PRINCIPAL COMMISSIONER OF INCOME TAX, DELHI-2 vs. M/S BOEING INDIA PVT. LTD.

ITA No.71/2022 Page 4 of 9 “20. We have carefully considered the orders of the authorities below. The undisputed fact is that the assessee is a debt free company. It is also not in dispute that no interest was paid to the creditor/supplier nor any interest has been earned from unrelated party. Moreover, being a 100% captive service provider, the revenue of the assessee is 100% from its AEs. In our considered opinion, the question of receiving any intererest on receivables does not arise. Considering the facts of the assessee in hand, in totality, we do not find any merit in the TP adjustment of Rs.22.16 lakhs and the same is, accordingly, directed to be deleted.” 7. On similar facts, the ITAT, Delhi Bench I-2 in ITA No.1478/Del/2015 titled ‘Bechtel India Pvt. Ltd. vs. DCIT’ dated 21st December, 2015 has held that “It is brought to our notice that the assessee is a debt free company. In such circumstances it is not justifiable to presume that, borrowed funds have been utilized to pass on the facility to its AE’s. The revenue has also not brought on record that the assessee has been found paying interest to its creditors or suppliers on delayed payments.” 8. Upon the said matter being carried forward in an appeal, the Division Bench of this Court in Principal Commissioner of Income Tax-2 vs. M/s Bechtel India Pvt. Ltd. in ITA No.379/2016 dated 21st July, 2016 held as under:- “4. As far as question (B) concerning the adjustment for interest on receivables, the Court finds that the ITAT has returned a detailed finding of fact that the Assessee is a debt free company and the question of receiving any interest on receivables did not arise. Consequently, no substantial questin of law arises for consideration as far as this issue is concerned.” This is a digitally signed Judgement. NEUTRAL CITATION NO: 2022/DHC/004188

ITA No.71/2022 Page 5 of 9 9. A Special Leave Petition against the aforesaid judgment being CC No. 4956/2017 was dismissed by the Supreme Court on 21st July, 2017. The order of the Supreme Court is reproduced hereinbelow:- “We are in agreement with the High Court that as far as Question-B concerning adjustment for interest on receivabales is concerned, the Tribunal has returned a finding of fact. Consequently, no substantial question of law therefore, arises, on the facts of this case. The special leave petition is dismissed.” 10. Even the judgment of this Court in Principal Commissioner of Income Tax vs. Kusum Healthcare Pvt. Ltd. (supra) is not in favour of the appellant. The Division Bench while dismissing the appeal of the revenue observed as under:- “12. The court finds that the entire focus of the Assessing Officer was on just one assessment year and the figure of receivables in relation to that assessment year can hardly reflect a pattern that would justify a Transfer Pricing Officer concluding that the figure of receivables beyond 180 days constitutes an international transaction by itself. With the assessee having already factored in the impact of the receivables on the working capital and thereby on its pricing/profitability vis-a-vis that of its comparables, any further adjustment only on the basis of the outstanding receivables would have distorted the picture and re- characterised the transaction. This was clearly impermissible in law as explained by this court in CIT v. EKL Appliances Ltd., (2012) 345 ITR 241 (Delhi). Consequently, the court is unable to find any error in the impugned order of the Income-tax Appellate Tribunal giving rise to any substantial question of law for determination. The appeal is, accordingly, dismissed.” 11. As far as disallowance under Section 40(a)(ia) of the Act is concerned, this Court finds that there is no dispute that the assessee has This is a digitally signed Judgement. NEUTRAL CITATION NO: 2022/DHC/004188

ITA No.71/2022 Page 6 of 9 deducted tax at source under Section 192 of the Act. This Court is in agreement with the opinion of the ITAT that Section 195 of the Act has no application once the nature of payment is determined as salary and deduction has been made under Section 192 of the Act. 12. This Court is further of the view that the judgment in Centrica India Offshore Pvt. Ltd (supra) has no application to the present case as the ITAT has returned a finding that the real employer of the seconded employees continues to be the Indian entity and not the overseas entity. 13. In Director of Income Tax (IT)-I vs. A.P.Moller Maersk A S, the Supreme Court in Civil Appeal No.8040/2015 decided on 17th February, 2017 has held as under:- “11. Aforesaid are the findings of facts. It is clearly held that no technical services are provided by the assessee to the agents. Once these are accepted, by no stretch of imagination, payments made by the agents can be treated as free for technical service. It is in the nature of reimbursement of cost whereby the three agents paid their proportionate share of the expenses incurred on these said systems and for maintaining those systems. It is reemphasized that neither the AO nor the CIT(A) has stated that there was any profit element embedded in the payments received by the assessee from its agents in India. Record shows that the assessee had given the calculations of the total costs and pro-rata division thereof among the agents for reimbursement. Not only that, the assessee have been submitted before the Transfer Pricing Officer that these payments were reimbursement in the hands of the assessee and the reimbursement was accepted as such at arm’s length. Once the character of the payment is found to be in the nature of reimbursement of the expenses, it cannot be income chargeable to tax.” 14. A Division Bench of this Court in Commissioner of Income Tax, Delhi II vs. Karl Storz Endoscopy India (P) Ltd., ITA No.13/2008 decided This is a digitally signed Judgement. NEUTRAL CITATION NO: 2022/DHC/004188

ITA No.71/2022 Page 7 of 9 on 13th September, 2010 has held as under:- 1. This appeal pertains to the Assessment Year 2001-02. The issue relates to the treatment which is to be given to the amount of Rs.6,59,416 paid by the assessee to its parent foreign company, i.e., Karl Storz Vertriebs GMBH & Company. The assessee had claimed that he parent company had deputed one of the employees, viz., Mr. Peter Laser to the Indian Company/assessee and the aforesaid amount represented reimbursement of the salary, which was payable to Mr.Peter Laser. The Assessing Officer (AO), however, was of the opinion that since no agreement between the assessee and the parent company was produced and even the agreement between the parent company and its employees. Mr. Peter Lazer on the basis of which he was purportedly deputed to the Indian Company was produced, this amount should be treated as payment towards technical fee. xxx xxx xxx 3. Learned counsel for the respondent-assessee has pointed out that this was not the first year in which such a claim was made. He stated that the Indian Company was incorporated during the Assessment year 1998-99 and for the establishment of this company which is subsidiary to the aforesaid foreign company. Mr. Peter Laser was deputed, the amount paid from the Assessment year 1998-99 onwards were always treated as salary and accepted as such. Learned counsel for the respondent has produced the copy of the orders dated 15.06.2005 passed by the ITAT, which relates to the Assessment year 1998-99, i.e. the first year of the incorporation of the respondent-company. Perusal of this orders shows that this very issue is decided and the following findings were arrived at by the Tribunal holding that the aforesaid payment would be treated as salary to Mr.Peter Laser. "10. The foreign company had deputed one of its employees to look after the affairs of the Indian Company. The salary payable to this employee was to be borne by the foreign company. The Indian company was to reimburse this salary at cost, i.e. without any mark-up. Thus, it was merely the question of payment of salary to Mr. Peter Laser. There is no question of any technical fees being paid to the foreign company. Assuming for the sake of argument that it was in the nature of technical fees paid to the foreign company; then, as rightly pointed out by the learned This is a digitally signed Judgement. NEUTRAL CITATION NO: 2022/DHC/004188

ITA No.71/2022 Page 8 of 9 counsel, Article 12.4 was applicable and not Article 13.4 as contended by the learned DR. Even if Article 12.4 was applicable, the said Article specifically excludes payments mentioned in Article 15. Article 15 states that salaries, wages and other similar remuneration derived by a resident of a Contracting State (Germany) in respect of an employment shall be taxable in the other Contracting State (Indian) only if the employment is exercised there. In other words, salaries paid to such personnel like Mr. Laser are taxable in India and they cannot be considered to be fees for technical services. Further, even as per Section 9 of the Act, the payment cannot be treated as fees for technical service. Explanation 2 to Section 9(1)(vii) gives the meaning of the expression "fees for technical services" as per which, inter alia, any consideration which would be income of the recipient chargeable under the head "salaries", then such payment will not be considered as fees for technical services. Thus, even as per the provisions of the Act, the payment in question cannot be treated as fees for technical services. Moreover, since it is paid as salary to Mr. Laser, tax has been deducted under Section 192 of the Act." 4. Learned counsel also submitted that thereafter in the Assessment Year 1990-00 as well as 2000-01, the amounts reimbursed in identical manner were treated as “salary” to Mr.Laser. He further states that no appeal was filed against the aforesaid order of the Tribunal by the Revenue.” 15. Consequently, this Court is of the view that the issues of ‘receivables’ as well as ‘disallowance’ under Section 40(a)(ia) of the Act are essentially questions of fact, which give rise to no substantial questions of law especially when the findings of the ITAT are not perverse. 16. This Court may mention that though it was inclined to admit Question No.1 proposed by the appellant, yet keeping in view of the fact that this Court has concurred with the findings of fact rendered by the ITAT on Question No.2 & 3 and as a consequence no substantive addition can be made in the present appeal, the Question No.1 is left open to be agitated in This is a digitally signed Judgement. NEUTRAL CITATION NO: 2022/DHC/004188

ITA No.71/2022 Page 9 of 9 an appropriate matter. 17. With the aforesaid liberty, the present appeal is dismissed. MANMOHAN, J MANMEET PRITAM SINGH ARORA, J OCTOBER 11, 2022 KA/AS This is a digitally signed Judgement. NEUTRAL CITATION NO: 2022/DHC/004188