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Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGH, VICE- & SHRI G.MANJUNATHA
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”).
The assessee has more or less raised common grounds of appeal in all appeals, therefore, for the sake of brevity, grounds of appeal filed in are reproduced as under:-
The learned CIT(A) order is contrary to law, facts and circumstances of the case.
2. The learned CIT(A) grossly erred in dismissing the appeal on the ground that the appeal does not qualify the criteria under section 248 of the Income-tax Act, 1961.
3. The learned CIT(A) having mentioned the details of the income payable and the corresponding tax deducted at source as furnished in the statement or facts/Grounds of appeal
by the Appellant, erred in making completely contrary observation that the said details are not available and consequently rejecting the appeal.
4. The learned CIT(A) ought to have appreciated that the Appellant had deducted the applicable taxes and remitted the same to the credit of the Central Government.
5. The learned CIT(A) ought to have appreciated that the Appellant had filed the tax remittance challan evidencing the quantum of taxes paid while filing the appeal under section 248 of the Act.
6. The learned CIT(A) did not provide any opportunity of being heard to the appellant before rejecting the appeal.
7. Without prejudice to the above, the learned CIT(A) ought to have appreciated that the Appellant is liable to bear the taxes and as such the appeal was rightly filed under section 248 of the Act. 8. Without prejudice to the above, the learned CIT(A) ought to have appreciated that the remittances i.e. reimbursement of cost relating to immigration, relocation and language training or deputed employees are not chargeable to tax in India and as such there Is no requirement to withhold taxes. 9. The appellant caves leave to alter, amend, modify, amplify or withdraw any or all the above grounds of appeal or any further grounds before or at the time of hearing.”
Brief facts of the assessee are that the assessee is a private limited company incorporated in India. The assessee is a 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 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.
4. The learned CIT(A) after considering relevant facts of the 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 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.
At the outset, learned AR for the assessee submitted that the 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.
The learned DR, on the other hand, strongly opposing 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.
Having heard both sides and considered the petition filed by the 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.
The learned AR for the assessee submitted that the issue 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 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 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.
The learned DR, on the other hand, submitted that the 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.
We have heard both the parties, perused the material available 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 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.
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.
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.
In view of the foregoing, the matter is to be restored back to the file of the ld. CIT(A) for an adjudication on merits. This is as he has, without doing so, only stated that no issue arises for adjudication as the assessee could not have any grievance. His stating that there is no assessment order is misconceived, as the same is not a requirement of s. 248. As sought to be explained by us per para 3 of this order, there is a definite case of grievance to the assessee where the sums remitted, by paying tax thereon u/s. 195, do not, as claimed, represent income in the hands of the payees, or that which is not taxable in India, or tax in respect of which stands already paid by or on behalf of the payees, so that no tax was in fact deductible u/s. 195. Reference in this context may also be made to the decision by the Apex Court in GE India Technology Centre (P.) Ltd. v. CIT [2010] 327 ITR 456 (SC). Section 248 provides the mechanism for recovery of the tax paid u/s. 195 on other than interest paid. The onus to prove its claims though would be on the assessee. The ld. CIT(A) shall decide qua each of the sums remitted per a speaking order, issuing definite findings of fact. The assessee, needless to add, shall render all assistance and cooperation in the matter in the appellate proceedings. We decide accordingly.”
In the present appeals filed by the assessee, the facts are pari 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 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.
In the result, appeal filed by the assessee in & 1962/Chny/2017 are treated as allowed for statistical purposes.
ITA Nos.1962 & 1963/Chny/2017:
These two appeals filed by the assessee are against 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 filed by the assessee becomes infructuous and hence, these appeals filed by the assessee are dismissed as not maintainable.
In the result, & 1962/Chny/2017 filed by the 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