TaxTMI 
TaxTMI 
2023 (1) TMI 18
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....ons 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. "The Hon'ble DRP/Ld. AO erred in law in upholding the tr....
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....ome 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, appeals, orders, statutory or otherwise, exemptions, enquiry, investigation, verification of infor....
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....tion 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 which also lays down certain procedures to be followed for issue of manual order under certain circumstances. Accordingly the manual communication should mention the fact that the communication is issued manua....
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....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 law are binding on all the officers responsible for implementation of the Act and, therefore, bound to follow and observe any such orders, instructions and directions of the Board. 13.4 In the decision of Dy. CIT v. Sunita Finlease Ltd. [2011] 1....
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....artment 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 to have never been issued as it fails to mention DIN in its body by adhering to the CBDT circular no. 19 of 2019. Accordingly, additional ground taken by the assessee is allowed. Having so held on the legal issue raised by the assessee in the additional ground, the grounds relating to th....
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....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 facts of the case tabulated above and placing reliance on the coordinate bench, we hold that the order date 01.11.2019 is passed beyond the period of limitation and therefore the adjustment proposed by way of transfer pricing order u/s. 92CA(3), therefore needs to be quashed. It is ordered accordingly Disallowance u/s. 40(a)(ia) ....
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....t 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 information technology and other services as agreed. Thus, the Service providers being the Related parties as discussed supra, impart knowledge to the assessee company (Service recipient), apart from providing of services. Moreover, the Service Recipient, meaning, the assessee, has direct access to knowledge of confidential information of the Service provider. The relevant portion of this part....
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....d 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 made by the assessee to its Related parties, are not in the nature of their business income as claimed by the assessee and the applicability of 'Permanent Establishment' test does not arise. 6.5.5 The Hon'ble Supreme Court in case of GE India Technology Cen. (P.) Ltd. Vs CIT ([2010] 193 Taxman 234 (SC)) held that the most important expression in Section195(1) of the Act are the words 'chargeable under the provisions of the Act'. Any person paying interest or any other sum to a ....
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....egard 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 (Karnataka). The ld AR further submitted that the payments made to Intercall Inc was examined by the CIT(Appeals) in the assessment year 2015-16 and the CIT(Appeals) vide order dated 28.06.2019 held that the payments are not liable for tax deduction at source in India. It is therefore contended that the revenue cannot take a different stand for the same payment in the year under consideration. 20. The ld DR submitted that there is a clear distinction between technology and the technical knowledge that is made available as per the clauses of the DTAA. He drew our attention to Ar....
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....nferencing 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 risk of bad debts, quality claims, and currency risk related to sales solicited by Service Provider." Conferencing Ops / Telecom * Service Provider may provide conferencing operational and / or telecom services to Service Recipient. To conduct this service, Service Provider will own or lease facilities, employ the appropriate personnel, and own and operate / maintain conferencing hardware equipment, as needed. * In order for Service Provider to provide this service, Service Recipient will sub-license the conferencing or other platforms to Service Provider on a royalty-free basis. * Service Provider's conferencing bridges may carry calls for both S....
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....s 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 order, it is clear that the technical knowledge, experience, skill know-how or processes which enables the person acquiring the services to apply the technology contained therein. The Hon'ble Karnataka High Court in the case of CIT vs. De Beers India Minerals Pvt. Limited (2012): 346 ITR 467 (Kar) while considering a similar issue has held that - "To be said to "make available", the service should be aimed at and result in transmitting technical knowledge etc so that the payer of the service could derive an enduring benefit and utilize the knowledge or know-how on his own in future without the aid of the service provider. In other words, to fit into terminology "making available", the technical knowledge, skills" etc must remain with the person receiving the service even after the particular contract comes to an end. It is not enough that the services offe....