TaxTMI 
TaxTMI 
2017 (3) TMI 1515
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....isposal, and control, of the assessee. The income tax authorities conducted a survey, for examining tax withholding compliance, at the premises of the assessee, on 19th July 2011. During the course of these survey proceedings, it was found that the assessee has made remittances to BH Inc, in respect of reimbursement of payroll costs, without any deductions on account of tax withholdings. These payments aggregated to Rs. 2,25,20,265 for the assessment year 2008-09, Rs. 4,45,52,944 for the assessment year 2009-10, Rs. 3,84,14,054 for the assessment year 2010-11 and Rs. 1,34,31,414 for the assessment year 2011-12. It was noted by the Assessing Officer that "This reimbursement relates to the employees who have been recommended to BDH (i.e. the assessee) from BHI (i.e. Burt Hills Inc USA) whilst continuing to be employed by BHI for the purposes of BHD's business". The Assessing Officer further noted that "reimbursements have been made by BHD to BHI for the employees who have been seconded to BHD from BHI, though these employees remain the employees of BHI and their salary etc paid by BHI only", that "BHD, on behalf of BHI, pays the housing allowance, advance of salary, loan in local cur....
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....ars 2008-09, 2010-11 and 2011-12 are concerned, since the assessee had deducted tax at source under section 192, the assessee did not have any tax withholding obligation under section 195. He further held that since the assessee did not have any tax withholding obligations under section 195, for these assessment years, it was an academic question as to whether the service PE existed or not, or whether such payments could be treated as fees for technical services or not. So far as assessment year 2009-10 was concerned, the CIT(A) was of the considered view, on the basis of his separate order in assessee's own case in the assessment year 2009-10 in regular assessment proceedings, that while the B H Inc USA cannot be said to have a service PE in India, the amounts so paid are required to be treated as fees for technical services. Accordingly, in his view, the assessee should have withheld taxes, at the rates applicable for fees for technical services, so far as payments made by him for the assessment year 2009-10 are concerned. The credit was, however, directed to be given for the advance tax deposited by the assessee on behalf of the seconded employees. Learned CIT(A) therefore, uphe....
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....nagerial technical and consultancy services and are taxable as per Indian I.T. Act and also as per Article 12(4) of Indo- US DTAA therefore the Ld. CIT(A) should have upheld the order of the AO. (viii) Any other ground that may be urged at the time of hearing. For AY 2009-10, apart from the above referred common grounds, the Revenue has taken following grounds also:- 1. The Ld. CIT(A) has erred in law and on facts in directing the AO to recomputed tax liability by characterizing the payment as fees for included services under article 12 of Indo-US DTAA when such payments are taxable as business income. 2. Without prejudice the Ld. CIT(A) erred in relying on the judgment of Rajkot Special Bench in Bharati Auto and stating that amendment brought by Finance Act 2013, w.e.f 01.07.12 inserting proviso to section 201(1) of the Act, is retrospective in nature. 3. Without prejudice the Ld. ClT(A) erred in relying on the judgment of Apex court in Hindustan Coca Cola beverage p. Ltd vs CIT (293 ITR 2226) and holding that where payee has paid tax then payer cannot be asked to pay tax once again. 4. Without prejudice the Ld. CIT(A) erred in holdi....
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....t thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force [Emphasis, by underlining, supplied by us] 5. Quite clearly, therefore, as long as a payment to non-resident entity is in the nature of payment consisting of income chargeable under the head 'Income from Salaries', the assessee does not have any tax withholding obligations under section 195. 6. There is no, and there cannot be any, dispute about the factual aspect that the payment made to Burt Hill Co Inc USA consists of income which is chargeable, and has been charged, to tax in India under the head 'income from salaries'. There is also no dispute that the payments for all the four years before us are of the same nature, under the same agreement and of the same character. What was held to be income in the nature of salaries for the assessment years 2008-09, 2010-11 and 2011-12 cannot be of any different nature for the assessment year 2009-10 just because the assessee, rather than deducting tax at source under section 192, paid the advance taxes on behalf of the seconded employees in that particular assessment year. It is not th....
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....payments are in the nature of the reimbursements, and, particularly when even the income embedded in these payments has already been brought to tax in India in the hands of ultimate beneficiaries- i.e. the seconded employees, there cannot be any tax withholding obligations under section 195. It is only elementary that the tax deduction source liability under Section 195 is a vicarious liability in the sense that it's survival in the hands of tax-deductor is wholly dependent on existence of tax liability in the hands of recipient of income. When a payment made by, an Indian resident, to a non-resident, does not trigger the taxability of that income in the hands of recipient, the tax deduction liability does not come into play at all. This scheme of the Act is implicit from the wordings of Section 195 (1) which refer to " any other sum chargeable under the provisions of this Act (not being income chargeable under the head "Salaries")" When income embedded in a payment is not taxable under the Income Tax Act, 1961, the tax withholding liability does not get triggered at all. This is what Hon'ble Supreme Court has also held in the case of G E Technology Centre Pvt Ltd Vs CIT [(2010) 32....