M/s. JC Bamford Excavators Ltd., New Delhi V. DDIT, New Delhi

CO 302/DEL/2012

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9366 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 20 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 14-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 12-11-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 24-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV SHARMA
• Assessee Lawyers: G C SRIVASTAVA; SAURABH SRIVASTAVA
• Keywords: Double taxation relief

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI R. S. SYAL, AM AND SHRI A. D. JAIN, JM ITA NO. 110/DEL/2012 : ASSTT. YEAR: 2007-08 DEPUTY DIRECTOR OF INCOME TAX, CIRCLE-3(1), INTERNATIONAL TAXATION, NEW DELHI VS M/S JC BAMFORD EXCAVATORS LIMITED, C/O PRICEWATERHOUSE, 11-A, SUCHETA BHAWAN, VISHNU DIGAMBAR MARG, NEW DELHI-110002 (APPELLANT) (RESPONDENT) C. O. NO. 302/DEL/2012 : ASSTT. YEAR: 2007-08 M/S JC BAMFORD EXCAVATORS LIMITED, C/O PRICEWATERHOUSE, 11-A, SUCHETA BHAWAN, VISHNU DIGAMBAR MARG, NEW DELHI-110002 VS DEPUTY DIRECTOR OF INCOME TAX, CIRCLE-3(1), INTERNATIONAL TAXATION, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AABCJ6004D ASSESSEE BY: SHRI G. C. SRIVASTAVA & SHRI SAURABH SRIVASTAVA REVENUE BY: SHRI SANJEEV SHARMA DATE OF HEARING 11.3.2014 DATE OF PRONOUNCEMENT 14.3.2014 ORDER PER R. S. SYAL, AM: 1. THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTI ON OF THE ASSESSEE ARISE OUT OF THE ORDER PASSED BY CIT(A) ON 30.9.2011 IN RELATION TO THE ASSESSMENT YEAR 2007-08. 2. BEFORE PRECEDING WITH THE MATTER IT IS RELEVANT TO MENTION THAT THE CROSS APPEALS OF THE ASSESSEE AS WELL AS THE REVENU E FOR THE ASSESSMENT YEAR 2006-07 WERE ARGUED EXTENSIVELY BY BOTH THE SI DES. THE ISSUE ITA NO. 110/DEL/2012 & CO 302/DEL/2012 JC BAMFORD EXCAVATORS LTD. 2 RAISED IN THE APPEALS FOR THE ASSESSMENT YEAR 2007- 08 WHICH ARE SIMILAR TO THOSE IN APPEALS FOR THE ASSESSMENT YEAR 2006-07 WERE NOT SEPARATELY ARGUED AND THE SUBMISSIONS MADE FOR THE ASSESSMENT YEAR 2006-07 WERE ADOPTED FOR THE ASSESSMENT YEAR 2007-08. WE HAVE PA SSED A SEPARATE DETAILED ORDER FOR THE ASSESSMENT YEAR 2006-07. 3. FOLLOWING THE VIEW TAKEN IN SUCH ORDER FOR THE IMMEDIATELY PRECEDING YEAR, WE OVERTURN THE IMPUGNED ORDER IN S O FAR AS THE DIRECTION OF THE LD. CIT(A) IN HOLDING THAT THE ASS ESSEE DID NOT HAVE A SERVICE P.E IN INDIA, IS CONCERNED. THIS GROUND IS ALLOWED. 4. THE NATURAL CONSEQUENCE OF THE ALLOWING OF TH IS GROUND IS THAT THE AMOUNT ATTRIBUTABLE TO SERVICES RENDERED BY THE EMP LOYEES OF THE FIRST CATEGORY OF THE ASSESSEE WOULD BE CHARGEABLE TO TAX UNDER ARTICLE 7 AND THE AMOUNTS REPRESENTING ROYALTY FOR THE TRANSFER O F IP RIGHTS SIMPLICITOR AND ALSO CONSIDERATION FOR THE SERVICES BY THE EMPLOYEES OF THE SECOND CATEGORY SHALL BE TAXED UNDER ARTICLE 13 (2) OF THE DTAA. 5. SECOND GROUND OF THE REVENUES APPEAL IS AGAINST THE DIRECTION OF THE LD. CIT(A) THAT ROYALTY INCOME OF RS. 92,13,440 /- EARNED BY THE ASSESSEE DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION BE TAXED IN THE SUCCEEDING YEAR. THE FACTS APROPOS THIS GROUND ARE THAT THE ASSESSEE OFFERED A SUM OF RS. 6 8.22 CRORES AS ROYALTY. THE AUDITORS DETERMINED THE CORRECT AMOUNT OF ROYALTY AT RS. 69.14 CRORES. THE DIFFERENCE OF RS. 92,13,440/- WAS OFFERED TO TAX BY THE ASSESSEE IN SUBSEQUENT YEAR, THAT IS, ASSESSME NT YEAR 2008-09. THE ITA NO. 110/DEL/2012 & CO 302/DEL/2012 JC BAMFORD EXCAVATORS LTD. 3 ASSESSING OFFICER HELD THAT SINCE THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THE AMOUNT OF ROYALTY PERT AINED TO THE FINANCIAL YEAR 2006-07, THE FULL AMOUNT AS CERTIFIE D BY THE AUDITORS AT RS. 69.14 CRORES SHOULD BE TAXED IN THE FINANCIAL Y EAR RELEVANT TO THE ASSESSMENT YEAR 2007-08. THE AMOUNT OFFERED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2008-09 WAS TAXED ON PROTECTIVE BAS IS. THE LD. CIT(A) OVERTURNED THE ASSESSMENT YEAR ON THIS POINT BY HOL DING THAT THE LIABILITY FOR ADDITIONAL AMOUNT OF RS. 92.13 LACS C RYSTALLIZED IN THE SUBSEQUENT FINANCIAL YEAR. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE ON THE FACT THAT THE AUDITORS IDENTIFIED THE CORRECT AMOUNT OF ROYALTY AT RS. 69. 14 CRORES AS RELATABLE TO THE YEAR UNDER CONSIDERATION. THE ASSESSEE OBVIO USLY SHORT REFLECTED THIS AMOUNT TO THE EXTENT OF RS. 92.13 LACS. WE AR E UNABLE TO APPRECIATE THE VIEW POINT OF THE LD. CIT(A) THAT THE LIABILITY TOWARDS THIS ADDITIONAL SUM GOT CRYSTALLIZED IN THE SUBSEQUENT YEAR. WHEN T HE ASSESSEE RENDERED SERVICES IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND THE ENTIRE AMOUNT OF RS. 69 .14 CRORES RELATES TO SUCH SERVICES, IT IS BUT NATURAL THAT THE ENTIRE AMOUNT IS CHARGEABLE TO TAX IN THE FINANCIAL YEAR TO WHICH IT PERTAINS. SUC H FINANCIAL YEAR IN THE PRESENT CASE IS THE YEAR RELEVANT TO THE ASSESSMENT YEAR 2007-08. THERE CAN BE NO QUESTION OF ANY CRYSTALLIZATION OF SUCH A DDITIONAL LIABILITY IN THE SUBSEQUENT YEAR WHEN THE SERVICES WERE IN FACT RENDERED IN THE RELEVANT FINANCIAL YEAR AND THERE WAS NO DISPUTE WH ATSOEVER ON THE ITA NO. 110/DEL/2012 & CO 302/DEL/2012 JC BAMFORD EXCAVATORS LTD. 4 CLAIM OR QUANTIFICATION OF THE AMOUNT. WE, THEREFOR E, HOLD THAT THE SUM OF RS. 92.13 LACS SHOULD BE TAXED IN THE YEAR UNDER CONSIDERATION. 7. THE ONLY GROUND RAISED BY THE REVENUE IN ITS CRO SS OBJECTION IS ABOUT INTEREST U/S 234B. THIS GROUND IS SIMILAR TO THAT RAISED FOR THE ASSESSMENT YEAR 2006-07. FOLLOWING THE VIEW TAKEN I N THE APPEAL FOR THE ASSESSMENT YEAR 2006-07 WE ALLOW THIS GROUND. 8. IN THE RESULT, THE CROSS OBJECTION OF THE ASSESS EE IS ALLOWED AND THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/03/2014. SD/- SD/- (A. D. JAIN ) (R. S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 14/03/2014 *SUBODH* COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(APPEALS) 5.DR: ITAT ASSISTANT REGISTRAR