Sivagami Holdings Pvt. Ltd., CHENNAI V. ACIT, CHENNAI

CO 145/CHNY/2013

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9240 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 15-01-2014
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 06-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 12-08-2013
• Court: TRIBUNAL
• Department Lawyers: T N BETGERI
• Assessee Lawyers: R RAJASEKARAN
• Keywords: Double taxation relief; Permanent establishment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NOS. 1486, 1487 & 1488/MDS/2013 & C.O. NOS. 143, 144 & 145/MDS/2013 ( IN ITA NOS.1486/MDS//13, 1487/MDS/13 & 1488/MDS/201 3 ) ASSESSMENT YEARS : 2006-07, 2008-09 & 2009-10 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-VI(3), AAYAKAR BHAVAN, NEW BLOCK, 121, M.G.ROAD, 7 TH FLOOR, CHENNAI-600 034. VS M/S. SIVAGAMI HOLDINGS PVT. LTD., 202, ANNA SALAI, CHENNAI-600 002. [PAN: AAECS 3279 A] (APPELLANT) (RESPONDENT/CROSS OBJECTOR) REVENUE BY : SHRI T.N. BETGERI, JCIT ASSESSEE BY : SHRI R. RAJASEKARAN, CA DATE OF HEARING : 06-01-2014 DATE OF PRONOUNCEMENT : 15-01-2014 O R D E R PER BENCH: THE SET OF THREE APPEALS HAVE BEEN FILED BY THE RE VENUE ASSAILING THE ORDERS OF THE COMMISSIONER OF INCOME TAX(APPEALS)-V, CHENNAI ALL DATED 28-03-2013 RELEVA NT TO THE ASSESSMENT YEARS (AYS) 2006-07, 2008-09 & 2009-10 ITA. NOS. 1486, 1487 & 1488/MDS/13 & C.O. NOS. 143, 144 & 145/MDS/13 :- 2 -: RESPECTIVELY. IN ALL THE THREE APPEALS, THE REVENU E HAS RAISED SINGLE ISSUE IN RESPECT OF INCOME OF THE ASSESSEE F ROM ITS BRANCH IN MALAYSIA. 2. THE ASSESSING OFFICER IN ALL THE AFORESAID AYS H AS HELD THAT THE INCOME OF ASSESSEES BRANCH IN MALAYSIA IS ASSE SSABLE IN INDIA. THE ASSESSING OFFICER FURTHER HELD THAT THE ASSESSEE MAY BE MAINTAINING A FIXED PLACED OF BUSINESS IN MALAYS IA BY FORMING A COMPANY UNDER MALAYSIAN LAWS BUT THE MALAYSIAN BR ANCH IS NOT A PERMANENT ESTABLISHMENT. AGGRIEVED AGAINST THE ASSESSMENT ORDERS FOR THE RES PECTIVE AYS, THE ASSESSEE FILED APPEALS BEFORE THE CIT(APPE ALS). THE CIT(APPEALS) FOLLOWED THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS.956 TO 959/MDS/2009 FOR THE AYS. 20 00-01, 2001-02, 2002-03 & 2005-06 TITLED M/S.SIVAGAMI HOLDINGS PVT. LTD., VS. ACIT, WHEREIN IT HAS BEEN HELD THAT THE MALAYSIAN BRANCH OF THE ASSESSEE-COMPANY IS A PERMANENT ESTAB LISHMENT, OPERATING IN MALAYSIA IN TERMS OF ARTICLE 5 OF THE INDO-MALAYSIAN DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). ITA. NOS. 1486, 1487 & 1488/MDS/13 & C.O. NOS. 143, 144 & 145/MDS/13 :- 3 -: 3. THE ASSESSEE HAS ALSO FILED CROSS-OBJECTIONS IN RESPECT OF AFORE MENTIONED THREE AYS ASSAILING THE FINDINGS OF THE CIT(APPEALS) UPHOLDING THE RE-OPENING OF THE ASSESS MENT PROCEEDINGS. ON MERITS, THE ASSESSEE HAS SUPPORTED THE ORDER OF THE CIT(APPEALS). 4. THE ASSESSEE IS AN INVESTMENT COMPANY. THE ASSE SSEE IS HAVING ITS BRANCH IN MALAYSIA WHICH IS ALSO IN THE SAME BUSINESS. THE FOREIGN INVESTMENTS ARE MANAGED BY ASSESSEES M ALAYSIAN BRANCH THROUGH ITS DULY APPOINTED AGENT. THE ASSES SEE ALSO ACQUIRED PROPERTY IN SINGAPORE BESIDES IMMOVEABLE P ROPERTY AT MALAYSIA FROM WHICH IT IS HAVING RENTAL INCOME. TH E ASSESSEE IN ITS RETURN OF INCOME HAD ADMITTED FOREIGN INCOME FR OM KUALAMPUR (MALAYSIA) BRANCH. THE ASSESSEE HAS CLAIMED EXEMPT ION ON THE INCOME SO EARNED IN VIEW OF DTAA BETWEEN INDIA AND MALAYSIA. THE ISSUE FOR CONSIDERATION BEFORE THE TRIBUNAL IS: WHETHER THE MALAYSIAN BRANCH OF THE ASSESSEE-COMPANY IS A P ERMANENT ESTABLISHMENT IN MALAYSIA? THE LEVY OF TAX ON THE INCOME OF MALAYSIAN BRANCH ENTIRELY HINGES ON THE ANSWER TO T HE ABOVE ITA. NOS. 1486, 1487 & 1488/MDS/13 & C.O. NOS. 143, 144 & 145/MDS/13 :- 4 -: QUESTION. IN CASE THE ANSWER TO ABOVE QUESTION IS IN AFFIRMATIVE, THE INCOME ARISING FROM FOREIGN BRANCH SHALL BE EXE MPT FROM TAX IN VIEW OF DTAA BETWEEN INDIA AND MALAYSIA. 5. SHRI R. RAJASEKARAN, APPEARING ON BEHALF OF THE ASSESSEE AT THE OUTSET SUBMITTED THAT THE ISSUE IN APPEAL IS SQUARELY COVERED BY THE ORDER OF THE CO-ORDINATE BENCH OF TH E TRIBUNAL IN ITA NOS. 956 TO 959/MDS/2009 FOR THE AYS. 2000-01 , 2001-02, 2002-03 & 2005-06 DECIDED ON 31 ST MAY, 2011 (SUPRA). SINCE THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES O F THE PRESENT CASE, FRESH ADJUDICATION ON THE ISSUE IS NOT REQUIR ED. THE LD.AR PLACED ON RECORD THE COPY OF THE AFORESAID ORDER OF THE TRIBUNAL AT PAGE NOS. 89 TO 130 OF THE PAPER BOOK. 6. ON THE OTHER HAND, SHRI T.N. BETGERI, APPEARING ON BEHALF OF THE REVENUE FAIRLY CONCEDED THAT ALTHOUGH THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE, HOWEVER, THE DEPARTMENT HAS PREFERRED AN APPEAL BEFORE THE HONB LE MADRAS HIGH COURT ASSAILING THE ORDER OF THE TRIBUNAL. TH EREFORE, THE ITA. NOS. 1486, 1487 & 1488/MDS/13 & C.O. NOS. 143, 144 & 145/MDS/13 :- 5 -: ORDER OF THE TRIBUNAL REFERRED TO BY THE LD.AR HAS NOT BECOME FINAL. 7. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES. WE HAVE ALSO PE RUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE ORDE R OF THE TRIBUNAL IN ITA NOS.956 TO 959/MDS/2009 DECIDED ON 31-05-201 1(SUPRA). WE FIND THAT THE ISSUE WITH REGARD TO PERMANENT EST ABLISHMENT STATUS OF MALAYSIAN BRANCH OF THE ASSESSEE IN MALAY SIA HAS ALREADY BEEN ADJUDICATED BY THE TRIBUNAL. THE TRIB UNAL IN ITS DETAILED ORDER HAS TAKEN INTO CONSIDERATION VARIOUS JUDGMENTS INCLUDING THE JUDGMENT OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF UNION OF INDIA & ANOTHER VS. AZADI BACHAO ANDOLAN & ANOTHER REPORTED AS 263 ITR 706. AFTER CONSIDERING THE FACTS OF THE CASE AND VARIOUS DECISIONS, THE TRIBUNAL HELD T HAT THE MALAYSIAN BRANCH OF THE ASSESSEE HAS THE STATUS OF PERMANENT ESTABLISHMENT IN MALAYSIA. THE TRIBUNAL FURTHER HE LD ON MERITS THAT, THE INCOME OF MALAYSIAN BRANCH OF THE ASSESSE E IS INCOME EARNED IN MALAYSIA AND BY VIRTUE OF DTAA THAT INCOM E IS LIABLE FOR ITA. NOS. 1486, 1487 & 1488/MDS/13 & C.O. NOS. 143, 144 & 145/MDS/13 :- 6 -: TAXATION ONLY IN MALAYSIA. THE RELEVANT EXTRACT OF THE ORDER OF THE TRIBUNAL IS RE-PRODUCED HEREIN BELOW: 39. AS ALREADY STATED, IT IS NOT THE CASE OF THE A SSESSING AUTHORITY THAT THE MALAYSIAN BRANCH OF THE ASSESSEE COMPANY IS NOT A PERMANENT ESTABLISHMENT IN MALAYSIA. THE SAID BRANCH OF THE ASSESSEE COMPANY HAS BEEN REGISTERED IN MALAYSIA AS A COMPANY UNDER THE COMPANIES ACT OF TH AT COUNTRY. THE MALAYSIAN BRANCH HAS BEEN REGISTERED A S AN ASSESSEE FOR THE PURPOSE OF INCOME-TAX IN MALAYSIA. THE MALAYSIAN BRANCH OF THE ASSESSEE COMPANY IS WORKING AFTER OBTAINING ALL THE NECESSARY LICENCES AND PERMITS PR ESCRIBED BY THE LAWS OF THAT COUNTRY. THE MALAYSIAN BRANCH IS MANAGING THE AFFAIRS OF INVESTMENT OF THE COMPANY MADE OUTSI DE INDIA. THE MALAYSIAN BRANCH IS ALSO MANAGING THE PROPERTIE S IN MALAYSIA AND SINGAPORE. THE SITUS OF THE BRANCH CO MPANY IS IN MALAYSIA, WHICH IS OUTSIDE INDIA AND THAT OFFICE IS DEALING IN THE AFFAIRS OF THE FOREIGN INVESTMENTS OF THE ASSES SEE COMPANY AND THE BRANCH OFFICE HAS BEEN ESTABLISHED AS AN INDEPENDENT LEGAL ENTITY IN ACCORDANCE WITH THE MAL AYSIAN LAWS AND IN SUCH CIRCUMSTANCES THERE IS NO MUCH FOR CE IN THE ARGUMENT OF THE CIT(APPEALS) THAT THE ASSESSEE IS N OT A PERMANENT ESTABLISHMENT IN MALAYSIA. THE QUESTION AS TO WHETHER THE MALAYSIAN BRANCH IS PERMANENT ESTABLISH MENT OR NOT HAS BEEN IN FACT RAISED BY THE CIT(APPEALS) HIM SELF AND ALSO ANSWERED BY HIMSELF. THE ASSESSING AUTHORITY HAS NO SUCH A CASE. IT IS TO BE SEEN THAT ESPECIALLY IN C ASES OF INCOME ESCAPING ASSESSMENT, THE APPELLATE AUTHORITI ES ARE NOT ITA. NOS. 1486, 1487 & 1488/MDS/13 & C.O. NOS. 143, 144 & 145/MDS/13 :- 7 -: EXPECTED TO ENLARGE THE SCOPE OF THE ENQUIRY DETERM INED BY THE NOTICE ISSUED UNDER SECTION 148. IN THE PRESEN T CASE THE CIT(APPEALS) HAS TRAVELLED BEYOND THE REASON RECORD ED BY THE ASSESSING AUTHORITY AND IMPORTED FRESH REASONS TO D ISPEL THE ARGUMENTS OF THE ASSESSEE. 40. THEREFORE, IN THE FACTS AND CIRCUMSTANCE OF THE CASE THERE IS NOTHING ON RECORD TO DENY THE MALAYSIAN BR ANCH OF THE ASSESSEE COMPANY THE STATUS OF A PERMANENT ESTABLIS HMENT OPERATING IN MALAYSIA. WHEN THIS IS THE FACTUAL PO SITION, THE QUESTION TO BE LOOKED INTO IS WHETHER THE INCOME GE NERATED BY THE SAID MALAYSIAN BRANCH IS TAXABLE IN THE HANDS O F THE ASSESSEE COMPANY OR NOT. THERE IS NO DISPUTE ON TH E FACTS THAT THE TAXABILITY OF THE INCOME OF THE ASSESSEE A ND ITS MALAYSIAN BRANCH IS GOVERNED BY THE DTAA ENTERED IN TO BETWEEN INDIA AND MALAYSIA. THE RELEVANT ARTICLES OF DTAA HAVE BEEN SUFFICIENTLY DISCUSSED IN THE ORDERS OF T HE LOWER AUTHORITIES. IT IS SUFFICE TO SAY THAT AS FAR AS T HE INCOME ATTRIBUTABLE IN THE HANDS OF THE ASSESSEES MALAYSI AN BRANCH IS CONCERNED THE INCOME IS TO BE TAXED IN MALAYSIA. THE INCOME GENERATED IN THE HANDS OF THE MALAYSIAN BRAN CH OF THE ASSESSEE COMPANY IS RENT AND INTEREST INCOME. THEY ARE ALL GENERATED FROM ASSETS SITUATED OUTSIDE INDIA. THER EFORE, AS PER THE TERMS OF THE DTAA THE INCOME OF MALAYSIAN B RANCH OF THE ASSESSEE COMPANY IS LIABLE FOR TAXATION IN MALA YSIA. ONCE IT IS LIABLE FOR TAXATION IN MALAYSIA, DTAA MAKES I T CLEAR THAT THE SAID INCOME IS NOT SUBJECTED TO THE JURISDICTIO N OF INDIAN TAXATION. ITA. NOS. 1486, 1487 & 1488/MDS/13 & C.O. NOS. 143, 144 & 145/MDS/13 :- 8 -: THE LD.DR HAS NOT PLACED ON RECORD ANY ORDER OF THE HIGHER AUTHORITIES, VIDE WHICH THE AFORE MENTIONED ORDER O F THE TRIBUNAL HAS BEEN STAYED OR REVERSED. THEREFORE, AS ON DAY, THE ORDER OF THE TRIBUNAL HOLDS GOOD. RESPECTFULLY FOLLOWING TH E SAME, WE HOLD THAT THE MALAYSIAN BRANCH OF THE ASSESSEE IS H AVING PERMANENT ESTABLISHMENT IN MALAYSIA AND THE INCOME ARISING THERE FROM IS NOT TAXABLE IN INDIA IN VIEW OF THE D OUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND MALAYSIA. TH ERE IS NO MERIT IN THE APPEALS OF THE REVENUE AND THE SAME AR E DISMISSED. 8. THE ASSESSEE HAS FILED CROSS-OBJECTIONS AGAINST THE ORDER OF THE CIT(APPEALS) ASSAILING THE FINDINGS OF THE CIT( APPEALS) ON THE ISSUE OF RE-OPENING OF THE ASSESSMENT PROCEEDINGS. THE LD.AR HAS NOT RAISED ANY ARGUMENTS ON THE ISSUE. MOREOVE R, WE FIND THAT THE ORDER OF THE CIT(APPEALS) ON THE ISSUE OF RE-OPENING IS DETAILED AND JUSTIFIED AND THUS CALLS FOR NO INTERF ERENCE. ACCORDINGLY, THE CROSS-OBJECTIONS OF THE ASSESSEE F OR THE THREE AYS ARE DISMISSED. 9. IN THE RESULT, ALL THE THREE APPEALS OF THE REVE NUE I.E., I.T.A. NOS. 1486, 1487 & 1488/MDS/2013 AND ALL THE CROSS- OBJECTIONS OF ITA. NOS. 1486, 1487 & 1488/MDS/13 & C.O. NOS. 143, 144 & 145/MDS/13 :- 9 -: THE ASSESSEE I.E., C.O.NOS.143, 144 & 145/MDS/2013 ARE DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 15 TH JANUARY, 2014 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) (VIK AS AWASTHY) VICE PRESIDENT JUDICIAL MEMBER DATED: 15 TH JANUARY, 2014 TNMM COPY TO: ASSESSEE/AO/CIT(A)/CIT/DR