AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 1853
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.... Dispute Resolution Panel (hereinafter referred to as "Ld, Panel") erred in confirming the same as an international transaction without appreciating the fact that it does not fall within the ambit of "International transaction" u/s 92B of the Act. 1.2 The Ld.AO/TPO and the Ld. Panel failed to appreciate the fact that corporate guarantee has been advanced by the appellant as a matter of commercial prudence to protect the business interest of the group by fulfilling the shareholder's obligation as any financial incapacitation would jeopardize the investment of the appellant. 1.3 Without prejudice to the above, the Ld. AO /TPO and Ld. Panel failed to appreciate the corporate guarantee extended by the appellant is part and parcel of the management agreement entered into with the AE and therefore, the Ld. AO/TPO erred in demanding an additional charge on the corporate guarantee and Ld. Panel in confirming the same. 1.4 Without prejudice to the above, the Ld. Panel erred in arbitrarily confirming the arm's length guarantee commission rate of 3%, when a nominal guarantee commission rate of 0.3%-0.5% would meet the arm's length criteria based on various legal jurisprudenc....
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....wance of Rs. 3,51,52,181/- in the present case. 3.6 On the facts and in the circumstances of the case& in law and without prejudice to grounds taken here-in-above, the Ld. Panel as well as the Ld. AO grossly erred in ignoring the decision of Kolkata Tribunal in the appellant's own case in DCIT -vs- EIH Limited (2015) I.T.A. No. 426/Ko1/2006 and disallowing proportionate interest cost under Section 14A read with Rule 8D(2)(ii) without appreciating that various investments on which exempt income was earned were made in past years out of own/surplus funds and no evidence was brought to prove any nexus between the borrowed funds and the amount invested. 3*7 On the facts and in the circumstances of the case & in law and without prejudice to grounds take herein above, the Ld. Panel as well as the Ld. AO erred in not allowing netting off of interest expenditure with interest income while computing disallowance of proportionate interest cost under Section 14A read with Rule 8D(2)(ii). 4.0 Disallowance of principal repayment of finance lease 4.1 On the facts and in the circumstances of the case& in law, the Ld. Panel erred in confirming the disallowance of Rs. 8,85,68,539/- prop....
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....vision its scope extended only up to computation of capital gain, however such gain arising from transfer of long term capital assets, retained the character of long term capital gain for all other provisions and is eligible for set off u/s 74 against brought forward loss from long term capital asset. 6.3 On the facts and in the circumstances of the case & in law, the Ld. Panel while confirming the action of Ld. AO grossly erred in not applying the ratio decidendi laid down in the decision of the Supreme Court in the case of CIT - vs.- Dempo Company Limited [Civil Appeal No. 4797/2008 - SC] applicable in the case of the appellant. 7.0 Disallowance u/s 40(a)(i) of the Act 7.1 On facts and in the circumstances of the case& in law, the Ld. AO while giving effect to the direction of the Ld. Panel erred in confirming the disallowance u/s 40(a)(i) of the Act of Rs. 5,30,91,623/- for alleged non deduction of tax u/s 195. 7.2 On the facts and in the circumstances of the case & in law, the Ld. AO grossly erred in confirming disallowance to the extent of Rs. 5,30,91,623/- u/s 40(a)(i) of the Act without providing sufficient opportunity to the appellant and disregarding the substantiv....
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....a). 10.0 Short grant of credit for tax deducted at source and tax collected at source 10.1 On the facts and in the circumstances of the case, Ld. AO erred in not granting TDS/TCS credit to the extent of Rs. 1,18,60,966/- without assigning any reasons. 11.0 Dividend Distribution Tax 11.1 On the facts and in the circumstances of the case, the Ld. AO erred in calculating Dividend Distribution Tax on gross dividend of Rs. 51,44,12,473/- without excluding dividend received from subsidiary companies exempt u/s 1150(1A) of the Act amounting to Rs. 7,43,40,000/- 12.0 MAT credit set off 12.1 On the facts and in the circumstances of the case, the Ld. AO erred in not granting set off of MAT credit brought forward from AY 2011-12 without assigning any reasons. 13.0 That the appellant craves leave to add to and to alter, amend, rescind or modify the grounds raised hereinabove before or at the time of hearing of the appeal." Shri Ravi Sharma, Ld. Authorized Representative appeared on behalf of assessee and Shri P.K. Srihari, Ld. Departmental Representative appeared on behalf of Revenue. 2. First issue raised by assessee in ground No.1 is that Ld. DRP erred in confirming the order....
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....by the assessee/assessee company to the lender bank is normal business practice and obligation towards a subsidiary. Since the AE was a startup company, the assessee extended corporate guarantee to the third party borrowers as a matter of commercial prudence to protect its interest by fulfilling the shareholders obligation. We agree with the contention of the ld AR that the corporate guarantee as provided by the assessee was a matter of commercial prudence to protect and by fulfilling the shareholder obligation, as any financial incapacitation of the subsidiary would jeopardize the investment of the assessee. For that we rely on the order of the Coordinate Bench of this Tribunal in the case of Tega Industries Ltd. Vs DCIT (ITA No.1912/Kol/2012 wherein it was held that the provision of corporate guarantee is in the nature of shareholder activity and hence, no TP adjustment on account of corporate guarantee is required. In the said case, this tribunal had held that "the assessee's expectation from provision of guarantee was not that of a guarantor i.e. to earn a guarantee fee, rather, the expectation was of a shareholder to protect its investment interest, to help it achieve the asse....
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....ases, sales, provision for services, lending or borrowing or any other transaction) should have bearing on the profits, incomes, losses or assets of such enterprises. In our opinion, the condition precedent of a transaction having a bearing on profits, incomes, losses, or assets would apply to each of the aforesaid transactions namely purchase, sale, or lease of tangible or intangible property or provision of services, or lending or borrowing money or any such transaction. This understanding of ours gets further clarified by way of insertion of Explanation in section 92B(1) by the Finance Act 2012 with retrospective effect from 01.04.2002 vide clause (a) to (d). We find that in the said explanation, clause (e) alone has been carved out as an exception wherein, the transaction thereon has been specifically mandated to be an international transaction where a transaction of business restructuring or reorganization, entered into by an enterprise with an AE irrespective of the fact that it has bearing on the profits, incomes, losses, or assets of such enterprises at the time of transaction or at any future date. 12.12. Thus, we hold that when a parent company extends an assistance to ....
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....are unable to see, in the judgment of Hon'ble Bombay High Court, any support to the proposition that issuance of corporate guarantee is inherently within the ambit of definition of 'international transaction' under section 92B irrespective of whether or not such transactions have any 'bearing on profits' incomes, losses, or assets of such enterprises'. Revenue, therefore, does not derive any help from the said decision." 12.14. The ld CIT DR would have had a case where a fee has been charged for the intra service which has been rendered (in the context of corporate guarantee), and, therefore, the assessee or the Court has treated it as an international transaction, then the charge of corporate guarantee has to be in accordance with Arm's Length principle. This means that the price for corporate guarantee should be that which would have been paid and accepted by independent enterprises in comparable circumstances. In that case transfer pricing adjustments are required. In that case, it has to be determined what will be the ALP of corporate guarantee commission paid by associate enterprise to the parent company providing corporate guarantee. Since that is not the case before us....
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.... cost of funds comes to 4.92% (0.92%+4%) and accordingly ARM length interest was computed at 8.92% (4.92%+400bps). Thus the TPO worked out the arm length of interest amount for the opening balance of loan amount @ 17.75% and for the fresh loan given during the year @ 8.92% which comes in aggregate to Rs. 3,32,83,015.00. Accordingly the TPO worked out transfer pricing adjustment amounting to INR 3,32,83,015.00 only. 8. Aggrieved by the order of the TPO, the assessee filed objections before the Ld. DRP. The ld DRP confirmed the order of the ld TPO and held that interest free loan provided its AE was not in the nature of shareholder activity. Therefore the assessee was entitled for the interest on the amount of loan provided to its AE. Thus the ld. DRP upheld the order of TPO. Being aggrieved by the final order of the AO, the assessee is in appeal before us. 9. The Ld. AR for the assessee before us submitted that only LIBOR should be used as the rate of interest to determine the arm's length interest rate for the loan. The ld. AR in support of assessee's argument relied on the order of Hon'ble Rajasthan High Court in the case of CIT Vs. Vaibhav Gems Ltd. reported in 88 taxmann.....
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....2. 12. The assessee during the year has earned dividend income of Rs.19,07,36,227/- which was claimed exempted u/s 10(34) of the Act. The assessee in relation to such income has suo motu disallowed the expense of Rs.29,20,022/- only. The details of disallowance made by the assessee at its own in relation to dividend income stand as under:- Sl.No. Particulars Amount 1. Demat charges 496/- 2. 10% of directors fees 76,000/- 3. 5% of H.O staff maintenance expense Engaged in the maintenance accounts 5,45,463/- 4. 7% travelling, conveyance, printing, postage General charges etc. 22,98,063/- However, AO during the course of assessment proceedings observed that the assessee has incurred interest expense of Rs. 53,49,40,020/- which has not been considered for the purpose of disallowance u/s 14A of the Act. Accordingly, AO invoked the provision of Rule 8D of IT Rules, 1962 and made the following disallowance:- Sl.No. Particulars Rule Amount 1 Direct expense 8D(2)() 4,96/- 2 Interest expense 8D(2)(ii) 2,85,20,257/- 3 Administrative expense 8D(2)(iii) 95,51,450/- In view of above, the AE made the disallowance of Rs.3,51,52,181/- after adjusting ....
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.... iii) (2014) 50 taxman.com 271 (Delhi-Trib) in the case of Joint Investment Pvt. Ltd. vs. ACIT Circle-4(1) the above citations enumerate circumstances on invoking rule 8D while making disallowances u/s. 14A and are clearly to be applied in case of the appellant. Besides, the elaborate submissions made about own funds being used do not further the case of the appellant as the appellant has availed of loans. The contention of the assessee is accordingly not tenable as the funds available for specific purposes have to be used as such and absence of relevant corroborative evidence does not help the case of the assessee. The doctrine of merger of funds and 'money having no colour' go against the contentions on behalf of appellant as the 'opportunity cost' foregone in such a scenario is to be viewed in form of disallowance under rule 8D. In view of the intent & purpose of the section 14A, the foregoing and the judicial pronouncements as discussed above, the addition made by the AO is upheld." Being aggrieved by this order of DRP, assessee is in second appeal before us. 14. Ld. AR for the assessee filed paper book with case laws which is running pages from 1 to 100 and also filed wr....
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.... whereas the assessee itself had voluntarily disallowed Rs. 42,48,850/-. Hence we direct the ld AO to adopt the disallowance figure of Rs. 42,48,850/- which had already been disallowed by the assessee and hence no further disallowance in that regard is to be made." Respectfully following the same, we reverse the order of DRP and direct the AO to delete the same. Hence this ground of appeal of the assessee is allowed. 16. Next issue raise by assessee in ground No.4 is that Ld. DRP erred in confirming the disallowance made by the AO for Rs.8,85,68,539/- on account of lease rental expenses as capital expenditure. 17. The assessee during the year has incurred rental expense on account of acquisition of machineries on financial lease basis. The assessee claimed that the depreciation charged in respect of such machineries was added back in the computation of income and lessor has claimed depreciation in respect of such machineries. However, the AO observed that the rental charges paid by the assessee was inclusive of the payment of the principal for Rs.8,85,68,539/- only. As per the AO, the repayment of principal amount for the acquisition of the machineries was capital in natur....
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....ase as a capital expenditure. It is quite evident that under a mutual understanding the lessor has already claimed income tax depreciation on the impugned assets. "in the light of the above discussions, it is held that the principal repayment of Rs. 8,85,68,539/- is a capital expenditure in the hand of the assessee and is hence disallowed for deduction. A sum of Rs. 8,85,68,539/- is thus, added back in computing the income of the assessee.' The directions in the earlier period being for a different financial period are not followed in view of changed legal position in the current period and the discussions supra. The objection is accordingly dismissed." Being aggrieved by this order of Ld. DRP assessee is in second appeal before us. 20. Ld. AR for the assessee reiterated the same arguments that were made before Ld. DRP whereas Ld. DR for the Revenue vehemently relied on the order of Authorities Below. 21. We have heard the rival contentions of both the parties and perused the material available on record. At the outset, we note that the issue has already been decided by the co-ordinate Bench of this Tribunal in assessee's own case in ITA No.110/Kol/2016 (supra) and the rel....
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....h the Circulars laid down in this regard more so when the CBDT has itself clarified vide Circular No. 2/2001 dated 9.2.2001 that the AS 19 will have no implication on the allowance of depreciation on assets under the provisions of IT Act. It is well settled that the CBDT Circulars are binding on the revenue. As per this Circular No. 2/2001 dated 9.2.2001, in a lease transaction, the owner of the assets is entitled to depreciation. In the instant case, the lessor (Orix Auto) being the owner had the right to claim depreciation and the assessee has not claimed any depreciation as per the provisions of the IT Act and instead had claimed the entire lease rental as revenue expenditure. We find that the issue is squarely covered by the decision of the Hon'ble Supreme Court in the case of I.C.D.S. Ltd vs CIT reported in (2013) 350 ITR 527 (SC) wherein it was held that :- "Held, affirming the decision of the Tribunal, (i) that the assessee was a leasing company which leased out the trucks that it purchased. Therefore, on a combined reading of section 2(13) and (24) of the Act the income derived from leasing of the trucks would be business income, or income derived in the course of busin....
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.... We also find that the issue is squarely covered by the decision of the Hon'ble Rajasthan High Court (Jaipur Bench) in the case of Rajshree Roadways vs Union of India & Ors reported in (2003) 263 ITR 206 (Raj) wherein it was held that :- Held, that under the agreement there was a clause that after completion of lease period, if one per cent. of the total consideration of the trucks was paid, the lessee would be the owner of those trucks. However, the agreement dealt with the ownership of the trucks under the agreement. There was a clear provision that the said machinery shall at all times remain sole and exclusive property of the lessor and the lessee shall have no right, title or interest thereon. It further that irrecoverable undertaking of the lessee that at no time during the currency of the lease agreement, which shall be non-cancellable, would the lessee attempt to capitalise the leased assets in its balancesheet. As per clause 8, it had been agreed that the ownership of the said assets during the tenure of the lease and inclusive of any renewal options that the lessor may concur indisputably rested with the lessor. So in clear terms, the agreement provided that during th....
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....second appeal before us. 25. Ld. AR for the assessee reiterated the same arguments that were placed before Ld. DRP whereas Ld. DR for the Revenue vehemently relied on the order of Authorities Below. 26. We have heard the rival contentions of both the parties and perused the material available on record. At the outset, we find that same issue has already been decided by the co-ordinate Bench of this Tribunal in assessee's own case in ITA No.110/Kol/2016 (supra). The relevant extract of this order is reproduced below:- "4.1. We have heard the rival submissions and perused the materials available on record including the paper book of the assessee. We find that the assessee owns the aircrafts and were used for providing services to the tourists of the assessee company as well as others who chartered them according to their requirements. These aircrafts were utilized for chartering flights also and assessee had derived chartering income also which are reflected as income in the profit and loss account which evidences the business nexus of use of aircrafts. We also find that the assessee had stated that sometimes the directors of the assessee company had to use the aircrafts for the ....
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....e for the Asst Years 2003-04, 2004-05 & 2005-06 in ITA No. 57/Kol/2007 ; 1846/Kol/2007 and 299/Kol/2010 dated 9.12.2015 respectively, wherein it was held that :- 6.3. We have heard the rival submissions and perused the materials available on record. We find that this issue is squarely covered by the decision of the co-ordinate bench decision of this tribunal in assessee's own case for Asst Year 2002-03 in ITA No. 316/Kol/2006 dated 11.9.2015 in para 4.4 had held as under:- "It is seen that the net expenditure towards running and maintenance of aircrafts debited in profit and loss account is only Rs. 95,64,995/- and hence the premise of the Learned AO that a sum of Rs. 2,14,04,416/- is debited to profit and loss account is grossly incorrect. It is observed that ultimately the assessee had derived surplus of Rs. 1,07,87,457/- being the difference between the chartering income of Rs. 2,02,52,452/- and maintenance and running of aircrafts expenditure to the tune of Rs. 95,64,995/-, even though deriving surplus thereon is not a pre-requisite for allowance of expenditure incurred. We also find that complete details of the entire expenditure towards running and maintenance of aircraft....
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....Accordingly, the grounds raised by the assessee in this regard for various assessment years are allowed and grounds raised by the revenue in this regard are dismissed. 4.2. Respectfully following the aforesaid decision, we hold that no disallowance could be made on an estimated basis towards running, repairs & maintenance of aircrafts including depreciation thereon. Accordingly, the Ground No. 4.1 raised by the assessee is allowed." Respectfully following the decision of this co-ordinate Bench of this Tribunal we reverse the order of Ld. DRP and direct the AE to delete the same. This ground of assessee's appeal is allowed. 27. Next issue raised by assessee in ground No.6 is that Ld. DRP erred in confirming the order of AO by not allowing set off of long term capital loss against the Short-Term Capital Gains (STCG for short) u/s 74 of the Act. 28. The assessee during the year earned STCG u/s 50 of the Act which was set off by an amount of Rs.1,40,51,830/- against the brought forward Long Term Capital Loss. However, AO was of the view that such brought forward long term capital loss cannot be set off against the short term capital income. Accordingly, AO disallowed the same and....
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....al asset; (2) where any block of assets cease to exist as such, for the reason that all the assets ins that block are transferred during the previous year, the cost of acquisition of the block of assets shall be the written down value of the block of assets at the beginning of the previous year, as increased by the actual cost of any asset falling within that block of assets, acquired by the assessee during the previous year and the income received or accruing as a result of such transfer or transfers shall be deemed to be the capital gains arising from the transfer of shortterm capital assets.]" This is a non obstante clause and it has to have an overriding effect on other provisions of the act. The assessee has relied on section 74 of the IT Act which deals with mechanism of computation of capital gains. This section cannot be read in isolation from section 50 nor can it nullify the impact of section 50. Ld. AR placed reliance on various case laws in this regard. The same are not applicable being distinguishable on the facts. The Ld. AR also vehemently relied on the decision of Hon'ble Supreme Court in the case of M/s Dempo (CA 4797/2008). The panel has gone through the s....
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....he capital gain arising on transfer of a depreciable asset shall be treated as capital gain arising on transfer of short term capital asset is only for the purpose of sections 48 and 49 of the Act and not for the purpose of any other section. It is well settled that the deeming fiction and the deeming provisions should be construed very strictly and to be applied in limited sense and the same cannot be imported into other sections of the Act unless otherwise specified. Section 74(1)(b) of the Act being an independent section is not bound by the deeming provisions of section 50 of the Act. The nature of capital asset, whether short term or long term, has to be determined applying the provisions of section 2(42A) and section 2(29B) of the Act. Hence we hold that the depreciable assets which had been held for more than 36 months prior to its sale, does not lose its character of being a long term capital asset, even though it might get taxed as short term capital gain in terms of deeming fiction provided u/s 50 of the Act. Reliance in this regard is placed on the decision of Hon'ble Supreme Court in the case of CIT vs V.S.Dempo Company Ltd reported in (2016) 74 taxmann.com 15 (SC) wher....
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....ing in Section 50 to suggest that the fiction created in Section 50 is not only restricted to Sections 48 and 49 but also applies to other provisions. On the contrary, Section 50 makes it explicitly clear that the deemed fiction created in sub-section (I) & (2) of Section 50 is restricted only to the mode of computation of capital gains contained in Section 48 and 49. Secondly, it is well established in law that a fiction created by the legislature has to be confined to the purpose for which it is created. In this connection, we may refer to the decision of the Apex Court in the case of State Bank of India v. D. Hanumantha Rao 1998 (6) SCC 183. In that case, the Service Rules framed by the bank provided for granting extension of service to those appointed prior to 19.07.1969. The respondent therein who had joined the bank on 1.7.1972 claimed extension of service because he was deemed to be appointed in the bank with effect from 26.10.1965 for the purpose of seniority, pay and pension on account of his past service in the army as Short Service Commissioned Officer. In that context, the Apex Court has held that the legal fiction created for the limited purpose of seniority, pay and p....
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....ses as directed above." Respectfully following the proposition laid down in the decision of this coordinate Bench of this Tribunal, we allow the ground of appeal of assessee for statistical purpose in terms of above direction of this Tribunal. Hence this ground of appeal of the assessee is allowed for statistical purpose. 32. Next issue raised by assessee in ground No.7 is that Ld. DRP erred in confirming the order of AO by sustaining the disallowance of Rs. 5,30,91,623/- on account of non-deduction of tax u/s 195 of the Act r.w.s. 40(a)(i) of the Act. 33. The assessee during the year has incurred certain expenses in foreign currency for Rs.23,20,18,199/- only. The expenses in foreign currency include the following expenses:- i) Inspection fee ii) Advertisement in magazine / website listing iii) Recruitment charges iv) Professional charges v) Consultancy charges vi) Marketing and development expenses Out of total expenses incurred in foreign currency, assessee has not deducted Tax at Source (TDS) on the amount of Rs.5,30,91,623/- only. The assessee claimed that the impugned expenses are not chargeable to tax in India in view of the provision of DTAA as well as ther....
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....ested the Bench to confirm the same. 36. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we find that issue under consideration has already been decided by the co-ordinate Bench of this Tribunal in assessee's own case (supra) for statistical purpose. The relevant extract of this order is reproduced below:- 6.2. We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee. We find that the assessee had given unit wise details of various expenditures incurred in foreign currency vide its letter dated 12.3.2015 & 16.3.2015 with detailed write up about the each expenditure as under:- Expenditure in Foreign Currency towards Professional, Consultancy & Other matters [Clause 25(a) of Schedule 24 to Annual Accounts] Name of the Hotel/Division Amount (Rs.) The Oberoi Grand 4,625,991 The Oberoi, New Delhi 65,397,301 The Oberoi Mumbai/Tident Nariman Point 35,607,111 Trident Bandra Kurla, Mumbai (Operations) 9,260,223 Oberoi Flight Services, Mumbai 1,081,847 Oberoi Airport Services, Mumbai 169,761 The Oberoi, Bangalore 9,805,671 The Obe....
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....r, even under the respective treaties, US / UK etc, with restricted FTS clause with 'make available' provision, no TDS is called for in India. 6.4. Inspection Fees The assessee explained that fees paid to overseas parties for carrying on inspections outside India. To ensure quality assurances, inspection fees were paid to various agencies mostly from the UK. Even if it is admitted that the services to provide such Inspection requires technical expertise, under the Indo-UK tax treaty, the FTS clause is very narrow. To qualify for an amount alling under the FTS clause, there should be 'making available' of a technology. In case of inspection fees, the service provider only provides their report or only provides a quality assurance. Such services do not fall under FTS and hence in the absence of their PEs in India, there was no withholding tax requirement in India under the India UK treaty. 6.5. Recruitment Charges Payments towards professional fees for manpower recruitment in hotels outside India. The assessee had to take the services of various foreign recruitment agents (specially for SPAs , Chefs etc) . The services are rendered outside India and the payments are made ou....
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....y explained, the target for the advertisements are the Foreign tourists. Hence, in those cases, what ensured is that these foreign advertisements are circulated in the US; Canada and in UK and European countries. Taxability under the Income tax Act, 1961 The services rendered by foreign vendors in relation to advertisement/ web listing are in the nature of marketing expenses. These services are not taxable under the provision of Income tax Act, 1961 for the following reasons: * It is not received or deemed to be received in India. * The Income does not accrues or arises or deemed to accrue or arise in India as the advertisement is published/Printed/ distributed outside India , * Since all the operations of payee are carried out outside India, in accordance with clause (a) of Explanation 1 to Section 9(1)(i), the various remittances should not be considered as deemed to accrue or arise in India and accordingly such income ought not to be chargeable to tax in India under Section 9(1)(i) of the Act. * The remittances made on account of were not for any use or right to use of any equipment, copy right, scientific work etc. and hence should not qualify as Royalty under Sect....
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....roviding, inter alia, the best hotel facilities of international standards to tourists worldwide by promoting and advertising worldwide the Sheraton chain of hotels for mutual benefit. Both parties had come together with their specialized information, experience and knowledge in the field of hotel business for mutual benefit. The main intention or purpose of the association between the assessee and ITC was to publisize, market and promote the hotels of the ITC and the assessee-company, had undertaken to provide all the services as enumerated in the various articles to achieve this main intention or purpose. If all the terms thereof were read together as a whole, it explicitly showed that the assessee in substance, had mainly undertaken the job of publicity, marketing and advertising of the hotels of Indian clients worldwide and all the services to be rendered by it as enumerated in the various articles of the agreement were incidental or supplementary to carrying out this job effectively and efficiently in the interest of its business of which the said activity or job formed a part. The services, therefore, were an integral part of the main work undertaken by the assessee of public....
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....ilable' means that the person acquiring the technical service is enabled to independently apply the technology. 'the word 'enable' is used in the sense that the technical services should be such that they make the recipient able or wiser in the subject matter. Thus, where the recipient of technical services does not get equipped with the knowledge or expertise and the recipient would not be able to apply it in future independently withoutsupport from the service provider, it will not be a case of technical service having been 'mad available'. And in such cases the concerned transaction would not be taxable in India and subject to withholding tax in India. In such cases, the income of the recipient shall be treated as business income under the Article 7. Since the entire operation of the service provider is carried outside India, there is no existence of any PE in India and in such cases the concerned transaction would not be taxable in India and subject to withholding tax in India. Reliance in this connection is placed on decision 'of ITAT Delhi in case of Sheraton International Inc Vs. Deputy Director of Income-tax reported in (2007) 293 ITR (A.T.) 68....
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.... the Article 12 of the DTAA for the following reasons: * Such services are not ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment is received by the vendor; * Do not make: available technical knowledge, technical knowledge, experience, skill know-how or processes or consist of the development and transfer of technical plan or technical design. The concept of 'make available' has been elaborately explained herein above. Further, the protocol to the tax treaty elucidates the situation where the services can be said to be made available to the recipient of the services. As per the protocol, generally speaking, technology will be considered "made available" when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service may require technical input .by the person providing the service does not per se mean that technical knowledge, skill etc. are made available to the person purchasing the service. Similarly, the use of a product which embodies technology shall not per se be considered to make the technology available. . Reliance in this connection is placed ....
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....herlands. Since in the instant case, the services do not involve make available of technical knowledge, the same is out of purview of the fees for technical services within the scope of DTAA between India and Belgium. Accordingly withholding tax is not applicable for the services pertaining to advertisements. g) France - Article 13 read with protocol of the DTAA h) Switzerland - Article 12 read With protocol of the DTAA. i) Spain - Article 13 read with protocol of the DTAA As per Article 13(4), the term "fees for technical services" means payments of any kind to any person in consideration for services of a managerial, technical or consultancy nature. Further, the clause 7 of protocol to the DTAA provides that in respect of Article 13 concerning fees for technical services, if under any Convention, Agreement or Protocol signed after 01.09.1989, between India and a third State which is a member of the GECD, India limits its taxation at source on fees for technical services to a rate lower or a scope more restricted than the rate of scope provided for in this Convention, Agreement or Protocol with effect from the date on which the present Convention or the relevant Indian ....
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...., inspection fees has been paid to Leading Quality Assurance Ltd based out of UK. This service is being availed from the same service provider in each year The vendor carries on independent audit about the quality standard of the hotels pertaining to the assessee. The abovementioned service is are not covered within the scope of 'fees for technical services' as defined in the Article 13(5) for the following reasons: Such services do not involve rendering of any technical or consultancy services which: * are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment is received by the vendor. It is understood that, in order for a service to be considered "ancillary and subsidiary" to the application or enjoyment of some right, property, or information for which a payment is received, the service must be related to the application or enjoyment of the right, property, or information. * are ancillary and subsidiary to the enjoyment of any property; make available technical knowledge, experience, skill know-how or processes or consist of the development and transfer of technical plan or technical design. The concept....
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....ade towards stay of guest under the arrangement with the assessee in order to promote the sales of the assessee. Under this scheme, when a guest stays in the hotels of the assessee, he gets complementary stay in other hotels against which the payment is claimed from the assessee by that hotel. This way it promote the business of the assessee as a whole. The payment .is towards stay charges cannot be covered under the scope of fees for technical services under section 9(1)(vii) of the Act. Since the entire operation of the vendor is carried outside India, it is not taxable under the Income tax Act as business income as well. Since tax treaty between India and Mauritius does not have any fees for technical service clause, in absence of 'permanent establishment, the concerned service is not taxable in India. Recruitment Charges Taxability under the Income tax Act The assessee had to take the services of various foreign recruitment agents (specially for SPAs, chefs etc.). The services are normally rendered outside India and the payments are made outside India as well. Further, since this does not involve any know how or technical expertise, the same is not covered withi....
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....ist of the development and transfer of technical plan or design. For detailed explanation, reference may be made to annexure 2,4 and 5. 6.10. Apart from this, the assessee had even provide the certificate of tax residency of the parties to whom payments were made in foreign currency and declaration form them that no PE existed for them in India. The assessee had even furnished the copies of agreements entered into with those parties, copy of advertisements, copy of invoice, subscription renewal forms etc. All these documents are enclosed in pages 822 to 930 of the Paper Book. 6.11. We find that in the earlier years in assessee's own case, the ld CITA had granted relief to the assessee by placing reliance on 'make available' clause prevailing in various tax treaties , but the same is not done by the ld AO and ld DRP in the instant case. We find that the assessee had filed various documents with detailed factual and legal submissions with supporting evidences before the ld AO, which had not been appreciated by the ld AO and ld DRP in the proper perspective. Hence we deem it fit and appropriate, to remand this entire issue to the file of the ld AO, for de novo adjudication of this....
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....ustice and fair play we are inclined to restore the issue to the file of Assessing Officer for fresh adjudication in accordance with law. Accordingly, assessee is directed to produce necessary documents justifying that employees' contribution to PF/ESI has been deposited within due date of income tax return filing as specified u/s 139(1) of the Act. Hence, this ground of assessee's appeal is allowed for statistical purpose in terms of above direction. 42. Next issue raised by assessee in ground No.9 is that Ld. DRP erred in confirming the order of AO by not allowing the deduction of provision for bad and doubtful debts written back for Rs.51,77,916/- under normal provision as well as under the computation of book profit. 43. At the outset, Ld. AR before us submitted that the assessee omitted to claim the deduction on account of the provision for bad and doubtful debts written back for Rs.51,77.916/- inadvertently in the income tax return. He further submitted that the claim was made before the AO vide letter dated 21.03.2016 but same was not considered by the AO. 44. The matter was carried before the Ld. DRP which also denied the claim made by the assessee during the course of a....
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.... direction to allow the credit of TDS/TCS and adjudicate the same as per law. Hence, this ground of assessee's appeal is allowed for statistical purpose in terms of above direction. The assessee should co-operate at the time of assessment proceedings. 49. Next issue raised by assessee in ground No.11 is that Ld. DRP erred in calculating the dividend distribution tax on the gross amount of Rs.51,44,12,473/- without excluding the dividend receipt from its subsidiary company for Rs.7,43,40,00. 50. The provision of u/s 115-O(1A) of the Act is reproduced below :- "[(1A) The amount referred to in sub-section (1) shall be reduced by,- (i) the amount of dividend, if any, received by the domestic company during the financial year, if- (a) such dividend is received from its subsidiary; (b) the subsidiary has paid tax under this section on such dividend; and (c) the domestic company is not a subsidiary of any other company : Provided that the same amount of dividend shall not be taken into account for reduction more than once; (ii) the amount of dividend, if any, paid to any person for, or on behalf of, the New Pension System Trust referred to in clause (44) of section 10. Exp....