DY CIT 11 (3)(1), MUMBAI vs. TOTAL OIL INDIA PVT LTD., MUMBAI

Appellant by : Niraj Sheth Respondent by : Ajay Kumar Sharma Date of Hearing 30.11.2023 Date of Pronouncement 29.12.2023 आदेश / O R D E R Per Amarjit Singh (AM):

P a g e | C.O. 57/Mum/2021 Dy.CIT-11(3)(1) Vs. Total Oil India Pvt. Ltd. The appeal filed by the revenue is directed against the order passed by the ld. CIT(A)-55, Mumbai. Since the appeal filed by the revenue and cross objection filed by the assesse are based on identical facts on similar issue, therefore, for the sake of convenience both these appeals are adjudicated together. “1. Whether on the facts and circumstances of case and in law, the Ld. CIT(A) was justified in deleting the disallowance of Rs 4.63 crores made on account of non-deduction of TDS u/s 40(a)(i) on demurrage charges ignoring the fact that these were not reimbursements and ultimately paid to a third party through a related entity? 2. Whether on the facts and circumstances of the case and in law, the Ld CIT(A) was justified in deleting the disallowance of Rs 4.63 crores made on account of non deduction of TDS u/s 40(a)(i) on demurrage charges ignoring the fact that these charges form part of freight income of ship owners which is chargeable to tax in India? 3. Whether on the facts and circumstances of case and in law, the Ld CIT(A) was Justified in deleting the disallowance of Rs 8.20 crores made on account of non deduction of TDS u/s 40(a)(i), ignoring the fact that these payments were made to group entities and not made to persons deputed in India? 4. Whether on the facts and circumstances of case and in law, the Ld CIT(A) was justified in deleting the disallowance of Rs 8.20 crores ignoring the fact that the group entities retained their rights over the persons deputed in India? 5. Whether on the facts and circumstances of case and in law, the Ld CIT(A) was justified in ignoring the decision of Hon'ble ARR in the case of Verizon Data Services India Pvt Ltd. (ARR No 856/2010) and AT & S India Pvt Ltd (2006) 287 ITR 421 wherein it was held that the reimbursement is in the nature of FTS and the fact that taxes are paid under the head 'Salaries' is of no consequence? 6. he appellant prays that the order of the Id. CIT(A) on the above grounds be set aside and that of the AO be restored 7. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.”

Ground No. 1 & 2: Disallowance of Rs.4.63 crores made on account of non-deduction of TDS u/s 40(a)(ia) of demurrage charges:

3. During the course of assessment the assessing officer noticed that the assesse company has made certain payments to non-resident entities located outside India without deducting tax at source as per provisions of Section 195 of the Act. The detail of such payment made to non-resident under the head demurrage charges are as under:

Sr. Nature of Name of the party Amount No. Expenses/Treatment 1. Reimbursement of SHV Gas Supply & 67,23,126 Demurrage Expenses Risk Management SAS, France 2. Reimbursement of Total Oil Asia Pacific 9,380 Demurrage Expenses PTE Singapore 3. Reimbursement of Exxonmobil Asia 65,38,747 Demurrage Expenses Pacific PTE Ltd, Singapore 4. Reimbursement of S Oil Corporation, 3,13,06,400 Demurrage Expenses South Korea 5. Reimbursement of Totsa Total Oil 17,63,840 Demurrage Expenses Trading SA, Switzerland Total 4,63,41,493 On query the assessee explained as under: “1.2.1 That the demurrage charges paid to the supplier/carrier of oil is towards the delay in clearing /discharging cargo from the ship docked at the port of discharge in India. The charges are payable by the assessee to the supplier/shipping company if there is any delay in discharge of cargo over and above the free time stipulated by the Port Authority as per their rules and regulations or Charter Party agreement for transportation of P a g e | C.O. 57/Mum/2021 Dy.CIT-11(3)(1) Vs. Total Oil India Pvt. Ltd. the cargo. Thus, Demurrage paid by the assessee is in nature of reimbursement of expenses incurred by the shipping company or the supplier of goods for the payments made to Port Authorities in India. 1.2.2 That the shipping Company is required to make payment of demurrage charges for delay in discharge of cargo beyond the stipulated free time at the tune of sailing which in turn makes payment to Port Authority in India. The vessel will not be issued Port Clearance for sailing without make payment of demurrage charges to the Port. In order to recover such Port charges, the Charter Party/agreement stipulated recovery/levy of demurrage charges on the basis of supporting documents of delay and payment from the supplier and Port Authority. Thereafter, the supplier raises an invoice on the buyer (TOPIL) for such delay and makes similar payment to shipping company. Thus there is a back to back payment of demurrage charges by the recipient to shipping company and this is a case of reimbursement of expenses incurred for and behalf of the Buyer. 1.2.3 That the recipient being a non-resident, the liability to deduct tax is determined by the provisions of Section 195 ITA, 1961. Further, Section 195 provides that any person responsible for making any payment chargeable to tax under the provisions of the Act, shall at the time of payment or credit, deduct tax at source at the applicable rates. Correspondingly, section 40(a)(i) provides for disallowance of expenses on which tax has not been deducted and deposited as per the provisions of the Act 1.2.4 On conjoint reading of section 195 and 40(a)(i), it may be inferred that the Indian payer is obliged to deduct tax at source u/s 195 on payment made to Non-resident which is in nature of income chargeable to tax and pay over the tax as per the provisions of Section 40(a)(i) so as to be eligible to claim the payment as expenditure. Conversely, in case the payment to the Non-resident is not chargeable to tax either as per the provisions of the Act or the DTAA (Double Tax Avoidance Agreement), the Indian payer is not obliged to deduct tax and consequently there can be no dis-allowance u/s. 40(a)(i) for non-deduction of tax at source on such payments. 1.2.5 Assuming that there does arise a liability to pay tax u/s. 44B & 172 of the Act, Section 90(2) provides that wherever India has entered into Double Tax Avoidance Agreement with the country for relief of tax or avoidance of double tax, the provisions of the Income Tax Act will apply to the extent it is beneficial to the assessee. For e.g. Article 8 of India- Singapore treaty provides that profits derived by an enterprise from operations of ships or aircraft in international traffic are taxable in the country of residence of the enterprise. It is not dispute that freight paid to the Shipping Company is profits from operation of ship in international traffic nor is it disputed that Article 8 of the respective treaties is not applicable. Therefore, the companies being resident of countries with which India has DTAA, India does not have the jurisdiction to tax the profit arising out of the shipping business through international traffic. Hence, the recipient is not liable to tax in India. Therefore, provisions of Section 195 are not applicable and the assessee was not liable to tax.”

P a g e | C.O. 57/Mum/2021 Dy.CIT-11(3)(1) Vs. Total Oil India Pvt. Ltd. The AO has not agreed with the submission of the assessee. The assessing officer was of the view that freight income generated in India was taxable income under the income tax act hence any payment of freight to a non-resident will subject to TDS u/s 195 of the Act. He also stated that if ship owner has paid taxes u/s 172 of the Act then the provision of Sec. 195 will not be applied. He further stated that in the case of the assessee non-resident ship owner had not included the demurrage charges while paying taxes u/s 172 of the Act, therefore, the assessee was liable to deduct tax u/s 195 of the Act. Accordingly, the AO has disallowed an amount of Rs.4,63,41,493/- as per the provisions of Sec. 195 r.w.s 9(1)(vii) and Sec. 40(a)(i) of the Act.

4. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee after following the decision of ITAT, Mumbai in the case of the assessee itself for assessment year 2010-11.

5. During the course of appellate proceedings before us the ld. D.R supported the order of lower authorities. On the other hand, the ld. Counsel submitted that identical issue on similar fact has been adjudicated by the ITAT, Mumbai in the case of the assessee itself for assessment year 2010-11 to 2015-16 and also placed copy of these order in the paper book.

“8. On appraisal of the above said finding, we noticed that the matter of controversy has been decided by the CIT(A) on the basis of decision of Bombay High Court in the case of Orient (Goa) (P) ltd., [20091 185 TaX 111311 131 Bombay. But the situation has been changed now specifically in view of the decision of Bombay High Court in the case of CIT Vs. Dempo and Co. P. Ltd. (381 ITR 303). The relevant finding has been given in para no. 46 to 54 which is hereby reproduced as under.: - “46. A bare perusal thereof would indicate as to how this provision covers the case of an assessee who is a non-resident and engaged in the business of operation of ships. That stipulates a sum equal to 7½% of the aggregate of the amount specified in sub-section (2) of section 44B as deemed to be profits and gains of such business chargeable to tax under the head "Profits and Gains of Business or Profession". It is the explanation which refers to the demurrage and for the purpose of sub- section (2) of SRP 62/79ITXA989.15.doc section 44B. It clarifies that the amount paid or payable or received or deemed to be received, as the case may be, by way of demurrage charges or handling charges or any other amount of similar nature shall for the purposes of sub-section (1) deemed to be the profits and gains of the business, namely, shipping business chargeable to tax under that head. The amounts which are paid or payable whether in or out of India to the assessee or to any person on his behalf on account of carriage of passengers, livestock, mail or goods shipped at a port in India and the amount received was deemed to be received in India by or on behalf of the assessee on account of the carriage of passengers, livestock, mail or goods shipped at any port outside India shall be deemed to be the profits and gains. On that the tax is payable by virtue of subsection (1) of section 172. That has to be levied and recovered in terms of the sub-sections of section 172 of the Income Tax Act. Once section 172 falls in Chapter XV titled as Liability in Special Cases - Profits of Non-residents, then section 172 is referable to section 44B. Both provisions open with a nonobstante clause and whereas section 44B enacts special provisions for computing profits and gains of shipping business in case of non-residents section 172 dealing with shipping business of non-residents is SRP 63/79ITXA989.15.doc enacted for the purpose of levy and recovery of tax in the case of any ship belonging to or chartered by a non-resident operated from India. These sections and particularly section 172 devise a scheme for levy and recovery of tax. The sub-sections of section 44B denote as to how the amounts paid to or payable would include demurrage charges or handling charges or any other amount of similar nature. The sub-sections of section 172 read together and harmoniously would reveal as to how the tax should be levied, computed, assessed and recovered. Therefore, there is no warrant in applying the provisions in chapter XVII for collection and recovery of the tax and its deduction at source vide section 195. P a g e | C.O. 57/Mum/2021 Dy.CIT-11(3)(1) Vs. Total Oil India Pvt. Ltd.

P a g e | C.O. 57/Mum/2021 Dy.CIT-11(3)(1) Vs. Total Oil India Pvt. Ltd.

P a g e | C.O. 57/Mum/2021 Dy.CIT-11(3)(1) Vs. Total Oil India Pvt. Ltd. "7. The Scheme of Section 172 of the Act appears to be this: Section 172(1) of the Act gives a right to the Income Tax Officer to levy and recover tax in the case of any ship belonging to a non-resident, in a summary manner, (ad hoc assessment) notwithstanding anything contained in the other provisions of the Act. It is an absolute right conferred on the assessing authority. The assessee has no right to object to the same. Normally, this will be assessment of the assessee for the year. But, under Section 172(7) of the Act a right is given to the assessee to claim before the expiry of the assessment year relevant to the previous year in which the date of departure of the ship from the Indian port falls, that an assessment, according to the provisions of the Act, in a regular manner be made. Thus, a right is given to the assessee to opt for a regular assessment although a "rough and ready" or a "summary assessment" has already been made under Section 172(4) of the Act. It is a valuable right. If the assessee exercises the right conferred on him under section 172(7) of the Act, the Income Tax Officer is bound to make an assessment of the total income of the previous year of the assessee and the tax payable on the basis thereof "should be determined in accordance with the other provisions of the Act" and any payment made under the section (earlier) "shall be treated as a payment in advance of the tax" leviable for that assessment year and the difference between the sum so paid and the amount of tax found payable by him on such assessment, shall be paid to the assessee or refunded to him. The "ad hoc" assessment made under Section 172(4) of the Act is superseded and a "regular assessment" is made as per the provisions of the Act. In such a case, it is only proper and appropriate to hold that all "the provisions" of the Act in the determination of the tax liability including the ancillary or incidental or consequential matters pertaining to it are necessarily attracted.

8. Section 172(7) of the Act provides that payment made under the section shall be treated as a payment in advance of the tax leviable for that assessment year. It only means that such payment would be treated as advance of the tax leviable. Such payments are treated on a par with advance income tax payments. It is implicit from the tenor and phraseology employed in Section 172(7) of the Act to the effect, "payment made under the section .... shall be treated as a payment in advance of the tax leviable for that assessment year" that in substance, a legal fiction is created by which the payments have been treated as advance tax. That is the purpose for which the legal fiction is created. In construing the said legal fiction, it will be proper and necessary to assume all those facts on which alone the fiction can operate. The law on the point has been stated in innumerable decisions of this Court. In Mond. Iqbal Madar Sheikh v. State of Maharashtra (1996) 1 SCC 722 a three-number Bench of this Court stated the law thus: "..... The effect of a legal fiction by deeming clause is well known. Legislature can introduce a statutory fiction and courts have to proceed on the assumption that such state of affairs exists on the relevant date, because when one is bidden to treat an imaginary state of affairs as real he has to also imagine as real the consequence which shall flow from it unless prohibited by some other statutory provision."

P a g e | C.O. 57/Mum/2021 Dy.CIT-11(3)(1) Vs. Total Oil India Pvt. Ltd. (emphasis supplied) So, necessarily all the provisions in the Act in respect of the payment of advance tax will apply. On effecting the regular assessment, if there is any excess payment made by the assessee, then the assessee would be entitled to the excess amount paid and also interest, for payments made in excess of the tax assessed. We are unable to appreciate the distinction drawn by the High Court between "advance tax" and "payment in advance of the tax" Mentioned in Section 172(7) of the Act. We hold that the distinction so drawn has no basis. The High Court has furtehr held that the payment made under Section 172(4) of the Act is not a payment of SRP 70/79 ITXA989.15.doc advance tax within the meaning of the Act, as the tax under Section 172(4) of the Act is a payment on assessment and not a payment of advance tax under the Act. We are afraid that the High Court has failed to give due effect to the language employed in Section 172(7) of the Act and the scope of the legal fiction enshrined therein. The reasoning of the High Court is rather strained as the distinction drawn is without any substance or difference. Section 172(7) of the Act provides for a regular assessment, wherein all the provisions of the Act will apply. It is not a mere provision for adjustment. The High Court was swayed by the title used in the corresponding provision of the predecessor Act (Income Tax Act, 1922 - Section 44-C), wherein there was a heading to the section - "Adjustment". Section 172 of the Act contains no such heading. We hold that the Income Tax Appellate Tribunal was justified in holding that since the payment made under Section 172(4) of the Act is, by fiction, treated as advance tax, all the provisions in respect of the advance tax will apply and if on regular assessment made under Section 172(7) of the Act, there is any excess payment made by the assessee, then the assessee would be entitled to it and also interest thereon under Section 214 of the Act. We answer the question referred to the High Court in the affirmative, in favour of the assessees and against the Revenue. ....."

11. While deciding the scope of Section 195(2) it is important to note that the tax which is required to be deducted at source is deductible only out of the chargeable sum. This is the underlying principle ofSection 195. Hence, apart from Section 9(1), Sections 4, 5, 9, 90, 91 as well as the provisions of DTAA are also relevant, while applying tax deduction at source provisions.

12. Reference to ITO(TDS) under Section 195(2) or 195(3) either by the non-resident or by the resident payer is to avoid any future hassles for both resident as well as non-resident. In our view Sections 195(2) and 195(3) are safeguards. The said provisions are of practical importance. This reasoning of ours is based on the decision of this Court in Transmission Corporation (supra) in which this Court has observed that the provision of Section 195(2) is a safeguard. From this it follows that where a person responsible for deduction is fairly certain then he can make his own determination as SRP 73/79 ITXA989.15.doc to whether P a g e | C.O. 57/Mum/2021 Dy.CIT-11(3)(1) Vs. Total Oil India Pvt. Ltd. the tax was deductible at source and, if so, what should be the amount thereof. Submissions and findings thereon 13 If the contention of the Department that the moment there is remittance the obligation to deduct TAS arises is to be accepted then we are obliterating the words "chargeable under the provisions of the Act" in Section 195(1). The said expression in Section 195(1)shows that the remittance has got to be of a trading receipt, the whole or part of which is liable to tax in India. The payer is bound to deduct TAS only if the tax is assessable in India. If tax is not so assessable, there is no question of TAS being deducted. [See : Vijay Ship Breaking Corporation and Others Vs. CIT 314 ITR 309] One more aspect needs to be highlighted. Section 195 falls in Chapter XVII which deals with collection and recovery. Chapter XVII-B deals with deduction at source by the payer. On analysis of various provisions of Chapter XVII one finds use of different expressions, however, the expression "sum chargeable under the provisions of the Act" is used only in Section 195. For example, Section 194C casts an obligation to deduct TAS in respect of "any sum paid to any resident". Similarly, Sections 194EE and 194F inter alia provide for deduction of tax in respect of "any amount" referred to in the specified provisions. In none of the provisions we find the expression "sum chargeable under the provisions of the Act", which as stated above, is an expression used only in Section 195(1). Therefore, this Court is required to give meaning and effect to the said expression. It follows, therefore, that the obligation to deduct TAS arises only when there is a sum chargeable under the Act.

P a g e | C.O. 57/Mum/2021 Dy.CIT-11(3)(1) Vs. Total Oil India Pvt. Ltd. [312 ITR 225] the provisions for deduction of TAS which is in Chapter XVII dealing with collection of taxes and the charging provisions of the I.T. Act form one single integral, inseparable Code and, therefore, the provisions relating to TDS applies only to those sums which are "chargeable to tax" under the I.T. Act. It is true that the judgment in Eli Lilly (supra) was confined to Section 192 of the I.T. Act. However, there is some similarity between the two. If one looks at Section 192 one finds that it imposes statutory obligation on the payer to deduct TAS when he pays any income "chargeable under the head salaries". Similarly, Section 195 imposes a statutory obligation on any person responsible for paying to a non-resident any sum "chargeable under SRP 75/79 ITXA989.15.doc the provisions of the Act", which expression, as stated above, do not find place in other Sections of Chapter XVII. It is in this sense that we hold that the I.T. Act constitutes one single integral inseparable Code. Hence, the provisions relating to TDS applies only to those sums which are chargeable to tax under the I.T. Act.

P a g e | C.O. 57/Mum/2021 Dy.CIT-11(3)(1) Vs. Total Oil India Pvt. Ltd.

P a g e | C.O. 57/Mum/2021 Dy.CIT-11(3)(1) Vs. Total Oil India Pvt. Ltd. 9. On appraisal of the above mentioned finding, we noticed that the earlier finding in the case CIT Vs. Orient (Goa) Pvt. Ltd. has been overruled by this decision, therefore, in view of the decision of Hon’ble High Court in the case of CIT Vs. Dempo (supra), we set aside the finding of the CIT(A) on this issue and allowed the claim of the assessee.”

Following the decision of coordinate bench as referred above we don’t find any merit in the ground no. 1 & 2 of the appeal of the revenue, therefore, the same stand dismissed.

Ground No. 3 to 5: On the issue of deleting disallowance of Rs.8.20 crores made on account of non-deduction of TDS u/s 40(a)(i) in respect of payments made to group entities and not made to persons deputed in India:

7. During the course of assessment the assessing officer noticed that assesse has made reimbursement of salary on account of availing personnel services from its associate enterprise without deducting tax. The detail of such reimbursement to the amount of Rs.820,30,029/- is as under:

Sr. No. Nature of Name of the Amount Remarks Expenses party 1. Reimbursement of Total Marketing 5,89,12,384 TDS u/s 192 salary Services 2. Reimbursement of Total Gestion 2,31,17,645 TDS u/s 192 Salary Internationale On query, the assessee submitted that payment to seconded employees were made on account of salary and allowances paid by the associate enterprise to their employees who were deputed with the assessee company and subsequently, such amount was recovered by them from the assessee company. However, the AO has not agreed with the submission of the assessee. He was of the view that employees have been seconded to India for a specific purposes and the associated enterprises has retained their rights as an employer over these P a g e | C.O. 57/Mum/2021 Dy.CIT-11(3)(1) Vs. Total Oil India Pvt. Ltd. employees. The AO further stated that the right and control to appoint or remove these employees was still vested with the employers which was separate from the assessee company and it cannot be said that the payment made by the assessee company to such entities having control over the employees as employer amount to reimbursement of salary paid for services rendered in India on which TDS was applicable u/s 192 of the Act. He was of the view that such payment made by the assessee is to be treated as fees paid in lieu to technical services rendered by such associate enterprise to the assessee company. Therefore, the payment made by the assessee company cannot be held to be in nature of reimbursement but the same to be taken as payment made for services rendered by associate enterprise. The same cannot be treated as mere reimbursement of expenses and provision of Sec. 195 of the Act was applicable as such payment made to the associate enterprise for availing the personnel services. Therefore, the assessing officer has disallowed the amount of reimbursement made to the associate enterprise as per provision of Sec. 195 of the Act r.w.s 9(1)(vii) of the Act and added to the total income of the assessee.

8. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assesse. The relevant part of the decision is reproduced as under:

Decision I have considered the facts and the circumstances of the case and information produced by the Appellant available on record. The Appellant has contended that the reimbursement of personnel costs amounting to Rs.8,20,30,029 represents mere reimbursement of expenses on actual basis and there is no mark-up element in the same. Accordingly, in absence of any income element, the expenditure was not liable to tax in India and no TDS was to be deducted. Further, it has been submitted that TDS under section 192 of the Act has been deducted by the Appellant on such salary payments to the non-residents. The arguments have been considered and found tenable Moreover, this issue has been decided in favor of the Appellant in the preceding years i.e AY 201011 to AY 2015-16 by my predecessor/ me It has also been brought to my notice that Hon'ble ITAT has also adjudicated this issue in favour of the Appellant for P a g e | C.O. 57/Mum/2021 Dy.CIT-11(3)(1) Vs. Total Oil India Pvt. Ltd. AY 2010-11. In view of this, I find the issue squarely covered by the Hon'ble ITAT order for AY 2010-11 and the appellate orders passed by my predecessor/ me. Therefore, I direct the AO to delete the disallowance so made. This ground of appeal is allowed.”

The ld. CIT(A) has allowed the appeal of the assessee by referring the decision of ITAT for assessment year 2010-11 to 2015-16.

“08. With respect to reimbursement of expenses of seconded employees, he submitted that this issue is also squarely covered in favour of the assessee by the decision of the Coordinate Bench in filed by the Revenue for assessment year 2011-12, order dated 2/11/2019. He submitted that as per paragraph 12 of the above order, it was held by the Coordinate Bench that there is no income chargeable to tax in India. He further referred to identical issue in the case of the assessee in ITA No.4300/MUM/2016 while deciding issue No.1 at paragraph 15 of that order. He submits that identical set of agreement is in existence. Accordingly, both the issues are covered in favour of the assessee.

9. We have carefully considered the rival contentions and perused the orders of the lower authorities. We have also perused the orders of the Coordinate Bench in the assessee’s own case for earlier assessment years where identical issue arose and the issue is decided in favour of the assessee. We find that first time the issue arose in the case of the assessee with respect to reimbursement of demurrage charges in ITA No.4135/MUM/2016. While deciding the issue being ground No.2.1, at paragraphs 7 to 9 of the appeal, following the decision of the Hon'ble Bombay High Court in the case of CIT vs. Dempo and Co. P. Ltd., 381 ITR 303. Further, for subsequent years also, the Coordinate Bench has followed this decision. The Learned DR could not show us any reason as to why the above decision should not be followed. Accordingly, respectfully following the decision of the Coordinate Bench in the assessee’s own case, we confirm the order of the Learned CIT-A in deleting the disallowance of demurrage charges paid by the assessee of Rs.2,48,16,533/-. Accordingly, ground No.1 of the appeal is dismissed.

10. With respect to ground No.2 where the disallowance of reimbursement of salary paid to seconded employees on account of non-deduction of tax at source was deleted by the Learned CIT-A. We find that the issue first arose in the case of the assessee in ITA No.4300/MUM/2015 for assessment year 2010-11 where the Coordinate Bench has dealt with the issue in paragraphs 15 & 16 and deleted the addition. The Coordinate Bench for that year has relied upon the decision in the case of Burt Hill Design Pvt. Ltd. vs. DDIT (IT), 79 Taxmann.com 459. The Learned CIT-A has followed the decision of the Coordinate Bench in deleting the disallowance. Therefore, we do not find any infirmity in the order of the Learned CIT-A. Accordingly, ground No.2 of the appeal of the Assessing Officer is dismissed, holding that no tax is required to be deducted on reimbursement of salary to seconded employees, amounting to Rs.11,44,50,849/-. Thus, the appeal of the Assessing Officer for assessment year 2017-18 in ITA No.97/MUM/2023 is dismissed.”

“15. Under this issue the revenue has challenged the allowance of the claim of assessee in connection with the reimbursement of salary cost of related relocation expenses made on account of availing personnel services from its AEs who has been India on an assignment. The Ld. Representative of the revenue has argued that the such type of payment falls within the ambit of Section 195 r.w.s. 9(1)(vii) of the Act and the Explanation to Section 9(2) of the I.T. Act, 1961, therefore, CIT(A) has wrongly allowed the claim of the assessee, hence, the finding of the CIT(A) is wrong against law and facts and is liable to be set aside. However on the other hand, the Ld. Representative of the assessee has refuted the said contention. Before going further, we deem it necessary to advert the finding of the CIT(A) on record.:- “9 Ground no. 5.2 relates to non-deduction of TDS on reimbursement of salary costs and related relocation expenses of Rs.6,47,96,467. During the year, the appellant has availed personnel services from various associate enterprises based on its requirements. For this, the appellant has entered into an arrangement with the companies whose manpower have been taken on deputation basis. As a matter of convenience and to ensure that the non-residents continued to have social benefits in their country of residence, salary was paid by the companies who deputed these personnel and charged to the appellant company. The appellant company, while making the reimbursement, deducted suitable taxes u/s 192 of the Act.

9. I The AO has observed that the appellant has not paid the salary into the bank accounts of the deputed personnel directly but the amount has been paid towards cost to the deputing companies and the social security expenses. The AO has inferred that the employees have been seconded to India for specific purpose and the AEs have retained their rights as an employer over these employees. The right and control to appoint and remove these employees is still vested with the employer which is P a g e | C.O. 57/Mum/2021 Dy.CIT-11(3)(1) Vs. Total Oil India Pvt. Ltd. separate from assessee company and it cannot be said that the payments made by the assessee company to such entities having control over the employees as employers amounts to reimbursement of salaries paid for services rendered in India on which TDS is applicable lids 192. Re AO has claimed that this is a case of dual employment where the appellant is the economic employer and the AEs are legal employer. By sending their employees to India, the AEs arc actually rendering services to the assessee company in India and accordingly, the payments made by the assessee company are in the nature of Fee for Technical Service (FTS). Accordingly, the AO has concluded that TUS ought to have been deducted u/s 195 by the appellant. 9.2 The AO has relied on the decision of AAR in the case of Verizon Data Services India Pvt I.td (AAR No. 865 of 2010), Centrica Offshore Pvt Ltd (AAR No. 856 of 2010) and AT&S India Pvt Ltd [2006) 287 ITR 421 wherein it has been held that reimbursement is in the nature of FTS and the fact that taxes are paid under head 'Salaries' is of no consequence. 9.3 The submission made by the appellant on this issue is summarized as below; 9.3.1 The Appellant had availed services of personnel/employees who were oil payrolls of its Associated Enterprises ('AE'), and in lieu of the same, salary, relocation and other related charges were subsequently recharged (by way of reimbursements) by the AEs to the Appellant. It may be noted that for the purposes of administrative convenience, the employees remained on the payrolls of the AEs and their salary and other related costs were reimbursed by the Appellant to the AEs, instead of paying to the employees. Accordingly, time Appellant had reimbursed a sum of us 6,37,87,105 to its AEs towards salary and related costs of such personnel and Rs 10,09,452 towards relocation expenses. The appellant has contended that it had discharged its TDS obligations under section 192 of the Act on salary amount payable to the employees (paid through the AEs and not to employees directly due to administrative convenience). 9.3.2 The Appellant has contended that the salary, relocation and other related charges paid by way to the AEs had no element of mark-up involved (i.e. cost to cost reimbursements). Further, the AEs have merely provided their personnel/ employees to the Appellant no services have been provided by the AEs. Accordingly, in the absence of any services being provided by the ALs there is no question of withholding tax on recharge of the employees' salary costs (on which taxes have been deducted under section 192 of the Act) reimbursed to them on a cost-to- cost basis. 9.3.3 To substantiate that merely the salary costs have been reimbursed by the Appellant to the AEs and that there is no markup clement involved therein, the appellant has referred to clause 1-5 of the Cost Reimbursement Agreement entered into between the Appellant and Total SA wherein it is provided as under :

P a g e | C.O. 57/Mum/2021 Dy.CIT-11(3)(1) Vs. Total Oil India Pvt. Ltd.

4. While assigned to TOTAL LUBRICANTS India Ltd you will be required to comply with any local employment regulations established by TOTAL LUBRICANTS India Ltd. at the assignment location.

by the appellant is upheld and the disallowance u/s 40(a)(i) is directed to be deleted.”

16. On appraisal of the above mentioned finding, we noticed that the employees who were serving in India or deputed in India had already deducted tax at source u/s 195 of the Act. The provision of TDS is not applicable on reimbursement of deputation expenses to foreign AE. The CIT(A) has relied upon the decision in the case of Burt Hill Design (P) Ltd. Vs. DDIT (IT) (79 Taxmann.com 459). The facts are not distinguishable at this stage. No law contrary to the law relied by the Ld. Representative of the assessee has been produced before us. In view of the said circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage.”

Since facts and circumstances for different years were identical particularly in the case of the assesse therefore following the decision of P a g e | C.O. 57/Mum/2021 Dy.CIT-11(3)(1) Vs. Total Oil India Pvt. Ltd. ITAT in the case of the assessee as discussed above and the decision of the ITAT Delhi in the case of Ernest & Young U.S LLP We do not find any reason to interfere in the decision of the ld. CIT(A). Therefore, this ground of appeal of the revenue is dismissed.

15. The appeal of the revenue is dismissed.

C.O. No. 57/Mum/2021 “General Objection to Department's Appeal 1. erred in objecting the order of Ld. CIT(A) deleting various additions/disallowances made assessment without appreciating the facts of the case and submissions made, thereby further contesting various issues before the Hon'ble Tribunal by filing an appeal, Non consideration of taxability of demurrage expenses as per Double Taxation Avoidance Agreement ('DTAA) 2. erred in not adjudicating the submission made by the Assessee on non- taxability of demurrage expenses as per DIAA between India and payee while adjudicating the ground of reimbursement of demurrage expenses and not holding that even as per the DTAA provisions no taxes were required to be deducted on demurrage payments, Non applicability of provision of section 40(a)(i) on account of short deduction of taxes 3. erred in not holding that reimbursement of salaries of the employees shall not be disallow under section 40(a)(i) of the Act as the Assessee has already deducted taxes on salaries payment to employees and accordingly provisions of section 40(a)(i) shall not apply on short deduction of taxes, Deduction of DDT on Dividend Distributed as per DTAA 4. The Ld AO be directed to compute tax payable by the Assessee under section 115 O of the Income-tax Act, 1961 ('the Act') at the rate prescribed in the DTAA between India and France respect of dividend paid by the Assessee to non-resident shareholders i.e Total Marketing Services and Total Holding Asie, tax resident of France, Deduction in respect of education cess and secondary & higher cess paid on income-tax and dividend distribution tax (collectively called as 'cess') 5. The Ld. AO be directed to allow the deduction for cess paid on income tax and dividend distribution tax.

P a g e | C.O. 57/Mum/2021 Dy.CIT-11(3)(1) Vs. Total Oil India Pvt. Ltd. 16. Since, we have dismissed the ground of appeal of the revenue against the decision of ld. CIT(A) on the issue of disallowance of demurrage charges and reimbursement of expenses while adjudicating the appeal of Revenue in this order vide therefore, grounds of cross objection 1 to 3 of the assessee have become infructuous therefore the same stand dismissed.

16. Ground No. 4 & 5 are not pressed therefore the same stand dismissed.

17. In the result, the appeal of the revenue is dismissed and the Cross Objection filed by the assessee is also dismissed.