BUREAU VERITAS INDIAN DIVISION, MUMBAI V. ADIT (IT)-3(2), MUMBAI

ITA 2184/MUM/2009

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84503 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 11-12-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 08-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK PERAMPURNA
• Keywords: Double taxation relief; Permanent establishment; Commercial expediency
• Section: 5(2)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES L MUMBAI . . , , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO.3238/MUM/2006 (A.Y.2002-03) ITA NO.659/MUM/2007(A.Y. 2003-04) ITA NO.273/MUM/2008(A.Y. 2004-05) ITA NO.2184/MUM/2009(A.Y. 2006-07) M/S. BUREAU VERITAS-INDIAN DIVISION, 6 TH FLOOR, MARWAH CENTRE, OPP. ANSA INDL. ESTATE, K MARWAH MARG, ANDHERI (E), MUMBAI 400 072 PAN:AAACB 1465H (APPELLANT ) VS. ADIT/DDIT(INTERNATIONAL TAXATION) 3(2), SCINDIA HOUSE, N.M.ROAD, MUMBAI (RESPONDENT) ITA NO.04/MUM/2008 (A.Y. 2004-05) DDIT(INTERNATIONAL TAXATION) 3(2), SCINDIA HOUSE, N.M.ROAD, MUMBAI (APPELLANT ) VS. M/S. BUREAU VERITAS-INDIAN DIVISION, 6 TH FLOOR, MARWAH CENTRE, OPP. ANSA INDL. ESTATE, K MARWAH MARG, ANDHERI (E), MUMBAI 400 072 PAN:AAACB 1465H (RESPONDENT) ASSESSEE BY : SHRI DEEPAK TRALSHAWAL A REVENUE BY : SHRI VIVE K PERAMPURNA DATE OF HEARING : 16/12/2014 DATE OF PRONOUNCEMENT : 16 /12/2014 ORDER PER BENCH: ITA NO.3238/MUM/2006,A.Y.2002-03, ITA NO.659/MUM/ 2007,A.Y.2003-04, ITA NO.273/MUM/2008, A.Y 2004-05, ITA NO.2184/MUM/2 009, 2006-07 ARE FILED M/S. BUREAU VERITAS-INDIAN DIVISION, 2 BY THE ASSESSEE AND ITA NO.04/MUM/2008,A.Y.2004-05 IS AN APPEAL FILED BY THE REVENUE. GROUNDS OF APPEAL IN EACH APPEAL READ AS UNDER: GROUNDS OF APPEAL IN ITA NO.3238/MUM/06, A.Y. 2002- 03: 1.1 THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANC E OF RS. 50,59,019 BEING SHARE OF TECHNICAL EXPENSES OF HEAD OFFICE WITHOUT APPRECIA TING THE FACT THAT THE SAME WAS REIMBURSEMENT OF ACTUAL EXPENSES INCURRED BY THE HE AD OFFICE. 1.2 THE CIT(A) FURTHER ERRED IN CONSIDERING THE RE IMBURSEMENT OF ACTUAL EXPENSES AS FEES FOR TECHNICAL SERVICES WITHOUT CONSIDERING THE DEFINITION OF FEES FOR INCLUDED SERVICES AS PER ARTICLE 12(4) OF INDIA-USA T- FRAN CE TAX TREATY 2.1THE CIT(A) ERRED IN NOT ADMITTING THE ADDITIONAL GROUND OF APPEAL REPRODUCED IN THE ORDER OF CIT(A) UNDER PARA 14, SAME HAVING BEEN TAK EN ON ACCOUNT OF THE VIEW ON THE APPELLANTS GROUND OF APPEAL BEING TAKEN BY CIT(A), GATHERED IN THE COURSE OF APPEAL PROCEEDINGS. PROCEEDINGS. 2.2 IT IS SUBMITTED THAT DISALLOWANCE OF RS. 50,59 ,019 ON THE GROUND COMPLETELY OTHER THAN BASIS OF THE ASSESSING OFFICER WAS NOT CALLED FOR AND IN ANY CASE ON THAT BASIS, ADDITIONAL GROUND AS RAISED SHOULD HAVE BEEN ADMITT ED. 3.1 ASSESSING OFFICER ERRED IN DISALLOWING EXPENDI TURE ON FOREIGN TRAVEL OF RS. 6,87,066 BEING EXPENDITURE ON FOREIGN TRAVEL OF BUSINESS ASS OCIATES AND CIT(A) ERRED IN CONFIRMING THE SAME. THE APPELLANT SUBMITS THAT THE SAID EXPEN DITURE IS INCURRED FOR COMMERCIAL EXPEDIENCY. HENCE. SAME BE ALLOWED. 3.2 1HE APPELLANT NOTES THAT FOR SIMILAR DISALLOWAN CE OF FOREIGN TRAVEL EXPENDITURE FOR A.Y 93-94 APPEAL IS PENDING BEFORE THE SUPREME COUR T AND FOR A.YS. 1995-96 TO 1998- 99 APPEALS ARE PENDING BEFORE BOMBAY HIGH COURT. GROUNDS OF APPEAL IN ITA NO.659/MUM/2007(A.Y.2003-0 4 ): 1.1 THE ASSESSING OFFICER ERRED AND CIT(A) IN CONF IRMING THE DISALLOWANCE OF RS 48,51,584/- BEING SHARE OF TECHNICAL EXPENSES OF HE AD OFFICE WITHOUT APPRECIATING THE FACT THAT THE SAME IS REIMBURSEMENT OF ACTUAL EXPEN SES INCURRED BY THE HEAD OFFICE. 1.2 THE ASSESSING OFFICER FURTHER ERRED IN CONSIDE RING THE REIMBURSEMENT OF ACTUAL EXPENSES AS FEES FOR TECHNICAL SERVICES WITHOUT CON SIDERING THE DEFINITION OF FEES FOR INCLUDED SERVICES AS PER ARTICLE 12(4) OF INDIA-US A TREATY WHICH APPLIES TO INDIA-FRANCE TAX TREATY AS PER CLAUSE 7 OF THE PROTOCOL OF INDIA FRANCE TAX TREATY AND CIT(A) IN CONFIRMING SUCH CONSIDERATION. GROUNDS OF APPEAL IN ITA NO.273/MUM/2008(A.Y. 2004- 05): 1. THE ASSESSING OFFICER HAS ERRED IN DISALLOWING U/S. 40(A)(I) THE SHARE OF TECHNICAL EXPENSES OF THE HEAD OFFICE OF RS.47,75,357/- IGNOR ING THE FACT THAT THE PAYMENT IS TOWARDS REIMBURSEMENT OF SHARE OF EXPENSES CHARGED TO THE BRANCH ON THE GROUND THAT THE PAYMENT IS IN THE NATURE OF TECHNICAL FEES LIAB LE TO DEDUCTION OF TAX AT SOURCE. M/S. BUREAU VERITAS-INDIAN DIVISION, 3 2 THE ASSESSING OFFICER ERRED IN DISALLOWING FOREIG N TRAVELING EXPENSES OF RS. 2,57,052/- IGNORING THE FACT THAT THE EXPENSES WERE INCURRED F OR THE PURPOSE OF BUSINESS. GROUNDS OF APPEAL IN ITA NO.2184/MUM/2009(A.Y.2006- 07): 1. THE COMMISSIONER OF INCOME TAX (APPEAL) HAS ERR ED IN CONFIRMING THE DISALLOWANCES MADE BY THE ASSESSING OFFICER U/S. 40(A)(I) IN RESP ECT OF SHARE OF TECHNICAL EXPENSES OF THE HEAD OFFICE OF RS.50,22,533/- ON THE GROUND THA T THE PAYMENT IS IN THE NATURE OF TECHNICAL FEES LIABLE TO DEDUCTION OF TAX AT SOURCE IGNORING THE FACT THAT THE PAYMENT IS TOWARDS REIMBURSEMENT OF SHARE OF EXPENSES CHARGED TO THE BRANCH. GROUNDS OF APPEAL IN ITA NO.04/MUM/2008 (A.Y.2004-0 5): 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.47,75,357/- HOLDING TH AT THIS AMOUNT NOT BEING AN ALLOWABLE DEDUCTION IN THE HANDS OF INDIAN P.E CANNOT BE BROUGHT TO TAX IN THE HANDS O F HEAD OFFICE AS INCOME. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO RESTORED. 2. AT THE OUTSET IT WAS SUBMITTED BY LD. AR THAT CR OSS APPEAL FILED BY THE REVENUE IN RESPECT OF A.Y 2002-03 HAS ALREADY BEEN DISPOSED OFF BY THE TRIBUNAL VIDE ITS ORDER DATED 29/10/2009 REPORTED AS (2011) 45 SOT 67 (MUM ) (URO). COPY OF THE ORDER WAS PLACED ON OUR RECORD. IT ALSO CAME TO OUR NO TICE THAT AGAINST AFOREMENTIONED ORDER PASSED BY THE TRIBUNAL REVENUE HAD PREFERRED AN APPEAL WHICH HAS ALSO BEEN DECIDED BY THEIR LORDSHIP OF HONBLE BOMBAY HIGH CO URT VIDE THEIR ORDER DATED 28/09/2011 IN ITA NO.3377 OF 2010, COPY OF THE SAI D ORDER IS ALSO PLACED ON RECORD. ONE COMMON ISSUE RAISED IN ALL THE APPEALS IS REGAR DING DISALLOWANCE MADE BY THE AO IN RESPECT OF AMOUNT PAID BY THE ASSESSEE TO IT S HEAD OFFICE, WHICH ACCORDING TO ASSESSEE IS IN THE NATURE OF REIMBURSEMENT OF TECHN ICAL EXPENSES AND IS NOT TAXABLE IN INDIA. AS AGAINST THE SAID CLAIM OF THE ASSESS EE IT IS THE CLAIM OF THE REVENUE THAT THE SAID AMOUNT IS TAXABLE IN THE HANDS OF THE HEA D OFFICE AND SINCE NO TAX HAS BEEN DEDUCTED BY THE ASSESSEE WHICH WAS REQUIRED TO BE D EDUCTED, THE DISALLOWANCE WAS CALLED FOR UNDER SECTION 40(A)(IA) OF THE INCOME TA X ACT, 1961(THE ACT). IT IS ALSO THE CASE OF THE REVENUE THAT THE SAID AMOUNT IS ALSO AS SESSABLE IN THE HANDS OF THE ASSESSEE AS THE SAID AMOUNT IS RECEIVED BY THE HEAD OFFICE OF THE ASSESSEE IS IN THE NATURE OF FEE FOR TECHNICAL SERVICES WHICH IS TAX ABLE IN INDIA @ 20% APART FROM OTHER M/S. BUREAU VERITAS-INDIAN DIVISION, 4 INCOME OF THE PERMANENT ESTABLISH AS PER DOUBLE TAX ATION AVOIDANCE AGREEMENT (DTAA) BETWEEN INDIA AND FRANCE. 3. BEFORE PROCEEDINGS FURTHER IT WILL BE RELEVANT T O MENTION BRIEF FACTS OF THE CASE. THE ASSESSEE IS A COMPANY INCORPORATED IN FRANCE AN D OPERATED IN INDIA THROUGH ITS INDIAN DIVISION. THE HEAD OFFICE OF THE ASSESSEE I S CLASSIFICATION SOCIETY RECOGNIZED BY 120 NATIONAL MARITIME ADMINISTRATOR AND CARRIES OUT CLASSIFICATION AND A STATUTORY SURVEY AS WELL AS AUDITS FOR IMPLEMENTATI ON OF INTERNATIONAL SAFETY MANAGEMENT CODE AND ISSUING DOCUMENTS OF COMPLIANC E TO COMPANIES AND SAFETY MANAGEMENT CERTIFICATES TO SHIPS. THE INDIAN BRANC H IS ENGAGED IN THE BUSINESS OF PROVIDING SERVICES RELATING TO SHIPPING INDUSTRIES , WHICH INTER-ALIA INCLUDES, CLASSIFICATION, STATUTORY INSTRUCTIONS AND SURVEYS OF ALL TYPES OF SHIPS, CRAFTS AND VESSELS AND ISSUING STATUTORY SURVEYS IN RESPECT OF SURVEYS AND INSPECTION CARRIED OUT. DURING THE COURSE OF ASSESSMENT PROCEEDING S FOR ASSESSMENT YEAR 2002-03 THE AO NOTICED THAT HEAD OFFICE OF THE ASSESSEE HA S ALLOCATED AN EXPENDITURE TO ITS INDIAN DIVISION WHICH ACCORDING TO AO WAS IN THE NA TURE OF TECHNICAL EXPENDITURE OF A SUM OF RS.50,59,019/-. ACCORDING TO AO THE SAID A MOUNT REPRESENTS FEE FOR TECHNICAL SERVICES AND WHILE CREDITING SUCH AMOU NT TO HEAD OFFICE ACCOUNT NO TAX WAS DEDUCTED. THEREFORE, AO ADDED THE SAID AMOUNT UNDER SECTION 40(A)(IA) OF THE ACT. THE AO ALSO ADDED THE SAID AMOUNT IN THE HAN DS OF THE ASSESSEE AS ACCORDING TO AO THE SAID AMOUNT IS TAXABLE SEPARATELY @ 20% IN THE HANDS OF PERMANENT ESTABLISHMENT AS PER DTAA BETWEEN INDIA AND FRANCE. 