ITO, International Taxation, Kolkata, Kolkata V. M/s. A T & S India Pvt. Ltd., Karnataka

ITA 259/KOL/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4476 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 12-07-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 22-02-2016
• Court: TRIBUNAL
• Department Lawyers: NILOY B SOM
• Keywords: Business income; Double taxation relief; Permanent establishment
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASE EM AHMED, AM] I.T.A NO. 259/KOL/201 6 ASSESSMENT YEAR : 2004-0 5 ITO.WD-INTERNATIONAL TAXATION -VS.- M/S. A T & S INDIA PVT. LTD. KOLKATA KOLKATA [PAN : AAECA 2930 J] (APPELLANT) (RESPONDENT) FOR THE APPELLANT SHRI NILOY B.SOM, JCIT, SR.DR FOR THE RESPONDENT : SHRI ANUP SINHA, A.R. DATE OF HEARING : 15.07.2016. DATE OF PRONOUNCEMENT : 20.07.2016. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 30.10.2015 OF CIT(A)-22, KOLKATA, RELATING TO AY 2004-05. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE REA DS THUS: (I) IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.CIT(A) ERRED BY RELYING UPON THE DECISION OF THE HON'BLE KOLKATA TRIBUNAL IN ASSESSE E'S OWN CASE ALTHOUGH THE MATTER BEFORE THE KOLKATA TRIBUNAL WAS THAT OF DISALLOWANC E ULS.40(A)(IA) OF THE I.T '61 AND THE ISSUE BEFORE THE LD.CIT(A) WAS ARISING OUT OF AN OR DER UNDER SECTION 195 OF THE IT.ACT'61,WHICH IS BASED ON DIFFERENT FACTS. (II) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) ERRED IN HOLDING THAT ORDER U/S.L95(2) OF THE ACT'61 WAS NOT VALID W ITHOUT GOING INTO THE MERIT OF THE CASE OR WITHOUT GIVING AN INDEPENDENT FINDING THAT THE AMOU NT WAS NOT IN THE NATURE OF 'FEES FOR TECHNICAL SERVICES' AS DETERMINED IN THE ORDER U/S/ 195(2) OF THE IT.ACT'61. (III) IN THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD.CIT(A) WAS NOT JUSTIFIED TO RELY UPON THE DECISION OF THE HON'BLE KOLKATA TRIBUNAL AND HO LDING THAT THE AMOUNT RECEIVED BY AT &S AUSTRIA WAS NOT TAXABLE AS PER ARTICLE-7 OF THE INDIA-AUSTRIA DTAA DESPITE THE FACT 2 ITA NO.259/KOL/2016 M/S. A T & S INDIA PVT. LTD. A.YR.2004-05 2 THAT THE A.O IN HIS ORDER U/S.L95 OF THE LT.ACT'61 DATED 13.12.2004 NEVER DETERMINED THE SAME TO BE TAXABLE AS PER ARTICLE 7 OF INDIA- AUSTR IA DTAA' (IV) IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.CIT(A) ERRED IN HOLDING THAT THE PAYMENTS SOUGHT TO BE MADE TO AT &S AUSTRIA IN RESP ECT OF SERVICES UTILIZED BY THE AT &S INDIA PVT. FOR ITS BUSINESS OR PROFESSION CARRIED I N INDIA WILL NOT BE TAXABLE IN INDIA CONSIDERING THE FACT THAT THE JOB PERFORMED BY AT & S AUSTRIA IS OF HIGHLY TECHNICAL AND SKILL ORIENTED JOB WHICH IS CRITICAL FOR GOODS BEIN G ACCEPTABLE TO THE END USER, AND THUS TAXABLE AS FEES FOR TECHNICAL SERVICES. (V) IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.CIT(A) ERRED BY RELYING ON THE HON'BLE KOLKATA TRIBUNAL'S ORDER WHICH WAS BASED UP ON THE HON'BLE KARNATAKA HIGH COURT'S ORDER IN CASE OF DIT VS. SUN MICROSYSTEMS I NDIA P.LTD.(2014)369ITR 63(KARN.) AS THE FACTS IN THE TWO CASES ARE DIFFERENT. IN THE CASE OF SUN MICROSYSTEMS INDIA P.LTD. IT WAS FOUND THAT THE CONSIDERATION FOR 'FEES FOR TECH NICAL SERVICES' WAS NOT TAXABLE IN INDIA AS TECHNOLOGY WAS NOT MADE AVAILABLE AND IN ABSENCE OF A PERMANENT ESTABLISHMENT THE SAME WAS NOT TAXABLE AS PER ARTICLE-7 OF THE INDIA -SINGAPORE DT AA. IN THE INSTANT CASE, THE MAKE AVAILABLE CLAUSE IS NOT PRESENT IN ARTICLE 12 OF INDIA- AUSTRIA DT AA AND THEREFORE, IN ABSENCE OF A P.E IN INDIA THE AMOUNT RECEIVED IN THE NATURE OF 'FEES FOR TECHNICAL SERVICES' IS TAXABLE AS PER ARTICLE-12 OF INDIA-AUSTRIA DT AA. (VI) THE DEPARTMENT CRAVES LEAVE TO ADD OR ALTER, A MEND AND MODIFY, SUBSTANTIATE, DELETE AND/OR REVISE ALL OR ANY OF THE GROUNDS OF APPEAL O N OR BEFORE THE FINAL BEARING. 3. THE ASSESSEE IS A WHOLLY-OWNED SUBSIDIARY OF AT &S AUSTRIA AND IS INTERALIA ENGAGED IN THE MANUFACTURE AND SALE OF PRINTED CIRC UIT BOARDS (HEREINAFTER REFERRED TO AS 'PCBS'). IN ORDER TO SELL THE PCBS, IT IS NECESSARY TO FINISH THE MANUFACTURE OF THE PCBS WITHOUT WHICH THE CUSTOMERS WOULD NOT ACCEPT THE GO ODS. THE ASSESSEE PARTLY MANUFACTURES GOODS IN INDIA. SINCE THE RESPONDENT D OES NOT HAVE ADEQUATE MANUFACTURING FACILITY IN INDIA, THE ASSESSEE SENDS PARTLY-MANUFACTURED GOODS TO AT&S AUSTRIA FOR COMPLETING THE MANUFACTURE AND SALE OF THE FINISHED GOODS. THE PARTLY MANUFACTURED GOODS SENT BY THE ASSESSEE TO AT&S AUS TRIA ARE NOT IN A SALEABLE CONDITION. AT&S AUSTRIA FINISHES THE MANUFACTURING ACTIVITY IN AUSTRIA (I.E. OUTSIDE INDIA) AFTER WHICH THE GOODS WOULD BE READY FOR SAL E. THEREAFTER, AT&S AUSTRIA SELLS THE GOODS TO VARIOUS CUSTOMERS SITUATED OUTSIDE INDIA. IT WAS MUTUALLY AGREED BETWEEN THE ASSESSEE AND AT&S AUSTRIA THAT THE COSTS INCURRED B Y AT&S AUSTRIA IN PERFORMING THE 3 ITA NO.259/KOL/2016 M/S. A T & S INDIA PVT. LTD. A.YR.2004-05 3 AFORESAID MANUFACTURING ACTIVITY TO FINISH THE PROD UCTION OF PCBS WOULD BE REIMBURSED BY THE ASSESSEE TO AT&S AUSTRIA. 4. DURING THE PREVIOUS YEAR, AT&S AUSTRIA RAISED D EBIT NOTES ON THE ASSESSEE TOWARDS THE AFORESAID MANUFACTURING COSTS INCURRED BY THE F ORMER WHICH WAS USD 2,26,190/-. WHILE MAKING PAYMENT OF USD 2,26,190/- TO AT&S AUST RIA IN RESPECT OF REIMBURSEMENT OF ACTUAL MANUFACTURING COSTS, THE AS SESSEE MADE APPLICATION TO THE DEPUTY DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATI ON)-I, KOLKATA (HEREINAFTER REFERRED TO AS THE 'DDIT') FOR AN ORDER UNDER SECTION 195(2) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE 'ACT') FOR PERMITTI NG THE ASSESSEE TO REMIT THE SUM WITHOUT DEDUCTION OF TAX AT SOURCE UNDER SECTION 195(1) OF THE ACT. 5. THE DDIT, VIDE ORDER DATED 13 TH DECEMBER, 2004, HELD THAT THE AMOUNT PAYABLE BY THE ASSESSEE TO AT&S AUSTRIA FOR CARRYING OUT CRIT ICAL MANUFACTURING OPERATIONS FOR MAKING THE FINISHED GOODS ACCEPTABLE TO THE FINAL C USTOMERS WOULD REPRESENT 'FEES FOR TECHNICAL SERVICES' AND THE SAME SHOULD BE TAXED AT THE RATE OF 10% IN VIEW OF THE PROVISIONS OF ARTICLE-12 OF THE DOUBLE TAXATION AVO IDANCE AGREEMENT (HEREINAFTER RE FERRED TO AS THE 'DTM') ENTERED INTO BETWEEN INDIA AND AUSTRIA. THE ASSESSEE, AGGRIEVED BY THE ACTION OF THE DDIT, FILED AN APPEA L BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS)-22 (HEREINAFTER REFERRED TO AS THE CIT(A) AFTER DEPOSITING THE ENTIRE TDS ON THE AFORESAID AMOUNT UNDER PROTEST AS PER THE PROVISIONS OF SECTION 248 OF THE ACT. THE LD. CIT(A) DELETED THE ADDITION MADE BY THE DDIT BY FOLLOWING THE DECISION RENDERED BY THE HON'BLE TRIBUNAL IN THE AS SESSEES OWN CASE IN THE AY 2004-05 AND AY 2005-06 WHEREIN THE HON'BLE TRIBUNAL DELETED THE ADDITION MADE BY THE AO ON THE GROUND THAT THERE IS NO REQUIREMENT OF DEDUCTIO N OF TDS IN RESPECT OF REIMBURSEMENTS OF THE PAYMENTS MADE TO AT&S AUSTRIA . AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE HAS PREFERRED THE PRESENT APPEA L BEFORE THE TRIBUNAL. 4 ITA NO.259/KOL/2016 M/S. A T & S INDIA PVT. LTD. A.YR.2004-05 4 6. WE HAVE HEARD THE SUBMISSIONS OF THE LD.DR, WHO REITERATED THE STAND OF THE REVENUE AS REFLECTED IN THE GROUNDS OF APPEAL FILED BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS SEEN THAT DURING THE RELEVANT PREVIOUS YEAR, AT&S AUSTRIA RAISED DEBIT NOTES ON T HE ASSESSEE TOWARDS MANUFACTURING COSTS INCURRED BY IT IN ORDER TO MAKE THE PCBS SALE ABLE TO CUSTOMERS FOR A SUM OF USD 2,26,190/-. THE AFORESAID COST WAS DEBITED IN THE B OOKS OF ACCOUNT OF THE ASSESSEE UNDER THE HEAD 'REWORK COST' DURING THE PREVIOUS YE AR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND IT CONSISTED OF DIRECT MATE RIAL COST, MATERIAL OVERHEAD COSTS, PRODUCTION OVERHEAD AND TRANSPORTATION COST INCURRE D IN AUSTRIA. DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF THE ASSESSEE FOR A.Y.2004 -05 UNDER SECTION 143(3) OF THE ACT, THE AO DISALLOWED THE SAID PAYMENT UNDER SECTI ON 40(A)(IA) OF THE ACT AND REJECTED THE CONTENTION OF THE ASSESSEE THAT REIMBURSEMENT O F ACTUAL MANUFACTURING COSTS WOULD NOT CONSTITUTE INCOME IN THE HANDS OF AT&S AUSTRIA. THE AO HELD THAT THE AFORESAID PAYMENT WAS ESSENTIALLY IN THE NATURE OF PAYMENTS F OR FEES FOR TECHNICAL SERVICES AS DEFINED IN SECTION 9(1 )(VII) OF THE ACT AND AS SUC H, THESE PAYMENTS WERE LIABLE FOR DEDUCTION OF TAX AT SOURCE. THE LD. CIT(A) CONFIRME D THE DISALLOWANCE MADE BY THE AO AND HELD THAT PAYMENT FOR REWORK COST MADE TO AT&S AUSTRIA WAS IN THE NATURE OF TECHNICAL FEES WITHIN THE MEANING OF PROVISIONS OF SECTION 9(1 )(VII) OF THE ACT. AGAINST THE AFORESAID ORDER OF THE CIT(A) THE ISSUE WAS AGI TATED BEFORE THE HON'BLE TRIBUNAL AND THE HON'BLE TRIBUNAL SET ASIDE THE ORDER OF THE LD. CIT (A) AND REMITTED BACK THE MATTER TO THE FILE OF THE AO FOR FRESH CONSIDERATION. THER EAFTER THE AO AGAIN BY ORDER DT. 27.12.2010 DISALLOWED THE AFORESAID PAYMENT ON THE GROUND THAT PAYMENT FOR REWORK COST MADE TO AT&S AUSTRIA WAS IN NATURE OF TECHNICA L FEES WITHIN THE MEANING OF PROVISIONS OF SECTION 9(1 )(VII) OF THE ACT. ON APP EAL BY THE ASSESSEE AGAINST THE SAID ORDER OF THE AO, THE LD CIT(A) BY ORDER DT. 15.3.2 013 CONFIRMED THE ADDITION WHICH WAS CHALLENGED BY THE ASSESSEE BEFORE THE HON'BLE T RIBUNAL IN ITA NO.2305/KOL/2013. 5 ITA NO.259/KOL/2016 M/S. A T & S INDIA PVT. LTD. A.YR.2004-05 5 THE HON'BLE TRIBUNAL ALLOWED THE ASSESSEES APPEA L BY ORDER DT. 15.10.2015. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF THE TRI BUNAL ON THE SAME ISSUE: COMING TO ASSESSEES APPEAL ITA NO.2305/KOL/2013 A Y 04-05 7. IN THIS APPEAL ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- '1. THAT THE ORDER PASSED BY THE LEARNED COMMISSION ER OF INCOME- TAX (APPEALS)['LD. CIT(APPEALS)] UNDER SECTION 250 OF THE INCOME-TAX A CT, 1961 (,AD,), TO THE EXTENT PREJUDICIAL TO THE APPELLANT, IS BAD IN LAW AND LIA BLE TO BE QUASHED. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(APPEALS) ERRED IN UPHOLDING THE DISALLOWANCE OF RS. 10,128,788/- MADE BY THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX ['A.O], BEING REIMBURSE MENT OF REWORK COSTS BY THE APPELLANT TO A T&S AUSTRIA BY APPLYING THE PROVISIO NS OF SECTION 40(A)(IA) OF THE ACT. 3. THAT THE LD. CIT(APPEALS) ERRED IN UPHOLDING THE ACTION OF THE LD. AO BY CONFIRMING THAT, THE AFORESAID PAYMENT WAS IN THE NATURE OF FE ES FOR TECHNICAL SERVICES UNDER SECTION 9(1 )(VII) OF THE ACT AND ACCORDINGLY, TAXE S ARE REQUIRED TO BE DEDUCTED AT SOURCE. 4. THAT THE LD. CIT(APPEALS) ERRED IN CONFIRMING TH E ORDER OF THE AO HOLDING THAT, TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE FROM THE IMPU GNED PAYMENT BY APPLYING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 5. THAT THE LD. CIT(APPEALS) AND THE LD. AO ERRED I N NOT FOLLOWING THE DECISION OF THE HON 'BLE KOLKATA ITA T IN APPELLANT'S OWN CASE (ITA NO.S 1448 & 1449(KOL) OF 2008 DATED JULY 24,2009) FOR AY 2002-03 AND AY 2003-04, WHEREIN IT WAS HELD THAT REIMBURSEMENT OF INFORMATION TECHNOLOGY COSTS DOES NOT RESULT IN INCOME IN THE HANDS OF THE RECIPIENT AN HENCE, THE PAYMENTS ARE ALLOWAB LE DEDUCTIONS AND NOT FALL WITHIN THE MISCHIEF OF SECTION 40(A)(I) READ WITH SECTION 195. 6. THAT THE LD. AO ERRED IN CONSEQUENTLY LEVYING IN TEREST UNDER SECTION 234B OF THE ACT. 8. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE HAS CLAIMED THE EXPENSES OF RS.1,01,28,788/- IN THE FORM OF REIMBURSEMENT COST INCURRED BY AT & S AUSTRIA TOWARDS THE COST OF REPAIR / REMANUFACTURING OF DEFECTIVE PRODUCTS. THE AO HELD THAT EXPENSES AS FEES FOR TECHNICAL SERVICES AS DEFINED UNDER SECTION 9{1 )(VII) OF THE ACT, SO HE DISALLOWED THE SAID EXPENSES FOR THE VIOLATION OF THE PROVISIONS OF SECTION 40(A )(I) OF THE ACT. THE AO ALSO RELIED ON THE JUDGMENT HON'BLE DELHI TRIBUNAL IN THE CASE OF SAHA RA AIRLINES LTD. VS DCIT( 2002) 83 ITD 11, 41 (DELHI) AND HON'BLE ITAT HYDERABAD IN TH E CASE OF MANNESMANN DEMAG LAUN'CHHAMMER VS. CIT (1988) 26 ITO 198, 202-03( HY D.). AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE CIT(A ) WHO HAS UPHELD THE ORDER OF THE AO. 9. NOW AGGRIEVED ASSESSEE IS IN SECOND APPEAL BE FORE US. THE LD AR SUBMITTED THAT THE DECISION OF THE HON'BLE KOLKATA ITAT IN APPELLANT'S OWN CASE (ITA NO.S 1448 & 1449(KOL) OF 2008 DATED JULY 24,2009) FOR AY 2002- 03 AND AY 2003-04, WHEREIN IT WAS 6 ITA NO.259/KOL/2016 M/S. A T & S INDIA PVT. LTD. A.YR.2004-05 6 HELD THAT REIMBURSEMENT OF INFORMATION TECHNOLOGY C OSTS DOES NOT RESULT IN INCOME IN THE HANDS OF THE RECIPIENT AN HENCE, THE PAYMENTS ARE A LLOWABLE DEDUCTIONS AND NOT FALL WITHIN THE MISCHIEF OF SECTION 40(A)(I) READ WITH SECTION 195. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 10. WE FIND FROM THE AFORESAID DISCUSSION AND SU BMISSION OF THE ASSESSEE THAT THE FACTS HAVE ALREADY BEEN DECIDED BY THE HON'BLE KOLKATA IT AT BENCH IN FAVOUR OF THE ASSESSEE IN THE CASE OF DCIT V. M/S AT&S INDIA PVT. LTD. IN ITA NO. 1262/KO1/2010, 186/KO1/2011, 2071/KOL/201 0 & 779/KOL/2012 FOR A Y S 2005-06, 2006-07 & 2007-08 VIDE DATED 29-01-2015. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED BELOW: '18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND G ONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. A PERUSAL OF THE DECISIO N OF THE COORDINATE BENCH OF THIS TRIBUNAL REFERRED TO SUPRA FOR THE ASSESSMENT YEARS 2002-03 AND 2003-04 CLEARLY SHOWS THAT THE TRIBUNAL HAS TAKEN INTO CONS IDERATION THE AGREEMENT DATED 13.03.2001 BETWEEN THE ASSESSEE AND AT & S AU STRIA. FURTHER, SIMILARLY, HON'BLE KARNATAKA HIGH COURT IN A RECENT JUDGMENT I N THE CASE OF OIT V. SUN MICROSYSTEMS INDIA P. LTD. (2014) 369 ITR 63 (KARN) EXACTLY ON THE SIMILAR ISSUE INTINTERPRETING ARTICLE 7 OF THE DTAA BETWEEN INDIA AND SINGAPORE, WHICH IS IDENTICALLY WORDED TO ARTICLE 7 OF DTAA BETWEEN INDIA AND AUSTRIA HELD THAT THE PARENT COMPANY HAS NOT MADE AVAILABLE TO THE AS SESSEE THE TECHNOLOGY OR THE TECHNOLOGICAL SERVICES WHICH WAS REQUIRED TO PROVID E THE DISTRIBUTION, MANAGEMENT AND LOGISTIC SERVICES. WE FURTHER NOTICE D THAT IN THE SAID ORDER THE TRIBUNAL HAS TAKEN INTO CONSIDERATION THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. DUNLOP RUBBER CO. LIMITED (1983) 142 ITR 493 (CAL) AND IN THE SIMILAR CIRCUMSTANCES THAT OF THE ASSESSEE TO HOLD THAT THE REIMBURSEMENT OF THE EXPENDITURE DOES NOT GENERATE ANY INCOME IN THE HANDS OF THE RECIPIENT 'AND CONSEQUENTLY THERE WAS NO REQUIR EMENT OF DEDUCTION OF TOS AND CONSEQUENTLY THE PROVISIONS OF SECTION 40(A)(IA ) COULD NOT BE INVOKED. THE FACTS BEING IDENTICAL FOR THIS ASSESSMENT YEAR, RES PECTFULLY FOLLOWING THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSE E'S OWN CASE FOR THE ASSESSMENT YEARS 2002-03 AND 2003-04 REFERRED TO SU PRA, FINDING OF CIT(A) STANDS REVERSED AND THE DISALLOWANCE AS MADE BY THE ASSESSING OFFICER IN RESPECT OF THE REIMBURSEMENT OF THE PAYMENTS MADE T O AT & S AUSTRIA TO THE EXTENT OF RS.1,50,44,031/- STANDS DELETED. THIS ISS UE OF ASSESSEE'S APPEAL IS ALLOWED. ' SINCE THE MATTER IS ALREADY COVERED IN FAVOUR OF AS SESSEE IN ITS OWN CASE BY THIS TRIBUNAL, WE CONCLUDE THE APPEAL IN FAVOUR OF ASSESSEE. 8. IN VIEW OF THE AFORESAID DECISION RENDERED IN R ESPECT OF THE VERY SAME PAYMENT, WE ARE OF THE VIEW THAT THERE IS NO MERIT IN THIS APPE AL BY THE REVENUE. WE DO NOT FIND ANY SUBSTANCE IN THE GROUNDS RAISED BY THE REVENUE BEFO RE US. AS FAR AS GROUND NO.1 RAISED BY THE REVENUE IS CONCERNED, IT IS CLEAR FROM THE O RDER OF THE TRIBUNAL THAT THE VERY SAME 7 ITA NO.259/KOL/2016 M/S. A T & S INDIA PVT. LTD. A.YR.2004-05 7 PAYMENT WHICH WAS SUBJECT MATTER OF APPLICATION U/S .195 OF THE ACT THAT THE DISALLOWANCE WAS MADE BY THE AO U/S.40(A)(I) OF THE ACT.(INADVERTENTLY MENTIONED AS SEC.40(A)(IA) OF THE ACT IN THE ORDER OF THE TRIBUN AL REFERRED TO ABOVE) AS FAR AS GROUND NO.2 RAISED BY THE REVENUE IS CONCERNED, THE TRIBUN AL HAS CONSIDERED THE MERITS OF THE CASE AND HAS GIVEN A CLEAR FINDING WITH REGARD TO T HE NATURE OF THE PAYMENT BEING IN THE NATURE OF REIMBURSEMENT AND THE ALLEGATIONS IN THE GROUNDS OF APPEAL OF THE REVENUE ARE WITHOUT ANY MERIT. AS FAR AS GROUND NO.3 & 4 ARE C ONCERNED, THE CIT(A) IN THE IMPUGNED ORDER HAS FOLLOWED THE DECISION OF THE TRI BUNAL ON IDENTICAL PAYMENT MADE TO AT& S AUSTRIA, IN AY 2005-06 AND HAS COME TO THE CO NCLUSION THAT THE PAYMENT WAS NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES BUT WAS IN THE NATURE OF BUSINESS INCOME AND SINCE THE AT & S, AUSTRIA DID NOT HAVE A PERMANENT ESTABLISHMENT IN INDIA, THE SUM IN QUESTION CANNOT BE TAXED IN VIEW OF THE PROVISIONS OF ARTICLE 7 OF THE INDIA- AUSTRIA DTAA. AS FAR AS GROUND NO.5 RAISED BY THE REVENUE IS CONCERNED, THE LD. CIT(A) HAS RELIED ON THE DECISIONS OF THE JURISDICT IONAL TRIBUNAL IN THE ASSESSEES OWN CASE AND ALLOWED THE APPEAL HOLDING THAT THE PAYMEN T MADE TO AT & S AUSTRIA IS ACTUALLY THE REIMBURSEMENT OF THE EXPENSES INCURRED BY THE AT&S AUSTRIA AND THE SAME DOESNT CONTAIN ANY PROFIT ELEMENT. THAT THE INCOME GENERATED, IF ANY, WOULD CONSTITUTE BUSINESS INCOME AND WOULD NOT CHARGEABLE TO TAX UND ER THE PROVISIONS OF ARTICLE 5 R.W. ARTICLE 7 OF THE DTAA. THE LD. CIT(A) IN THE INSTAN T CASE HAS NEVER RELIED ON THE DECISION OF KARNATAKA HIGH COURT IN THE CASE OF DIT VS SUN MICROSYSTEMS TO ALLOW THE APPEAL OF THE ASSESSE. SINCE THE IMPUGNED APPEAL IS ARISING OUT OF THE ORDER OF LD.CIT(A) RAISING SUCH GROUND BEFORE THE HONBLE TR IBUNAL WAS NOT PROPER. 9. FOR THE REASONS GIVEN ABOVE, WE DO NOT FIND ANY MERITS IN THIS APPEAL BY THE REVENUE. THE APPEAL BY THE REVENUE IS THEREFORE DI SMISSED. 8 ITA NO.259/KOL/2016 M/S. A T & S INDIA PVT. LTD. A.YR.2004-05 8 10. IN THE RESULT, APPEAL BY THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE COURT ON 20.07.2016. SD/- SD/- [WASEEM AHMED] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20.07.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1. M/S. A T & S INDIA PVT. LTD., 12/A, INDUSTRIAL A REA, NANJANUD, MYSORE DISTRICT, KARNATAKA-571301. 2. I.T.O., INTERNATIONAL TAXATION, WARD- KOLKATA. 3. CIT(A)-22, KOLKATA. 4. CIT-(IT & TP), K OLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES