Income Tax Appellate Tribunal - Mumbai
Owens-Corning Insulating Systems ... vs Dcit (It) Rg 3(2)(2), Mumbai on 16 July, 2019
1 ITA No.7583/Mum/2016 Owens Corning Insulating Systems Canada LP आयकर अपीलीय अिधकरण " आई" ायपीठ मुं बई म ।
Assessment Year-2013-14
IN THE INCOME TAX APPELLATE TRIBUNAL
"I" BENCH, MUMBAI
माननीय ी संद प गोसांई, ाियक सद एवं
माननीय ी मनोज कुमार अ वाल ,लेखा सद के सम ।
BEFORE HON'BLE SHRI SANDEEP GOSAIN, JM AND
HON'BLE SHRI MANOJ KUMAR AGGARWAL, AM
आयकरअपील सं./ I.T.A. No.7583/Mum/2016
( िनधा रणवष / Assessment Year: 2013-14)
Owens Corning Insulating Systems Canada LP DCIT (IT)- Range 3(2)(2)
C/o. Owens Corning (India) Private Limited
th बनाम
नाम/
नाम 16th Floor, Air India Building
7 Floor, Alpha Building Nariman Point
Hiranandani Gardens, Powai Vs. Mumbai-400 021.
Mumbai-400 076.
ःथायीले खासं . / जीआइआरसं . /PAN/GIR No. AADFO-2598-L (अपीलाथ /Appellant) : (ू!यथ / Respondent) अपीलाथ क# ओरसे/ Appellant by : Shri J.D. Mistri-Ld. DR ू!यथ क# ओर से/Respondent by : Shri Samir Tekriwal- Ld. DR सुनवाई क# तार ख/ : 09/07/2019 Date of Hearing घोषणा क# तार ख / : 16/07/2019 Date of Pronouncement आदे श / O R D E R Manoj Kumar Aggarwal (Accountant Member): -
1. Aforesaid appeal by assessee for Assessment Year [in short referred to as 'AY'] 2013-14 contest the final assessment order dated 21/11/2016 2 ITA No.7583/Mum/2016 Owens Corning Insulating Systems Canada LP Assessment Year-2013-14 passed by Ld. Dy. Commissioner of Income Tax (International Taxation) -
3(2)(2), Mumbai [AO] u/s. 143(3) r.w.s. 144C(13) of the Income Tax Act pursuant to the directions of Ld. Dispute Resolution Panel-2, Mumbai, [in short referred to as DRP] u/s 144C(5) dated 21/10/2016. The ground raised by the assessee read as under: -
1. 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.
2. 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 ITA No.7583/Mum/2016 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.
4 ITA No.7583/Mum/2016Owens Corning Insulating Systems Canada LP Assessment Year-2013-14
3. Aggrieved, the assessee raised objections before Ld. DRP, by way of elaborate written submissions. The attention was drawn, inter-alia, to erroneous observations made by Ld. AO in the draft assessment order. It was submitted that the assessee was Limited Partnership incorporated in Canada and not a foreign company incorporated in USA. Further, the correct name of employee was Mr. Anindya Ghosh who rendered services in managerial field as against the observation of Ld. AO that the service was rendered by Mr. Anil Gupta who was stated to be a qualified engineer. However, Ld. DRP, while confirming the stand of Ld. AO in treating the aforesaid payment as FTS, directed Ld. AO to apply correct rate of tax as per statutory provisions. Pursuant to the aforesaid directions, final assessment order was passed by Ld. AO on 27/11/2016 determining income at Rs.149.96 Lacs, being taxable @10%. Aggrieved, the assessee is in further appeal before us.
4. 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 5 ITA No.7583/Mum/2016 Owens Corning Insulating Systems Canada LP Assessment Year-2013-14 in the paper-book. The Ld. DR submitted that the matter may be remanded back for re-appreciation of correct facts by Ld. AO.
5. Upon careful consideration, we find substance in the submissions made by Ld. Sr. Counsel since the perusal of documents on record reveal that the assessee has entered into employee secondment agreement dated 01/01/2012 with the Indian entity. Pursuant to Clause (6) of the agreement, the assessee was to be reimbursed with direct wages and benefit costs. The role and responsibilities of Mr. Anindya Ghosh, has been remunerated in the submissions dated 29/03/2016. The perusal of Form 16 & 12BA, as placed on record, would reveal that the Indian Entity has deducted due taxes against the aforesaid payments.
6. In the stated facts and circumstances, the matter would go back to Ld. AO for re-appreciation of correct facts and re-adjudication of the matter in the light of submissions made by Ld. Sr. Counsel. Needless to add hat adequate opportunity of being heard shall be granted to the assessee to substantiate its stand.
7. In result, the appeal stands allowed for statistical purposes.
Order pronounced in the open court on 16th July, 2019.
Sd/- Sd/-
(Sandeep Gosain) (Manoj Kumar Aggarwal)
ाियक सद / Judicial Member लेखा सद / Accountant Member
मुंबई Mumbai; िदनां कDated : 16/07/2019
Sr.PS:-Jaisy Varghese
आदे श की ितिलिप अ े िषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant 6 ITA No.7583/Mum/2016 Owens Corning Insulating Systems Canada LP Assessment Year-2013-14
2. !"थ / The Respondent
3. आयकरआयु#(अपील) / The CIT(A)
4. आयकरआयु#/ CIT- concerned
5. िवभागीय!ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai
6. गाड* फाईल / Guard File आदे शानुसार/ BY ORDER, उप/सहायकपंजीकार (Dy./Asstt.Registrar) आयकरअपीलीयअिधकरण, मुंबई / ITAT, Mumbai.