4. AN APPEAL WAS FILED BEFORE LD. CIT(A) WHO HAS DE CIDED APPEAL BY THE IMPUGNED ORDER DATED 6/3/2006. LD. CIT(A) HAS HELD THAT THE AMOUNT PAID BY THE ASSESSEE TO ITS HEAD OFFICE IS FEE FOR TECHNICAL SERVICES T AXABLE UNDER ARTICLE -13 OF THE INDO- FRANCE TAX TREATY. HE REJECTED THE CONTENTION OF T HE ASSESSEE THAT AMOUNT COULD NOT BE DISALLOWED AS ITS PAYMENT IS TO SELF AND RE LIANCE WAS PLACED AS THE DECISION OF THE TRIBUNAL IN THE CASE OF ABN AMRO BANK NV. LD. CIT(A) HAS ALSO CONFIRMED THE DISALLOWANCE BEING IN ACCORDANCE WITH ARTICLE 7(3)( B) OF INDO-FRANCE TAX TREATY WHICH DESCRIBE THAT THE DEDUCTION WILL NOT BE ALLOWED FO R AMOUNT, IF ANY, PAID (OTHERWISE M/S. BUREAU VERITAS-INDIAN DIVISION, 5 THAN TOWARDS REIMBURSEMENT OF ACTUAL EXPENDITURE) BY P.E TO THE HEAD OFFICE BY WAY OF ROYALTY, FEE OR OTHER PAYMENTS IN RETURN FOR THE USE OF PATENT OR OTHER RIGHTS. HOWEVER, LD. CIT(A) HAS ACCEPTED THE CASE OF THE A SSESSEE THAT SINCE THE SAID AMOUNT HAS ALREADY BEEN ADDED TO THE INCOME OF THE P.E THE SAME AMOUNT CANNOT BE ADDED AGAIN IN THE HANDS OF PE SEPARATELY FROM ITS INCOME ASSESSABLE AS PE. LD. CIT(A) HELD THAT SUCH AMOUNT WOULD AMOUNT TO DOUBL E TAXATION. FOR THE SAKE OF COMPLETENESS SUCH CONCLUSION OF LD. CIT(A) ARE REPR ODUCED BELOW. 9. THE APPELLANT IS ACCEPTING THAT TECHNICAL SERV ICES ARE BEING PROVIDED TO THE BRANCH BY BUREAU VERITAS, PARIS (REFER PARA 2 OF ANNEXURE TO NOTE 1 WITH THE STATEMENT OF FACTS IN WHICH THE DETAILS OF TECHNICAL SERVICES ACTUALL Y PROVIDED BY OUR HEAD OFFICE IS GIVEN. THEREFORE, THE AMOUNT OF RS.50,59,019/- IS FEES FO R TECHNICAL SERVICES TAXABLE UNDER ARTICLE 13 OF THE INDIA FRANCE TAX TREATY. THE APP ELLANTS CONTENTION BASED ON PARA 26 OF ABN AMRO BANK NV SUPRA THAT THE AMOUNT CANNOT BE CONSIDERED DISALLOWABLE IN THE HANDS OF THE BRANCH WHILE COMPUTING ITS BUSINESS IN COME IS NOT ACCEPTED. THEREFORE, THE DISALLOWANCE OF THE CLAIM OF SHARE OF TECHNICAL EXPENSES OF RS.50,59,619/- MADE BY THE AO IS CONFIRMED ON THE GROUND THAT THE PAYMENT OF EXPENDITURE IS TO SELF AND RELIANCE IN THIS REGARD IS PLACED UPON ABN AMRO BANK NV SUPR A. ALTERNATIVELY, THE DISALLOWANCE IS ALSO CONFIRMED UNDER PARAGRAPH 3(B) OF THE ARTIC LE-7 OF INDIA FRANCE TAX TREATY WHICH INTER- ALIA STATES THAT DEDUCTION WILL NOT BE ALLO WED FOR AMOUNTS, IF ANY, PAID (OTHERWISE THAN TOWARDS REIMBURSEMENT OF ACTUAL EXPENSES) BY T HE PE TO THE HEAD OFFICE BY WAY OF ROYALTIES, FEES OR OTHER PAYMENT IN RETURN FOR THE USE OF PATENT OR OTHER RIGHTS. 10. THE AO HAS ALSO HELD THAT THE HEAD OFFICE HA S RECEIVED RS.50,59,019/- AS FEES FOR TECHNICAL SERVICES WHICH IS TAXABLE IN INDIA AT 20% SEPARATE FROM OTHER INCOME OF PE AS PER DTAA BETWEEN INDIA AND FRANCE. THE DISALLOWANC E OF THE AMOUNT OF RS.50,59,019/- HAS BEEN CONFIRMED ABOVE SINCE THE PAYMENT MADE BY THE BRANCH (PE) TO THE HEAD OFFICE IS PAYMENT TO SELF AND IS THEREFORE NOT AN ALLOWABL E DEDUCTION. IN VIEW OF THIS FINDING, THE TAXATION OF THE SAME AMOUNT OF RS.50,59,019/- A S FEES FOR TECHNICAL SERVICES IN THE HANDS OF THE HEAD OFFICE WOULD NOT SURVIVE. THIS C ONCLUSION IS ALSO SUPPORTED BY THE DISCUSSION IN PARA NO.26 OF ABN AMRO BANK NV CASE W HERE IT IS STATED THAT ON THE ASSUMPTION THAT THE PE IS A DIFFERENT ENTITY THAN I TS HEAD OFFICE AND THE INTEREST PAYMENT BY THE PE TO THE HEAD OFFICE IS AN ALLOWABLE DEDUCT ION ON THE PARITY OF REASONING, THE RECEIPT BY THE HEAD OFFICE OF THE INTEREST PAID BY THE PE WOULD BE CHARGEABLE TO TAX IN INDIA U/S. 5(2) OF THE ACT READ WITH ARTICLE 11 OF THE DTAA I.E. THE CHARGEABILITY IN THE HANDS OF THE HEAD OFFICE WOULD ONLY ARISE WHERE THE PE IS TREATED AS A DIFFERENT ENTITY THAN ITS HEAD OFFICE. IN THE PRESENT CASE, AS DISC USSED ABOVE, THE PE IS NOT REGARDED AS A SEPARATE ENTITY FROM THE HEAD OFFICE AND THE PAY MENT OF THE AMOUNT OF RS.50,59,019/- BY THE BRANCH (PE) TO THE HEAD OFFICE HAS BEEN HEL D TO BE A PAYMENT TO SELF. THIS CONCLUSION WOULD ALSO BE APPLICABLE TO THE ALTERNAT IVE FINDING GIVEN ABOVE THAT THE AMOUNT OF RS.50,59,019/- IS TO BE DISALLOWED UNDER ARTICLE 7(3) OF THE INDIA FRANCE TAX TREATY SINCE THE DISALLOWANCE ARISES BECAUSE OF TH E RELATIONSHIP OF PE AND HEAD OFFICE AND TAXATION OF THE AMOUNT DISALLOWED BY ASSESSING THE AMOUNT IN THE HANDS OF THE HEAD OFFICE ON THE BASIS OF THE SAME RELATIONSHIP WOULD AMOUNT TO DOUBLE TAXATION. THEREFORE, THE AOS FINDING THAT THE AMOUNT OF RS.5 0,59,019/- WILL BE TAXED IN THE HANDS M/S. BUREAU VERITAS-INDIAN DIVISION, 6 OF THE HEAD OFFICE AT THE RATE OF 15% SEPARATE FRO M OTHER INCOME OF THE PE IS DELETED AND THE AO IS DIRECTED ACCORDINGLY. 4.1 ON THE AFOREMENTIONED FINDINGS OF THE LD. CIT(A ) THE REVENUE IN ITS APPEAL FOR A.Y 2002-03 HAD RAISED FOLLOWING GROUND WHICH IS DE CIDED BY AFOREMENTIONED ORDER DATED 29/10/09 RENDERED IN REVENUES CROSS APPEAL. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER (NOT) TO TAX THE FEES FOR TECHNICAL SERVICES RECEIVED BY THE HEAD OFFICE AMOUNTING TO RS.50,59,019/- SEPARAT ELY FROM THE OTHER INCOME OF THE PE (PERMANENT ESTABLISHMENT) AS PAYMENT TO SELF. 5. THE APPEAL FILED BY THE REVENUE HAS BEEN DISMISS ED BY THE TRIBUNAL. THE TRIBUNAL HAS RECORDED A FINDING OF FACT THAT THE PA YMENT MADE BY THE ASSESSEE TO ITS HEAD OFFICE WAS IN THE NATURE OF REIMBURSEMENT OF T ECHNICAL EXPENSES AND ACCORDINGLY AMOUNT BEING NOT TAXABLE IN INDIA, THE ASSESSEE IS JUSTIFIED IN NOT DEDUCTING TAX AT SOURCE. CONSEQUENTLY NO DISALLOW ANCE COULD BE MADE ON THE SAID AMOUNT OF FEE FOR TECHNICAL SERVICES PAID BY THE A SSESSEE TO ITS HEAD OFFICE. THESE FINDINGS OF TRIBUNAL ARE MENTIONED IN THE ORDER PAS SED BY HONBLE HIGH COURT DATED 28/09/2011(SUPRA) AND THE SAID ORDER IS REPRODUCED BELOW. 1. WHETHER THE INCOME TAX APPELLATE TRIBUNAL WAS J USTIFIED IN HOLDING THAT THE FEES FOR TECHNICAL SERVICES PAID BY THE ASSESSEE TO ITS HEAD OFFICE WAS NOT TAXABLE IN INDIA AND, THEREFORE, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TA X AT SOURCE IS THE QUESTION RAISED IN THIS APPEAL. 2. THE FINDING OF FACT RECORDED BY THE INCOME TAX APPELLATE TRIBUNAL IS THAT THE PAYMENT MADE BY THE ASSESSEE TO ITS HEAD OFFICE WA S IN THE NATURE OF REIMBURSEMENT OF TECHNICAL EXPENSES AND ACCORDINGLY THE AMOUNT BEING NOT TAXABLE IN INDIA, THE ASSESSEE IS JUSTIFIED IN NOT DEDUCTING TAX AT SOURCE. CONSE QUENTLY, NO DISALLOWANCE COULD BE MADE ON THE SAID AMOUNT OF FEES FOR TECHNICAL SERVI CES PAID BY THE ASSESEE TO ITS HEAD OFFICE. 3. WE SEE NO INFIRMITY IN THE ORDER PASSED BY THE INCOME TAX APPELLATE TRIBUNAL. THE APPEAL IS ACCORDINGLY DISMISSED WITH NO ORDER AS TO COSTS. 5.1 IN VIEW OF AFOREMENTIONED DECISION OF HONBLE H IGH COURT IN THE CASE OF ASSESSEE ITSELF, AFTER HEARING BOTH THE PARTIES IT HAS TO BE HELD THAT ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE FROM THE IMPUGNED PAYMENT, CONSEQUENTLY NO DISALLOWANCE COULD BE MADE OF THE SAID AMOUNT OF FE E FOR TECHNICAL SERVICES PAID BY M/S. BUREAU VERITAS-INDIAN DIVISION, 7 THE ASSESSEE TO ITS HEAD OFFICE, THEREFORE, DISALLO WANCE UNDER SECTION 40(A)(IA) OF THE ACT WAS NOT CALLED FOR. 5.2 NOW ASSESSEE IN ITS APPEAL HAS AGITATED THE FIN DINGS OF LD. CIT(A) THAT THE SAID AMOUNT COULD NOT BE TAXED IN THE HANDS OF THE ASSES SEE AS NEITHER THE SAME COULD BE TAXED AS PER PROVISIONS OF ARTICLE -13 NOR IT WAS T AXABLE AS PER ARTICLE 7 OF INDIA FRANCE TREATY. THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE AFOREMENTIONED DECISION OF TRIBUNAL PASSED IN DEPARTMENTAL APPEAL. THE TRIBUNAL HAS HELD THAT IT WAS ONLY ELEMENTARY THAT TAXABLE UNIT IN THE INSTAN CE CASE WAS THE NON-RESIDENT COMPANY AND NOT ITS HEAD OFFICE OR THE BRANCH OFFIC E. IN TERMS OF THE PROVISIONS OF SECTION 90, THE PROVISIONS OF APPLICABLE DTAA OVER- RIDE