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Income Tax Appellate Tribunal, “C” BENCH, PUNE
Before: SHRI S.S.GODARA, JM & SHRI DR. DIPAK P. RIPOTE, AM
आदेश / ORDER` PER S. S. GODARA, JM :
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”.
Heard both the parties. Case file perused.
Vishay Intertechnology Asia Pte Ltd.,
The assessee raises the following substantive grounds in the instant appeal.
“1. erred in facts and in law by making addition of Rs. 8,36,46,092 to the total income of the Appellant;
Addition of reimbursement receipts by wrongly treating as fee for technical services (FTS) Rs. 8,36,46,092
2. erred in holding that a sum of Rs. 8,36,46,092 reimbursed to the Appellant as taxable as fee for technical services in accordance with para 4 of Article 12 of DTAA between India and Singapore;
Erroneous levy of interest under section 234B of the Act 3. erred in levying interest of Rs 45,16,884 under section 234B of the Act; Initiation of penalty under section 271 (1)(C) of the Act erred in the initiation of penalty proceedings on the above u/s 271(1)(c). Any consequential relief, to which the Appellant may be entitled under the law in pursuance of the aforesaid grounds of appeal, or otherwise, may thus be granted.
The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing of the appeal, so as to enable the learned Hon’ble ITAT to decide the appeal according to law”
A few relevant facts regarding the main issue herein of fee for technical services (FTS) addition of Rs.8,36,46,092/- may be noticed.
Vishay Intertechnology Asia Pte Ltd.,
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
Vishay Intertechnology Asia Pte Ltd., had been executed at arms length and therefore, he did not made any adjustment in its revenue in issue.
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.
This leaves the assessee aggrieved.
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
Vishay Intertechnology Asia Pte Ltd., order that the Assessing Officer is himself very fair in concluding that “ the receipts derived by the assessee in the nature of reimbursements for global IT support charges towards various SAP, non SAP charges as well as data being provided by the assessee company, amounting to Rs.8,36,46,092/- are chargeable to tax in India as Fees for technical services. It is thus clear that the learned assessing authority has assessed to the assessee’s reimbursement receipts; without any mark-up, as it’s deemed income u/s. 9(1) (Vii) of the Act.
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.
Vishay Intertechnology Asia Pte Ltd.,
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.
Order pronounced in the Open Court on this 05th day of August, 2022.