TaxTMI 
TaxTMI 
2020 (9) TMI 1255
X X X X Extracts X X X X
X X X X Extracts X X X X
....lowance of BD commission without deciding whether the appellant was liable to deduct tax at source, particularly when all facts in respect of the same were before it and were undisputed facts ? ii. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was right in providing directions to the Assessing Officer to examine whether there was any concerted effort to shift profits by camouflaging it as BD commission, particularly when the same was not relevant for adjudication of the issue before it and the only issue before the Tribunal was whether the disallowance of BD commission for non deduction of tax source was correct ? And iii. Whether the appellant was not able to deduct tax source in respect of the BD commission paid by it considering the provisions of the Act and the DTAA between India and US particularly when the recipient did not have any permanent establishment in India ? " 4. The assessee is a private limited company and a subsidiary of a company incorporated in the United States (US). The assessee is engaged in business process outsourcing and IT enabled services to a wide range of industries and primarily caters to third party clien....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the impugned order wherein the assessee stated that the non taxability of the BDC having been accepted by the Department pursuant to the order of the concerned CIT(A) against TDS order under Section 201 of the Act may kindly be treated as having attained finality in favour of the assessee. Though such a ground was raised, the Tribunal did not deal with the same, however proceeded to reopen the issue, which had attained finality. 8. Hence, the learned counsel for the appellant - assessee has submitted that the Tribunal exceeded in its jurisdiction. On merits, it is submitted that the BDC was not taxable under the Indian Income Tax Act in the hands of the recipient and more particularly when there was no business connection. It is further submitted that the recipient did not have permanent establishment in India and that the BDC was not taxable in the hands of the recipient in India in view of the Double Taxation Avoidance Agreement (DTAA) between India and the US. 9. With regard to the jurisdiction of the Tribunal, the learned counsel for the appellant - assessee has referred to the decisions in the cases of (i) New India Life Assurance Co. Ltd. Vs. CIT [reported in (1957) 31 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of the order dated 03.2.2014 reads as follows : "I have carefully gone through the AO's contention and appellant's submission. Admittedly, the appellant has been rendering BPO services to foreign clients mostly based in US and Europe and their entire turnover except small portion is exports. All these exports are to third party customers like Microsoft, Dell, Intuit and other leading companies. The Indian company has availed services of the parent company situated in USA for business development in terms of Inter- company Service Agreement. The parent company has undertaken the business development activities for all its subsidiary company in various countries including Indian subsidiary by having centralized sales and marketing department and the nature of services includes getting new customers, retaining and growing existing customers. And the process includes generating prospective leads, allocating the concerned marketing people to follow up with the leads and present to the prospective client above the nature of services and the benefit that the client will get by outsourcing to locations like India. The above process of carrying out sale and marketing and....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... India. The appellant has made advance payment only during the month July 2011. In all the other cases, the payment is made only on actual turnover amounts. "Therefore, mere upfronting of cash flow cannot alter the character of the payment" is an acceptable argument. Since the appellant is subject to order by Transfer Pricing Officer as these are paid for the services rendered by the parent company, there cannot be any presumption on/off profits. Further, the parent company is not in the business of running consultancy services in sales and marketing and hence, Article 12(4) of India US DTAA will have no application. Under the similar circumstances, in the case of WNS North America Bombay Tribunal in ITA.No.2944/Mum/2012 has held that payment for sales and marketing is not fee for included services under India US DTAA where it involved rendering of similar service of sales and marketing to the Indian subsidiary, which is also engaged in the BPO business like that of the appellant. Considering the above submission of the appellant, I hold that these payments, which are for sales and marketing promotion for the development of the business of the appellant is neither fee for ....