VISHAY INTERTECHNOLOGY ASIA P LTD,SINGAPORE vs. ACIT(IT), CIR-2, PUNE

This assessee’s appeal for A.Y. 2016-17 arises against the ACIT(IT)Cir- 2, Pune’s assessment dated 23/09/2020 framed in furtherance to the CIT(DRP)-3 Mumbai-2’s directions dated 26.08.2020 in DIN and Order number ITBA/DRP/F/144C(5)/2020-21/1027806131(1),involving proceeding u/s.143(3) r.w.s. 144 C(13) of the Income Tax Act, 1961; in short "the Act”.

The assessee raises the following substantive grounds in the instant appeal.

This assessee M/s. Vishay Intertechnology Asia Pte Ltd., is a singaporean entity assessed in India as a non-resident. It had filed its return on 13.11.2016 declaring Nil income. The same was taken up in scrutiny. The Assessing Officer thereafter made section 92(CA)(1) reference to the Transfer Pricing Officer “TPO” on 28.03.2018 for determining arms length price “ALP” of its transactions with indian associate enterprises “AE” namely M/s. Vishay Components India Pvt. Ltd., and Vishay Semi Conductor India Pvt. Ltd.

There is hardly any dispute between the parties that the assessee had received “Global IT Support Charges” of Rs. 6,76,38,205/- and 1,43,70,296/- with “IT -Data Centre Cost” of Rs.13,13,025/- and Rs.3,24,566/-; respectively totaling to Rs.8,36,46,092/-, from the above twin group entities. A perusal of page 169 in assessee’s detailed paper book suggests that it contended before the TPO that the above twin heads of charges were merely in the nature of recovery of 3rd party costs; at the behest of the common holding entity M/s. Vishay Intertechnology INC, USA. Mr. Irani informs us at this stage that these charges had arisen in furtherance to a cost sharing agreement “CSA” executed amongst all these group companies for availing a basket of services from time to time. We note in this factual backdrop the TPO passed his section 92CA(3) order dated 31.05.2019 accepting assessee’s all contentions thereby holding that these transactions

Next came Assessing Officer turn to pass his drafting assessment order. The same is dated 26.09.2019 which forms part of the case records before us at page No.19 onwards. He put the assessee on notice for assessing the foregoing sum of Rs.8,36,46,092/- as fee for technical services “FTS”. This taxpayer filed again its detailed explanation dated 17.07.2019 (page 173 in paper book) inter alia re-iterating the fact that the foregoing sum(s) represented cost to cost reimbursements only without any mark up thereupon. The Assessing Officer rejected all this contentions in his draft assessment. The assessee filed its objection before the DRP. Learned panel rejected the same on 26.08.2020. It is in this backdrop that the Assessing Officer has framed his consequential assessment holding the assessee’s sum in issue holding the assessee’s sum in issue of Rs.8,36,46,092/-, taxable as fee for technical services.

We have given our thoughtful consideration to vehement rival contentions against and in support of impugned addition. We sought to ascertain the correct nature of assessee’s receipts in issue during the course of hearing. We find from a perusal of para 11 on page 29 of the assessment

It is in light of the foregoing clinching fact of reimbursement element only in the assessee’s receipts which constrains us to hold that the same could be hardly assessed as an instance deemed income chargeable to tax u/s. 9(1)(vii) of the Act in light of (2017) 78 taxmann.com 287(SC) DIT V/s. A.P.Moller Maersk A S, followed in CIT V/s. BNP Paribas Tax Appeal 1193 of 2015 dated 28.03.2018 (Bom) as well as this tribunal’s Special Bench in Mahindra & Mahindra Ltd. Vs. DCIT (2009) 30 SOT 374 (Mum)(SB) holding that such a reimbursement of expenses neither amounts to nor it partakes the character of income which could be held to have accrued or arisen in India since lacking income element itself. We are of the opinion in this legal and factual backdrop the learned lower authorities have erred in law and on facts in assessing the impugned reimbursement receipts of Rs.8.36 crores as Fee for Technical Services “FTS” in issue. The same is directed to be deleted. Ordered accordingly.

Mr. Irani had also referred to this tribunal’s various orders in preceding assessment years holding assessee’s payer M/s. Vishay Components India Pvt. Ltd. (supra) as not having paid any royalty etc. in alleged identical nature of payments wherein the learned coordinate bench(es) have deleted section 40(a)(i) disallowance. He has filed a compilation chart of the tribunal’s orders to this effect alongwith other relevant details which are not commented upon in the instant lis once it has come on record that assessee’s reimbursement receipts are not taxable as income.

Delay of 2 days in filing of the instant appeal stands condoned since falling in Covid-19 pandemic outbreak period.

This assessee’s appeal is allowed in above terms.