2018 (4) TMI 989

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....s as under: 1. The appellant wants to state that the learned assessing officer has taken a view in the assessment order that management charges paid are technical services and consequently by applying the provisions of Sec. 40(a)(i) of the Act, has disallowed the management charges. The learned CIT(A) restricted the disallowance to 50% of the management charges by considering the same as technical services. The appellant contends that the whole of management charges paid are not covered by the provisions of Sec. 40(a)(i) of the Act. Considering the above on the facts and in the circumstances of the case, the learned CIT(A) should have allowed management charges fully without applying the provisions of Sec. 40(a)(i) of the ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... making disallowance u/s 40{a)(i3, albeit restricted to 50% viz., Rs. 12,53,941/-, The appellant gets an equivalent quantum as relief. The ground is partly allowed. 6. For assessment year 2011-12, the ld. Commissioner of Income Tax (Appeals) has followed his order for assessment year 2006-07 and has held as under: In the present facts of the case, it is seen that the issue has already been a matter of adjudication as to whether the management charges received by Lloyds Register UK are to be treated as taxable in India. My predecessor in his order for Ay 2006- 07 vide order CIT(A)-II/IT/Rg.4(l)/09-10/301-L dated 21.02.2011, for detailed reasons given therein, has held that 50% of the charges would be held as taxable in India, if ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....would arise only when an amount was chargeable to tax, that it was not necessary to obtain nil withholding tax certificate, that tax had not to be deducted $ source in each case, that the India Branch office had reimbursed the payments towards management charge to its HO in UK, that it in turn had made the payment to LR in UK. He further argued that the issue stands decided in favour of the assessee by the judgment of the Hon'ble Delhi High Court in the case of Herbalifc International India P.Ltd. (384 ITR 276). 6.2.We have heard the rival submissions and perused the available material. We find that in the case of Herbalife- International India P. Ltd. (supra)the Honble Delhi High Court has dealt the issue as under: "S....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....rement of deduction of tax at source. The lack of parity in the allowing of the payment as deduction is what brings about the discrimination. The consequence of non-deduction of tax at source when die payment to a non-resident has an adverse consequence to the payer. Since it is mandatory in terms of section 4Q(a)(i) for the payer to deduct tax at source from the payment to the non-resident, the latter receives the payment net of tax deducted al source. The object of article 26(3) of the Double Taxation Avoidance Agreement was to ensure non-discrimination in the condition of deductibility of the payment in the hands of the payer where the payee is either a resident or a non-resident. That object would gel defeated as a result of the discrim....