's decision that the payments were not reimbursements and were subject to tax deduction at source under Section 195. Consequently, the disallowance under Section 40(a)(i) was upheld.Conclusion:The appeal of the assessee was dismissed, with the Tribunal affirming the AO's findings that the payments for IT services were not reimbursements and were subject to tax deduction at source. The Tribunal emphasized the necessity of providing cogent evidence to substantiate claims of reimbursement.