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Income Tax Appellate Tribunal, DELHI BENCH ‘D’, NEW DELHI
Before: SH. N. K. BILLAIYA & MS ASTHA CHANDRA
ORDER PER N.K. BILLAIYA, AM:
This appeal by the revenue is preferred against the order of the CIT(A)- 23, New Delhi dated 12.12.2019 pertaining to A.Y.2013-14.
The grievance of the revenue read as under :-
Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in relying upon evidence furnished by the assessee during appellate proceedings, when the same was not allowed to be admitted under Rule 46A of the Income Tax Act, 1961. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in applying a cost plus markup of 25% formula to arrive at the profit figure for AY 2013-14 without examining or appreciating how the allocation of costs etc. was done. 3. The appeal craves to add, amend, modify or alter any ground of appeal at any time or before the hearing of the appeal.
Representatives of both the sides were heard at length. Case records carefully perused.
Briefly stated the facts of the case are that the assessee is a company incorporated in Canada and is a global leader in the frozen food industry and has a wholly owned subsidiary in India.
The assessee had entered into an agreement dated 01.07.2009 with McCain India to provide certain management support services for which it received an amount of Rs.7,64,76,876/-. McCain India made these payments to the assessee after withholding taxes by treating the said payments as fees for technical services as per section 9 (1) (vii) of the Act.
During the course of the scrutiny assessment proceedings the AO examined whether the payments would constitute FTS and further went on to examine whether the assessee had Permanent Establishment in India on account of the employees who had travelled to India. The AO was of the firm belief that furnishing of services through employees in India for more than 90 days shall constitute PE services in India and holding such held that 50% of the total management fees attributable to the PE constituted on account of these employees and taxed the same @ 40%. 7. Assessee carried the matter before the CIT(A) and reiterated what has been stated during the course of the assessment proceedings. 8. After considering the facts and the submissions the CIT(A) was convinced that similar facts were considered in A.Y.2010-11 and no new facts have been brought on record, therefore, the CIT(A) went on to decide the appeal on the basis of findings given in A.Y.2010-11. 9. Before us the DR placed strong reliance on the findings of the AO. 10. Per contra the counsel reiterated that facts are identical to A.Y.2010-11 which decision has been accepted both by the revenue and the assessee. 11. We have given a thoughtful consideration to the orders of the CIT(A) given in A.Y.2010-11. The relevant findings read as under :- “5.5 These grounds are interconnected and disposed off together. These grounds are related to the profit attributable to the PE in India. It is not disputed by the appellant that employees of the appellant had visited India in the year under reference. The threshold days for establishing a service PE in India as envisaged in the DTAA with Canada have been admitted to be exceeded by the appellant The AO therefore has correctly held that there was a Services PE in India. The appellant in his return filed in response to sec 148 has also admitted the service PE. It is further not disputed that the total receipts from McCaine India during the relevant FY were Rs.l,97,41,500. The appellant in his return had stated that the cost allocation for the visiting employees was Rs.31,24,497 after realising a profit margin of 8%. The appellant in his submissions stated that only basic management for foundations were being executed by the visiting personnel and therefore the cost plus of 8 percent on the actual cost incurred of Rs. 28,93,054 was adequate. The AO has not disputed the cost allocation of Rs. 28,93,054. The only issue in the present grounds is related to the cost plus percentage or the markup to be applied on the cost incurred. The markup according to the AO and correctly so, is determined on the basis of the nature of services being rendered by the appellant to its Indian entity.” XXXXXXXXXXXX
The argument of the appellant that the services were rendered from outside India is also fallacious. It is seen that the total receipts of the appellant from the Indian entity is Rs. Rs. 1,97,41,500. The AO while computing the markup, has taken only an amount of Rs. 28,93,054. Therefore the AO has also accepted that the major part of the receipts is related to services rendered abroad and not related to the service PE m India. The simplicitor markup on the cost incurred on travel and support in India has been taken which is more than reasonable. Therefore the markup of 25 percent on only a portion of the expense which are clearly allocable to the PE is correct.
As no new facts have been brought on record and as both the representatives fairly conceded that decision of A.Y.2010-11 has been accepted. We, therefore, do not find any reason to interfere with the findings of the CIT(A)(supra). The appeal filed by the revenue is accordingly dismissed.
Decision announced in the open court on 09.06.2022.