TaxTMI 
TaxTMI 
2019 (1) TMI 1990
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....16 AY 2011-12 1. On the fact and the circumstances of the case, the Ld.CIT(A) has erred in deleting the addition made by the A.O. amounting to Rs.1,45,99,745/- on account of disallowance of expenses u/s 40(a)(ia) of Income Tax Act, 1961. 2. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal." 2. Brief facts of the case are as under: We are taking appeal for A.Y. 2010-11 first, as the issue involved in both AYs is same. Assessee filed its return of income declaring loss of Rs.3,17,32,199/-. Return was processed under section 143 (1) of the Income Tax Act, 1961 (the Act), and case was selected for scrutiny. Accordingly, notice under section 143 (2) of the Act, was issued on 24/08/11 to assessee followed by notice under section 142 (1) along with questionnaire. In response to statutory notices, representative of assessee appeared before Ld.AO and filed necessary details as called for. 2.1. Ld.AO observed that assessee is engaged in the business of investment consulting and strategic communication services. During the assessment proceeding....
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....nity, including India, etc). - Finance support services: The services involve oversight of financial and business management functions, treasury, local audit, global/ regional consolidation and reporting, etc. for APCO India. In addition, financial support services also include assistance in developing financial strategy for APCO group and providing guidance on various financial matters relating to APCO India (including establishing and documenting uniform finance policies and procedures, global transfer pricing policies, banking relationships etc.) to ensure alignment with global financial strategies. - Information Technology: These services involve management of data and IT network required by APCO India, undertaking data/ server back-up procedures, new joiner IT related induction, assistance in centralized procurement of software, desktop, server hardware built and related maintenance services as per APCO Group standards, management of IT relationships with 3rd party software and hardware providers, support in uninterrupted remote access to APCO systems, resolving e-mail issues and Microsoft Office issues, etc. - Human Resources support: These services....
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....s been filed by the appellant as per Annexure 6 to page 35-38 of the paper book. The appellant submitted that the payment made to the overseas group reimbursement of expenses and no income element is involved in the same. These payments have been made to the group entities towards professional, legal and corporate charges on cost to cost basis and there is no mark up involved. The appellant submitted that there is no income element embedded in the aforesaid reimbursement of expenses. The appellant has filed copy of Form 15CA & CB in the paper book filed on 12.10.2015 wherein the payments remitted to the group entities are reflected. It is also seen that the reimbursement made to overseas group entities has been made in the consolidated manner which is pertaining to the previous year as well as for the assessment year under consideration. The appellant has also filed reconciliation of the reimbursement made with the respective party ledger account filed in the paper book dated October 12, 2015. The same has been found to be in order. As discussed above, the appellant has filed tax residency certificate of APCO U.S., APCO U.K. The appellant has also filed certificat....
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....ourt held that no TDS was required to be deducted by the assessee. A special leave petition preferred by the revenue against the High Courts decision was dismissed by the Supreme Court on 17.01.2014 (in SLC CC No. 175 of 2014). This court is also supported in its reasoning by the text of Section 194C (TDS for "work") and Section 194J (TDS of income from "professional services"- the latter expression defined expansively by Section 194J (3) Explanation (a)). Neither provision obliges the person making the payment to deduct anything from contractual payments such as those made for reimbursement of ITA 627/2012 & 507/2013 Page 11 expenses, other than what is defined as "income". The law thus obliges only amounts which fulfil the character of "income" to be subject to TDS in such cases; for other payments towards expenses, the deduction to those entitled (to be made by the payeee) the obligation to carry out TDS is upon the recipient or payee of the amounts. 21. The facts of this case are identical to those in Gujarat Narmada Valley (supra) and for the reasons stated above, this Court does not find any compelling ground to arrive at a different conclusion. Thus, the IT....
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....he contrary, Ld.Sr.DR placed reliance upon decision of Hon'ble Supreme Court in case of Transmission Corporation of AP vs. CIT reported in105 Taxmann 72. Ld.Sr.DR submitted that, unless payer makes an application to Assessing Officer under section 195(2) and obtain permission for non-deduction of tax at source, it was not permissible for payer to contend that payment made to non- resident did not give rise to "income" taxable in India and that, therefore, there was no need to deduct any tax at source. 7. We have perused the submissions advanced by both sides in the light of the records placed before us. 8. The entire basis of Ld.Sr.DR 's contention is that, if assessee makes payments to non-residents without deducting tax at source, section 195(2), would plug the loophole, as, the said section requires payer to make declaration before Assessing Officer (TDS) of payments made to non-residents. In other words, according to Ld.Sr. DR, section 195(2) is a provision, by which payer is required to inform Department of remittance made to a non-resident. 8.1. In our opinion section 195(1) uses expression "sum chargeable under the provisions of the Act", and section 195 uses the wo....
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....ayment made with some mark-up having profit element. It is a settled legal position that when reimbursement of expenses is made which does not include any mark up or profit element, there can be no question of taxing such amount in the hands of the recipient. Once a particular amount is not chargeable to tax in the hands of the nonresident recipient, the question of applicability of section 195 does not arise. Recently, the Hon'ble Supreme Court in DIT(I.T.) VS. A.P. Moller Maersk A/S (2017) 392 ITR 186 (SC) has held that once payment is in the nature of reimbursement of expenses, that is, it is a cost sharing arrangement, it cannot be income chargeable to tax in the hands of recipient. Similar view was earlier taken by the Hon'ble Bombay High Court in DIT VS. Wizcraft International Entertainment P. Ltd. (Bom) (2014) 364 ITR 227 (Bom) holding that payment by way of reimbursement of expenses is not taxable in India. In view of the fact that the amount paid by the assessee to non-residents is not chargeable to tax in their hands and, as such, the provisions of section 195 of the Act are not attracted, there can be no question of applying section 40(a)(i) for making disallowance in th....