TaxTMI 
TaxTMI 
2019 (11) TMI 1872
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....judicated, as per the order of the Tribunal are reproduced as under:- Disallowance under Section 40(a)(i) of the Income Tax Act. 1961 on account of payments towards Inspection, Verification, Testing and Certification Services (IVTC'), Reimbursements of expenses and Representation / Co-ordination Services 1 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) -11, Mumbai ['CIT (A)'] has erred in allowing partial relief to the extent of Rs. 9,86,632 out of the total disallowances of Rs.1945872/- under section 40(a)(i) of the Income Tax Act, 1961 ('Act')) on account of Inspection, Verification, Testing and Certification services ('IVTC') 2 On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in law and on facts in allowing partial relief of Rs. 2,17,31,522 out of the total disallowances of Rs.23528174/- under section 40(a)(i) of the Act on account of reimbursement of expenses. 3. The first issue that came up for our consideration from ground No.1 of assessee appeal is disallowance of payments towards inspection, verification, testing....
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....rce u/s 195 of the I.T. Act, 1961. 7. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. The facts with regard to taxability of FTS u/s 9(1)(vi) in the hands of non-residents in India, even though services were rendered by such non-residents outside India is not disputed, because the law has been amended by the Finance Act, 2010 with retrospective effect from 1976 to the provision of section 9(1)(vi) and amended the definition of FTS and accordingly, even non-residents are liable to pay tax on FTS in India, even though services were rendered in outside India. But, fact remains that whether, the assessee was liable to deduct TDS u/s 195 in a situation, where the non-residents service provider are not liable to tax in respect of FTS u/s 9(1)(vii), at the time of remittance, but became liable to tax by virtue of a retrospective amendment made in the year, 2010 i.e two years after the end of financial year 2007-08 was exmained by the courts. We find that the Hon'ble Bombay High Court in the case of CIT vs KPMG in ITA No. 609 of 2017 had considered identical issue and after considering relevant amendments to prov....
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....lowed u/s 40(a)(i) of the I.T. Act, 1961, for failure to deduct tax at source u/s 195 of the I.T. Act, 1961. Therefore, by respectfully following the decision of Hon'ble Bombay High Court in the case of CIT vs KPMG, we direct the AO to delete additions made towards reimbursement of expenses u/s 40(a)(i) of the I.T. Act, 1961. 10. In the result, appeal filed by the assessee and consequent ground No.1 and 2 are treated as allowed in terms of our observations given hereinabove. IT(T.P).A.No. 2512/Mum/2017 for AY 2009-10 11. The assessee has raised the following grounds of appeal: Transfer pricing adjustment in relation to provision of expenses On the facts and circumstances of the case and in law, the TPO erred and CIT[A) further erred in determining the arm's length price (or provision of expenses to the extent of INR 12, 00,000 as NIL The Appellant prays that there ought not to be any addition m AY 2009-10 as The Appellant itself has written back the said provision amount in AY 2010-11. Disallowance under Section 40(a)(i) of the Income Tax Act, 1961 with respect to Inspection., Verification, Testing and Certification Services (IVTC') charg....
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....y The Finance (No 2) Act, 2014, should be applied retrospectively from 1 April 2005. b) by applying non-discrimination article provided under The DTAA's, in the event of non-deduction of Tax at source while making payment to non-resident, the disallowance should be restricted to 30% of the amount. Denying the benefit of Article 10 of the India Switzerland DTAA: 8. On the facts and in the circumstances of the case and in law, the AO as well as learned CIT(A) has erred in not granting the benefit of Article 10 of the India Switzerland Double Taxation Avoidance Agreement for determining dividend distribution tax ('DDT') liability under section 115-O on distribution of dividend to Swiss shareholder. The AO as well as CIT(A) erred in not appreciating that the Appellant is liable to pay DDT at the beneficial rate of 10% (as per India-Swiss DTAA) as against @16.995% (as per section 115-O of the Act). 8.1 On the facts and in the circumstances of The case and in law, the learned AO as well as CIT(A) has erred in not granting refund with respect to DDT paid in excess of 10% amounting To Rs. 1,39,90,000 (i.e. Rs 20,00,00,000 @ 6.995%). Penalty:....
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....ground taken by the assessee is dismissed as infructuous. 14. The next issue that came up for our consideration from ground No.4 of assessee appeal is disallowances of training charges u/s 40(a)(i), for failure to deduct tax at source u/s 195 of the Act, 961. The assessee claims that training rendered outside India by non-residents are not liable to TDS in India, when payments were made although, the said provisions have been retrospectively amended by the Finance Act, 2010 w.e.f financial year 1976. We find that an identical issue had been considered by us, in light of amended provision of section 9(1)(vii) of the I.T. Act, 1961 by the Finance Act, 2010 with retrospective effect from 1976 and by following the decision of Hon'ble Bombay High Court, in the case of CIT vs KPMG. (supra) held that a party cannot be called upon to perform an impossible Act i.e to comply with the provision, which was not in force at the relevant time. Consequently, there could be no obligation to deduct tax at source, when the payments have been made to the services providers outside India, in the absence of a specific provision at the time, when the payments were made and hence, the said payments can....
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....set aside to the file of the CIT(A) for fresh adjudication. 18. We have heard both the parties, perused the material available on record and gone through and orders of the authorities below. We find that an identical has been considered by Tribunal for AY 2008-09 in assessee own case and after considering relevant facts, the issue has been set aside to the file of the Ld. CIT(A) for fresh consideration. The relevant findings of the Tribunal are as under:- "We have heard the rival contentions and perused the material available on record. Undisputedly, in the return of income filed assessee has computed DDT @ 15% on the dividend of Rs. 35.95 crore payable to SGS, Switzerland, in terms of provisions contained under section 115O of the Act. It is also relevant to observe, in the course of assessment proceedings, the assessee has not raised any issue with regard to the applicable rate of DDT. In the course of hearing before the first appellate authority, the assessee had raised an additional ground claiming that the DDT paid under section 115O is excess of the amount actually payable by the assessee on the dividend declared in terms of Article-10 of the India Switzerland DTA....
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....ill only apply where the non-resident recipient of dividend incurs the liability in respect of dividend. In our considered opinion, the learned Commissioner (Appeals), though, was required to deal with all propositions advanced by the assessee, he has not done so. Therefore, we are inclined to restore the matter back to the file of the learned Commissioner (Appeals) for fresh consideration after reasonable opportunity of being heard to the assessee." 19. In this view of the matter and consistent with view taken by the coordinate bench, we restored this issue to the file of the Ld. CIT(A) for fresh consideration, in light of observations of the Tribunal for the AY 2008-09 20. In the result, appeal filed by the assessee is partly allowed for statistical purpose. ITA No. 2513/Mum/2017 for AY 2010-11:- 21. The assessee has raised the following grounds of appeal:- Disallowance under Section 40(a)(i) of the Income Tax Act, 1961 with respect to Inspection, Verification. Testing and Certification Services (IVTC) charges and Reimbursements of other charges 1. On the facts and In the circumstances of the case and in law, the learned Commissioner of Income-lax (A....
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....ed under the DTAA's, in the event of non-deduction of tax at source while making payment lo non-resident, the disallowance should be restricted To 30% of the amount. Denying the benefit of Article 10 of the India Switzerland DTAA; 6. On the facts and in the circumstances of the case and in taw, the AO as well as learned CIT(A) has erred in not granting the benefit of Article 10 of The India Switzerland Double Taxation Avoidance Agreement for determining dividend distribution Tax ['DDT'] liability under section 115-O on distribution of dividend to Swiss shareholder. The AO as well as CIT(A) erred in not appreciating that The Appellant is liable to pay DDT at the beneficial rate of 10% (as per India-Swiss DTAA) as against 16.995% (as per section 115-O of the Act.). 6.1 On the fads and in the circumstances of the case and in law, the learned CIT(A) has erred in not granting refund with respect to DDT paid in excess o( 10% amounting to Rs. 1,88, 86,500 (i.e. Rs.27,00,00,000 @ 6.995%). Penalty: 7. On the facts and in the circumstances of the case and in law, the AO erred in initiating penalty proceedings under Section 271(1)(c) of the....