OWENS-CORNING INSULATING SYSTEMS CANADA LP,MUMBAI vs. DCIT (IT) RG 3(2)(2), MUMBAI

Re.: Treating salary and other related costs reimbursed by OWENS-CORNING (India) Pvt. Ltd. [OCIL] to the appellant as Fees for Technical Services: 1.1 The Dispute Resolution Panel / Assessing officer has erred in taxing the amount of Rs.1,49,96,676/- received by the Appellant during the year under consideration as reimbursement of the salary and other related costs as 'fees for technical services' in terms of section 9(1)(vii) of the Income-tax Act, 1961 as well as under Article 12 of the Double Taxation Avoidance Agreement entered into and subsisting between India and Canada ("India-Canada DTAA"). 1.2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the reimbursement of salary and other related costs received by it does not fall within the purview of the term 'fees for technical services' nor 'income' either under the Income-tax Act, 1961 nor under the provisions of the India-Canada DTAA and the stand taken by the Assessing Officer in this regard is misconceived, illegal, erroneous and incorrect. 1.3 The Appellant submits that the Assessing Officer be directed to delete the addition of Rs.1,49,96,676/- and to re-compute its total income accordingly.

Re: Levy of interest u/s. 234B of the Income tax Act, 1961: 2.1 The Assessing Officer has erred in levying interest u/s. 234B of the Income tax Act, 1961 on the Appellant 2.2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject no interest u/s. 234B is leviable and the stand taken by the Assessing Officer in this regard is misconceived, incorrect, erroneous and illegal. 2.3 The appellant submits that the Assessing Officer be directed to delete the interest u/s. 234B so levied on it and to re-compute its tax liability accordingly. 2.1 Facts as noted by Ld. AO were that the assessee being a foreign company incorporated in USA was a group concern of Owens Corning Group Companies (leading manufacturer of glass). The assessment was 3 Owens Corning Insulating Systems Canada LP Assessment Year-2013-14 framed for impugned AY vide final assessment order passed u/s 143(3) r.w.s 144C(13) on 21/11/2016 wherein the income of the assessee was determined at Rs.149.96 Lacs as against Nil return e-filed by the assessee on 26/11/2013. 2.2 The sole addition of Rs.149.96 Lacs stem from the fact that the assessee, during the year, was in receipt of aggregate sum of Rs.149.96 Lacs as reimbursement of salary expenditure & related costs from group entity namely M/s Owens Corning India Pvt. Ltd. The said reimbursement, in the opinion of Ld. AO, fall within the meaning of Fees for technical Services [FTS] and taxable in the hands of the assessee. In defense, the assessee submitted that in terms of Article 12(4) of India-Canada Double Taxation Avoidance Agreement [DTAA], the services should make available technical knowledge, experience, skill, know how or processes etc. before the same could be terms as fees for included services. The attention was drawn to the fact that the work performed by assessee’s employee namely Mr. Anindya Ghosh was more in the nature of managerial services and the same do not qualify as technical or consultancy services and therefore, do not fall within the ambit of fees for included services. 2.3 However, disregarding the same, Ld.AO opined that royalty paid to non-residents were taxable in India if sourced in India and the amount so received would be chargeable to tax in India within the meaning of Section 9(1)(vii) of the Act. Accordingly, the same was added to the income of the assessee in the draft assessment order.

The Ld. Sr. Counsel for Assessee [AR], at the outset, drew attention to the fact that Ld. AO proceeded on wrong assumption of facts since the payment was in relation to an employee namely Mr. Anindya Ghosh who rendered managerial service as against the observation of Ld. AO, at para 6.4 & 6.5 of the final assessment order that the services were rendered by Mr. Anil Gupta who was a qualified engineer. To support the said submissions, our attention has been drawn to Employee Secondment Agreement dated 01/01/2012 entered into by the assessee with the Indian entity, submissions on role and responsibility of Mr. Anindya Ghosh, Form No. 16 and salary details in Form No.12BA and other documents as placed