Appeal details
Counselvise Citation
[2019] 116 COUNSELVISE.COM (IT) 1734 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 1 month(s) 18 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
24-05-2019
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
L
Assessment Year
2003-2004
Appeal Filed On
06-04-2017
Judgement Text
IN THE INC OME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE HONBLE SH. G. S. PANNU, V.P. & HONBLE SH. SANDEEP GOSAIN, JM ./ I.T.A. NO . 2479, 2480 & 2481 /MUM/201 7 ( / ASSESSMENT YEAR: 20 03 - 04, 2004 - 05 & 2007 - 08 ) IN THE MATTER OF: - MARRIOTT INTERNATIONAL LICENSING COMPANY BV, C/O - BMR & ASSOCIATES LLP, BMR HOUSE, 36B, DR. R. K. SHIRODKAR MARG, PAREL, MUMBAI - 400012 / VS. DCIT (INTL. TAXATION) - 3(2)(1), R. NO. 1615, 16 TH FLOOR, AIR INDIA BLDG, NARIMAN POINT, MUMBAI - 400 021 ./ ./ PAN NO. A A DCM0918R ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI PARAS S. SAVLA & SH. PRATIK PODDAR , AR S / RESPONDENTBY : SHRI NISHANT SAMAIYA, DR / DATE OF HEARING : 20 .03.2019 / DATE OF PRONOUNCEMENT : 24.05.2019 2 I.T.A. NO. 2479, 2480 & 2481 /MUM/201 7 MARRIOTT INTERNATIONAL LICENSING COMPANY BV, / O R D E R SANDEEP GOSAIN, J UDICIAL MEMBER : THE PRESENT THREE (3 ) APPEAL S HAVE BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMIS S IONER OF INCOME TAX (APPEALS) - 57 , MUMBAI, DATED 30.11.16 FOR AY 20 03 - 04, 2004 - 05 & 2007 - 08 RES PECTIVE LY. 2. SINC E THE ISSUES RAISED IN THESE APPEALS ARE IDENTICAL, THEREFORE, FOR TH E SAKE OF CONVENIENCE, THESE APPEALS ARE CLUBBED, HEARD AND DISPOSED OF BY THIS CONSOLIDATED ORDE R. I.T.A. NO. 2479 /MUM/201 7 (AY 2003 - 04 ) 3 . FIRST OF ALL WE TAKE UP ASSESSEE S APPEAL IN I.T.A. NO. 2479 /MUM/201 7 (AY 2003 - 04 ) ON THE GROUNDS MENTIONED HEREIN BELOW: - GROUNDS OF APPEAL BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE MARRIOTT INTERNATIONAL LICENSING COMPANY BV ('THE APPELLANT') RESPECTFULLY SUBMITS THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 57, MUMBAI, HAS IN HIS ORDER DATED NOVEMBER 30, 2016 UNDER 3 I.T.A. NO. 2479, 2480 & 2481 /MUM/201 7 MARRIOTT INTERNATIONAL LICENSING COMPANY BV, SECT ION 250 OF THE INCOME - TAX ACT, 1961 ERRED IN DISPOSING THE APPEAL OF THE APPELLANT ON THE FOLLOWING GROUNDS (WITHOUT PREJUDICE TO EACH OTHER): 1. IN HOLDING THAT THE APPELLANT HAS A PERMANENT ESTABLISHMENT IN INDIA AS PER THE PROVISIONS OF ARTICLE 5 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND THE NETHERLANDS; 2. IN HOLDING THAT THE INDIAN HOTELS CONSTITUTE 'DEPENDENT AGENTS' OF THE APPELLANT IN INDIA, MERELY ON THE BASIS THAT THE APPELLANT HAD SUPERVISION / CONTROL OVER THE OPERATIONS OF TH E INDIAN HOTELS WHICH WERE USING THE BRAND NAME 'MARRIOTT', LOGO AND SYMBOL AS PER THE TERMS AND CONDITIONS OF THE AGREEMENTS ENTERED INTO BY THE APPELLANT WITH THE INDIAN HOTELS; 3. IN HOLDING THAT THE APPELLANT CHARACTERIZED THE AMOUNTS RECEIVED UNDER TH E INTERNATIONAL SALES AND MARKETING AGREEMENT FROM THE INDIAN HOTELS AS 'REIMBURSEMENT OF EXPENSES' AND NOT 'ROYALTY' ONLY TO AVOID THE PAYMENT OF TAXES IN INDIA; DISREGARDING THE FACT THE THAT THE GOVERNMENT OF INDIA HAS ACCORDED ITS APPROVAL TO THE MARRI OTT GROUP TO ENTER INTO DIFFERENT AGREEMENTS WITH THE INDIAN HOTELS; AND 4. IN ASSUMING THE FOLLOWING: 4 I.T.A. NO. 2479, 2480 & 2481 /MUM/201 7 MARRIOTT INTERNATIONAL LICENSING COMPANY BV, THE APPELLANT HAS INCURRED EXPENSES IN RELATION TO OFFICE AND PERSONNEL IN INDIA; HOWEVER, AS A MATTER OF FACT, NEITHER THE APPELLANT HAS AN OFFICE IN INDIA NOR THE APPELLANT HAS ANY PERSONNEL IN INDIA; THE APPELLANT HAS LENT FUNDS TO CORPORATES IN INDIA AND HAS DERIVED 'INTEREST INCOME' FROM INDIAN OPERATIONS; WHEREAS THE APPELLANT HAS NO OPERATIONS IN INDIA AND THEREBY, DID NOT (I) LEND ANY MON EY TO ANY PERSON IN INDIA; OR (II) EARN ANY INTEREST FROM ANY PERSON IN INDIA; AND THE APPELLANT HAS A BANK ACCOUNT IN INDIA FOR PARKING ITS RECEIPTS AWAITING TRANSFER; HOWEVER, AS A MATTER OF FACT, THE APPELLANT DID NOT HAVE A BANK ACCOUNT IN INDIA. THE APPELLANT WISHES TO MENTION THAT EACH OF THE ABOVE GROUND IS WITHOUT PREJUDICE TO THE OTHER. FURTHER, THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OMIT, SUBSTITUTE OR AMEND ANY OF THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR AT, THE TIME OF A PPEAL, SO AS TO ENABLE THE HONOURABLE INCOME - TAX APPELLATE TRIBUNAL TO DECIDE THIS APPEAL ACCORDING TO LAW. 4 . AT THE VERY OUTSET, LD. AR APPEARING ON BEHALF OF THE ASSESSEE DRAWN OUR ATTENTION TO LETTER DATED 10 TH OCT 2018 FILED BY 5 I.T.A. NO. 2479, 2480 & 2481 /MUM/201 7 MARRIOTT INTERNATIONAL LICENSING COMPANY BV, THE ASSESSEE FOR SEEKI NG ADMISSION OF ADDITIONAL GROUND, WHICH ARE REPRODUCED BELOW: - 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSMENT ORDER DATED MARCH 30, 2015 PASSED BY THE ASSESSING OFFICER OAO') WITHOUT PASSING DRAFT ASSESSMENT ORDER, IS BAD IN LA W AND VOID AB INITIO AS THE SAME HAS BEEN PASSED IN VIOLATION OF SECTION 144C OF THE INCOME - TAX ACT, 1961 ('THE ACT'). 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSMENT PROCEEDINGS HAVE BEEN ABATED, SINCE THE AO HAS FAILED TO PASS THE ORDER GIVING EFFECT TO THE DIRECTION IN COMMISSIONER OF INCOME - TAX (APPEALS) ORDER WITHIN THE PERIOD OF LIMITATION AS PROVIDED BY THE ACT. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OMIT, SUBSTITUTE OR AMEND THE ABOVE GROUND OF APPEAL, AT ANY TI ME BEFORE OR AT, THE TIME OF APPEAL, SO AS TO ENABLE THE HONOURABLE INCOME - TAX APPELLATE TRIBUNAL TO DECIDE THE APPEAL ACCORDINGLY. LD. AR SU BMITTED THAT THE ADDITIONAL GROUND S ARE PURELY QUESTION OF LAW AND NO NEW FACTS ARE REQUIRED TO BE INVESTIGATED O R BROUGHT ON RECORD. THEREFORE, APPLICANT BE ALLOWED TO RAISE 6 I.T.A. NO. 2479, 2480 & 2481 /MUM/201 7 MARRIOTT INTERNATIONAL LICENSING COMPANY BV, ADDITIONAL G ROUNDS AS THE SAME GOES TO THE ROOTS OF THE MATTER AND IN SUPPORT OF HIS ARGUMENTS, LD. AR RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF JUTE CORPORATION OF INDIA LTD. VRS. CIT 187 ITR 688 (SC) . 5 . ON THE OTHER HAND LD. DR SUBMITTED THAT THE APPLICATION DATED 10.10 .18 IS MISCONCEIVED AND IS LIABLE TO BE DISMISSED. 6 . AFTER HAVING HEARD THE COUNSELS ON THIS APPLICATION, WE ARE OF THE VIEW THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS PURELY LEGAL IN NATURE AND ALL THE NECESSARY FACTS REQUIRED FOR ADJUDICATION ARE ALREADY ON THE RECORD AND THUS, NO NEW EVIDENCE IS REQUIRED TO BE BROUGHT ON RECORD. EVEN OTHERWISE, THIS GROUND GOES TO THE ROOTS OF THE CASE , THEREFORE KEEPING IN VIEW THE PRINCIPLE LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF NTPC VRS CIT 229 ITR 383, JUTE CORPORATION OF INDIA VRS. CIT 187 ITR 688 (SC) AND AHMEDABAD ELECTRICITY LTD. VRS. CIT 199 ITR 351 (BOM) (FB) , W E ALLOW THE APPLICATION DATED 10.10 .18 AND ADMIT THE ADDITIONAL GROUNDS MENTIONED ABOVE FOR ADJUDICATING ON MERITS. 7 I.T.A. NO. 2479, 2480 & 2481 /MUM/201 7 MARRIOTT INTERNATIONAL LICENSING COMPANY BV, 7 . THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A COMPANY INCORPORATED IN AND A TAX RESIDENT OF NETHERLANDS. T HE R ETURN OF I NCOME FOR THE YEAR UNDE R CONSIDERATION WAS FILED ON 30/10/2003 DECLARING TOTAL INCOME OF RS.11,83,230/ - . SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND AFTER SERVING STATUTORY NOTICES AND PROVIDING OPPORTUNITY OF HEARING TO THE ASSESSEE, ASSESSMENT ORDER U/S 143(3) OF ACT WAS PASSED BY AO ON 30.03.15 THEREBY DETERMINING A TAXABLE INCOME OF RS. 1,21,12,340/ - . AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE . NOW BEFORE US, THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL ON THE GROUNDS MENTIONED HEREIN ABOVE. ADDITIONAL GROUND NO. 5 & 6. 8 . SINCE THESE GROUNDS RAISED BY THE ASSESSEE ARE INTER CONNECTED AND INTER RELATED AND GOES TO ROOTS OF THE CAS E, THEREFORE WE THOUGHT IT FIT TO DISPOSE OF THESE GROUNDS FIRSTLY. THESE GR OUNDS RAISED BY THE ASSESSEE RELATES TO CHALLENGING THE 8 I.T.A. NO. 2479, 2480 & 2481 /MUM/201 7 MARRIOTT INTERNATIONAL LICENSING COMPANY BV, ORDER OF LD. CIT(A) IN CONFIRMING THE ACTION OF AO IN PASSING ASSESSMENT ORDER, WHICH IS BAD IN LAW AND VOID AB INITIO AS TH E SAME HAS BEEN PASSED IN VIOLATION OF SECTION 144C OF THE INCOME - TAX ACT, 1961. 9 . LD. AR APPEARING ON BEHALF OF THE ASSESSEE SUBM ITTED BEFORE US THAT THE ASSESSMENT ORDER DATED MARCH 30, 2015 PASSED BY THE AO WITHOUT PASSING DRAFT ASSESSMENT ORDER, IS BAD IN LAW AND VOID AB INITIO AS THE SAME HAS BEEN PASSED IN VIOLATION OF SECTION 144C OF THE INCOME - TAX ACT, 1961. IT WAS SUBMITTED THAT PURSUANT TO THE ORDER OF ITAT IN THE FIRST ROUND OF PROCEEDINGS, THE MATTER WAS SET ASIDE TO THE FILE OF AO TO DET ERMINE AFRESH THE TAXABILITY OF INCOME OF THE ASSESSEE. HOWEVER, AO WITHOUT PASSING A DRAFT ASSESSMENT ORDER HAD STRAIGHT WAY PASSED THE FINAL ASSESSMENT ORDER DATED 30.03.15, WHICH IS AGAINST THE PROVISION OF SECTION 144C(1) OF THE ACT. THUS ALL THE PROCE EDINGS INITIATED BY THE AO ARE LIABLE TO BE QUASHED. IN THIS RESPECT LD. AR RELIED UPON THE JUDGMENT IN THE CASE OF DIMENSION DATA ASIA PACIFIC PTE LTD. VRS. DCIT (2018) 96 TAXMAN.COM 182 (MUM), TURNER INTERNATIONAL INDIA PVT. LTD. VRS. DCIT (2017) 82 TAXM AN.COM 9 I.T.A. NO. 2479, 2480 & 2481 /MUM/201 7 MARRIOTT INTERNATIONAL LICENSING COMPANY BV, 125(DELHI HC) AND OTHER JUDGMENTS, WHICH ARE MENTIONED IN THE SUBMISSIONS FILED BY THE ASSESSEE. 10 . ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS PASSED BY REVENUE AUTHORITIES. IT WAS SUBMITTED THAT THE HONBLE TRIBUNAL HAD RESTORED THE MATTER TO THE FILE OF AO FOR A LIMITED PURPOSE ONLY I.E. RECEIPTS WERE IN THE NATURE OF REVENUE RECEIPTS AND WERE HELD AS BUSINESS PROFIT WHICH COULD BE COVERED UNDER ARTICLE 7 OF THE DTAA, IN THE ABOVE CIRCUMSTANCES, REQUIREMENT OF PASSING A DRAFT ORDER IN TERM S OF SECTION 144C OF THE ACT IS NOT CALLED FOR AS THE ORDER IN SECOND ROUND OF THE AO WAS IN THE NATURE OF APPEAL EFFECT ORDER OF THE ORDER OF THE TRIBUNAL. 11 . WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD , JUDGMENT S CITED BY THE PARTIES AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. WE FIND THAT THE ASSESSEE BEING A FOREIGN COMPANY IS AN ELIGIBLE ASSESSEE. THEREFORE, IN THIS RESPECT, THE PROVISI ON OF SECTION 144C OF THE ACT ARE APPLICABLE WHICH ARE UNAMBIGUOUS A ND SUB - SECTION 1 OF SECTION 144C OF THE ACT, 10 I.T.A. NO. 2479, 2480 & 2481 /MUM/201 7 MARRIOTT INTERNATIONAL LICENSING COMPANY BV, CLEARLY PROVIDES FOR ISSUANCE OF A DRAFT ORDER, WHICH IS A SINE QUA NON BEFORE AO PASSES AN ASSESSMENT ORDER U/S 143(3) OF THE ACT. I N THE FIRS T ROUND OF PROCEEDINGS, TRIBUNAL HAD SET ASIDE THE MATTER BACK TO THE FILE OF AO FOR DETERMINING AFRESH THE TAXABILITY OF RECEIPT IN TERMS OF BUSINESS PROFITS UNDER ARTICLE 7 OF THE DTAA . THE OPERATIVE PORTION OF THE ORDER OF COORDINATE BENCH OF ITAT IS REPRODUCED BELOW: - THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) OF 24.10.2007 IN RELATION TO AY. 2003 - 04. THE ONLY GROUND RAISED IN THIS APPEAL IS AS UNDER: - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)ERRED IN HOLDING THAT THE PAYMENTS MADE UNDER ARTICLE 3.1 OF THE FRANCHISE AGREEMENT AND THE INTERNATIONAL SALES & MARKETING AGREEMENT (ISMA) WITH M/S ANSAL HOTELS LIMITED(AHL) IS ROYALTY AND THE PAYMENTS MADE UNDER ARTICLE 3.2 OF THE SAID AGREEMENT IS PURELY REIMBURSEMENT OF EXPENSES ON SALES PROMOTION AND MARKETING AND HENCE THE PAYMENTS MADE AS PER ARTICLES 3.2 AND 3.3 IS NOT ROYALTY AND NOT TAXABLE IN INDIA. 2. BOTH THE SI DES IN AGREEMENT THAT THE FACTS AND CIRCUMSTANCES OF THIS APPEAL ARE MUTATIS MUTANDIS 11 I.T.A. NO. 2479, 2480 & 2481 /MUM/201 7 MARRIOTT INTERNATIONAL LICENSING COMPANY BV, SIMILAR TO THOSE FOR AY. 2004 - 05, WHICH APPEAL WAS ARGUED ALONG WITH THE INSTANT APPEAL. IN FACT, NO SEPARATE ARGUMENTS WERE MADE BY THE RIVAL PARTIES, WHO CHOSE TO ADOPT THE ARGUMENTS MADE FOR THE OTHER APPEAL. WE HAVE PASSED A SEPARATE DETAILED ORDER FOR THE AY 2004 - 05. FOLLOWING THE VIEW TAKEN THEREIN, WE SET - ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF AO FOR DECIDING THIS ISSUE AFRESH IN TERMS OF `BUSI NESS PROFITS UNDER ARTICLE 7 OF THE DTAA IN CONSONANCE WITH OUR DIRECTIONS CONTAINED IN THE ORDER FOR THE AY.2004 - 05. 3. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 12. IN AY 2003 - 04, THE TRIBUNAL HAD FOLLOWED ITS OWN ORDER IN ASSESS EES OWN CASE FOR AY 2004 - 05 AND HAD SET ASIDE THE MATTER TO THE FILE OF AO FOR DETERMINING THE TAXABILITY OF THE RECEIPTS AFRESH AS BUSINESS PROFIT IN TERMS OF ARTICLE 7 OF DTAA. HOWEVER, AO MADE VARIATION TO THE RELEVANT INCOME AND PASSED THE FINAL ORD ER ON 30.03.15 WITHOUT PASSING THE DRAFT ASSESSMENT ORDER. SINCE THE ASSESSEE BEING A FOREIGN COMPANY IS AN ELIGIBLE ASSESSEE, THEREFORE ON OR AFTER 01.10.09, IT WAS MANDATORY FOR THE AO TO FORWARD THE DRAFT ASSESSMENT ORDER TO THE ASSESSEE, IF HE 12 I.T.A. NO. 2479, 2480 & 2481 /MUM/201 7 MARRIOTT INTERNATIONAL LICENSING COMPANY BV, PROPOSES TO MAKE ANY VARIATION TO THE INCOME OR LOSS, WHICH IS PREJUDICIAL TO THE INTEREST OF ELIGIBLE ASSESSEE. SINCE IN THE PRESENT CASE, THE ORIGINAL ASSESSMENT ORDER MERGED WITH THE ORDER OF TRIBUNAL AND HENCE ONCE THE MATTER IS REMANDED BACK TO THE AO, THEN I N THAT CIRCUMSTANCES, IT GOES BACK TO THE STAGE OF ASSESSMENT. THEREFORE, IN OUR VIEW, ORDER DATED 30.03.15 PASSED BY AO WAS NOT MERELY AN ORDER GIVING EFFECT TO THE TRIBUNAL ORDER, BUT IT WAS AN ASSESSMENT ORDER U/S 143(3) OF THE ACT AND PROVISION OF SECT ION 144C OF THE ACT MUST BE MANDATORILY COMPLIED WITH. IN THIS RESPECT, WE RELY UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF DIMENSION DATA ASIA PACIFIC PTE LTD. VRS. DCIT (2018)96 TAXMAN.OMC 182 (BOM) HAS HELD AS UNDER: - 4. BRIEFLY, THE FACTS RELEVANT TO THIS PETITION ARE AS UNDER: - (A) THE PETITIONER IS FOREIGN COMPANY AND .ENTITLED TO THE PROCEDURE PROVIDED UNDER SECTION 144C OF THE ACT AS IT IS AN ELIGIBLE ASSESSEE AS DEFINED THEREIN. (B) ON 30TH NOVEMBER, 2011 THE PETITIONER FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011 - 12. IN ITS RETURN, IT DECLARED NIL INCOME. 13 I.T.A. NO. 2479, 2480 & 2481 /MUM/201 7 MARRIOTT INTERNATIONAL LICENSING COMPANY BV, (C) THEREAFTER, ON 20TH MARCH, 2015 A DRAFT ASSESSMENT ORDER AS REQUIRED UNDER SECTION 144C(1) OF THE ACT WAS PASSED FOR ASSESSMENT YEAR 2011 - 12. THE PETITIONE R FILED ITS OBJECTIONS IN TERMS OF SECTION 144C(2)(B) OF THE ACT TO THE FRIDAY, 6.7.2018 DISPUTE RESOLUTION PANEL (DRP). (D) ON 4TH DECEMBER, 2015 THE DRP ISSUED DIRECTIONS ON THE PETITIONER'S OBJECTION TO THE DRAFT ASSESSMENT ORDER DATED 20TH MARCH, 201 5. (E) CONSEQUENT TO THE DIRECTIONS OF THE DRP, AN ORDER OF ASSESSMENT DATED LLTH JANUARY, 2016 WAS PASSED UNDER SECTION 143(3) READ WITH SECTION 144(C)(13) OF THE ACT. 5. THE PETITIONER'S CHALLENGE TO THE IMPUGNED ORDER DATED 31ST JANUARY, 2018 IS THA T, IT IS WITHOUT JURISDICTION AS IT IS PASSED IN DEFIANCE OF SECTION 144C OF THE ACT. THE PETITIONER IS A FOREIGN COMPANY. THEREFORE, IN TERMS OF SECTION 144C OF THE ACT, A SEPARATE PROCEDURE FOR PASSING ASSESSMENT ORDERS AND APPELLATE PROCEDURE THEREUPON IS PROVIDED FOR ELIGIBLE ASSESSEE AS DEFINED IN SECTION 144C(15) OF THE ACT, WHICH INCLUDES FOREIGN COMPANY. THEREFORE, IN TERMS THEREOF, THE PETITIONER IS ENTITLED TO A DRAFT ASSESSMENT ORDER BEING PASSED UNDER SECTION 144(1) OF THE ACT BEFORE THE FINAL A SSESSMENT ORDER AS PASSED IN THIS CASE 14 I.T.A. NO. 2479, 2480 & 2481 /MUM/201 7 MARRIOTT INTERNATIONAL LICENSING COMPANY BV, UNDER SECTION 143(3) READ WITH SECTION 144(13) OF THE ACT BEING THE IMPUGNED ORDER. THUS, THE IMPUGNED ORDER DATED 31ST JANUARY, 2018 IGNORES THE MANDATE OF SECTION 144C OF THE ACT. RESULTANTLY* IT TAKES AWAY THE PET ITIONER'S RIGHT TO OBJECT TO THE DRAFT ASSESSMENT ORDER BEFORE THE DRP. THEREFORE, TAKING AWAY A VALUABLE RIGHT OF THE PETITIONER BEFORE THE ASSESSING OFFICER PASSES A FINAL ORDER WHICH CAN BE SUBJECTED TO APPELLATE PROCEEDINGS. IN SUPPORT, RELIANCE WAS PL ACED UPON THE DECISIONS OF THIS COURT IN INTERNATIONAL AIR TRANSPORT ASSOCIATION V. DY. C/7~[2016] 68 TAXMANN.COM 246/241 TAXMAN 249. AND OF DELHI HIGH COURT IN JCB INDIA LTD. V. DY. CIT [2017] 85 TAXMANN.COM 155/251 TAXMAN 143/398 1TR 189. 6. AS AGAINST T HE ABOVE, IT IS THE RESPONDENT'S CONTENTION THAT THE ORDER DATED 5TH MAY, 2017 OF THE TRIBUNAL DOES NOT SET ASIDE THE ORIGINAL ASSESSMENT ORDER DATED LLTH JANUARY, 2016 AND MERELY RESTORES IT TO THE ASSESSING OFFICER TO GIVE EFFECT TO ITS ORDER DATED 5TH M AY, 2017. THIS RESTORATION TO THE ASSESSING OFFICER IS ONLY TO DETERMINE THE PROFITS ATTRIBUTABLE TO THE RE IN INDIA. IN ABOVE CIRCUMSTANCES, IT IS CONTENDED BY THE REVENUE THAT THE REQUIREMENT OF PASSING A DRAFT ASSESSMENT ORDER IN TERMS OF SECTION 144C O F THE ACT IS NOT CALLED FOR, AS THE ORDER DATED 31ST JANUARY, 2018 IS ONLY AN ORDER GIVING EFFECT TO THE 15 I.T.A. NO. 2479, 2480 & 2481 /MUM/201 7 MARRIOTT INTERNATIONAL LICENSING COMPANY BV, ORDER DATED 5TH MAY, 2017 OF THE TRIBUNAL. THE REMEDY, IF ANY, OF THE PETITIONERS ACCORDING TO THE REVENUE IS FILING AN APPEAL FROM THE IMPUGNED ORDER DATED 31ST JANUARY, 2018 TO THE INCOME TAX APPELLATE TRIBUNAL AND/OR \ I THE COMMISSIONER OF INCOME - TAX (APPEALS). 7. WE NOTE THAT, IT IS AN UNDISPUTED POSITION BEFORE US, THAT THE PETITIONER IS A FOREIGN COMPANY AND AN ELIGIBLE ASSESSEE AS DEFINED IN SECTI ON 144C(15)(B)(II) OF THE ACT. IT HAS BEEN HELD BY THIS COURT IN INTERNATIONAL AIR TRANSPORT ASSOCIATION (SUPRA) THAT A FOREIGN COMPANY IS ENTITLED TO BEING ASSESSED IN ACCORDANCE WITH SECTION 144C OF THE ACT. IT IS THE ABOVE SECTION 144C OF THE ACT, WHICH PROVIDES A SEPARATE SCHEME FOR THE MANNER IN WHICH THE ASSESSING OFFICER WOULD PASS ASSESSMENT ORDERS UNDER THE ACT AND A SEPARATE PROCEDURE TO CHALLENGE AN DRAFT ORDER I.E. BEFORE AN ASSESSMENT ORDER WHICH IS SUBJECT TO APPEAL UNDER THE ACT IS PASSED. TH E ENTIRE OBJECT IS TO ENSURE THAT THE DISPUTES OF FOREIGN COMPANIES ARE RESOLVED EXPEDITIOUSLY AND FINAL ASSESSMENT ORDERS ARE NOT PASSED WITHOUT A RE - LOOK TO THE PROPOSED ORDER (DRAFT ORDER), IF SO DESIRED BY THE FOREIGN COMPANY. IN ESSENCE, IT OBLIGES TH E ASSESSING OFFICER TO FIRST PASS A DRAFT OF THE PROPOSED ASSESSMENT ORDER INDICATING THE PROPOSED VARIATION IN THE INCOME RETURNED. THIS DRAFT 16 I.T.A. NO. 2479, 2480 & 2481 /MUM/201 7 MARRIOTT INTERNATIONAL LICENSING COMPANY BV, ASSESSMENT ORDER IS TO BE PASSED UNDER SECTION 144C(1) OF THE ACT, WHICH ENTITLES AN ELIGIBLE ASSESSEE SUCH AS A FOREIGN COMPANY TO APPROACH THE DRP WITH ITS OBJECTION TO THE DRAFT ASSESSMENT ORDER. THIS IS SO PROVIDED, SO THAT AN ELIGIBLE ASSESSEE CAN HAVE HIS GRIEVANCE ADDRESSED BEFORE THE FINAL ASSESSMENT ORDER IS PASSED. IN CASE, AN ASSESSEE DOES NOT OBJECT TO T HE DRAFT ASSESSMENT ORDER, THEN A FINAL ASSESSMENT ORDER IS PASSED IN TERMS OF THE DRAFT ASSESSMENT ORDER BY THE ASSESSING OFFICER. IT IS ONLY ON PASSING OF THE FINAL ASSESSMENT ORDER THAT THE ASSESSEE, IF AGGRIEVED BY IT, WOULD BE ABLE TO APPROACH THE APP ELLATE AUTHORITIES UNDER THE ACT. THESE SPECIAL RIGHTS ARE MADE AVAILABLE UNDER SECTION 144C OF THE ACT TO AN ELIGIBLE ASSESSEE SUCH AS THE PETITIONER. THEREFORE, IT CANNOT BE IGNORED BY PASSING AN FINAL ORDER UNDER SECTION 144(13) OF THE ACT WITHOUT PRECE DING IT WITH A DRAFT ASSESSMENT ORDER AS REQUIRED THEREIN. 8. THE CONTENTION OF THE REVENUE THAT THE REQUIREMENT OF PASSING A DRAFT ASSESSMENT ORDER UNDER SECTION 144C OF THE ACT WOULD ONLY EXTEND TO THE ORDERS PASSED IN THE FIRST ROUND OF PROCEEDINGS OR I N RESPECT OF AN ORDER PASSED BY THE ASSESSING OFFICER IN REMAND PROCEEDINGS BY THE TRIBUNAL WHICH HAS ENTIRELY SET ASIDE THE ORIGINAL ASSESSMENT ORDER. THIS DISTINCTION WHICH IS SOUGHT TO BE DRAWN BY THE REVENUE IS NOT 17 I.T.A. NO. 2479, 2480 & 2481 /MUM/201 7 MARRIOTT INTERNATIONAL LICENSING COMPANY BV, BORNE OUT BY SECTION 144C OF THE ACT. INFACT, THE DELHI HIGH COURT IN JCB (INDIA) LTD. (SUPRA) HELD THAT, EVEN IN PARTIAL