Commissioner Of Income Tax vs. M/s. Temenos Headquarters SA

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TCA/314/2024HC Madras16 December 2024Bench: Honourable Mr Justice R. SURESH KUMAR4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court, by way of a judgment delivered on 16.12.2024, dismissed the Tax Case Appeal filed by the Revenue. This decision was based on a submission by the learned Standing Counsel for the appellant Revenue that, as per CBDT's Circular No.9 of 2024 dated 17.09.2024, the tax effect in the instant case was less than the monetary limit imposed. Consequently, the Revenue requested that the appeal be disposed of, keeping the substantial questions of law open for adjudication at a later point in time. The Court recorded this submission and accordingly dismissed the appeal for low tax effect, explicitly stating that the substantial questions of law are kept open for adjudication at the appropriate stage. No costs were awarded. The specific findings of the ITAT on the four substantial questions of law were not adjudicated upon by the High Court.

What were the facts?

The Revenue, represented by the Commissioner of Income Tax (International Taxation), Chennai, filed a Tax Case Appeal before the High Court of Judicature at Madras. The appeal challenges an order dated 12.06.2024 passed by the Income Tax Appellate Tribunal (ITAT), Chennai 'B' Bench, in ITA No.1575/CHNY/2023. The assessee is M/s. Temenos Headquarters SA, a Swiss entity. The appeal concerns assessment years not explicitly stated in the provided text. The core dispute revolves around the ITAT's decision regarding withholding tax obligations on expenses for seconded employees, the classification of services as Fees for Technical Services (FTS), a disallowance made under Section 40(a)(i), and depreciation on software licenses. The amount in dispute is stated as Rs.28,09,09,809/- in relation to the disallowance.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the ITAT was correct in dismissing the Revenue's appeal, holding that no withholding tax under Section 195 was required on reimbursed expenses for seconded employees, given that the assessee had already deducted tax at source under Section 192 on salary payments to these employees. 2. Whether the ITAT was right in ignoring agreement clauses that indicated the overseas entity, through its employees, rendered technical, managerial, and consultancy services, thereby qualifying as FTS under Section 9(1)(vii) and the Double Taxation Avoidance Agreement (DTAA). 3. Whether the ITAT was correct in deleting the disallowance of Rs.28,09,09,809/- made by the assessing authority under Section 40(a)(i) without considering the merits. 4. Whether the ITAT was correct in holding that depreciation on software licenses is eligible for depreciation at 60%, similar to computers. The Revenue argued that the ITAT erred on all these points. The assessee's arguments are not recorded in the provided text. The Revenue relied on CBDT's Circular No.9 of 2024.

Which sections of the Income-tax Act were involved?

Section 260A,Section 195,Section 192,Section 9(1)(vii),Section 40(a)(i)

AI-generated summary — verify with the full judgment below

T.C.A.No.314 of 2024 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 16.12.2024 CORAM THE HON'BLE MR.JUSTICE R.SURESH KUMAR AND THE HON'BLE MR.JUSTICE C.SARAVANAN Tax Case Appeal No.314 of 2024 Commissioner of Income Tax International Taxation, Chennai. Appellant Vs. M/s.Temenos Headquarters SA No.2, Rue De Lecole De Chime, 1205 Geneva Switzerland-1205, PAN: AADCT-7868H Respondent ----- Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Chennai 'B' Bench, Chennai, dated 12.06.2024 made in ITA No.1575/CHNY/2023. For Appellant : Mr.Karthik Ranganathan Senior Standing Counsel J U D G M E N T (Delivered by R.SURESH KUMAR, J.) This Tax Case Appeal has been filed by the Revenue calling in question the correctness of the order passed by the Income Tax Appellate Tribunal, Chennai 'B' by raising the following substantial questions of law: https://www.mhc.tn.gov.in/judis T.C.A.No.314 of 2024 "(i) Whether the learned ITAT is correct in law in dismissing the Revenue's appeal holding that there is no need to withhold u/s.195 on the expenses in respect of seconded employees reimbursed to the foreign AE when the assessee has deducted tax at source u/s 192 on the salary payments made to such expatriated employees? (ii) Whether on the facts and in the circumstances of the case and in law, the learned ITAT was right in ignoring the various clauses of the agreement which signified that the overseas entity through the employees rendered technical, managerial and consultancy services, thus satisfied FTS as per the provisions of Section 9(1)(vii) of the Act and also under DTAA? (iii) Whether on the facts and in the circumstances of the case, the learned ITAT is right in law in deleting the disallowance of sum of Rs.28,09,09,809/- made by assessing authority under Section 40(a)(i) without considering the merits of the case? (iv) Whether the learned ITAT is correct in law in holding that depreciation on software license is also entitled for depreciation @ 60% as for the computer?” 2. It is brought to our notice by the learned Standing Counsel for the https://www.mhc.tn.gov.in/judis T.C.A.No.314 of 2024 appellant Revenue that in the instant case, as per the CBDT's Circular No.9 of 2024 dated 17.09.2024 the tax effect is said to be less than the monetary limit imposed and therefore, the appeal can be disposed of, keeping the substantial questions of law raised in this appeal open for adjudication at a later point of time. 4. Recording the said submission, this Tax Case Appeal is dismissed for low tax effect, keeping open the substantial questions of law for adjudication at appropriate stage. No costs. (R.S.K.,J.) (C.S.N.,J.) 16.12.2024 NCS : Yes/No Index : Yes/No KST To The Income Tax Appellate Tribunal 'B' Bench, Chennai. https://www.mhc.tn.gov.in/judis T.C.A.No.314 of 2024 R.SURESH KUMAR, J. AND C.SARAVANAN, J. KST T.C.A.No.314 of 2024 16.12.2024 https://www.mhc.tn.gov.in/judis

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