TaxTMI 
TaxTMI 
2023 (1) TMI 18
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.... assessee had certain international transactions with its AE and therefore a reference to the TPO was made for determination of ALP of the assessee's international transaction. The TPO made a TP adjustment towards receipt of management services by the assessee from its AE which resulted in an adjustment of Rs.22,03,14,210. The AO passed a draft assessment order incorporating the TP adjustment. The AO also made a disallowance u/s. 40(a)(i) for non-deduction of tax at source on the same payments made by the assessee for receipt of management services by holding that the payments are in the nature of Fees for Technical services [FTS]. 3. Aggrieved the assessee filed its objections before the DRP, who confirmed the additions/disallowances. Aggrieved by the final order of assessment passed pursuant to the directions of the DRP, the assessee is in appeal before the Tribunal. 4. The assessee raised 14 grounds with regard to TP adjustment. During the course of hearing, the ld. AR presented arguments with regard to ground No.3 which is extracted below and submitted that if this ground is adjudicated, the rest of the grounds with regard to TP adjustment would become academic. ....
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....ification Number in Notice/Order/Summons/letter/ correspondence issued by the Income Tax Department - reg. With the launch of various e-governance initiatives, Income-tax Department is moving toward total computerization of its work. This has led to a significant improvement in delivery of services and has also brought greater transparency in the functioning of the tax-administration. Presently, almost all notices and orders are being generated electronically on the Income Tax Business Application (ITBA) platform. However, it has been brought to the notice of the Central Board of Direct Taxes (the Board) that there have been some instances in which the notice, order, summons, letter and any correspondence (hereinafter referred to as "communication") were found to have been issued manually, without maintaining a proper audit trail of such communication. 2. In order to prevent such instances and to maintain proper audit trail of all communication, the Board in exercise of power under section 119 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), has decided that no communication shall be issued by any income-tax authority relating to assessment, app....
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....ituations specified in para 3- (i), (ii) or (iii) above shall have to be regularised within 15 working days of its issuance, by - i. uploading the manual communication on the System. ii. compulsorily generating the DIN on the System; iii. communicating the DIN so generated to the assessee/any other person as per electronically generated pro-forma available on the System. 6. An intimation of issuance of manual communication for the reasons mentioned in para 3(v) shall be sent to the Principal Director General of Income-tax (Systems) within seven days from the date of its issuance. 7. Further, in all pending assessment proceedings, where notices were issued manually, prior to issuance of this Circular, the Income-tax authorities shall identify such cases and shall upload the notices in these cases on the Systems by 31th October, 2019." Sd/- (Sarita Kumari) Director (ITA.II)CBDT." 8. From the plain reading of the circular it is clear that the effective 1st October 2019, no communication shall be issued unless a DIN is allotted and is quoted in the body of the letter except under exceptional circumstances as mentioned in Para 3 w....
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....nding on the authorities in the administration of the Act. Under section 119(2)(a) , however, the circulars as contemplated therein cannot be adverse to the assessee. Thus, the authority which wields the power for its own advantage under the Act is given the right to forgo the advantage when required to wield it in a manner it considers just by relaxing the rigour of the law or in other permissible manners as laid down in section 119. The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. It is a beneficial power given to the Board for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. Hard cases which can be properly categorized as belonging to a class, can thus be given the benefit of relaxation of law by issuing circulars binding on the taxing authorities." 13.3 In the matter of CIT v. Smt. Nayana P. Dedhia [2004] 141 Taxman 603/270 ITR 572 (AP), the Hon'ble Andhra Pradesh High Court held that the guidelines issued by the Board in exercise of powers in terms of section 119 of the Act relaxing the rigours of la....
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....partment, which is State, can be permitted to selectively apply the standards set by themselves for their own conduct. If this type of deviation is permitted, the consequences will be that floodgate of corruption will be opened which it is not desirable to encourage. When the department has set down a standard for itself, the department is bound by that standard and cannot act with discrimination. In case, it does that, the act of the department is bound to be struck down under article 14 of the Constitution. In the facts of the case, it is not necessary for us to decide whether the intention of CBDT was to restrict the period of issuance of notice from the date of filing the return laid down under section 143(2) of the I.T. Act. [emphasis supplied by us by underline] 14. Considering the facts on record, perusal of the impugned order, submissions made by the Ld. Counsel and the department, CBDT circular and the judicial precedents including that of Hon'ble Supreme Court and the jurisdictional High Court of Calcutta, we are inclined to adjudicate on the additional ground in favour of the assessee by holding that the order passed by the Ld. CIT(E) is invalid and deemed t....
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....tion should be considered. In this regard we notice that the coordinate bench of the Tribunal in the case of Sap Labs (supra) has considered the issue of time limit for passing the order u/s.92CA and held that the order should be passed before sixty days prior to the date on which the period of limitation referred to in section 153 and in this regard the Hon'ble Tribunal had relied on the decision of the coordinate bench in the case of Swiss Re Global Business Solution India Pvt. Ltd. vs. DCIT in IT(TP)A Nos. 290 & 438/Bang/2015 vide order dated 30.12.202. 13. The relevant dates pertaining to the issue under consideration are tabulated below:- I. Date of filing of return of income - 30.11.2016 II. 143(2) issued on - 02.08.2017 III. Time period within which 143(3) is to be passed as per sec.153(1) - 31.12.2019 (twenty-one months from the end of the assessment year in which the income was first assessable) IV. Date by which order u/s. 92CA(3) was to be passed - 31.10.2019 (60 days prior to the date on which the period of limitation prescribed u/s.153 expires) V. Date of passing the order u/s. 92CA(3) - 01.11.2019 14. Considering the ....
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....f the 'Master Services Agreement' as referenced in the preceding paragraphs makes it clear that that the service provider 'makes available' technical knowledge, experience, skill, know-how or processes, which enables the assessee to apply such knowledge on its own. The relevant portions of the assessee's 'Master Services Agreement' with West Unified Communication Services Inc. (Formerly Intercall Inc.) and West UC Asia Pte Ltd (Formerly InterCall Asia Pacific Holdings Pte. Ltd) for receipt of services, are reproduced below. (Note: The relevant text of agreements with both the parties is the same and hence the discussion below is applicable for payments to both Related parties.) ARTICLE 4 SERVICES The Service Provider will render to the Service Recipient some or all of the Services defined in Exhibit 1, which are adequate for the needs, benefit and interest of the Service Recipient. As needed, the service may include, in particular but not limited to, business advisory services, coaching and operational support for example in treasury and finance, business development, legal, human resources, sales and marketing as well as infor....
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....ation"). Both Parties undertake hereby to hold in stria confidence all and any information and not to use, disclose, reproduce or dispose of any Information in any manner other than that expressly provided for in this Agreement. Furthermore, both Parties hereby guarantee that any person related to them which might have access or obtain knowledge of the Information, including but not limited to its personnel. employees, consultants or agents, shall be bound by this Article 11. The obligations of both Parties under this Article 1I shall survive in arty case the termination of this Agreement, being irrelevant the reasons of such a termination. The technical knowledge, skills, etc. remains with the person receiving the services, being the assessee Company, even after the contract comes to an end. 6.5.4 With this, the assessee's case has passed all the tests required, in respect of necessity of deduction of taxes as required by Section 195, section 5, section 9, section 90 and the relevant section (Article-12) of both DTAAs. The assessee's case is also covered by the judicial pronouncements as explained above. As such, the payments ma....
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....rieved the assessee is in appeal before us. 19. The ld AR submitted that it is a settled position that the technology will be considered 'made available' when the person who received the service is enabled to apply the technology independent of the service provider and in the present case no such technology is made available to the assessee. The ld. AR drew our attention to the services agreed to be provided by the related parties to the assessee and contended that these services are not in the nature of technical services which is made available to the assessee. With regard to the confidentiality clause, as relied on by the AO, the ld. AR submitted that as per the same clause, both parties are not to use, disclose, reproduce or dispose of any information which would mean that there is no transfer of knowledge that is made available to the assessee by the related parties. Further it is submitted that mere presence of such clause in the agreement cannot lead to the conclusion that technology was made available. In this regard, the ld. AR relied on the decision of the jurisdictional High Court in the case of CIT v. De Beers India Minerals Pvt. Ltd. [2012] 21 taxmann.com 214 (Karna....
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....t of this Agreement. All the information included in Exhibit 1 shall be reviewed periodically and be aligned with actual circumstances, which may change over the duration of this Agreement. The Parties shall mutually agree on any changes to such information." Exhibit - 1 "Reseller Services * Service Provider may solicit sales within the Territory and other selected country customers within the guidelines provided by Service Recipient. Service Recipient retain,. the right of approval on all sales. * Service Recipient will make all strategic decisions with regard to the execution of its conferencing business in the Territory and will be the significant risk taker with regard to the conferencing, event, and other services resold by Service Provider. * Service Provider will perform or assist in marketing activities required to develop its sales market. * The parties will decide whether Service Provider or Service Recipient will prepare and issue customer invoices and make collections from customers. * Service Provider will retain ownership of the customer relationships. * Service Recipient will assume the ....
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....ervices which may be provided (not allinclusive), are: - Finance, Accounting, and Treasury - Invoicing and collections - Legal - Human Resources and Payroll administration - Information Technology - Marketing - Other Contract Research & Development * Service Provider may provide contract research and development services to Service Recipient. * To conduct this service, Service Provider will own or lease facilities, employ the appropriate personnel, and operate / maintain computer hardware, as needed. * Service Provider will have no ownership right to the software developed or upgraded and Service Recipient will retain all rights and ownership to the software. * Service Provider's programmers may perform development work for both Service Recipient as well as other West Group companies that will contract with Service Provider. Service Provider will maintain records to segregate time and expense to separately invoice the other West Group companies." 22. From the Article 12 of the DTAA between India and US and India and Singapore as extracted in the earlier part of this or....