B Y K ASIA PACIFIC PRIVATE LIMITED, INDIA BRANCH,PUNE V. ASSISTANT COMMISSIONER OF INCOME TAX(INTERNATIONAL TAXATION), CIRCLE-1, PUNE

MA 44/PUN/2024

AI Insights

The case involves BYK Asia Pacific Pte Limited, India Branch, which filed a Miscellaneous Application against an order of the Income Tax Appellate Tribunal dated 23 January 2024. The original dispute centered on whether certain IT support services and related payments constituted 'fees for technical services' or 'royalty' under the India-Singapore tax treaty, and thus were taxable. The Tribunal had previously ruled against the assessee, stating that the assessee did not provide sufficient evidence to support its claims. In the Miscellaneous Application, the assessee argued that it had submitted additional evidence that was not considered due to a clerical error in sending documents to an outdated address. The Tribunal dismissed the application, stating that it could not revisit the merits of the case under the guise of rectification as per section 254(2) of the Income Tax Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 714490 (ITAT-PUNE)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 05-08-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Assessment Year: 2016-2017
• Other Referred Cases: Engineering Analysis Centre of Excellence Private Ltd vs. CIT, CIT vs. Reliance Telecom Ltd, Rieter Machine Works Ltd vs. ITA number 19/PUN/2021
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAMNATH P. MURKUNDE
• Assessee Lawyers: KETAN VED
• Keywords: Non-deduction of tax
• Section: 143(3)

Judgement Text

" आयकर अपीलीय अधिकरण “सी” न्यायपीठ पुणे में । IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, PUNE BEFORE MS. ASTHA CHANDRA, JUDICIAL MEMBER AND SHREE DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER धिधिि आिेदन सं. / MA No.44/PUN/2024 (Arising out of ITA No.207/PUN/2023) धनिाारण िर्ा / Assessment Year : 2016-17 B Y K Asia Pacific Pte Limited, India Branch, 147, Beck India Ltd. Compound, Mumbai-Pune Road, Off. PMC, Pimpri, Pune – 411018 PAN : AACCB5950H Vs. ACIT (IT) Circle-1, Pune अपीलार्थी / Appellant प्रत्यर्थी / Respondent Assessee by : Shri Ketan Ved Department by : Shri Ramnath P. Murkunde Date of hearing : 09-05-2025 Date of Pronouncement : 05-08-2025 आदेश / ORDER PER ASTHA CHANDRA, JM : The present Miscellaneous Application is filed by the assessee seeking recall of the Tribunal’s order dated 23.01.2024 in ITA No. 207/PUN/2023 for the Assessment Year (“AY”) 2016-17. 2. The assessee in its Miscellaneous Application has raised the following contentions the relevant potion of which is reproduced below: “6. The Applicant filed an appeal to the Hon'ble ITAT against the Order dated 13 December 2022 passed u/s. 143(3) r.w.s 144C(13) r.w.s. 254 of the Act. 7. In the said appeal, the Applicant had raised six grounds of appeal, which are not reproduced here for the sake of brevity. 8. The present application relates to the ground of appeal Nos. 3 and 4 raised by the Applicant in the said appeal. The relevant ground of appeal is extracted hereunder for ready reference: 3. Limited purpose of set-aside proceedings exceeded, and directions of the Hon'ble ITAT not followed. 3.1. The learned AO/DRP erred in not following the directions of the Hon'ble ITAT while giving effect to Hon'ble ITAT's order dated 24 March 2021. Printed from counselvise.com 2 MA No.44/PUN/2024, AY 2016-17 3.2. As directed by Hon'ble ITAT the learned AO ought to have first determined whether the IT services are for rendering technical services to customers in Asia Pacific region and if yes, to analyze whether the payment falls under 'fees for technical services. The learned AO erred in not evaluating the first step as laid down by the ITAT. 3.3. The learned AO/DRP failed to appreciate that the IT support services are not directly linked to rendering of technical support services provided by the appellant to the customers in India and hence, as held by ITAT cannot be subject to tax. 3.4. The learned AO/DRP erred in holding that BYK Germany has created its own IT infrastructure and BYK Germany is providing access to such IT infrastructure to its group companies. 3.5. The learned AO/DRP ought to have appreciated that the payment of Rs. 36,44,508 being reimbursement of cost without any mark-up was not chargeable to tax and hence, it does not warrant any disallowance on account of non-deduction of tax at source. 3.6. The learned AO/DRP erred in applying the provisions of section 195 of the Act in absence of any income chargeable to tax as provided in section 195 of the Act. 4. Reimbursement of expense wrongly considered to be royalty and/or fees for technical services under the India Singapore tax treaty. 4.1. The learned AO/DRP erred in not considering the information provided by the assessee and wrongly treating the entire payment including for services and software license fees as \"fees for technical services\" as well as \"royalty\". 4.2. The learned AO/DRP erred in holding that the amount of Rs.36,44,508 reimbursed by the appellant is in the nature of lees for technical service. The learned AO/ORP ought to have appreciated that the payment being in the nature of reimbursement of expenses, it should not be table to tax. 4.3. The learned AO/DRP erred in treating the payment for end user licenses for SAP, Microsoft etc, as fees for technical services/royalty of Rs. 15,10,450 (included in Rs. 36,44,508) and chargeable to tax under section 9(1)(vi)/(vil) of the Act and Article 12 of the India- Singapore tax treaty. 4.4. The learned AO/DRP ought to have appreciated that the licenses granted to the assessee are end-user license and are only 'right to use' licenses. The underlying right of the license remains with the third-party provider. 4.5. The learned AO/DRP erred in disregarding the reliance placed by the appellant on the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Ltd 432 ITR 471(SC). 4.6. The learned AO/DRP erred in placing reliance on the decision of Pune ITAT in the case of Rieter Machine Works Ltd in ITA number 19/PUN/2021 where the facts of the case are different from that of the assessee. Printed from counselvise.com 3 MA No.44/PUN/2024, AY 2016-17 4.7. The learned AO/DRP erred in holding that the IT support services provided by BYK Singapore to the appellant full the condition of \"make available as referred in Article 12 of the India-Singapore tax treaty. 4.8. The learned AO/DRP erred in observing that the tax treaty applicable to the transaction would be India Germany tax treaty instead of India Singapore tax treaty. 9. In support of the arguments made, the Applicant had filed a paper book of 138 pages on the issues involved in appeal and made detailed arguments in support of its grounds. Further the Applicant also filed letter dated 14 December 2023 alongwith paper book of 3 pages in relation to certain additional details requested by the Hon'ble ITAT. 10. During the course of the hearing on 14 December 2023, the Hon'ble ITAT had asked the Applicant to furnish on or before 22 December 2023, the following additional / further details/particulars in order to verify the facts relating to the claim of reimbursement:  the accounting statements of BYK Asia pacific Pte Ltd. India branch for the year ended 31 March 2016;  the ledger account of the head office in the books of the India branch; and  the ledger account of the India branch in the books of the head office. 11. The Applicant filed a further paper book of 31 pages vide letter dated 22 December 2023 on the same date containing the accounting statements of BYK Asia Pacific Pte Ltd. India branch alongwith the audited financial statements for the year ended 31 March 2016 and in the said letter sought time of four weeks to file the balance details on account of year-end holidays at the head office in Singapore i.e. by 23 January 2024. This request has been recorded in Para No. 13 of the Order dated 23 January 2024 passed by the Hon'ble Bench. 12. The Hon'ble Tribunal vide its Order dated 23 January 2024 has decided this issue in paragraph Nos. 13 and 14 of its Order on Page Nos. 9 to 12 against the Applicant by stating that there have been no cogent evidences furnished by the Applicant to support its contentions and therefore held that the IT expenses are not reimbursement. The operative portion of the Order in paragraph Nos. 13 and 14 on Page Nos. 10 to 12 of its Order is reproduced hereunder for ready reference: \"13. Since, no such evidences filed till today i.e. 23-01-2024 which, in our opinion, are the necessary evidences for fair adjudication of the present issue, absence of which clearly establishes the same situation as it was in the first round of litigation before the Co-ordinate Bench. Having failed to bring on record the necessary evidences in support of assessee's contention inspite of reasonable opportunity, we hold that the assessee failed to place cogent evidences for our adjudication. Therefore, we treat the same as there were no evidences. Further, we note that the significant accounting policies under revenue recognition is clearly mentioned revenue from services rendered is recognized on the basis of an agreed mark-up on net costs incurred, and in accordance with arrangements entered into with the parent company. Therefore, we find support in the arguments of Ld. DR, Shri H. Ananda in bringing to our notice the finding of this Tribunal in the first round of litigation, wherein, it clearly mentioned in para 6 \"that the assessee incurred total expenses at Rs.6.61 crore, debited to its Profit and loss account, which include the expenses of Rs.1.22 crore under consideration. Mark-up at 10% was charged on all the expenses including Rs.1.22 crore which is matching with the figure of Printed from counselvise.com 4 MA No.44/PUN/2024, AY 2016-17 transactions between related parties. There is no dispute with regard to revenue from operations at Rs.7.49 crore (i.e. all the expenses incurred plus mark-up) were credited to the Profit and loss account and resultant profit was offered for taxation To put simply, the Indian BO was allowed mark-up on such expenses of Rs.1.22 crore, which was duly offered for taxation\" Thus, view of the above, the contention of assessee and the arguments of Ld. AR are rejected. 14. Since, we held the IT expenses are not reimbursement, we reiterate the reasons recorded by the ITAT in the first round of litigation in para 7, \"the case of the AO is that the assessee violated the provisions of section 195 and ex consequenti exposed itself to the rigor of u/s.40(a)(i) of the Act. Relevant part of section 195(1) clearly states that: Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any other sum chargeable under the provisions of this Act (not being income chargeable under the head \"Salaries\") shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force.' A cursory look at the provision transpires that deduction of tax at source is warranted, inter alia, on \"any other sum chargeable under the provisions of this Act.\" Thus, the chargeability of amount to tax in India in the hands of recipient is sine-qua-non so as to trigger deduction of tax at source u/s.195 of the Act. Chargeability under the provisions of the Act pre-supposes some profit element involved in the receipt. If the recipient simply recovers the amount spent by it without any profit element, such a receipt, being reimbursement, cannot be characterized as any sum chargeable under the provisions of this Act' and hence would be immune from tax deduction at source. Two fundamental conditions must co-exist in order to fall within the domain of reimbursement. The first is that one-to-one direct correlation between the outgo of the payment and inflow of the receipt must be established; and the second is that the receipt and payment must be of identical amount. The first condition gets satisfied when there is a directly identifiable amount which is spent on behalf of another and later on it is recovered as such from the latter. It means that incurring of the expenditure, at the stage of incurring itself, is known to be for the benefit of the other and not the payer. The second condition gets satisfied when the receipt back of the amount originally spent is not laced with any mark-up Inasmuch as exact amount incurred is recovered. Per contra, receipt of a fixed amount, which may be more or less than the actual outgo, cannot be designated as reimbursement\". Therefore, ground Nos. 3 consisting of 3.1 to 3.6 and 4 consisting of 4.1 to 4.8 raised by the assessee fails and are dismissed\". 13. The Applicant submits that it had collated the balance details and sought to file it vide its letter dated 19 January 2024 and the same had been couriered / sent to its representative's (viz. Deloitte Haskins & Sells LLP) office in Pune for filing. However, the letter was couriered to the old office address (viz. 106, B Wing, 1\" Floor, ICC Trade Tower, Senapati Bapat Road, Pune 411016). During this period, there was a change in their office address (viz. 11th Floor, West end icon, Section 1, Building A, S. No. 169/1, Near Parihar Chowk, DP road, Aundh, Pune 411007). Accordingly, the said letter could not be filed prior to the passing of the Order dated 23 January 2024. Copy of the receipt issued by DTDC at the time of booking the courier on 19 January 2024 alongwith the tracking status of the courier is enclosed as Annexure B (refer page Nos. 13 to 14 of the compilation). 3. The Ld. AR at the time of hearing reiterated the above stated contentions made in the Miscellaneous Application and requested for recall Printed from counselvise.com 5 MA No.44/PUN/2024, AY 2016-17 of the Tribunal’s order dated 23.01.2024 vis-à-vis the ground of appeal Nos. 3 and 4 raised by the assessee and to dispose off these grounds after taking into consideration the arguments and the details sought to be filed by the assessee which could not be earlier submitted due to the reason mentioned in Para 13 of the Miscellaneous application of the assessee reproduced above. In support of the said claim, the Ld. AR took the Bench through a copy of the courier receipt showing the date of booking and receipt of the courier by the person named therein who is an employee of Deloitte Haskins & Sells LLP, Pune. 4. The Ld. DR, on the other hand, submitted that the contention of the assessee in the Miscellaneous Application is beyond the scope of section 254(2) of the Act as there is no mistake apparent on record in the order of the Tribunal. The Tribunal has passed a speaking order taking into consideration all the facts and evidences adduced by the assessee which were available on the records before it at the time of passing the impugned order. The Ld. DR argued that by way of this Miscellaneous Application the assessee is seeking review of the Tribunal’s order in the garb of rectification which is not permissible under the law. 5. We have heard both the parties, considered their arguments and carefully perused the Tribunal’s order dated 23.01.2024 in ITA No. 207/PUN/2023 for AY 2016-17. The assessee by way of the present Miscellaneous Application is contending for recall of the order of the Tribunal dated 23.04.2024 to the limited extent of deciding ground no.3 and ground no. 4 (including its sub-grounds) raised in the said appeal afresh after taking into consideration the arguments and the details sought to be filed by the assessee. Perusal of the order sheet in ITA No. 207/PUN/2023 dated 14.12.2023 reveals that the matter was taken as “heard” on 14.12.2023 with a direction to the assessee to produce certain documents/evidences specified therein and the Ld. counsel for the assessee had agreed to produce the same in a week’s time subject to which the matter was taken as heard by the Bench which was extended for further four weeks at the request of the assessee. Admittedly, the assessee could not furnish the requisite documents/details as directed by the Bench within the specified time. The reason for the same as stated by the Ld. Counsel for the assessee is the lapse on the part of the assessee’s employee in its Pune Office. From the perusal of para 13 and 14 of Tribunal’s order, we observe that the Tribunal has decided the impugned issue(s) clearly Printed from counselvise.com 6 MA No.44/PUN/2024, AY 2016-17 stating therein that the assessee failed to place cogent evidences for adjudication inspite of sufficient opportunity granted to the assessee. Apparently, there is a discussion on the merits as well. Ground Nos. 3 consisting of 3.1 to 3.6 and 4 consisting of 4.1 to 4.8 raised by the assessee were accordingly failed and dismissed by the Bench for the detailed reasoning reproduced in the preceding paragraph. 6. In exercise of powers under section 254(2) of the Act, the Tribunal may amend any order passed by it only to rectify any mistake apparent from the record. The Tribunal cannot revisit its earlier order and go into the details on merit, which is beyond the scope and ambit of the power conferred under section 254(2) of the Act. 7. On perusal of the contents of the Miscellaneous Application filed by the assessee as well as the findings of the Tribunal in its order dated 23.01.2024 in ITA No. 207/PUN/2023, we find it difficult to agree with the contentions of the assessee. In our view, the assessee through this Miscellaneous Application is trying to re-argue its case and thereby persuading the Tribunal to recall/amend its own order which amounts to review of its own order by the Tribunal which is not permissible in law. On the other hand, we agree with the contention of the Ld. DR that what the assessee is actually seeking by way of this Miscellaneous Application is the review of the Tribunal’s order in the garb of rectification which is not permissible under the law. 8. It is a settled law that review in the garb of rectification is not permissible under section 254(2) of the Act. We find the Hon'ble Supreme Court in the case of CIT vs. Reliance Telecom Ltd. (2022) 440 ITR 1 (SC) at para 6 of the decision has observed as under: \"6. None of the aforesaid grounds are tenable in law. Merely because the Revenue might have in detail gone into the merits of the case before the ITAT and merely because the parties might have filed detailed submissions, it does not confer jurisdiction upon the ITAT to pass the order de hors Section 254(2) of the Act. As observed hereinabove, the powers under Section 254(2) of the Act are only to correct and/or rectify the mistake apparent from the record and not beyond that. Even the observations that the merits might have been decided erroneously and the ITAT had jurisdiction and within its powers it may pass an order recalling its earlier order which is an erroneous order, cannot be accepted. As observed hereinabove, if the order passed by the ITAT was erroneous on merits, in that case, the remedy available to the Assessee was to prefer an appeal before the High Court, which in fact was filed by the Assessee before the High Court, but later on the Assessee withdrew the same in the instant case.\" Printed from counselvise.com 7 MA No.44/PUN/2024, AY 2016-17 9. In view of the binding decision of the Hon'ble Supreme Court in the case of CIT vs. Reliance Telecom Ltd. (supra), we do not find any merit in the Miscellaneous Application filed by the assessee. Accordingly, the Miscellaneous Application filed by the assessee is dismissed. 10. In the result, the Miscellaneous Application filed by the assessee is dismissed. Order pronounced in the open court on 05th August, 2025. Sd/- Sd/- (Dr. Dipak P. Ripote) (Astha Chandra) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; दिन ांक / Dated : 05th August, 2025. रदि आदेश की प्रधिधलधप अग्रेधर्ि / Copy of the Order forwarded to : 1. अपील र्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The Pr. CIT concerned. 4. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, “सी” बेंच, पुणे / DR, ITAT, “C” Bench, Pune. 5. ग र्ड फ़ इल / Guard File. //सत्य दपि प्रदि// True Copy// आिेश नुस र / BY ORDER, िररष्ठ दनजी सदचि / Sr. Private Secretary आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune Printed from counselvise.com "