DDIT, Intl. Taxation, New Delhi V. M/s Ericsson AB Sweden, New Delhi

ITA 2287/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2943 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 02-05-2017
• Assessment Year: 2002-2003
• Appeal Filed On: 18-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T M SHIVA KUMAR PR
• Keywords: Difference of opinion; Change of opinion
• Section: 234B; 148; 154

Judgement Text

ITA NO. 2287/DEL/2013 & CO NO. 160/DEL/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDEN T & SHRI K.N. CHARY, JUDICIAL MEMBER ITA NO.-2287/DEL/2013 ( ASSESSMENT YEAR: 2002-03) DDIT, INTL. TAXATION CIRCLE 1(2) NEW DELHI. VS ERICSSON AB SWEDEN C/O PRICE WATER HOUSE COOPERS P. LTD. SUCHETA BHAWAN (GATE NO.2) 1 ST FLOOR, 11-A, DIGAMBER MARG, NEW DELHI. AAACE9466B & CROSS OBJECTION NO.-160/DEL/2013 (IN ITA NO. 2287/DEL/2013) ( ASSESSMENT YEAR: 2002-03) ERICSSON AB SWEDEN C/O PRICE WATER HOUSE COOPERS P. LTD. SUCHETA BHAWAN (GATE NO.2) 1 ST FLOOR, 11-A, DIGAMBER MARG, NEW DELHI. AAACE9466B VS DDIT, INTL. TAXATION CIRCLE 1(2) NEW DELHI. ASSESSEE BY SH. SALIL KAPOOR, ADV. REVENUE BY SH. T.M. SHIVA KUMAR, PR. CIT DR ORDER PER K. NARSIMHA CHARY, J.M. CHALLENGING THE ORDER DATED 22.01.2013 IN APPEAL N O. 119/10-11 PASSED BY THE LD. COMMISSIONER OF THE INCOME TAX (A PPEALS)-XI, NEW DELHI DATE OF HEARING 26.10.2017 DATE OF PRONOUNCEMENT 26 .12.2017 ITA NO. 2287/DEL/2013 & CO NO. 160/DEL/2013 2 (FOR SHORT CALLED AS THE LD. CIT (A)) REVENUE PRE FERRED THE APPEAL AND THE ASSESSEE PREFERRED THE CROSS OBJECTION. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A COMPAN Y INCORPORATED IN SWITZERLAND AND FOR THE AY 2002-03, RETURN OF INCOM E WAS FILED DECLARING A TOTAL INCOME OF RS.13,87,54,266/-. BY WAY OF ORDER DATED 07.03.2005, LD.AO MADE AN ADDITION OF RS.138,43,38,750/- AND TA XED IT AT 10% ON ACCOUNT OF LICENSING OF SOFTWARE. SUBSEQUENTLY, BY ISSUANCE OF NOTICE DATED 28.03.2007 U/S 148 OF THE ACT, LD.AO SOUGHT TO RE-O PEN THE ASSESSMENT. ASSESSEE DID NOT FILE ANY FRESH RETURN OF INCOME. THE REASONS WERE FURNISHED TO THE ASSESSEE. ASSESSEE CONTESTED THE T AXABILITY OF THE PAYMENTS OF SOFTWARE AS ROYALTY, AND CLAIMED IT AS ROYALTY EVEN IF EFFECTIVELY CONNECTED WITH EABP, IT CANNOT BE TAXED ON GROSS BA SIS. SUBSEQUENTLY BY ORDER DATED 31.12.2007, LD AO RECORDED THAT THE CON TENTION OF THE ASSESSEE ARE NOT ACCEPTABLE AND PROCEEDED TO BRING THE ROYALTIES AND FEE FOR TECHNICAL SERVICES TO TAX AT 20% AS AGAINST 10% TAX E ARLIER. 3. IN APPEAL BEFORE THE LD. CIT(A), ASSESSEE CHALLE NGED THE RE-OPENING PROCEEDINGS ON THE GROUND THAT THE OBJECTIONS OF TH E ASSESSEE TO THE REASONS RECORDED FOR RE-OPENING WERE NOT DISPOSED O F BY WAY OF A SPEAKING ORDER. LD. CIT(A) REJECTED THE SAME. HOWEVER, WHI LE RELYING UPON THE ORDERS OF THE TRIBUNAL FOR AYS 1999-2000 TO AY 2004 -05, LD. CIT(A) HELD THAT THE ASSESSEE DID NOT HAVE A PE IN INDIA AND DE LETED THE ADDITION. LD.CIT(A) FURTHER HELD THAT THE CHARGING OF INTERES T U/S 234B OF THE ACT IS MANDATORY IN NATURE. ITA NO. 2287/DEL/2013 & CO NO. 160/DEL/2013 3 4. IN THIS APPEAL, REVENUE CHALLENGED THE OBSERVATI ONS OF THE LD.CIT(A) IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 1999-2000 TO 2004-05. R EVENUE NOW CONTENDS SUCH ORDERS WERE NOT ACCEPTED BY THE REVENUE. REVE NUE IS ALSO CHALLENGING THE CONSEQUENT DELETION OF THE ADDITION MADE ON ACCOUNT OF TAXING THE ROYALTY AT 20% INSTEAD OF 10%. AT THE SA ME TIME, ASSESSEE PREFERRED THE CROSS-OBJECTION CHALLENGING THE OBSE RVATIONS OF THE LD.CIT(A) IN RESPECT OF THE NON-DISPOSAL OF THE OBJECTIONS OF THE ASSESSEE TO THE REASONS RECORDED BY THE AO BY SPEAKING ORDER AND CH ARGING OF THE INTEREST U/S 234B OF THE ACT. 5. LD. DR SUBMITTED THAT IN RESPECT OF THE ORDERS O F THE TRIBUNAL FOR THE AYS 1999-2000 TO 2004-05, REVENUE PREFERRED APPEAL BEFORE THE HONBLE JURISDICTIONAL HIGH COURT AND HONBLE HIGH COURT BY WAY OF ORDER DATED 18.05.2015 SET ASIDE THE MATTER TO THE FILE OF LD.C IT(A) TO DECIDE THE MATTER AFRESH IN THE LIGHT OF THE SURVEY THAT WAS CONDUCTE D ON 22.11.2007, AS SUCH, IN VIEW OF THIS FACT, HE PRAYED TO REMAND THI S MATTER ALSO TO THE FILE OF THE CIT(A) TO BE DISPOSED OF WITH THE BATCH OF MATT ERS THAT ARE REMANDED BY THE HONBLE HIGH COURT TO THE FILE OF THE LD.CIT(A) . 6. HOWEVER, LD.AR SUBMITTED THAT INASMUCH AS THE C. O RELATES TO THE LEGALITY OR OTHERWISE OF THE RE-OPEN PROCEEDINGS, T HE PRESENT MATTERS COULD BE DISPOSED OF BY THIS TRIBUNAL AT THIS STAGE AND T HERE IS NO NEED OF REMAND. ON MERITS, HE SUBMITTED THAT THERE IS NO F RESH MATERIAL THAT HAS COME TO THE POSSESSION OF THE AO IN ORDER TO SEEK T HE REOPENING OF THE ITA NO. 2287/DEL/2013 & CO NO. 160/DEL/2013 4 CONCLUDED PROCEEDINGS. HE FURTHER SUBMITTED THAT IN THIS MATTER THE REASONS RECORDED BY THE LD. AO AMOUNT TO CHANGE OF OPINION AND IS PROHIBITED UNDER LAW. HE FURTHER STATED THAT IT IS NOT OPEN FOR THE LD. AO TO PROCEED FURTHER WITH THE MATTER OF REOPENING THE CO NCLUDED ASSESSMENT WITHOUT DISPOSING OF THE OBJECTIONS FILED BY THE AS SESSEE, AND ANY SUCH ASSESSMENT IN VIOLATION OF THE MANDATE OF THE HONB LE COURT IN GKN DRIVESHAFT CASE IS BAD UNDER LAW. THE NEXT CONTENTIO N IS THAT THE RECTIFICATION PROCEEDINGS UNDER SECTION 154 OF THE ACT WERE PROPOSED BUT DROPPED ON THE SIMILAR GROUNDS AS SUCH REOPENING IS NOT SUSTAINABLE. LASTLY, HE CONTENDED THAT WHEN THE APPEAL AGAINST T HE ORIGINAL ASSESSMENT WAS PENDING ON THE FILE OF THE LD. CITA, AS ON THE DATE OF THE ISSUANCE OF THE NOTICE UNDER SECTION 148 OF THE ACT, LD. AO DOE S NOT HAVE JURISDICTION TO PROCEED WITH THE REOPENING OF THE CONCLUDED ASSE SSMENT. IN SUPPORT OF THESE CONTENTIONS, LD. AR SUBMITTED A NUMBER OF DEC ISIONS OF THE HONBLE APEX COURT, HONBLE JURISDICTIONAL HIGH COURT, AND C OORDINATE BENCHES OF THIS TRIBUNAL. 7. IN REPLY, LD. DR SUBMITTED THAT IT IS EVIDENT FR OM THE ORDER OF THE HONBLE HIGH COURT THAT NEITHER THE ASSESSEE NOT TH E LD. AO HAD THE OPPORTUNITY TO CONSIDER THE MATERIAL FOUND IN SURVE Y CONDUCTED ON 22/11/2007, AND FOR THIS REASON THE HONBLE HIGH CO URT REMANDED THE MATTER TO THE FILE OF THE LD. CITA AND PRECISELY FO R THE SAME REASON THIS MATTER ALSO NEEDS TO BE CONSIDERED BY THE LD. CITA WHILE DISPOSING OF THE APPEALS THAT WERE REMANDED BY THE HONBLE HIGH COUR T. HE FURTHER ITA NO. 2287/DEL/2013 & CO NO. 160/DEL/2013 5 SUBMITTED THAT IN ANY CASE THERE CAN BE ONLY ONE AS SESSMENT FOR A PARTICULAR ASSESSMENT YEAR, AS SUCH, IT WOULD BE JU ST AND CONVENIENT FOR DISPOSAL OF THE PRESENT APPEAL ALONG WITH CROSS OBJ ECTION, WITH THE APPEAL PREFERRED AGAINST THE ORIGINAL ASSESSMENT FOR THE A SSESSMENT YEAR 2002-03. 8. IN RESPECT OF MERITS HE SUBMITTED THAT THE ASSES SEE PREFERRED THE CROSS OBJECTION QUESTIONING THE APPLICABILITY OF SE CTION 44D OF THE ACT AND ALSO CHARGING OF INTEREST UNDER SECTION 234 B AND 2 34 D OF THE ACT. IN RESPECT OF THE APPLICABILITY OF SECTION 44D, LD. DR SUBMITTED THAT IT REQUIRES DETERMINATION WHETHER THE ROYALTIES EFFECT IVELY CONNECTED WITH PE, AND INASMUCH AS THE QUESTIONS RELATING TO THE PERMA NENT ESTABLISHMENT AND ROYALTY ARE OPEN BEFORE THE LD. CITA, AS A CONS EQUENCE OF THE ORDERS OF THE HONBLE HIGH COURT SUCH AN ISSUE NEED NOT AND C ANNOT BE DECIDED AT THIS STAGE. IN RESPECT OF CHARGEABILITY OF INTEREST UNDER SECTION 234B IS CONCERNED, LD. DR SUBMITTED THAT, AS IS EVIDENT FRO M THE ORDERS OF THE TRIBUNAL AS WELL AS THE HONBLE HIGH COURT, SUCH A QUESTION IS OPEN BEFORE THE LD. CITA. HE BROUGHT TO OUR NOTICE THE OBSERVAT IONS OF THE HONBLE HIGH COURT THAT THE RIGHTS AND CONTENTIONS OF THE PARTIE S ARE RESERVED BEFORE THE LD. CITA. FOR ALL THESE REASONS, LD. DR SUBMITTED T HAT NO SPECIFIC ADJUDICATION IS REQUIRED BY THE TRIBUNAL AT THIS ST AGE AND IT IS JUST AND CONVENIENT TO REMAND THE MATTER TO THE FILE OF THE LD. CITA FOR DISPOSAL ALONG WITH THE BATCH OF APPEALS RELATING TO THE ASS ESSMENT YEARS 1999- 2000 TO 2004-05 WHICH INCLUDES THE APPEAL RELEVANT FOR THE ASSESSMENT YEAR 2002-03. ITA NO. 2287/DEL/2013 & CO NO. 160/DEL/2013 6 9. WE HAVE GONE THROUGH THE RECORD. VIDE PARAGRAPH NO. 8, IN THE APPEALS RELATING TO THE ASSESSMENT YEARS 1999-2000 TO 2004-05, THE HONBLE HIGH COURT OBSERVED AS FOLLOWS:- 8. IN THE CIRCUMSTANCES, THIS COURT DEEMS IT MOST APP ROPRIATE TO SET ASIDE THE ORDER OF THE ITAT AND A CITA AND REMEDY MA TTER TO THE CIT (APPEALS) WHO SHALL GIVE REASONABLE OPPORTUNITY TO T HE ASSESSEE, IN THE LIGHT OF THE MATERIAL COLLECTED DURING THE SURVEY CO NDUCTED ON 22/11/2007 FOR THE ASSESSMENT YEARS IN QUESTION THA T IS 1999-2000 TO 2004-05. ITS OPEN TO THE ASSESSEE TO TAKE ALL T HE CONTENTIONS INCLUDING THE SUBMISSIONS TO BE MADE IN THE LIGHT OF THE PREVIOUS JUDGEMENT OF THIS COURT. RIGHTS AND CONTENTIONS OF TH E PARTIES ARE RESERVED. 10. IT IS THEREFORE CLEAR THAT BY RESERVING THE RIG HTS AND CONTENTIONS OF THE PARTIES, THE HONBLE HIGH COURT REMANDED THE MATTER S RELATING TO THE ASSESSMENT YEARS 1999-2000 TO 2004-05 TO THE FILE O F THE LD. CITA FOR DISPOSAL OF THE MATTERS IN THE LIGHT OF THE MATERIA L COLLECTED DURING THE SURVEY CONDUCTED ON 22/11/2007. WHEN SUCH MATTER IS PENDING BEFORE THE LD. CITA WHOSE POWERS ARE COEXTENSIVE WITH THOSE OF THE LD. DR, AND IN ANY CASE THERE CAN BE ONLY ONE ASSESSMENT, IT APPEA RS PROPER TO US THAT INSTEAD OF DISPOSING OF THIS APPEAL SEPARATELY, AS RIGHTLY SUGGESTED BY THE LD. DR, IT WOULD BE JUST INCONVENIENT TO REMAND THI S MATTER ALSO TO THE FILE OF THE LD. CITA FOR DISPOSAL BY TAKING A COMPREHENS IVE VIEW, ALONG WITH THE APPEALS RELATING TO THE ASSESSMENT YEARS 1999-2000 TO 2004-05 WHICH INCLUDES THE APPEAL RELATING TO THE YEAR UNDER CONS IDERATION IN THIS APPEAL. IT IS MORE PARTICULARLY NECESSARY IN VIEW OF THE FA CT THAT THE APPEAL AGAINST THE ORIGINAL ASSESSMENT ORDER NEEDS TO BE DECIDED I N THE LIGHT OF THE SURVEY THAT WAS CONDUCTED ON 22/11/2007 WHEREAS THE NOTICE UNDER SECTION 148 OF THE ACT IN HIS ASSESSMENT YEAR WAS ISSUED ON28.0 3.2007. WHEN THE ITA NO. 2287/DEL/2013 & CO NO. 160/DEL/2013 7 HONBLE HIGH COURT DIRECTED THAT THE LD. CITA HAD T O CONSIDER THE MATERIAL COLLECTED DURING THE SURVEY CONDUCTED ON 22/11/2007 , WHICH IS LATER THAN THE ISSUANCE OF THE NOTICE UNDER SECTION 148, THE O RDER OF THE HONBLE HIGH COURT WILL PREVAIL AND THE LD. CITA IS BOUND TO CON SIDER THE LATER EVENTS WHILE DISPOSING OF THE MATTER, AS SUCH, DISPOSAL OF THIS APPEAL AND CROSS OBJECTION WHICH RELATES TO THE PERIOD EARLIER TO TH E SURVEY IS OF LITTLE CONSEQUENCE. IT IS ALWAYS OPEN FOR THE ASSESSEE TO TAKE THE CONTENTIONS BEFORE THE LD. CITA DURING THE COURSE OF SUCH HEARI NG. WITH THIS VIEW OF THE MATTER, WE ARE INCLINED TO AGREE WITH THE LD. DR IN THE SUBMISSION THAT THIS APPEAL CANNOT BE DISPOSED OF BY WAY OF A SEPARATE O RDER INASMUCH AS SUBSTANTIALLY THE MATTER IS PENDING BEFORE THE LD. CITA. WE, THEREFORE, SET ASIDE THE ISSUE INVOLVED IN BOTH THE APPEAL AND THE CROSS OBJECTION TO THE FILE OF THE LD. CITA FOR DISPOSAL ALONG WITH THE B ATCH OF APPEALS REMANDED TO HIM BY THE HONBLE JURISDICTIONAL HIGH COURT REL EVANT FOR THE ASSESSMENT YEARS 1999-2000 TO 2004-05, AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE TO RISE THE CONTENTIONS IN RESPECT OF THES E MATTERS ALSO. 11. THE APPEAL AND CROSS OBJECTION OR DISPOSED OF A CCORDINGLY. IN THE RESULT APPEAL AND CROSS OBJECTION ARE ALLOWED FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26.12.2017 SD/- SD/- (G.D. AGRAWAL) (K. NARSIM HA CHARY) PRESIDENT JUDICIAL MEMBER DATED: 26.12.2017 *KAVITA ARORA ITA NO. 2287/DEL/2013 & CO NO. 160/DEL/2013 8 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI