BASF INDIA LTD, MUMBAI V. DDIT 3(2) (IT), MUMBAI

ITA 4754/MUM/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9133 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 20-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P J PARDIWALA
• Keywords: Transfer pricing; Double taxation relief; Opportunity of being heard; Additional evidence; Advance ruling

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO. 4754/MUM./2015 ( ASSESSMENT YEAR : 2014 15 ) BASF INDIA LTD. PLTO NO.37, CHANDIVALI FARM ROAD CHANDIVALI, ANDHERI (EAST) MUMBAI 400 072 PAN AAACB4599E . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX (I.T) CIRCLE 3(2), MUMBAI . RESPONDENT ITA NO. 4755/MUM./2015 ( ASSESSMENT YEAR : 2015 16 ) BASF INDIA LTD. PLTO NO.37, CHANDIVALI FARM ROAD CHANDIVALI, ANDHERI (EAST) MUMBAI 400 072 PAN AAACB4599E . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX (I.T) CIRCLE 3(2), MUMBAI . RESPONDENT ASSESSEE BY : SHRI P.J. PARDIWALA REVENUE BY : SHRI LOVISH KUMAR DATE OF HEARING 17 . 09 .2018 DATE OF ORDER 14.12.2018 2 BASF INDIA LTD. O R D E R PER SAKTIJIT DEY, J.M. THE AFORESAID APPEALS BY THE ASSESSEE ARE AGAINST TWO SEPARATE ORDERS , BOTH DATED 24 TH MARCH 2015, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 55, MUMBAI, CONFIRMING THE ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 195(2) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) FOR THE ASSESSMENT YEARS 2014 15 AND 2015 16 . 2 . IN GROUND NO.1 TO 3, WHICH ARE COMMON IN BOTH THE APPEALS EXCEPT THE FIGURES, THE ASSESSEE HAS CHALLENGED THE DECISION OF THE DEPARTMENTAL AUTHORITIES IN HOLDING THAT THE PAYMENT MADE TO BASF SE, GERMANY, IS IN THE NATURE OF FEES FOR TECHNICAL SERVICES AND FURTHER DIRECT ION TO DEDUCT TAX AT SOURCE @ 10% ON GROSS BASIS. 3 . B RIEF FACTS ARE, THE ASSESSEE , AN INDIAN COMPANY , IS PART OF BASF GROUP OF COMPANIES HAVI NG ITS HEADQUARTERS IN GERMANY AND THE HOLDING COMPANY OF THE ENTIRE GROU P IS BASF SE , GERMANY. AS CAN BE SEEN FROM THE FACTS ON RECORD, THE ASSESSEE ENTERED INTO A COST SHAR ING AGREEMENT WITH BASF SE W.E.F. 1 ST JANUARY 2010. AS PER THE TERMS OF THE SAID AGREEMENT, THE ASSESSEE WAS REQUIRED TO REMIT U.S. $ 3,401,060, TO BASF SE, GERMANY, TOWARDS REIMBURSEMENT OF COMMON COST ALLOCATED TO THE ASSESSEE AS PER THE COST SHARING AGREEMENT FOR 3 BASF INDIA LTD. ASSESSMENT YEAR 2014 15. S IMILARLY, THE ASSESSEE WAS REQUIRED TO REMIT AN AMOUNT OF U.S. $ 35,51,860, TO B A SF SE, GERMANY, IN ASSESSMENT YEAR 2015 16. SINCE , THE ASSESSEE WAS OF THE VIEW THAT THE REMITTANCE TO BASF SE, GERMANY IS IN THE NATURE OF REIMBURSEMENT OF COST AND IT IS NOT AN INCOME CHARGEABLE TO TAX IN INDIA IN THE HANDS OF THE RECIPIENT I.E., BASF SE, GERMANY , IT MADE APPLICATION S UNDER SECTION 195(2) OF THE ACT SEEKING PERMISSION FOR REMITTING THE AMOUNT IN QUESTION WITHOUT DEDUCTING TAX AT SOURCE FOR BOTH THE ASSESSMENT YEARS. THE ASSESSING OFFICER AFTER EXAMINING THE APPLICATION S OF THE ASSESSEE, HOWEVER, WAS OF THE VIEW THAT REMITTANCES TO BE MADE BY THE ASSESSEE TO BASF SE, GERMANY, ARE IN THE NATURE OF FEES FOR TECHNICAL SERVICES, THEREFORE, HE DIRECTED THE ASSESSEE TO DEDUCT AT SOURCE @ 10% ON THE REMITTANCES ON GROSS BASIS. BEING AGGRIEVED WITH THE ORDERS PASSED UNDER SECTION 195(2) OF THE ACT , THE ASSESSEE PREFERRED APPEAL S BEFORE THE FIRST APPELLATE AUTHORITY. 4 . IN COURSE OF HEARING BEFORE THE FIRST APPELLATE AUTHO RITY, THE ASSESSEE FILED A WRITTEN SUBMISSION STATING THE REASONS FOR WHICH THE PAYMENT MADE TO BASF SE CANNOT BE CONSIDERED AS FEES FOR TECHNICAL SERVICES THEREBY DOES NOT REQUIR E DEDUCTION OF TAX AT SOURCE UNDER SECTION 195(1) OF THE ACT. THE LEARNED COM MISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF THE FACTS 4 BASF INDIA LTD. AND MATERIAL ON RECORD, HOWEVER, UPHELD THE ORDERS PASSED BY THE ASSESSING OFFICER. 5 . SHRI P.J. PARDIWALA, LEARNED SR. COUNSEL, APPEARING FOR THE ASSESSEE SUBM ITTED , THE FIRST APPELLATE AUTHORITY HAS COMPLETELY MISCONCEIVED THE FACT S THEREBY CAME TO AN ERRONEOUS CONCLUSION WHILE UPHOLDING THE ORDERS OF THE ASSESSING OFFICER. HE SUBMITTED , THE HOLDING COMPANY I.E., BASF SE (FORMERLY KNOWN AS BASF AG) ENTERED INTO A COST SHARING AGREEMENT WITH OTHER COMPANIES OF BASF GROUP , WHICH ARE MAINLY PRODUCTION COMPANIES , ON 25 TH MAY 2000, HE SUBMITTED , AS A RESULT OF GLOBALIZATION OF BUSINESS ACTIVITIES THE WORLD WIDE STRUCTURE OF PRODUCTION AND THE DIVISION OF FUNCTION WITHIN THE BASF GROUP , THE POOL MEMBERS USE AND PURCHASE NUMBER OF MANAGEMENT AND OTHER SERVICES WHICH ARE PROVIDED IN COMMON INTEREST AND FOR THE COMMON BENEFIT OF POOL MEMBERS BY ONE OR MORE POOL MEMBERS. HE SUBMITTED , AS PER COST SHARING AGREEMENT, ACTUAL DIRECT AND INDIRECT EXPENSES ARE DETERMINED ON THE BASIS OF ACCOUNTING RULES OF THE COUNTRY IN WHICH THE POOL MEMBER IS PROVIDING TH E SERVICE IS LOCATED AND THE ALLOCABLE AMOUNT IS TO BE DETERMINED ON A COST CENTRE BASIS BY THE POOL MEMBER PROVIDING THE SERVICE. THE BASIS OF ALLOCATION IS THE TOTAL COST OF THE COST CENTRE MINUS INDIVIDUAL CHARGES AND THOSE RESULTING FROM SERVICES WHICH ARE CHARGED DIRECTLY. THE ALLOCABLE AMOUNT IS TO BE DETERMINED SEPARATELY FOR EACH TYPE OF 5 BASF INDIA LTD. SERVICE SPECIFIED IN THE SCHEDULE AND ON THE BASIS OF THE RESPECTIVE COST CATEGORY SUCH AS SELLING EXPENSES, ADMINISTRATIVE EXPENSES, ETC. HE SUBMITTED , COST SHARIN G AGREEMENT IS BASED ON THE PRINCIPLE THAT THE SERVICES ARE PROVIDED IN THE COMMON INTEREST AND FOR THE COMMON BENEFIT OF POOL MEMBERS . HE SUBMITTED , THOUGH THE COST SHARING AGREEMENT WAS IN FORCE SINCE MAY 2000, HOWEVER, THE ASSESSEE BECAME A PART OF THE AGREEMENT W.E.F. 1 ST JANUARY 2010, EXPLAINING THE REASON WHY THE ASSESSEE WAS NOT A PARTY TO THE AGREEMENT IN MAY 2000. HE SUBMITTED , THE ASSESSEE WAS RECEIVING BENEFITS OF COST SHARING AGREEMENT BEFORE IT JOINED INTO THE POOL IN 2010. HE SUBMITTED , PRIOR TO 2010, THOUGH CSA COSTS WERE ALLOCATED TO THE ASSESSEE BUT WERE NOT CHARGED TO IT. INSTEAD, ASSESSEES PORTION OF CSA COST WAS BORN E BY BASF SE AS A MATTER OF INTERNAL MANAGEMENT DECISION. HOWEVER, SUBSEQUENTLY, DUE TO CERTAIN CONTINGENCIES ARISING DUE T O CSA AUDIT BY GERMAN TAX AUTHORITIES REQU I RING CHARGING OF COSTS TO ALL COMPANIES WHICH HAVE A BENEFIT OF COST SHARING ACTIVITY , THE ASSESSEE JOIN ED THE COST SHARING AGREEMENT IN JANUARY 2010. TAKING US THROUGH THE COST SHARING AGREEMENT PLACED IN THE PAP ER BOOK THE LEARNED SR. COUNSEL FOR THE ASSESSEE SUBMITTED , THE NATURE OF SERVICES PROVIDED IN THE AGREEMENT CANNOT BE TERMED AS F EE FOR TECHNICAL SERVICES. FURTHER , HE SUBMITTED , THE COST SHARING AGREEMENT MAKES IT CLEAR THAT THE SERVICES ARE ACTUALLY PROVIDED BY THE OTHER GROUP 6 BASF INDIA LTD. COMPANIES (POOL MEMBERS) AND NOT BY BASF SE. DRAWING OUR ATTENTION TO EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT, HE SUBMITTED THAT AS PER THE DEFINITI ON OF FEES FOR TECHNICAL SERVICES PROVIDED THEREIN , THE RECIPIENT MUST HAVE PROVIDED / RENDERED MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES. HE SUBMITTED , SINCE IN THE PRESENT CASE, BASF SE DID NOT OR DOES NOT RENDER ANY SERVICE , THERE IS NO REQUIREMENT FOR DEDUCTION OF TAX O N REMITTANCE MADE TO BASF SE. IN SUPPORT OF SUCH CONTENTION, HE RELIED UPON THE DECISION OF AUTHORITY FOR ADVANCE RULING IN ABB LTD., [2010] 322 ITR 564. TO EMPHASIZE ON THE FACT THAT THE SERVICES WERE ACTUALLY RENDERED BY THE POO L ME MBERS ON COST TO COST BASIS, T HE LEARNED SR. COUNSEL DREW OUR ATTENTION TO A STATEMENT SHOWING COST TO COST ALLOCATION OF POOL PARTNERS TO BASF INDIA LTD. VIA BASF SE. FURTHER, HE ALSO DREW OUR ATTENTION TO CERTAIN DETAILS / DOCUMENTARY EVIDENCES PLACED AT PAGES 81 TO 96 OF THE PAPER BOOK. THE LEARNED SR. COUNSEL ALSO DREW OUR ATTENTION TO LETTER DATED 28 TH DECEMBER 2011, PLACED AT PAGE 97 OF THE PAPER BOOK TO CONTEND THAT THE PAYMENT MADE WAS FOR REIMBURSEMENT OF COST AND NOT FEES FOR TECHNICAL SERVICES. T O FURTHER CLARIFY THE FACTUAL POSITION, THE LEARNED SR. COUNSEL DREW OUR ATTENTION TO THE LETTER DATED 3 RD DECEMBER 2018, ISSUED ON BEHALF OF DELOITTE CLARIFYING THAT THE REIMBURSEMENT OF COST WAS ON ACTUAL BASIS AND WITHOUT ANY MARK UP. HOWEVER, HE FAIRLY SUBMITTED THAT MANY OF THESE DOCUMENTS ARE BEING FURNISHED FOR THE 7 BASF INDIA LTD. FIRST TIME BEFORE THE TRIBUNAL AND IN THIS REGARD HE FILED A SEPARATE APPLICATION REQUESTING THE BENCH TO ADMIT THEM AS ADDITIONAL EVIDENCES. CONTESTING THE FINDING OF THE LEARNED COMMISSI ONER (APPEALS) TH AT THE INVOICE RAISED BY BASF SE ON TH E ASSESSEE DOES NOT REFER TO THE COST SHARING AGREEMENT, THE LEARNED SR. COUNSEL SUBMITTED , SUCH FINDING OF THE FIRST APPELLATE AUTHORITY IS FACTUALLY INCORRECT SINCE THE INVOICE RAISED BY BASF SE CLEA RLY REFERS TO COST SHARING AGREEMENT. IN THIS CONTEXT, HE DREW OUR ATTENTION TO A COPY OF INVOICE PLACED AT PAGE 46 OF THE PAPER BOOK. REFERRING TO A REPORT BY INDEPENDENT AUDITOR DELOITTE, THE LEARNED SR. COUNSEL SUBMITTED , THE REPORT CLEARLY PROVES THAT THE SERVICES WERE RENDERED BY POOL MEMBERS AND THE PAYMENT MADE BY THE ASSESSEE WAS TOWARDS REIMBURSEMENT OF SUCH COSTS. HE SUBMITTED , BASF SE IS ONLY A PASS - THROUGH ENTITY. THE LEARNED SR. COUNSEL SUBMITTED , IN THE ORDER PA SSED UNDER SECTION 92CA OF THE ACT FOR THE IMPUGNED ASSESSMENT YEAR, THE TRANSFER PRICING OFFICER HAS DISALLOWED THE REIMBURSEMENT OF COST WITH THE OBSERVATION THAT THE ASSESSEE HAS NOT AVAILED ANY SERVICES. THUS, THE LEARNED SR. COUNSEL SUBMITTED , IF IT I S THE CASE OF TRANSFER PRICING OFFICER THAT THE ASSESSEE HAS NOT AVAILED ANY SERVICES , THE ASSESSING OFFICER WHILE REJECTING ASSESSEES APPLICATION UNDER SECTION 195(2) OF THE ACT COULD NOT HAVE CONCLUDED THAT SERVICES RENDERED ARE IN THE NATURE OF FEES FO R TECHNICAL SERVICES. THE LEARNED SR. COUNSEL 8 BASF INDIA LTD. SUBMITTED , IN CASE OF ANOTHER SISTER CONCERN LOCATED IN INDIA , WHICH IS ALSO A PARTY TO THE COST SHARING AGREEMENT WITH BASF SE, THE ASSESSING OFFICER HAS PASSED AN ORDER UNDER SECTION 195(2) OF THE ACT PERMITT ING THE COMPANY TO MAKE REMITTANCES TO BASF SE WITHOUT DEDUCTING ANY TAX AT SOURCE. THUS, HE SUBMITTED , THE DEPARTMENT CANNOT TAKE CONTRADICTORY STAND IN RESPECT OF PAYMENT MADE BY TWO INDIAN COMPANIES UNDER THE SAME COST SHARING AGREEMENT. THUS, THE LEARN ED SR. COUNSEL SUBMITTED , TAX DEDUCTED AT SOURCE AND PAID TO THE GOVERNMENT ACCOUNT SHOULD BE REFUNDED TO THE ASSESSEE. 6 . SHRI LOVISH KUMAR, LEARNED DEPARTMENTAL REPRESENTATIVE , OPPOSING THE CONTENTION S RAISED ON BEHALF OF THE ASSESSEE SUBMITTED , THE ASSESS EE HAS NOT SUBSTANTIATED WHETHER THE SERVICES WERE ACTUALLY RENDERED OR NOT. HE SUBMITTED , AS PER THE COST SHARING AGREEMENT, THE NATURE OF SERVICES TO BE RENDERED ARE HIGHLY TECHNICAL, THEREFORE, THE PAYMENT MADE FOR SUCH SERVICES HAS TO BE TREATED AS FEE S FOR TECHNICAL SERVICES AS PER THE PROVISIONS OF SECTION 9(1)(VII) OF THE ACT. HE ALSO SUBMITTED , THE PAYMENT MADE IS IN THE NATURE OF FEES FOR TECHNICAL SERVICES AS PER THE DEFINITION PROVIDED IN THE INDIA GERMANY DOUBLE TAXATION AVOIDANCE AGREEMENT , SIN CE , IT IS WIDE IN SCOPE AND THERE IS NO CONDITION OF MAKE AVAILABLE . REFERRING TO THE REPORT OF THE I NDEPENDENT AUDITOR , DELOITTE , THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , MUCH RELIANCE CAN NOT BE PLACED ON THE SAID 9 BASF INDIA LTD. DOCUMENT AS THE PURPOSE AND L EGAL BASIS FOR WHICH THE DOCUMENT IS PREPARED IS NOT CLEAR. FURTHER, HE SUBMITTED , IN THE SAID REPORT THERE IS NO ANALYSIS ON THE AMOUNTS AND FIGURES. HE SUBMITTED , WHILE THE COST SHARING AGREEMENT IS EXECUTED BETWEEN BASF AG AND THE POOL MEMBERS, THE ASSE SSEE HAS MADE PAYMENT TO BASF SE. THEREFORE, IT CANNOT BE SAID THAT THE PAYMENT HAS BEEN MADE AS PER COST SHARING AGREEMENT. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , THE REPORT OF THE GERMAN AUDITOR DELOITTE IS ALSO QUALIFIED AS THE AUDITOR STATE D THAT IT IS VERY LIMITED IN SCOPE. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , THE REPORT OF THE GERMAN AUDITOR CANNOT BE TAKEN AT ITS FACE VALUE. HE SUBMITTED , THE CLAIM OF THE ASSESSEE THAT THERE IS NO MARK UP AND PAYMENT IS ON COST TO COST BASIS IS INCORRECT AS IT IS NOT SUPPORTED BY ANY VERIFIABLE DOCUMENT. HE SUBMITTED , THIS FACT CAN ONLY BE VERIFIED BY THE ASSESSING OFFICER AFTER EXAMINING ALL THE BOOKS OF ACCOUNT OF THE COMPA N Y ACTUALLY MAKING THE EXPENSES AND COST ALLOCATION S HEETS OF THE HOLDING COMPANY , WHICH HAVE NOT BEEN PRODUCED BY THE ASSESSEE. HE SUBMITTED , COST SHARING AGREEMENT ALSO MAKES IT CLEAR THAT THE COST CENTRE CAN ADJUST THE COST ACCORDING TO THEIR WISH AND THE HEAD OFFICE RETAINS THE DISCRETION TO ALLOCATE COSTS OF SMALLER COMPANIES TO OTHERS. AS REGARDS THE ADDITIONAL EVIDENCES SOUGHT TO BE FILED BY THE ASSESSEE, THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY OPPOSED ADMISSION OF SUCH EVIDENCES AT 10 BASF INDIA LTD. THIS STAGE. WITHOUT PREJUDICE TO THE AFORESAID SUBMISSIONS, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , MERELY BECAUSE THE ASSESSEE CLAIMS THE PAYMENT AS REIMBURSEMENT , IT CANNOT LOSE ITS CHARACTER AS FEES FOR TECHNICAL SERVICES. IN SUPPORT OF HIS CONTENTION, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIEDUPON THE FOLLOW ING DECISIONS: I ) CENTRICA INDIA OFFSHORE PVT. LTD. V/S CIT, W.P.(C) NO.6807/ 2012, DATED 25.04.2014; II ) GVK INDUSTRIES V/S ITO, [1997] 228 ITR 564; AND III ) U.S. TECHNOLOGY RESOURCES PVT. LTD. V/S ACIT, ITA NO.99 104/COCH./2017, DATED 29.01.2018. 7 . IN REJOINDER, THE LEARNED SR. COUNSEL SUBMITTED , BASF AG AS APPEARING IN THE COST SHARING AGREEMENT HAS SUBSEQUENTLY BE EN RENAMED AS BASF SE , HENCE, THEY ARE NOT DIFFERENT ENTITIES . AS REGARDS THE CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE REPORT OF THE GERMAN AUDITOR , DELOITTE CANNOT BE RELIED UPON, THE LEARNED SR. COUNSEL SPECIFICALLY DRAWING OUR ATTENTION TO PAGE 63 OF THE PAPER BOOK SUBMITTED THAT BASF SE HAS ENGAGED THE AUDITOR TO AUDIT THE PROVISION AND INVOICING AND ACTIVITIES BETWEEN BASF SE A ND POOL MEMBERS UNDER THE COST SHARING AGREEMENT FOR THE PERIOD FROM 1 ST JANUARY TO 31 ST DECEMBER 2012. THUS, HE SUBMITTED , THE APPREHENSION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE IS MISPLACED. IN SUPPORT OF HIS CONTENTION, THE LEARNED SR. COUNSEL RELI ED UPON THE FOLLOWING DECISIONS: 11 BASF INDIA LTD. I ) CIT V/S SIEMENS AKTIONGESELLSCHAFT, [2009] 310 ITR 320 (BOM.) ; AND II ) DCIT V/S M/S. AT&S INDIA PVT. LTD., ITA NO.1160 AND 2305/ KOL./2013 DATED 15.10.2015. 8 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. WE HAVE ALSO APPLIED OUR MIND TO THE DECISIONS RELIED UPON. THE DISPUTE IN THE PRESENT APPEAL ARISE OUT OF REJECTION OF ASSESSEES APPLICATION MADE UNDER SECTION 195(2) OF THE ACT REQUESTING FOR NO DEDUCTION OF TAX AT SOURCE ON REMITTANCES TO BE MA DE. THE ASSESSING OFFICER HAS REJECTED THE AFORESAID APPLICATIONS FILED BY THE ASSESSEE ON THE GROUND THAT SERVICES RENDERED BY BASF SE TO WHOM REMITTANCES WERE TO BE MADE ARE IN THE NATURE OF FEES FOR TECHNICAL SERVICES. HOWEVER, THE AFORESAID ORDER PASSE D BY THE ASSESSING OFFICER IS CRYPTIC AND BEREFT OF REASONING. THE ASSESSING OFFICER HAS NOT STATED ON WHAT BASIS HE CONSIDERS THE NATURE OF PAYMENT TO BE MADE IS FEES FOR TECHNICAL SERVICES. IT IS ALSO NOT KNOWN WHETHER BEFORE TREATING THE NATURE OF PAYME NT AS FEES FOR TECHNICAL SERVICES THE ASSESSING OFFICER HAS PROPERLY EXAMINED THE COST SHARING AGREEMENT, THE NATURE OF SERVICES PROVIDED AND OTHER RELEVANT FACTORS INCLUDING THE RELEVANT PROVISIONS UNDER THE INDIA GERMANY DTAA. WHILE DECIDING THE APPEALS OF THE ASSESSEE, THE LEARNED COMMISSIONER (APPEALS) HAS UPHELD THE ORDERS PASSED BY THE ASSESSING OFFICER FOR THE FOLLOWING REASONS: 12 BASF INDIA LTD. I ) INVOICE DATED 17.12.2012, RAISED BY BASF SE ON THE ASSESSEE DOES NOT REFER TO COST SHARING AGREEMENT DATED 25.05.2000. II ) SERVICES TO BE RENDERED UNDER THE COST SHARING AGREEMENT ARE IN THE NATURE OF FEES FOR TECHNICAL SERVICES. III ) COST SHARING AGREEMENT WAS EXECUTED IN THE YEAR 2000 , WHEREAS , THE ASSESSEE BECAME PARTY TO THE AGREEMENT IN THE YEAR 2010. THUS, WHEN THE ASSESSEE PRIOR TO 2010 DID NOT MAKING ANY REMITTANCES FOR AVAILING SUCH SERVICES THERE IS NO NEED TO DO SO NOW UNLESS THE ASSESSEE AVAILS SERVICES IN THE NATURE OF FEES FOR TECHNICAL SERVICES. 9 . AS REGARDS THE ALLEGA TION OF THE LEARNED COMMISSIONER (APPEALS) THAT THE INVOICE RAISED BY THE BASF SE DATED 17 TH DECEMBER 2012, DOES NOT REFER TO THE COST SHARING AGREEMENT , WE FIND SUCH ALLEGATION TO BE FACTUALLY INCORRECT. P ERUSAL OF THE SAID INVOICE , A COPY OF WHICH IS PLACE D AT PAGE 46 OF THE PAPER BOOK , CLEARLY REVEAL S THAT IT REFERS TO THE COST SHARING AGREEMENT DATED 25 TH MAY 2000. AS REGARDS THE OBSERVATIONS OF THE LEARNED COMMISSIONER (APPEALS) THAT NATURE OF SERVICES RENDERED IS MANAGERIAL AND TECHNICAL , THERE IS ABSOLUTELY NO REASONING ON WHAT BASIS THE LEARNED COMMISSIONER (APPEALS) HAS COME TO SUCH CONCLUSION. THOUGH, HE HAS STATED THAT SUCH CONCLUSION IS ARRIVED AT AFTER GOING THROUGH THE COST SHARING AGREEMENT, HOWEVER, THE ORDER PASSED BY THE LEARNE D COMMISSIONER (APPEALS) DOES NOT REVEAL WHETHER HE HAS EXAMINED AND ANALYZED THE NATURE OF SERVICES RENDERED BY THE POOL MEMBERS TO TERM THE PAYMENT MADE AS FEES FOR 13 BASF INDIA LTD. TECHNICAL SERVICES. FURTHER, ONLY BECAUSE THE ASSESSEE BECAME PARTY TO THE AGREEMENT IN D ECEMBER 2010, IT CANNOT BE SAID THAT THE PAYMENT MADE BY THE ASSESSEE FOR SERVICES ARE IN THE NATURE OF FEES FOR TECHNICAL SERVICES. IT IS NECESSARY TO OBSERVE , THE ASSESSEE HAS FURNISHED BEFORE US A NUMBER OF DOCUMENTARY EVIDENCES , SOME OF WHICH FOR THE F IRST TIME BY WAY OF ADDITIONAL EVIDENCES , TO DEMONSTRATE THAT THE PAYMENT MADE TO BASF SE IS ACTUALLY RELATING TO SERVICES RENDERED BY DIFFERENT POOL MEMBERS ON COST TO COST BASIS WITHOUT ANY MARK UP . L EARNED SR. COUNSEL FOR THE ASSESSEE WITH THE AID OF TH E AFORESAID DOCUMENTARY EVIDENCES HAD ATTEMPTED TO DEMONSTRATE THAT SERVICES WERE NOT RENDERED BY BASF SE BUT BY POOL MEMBERS, HENCE, REMITTANCES TO BASF SE DOES NOT REQUIRE DEDUCTION OF TAX AT SOURCE UNDER SECTION 195(1) OF THE ACT. IN OUR VIEW, BEFORE CO NCLUDING THAT THE REMITTANCES ARE IN THE NATURE OF FEES FOR TECHNICAL SERVICES AND CHARGEABLE TO TAX AT THE HANDS OF THE RECIPIENT IN INDIA, ALL NECESSARY AND RELEVANT DOCUMENTS INCLUDING THE COST SHARING AGREEMENT , THE AUDIT ORS REPORT AS WELL AS OTHER AD DITIONAL EVIDENCES FILED BY THE ASSESSEE BEFORE US NEEDS TO BE PROPERLY ANALYSED AND EXAMINED. FURTHER, CONTENTION OF LEARNED SR. COUNSEL THAT BASF SE HAVING NOT RENDERED ANY SERVICES TO THE ASSESSEE, PAYMENT MADE CANNOT BE TREATED AS FEES FOR TECHNICAL SE RVICES AS PER EXPLANATION 2 TO SECTION 9(1)(VII) HAS NOT BEEN CONSIDERED BY THE DEPARTMENTAL AUTHORITIES 14 BASF INDIA LTD. BOTH FACTUALLY AND LEGALLY. FURTHER, THE CONTENTION OF THE ASSESSEE THAT WHEN ANOTHER INDIAN COMPANY OF BASF GROUP, A PARTY TO THE SAME COST SHARING AG REEMENT HAS BEEN ISSUED A NO DEDUCTION CERTIFICATE UNDER SECTION 195(2) OF THE ACT, WHY A DIFFERENTIAL TREATMENT SHOULD BE METED OUT TO THE ASSESSEE ALSO NEEDS TO BE CONSIDERED WITH PROPER REASONING. SINCE , THE AFORESAID ASPECTS HAVE NOT BEEN CONSIDERED B Y THE DEPARTMENTAL AUTHORITIES AND MANY OF THE DOCUMENTARY EVIDENCES WERE FURNISHED FOR THE FIRST TIME BEFORE US BY WAY OF ADDITIONAL EVIDENCES AND WERE NOT BEFORE THE DEPARTMENTAL AUTHORITIES , THOUGH WE ARE OF THE OPINION THAT THE ADDITIONAL EVIDENCES FUR NISHED BY THE ASSESSEE REQUIRE TO BE ADMITTED AS THEY WILL HAVE A CRUCIAL BEARING FOR DECIDING THE ISSUE, HOWEVER, TO AFFORD A FAIR OPPORTUNITY TO THE DEPARTMENT TO EXAMINE SUCH DOCUMENTS , WE ARE INCLINED TO RESTORE THE ISSUES RAISED IN THE AFORESAID GROUNDS TO THE ASSESSING OFFICER FOR DE NOVO ADJUDICATION AFTER DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WHILE DOING SO, THE ASSESSING OFFICER MUST CONSIDER THE RATIO LAID DOWN IN THE DE CISION S TO BE CITED BEFORE HIM. 10 . THE ISSUE RAISED IN GROUND NO.4, WHICH IS COMMON IN BOTH THE APPEALS , BEING CONSEQUENTIAL TO GROUNDS NO.1 TO 3, WE ACCORDINGLY RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION DEPENDING UPON THE DECISION TO BE TAKEN IN RESPECT OF ISSUES RAISED IN GROUNDS NO.1 TO 3. 15 BASF INDIA LTD. 11 . IN THE RESULT, ASSESSEES APPEALS ARE ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14.12.2018 SD/ - N.K. PRADHAN ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 14. 12.2018 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (ASSTT. REGISTRAR/SR.P.S) ITAT, MUMBAI