Country who is party to a Treaty cannot unilaterally alter its provisions

IN THE ITAT MUMBAI BENCH ‘L’

WNS North America Inc.

Versus

Assistant Director of Income-tax (International Taxation)

IT APPEAL NO. 8621 (MUM.) OF 2010

[ASSESSMENT YEAR 2006-07]

DECEMBER 14, 2012

ORDER

R.S. Syal, Accountant Member 

This appeal by the assessee is directed against the order passed by the Assessing Officer on 28.10.2010 u/s 144C(13) read with section 143(3) of the Income-tax Act, 1961 (hereinafter called the ‘Act’) in relation to the assessment year 2006-2007.

2.1. First issue raised in this appeal is against the holding the Marketing and management fees received by the assessee from WNS India as covered under Article 12 of India-US Double Taxation Avoidance Agreement. Briefly stated the facts of the case are that the assessee is a company incorporated in United State of America. It provided marketing, management and sales support services to WNS Global Services Private Limited (hereinafter called “WNS India”). The assessee filed its return declaring income of Rs. 2,38,78,407. During the course of assessment proceedings it was observed by the A.O. that the assessee received a sum of Rs. 41,02,61,224 towards Marketing and management fees from WNS India comprising of two parts viz., provision of marketing and management services outside India amounting to Rs. 36,88,13,733 and provision of marketing and management services in India amounting to Rs. 4,14,47,491.The assessee was called upon to explain as to why the entire marketing and management fees should not be treated as “Fees for included services” and assessed to tax as per Article 12(4)(b) of India-US Double Taxation Avoidance Agreement (hereinafter called the “DTAA”). The assessee stated that it entered into agreement with WNS India for providing marketing and sales services, inter alia, identifying customers and establishing contacts, soliciting inquiries from the customers, meeting with such customers and market the business of WNS India. The assessee also undertook to appoint advertising agencies to prepare, plan and execute advertising of WNS India’s business in newspapers, magazines etc. It was stated that payment for rendering such marketing and management services was not in the nature of Fees for included services (hereinafter called the ‘FIS’) as defined under Article 12 of the DTAA. It was also stated that the assessee did not make available any knowledge, experience or skills etc. to WNS India. The assessee further argued that an order was passed u/s 195(2) in the case of WNS India and the CIT(A) was pleased to hold that the payment by WNS India to the assessee did not qualify as Fees for included services under the DTAA. The Assessing Officer did not concur with the submissions advanced on behalf of the assessee. He observed that the assessee-company provided marketing, management services on receiving instructions from WNS India. The rendering of such services also required various administrative and operational support services for undertaking the above business activities. He also considered the fact that the assessee’s personnel visited WNS India to provide managerial services which amounted to rendering of expertise and technical knowledge for conduct of the Indian concern. In the background of such facts, the AO held in the Draft order that the entire marketing and management fees of Rs. 41.02 crore received by the assessee was liable to tax as FIS under Article 12 of DTAA at the rate of 15% on gross basis. The Dispute Resolution Panel (hereinafter called the “DRP”) upheld the A.O.’s draft order on this issue by holding that the amount falls under Article 12 of DTAA. It did not find any force in the reliance on behalf of the assessee on the DRP’s order in the case of WNS India for the A.Y. 2006-2007, as in its opinion the issue in that case was of disallowance u/s 40(a)(i) of the Act and since the ITAT had held that no tax was deductible, the Panel had to delete the disallowance made. The A.O. in the impugned order dated 28.08.2010 considered the entire marketing and management fees of Rs. 41,02,61,224 received by the assessee as liable to tax as FIS under Article 12 of the DTAA at the rate of 15% on a gross basis. The assessee is aggrieved against such treatment given by the AO to the consideration for marketing and management services.

2.2. We have heard the rival submissions and perused the relevant material on record. Before we proceed further it is pertinent to note that for providing the marketing and management services to WNS India in India, the employees of the assessee visited India during the previous year relevant to the assessment year under consideration. As per Article 5(2) of the DTAA, the existence of the assessee’s employees in India constituted a Service PE in India. That is how the assessee offered income for taxation under Article 7 of the DTAA. The short controversy before us is to decide the nature of Rs. 41.02 crore which has been treated by the Revenue as FIS under Article 12 and the assessee is claiming a part of it, representing consideration of Rs. 4.14 crore for rendering marketing and management services in India, as business profits under Article 7.

2.3. At the very outset we want to make it clear that identical issue came up for adjudication before the Tribunal in assessee’s own case for the assessment year 2004-2005. The Tribunal vide its order dated 25.11.2011 in ITA Nos.1993 & 1994/Mum/2009 for the said assessment year has decided this issue in assessee’s favour by holding that the fees received by the assessee for provision of marketing, management and services cannot be considered as fees for included services as per Article 12 of the DTAA. Despite that, the learned Departmental Representative forcefully argued that the relevant provisions of section 9(1)(vii) were not considered by the tribunal in right perspective and if such provisions had been correctly considered, the decision would have been otherwise. In the opposition, the learned AR relied on the impugned order in this regard.

2.4. Having heard the rival submissions on the point and considered the relevant material on record, we do not find any force in the arguments put forth on behalf of the Revenue for two reasons. Firstly, the Assessing Officer treated this amount as “Fees for included services” under Article 12(4)(b) of the DTAA by relying on similar view taken by him in earlier year. Such earlier year’s order passed by the A.O. has been eventually considered and overturned by the tribunal. In this order it has been held by the tribunal that the amount is not taxable as FIS under Article 12(4)(b). There is absolutely no difference in the facts and legal position prevailing in the earlier year vis-à-vis the current year. As such, there can be no question of deviating from the view taken by the tribunal in such earlier year, which we fully subscribe to.

2.5. The second reason for not accepting the learned Departmental Representative’s contention for considering the issue as per section 9(1)(vii) of the Act is that primarily the AO in the impugned order has relied on Article 12 of the DTAA to hold the amount as FIS. Nowhere did he refer to section 9, directly or indirectly to fix the taxability of this amount as FIS under the provisions of the Act. However, with a view to provide completeness to this order, we would like to note that the scope of section 9(1)(vii) is somewhat different in comparison with the Article 12(4)(b). In order to rope in any amount within the purview of FIS under the Article 12(4)(b) of DTAA, which has been invoked by the AO, it is essential that the payment should be to ‘make available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design.’ On the contrary, there is no such requirement of ‘making available’ any managerial, technical or consultancy services’. Simple rendition of such services is sufficient. It is not the case of the Revenue that the assessee made available some managerial, technical or consultancy services to WNS India. Even if we consider for a moment that the marketing and management services rendered by the assessee were in the nature of technical services as per section 9(1)(vii), the same would not become FIS as per the DTA because of the language of Article 12(4)(b) which mandates that such services must be made available to the payer of the consideration. As the assessee in the instant case has not made available any technical knowledge, experience, skill etc. to WNS India, in our considered opinion, the same cannot be subjected to tax by considering the provisions of section 9(1)(vi) on stand alone basis. We will discuss infra in a little more detail that the provision of the Act or the relevant Double Taxation Avoidance Agreement, whichever is more beneficial to the assessee, shall apply. As the provisions of Article 12(4)(b) are beneficial to the assessee in comparison with section 9(1)(vi), it is the prescription of Article 12, which shall apply in supersession of section 9(1)(vi) of the Act. We, therefore, hold that the marketing and management services rendered by the assessee to WNS India are not chargeable to tax as FIS under Article 12 of the DTAA. The impugned order is, therefore, reversed to this extent.

2.6. As we have held in the foregoing para that the amount of Rs. 41.02 crore cannot be considered as FIS, naturally the amount received by the assessee on this score needs to be examined from the angle of taxability under other provisions. It is important to note that the assessee filed its return declaring total income of Rs. 2,38,78,407 by inter alia treating the sum of Rs. 4.11 crore being the consideration for the provision of marketing and management services in India as falling under Article 7. The AO has treated the entire amount of Rs. 41.02 crore as FIS and thus computed the total income by ignoring the income offered by the assessee. As such the business income shown by the assessee as per Article 7 shall revive and become taxable. The AO is directed to include such amount in the total income of the assessee. In so far as the remaining receipts of Rs. 36.18 crore, being the consideration for the provision of marketing and management services outside India is concerned, the same cannot be subjected to tax in India because such income cannot be said to have accrued or arisen to the assessee or deemed to have been accrued or arisen to the assessee in India. Even the existence of the Service PE in India will not make it taxable because of no involvement of such PE in earning this income for which the services were rendered outside India.

3.1. Second issue raised in this appeal is against the reimbursement of international telecom connectivity charges received by the assessee from WNS India which have been held by the AO to be taxable under Article 12 of the DTAA as Royalty. The facts apropos this issue are that the assessee received reimbursement of lease line charges amounting to Rs. 6,41,87,580 from WNS India. The A.O. called upon the assessee to explain as to why the reimbursement of such expenses should not be considered as royalty liable to tax under Article 12 of DTAA. The assessee submitted that WNS India is in the business of providing software and IT enabled services to clients located outside India. For transmitting the data from the unit of the WNS India to the customers located outside India, WNS India availed the services of the domestic as well as International telecom operators. The assessee paid these international telecom connectivity charges to the International telecom operators for the services utilized by WNS India outside India and the same was accordingly reimbursed by WNS India to the assessee. It was stated that these recoveries represented reimbursement at cost of the expenses incurred by the assessee for and on behalf of WNS India without any mark up. Similar submissions were also advanced before the DRP contending that the reimbursement of international telecom connectivity charges was without any profit element and hence the same could not be considered as its income. Not convinced with the assessee’s submissions, the A.O. treated the payment received from WNS India towards reimbursement of international telecom connectivity charges amounting to Rs. 6.41 crore as royalty taxable as per Article 12 of the DTAA. In reaching this conclusion, the A.O. followed his order for the earlier year on this issue. The assessee is before us assailing the treatment given by the authorities below to such reimbursement of expenses as royalty.

3.2. The ld. AR relied on the order passed by the tribunal for the earlier year deciding such issue in favour of the assessee. Per contra, the learned Departmental Representative opposed such view taken by the tribunal and insisted that the same should not be followed due to insertion of Explanation 5 by the Finance Act, 2012 w.r.e.f. 1.6.1976 which gives proper meaning to clause (iva) to Explanation (2) below section 9(1)(vi). He submitted that the clause (iva) clearly provides that royalty means any consideration for ‘the use or right to use any industrial, commercial or scientific equipment…..’. Inviting our attention towards Explanation (5) inserted by the Finance Act, 2012 with retrospective effect, the ld. DR stated that the same clarifies that ‘the royalty includes … consideration in respect of any right, property or information whether or not — (a) the possession or control of such right, property or information is with the payer; (b) such right, property or information is used directly by the payer …’. It was contended that the insertion of Explanation (5) by the Finance Act, 2012 with retrospective effect also covering the year under consideration has changed the entire complexion of the case and it has necessitated observing departure from the earlier order of the tribunal which was passed without the assistance of such legislative amendment coming on the statute after the passing of such order. The learned Departmental Representative contended that the payment received by the assessee in the instant case is in respect of allowing WNS India the user of the equipment without taking its personal possession and hence consideration for such user amounts to royalty. It was, therefore, submitted that the order passed by the Tribunal for the earlier year should not be followed because of insertion of Explanation (5) by the Finance Act, 2012 with retrospective effect covering the period relevant to the assessment year under consideration.

3.3. We have heard the rival submissions and perused the relevant material on record. Here again it is noticed that similar issue was raised before the Tribunal in assessee’s own case for the earlier year. Vide the afore-noted order, the Tribunal has held that the reimbursement of lease line charges received by the assessee from WNS India is not chargeable to tax in India as such payment was not in respect of use of any equipment so as to be called as royalty. Further the Tribunal held that it was a case of reimbursement of the lease line charges which did not include any mark up or profit and such reimbursement of actual expenses could not treated as royalty income chargeable to tax.

3.4. Now we take up the contention of the ld. DR urging us to deviate from the view canvassed by the tribunal in the earlier year. The contention of the ld. DR is two-fold. First, that any retrospective amendment to the provisions of the Act is relevant for determining the taxability or deductibility of an amount even under the provision of the DTAA and second, the amount in question, when examined in the light of Explanation 5 to sec. 9(1)(vi) inserted retrospectively clearly, brings it in the scope of ‘royalty’.

3.5. We espouse the first segment of the contention of the ld. DR that the retrospective amendment to the provisions of the Act per se should be considered for determining the taxability of the amount even under the DTAA. It is trite that under normal circumstances the retrospective amendment of any provision of the Act mandates it to be followed from the date from which such retrospective effect is given. In such a situation it is considered as if for all practical purposes the provision was there on the statute from such earlier date. Accordingly the assessments and other proceedings under the Act have to move with the presumption of existence of such provision from the earlier date. Any assessment order, which when originally passed in accordance with the law as prevailing at that point of time, shall require amendment if there is some retrospective amendment to the provision germane to the issue, of course, subject to other provisions of the Act.

3.6. However, position is slightly different when there is a Double taxation avoidance agreement with another country. Sub-section (1) of section 90 of the Act provides that the Central Government may enter into an agreement with the Government of any other country for the granting of relief of tax in respect of income on which tax has been paid in two different tax jurisdictions. Sub-section (2) of section 90 unequivocally provides that where the Central Government has entered into an agreement with the Government of any country outside India under sub-section (1) for granting relief of tax or for avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, ‘the provisions of this Act shall apply to the extent they are more beneficial to that assessee‘. The crux of sub-section (2) is that where a DTAA has been entered into with another country, then the provisions of the Act shall apply only if they are more beneficial to the assessee. In simple words, if there is a conflict between the provisions under the Act and the DTAA, the assessee will be subjected to the more beneficial provision out of the two. If the provision of the Act on a particular issue is more beneficial to the assessee vis-a-vis that in the DTAA, then such provision of the Act shall apply and vice versa. The Hon’ble Supreme Court in the case of CIT v. P.V.A.L. Kulandagan Chettiar [[2004] 267 ITR 654 (SC)] has held that the provisions of sections 4 and 5 are subject to the contrary provision, if any, in DTAA. Such provisions of a DTAA shall prevail over the Act and work as an exception to or modification of sections 4 and 5. Similar view has been taken by the Hon’ble jurisdictional High Court in CIT v. Siemens Aktiongesellschaft [[2009] 310 ITR 320 (Bom.)]. In the light of the above discussion it becomes vivid that if the provisions of the Treaty are more beneficial to the assessee vis-à-vis its counterpart in the Act, then the assessee shall be entitled to be ruled by the provisions of the Treaty.

3.7. We come back to the contention of the ld. DR that the retrospective amendment to the provisions of the Act should be considered for determining the taxability of the amount even under the DTAA. This contention, in our considered opinion, is partly correct. Any amendment carried out to the provisions of the Act with retrospective effect shall no doubt have the effect of altering the provisions of the Act but will not per se have the effect of automatically altering the analogous provision of the Treaty. There are certain provisions in some Treaties which directly recognize the provisions of the domestic law. For example, Article 7 in certain Conventions provides that the deductibility of expenses of the permanent establishment shall be subject to the provisions of the domestic law. In such a case, if any retrospective amendment is made to the provisions of the Act governing the deductibility of the expenses, the same shall apply under the Treaty as well.

3.8. Article 23 in certain Treaties including that of India with Mauritius is ‘Elimination of Double taxation’. Para 1 of Article 23 in Mauritius Treaty provides that: “The laws in force in either of the Contracting States shall continue to govern the taxation of income in the respective Contracting States except where provisions to the contrary are made in this Convention”. First part of para 1 of Article 23 makes out a general rule that if income of the permanent establishment is to be computed in India, then the provisions of the Act shall govern the taxation of income in India. However, the second part of para 1 of Article 23 contains a qualification, which makes the operation of the first part of para 1 of Article 23 subject to the fulfillment of such stipulation. The word “except” is the dividing contour between the main provision and the qualification part. The portion starting thereafter enumerates the qualification, which is : ‘where provisions to the contrary are made in this Convention.’ When we read full text of para 1 of Article 23, it becomes manifest that if there is some provision in the Treaty contrary to the domestic law, then it is the provision of the Treaty which shall prevail. Thus the general rule contained in the first part of para 1 of Article 23, being the applicability of the domestic law, has cast a shadow on any provision to the contrary in the Treaty. In case there is no contrary provision in the Treaty, then it is the domestic law which shall apply. If however, there is some provision in the Treaty contrary to the domestic law then it is such contrary provision of the Treaty which shall override the provision in the domestic law in the computation of income as per the Treaty. Coming back to our context, if the retrospective amendment is in the realm of a provision of which no contrary provision is there in the Treaty, then such amendment will have effect even under the DTAA and vice versa.

3.9. Article 3(2) in most of the Treaties including the India-USA DTAA provides that any term not defined in the Convention shall unless the context otherwise requires, have the meaning which it has under the laws of that State concerning tax to which the Convention applies. The nitty-gritty of Article 3(2) in the present context is that if a particular term has not been defined in the Treaty but the same has been defined in the Act and further there is a retrospective amendment to that term under the Act, it is this amended definition of the term as per the Act, which shall apply in the Treaty as well. If however a particular term has been specifically defined in the Treaty, the amendment to the definition of such term under the Act would have no bearing on the interpretation of such term in the context of the Convention. A country who is party to a Treaty cannot unilaterally alter its provisions. Any amendment to Treaty can be made bilaterally by means of deliberations between the two countries who signed it. If there is no amendment to the provision of the Treaty but there is some amendment adverse to the assessee in the Act, which provision has been specifically defined in the Treaty or there is no reference in the Treaty to the adoption of such provision from the Act, again the mandate of section 90(2) shall apply as per which the provisions of the Act or the Treaty, whichever is more beneficial to the assessee shall apply. Going by such rule, the amendment to the Act shall have no unfavorable effect on the computation of total income of the assessee.

3.10. Reverting to the facts of the extant case, we observe that the term “royalty” has been defined in the DTAA as per Article 12(3). Such definition of the term “royalty” as per this Article is exhaustive. Pursuant to the insertion of Explanation (5) by the Finance Act, 2012, no amendment has been made in the DTAA to bring the definition of royalty at par with that provided under the Act. Subject matter of the Explanation is otherwise not a part of the definition of Royalty as per Article 12. As such, it is clear that the contention of the learned Departmental Representative that the retrospective insertion of Explanation 5 to section 9(1)(vii) should be read in the DTAA also, cannot be countenanced.

4.1. Be that as it may, we take up the second aspect of the contention of the ld. DR on this issue, as per which he stated that on merits, the Explanation 5 has made the amount in question as Royalty. We find that the receipt of Rs. 6.41 crore cannot be considered as royalty even under the amended provisions of the Act. The facts are very briefly recapitulated that the assessee received the said sum as reimbursement of charges from WNS India which were paid by it for lease line to MCI WorldCom etc. In other words, the lease line services were availed by WNS India from MCI WorldCom etc., for which the assessee originally made the payment to such operators on behalf of WNS India and subsequently recovered the same from WNS India at cost without any mark up. The question is whether under these circumstances it can be said that the assessee got this consideration of Rs. 6.41 crore in the nature of royalty? The case of the learned Departmental Representative rests on clause (iva) of Explanation (2) to section 9(1)(vi) along with Explanation (5). It has been contended that the amount be considered as royalty in the hands of the assessee because it is for allowing the use of equipment. We are unable to comprehend this point of view for the reason that such charges were not recovered by the assessee because of providing any access to lease lines owned or held by it. The mandate of clause (iva) of Explanation 2 along with Explanation 5 to section 9(1)(vi) is triggered when the consideration is received for the use or right to use any industrial, commercial or scientific equipment. The ld. DR vigorously argued that the payment received by the assessee in the instant case is in respect of allowing WNS India the user of the equipment without taking its personal possession and hence consideration for such user amounts to royalty. There is a basic fallacy in this contention. The international telecom operators who eventually received the amount for allowing the use of equipment are different parties and the assessee simply got the reimbursement of the amount paid by it to such telecom operators. This amount can be considered as royalty only in the hands of the owner or lessor or any other person entitled to permit the use of equipment and earning income in his own right from allowing the use of such equipment to others. By no stretch of imagination an intermediary, who makes payment to the owner of equipment on behalf of some person and then gets reimbursed for the said payment, can be considered as an owner or lessor etc. of the equipment so as to be considered u/s 9(1)(vi). The said amount may be considered as royalty in the hands of MCI WorldCom and other international operations under the provisions of the Act, who own the equipment and allowed use or right to use such equipment to WNS India. The assessee in the instant case simply paid a sum of Rs. 6.14 crore to MCI WorldCom etc. in the first instance and then recovered the same from WNS India. Thus it is evident, the said sum is not royalty even as per section 9(1)(vi) of the Act.

5.1. Having held that the amount is not in the nature of royalty in the hands of the assessee, the next question which arises for our consideration is as to what is the correct nature of this amount and whether it is taxable as business profits as per article 7 ? There is no dispute on the legal issue that the reimbursement of expenses without any mark up cannot be considered as income in the hands of the assessee so as to attract taxability.

5.2. Reimbursement of expenses means that the expenses earlier incurred by a person on behalf of another are recovered as such. Ordinarily there is no element of profit in such reimbursement. Since there is no mark-up in such recovery, there can be no question of imputing any income on this issue in the hands of recipient. However, the onus to prove that there is no element of profit in such reimbursement is always on the assessee. Mere nomenclature of ‘reimbursement’ is not relevant. The assessee is required to lead evidence to show that the expenses incurred are equal to the amount recovered. If the AO, on examination of the evidence, comes to the conclusion that the receipt is higher than the amount spent, then the excess is always taxable, notwithstanding the fact that the assessee named and claimed it as reimbursement of expenses. Not only the reimbursement of expenses should be without profit element, no attempt should be made to bifurcate the price of a contract into different parts with the intention of avoiding tax by slicing away a part of the total consideration of a contract, when the taxation is on gross basis as a percentage of contract value. The assessee cannot be allowed to show some part of the contract price distinctly as reimbursement of expenses, even without any mark-up, and hence claim exemption in this regard, when incurring of expenses for which such reimbursement is claimed, are towards the performance of contract.

5.3. Different consequences follow in the hands of the payer and payee for making a claim of reimbursement of expenses having profit element; or treating a part of contract value as reimbursement of expenses even without any mark-up. Whereas in some cases such claim for reimbursement may be tax neutral, while in others it may have bearing on tax liability. From the angle of payee, it will be tax neutral if there is question of computing business profits as per Article 7 because of computation of such income on net basis. But, it will affect tax liability, if the tax is to be computed as per Article 12 by treating the amount as Royalty or Fees for technical services wherein the tax liability is determined on the gross amount itself. In the hands of non-resident payer, the claim for treatment of head office expenditure as reimbursement of expenses shall have bearing on the computation of deduction of head office expenditure as per section 44C of the Act. In the like manner, there are several provisions including Chapter X, which affect the amount of total income or the tax liability by wrong treatment of payment of expenses as reimbursement of expenses. The crux of the matter is that the payment of expenses is to be distinguished from and not intermingled with the reimbursement of expenses in the hands of payer as well as payee. In fact, it is the substance of the transaction which matters. The real character of a transaction cannot be cloaked under some superficial name.

5.4. Adverting to the facts of the instant case we find that the assessee undertook to carry out the marketing and sales promotion activities on behalf of WNS India by identifying the customers and establishing contact; soliciting inquiries from clients and rendering such services as may be required to present and market the business of WNS India. On the other hand, the payment claimed as reimbursement is admittedly for the use of international telecom connectivity paid by the assessee to the International telecom operators, for transmitting the data by WNS India to its customers located outside India. The international telecom connectivity charges are not related in any manner with the rendering of marketing and management services. By no standard, such a claim for reimbursement of expenses can be considered as division of the contract price so as to gain some tax advantage.

5.5. Now let us see, whether the claim for reimbursement of expenses in the hands of the assessee is with or without any profit component. It goes without saying that if reimbursement includes some profit element, then the tax liability cannot escape. It is noticed that the assessee made a categorical claim that the international telecom connectivity charges were paid to the international telecom operators for the services utilized by WNS India outside India and the same were reimbursed by WNS India without any mark up. This contention was raised not only before the A.O. but the DRP as well. Such contention has remained uncontroverted by the authorities below. This shows that the assessee has discharged the burden cast upon it to prove that the lease line charges recovered by it from WNS India were without any mark up so as to attract any possible taxation under Article 7 of the DTAA. One can possibly contend that since the AO taxed the gross amount of such reimbursement as Royalty, there could have been no occasion for him to deal with the contention of the assessee of not having earned any profit in such reimbursement to find out and thus tax such profit element from such reimbursement. However, an important factor which has persuaded us to hold that there is no mark up in such reimbursement in the present case is that the Assessing Officer followed the view taken by him in earlier year on this issue. When his order for the earlier year came up for adjudication before the Tribunal, a categorical finding has been recorded by the tribunal that there is no mark up in reimbursement of lease line charges. There is nothing on record to show that either the facts of the current year are different from those of the preceding year or the view taken by the tribunal has been modified or reversed by the Hon’ble High Court on this issue. Further, there is nothing to demonstrate that the Revenue preferred any miscellaneous application against such order, if it was convinced that the finding of the tribunal for was incorrect. In view of these facts, we are not inclined to accept the contention of the ld. DR for remitting the matter to the file of AO for verifying if there is any profit element in such reimbursement and then determine tax liability accordingly. Once it is held that there is no profit element in such reimbursement, it becomes manifest that the gross income of Rs. 6.14 crore recovered by the assessee from WNS India is equal to the same amount paid by it to MCI WorldCom etc., thereby leaving no surplus liable to tax under Article 7 of the DTAA. This issue is decided in assessee’s favour and the consequential ground is allowed.

6.1. Next issue raised in this appeal is against taxability of reimbursement of other expenses amounting to Rs. 4,10,70,798 from WNS India. This amount represents reimbursement of expenses incurred on employees of WNS India on their visits abroad. The assessee claimed that since these amounts were pure reimbursement and hence not taxable. The A.O. held such amount as taxable under Article 12 as fees for included services.

6.2. Having heard the rival submissions on this issue and perused the relevant material on record, it is the common submissions by both the sides that similar issue was involved in the appeal for some other year and the Tribunal has restored this matter to the lower authorities for deciding it afresh after verifying the relevant details. As the issue stands covered by the earlier order of the tribunal, to which both the sides are agreeable, we set aside the impugned order on this issue and remit the matter to the file of A.O. for deciding it afresh as per law after allowing a reasonable opportunity of being heard to the assessee.

7. The last issue is about the levy of interest u/ss 234B and 234C. Having heard the rival submissions and perused the relevant material on record we find that the issue of charging of interest u/ss 234B and 234C in the present case is no more res integra in view of the judgment of the Hon’ble jurisdictional High Court in the case of Director of income-tax (International Taxation) v. NGC Network Asia LLC [[2009] 313 ITR 187 (Bom.)] in which it has been held that when the duty is cast on the payer to deduct tax at source, on failure of the payer to do so, no interest can be charged from the payee assessee u/s 234B. The same view has been reiterated in DIT (IT) v. Krupp UDHE GmbH [[2010] 38 DTR (Bom.) 251]. As the assessee before us is a non-resident, naturally any amount payable to it which is chargeable to tax under the Act, is otherwise liable for deduction of tax at source. In that view of the matter and respectfully following the above precedents, we hold that no interest can be charged u/ss 234B and 234C of the Act. This ground is allowed.

8. In the result, the appeal is partly allowed.