AGFA GEVAERT NV, MUMBAI V. DCIT (IT)1(1)(1), MUMBAI

ITA 1920/MUM/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0843 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 28-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 244A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI N.K. PRADHAN , HON'BLE ACCOUNTANT MEMBER ITA NO. 1920 /MUM/201 6 (A.Y: 2012 - 13) M/S. AGFA GEVAERT NV C/O. DELOITTE HASKINS & SELLS LLP TOWER 3, 27 TH FLOOR TO 32 ND FLOOR, INDIA BULLS FINANCIAL CENTRE, ELPHINSTONE MILLS COMPOUND, SENAPATI BAPAT MARG, MUMBAI 400 013 PAN: AAKCA 6821 A V. D .C.I.T (INTL. TAXATION) - 1(1) ( 1 ) ROOM NO . 117, 1 ST FLOOR, SCINDIA HOUSE, BALLARD ESTATE, MUMBAI - 400 038 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI GIRISH DAVE DEPARTMENT BY : SHRI SAMUEL DARSE DATE OF HEARING : 10 .09 .2018 DATE OF PRONOUNCEMENT : 30 .11 .2018 O R D E R PER C. N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE D ISPUTE RESOLUTION PANEL 1, MUMBAI [HEREINAFTER IN SHORT DRP] PASSED U/S. 144C(5) OF THE INCOME - TAX ACT, 1961 DATED 22.12.2015. 2. THE ASSESSEE HAS RAISED FOL LOWING GROUNDS IN ITS APPEAL: - 1. REMUNERATION RECEIVED FROM AGFA HEALTHCARE INDIA PVT. LTD. [AHIPL] TAXED AS INCOME IN HANDS OF THE APPELLANT 2 ITA NO.1920/MUM/2016 (A.Y: 2012 - 13) M/S. AGFA GEVAERT NV 1.1 AS DIRECTED BY HON'BLE DISPUTE RESOLUTION PANEL [DRP], THE LEARNED DCIT ERRED IN TAXING AN AMOUNT OF RS. 56,08,850 RECEIVED BY THE APPELLANT FR OM ITS INDIAN SUBSIDIARY NAMELY AHIPL. 1.2 THE HON'BLE DISPUTE RESOLUTION PANEL [DRP] ERRED IN HOLDING THAT THE PAYMENTS RECEIVED BY THE APPELLANT ARE IN RELATION TO USE OF COMPUTER SOFTWARE OR USE OF THE PROCESS OR FOR RENDERING SERVICES IN CONNECTION WIT H THESE ITEMS AND HENCE, TAXABLE AS ROYALTIES IN VIEW OF THE PROVISIONS OF SUB CLAUSE (I) AND SUB CLAUSE (VI) ANY READ WITH EXPLANATION 4 TO CLAUSE (VI) OF SUB SECTI ON (1) OF SECTION 9 OF THE ACT. 1.3 THE HON'BLE DRP/DCIT ERRED IN NOT PROVIDING THE OBSERVATIONS AS TO HOW TAX REMUNERATION RECEIVED FROM AHIPL IS TAXABLE AS ROYALTY UNDER INDIA - BELGIUM TAX TREATY. 1 .4 THE HON'BLE DRP/DCIT ERRED IN NOT GRANTING AN OPPORTUNITY OF BEING HEARD OR MAKING SUBMISSIONS REGARDING WHY THE REMUNERATION RECEIVED B Y THE APPELLANT FROM AHIPL IS NOT ROYALTIES. 1.5 WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED DCIT ERRED IN LEVYING TAX AT RATE OF 10.3% (INCLUDING EDUCATION CESS AT RATE OF 3%) UNDER SECTION 115A OF THE ACT AS AGAINST THE BENEFICIAL RATE OF 10% PROVIDED IN THE INDIA - BELGIUM TAX TREATY. 2. GRANT OF INTEREST UNDER SECTION 244A 2.1 THE LEARNED DCIT ERRED IN GRANTING SHORT INTEREST OF .65,280/ - ON REFUND PAYABLE TO APPELLANT UNDER SECTION 244A OF THE ACT. 3. AT THE OUTSET , LD. COUNSEL FOR THE ASSESSEE SHRI GIRISH DAVE SUBMITTED THAT IN THIS CASE DRAFT ASSESSMENT ORDER WAS PASSED PROPOSING TO TAX THE REMUNERATION RECEIVED BY THE ASSESSEE FROM INDIAN SUBSIDIARY AGFA HEALTHCARE INDIA PVT. LTD [ AHIPL] ON THE SERVICES RENDERED P URSUANT TO SERVICES AGREEMENT IS IN THE NATURE OF FEES FOR TECHNICAL SERVICES AND ACCORDINGLY THE ASSESSING OFFICER TREATED THE AMOUNT RECEIVED BY THE ASSESSEE FROM AHIPL IS ON ACCOUNT OF TECHNICAL SERVICES RENDERED TO THE INDIAN SUBSIDIARY AS TAXABLE U/S. 9(1)(VIII) AND ALSO AS PER ARTICLE 12(3)(B) OF DT A A BETWEEN INDIA AND BELGIUM. 4. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT OBJECTIONS WERE FILED BEFORE DRP CONTENDING THAT THE SERVICES RENDERED TO AHIPL BY THE 3 ITA NO.1920/MUM/2016 (A.Y: 2012 - 13) M/S. AGFA GEVAERT NV ASSESSEE ARE NOT IN THE NATURE OF FEES FO R TECHNICAL SERVICES. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE DRP ACCEPTED THAT THE ASSESSEE IS ONLY PROVIDING USERS AN ACCESS TO SERVICES AND NO TECHNICAL KNOWLEDGE OR EXPERTISE IS MADE AVAILABLE TO THE USERS OF THE SERVICES AND T HEREFORE REMUNERATION RECEIVED BY THE ASSESSEE IN RELATION TO THE SERVICES RENDERED WILL NOT QUALIFY AS FEES FOR TECHNICAL SERVICES UNDER ARTICLE 12(3)(B) OF INDIA BELGIUM TAX TREATY R.W. CLAUSE (1) OF THE PROTOCOL TO THE IN DIA - BELGIUM TAX TREATY AND ARTICLE 13(4) OF THE INDIA - UK TAX TREATY. 5. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE DRP HAVING ACCEPTED THAT THE ASSESSEE IS NOT PROVIDING ANY TECHNICAL SERVICES AND THE AMOUNT RECEIVED FROM AHIPL IS NOT FOR ANY FEES FOR TECHNICAL SERVICES, H OWEVER, HELD THAT T HE PAYMENTS ARE IN RELATION TO USE OF COMPUTER SOFTWARE OR USE OF PROCESS OR FOR REND ER ING SERVICES IN CONNECTION WITH THE VARIOUS ITEMS AND THEREFORE IN VIEW OF THE PROVISION OF SUB CLAUSE ( I) AND SUB CLAUSE (VI ) R.W. EXPLANATION 4 TO CLAUSE (VI ) OF SUB SECTION 1 OF SECTION 9, IT WAS HELD THAT THE PAYMENT RECEIVED BY THE ASSESSEE ARE TAXABLE AS ROYALTY. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHILE HOLDING SO NO OPPORTUNITY HAS BEEN GIVEN TO THE ASSESSEE BY DRP TO SUBMIT ITS OBJECTION AS TO WHY THE PAYMENTS RECEIVED BY THE ASSESSEE FOR THE SERVICES DO NOT FALL UNDER ROYALTY . T HEREFORE , LD. 4 ITA NO.1920/MUM/2016 (A.Y: 2012 - 13) M/S. AGFA GEVAERT NV COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ORDER PASSED BY THE DRP WITHOUT GIVING AN OPPORTUNIT Y TO PUT - FORTH ITS CONTENTIONS IS IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. 6. FURTHER, THE LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ORDER PASSED BY THE TRIBUNAL FOR THE ASSES SMENT YEAR 2014 - 15 IN ITA.NO. 6740/MUM/2017 DATED 31.08.2010 AND SUBMITTED THAT SIMILAR ISSUE WAS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER BY THE TRIBUNAL AS THE LOWER AUTHORITIES HAVE NOT PROVIDED ADEQUATE OPPORTUNITY TO THE ASSESSEE TO REBUT THE CONTENTION S AND T HEREFORE HE PLEADED THAT THE ISSUE IN APPE AL FOR THE ASSESSMENT YEAR UNDER CONSIDERATION MAY ALSO BE RESTORED TO THE FILE OF ASSESSING OFFICER FOR D ENOVO ADJUDICATION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . 7. LD. DR HAS NO SERIOUS OBJECTION IN RESTORING THE MATTER BACK T O THE FILE OF THE ASSESSING O FFICER FOR D ENOVO ADJUDICATION. 8. ON HEARING BOTH THE PARTIES AND PERUSING THE ORDERS OF THE ASSESSING OFFICER AND THE DRP, W E FIND THAT THE ASSESSING OFFICER TREATED THE PAYMENT RECEIVED BY THE ASSESSEE FOR THE SERVICES RENDERED TO AHIPL AS FEES FOR TECHNICAL SERVICES AND THE DRP HELD THAT THE SAID AMOUNTS DO NOT FALL UNDER FEES FOR TECHNICAL SERVICES. HOWEVER, IT WAS HELD THA T THE SAID REMUNERATION RECEIVED BY ASSESSEE MAY FALL UNDER ROYALTY. THE DRP FAIL ED TO GIVE SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO SUBMIT ITS OBJECTION S 5 ITA NO.1920/MUM/2016 (A.Y: 2012 - 13) M/S. AGFA GEVAERT NV AS TO WHY THE SAID PAYMENTS DO NOT FALL UNDER ROYALTY. WE ALSO FIND THAT FOR THE ASSESSMENT YEAR 2 014 - 15 THE TRIBUNAL RESTORED THE ISSUE OF WHETHER THE AMOUNT RECEIVED TOWARDS INFORMATION AND COMMUNICATION SERVICES (ICS) BY THE ASSESSEE FROM AHIPL WOULD FALL UNDER THE DEFINITION OF ROYALTY , HAS BEEN RESTORED TO THE FILE ASSESSING OFFICER FOR D ENOVO ADJUDICATION AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THEREFORE, KEEPING IN VIEW THE ORDERS PASSED BY THE LOWER AUTHORITIES AND THE TRIBUNAL WE RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WHO SHALL EXAMINE THE SAME AFR ESH IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9. GROUND NO.2 OF GROUNDS OF APPEAL IS WITH RESPECT TO GRANTING OF SHORT INTEREST U/S. 244A OF THE ACT. THIS GROUND IS RESTORED TO THE FILE OF ASSESSING OFFICER WITH A DI RECTION TO COMPUTE THE INTEREST IN ACCORDANCE WITH LAW, AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THE 30 TH NO VEMBER , 2018 SD/ - SD/ - ( N.K. PRADHAN ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 30 / 11 / 2018 GIRIDHAR , S R. PS 6 ITA NO.1920/MUM/2016 (A.Y: 2012 - 13) M/S. AGFA GEVAERT NV COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM