Boeing International Corporation India Pvt. Ltd., New Delhi V. ADDL. CIT, SPECIAL RANGE- 2, New Delhi

ITA 3695/DEL/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 4246 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I1
• Assessment Year: 2011-2012
• Appeal Filed On: 17-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RECTIFICATION
• Keywords: Transfer pricing; Rectification of order; Double taxation relief; TDS
• Section: 143(3); 234B; 40(a)(ia); 195; 192; 22; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: D NEW DELHI BEFORE SHRI O.P. KANT, ACCOUNTANT MEMBER AND SHRI K.N. CHARY, JUDICIAL MEMBER [THROUGH VIDEO CONFERENCING] ITA NO.983/DEL./2016 ASSESSMENT YEAR: 2011-12 WITH ITA NO.3695/DEL./2018 ASSESSMENT YEAR: 2011-12 M/S. BOEING INTERNATIONAL CORPORATION INDIA PVT. LTD., 3 RD FLOOR, DLF CENTRE, SANSAD MARG, NEW DELHI VS. ACIT, CIRCLE-5(1), NEW DELHI PAN : AACCB3303J (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE FINAL ASSESSMENT ORDER DATED 28 TH DECEMBER, 2015 PASSED BY THE ASSESSING OFFICER AND RECTIFICATION ORDER DATED 28. 03.2018 PASSED BY THE ASSESSING OFFICER FOR ASSESSMENT YEAR 2011-12. APPELLANT BY SMT. ANURADHA DUTT, ADV. & SHRI SACHIT JOLLY, ADV. RESPONDENT BY DR. PRABHA KANT, CIT DATE OF HEARING 11.02.2021 DATE OF PRONOUNCEMENT 11.02.2021 2 ITA NO. 983/DEL./2016 & 3695/DEL./2018 2. THESE APPEALS ARE CONNECTED WITH THE SAME ASSESSME NT YEAR AND, THEREFORE, SAME WERE HEARD TOGETHER AND DISPOS ED OF BY WAY OF THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIE NCE. ITA NO. 983/DEL./2016 (AY: 2011-12) 3. FIRSTLY, WE TAKE UP THE APPEAL IN ITA NO. 983/DEL./ 2016. THE GROUNDS RAISED IN THE APPEAL ARE REPRODUCED AS UNDER: 1. ON THE FACTS, IN LAW AND IN THE PECULIAR CIRCUMS TANCES OF THE PRESENT CASE, THE LEARNED DISPUTE RESOLUTION PANEL (LD. DRP)/ LD. AO HAS GROSSLY ERRED IN MAKING AN ADDITION OF RS. 2 5,10,56,019/- UNDER SECTION 40(A)(I) OF THE ACT, BY EXCEEDING ITS POWERS AS DETAILED UNDER SECTION 1440(8) OF THE ACT BY DIRECTING AN AD DITION ON AN ISSUE WHICH NEITHER AROSE OUT OF THE ASSESSMENT PROCEEDIN GS, NOR WAS IN RELATION TO PROPOSED VARIATION BY THE LD. AO AND HE NCE FOR THIS REASON ALONE, IT IS PRAYED THAT THE ADDITION SO MAD E, MAY BE ORDERED TO BE DELETED. 2. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. AO AS W ELL AS LD. DRP GROSSLY ERRED IN MAKING AN ADJUSTMENT OF RS. 25,10, 56,019/- TO THE RETURNED INCOME OF THE APPELLANT, TREATING THE SAME AS FEES FOR TECHNICAL SERVICES (FTS) AS PER THE PROVISIONS OF SECTION 9(I)(VII) OF THE ACT AND FEE FOR INCLUDED SERVICES/ FTS/ ROYALTY UNDER ARTICLE 12(4) OF INDIA- US TAX TREATY/ ARTICLE 12(4) OF IND IA-UK TAX TREAT/ ARTICLE 12(3) OF INDIA AUSTRALIA TAX TREATY RESPECT IVELY AND HOLDING THAT THE SAME IS TO BE DISALLOWED UNDER SECTION 40( A)(1) OF THE ACT FOR FAILURE ON THE PART OF THE APPELLANT IN DEDUCTING T HE TAXES THEREOF. 3. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. AO AS WELL LD. DRP FAILED TO APPRECIATE THAT THE PAYME NT OF RS. 25,10,56,019/- WAS ON ACCOUNT OF REIMBURSEMENT OF S ALARY AND OTHER ALLOWANCES PAID TO VARIOUS ASSOCIATED ENTERPR ISES (AES) FOR EMPLOYEES WHO WERE SECONDED AND WERE WORKING FOR TH E APPELLANT UNDER ITS CONTROL DURING THE COURSE OF THE CONCERNE D ASSESSMENT YEAR. 4. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE & IN LAW, WHILE COMING TO THE AFOREMENTIONED CONCLUSION, THE LD. AO / LD. DRP ERRED IN: 4.1 IGNORING THE FACTS SUBMITTED BY THE APPELLANT V IDE LETTERS DATED SEPTEMBER 24, 2015 AND OCTOBER 26, 2015 THAT THE EXPATRIATE EMPLOYEES WORKED UNDER THE CONTROL AND SUPERVISION OF THE 3 ITA NO. 983/DEL./2016 & 3695/DEL./2018 APPELLANT, AND WERE ENGAGED IN CARRYING OUT BUSINES S ACTIVITIES FOR AND ON BEHALF OF THE APPELLANT IN INDIA. 4.2 NOT APPRECIATING THAT THE EXPATRIATE EMPLOYEES HAVE NOT BEEN CARRYING OUT SERVICES ON BEHALF OF THE AES IN INDIA AND DID NOT HAVE AUTHORITY TO BIND OR OTHERWISE OBLIGE THE AES IN AN Y MANNER WHATSOEVER. 4.3 DRAWING ADVERSE INFERENCE FROM THE LINKED IN PR OFILE/ PERSONAL WEBSITE OF THE EXPATRIATE EMPLOYEES (DINES H KESKAR AND VIVEK LALL) AND CONCLUDING THAT ALL THE EXPATRIATE EMPLOYEES CONTINUED TO BE IN THE SERVICE OF THE AES. 4.4 NOT APPRECIATING THE FACT THAT THE TAX WAS DULY WITHHELD ON THE SALARY COST AS PER THE PROVISIONS OF SECTION 192 OF THE ACT. 4.5 GIVING INCORRECT FINDINGS ON FACTS, ALLEGING TH AT THE APPELLANT FAILED TO FILE THE REQUISITE DETAILS. 5. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. DRP AND THE LD. TRANSFER PRICING OFFICER (LD. TPO ) / AO (FOLLOWING THE DIRECTIONS OF THE LD. DRP), HAVE GROSSLY ERRED ON FACTS AND IN LAW IN ENHANCING THE INCOME OF THE APPELLANT BY RS. 7,6 4,82,506 ON ACCOUNT OF: 5.1 INCORRECTLY CHARACTERISING THE APPELLANT AS A T ECHNICAL CONSULTANCY SERVICE PROVIDER AND NOT APPRECIATING T HE FACT THAT THE APPELLANT IS A BUSINESS DEVELOPMENT, ADVISORY AND O THER SUPPORT SERVICE PROVIDER; 5.2 PURSUANT TO SUCH INCORRECT RE-CHARACTERIZATION: 5.2.1 INCORRECTLY REJECTING THE ECONOMIC ANALYSIS A ND THE COMPARABLE RESULTS CONTAINED IN THE TRANSFER PRICING (TP) DO CUMENTATION; 5.2.2 INCORRECTLY REJECTING COMPARABLES SELECTED BY THE APPELLANT AS FUNCTIONALLY NOT COMPARABLE; 5.2.3 INCORRECTLY INCLUDING THE SEGMENT OF A COMPAR ABLE COMPANY WAPCOS LTD. EVEN WHEN THE COMPANY AS A WHOLE WAS CO MPARABLE TO THE APPELLANT; 5.2.4 DISREGARDING THE FRESH SEARCH CONDUCTED BY TH E APPELLANT WITH RESPECT TO ALLEGED TECHNICAL CONSULTANCY SERVICES P ERFORMED BY THE APPELLANT. 6. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. DRP AND BUSINESS AND COMMERCIAL REALITY THAT THE AP PELLANT UNDERTAKES MINIMAL COMPARABLE COMPANIES THAT ARE FU LL-FLEDGED RISK 4 ITA NO. 983/DEL./2016 & 3695/DEL./2018 TAKING ENTREPRENEURS, ADJUSTMENT TO THE APPELLANT O N ACCOUNT OF THIS FACT. 7. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. DRP AND LD. TPO/AO HAVE GROSSLY ERRED IN COMPUTING THE TRANSFER PRICING ADJUSTMENT BY CONSIDERING EVEN UNRELATED PA RTY TRANSACTIONS OF THE APPELLANT 8. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE ASSESSMENT ORDER PASSED BY THE LD. AO PURSUANT TO T HE DIRECTIONS OF LD. DRP IS BAD IN LAW AND VOID AB-INITIO. 9. ON THE FACTS, IN LAW AND IN PECULIAR CIRCUMSTANC ES OF THE CASE, THE LD. DRP/ LD. AO ERRED IN NOT GIVING THE APPELLANT P ROPER OR SUFFICIENT OPPORTUNITY TO HAVE IT SAY OR MAKE NECESSARY COMPLI ANCE OF THE REASONS RELIED UPON BY LD. DRP/ LD. AO IN MAKING TH E ADDITION/ ADJUSTMENTS UNDER THE ACT IN THE PRESENT CASE. 10. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN LEVYING CONSEQUENTIAL INTEREST UNDER SE CTION 234B OF THE ACT ON THE DISALLOWANCE MADE IN THE ASSESSMENT ORDE R. 11. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SE CTION 271(1X0) OF THE ACT. 3. WE HAVE HEARD BOTH THE PARTIES THROUGH VIDEO CONFER ENCING FACILITY. THE LEARNED COUNSEL FOR THE ASSESSEE FILE D A PAPER-BOOK AND OTHER DOCUMENTS ELECTRONICALLY. 4. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT GROUNDS NO. 1 TO 4 OF THE APPEAL ARE COVERED BY THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2015- 16. THE GROUNDS NO. 5 TO 9 WERE NOT PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE AND ACCORDINGLY THE SAME ARE DISMISSED AS INFRUCTUOUS. 4.1 THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS O F PROVIDING MARKET INFORMATION AND KNOWLEDGE SUPPORT SERVICES TO THE BOEING COMPANY (TBC), USA. IN THE DRAFT ASSES SMENT 5 ITA NO. 983/DEL./2016 & 3695/DEL./2018 ORDER, THE LEARNED ASSESSING OFFICER PROPOSED DISAL LOWANCE IN TERMS OF SECTION 40(A)(IA) FOR EXPENDITURE TOWARDS SALARY AND OTHER ALLOWANCES OF EXPATRIATE EMPLOYEES HOLDING TH AT SAME ARE IN NATURE OF FEE FOR TECHNICAL SERVICES AND NO TAX WAS DEDUCTED AT SOURCE BY THE ASSESSEE. THE LEARNED DISPUTE RESOLUT ION PANEL (DRP) REJECTED THE OBJECTION RAISED BY THE ASSESSEE ON THIS ISSUE. IN THE FINAL ASSESSMENT ORDER, THE ASSESSING OFFICE R HAS MADE DISALLOWANCE OF RS.25,10,56,019/-, OBSERVING AS UND ER: 7. ADDITION U/S 40A(A)(I) OF INCOME TAX ACT, 1961 FURTHER, THE DRP VIDE HIS ORDER DIRECTED THE AO, TH E DIRECTION(S) OF THE DRP ARE REPRODUCED AS UNDER: 'CONSIDERING THE FACTS AND JUDICIAL DECISIONS ON TH IS SUBJECT, THIS EXPENDITURE TOWARD SALARIES AND ALLOWANCES AND TRAVEL EXPENSES ETC, AMOUNTING TO RS. 31,73,75,430/- CONST ITUTES FEES FOR INCLUDED SERVICES CHARGEABLE TO TAX IN INDIA, IN TE RMS OF ARTICLE 12(4) OF THE INDIA US DTAA. THE PAYMENTS COVERED BY THE I NDIA UD DTAA AND THE INDIA AUSTRALIA DTAA ARE ALSO TAXABLE IN TE RMS OF THESE DTAAS. THESE PAYMENTS ARE FEES FOR TECHNICAL SERVIC ES IN TERMS OF SECTION 9(L)(VII) READ WITH EXPLANATION 2, OF THE I NCOME TAX ACT AND ARE CHARGEABLE TO TAX IN THE HANDS OF THE RECIPIENT S. THE ASSESSEE FAILED TO DEDUCT TAX AT SOURCE ON THIS EXPENDITURE THEREFORE, DISALLOWANCE UNDER SECTION 40(A)(I) IS REQUIRED. FE ES FOR TECHNICAL SERVICES ARE TAXED @10% UNDER SECTION 115A. CBDT CI RCULAR NO. 03/2015 DATED 12.02.2015 HAS CLARIFIED THAT 'FOR TH E PURPOSE OF MAKING DISALLOWANCE OF OTHER SUM CHARGEABLE' UNDER SECTION 40(A)(I) OF THE I.T, ACT, 1961, THE APPROPRIATE PORTION OF T HE SUM WHICH IS CHARGEABLE TO TAX UNDER THE ACT SHALL FORM THE BASI S OF SUCH DISALLOWANCE'. THIS CIRCULAR ALSO REFERS TO SIMILAR CBDT INSTRUCTION NO. 2/2014 DATED 26.02.2014. THE AO IS DIRECTED TO COMPUTE THE DISALLOWANCE UNDER SECTION 40(A)(I) IN ACCORDANCE W ITH THE CBDT CIRCULAR. THE ABOVE WILL RESULT IN AN ENHANCEMENT OF INCOME A S COMPARED TO THE DRAFT ASSESSMENT ORDER. THIS IS WIT HIN THE STATUTORY POWERS OF THE DRP U/S 144C(8). THE ASSESSEE HAS BEE N GIVEN THE OPPORTUNITY TO EXPLAIN WHY THE ABOVE EXPENDITURE BE NOT DISALLOWED AND INCOME ACCORDINGLY ENHANCED AND ITS REPLY HAS B EEN DULY CONSIDERED.' AS PER THE DIRECTION GIVEN BY THE DRP, THE ASSESSIN G OFFICER VERIFIED THE AMOUNT OF RS. 31,73,75,430/-. THE SAME CONSTITUTES 6 ITA NO. 983/DEL./2016 & 3695/DEL./2018 EXPENDITURE TOWARDS SALARIES AND OTHER ALLOWANCES O F EMPLOYEES OF RS. 25,10,56,019/- EXPENDITURE TOWARDS TRAVELLING E XPENSES OF EMPLOYEES OF RS. 6,42,34,233/- AND OTHER EXPENSES OF RS. 20,85,178/-. DURING THE VERIFICATION OF VARIOUS SUBMISSION AND L EDGER SUBMITTED BY THE AR OF THE ASSESSEE, IT IS FOUND THAT THE ASS ESSEE FAILED TO DEDUCT TAX AT SOURCE ON THE EXPENDITURE TOWARDS SAL ARIES AND OTHER ALLOWANCES, THEREFORE, DISALLOWANCE UNDER SECTION 4 0(A)(I) OF THE L.T. ACT, 1961 IS REQUIRED. THE ASSESSEE WAS ASKED WHY T HE EXPENDITURE TOWARDS EXPENDITURE TOWARDS SALARIES AND OTHER ALLO WANCES SHOULD BE DISALLOWED AS THE ASSESSEE HAS FAILED TO DEDUCT THE TDS OVER THIS EXPENDITURE. THE AR ATTENDED AND SUBMITTED REPLY. A FTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, IT CAME TO NOTICE T HAT NO TDS HAS BEEN DEDUCTED BY THE ASSESSEE ON AMOUNT OF RS. 25,1 0,56,019/-. HENCE, THE SAME IS DISALLOWED U/S 40(A)(I) OF THE L .T. ACT, 1961. (ADDITION: - RS. 25,10,56,019/-) 4.2 WE FIND THAT IDENTICAL ISSUE OF DISALLOWANCE UNDER SECTION 40(A)(I) OF THE ACT FOR EXPENDITURE ON SALARY, ALLO WANCES AND TRAVELLING EXPENSES TO EXPATRIATE EMPLOYEES WAS RAI SED BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2015-16, WHICH HAS BEEN DELETED BY THE INCOME TAX APPELLATE TRIBUNAL (TRIBU NAL) IN ITA NO.9765/DEL./2019. THE RELEVANT FINDING OF THE TRIB UNAL (SUPRA) IS REPRODUCED AS UNDER: 22. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE ASSESSING OFFICER SOUGHT CLARIFICATION OF SERVICES PERFORMED BY BOEING COMPANY USA, BOEING DEFENCE AUSTRALIA LTD, BOEING KOREA LLC AND WHETHER THE SALARY PAID TO EXPATRIATES HAS BEEN INCLUDED IN THE TOTAL SALARY. FURTHER, THE ASSESSEE WAS ASKED TO EXPLAIN THE WORK PERFORMED BY THE EXPATRIATES. THE ASSESSEE WAS ASKED TO EXPLAIN THE REIMBURSEMENT OF EXPENSES TO BOEING COMPANY USA, BO EING INTERNATIONAL CORPORATION KOREA AND BOEING DEFENCE AUSTRALIA. THE ASSESSEE FURNISHED NECESSARY DETAILS. IT WAS EXPLAI NED THAT REIMBURSEMENT OF SALARY COST TO EXPATRIATE EMPLOYEE S IS NOT TAXABLE AS FIS, BOTH UNDER THE PROVISIONS OF THE ACT AND RE LEVANT DTAA, AND NO WITHHOLDING TAX WAS REQUIRED ON THE SAME. 23. IT WAS FURTHER EXPLAINED THAT THE ASSESSEE WAS A REAL AND ECONOMIC EMPLOYER OF EXPATRIATE EMPLOYEES, AS THESE EMPLOYEES WERE UNDER THE CONTROL OF THE COMPANY WITHOUT ANY RELATION/CONNECTION WITH THE AES AND SALARY EXPENSE S HAVE BEEN BORNE BY THE ASSESSEE ON WHICH THE APPROPRIATE TAXE S WERE DULY DEDUCTED AND DEPOSITED U/S 192 OF THE ACT. IT WAS S TRONGLY 7 ITA NO. 983/DEL./2016 & 3695/DEL./2018 CONTENDED THAT REIMBURSEMENT OF COST CHARGES OF SAL ARY OF EXPATRIATE EMPLOYEES IS NOT TAXABLE AS FTS/FIS. 24. THE ASSESSING OFFICER WAS NOT CONVINCED WITH TH E SUBMISSIONS OF THE ASSESSEE AND REFERRING TO THE TERMS OF SECON DMENT AGREEMENT AND DRAWING SUPPORT FROM THE DECISION OF THE HON'BL E HIGH COURT IN THE CASE OF CENTRICAINDIA OFFSHORE INDIA LTD 364ITR 336 AND FURTHER REFERRING TO VARIOUS JUDICIAL DECISIONS, THE ASSESS ING OFFICER FINALLY CAME TO THE CONCLUSION THAT THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE ON THE EXPENDITURE TOWARDS SALARIES AND OTHE R ALLOWANCES AND INVOKING THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT, THE ASSESSING OFFICER MADE DISALLOWANCE OF RS. 56,58,19 ,799/-. 25. OBJECTIONS WERE RAISED BEFORE THE DRP BUT WERE OF NO AVAIL. 26. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEH EMENTLY STATED THAT THE ASSESSEE HAS DEDUCTED TAX AT SOURCE/S 192 OF THE ACT, AND, THEREFORE, THERE SHOULD NOT BE ANY DISALLOWANCE U/S 40(A)(I) OF THE ACT. RELIANCE WAS PLACED ON THE DECISION OF THE CO -ORDINATE BENCH IN THE CASE OF NEEMRANA HOTELS PVT LTD ITA NO. 98/DEL/ 2017 ORDER DATED 10.07.2019. IT IS THE SAY OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE TAX HAS BEEN DEDUCTED U/S 192 OF THE ACT , PROVISIONS OF SECTION 195 WILL NOT APPLY. 27. DISTINGUISHING THE DECISION OF CENTRICA INDIA O FFSHORE INDIA LTD [SUPRA], THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTL Y STATED THAT THE DECISION IN THE CASE OF CENTRICA INDIA OFFSHORE IND IA LTD WAS BASED UPON ENTIRELY DIFFERENT SET OF FACTS WHEREIN IN THA T CASE,THE INDIAN COMPANY WAS A NEWLY FORMED ENTITY AND DID NOT HAVE NECESSARY TRAINED HUMAN RESOURCES AND SCOPE OF WORK EMERGING FROM SERVICE AGREEMENT AND SECONDMENT AGREEMENT CLEARLY SHOWS TH AT SECONDEES WERE SENT TO INDIA WITH THE KNOWLEDGE OF VARIOUS PROCESSES AND PRACTICES AND ALSO WITH EXPERIENCE IN MANAGING AND APPLYING SUCH PROCESSES AND PRACTICES. 28. ON THESE FACTS, THE HON'BLE HIGH COURT WAS SATI SFIED THAT THE SECONDARY EMPLOYEES ARE MAKING AVAILABLE THEIR EXPE RIENCE AND SKILL IN MANAGING AND APPLYING THE PROCESSES. IT IS THE SAY OF THE LD. COUNSEL FOR THE ASSESSEE THAT IN SO FAR AS THE ASSE SSEE IS CONCERNED, IT IS IN EXISTENCE SINCE 2003 AND THE EMPLOYEES RE CRUITED OUTSIDE INDIA DO NOT POSSESS ANY SPECIFIC SKILL SET THAT IS NOT AVAILABLE WITH INDIAN EMPLOYEES. THE LD. COUNSEL FOR THE ASSESSEE EXPLAINED THAT IN IN-HOUSE ADMINISTRATION SUPPORT DIVISION, THE APPEL LANT HAS 58 EMPLOYEES OUT OF WHICH ONLY 6 ARE EXPATRIATE EMPLOY EES. THIS DIVISION RENDERS TRAVEL LOGISTICS, FINANCE AND ACCO UNTING SUPPORT ETC AND THE QUALIFICATIONS AND ROLE SHOW THAT SUCH EXPA TRIATE EMPLOYEES CANNOT MAKE AVAILABLE ANY KNOWLEDGE. FURTHER RELIAN CE WAS PLACED ON THE DECISION OF THE COORDINATE BENCH IN THE CASE OF AT & T COMMUNICATION SERVICES INDIA PVT LTD 101 TAXMANNN.C OM 105 [DELHI TRIB] 29. PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE F INDINGS OF THE LOWER AUTHORITIES AND PLACED STRONG RELIANCE ON THE DECISION OF THE 8 ITA NO. 983/DEL./2016 & 3695/DEL./2018 HON'BLE HIGH COURT IN THE CASE OF CENTRICA INDIA OF FSHORE PVT LTD [SUPRA]. 30. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE O RDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO CAREFULLY PERUSED T HE SALARY REIMBURSEMENT AGREEMENT, WHICH IS PLACED AT PAGES 2 96 ONWARDS OF THE PAPER BOOK, AND AS PER CLAUSE1.1, IT IS PROVIDE D THAT THE SECONDEES HAVE EXPRESSED THEIR WILLINGNESS TO BE DE PUTED TO BIPICL [THE 20 APPELLANT] AND TBC [AE] HAVE AGREED TO RELE ASE THESE EMPLOYEES TO BIPICL. IT IS PROVIDED THAT TBC WILL F ACILITATE PAYMENT OF SALARIES IN SECONDEES HOME COUNTRY ON BEHALF OF BICIPL. UNDER THE HEAD EMPLOYMENT STATUS, IT IS PROVIDED THAT THE SECONDEES SHALL BE WORKING FOR BICIPL AND WILL BE UNDER SUPERVISION , CONTROL AND MANAGEMENT OF BICIPL AS AN EMPLOYEE OF BICIPL. 31. IT IS CLEAR FROM THE AFORE-STATED RELEVANT CLAU SES THAT THE SECONDEES WERE, IN FACT, IN EMPLOYMENT OF THE APPEL LANT AND AS PER THE TERMS, THE A WAS PAYING SALARIES AT THE HOME COUNTRY OF THE SECONDEES AND, THEREFORE, THERE WAS REIMBURSEMENT B Y THE APPELLANT. THESE FACTS CLEARLY SHOW THAT THE ASSESS EE HAS BEEN PAYING TO ITS OWN EMPLOYEES AND THIS FACT ALONE CLE ARLY DISTINGUISHES THE FACTS OF THE DECISION IN THE CASE OF CENTRICA INDIA OFFSHORE LTD [SUPRA]. 32. THE CO-ORDINATE BENCH IN THE CASE OF AT & T COM MUNICATION SERVICES INDIA PVT LTD. [SUPRA], DISTINGUISHING THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CENTRICA IN DIA OFFSHORE PVT LTD [SUPRA], HAS HELD AS UNDER: 30. THE DRP HAS AFFIRMED THE DECISION OF THE LD. A O BY HOLDING THAT THE ASSESSEE HAS DEDUCTED WITHHOLDING TAX ON 21 SUBSTANTIAL PAYMENTS AND YET ARGUED THAT THE TAX IS NOT DEDUCTIBLE U/S 195 OF THE ACT AND PROVISION OF SECT ION 40(A)(I) CANNOT BE INVOKED IN THE CASE OF SAID PAYMENT. 31. THE DRP HAS AFFIRMED THE DECISION OF THE AO BY HOLDING THAT THE ASSESSEE HAS DEDUCTED WITHHOLDING TAX ON SUBSTANTIAL PAYMENTS AND YET ARGUED THAT THE TAX IS NOT DEDUCTIBLE U/S 195 OF THE ACT AND PROVISION OF SECT ION 40(A)(I) CANNOT BE INVOKED IN THE CASE OF SAID PAYMENT. 32. THE SPECIAL AUDITORS IN THEIR AUDIT REPORT HAVE WORKED OUT PARTICULARS OF PAYMENTS IN RESPECT OF WHICH NO TDS WAS DEDUCTED U/S 40(A)(IA) OF THE ACT. CONSEQUENTLY, AN AMOUNT OF RS. 54,06,328/- WAS NOT TO BE ALLOWED AS EXPENDITUR E. 33. WE HAVE ALSO PERUSED THE TDS CERTIFICATES, FORM S 15CA AND 15CB, TAX DEDUCTED BY THE ASSESSEE AND ALL THESE DO CUMENTS ARE PART OF THE PAPER BOOK. THERE IS NO DISPUTE THAT TH E ASSESSEE HAS DEDUCTED TAX AT SOURCE U/S 192 OF THE ACT. ON THE G IVEN FACTS OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE PRO VISIONS OF SECTION 9 ITA NO. 983/DEL./2016 & 3695/DEL./2018 195 OF THE ACT DO NOT APPLY. CONSIDERING THE FACTS OF THE CASE IN TOTALITY, IN LIGHT OF JUDICIAL DECISIONS REFERRED T O HEREINABOVE, WE DO NOT FIND ANY MERIT IN 22 THE DISALLOWANCE MADE BY T HE ASSESSING OFFICER/DRP. WE, ACCORDINGLY, DIRECT FOR DELETION O F ADDITION OF RS. 56.58 CRORES. 4.3 AFTER FOLLOWING THE DECISION OF THE TRIBUNAL IN AS SESSMENT YEAR 2015-16, THE TRIBUNAL HAS DELETED THE IDENTICA L DISALLOWANCES IN ASSESSMENT YEAR 2012-13 (ITA NO. 2374/DEL./2018) AND ASSESSMENT YEAR 2013-14 (ITA NO . 2375/DEL./2018). FURTHER, THE LEARNED COUNSEL ALSO BROUGHT TO OUR NOTICE THAT WHILE SENDING THE REMAND REPORT, TH E ASSESSING OFFICER HAS ADMITTED THAT THE IDENTICAL DISALLOWANC E WERE BEING MADE FROM ASSESSMENT YEAR 2011-12 ONWARDS. 4.4 IN VIEW OF THE IDENTICAL ISSUE INVOLVED IN THE YEA R UNDER CONSIDERATION, RESPECTFULLY FOLLOWING THE FINDING O F THE TRIBUNAL (SUPRA), WE DELETE THE DISALLOWANCE MADE IN THE IMP UGNED ORDER. THE GROUNDS NO. 1 TO 4 OF ITA NO.983/DEL./20 16 ARE ACCORDINGLY ALLOWED. 5. HENCE, APPEAL IS ALLOWED. ITA NO. 3695/DEL./2018 (AY: 2011-12) 6. NOW, WE TAKE UP THE APPEAL IN ITA NO. 3695/DEL./201 8. THE GROUNDS RAISED BY THE ASSESSEE IN THE APPEAL ARE RE PRODUCED AS UNDER: 1. IN LAW, ON FACTS AND PECULIAR CIRCUMSTANCES OF T HE PRESENT CASE, THE ISSUANCE OF NOTICE UNDER SECTION 154 OF THE ACT TO ACCESS THE AMOUNT OF RS. 6,63,19,411/- AS INCOME OF THE APPELL ANT AND PASSING OF ORDER UNDER SECTION 154/ 143(3) OF THE ACT DATED MARCH 28, 2018 ARE ILLEGAL, VOID AB-INITIO, BAD IN LAW AND THEREFO RE, MAY KINDLY BE ORDERED TO BE QUASHED. 10 ITA NO. 983/DEL./2016 & 3695/DEL./2018 2. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. AO GROSSLY ERRED IN MAKING AN ADJUSTMENT OF RS. 6,6 3,19,411/- TO THE RETURNED INCOME OF THE APPELLANT, TREATING THE SAME AS FEE FOR TECHNICAL SERVICES (FTS) AS PER THE PROVISIONS OF SECTION 9(L)(VII) OF THE ACT AND FEE FOR INCLUDED SERVICES/ FTS/ ROYALTY UND ER ARTICLE 12(4) OF INDIA US TAX TREATY/ ARTICLE 12(4) OF INDIA UK T AX TREATY/ ARTICLE 12(3) OF INDIA AUSTRALIA TAX TREATY RESPECTIVELY, G ROSSLY IGNORING THE FACT THAT THE SAID AMOUNT REPRESENT PURE REIMBURSEM ENT WITHOUT ANY INCOME ELEMENT AND HOLDING THAT THE SAME IS TO BE D ISALLOWED UNDER SECTION 40(A)(I) OF THE ACT FOR FAILURE ON THE PART OF THE APPELLANT IN DEDUCTING THE TAXES THEREOF.. 3. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. AO ERRED IN NOT APPRECIATING THE FACT THAT SUCH REIMBU RSEMENT OF TRAVELLING EXPENSE AND OTHER EXPENSE CANNOT BE CONS IDERED AS MAKING AVAILABLE TECHNICAL KNOWLEDGE IN TERMS OF AR TICLE 12(4) OF INDIA US TAX TREATY/ ARTICLE 12(4) OF INDIA UK TAX TREATY/ ARTICLE 12(3) OF INDIA AUSTRALIA TAX TREATY RESPECTIVELY. 4. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. AO ERRED IN GRANTING SHORT CREDIT OF TAXES PAID AMO UNTING TO RS. 9,44,12,220 INSTEAD OF RS. 10,94,12,220 WHILE COMPU TING THE TAX PAYABLE BY THE APPELLANT WHILE PASSING THE ORDER UN DER SECTION 154/143(3) OF THE ACT. 5. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. AO ERRED IN LEVYING CONSEQUENTIAL INTEREST UNDER SE CTION 234B OF THE ACT. 7. WE FIND THAT THE ASSESSING OFFICER IN THE IMPUGNED ORDER HAS RECTIFIED THE AMOUNT OF DISALLOWANCE UNDER SECT ION 40(A)(I) TO RS. 31,73,75,430/- FROM THE DISALLOWANCE MADE IN TH E ORIGINAL ASSESSMENT ORDER AT RS.25,10,56,019/-. IN THE IMPUG NED RECTIFICATION ORDER, THE ASSESSING OFFICER HAS MADE NET ADDITION OF RS.6,63,19,411/- FOR PAYMENT TOWARDS SALARY, ALLOWA NCES AND TRAVEL EXPENSES TO EXPATRIATE EMPLOYEES. 7.1 THIS ISSUE HAS ALREADY BEEN ALLOWED IN FAVOUR OF T HE ASSESSEE IN THE FOREGOING PARAGRAPHS, I.E., PARAS 4 TO 4.4. TO MAINTAIN THE CONSISTENCY IN OUR DECISIONS, THIS ADD ITION IS ALSO DELETED. ACCORDINGLY, THE GROUNDS NO. 1 TO 3 ARE AL LOWED. 11 ITA NO. 983/DEL./2016 & 3695/DEL./2018 8. IN GROUND NO. 4, THE ASSESSEE HAS RAISED THE ISSUE OF SHORT CREDIT OF TAXES GRANTED. THIS IS A MATTER OF VERIFI CATION AT THE HAND OF THE ASSESSING OFFICER. ACCORDINGLY, WE DIRECT TH E ASSESSING OFFICER TO VERIFY THE AMOUNT OF TAXES PAID AND ALLO W CREDIT IN ACCORDANCE WITH LAW. THIS GROUND OF APPEAL IS ALLOW ED FOR STATISTICAL PURPOSES. 9. IN RESULT, THE APPEAL IN ITA NO. 983/DEL./2018 IS ALLOWED AND THE APPEAL IN ITA NO. 3695/DEL./2018 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH FEBRUARY, 2021 SD/- SD/- (K.N. CHARY) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 11 TH FEBRUARY, 2021. RK/- (D.T.D.S.) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI