| 2018-TII-INSTANT-ALL-539 | 09 March 2018 |
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CASE LAWS DSV AIR AND SEA PVT LTD Vs DCIT: MUMBAI ITAT (Dated: March 7, 2018) Income tax - Sections 92C & 92CA Keywords - ALP - benefit test - management cost - rendering of managerial services The Assessee company preferred present appeal challenging the action of CIT(A) in confirming the TPO's order of determining the value of management services received at Rs Nil, as against payment of Rs. 39,64.096 made to by the Assessee to its AE in Denmark. The Assessee also urged that the CIT(A) had ignored the details submitted and questioned the benefits received by the Assessee in respect of the management services received from its AE. On appeal, the ITAT held that, Whether additional evidences which are neccesary for arriving at correct ALP, deserves to be admitted while adjudicating the appeals - YES: ITAT + the AR has submitted that an identical issue was considered by this tribunal in earlier year, wherein as in current assessment years, additional evidence on this issue were rejected by the CIT(A). It was submitted that this tribunal in assessee’s own case in ITA No. 409/Mum/2015 for the A.Y 2008-09 - 2016-TII-343-ITAT-MUM-TP had decided the issue by opining that: "....The proper course of disposing the first appeal would have been to refer the additional evidences to the TPO/AO and to call for a remand report. But, the FAA rejected the request of the assessee for admitting the additional evidence. The assessee has been penalised enough for not submitting the papers before the TPO. But the principles of natural justice demand that only due taxes should be collected and for that all the evidences should be considered. In the case of Avan Gidwani, the Tribunal has held that Rule 46A of the Income tax Rules could not overrule the basic principles of natural justice. Considering the peculiar facts and circumstances of the case, that matter should be restored back to the file of FAA for admitting the additional evidences, submitted by the assessee for deciding the matter afresh...."; + in the present case also there has been an issue of admission of additional evidence which has been rejected by the CIT(A) on the same lines. Since ITAT in assessee’s own case has remitted the matter to the CIT(A) for admitting the additional evidences and deciding the matter afresh, this issue is also remitted to the file of CIT(A) with a similar direction. Case remanded DDIT Vs SNC LAVALIN ACRES INC: DELHI ITAT (Dated: February 22, 2018) Income tax - Sections 40(a)(i) & 195 Keywords - expenses debited to P&L A/c - expenditure incurred by PE - TDS liability The Revenue Department preferred present appeal challenging the action of CIT(A) in holding that the assessee was not liable to deduct TDS u/s 195, without appreciating that TDS provisions were applicable not only to the expenses incurred by the PE in India but also by the Head Office or any other branch of the assessee in any country, if such expenses were debited to the P&L accounts of the PE in India. On appeal, the ITAT held that, Whether an Indian PE is liable to withhold TDS on the payments made to its overseas HO, if such expenses are not chargeable to tax in India - NO: ITAT + the CIT(A) has decided the issue under present appeal by observing that only so much of the profits of assessee could be taxed in India as was attributable to the activities of the P.E., and the P.E. had not debited these expenses to its P&L account. The requirement of withholding taxes is not applicable in case of expenditures which have not been claimed by assessee against its taxable income in India. As per section 195, the tax should have been deducted at source from payment to a non-resident only if the amount payable is chargeable to tax in India. Even if there had been payment by the P.E. to the head office, of salaries, travelling expenses, and computer repair and maintenance, these payments are not in the nature of fees for technical services as technical knowledge, skill or knowhow has not been 'made available’ to the PE; + the CIT(A) was also in agreement with the assessee that as per the "nondiscrimination" provisions of the DTAA with Canada, the assessee cannot be subjected to any taxation requirement which is more burdensome than that applicable to an Indian national. For the year under consideration, i.e. A.Y. 2001-02, there was no provision for disallowance of expenses in the hands of an Indian resident, if the payments were made to Indian residents without withholding of income tax. However section 40(a)(i) specifically disallowed expenses in respect of payment made by Indian residents to non-residents without withholding of tax. Applying this logic to the facts of this present case, the assessee that is the PE, is not liable to withhold tax while making payments to another non-resident (Head office) as it would lead to discrimination under article 24 of the DTAA; + the assessee has also pointed out that the AO has levied the withholding tax rate of 100% on the expenses on computer repairs and maintenance, whereas the maximum rate that could have been applied is 20% under the DTAA. The AO has given no explanation for applying the rate of 100% to the said expenses, and it is certainly not in accordance with the provisions of the Act, or of the DTAA. In any event, there was no liability on the PE to deduct tax on computer hire charges paid by the head office to a third party in Canada. To conclude, the CIT(A) therefore held that the assessee was not liable to deduct tax at source out of the expenses incurred by the head office, as no payments were made by the PE, nor was any liability incurred by it. Revenue's appeal dismissed |
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