STANDARD CHARTERED GLOBAL BUSINESS SERVICES PVT. LTD. ,CHENNAI vs. DCIT INTERNATIONAL TAXATION 2(2) , CHENNAI

PER G.MANJUNATHA, ACCOUNTANT MEMBER:

These four appeals filed by the assessee are directed against

separate, but identical orders of the learned Commissioner of

Income Tax (Appeals)-16, Chennai, all dated 28.09.2016, in turn the

same was filed under section 248 of the Income Tax Act,

1961(hereinafter referred to as “the Act”).

appeal in all appeals, therefore, for the sake of brevity, grounds of

appeal filed in ITA No.1961/Chny/2020 are reproduced as under:-

2 ITA No.1961 to 1964/Chny/2017

limited company incorporated in India. The assessee is a

3 ITA No.1961 to 1964/Chny/2017

subsidiary of Standard Chartered Bank, United Kingdom (‘SCB UK’).

SCB UK has subsidiaries and affiliates around the world (group

entities). The assessee is into the business of rendering back

end Information Technology / Information Technology Enabled

Services to SCB group entities for which SCB group entities have

deputed employees to the assessee. The roles and responsibilities

of the deputed employees were determined by the assessee

company and such employees report to the assessee company

during their tenure of work in India. The deputed employees have

requested that a portion of their salary should be paid outside

India in their respective country to meet their social security and

other obligations in that country. The assessee chose to oblige to

the legitimate request of the deputed employees and made

arrangements for remittance of a portion of the salary outside India.

For this purpose, SCB UK has a contract with vendors for

providing support like immigration, relocation and language

training to the deputed employees. The assessee claims that

since the employees are working for the assessee, the costs are

reimbursed without any mark up by SCB UK. Further, since the

payments were on cost to cost reimbursement, the assessee has

filed an application u/s.195(2) of the Act seeking Nil rate of

4 ITA No.1961 to 1964/Chny/2017

deduction for the above payment. The Assessing Officer has held

that tax should be withheld @ 15% in respect of costs incurred by

SCB UK for immigration, relocation and language training to the

deputed employees. The assessee has remitted the salary and

other costs to SCB UK after withholding tax u/s.195 of the Act on

the total amount of USD 132,416 and the said tax cost was

borne by the assessee company. Accordingly, aggrieved by the

order of the Assessing Officer, the assessee has filed an appeal

before the learned CIT(A) and contested that as no tax was

required to be deducted on reimbursement of expenses of SCB UK.

assessee and taken into consideration of provisions of section 248

of the Act, dismissed the appeal filed by the assessee by holding

that on a careful consideration of the details furnished in Form 35,

it was clearly noticed that the assessee is in appeal against the

proceedings for deduction of tax at source u/s.195 of the Act, as

such, no appeal lies against the order passed under section 195 of

the Act. He further noticed that however, the assessee can file

appeal u/s.248 of the Act with necessary details including details

of income payable and amount of tax paid to the credit of the

Central Government. Since the assessee has not furnished any

5 ITA No.1961 to 1964/Chny/2017

details of amount payable and the amount of tax deducted on

such amount, the appeal filed by the assessee do not qualify the

criteria of section 248 and accordingly dismissed the appeal filed

by the assessee. Being aggrieved by the learned CIT(A) order, the

assessee is in appeal before us.

appeal filed by the assessee is time barred by 252 days for which

necessary petition for condonation of delay along with affidavit

explaining the reasons for the delay has been filed. The AR

further submitted that the assessee could not file appeal within the

time allowed under the Act due to the fact that it has filed

rectification application before the learned CIT(A) to rectify the

mistakes and awaiting the orders from the learned CIT(A). When

the learned CIT(A) has rejected the application filed by the

assessee, the assessee preferred an appeal against the original

order passed by the learned CIT(A) which caused delay of 252

days. The delay in filing appeal is neither intentional nor willful but

for the unavoidable reasons, therefore, delay may be condoned in

the interest of advancement of substantial justice.

6 ITA No.1961 to 1964/Chny/2017

condonation of delay petition filed by the assessee submitted that

the reasons given by assessee do not come within the ambit of

reasonable and bonafide reasons, which cannot be considered for

condonation of delay and hence, appeal filed by the assessee may

be dismissed as not maintainable.

assessee for condonation of delay, we are of the considered view that reasons given by the assessee for not filing the appeal within

the time allowed under the Act comes under reasonable cause as

provided under the Act for condonation of delay and hence, delay

in filing of appeal is condoned and appeals filed by the assessee

are admitted for adjudication.

involved in the appeals filed by the assessee is squarely covered in

favor of the assessee by the decision of Chennai Bench of the

Tribunal for the assessment year 2013-14 in ITA No.

1106/Mds/2016 dated 04.08.2017, where under identical set of facts, this Tribunal has set aside the appeals to the file of the

CIT(A) to decide the issue of applicability of withholding of tax

7 ITA No.1961 to 1964/Chny/2017

u/s.195 on remittances made to SCB UK towards reimbursement of

cost incurred on employees deputed by speaking order. The facts

in the present appeals filed by the assessee are pari materia with

the facts already considered by the Tribunal, and therefore, these

appeals may be set aside to the file of the learned CIT(A) to decide

the issue of application of section 195 of the Act on remittances in

accordance with law.

assessee has failed to file necessary evidences at amount payable

and consequent withholding of tax deducted and remittance of

same to the credit of the Central Government account in order to

file appeal u/s.248 of the Act. Since the assessee has failed to

furnish necessary details, the learned CIT(A) has rightly dismissed

the appeal filed by the assessee and hence, there is no reason to

give another opportunity to the assessee.

on record and gone through the orders of authorities below. We find

that an identical issue under identical facts and circumstances has

been considered by the co-ordinate Bench of the Tribunal in

assessee’s own case for the assessment year 2013-14 in ITA

ITA No.1961 to 1964/Chny/2017

No.1106/Mds/2016 vide order dated 04.08.2016, where by

referring to provisions of section 248 of the Act and also by

following the decision of Hon’ble Apex Court in the case of M/.s

G.E. India Technology Centre Pvt. Ltd. Vs.CIT (2010) 327 ITR 356

(SC), has set aside the appeal to the file of the learned CIT(A) and

direct him to decide applicability of section 195 of the Act to the

sums remitted by the assessee to SCB UK qua each of the sums

remitted. The relevant findings of the Tribunal in ITA

No.1106/Mds/2016 vide order dated 04.08.2017 are as under:-

“3. We have heard the parties, and perused the material on record. Section 248, under which section appeal stands preferred before the ld. CIT(A), reads as under:

‘Appeal by person denying liability to deduct tax in certain cases. 248. Where under an agreement or other arrangement, the tax deductible on any income, other than interest, under section 195 is to be borne by the person by whom the income is payable, and such person having paid such tax to the credit of the Central Government, claims that no tax was required to be deducted on such income, he may appeal to the Commissioner (Appeals) for a declaration that no tax was deductible on such income.’ The assessee-appellant, as explained, pays a part of the salary to the employees of its’ group entities seconded to it in India, while the balance part, representing their social benefits, health insurance, etc., is paid to or for the benefit of the said employees directly by the regular employer abroad. The assessee, by reimbursing the part salary paid outside India, thus bears the entire salary cost of the said employees, and being only in respect of services rendered in India, claims to have deducted tax at source on the entire salary u/s. 192 of the Act. It accordingly claims that there is no obligation on it’s part to deduct tax at source u/s. 195 of the Act thereon, and which it though has, by grossing up the amount paid, paying the same to the credit of the Central Government. That is, has however, remitted the salary as well as the other costs, by way of reimbursement, to the group entities by grossing up the tax, and paying the same u/s. 195, and for which it therefore seeks direction for refund.

ITA No.1961 to 1964/Chny/2017

There can clearly be no double taxation, as would be the case in respect of salary to seconded employees where, as contended, tax stands already paid on their entire salary, i.e., including that directly remitted abroad. There is also no question of deduction of tax at source on sums reimbursed. No part of the sums ‘reimbursed’ should, however, be liable to deduction of tax at source u/s. 195, as where it constitutes the income of the ultimate payee, taxable in India, inasmuch as tax cannot be avoided merely because the payment has been made by another in the first instance, and who is therefore ‘reimbursed’ the cost. Further, where sums not liable to deduction of tax at source are remitted by incurring tax cost, by grossing up the sums remitted for tax, the tax so deducted and paid is to be restored back to the assessee in-as-much as no tax could be exacted, save that levied under the authority of law (Article 265 of the Constitution of India). Section 248 accordingly provides for a recourse, where any person has paid tax u/s. 195 on any income, other than interest, to, upon establishing that no tax was required to be deducted u/s. 195 in the first place, seek a declaration to that effect and, thus, refund of the tax paid, being obliged to do so under the arrangement. The same, as it appears to us, is an alternate to s. 195 r/w s. 197 of the Act, though can be availed of only after the deposit of the tax under reference to the credit of the Central Government. Nothing, therefore, turns on the reference to s. 197 of the Act by the ld. DR during hearing; the assessee having invoked s. 248, and the ld. CIT(A) having in fact adjudicated thereon. We may here also clarify that his order, disposing the said appeal, becomes an order u/s. 250(6) of the Act, appealable before the Tribunal u/s. 253 of the Act.

10 ITA No.1961 to 1964/Chny/2017

materia with that of facts already considered by the Tribunal for

assessment year 2013-14 and therefore, by following the decision

of the co-ordinate Bench of the Tribunal in ITA No. 1106/Mds/2016

vide order dated 04.08.2017, we set aside the appeal to the file of

the learned CIT(A) and direct him to reconsider the issue in the light

of the findings recorded by the Tribunal for assessment year

2013-14, after affording reasonable opportunity to the assessee in

accordance with law.

1962/Chny/2017 are treated as allowed for statistical purposes.

ITA Nos.1962 & 1963/Chny/2017:

dismissal of rectification application filed by the assessee against

the learned CIT(A) order rejecting appeal filed under section 248 of

the Act. Since, the substantive appeals filed by the assessee have

been set aside to the file of the learned CIT(A) to reconsider the

issue in accordance with the findings of the Tribunal for earlier

assessment year, these two appeals filed by the assessee against

the order of the learned CIT(A) rejecting rectification application

11 ITA No.1961 to 1964/Chny/2017

filed by the assessee becomes infructuous and hence, these

appeals filed by the assessee are dismissed as not maintainable.

assessee are allowed for statistical purposes and subsequent

remaining two appeals i.e ITA Nos.1963 & 1964/Chny/2017 are

dismissed. Order pronounced in the open court on 2nd December, 2020

Sd/- Sd/- (महावीर �संह) (जी.मंजुनाथ ) (Mahavir Singh) (G. Manjunatha ) उपा�य� / Vice-President लेखा सद$य / Accountant Member

चे&नई/Chennai, 'दनांक/Dated 2nd December, 2020 DS आदेश क� ��त)ल*प अ+े*षत/Copy to: 1. Appellant 2. Respondent 3. आयकर आयु,त (अपील)/CIT(A) 4. आयकर आयु,त/CIT 5. *वभागीय ��त�न1ध/DR 6. गाड� फाईल/GF.