APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) – 12, BANGALORE

COMPAGNIE IBM FRANCE APPELLANT

V/s

THE DEPUTY COMMISSIONER OF INCOME-TAX,

INTERNATIONAL TAXATION - CIRCLE 1 (1),
BANGALORE
RESPONDENT

ASSESSMENT YEAR (‘AY’) 2014-15

THIS IS AN APPEAL BEFORE THE HON'BLE COMMISSIONER OF INCOME TAX (APPEALS)– 12,
BANGALORE, AGAINST THE ORDER PASSED BY THE LEARNED DEPUTY COMMISSIONER OF INCOME-
TAX INTERNATIONAL TAXATION, CIRCLE 1(1), BANGALORE, UNDER SECTION 143(3) READ WITH
SECTION 144C(3) OF THE INCOME-TAX ACT, 1961 IN THE CASE OF COMPAGNIE IBM FRANCE FOR THE
ASSESSMENT YEAR 2014-15

GROUNDS OF APPEAL

1. That on the facts and in the circumstances of the case, the order passed by the Learned
Deputy Commissioner of Income-tax, International Taxation, Circle 1 (1), Bangalore (“the
Assessing Officer” or “AO”) under Section 143(3) read with Section 144C (3) of Income-tax
Act, 1961 (“the Act”) in so far as it is prejudicial to the interests of the Appellant is bad in law
and in facts, in the circumstances of the case and is in violation of the principles of equity
and natural justice.

2. Reimbursement of expenses treated as fee for technical services

2.1. That on the facts and in the circumstances of the case and without prejudice to any other
grounds taken herein, the Learned AO has erred in law and on facts in assessing the
payments received by Compagnie IBM France (“IBM France” or “the Appellant”) amounting
to Rs 22,610,658 representing reimbursement of actual salary costs for seconded employees
received by the Appellant from IBM India Private Limited (“IBM India”), to be in the nature of
Fees for Technical Services under the Act and under the Double Taxation Avoidance
Agreement between India and France (“tax treaty”).
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2.2. That on the facts and in the circumstances of the case and without prejudice to any other
grounds taken herein, the Learned AO has also erred in law and on facts in concluding that
the services provided by the Appellant to IBM India make available technical knowledge,
experience, skill, know-how or processes.

2.3. That on the facts and in the circumstances of the case and without prejudice to any other
grounds taken herein, having concluded that the amounts received by the Appellant are cost-
to-cost reimbursements, the Learned AO has erred in law and on facts in concluding that
such reimbursements will still be in the nature of “fees for technical services” under Section
9(1)(vii) of the Act and accordingly classified the same as “income” in the hands of IBM
France.

2.4. That on the facts and in the circumstances of the case and without prejudice to any other
grounds taken herein, the Learned AO has erred in law and on facts in holding that there is
no employer-employee relationship between IBM India and the employees seconded to IBM
India.

2.5. That on the facts and in the circumstances of the case and without prejudice to any other
grounds taken herein, the Learned AO has erred on facts in holding that IBM India is not the
economic employer of the seconded employees.

2.6. That on the facts and in the circumstances of the case and without prejudice to any other
grounds taken herein, the Learned AO has erred in law and on facts in concluding that there
is no master- servant relationship between the seconded employees and IBM India without
appreciating the fact that for all practical purposes, the seconded employees function under
the control, direction and supervision of IBM India and further erred in not appreciating the
fact that IBM France is not responsible for any of the activities performed by the seconded
employees.

2.7. That on the facts and in the circumstances of the case and without prejudice to any other
grounds taken herein, the Learned AO has erred in law and on facts in disregarding that the
payer of reimbursements (ie., IBM India) had already deducted taxes on remuneration paid
to the seconded employees under the provisions of Section 192 of the Act and disregarding
that the income has been subject to tax under relevant provisions of the Act.

2.8. That on the facts and in the circumstances of the case and without prejudice to any other
grounds taken herein, the Learned AO has erred in law in making references to the
submissions and documents filed by the Appellant during the assessment proceedings for
AY 2012-13 without appreciating that each assessment conducted under the Act is to be
treated as an independent proceeding and examined individually, and not merely based on
findings of previous years’ assessments.
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2.9. That on the facts and in the circumstances of the case and without prejudice to any other
grounds taken herein, the Learned AO has erred in law and on facts, in relying upon
documents submitted during the proceedings of the Appellant’s affiliate entities, without
recognising the principle that the proceedings of the Appellant were independent from that
of any other entity.

2.10. That on the facts and in the circumstances of the case and without prejudice to any other
grounds taken herein, the Learned AO has erred in law in relying on the case laws which are
distinguishable on facts of the case of the Appellant.

3. Other grounds

3.1. That on the facts and in the circumstances of the case and without prejudice to any other
grounds taken herein, the Learned AO has erred in raising a demand of Rs 2,763,792.

3.2. That on the facts and in the circumstances of the case and without prejudice to any other
grounds taken herein, the Learned AO has erred in short grant of credit pertaining to tax
deduction at source and further erred in not providing credit of tax deduction at source
which the Appellant is otherwise eligible to obtain credit of.

3.3. That on the facts and in the circumstances of the case and without prejudice to any other
grounds taken herein, the Learned AO has erred in short grant of credit pertaining to tax
deduction at source without appreciating the fact that IBM India, from which such
reimbursements on employee secondments were received, had already paid taxes under
protest after filing an appeal against the orders issued, pursuant to the TDS proceedings
conducted by the Indian Revenue Authorities on the payer Indian entity.

3.4. That on the facts and in the circumstances of the case and without prejudice to any other
grounds taken herein, the Learned AO has erred in law and on facts in initiating penalty
proceedings under Section 271(1)(c) of the Act without concluding that the Appellant has
concealed any particulars of income or has furnished inaccurate particulars of income or has
not acted in good faith and has not exercised due diligence.

3.5. That the Appellant prays to be granted opportunity to be heard in person and that the
appellant craves leave to add to, amend, modify, rescind, supplement or alter any of the
grounds stated hereinabove either before or at the time of hearing of this appeal.

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3.6. That on the facts and in the circumstances of the case and in view of the submissions made
here-in-above, the Appellant prays that the impugned order should be modified and/ or any
other order passed as may be deemed fit so as to grant complete and absolute relief to the
Appellant.

For Compagnie IBM France

_____________________
Power of Attorney Holder