EVEREST BUSINESS ADVISORY INDIA PVT. LTD.,,GURGAON vs. ITO, CIRCLE-8(4), NEW DELHI

PER SAKTIJIT DEY, JUDICIAL MEMBER: Captioned appeals by the assessee arise out of three separate orders of learned Commissioner of Income-Tax (Appeals)-3, New Delhi pertaining to assessment years 2011-12 to 2013-14.

3. Briefly, the facts, which are more or less common in all these appeals are, the assessee is a resident corporate entity engaged in the business of providing strategic advisory services on outsourcing. It also provides independent research on outsourcing.

4. In course of assessment proceedings, the assessing officer noticed that in the assessment years under dispute, assessee had paid certain amounts to its overseas associated enterprises viz. Everest Global Inc. towards management fee. When asked to explain, assessee submitted that the amount was paid towards use of manpower of sister concern in accepting third party projects abroad. Assessing Officer noticed that while making such payment, assessee had not deducted tax at source under Section 195 of the Act. Accordingly, he called upon the assessee to explain why amounts paid should not be disallowed under Section 40(a)(i) of the Act. Though, the assessee objected to the proposed disallowance by stating that the amount paid is not taxable at the hands of the AE in India. However, the assessing officer remained unconvinced. Accordingly, he disallowed the amounts paid in different assessment years by invoking the provisions of Section 40(a)(i) of the Act. While doing so, he held that the management fee paid is in the nature of Fee for Included Services (FIS) both under the Income-Tax Act, 1961 as well as the Indo-USA Double Taxation Avoidance Agreement (DTAA). Though, assessee contested the aforesaid disallowance before learned Commissioner (Appeals), however, disallowances made by the assessing officer were confirmed.

5. Before us, learned counsel appearing for the assessee submitted, in assessment year 2011-12, assessing officer has committed a factual mistake by disallowing an amount of Rs.1,81,51,665. Whereas, the expenditure actually debited to the P & L account is to the tune of Rs.1,01,39,583.

7. Learned Departmental Representative strongly relied upon the observations of the assessing officer and learned Commissioner (Appeals).

6. Training a. Global training conference b. Monthly training sessions c. Ad hoc training as required

Notably, while considering the taxability of the corresponding receipts made at the hands of the AE viz. Everest Global Inc. in assessment years 2010-11 to 2012-13, the Tribunal in 6137 & 2355/Del/2017 dated 30.03.2022 has held that they are not in the nature of FTS/FIS under Article 12(4) of the India-USA DTAA. As could be culled out from the observations of the Co-ordinate Bench in the aforesaid decision, the services received by the assessees are general managerial services, hence, do not qualify the test of technical/consultancy services to satisfy the definition of FIS under Article 12(4) of the Tax Treaty. Thus, considering the fact that while considering the nature and taxability of corresponding receipts at the hands of the payee, the Tribunal has held that the amount is not taxable in India, in our considered opinion, there is no legal obligation on the assessee to withhold tax at source under Section 195 of the Act while remitting the management fee to the AE. This is so, because, section 195 itself is quite explicit in its language while providing withholding of tax in respect of any payment, which is chargeable to tax in India. Since, the management fee paid by assessee is not chargeable to tax in India in terms with Article 12(4) of India-USA DTAA, as held by the Co-ordinate Bench in case of the payee, the assessee was not required to deduct tax at source while making such payment. Therefore, we hold that the disallowance made under Section 40(a)(i) of the Act in the assessment years under dispute are unsustainable, hence, deleted. Grounds are allowed.