Scope International Private Limited, CHENNAI V. ITO, CHENNAI

ITA 1106/CHNY/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6454 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 31-07-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 25-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH TRIPATHI JT
• Keywords: Onus to prove

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C, CHENNAI , ! . '# , $ %& ' BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ITA NO.1106/MDS/2016 $ ( )( / ASSESSMENT YEAR : 2013-14 SCOPE INTERNATIONAL PVT. LTD., 01, HADDOWS ROAD, NUNGAMBAKKAM, CHENNAI 600 006. [PAN: AAECS 9043E] VS. INCOME TAX OFFICER, INTERNATIONAL TAX-II(1), 121, M.G.ROAD, NUNGAMBAKKAM, CHENNAI. ( /APPELLANT ) ( / RESPONDENT ) *+ - . / APPELLANT BY : SHRI S.P.CHIDAMBARAM, ADVOCATE /0*+ - . / RESPONDENT BY : SHRI ASHISH TRIPATHI, JT. CIT - 1 / DATE OF HEARING : 31.07.2017 2) - 1 / DATE OF PRONOUNCEMENT : 04.08.2017 /ORDER PER SANJAY ARORA, AM : THIS IS AN APPEAL BY THE ASSESSEE AGITATING THE OR DER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-16, CHENNAI (CIT(A) FOR S HORT) DATED 07.01.2015, DISMISSING THE ASSESSEES APPEAL RAISING A CLAIM UN DER SECTION 248 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSES SMENT YEAR (AY) 2013-14. 2. OPENING THE ARGUMENTS FOR AND ON BEHALF OF THE ASSESSEE, IT WAS SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE (AR), ITS COUN SEL, TAKING US THROUGH THE STATEMENT OF FACTS BEFORE THE FIRST APPELLATE AUT HORITY, THAT THE ASSESSEE, A 2 ITA NO.1106/MDS/2016 (AY 2013-14) SCOPE INTERNATIONA L PVT. LTD. V. ITO PRIVATE COMPANY, IS A SUBSIDIARY OF THE LONDON BASE D STANDARD CHARTERED BANK (SCB UK). SCB UK HAS SUBSIDIARIES AND AFFILIATES AROUND THE WORLD (GROUP ENTITIES). SCB GROUP ENTITIES HAVE DEPUTED EMPLOYE ES TO THE ASSESSEE COMPANY UNDER SECONDMENT ARRANGEMENTS. THE ROLES AND RESPON SIBILITIES OF THE DEPUTED EMPLOYEES ARE DETERMINED BY THE ASSESSEE COMPANY, T HE APPELLANT, AND SUCH EMPLOYEES WORK FOR THE APPELLANT-COMPANY . THE APPELLANT PAYS A PART OF THE COMPENSATION IN INDIA FOR THE DEPUTED EMPLOYEES AND THE BALANCE IS PAID BY THE GROUP ENTITIES. THE APPELLANT-COMPANY DEDUCTS TAX O N THE TOTAL EMPLOYMENT INCOME PAID TO THE DEPUTED EMPLOYEES, I.E., IN INDI A AND OUTSIDE INDIA, AS STIPULATED U/S. 192 OF ACT. THE ASSESSEE HAS ALSO R EGISTERED THE DEPUTED EMPLOYEES AS MEMBERS WITH THE EMPLOYEES' PROVIDENT FUND ORGANISATION . THE GROUP ENTITIES HAVE RAISED DEBIT NOTES ON THE ASSES SEE COMPANY TO REIMBURSE THE EMPLOYMENT COSTS MET BY THEM. THE DEBIT NOTES REPRE SENT REIMBURSEMENT A T COST WITHOUT ANY MARK UP FOR PROFITS. THE NATURE OF THE PAYMENTS MADE BY THE ASSESSEE COMPANY IS AS UNDER: NATURE OF PAYMENT PAYMENT TO SCB UK FIGURES IN USD SCB US FIGURES IN USD SALARIES, ALLOWANCES, PERQUISITES AND BONUS 171,440 102,466 CONTRIBUTION TO RETIREMENT AND INSURANCE SCHEME 13,976 9,742 RELOCATION EXPENSES 165,004 0 TOTAL 350,420 112,208 SCB UK HAS FURTHER RAISED DEBIT NOTE AMOUNTING TO U SD 50,781.82 , BEING THE RELOCATION COST (AIR TICKETS, SHIPMENT CHARGES, TRA NSIT INSURANCE ETC.), PAID TO VENDORS FOR DIRECT RECRUITMENT OF EMPLOYEES WORKING IN THE GROUP ENTITIES. THE RELOCATION COST INCURRED BY SCB UK WAS RECHARGED ON THE ASSESSEE AT COST. THE ASSESSEE-APPELLANT HAS REMITTED ALL THE ABOVE PAYME NTS TO ITS GROUP ENTITIES AFTER DEDUCTING THE NECESSARY TAXES AS PER SECTION 195 OF THE ACT, AND THAT THE ENTIRE 3 ITA NO.1106/MDS/2016 (AY 2013-14) SCOPE INTERNATIONA L PVT. LTD. V. ITO TAX STANDS BORNE BY IT. IT WAS UNDER THESE FACTS AN D CIRCUMSTANCES, THE LD. AR WOULD CONTINUE, THAT AN APPEAL WAS PREFERRED U/S. 2 48 OF THE ACT, WHICH PROVIDES FOR AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY UNDER THE GIVEN CIRCUMSTANCES. HE WOULD THEN TAKE US THROUGH THE CHALLAN FOR PAYME NT OF . 33,86,257/-, PAID ON 06.03.2013, U/S. 195 OF THE ACT (COPY ON RECORD) . ON AN ENQUIRY BY THE BENCH, IT WAS EXPLAINED BY HIM THAT THE TAX ON SALA RY STANDS ALREADY DEDUCTED U/S. 192 OF THE ACT, I.E., OVER AND ABOVE THE SUM OF . 33.86 LACS PAID U/S. 195 OF THE ACT . THE LD. DEPARTMENTAL REPRESENTATIVE (DR) WOULD RE LY ON THE IMPUGNED ORDER, STATING THAT THE ASSESSEE SHOULD HAVE, IN CA SE NO TAX WAS IN ITS OPINION DEDUCTIBLE, AAILED OF THE PROCEDURE PRESCRIBED U/S. 197 OF THE ACT. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. SECTION 248, UNDER WHICH SECTION APPEAL STANDS PRE FERRED BEFORE THE LD. CIT(A), READS AS UNDER: APPEAL BY PERSON DENYING LIABILITY TO DEDUCT TAX I N CERTAIN CASES. 248. WHERE UNDER AN AGREEMENT OR OTHER ARRANGEMENT, THE TAX DEDUCTIBLE ON ANY INCOME, OTHER THAN INTEREST, UNDER SECTION 195 IS TO BE BORNE BY THE PERSON BY WHOM THE INCOME IS PAYABLE, AND SUCH PERS ON HAVING PAID SUCH TAX TO THE CREDIT OF THE CENTRAL GOVERNMENT, CLAIMS THAT NO TAX WAS REQUIRED TO BE DEDUCTED ON SUCH INCOME, HE MAY APPEAL TO THE COMMISSIONER (APPEALS) FOR A DECLARATION THAT NO TAX WAS DEDUCTI BLE ON SUCH INCOME. THE ASSESSEE-APPELLANT, AS EXPLAINED, PAYS A PART OF THE SALARY TO THE EMPLOYEES OF ITS GROUP ENTITIES SECONDED TO IT IN INDIA, WHILE THE BALANCE PART, REPRESENTING THEIR SOCIAL BENEFITS, HEALTH INSURANC E, ETC., IS PAID TO OR FOR THE BENEFIT OF THE SAID EMPLOYEES DIRECTLY BY THE REGUL AR EMPLOYER ABROAD. THE ASSESSEE, BY REIMBURSING THE PART SALARY PAID OUTSI DE INDIA, THUS BEARS THE ENTIRE SALARY COST OF THE SAID EMPLOYEES, AND BEING ONLY I N RESPECT OF SERVICES RENDERED IN INDIA, CLAIMS TO HAVE DEDUCTED TAX AT SOURCE ON THE ENTIRE SALARY U/S. 192 OF THE ACT. IT ACCORDINGLY CLAIMS THAT THERE IS NO OBLIGAT ION ON ITS PART TO DEDUCT TAX AT SOURCE U/S. 195 OF THE ACT THEREON, AND WHICH IT TH OUGH HAS, BY GROSSING UP THE AMOUNT PAID, PAYING THE SAME TO THE CREDIT OF THE C ENTRAL GOVERNMENT. THAT IS, 4 ITA NO.1106/MDS/2016 (AY 2013-14) SCOPE INTERNATIONA L PVT. LTD. V. ITO HAS HOWEVER, REMITTED THE SALARY AS WELL AS THE OTH ER COSTS, BY WAY OF REIMBURSEMENT, TO THE GROUP ENTITIES BY GROSSING UP THE TAX, AND PAYING THE SAME U/S. 195, AND FOR WHICH IT THEREFORE SEEKS DIRECTIO N FOR REFUND. THERE CAN CLEARLY BE NO DOUBLE TAXATION, AS WOULD BE THE CASE IN RESPECT OF SALARY TO SECONDED EMPLOYEES WHERE, AS CONTENDED, T AX STANDS ALREADY PAID ON THEIR ENTIRE SALARY, I.E., INCLUDING THAT DIRECTLY REMITTED ABROAD. THERE IS ALSO NO QUESTION OF DEDUCTION OF TAX AT SOURCE ON SUMS REIM BURSED. NO PART OF THE SUMS REIMBURSED SHOULD, HOWEVER, BE LIABLE TO DEDUCTIO N OF TAX AT SOURCE U/S. 195, AS WHERE IT CONSTITUTES THE INCOME OF THE ULTIMATE PAY EE, TAXABLE IN INDIA, INASMUCH AS TAX CANNOT BE AVOIDED MERELY BECAUSE THE PAYMENT HAS BEEN MADE BY ANOTHER IN THE FIRST INSTANCE, AND WHO IS THEREFORE REIMBU RSED THE COST. FURTHER, WHERE SUMS NOT LIABLE TO DEDUCTION OF TAX AT SOURCE ARE R EMITTED BY INCURRING TAX COST, BY GROSSING UP THE SUMS REMITTED FOR TAX, THE TAX S O DEDUCTED AND PAID IS TO BE RESTORED BACK TO THE ASSESSEE IN-AS-MUCH AS NO TAX COULD BE EXACTED, SAVE THAT LEVIED UNDER THE AUTHORITY OF LAW (ARTICLE 265 OF T HE CONSTITUTION OF INDIA). SECTION 248 ACCORDINGLY PROVIDES FOR A RECOURSE, WH ERE ANY PERSON HAS PAID TAX U/S. 195 ON ANY INCOME, OTHER THAN INTEREST, TO, UP ON ESTABLISHING THAT NO TAX WAS REQUIRED TO BE DEDUCTED U/S. 195 IN THE FIRST PLACE , SEEK A DECLARATION TO THAT EFFECT AND, THUS, REFUND OF THE TAX PAID, BEING OBL IGED TO DO SO UNDER THE ARRANGEMENT. THE SAME, AS IT APPEARS TO US, IS AN A LTERNATE TO S. 195 R/W S. 197 OF THE ACT, THOUGH CAN BE AVAILED OF ONLY AFTER THE DE POSIT OF THE TAX UNDER REFERENCE TO THE CREDIT OF THE CENTRAL GOVERNMENT. NOTHING, THEREFORE, TURNS ON THE REFERENCE TO S. 197 OF THE ACT BY THE LD. DR DU RING HEARING; THE ASSESSEE HAVING INVOKED S. 248, AND THE LD. CIT(A) HAVING IN FACT ADJUDICATED THEREON. WE MAY HERE ALSO CLARIFY THAT HIS ORDER, DISPOSING THE SAID APPEAL, BECOMES AN ORDER U/S. 250(6) OF THE ACT, APPEALABLE BEFORE THE TRIBUNAL U/S. 253 OF THE ACT. 4. IN VIEW OF THE FOREGOING, THE MATTER IS TO BE RE STORED BACK TO THE FILE OF THE LD. CIT(A) FOR AN ADJUDICATION ON MERITS. THIS IS A S HE HAS, WITHOUT DOING SO, 5 ITA NO.1106/MDS/2016 (AY 2013-14) SCOPE INTERNATIONA L PVT. LTD. V. ITO ONLY STATED THAT NO ISSUE ARISES FOR ADJUDICATION A S THE ASSESSEE COULD NOT HAVE ANY GRIEVANCE. HIS STATING THAT THERE IS NO ASSESSM ENT ORDER IS MISCONCEIVED, AS THE SAME IS NOT A REQUIREMENT OF S. 248. AS SOUGHT TO BE EXPLAINED BY US PER PARA 3 OF THIS ORDER, THERE IS A DEFINITE CASE OF GRIEVA NCE TO THE ASSESSEE WHERE THE SUMS REMITTED, BY PAYING TAX THEREON U/S. 195, DO N OT, AS CLAIMED, REPRESENT INCOME IN THE HANDS OF THE PAYEES, OR THAT WHICH IS NOT TAXABLE IN INDIA, OR TAX IN RESPECT OF WHICH STANDS ALREADY PAID BY OR ON BEHAL F OF THE PAYEES, SO THAT NO TAX WAS IN FACT DEDUCTIBLE U/S. 195. REFERENCE IN THIS CONTEXT MAY ALSO BE MADE TO THE DECISION BY THE APEX COURT IN GE INDIA TECHNOLOGY CENTRE (P.) LTD. V. CIT [2010] 327 ITR 456 (SC). SECTION 248 PROVIDES THE M ECHANISM FOR RECOVERY OF THE TAX PAID U/S. 195 ON OTHER THAN INTEREST PAID. THE ONUS TO PROVE ITS CLAIMS THOUGH WOULD BE ON THE ASSESSEE. THE LD. CIT(A) SHA LL DECIDE QUA EACH OF THE SUMS REMITTED PER A SPEAKING ORDER, ISSUING DEFINIT E FINDINGS OF FACT. THE ASSESSEE, NEEDLESS TO ADD, SHALL RENDER ALL ASSISTA NCE AND COOPERATION IN THE MATTER IN THE APPELLATE PROCEEDINGS. WE DECIDE ACCO RDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON AUGUST 04 TH , 2017 AT CHENNAI . SD/- SD/- ( ! . '# ) (DUVVURU RL REDDY) $ /JUDICIAL MEMBER ( ) (SANJAY ARORA) /ACCOUNTANT MEMBER /CHENNAI, 3 /DATED, AUGUST 4 TH , 2017 EDN 4 - /$156 76)1 /COPY TO: 1. *+ /APPELLANT 2. /0*+ /RESPONDENT 3. 81 ( )/CIT(A) 4. 81 /CIT 5. 69: /$1$ /DR 6. :#( ; /GF