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Income Tax Appellate Tribunal, BENCH ‘C’, CHENNAI
Before: SHRI SANJAY ARORA & SHRI DUVVURU RL REDDY
आदेश /ORDER
Per Sanjay Arora, AM:
This is an Appeal by the Assessee agitating the Order by the Commissioner of Income Tax (Appeals)-16, Chennai (‘CIT(A)’ for short) dated 07.01.2015, dismissing the assessee’s appeal raising a claim under section 248 of the Income Tax Act, 1961 (‘the Act’ hereinafter) for the assessment year (AY) 2013-14.
Opening the arguments for and on behalf of the assessee, it was submitted by the ld. Authorized Representative (AR), its counsel, taking us through the ‘Statement of Facts’ before the first appellate authority, that the assessee, a 2 (AY 2013-14) Scope International Pvt. Ltd. v. ITO private company, is a subsidiary of the London based Standard Chartered Bank (‘SCB UK’). SCB UK has subsidiaries and affiliates around the world (‘group entities’). SCB group entities have deputed employees to the assessee company under secondment arrangements. The roles and responsibilities of the deputed employees are determined by the assessee company, the appellant, and such employees work for the appellant-company. The appellant pays a part of the compensation in India for the deputed employees and the balance is paid by the group entities. The appellant-company deducts tax on the total employment income paid to the deputed employees, i.e., in India and outside India, as stipulated u/s. 192 of Act. The assessee has also registered the deputed employees as members with the Employees' Provident Fund Organisation. The group entities have raised debit notes on the assessee company to reimburse the employment costs met by them. The debit notes represent reimbursement at cost without any mark up for profits. The nature of the payments made by the assessee company is as under: Payment to SCB UK SCB US Nature of payment Figures in USD Figures in USD Salaries, allowances, 171,440 102,466 perquisites and bonus Contribution to retirement 13,976 9,742 and insurance scheme Relocation expenses 165,004 0 Total 350,420 112,208 SCB UK has further raised debit note amounting to USD 50,781.82, being the relocation cost (air tickets, shipment charges, transit insurance etc.), paid to vendors for direct recruitment of employees working in the group entities. The relocation cost incurred by SCB UK was recharged on the assessee at cost. The assessee-appellant has remitted all the above payments to its group entities after deducting the necessary taxes as per section 195 of the Act, and that the entire
3 (AY 2013-14) Scope International Pvt. Ltd. v. ITO tax stands borne by it. It was under these facts and circumstances, the ld. AR would continue, that an appeal was preferred u/s. 248 of the Act, which provides for an appeal before the first appellate authority under the given circumstances. He would then take us through the challan for payment of �. 33,86,257/-, paid on 06.03.2013, u/s. 195 of the Act (copy on record). On an enquiry by the Bench, it was explained by him that the tax on salary stands already deducted u/s. 192 of the Act, i.e., over and above the sum of �. 33.86 lacs paid u/s. 195 of the Act. The ld. Departmental Representative (DR) would rely on the impugned order, stating that the assessee should have, in case no tax was in its opinion deductible, aailed of the procedure prescribed u/s. 197 of the Act.
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. 248. 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,
4 (AY 2013-14) Scope International Pvt. Ltd. v. ITO 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, 5 (AY 2013-14) Scope International Pvt. Ltd. v. ITO 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.
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.
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 result, the assessee’s appeal is allowed for statistical purposes. Order pronounced on August 04th, 2017 at Chennai.