THE PROVISIONS OF THE ACT, EXCEPT TO THE EXTENT THAT THE LATTER WERE BENEFICIA L TO THE ASSESSEE. THEREFORE, WHEN THE ASSESSEE DID NOT HAVE ANY TAXABILITY IN INDIA, IN RESPECT OF AN INCOME, IN TERMS OF THE PROVISIONS OF THE APPLICABLE DTAA, ANY TAXABILI TY IN RESPECT THEREOF COULD NOT ARISE ON ACCOUNT OF THE PROVISIONS THE ACT EITHER . THE CONNOTATIONS OF FEES FOR TECHNICAL SERVICES UNDER THE INDO-FRENCH TAX TREATY WERE CONFINED TO PAYMENT FOR SUCH SERVICES AS MAKE AVAILABLE TECHNICAL KNOWLED GE, SKILL, EXPERIENCE, ETC. OR CONSISTED OF DEVELOPMENT AND TRANSFER OF TECHNICAL PLAN OR DESIGN. GENERALLY SPEAKING, TECHNICAL SERVICES ARE TREATED AS HAVING BEEN MADE AVAILABLE WHEN RECIPIENT OF SUCH TECHNICAL SERVICES IS ENABLED TO PERFORM SUCH SERVICES WITHOUT RECOURSE TO THE SERVICE PROVIDER. IN THE INSTANT C ASE, THE PAYMENT FOR TECHNICAL SERVICES, WHICH WAS SOUGHT TO BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE WAS IN THE NATURE OF REIMBURSEMENT OF TECHNICAL EXPENSES T O THE HEAD OFFICE. THE ASSESSING OFFICER HAD OBSERVED THAT THE HEAD OFFICE EXPENDI TURE ALLOCATED TO THE INDIAN DIVISION WAS IN THE NATURE OF TECHNICAL AND ADMINISTRATIVE E XPENSES. THUS, THIS AMOUNT WAS NOT ON ACCOUNT OF ANY SPECIFIC TECHNICAL SERVICES H AVING BEEN MADE AVAILABLE, IN THE SENSE IN WHICH THIS EXPRESSION WAS EMPLOYED IN THE TAX TREATIES, THE AMOUNT COULD NOT BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE UNDER ARTICLE 13 OF THE INDO- FRENCH TAX TREATY. THIS AMOUNT COULD NOT ALSO BE T AXED IN THE HANDS OF THE ASSESSEE UNDER ARTICLE 7 AS IT WAS NOT AN INCOME ATTRIBUTAB LE TO PE. HENCE, THE TAXABILITY OF THE IMPUGNED SUM IN THE ASSESSEES HAND WAS INDEED INCORRECT. M/S. BUREAU VERITAS-INDIAN DIVISION, 8 5.3 THE ABOVE OBSERVATION OF TRIBUNAL CAN BE FOUND IN PARA-9 OF THE ORDER. IN VIEW OF AFOREMENTIONED ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE IN RESPECT OF VERY SAME YEAR, I.E. FOR A.Y 2002-03, IT HAS TO BE HELD THAT THE AFOREMENTIONED AMOUNT COULD NOT EVEN BE ASSESSED IN THE HANDS OF THE ASS ESSEE ON ACCOUNT OF APPLICABILITY OF ARTICLE -13 AND 7 OF DTAA. THEREFORE, FINDINGS OF LD. CIT(A) TO THIS EXTEND HAS TO BE VACATED AND THE ADDITION IS DELETED. 6. THE OTHER GROUND RAISED BY THE ASSESSEE IN A.Y 2 002-03 AND 2006-07 RELATES TO FOREIGN TRAVEL EXPENSES WHICH WAS NOT PRESSED AND, THEREFORE, DISMISSED AS NOT PRESSED. IN THE RESULT, GROUND NO.3.1 AND 3.2 FOR A.Y 2002-03 AND GROUND NO.2 FOR ASSESSMENT YEAR 2004-05 OF ASSESSEES APPEAL ARE DI SMISSED BEING NOT PRESSED. 7. IN VIEW OF ABOVE DISCUSSION, SO FAR AS IT RELAT ES TO A.Y 2002-03 SINCE IMPUGNED ADDITION OF RS.50,59,019/- IS DELETED, GROUND NO.1 & 1.2 ARE ALLOWED AND GROUND NO.2.1 AND 2.2 BECOME INFRUCTUOUS WHICH NEED NOT TO BE ADJUDICATED. THE APPEAL OF THE ASSESSEE FOR A.Y 2002-03 IS PARTLY ALLOWED. 8. SO FAR AS IT RELATES TO APPEALS OF THE ASSESSEE FOR A.Y 2003-04, 2004-05 AND 2006-07, THE COMMON ISSUE RAISED BY THE ASSESSEE IS REGARDING SIMILAR ADDITION OF RS.48,51,584/- FOR A.Y 2003-04, RS.47,75,357/- FOR A.Y 2004-05 AND RS.50,22,533/- FOR A.Y 2006-07 RESPECTIVELY AND THE SAME IS DISCUSSED IN GROUND NO.1 & GROUND NO.1.2 FOR A.Y 2002-03. FOLLOWING TH E AFOREMENTIONED DECISION RENDERED IN RESPECT OF A.Y.2002-03 THE IMPUGNED DIS ALLOWANCE IN RESPECT OF ALL THE YEARS IS DELETED AND THE GROUNDS RELATING TO IMPUG NED ADDITION ARE ALLOWED. 9. SO FAR AS IT RELATES TO REVENUES APPEAL FOR A .Y 2004-05, THE GROUND TAKEN BY THE REVENUE IS SIMILAR TO THE GROUND TAKEN BY REVENUE IN RESPECT OF 2002- 03. IN RESPECT OF A.Y 2002-03 THE APPEAL FILED BY THE REVENUE WAS DISMISSED BY THE TRIBUNAL VIDE AFOREMENTIONED ORDER OF TRIBUNAL DATE D 29/10/2009. THE ORDER OF THE TRIBUNAL HAS ALSO BEEN CONFIRMED BY HONBLE JURISDI CTIONAL HIGH COURT, THEREFORE, M/S. BUREAU VERITAS-INDIAN DIVISION, 9 RESPECTFULLY FOLLOWING THE SAME THE PRESENT APPEAL FILED BY THE REVENUE IS ALSO DISMISSED. 10. BEFORE PARTING IT MAY BE MENTIONED HERE THAT R EVENUES APPEAL FOR A.Y 2006- 07 HAS ALREADY BEEN DISMISSED BY THE TRIBUNAL FOLLO WING THE AFOREMENTIONED ORDER OF THE TRIBUNAL DATED 29/10/2009 IN RESPECT OF DEPARTM ENTAL APPEAL FOR A.Y 2002-03. THOUGH AS PER JUDICIAL PRUDENCE CROSS APPEAL FOR A. Y 2006-07 WERE REQUIRED TO BE DECIDED IN A CONSOLIDATED ORDER BUT TAKING COGNIZAN CE OF THE CONFIRMATION OF DECISION OF TRIBUNAL BY HONBLE HIGH COURT VIDE THE IR ORDER DATED 28/9/2011 IN RESPECT OF A.Y 2002-03 WE HAVE DECIDED THE ASSESS EES APPEAL BY THIS ORDER AS THE APPEAL FILED BY THE REVENUE HAS ALREADY BEEN DECIDE D AND IS IN ACCORDANCE WITH THE VIEW UPHELD BY HONBLE HIGH COURT. 11. IN THE RESULT THE APPEALS FILED BY THE ASSESSEE IN RESPECT OF A.Y 2002-03 AND 2004-05 ARE PARTLY ALLOWED AND APPEALS FOR A.Y 2003 -04 AND 2006-07 ARE ALLOWED. APPEAL FILED BY THE REVENUE FOR A.Y. 2004-05 IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/12/20 14 ! ' #$ % &'( 16/12/2014 ' ) SD/- SD/- ( /SANJAY ARORA ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; &' DATED 16/12/2014 M/S. BUREAU VERITAS-INDIAN DIVISION, 10 ! ! ! ! ' '' ' *+, *+, *+, *+, -,$+ -,$+ -,$+ -,$+ / COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. *0./ / THE RESPONDENT. 3. 1 ( ) / THE CIT(A)- 4. 1 / CIT 5. ,2) *+' , , / DR, ITAT, MUMBAI 6. )3 4 / GUARD FILE. !' !' !' !' / BY ORDER, 0,+ *+ //TRUE COPY// 5 55 5 / 6 6 6 6 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . ' . ./ VM , SR. PS