DCIT, NEW DELHI vs. M/S. CARGILL INTERNATIONAL TRADING PTE. LTD., SINGAPORE

ORDER Per L.P. Sahu, A.M.: This is an appeal filed by the Revenue against the order of the ld.

CIT(A)-42, New Delhi dated 30.03.2015 for the assessment year 2009-10 on the following grounds :

“1. On the facts and circumstances of the case, the Ld. CIT(A) has ered in holding that reimbursement received by the assessee for rendering advisory services/technical services for managing the affairs of CIPL through its employee is in the nature of FTS and taxable in India as per the provision of Act as well as under DTAA.

2. On the facts and circumstances of the case, the Ld. cIT(A) has erred in deleting interest u/s. 234B.”

“During the subject year, CITPL has received the reimbursement of actual expenditure incurred by it on behalf of its group company, Cargill India Private Limited (CIPL). AIPL has reimbursed expenses amounting to Rs.24,155,248 during the subject year on which tax amounting to Rs.71,625 has been deducted at source by CIPL. Accordingly, tax amounting to Rs.71,625/- deducted at source by CIPL has been claimed as defined by CIPTL.”

In this regard the assessee was issued show cause notice, in response to which the assessee submitted that the said reimbursement did not constitute income either under the Act or under the Tax Treaty. The assessee also relied on various judgments. The Assessing Officer observed that this payment made by the assessee on behalf of CIPL on account of hotel stay, professional fees for tax returns, salary etc. are in no way result of business obligations of the assessee. The said services, in fact, amounted to managing services of CIPL.

These are therefore clearly in the nature of FTS and taxable in the source state, i.e., in India. The Assessing Officer relied on the provisions of section 91(7) and section 115A(1b). He also referred to Tax Treaty between India & Singapore. The Assessing Officer considering the submissions of the assessee and relying on some case laws, treated it as FTS and applied the tax rate on the payment of Rs.2,41,55,248/- as per DTAA between India and Singapore.

The Assessing Officer also charged interest u/s. 234B applicable on the above addition. Aggrieved, the assessee appealed before the ld. CIT(A), who after considering the detailed submissions of the assessee and the order of the Assessing Officer allowed the appeal of the assessee on both the issues. The Revenue is, therefore, in this appeal before the Tribunal, challenging the impugned order.

“7.1. I have duly considered submissions of the appellant. The relevant facts are that Mr. Jitesh Avlani, one of expatriate of the appellant was seconded to C1PL who worked as chairman of CIPL for the period from 01.02.2007 to 14.08.2008 and he was on payroll of CIPL. The salary costs paid by CIPL to Mr. Jitesh have been offered to tax in India. Part of salary costs in nature of bonus, rest and recreation expenses and expense for filing of income tax return of Mr. Jitesh in Singapore were paid by the appellant to Mr. Jitesh and CIPL reimbursed to the appellant. Bonus and rest and recreation expenses were also offered to tax in India. The case of the appellant is that receipts are purely reimbursement in nature and not in nature of FTS as has been held by the AO in the impugned assessment order.

7.2. It is seen that there does not exist any service agreement between appellant and CIPL. The appellant is also not in business of providing any services. The payments in dispute are made in relation to employment of Mr. Jitesh Avlani who was on payroll of CIPL. Payment of salary costs to Mr. Jitesh was responsibility of CIPL. Part of such costs has been paid by the appellant to Jitesh which were later on reimbursed by CIPL. All the salary costs including those paid by the appellant have been offered to tax in India. The payments made by the appellant to Mr. Jitesh were infact obligations of CIPL and therefore subsequent payments made by CIPL to the appellant are reimbursement in nature. Therefore, it cannot be held that appellant has provided any technical service within meaning of section 9(1)(vii) of the Act or Article 12(4) of DTAA.

7.3. In view of discussion above, I hold that impugned payments are not in nature of FTS and hence not taxable in India. The AO is directed to grant relief accordingly. The ground of appeal is allowed.”

9.1. The appellant has submitted that interest u/s 234B of the Act is not leviable because all the payments made to the appellant are subject to withholding tax u/s 195. For this proposition, the appellant has relied upon various case laws as under:

DIT vs Jacabs Civil Incorporated, Mitsubishi Corpn. & ors. 330 ITR 578 (Delhi) CJT vs Sedco Forex International Drilling Co. Ltd. 264 ITR 320 (Uttar) DIT vs NGC Network Asia LLC 222 CTR 86 (Bom)

9.2. The contention of the appellant has been duly considered. In view of jurisdictional High Court's decision and other authorities on the issue, I hold that interest u/s 234B of the Act is not leviable in this case as payments made to the appellant were subject to withholding tax u/s 195 of the Act. The ground of appeal is allowed.

5. A perusal of the aforesaid findings, we find that the ld. CIT(A) has done a good reasoned order which does not require any interference. The case law cited by the Revenue is not applicable to the present case because of different facts of the case in hand. On the second issue of interest u/s. 234B, we find that the conclusion reached by the ld. CIT(A) is based on the decision rendered by Hon’ble jurisdictional High Court on the issue of interest – whether leviable on the non-resident assessee or not, as per provisions of section 234B of the Act, as the assessee was subject to withholding tax u/s. 195 of the Act. No counter decision is placed on record on behalf of the Revenue. We, therefore, finding no infirmity in the impugned order, are not inclined to interfere with the same. Accordingly, the appeal of the Revenue deserves to be dismissed on both the issues.