TaxTMI 
TaxTMI 
2015 (4) TMI 766
X X X X Extracts X X X X
X X X X Extracts X X X X
....h is payable outside India/ to a non-resident, on which TDS is deductible under Chapter XVII-B, unless a certificate of NIL withholding is obtained. 2. CIT(A) erred in deleting the addition of amounts shown as liability in the name of IMG Canada received from Sahara India Financial Corporation Ltd. towards title sponsorship, without appreciating that since the games were not held and since Sahara India has not demanded the money back, the same has become the income of the assessee." 2. The revenue has also raised the following two additional grounds:- "i) On the facts and in the circumstances of the case, the ld the Commissioner of Income Tax (appeal) has erred in deleting the additions made under section 40(a)(i) by the AO holding that the assessee was not liable to withhold tax at the time of payments made to Tamil Nadu Tennis Association and All India Tennis Association. ii) On the facts and in the circumstances of the case, the ld Commissioner of Income Tax (Appeal) has erred in ignoring the fact that the provisions of section 40(a)(i) of the Act not only talks only about interest, royalty, fees for technical services but about 'other sum' chargeable under the Act a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Hon'ble Calcutta High Court in the case of Indcom Vs. CIT (TDS) (2011) 11 Taxmann.com 109 (Cal) held as under after taking note of the provisions of laws applicable to the issue in hand i.e. sections 2(24)(ix), 5(2), 9(1)(i), 115BBA, 194E, 194J and 201(1) of the Income-tax Act, 1961 which are quoted below : "2(24) "income" includes-** ** ** (ix) any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever; 5. Scope of total income.-** ** ** (2) subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which- (a)is received or is deemed to be received in India in such year by or on behalf of such person; or (b)accrues or arises or is deemed to accrue or arise to him in India during such year. Explanation 1.-Income accruing or arising outside India shall not be deemed to be received in India within the meaning of this section by reason only of the fact that it is taken into account in a balance-sheet prepared ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndia in any game (other than a game the winnings wherefrom are taxable under section 115BB) or sport; or (ii)advertisement; or (iii)contribution of articles relating to any game or sport in India in newspapers, magazines or journals; or (b)being a non-resident sports association or institution, includes any amount guaranteed to be paid or payable to such association or institution in relation to any game (other than a game the winnings wherefrom are taxable under section 115BB) or sport played in India, the Income-tax payable by the assessee shall be the aggregate of- (i)the amount of Income-tax calculated on income referred to in clause (a) or clause (b) at the rate of ten per cent; and (ii)the amount of Income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the amount of income referred to in clause (a) or clause (b) Provided that no deduction in respect of any expenditure or allowance shall be allowed under any provision of this Act in computing the income referred to in clause (a) or clause (b ). (2) It shall not be necessary for the assessee to furnish under sub-section (1) of section 139 a return....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nal services or technical services is credited or paid, shall be liable to deduct Income-tax under this section :] [Provided also that no individual or a Hindu undivided family referred to in the second proviso shall be liable to deduct Income-tax on the sum by way of fees for professional services in case such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family.] (2) to (3) ** ** ** Explanation.-For the purposes of this section,- (a)"professional services" mean services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section; (b)"fees for technical services" shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; (c)where any sum referred to in sub-section (1) is credited to any account, whether called "Suspense account" or by any other name, in the books of account of the person liable to pay suc....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of taxable income and thus, his client had no duty to deduct tax from that amount paid to the team at the source. In our opinion, such contention is not tenable for the simple reason that it was the appellant who made a lump sum amount to the team-manager and as indicated in the proviso to section 115BBA(1) of the Act, no deduction in respect of any expenditure is permissible for calculation of the income under the said provision from the total amount received by the foreign team for such participation. Thus, in our opinion, the additional amount paid in form of the alleged "administrative expenses" was really part of the prize money allotted to the teams. It goes without saying that prize money is payable also to a losing team, although, at a lesser rate. 6. In the case of GE India Technology Centre (P.) Ltd. v. CIT [2010] 327 ITR 456/ 193 Taxman 234 (SC) and relied upon by Mr. Bajoria, it was pointed out that section 195(1) of the Act uses the expression "sum chargeable under the provisions of the Act" and there is no necessity to give weightage to those words. Further, it was held that section 195 of the Act uses the word "payer" and not the word "assessee" and the payer is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....il War between India & Pakistan. Similarly, Sahara Cup for the year 2000 was cancelled due to tensions between India & Pakistan. Therefore, the appellant kept this amount of Rs. 55,983,783 as payable to IMG Canada as this amount was received on behalf of IMG Canada only. The amount could not be repatriated because of non-availability of the permission from the Government of India .... In this case the appellant has not claimed any deduction in any earlier assessment years and no benefits has been received in any subsequent year. IMG Canada has also not waived its claim of receiving the money. It has been confirmed that the amount is receivable from the appellant. The appellant has also shown the amount as payable in its balance sheet to IMG Canada. At no stage it has been established that the liability to pay the above surplus has extinguished. Even if the amount cannot be repatriated to Canada, the amount belongs to IMG Canada and it can be spent or utilized in India as per the directions of IMG Canada ..... 3.1 From the above facts, legal position and considering reply of the appellant it is clear that the conditions of section 41 of 1. T. Act are not fulfilled in this case....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../s 40(a)(i) of the Act. And the AR submitted that in order to promote the business of Tennis and Chennai Open Tournament in the State of Tamil Nadu, a contribution was made towards development and promotion of Tennis by the assessee. 19. We have considered the rival submission and perused the records and find that the payment is towards a contribution to the Tamil Nadu Tennis Association (TNTA) and thus is not a specified payment eligible for deduction of taxes. The AO in the order also has not specified any provision to attract chapter XVII B (TDS). 20. The argument of the revenue, that the disallowance is warranted u/s 40(a)(i) of the Act is misplaced as payment is made to a resident and within India and not to a non-resident or a foreign company, which is a condition precedent to invoke section 40 (a)(i) of the Act. As such the AO had not even correctly invoked section 40(a)(i) of the Act. Thus the specific ground of the revenue is that the ld CIT(A) has erred in ignoring the fact that the provision of section 40(a)(i) of the Act talks not only talks about interests, royalty Fee For Technical Services but 'other sum' chargeable under the Act, is misconceived because sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s.9,89,655/- (Ground No.1) - - - 4. A.Y.2009-10 Assessee - - Rs.17,09,050/- Ground No.1 25. So far as the payments to Association of Tennis Profession (ATP) are concerned, we have already held for Assessment Year 2005-06, that the assessee ought to have deducted TDS u/s 194E before payment was made to ATP. So we uphold the disallowance made in the order of assessment. So to that extent the ld CIT(A) order for Assessment Year 2006-07 stands reversed and order of the DRP for Assessment Year 2007-08 and the order of the ld CIT(A) order for Assessment Year 2008-09 stands upheld. As regards, the payment to IMG USA is concerned, we find that the AO has observed that according to the assessee aforesaid sum had been paid as a reimbursement of the expenditure incurred for organizing a free trip to USA for teenagers, before the commencement of the tournament "Chennai Open". However, as the assessee did not provide any vouchers or debit note in relation to this payment, therefore the AO in absence of any proof disallowed the said expenditure. The ld CIT(A) has not given any specific finding while allowing the claim of the assessee. The DRP in Asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t. To simplify the matter, this interest must be accounted for or credited in the account of some person who is chargeable under the Act. In other words, this remittance of interest must result in an income which is chargeable under the Act. In those circumstances tax may be deducted at source. But where this interest is not so chargeable, no tax is deducted. In this case, by virtue of the above convention, the head office of the appellant is not liable to pay any tax under the Act. Therefore, in our opinion, there was and still is no obligation on the part of the appellant's said branch to deduct tax while making interest remittance to its head office or any other foreign branch. Therefore, in the circumstances there is no scope for any argument that for the purpose of computation of expenditure the branch and the head office are to be taken as separate entities but for the purpose of payment of tax to be deducted at source on interest payment, it is to be taken as one bank and no deduction is to be made as sought to be made by the learned counsel for the appellant. Such contentions are totally unfounded in our opinion. The permanent establishment and the head office have t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t vide order dated 16.12.2010 in Appeal No. 48/2010-11 for assessment year 2005-06. As the facts and circumstances of the case are pari materia with the case of the appellant in assessment year 2005-06, for the reasons as discussed in the aforesaid order of the undersigned, disallowance of the payments totalling Rs. 49,81,932/-on account of reimbursement of expenses by the appellant to its Associated Enterprises is confirmed. In this context, it may be appropriate to reproduce the findings of the undersigned in Para 7.4 of the appellate order for assessment year 2005-06 referred to above:- "7.4 I have considered the written submission on behalf of the appellant, the findings of the Assessing Officer in the assessment order as well as in the remand report and the facts on record. For any expenditure to be permitted as deduction under section 37(1) of the Act the twin conditions which are required to be fulfilled are that the expenditure in issue should not be of a capital nature, and that it should have been expended wholly for the purposes of business. It is well-settled that the expression 'for the purposes of business' in section 37 of the Act has been held to mean an ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ss expenditure. The ld AR took our attention to the month-wise break up of salary is enclosed on page no. 51 of paper book. The ld AR also took our attention to the copy of power of Attorney and resolution evidencing power and role of Mr Ravi Krishnan in the capacity of MD of the assessee is evident from reading of page no. 52 to 54 of paper book. Further, relevant e-mails showing bifurcation of salary amount of Rs. 4,278,685 is enclosed on page no. 55 to 56 of paper book. Out of the aforesaid amount, Rs. 182,569/- relates to expenses paid on air ticket of Simon Lock for attending Lakme Fashion week. Salary of Mr Ravi Krishnan was paid by IMG America Pty Ltd on account of administrative convenience and charged back to the Appellant on a cost to cost basis. The withholding taxes/ income taxes as applicable to such transaction were duly deducted/ deposited/ paid in India (Refer Form 16 for Mr Ravi Krishnan for the subject A Y on page no. 58 to 59 of paper book). Health insurance charges of Mr Ravi Krishnan (Rs 368,496) - Such expense incurred on Ravi Krishnan for the period when he stayed in India for business purposes, was initially paid by International Management Group (UK) Ltd....