Deputy Commissioner of Income-tax, V. Faurecia Automotive Holding, Pune

ITA 2333/PUN/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9253 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 01-07-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 06-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH C, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER . / ITA NO.804/PUN/2016 / ASSESSMENT YEAR : 2012-13 M/S.FAURECIA AUTOMOTIVE HOLDING, PLOT NO.T-187, PIMPRI INDUSTRIAL AREA (B.G.BLOCK), BEHIND BHOSARI POLICE STATION, BHOSARI, PUNE 411 026 PAN : AABFG6351K VS. DCIT, INTERNATIONAL TAXATION, CIRCLE-1, PUNE (APPELLANT) (RESPONDENT) . / ITA NO.2333/PUN/2016 / ASSESSMENT YEAR : 2011-12 DCIT, INTERNATIONAL TAXATION, CIRCLE-1, PUNE VS. M/S.FAURECIA AUTOMOTIVE HOLDING, PLOT NO.T-187, PIMPRI INDUSTRIAL AREA (B.G.BLOCK), BEHIND BHOSARI POLICE STATION, BHOSARI, PUNE 411 026 PAN : AABFG6351K (APPELLANT) (RESPONDENT) . / ITA NO.474/PUN/2015 / ASSESSMENT YEAR : 2011-12 M/S.FAURECIA INTERIEUR INDUSTRIE, PLOT NO.T-187, PIMPRI INDUSTRIAL AREA (B.G.BLOCK), BEHIND BHOSARI POLICE STATION, BHOSARI, PUNE 411 007 PAN : AACCF1121G VS. DCIT, INTERNATIONAL TAXATION, CIRCLE-1, PUNE (APPELLANT) (RESPONDENT) FAURECIA GROUP 2 / ORDER PER R.S.SYAL, VP : THIS BATCH OF THREE APPEALS BY THE TWO DIFFERENT BUT CONNE CTED ASSESSEES INVOLVE ASSESSMENT YEARS 2011-12 AND 2012-13 . SINCE SOME COMMON ISSUES ARE RAISED IN THESE APPEALS, WE ARE, THEREFORE, PROCEEDINGS TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER F OR THE SAKE OF CONVENIENCE. 2. ITA NO.2333/PUN/2016 IS AN APPEAL BY THE REVENUE IN THE CASE OF FAURECIA AUTOMOTIVE HOLDING AGAINST THE ORDER PASSED BY THE LD. CIT(A)-13, PUNE DATED 07-07-2016 DELETING PENALTY OF RS.26,67,220/- IMPOSED BY THE ASSESSING OFFICER U/S.271 (1)(C) R.W.S. 144C(13) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) IN RELATION TO THE ASSESSMENT YEAR 2011-12. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE AO PASS ED THE ASSESSMENT ORDER MAKING TWO ADDITIONS, VIZ., (1) REIMBURSE MENT OF SALARY PAID TO EXPATRIATE MR. FRANCK EUVRARD TREATED AS FEES FOR TECHNICAL SERVICES; AND (2) RECEIPT OF IT SUPPORT SERVICES ETC. APPELLANT BY SHRI NARESH KUMAR RESPONDENT BY SHRI AVADHESH KUMAR DATE OF HEARING 03-07-2019 DATE OF PRONOUNCEMENT 08-07-2019 FAURECIA GROUP 3 CONSIDERED AS ROYALTY AS WELL AS FEES FOR TECHNICAL SERVICES. THE AO IMPOSED INSTANT PENALTY U/S 271(1)(C) OF THE ACT ONLY WITH REFERENCE TO FEES RECEIVED ON ACCOUNT OF RENDERING IT SU PPORT SERVICES ETC. TREATED AS INCOME OF THE ASSESSEE. THE LD. CIT(A) DELETED SUCH PENALTY, AGAINST WHICH THE REVENUE HAS COME U P IN APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD BOTH THE SIDES GONE THROUGH THE RELEVAN T MATERIAL ON RECORD. QUANTUM APPEAL OF THE ASSESSEE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ITA NO. 784/PUN/2015, WHICH HAS BEEN DISPOSED OFF VIDE A SEPARATE ORDER DATED 8.7.2019 BY HOLDING THAT REIMBURSEMENT OF COST CANNOT BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. SIMILARLY, THE OTHER ADDITION ON ACCOUNT OF RECEIPT FOR IT SUPPORT AND MANAGERIAL SERVICES HAS ALSO BEEN DELETED BY HOLDING THAT THE SAME IS NOT INCLUDIBLE IN THE TOTA L INCOME OF THE ASSESSEE EITHER AS ROYALTY OR FEES FOR TECHNIC AL SERVICES. THUS, IT IS SEEN THAT BOTH THE ADDITIONS MADE IN THE ASSESSMENT ORDER STAND DELETED. SINCE THE SECOND ADDITION, F ORMING BEDROCK OF THE EXTANT PENALTY, DOES NOT SURVIVE ANYMORE, THERE REMAINS NO QUESTION OF ANY PENALTY THEREON. AS SUCH, WE UPHOLD THE IMPUGNED ORDER DELETING THE PENALTY. 5. IN THE RESULT, THE APPEAL IS DISMISSED. FAURECIA GROUP 4 6. ITA NO.804/PUN/2016 IS AN APPEAL BY M/S. FAURECIA AUTOMOTIVE HOLDING IN RELATION TO THE A.Y. 2012-13. 7. FIRST GROUND OF THIS APPEAL IS AGAINST REIMBURSEMENT OF RS.88,64,192/- RECEIVED BY THE ASSESSEE FROM FAURECIA T ECHNOLOGY CENTER INDIA PVT. LTD. TOWARDS PART OF SALARY PAID BY IT TO THE EXPATRIATE MR. FRANCK EUVRARD IN FRANCE, WHICH WAS TREATED B Y THE AO AS FEES FOR TECHNICAL SERVICES (FTS) AND INCLUDED IN THE TOTAL INCOME. 8. HAVING HEARD BOTH THE SIDES AND GONE THROUGH THE RELEVA NT MATERIAL ON RECORD, IT IS FOUND AS AN ADMITTED POSITION FROM THE RIVAL SIDES THAT THE FACTS AND CIRCUMSTANCES OF THIS GROUND A RE MUTATIS MUTANDIS SIMILAR TO THOSE FOR THE A.Y. 2011-12. FOLLOWING THE VIEW TAKEN FOR THE A.Y. 2011-12, WE ORDER TO DELETE THE ADDITION. THIS GROUND IS, THEREFORE, ALLOWED. 9. THE ASSESSEE HAS RAISED AN ADDITIONAL GROUND IN RESPEC T OF TAXATION OF IT SUPPORT SERVICES FEES RECEIVED FROM FAURECIA INDIA AS ROYALTY AS WELL AS FTS. THE ASSESSEE RENDERED IT SUPPOR T SERVICES TO FAURECIA INDIA FOR WHICH IT RECEIVED A SUM OF RS.10,47,3 7,045/-. THE AO TREATED THIS AMOUNT BOTH AS ROYALTY AS WELL AS FTS AN D INCLUDED THE SAME IN THE ASSESSEES TOTAL INCOME. FAURECIA GROUP 5 10. HERE AGAIN, BOTH THE SIDES AGREE THAT THE FACTS AND CIRCUMSTANCES OF THIS GROUND ARE SIMILAR TO THOSE OF THE PRE CEDING YEAR. IN THE ORDER PASSED FOR THE A.Y. 2011-12, THE T RIBUNAL HAS HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE FOR RENDERING OF IT SUPPORT SERVICES AND MANAGERIAL SERVICES CAN NEITHER BE CO NSTRUED AS ROYALTY NOR AS FEES FOR TECHNICAL SERVICES. FOLLOWING THE SAME VIEW, WE DIRECT TO DELETE THE ADDITION. 11. GROUND NOS. 2 AND 3 ABOUT THE LEVY OF INTEREST U/S.234 B AND 234C AS WELL AS EDUCATION CESS HAVE BECOME ACADEMIC IN VIEW OF DELETION OF BOTH THE ADDITIONS. 12. IN THE RESULT, THE APPEAL IS ALLOWED. 13. ITA NO.474/PUN/2015 IS THE APPEAL BY M/S. FAURECIA INTERIEUR INDUSTRIE AGAINST THE FINAL ASSESSMENT ORDER PASSED BY THE AO U/S.143(3) R.W.S.147 R.W.S.144C(13) OF THE INCOME- TAX ACT, 1961 IN RELATION TO THE A.Y. 2011-12. 14. THE ONLY ISSUE PRESSED IN THIS APPEAL IS AGAINST TREATING INCOME FROM PROVIDING IT SUPPORT SERVICES TAXED AS ROYALTY AS WELL AS FEES FOR TECHNICAL SERVICES (FTS). FAURECIA GROUP 6 15. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSES SEE, A TAX RESIDENT OF FRANCE, IS PART OF FAURECIA GROUP OF INDUSTRIE S. DURING THE YEAR UNDER CONSIDERATION, IT RECEIVED A SUM OF RS.3,2 4,83,500/- FROM INDIAN ENTITIES FOR RENDERING IT SUPPORT SERVICES, WHIC H WAS CLAIMED AS NOT CHARGEABLE TO TAX. THE AO EXAMINED THE NATU RE OF SERVICES AND HELD THE SAME TO BE INCOME FROM ROYALTY/FTS. HE, THEREFORE, ADDED RS.3,24,83,500/- IN THE TOTAL INCOME OF THE ASSESSEE, AGAINST WHICH THE ASSESSEE HAS APPROACHED THE TRIBUNAL. 16. WE HAVE HEARD BOTH THE SIDES GONE THROUGH THE RELEVA NT MATERIAL ON RECORD. IT IS OBSERVED FROM THE COSTS ALLOCA TION AGREEMENT BETWEEN THE ASSESSEE AND FAURECIA TECHNOLOGY CENTER INDIA PVT. LTD., WHOSE COPY HAS BEEN PLACED AT PAGE 178 O NWARDS OF THE PAPER BOOK THAT THE ASSESSEE, A RESIDENT OF FRANCE, RENDERED SERVICES TO THE INDIAN ENTITY WHICH HAVE BEEN NARRATED IN EXH IBIT-1 OF THE AGREEMENT READING AS UNDER : THE SERVICE PROVIDER ASSISTS THE COMPANY IN THE COMPUTERISATION OF SYSTEMS, OFFICE AUTOMATION AND UTILISATION OF PERSONAL COMPUTERS ADAPTED TO THE COMPANY AND THE FAURECIA INTERIOR SYSTEMS. IT HELPS THE COMPANY TO CHOOSE THE EQUIPMENT (SOFTWARE, HARDWARE, NETWORKS). IT ALSO ASSIS TS THE COMPANY IN THE IMPLEMENTATION OF SYSTEMS. THE COMPANY MIGHT REQUEST HELP FROM THE SERVICE PROVIDER TO DESIGN TAILORED PROGRAMS. THIS SERVICE NEITHER INCLUDES THE LICENSING, NOR THE SALE OF SOFTWARE, NOR COMPUTER PROGRAMS . THE SERVICES PROVIDED BY THE SERVICE PROVIDER FALL INTO THRE E CATEGORIES: OPERATIONS, TECHNICAL SUPPORT AND STUDIES. FAURECIA GROUP 7 FIRST, THE SERVICE PROVIDER HELPS THE COMPANY TO RUN 'OPERATIONS', WHICH INCLUDES THE ORGANISATION AND THE MANAGEMENT OF DAILY OPERATIONS OF THE IT INFRASTRUCTURE AND OF THE APPLICATIONS AVAILABLE ON THE IT INFRASTRUCTURE, THE CHANGES AND EVOLUTIONS OF APPLICATIONS AVAILABLE SUCH AS NEW APPLICATIONS SET UP, UPGRATE OF CURRENT APPLICATIONS FROM PROJECT PHASE TO DELIVERY PRODUCTION. SECONDLY, THE SERVICE PROVIDER GIVES 'TECHNICAL SUPPORT', WHICH INCLUDES LOCAL IT SUPPORT TO USERS ON SITE TO ORDER, CHANGE OR UPGRATE PC OR LOCAL APPLICATIONS, CENTRAL SUPPORT WITH HELPDESK FOR APPLICATIONS AND INFRASTRUCTURE ISSUES, COR E COMPETENCE CENTRES FOR DEDICATED APPLICATIONS. THIRDLY, THE SERVICE 'STUDIES' ADAPTS THE INFORMATION SYSTEMS TO MEET THE USERS' NEEDS IN THE RESPECT OF THE REGULATIONS AN D THE FAURECIA CORE PROCEDURES (FCP) ON THE FOLLOWING AREAS: LEGAL EVOLUTIONS, NEW ORGANISATIONS, NEW PERIMETERS, FINAL CUSTOMERS' NEEDS, FAURECIA GROUP'S NEEDS, IT PROJECTS (APPLICATIONS, INFRASTRUCTURE). 17. ON GOING THROUGH THE ABOVE NATURE OF SERVICES, IT IS SE EN THAT THESE ARE SIMILAR TO THE TECHNICAL SERVICES PROVIDED BY FA URECIA AUTOMOTIVE HOLDING, FRANCE, TO FAURECIA TECHNOLOGY CENTER IND IA PVT. LTD., WHICH THE TRIBUNAL HAS DEALT WITH IN ITS ORDER FOR TH E A.YRS. 2011-12 AND 2012-13. THE TRIBUNAL HAS HELD THA T SUCH SERVICES ARE NOT IN THE NATURE OF ROYALTY/FTS AND ACCORDINGLY DELETED THE ADDITION. THE LD. DR FAIRLY ADMITTED THAT THE TECHNICA L SERVICES DISCUSSED IN THE CASE OF M/S. FAURECIA AUTOMOTIVE HOLDING ARE SIMILAR TO THOSE RENDERED BY THE INSTANT ASSESSE E. FAURECIA GROUP 8 FOLLOWING THE VIEW TAKEN IN SUCH CASE, WE ORDER TO DELETE THE ADDITION. 18. THE OTHER GROUNDS CHALLENGING INITIATION OF RE-ASSESSME NT PROCEEDINGS AND OTHERS WERE NOT PRESSED BY THE LD. AR, W HICH ARE HEREBY DISMISSED. 19. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH JULY, 2019. SD/- SD/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VI CE PRESIDENT PUNE; DATED : 08 TH JULY, 2019 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-13, PUNE 4. 5. 6. THE CIT/IT/TP, PUNE , , / DR C, ITAT, PUNE; / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR P RIVATE SECRETARY , / ITAT, PUNE FAURECIA GROUP 9 DATE 1. DRAFT DICTATED ON 03-07-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 08-07-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *