TaxTMI 
TaxTMI 
2016 (1) TMI 171
X X X X Extracts X X X X
X X X X Extracts X X X X
....nding of Assessing Officer that assessee failed to deduct tax at source. 3. Briefly stated facts are that assessee is a private limited company and engaged into business of manufacture and sale of professional grade printed circuit boards. The assessee-company is a subsidiary of AT&S Austria. AT&S Austria has entered into global arrangements for various facilities and services, which are to be used by AT&S Austria and its group companies located in different countries, including India. The different companies with whom such arrangements have been entered into by AT & S Austria are - Austrian Telecom for WAN Satellite link between Austria and India, T systems DSS GmbH for Lotus products (software), Microsoft Ireland Operations Ltd. for Microsoft products (software), SAP Osterreich GmbH for SAP software, IBM Osterreich GmbH for SAP software, Symantec for Norton Antivirus software. During the year under consideration, assesseecompany has claimed an expense of Rs. 1,59,95,287/- towards share technology services. It was paid to qua company based in Austria. During the assessment proceedings, AO found that assessee has failed to deduct TDS of such expenses. The AO calls upon the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....95 (SC) f) Skycell Communication Ltd. v. DCIT 251 ITR 53 g) Wipro Ltd. v. ITO (2003) 80 TTJ (Bang) h) BSES Telecom Ltd. v. DCIT (ITA No. 9281/Bang/2002) i) Tata Consultancy Services v. State of Andhra Pradesh 271 ITR 401 (SC) j) Cholamandalam MS General Insurance Co. Ltd. (2009) 309 ITR 356 k) CIT v. Industrial Engineering Projects Pvt. Ltd. (1993) 202 it 1014 (Cal) l) Rolls Royce India Ltd. v. ITO (1998) 25 ITD 127 (Del) m) ACIT v. Modicon Network Pvt. Ltd. (2007) 14 SOT 204 (Del) The Ld. AR also made the reference to the model treaties issued by OECD (Organization for Economic Cooperation and Development) with regard to the payment for the computer programs. On the basis of above submission, the CIT(A) held that the expenses are out of the purview of TDS being reimbursed and also not chargeable of tax in India. Therefore, the addition made by AO stands deleted. 5. Aggrieved, now Revenue is in appeal before us. Shri Niraj Kumar, Ld. Departmental Representative appearing on behalf of Revenue and Shri Soumitra Chowdhury, Ld. Authorized Representative appearing on behalf of assessee. 6. We have heard ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s, the Tribunal held that, as Sun Singapore is not having any permanent establishment and that Sun Singapore has not made available the technical knowledge, experience or skill, the payments made by the assessee to Sun Singapore were not required to be taxed under the head "Business" and is not taxable in view of article 7 of the DTAA between India and Singapore. The Revenue is challenging the said finding on the ground that the terms of the agreement provides from making available inventory physical movement and self-control process, assistance to enable, inventory transactions and management and business planning to address service level relating to the local business and customer needs. However, the assessee is not utilizing the said services in order to avoid deduction tax at source. This court had an occasions to consider this agreement in the case of CIT v. De Beers India Minerals P. Ltd. Reported in [2012] 346 ITR 467 (Karn), where after referring to various provisions of law, it was held that the question, whether along with rendering technical services, whether the technical knowledge with which the services was rendered was also made available to the assessee/cus....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 1449/Kol/2008 dated 24.07.2009 for AYs 2002-03 and 2003-04 and ITA No. 1450/Kol/2008 dated 31.03.2010 for the AY 2004- 05, wherein it has been held as under: '2.1. The fats of the case are that the assessee is a company which is deriving income from manufacture and sale of professional grade printed circuit boards. During the accounting year relevant to assessment year under consideration, the assessee made the payment of Rs. 45,94,291/- to M/s AT & S, Austria Technology & Systemtechnik, Aktiengesellschaft (hereinafter called 'AT & S, Austria"). The above payment was made by the assessee without deduction of tax at source. Before the AO, it was explained by the assessee that the amount has been paid at cost of inter-company services received. The assessee has entered into an agreement dated 13.03.2001 with M/s AT & S, Austria. In the agreement, it is stated that M/s. AT & S, Austria has entered into different agreements with different providers of services. Apart from these services rendered by the service providers relates to business operation of the assessee and are utilized by the assessee. 2.2 At the time of hearing before us, the learned counsel for the ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....duit through which payment was made. The services utilized by the assessee were highly technical and therefore, the same were within the meaning of technical services as provided u/s. 9(1)(vii) of the Act. He, therefore, submitted that the assessee was liable to deduct tax at source from the payments made by it. Since the assessee had failed to deduct tax at source, sec. 40(a)(ia) of the Act was attracted. The same should be sustained. The ld. DR also stated that the facts of various cases relied upon by the ld. Counsel for the assessee are altogether different. 2.4 In the rejoinder, it is stated by the ld. Counsel that the various service providers had an agreement with M/s. AT & S. Austria and not with the assessee-company. Therefore, the contention of the revenue that the payment is made by the assessee to the service providers through the conduit of M/s. AT & S. Austria is actually incorrect. As per the agreement with the various serviced provider companies, it was M/s. AT & S. Austria acquired the licence to use those services. In turn, M/s. At & S. Austria permitted its group concern worldwide to use those services and the total payment made to service providers was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsp; Project Firewall Cisco PIX 1N11 4 3,589 449 No Wartung Firewall Cisco PIX 4 0 7 Not mentioned ND Charon Faxserver-Kauf 1N11 2 7,885 1,606 TOTAL 87,481 2.6 From the above, it is evident that the allocation of expenditure for utilizing Microsoft products was on the basis of number of PCs used by the service receiver companies. Similarly, services provided by SAP, Austria were allocated on the basis of number of SAP users. In view of the above, we are of the opinion that the amount paid by M/s AT & S. Austria for using the products of various service provider companies was allocated amongst the group companies including the assessee on the basis of services actually utilized by them.Therefore, the nature of payment by the assessee to M/s. AT & S. Austria was in the nature of reimbursement of the expenditure actually incurred by M/s AT & S. Austria. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eduction of tax at source, section 40(a)(i) of the Act cannot be invoked. Accordingly, ground no. 2 of the assessee's appeal is allowed." As the facts are similar for the AY 2005-06 considering the fact that for the AY 2004-05 the AO has accepted the claim of the assessee that the reimbursement of the warranty expenses is not liable for TDs u/s 195 of the Act and as the Revenue has not been able to dislodge this finding, the finding of CIT(A) deleting the disallowance mad on account of nondeduction of TDS in respect of warranty expenses stands confirmed. This issue of revenue's appeal is dismissed." So from the aforesaid discussion, it is clear that the reimbursement cost incurred by the assessee is out of the purview of the TDS provision as it does not generate any income in the hands of the recipient and consequently the provisions of section 40(a)(ia) could not be invoked. Hence this ground of appeal of the revenue is dismissed. Coming to assessee'a appeal ITA No.2305/Kol/2013 AY 04-05. 7. In this appeal assessee has raised the following grounds:- "1. That the order passed by the learned Commissioner of Income-Tax (Appeals)['Ld. CIT(Appeals)'] under se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cision of the Hon'ble Kolkata ITAT in Appellant's own case (ITA No.s 1448 & 1449(Kol) of 2008 dated July 24,2009) for AY 2002- 03 and AY 2003-04, wherein it was held that reimbursement of Information technology costs does not result in income in the hands of the recipient an hence, the payments are allowable deductions and not fall within the mischief of section 40(a)(i) read with section 195. On the other hand, Ld. DR supported the order of the authorities below. 10. We find from the aforesaid discussion and submission of the assessee that the facts have already been decided by the Hon'ble Kolkata ITAT bench in favour of the assessee in the case of DCIT v. M/s AT&S India Pvt. Ltd. In ITA No. 1262/Kol/2010, 186/Kol/2011, 2071/Kol/2010 & 779/Kol/2012 for AYs 2005-06, 2006-07 & 2007-08 vide dated 29-01-2015. The relevant portion of the order is extracted below : "18. We have considered the rival submissions and gone through facts and circumstances of the case. A perusal of the decision of the Coordinate Bench of this Tribunal referred to supra for the assessment years 2002-03 and 2003-04 clearly shows that the Tribunal has taken into consideration the agreement dated ....