DDIT (I.T)-4(2), MUMBAI V. M/S. OWENS CORNING (I) LTD., MUMBAI

ITA 1607/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1123 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: L1
• Next Hearing Date: 03-06-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 04-03-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R C DANDAY
• Assessee Lawyers: H P SUTAR
• Keywords: Double taxation relief; Additional evidence
• Section: 143(3); 143(1); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L MUMBAI BEFORE SHRI P.M. JAGTAP (AM) AND SMT. ASHA VIJAYAR AGHAVAN (JM) ITA NO. 1607/MUM/2008 ASSESSMENT YEAR-2004-05 THE DDIT (IT)-4(2), 133, SCINDIA HOUSE, BALLARD PIER, MUMBAI-400 038 VS. M/S. OWENS CORNING (INDIA)LTD., ALPHA BLDG., 7 TH FLOOR, HIRANANDANI GARDENS, POWAI, MUMBAI-400 076 PAN - AAACO3242R (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI R.C. DANDAY RESPONDENT BY: SHRI NISHANT THAKKAR & SHRI H.P. SUTAR O R D E R PER SMT. ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER DT. 17.12.2007 PASSED BY THE LD. CIT(A)-XXXIII, MUM BAI FOR THE ASSESSMENT YEAR 2004-05. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY FORMED AND INCORPORATED WITH THE LAWS OF THE UNITED STATES OF AMERICA (USA). THE ASSESSEE IS ENGAGED IN PROVIDING SERVICE TO CON SUMERS AND INDUSTRIAL CUSTOMERS WITH BUILDING MATERIALS SYSTEMS AND COMPO SITES SYSTEMS. THE COMPANY OPERATES TWO SEGMENTS. BUILDING MATERIAL S YSTEMS AND COMPOSITES SOLUTIONS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2004-05 ON 29.10.2004 REPORTING TAX ABLE INCOME OF RS. 2,01,67,024/-. THE ASSESSMENT U/S. 143(3) WAS COMP LETED ON 17.11.2006. THE AO HELD THAT THE ASSESSEE IS NOT A RESIDENT OF USA AND DENIED THE BENEFITS OF THE DTAA BETWEEN INDIA-USA T AX TREATY STATING ITA NO.1607 /M/08 2 THAT THE ASSESSEE HAS FAILED TO PROVE THAT IT IS A RESIDENT OF USA AND DETERMINED THE TOTAL INCOME AT RS. 2,01,67,024/- AN D THE WORKING IS GIVEN BELOW: (I) TECHNICAL ENGG. FEES PAID TO OWENS CORNING RS. 29,93,781/- (II) LEASE RENTALS PAID TO OWENS CORNING RS. 1,71 ,73,243/- --------------------- TOTAL INCOME RS. 2,01,67,024/- ============= 3. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD. CIT(A). 4. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE HAS FILED ADDITIONAL EVIDENCE IN ACCORDANCE WITH RULE 46-A AL ONG WITH A LETTER DT. 27.9.2007 IN RESPECT OF ASSESSEES CLAIM THAT IT IS A TAX RESIDENT OF USA AND ENTITLED FOR THE BENEFITS OF THE DTAA. 5. THE SAID ADDITIONAL EVIDENCE ALONG WITH ENCLOSUR ES WAS SENT TO THE AO BY THE LD. CIT(A)FOR HIS COMMENTS WITH REGARD TO THE ADMISSIBILITY AND MERITS OF THE ADDITIONAL EVIDENCE. IN RESPONS E TO THE ABOVE, THE AO HAD SUBMITTED HIS REPORT VIDE LETTER DT. 14.11.2007 . 6. FIRSTLY THE AO STATED AS FOLLOWS: THE ONUS WAS ON THE ASSESSEE TO SUBMIT ANY EVIDENC E THAT IT MAY DEEM FIT, SO AS TO SUBSTANTIATE ITS CLAIM OF RE SIDENCY AND HENCE THE SUBMISSION OF THE ASSESSEE THAT IT WAS NEVER AS KED TO SUBMIT THE TAX RESIDENCY CERTIFICATE IS NOT CORRECT. 7. WITH RESPECT TO THE MERIT OF TAX RESIDENCY CERTI FICATE THE AO OBSERVED AS FOLLOWS: UPON PERUSAL OF THE ALLEGED TAX RESIDENCY CERTIFIC ATE, IT IS SEEN THAT THE CERTIFICATE DT. 22.7.2005, HAS BEEN C ERTIFIED BY THE TAX ITA NO.1607 /M/08 3 AUTHORITIES OF USA FOR BELGIUM ONLY. THE CERTIFICA TE IS, THEREFORE, IRRELEVANT FOR THE PURPOSE OF DETERMINATION OF RESI DENCY, THE PRIMARY PARAMETER IS TO SEE WHETHER THE RECEIPT IN QUESTION IS SUBJECT TO TAX IN THE PARENT COUNTRY OR NOT. THUS, THE RESIDENCY CERTIFICATE FOR BELGIUM WOULD BE IRRELEVANT FOR THE PURPOSE OF DETE RMINATION OF RESIDENCY IN INDIA. THUS, IT IS SUBMITTED THAT THE TAX RESIDENCY CERTIFICATE, SUBMITTED BY THE ASSESSEE IS LIABLE TO BE REJECTED, BOTH ON TECHNICAL GROUND AS VIOLATION OF RULE 46A AND ALSO ON MERIT. 8. THE LD. CIT(A) HELD AS FOLLOWS: I HAVE GONE THROUGH THE ISSUE CAREFULLY. THE IMP ORTANT QUESTION HERE IS WHETHER THE APPELLANT IS ENTITLED FOR THE BENEFITS OF DOUBLE TAXATION AVOIDANCE AGREEMENT BET WEEN INDIA AND USA. THE APPELLANT SUBMITS THAT THE AO N EVER ASKED TO FILE THE TAX RESIDENCY CERTIFICATE. THE A O ON THE OTHER HAND SAYS THAT THE APPELLANT WAS ASKED TO GIVE A NO TE ON TAXABILITY AND WHY THE INCOME SHOULD NOT BE TAXABLE AS PER DOMESTIC ACT AND THE APPELLANT HAS NOT FURNISHED TH E TAX RESIDENCY CERTIFICATE. THE WHOLE ISSUE IN APPEAL I S WHETHER THE APPELLANT IS ENTITLED FOR THE BENEFITS OF DTAA OR NOT AND TO DISPOSE OFF THIS SUBSTANTIAL ISSUE IT IS VERY MUCH NECESSARY TO LOOK INTO THE TAX RESIDENCY CERTIFICATE. IN VIEW O F THIS, I ADMIT THE EVIDENCE FILED BY THE APPELLANT UNDER RULE 46A( 4) OF THE I.T. RULES, 1962. 9. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), REVENU E IS IN APPEAL BEFORE US. 10. THE LD. DEPARTMENTAL REPRESENTATIVE SHRI R.C. D ANDAY CONTENDED THAT THE LD. CIT(A) HAD WRONGLY GRANTED THE BENEFIT AVAILABLE TO THE ASSESSEE UNDER THE INDIA- USA TAX TREATY ON THE PRE MISE THAT THE ASSESSEE IS COMING WITHIN THE DEFINITION OF RESIDEN T AS DEFINED IN ARTICLE IV OF THE INDIA- USA TAX TREATY, SINCE THE CERTIFI CATE PRODUCED BEFORE THE LD. CIT(A) CLEARLY STATED THAT THE SAME IS CERTIFIE D FOR BELGIUM. 11. THE LD. COUNSEL FOR THE ASSESSEE SHRI NISHANT T HAKKAR PLACED BEFORE US THE TAX RESIDENCY CERTIFICATE OF UNITED STATES OF AMERICAL, ITA NO.1607 /M/08 4 WHICH CERTIFICATE WAS NOT PRODUCED BEFORE THE LOWER AUTHORITIES. THE CERTIFICATE READS AS FOLLOWS: I CERTIFY THAT THE ABOVE-NAMED CORPORATION IS A U. S CORPORATION, AND A RESIDENT OF THE UNITED STATES OF AMERICA FOR PURPOSES OF U.S. TAXATION. 12. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMIT TED COPY OF AGREEMENT FOR AVOIDANCE OF DOUBLE TAXATION OF INCOM E WITH USA AND TOOK US THROUGH ARTICLE -4 DEALS WHICH READS AS FO LLOWS: ARTICLE -4 RESIDENCE-1. FOR THE PURPOSES OF THIS CONVENTION, THE TERM RESIDENT OF A CONTRACTING STA TE MEANS ANY PERSON WHO, UNDER THE LAWS OF THAT STATE, IS LIABLE TO TAX THEREIN BY REASON OF HIS DOMICILE, RESIDENCE, CITIZENSHIP, PLA CE OF MANAGEMENT, PLACE OF INCORPORATION OR ANY OTHER CRITERION OF A SIMILAR NATURE. 13. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT TH AT ARTICLE 4 OF THE TREATY BETWEEN USA AND BELGIUM IS IDENTICAL IN WORD ING AS THAT OF ARTICLE -4 OF TREATY BETWEEN USA AND INDIA, W.R.T. RESIDENCE. 14. THE LD. COUNSEL PRAYED FOR ADMISSION OF ADDITIO NAL EVIDENCE. THE LD. COUNSEL RELIED ON THE DECISION IN THE CASE OF CIT VS SMT. PRABHADEVI S. SHAH (231 ITR 01)(SC) WHEREIN IT HAS BEEN HELD AS FOLLOWS: ON A PLAIN READING OF RULE 46A OF THE I.T. RULES, 1962, IT IS CLEAR THAT THE RULE IS INTENDED TO PUT FETTERS ON T HE RIGHT OF THE ASSESSEE TO PRODUCE BEFORE THE APPELLATE ASSTT. COM MISSIONER ANY EVIDENCE, WHETHER ORAL OR DOCUMENTARY, OTHER TH AN THE EVIDENCE PRODUCED BY HIM DURING THE COURSE OF THE PROCEEDINGS BEFORE THE INCOME TAX OFFICER, EXCEPT I N THE CIRCUMSTANCES SET OUT THEREIN. IT DOES NOT DEAL WI TH THE POWERS OF THE APPELLATE ASSTT. COMMISSIONER TO MAKE FURTHER ENQUIRY OR TO DIRECT THE INCOME-TAX OFFICER TO MAKE FURTHER ENQUIRY AND TO REPORT THE RESULT OF THE SAME TO HIM . THIS POSITION HAS BEEN MADE CLEAR BY SUB-RULE (4) OF RUL E 46A WHICH SPECIFICALLY PROVIDES THAT THE RESTRICTIONS PLACED ON THE PRODUCTION OF ADDITIONAL EVIDENCE BY THE APPELLANT WOULD NOT AFFECT THE POWERS OF THE APPELLATE ASSTT. COMMISSIO NER TO CALL ITA NO.1607 /M/08 5 FOR THE PRODUCTION OF ANY DOCUMENT OR THE EXAMINATI ON OF ANY WITNESS TO ENABLE HIM TO DISPOSE OF THE APPEAL. 15. THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT T HE LD. CIT(A)S ORDER IS TO BE UPHELD. HE ALSO PRODUCED THE ASSESS MENT ORDER FOR THE ASSESSMENT YEAR 2006-07, TAX RESIDENCY CERTIFICATE FOR THE YEAR ENDED 2007, INTIMATION UNDER 143(1) FOR THE A.Y. 2007-08 AND ORDER U/S. 154 FOR THE A.Y. 2007-08 AND SUBMITTED THAT THE DOCUMEN TS/ORDER SHOULD ESTABLISH THAT THE ASSESSEE IS A RESIDENT OF USA. 16. WE ADMIT THE ADDITIONAL EVIDENCE IN THE PRESENT APPEAL UNDER THE PROVISIONS OF RULE 29 OF THE APPELLATE TRIBUNAL RUL ES, 1963. 17. IN THE CASE OF ABHAY KUMAR SHROFF 63 ITD 144 IT HAS BEEN HELD AS FOLLOWS: IT WAS THAT THE ASSESSEE AS A MATTER OF RIGHT COUL D NOT FILE OR FILED THEM BEFORE THE TRIBUNAL AS A MATTER OF COUR SE. IF THE ASSESSEE PRODUCES SOME DOCUMENTS AT THE APPROPRIATE TIME, THEY HAVE TO BE TAKEN INTO CONSIDERATION SUBJECT OF COURSE TO ALL JUST EXCEPTIONS, SUCH AS THEIR RELEVANCE, ETC. IF NOT DONE AT THE ASSESSMENT STAGE, THE ADMISSION OF DOCUMENTS HA S TO BE GOVERNED BY RULE 46A OF THE I.T. RULES, 1962, IF P RODUCED FOR THE FIRST TIME BEFORE THE FIRST APPELLATE AUTHORIT Y. HAVING MISSED THE BUS AND THE MATTER HAVING TRAVELLED TO T HE TRIBUNAL, THE ADMISSION OF DOCUMENTS IS TO BE GOVER NED BY RULE 29 OF THE APPELLATE TRIBUNAL RULES. HENCE, IF THE DOCUMENTS SOUGHT TO BE ADMITTED EVEN AT THE SECOND APPELLATE STAGE ARE OF A NATURE AND QUANTITATIVELY SUCH THAT THEY RENDER ASSISTANCE TO THE TRIBUNAL IN PASSING ORDERS OR A RE REQUIRED TO BE ADMITTED FOR ANY OTHER SUBSTANTIAL CAUSE, I T WOULD RATHER BE THE DUTY OF THE TRIBUNAL TO ADMIT THEM. THEREFORE, IF THE RECEIPT OR ADMISSION OF ADDITIONAL EVIDENCE IS VITAL AND ESSENTIAL FOR THE PURPOSE OF CONSIDERATION OF THE SUBJECT MATTER OF APPEAL AND TO ARRIVE AT A FINAL AND ULTIM ATE DECISION, THE TRIBUNAL IS AMPLY EMPOWERED TO ADMIT ADDITIONAL EVIDENCE UNDER RULE 29. THEREFORE, THE TRIBUNAL HAD TO ADMI T ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE SINCE THAT WAS VI TAL AND ESSENTIAL FOR RENDERING JUSTICE AND IN DECIDING APP EALS. ITA NO.1607 /M/08 6 HOWEVER, IT WAS NECESSARY TO GIVE THE DEPARTMENT A REASONABLE OPPORTUNITY OF REBUTTING IT ACCORDING TO THE PRINCIPLE OF NATURE JUSTICE AND FOR THAT PURPOSE TH E MATTER WAS RESTORED TO THE FILE OF THE AO. 18. WE THEREFORE ADMIT THE ADDITIONAL GROUND AND RE MIT THE MATTER BACK TO THE FILE OF THE AO TO EXAMINE THE ADDITIONA L EVIDENCE FILED AND PASS THE ORDERS AFTER GIVING AN ADEQUATE OPPORTUNIT Y TO THE ASSESSEE TO BE HEARD. 19. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 16 TH DAY OF JULY, 2010 SD/- SD/- (P.M. JAGTAP ) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 16 TH JULY, 2010 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR L BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO.1607 /M/08 7 DATE INITIALS 1 DRAFT DICTATED ON: 14.7.2010 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 14.7.2010 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: _________ ______ 9. DATE OF DISPATCH OF ORDER: _________ ______