Tuesday, 22 September 2015

Service PE case law decesion.

Income Tax Appellate Tribunal - Delhi
Convergys Customer Management ... vs Assessee on 28 January, 2015
               IN THE INCOME TAX APPELLATE TRIBUNAL
                     DELHI BENCH 'B' : NEW DELHI

     BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER
         AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER

                          ITA No. 3605/De/2013
                               AY: 2007-08

M/s Convergys Customer Management            vs.   ACIT, Circle 1(1)
Group Inc.                                         International Taxn
C/o Price Waterhouse Coopers Pvt.Ltd.              New Delhi
1st floor, Sucheta Bhawan
Gate no.2, 11-A
Vishnu Digamber Marg
New Delhi 110 002

PAN: AACCC 8989 M

     (Appellant)                                        (Respondent)

                    Appellant by: Sh.Pawan Kumar,
                         Sh.Vishal Anand, Sh.Mudit Sharma, C.As
                     Respondent by: Sh. Sanjeev Sharma, CIT, D.R.

                                   ORDER
PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee directed against the order of the AO dt. 11.4.2013 for the AY 2007-08 passed under Section 143(3) read with s. 144C of the Income Tax Act, 1961.
2. The facts are brought out by the AO in the following manner in his assessment order.
"Convergys Customer Management Group Inc. (hereinafter "assessee"/"company"/"CMG") e-filed its return of income for the Assessment Year ("AY") 2007-08 declaring total income of Rs.4,36,33,694/- on 30.10.2007 and the acknowledgement copy is filed on 05.11.2007. The notice u/s 143(2) of the Act was issued on 5.8.2008 and served on the assessee. Various notices and letters were issued to the assessee, in response to which Mr.Sachin Garg and Mr.Satyam Rastogi, CAs from PricewaterhouseCoopers, appeared as the Authorised Representative (AR) and filed required information as placed on record.
ITA 3605/Del/2013 AY: 2007-08 M/s Convergys Customer Management Group Inc. The assessee is a call centre company and is having a subsidiary in India by the name of Convergys India Services Pvt.Ltd. ("CIS"). A detailed order has been passed for the A.Y. 2006-07 wherein various issues have been discussed like loans given by assessee, reimbursement of salary, fees for technical services etc. The facts of the case are same as were in the last year. This fact has been accepted by the assessee also. Even in the writ petition filed before the Hon'ble High Court for the AY 2006-07, the assessee has not challenged the facts as brought out in the assessment order. The assessee has filed its submissions on 21.12.2009 regarding the existence of PE. Relying on the assessment Order for the AY 2006-07 and the detailed discussion contained therein, similar is held as far as the existence of PE and transactions not being at arm's length price is concerned. The same can be summarized as below :- •The assessee has PE in India in the form of fixed place PE, as the employees of the assessee were seconded to CIS and the visiting employees of the assessee had a fixed place ' of business at their disposal in the form of facilities of CIS.
•The assessee has borne the cost of setting up of various call centre sites and has provided free of cost assets in India for use of CIS. • The sales team of CIS assists CMG in the sales and marketing efforts. •The assessee is providing services to CIS and these services are not in the nature of fees for included services (which are characterized by the assessee). The visiting employees as well as seconded employees are sent by the assessee and not requested by the CIS. • The cost base of the Cenvergys India is highly understated. •All the functions performed by Cenvergys India for CMG are not identified. The Cenvergys India has even stepped disclosing the various activities, which were identified in the transfer pricing study report for FY 2002-03.
•The activities of the assessee in India are not excluded from being PE referred in Paragraph 3 ofArticle 5. The activities of the cssessee in India are not of the preparatory or auxiliary in nature. The assessee is in India, not for doing any business with its customers in India, but for doing core business of customer management activity relating to its customers located outside India.
•As per provisions of Paragraph 5, CIS is also not an agent of independent status within the meaning of this paragraph, because the activities of CIS are devoted wholly on behalf of the cssessee.
•The transactions between CIS and the assessee are not made under arm's length conditions.
•CMG has set up the business of CIS, it is providing various assets free of ITA 3605/Del/2013 AY: 2007-08 M/s Convergys Customer Management Group Inc. cost, it has also provided software free of cost and it is allowing CIS to use its servers, gateways, communication lines, CIS has also developed software for CMG and CMG has provided free training to the employees of CIS and for all these transactions there is no compensation from either side. Therefore also, the transactions are not at arm's length. •These transactions of call centre activity are not reflected by the assessee in Form No. 3CEB, documents relating to these transactions are not filed and arm's length nature of these transactions is not tested even by the assessee.
•As per the meager quantum of transactions identified in Form No. 3CEB,the assessee has not verified about the main transactions that its transactions were at arm's length, which it was supposed to do as per law.
•The assessee has not kept and maintained the required documentation as required by Section 92D of the Act and it is relying on the appropriate documentation maintained by CIS and CIM. This indicates that, CIS and CIM are not independent entities and are working under the control and directions of CMG. If it is not so, how could it rely on the documents maintained by other parties?
•For the fixed place PE in the form of assets of the assessee in India, separate attribution has to be there.
•The profits attributable to the PE on the basis of arm's length principle cannot be determined and such determination will also present exceptional difficulties, therefore, same is being estimated on reasonable basis."
3. The next issue is attribution of profits. The draft assessment order states as follows.
"The assessee has stated that the revenue from the Indian operations is 166 million USD and the assessee has paid USD 137,238,463 to CIS for these services (including the 14% mark up).
The assessee has received an amount of Rs. 54,389,123/- on account of IPLC cost. For the detailed reasons discussed in the order for the A.Y. 2006-07 it is held that this consideration is taxable at the rate of 10% as per the DTAA. Reliance in this regard is placed on the order of Hon'ble ITA T is the case of Asia Satellite Telecommunications Co. Ltd. (85 ITD 478), ruling of Hon'ble Authority for Advance Ruling (AAR) in P.No. 30 of 1999's case and ruling of Hon'ble ITAT in the case of New Skies Satellites N V. vs ADIT [2009] 121 ITD 1 (DELHI) (SB)".
ITA 3605/Del/2013 AY: 2007-08 M/s Convergys Customer Management Group Inc.
4. Aggrieved the assessee is in appeal before us on the following grounds.
"1. That on the facts and in the circumstances of the case & in law, the order passed by the Ld. Assessing Officer under section 143(3) read with section 144(C) of the Act is bad in law and void ab-initio.
2. That on the facts and in circumstances of the case & in law, the Ld. AO erred in assessing the returned income of appellant of Rs. 4,36,33,694 at Rs. 97,24,66,634.
3. That on the facts & circumstances of the case & in law, the Ld. DRP erred in confirming the draft order of the Ld. AO and conclusions contained therein.
4. That the Ld. AO erred on facts & in law, in alleging that the appellant has a Permanent Establishment ('PE') in India in terms of the provisions of the Article 5 of the Double Taxation Avoidance Agreement between India and United States of America ('DTAA') without bringing any material on record.
4.1 That the Ld. AO, erred on facts & in law, in holding that the Appellant has a Fixed Place PE in India in terms of Article 5(1) and 5(2) of the DTAA.
4.2 The Ld. AO, erred on facts & in law, in not appreciating that the appellant was merely procuring services from India and was accordingly covered under the exclusionary clause provided under Article 5(3) of the DT AA.
4.3 That the Ld. AO, erred on facts & in law, in holding that the Appellant has Dependent Agent PE in terms of Article 5(4) and 5(5) of the DTAA.
4.4 That the Ld. AO, erred on facts & in law, in holding that the Appellant has Service PE in terms of Article 5(2)(1) of the DTAA.
5. That the Ld. AO, erred on facts & in law, in attributing a sum of Rs.87,44,43,817/- as profits of the alleged PE of the appellant in India on mere conjectures and surmises.
5.1 That the Ld. AO erred in law in making the impugned attribution / addition to the alleged PE without referring the matter to the Transfer Pricing Officer which is in complete contradiction to the Instruction No. 3 dated May 20,2003 issued by the CBDT.
5.2 That the Ld. AO erred in law in making the impugned attribution / addition to the alleged PE in gross disregard to the Circular No. 5 of 2004 dated September 28, 2004 issued by the CBDT.
5.3 That the Ld. AO failed to appreciate that attribution of profits to the PE is a transfer pricing issue and grossly erred on facts and in law in disregarding established judicial pronouncements in India on the issue that once an arm's length price has been determined for the Indian associated enterprise [Convergys India Services Private Limited (CIS) in the present case] which subsumes the functions, assets and risk profile of the alleged PE, nothing further can be attributed to the PE.
ITA 3605/Del/2013 AY: 2007-08 M/s Convergys Customer Management Group Inc. 5.4 That the Ld.DRP failed to appreciate the transfer pricing study based on which no further profits ought to be attributed to the alleged PE. 5.5 Without prejudice to the ground that no PE exists, the profit attribution made by the Ld. AO / ORP to the alleged PE is highly excessive and without any basis.
5.6 That the Ld. AO ought to have considered the net revenue (Gross revenue less related cost incurred outside India) while computing the profit attributable to the alleged PE and erred in ignoring the evidences / information placed on record.
5.7 That the Ld. AO further, erred in facts & law by invoking the provisions of section 40(a)(i) andsection 44C of the Act with regard to cost incurred outside India thereby restricting the allocation of expenses to USD 1,438,077,
6. That the Ld. ORP erred in rejecting the Transfer Pricing Study filed as additional evidence on mere conjectures and surmises.
7. That the Ld. AO, erred on facts and in law, in making an addition of Rs. 54,389,123 (USD 1,204,440) paid on account of International Private Leased Circuit (IPLC) charges by stating that they are taxable as 'Equipment Royalty' in terms of Article 12(2) read with Article 12(3)(b) of the DTAA.
8. That the Ld. AO erred on facts and in law in withdrawing interest under section 244A of the Act and levying interest under sections 2348 and 2340 of the Act.
That the above grounds of appeal are without prejudice to each other. That the appellant reserves its right to add, alter, amend or withdraw any ground of appeal either before or at the time of hearing of this appeal.
5. Shri Pawan Kumar, the Ld.Counsel for the assessee submitted that the facts of the current year are identical to the facts of the earlier AY 2006-07. He pointed out that the Tribunal had held that the assessee had a Permanent Establishment by rejecting the claims of the assessee.
5.1. On the issue of attribution of profits to the Permanent Establishment, the Tribunal laid down the approach to be followed, to arrive at the profits attributable to the Permanent Establishment. On payment of IPLC/ linking charges, the Tribunal held that the payment is not taxable in the hands of the assessee as royalty. The assessee contends that even otherwise, the payment in question is in the nature of reimbursement of expenses and accordingly not taxable in the hands of the assessee.
ITA 3605/Del/2013 AY: 2007-08 M/s Convergys Customer Management Group Inc. 5.2. On interest under Section 234B of the Act, the assessee submitted that the Tribunal had decided the issue against the assessee. He submitted that the assessee had filed an appeal on all these issues before the Hon'ble High Court. He further contended that on the issue of Permanent Establishment the Hon'ble Jurisdictional High Court of Delhi in its judgement in the case of E-Fund Corporation (in ITA no. 738/2011) has held that, outsourcing of service by the U.S.Company to its Indian Subsidiary, does not constitute a P.E. of the U.S.Company in India. He submitted that if the propositions laid down in this case law apply to the assessee's case, and it should be held that the assessee has no Permanent Establishment in India. He pointed out that this decision was not available with the ITAT at the time of disposing of the appeal for the AY 2006-07. He pleaded as follows.
"* The appellant company cannot be said to have a Fixed place PE in India in terms of Article 5(1)of the Indo US Tax Treaty. * The Appellant company does not have a Service PE in India in terms of Article 5(2)(1) of the Indo US Tax Treaty. Even the Ld.CIT(A), in his order for AY 2006-07, did not agree with the findings of the AO that CMG has a service PE in India. The Ld.AO also has not challenged the order of the Ld.CIT(A) for the AY 2006-07 before the Hon'ble ITAT on the aspect of service PE.
*The appellant company does not have a Dependent Agent PE in India in terms of Article 5(4) of the Indo US Tax Treaty.
*IPLC charges/link charges are not taxable as Royalty under the provisions of the Act and the Indo US Tax Treaty."
5.3. On attribution of profits to the Permanent Establishment, he submitted the following calculation and argued that the directions of the Tribunal, if followed by the Assessing Officer, would result in the attribution to the P.E. an amount of $ 2,82,224/-.
Particulars Amount (in US Dollars) Total revenue of CMG as per the Annual Report (A) 1,838,100,000 (Refer page no.466 of paper book Vol.II) Operating Income of CMG as per the Annual 219,000,000 Report (B) (Refer page no.406 of the paper book Vol.II) ITA 3605/Del/2013 AY: 2007-08 M/s Convergys Customer Management Group Inc. Operating income as a percentage of revenue 11.91% earned (C=B/A) End Customer revenue from Indian operations (D) 166,000,000 (Refer page no.349 of paper book Vol.II) Operating income of CIS (profit before tax of CIS)(F) 17,896,538 (Refer page no.708 of paper book) Vol.III INR 777,067,680 converted at the exchange rate of USD 1=INR 43.42) Profit/(loss) retained by CMG in the US (G=E-F) 1,881,494 Amount to be attributed to the PE in India (15% of 282,224 G above) 5.4. He pleaded for relief.
6. The Ld.D.R. submitted that the issue is squarely covered in favour of the Revenue and against the assessee, by the order of the Tribunal in ITA no.1443/Del/13 and ITA 1376/Del/2012 vide order dt. 10th May,2013 in the assessee's own case, in the appeal of the assessee for A.Y. 2006-07 as well as for AY 2008-09. He submitted that the Tribunal should follow this decision as on the propositions laid down by the Hon'ble Jurisdictional High Court of Delhi in the case of e-fund Corporation (supra) do not apply to the facts of the case.
7. Heard rival contentions. After carefully perusing the material placed on record, orders of the authorities below, case laws cited, we hold as follows.
8. The Tribunal for the AY 2006-07 as well as for the AY 2008-09 order dt. 10th May,2013 has considered the issue of Permanent Establishment, the issue of profits attribution to the Permanent Establishment and the issue of payment on account of IPCL/link charges and the issue of interest and after detailed discussion adjudicated the matter. We are inclined to follow the same for the sake of consistency. Thus we dispose of the appeal as follows.
8.1. Ground nos. 1to 3 are general in nature.
ITA 3605/Del/2013 AY: 2007-08 M/s Convergys Customer Management Group Inc. 8.2. Groundno.4 is on the issue of Permanent Establishment. The Tribunal in the above referred order for the AY 2006-07 and 2008-09 at para 9.8 at page 46 and 47 held as follows.
"9.8. Looking at the entirety of facts and circumstances, we are of the view that the Ld.CIT(A)'s order on the proposition of PE deserves to be upheld. The employees of the assessee frequently visited the premises of CIS to provide supervision, direction and control over the operations of CIS and such employees had a fixed palce of business at their disposal. CIS was practically the projection of assessee's business in India and carried out its business under the control and guidance of the assessee and without assuming any significant risk in relation to such functions. Besides assessee has also provided certain hardware and software assets on free of cost basis to CIS. Thus, the findings of the CIT(A) that assessee has a fixed place PE in India under Article 5(1)of the DTAA is upheld."
8.3. Consistent with the view taken therein, we hold that the assessee has a fixed base Permanent Establishment in India.
9. Ground no.5 is on attribution of profits. The Tribunal at pages 55 to 58 at para 11.17 held as follows.
"11.17. In view of the above facts, circumstances, case law, CBDT circulars and various articles of India-USA DTAA, following conclusions are arrived at:
A. The Ld. CIT (A) accepted the revenue from end-customer with regard to contracts/projects wherein services were procured from CIS of USD 138.9 million submitted by the assessee for assessment year 2006-07. The end customer revenue has been accepted by the AO is the assessment of all the other years on the same basis.
B. The methodology adopted by the AO and the ld. CIT(A) cannot be accepted as they have considered revenue of the assessee company (CMG as a multi-national enterprise) as the starting point for arriving at the profits attributable to the PE of assessee in India. The revenue of the assessee company cannot be considered as the revenue of the PE by any stretch of imagination. Furthermore the expenses incurred outside India are linked with the business activities of the assessee undertaken outside ITA 3605/Del/2013 AY: 2007-08 M/s Convergys Customer Management Group Inc. India for the functions performed outside India and are not linked to the PE of the assessee in India.
C. The attribution of profits to the PE should be made by the transfer pricing principles supported by the CBDT Circular No. 5 of 2004 as ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12 Convergys Customer Management Group Inc. as well as the judgment of the Supreme Court in Morgan Stanley (292 ITR 416). As per the Supreme Court in the case of Morgan Stanley, it has been held. as under:
"The impugned ruling is correct in principle insofar as an associated enterprise, that also constitutes a PE, has been remunerated on an arm's length basis taking into account all the risk-taking functions of the enterprise. In such cases nothing further would. be left to be attributed to the PE. The situation would. be different if transfer pricing analysis does not adequately reflect the functions performed and the risks assumed by the enterprise. In such a situation, there would. be a need to attribute profits to the PE for those functions/risks that have not been considered. Therefore, in each case the data placed by the taxpayer has to be examined as to whether the transfer pricing analysis placed by the taxpayer is exhaustive of attribution of profits and that would. depend on the functional and factual analysis to be undertaken in each case. Lastly, it may be added that taxing corporates on the basis of the concept of economic nexus is an important feature of attributable profits (profits attributable to the PE)."
The application of transfer pricing principles is also supported by the decisions of the Bombay High Court in Set Satellite (Singapore) Pte Ltd. (307 ITR 205), jurisdictional High Court in Rolls Royce Singapore Pvt. Ltd. (202 Taxman 45) (Del.), Director of Income Tax vs. BBC Worldwide Ltd. (203 Taxman 554) (Del.) D. The ld. CIT (A) has held that further profit was required to be attributed on account of Assets provided by the assessee to CIS and management of risk by the assessee in India. In our view no attribution of profits can be made on account of management of risk as risk resides outside India. Even otherwise the charge for the employees seconded to CIS and employees visiting India to provide the technical services is subsumed in the transfer pricing analysis of CIS. Therefore, attribution can only be made on account of free of cost assets and software's provided by the assessee to CIS.
E. The assessee has submitted that it does not prepare India specific accounts, therefore the attribution of profits on the basis as disclosed in the transfer pricing study for assets and software cannot be accepted. Further, in the facts and circumstances of the case Profit Split method is ITA 3605/Del/2013 AY: 2007-08 M/s Convergys Customer Management Group Inc. not the correct method for attribution of profits to the PE of the assessee in India.
F. In our considered opinion, the correct approach to arrive at the profits attributable to the PE should. be as under:
Step 1: Compute Global operating Income percentage of the customer care business as per annual report/10K of the company. Step 2: This percentage should. be applied to the end-customer revenue with regard to contracts/projects where services were procured from CIS. The amount arrived at is the Operating Income from Indian operations. Step 3: The operating income from India operations is to be reduced by the profit before tax of CIS. This residual is now attributable between US and India Step 4: The profit attributable to the PE should be estimated on residual profits as determined under Step 3 above. The attribution of India profit shall be worked out as under, mentioned after the table:
11.18. In the computation based on the above approach for the AY 2006-07, the profits attributable to India comes as under:
         Particulars                                              Amount (in US Dollars)
Total revenue of CMG as per the Annual Report (A)                 1,663,600,000
Operating Income of CMG as per the Annual                         175,500,000
Report (B)
Operating income as a percentage of revenue                             10.55%
earned (C=B/A)
End Customer revenue from Indian operations (D)                    138,900,000
Operating Income from Indian operations (E=C*D)                   14,653,950
Operating income of CIS (profit before tax of CIS)(F)             13,800,000
Profit retained by CMG in the US (G=E-F)                            853,950
Placitum 'X'


9.1. Based on these directions the assessee computes the attribution of profits to the P.E, as extracted in para 5.3 of this order.
9.2. The Assessing Officer is directed to verify this claim of the assessee and pass consequential orders in line with the directions of the ITAT on this issue for the AY 2006-07.
10. Ground no.7 is against the addition on account of IPCL/link charges. The Tribunal at para 13 page 67 held as follows. "13. Adverting to the issue of taxability of link charges as 'Equipment Royalty' in terms of Article 12(2) read with Article 12(3)(b) of the DTAA.
ITA 3605/Del/2013 AY: 2007-08 M/s Convergys Customer Management Group Inc. This issue is common to both assessment year 2006-07 and 2008-09. In this regard, the ld. AR of the assessee submitted that the link charges pertain to leased lines (under sea cables) that allow a dedicated capacity for a private, secure communication link from India to the US which enables CIS to communicate with the customers. The assessee makes payment for such link charges to telecom service providers in the USA and cross charges the portion of the cost incurred by it in connection with the India half link to CIS, which is accordingly reimbursed by CIS to CMG. Ld. counsel also referred to the invoice of raised by the assessee on CIS on Page 349 of paper book volume I and the basis of cross charged at page 828 of paper book volume III and placed reliance on the decision of the Hon'ble Delhi High Court in the case of Expeditors International India (P) Ltd. (209 Taxman 18) on reimbursement of common expenses incurred by the parent company.
13.1. AO made an addition on account of link charges by stating that they were taxable as 'Equipment Royalty' in terms of Article 12(2) read with Article 12(3)(b) of the DTAA and accordingly taxed it @ 10% on gross basis. CMG/CIS, who availed the services from the service providers, have neither intended to nor have obtained any right to use the underlying infrastructure maintained and used by the service providers for providing the services. It is important to see whether there was any intention to transfer the right to use or not. In the present set of facts, CMG/CIS do not have any control or possession over the equipment i.e. the network facilities are under the control of and maintained and operated by the service providers. CMG/CIS merely avail a service. Accordingly, we hold that the link charges do not qualify as 'Equipment Royalty' in terms of Article 12 of the DTAA and hence are not taxable in India. Useful can be drawn from the following judgments:
 Bharat Sanchar Nigam Ltd. vs. Union of India (282 ITR 273) (SC) • Dell International Services India Pvt. Ltd. (AAR No. 735 of 2006) • Cable & Wireless Networks India Private Limited (AAR No. 786 of 2008) - (The Special Leave Petition filed against this ruling has been dismissed by the Supreme Court) • Asia Satellite Telecommunications Co. Ltd. (332 ITR 340) (Delhi High Court) • Yahoo India Pvt Ltd. Vs DCIT [ITA No. 506/Mum/2008] • Standard Chartered Bank Vs Dy. Director of Income Tax [ITA No. 3824/MUM/2006] 13.2. CIT (A) in his order has accepted the contention of the assessee that the third party service provider was merely using its own equipment itself while rendering the services to its customers including the assessee and CIS and there is no transfer of the right to use, either to the assessee or ITA 3605/Del/2013 AY: 2007-08 M/s Convergys Customer Management Group Inc. CIS. The assessee has merely procured services and provided the same to CIS and no part of the equipment was leased out to CIS. The Ld. CIT (A) held that the payment for link charges do not constitute Royalty under the provisions of Article 12 of the DTAA.
13.3. The provisions of Equipment Royalty are also contained in Explanation 2(iva) of section 9(1)(vi) of the Income Tax Act, 1961 ('Act') which is similar to the provisions of Article 12(3)(b) of DTAA. 13.4. Besides, though Asia Satellite case is a decision on the domestic law but also makes an observation regarding DTAA. In para 74 of the judgment, it is specifically mentioned that " Even when we look into the matter from the standpoint of Double Taxation Avoidance Agreement (DTAA), the case of the assessee gets a boost". This observation supports the case of assessee.
13.5. In view of the foregoing observations we hold that there is no transfer of the right to use, either to the assessee or to CIS. The assessee has merely procured a service and provided the same to CIS, no part of equipment was leased out to CIS. Even otherwise, the payment is in the nature of reimbursement of expenses and accordingly not taxable in the hands of the assessee. Therefore, it is held. that the said payments do ot constitute Royalty under the provisions ofArticle 12 of the tax treaty and the ground is allowed in favour of assessee."
10.1. Consistent with the view taken therein, we uphold the contentions of the assessee and allow this ground. The assessee further contends that even otherwise the payment is in the nature of reimbursement of expenses and accordingly not taxable in the hands of the assessee.
11. Ground no.8 is against the levy of interest under Section 234 B of the Act. The Tribunal at para 14, pages 67 and 68 has held as follows. "14. Coming to the assessee's ground about levy of interest under section 234B, it is pleaded that the taxable income of the assessee was liable to TDS, as the assessees are non-residents, therefore there was no liability to pay advance tax as per the provisions of sec. 209(1) of the I.T. Act and interest u/s 234B should not be levied.
14.1. We have considered rival submissions and record. The charging of interest is automatic under the Act if the assessee has defaulted in payment of advance tax. The income of the assessee was not liable for withholding tax under section 195 of the Act. In this case we have no option but to hold. that the assessee is liable to interest u/s 234B, as the income being assessed now cannot be held. to be income liable to TDS under Indian provisions. The same is being assessed in the hands of PEs ITA 3605/Del/2013 AY: 2007-08 M/s Convergys Customer Management Group Inc. who had not filed their return on the ground that this income was not attributed to Indian Business Connection. Provisions of section 234B are mechanical in nature. In view of the above this ground of appeal of the assessee is dismissed."
11.1. Consistent with the view taken therein, we decide the issue against the assessee.
12. In the result the appeal of the assessee is allowed in part.
Decision pronounced in the open Court on 28th January, 2015.
                  Sd/-                                                  Sd/-
        (GEORGE GEORGE K)                                (J.SUDHAKAR REDDY)
         JUDICIAL MEMBER                                ACCOUNTANT MEMBER

Dated : 28th January, 2015

·     Manga

Copy forwarded to: -

1.     Appellant   :
2.     Respondent :
3.     CIT
4.     CIT(A)
5.     DR, ITAT

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