TaxTMI 
TaxTMI 
2022 (9) TMI 1538
X X X X Extracts X X X X
X X X X Extracts X X X X
.... management and financial decision etc., therefore, the technical knowledge expertise and knowhow was made available to the assessee and there is no continuity in treatment on expenses on management fees for A.Y. 2009-10, 2010-11, 2013-14 & 2014-15 on the payments made its group entity in UK. (b) On the facts & circumstances of the case and in law, the ld. CIT (A) has erred in deleting the disallowance of this expenditure made buy the AO of Rs.2,06,29,647/- u/s 37 of the I. T. without considering that during the assessment proceedings, the assessee has submitted only some of invoices on a sample basis and not produced any other evidence. (c) Whether on the facts & circumstances of the case and in law, the ld. CIT (A) has erred in deleting the addition of Rs.1,64,839/- made by the AO in respect of delayed payment of Employee's contribution to the EPF/ESI, by not appreciating that the Employees contribution to EPF/ESI is governed by the provision of section 2(24) r.w.s. 36(1)(va) and not by the section 43B of the I.T. Act. 3. The first ground relates to disallowance under section 40(a)(i) of the Income Tax Act, 1961 (the Act) in respect of payment made for manage....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... its business activities. 5. Justifying the non-deduction of TDS on the aforesaid payments the assessee submitted that provisions of the Income Tax Act provides that TDS is required to be deducted from payments made to non-residents only if such amounts are chargeable to tax under the provisions of the Act. It was contended before the Assessing Officer that it is legal position that by virtue of section 90(2) of the Act where the Government of India has entered into an agreement with the Government of any other country by granting relief of tax or as the case may be Avoidance of Double Taxation ('DTAA') then in relation to the assessee to whom such agreement applies the provisions of such DTAA shall apply to the extent which are more beneficial to the assessee. Therefore, it was contended that the provisions of DTAA over-ride the provisions of the Act to the extent these DTAA are favourable to the assessee. 6. The assessee further contended that the definition of Fees for Technical Services ('FTS') under the India UK DTAA and fees for included services (FIS) in the India USA DTAA covers only technical and consultancy services and does not include managerial services. Accordin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d the issue in favour of the assessee, held that management charges paid by the assessee to its AEs do not fall under FTS and not liable to deduction of tax at source under section 195 of the Act. 9. The ld. DR strongly supported the order of the Assessing Officer. The ld. DR further submits that the Revenue did not file appeal for the assessment year 2010-11 where the CIT (Appeals) decided the issue in favour of the assessee in view of the meager disallowance. The ld. DR further submits that in subsequent years the assessee itself deducted TDS on the payments made towards managerial services to the entities in UK, Singapore and USA. The ld. Counsel for the assessee placed reliance on the order of the ld. CIT (Appeals). The ld. Counsel for the assessee further submits that even during the assessment year 2014-15 the issue was decided in favour of the assessee and the Revenue did not file appeal and accepted the order of the ld. CIT (Appeals). The ld. Counsel for the assessee further submits that the assessee has been making such management charges since 2006 through the Global Management Services Agreement (GMSA) entered between Intertek Management UK and various entities of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al of the Revenue. 12. In ground No. (b) of the grounds of appeal of Revenue challenges the order of the ld. CIT (Appeals) in deleting disallowance of management charges disallowed by the Assessing Officer under section 37 of the Act. 13. On perusal of the order of the ld. CIT (Appeals) it is noticed that in the course of appellate proceedings remand report was called for by the ld. CIT (Appeals) on the additional evidences furnished by the assessee to prove whether the expenses were in fact incurred by the assessee for the purpose of its business. 14. The ld. CIT (Appeals) considering the remand report and the submissions of the assessee and the additional evidences furnished by the assessee deleted the disallowance of management charges made under section 37(1) of the Act observing as under:- 15. On careful reading of the order of the ld. CIT (Appeals) we find that the ld. CIT (Appeals) has examined the evidences furnished and came to the conclusion that the expenses incurred towards management services are for the purpose of business and such services are routine and recurring in nature and qualify as Revenue expenditure. It is also the submission of the ld. Counsel ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecipient. The scope of make available has been extensively discussed in the following judicial decisions felled upon by the Appellant 7.4 Guy Carpenter & Co. Ltd. vs ADIT, Circle 1(2), International Taxation, New Delhi [(2011) 15 taxmann.com 285 (Delhi)] CIT vs De Beers India Minerals (P) Ltd. [346 ITR 467] Raymond Limited vs Deputy CIT [80 TTJ 120] (Mumbai ITAT) Based on an examination of the services received by the Appellant and the principles laid down in the above rulings, it is observed that the underlying services are routine in nature and do not enable the appellant to perform the functions in its own in the future. Thus, the make available condition is not satisfied and hence, these services do not qualify as FTS under the tax treaties. In case of UK and USA, DTAA, fees for technical services does not include managerial services. In the case of Singapore however, managerial services is included in the definition but that is subject to make available technical knowledge, experience, skill, knowhow or processes which enables the person acquiring the services to apply the technology contained. 7.5 In this regard, the AR....
X X X X Extracts X X X X
X X X X Extracts X X X X
....appeilant and accordingly, I hold that such payments were not covered within the provisions of Section 155. in view of this, no disallowance under Section 40/alfia) was called for, which was erroneously done by the appellent in the computation of income. The id. AO is directed to give allowance for the same." 7.6 The facts and issues involved in the present appeal is identical to the facts of the case before the Ld. CIT(A for AY 2010-11 and in that year, the issue has been decided in favour of the appellant. Following the same, I agree with the appellant's contention that the management charges paid by it to its AEs are not liable for deduction of tax at source under section 195 of the Act based on the relevant provisions of the applicable tax treaties and in due deference to the case laws submitted by the appellant, the disallowance of management charges under section 40(a)(i) is deleted. The ground number 3 above is allowed. Document 2 7.7 In the order, the AO has also disallowed management charges under # section 37 of the Act by stating that the appellant did not produce any evidence (except for sample copies of invoices) to demonstra....