TaxTMI 
TaxTMI 
TaxTMI 
2019 (5) TMI 733
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....is order under section 143(3) read with section 144C(13) of the Act erred: 1. In holding that the referral fees received by the Appellant [through Credit Suisse AG, Dubai branch and Credit Suisse AG, Singapore branch ('CSSB')] from Credit Suisse Securities (India) Private Limited qualify as income deemed to accrue or arise in India pursuant to section 5(2)(b) of the Act read with section 9(1)(i) of the Act. 2. In holding that the referral fees received by the Appellant qualify as Fees for Technical Services under the provisions of the Act and concluding that the referral fees are deemed to accrue or arise in India per the provisions of section 9(1)(vii) of the Act. 3. In holding that the interest paid by Credit Suisse AG, Mumbai Branch ('CSMB') to its Head Office ('HO') and CSSB, on amounts borrowed by CSMB from the HO and CSSB, is income attributable to the HO / CSSB and liable to tax in India in the hands of the HO and CSSB. 4. In initiating penalty proceedings under section 271(1)(c) of the Act on the basis that the Appellant has concealed particulars of income and furnished inaccurate particulars of income. 2. At the outset of hearing, the ....
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....ld that the referral fee was liable to be taxed in India having regard to Section 5(2)(b) of the Act read with section 9(1)(i) of the Act. As per the Assessing Officer, since the referral fee was payable to CSDB in relation to the execution of transaction between Indian Company and referred client, such referral fee is deemed to accrue or arise in India. In other words, as per the Assessing Officer, by virtue of the source of the 'referral fee' being located in India, the same was taxable in India. In coming to such conclusion, the Assessing Officer differed with the assessee on the nature of the impugned fee, which according to him was in the nature of 'fee for technical services' and not 'business income' as contended by the assessee. For the said reasons, the Assessing Officer brought to tax a sum of Rs. 18,27,90,578/- to tax in hand of the assessee as 'fee for technical services' earned by CSDB in the draft assessment order passed u/s.144C(1) read with section 143(3) of the Act dated 25.03.2015. Against the said order, the assessee raised various objections before the DRP, inter-alia, assailing the stand of the Assessing Officer of not treating the 'referral fee' as 'business i....
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....at the same is merely in the nature of commission income. (i) Cushman & Wakefield (S) Pte. Ltd., 305 ITR 208(AAR) (ii) CLSA Ltd., vs. ITO (International Taxation), 56 SOT 254(Mum) (iii)ADIT (IT) vs. Star Cruise India Travel Services (P) Ltd., 46 SOT 173(Mum) 6. The stand of the assessee is that considering the fact that the 'referral fee' is in the nature of commission income, the DRP made no mistake in treating it as not taxable in India in view of the Article 7 of the Indo-Swiss Double Taxation Avoidance Agreement (DTAA). 7. We have carefully considered the rival submissions. As the aforesaid discussion shows, the short controversy before us relates to the nature and chargeability to tax of referral fee of Rs. 18,27,90,578/- received by assessee's Dubai Branch (CSDB) from the Indian Company. The charge of the Assessing Officer is that having regard to Section 5(2)(b) read with section 9(1)(i) of the Act, the said income is includible in the scope of total income chargeable to tax in India. To put it differently, as per the Assessing Officer, 'referral fee' is deemed to accrue or arise in India and therefore, the same is taxable in India. This has been inferred on t....
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.... in the nature of 'business income'; both, under the Act as well as under the Indo-Singapore Double Taxation Avoidance Agreement (DTAA), and not as 'fees for technical services'. To the similar effect is the decision of the Mumbai Tribunal in the case of CLSA Ltd., (supra) wherein also referral fee earned by a non-resident assessee from an India based entity for referring certain international clients was held not to be in the nature of 'fees for technical services' within the meaning of Section 9(1)(vii) of the Act. Notably, the aforesaid decisions have also been referred and relied upon by the DRP in concluding that the 'referral fee' is in the nature of 'commission' to be taxed as 'business income' and not as 'fees for technical services'. In the course of hearing before us, no decision to the contrary has been brought out by the Revenue. For all the said reasons, we are unable to uphold the stand of the Assessing Officer that the impugned 'referral fee' was a consideration in the nature of 'fees for technical services'. 8. Another factual aspect which is not in dispute is that CSDB has no PE in India and also the fact that assessee's PE in India i.e., Mumbai bank branch had ....
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....brought sufficient material and relied upon the decision of Hon'ble Kolkata High Court decision in ABN Amro Bank [2011] (343 ITR 81). 8. In the rejoinder submission, the ld. AR of the assessee submits that the submission of ld. DR for the revenue is not acceptable as the interest paid by assessee to its head office being payment made to self does not give rise to any income i.e. chargeable to tax in India as held by Hon'ble Supreme Court in Kikabhai Premchand (24 ITR 506 (SC). 9. We have considered the rival submission of the parties and have gone through the orders of authorities below. During the assessment, the Assessing Officer concluded that interest payment made to head office is attribution to the interest income of head office as provided under Article- 7(2) of India - Switzerland Tax Treaty on the basis of function carried out, assets deployed and the risk assumed by the head office and not to be considered as expenditure as there is no concept of income from salary. The Assessing Officer also concluded that the income shown in the Profit & Loss Account of assessee will be reduced to the extent of income attributed to head office. The interest attributed to India Branc....