JACOBS UK LIMITED, MUMBAI V. DCIT (IT) - 3 (1)(1), MUMBAI

ITA 1716/MUM/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1731 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2014-2015
• Appeal Filed On: 22-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Application of stay; Additional evidence; Corroborative evidences
• Section: 139(1); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI M. BALAGANESH , ACCOUNTANT MEMBER ITA NO. 1716 / MUM . /201 9 ( ASSESSMENT YEAR : 20 1 4 15 ) JACOBS U.K. LIMITED 14 TH FLOOR, THE RUBY 29, SENAPATI BAPAT MARG DADAR (W), MUMBAI 400 028 PAN AACCJ3162D . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION CIRCLE 3(1)(1), MUMBAI . RESPONDENT S.A. NO.270/MUM./2019 ARISING OUT OF ITA NO. 1716 /MUM. /2019 ( ASSESSMENT YEAR : 20 14 15 ) JACOBS U.K. LIMITED 14 TH FLOOR, THE RUBY 29, SENAPATI BAPAT MARG DADAR (W), MUMBAI 400 028 PAN AACCJ3162D . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION CIRCLE 3(1)(1), MUMBAI . RESPONDENT REVENUE BY : SHRI S. AMBUSELVAN ASSESSEE BY : SHRI R. MURALIDHAR DATE OF HEARING 16 .09.2019 DATE OF ORDER 06.12.2019 2 MINDSET ESTATES PVT. LTD. O R D E R PER SAKTIJIT DEY. J.M. TH E CAPTIONED APPEAL HAS BEEN FILED BY THE ASSESSEE ASSAILING THE ORDER DATED 22 ND FEBRUARY 2019, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 5 7 , MUMBAI, FOR THE ASSESSMENT YEAR 20 1 4 1 5 . ITA NO.1716/MUM./2019 ASSESSEES APPEAL 2. IN GROUND NO.1, THE ASSESSEE HAS CHALLENGED THE ADDITION OF ` 4,45,93,493, RECEIVED THROUGH REIMBURSEMENT OF EXPENSES AS FEE FOR TECHNICAL SERVICES. 3. BRIEF FACTS ARE, THE ASSESSEE , A FOREIGN COMPANY , IS A TAX RESIDENT OF UNITED K INGDOM(UK) . THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING ENGINEERING SERVICES. F OR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 28 TH NOVEMB ER 2014 DECLARING NIL INCOME. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ON VERIFYING THE MATERIAL ON RECORD FOUND THAT DURING THE YEAR UNDER CO NSIDERATION, THE ASSESSEE HAD RECEIVED AN AMOUNT OF ` 4,45,93,498, FROM JACOBS ENGINEERING INDIA PVT. LTD. (JEIPL) TOWARDS REIMBURSEMENT OF EXPENSES. STATING THAT THE REIMBURSEMENT OF EXPENSES WAS RECEIVED ON COST TO COST BASIS WITHOUT ANY MARK UP, THE ASS ESSEE CLAIMED IT AS NOT TAXABLE IN INDIA. WHILE VERIFYING ASSESSEES 3 MINDSET ESTATES PVT. LTD. CLAIM, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO FURNISH THE DETAILS OF SUCH EXPENSES AND ALSO TO EXPLAIN WHY THE PAYMENT SHOULD NOT BE TREATED AS FEE FOR TECHNICAL SERVICE S (FTS) / FEE FOR INCLUDED SERVICES (FIS). IN REPLY, IT WAS SUBMITTED THAT OUT OF THE REIMBURSEMENT OF EXPENSES AGGREGATING TO ` 6,68,30,679, THE ASSESSEE HAS OFFERED AN AMOUNT OF ` 2,22,37,186 TO TAX IN INDIA AND HAS NOT OFFERED THE BALANCE AMOUNT AS IT IS NOT TAX ABLE IN INDIA. IN FURTHER SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER, THE ASSESSEE FURNISHED MORE DETAILS RELATING TO THE PAYMENT RECEIVED AND SUBMITTED THAT THE AMOUNT RECEIVED BEING PURELY IN THE NATURE OF REIMBURSEMENT ON COST TO COST BASIS WITHOUT A NY MARK UP , CANNOT BE TREATED AS FTS/FIS. THE ASSESSING OFFICER, HOWEVER, DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE. HE OBSERVED , THE AMOUNT OF ` 4,45,93,493 RECEIVED FROM JEIPL WAS STATED TO BE REPRESENTING THE AMOUNT OF VAT PAID IN UK BY THE ASSESSE E AS PER UK VAT LAWS ON TOWARDS SERV ICES RENDERED BY JEIPL TO ITS UK CLIENTS. IT WAS SUBMITTED , THE AFORESAID PAYMENT WAS MADE BY THE ASSESSEE ON BEHALF OF JEIPL FOR ADMINISTRATIVE CONVENIENCE WHICH WAS REIMBURSED BY JEIPL. THE ASSESSING OFF ICER OBSERVED , THE CLAIM OF THE ASSESSEE IS NOT ACCEPTABLE AS THE ASSESSEE FAILED TO SUBSTANTIATE THE GENUINENESS OF SUCH CLAIM BY FURNISHING THE DETAILS AND NATURE OF SERVICE PROVIDED TOWARDS SUCH PAYMENT. THE ASSESSING OFFICER OBSERVED , AS PER THE EXISTI NG AGREEMENT BETWEEN THE ASSESSEE AND JEPIL, ALL PAYMENTS RECEIVED ARE 4 MINDSET ESTATES PVT. LTD. OF THE NATURE OF FTS/ROYALTY. HE OBSERVED , NO DETAILS/ EVIDENCES WERE FURNISHED BY THE ASSESSEE WHICH CAN PROVE THAT THE ASSESSEE HAD INCURRED VAT PAYME NT ON BEHALF OF JEIPL IN U K. THUS, ULTIMATELY, THE ASSESSING OFFICER TREATED THE PAYMENT RECEIVED FROM JEIPL AS ROYALTY/ FTS AND ADDED TO THE INCOME OF THE ASSESSEE. THOUGH , THE ASSESSEE CHALLENGED THE AFORESAID ADDITION BEFORE LEARNED COMMISSIONER (APPEALS), HOWEVER, IT WAS UNSUCCESSFUL . 4. DRAWING OUR ATTENTION TO THE SUBMISSIONS MADE BEFORE LEARNED COMMISSIONER (APPEALS), THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , LEARNED COMMISSIONER (APPEALS) HAS COMPLETELY MISCONCEIVED THE FACTS WHILE OBSERVING THAT THE ASSESSEE HAD FILED ADDITIONA L EVIDENCE WITHOUT MAKING ANY APPLICATION FOR THEIR ADMISSION. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ASSESSEE HAS NOT FURNISHED ANY ADDITIONAL EVIDENCE BEFORE THE FIRST APPELLATE AUTHORITY WHICH WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER . HE SUBMITTED , ONLY THOSE EVIDENCES WHICH WERE FURNISHED BEFORE THE ASSESSING OFFICER WERE FILED BEFORE LEARNED COMMISSIONER (APPEALS). HE SUBMITTED , WITHOUT PROPERLY VERIFYING ASSESSEES SUBMISSIONS AND FACTS AND MATERIAL ON RECORD, LEARNED COMMISSIONER (APPEALS) HAS SUSTAINED THE ADDITION ON FACTUAL MISCONCEPTION. HE SUBMITTED , THOUGH, THE ASSESSEE HAS FILED A APPLICATION UNDER SECTION 154 OF THE ACT BEFORE LEARNED COMMISSIONER (APPEALS) POINTING OUT THE AFORESAID MISTAKE IN HER ORDER, HOWEVER, THE SAID APPLICATION IS STILL PENDING. 5 MINDSET ESTATES PVT. LTD. THUS, HE SUBMITTED , THE ISSUE MAY BE RESTORED BACK TO THE ASSESSING OFFICER FOR DE NOVO ADJUDICATION AFTER CONSIDERING THE EVIDENCES FILED BY THE ASSESSEE. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECO RD. AS COULD BE SEEN FROM THE FACTS EMANATING FROM RECORD , BEFORE THE ASSESSING O FFICER ASSESSEE HAS CLAIMED THAT THE AMOUNT OF ` 4,45,93,493, RECEIVED BY THE ASSESSEE FROM JEIPL IS REIMBURSEMENT OF EXPENSES ON COST TO COST BASIS. THE ASSESSEE HAS FURTHER EXPLAINED THAT IT HAS PAID VAT ON BEHALF OF JEIPL UNDER THE UK VAT LAWS TOWARDS SERVICES RENDERED BY JEIPL IN U K. IT IS OBSERVED , THE ASSESSING OFFICER