REMAND PROCEEDINGS FROM THE TRIBUNAL, THE ASSESSING OFFICER IS OBLIGED TO PASS A DRAFT ASSESSMENT ORDER UNDER SECTION 144C(1) OF THE ACT. ACCORDING TO US, THE ASSESSING OF FICER, IS OBLIGED TO, IN TERMS OF SECTION 144C OF THE ACT TO PASS A DRAFT ASSESSMENT ORDER IN ALL CASES WHERE HE PROPOSES TO ASSESS THE FOREIGN COMPANY UNDER THE ACT BY MAKING A VARIATION IN THE RETURNED INCOME. IN THIS CASE, THE IMPUGNED ORDER DATED 31ST JANUARY, 2018 HAS BEEN PASSED IN TERMS OF SECTION 143(3) READ WITH SECTION 144C READ WITH SECTION 254 OF THE ACT AND IT CERTAINLY MAKES A VARIATION TO THE RETURNED INCOME FILED BY THE PETITIONER. THIS EVEN IF, ONE PROCEEDS ON THE BASIS THAT THE RETURNED IN COME STANDS VARIED BY THE ORDER OF THE TRIBUNAL IN THE FIRST ROUND, TO THE EXTENT THE PETITIONER ACCEPTS IT. THEREFORE, THE ASSESSING OFFICER CORRECTLY INVOKES SECTION 144C OF THE ACT IN THE IMPUGNED ORDER. ONCE HAVING INVOKED SECTION 144C OF THE ACT, THE ASSESSING OFFICER IS OBLIGED TO COMPLY WITH IT IN FULL AND NOT PARTLY. THIS IMPUGNED ORDER WAS PASSED CONSEQUENT TO THE ORDER OF THE TRIBUNAL DATED 5TH MAY, 2017 RESTORING SOME OF THE ISSUES BEFORE IT TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION. 18 I.T.A. NO. 2479, 2480 & 2481 /MUM/201 7 MARRIOTT INTERNATIONAL LICENSING COMPANY BV, 9. THI S 'FRESH ADJUDICATION' ITSELF WOULD IMPLY THAT IT WOULD BE AN ORDER WHICH WOULD DECIDE THE LIS BETWEEN THE PARTIES, MAY NOT BE ENTIRE LIS, BUT THE DISPUTE WHICH HAS BEEN RESTORED TO THE ASSESSING OFFICER. ACCORDING TO US, THE ORDER DATED 31 ST JANUARY, 201 8 IS NOT AN ORDER MERELY GIVING AN EFFECT TO THE ORDER OF THE TRIBUNAL, BUT IT IS AN ASSESSMENT ORDER WHICH HAS INVOKED SECTION 143(3) OF THE ACT AND ALSO SECTION 144C OF THE ACT. THIS INVOCATION OF SECTION 144C OF THE ACT HAS TAKEN PLACE AS THE ASSESSING OFFICER IS OF THE VIEW THAT IT APPLIES, THEN THE REQUIREMENT OF SECTION 144C(1) OF THE ACT HAS TO BE COMPLIED WITH BEFORE HE CAN PASS THE IMPUGNED ORDER INVOKING SECTION 144C(13) OF THE ACT. INFACT, SECTION 144C(13) OF THE ACT CAN ONLY BE INVOKED IN CASES WHERE THE ASSESSEE HAS APPROACHED THE DRP IN TERMS OF SUB - SECTION 144(C)(2)(B) OF THE ACT AND THE DRP GIVES DIRECTION IN TERMS OF SECTION 144C(5) OF THE ACT. IN THIS CASE, THE ASSESSMENT ORDER HAS INVOKED SECTION 144C(13) OF THE ACT WITHOUT HAVING PASSED T HE NECESSARY DRAFT ASSESSMENT ORDER UNDER SECTION 144C(1) OF THE ACT, WHICH ALONE WOULD MAKE AN DIRECTION U/S 144C(5) OF THE ACT BY THE DRP POSSIBLE. THUS, THE IMPUGNED ORDER IS COMPLETELY WITHOUT JURISDICTION. 19 I.T.A. NO. 2479, 2480 & 2481 /MUM/201 7 MARRIOTT INTERNATIONAL LICENSING COMPANY BV, 10. MOREOVER, SO FAR AS A FOREIGN COMPANY IS CONCERNED, THE PARLIAMENT HAS PROVIDED A SPECIAL PROCEDURE FOR ITS ASSESSMENT AND APPEAL IN CASES WHERE THE ASSESSING OFFICER DOES NOT ACCEPT THE RETURNED INCOME. IN THIS CASE. IN THE WORKING OUT OF THE ORDER DA TED 5TH MAY, 2017 OF THE TRIBUNAL RESULTS IN THE RETURNED INCOME BEING VARIED, THEN THE PROCE DU RE OF PASSING A DRAFT ASSESSMENT ORDER UNDER SECTION 144C(L) OF THE . ACT IS MANDATORY AND HAS TO BE COMPLIED WITH, WHICH HAS NOT BEEN DONE. 11. IN THE ABOVE VI EW, THE IMPUGNED ORDER IS WITHOUT JURISDICTION. THUS, THE PLEA OF ALTERNATE REMEDY ADVANCED BY THE REVENUE SO AS TO NOT ENTERTAIN THIS PETITION, DOES NOT MERIT ACCEPTANCE IN THE PRESENT FACTS. 12. IN THE ABOVE VIEW, THE IMPUGNED ORDER DATED 31ST JANUARY, 2 018 HAS BEEN PASSED WITHOUT COMPLYING WITH THE MANDATORY REQUIREMENTS OF SECTION 144C OF THE ACT WHICH IS APPLICABLE TO A FOREIGN COMPANY SUCH AS THE PETITIONER. THEREFORE, THE IMPUGNED ORDER IS QUASHED AND SET ASIDE. NEEDLESS TO STATE, THIS ORDER WOULD NO T, IN ANY WAY, STOP THE REVENUE FROM TAKING SUCH STEPS AS ARE AVAILABLE TO IT IN LAW AND THE 20 I.T.A. NO. 2479, 2480 & 2481 /MUM/201 7 MARRIOTT INTERNATIONAL LICENSING COMPANY BV, P ETITIONER ALSO FROM CONTESTING THE ACTION OF THE REVENUE IN ACC ORDANCE WITH LAW, IF IT SO DESIRES. 13. IN THE CASE OF TURNER INTERNATIONAL INDIA PVT. LTD. VRS. D CIT (2017) 82 TAXMANN.COM 155(DELHI HC) , WHEREIN IT WAS HELD THAT THE LEGAL POSITION IS UNAMBIGUOUS AS THE FAILURE ON THE PART OF AO TO ADHERE TO THE MANDATORY REQUIREMENT OF SECTION 144C OF THE ACT AND PASSING FINAL ORDER WITHOUT FIRSTLY PASSING A DRAFT A SSESSMENT ORDER RESULTS IN INVALIDATION OF THE FINAL ASSESSMENT ORDER AND THE CONSEQUENT DEMAND NOTICES AND PENALTY PROCEEDINGS. 14. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS KEEPING IN VIEW OF THE JUDICIAL PRONOUNCEMENT AS MENTI ONED ABOVE, WE FIND THAT AO HAD PASSED FINAL ASSESSMENT ORDER U/S 144C(13) OF THE ACT WITHOUT PASSING A DRAFT ASSESSMENT ORDER AS MANDATORILY REQUIRED U/S 144C(1) OF THE ACT, THUS IN THESE CIRCUMSTANCES, THE IMPUGNED FINAL ORDER PASSED BY AO IS IN CONTRAV ENTION OF THE PROVISION S OF SECTION 144C(1) OF THE ACT, WHICH IS APPLICABLE TO A FOREIGN COMPANY SUCH AS APPELLANT, THEREFORE KEEPING IN VIEW THE JUDICIAL DECISION AS MENTIONED 21 I.T.A. NO. 2479, 2480 & 2481 /MUM/201 7 MARRIOTT INTERNATIONAL LICENSING COMPANY BV, ABOVE, THE IMPUGNED ORDER DATED 30.03.15 IS QUASHED AND SET ASIDE. NEEDLESS TO STATE, THIS ORDER WOULD NOT, IN ANY WAY, STOP THE REVENUE FROM TAKING SUCH STEPS AS ARE AVAILABLE TO IT IN LAW AND THE APPELLANT ALSO FROM CONTESTING THE ACTION OF THE REVENUE IN ACCORDANCE WITH LAW, IF SO DESIRES. RESULTANTLY, THESE GROUNDS RA ISED BY THE ASSESSEE ARE AL LOWED . 15. SINCE WE HAVE ALREADY ALLOWED THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE AND QUASHED AND SET ASIDE THE ORDER OF ASSESSMENT DATED 30.03.15 , THEREFORE IN VIEW OF OUR ABOVE DECISION, THE MAIN GROUND S OF APPEAL NO. 1 TO 4, NEEDS NO SP ECIFIC ADJUDICATION AND THUS BECOMES INFRUCTUOUS. 16 . CONSEQUENTLY, THE APPEAL FILED B Y THE ASSESSEE STANDS ALLOWED . ITA NO. 2480 & 2481/MUM/2017 1 7 . NOW WE TAKE UP ASSESSEE S APPEALS IN ITA NO. 2480 /MUM/2017 (AY 2 004 - 05 & 2007 - 08 ) . SINCE WE HAVE ALREADY DECIDED THE SIMILAR G ROUNDS OF APPEAL IN ITA NO. 2479 /M UM/2017 FOR AY 2003 - 04 ON MERITS. THEREFORE , FOLLOWING 22 I.T.A. NO. 2479, 2480 & 2481 /MUM/201 7 MARRIOTT INTERNATIONAL LICENSING COMPANY BV, OUR OWN DECISION IN ITA NO. 2479 /MUM /17 , WE APPLY THE SAME FINDINGS IN THE PRESENT APPEAL IN ORDER TO MAINTAIN JUDICIAL CONSISTENCY WHICH IS APPLICABLE MUTATIS MUTANDIS . 1 8 . IN THE NET RESULT, ALL THE APPEALS FILED BY THE ASSESSEE STA NDS ALLOWED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH MAY, 2019. SD/ - SD/ - (G. S. PANNU) (SANDEEP GOSAIN) VICE PRESIDENT JUDICIAL MEMBER MUMBAI ; DATED : 24 . 05 .201 9 SR.PS. DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI
