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AMD Research & Development Center vs. DCIT (ITAT Hyderabad)

COURT:
CORAM: ,
SECTION(S): ,
GENRE:
CATCH WORDS: , ,
COUNSEL:
DATE: October 22, 2014 (Date of pronouncement)
DATE: October 26, 2014 (Date of publication)
AY: 2007-08
FILE: Click here to download the file in pdf format
CITATION:
In view of the finding of the service-tax authorities that services were rendered, argument that amount paid is a reimbursement of actual cost without profit element is not acceptable and it is chargeable as “fee for included services”

Having held that the amount in question was remitted by the assessee company to ATI Technologies, Canada for certain benefits received by it in the form of services procured by ATI Technologies, Canada from Soctronics India Private Limited and provided to the assessee company, and it was not a case of either gratuitous payment made by the assessee or mere reimbursement of expenditure incurred by the ATI Technologies, Canada, the question that now arises for our consideration is what exactly is the nature of this payment. As already noted by us, almost similar view, as taken by us on this issue, has been taken by the Commissioner of Service Tax vide his order dated 23.7.2012. In their respective orders, the Assessing Officer as well as the learned CIT(A) have observed that if one were to go by the conclusion of the Commissioner of Service Tax, the amount in question paid by the assessee to ATI Technologies, Canada for services procured from Soctronics India Private Limited and made available to the assessee company will be in the nature of ‘fee for included services’ which is chargeable to tax in the hands of ATI Technologies, Canada as per the domestic law as well as India Canada DTAA. At the time of hearing before us, when this position was confronted to the learned counsel for the assessee, he has also agreed that if the case of the assessee for reimbursement of actual cost to ATI Technologies, Canada, without any profit element is not found acceptable by the Tribunal, the amount in question is liable to be treated as “fee for included services”, which is chargeable to tax in India in the hands of ATI Technologies, Canada as per the domestic law and India Canada DTAA. It accordingly follows that the assessee company was liable to deduct tax at source from this amount as per the provisions of S.195, and having failed do so, it has to be treated as an assessee in default under S201(1) to the extent of tax payable by ATI Technologies, Canada in India on the mount in question which is in the nature of “fee for included services”. We accordingly modify the order of the learned CIT(A) on this issue and sustain the order of the Assessing Officer in treating the assessee as in default under S201(1) to the extent of tax payable by ATI Technologies, Canada in India on the amount in question which is chargeable as ‘fee for included services’ alongwith interest payable thereon under S.201(1A).

One comment on “AMD Research & Development Center vs. DCIT (ITAT Hyderabad)
  1. vswami says:

    Reaction (impromptu)

    Reads like a glaring instance of, -bitten twice (or more) but not even remotely shy, once, so to say.

    The tribunal order is, as understood, noted to throw up the fact of the Canadian company having been charged on fee income, not only to income-tax but also to service tax.

    To a common man, not so-well informed, the instance sounds too bizarre; to be, besides not appealing or not acceptable to common sense, not justifiable by any logic one can readily think of. May be, law experts at large, with reasonable exposure and expertise think differently, and find legitimacy , if not strict legality in such a duplication in taxation.

    Even so, one is left bewildered , and stoutly wondering, – do not the governing tax enactments have any provision for saving from duplicate concurrent incidence of ‘direct’ and ‘indirect’ tax ? In case ‘do not’, does it not call for, for sake of legitimacy, a review and remedial action?

    Incidentally, as is expected to be known, India does have a comprehensive tax treaty, in force, with Canada. Of which, of course, no notice appears to have been taken, and no mention at all been made. Hence, no knowing whether or not, and in any case, why the tax treaty can be taken to have no implication or application, whatsoever, in deciding the point of issue.
    To hint at : Consider, in a given case, as per agreed terms, apart from income-tax, service tax, if leviable / levied, is required to be to the Canadian company’s account , and borne by it. In such a case, if both are leviable / levied, availing of double tax relief on both would requires to be examined, having particular regard to the treaty provisions defining ‘taxes’ covered for such relief.

    Over to law experts, if any willing and mind to, to enlighten the not –so- well-informed readers but having an inborn passion or quest for ‘knowledge’ – the so avidly scouted for “jnana Vistara’ !

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