TaxTMI 
TaxTMI 
2017 (4) TMI 49
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....see under secondment agreement with Burt Hill Inc USA; and (iii) the disallowance of Rs. 1,50,000 being house rent paid to Managing Director of the assessee company. For the record, however, the detailed grounds of appeal raised by the assessee are set out below: 1. (a) The learned CIT (A) has grossly erred in law and on facts of the case in confirming the action of the AO in disallowing an amount of Rs. 4,54,28,424/- being expenditure incurred on pay-roll ( man power) costs of the employees of the company who were working in India for the appellant company's business operations on full time basis under the secondment agreement paid by way of reimbursement to its parent foreign company i.e. Burt, Hill Inc, USA. (b) The learned CIT (A) has grossly erred in law and on facts of the case in confirming the action of the AO in disallowing an amount of Rs. 16,86,463/- being expenditure on legal and professional fees paid by way of reimbursement to its parent foreign company i.e. Burt, Hill Inc, USA. (c) The learned CIT (A) has grossly erred in law and on facts of the case in confirming the action of the AO in disallowing an amount of Rs. 4,71,14,887/- (Rs. 4,54,28,424/- on ac....
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....ly erred in law and on facts of the case in confirming the action of the AO in disavowing an amount of Rs, 12,77,927/- being medical Insurance premium in respect of the personnel placed In the disposal of the appellant company for its business operations by the parent company. (b) The learned CIT (A) has grossly erred In law and on facts of the case in confirming the action of the AO in making the Impugned disallowance of Rs, 12,77,927/- without Issuing any show cause notice to the appellant assessee of his Intention to make such disallowance. The impugned assessment order has been passed in violation of the principle of natural justice of affording reasonable opportunity of being heard and therefore such order is liable to be quashed. The learned CIT (A) did not adjudicate Ground 7 (b) of the Grounds of Appeal taken before him. (c) It is therefore prayed that impugned addition / disallowance of Rs. 12,77,927/- may please be deleted. 4 (a) The learned CIT (A) has grossly erred in law and on facts of the case in confirming the action of the AO in disallowing an amount of Rs. 1,50,000/- being expenditure on rent paid by way of reimbursement to Mr. Jayesh Hariyani, Managing D....
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....O complete details and justification with regard to its claim for deduction u/s. 10A in the event of determination of positive income. (c) It is therefore prayed that the appellant may please be allowed deduction u/s. 10A of the I.T. Act. 6. The appellant craves liberty to add or alter any ground at the time of hearing. 3. So far as the first grievance of the assessee is concerned, we find that the issue is now covered, by our order of even date in assessee's own case in respect of tax withholding demands under section 195 r.w.s 201, wherein we have, inter alia, observed as follows: 4. As we deal with these appeals, we consider it appropriate to reproduce, for ready reference, the related statutory provision set out in Section 195(1). This is as follows: Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest on securities) or any other sum chargeable under the provisions of this Act (not being income chargeable under the head "Salaries") shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft....
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....the only reason why the revenue must fail in its case. 8. A lot of emphasis has been placed on the fact that there was a service PE in the present case. Nothing, however, turns on the existence of the PE because admittedly whatever has been paid to Burt Hill Inc USA is, in turn, paid by Burt Hill Inc UA to its employees seconded to the assessee. There cannot be any profits, therefore, in the hands of the Service PE, and what is taxable in the hands of the PE under article 7(1) is not the gross receipt but the profits attributable to the PE. The existence of service PE, in the present case, will be wholly academic inasmuch as whatever is the aggregate of receipts said to be attributable to the PE, is exactly the same as aggregate of expenditure attributable to the PE. It is not the revenue's case that any other receipts of the Burt Hill Inc USA, other than the receipts on account of reimbursements for salaries, or any other income could be attributed to the so called Service PE. The payments in question have not resulted in any income taxable in the hands of the assessee. Be that as it may, in any event, when undisputedly the payments are in the nature of the reimbursements, and,....
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.... is an expression used only in Section 195(1). Therefore, this Court is required to give meaning and effect to the said expression. It follows, therefore, that the obligation to deduct tax at source arises only when there is a sum chargeable under the Act. 9. The decision to withheld tax from a credit or payment to a non-resident is not taken de horse the taxability of income embedded in the related payment. It is taken in the light of the tax liability of the non-resident in respect of the amount in question, and, if there were any doubts on this proposition, these doubts have now been set at rest by Their Lordships. As for the payments made by the assessee being in nature of the fees for technical services, this stand of the Assessing Officer is equally frivolous. There is not even an effort to show as to how any technical knowledge, skills, knowhow or processes etc are "made available" by these services inasmuch as these services can be performed by the assessee without any recourse to the service provider. Unless this condition, under make available clause under article 12(4)(b), is satisfied the fees for technical services cannot be brought to tax in India in the hands of e....