Marsh Ltd., London V. ACIT (International Taxation), New Delhi

ITA 1454/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7949 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 09-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SATPAL GULATI
• Keywords: Principle of natural justice; Additional evidence
• Section: 143(3); 13

Judgement Text

1 ITA NO. 1454/DEL/2017 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE MS SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO. 1454/DEL/2017 (A.Y 2013-14) MARSH LTD., 1, TOWER PLACE WEST, TOWER PLACE, LONDON, ENGLAND. (PAN : AAJCM 0510 E) (APPELLANT) VS ACIT(INTERNATIONAL TAXATION), CIRCLE (2)(2)(1) NEW DELHI ( RESPONDENT) APPELLANT BY SH. K. M. GUPTA, ADV. RESPONDENT BY SHRI SATPAL GULATI, SR. D.R. ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER DATED 03.01.2017 PASSED BY ACIT, CIRCLE 2(2)(1), INTERNATIONAL TAXATION, NEW DELHI (ASSESSING OFFICER) FOR ASSESSMENT YEAR 2013-14 UNDER SECTION 143(3) R.W.S. 144C(13) OF THE INCOME TAX ACT, 1961. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THE LEARNED DISPUTE RESOLUTION PANEL (LD. DRP) AND LEARNED ASSESSING OFFICER (LD. AO') ERRED IN HOLDING THAT RECEIPTS ON ACCOUNT OF BUSINESS SUPPORT SERVICES AND RISK ADVISORY SERVICES BY T E APPELLANT IS IN THE NATURE OF FEES FOR TECHNICAL SERVICES (FTS) WITHIN THE MEANING OF ARTICLE 13 OF DOUBLE TAXATION AVOIDANCE AGREEMENT ENTERED BETWEEN INDIA & U.K (DTAA) WITHOUT APPRECIATING THAT THE SERVICE DOES NOT MAKE AVAILABLE TECHNICAL KNOWLEDGE TO THE RECIPIENT AND HENCE CANNOT BE TAXED IN INDIA. DATE OF HEARING 08.01.2020 DATE OF PRONOUNCEMENT 27.01.2020 2 ITA NO. 1454/DEL/2017 1.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. DRP & LD. AO WHILE HOLDING THAT THE ABOVE MENTIONED RECEIPTS ARE FTS IN NATURE, INCORRECTLY RELIED ON THE NATURE OF SERVICES MENTIONED IN THE SERVICE AGREEMENT PROVIDED BY ANOTHER GROUP ENTITY AND NOT BY THE APPELLANT. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN NOT GRANTING THE CREDIT OF TAXES DEDUCTED AT SOURCE AMOUNTING TO INR 1,37,61,905/-. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. DRP & LD. AO ERRED IN LEVYING INTEREST UNDER SECTIONS 234A, 234B, 234C AND 234D OF THE ACT. 4. THE LD. AO ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 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. 3. THE ASSESSEE IS A TAX RESIDENT OF THE UNITED KINGDOM. DURING THE YEAR UNDER CONSIDERATION, THE COMPANY WAS ENGAGED BY CERTAIN INDIAN INSURANCE COMPANIES TO HELP PLACE REINSURANCE BUSINESS IN THE INTERNATIONAL MARKET. ALL THE ACTIVITIES RELATED SUCH WORK WAS CARRIED OUTSIDE INDIA, PROPOSALS WERE RECEIVED AND NEGOTIATED OVERSEAS; PREMIUM WAS ALSO DIRECTLY RECEIVED OUTSIDE INDIA. THE COMPANY ALSO PROVIDED CERTAIN BUSINESS SUPPORT SERVICES & RISK ADVISORY SERVICES TO MARSH INDIA. DURING THE YEAR UNDER CONSIDERATION THE ASSESSING OFFICER ASKED THE ASSESSEE AS TO WHY THE AMOUNT IN RELATION TO BUSINESS SUPPORT SERVICES & RISK ADVISORY SERVICES SHOULD NOT BE CONSIDERED AS FEES FOR TECHNICAL SERVICES UNDER THE INCOME TAX ACT, 1961 AND UNDER TAX TREATY BETWEEN INDIA & UNITED KINGDOM. THE ASSESSING OFFICER OBSERVED THAT THE SERVICES PROVIDED BY THE ASSESSEE ARE CONSULTANCY IN NATURE AND THE PAYMENTS FALL WITHIN THE DEFINITION OF FEES FOR TECHNICAL SERVICES AVAILABLE IN EXPLANATION-2 TO SECTION 9(1)(VII) OF THE INCOME TAX ACT, 1961. THE CONSIDERATION RECEIVED BY THE ASSESSEE MAKE AVAILABLE EXPERIENCE, SKILL OF THE ASSESSEE TO THE INDIAN COMPANY, ACCORDINGLY, THE PAYMENT IS ALSO COVERED BY 3 ITA NO. 1454/DEL/2017 THE DEFINITION OF FEES FOR TECHNICAL SERVICES AVAILABLE FOR PARAGRAPH 4(C) OF THE ARTICLE -13 OF THE TAX TREATY BETWEEN INDIA AND U.K. ACCORDINGLY, SUCH PAYMENTS ARE MADE BY THE INDIAN COMPANIES, THEREFORE, THE FEES FOR TECHNICAL SERVICES IS DEEMED TO ARISE IN INDIA AS PER PROVISIONS OF ARTICLE 13 AND SUCH FEES FOR TECHNICAL SERVICES IS TAXABLE ON GROSS BASIS. IN LIGHT OF THE SAID FINDINGS, THE ASSESSING OFFICER ASSESSED INCOME OF THE ASSESSEE COMPANY AS UNDER: PARTICULARS AMOUNT IN INR AMOUNT IN INR ASSESSED INCOME INCOME AS PER THE RETURN OF INCOME NIL ADDITION: (I) BUSINESS SUPPORT SERVICES (II) RISK ADVISORY SERVICES 6,80,88,550 7,20,974 6,88,09,524 TOTAL INCOME 6,88,09,524 4. A DRAFT ASSESSMENT ORDER WAS PASSED IN THIS CASE ON 22.03.2016. THE ASSESSEE RAISED OBJECTIONS TO THE DRAFT ORDER BEFORE THE DISPUTE RESOLUTION PANEL (DRP). THE DRP VIDE ORDER DATED 15.12.2016 GAVE CERTAIN DIRECTIONS TO THE ASSESSING OFFICER. THE ASSESSING OFFICER VIDE ORDER DATED 03.01.2017 MADE ADDITION OF RS.6,80,88,550/- TOWARDS BUSINESS SUPPORT SERVICES AND RS.7,20,974/- TOWARDS RISK ADVISORY SERVICES. 5. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE FILED APPEAL BEFORE US. 6. THE LD. AR SUBMITTED THAT THE ASSESSEE FILED CERTAIN ADDITIONAL EVIDENCE WHICH IS CRUCIAL TO DETERMINE THAT THE SERVICES PROVIDED BY THE ASSESSEE WERE NOT FOR TECHNICAL SERVICES. THE LD. AR SUBMITTED THAT THERE ARE CERTAIN EVIDENCES WHICH DUE TO SOME REASON, ASSESSEE COULD NOT FILE BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE DRP. SINCE THESE EVIDENCES WERE NOT BEFORE THE ASSESSING OFFICER, THEREFORE, THE MATTER MAY BE REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER. 7. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE DIRECTIONS OF THE 4 ITA NO. 1454/DEL/2017 DRP. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIALS AVAILABLE ON RECORD. FROM THE PERUSAL OF THE ADDITIONAL EVIDENCE WHICH INCLUDES SERVICES AGREEMENT, IT IS FOUND THAT THESE DOCUMENTS WERE NOT BEFORE THE ASSESSING OFFICER AND ARE VERY VITAL IN DETERMINING WHETHER THE SERVICES PROVIDED BY THE ASSESSEE ARE MAKE AVAILABLE OR NOT AND ARE CHARGEABLE UNDER FEES FOR TECHNICAL SERVICES OR NOT. THEREFORE, WE ARE ADMITTING THE ADDITIONAL EVIDENCES AND REMAND BACK THIS ISSUE IN ENTIRETY TO THE FILE OF THE ASSESSING OFFICER TO TAKE COGNIZANCE OF THESE ADDITIONAL EVIDENCES AND ARRIVED AT A PROPER DECISION AS PER THE LAW. NEEDLESS TO SAY THE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING BY FOLLOWING PRINCIPLE OF NATURAL JUSTICE. 9. IN RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH DAY OF JANUARY, 2020 . SD/- SD/- (PRASHANT MAHARISHI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27/01/2020 PRITI YADAV, SR. PS * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 5 ITA NO. 1454/DEL/2017 DATE OF DICTATION 15 . 01 .20 20 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 20 .01.2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 2 7 .01.2020 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS 2 7 .01.2020 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 2 7 .01.2020 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 2 7 .01.2020 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 2 7 .01.2020 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 2 7 .01.2020 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK