INCOME TAX OFFICER (IT) 3(2) (2) , MUMBAI vs. M/S. MACROTECH DEVELOPERS LTD, MUMBAI

Whether, on the fact and circumstances of the case and in law, the Ld. CIT(A) erred in treating the remittance made to LDL UK Ltd. towards marketing services for projects of the assessee company as consultancy services when the services provided come in purview of Fees for Technical Services as per India UK DTAA."

Whether, on the fact and circumstances of the case and in law, the Ld. CIT(A) erred in treating the remittance made to various non resident entities towards. brokerage for sale of projects in India as consultancy services ignoring the fact that the income of the non resident has accrued in India."

Whether, on the fact and circumstances of the case and in law, the Ld. CIT(A) erred in treating the remittance made to various non resident entities for reimbursement of expenses as consultancy services when reimbursement were for services rendered by vendors whose services were in the nature of Fees for Technical Services."

The Appellant prays that the order of the ld CIT(A) on the above ground(s) be set aside and that of the Assessing Officer be restored.

The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary.”

Fact in brief is that assesse is engaged in the business of land development and construction of real estate properties. The AO passed an order dated 31.07.2018 raising demand of Rs.1,29,23,408/- u/s 201(1) and interest of Rs.78,10,519/- u/s 201(1A) of the Act on account of not withholding tax u/s 195 of the Act pertaining to payment made under the following categories:- (i) Architectural Consultancy and payment for other services. (ii) Brokerage payment. (iii) reimbursement of expenses.

During the course of assessment the assesse submitted that such payments were not taxable in the hands of foreign recipients as per the provision of the Act r.w. the provisions of applicable Double Tax Avoidance Agreement (DTAA). Ground No. 1 & 2: Levy of demand u/s 201/201A of foreign payment towards architectural design consultancy services and other services:

During the year under consideration the assesse has made the following remittances to the foreign vendors: Sr. Name of Vendor Country of Nature of service Amount of No. Residence Remittance (INR)

On query the assesse submitted the relevant details along with the nature of such consultancy services as under:

Rowan United Wind and Microclimate Engineering Annexure B Williams Kingdom Consultancy Services. Davies Such services are not taxable as ‘Fees for Technical Services’ since the services do not meet ‘make available’ criteria.

Sitetectonix Singapore Landscape Architectural Consultancy Annexure C Pte. Ltd. Services. Such services are not taxable as ‘Fees for Technical Services’ since the services do not meet ‘make available’ criteria.

Lodha UK Marketing Consultancy Services. Annexure D Developer Such services are not taxable as ‘Fees UK Ltd. for Technical Services’ since the services do not meet ‘make available’ criteria.

The assesse submitted that such services did not meet ‘make available’ criteria, therefore, the same were not taxable in India pursuant to beneficial provision of respective DTAA. However, the assessing officer after referring provision of Sec. 195(1), section 5 (2) and Section 9(1)(vii) and the document submitted by the assesse come to the conclusion that the payment to non-resident were taxable and assesse failed to deduct tax on such remittance, therefore he held that assesse was in default as per provision of Sec.201(1) of the Act and Sec. 201(1A) of the Act.

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

A reading of Article 12(4) of the tax treaty would make it clear that payment made to a resident of one of the contracting state can be regarded as FTS, if, in course of providing managerial/technical or consultancy services, technical knowledge experience, skill know how or processes is made available which enables the person acquiring such services to apply the technology contained therein It further provides, if the services consist of development and transfer of a technical plan or technical design, but excludes any services that does not enable the person acquiring the service to apply the technology contained therein would not qualify as FTS In the facts of the present appeal, the payments made and the nature of services rendered are as under:- Sr. Name of the party Country Amount (Rs.) Nature of services No.

Thus, as could be seen, the scope of work is limited to various types of drawings and designs for the residential project being developed at BKC On further verification of facts on record, it is evident that insofar as Arc Studio Architecture Urbanism Pte. Ltd concerned, it will provide an illustrative site/roof plan showing all the components of the project, general landscape, recommendation and overall infrastructure elements, such as entry driveways and service circulation, Diagram showing each of the major public at 1.200 scale, image board to describe the architectural character of the project etc. The scope of work also requires the entity to prepare schematic design drawings, approved by the client in case of minor adjustment. The terms of the agreement make it clear that the design drawing rendering, model, specification electronic files including database: and spreadsheets and other derivation that are part of the project will remain the intellectual property of the service provider and are intended for use solely with respect to the project further restrains the assessee from utilizing such intellectual property for any other project or for addition to the subject project or for completion of the project by any other entity Similar is the scope of work and terms and conditions in respect of Web Structures Pte. Ltd another non-resident entity

Thus from the nature of services provided by the non-resident entities and the tem and conditions under which it was provided, it is clear that whatever services were provided are project specific and cannot be used for any other project by the assessee Further while providing such services neither any technical knowledge, skill, etc. is made available to the assessee for utilizing them in future, independently nor any developed drawing or design have been provided to the assessee which can be applied by the assesse independently. Thus, it is very much clear, the conditions of Article 12(4) of the tax treaty are not fulfilled

Though the assessing officer has generally observed that in course of providing services to the assessee, the non-resident entities have made available technical knowledge, know-how, processes to the assessee However, no substantive material has been brought on record by him to back such conclusion Even, before us, learned departmental representative has not brought any material to demonstrate that conditions of Article 12(4) have been fulfilled in the facts of the present case. In view of the aforesaid we do not find any valid reasons to interfere was then of learned Commissioner (Appeals) Accordingly, we uphold the order of teamed Commissioner (Appeals) on the issue by dismissing ground raised.” 5.2.2 On going through the order of A.O and assessee's submission, it can be seen that the facts of the case are almost similar to the case mentioned above 5.2.3 Following the above judgment, it is held that income of the entities were not taxable in India. Therefore, the assessee was not required to deduct TDS on these payments.”

During the course of appellate proceedings before us the ld. D.R has referred the order of the A.O and the analysis of the document made by the A.O in the assessment order. He submitted that there was close connection of the architectural design services providers with the assesse and the whole process was approved by the owner after specifying, the planning and architectural design services. The ld. D.R supported the order of the assessing officer.

However, the ld. Counsel specifically referred Article 12 of the India & USA DTAA on the issue of payment of fees for technical services. In this regard he referred protocol between USA & India and referred paragraph 4(b) of the protocol that technology will be considered “made available” when the person acquiring the service is enabled to apply the technology. The use of a product which embodies technology shall not P a g e | 8 9 Appeals ITO (IT)-3(2)(2) Vs. M/s Macrotech Developer Ltd. per se be considered to make the technology available. He also referred India of Article 12 of the India Singapore DTAA which exclude any service that does not enable the person to use the technology independently.

Heard both the sides and perused the material on record. During the year under consideration the assesse made remittances to Woha Design Pvt. Ltd. Singapore for providing services relating to architectural design which include macro lable lay out of the entire project including design positioning of various buildings, placement, of common amenities like swimming pool & club houses etc. The assesse submitted along with the supporting document that while providing such services not any technical knowledge skill etc. was made available to the assesse to apply these services independently in future.

We have also perused the details of payment towards architectural design consultancy services to Woha Design Pte. Ltd, comprising copies of work order, note on payment made to Woha Design Pte. Ltd, copy of invoices, Form No. 15CA and 15CB along with other relevant documents placed in the paper book. The nature of payment was pertained to consultancy services for master planning of the specific project namely Wadala TT, Mumbai. As per clause 14 of the agreement, the design prepared by the design consultant was solely for the purpose of the above referred project. Woha design consultant is a tax resident of Singapore and Article 12 of the India Singapore DTAA deals with the taxability of income from Royalties & FTS. It provides that services will be considered as FTS only if such vendor is making available the technical knowledge, experience, skill, knowhow or process which enable the person acquiring the services to apply the technological contained therein. The relevant part of the Article 12 of the Royalties

The term “fees for technical services” as used in this Article means payments of any kind to any person in consideration for services of a managerial, technical or consultancy nature (including the provision of such services through technical or other personnel) if such services: a. are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received, or b. make available technical knowledge, experience, skill, know-how or processes. which enables the person acquiring the services to apply the technology contained therein; or c. consist of the development and transfer of a technical plan or technical design, but excludes any service that does not enable the person acquiring the service to apply the technology contained therein. For the purposes of (b) and (c) above, the person acquiring the service shall be deemed to include an agent, nominee, or transferee of such person...”

We have also perused the various judicial pronouncements referred by the ld. Counsel:

5 Analysis 5.5.1 On going to the judgement, it can be seen that the assessee has entered into the agreement with two foreign entities.

The reasoning of the Assessing Officer is confusing, laconic and not clear. In the first paragraph of the assessment order quoted above it has been held that the right to receive income by ETUK had situs or origin in India. It is stated that the place of accrual of income was in India as payment was made from India and, therefore, it is deemed to be received in India. In the first paragraph towards the end, the Assessing Officer has held that that the source of income by way of commission earned by ETUK has business connection with the respondent- assessee in India i.e. the source was situated wholly and completely within the territory of India. The second paragraph refers to business connection and principle of deemed accrual.

Thus, on one hand, it was held that the commission income paid to ETUK had accrued or arisen in India and the said ETUK had right to receive income in India, since the situs/origin is in India but it is also averred that ETUK had business connection with the respondent assessee in India.

Concept of deemed accrual of income is different from income accruing, arising or received in India. When income accrues, arises or is received in India by a non resident, it is taxable in India. Income which is deemed to accrue or arise in India under the Act is taxable in India even though such income has not actually accrued, arisen or received in India.

To appreciate the legal position, Section 52) of the Act is reproduced below:- "Section 5 (2): Subject to the provisions of this Act. the total income of any previous year of a person who is a P a g e | 17 9 Appeals ITO (IT)-3(2)(2) Vs. M/s Macrotech Developer Ltd. non-resident includes all income from whatever source derived which-(a) Is received or is deemed to be received in Indio in such year by or on behalf of such person; or (b) Accrues or arises or is deemed to accrue or arise to him in India during such year. Explanation 1: Income accruing or arising outside India shall not be deemed to be received in India within the meaning of this section by reason only of the fact that it is taken into account in a balance sheet prepared in India. Explanation 2: For the removal of doubts, it is hereby declared that income which has been included in the total income of a person on the basis that it has accrued or arisen or is deemed to have accrued or arisen to him shall not again be so included on the basis that it is received or deemed to be received by him in India"

It is apparent from the Section 5(2) of the Act that total income of previous year of a person, who is a non-resident, is chargeable to tax in India if it is received or is deemed to be received in India or accrues or arises or is deemed to accrue or arise to him in India. Explanation 1 to the said section stipulates that income accruing or arising outside India shall not be deemed to be received in India within the meaning of the said section by reason of the fact that it is taken into account in the balance sheet prepared in India. Explanation 1 is a complete answer to the observations of the Assessing Officer that commission income had accrued, arisen or was received by ETUK in India because it was recorded in the books of respondent assessee in India or was paid by the respondent assessee situated in India. This aspect has been also examined below while dealing with the question of deemed accrual.

Section 9 of the Act postulates and states when income is deemed to arise in India. The Assessing Officer has not mentioned any specific provision of Section 9 but it appears that he had invoked Section 9(1)(1) of the Act which for the sake of convenience is reproduced below:- "

Income deemed to accrue or arise in India-(1) The following incomes shall be deemed to accrue or arise in India-() all income accruing or arising, whether directly or indirectly, through or from any business connection in Indio, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of o capital asset situate in India. Explanation 1-For the purposes of this clause- (a) in the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India, (b) in the case of a non-resident, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to the purchase of goods in Indio for the purpose of export; (c) in the case of a non-resident, being a person engaged in the business of running a news agency or of publishing newspapers, magazines or journals, no income shall be deemed to accrue or arise in India to him through or from activities which are confined to the collection of news and views in India for transmission out of India; (d) in the use of a non-resident, being-(1) an individual who is not a citizen of India, or (2) a firm which does not have any partner who is a citizen of India or who is resident in Indio, or (3) a company which does not have any shareholder who is a citizen of India or who is resident in India, no income shall be deemed to accrue or arise in India to such individual, firm or company through or from operations which are confined to the shooting of any cinematograph film in India;

For the said provision to apply, the Assessing Officer was required to examine whether the said commission income is accruing or arising directly or indirectly from any business connection in India. The Assessing Officer has not dealt with or examined the said aspect but has merely recorded that the payment made to ETUK was taxable in India because of its "business connection". The Assessing Officer did not elaborate or has not discussed on what basis he had come to the conclusion that "business connection" as envisaged under Section 9(1)(i) existed On this aspect, we may note that the respondent assessee had submitted that ETUK was a non resident company and did not have any permanent establishment in India. ETUK was not rendering any service or performing any activity in India itself. These facts are not and cannot be disputed. Explanation 2 has not been invoked or relied upon by the Revenue Factual matrix in respect of Explanation 2 has not been referred to or examined by the Assessing Officer and is not on record. 11 Commissioner of Income Tax (Appeals) relied upon two circulars issued by the Central Board of Direct Taxes being Circular No. 23 dated 23 July, 1969 and Circular No. 786 dated 7 February, 2000, reported in [2000] 241 ITR 132 (St.). The relevant portion of the said circulars, for the sake of convenience are quoted below:- Circular No.23 dated 23.07.1969 "Foreign Agents of India Exports Where a foreign agents of India exporter operates in his own country and his commission is usually remitted directly to m/him and is therefore, not received by him or on his behalf in India. Such an agent is not liable to income tax in India on the commission" Circular No.786 dated 07.02.2000 "As clarified earlier in circular No.23 dated 23-7-1969 (see under section (5) where the non- resident agent operates outside the country, no part of his income arises in India, and since the payment is usually remitted directly abroad, it cannot be held to have been received by or on behalf of agent in India.

On the said aspect we may refer to the decision of the Supreme Court in C.I.T. vs. Toshoku Limited, (1980) 125 ITR 525 (SC). This case relates to the assessment year 1962-63. The Indian assessee had paid commission to two foreign companies through whom they had procured export orders Questions arose; what was the effect of the entries in the books of accounts of the Indian assessee which had resulted in debit and credit entries on account of commission and secondly, whether procurement of export orders by the foreign companies for the Indian company had resulted in a business connection. Two contentions were rejected by the Supreme Court inter-alia recording as under- "It cannot be said that the making of the book entries in the books of the statutory agent amounted to receipt by the assessees who were non-residents as the amounts so credited in their favour were not at their disposal or control. It is not possible to hold that the non-resident assessees in this case either received or can be deemed to have received the sums in question when their accounts with the statutory agent were credited, since a credit balance, without more, only represents a debt and a mere book entry in the debtor's own books does not constitute payment which will secure discharge from the debt. They cannot, therefore, be charged to tax on the basis of receipt of income actual or constructive in the taxable territories during the relevant accounting period XXX In the instant case, the non-resident assessees did not carry on any business operations in the taxable territories. They acted as selling agents outside India. The receipt in India of the sale proceeds of tobacco remitted or caused to be remitted by the purchasers from abroad does not amount to an operation carried out by the ossessees in India as contemplated by cl. (o) of the Explanation to s. 9(1)(i) of the Act. The commission amounts which were earned the non-resident assessees for services rendered outside India cannot, therefore, be deemed be incomes which have either accrued or arisen in India. The High Court was, therefore, right in answering the question against the department."

The aforesaid decision is a complete answer to the contention raised by the Revenue and as mentioned in the assessment order that commission income had accrued and arisen in India when credit entries were made in the books of the respondent assessee in favour of the ETUK and the said income towards commission was received in India. As noticed above, the stand of the Revenue is contrary to the two circulars issued by the CBDT in which it is clearly held that when a non-resident agent operates outside the country no part of his income arises in India, and since payment is remitted directly abroad, and merely because an entry in the books of accounts is made, it does not mean that the non- resident has received any payment in India. This fact alone does not establish business connection. In Circular No. 786 dated 7 February,

The term "business connection" has been interpreted by the Supreme Court to mean something more than mere business and is not equivalent to carrying on business, but a relationship between the business carried on by a non-resident, which yields profits and gains and some activities in India, which contributes directly or indirectly to the earning of those profits or gains. It predicates an element of continuity between the business of the non-resident and the activity in India (CIT Vs. R.D. Aggarwal and Company (1965) 56 ITR 20 (SC), Carborandum & Co. Vs. CIT (1977) 2 SCC 862 and Ishikawajma-Harima Heavy Industries Itd. Vs. Director of income Tax, Mumbai (2007) 3 SCC 481] The test which is to be applied is to examine the activities in India and whether the said activities have contributed to the business income earned by the non- resident, which has accrued, arisen or received outside India. The business connection must be real and intimate from which the income had arisen directly or indirectly. The question of business connection, therefore, has to be decided on facts found by Assessing Officer (or in the appellate proceedings). In the present case, facts found by the Assessing Officer do not make out a case of business connection as stipulated in Section 9(1) (i) of the Act. There is hardly any factual discussion on the said aspect by the Assessing Officer. He has not made any foundation or basis for holding that there was business connection and, therefore, Section 9(1)(1) of the Act is applicable. Appellate authorities; on the basis of material on record, have rightly held that "business connection" is not established.

The scope and ambit of Section 195 of the Act has been explained by the Supreme Court in GE India Techonology Centre (P) Ltd. vs. CIT (2010) 327 ITR 456. In the said case the expression "any other sum chargeable under the provisions of the Act" in Section 195 of the Act was elucidated and explained. It was held that if payment is made in respect of the amount which is not chargeable to tax under the provisions of Act, tax at source (TDS, for short) is not liable to be deducted. Decision of Supreme Court in Transmission Corporation of Andhra Pradesh vs. CIT, (1999) 239 ITR 587 (SC), operates and is applicable when the sum or payment is chargeable to tax under the provisions of the Act. In such cases, TDS has to be deducted on the gross amount of payment made and not merely on the taxable income included in the grass amount. The said decision would not apply in case payment is made but the said sum in entirety is not chargeable or exigible to tax under the provisions of the Act. The said distinction has been rightly understood by the first appellate authority and the ITAT and correctly applied by them.

It will be appropriate to refer to the following observations of the Supreme Court in the Commissioner of Income Tax, New Delhi Vs. Eli Lilly and Company (India) Private Ltd., (2009) 15 SCC 1, wherein it has been observed:

Under the 1961 Act, total income for the previous year is chargeable to tax under Section 4. Section 4(2) inter alia provides that in respect of income chargeable under Section 4(1), income tax shall be deducted of source where it is so deductible under any provision of the 1961 Act. Section 192(1) falls in the machinery provisions. It deals with P a g e | 21 9 Appeals ITO (IT)-3(2)(2) Vs. M/s Macrotech Developer Ltd. collection and recovery of tax. That provision is referred to in Section 4(2). Therefore, if a sum that is to be paid to the non-resident is chargeable to tax, tax is required to be deducted. The sum which is to be paid may be income out of different heads of income mentioned in Section 14, that is to say, income from salaries, income from house property, profits and gains of business, capital gains and income from other sources 61. The scheme of the TDS provisions applies not only to the amount paid, which bears the character of "income" such as salaries, dividends, interest on securities, etc. but the said provisions also apply to grass sums, the whole of which may not be income or profits in the hands of the recipient, such as payment to contractors and sub-contractors 62. The purpose of TDS provisions in Chapter XVII-B is to see that the sum which is chargeable under Section 4 for levy and collection of income tax, the payer should deduct tax thereon of the rotes in force, if the amount is to be paid to a non-resident. The said TDS provisions are meant for tentative deduction of income tax subject to regular assessment. (See Transmission Corpn of AP Ltd. v. CIT, SCC pp. 273-74, para 10: ITR pp. 594-95.)" (emphasis supplied) It was thereafter lucidly clarified:

On the question as to whether there is any interlinking of the charging provisions and the machinery provisions under the 1961 Act, we may, at the very outset, point out that in CIT v. BC Srinivasa Setty this Court has held that:

Section 195 appears in Chapter XVII which deals with collection and recovery. As held in CIT v. Eli Lilly & Co. (India) (P) Ltd the provisions for deduction of TAS which is in Chapter XVII dealing with collection of taxes and the charging provisions of the IT 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 IT Act. It is P a g e | 22 9 Appeals ITO (IT)-3(2)(2) Vs. M/s Macrotech Developer Ltd. true that the judgment in Eli Lilly was confined to Section 192 of the IT 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 the provisions of the Act", which expression, as stated above, does not find place in other sections of Chapter XVII. It is in this sense that we hold that the IT 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 IT Act.

If the contention of the Department that any person making payment to a non-resident is necessarily required to deduct TAS then the consequence would be that the Department would be entitled to appropriate the monies deposited by the payer even if the sum paid is not chargeable to tax because there is no provision in the IT Act by which a payer can obtain refund. Section 237 read with Section 199 implies that only the recipient of the sum i.e. the payee could seek a refund. It must therefore follow, if the Department is right, that the law requires tax to be deducted on all meats. The payer, therefore, has to deduct and pay tax, even if the so-called deduction comes out of his own pocket and he has no remedy whatsoever, where the sum paid by him is not a sum chargeable under the Act. The interpretation of the Department, therefore, not only requires the words "chargeable under the provisions of the Act" to be omitted, it also leads to an absurd consequence. The interpretation placed by the Department would result in a situation where even when the income has no territorial nexus with India or is not chargeable in Indio, the Government would nonetheless collect tax. In our view, Section 195(2) provides a remedy by which a person may seek a determination of the "appropriate proportion of such sum so chargeable" where a proportion of the sum so chargeable is liable to tax 18. In view of the aforesaid discussions, it has to be held that there is no error in the findings recorded by the Commissioner of Income Tax (Appeals) which have been in the impugned order by the ITAT. We do not find any merit in the present appeal and the same is dismissed." 5.5.10 In this judgment, the Hon'ble Delhi High Court has with the issue of deduction of tax on commission payment to a foreign party, and all the aspects related to this issue were analysed in detail by the Hon'ble High Court 5.5.11 Respectfully following the judgment of Hon'ble Delhi High Court, it is held that brokerage payment (which is similar to commission payment) cannot be taxed in Therefore, no TDS was deductible on these payments 5.5.12 This issue is therefore decided in favour of assesse.”

During the course of appellate proceedings the ld. D.R has placed reliance on the finding of A.O and contended that payment made to the non-resident of brokerage is taxable. On the other hand the ld. Counsel has referred page no. 187 to 220 of the paper book and contended that P a g e | 23 9 Appeals ITO (IT)-3(2)(2) Vs. M/s Macrotech Developer Ltd. assesse has made payment of brokerage to non-resident for rendering services outside India and the payments were made to them by the assesse in their bank accounts outside India, therefore, the same were not taxable in India. The ld. Counsel has relied on the following judicial pronouncements:

Heard both the sides and perused the material on record. The assesse has made payment of brokerage to non-resident brokers for assistance on sale of flats to non-resident in the project developed by the assesse in India. The entire work by the broker was carried out outside India and the brokerage payment were made by the assesse in P a g e | 24 9 Appeals ITO (IT)-3(2)(2) Vs. M/s Macrotech Developer Ltd. the bank account of foreign parties outside India. The brokers has not carried out any operation in India. Therefore, the AO has not proved that how the provisions of Sec. 5(2) and provisions of Sec.9(1)(i) of the Act are attracted in the case of the assesse. Regarding applicability of provision of Sec.9(1)(vii) by way of treating the payment as fees for technical services the A.O has not proved that how such payment made in the context of ‘make available’ clause. From the perusal of material on record it is observed that there is no element of technical knowledge, experience, skill knowhow or process in the rendering of brokerage services. No such technical knowledge etc. is made available to the assesse by such brokers. Therefore, we don’t find any infirmity in the decision of ld. CIT(A) that the payment of brokerage by the assesse to the brokers is not taxable in India either pursuant to Sec. 9(1)(vii) or under the provisions of DTAA due to restrictive definition of FTS/FIS, therefore, the ground of appeal of revenue stand dismissed. Ground No. 4: Reimbursement of Expenses:

During the year under consideration the assesse had made remittance to foreign parties towards reimbursement of expenses. The detail of the payment are as under:

Aggrieved, the assesse filed the appeal before the ld. CIT(A). The ld. CIT(A) has deleted the addition made by the Assessing Officer. The relevant part of the decision of CIT(A) is reproduced as under:

During the course of appellate proceedings the ld. D.R has supported the order of Assessing Officer. On the other hand, the ld. Counsel referred page no. 201 to 220 of the paper book and submitted that remittance made by the assesse towards reimbursement of expenses was on cost to cost basis without any mark up and same was not taxable.

Heard both the sides and perused the material on record. The assesse has made remittances to foreign parties towards reimbursement of expenses incurred by them. The expenses were incurred by such parties on account of travel, meal, hotel stay etc. Reimbursement were made in respect of actual expenditure incurred on cost to cost basis without any mark up. The assesse has also referred CBDT Circular No. 715 dated 08.08.1995 as per question no. 30 it provide that if separate bill has been raised for reimbursement of expenses then no taxes are deductible on such payment. The claim of the assesse that remittance was made towards reimbursement of expenses on cost to cost basis was not contrary disproved by the assessing officer. The assesse has also referred the following judicial pronouncements:  GE India Technology Centre Private Ltd vs CIT [2010] 327 ITR 456 (Supreme Court)  DIT (IT)-I vs AP Moller Maersk A S [Civil Appeal No. 8040 of 2015] (Supreme Court)

As the facts and the issue involved in this ground are the same as supra ground No. 1 & 2 of ITA No. 497/Mum/2022 therefore, applying the same findings mutatis mutandis, both ground of appeal of the revenue are dismissed.

As the facts and the issue involved in this ground are the same as supra ground No. 3 & 4 of ITA No. 497/Mum/2022 therefore, applying the same findings mutatis mutandis, both ground of appeal of the revenue are dismissed.

As the facts and the issue involved in this ground are the same as supra ground No. 1 & 2 of ITA No. 497/Mum/2022 therefore, applying the same findings mutatis mutandis, both ground of appeal of the revenue are dismissed.

As the facts and the issue involved in this ground are the same as supra ground No. 3 & 4 of ITA No. 497/Mum/2022 therefore, applying the same findings mutatis mutandis, both ground of appeal of the revenue are dismissed. Ground No.1:

As the facts and the issue involved in this ground is the same as supra ground No. 1 of ITA No. 497/Mum/2022 therefore, applying the P a g e | 29 9 Appeals ITO (IT)-3(2)(2) Vs. M/s Macrotech Developer Ltd. same findings mutatis mutandis, this ground of appeal of the revenue is dismissed. Ground No. 2:

As the facts and the issue involved in this ground is the same as supra ground No. 3 of ITA No. 497/Mum/2022 therefore, applying the same findings mutatis mutandis, this ground of appeal of the revenue is dismissed. Ground No. 3:

As the facts and the issue involved in this ground is the same as supra ground No. 4 of ITA No. 497/Mum/2022 therefore, applying the same findings mutatis mutandis, this ground of appeal of the revenue is dismissed. Ground No. 1 to 5:

As the facts and the issue involved in this ground are the same as supra ground No. 1 & 2 of ITA No. 497/Mum/2022 therefore, applying the same findings mutatis mutandis, all the grounds of appeal of the revenue are dismissed. Ground No. 6:

As the facts and the issue involved in this ground is the same as supra ground No. 3 of ITA No. 497/Mum/2022 therefore, applying the same findings mutatis mutandis, this ground of appeal of the revenue is dismissed. Ground No. 7:

As the facts and the issue involved in this ground are the same as supra ground No. 4 of ITA No. 497/Mum/2022 therefore, applying the P a g e | 30 9 Appeals ITO (IT)-3(2)(2) Vs. M/s Macrotech Developer Ltd. same findings mutatis mutandis, both these ground of appeal of the revenue are dismissed. Ground No. 8:

During the year under consideration the assesse made remittance of Rs.30,464/- to Ideascape Marketing N. Communication F2C for purchases. As per DTAA with UAE (Article 7), payment to an entity in UAE can be brought to tax in India only when such entity has a permanent establishment in India. The AO has not brought any material on record to prove contrary, therefore we don’t find any merit in this ground of appeal of the revenue. Accordingly, this ground of appeal stand dismissed. Cross Objections Nos. 73 to 75 & 85/Mum/2022:

Since, we have dismissed the appeals of the revenue, therefore, cross objection filed by the assesse become infructuous the same stand dismissed.

In the result, all the appeals of the revenue are dismissed and all the cross objection filed by the assesse are also dismissed. Order pronounced in the open court on 24.01.2023 (Aby T Varkey) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 24.01.2023 Rohit: PS