TaxTMI 
TaxTMI 
TaxTMI 
2019 (1) TMI 107
X X X X Extracts X X X X
X X X X Extracts X X X X
....ication. 3. Ground Nos. 2 to 4, with all its sub grounds, relates to the adjustment of Rs. 1,45,06,572/- made on account of disallowance of payment of management services and unit charges [MSU charges] by the assessee to its AEs. 4. Briefly stated, the facts of the case are that the appellantcompany is a wholly owned subsidiary of BG Asia Pacific Holdings Pvt Limited. It commenced midstream gas marketing operations in India after obtaining the approval of the Foreign Investment Promotion Board [FIPB] of the Government of India to undertake marketing and distribution of natural gas as well as LNG. 5. The assessment year under consideration was the first year of purchase and sale of LNG operations. The international transactions reported b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....international transaction pertaining to payment of MSU charges and determined ALP at NIL. 9. The assessee raised objections before the DRP and the DRP, after considering the submissions of the assessee, dismissed the same by observing that BGEPIL is getting management services from BGIL, then how can it pass on these services to the assessee when it itself is getting these services from BGIL. The DRP further observed that the assessee is getting business support services from BGEPIL but has not explained how the management support services are different and distinct from support services. The DRP concluded by holding that since the assessee has already paid for the support services and the payment for which has been accepted by the TPO, th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... same has not been accepted because the TPO/DRP were of the opinion that the payments for these services are duplicative and when the assessee has already paid for support services and the payments for which have been accepted by the TPO. 15. The agreement mentioned elsewhere explains the scope of work and in Article 2, it has been mentioned as under: "2.1 BGEPIL shall endeavour to provide the following services to BGIES (the "Services"): (a) assist BGIES to procure LNG and natural gas from International and domestic sellers. (b) assist BGIES to sell LNG and natural gas to various customers of BGIES. (c) obtain information concerning industrial and commercial matters, which are of interest to BGIES especially in connection with ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... appreciated by the lower authorities. In the light of this agreement, we are of the considered opinion that there is no payment for duplicative services and the payment of Rs. 1,45,06,572/- is distinct as MSU charges and adjustment made by the TPO is uncalled for and deserves to be deleted 18. Before closing, it would be pertinent to mention here that in the financial statement of the assessee, there is no expenditure relating to the employees cost and in the notes annexed and forming part of the financial statement at clause 10A it has been specifically mentioned that no provision for retirement benefits has been made in these accounts as there were no employees about the payroll of the company during the year. The sales of LNG amounting....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee failed to establish that the provision for time writing charges was an ascertained liability. Accordingly, addition of Rs. 14,00,976/- was made. 22. The assessee raised objections before the DRP. 23. After considering the submissions and objections raised by the assessee, the DRP observed that payments being FTS in nature, were subject to TDS u/s 195 of the Act and since the assessee has not deducted tax at source, the payment needs to be disallowed u/s 40(a)((i) of the Act. Disallowance made by the Assessing Officer was upheld but though on different ground. 24. Before us, the ld. AR vehemently stated that the impugned payment cannot be considered as FTS, as nothing was made available to the assessee by BGIL. It is the say of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rges were raised by BGIL on BGEPIL which were further allocated to the assessee. It would be pertinent to mention here that the amount received by BGIL from the assessee has already been taxed in India u/s 44BB of the Act and as mentioned elsewhere, taxes have been duly deducted from the payments made for the time writing charges to BGIL. Be that as it may, the time writing charges paid to BGIL cannot be termed as 'FTS" under the Act read with India UK DTAA. Article 13 of the India UK DTAA defines FTS as under: "4. For the purposes of paragraph 2 of this Article, and subject to paragraph 5, of this Article, the term "fees for technical services" means payments of any kind of any person in consideration for the rendering of any technical o....