TaxTMI 
TaxTMI 
2020 (6) TMI 137
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....eduction of Tax at Source u/s 195 of the Income Tax Act of Rs. 2616/- in respect of payment made to Buhler AG Swittzerland of Rs. 38093/- during the year under consideration and al so interest charged by the A. O. u/s 201/20I(IA) of the Income Tax Act of Rs. 654/- without properly appreciating the facts of the case and submissions made before her even when the assessee was not liable to deduct TDS on this payment. 02. The assessee reserve its right to add, alter, modify or amend the grounds of appeal as and when required. ITA No.744/Ind/2018 A.Y.2016-17 01. That on the facts and in the circumstances of the case the Learned CIT( A) erred in confirming the action of the assessing officer by treating the Assessee company as assessee in default in respect of non-deduction of Tax at Source u/s 195 of the Income Tax Act of Rs. 19,463/- in respect of payment made to Buhler AG Swittzerland of Rs. 283438/- during the year under consideration and al so interest charged by the A. O. u/s 201/20I(IA) of the Income Tax Act of Rs. 3892/- without properly appreciating the facts of the case and submissions made before her even when the assessee was not liable to deduct TD....
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....n the sales made to the Indian company is subject to the withholding tax u/s 195 of the Act and accordingly applied 10% of Net profit rate on the amount remitted. Default of TDS @ 41.2% is calculated on the gross amount for the two payments made at Rs. 38,093/- and Rs. 2,83,438/- during March 2015 and August 2015 during financial year 2014-15 and 2015-16 respectively in the following manner:- F.Y 2014-15 Name of Recipient Total amount remitted in Rs. Amount of Profit 10% of amount remitted Gross up amount as per section 195A of the Act Default of TDS @ 41.2% incld. Cess Date of remittance Interest thereon u/s 201(1A) Buhler Switzerland 38093 3809 6349 2616 March 15 654 F.Y 2015-16 Name of Recipient Total amount remitted in Rs. Amount of Profit 10% of amount remitted Gross up amount as per section 195A of the Act Default of TDS @ 41.2% incld. Cess Date of remittance Interest thereon u/s 201(1A) Buhler Switzerland 283438 28344 47240 19463 August 15 3892 5. Aggrieved assessee preferred appeals before Ld. CIT(A) but failed to succeed and now the assessee is in appeal before the Trib....
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....o meet out the Quality specification which is also competitive in terms of price. 3.5] It was also explained to the Ld. ITO (IT & TP) that assessee has placed order to the Non Resident supplier directly for purchase of spare parts Since and since there is no liability of TDS u/s 195 on purchase of Capital Goods from Foreign Supplier of Goods hence there was no liability towards withholding tax u/s 195 on said payment made to non-residents 04] The Ld. Income Tax Officer has not appreciated the facts placed before him and has passed an order u/s 201(1)/201(1A) of the Act on 28.03.2017 wherein he was of the view that payment made by the Assessee company to M/s Bhuler AG , Switzerland towards purchase of Spare Parts for Old Machines and Flour Milling Machine is governed by the provisions of Sec. 9(1) of the Act and on which no withholding Tax u/s 195 of the Act was deducted. Hence he has considered the assesse as assesse in default and created the demand in his case. S.No. Particulars Amount paid Gross up amount Default of TDS Interest u/s 201(1A) 01 Payment to M/s Buhler AG Switzerland 38,093 6,349 2,616 654 02 Payment to M/s....
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....eemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. Explanation 2.-For the removal of doubts, it is hereby clarified that the obligation to comply with sub-section (1) and to make deduction there under applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not the non-resident person has- (i) a residence or place of business or business connection in India; or (ii) any other presence in any manner whatsoever in India. (2) .......... (3) .......... (4) .......... (5) .......... Section 5 in The Income- Tax Act, 1995 5.(1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which- (a) is received or is deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year; or (c) accrues or arises to him outsid....
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.... accrues or arises or is deemed to accrue or arise to him in India during such year. 7.3.2] That on perusal of the Bills along with the correspondence made by the assesse with the said supplier you will find that payment to the Non-resident Supplier was towards purchase of Capital Goods being Spare parts for Old Machines and Flour Milling Machine. The assesse has placed order to the Non-Resident supplier directly. 8.1] It was also mentioned that said transactions were made though Indian Parties which were agents brokers in India of those non- Resident. The detail of the same as mentioned by the Ld. A.O. is as under:- S.No. Name of Recipient Name of Agent/Broker through which order is placed 01 Buhler AG Switzerland Buhler India Pvt. Ltd Bangalore 8.2] In this respect the assessee has already clarified to Ld. ITO that assessee Company has purchased Spare parts for Old Machines and Flour Milling Machine from the above Non Resident party. 8.3] That to purchase the said items the company floats enquiries to various foreign suppliers and obtains technical specification and rates of same from them. Subsequently it places the Purchase ....
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....on referred and relied by the assessee. The common grievance raised by the assessee in the instant two appeals for Assessment Year 2015-16 and 2016-17 is against the finding of Ld. CIT(A) confirming the action of Ld. A.O treating the assessee company as an assessee in default for non deduction of tax at source u/s 195 of the Act at Rs. 2616/- and Rs. 19,463/- on the payment for purchase of spare parts to non resident company namely Buhler AG, Switzerland at Rs. 38,093/- and Rs. 2,83,438/- during Financial Year 2014-15 and Financial Year 2015.16. 9. We observe that the assessee company is engaged in the business of manufacturing of wheat products. It intended to purchase spare parts for its old flour mill machines. The assessee after making necessary enquiry finally purchased goods from M/s Buhler AG, Switzerland vide invoice dated 24.3.2015 and 11.8.2015. In order to make payments to the supplier, form 15CA/15CB of I.T. Rules was not filed on the ground that no such forms needs to be filed online and need not be provided to bank in case of purchase of capital goods/spare parts of machineries. 10. When the matter was taken by the Ld. A.O, necessary details were called and it w....
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....ppellant and Buhler (India) PvL. Ltd. Bangalore.ir is noted that the appellant it) primarily dealing with Indian counterpart subsidiary/group company - Buhler (India) Pvt. Ltd Bangalore. At page No. 5 of the AO's order, AO has reproduced extracts of said mail correspondences carried by appellant company with BIPL. Extract of said mail correspondences (lie produced herein under: "....................... Assessee to Buhler India Banqalore- As per your quotation No- 20123456284/002 we are sending herewith a purchase order of spare parts of Sanqhvi Foods Put. Ltd. Buhler India Bangalore to Assessee- Please find herewith attached revised quotation for the part required by you, kindly go through the same and send your confirmation for our further process looking forward for your valuable order. Thanks and regards. Buhler India Put. Lid. Bangalore. Assessee to Buhler: India Banqalore- We require below, items: .Material &nb....
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....on behalf of its ,<\E namely BAGS, To put in the same How chart it may be noted that the marked portion of the contract is being carried out by BIPL for and on behalf of BAGS in India. Received Indent from Plant for requirement* _ Check Inventory and final the requirement* Send enquiry to Vendor by Email* Received quotation from Vendor* We negotiate price* Send to P.O for confirmation* We have received confirmation order* Transfer the amount by bank as per T&C of P.O*. Vendor confirm the payment* Vendor send the schedule of dispatch of goods like by Air/Sea and other detail* We have given contract for clearance of goods to CHA* CHA clear Goods from custom for completing all legal compliance* CHA send goods to our factory premises* *Mail communications between appellant company and Buhler (India) Pvt. Ltd clearly indicates that appellant company was in conversation with Buhler (India) Pvt. Ltd till finalisation and confirmation of o....
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....is a non-resident includes al! income from whatever source derived which- (a.) is required or is deemed to be received in India in such. year by Or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year." Income deemed to accrue or arise in India "9. (1) The following incomes shall be: deemed to accrue or arise in India: All income accruing or arisinq, whether directly or indirectly, through or from any business connection in. India, or through or from any property in India, or through or from any asset or source of income in India, or throuqh. the transfer of a capital asset situate in lndia. Explanation 2.- For ale removal doubts, it is hereby declared that "business connection" shall include any business activity carried out through a, person who, acting on behalf of the non resident,- (a) has and habitually exercises in India, an authority to conclude contracts on behalf of the nonRresident, unless his activities are limited to the purchase of goods or merchandise for the non-resident; or (b) has HO such authority, but habitually maintains in India a stock....
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.... said transactions of purchase of machine parts. BIPL is carrying out functions like orders, raising quotations, revising quotations, finalizing terms, confirming the purchase order, etc. BIPL was fully involved during the transaction and played an important role while undertaking discussions, negotiations, offering quotation, accepting purchase orders, liaison work and finalizing the deal etc. In totality, Buhler India is in lead to get deal concluded for BAGS. These functions performed by BIPL for BAGS sufficiently go to prove that it is acting on behalf of BAGS and concludes contracts on behalf of it. It is not mere business sourcing agent but it is taking onerous task till the finalization of business transaction which leads to a close business connection in India. Further, vide reply to 133(6) BIPL also confirms that it regularly assists BAGS and other group of companies in India and evidences on records go to show that it actually does much more than the services as conveyed. Considering the above factual position, I find no reason to interfere with the findings of the Assessing Officer. In my considered view, therefore, the BAGS indeed has a business connection in I....
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....holds tax and pay it to the income tax department. The contention that if the material would have been bought from Indian entity would not attract TDS u/s.195, as the Indian entities file their return of income in India is otiose. On above detailed discussion, I find that Buhler {India) Pvt Ltd. Bangalore constitutes business connection / PE in India for Buhlcr AG Switzerland. I find merit in the findings of the Let AO and hence reject appellant's ground of appeal. 10. As a result, the appeal of the appellant is Dismissed." 13. Though the finding of Ld. CIT(A) and the investigation of Ld. A.O clearly shows that the role of BIPL cannot be ignored at any stage. Since the beginning when the assessee company searched for suppliers of the spare parts, BIPL was very much in the scene of the transaction of purchase. This fact is further strengthened with the reply submitted by BIPL u/s 133(6) of the Act on 15.2.2017 through e-mail to the A.O and the same reads as follows:- "We refer to your letter dated 12.01.17 which was received by us on 17.01.17 calling for information with respect to proceedings u/s 201(1)/201(1A) of the Act in the case of Sanghvi Foods Pvt. L....
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....gularly delivers goods or merchandise on behalf of the non resident; or (c) habitually secures orders in India, mainly or wholly for the non- resident or for that non-resident and other non- residents, controlled by, or subject to the same common control, as that non-resident. The activities carried out by B/s BIPL for Buhler AG, Switzerland squarely falls in activity (a), (b) & (c). Since "Business connection" of Buhler AG, Switzerland in India and "M/s BIPL, Bangalore" is established beyond doubt, the income portion in the transaction between the Buhler AG, Switzerland and the assessee is subject to tax and the same has been rightly carried out by Ld. A.O. 16. As regards the decision referred and relied by Ld. Counsel for the assessee of ITAT, Indore Bench in the case of "Hind Energy & Coal Benefication (India) Ltd" (supra) the same is not applicable in the instant case since the facts are different. In the case of Hind Energy & Coal Benefication (India) Ltd where the activity of receiving order was carried though an Indian agent who along with the non resident company in question provided services to many other companies also and thus was not "wholly" working for ....