ATOS INFORMATION TECHNOLOGY HK LTD, MUMBAI V. DDIT (IT)1(1), MUMBAI

ITA 2137/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4225 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 28-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL K JHADR
• Assessee Lawyers: DHANESH BATRA
• Keywords: Double taxation relief; Principle of natural justice; Application of stay; Retrospective amendment; Extension of stay; Reassessment proceedings
• Section: 143(3); 234B; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NOS.2137 & 2138/MUM/2014 ASSESSMENT YEARS- 2006-2007 & 2007-08 ATOS INFORMATION TECHNOLOGY HK LIMITED (EARLIER KNOW AS ATOS ORIGIN(HONG KONG) LIMITED), C/O- ATOS ORIGIN INDIA PVT. LTD. PLOT NO.5, GODREJ & BOYCE MFG. CO. LTD. PIROJSHANAGAR, LBS MARG, VIKHROLI (W), MUMBAI-400079 / VS. DY. DIT(IT) - 1(1), MUMBAI PAN NO. AAKCS8720L ( / ASSESSEE) ( / REVENUE) / ASSESSEE BY SHRI DHANESH BATRA / REVENUE BY SHRI SUNIL K. JHA-DR / DATE OF HEARING : 07/04/2016 / DATE OF ORDER: 07/04/2016 ITA NO.2137 & 2138/MUM/2014 ATOS INFORMATION TECHNOLOGY HK LIMITED (EARLIER KNOW AS ATOS ORIGIN(HONG KONG) LIMITED), 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) BOTH THESE APPEALS ARE BY THE ASSESSEE CHALLENGING IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT AMOU NTING TO RS.,17,82,080/- AND RS.8,02,37,398/- RESPECTIVELY. 2. DURING HEARING OF THESE APPEALS, THE LD. COUNSE L FOR THE ASSESSEE, SHRI DHANESH BAFNA, CONTENDED THA T QUANTUM APPEAL HAS BEEN SENT BACK TO THE FILE OF TH E LD. ASSESSING OFFICER, THEREFORE, THE PENALTY MAY BE DE LETED. ON THE OTHER HAND, THE LD. DR, SHRI SUNIL K. JHA, STRO NGLY OBJECTED TO THE PLEA OF THE ASSESSEE ON THE GROUND THAT THE PENALTY APPEAL MAY ALSO BE SENT TO THE ASSESSING OF FICER. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE CO MING TO ANY CONCLUSION, WE ARE REPRODUCING HEREUNDER THE RE LEVANT PORTION FROM THE ORDER OF THE TRIBUNAL DATED 07/03/ 2014, IN THE CASE OF ASSESSEE ITSELF, ON QUANTUM ADDITION , ITA NO.6562 /MUM/2009, ITA NO.219/MUM/2010 AND ITA NO.8892/MUM/2010 (ASSESSMENT YEAR 2007-08) FOR READ Y REFERENCE AND ANALYSIS:- ITA NO.6562/MUM/2009 & 219/MUM/2010 ARE CROSS APPE ALS DIRECTED AGAINST ORDER PASSED BY LD. CIT(A)-10, MUM BAI DATED 29/10/2009 FOR ASSESSMENT YEAR 2006-07. ITA NO.6888 /MUM/2011 IS AN APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER DATED ITA NO.2137 & 2138/MUM/2014 ATOS INFORMATION TECHNOLOGY HK LIMITED (EARLIER KNOW AS ATOS ORIGIN(HONG KONG) LIMITED), 3 11/8/2011 FOR ASSESSMENT YEAR 2006- 07 PASSED UNDER SECTION 144C(13) R.W.S. 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (THE ACT). ITA NO.8892/MUM/2010 AND ITA NO.6889/MUM/2011 ARE ALSO APPEALS FIELD BY THE ASSESSEE AGAINST ASSESSMENT OR DERS DATED 27/10/2010 AND 10/8/2011 PASSED UNDER SECTION 144(C )(13) R.W.S. 143(3) OF THE ACT FOR ASSESSMENT YEARS 2007-08 AND 2008-09 RESPECTIVELY. 2. IN ITA NO.6888/MUM/2011 & 6889/MUM/2011 THE ASSE SSEE HAS ALSO FILED ADDITIONAL GROUNDS. THE GROUNDS OF APPEA L IN ALL THE APPEALS AND ADDITIONAL GROUNDS OF RAISED IN ITA NO. 6888 & 6889/MUM/2011 ARE REPRODUCED BELOW: GROUNDS OF APPEAL IN ITA NO.NO .6562 /MUM /2009(ASS ESSEE S APPEAL) : ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN A W THE EARNED COMMISSIONER OF INCOME-TAX (APPEALS)-10[CIT (A)] ER RED IN CONFIRMING THE FOLLOWING GROUND: 1.1 THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE C ASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-10, MUMBAI (HE REINAFTER REFERRED TO AS CIT(A)) ERRED IN CONFIRMING THE DE CISION OF THE ASSESSING OFFICER (AC) THAT THE AMOUNT OF RS.117, 820,808 PAYABLE TO ATOS ORIGIN HONGKONG PRIVATE LIMITED (ATOS) IS TABLE TO TAX IN INDIA AS ROYALTY INCOME UNDER SECTION 9(1)(VI) OF T HE INCOME TAX ACT, 1961 (THE ACT). GROUNDS OF APPEAL IN ITA NO.NO .219/M /2010(REVENUE S APPEAL) : ITA NO.2137 & 2138/MUM/2014 ATOS INFORMATION TECHNOLOGY HK LIMITED (EARLIER KNOW AS ATOS ORIGIN(HONG KONG) LIMITED), 4 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT THE INCOME FROM ROY ALTY IN THE CASE OF THE ASSESSEE IS TAXABLE @ 10% AS THE CONTRACT BETWE EN THE ASSESSEE AND STANDARD CHARTERED BANK WAS ENTERED INTO AFTER 01/06/2005 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A) ERRED HOLDING THAT THE CONTRACT BETWEEN T HE ASSESSEE AND STANDARD CHARTERED BANK HAS BEEN ENTERED AFTER 01/0 6/2005 DESPITE THE FACT THAT THE SERVICES WERE PROVIDED BY THE ASS ESSEE UNDER THE COCTEAU AGREEMENT DATED 12/02/2004 GROUNDS OF APPEAL IN ITA NO.NO .6888 /M/2010(ASSESS EE S APPEAL) : 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE DEPUTY DIRECTOR OF INCOME- TAX, (INTERNATIONAL TAXA TION) RANGE 1(1), MUMBAI (THE LEARNED AO) ERRED IN INITIATING REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE INCOMETAX ACT, 1961 (THE ACT). 1.2 WITHOUT PREJUDICE TO ABOVE GROUND NO. 1.1, THE LEARNED AO AND THE DISPUTE RESOLUTION PANEL (THE DRP) ERRED IN H OLDING THE SUM OF RS.11,78,20,808 AS ROYALTY UNDER SECTION 9(1)(VI) OF THE ACT. IN DOING SO, THE LEARNED AO AND THE DRP DISREGARDED TH E CONTRACT FORPROVISION OF COMPUTING SERVICES ENTERED INTO BET WEEN THE ASSESSEE AND SCB INDIA FOR THE SERVICES RENDERED BY THE ASSESSEE TO STANDARD CHARTERED BANK INDIA (SCB INDIA). 1.3 WITHOUT PREJUDICE TO ABOVE GROUND NO. 1.2, THE LEARNED AO AND THE DRP ERRED IN APPLYING A HIGHER RATE OF TAX I.E. 20% (EXCLUDING SURCHARGE AND CESS) AS PER SECTION IN 115A(1)(B)(A) OF THE ACT TO THE ITA NO.2137 & 2138/MUM/2014 ATOS INFORMATION TECHNOLOGY HK LIMITED (EARLIER KNOW AS ATOS ORIGIN(HONG KONG) LIMITED), 5 PAYMENTS MADE BY SCB INDIA TO THE ASSESSEE, DISREGA RDING THE REVISED RATE OF TAX APPLICABLE FOR AGREEMENTS ENTER ED INTO AFTER JUNE 1, 2005, I.E. 10% (EXCLUDING SURCHARGE AND CESS). I N DOING SO, THE LEARNED AO FAILED TO TAKE COGNIZANCE OF THE FACT TH AT THE ASSESSEE STARTED RENDERING SERVICES TO SCB INDIA FROM HONGKO NG ONLY FROM AUGUST 2005. 1.4 WITHOUT PREJUDICE TO ABOVE GROUND NO. 1.3, THE LEARNED AO AND THE DRP ERRED IN DENYING THE BENEFIT OF THE RATE PR ESCRIBED UNDER SECTION 11 5A OF THE ACT. IN DOING SO, THE LEARNED AO AND THE DRP HELD THAT SCB INDIA IS A NON RESIDENT COMPANY AND D OES NOT FALL WITHIN THE AMBIT OF THE TERM INDIAN CONCERN AS PE R THE PROVISIONS OF SECTION 115A OF THE ACT AND ACCORDINGLY, THE PROVIS IONS OF SECTION 115A OF THE ACT DO NOT APPLY TO THE PAYMENTS MADE B Y SCB INDIA. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO ERRED IN LEVYING INTEREST UNDER SECTION 234B OF THE ACT WITHOUT APPRECIATING THAT THE ENTIRE INCOME OF THE ASSESSEE IS SUBJECT TO DEDUCTION OF TAX AT SOURCE AND HENCE, THE QUESTI ON OF ADVANCE TAX, DOES NOT ARISE. ADDITIONAL GROUNDS OF APPEAL: THE UNDER MENTIONED G ROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO OTHER GROUNDS 1. WITHOUT PREJUDICE TO GROUND NOS. 1.1 TO 1.4, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WHILE CAL CULATING THE TAX LIABILITY OF THE APPELLANT, THE LEARNED AO HAS ERRE D IN ADOPTING CHARGEABLE INCOME AS GROSS RECEIPTS INSTEAD OF NET RECEIPTS RECEIVED BY THE APPELLANT (I.E. AFTER DEDUCTING THE EXPENSES ATTRIBUTABLE TO GROSS RECEIPTS). THE APPELLANT HUMBLY PRAYS THAT TH E LEARNED AO BE ITA NO.2137 & 2138/MUM/2014 ATOS INFORMATION TECHNOLOGY HK LIMITED (EARLIER KNOW AS ATOS ORIGIN(HONG KONG) LIMITED), 6 DIRECTED TO COMPUTE THE CHARGEABLE INCOME OF THE AP PELLANT BY ADOPTING NET RECEIPTS INSTEAD OF GROSS RECEIPTS. THE APPELLANT HUMBLY PRAYS THAT THE LEARNED AO BE D IRECTED TO COMPUTE THE CHARGEABLE INCOME OF THE APPELLANT BY A DOPTING NET RECEIPTS INSTEAD OF GROSS RECEIPTS. GROUNDS OF APPEAL IN ITA NO.NO.6889 /M/2011(ASSESSE E S APPEAL) : 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED AO AND THE DISPUTE RESOLUTION PANEL (THE D RP) ERRED IN HOLDING THE SUM OF RS.13,99,38,383 AS ROYALTY AND FEES FOR TECHNICAL SERVICES UNDER SECTION 9(1)(VI) AND 9(1) (VII) OF THE INCOME TAX ACT, 1961 (THE ACT). IN DOING SO, THE LEARNED AO AND THE DRP DISREGARDED THE CONTRACT FOR PROVISION OF C OMPUTING SERVICES ENTERED INTO BETWEEN THE ASSESSEE AND SCB INDIA FOR THE SERVICES RENDERED BY THE ASSESSEE TO STANDARD CHART ERED BANK, INDIA (SCB INDIA). 1.2 WITHOUT PREJUDICE TO ABOVE GROUND NO. 1.1, THE LEARNED AO AND THE DRP ERRED IN DENYING THE BENEFIT OF THE RATE PR ESCRIBED UNDER SECTION 115A OF THE ACT. IN DOING SO, THE LEARNED A O AND THE DRP HELD THAT SCB INDIA IS A NON RESIDENT COMPANY AND D OES NOT FALL WITHIN THE AMBIT OF THE TERM INDIAN CONCERN AS PE R THE PROVISIONS OF SECTION 115A OF THE ACT AND ACCORDINGLY, THE PROVIS IONS OF SECTION 11 5A OF THE ACT DO NOT APPLY TO THE PAYMENTS MADE BY SCB INDIA. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO ERRED IN LEVYING INTEREST UNDER SECTION 234B OF THE ACT ITA NO.2137 & 2138/MUM/2014 ATOS INFORMATION TECHNOLOGY HK LIMITED (EARLIER KNOW AS ATOS ORIGIN(HONG KONG) LIMITED), 7 WITHOUT APPRECIATING THAT THE ENTIRE INCOME OF THE ASSESSEE IS SUBJECT TO DEDUCTION OF TAX AT SOURCE AND HENCE, THE QUESTI ON OF ADVANCE TAX DOES NOT ARISE. ADDITIONAL GROUNDS OF APPEAL: THE UNDER MENTIONED GROUNDS OF APPEAL ARE WITHOUT P REJUDICE TO OTHER GROUNDS 1.3 WITHOUT PREJUDICE TO GROUND NOS. 1.1 TO 1.2, O N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WHILE CAL CULATING THE TAX LIABILITY OF THE APPELLANT, THE LEARNED AD HAS ERRE D IN ADOPTING CHARGEABLE INCOME AS GROSS RECEIPTS INSTEAD OF NET RECEIPTS RECEIVED BY THE APPELLANT (I.E. AFTER DEDUCTING THE EXPENSES ATTRIBUTABLE TO GROSS RECEIPTS). THE APPELLANT HUMBLY PRAYS THAT THE LEARNED AD BE D IRECTED TO COMPUTE THE CHARGEABLE INCOME OF THE APPELLANT BY A DOPTING NET RECEIPTS INSTEAD OF GROSS RECEIPTS. GROUNDS OF APPEAL IN ITA NO.NO .8892 /M/2010(ASSESS EE S APPEAL) : 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ADDITIONAL DIRECTOR OF INCOME-TAX, RANGE 1, MUMBAI (THE LEARNED AO) AND THE DISPUTE RESOLUTION PANEL (THE DRP) E RRED IN HOLDING THE SUM OF RS.20,08,93,494 AS ROYALTY AND FEES FO R TECHNICAL SERVICES UNDER SECTION 9(1)(VI) AND 9(1)(VII) OF T HE INCOME TAX ACT, 1961 (THE ACT). ITA NO.2137 & 2138/MUM/2014 ATOS INFORMATION TECHNOLOGY HK LIMITED (EARLIER KNOW AS ATOS ORIGIN(HONG KONG) LIMITED), 8 1.2 WITHOUT PREJUDICE TO ABOVE GROUND NO. 1.1, THE LEARNED AO AND THE DRP ERRED IN APPLYING A HIGHER RATE OF TAX I.E. 20% (EXCLUDING SURCHARGE AND CESS) AS PER SECTION IN 115A(1)(B)(A) OF THE ACT TO THE PAYMENTS MADE BY SCB INDIA TO THE ASSESSEE. IN DOIN G SO. THE AO AND THE DRP DISREGARDED THE CONTRACT FOR PROVISION OF COMPUTING SERVICES ENTERED BETWEEN THE ASSESSEE AND SCB INDIA . 3. ALL THESE APPEALS WERE ARGUED TOGETHER BY BOTH T HE PARTIES AND FOR THE SAKE OF CONVENIENCE ALL THESE APPEALS ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER. 4. IT MAY BE MENTIONED HERE THAT ASSESSEE IN THE PR ESENT CASES HAD FILED APPLICATION FOR EXTENSION OF STAY AND VIDE OR DER DATED 4/10/2013 PASSED BY THE ITAT THE APPLICATIONS FILED BY THE ASSESSEE FOR EXTENDING THE STAY OF DEMAND IN RESPECT OF ASSE SSMENT YEAR 2006- 07 AND 2008-09 WERE DISMISSED. AGAINST SUCH ORDER O F ITAT THE ASSESSEE HAD FILED WRIT PETITIONS BEFORE HONBLE BO MBAY HIGH COURT WHICH HAVE BEEN DECIDED VIDE ORDER DATED 26/11/2013 , COPY OF WHICH WAS PLACED ON OUR RECORD. THEIR LORDSHIPS OF HONBL E BOMBAY HIGH COURT HAVE GRANTED THE STAY OF OUTSTANDING DEMAND I N RESPECT OF ASSESSMENT 2006-07 AND 2008-09 AND HAVE ALSO DIRECT ED TO DISPOSE OF THE APPEALS RELATING TO ASSESSMENT YEAR 2006-07 AND 2008-09 EXPEDITIOUSLY AND IN ANY CASE WITHIN A PERIOD OF FO UR MONTHS FROM THE DATE OF THE ORDER. ACCORDINGLY, THESE APPEALS O F THE ASSESSEE WERE FIXED FOR HEARING ALONG WITH APPEAL OF THE ASSESSEE FOR 2007-08. 5. THE ASSESSEE COMPANY IS INCORPORATED IN HONGKONG AND PROVIDING SERVICES/FACILITIES FOR THE PROCESSING OF DATA THRO UGH COMPUTER SOFTWARE FROM HONGKONG. THE ASSESSEE IS A NON-RESID ENT IN INDIA. IT ITA NO.2137 & 2138/MUM/2014 ATOS INFORMATION TECHNOLOGY HK LIMITED (EARLIER KNOW AS ATOS ORIGIN(HONG KONG) LIMITED), 9 ENTERED INTO A CONTACT FOR PROVISION OF COMPUTING S ERVICES, FOR THE PROVISION OF DATA PROCESSING SUPPORT TO STANDARD CH ARTERED BANK, INDIA (SCB INDIA) ENGAGED IN THE BUSINESS OF BANKIN G IN INDIA. UNDER THE SAID CONTRACT THE ASSESSEE IS PROCESSING DATA FOR SCB INDIA IN HONGKONG AND SUCH SERVICES ARE BEING PROVI DED BY THE ASSESSEE TO SCB INDIA SINCE 07/08/2005 FROM HONGKON G. ACCORDING TO THE ASSESSEE THE SAME AGREEMENT PRIOR TO 7/8/200 5 WAS PREVAILING AND THE SERVICES WERE PROVIDED BY THE ASSESSEE TO S CB INDIA FROM SINGAPORE. SO FAR AS IT RELATES TO PERIOD PRIOR TO AUG.2005, IT WAS SUBMITTED THAT THE ISSUES RAISED IN THE PRESENT APP EALS ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL DATED 11/5/2011 IN WHICH IT WAS HELD THAT THE PAYMENTS RECEIVED BY THE ASSESSEE FROM SCB INDIA FOR THE PROVISION OF SERVICES OF SPECIALI ZED DATA, PROCESSING OF RAW DATA, USING MAINFRAME COMPUTERS C ANNOT BE CHARACTERIZED AS A ROYALTY U/S. 9(1)(VI) OF THE A CT AS WELL AS UNDER ARTICLE 12(3) OF THE DTAA PREVAILING BETWEEN INDIA AND SINGAPORE INSTEAD OF IN THE NATURE OF BUSINESS PROFIT. HOWEVE R, THE RECEIPTS OF THE ASSESSEE IN THE YEARS UNDER CONSIDERATION ARE F ROM HONGKONG AND INDIA DOES NOT HAVE ANY DTAA WITH HONGKONG, THE REFORE, THE TAXABILITY OR OTHERWISE OF THE RECEIPTS OF THE ASSE SSEE IN ITS HAND IN INDIA IS REQUIRED TO BE EXAMINED UNDER THE DOMESTIC PROVISIONS WHICH ALSO HAVE BEEN AMENDED BY THE FINANCE ACT, 20 12 BY WAY OF INSERTION OF EXPLANATIONS 4, 5 & 5 TO SECTION 9(1)( VI) OF THE ACT. THEREFORE, THOUGH THE ORDERS RENDERED BY THE TRIBUN AL MAY BE HELPFUL TO SOME EXTENT BUT THE ISSUES RAISED IN THE PRESENT APPEALS ARE REQUIRED HAS TO BE EXAMINED IN THE LIGHT OF AMENDED PROVISIONS OF SECTION 9(1)(VI) WHICH HAVE NOT BEEN EXAMINED EITHE R BY THE AO, DRP OR BY THE TRIBUNAL. THUS THE MAIN ISSUE WHICH I NVOLVED IN ALL ITA NO.2137 & 2138/MUM/2014 ATOS INFORMATION TECHNOLOGY HK LIMITED (EARLIER KNOW AS ATOS ORIGIN(HONG KONG) LIMITED), 10 THESE APPEALS IS REGARDING THE TAXABILITY OR OTHERW ISE OF THE RECEIPTS OF THE ASSESSEE IN THE LIGHT OF THE AFOREMENTIONED AMENDED PROVISIONS. THE AFOREMENTIONED AMENDMENT IS APPLICA BLE FROM RETROSPECTIVE EFFECT I.E. FROM 1/6/1976. SINCE THE SAID RETROSPECTIVE AMENDMENT HAS BEEN BROUGHT BY THE FINANCE ACT, 2012 AND THE ORDERS PASSED BY THE LOWER AUTHORITIES AND TRIBUNAL WERE RENDERED BEFORE INCORPORATION OF THE AMENDED PROVISIONS, IT IS THE CASE OF LD. AR THAT IT WILL SERVE THE INTEREST OF JUSTICE IF TH E MATTER IS RESTORED BACK TO THE FILE OF A.O. LD. A.R HAS PREPARED A CHA RT SHOWING APPEAL WISE GRIEVANCES OF THE ASSESSEE AS WELL DEPARTMENT. THE CHART IS AS FOLLOWS: XXXXXXXXXXXX 5.1 LD. AR HAS ALSO SPECIFIED VARIOUS ORDERS AND TH EIR DATES TO SHOW THAT THE AFOREMENTIONED RETROSPECTIVE AMENDMENT DID NOT EXIST ON THE DATES WHEN THESE ORDERS WERE PASSED. . THE CHART RE ADS AS UNDER: XXXXXXXXXXXX 5.2 ON THE ABOVE MENTIONED FACTS IT WAS SUBMITTED B Y LD. AR THAT AS THE MATTER HAS TO BE EXAMINED AFRESH IN THE LIGHT O F AFOREMENTIONED RETROSPECTIVE AMENDMENT, IT WOULD SERVE THE INTERES T OF JUSTICE IF THE APPEALS EXCEPT ITA NO.6888/MUM/2011 ARE RESTORED BA CK TO THE FILE OF AO. LD. AR HAS ALSO FILED A LETTER AND REFERRING TO THE ABOVE FACTS IT IS PLEADED IN THE LETTER THAT THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF AO. THE RELEVANT PORTION OF THE SAID LE TTER IS REPRODUCED BELOW: ITA NO.2137 & 2138/MUM/2014 ATOS INFORMATION TECHNOLOGY HK LIMITED (EARLIER KNOW AS ATOS ORIGIN(HONG KONG) LIMITED), 11 4.1 THE LD. AO WHILE PASSING THE ORDER FOR AY 2006 -07 FOLLOWED HIS PREDECESSORS ORDER IN THE CASE OF ATOS SINGAPO RE TO HOLD THAT THE PAYMENT MADE BY SCB INDIA TO THE APPELLANT IS P AYMENT FOR ROYALTY. FURTHER, THE CIT(A) FOLLOWED HIS PREDECESS ORS ORDER IN THE CASE OF ATOS SINGAPORE TO CONFIRM THE ACTION OF THE AO. 4.2 IN AY 2007-08 & 2008-09, THE AO IN ADDITION TO HOLDING THE PAYMENT RECEIVED IS TAXABLE AS ROYALTY, ALSO, ALTER NATIVELY, ALLEGED IT TO BE TAXABLE AS FEES FOR TECHNICAL SERVICES (FTS ) .THE DRP CONFIRMED THE ACTION OF THE AU IN BOTH THE YEARS. 4.3 AT THE OUTSET, IT MAY BE STATED THAT WHILE PASS ING THE ABOVE ORDERS (REFER TABLE GIVEN AT POINT NO. 3), NONE OF THE LOW ER AUTHORITIES CONSIDERED THE FAVOURABLE ORDER OF THE HONBLE TRIB UNAL PASSED IN THE CASE OF ATOS SINGAPORE AND SCB INDIA (ITA NO.38 24/M/O6 TO 3828/M/O6, 1932/M/O8 TO 1938/M/O8, 1457/M/O8) (ORDE R DATED MAY II, 2011) HOLDING THAT THE PAYMENT RECEIVED FROM TH E SCB INDIA FOR THE PROVISION OF SERVICES OF SPECIALIZED DATA PROCE SSING OF RAW DATA USING MAINFRAME COMPUTERS CANNOT BE CHARACTERIZED A S A ROYALTY U/S 9(1)(VI) OF THE INCOME TAX ACT, 1961 (THE ACT ) AS WELL AS UNDER ARTICLE 12(3) OF THE DTAA BETWEEN INDIA AND SINGAPO RE BUT INSTEAD IS IN THE NATURE OF BUSINESS PROFITS. 4.4 FURTHER, THE AUTHORITIES ALSO DID NOT CONSIDERE D THE RETROSPECTIVE INSERTION OF EXPLANATION 4, 5, & 6 TO SECTION 9(1)( VI) OF THE ACT BY THE FINANCE ACT 2012. 5) IN VIEW OF THE ABOVE, AS UNANIMOUSLY CONSIDERED DURING THE HEARING, THAT IN THE MERIT OF JUSTICE THE MATTER MA Y BE RESTORED TO THE FILES OF THE LD. AO TO DECIDE BY ALLOWING THE APPEL LANT REASONABLE ITA NO.2137 & 2138/MUM/2014 ATOS INFORMATION TECHNOLOGY HK LIMITED (EARLIER KNOW AS ATOS ORIGIN(HONG KONG) LIMITED), 12 OPPORTUNITY AND THE LIBERTY TO FILE ANY EVIDENCES! MATERIALS NECESSARY TO SUBSTANTIATE ITS CONTENTION. 5.3 ON THE AFOREMENTIONED SUBMISSIONS OF LD. AR, LD . DR DID NOT HAVE ANY OBJECTION. HOWEVER, HE SUBMITTED THAT IF T HE ISSUE RAISED IN ALL THE APPEALS EXCEPT APPEAL NO.6888/MUM/2011 ARE BEING RESTORED TO THE FILE OF AO THEN THE APPEAL OF THE ASSESSEE I N ITA NO.6888/MUM/2011 WILL BECOME INFRUCTUOUS AS THE ONL Y ISSUE ON MERITS RAISED BY THE ASSESSEE IS REGARDING TAX LIAB ILITY OF THE ASSESSEE AND THE RATE OF TAX APPLICABLE THEREON. IT WAS SUBM ITTED THAT THE SAME ISSUE IS INVOLVED IN THE APPEAL OF THE DEPARTMENT F OR THE SAME YEAR I.E. ITA NO.219/MUM/2010. IT WAS SUBMITTED THAT AS THE ISSUE REGARDING RATE OF TAX HAS TO BE RE-EXAMINED AND RE- ADJUDICATED BY THE AO AS PER LAW THEN THE APPEAL FILED BY THE ASSE SSEE WITH REGARD TO RATE OF TAX APPLICABLE WILL BECOME INFRUCTUOUS. LD. DR FURTHER SUBMITTED THAT THE OTHER ISSUE RAISED BY THE ASSESS EE IN ITA NO.6888/MUM/2011 IS REGARDING INTEREST LEVIED UNDER SECTION 234B OF THE ACT. ACCORDING TO LD. DR THE SAID ISSUE IS C ONSEQUENTIAL TO THE ASSESSED INCOME WHICH HAS ALSO TO BE CONSIDERED BY THE AO WHILE EXAMINING THE LIABILITY OF THE ASSESSEE AND ASSESSE E WILL BE HAVING RIGHT TO FILE OBJECTIONS AGAINST SUCH LEVY WHICH WI LL BE DECIDED BY THE AO AS PER LAW. TO SUCH SUBMISSION OF LD. DR, LD. AR SUBMITTED THAT THE ISSUE REGARDING LEVY OF INTEREST UNDER SECTION 234B THOUGH IS CONSEQUENTIAL BUT ITS LEVY CAN BE CHALLENGED BY THE ASSESSEE AS PER LAW IF THE MATTER IS RESTORED BACK TO THE FILE OF A O. 6. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. FROM THE ABOVE DISCUSSIO N IS CLEAR THAT THE LIABILITY OR OTHERWISE OF THE ASSESSEE REGARDIN G ITS RECEIPTS HAS TO ITA NO.2137 & 2138/MUM/2014 ATOS INFORMATION TECHNOLOGY HK LIMITED (EARLIER KNOW AS ATOS ORIGIN(HONG KONG) LIMITED), 13 BE RE-ADJUDICATED IN THE LIGHT OF AFOREMENTIONED RE TROSPECTIVE AMENDMENT. THE ORDERS PASSED IN THE ASSESSEES CASE BY THE AO, DRP AND ITAT ARE PRIOR TO THE AFOREMENTIONED AMENDM ENT IN THE STATUTE. THEREFORE, WE ARE OF THE OPINION THAT IT W OULD SERVE THE INTEREST OF JUSTICE IF ALL THESE APPEALS EXCEPT ITA NO.6888/MUM/2011 ARE RESTORED BACK TO THE FILE OF AO WITH A DIRECTIO N TO RE-ADJUDICATE THE ISSUES IN ACCORDANCE WITH LAW AFTER GIVING FURT HER OPPORTUNITY TO THE ASSESSEE AND PLACING ALL THE MATERIAL REQUIRED FOR ADJUDICATION OF THE ISSUES RAISED IN THE PRESENT APPEALS. AFTER GIV ING SUCH OPPORTUNITY THE AO WILL RE-ADJUDICATE ALL THE ISSUE S RAISED IN THE PRESENT APPEALS AS PER PROVISIONS OF LAW. 7. SO FAR AS IT RELATES TO GRIEVANCES OF THE ASSESS EE IN ITA NO.6888/MUM/2011, THE MAIN GRIEVANCE OF THE ASSESSE E IS REGARDING INITIATION OF RE-ASSESSMENT PROCEEDINGS IN RESPECT OF TAX LIABILITY OF THE ASSESSEE REGARDING ITS RECEIPTS FROM SCB INDIA AND FOR THE SAME ASSESSMENT YEAR IN ORIGINAL PROCEEDINGS, THE SAME I S RESTORED BACK TO THE FILE OF AO FOR RE-ADJUDICATION. 7.1 SIMILAR IS THE POSITION IN RESPECT OF GROUND NO .1.3 & 1.4 AND ADDITIONAL GROUND NO.1.5 IN WHICH THE ASSESSEE HAS RAISED GRIEVANCES REGARDING RATES OF TAX TO BE APPLIED ON THE ABOVE RECEIPTS. ALL THESE ISSUES ON MERITS ARE TO BE READ JUDICATED AS PER LAW IN ITA NO.6562/MUM/2009 & 219/MUM/2010 BEING CROSS APPEALS IN RESPECT OF ASSESSMENT YEAR 2006-07 AGAINST ORIGINAL ASSESSMENT. 7.2 THE OTHER ISSUES RAISED IN ITA NO.6888/MUM/2011 REGARDING LEVIABILITY OF INTEREST UNDER SECTION 234B WHICH WA S ADMITTED TO BE CONSEQUENTIAL AND WITH A RIDER THAT ASSESSEE HAS LI BERTY TO SHOW ITA NO.2137 & 2138/MUM/2014 ATOS INFORMATION TECHNOLOGY HK LIMITED (EARLIER KNOW AS ATOS ORIGIN(HONG KONG) LIMITED), 14 BEFORE AO WHY IT IS NOT LIABLE FOR LEVY OF INTEREST UNDER SECTION 234B, THE MATTER WOULD BE RE-ADJUDICATED IN ORIGINAL ASSE SSMENT PROCEEDINGS AS DISCUSSED IN PARA 5.3 OF THIS ORDER. 7.3 IN VIEW OF ABOVE DISCUSSION SINCE ALL THE ISSUE S RAISED ON MERITS IN ITA NO.6888/MUM/2011 ARE RESTORED BACK TO THE FI LE OF A.O IN ITA NO.6562/MUM/2009 & ITA NO.219/MUM/2010(BEING CROSS APPEALS IN RESPECT OF ASSESSMENT YEAR 2006-07, I.E. ORIGINA L ASSESSMENT PROCEEDINGS) AND ARE DIRECTED TO BE RE-ADJUDICATED AS PER LAW, THEN THE VALIDITY OF REASSESSMENT PROCEEDINGS CANNOT BE UPHELD. UPHOLDING THE VALIDITY OF REASSESSMENT IN THE PRESE NT CASE WILL TANTAMOUNT TO UPHOLDING THE VALIDITY OF THE TWO ASS ESSMENTS AT A TIME OF THE SAME ASSESSEE IN RESPECT OF SAME ASSESSMENT YEAR, WHICH IS NOT PERMISSIBLE IN THE EYES OF LAW. THEREFORE, GROUND N O.1 OF ITA NO.6888/MUM/2011 IS ALLOWED AND OTHER GROUNDS OF TH E SAID APPEAL ARE DISMISSED HAVING BECOME INFRUCTUOUS IN THE LIGH T OF OUR DECISION IN ITA NO.6562/MUM/2009 & ITA NO.219/MUM/2010 7.4. IN THE RESULT, ITA NO 6888/MUM/2011 IS PARTLY ALLOWED. 8. TO SUM UP ITA NO.6888/MUM/2011 IS PARTLY ALLOWED AND ALL OTHER APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 07/03/2014 IF THE OBSERVATION MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, CONCLUSION DRAWN IN THE ORDER OF THE TRIBUNAL ON QU ANTUM ADDITION, ASSERTIONS MADE BY THE LD. RESPECTIVE COU NSEL, IF ITA NO.2137 & 2138/MUM/2014 ATOS INFORMATION TECHNOLOGY HK LIMITED (EARLIER KNOW AS ATOS ORIGIN(HONG KONG) LIMITED), 15 KEPT IN JUXTAPOSITION AND ANALYZED, WE FIND THAT TH E TRIBUNAL HAS SENT THE QUANTUM ADDITION BACK TO THE FILE OF THE ASSESSING OFFICER, THEREFORE, WE ARE NOT IN AGR EEMENT WITH THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSE SSEE THAT PENALTY MAY BE DELETED BECAUSE QUANTUM HAS NOT BEEN DELETED RATHER IT HAS BEEN SENT BACK TO THE ASSESSI NG OFFICER, THEREFORE, IN ALL FAIRNESS AND TO SAFEGUAR D THE INTEREST OF BOTH SIDES AND KEEPING IN VIEW THE PRIN CIPLE OF NATURAL JUSTICE, WE REMAND BOTH THESE FILES OF PENA LTY ALSO TO THE FILE OF THE LD. ASSESSING OFFICER FOR ADJUDI CATION AND TO DECIDE IN ACCORDANCE WITH LAW AFTER TAKING A DECISI ON IN THE QUANTUM APPEALS. BOTH THE APPEALS OF THE ASSESSEE A RE ALLOWED FOR STATISTICAL PURPOSES ONLY. FINALLY, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOW ED FOR STATISTICAL PURPOSES ONLY. THIS ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 07/04/2016. SD/- SD/- (RAJENDRA) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER MUMBAI; # DATED : 07/04/2016 ITA NO.2137 & 2138/MUM/2014 ATOS INFORMATION TECHNOLOGY HK LIMITED (EARLIER KNOW AS ATOS ORIGIN(HONG KONG) LIMITED), 16 F{X~{T? P.S/. . . !%$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. %& '( / THE APPELLANT (RESPECTIVE ASSESSEE) 2. )*'( / THE RESPONDENT. 3. ++ , ( %& ) / THE CIT, MUMBAI. 4. ++ , / CIT(A)- , MUMBAI, 5. /01)2 , +%& %23 , / DR, ITAT, MUMBAI 6. 145 / GUARD FILE. ! / BY ORDER, */&) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI