Stantee Consulting Pvt. Ltd. (Earlier known as Burt Hill Design Pvt.Ltd.), Ahmedabad V. The DDIT, International Taxation, Ahmedabad

ITA 314/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8985 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 23-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 31-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Double taxation relief; Principle of natural justice
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 194C; 201(1); 195; 201

Judgement Text

ITA NOS. 314 TO 317 AND 406 TTO 409/AHD/2014 ASSESSMENT YEARS: 2008-09 TO 2011-12 PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD I BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND MAHAVIR PRASAD JM] ITA NOS. 314, 315,316 AND 317/AHD/2014 ASSESSMENT YEAR: 2008-09, 2009-10, 2010-11 AND 201 1-12 BURT HILL DESIGN PVT LTD .............APPEL LANT (NOW KNOWN AS STANTEC CONSULTING PVT LTD) 71-72, TITANIUM CORPORATE STREET OPP PRAHLANDNAGAR GARDEN, SATELLITE, AHMEDABAD [PAN : AADCB0953H] VS. DEPUTY DIRECTOR OF INCOME TAX INTERNATIONAL TAXATION, AHMEDABAD .......................RESPONDENT ITA NOS. 406,407,408 AND 409/AHD/2014 ASSESSMENT YEAR: 2008-09, 2009-10, 2010-11 AND 201 1-12 DEPUTY DIRECTOR OF INCOME TAX INTERNATIONAL TAXATION, AHMEDABAD .............APPELLANT VS. BURT HILL DESIGN PVT LTD .......................RESPONDENT (NOW KNOWN AS STANTEC CONSULTING PVT LTD) APPEARANCES BY: TUSHAR HEMANI FOR THE APPELLANT MAHESH SHAH AND DILIP KUMAR FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 24.03.2017 DATE OF PRONOUNCING THE ORDER : 28.03.2017 O R D E R PER PRAMOD KUMAR AM: 1. THESE EIGHT APPEALS, CONSISTING OF FOUR SETS OF CROSS APPEALS, ARE DIRECTED AGAINST THE COMMON ORDER DATED 28 TH NOVEMBER 2013 PASSED BY THE CIT(A) IN THE MATTER OF TAX WITHHOLDING DEMANDS UNDER SECTION 201 R.W.S 195 FOR THE ASSESSMENT YEARS 2008-09 TO 2011-12. 2. TO ADJUDICATE ON THESE APPEALS, ONLY A FEW UNDIS PUTED AND MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE, ENGAGED IN THE BUSINESS OF PROVIDING INFORMATION TECHNOLOGY ENABLED SERVICES (ITES), IS SUBSIDIARY OF BURT HILL INC USA ITA NOS. 314 TO 317 AND 406 TTO 409/AHD/2014 ASSESSMENT YEARS: 2008-09 TO 2011-12 PAGE 2 OF 8 ( BH INC , IN SHORT) . DURING THE RELEVANT PERIOD, UNDER A SECONDMENT AGREEMENT WITH THE ASSESSEE, BH INC HAD PLACED CERTAIN EMPLOYEES A T THE DISPOSAL, AND CONTROL, OF THE ASSESSEE. THE INCOME TAX AUTHORITIES CONDUCTED A SURVEY, FOR EXAMINING TAX WITHHOLDING COMPLIANCE, AT THE PREMISES OF THE ASSE SSEE, ON 19 TH JULY 2011. DURING THE COURSE OF THESE SURVEY PROCEEDINGS, IT WAS FOUN D THAT THE ASSESSEE HAS MADE REMITTANCES TO BH INC, IN RESPECT OF REIMBURSEMENT OF PAYROLL COSTS, WITHOUT ANY DEDUCTIONS ON ACCOUNT