GE Engine Services LLC, Gurgaon V. ACIT, Circle 1(3)(1) Int. Taxation, New Delhi

ITA 1860/DEL/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 9669 (ITAT-DELHI)
• Duration Of Justice: 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2019-2020
• Appeal Filed On: 16-08-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief; FORM 26AS
• Section: 143(3); 234B; 144C; 153

Judgement Text

Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘D’, NEW DELHI Before Sh. Saktijit Dey, Judicial Member Dr. B. R. R. Kumar, Accountant Member ITA No. 1859 & 1860/Del/2022 Asstt. Year : 2018-19 and 2019-20 GE Engine Services LLC, C/o. 5 th Floor, Building-7A, Standard Chartered Building, DKF Cyber City, Phase-III, Gurgaon Vs ACIT, Circle-1(3)(1), International Taxation, New Delhi (APPELLANT) (RESPONDENT) PAN No. AADCG1809R SA No. 290 & 291/Del/2022 (In ITA No. 1859 & 1860/Del/2022) Asstt. Year : 2018-19 and 2019-20 GE Engine Services LLC, C/o. 5 th Floor, Building-7A, Standard Chartered Building, DKF Cyber City, Phase-III, Gurgaon Vs ACIT, Circle-1(3)(1), International Taxation, New Delhi (APPELLANT) (RESPONDENT) PAN No. AADCG1809R Assessee by : Sh. Kanchan Kaushal, CA Ms. Shruti Khimta, AR Revenue by : Sh. Abhishek Kumar, Sr. DR Date of Hearing: 02/09/2022 Date of Pronouncement: 29.09.2022 ORDER Per Dr. B. R. R. Kumar, Accountant Member: These are the appeals filed by the Assessee against the order of the ld ACIT, Circle, International Taxation, Circle-1(1)(1) for Assessment Year 2018-19. 2. Since, the issue involved in both the appeals are identical, they were heard together and are being adjudicated by a common order. Page | 2 3. The Assessee has raised the following grounds of appeal for Assessment Year 2018-19: “1. On the facts and circumstances of the case & in law, the assessment order passed by the Learned Assessing Officer ('Ld. AO') under section 143(3) read with section 144C of the Income-tax Act, 1961 (‘the Act’) is bad in law. 2. On the facts and circumstances of the case & in law, the Ld. Dispute Resolution Panel (DRP) grossly erred in issuing directions amounting to setting aside the issue involved to the file of the Ld. AO in violation of the provisions of Section 1440(8) of the Act. 3. On the facts and circumstances of the case & in law, the Ld. AO erred in passing the final assessment order in pursuance of the directions of the Ld. DRP in violation of the provisions of Section 1440(8) of the Act. 4. On the facts and circumstances of the case & in law, the assessment order is erroneous and bad in law as it was passed on an incorrect understanding of facts and incorrect interpretation of the provisions of law. In doing so, 4.1. the Ld. AO erred in basing the conclusions upon the open domain enquiry which have no link/applicability to the facts of the case. 5. On the facts and circumstances of the case & in law, the Ld. AO/DRP grossly erred in denying the entitlement to the Appellant of the benefit under the India-US DTAA by erroneously holding that the Appellant, being an LLC, is not covered under Article 4 of the India-US DTAA. 6. On the facts and circumstances of the case & in law, the Ld. AO grossly erred in treating the receipt towards performance of offshore aircraft engine repair and overhaul activity by the Appellant as Fee for Included Services (‘FIS’) under the India-US DTAA as well as Fes for technical services (‘FTS’) under Section 9(i)(vii) of the Act. In doing so, 6.1. the Ld. AO erred in contending that the Appellant has made available its technical expertise to the Indian customers Page | 3 6.2. the Ld. AO erred in contending that the Appellant has provided technical training to its Indian customers 6.3. the Ld. AO erred in contending that the Appellant has transferred technical plan and data to the Indian customers 6.4. the Ld. AO erred in not appreciating the fact that no services were rendered in India & none of the employees of the Appellant visited India during the year for providing the services 6.5. the Ld. AO erred in not appreciating the fact that the offshore repair activity involves replacement or refurbishment of parts, sub-parts components, consumables, etc. and no standalone services are rendered to the Indian customers 7. On the facts and in the circumstances of the case, the Ld. AO while taking Form 26AS as a basis for determining the assessed income, has erred in taking an incorrect value of receipt (i.e. INR 5,23,50,93,394) from Jet Airways India Ltd as against value of INR 5,21,78,50,962 appearing in Form 26AS of AY 2018- 19. 8. On the facts and in the circumstances of the case and in law, the Ld. AO erred in levying interest of INR 48,28,707 and INR 24,62,64,057 under section 234A and 234B of the Act, respectively.” 4. Heard the arguments of both the parties and perused the material available on record. 5. Brief facts of the case are that the assessee is a company formed in and tax resident of USA. It is engaged in the business of carrying out engine repair and overhaul activities. Its customers are airline companies which use sophisticated GE engines in their aircrafts. These engines are requires to be handled in a proper manner to ensure their smooth and efficient functioning. The assessee carries out overhaul, repair work, supply of spare parts, Page | 4 inspection/ testing activity, on an offshore basis i.e. in its facilities located outside India. 6. The ld. DRP has passed the order for A.Y. 2019-20 on 21.04.2022 and for A.Y. 2018-19 on 19.04.2022. The issues involved in both the appeals are similar in nature. The ld. DRP while adjudicating the issue of DTAA-FTS/FIS has directed the “ AO to pass a speaking order as regards granting of adequate opportunity to the assessee by confronting it with the facts relied upon by the AO in arriving at her conclusion.” 7. Subsequent to the directions of the ld. DRP, the AO repeated the same position which has been taken in the draft Assessment Order which was a subject matter of ld. DRP. For the sake of ready reference and brevity, the relevant portion of the Assessment Order is reproduced as under: “In para 4.4.2, the directions of the DRP state: “The AO is directed to consider the submissions of the assessee on the issue of nature of services provided by the assessee to its clients in India and pass a speaking order as to whether these services qualify as FTS/FIS under the provisions of the Income Tax Act, 1961 and India-US DTAA.” It is imperative to state here that the directions of the DRP to the undersigned to consider the assessee’s submissions are bound by section 144C(13) of the Income Tax Act, 1961, which states “upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, inconformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 [or section 153B], the assessment without providing any further opportunity of being heard to the assessee, within one month in which such direction is received.” Page | 5 It is to be noted based on the discussion by the Assessing Officer in the Draft Assessment Order that the services are technical in nature and are taxable u/s 9(1)(vii) read with Article 12 of India USA DTAA. Thus, the services are to be considered as FTS/FIS as per the of the Income Tax Act, 1961 as well as according to Article 12(4)(b) of India-USA DTAA.” 8. Thus, we find that the Assessing Officer ignored the directions of the ld. DRP. 9. This is a classic case wherein the directions of the ld. DRP have been circumvented by the Assessing Officer by resorting to provisions of Section 144C(13). While we decline to comment and interfere on the hierarchical structure and discipline of the revenue authorities Viz., the ld. DRP and the AO, it is a fact on record that the directions of the ld. DRP have not been followed by the Assessing Officer. This was due to the fact that the ld. DRP has chosen not to give unambiguous directions to the Assessing Officer. We have contemplated on this issue of remanding the matter to the ld. DRP or to the AO. We find that the ld. DRP and the Assessing Officer are the quasi judicial authority as per the provisions of the Income Tax Act. Remanding the matter to the file will only lengthen the proceedings wherein the AO who is not very clear of the directions choose not to implement the same which in- turn necessitates the AO to refer the matter and seek clarification from the ld. DRP. Hence, we hereby remand the matter back to the ld. DRP to issue a clear implementable direction to the AO. Page | 6 10. In the result, the appeals of the assessee are allowed for statistical purpose. 11. Since, the above appeals of the assessee are decided, the Stay Applications of the assessee are become infructuous and hence dismissed. Order Pronounced in the Open Court on 29/09/2022 . Sd/- Sd/- (Saktijit Dey) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 29/09/2022 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR