JCIT, SPECIAL RANGE-1, NEW DELHI vs. AMERICAN EXPRESS (INDIA) PVT. LTD., NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “I-1” BENCH: NEW DELHI

(THROUGH VIDEO CONFERENCING)

BEFORE SHRI R.K.PANDA, ACCOUNTANT MEMBER & SHRI KUL BHARAT, JUDICIAL MEMBER

ITA No.2714/Del/2018 Assessment Year : 2012-13 American Express (India) Pvt.Ltd., vs JCIT, Metropolitan Saket, 7th Floor, Office Special Range-I, Block, District Centre, Saket, New Delhi-110002. New Delhi-110017. PAN-AAACA8163F APPELLANT RESPONDENT

ITA Nos.4487 & 2834/Del/2018 Assessment Year : 2012-13 JCIT, vs American Express (India) Pvt.Ltd., Special Range-I, MGF, Metropolitan Saket, 7th Floor, New Delhi-110002. Office Block, District Centre, Saket, New Delhi-110017. PAN-AAACA8163F APPELLANT RESPONDENT

C.O.No.125/Del/2018 [In ITA No.2834/Del/2018] Assessment Year : 2012-13 American Express (India) Pvt.Ltd., vs JCIT, MGF, Metropolitan Saket, 7th Floor, Special Range-I, Office Block, District Centre, Saket, New Delhi-110002. New Delhi-110017. PAN-AAACA8163F APPELLANT RESPONDENT

ITA No.3769/Del/2018 Assessment Year : 2013-14 American Express (India) Pvt.Ltd., vs JCIT, MGF, Metropolitan Saket, 7th Floor, Special Range-I, Office Block, District Centre, Saket, New Delhi-110002. New Delhi-110017. PAN-AAACA8163F APPELLANT RESPONDENT

ITA Nos. 2714/Del/2018 & Others

ITA No.3148/Del/2018 Assessment Year : 2013-14 JCIT, vs American Express (India) Pvt.Ltd., Special Range-I, MGF, Metropolitan Saket, 7th Floor, New Delhi-110002. Office Block, District Centre, Saket, New Delhi-110017. PAN-AAACA8163F APPELLANT RESPONDENT

C.O.No.126/Del/2018 [In ITA No.3148/Del/2018] Assessment Year : 2013-14 American Express (India) Pvt.Ltd., vs JCIT, MGF, Metropolitan Saket, 7th Floor, Special Range-I, Office Block, District Centre, Saket, New Delhi-110002. New Delhi-110017. PAN-AAACA8163F APPELLANT RESPONDENT

Appellant by Sh. Nageswar Rao, Sh. S.Chakarborty, Adv. & Ms. Deepika Aggarwal, Adv. Respondent by Sh. Surendar Pal, CIT DR & Sh. Vijay Choudhary, Sr. DR Date of Hearing 13.07.2021 Date of Pronouncement 16.09.2021

ORDER PER KUL BHARAT, JM :

These appeals filed by the assessee and the Revenue for the

assessment years 2012-13 & 2013-14 are directed against the separate

orders of Ld. CIT(A)-44, New Delhi dated 31.01.2018, 17.04.2018,

31.01.2018, 28.02.2018 & 28.02.2018 respectively. The assessee has also

filed cross-objections for the Assessment Years 2012-13 & 2013-14.

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all appeals and cross-objection were taken up together and are being

disposed of by way of a consolidated order, for the sake of brevity.

13] wherein the assessee has raised following grounds of appeal:-

“Based on the facts and circumstances of the case and in law, the Appellant respectfully craves leave to prefer an appeal under section 253 of the Income-tax Act, 1961 ("the Act") against the order dated January 31, 2018 passed by the Learned Commissioner of Income-tax (Appeals) - 44, New Delhi ("referred to as Learned CIT(A)") against the assessment order dated May 25,2016 passed by the Assistant Commissioner of Income-tax, Circle 2(2), New Delhi ("referred to as learned AO") under section 143(3) the Act on the following grounds:

Part I - Transfer pricing grounds of appeal

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Part II - Corporate tax grounds of appeal

3.1 Based on the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred in upholding the action of Learned AO disallowing the amount paid to AETRSCO as reimbursement of relocation expenses incurred by AETRSCO on relocation of employees (except providing relief with respect to travel cost/travelling expenses incurred towards visits of the Appellant's own employees visiting outside India), u/s 40(a)(i) of the Act.

3.1.1. On the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred in providing relief only with respect to reimbursement of travel cost/travelling expenses incurred by AETRSCO towards visits of the Appellant's own employees visiting outside India instead of the entire relocation expenses incurred towards such employees.

3.2 Based on the facts and in the circumstances of the case and in law, the Learned CIT(A) / Learned AO have erred in holding the aforesaid reimbursement of relocation expenses as "Fees for technical services" ('FTS') under section 9(1)(vii) of the Act and Article 12(4) of the India-USA Double Taxation Avoidance Agreement ('DTAA').

3.3 Based on the facts and in the circumstances of case and in law, the Learned CIT(A)/Learned AO have erred in relying upon the judgment of the Hon'ble Supreme Court in the case of Centrica India Offshore India Pvt Ltd without appreciating the fact that the said decision relates to payment made towards provision of services and not to reimbursement of expenses such as relocation expenses and hence, is not applicable to the Appellant's case.

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Part III- Initiation of penalty proceedings

The above grounds of appeal are mutually exclusive & without prejudice to each other. The Appellant prays for leave to add, alter, amend and / or modify any of the grounds of appeal at or before the hearing of the appeal.

The Appellant prays for appropriate relief based on the said grounds of appeal and the facts and circumstances of the case.”

under:-

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Ground 5: Deduction in respect of Education Cess “That on the facts and in the circumstances of the case, the Appellant prays that education cess and secondary higher education cess on income-tax paid for the year under consideration, i.e. Assessment Year 2012-13 ought to be allowed as a deduction under section 37(1) of the Income Tax Act, 1961 while computing the total income.” The Appellant craves leave to add, alter, delete or modify the above ground of appeal. 3. The Appellant humbly submits that the above-mentioned ground may kindly be admitted as it does not require any fresh examination of facts and can be adjudicated on the basis of material on record It goes to the root of the matter and is required to be adjudicated In order to determine the correct tax liability of the Appellant Reliance is also placed on the decision of the Apex Court in the case of National Thermal Power Corporation Limited v. err (1998) 229 ITR 383 (SC). 4. In the interest of justice, it is therefore humbly requested that the said additional ground may kindly be admitted and adjudicated and the Hon'ble Tribunal may decide on merits after providing the Appellant an opportunity of hearing in the matter. 5. In view of the aforesaid and in the interests of equity and justice, it is respectfully prayed that the aforesaid additional ground of appeal, by virtue of the discretion vested with this Hon'ble Tribunal under Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963, be admitted and taken into consideration while adjudicating the above appeal.”

allowability of education cess as deduction u/s 37(1) of the Act. He

submitted that the issue being legal can be raised at any stage. He placed

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reliance on the decision of the Hon’ble Supreme Court rendered in the case

of National Thermal Power Corporation vs CIT [1998] 229 ITR 383 (SC).

submitted that such a belated stage, the assessee should not be allowed to

raise this ground.

available on record. There is no dispute with regard to the fact that

ground raised by the assessee is a legal ground related to allowability of

education cess as a deduction u/s 37(1) of the Act. Therefore, respectfully

following the ratio laid down in the case of National Thermal Power

Corporation vs CIT (Supra), the additional ground raised by the assessee is

hereby admitted for adjudication.

declaring income of Rs.2,12,33,10,464/- was e-filed on 29.11.2012 which

was subsequently revised and a return declaring income of

Rs.2,12,92,84,620/- was filed on 31.03.2014. The case was selected for

scrutiny assessment. In response to the Statutory notices, the Ld.AR of the

assessee appeared and filed the details. Thereafter, a draft assessment

order was passed on 17.03.2016 by the Addl.CIT, Range-2, New Delhi.

Since, no objection to draft assessment was filed by the assessee, the

Assessing Officer proceeded to make assessment. The Assessing Officer

observed that the assessee company was a wholly owned subsidiary of

American Express International Inc., USA and was engaged in the global

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business processing and support services and Travel & Travel related

services. During the previous year relevant to the Assessment Year, the

assessee had undertaken international transaction with its Associated

Enterprises (“AE”) amounting to more than Rs.15,00,00,000/-. Therefore,

in terms of section 92CA of the Act, the international transactions entered

into by the assessee with AE were referred to the Transfer Pricing Officer

(“TPO”) for determining the Arm's Length Price (“ALP”) with the previous

approval of the CIT, Delhi-1, New Delhi. The TPO vide order dated

15.01.2016 suggested adjustment in respect of receivables of

Rs.10,73,12,034/-. It was observed by the Assessing Officer that the

assessee had shown receivables from its AE in its books of accounts. It

was noticed by the Assessing Officer that the assessee company was in

receipt of payment for services rendered to its AEs after expiry of period

specified in the respective service agreements but did not charge any

interest on such delayed payments by the AE. Therefore, the TPO suggested

upward adjustments of Rs.10,73,12,034/- to the income of the assessee

u/s 92CA of the Act. The Assessing Officer following the reasoning of the

TPO made addition of Rs.10,73,12,034/- on account of upward adjustment

for Arm's Length Price. Further, it was noticed by the Assessing Officer

that the assessee had debited a sum of Rs.3,92,81,738/- on account of

Relocation expenses reimbursed to American Express Travel related

services and CO. (“AETRSCO”). It was noticed that these expenses were on

account of payments to assessee’s employees who worked for assessee

outside India. The expenses form part of the same secondment contracts

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by which these employees were paid salaries. The Assessing Officer was of

the view that the assessee was required to deduct tax at source which was

not done by the assessee. Therefore, the Assessing Officer vide order sheet

entry dated 04.03.2016 called upon the assessee as to why the Relocation

charges of Rs.3,92,81,738/- should not be disallowed and added back as

was done in the last year on account of non-deduction of TDS. In response

thereto, the assessee filed a detailed reply. The reply of the assessee was

not found acceptable by the Assessing Officer. The Assessing Officer was

further of the view that having deducted tax u/s 195 of the Act, on

payment of reimbursement of salaries of employees on secondment, the

assessee ought to have deducted correctly relocation expenses which

formed part of the same secondment contracts. Therefore, the Assessing

Officer made addition of Rs.3,92,81,738/-. Hence, the Assessing Officer

computed the income at Rs.2,27,58,78,390/- against the profit before tax

as declared by the assessee of Rs.1,82,76,28,525/-.

before Ld.CIT(A) who after considering the submissions, partly allowed the

appeal of the assessee. Thereby, Ld.CIT(A) affirmed the view of TPO that

the transaction of the appellant-assessee with the AEs with regard to

receivable is an international transaction which would come under the

purview of transfer pricing regulations. Any delay in receipt of money by

the appellant leads to decrease its profitability and there is an opportunity

cost of money received after a delay which has correctly been treated by the

TPO as loan advance to the AE hence, an international transaction.

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However, the Ld.CIT(A) following the direction of the DRP and the

judgement of Hon’ble Delhi High Court in the case of Kusum Healthcare

Pvt.Ltd. in ITA No.6814/Del/2014 dated 26.03.2015, directed the Assessing

Officer to allow working capital adjustment to the appellant by calculating

its profit margin in accordance with formula stipulated by DRP for

Assessment Year 2009-10 and give relief to the appellant, if any.

Assessing Officer/TPO that the payment towards travel expenses

constitutes fee for technical services in terms of section 9(1)(vii) of the Act

and Article 12 (4) of India US DTAA. It was further held that the appellant

was required to deduct TDS on the payment made to AE hence, non-

deduction of tax would attract disallowance u/s 40(a)(i) of the Act. Further,

the disallowance of travelling expenses made in respect of the employees

who travelled aboard for training or business purposes, did not accept the

finding of the Assessing Officer and held that such expenditure do not

constitute FTS under either the Act or the Treaty.

filed separate cross-appeals before this Tribunal.

separate adjudication.

pricing ground of appeal is against that Ld.CIT(A) failed to give clear

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direction allowing the relief sought by way of deletion of adjustment of

outstanding receivables from AEs.

decision of the Tribunal in assessee’s own case. He contended that vide

order dated 03.08.2018 in ITA No.2577/Del/2014 wherein the Department’s

appeal pertaining to interest on receivables was dismissed on account of

low tax effect. The department had preferred appeal before Hon’ble High

Court in ITA No.656/2019 but did not raise this issue. Further, reliance is

placed on the decision of this Tribunal dated 17.07.2019 in ITA

No.1426/Del/2015 for Assessment Year 2010-11 and also the order dated

13.08.2020 wherein ITA No.355/Del/2016 for the Assessment Year 2011-

12.

Assessing Officer and TPO. Ld. CIT DR vehemently argued that the

judgement of Hon’ble Delhi High Court rendered in the case of Kusum

Healthcare Pvt.Ltd.(supra) would not apply on the facts of the present case.

He strongly relied upon the decision of the lower authorities.

that under the identical facts, the Tribunal was pleased to decide the issue

in favour of the assessee.

available on record and gone through the orders of the authorities below.

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Ld. Counsel for the assessee in re-joinder, submitted that in assessee’s own

case in ITA No.2577/Del/2014 pertaining to Assessment Year 2009-10 vide

order dated 03.08.2018 was dismissed on account of low tax effect. The

Department preferred appeal for the Assessment Year 2010-11. The

Department did not raise this issue. However, in Assessment Year 2010-

11, the Tribunal again deleted the disallowance. He also relied on the

decision the Tribunal in assessee’s own case in ITA No.355/Del/2016

pertaining to Assessment Year 2011-12. The Revenue could not controvert

these averments of the assessee by placing and contrary binding precedent

of the Hon’ble High Court or the Hon’ble Apex Court.

Assessment Year 2010-11 in ITA No.1426/Del/2015 vide order dated

17.07.2019 has held as under:-

Tribunal. We do not see any reason to deviate from the decision rendered

in the earlier years. The Assessing Officer is directed accordingly. The

Ground of appeal No.2 raised by the assessee is thus, allowed.

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respect of addition made by invoking the provision of section 40(a)(i) of the

Act. It is contended by the Ld. Counsel for the assessee that the Assessing

Officer disallowed a sum of Rs.3,92,81,378/- stating that reimbursement of

relocation expenses form part of secondment contract and as assessee had

deducted tax on source u/s 195 of the Act for the reimbursement of

salaries so should have been the case for reimbursement of relocation

expenses. It was also submitted that the Assessing Officer treated the

same in the nature of FTS and thus chargeable to tax u/s 9(1)(vii) and

Article 12(4) of the DTAA between India and USA. He further submitted

that Ld.CIT(A) relied upon the decision of Hon’ble Delhi High Court in the

case of Centrica Offshore Pvt. Ltd. vs CIT bearing WP(C) No.6807/2012 to

hold that payment towards travel expenses constitute fees for technical

services. Ld. Counsel for the assessee submitted that Ld.CIT(A) partly

allowed the appeal of the assessee by observing that “the entire

disallowance pertained to two separate heads namely, relocation expenses

occurred by assessee’s employees who travelled aboard and expenses of

employees of AEs who travelled to India”. Based on this observation held

that reimbursement of expenses pertaining to relocation for assessee’s own

employees do not constitute FTS under the Act or DTAA and thus, it is to

be allowed. Ld. Counsel for the assessee submitted that it is respectfully

submitted that as far as deduction for reimbursement made to AE towards

expenses relating to assessee’s employees visit is concerned, Ld.CIT(A) has

rightly granted deduction as the same could not be FTS by any stretch of

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imagination and no disallowance u/s 40(1)(i) of the Act is justified. Ld.

Counsel for the assessee submitted that in respect of reimbursement to AE

towards relocation charges of employees seconded to assessee entity from

AE. it is submitted that firstly, there is no estoppels against law and it

would be incorrect to contend that as assessee had deducted tax on salary

reimbursement for same seconded employees it was necessary for assessee

to deduct tax on reimbursement of relocation charges also relating to same

seconded employees. Reliance was placed on the decision of Hon’ble

Supreme Court in the case of CIT, Madras vs V.Mr.P.Firm, Maur 56 ITR 67

wherein it has been held that there is no estoppels against law. He

submitted that in law, the assessee is not liable to deduct tax. The

assessee cannot be forced to deduct tax by estoppels merely on the ground

that the assessee has deducted tax in earlier year. He submitted

undisputedly, the make available clause of India US DTAA is not satisfied

in present case and reimbursement cannot be characterized as FTS.

Hence, no tax is deductible in law and no disallowance could be made u/s

40(a)(i) of the Act. Reliance was placed on the decisions of Hon’ble

Karnataka High Court in DIT vs Abbey Business Services Pvt.Ltd. in ITA

No.214 of 2014 and the judgement of Hon’ble Bombay High Court in the

case of DIT vs Marks & Spencer Reliance India Pvt.Ltd. bearing ITA No.893 of

2014. Ld. Counsel for the assessee submitted in view of the aforesaid

decisions and more particularly, when the clause make available, is not

satisfied of India US DTAA. The authorities below were not justified in

making the disallowance.

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below and submitted that there is no infirmity in the order of Ld.CIT(A).

Ld.CIT DR submitted that Hon’ble Delhi High Court in the case Centrica

Offshore Pvt.Ltd. vs CIT (supra) has held that payment towards travel

expenses constitutes fees for technical services.

available on record and gone the orders of the authorities below. Ld.CIT(A)

confirmed the view of the Assessing Officer by relying on the decision of the

Hon’ble Delhi High Court in the case of Centrica Offshore Pvt.Ltd. vs CIT

(supra) dated 25.04.2014. It is contended by the Ld. Counsel for the

assessee that as per India US DTAA, the make available clause is not

satisfied in the present case. Therefore, the reimbursement cannot be

characterized as FTS. We find that this aspect has not been examined by

Ld.CIT(A), therefore, the finding of Ld.CIT(A) is set aside and this issue is

restored to Ld.CIT(A) to decide it afresh after having considered the

submissions of the assessee regarding make available clause in terms of

India US DTAA. Thus, Ground No.3 raised in the assessee’s appeal is

partly allowed for statistical purposes.

additional ground of the assessee’s appeal reads as under:-

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which a rectified order under section 154 r.w.s 250(6) of the Act dated April 17, 2018 was also passed) In respect of the Assessment Year 2012-13 ("Subject AY") on various grounds mentioned in the aforesaid Appeal. 2. In addition to the various grounds of appeals raised in the above-mentioned appeal, the Appellant craves leave of this Hon'ble Tribunal to raise the following additional ground of appeal and prays that the same may be admitted and be heard and considered as part of the Captioned Appeal while adjudicating the same. Ground 5: Deduction in respect of Education Cess “That on the facts and in the circumstances of the case, the Appellant prays that education cess and secondary higher education cess on income-tax paid for the year under consideration, i.e. Assessment Year 2012-13 ought to be allowed as a deduction under section 37(1) of the Income Tax Act, 1961 while computing the total income.” The Appellant craves leave to add, alter, delete or modify the above ground of appeal. 3. The Appellant humbly submits that the above-mentioned ground may kindly be admitted as it does not require any fresh examination of facts and can be adjudicated on the basis of material on record It goes to the root of the matter and is required to be adjudicated In order to determine the correct tax liability of the Appellant Reliance is also placed on the decision of the Apex Court in the case of National Thermal Power Corporation Limited v. err (1998) 229 ITR 383 (SC). 4. In the interest of justice, it is therefore humbly requested that the said additional ground may kindly be admitted and adjudicated and the Hon'ble Tribunal may decide on merits after providing the Appellant an opportunity of hearing in the matter. 5. In view of the aforesaid and in the interests of equity and justice, it is respectfully prayed that the aforesaid additional ground of

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appeal, by virtue of the discretion vested with this Hon'ble Tribunal under Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963, be admitted and taken into consideration while adjudicating the above appeal.” 24. Ld. Counsel for the assessee submitted that the additional ground for

Assessment Years 2012-13 & 2013-14 is raised against disallowance of

education cess u/s 37(1) of the Act. He submitted that the education cess

is allowable expenditure u/s 37(1) of the Act. In support of the contention,

Ld. Counsel for the assessee has placed reliance on the judgment of

Hon’ble High Court of Rajasthan in the case of CIT vs Chambal Fertilizers &

Chemicals in ITA No.52 of 2018 and the judgement of the Hon’ble Bombay

High Court in the case of Sesa Goa Ltd. vs JCIT in ITA Nos.17, 18 of 2013

and the decision of the Co-ordinate Benches of the Tribunal in ITA Nos.

3892/Del/2017, 704/Kol/2015, 736/PUN/2011, 1824/Pun/2018. Ld.

Counsel for the assessee submitted that the Assessing Officer ought to

have followed the clarification as made by the CBDT Circular

F.No.91/58/66-ITJ(19) dated 18.05.1967.

Hon’ble Supreme Court in the case of CIT vs K.Srinivasan AIR 1972 SC 491

has held that the cess is a tax.

placed on the judgement of Hon’ble Supreme Court in the case of CIT vs

K.Srinivasan (supra) is misplaced. He submitted that Hon’ble Supreme

Court in decision of Sun Engineering 198 ITR 297 has held that it is

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impermissible to read a sentence from decision out of context and assume

it to the law laid down in a decision. He submitted that Hon’ble Bombay

High Court in the case of Sesa Goa Ltd. vs JCIT (supra) considered the

CBDT circular and allowed the issue in favour of the taxpayer. Therefore,

he submitted that in the light of the Hon’ble Bombay High Court decision

in the case of Sesa Goa Ltd. vs JCIT (supra), disallowance was not justified.

Further, it is contended that the Circular issued by CBDT has clearly

stated that no disallowance could be made.

disputed about the Circular issued by CBDT which has been relied by Ld.

Counsel for the assessee. Moreover, the Hon’ble Bombay High Court has

considered all the case laws on this point and has ruled in favour of the

assessee. Therefore, we do not see any reason to take a different view.

Respectfully following the judgement of Hon’ble Bombay High Court in the

case of Sesa Goa Ltd. vs JCIT (supra), we direct the Assessing Officer to

delete the addition. Thus, additional grounds raised by the assessee are

allowed.

13] wherein the Revenue has raised following ground of appeal:-

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delay in receipt of receivables and by allowing working capital adjustment to the assessee while calculating its profit margin.”

capital adjustment of the assessee while calculating its profit margin.

has allowed the working capital adjustment by following the decision of

Tribunal in assessee’s own case in ITA No.1426/Del/2015 order dated

17.07.2019.

available on record. In para 18-19 of this order we have affirmed the view

of the Ld. CIT(A) on allowing working capital adjustments. Therefore, for the

same reasoning this ground is dismissed.

13] wherein the Revenue has raised following ground of appeal:-

1.1 “The Ld.CIT(A) has erred in law and on facts in directing the Transfer Pricing Officer (TPO) to allow working capital adjustment on account of receivables on account of TP adjustment in arm's length price as the Ld.ClT(A) has failed to appreciate the fact that working capital has three variables namely debtors, payables and inventory- the interplay of which is considered while making working capital adjustment.

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1.2 The Ld.ClT(A) has failed to appreciate that as per explanation of Section 92B, receivables are a separate category of international transaction which could be benchmarked separately.

1.3 The Department has not accepted the decision of Hon'ble DRP on this issue in the assessee's case for AY 2009-10 and is in appeal before Hon'ble ITAT for AY 2009-10.

a. It is not clear from the order of the Ld.CIT(A) whether travelling expenses as mentioned by the Ld.ClT(A) is same as relocation expenses because addition in the assessment order had been made by the AO on relocation expenses without distinguishing expatriates and assessee's own employees.

b. It is also not clear whether the expenses incurred for assessee's own employees were also part and parcel of the same Secondment Agreement by which the expenses of expatriates have been reimbursed.

c. Since TDS u/s 195 of the Income-tax Act, 1961 is required to be deducted for expenses mentioned in the Secondment Agreement, following that logic, TDS is also required to be deducted on expenses incurred for own employees.

d. For the AY 2011-12, the Hon'ble DRP in assessee's own case had directed disallowance of these relocation expenses since no TDS had been deducted.”

of working capital adjustment. Since this issue, we have decided in favour

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of the assessee by following the judgement of Hon’ble Delhi High Court in

the case of Kusum Healthcare Pvt.Ltd.(supra) and also the decision of

Tribunal in earlier years. Therefore, we do not see any infirmity in the

finding of Ld.CIT(A) and the same is hereby affirmed. Thus, Ground

Nos.1.1 to 1.3 raised by the Revenue are rejected.

of travelling expenses. Similar ground was raised by the assessee in ITA

No.2714/Del/2018.

allowability of payment of travelling expenses in respect of its own

employees in ITA No.2714/Del/2018. We do not see any reason to disturb

the finding of Ld. CIT(A) as payment of travelling expenses to its own

employee could not fall within the ambit of FTS. Thus, Ground No.2

raised by the Revenue is rejected.

against ITA No.2834/Del/2018 pertaining to Assessment Year 2012-13.

The assessee has raised following grounds in the cross-objection:-

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international transaction ("impugned transaction") and accordingly, determining of the Arm's Length Price ("ALP") of the impugned international transaction and thereby erred: a) by erroneously re-characterizing the outstanding receivables from AE as unsecured loan and computing notional interest at the rate of 12.60 percent (i.e SBI base rate in addition of 300 basis point) on alleged delays in realization of payment from the AE against the invoices raised for the export of data processing and back office support services; b) by determining the Comparable Uncontrolled Price ("CUP") method as the most appropriate method without providing any comparable uncontrolled transaction(s) thereby compromising the most fundamental rules and provisions laid down in the Act and the Rules to determine the arm's length price of the international transaction; c) by considering SBI base rate instead of LlBOR while computing notional interest on alleged delays in realization of payment from the AE as the invoices were raised on the AE are in foreign currency i.e. USD; d) by applying a spread of 300 basis points to factor various risks and ignoring the fact that the Appellant is a captive service provider and does not bear any risk; e) by ignoring the fact that interest chargeable on outstanding receivable does not fit within the meaning of international transaction as continuing debit balance is not an international transaction but is a result of international transaction. The above grounds of cross-objections are mutually exclusive and without prejudice to each other. The Respondent craves leave to add, alter, amend and / or modify any of the grounds of cross objections either before or during the course of the appellate proceedings before the Hon'ble Tribunal.”

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Cross Objection, has been addressed by Ld. CIT(A) in the earlier order

passed in ITA No.4487/Del/2018 relating to Assessment Year 2012-13.

Hence, the grounds raised in the cross-objection by the assessee do not

survive.

as rejected.

14] wherein the assessee has raised following ground of appeal:-

“Based on the facts and circumstances of the case and in law, the Appellant respectfully craves leave to prefer an appeal under section 253 of the Income-tax Act, 1961 ("the Act") against the order dated February 28, 2018 passed by the Learned Commissioner of Income-tax (Appeals) - 44, New Delhi ("referred to as Learned CIT(A)") against the assessment order dated February 27, 2017 passed by the Additional Commissioner of Income-tax, Special Range-1, New Delhi ("referred to as learned AO") under section 143(3) the Act on the following grounds:

2.1 Based on the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred in upholding the action of Learned

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AO disallowing the amount paid by the appellant to AETRSC0 on account of reimbursement of relocation expenses of employees seconded by AETRSCO to AEIPL, on cost to cost basis.

2.2 Based on the facts and in the circumstances of the case and in law, the Learned CIT(A) / Learned AO have erred in holding the aforesaid reimbursement of relocation expenses as "Fees for technical services" ('FTS') under section 9(1)(vii) of the Act and Article 12(4) of the India-USA Double Taxation Avoidance Agreement ('DTAA').

2.3 Based on the facts and in the circumstances of case and in law, the Learned CIT(A)/Learned AO have erred in relying upon the judgment of the Hon'ble Supreme Court in the case of Centrica India Offshore India Pvt Ltd without appreciating the fact that the said decision relates to payment made towards provision of services and not to reimbursement of expenses such as relocation expenses and hence, is not applicable to the Appellant's case.

The above grounds of appeal are mutually exclusive & without prejudice to each other. The Appellant prays for leave to add, alter, amend and / or modify any of the grounds of appeal at or before the hearing of the appeal.

The Appellant prays for appropriate relief based on the said grounds of appeal and the facts and circumstances of the case.”

adjudication.

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disallowance of relocation expenses u/s 40(1)(i) of the Act. The similar

ground has been decided vide Ground No.3 in ITA no.2714/Del/2018

relating to Assessment Year 2012-13 by observing as under:-

counsel for the assessee except stating that the facts of the of case in

Centrica Offshore Pvt. Ltd. vs CIT (supra) relied by the Ld. Authorities

below are distinguishable as in that case payment was made qua the

provision of service. In ITA No.2714/Del/2018, we have set-aside the order

of Ld. CIT(A) for decision afresh after considering the submissions of the

assessee. For the same reasoning in this year as well impugned order is

set-aside. Ld. CIT(A) is hereby directed to decide the issue after considering

all objections of the assessee.

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penalty proceedings. This ground is dismissed being pre-mature.

purposes.

14] wherein the Revenue has raised following ground of appeal:-

1.1. “The Ld.ClT(A) has erred in law and on facts in directing the Transfer Pricing Officer (TPO) to allow working capital adjustment on account of receivables on account of TP adjustment in arm's length price as the Ld.ClT(A) has failed to appreciate the fact that working capital has three variables namely debtors, payables and inventory- the interplay of which is considered while making working capital adjustment.

1.2. The Ld.CIT(A) has failed to appreciate that as per explanation of Section 92B, receivables are a separate category of international transaction which could be benchmarked separately.

1.3. The Department has not accepted the decision of Hon'ble DRP on this issue in the assessee's case for AY 2009-10 and is in appeal before Hon'ble ITAT for AY 2009-10.

a. Having deducted tax u/s 195 of the Income-tax Act, 1961 on payment for reimbursement of salaries of employees on second me nt. the assessee should have deducted TDS on relocation

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expense also since it also formed part of the same Secondment Agreement.

b. The terms and salary terms of the agreement are in the nature of services which are 'Fee for Technical Services'(FTS). Hence chargeable to tax both under the provisions of section 9 (1) (vii) of the Income -tax Act, 1961 as well as under the provisions of article 12(4) of Indo-USA DTAA.

c. For the AY 2011-12, the Hon'ble DRP in assessee's own case had directed disallowance of these relocation expenses since no TDS had been deducted.”

adjustment. The similar ground was decided vide Ground Nos. 1.1 to 1.3

in ITA No.2834/Del/2018 relating to Assessment Year 2012-13 by

observing as under:-

Revenue are rejected.

expenses to its own employees. Similar ground was raised vide Ground

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No.2 in ITA No.2834/Del/2018 relating to Assessment Year 2012-13 by

observing as under:-

dismissed.

against ITA No.3148/Del/2018 pertaining to Assessment Year 2013-14.

The assessee has raised following grounds in the cross-objection:-

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of 300 basis point) on alleged delays in realization of payment from the AE against the invoices raised for the export of data processing and back office support services; b) by determining the Comparable Uncontrolled Price ("CUP") method as the most appropriate method without providing any comparable uncontrolled transaction(s) thereby compromising the most fundamental rules and provisions laid down in the Act and the Rules to determine the arm's length price of the international transaction; c) by considering SBI base rate instead of LIBOR while computing notional interest on alleged delays in realization of payment from the AE as the invoices were raised on the AE are in foreign currency i.e. USD; d) by applying a spread of 300 basis points to factor various risks and ignoring the fact that the Appellant is a captive service provider and does not bear any risk; e) by ignoring the fact that interest chargeable on outstanding receivable does not fit within the meaning of international transaction as continuing debit balance is not an international transaction but is a result of international transaction. The above grounds of cross-objections are mutually exclusive and without prejudice to each other. The Respondent craves leave to add, alter, amend and I or modify any of the grounds of cross objections either before or during the course of the appellate proceedings before the Hon'ble Tribunal.” 56. It is seen from the record that Ld.CIT(A) has carried out requisite

rectification. Thus, grounds raised by the assessee in this Cross-objections

do not survive and the same are dismissed.

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allowed & ITA No.3769/Del/2018 of the assessee are partly allowed for

statistical purposes; ITA Nos. 4487, 2834 & 3148/Del/2018 of the

Revenue are dismissed; and Cross-objection Nos. 125 & 126/Del/2018

raised by the assessee are also dismissed.

Above decision was pronounced on conclusion of Virtual Hearing in

the presence of both the parties on 16th September, 2021.

Sd/- Sd/- (R.K.PANDA) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER *Amit Kumar*