OF TAX WITHHOLDINGS. THESE PA YMENTS AGGREGATED TO RS 2,25,20,265 FOR THE ASSESSMENT YEAR 2008-09, RS 4,4 5,52,944 FOR THE ASSESSMENT YEAR 2009-10, RS 3,84,14,054 FOR THE ASSESSMENT YEA R 2010-11 AND RS 1,34,31,414 FOR THE ASSESSMENT YEAR 2011-12. IT WAS NOTED BY TH E ASSESSING OFFICER THAT THIS REIMBURSEMENT RELATES TO THE EMPLOYEES WHO HAVE BEE N RECOMMENDED TO BDH (I.E. THE ASSESSEE) FROM BHI (I.E. BURT HILLS INC USA) WHILST CONTINUING TO BE EMPLOYED BY BHI FOR THE PURPOSES OF BHDS BUSINESS . THE ASSESSING OFFICER FURTHER NOTED THAT REIMBURSEMENTS HAVE BEEN MADE BY BHD TO BHI FOR THE EMPLOYEES WHO HAVE BEEN SECONDED TO BHD FROM BHI, T HOUGH THESE EMPLOYEES REMAIN THE EMPLOYEES OF BHI AND THEIR SAL ARY ETC PAID BY BHI ONLY , THAT BHD, ON BEHALF OF BHI, PAYS THE HOUSING ALLOWANCE, ADVANCE OF SALARY, LOAN IN LOCAL CURRENCY AND THAT BHD REIMBURSES THE SALARY ETC PAID BY BHI TO THE EMPLOYEES DEPUTED/ SECONDED TO BHD . THE ASSESSING OFFICER FURTHER NOTED THAT THE LIST OF SECONDED EMPLOYEES HAS BEEN PERUSE D AND PLACED ON RECORD. THE ASSESSEE DEDUCTED TAX AT SOURCE UNDER SECTION 192, IN RESPECT OF INCOME IN THE HANDS OF THE RECIPIENT SECONDED EMPLOYEES, FROM THE REIMBURSEMENTS SO MADE TO BH INC- SO FAR AS ASSESSMENT YEARS 2008-09, 2010-11 AND 2011-12 WERE CONCERNED, AND THE ASSESSEE HAD DULY DEPOSITED ADVANCE TAX ON BEHALF OF SUCH SECONDED EMPLOYEES. IT WAS ALSO EXPLAINED THAT THERE WAS NO LOSS OF REVENUE INASMUCH AS TAXES DUE FROM SALARIES SO PAID TO THE SECONDED EMP LOYEES WERE DULY PAID AND THE ASSESSMENTS COMPLETED ON THAT BASIS. IT WAS EXPLAI NED BY THE ASSESSEE THAT THESE ARE REIMBURSEMENTS PLAIN AND SIMPLE, AND THAT THESE PAYMENTS DID NOT INVOLVE ANY PROFIT ELEMENT TAXABLE IN THE HANDS OF BH INC. IT W AS ALSO EXPLAINED THE PAYMENTS WERE IN THE NATURE OF SALARIES, AND THAT THE ASSES SEE HAD DULY DISCHARGED HIS TAX WITHHOLDING OBLIGATIONS FROM THESE SALARIES TO THE EXTENT THE RECIPIENTS WERE TAXABLE IN INDIA. THE DETAILS OF TAX PAYMENT BY THE SECONDE D EMPLOYEES WERE ALSO FURNISHED. THE SECONDMENT AGREEMENT WAS EXAMINED AT LENGTH BY THE ASSESSING OFFICER. HE WAS OF THE VIEW THAT THE SECONDED EMPLOYEES CONTINU ED TO BE EMPLOYEES OF BH INC. IT WAS THEN HELD THAT SINCE EMPLOYEES WERE OF BH IN C, THE PAYMENT WAS INFACT IN THE NATURE OF PAYMENT FOR SERVICES RENDERED BY THESE EM PLOYEES. THE ASSESSING OFFICER PROCEEDED TO HOLD THAT THE WORK DONE BY THESE EMPLO YEES OF BH INC HAS RESULTED IN CREATION OF A SERVICE PE [I.E. PERMANENT ESTABLISHM ENT UNDER ARTICLE 5(2)(L) OF INDIA USA DOUBLE TAXATION AVOIDANCE AGREEMENT], AND THAT THE ENTIRE AMOUNT SO PAID TO BH INC, BEING ATTRIBUTABLE TO THE PE, IS TAXABLE ON GROSS BASIS, IN THE ABSENCE OF DETAILS OF EXPENDITURE OF PE, @ 40%. IT WAS ALSO HE LD, WITHOUT PREJUDICE TO THE SAID LINE OF REASONING, THAT IN ANY EVENT, THE AMOUNT SO PAID TO BH INC WAS TAXABLE AS ITA NOS. 314 TO 317 AND 406 TTO 409/AHD/2014 ASSESSMENT YEARS: 2008-09 TO 2011-12 PAGE 3 OF 8 FEES FOR INCLUDED SERVICES UNDER ARTICLE 12(4) OF I NDO US DTAA AS ALSO UNDER SECTION 9(1)(VII) OF THE INCOME TAX ACT, 1961. THE ASSESSEE WAS HELD TO BE AN ASSESSEE IN DEFAULT FOR NOT DEDUCTING THIS TAX AT SOURCE. ACCOR DINGLY, DEMANDS UNDER SECTION 201 R.W.S. 195 WERE RAISED. AGGRIEVED, ASSESSEE CARRIE D THE MATTER IN APPEAL BEFORE THE CIT(A). LEARNED CIT(A) HELD THAT SO FAR AS ASSESS MENT YEARS 2008-09, 2010-11 AND 2011-12 ARE CONCERNED, SINCE THE ASSESSEE HAD D EDUCTED TAX AT SOURCE UNDER SECTION 192, THE ASSESSEE DID NOT HAVE ANY TAX WITH HOLDING OBLIGATION UNDER SECTION 195. HE FURTHER HELD THAT SINCE THE ASSESSEE DID NO T HAVE ANY TAX WITHHOLDING OBLIGATIONS UNDER SECTION 195, FOR THESE ASSESSMENT YEARS, IT WAS AN ACADEMIC QUESTION AS TO WHETHER THE SERVICE PE EXISTED OR NO T, OR WHETHER SUCH PAYMENTS COULD BE TREATED AS FEES FOR TECHNICAL SERVICES OR NOT. SO FAR AS ASSESSMENT YEAR 2009-10 WAS CONCERNED, THE CIT(A) WAS OF THE CONSID ERED VIEW, ON THE BASIS OF HIS SEPARATE ORDER IN ASSESSEES OWN CASE IN THE ASSESS MENT YEAR 2009-10 IN REGULAR ASSESSMENT PROCEEDINGS, THAT WHILE THE B H INC USA CANNOT BE SAID TO HAVE A SERVICE PE IN INDIA, THE AMOUNTS SO PAID ARE REQUIR ED TO BE TREATED AS FEES FOR TECHNICAL SERVICES. ACCORDINGLY, IN HIS VIEW, THE A SSESSEE SHOULD HAVE WITHHELD TAXES, AT THE RATES APPLICABLE FOR FEES FOR TECHNIC AL SERVICES, SO FAR AS PAYMENTS MADE BY HIM FOR THE ASSESSMENT YEAR 2009-10 ARE CON CERNED. THE CREDIT WAS, HOWEVER, DIRECTED TO BE GIVEN FOR THE ADVANCE TAX D EPOSITED BY THE ASSESSEE ON BEHALF OF THE SECONDED EMPLOYEES. LEARNED CIT(A) TH EREFORE, UPHELD THE TAX WITHHOLDING DEMANDS TO THE EXTENT INDICATED ABOVE F OR THE ASSESSMENT YEAR 2009- 10. NONE OF THE PARTIES ARE SATISFIED BY THE STANDS SO TAKEN BY THE CIT(A), AND BOTH THE PARTIES ARE IN APPEAL BEFORE US. GRIEVANCES RAI SED BY THE PARTIES ARE AS FOLLOWS: (A) COMMON GRIEVANCES RAISED BY THE ASSESSING OFFIC ER FOR ALL THE ASSESSMENT YEARS BEFORE US: (I) THE CIT(A) HAS ERRED IN LAW AND ON FACTS ON REL YING ON THE DECISION OF CIT(A)-VI AND NOT ADJUDICATING ON THE ISSUE OF P ERMANENT ESTABLISHMENT OF THE ASSESSES IN INDIA IN LIGHT OF FACTS DISCUSSED BY THE AO IN THE ORDER U/S 201 R.W.S. 201(1A) OF THE A CT DATED 26.02.2013. (II) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N NOT APPRECIATING THE FACTS OF THE CASE AND RELYING ON THE DECISION OF CI T(A)-VI AND HOLDING THAT THE INCOME OF THE ASSESSEE IS NOT ATTR IBUTABLE TO PE AND IS NOT TAXABLE IN INDIA AS BUSINESS INCOME. (III) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT BURTHILL INC. DEPUTED TECHNICALLY HIGHLY QUALIFIED EMPLOYEES ON REQUEST OF BURTHILL DESIGN FOR ITS BUSINESS AND THE Y CONTINUED TO BE ON THE PAYROLL OF THE FOREIGN COMPANY AND WERE PROV IDING SERVICES TO INDIAN COMPANY ON ITS EXPRESS REQUEST AND THEREF ORE THERE IS NO ITA NOS. 314 TO 317 AND 406 TTO 409/AHD/2014 ASSESSMENT YEARS: 2008-09 TO 2011-12 PAGE 4 OF 8 QUESTION OF BURTHILL DESIGN REIMBURSING THE PAYMENT OF SALARY ETC. TO BURTHILL INC. IN FACT, IT IS PAYMENT IN RETURN O F SERVICES BEING PROVIDED BY SECONDEES ON BEHALF OF BURTHILL INC. (IV) THE LD. CIT(A) ERRED IN HOLDING THAT THERE IS NO INCOME ELEMENT IN PAYMENTS OTHER THAN PAYROLL COSTS. SUCH PAYMENTS AR E ALSO TAXABLE IN INDIA AND THE CIT(A) SHOULD HAVE UPHELD THE ORDE R OF THE AO. (V) WITHOUT PREJUDICE, ALTHOUGH THE CIT(A) RELIED O N THE DECISION OF CIT(A)-VI AND TREATED THE PAYMENT ON FTS IN AY 2009 -10 EVEN THEN THE CIT(A) HAS ERRED IN THE CURRENT YEAR HOLDING TH AT SEC. 195 R.W.S. 9 OF THE ACT WILL NOT APPLY WHEN THE NATURE OF SERV ICE REMAIN THE SAME AS IN A.Y. 2009-10, THE PROVISIONS OF SEC. 195 R.W.S. 9 OF THE ACT WILL APPLY. (VI) WITHOUT PREJUDICE THE LD. CIT(A) ERRED IN RELY ING ON THE DECISION OF CIT(A)-VI SINCE THE DECISION OF CIT(A)-VI IS ON DIF FERENT SET OF FACTS AND THE ARGUMENTS OF THE AO IN THE PRESENT CASE WE RE NOT BEFORE CIT(A)-VI. (VII) WITHOUT PREJUDICE, THE LD. CIT(A) HAS ERRED I N LAW AND ON FACTS IN NOT APPRECIATING THAT THE PAYMENTS MADE BY BURTHILL DESIGN ARE IN NATURE OF MANAGERIAL TECHNICAL AND CONSULTANCY SERV ICES AND ARE TAXABLE AS PER INDIAN I.T. ACT AND ALSO AS PER ARTI CLE 12(4) OF INDO- US DTAA THEREFORE THE LD. CIT(A) SHOULD HAVE UPHELD THE ORDER OF THE AO. (VIII) ANY OTHER GROUND THAT MAY BE URGED AT THE TI ME OF HEARING. FOR AY 2009-10, APART FROM THE ABOVE REFERRED COMMO N GROUNDS, THE REVENUE HAS TAKEN FOLLOWING GROUNDS ALSO:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N DIRECTING THE AO TO RECOMPUTED TAX LIABILITY BY CHARACTERIZING THE PAYM ENT AS FEES FOR INCLUDED SERVICES UNDER ARTICLE 12 OF INDO-US DTAA WHEN SUCH PAYMENTS ARE TAXABLE AS BUSINESS INCOME. 2. WITHOUT PREJUDICE THE LD. CIT(A) ERRED IN RELYIN G ON THE JUDGMENT OF RAJKOT SPECIAL BENCH IN BHARATI AUTO AND STATING TH AT AMENDMENT BROUGHT BY FINANCE ACT 2013, W.E.F 01.07.12 INSERTI NG PROVISO TO SECTION 201(1) OF THE ACT, IS RETROSPECTIVE IN NATU RE. 3. WITHOUT PREJUDICE THE LD. CLT(A) ERRED IN RELYIN G ON THE JUDGMENT OF APEX COURT IN HINDUSTAN COCA COLA BEVERAGE P. LTD V S CIT (293 ITR 2226) AND HOLDING THAT WHERE PAYEE HAS PAID TAX THE N PAYER CANNOT BE ASKED TO PAY TAX ONCE AGAIN. 4. WITHOUT PREJUDICE THE LD. CIT(A) ERRED IN HOLDIN G THAT RECOVERY U/S 201(1) OF THE ACT SHOULD NOT BE MADE TO THE EXTENT OF TAX DEPOSITED ITA NOS. 314 TO 317 AND 406 TTO 409/AHD/2014 ASSESSMENT YEARS: 2008-09 TO 2011-12 PAGE 5 OF 8 BY THE APPELLANT IN THE FORM OF ADVANCE TAX AND CON SEQUENTLY INTEREST CHARGED U/S 201(1A) OF THE ACT SHOULD BE REDUCED. (B) COMMON GRIEVANCES RAISED BY THE ASSESSEE FOR AL L THE ASSESSMENT YEARS BEFORE US: 1. THE ID. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN HOLDING THAT THE APPELLANT WAS REQUIRED TO DEDUCT TAX AT SO URCE U/S 195 OF THE ACT ON PAYMENT MADE TO NON-RESIDENT WITHOUT APPRECI ATING THAT THE PAYMENT MADE BY THE APPELLANT TO NON-RESIDENT IS N OT AT ALL TAXABLE IN INDIA. 2. THE ID. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN NOT HOLDING THAT BECAUSE THERE WAS NO LIABILITY TO DEDU CT TAX AT SOURCE U/S 195 OF THE ACT, THE ASSESSEE COULD NOT HAVE BEEN TR EATED AS ASSESSEE IN DEFAULT U/S 201 AND CONSEQUENTLY NOT LIABLE TO T DS AND ANY INTEREST THEREON U/S 201 R.W.S. 201(1A) OF THE ACT. 3. THE ID. CIT(A) HAS ERRED IN LAW AND ON THE FACT S OF THE CASE IN NOT HOLDING THAT THE PAYMENTS REMITTED TO THE USA PAREN T COMPANY CANNOT BE BROUGHT TO TAX EVEN UNDER THE PROVISIONS OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT ENTERED INTO BY THE RE PUBLIC GOVERNMENT OF INDIA WITH THE UNITED STATED OF AMERI CA. 4. BOTH THE LOWER AUTHORITIES HAVE PASSED THE ORDER S WITHOUT PROPERLY APPRECIATING THE FACT AND THAT THEY FURTHER ERRED I N GROSSLY IGNORING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFORMATION S UBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEE N CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THIS ACTION OF T HE LOWER AUTHORITIES IS IN CLEAR BREACH OF LAW AND PRINCIPLE S OF NATURAL JUSTICE AND THEREFORE DESERVES TO BE QUASHED. 3. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 4. AS WE DEAL WITH THESE APPEALS, WE CONSIDER IT AP PROPRIATE TO REPRODUCE, FOR READY REFERENCE, THE RELATED STATUTORY PROVISION SE T OUT IN SECTION 195(1). THIS IS AS FOLLOWS: ANY PERSON RESPONSIBLE FOR PAYING TO A NON-RESIDENT , NOT BEING A COMPANY, OR TO A FOREIGN COMPANY, ANY INTEREST (NOT BEING INTEREST ON SECURITIES) OR ANY OTHER SUM CHARGEABLE UNDER THE P ROVISIONS OF THIS ACT (NOT BEING INCOME CHARGEABLE UNDER THE HEAD SALARI ES) 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 CHE QUE OR DRAFT OR BY ANY ITA NOS. 314 TO 317 AND 406 TTO 409/AHD/2014 ASSESSMENT YEARS: 2008-09 TO 2011-12 PAGE 6 OF 8 OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATES IN FORCE [EMPHASIS, BY UNDERLINING, SUPPLIED BY US] 5. QUITE CLEARLY, THEREFORE, AS LONG AS A PAYMENT T O NON-RESIDENT ENTITY IS IN THE NATURE OF PAYMENT CONSISTING OF INCOME CHARGEABLE U NDER THE HEAD INCOME FROM SALARIES, THE ASSESSEE DOES NOT HAVE ANY TAX WITH HOLDING OBLIGATIONS UNDER SECTION 195. 6. THERE IS NO, AND THERE CANNOT BE ANY, DISPUTE AB OUT THE FACTUAL ASPECT THAT THE PAYMENT MADE TO BURT HILL CO INC USA CONSISTS O F INCOME WHICH IS CHARGEABLE, AND HAS BEEN CHARGED, TO TAX IN INDIA UNDER THE HEA D INCOME FROM SALARIES. THERE IS ALSO NO DISPUTE THAT THE PAYMENTS FOR ALL THE FOUR YEARS BEFORE US ARE OF THE SAME NATURE, UNDER THE SAME AGREEMENT AND OF THE SAME CH ARACTER. WHAT WAS HELD TO BE INCOME IN THE NATURE OF SALARIES FOR THE ASSESSMENT YEARS 2008-09, 2010-11 AND 2011-12 CANNOT BE OF ANY DIFFERENT NATURE FOR THE A SSESSMENT YEAR 2009-10 JUST BECAUSE THE ASSESSEE, RATHER THAN DEDUCTING TAX AT SOURCE UNDER SECTION 192, PAID THE ADVANCE TAXES ON BEHALF OF THE SECONDED EMPLOYE ES IN THAT PARTICULAR ASSESSMENT YEAR. IT IS NOT THE FACT OF TAX DEDUCTI ON UNDER SECTION 192, BUT THE NATURE OF INCOME EMBEDDED IN RELATED PAYMENTS WHICH IS REL EVANT FOR DECIDING WHETHER OR NOT SECTION 195 WILL COME INTO PLAY. OF COURSE, THE RE ARE SEPARATE SET OF CONSEQUENCES FOR NOT DISCHARGING TAX WITHHOLDING OB LIGATIONS UNDER SECTION 192. HOWEVER, THE ASSESSEE HAS DISCHARGED THESE OBLIGATI ONS AND THERE ARE NO PENDING ISSUES ABOUT THE SAME. WHETHER THE SECONDED EMPLOYE ES CONTINUE TO BE IN EMPLOYMENT OF THE FOREIGN ENTITIES OR NOT IS WHOLLY IRRELEVANT FOR THIS PURPOSE. WHAT IS RELEVANT IS THAT THE INCOME EMBEDDED IN THE PAYMENT S IN QUESTION IS TAXABLE IN INDIA UNDER THE HEAD SALARIES, AND IF THAT BE SO, THERE ARE NO TAX WITHHOLDING OBLIGATIONS UNDER SECTION 195. THAT PRECISELY IS THE UNDISPUTED POSITION ON THE FACTS OF THIS CASE- AS DULY ACCEPTED BY THE INCOME TAX AUTHORITIES. THE INCOME EMBEDDED IN THE IMPUGNED PAYMENTS BEING IN THE NATURE OF INCOME CHA RGEABLE TO TAX UNDER THE HEAD INCOME FROM SALARIES, THE ASSESSEE CANNOT BE SAID TO HAVE ANY TAX WITHHOLDING OBLIGATIONS UNDER SECTION 195. FOR THIS SHORT REASO N ALONE, WE MUST HOLD THAT THE IMPUGNED TAX WITHHOLDING DEMANDS, UNDER SECTION 201 R.W.S 195, ARE WHOLLY DEVOID OF ANY LEGALLY SUSTAINABLE MERITS. 7. THAT IS NOT, HOWEVER, THE ONLY REASON WHY THE RE VENUE MUST FAIL IN ITS CASE. 8. A LOT OF EMPHASIS HAS BEEN PLACED ON THE FACT TH AT THERE WAS A SERVICE PE IN THE PRESENT CASE. NOTHING, HOWEVER, TURNS ON THE EX ISTENCE OF THE PE BECAUSE ADMITTEDLY WHATEVER HAS BEEN PAID TO BURT HILL INC USA IS, IN TURN, PAID BY BURT HILL INC UA TO ITS EMPLOYEES SECONDED TO THE ASSESSEE. T HERE CANNOT BE ANY PROFITS, ITA NOS. 314 TO 317 AND 406 TTO 409/AHD/2014 ASSESSMENT YEARS: 2008-09 TO 2011-12 PAGE 7 OF 8 THEREFORE, IN THE HANDS OF THE SERVICE PE, AND WHAT IS TAXABLE IN THE HANDS OF THE PE UNDER ARTICLE 7(1) IS NOT THE GROSS RECEIPT BUT THE PROFITS ATTRIBUTABLE TO THE PE. THE EXISTENCE OF SERVICE PE, IN THE PRESENT CASE, WILL BE WHOLLY ACADEMIC INASMUCH AS WHATEVER IS THE AGGREGATE OF RECEIPTS SAID TO BE AT TRIBUTABLE TO THE PE, IS EXACTLY THE SAME AS AGGREGATE OF EXPENDITURE ATTRIBUTABLE TO TH E PE. IT IS NOT THE REVENUES CASE THAT ANY OTHER RECEIPTS OF THE BURT HILL INC USA, O THER THAN THE RECEIPTS ON ACCOUNT OF REIMBURSEMENTS FOR SALARIES, OR ANY OTHER INCOME CO ULD BE ATTRIBUTED TO THE SO CALLED SERVICE PE. THE PAYMENTS IN QUESTION HAVE NOT RESUL TED IN ANY INCOME TAXABLE IN THE HANDS OF THE ASSESSEE. BE THAT AS IT MAY, IN ANY EVENT, WHEN UNDISPUTEDLY THE PAYMENTS ARE IN THE NATURE OF THE REIMBURSEMENTS, A ND, PARTICULARLY WHEN EVEN THE INCOME EMBEDDED IN THESE PAYMENTS HAS ALREADY BEEN BROUGHT TO TAX IN INDIA IN THE HANDS OF ULTIMATE BENEFICIARIES- I.E. THE SECONDED EMPLOYEES, THERE CANNOT BE ANY TAX WITHHOLDING OBLIGATIONS UNDER SECTION 195. IT I S ONLY ELEMENTARY THAT THE TAX DEDUCTION SOURCE LIABILITY UNDER SECTION 195 IS A V ICARIOUS LIABILITY IN THE SENSE THAT ITS SURVIVAL IN THE HANDS OF TAX-DEDUCTOR IS WHOLL Y DEPENDENT ON EXISTENCE OF TAX LIABILITY IN THE HANDS OF RECIPIENT OF INCOME. WHE N A PAYMENT MADE BY, AN INDIAN RESIDENT, TO A NON-RESIDENT, DOES NOT TRIGGER THE T AXABILITY OF THAT INCOME IN THE HANDS OF RECIPIENT, THE TAX DEDUCTION LIABILITY DOES NOT COME INTO PLAY AT ALL. THIS SCHEME OF THE ACT IS IMPLICIT FROM THE WORDINGS OF SECTION 19 5 (1) WHICH REFER TO ANY OTHER SUM CHARGEABLE UNDER THE PROVISIONS OF THIS ACT (NOT BEING INCOME CHARGEABLE UNDER THE HEAD SALARIES) WHEN INCOME EMBEDDED IN A PAYMENT IS NOT TAXABLE UNDER THE INCOME TAX ACT, 1961, THE TAX WITHHOLDIN G LIABILITY DOES NOT GET TRIGGERED AT ALL. THIS IS WHAT HONBLE SUPREME COURT HAS ALS O HELD IN THE CASE OF G E TECHNOLOGY CENTRE PVT LTD VS CIT [(2010) 327 ITR 4 56(SC)] . WHILE HOLDING SO, THEIR LORDSHIPS HAVE, INTER ALIA, OBSERVED AS FOLLO WS: .THE SAID EXPRESSION IN SECTION 195(1) SHOWS THA T THE REMITTANCE HAS GOT TO BE OF A TRADING RECEIPT, THE WHOLE OR PA RT OF WHICH IS LIABLE TO TAX IN INDIA. THE PAYER IS BOUND TO DEDUCT TAX AT S OURCE ONLY IF THE TAX IS ASSESSABLE IN INDIA. IF TAX IS NOT SO ASSESSABLE, T HERE IS NO QUESTION OF TAX AT SOURCE BEING DEDUCTED. [SEE: VIJAY SHIP BREA KING CORPORATION AND OTHERS VS. CIT 314 ITR 309]. 9. ONE MORE ASPECT NEEDS TO BE HIGHLIGHTED. SECTIO N 195 FALLS IN CHAPTER XVII WHICH DEALS WITH COLLECTION AND RECOV ERY. CHAPTER XVII-B DEALS WITH DEDUCTION AT SOURCE BY THE PAYER. ON ANA LYSIS OF VARIOUS PROVISIONS OF CHAPTER XVII ONE FINDS USE OF DIFFERE NT EXPRESSIONS, HOWEVER, THE EXPRESSION SUM CHARGEABLE UNDER THE P ROVISIONS OF THE ACT IS USED ONLY IN SECTION 195. FOR EXAMPLE, SECT ION 194C CASTS AN OBLIGATION TO DEDUCT TAX AT SOURCE IN RESPECT OF A NY SUM PAID TO ANY RESIDENT. SIMILARLY, SECTIONS 194EE AND 194F INTER ALIA PROVIDE FOR ITA NOS. 314 TO 317 AND 406 TTO 409/AHD/2014 ASSESSMENT YEARS: 2008-09 TO 2011-12 PAGE 8 OF 8 DEDUCTION OF TAX IN RESPECT OF ANY AMOUNT REFERRE D TO IN THE SPECIFIED PROVISIONS. IN NONE OF THE PROVISIONS WE FIND THE E XPRESSION SUM CHARGEABLE UNDER THE PROVISIONS OF THE ACT, WHICH AS STATED ABOVE, IS AN EXPRESSION USED ONLY IN SECTION 195(1). THEREFOR E, THIS COURT IS REQUIRED TO GIVE MEANING AND EFFECT TO THE SAID EXP RESSION. IT FOLLOWS, THEREFORE, THAT THE OBLIGATION TO DEDUCT TAX AT SOU RCE ARISES ONLY WHEN THERE IS A SUM CHARGEABLE UNDER THE ACT. 9. THE DECISION TO WITHHOLD TAX FROM A CREDIT OR P AYMENT TO A NON-RESIDENT IS NOT TAKEN DE HORSE THE TAXABILITY OF INCOME EMBEDDED IN RELATED PAYME NT. IT IS TAKEN IN THE LIGHT OF THE TAX LIABILITY OF THE NON-RESIDENT IN RESPECT OF THE AMOUNT IN QUESTION, AND, IF THERE WERE ANY DOUBTS ON THIS PROPOSITION, THESE DOUBTS HAVE NOW BEEN SET AT REST BY THEIR LORDSHIPS. AS FOR THE PAYMENTS MADE BY THE ASSESSEE BEING IN NATURE OF THE FEES FOR TECHNICAL SERVICES, THIS STAND OF T HE ASSESSING OFFICER IS EQUALLY FRIVOLOUS. THERE IS NOT EVEN AN EFFORT TO SHOW AS T O HOW ANY TECHNICAL KNOWLEDGE, SKILLS, KNOWHOW OR PROCESSES ETC ARE MADE AVAILABL E BY THESE SERVICES INASMUCH AS THESE SERVICES CAN BE PERFORMED BY THE ASSESSEE WITHOUT ANY RECOURSE TO THE SERVICE PROVIDER. UNLESS THIS CONDITION, UNDER MAKE AVAILABLE CLAUSE UNDER ARTICLE 12(4)(B), IS SATISFIED THE FEES FOR TECHNICAL SERVI CES CANNOT BE BROUGHT TO TAX IN INDIA IN THE HANDS OF ENTITIES FISCALLY DOMICILED IN UNIT ED STATES. IT IS EVEN MORE ELEMENTARY THAT ONCE THESE PAYMENTS CANNOT BE BROUGHT TO TAX U NDER THE PROVISIONS OF THE INDIA US DTAA, THERE CANNOT BE ANY OCCASION TO INVOKE SEC TION 9(1)(VII) OF THE ACT EITHER BECAUSE IT CANNOT BE MORE BENEFICIAL TO THE ASSESSE E- AS IS THE CONDITION PRECEDENT, UNDER SECTION 90(2), FOR INVOKING THE SAME. 10. FOR THE DETAILED REASONS SET OUT ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE DEMANDS RAISED ON THE ASSESSEE UNDER SECTION 20 1 R.W.S 195 ARE WHOLLY DEVOID OF ANY LEGALLY SUSTAINABLE MERITS. 11. IN THE RESULT, ALL THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED, AND ALL THE APPEALS FILED BY THE ASSESSING OFFICER, ARE DISMISS ED- IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON THE 28 TH DAY OF MARCH, 2017 SD/- SD/- MAHAVIR PRASAD PRAMOD KU MAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 28 TH DAY OF MARCH, 2017 COPIES TO: (1) THE APPELLANT (2) THE RESPONDE NT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR FIT FOR PUBLICATION INCOME TAX APPELLATE TRIBUNAL SD/- SD/- AHMEDABAD BENCHES, AHMEDABAD (JM) (AM)