HAS REJECTED THE AFORESAID CLAIM OF THE ASSESSEE ALLEGING NON FURNISHING OF SUPPORTING EVIDENCE. HOWEVER , IT IS EVIDENT , THE ASSESSING OFFICER HAS NOT GIVEN A CLEAR CUT FINDING AS TO WHETHER THE AMOUNT RECEIVED BY THE A SSESSEE IS IN THE NATURE OF FTS OR ROYALTY. THE ASSESSING OFFICER CERTAINLY CANNOT TREAT THE PAYMENT MADE BOTH AS FTS AND ROYALTY. IN ANY CASE OF THE MATTER, THE CLAIM OF THE ASSESSEE THAT THE PAYMENT RECEIVED BY IT IS IN THE NATURE OF COST TO COST REIMBURSEMENT TOWARDS VAT P AID ON BEHALF OF THE JEIPL IN UK REQUIRES FACTUAL VERIFICATION. IF THE ASSESSEE THROUGH PROPER DOCUMENTARY EVIDENCES C AN ESTABLISH THIS FACT, THEN , THERE IS NO REASON WHY ITS CLAIM SHOULD NOT BE ACCEPTED. NOTABLY, LEARNED COMMISSIONER (APPEALS) WHILE SUSTAINING THE ADDITION HAS OBSERVED THAT THE ASSESSEE HAS FILED 6 MINDSET ESTATES PVT. LTD. CERTAIN ADDITIONAL EVIDENCES WITHOUT MAKING ANY APPLICATIO N FOR ADMISSION OF SUCH EVIDENCES. TO COUNTER THE AFORESAID OB SERVATION OF LEARNED COMMISSIONER (APPEALS), THE LEARNED AUTHORISED REPRESENTATIVE HAS ASSERTED BEFORE US THAT NO ADDITIONAL EVIDENCE, WHATSOEVER , WAS FILED. IN FACT, OUR ATTENTION HAS BEEN DRAW N TO APPLICATION DATED 18 TH MARCH 2019, PURPORTEDLY FILED UNDER SECTION 154 OF THE ACT BEFORE LEARNED COMMISSIONER (APPEALS) SEEKING RECTIFICATION OF THE ORDER. IT IS SUBMITTED BEFORE US THAT THE SAID APPLICATION IS STILL PENDING. THEREFORE, CONSIDERING TH E SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE IN THE CONTEXT OF FACTS AND MATERIAL ON RECORD, WE ARE INCLINED TO RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR DE NOVO ADJUDICATION AFTER CONSIDERING THE EVIDENCES FILED/ TO BE FILED BY THE ASSESSEE TO DEMONSTRATE THAT THE PAYMENT RECEI VED IS NOT IN THE NATURE OF FTS/ ROYALTY AND IS ONLY REIMBURSEMENT OF EXPENDITURE ON COST TO COST BASIS. NEEDLESS TO MENTION, THE ASSESSING OFFICER MUST AFFORD REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE DECIDING THE ISSUE. GROUNDS NO.1 TO 6, ARE ALLOWED FOR STATISTICAL PURPOSES. 6. I N GROUNDS NO.7 AND 8, THE ASSESSEE HAS CHALLENGED LEVY OF INTEREST UNDER SECTION 234A OF THE ACT. 7. IT IS THE SAY OF THE ASSESSEE THAT SINCE THE RETURN OF INCOME WAS FILED WITHI N THE DUE DATE AS PRESCRIBED UNDER SECTION 139(1) OF THE ACT, 7 MINDSET ESTATES PVT. LTD. THERE IS NO QUESTION OF LEVY OF INTEREST UNDER SECTION 234A OF THE ACT. IN OUR VIEW, THE AFORESAID ISSUE ALSO NEEDS RE CONSIDERATION BY THE ASSESSING OFFICER. ACCORDINGLY, WE DIRECT THE ASSESSIN G OFFI CER TO EXAMINE ASSESSEES CLAIM/ CONTENTION WITH REGARD TO LEVY OF INTEREST UNDER SECTION 234A OF THE ACT. 8. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. S. A NO. 270 /MUM./2019 9. IN VIEW OF OUR DECISION IN ASSESSEES APPEAL AS AFORESAID, THE STAY APPLICATION HAVING BECOME INFRUCTUOUS IS DISMISSED. 10. IN THE RESULT, STAY APPLICATION IS DISMISSED. ORDER PRONOUNCED IN THE OPEN C OURT ON 06.12.219 SD/ - M. BALAGANESH ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 06.12. 2019 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI