WNS NORTH AMERICA INC.,MUMBAI vs. D.C.I.T. (IT)4(3)(2), MUMBAI

Assessee by : Shri Manish Kant (AR) Revenue by : Shri V. Sreekar (DR) Date of Hearing: 09/12/2019 Date of Pronouncement: 06/03/2020 O R D E R PER RAM LAL NEGI, JM These appeals have been filed by the assessee against the order dated 17.09.2018 passed by the Ld. AO under section 143(3) read with section 144C(13) and 254 of the Act in pursuance of the directions issued by the Ld. Dispute Resolution Panel -2 (Ld.DRP),Mumbai pertaining to the assessment Assessment Years: 2008-09 & 2009-10 year 2008-09 in the case of WNS North America and order dated 17.09.2018 passed by the Ld. AO under section 143(3) read with section 144C(13) and 254 of the Act in pursuance of the directions issued by the Ld. Dispute Resolution Panel -2 (Ld.DRP),Mumbai pertaining to the assessment year 2009-10 in the case of WNS Global services (UK) Ltd.

s are common in both the cases these appeal were clubbed heard together and are being disposed of by this common and consolidated order for the sake of convenience.

3. Brief facts of the case are that the assessee is a foreign company incorporated in USA, engaged in the business of providing information technology enabled services to its customers directly or through subcontracting the same to its Associate Enterprises (AE) located across various parts of the world. During the assessment year under consideration the assessee inter alia received an amount of Rs. 12,99,13,821/- from WNS India and WNS Mortgage Services Pvt. Ltd. The assessee contended that since the amounts are reimbursement of expenses, the same is not taxable in India. However, the AO rejecting the contention of the assessee, made addition of the said amount to the income of the assessee and completed assessment u/s 144C r.w.s. 143(3) r.w.s. 254 of the Act, determining the total income of the assessee at Rs. 15,66,61,181/- Against the action of the AO, the assessee filed objections with the Ld DRP and on the basis of the directions passed by the Ld. DRP u/s 144C(5) of the Act, the AO passed the impugned order.

4. The assessee WNS North America has preferred the present appeal against the impugned order by raising the following grounds: General Ground 1. Erred in computing total income of assessee at Rs. 15,66,61,181/- as against the returned income of Rs. 2,67,47,360 for the subject assessment year.

2. Erred in taxing the amount of Rs. 12,99,13,821 received from WNS Global Services Pvt. Ltd. (WNS India), which was received towards reimbursement of expenses incurred on behalf of WNS Assessment Years: 2008-09 & 2009-10 India, as Fees for included Services (FIS) under Article 12 (4) of the India – USA DTAA.

Impugned order passed by the learned AO was bad in law 3. Erred in passing the alleged draft assessment order u/s 144C(1) r.w.s. 143 (3) r.w.s. 254 of the Act dated 18 December 2017 inspite of the fact that there was already an order giving effect to the order of Tribunal which was passed on 13 February 2017 by the learned AO. Without appreciating that post this first order giving effect to ITAT order dated 13 February 2017, the learned AO is functus officio and thereby impugned second order giving effect to ITAT order dated 18 December 2017 is without any sanity of law and liable to be quashed. Learned AP passed a final assessment order as against a draft assessment order making entire proceedings bad in law.

5. The assessee has challenged the impugned order inter alia on the ground that the AO has erred in not following the order of the ITAT rendered in assessee’s own case for the assessment years 2009-10, 2010-11 and 2012-13, even though the Ld. DRP had observed that the issue is covered by the orders of the ITAT, wherein the Tribunal has held that the payment by WNS India to the assessee is in the nature of reimbursement of costs without mark up, therefore, not taxable in the hands of the assessee. The Ld. counsel for the assessee pointed out that this issue is covered in favour of the assessee by the decision of the ITAT Mumbai in assessee’s own cases pertaining to the assessment years 2010-11, 2011-12 and 2012-13 therefore, the findings of the Ld AO is liable to be set aside. The Ld counsel invited our attention to para 7.3 of the DRP direction in which the Ld DRP has observed that the Tribunal has decided this issue in favour of the assessee in assessee’s appeals for the assessment year 2010-11, 2011-12 and 2012-13. The Ld. counsel further submitted that the Ld DRP has upheld the action of the AO only for the reason that the department has preferred appeal against the findings of the ITAT before the Hon’ble High Court. In view of the aforesaid facts, the Ld. counsel submitted that since the identical issue has already been decided in favour of the assessee by the Tribunal, the impugned order is liable to be set aside.

6. On the other hand the Ld. departmental representative (DR) fairly admitted that this issue has already been decided in favour of the assessee by the Tribunal, however, supported the impugned order on the ground that the department has not accepted the decision of the ITAT and challenged the same before the Hon’ble High Court. 7. We have perused the material on record including the orders of the authorities below and the decisions of the coordinate Benches rendered in assessee’s case. As pointed out by the Ld. counsel, the coordinate Bench has decided the identical issue in favour of the assessee in revenues appeal Years: 2008-09 & 2009-10 1407/Mum/2014 in assessee’s case pertaining to the assessment year2009- 10, holding as under:- “30. During the course of hearing before us, it was submitted by the Ld. Counsel that fairly speaking, in the earlier years requisite details were not on record and that is why both the above issues arising in this ground pertaining to taxability of reimbursement of expenses received by the assessee had to be sent back to the file of AO for ascertaining the nature of expenses and other allied facts, but in this year, complete details and other allied facts are available in this regard which were duly verified by DRP and after that factual findings were recorded by the DRP that it was a case of pure reimbursement of expenses on cost to cost basis and there was no involvement of any profit element or mark up. 31. These facts were not controverted by the Ld. DR. Under these circumstances, we have no other option but to uphold the findings of the DRP that since there was no element of any mark up or income embedded in these items and also in absence of any evidence of knowledge, skill or experience having been made available by the assessee under the impugned payments, the same was neither liable to be taxed as FTS/FIS nor as profit attributable to the service fee. It was stated by the Ld. Counsel that even if any amount was to be regarded as attributable to service fees, the net income that could be attributed to the service fee would be Nil as there was no income element involved threrein. This submission was not controverted by the Ld. DR. Under these circumstances, we do not find any force in the grounds raised by the Revenue and, therefore, Ground No.2 raised by the Revenue is dismissed.”

8. We further notice that the Ld. DRP in its directions has observed that this issue is covered in favour of the assessee by the order of the Tribunal in assessee’s cases pertaining to the assessment years 2010-11, 2011-12 and 2012-13. However, the Ld. DRP has declined to interfere with the findings of the AO basically on the ground that the department has challenged the findings of the Tribunal before the Hon’ble High Court. The observations of the Ld. DR on this issue read as under:- Assessment Years: 2008-09 & 2009-10 “7.3.1 We have considered the facts of the case and the submissions made by the assessee. This ground is in respect of taxability of reimbursement of expenses. In the impugned order the AO has proposed to tax the reimbursement of expenses considering the same as FTS under the Actor under Article 12(4) of the India US DTAA. We find that this issue was decided by the Hon’ble Tribunal in favour of the assessee in the order dated 24.07.2017 for the A.Y. 2012-13. The issue was also decided in favour of the assessee by the Hon’ble Tribunal during A.Y. 2010-11 and 2011-12. It is however, found that an appeal has been filed by the Revenue in the Hon’ble High Court against the said order of the Tribunal.”