Deputy Director of Income-tax, V. Sandvik Australia Pty Ltd., Pune

ITA 250/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7728 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 11-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 27; 148; 6

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NOS.250 AND 251/PUN/2015 [ [ / ASSESSMENT YEARS : 2006-07 & 2008-09 DY.DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-II, B.O. BHAVAN, SR.NO.47, PLOT NO.1, PUNE SATARA ROAD, PUNE 411009. . / APPELLANT V/S SANDVIK AUSTRALIA PTV LTD. C/O. SANDVIK ASIA LIMITED, MUMBAI PUNE ROAD, DAPODI, PUNE. PAN : AAJCS6708B . / RESPONDENT C.O.NOS.48 AND 49/PUN/2016 (ARISING OUT OF ITA NOS.250 AND 251/PUN/2015 [ [ / ASSESSMENT YEARS : 2006-07 & 2008-09 SANDVIK AUSTRALIA PTV LTD. C/O. SANDVIK ASIA LIMITED, MUMBAI PUNE ROAD, DAPODI, PUNE. PAN : AAJCS6708B . / APPELLANT V/S DY.DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-II, B.O. BHAVAN, SR.NO.47, PLOT NO.1, PUNE SATARA ROAD, PUNE 411009. . / APPELLANT ASSESSEE BY : SHRI KETAN VED. REVENUE BY : SHRI RAJEEV KUMAR / DATE OF HEARING : 22.05.2017 / DATE OF PRONOUNCEMENT: 18.08.2017 2 / ORDER PER ANIL CHATURVEDI, AM : THESE TWO APPEALS FILED BY THE REVENUE AND THE C.OS. FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS OF DY.DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) II, PUNE DT.15.01.2015 FOR THE ASSESSMENT YEARS 2006-07 AND 2008-09. 2. BEFORE US, AT THE OUTSET LD.D.R. SUBMITTED THAT THOUGH THE APPEALS FILED BY THE REVENUE ARE FOR DIFFERENT ASSESSMENT YEARS BUT THE FACTS AND ISSUES INVOLVED IN ALL THE APPEALS ARE IDENTICAL EXCEPT FOR THE ASSESSMENT YEAR AND THE AMOUNTS INVOLVED AND THEREFORE THE SUBMISSIONS MADE BY THE REVENUE WHILE ARGUING ONE APPEAL WOULD BE EQUALLY APPLICABLE TO OTHER APPEALS ALSO AND THEREFORE, BOTH THE APPEALS CAN BE HEARD TOGETHER. THE AFORESAID SUBMISSION OF THE LD.D.R. HAS NOT BEEN OBJECTED TO BY LD.A.R. WE THEREFORE FOR THE SAKE OF CONVENIENCE, PROCEED TO DISPOSE OF BOTH THE APPEALS BY A CONSOLIDATED ORDER. HOWEVER, WE PROCEED WITH NARRATING THE FACTS FOR THE APPEAL IN ITA NO.250/PUN/2015 FOR THE ASSESSMENT YEAR 2006- 07. 3. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER: ASSESSEE IS A NON-RESIDENT COMPANY INCORPORATED IN AUSTRALIA , IS A TAX RESIDENT OF AUSTRALIA UNDER THE DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) BETWEEN INDIA AND AUSTRALIA . ASSESSEE ELECTRONICAL L Y FILED ITS RETURN OF INCOME FOR A.Y. 2006-07 ON 01.03.2007 DECLARING TOTAL INCOME OF RS NI L . A NOTICE U/S 148 OF THE ACT DT.28.03.2013 WAS ISSUED AND SERVED ON ASSESSEE AND I N RESPONSE TO WH I CH ASSESSEE FURNISHED VARIOUS DETA I LS . AO NOTICED 3 THAT ASSESSEE HAD I NSTALLED ROUTERS , SERVERS, NETWORK L INES AND OTHER DEVISES IN I NDIA WHICH WERE OWNED, MONITORED AND MAINTAINED BY ASSESSEE. DURING THE RELEVANT PERIOD ASSESSEE HAD TWO SERVERS, ONE AT MEHSANA IN GUJARAT AND ANOTHER AT GURGAON , HARYANA . THROUGH THE NETWORK , DATA STO R AGE AND DATA RETR I EVA L WERE PROVIDED TO INDIAN COMPANY FOR WHICH PAYMENTS WERE RECEIVED BY THE ASSESSEE. AO WAS O F THE VIEW THAT PAYMENTS RECE I VED FOR USE OF NETWORK, SERVE R AND HARDWA R E WAS COVE R ED UNDER ART I CLE 12(3)(B) AND PAYMENTS RECEIVED FOR DATA ANALYSIS WAS COVERED UNDER ARTICLE 12(3)(C) AND (D) A N D HENCE L I ABLE TO BE TAXED IN INDIA . HE, THUS IN THE DRAFT ORDER PASSED ON 27 . 2 . 2014 U/S 144C(1) R.W.S 143(3) R.W.S 147 OF THE ACT, HELD THE INCOME OF RS.69,31 , 786/- TO BE INCOME FROM ROYALTY/FTS . ASSESSEE F I LED OBJECT I ONS BEFORE DISPUTE RESOLUTION PANEL (D.R.P.) ON 07 .0 4 . 2014 . DRP VIDE ORDER DATED 28 . 11 . 2014 HE L D THE REOPENING OF THE ASSESS M ENT T O BE NOT I N ACCORDANCE W I TH LAW AND ACCORDINGLY HELD THE REOPENING TO BE I NVAL I D AND CONSEQ U ENTLY THE ASSESSMENT FRAMED ON INVAL I D REOPENING TO BE NOT SUSTAINABLE . AO THEREAFTER PASSED ORDE R O N 15 .0 1 . 2015 U/S 144C(13) AND DETERMINED THE TOTAL I NCOME AT RS.NIL . AGGRIEVED BY THE D IR ECT I ONS OF DRP, REVENUE I S NOW IN APPEAL BEFORE US AND HAS RA I SED THE FOLLOWING GROUNDS : 1. ON THE FACTS AND CIRCUMSTANCES OF THIS CASE, THE DRP WAS NOT CORRECT IN DISMISSING THE RE- OPENING OF THE ASSESSMENT AS NOT BEING IN ACCORDANCE WITH THE PROVISIONS OF THE LAW AND TERMING THE SAME TO BE INVALID. 2. ON THE FACTS AND CIRCUMSTANCES OF THIS CASE, THE DRP WAS NOT CORRECT IN HOLDING THAT THE REOPENING WAS NOT BASED ON THE FACT THAT THERE WAS A REASON TO BELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT SINCE NO ASSESSMENT U/S143(3) WAS COMPLETED IN THE ASSESSMENT YEAR UNDER CONSIDERATION. 3. ON THE FACTS AND CIRCUMSTANCES OF THIS CASE, THE DRP WAS NOT CORRECT IN OBSERVING THERE WAS NO ASSESSMENT U/S 143(3) OR 147 OF THE ACT, THEREFORE AS SECTION 151(2) WAS APPLICABLE, THE NOTICE U/S 148 WAS ISSUED AFTER DUE APPROVAL OF JT. DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION), PUNE AS REQUIRED UNDER SECTION 151(2) OF THE ACT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THE DRP WAS NOT CORRECT IN OBSERVING THAT THERE WAS NO MATERIAL ON THE BASIS OF WHICH THE 4 BELIEF IS FORMED SINCE THE MATERIAL FOR FORMATION OF BELIEF WAS DEFINITE AND NOT VAGUE AND FANCIFUL. THE RE-OPENING OF THE ASSESSMENT WAS WELL WITHIN THE SCOPE OF PROVISIONS OF INCOME-TAX ACT AND THE REASONS RECORDED BY THE ASSESSING OFFICER BEFORE ISSUING NOTICE U/S 148 ARE EXPLICIT AND GOOD ENOUGH TO MAKE OUT A FIT CASE FOR RE-OPENING OF THE ASSESSMENT. 4. ASSESSEE IN THE CO.NO.48/PUN/2016 HAS RAISED THE FOLLOWING GROUNDS : 1. WITHOUT PREJUDICE TO THE RELIEF GRANTED BY THE HON'BLE DISPUTE RESOLUTION PANEL ['THE DRP'] IN RELATION TO REOPENING OF THE ASSESSMENT PROCEEDINGS, THE LEARNED DRP ERRED IN NOT ADJUDICATING UPON OBJECTION NO.2 BEING NON APPRECIATION OF THE ORDER PASSED BY PUNE INCOME TAX APPELLATE TRIBUNAL BY AO IN CONNECTION WITH TAXABILITY OF IT SUPPORT SERVICES IN RESPONDENTS OWN CASE. 2. WITHOUT PREJUDICE TO THE RELIEF GRANTED BY THE DRP IN RELATION TO REOPENING OF THE ASSESSMENT PROCEEDINGS AND GROUND NO. 1 ABOVE, THE LEARNED DRP ERRED IN NOT ADJUDICATING UPON OBJECTION NO.3 BEING TAXABILITY OF RECEIPTS FOR IT SUPPORT SERVICES AMOUNTING TO INR 69,31,786 AS FEES FOR TECHNICAL SERVICES. 3. WITHOUT PREJUDICE TO THE RELIEF GRANTED BY THE DRP IN RELATION TO REOPENING OF THE ASSESSMENT PROCEEDINGS AND GROUND NO. 1 ABOVE, THE LEARNED DRP ERRED IN NOT ADJUDICATING UPON OBJECTION NO.4 BEING TAXABILITY OF RECEIPTS FOR IT SUPPORT SERVICES AMOUNTING TO INR 69,31,786 AS ROYALTY. 4. IT IS FURTHER PRAYED THAT THE HON'BLE APPELLATE AUTHORITY IS ENTITLED TO CONSIDER THE CLAIM AND HAS THE POWER TO ADJUDICATE THE SAME IN ACCORDANCE WITH LAW. 5. BEFORE US , LD DR SUPPORTED THE ORDER OF AO . LD AR O N THE OTHER HAND SUPPO R TED THE ORDE R O F DRP AND REITERATED THE SUBMISSIONS MADE BEFORE LOWER AUTHORITIES AND SUBMITTED THAT EVEN ON MERITS THE AMOUNT IS NOT TA X ABLE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE WE F I ND THAT DRP HAS NOTED THAT THE NOTICE U/S 148 OF THE ACT WAS ISSUED AFTER EXP I RY OF FOUR YEARS AND T H AT ON I DENT I CAL ISSUE I N THE CASE OF AFFILIATE ENTITIES OF ASSESSEE, DRP HAD HELD THAT THERE WAS NO FA I LU R E ON THE PART OF T HE ASSESSEE TO FULLY AND T R ULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR THE ASSESSME N T AND T H E R EFORE T HE REOPENING IN THOSE CASES WERE HE L D TO BE INVAL I D . HE THEREAFTER RELYING ON THE DECISION IN THE CASE OF GROUP COMPANIES, 5 HELD THE RE-OPENING TO BE INVALID. WE FIND THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SANDVIK INFORMATION TECHNOLOGY AB (A GROUP OF COMPANY OF ASSESSEE) IN ITA NO.128/PUN/2014 AND C.O.NO.10/PUN/2015 ON IDENTICAL FACTS VIDE ORDER DT.28.12.2016 HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER: 15. A COMPARATIVE STUDY OF FORM 3CEB OF SAL ON THE BASIS OF WHICH THE ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 148 R.W.S 147 OF THE ACT AND FORM 3CEB FURNISHED BY THE ASSESSEE REVEAL THAT SIMILAR NOTE HAS BEEN MADE IN FORM 3CEB OF BOTH THE COMPANIES. FURTHER, THE FACT THAT THE ASSESSEE HAS CHARGED FOR THE SERVICES RENDERED IS ALSO MENTIONED IN COMPUTATION SHEET. THUS, IT CANNOT BE SAID THAT ANY FRESH TANGIBLE MATERIAL HAS COME TO THE KNOWLEDGE OF THE ASSESSING OFFICER. THE MATERIAL ON THE BASIS OF WHICH THE ASSESSING OFFICER HAS INITIATED REASSESSMENT PROCEEDINGS WAS ALREADY PLACED ON RECORD BY THE ASSESSEE AT THE TIME OF FILING OF RETURN OF INCOME. THE ASSESSEE HAD MADE FULL DISCLOSURE OF THE RECEIPTS. THE SAID RECEIPTS ARE CLAIMED BY THE ASSESSEE TO BE REIMBURSEMENT OF EXPENDITURE AND NOT AS INCOME. IT IS CLEARLY EVIDENT FROM RECORDS THAT THE ASSESSEE HAD ALREADY MADE DISCLOSURE OF THE RECEIPTS FROM SAL AND WALTER TOOLS INDIA PVT. LTD. AT THE TIME OF FILING OF RETURN OF INCOME. THE ASSESSING OFFICER HAS ERRED IN INVOKING THE PROVISIONS OF SECTION 148 R.W.S. 147 OF THE ACT, FOR REOPENING ON THE BASIS OF SAME INFORMATION DERIVED FROM THE DOCUMENTS OF GROUP CONCERN, I.E., SAL. THE ASSESSING OFFICER CAN HAVE REASON TO BELIEVE FOR REOPENING ASSESSMENT IF THERE IS ANY TANGIBLE MATERIAL IN HIS POSSESSION. IN THE PRESENT CASE WE ARE OF CONSIDERED VIEW THAT THE ASSESSING OFFICER HAD NO NEW INFORMATION OR TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME. IF THE ASSESSING OFFICER CHOOSES TO CLOSE HIS EYES ON THE MATERIAL/DOCUMENTS FURNISHED BY ASSESSEE AND STARTS SCANNING THE DOCUMENTS OF OTHER CONCERNS AND IN THE PROCESS COMES ACROSS SOME INFORMATION ABOUT ASSESSEE, WHICH THE ASSESSEE HAS ALREADY DISCLOSED, SUCH INFORMATION CANNOT PARTAKE THE CHARACTER OF NEW TANGIBLE MATERIAL. 16. IN SO FAR CONTENTIONS OF THE DEPARTMENT THAT THE ASSESSING OFFICER DID NOT GET OPPORTUNITY TO APPLY HIS MIND ON THE DOCUMENTS FURNISHED BY ASSESSEE AS THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(1), WE DO NOT FIND ANY FORCE IN THE SAID CONTENTIONS. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ORIENT CRAFT LTD. (SUPRA) HAS HELD THAT EXPRESSION, REASON TO BELIEVE DOES NOT HAVE DIFFERENT MEANING, WHERE ASSESSMENTS ARE FRAMED U/S.143(1) AND WHERE ASSESSMENT IS COMPLETED U/S.143(3) OF THE ACT. THE RELEVANT EXTRACT OF THE FINDINGS OF THE HONBLE HIGH COURT ARE AS UNDER : 13. HAVING REGARD TO THE JUDICIAL INTERPRETATION PLACED UPON THE EXPRESSION REASON TO BELIEVE, AND THE CONTINUED USE OF THAT EXPRESSION RIGHT FROM 1948 TILL DATE, WE HAVE TO UNDERSTAND THE MEANING OF THE EXPRESSION IN EXACTLY THE SAME MANNER IN WHICH IT HAS BEEN UNDERSTOOD BY THE COURTS. THE ASSUMPTION OF THE REVENUE THAT SOMEHOW THE WORDS REASON TO BELIEVE HAVE TO BE UNDERSTOOD IN A LIBERAL MANNER WHERE THE FINALITY OF AN INTIMATION UNDER SECTION 143(1) IS SOUGHT TO BE DISTURBED IS ERRONEOUS AND MISCONCEIVED. AS POINTED OUT EARLIER, THERE IS NO WARRANT FOR SUCH AN ASSUMPTION BECAUSE OF THE LANGUAGE EMPLOYED IN SECTION 147; 6 IT MAKES NO DISTINCTION BETWEEN AN ORDER PASSED UNDER SECTION 143(3) AND THE INTIMATION ISSUED UNDER SECTION 143(1). THEREFORE IT IS NOT PERMISSIBLE TO ADOPT DIFFERENT STANDARDS WHILE INTERPRETING THE WORDS REASON TO BELIEVE VIS--VIS SECTION 143(1) AND SECTION 143(3). WE ARE UNABLE TO APPRECIATE WHAT PERMITS THE REVENUE TO ASSUME THAT SOMEHOW THE SAME RIGOROUS STANDARDS WHICH ARE APPLICABLE IN THE INTERPRETATION OF THE EXPRESSION WHEN IT IS APPLIED TO THE REOPENING OF AN ASSESSMENT EARLIER MADE UNDER SECTION 143(3) CANNOT APPLY WHERE ONLY AN INTIMATION WAS ISSUED EARLIER UNDER SECTION 143(1). IT WOULD IN EFFECT PLACE AN ASSESSEE IN WHOSE CASE THE RETURN WAS PROCESSED UNDER SECTION 143(1) IN A MORE VULNERABLE POSITION THAN AN ASSESSEE IN WHOSE CASE THERE WAS A FULL- FLEDGED SCRUTINY ASSESSMENT MADE UNDER SECTION 143(3). WHETHER THE RETURN IS PUT TO SCRUTINY OR IS ACCEPTED WITHOUT DEMUR IS NOT A MATTER WHICH IS WITHIN THE CONTROL OF ASSESSEE; HE HAS NO CHOICE IN THE MATTER. THE OTHER CONSEQUENCE, WHICH IS SOMEWHAT GRAVER, WOULD BE THAT THE ENTIRE RIGOROUS PROCEDURE INVOLVED IN REOPENING AN ASSESSMENT AND THE BURDEN OF PROVING VALID REASONS TO BELIEVE COULD BE CIRCUMVENTED BY FIRST ACCEPTING THE RETURN UNDER SECTION 143(1) AND THEREAFTER ISSUE NOTICES TO REOPEN THE ASSESSMENT. AN INTERPRETATION WHICH MAKES A DISTINCTION BETWEEN THE MEANING AND CONTENT OF THE EXPRESSION REASON TO BELIEVE IN CASES WHERE ASSESSMENTS WERE FRAMED EARLIER UNDER SECTION 143(3) AND CASES WHERE MERE INTIMATIONS WERE ISSUED EARLIER UNDER SECTION 143(1) MAY WELL LEAD TO SUCH AN UNINTENDED MISCHIEF. IT WOULD BE DISCRIMINATORY TOO. AN INTERPRETATION THAT LEADS TO ABSURD RESULTS OR MISCHIEF IS TO BE ESCHEWED. 17. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF KHUBCHANDANI HEALTHPARKS (P) LTD. VS. ITO (SUPRA) HAS REITERATED THAT NOTICE ISSUED U/S.148 WOULD BE WITHOUT JURISDICTION FOR ABSENCE OF REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT EVEN IN CASE WHERE ASSESSMENT HAS BEEN COMPLETED EARLIER BY INTIMATION U/S.143(1) OF THE ACT. THE HONBLE HIGH COURT WHILE HOLDING SO, CONSIDERED THE DECISIONS RENDERED BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. RAJESH JHAVERI STOCK BROKERS (P) LTD. REPORTED AS 291 ITR 500 AND CIT VS. ZUARI ESTATE DEVELOPMENT & INVESTMENT CO. LTD. (SUPRA). THE RELEVANT EXTRACT OF THE JUDGMENT RENDERED IN THE CASE OF KHUBCHANDANI HEALTHPARKS (P) LTD. VS. ITO (SUPRA) READS AS UNDER : 3. ON HEARING THE PARTIES, WE FIND THAT THE APEX COURT IN ASSISTANT COMMISSIONER OF INCOME TAX VS. RAJESH JHAVERI STOCK BROKERS P. LTD. 291 ITR 500, HAD AN OCCASION TO DEAL WITH IDENTICAL FACTS, NAMELY REOPENING NOTICES ISSUED UNDER SECTION 148 OF THE ACT WHERE ASSESSMENT IS COMPLETED EARLIER BY INTIMATION UNDER SECTION 143(1) OF THE ACT. IN THE ABOVE CASE, THE APEX COURT HELD THAT A NOTICE FOR-REOPENING AN ASSESSMENT UNDER SECTION 148 OF THE ACT COULD ONLY BE JUSTIFIED IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THIS DECISION OF THE SUPREME COURT IN RAJESH JHAVERI STOCK BROKERS P. LTD. (SUPRA) HAS NOT BEEN DISTURBED BY THE APEX COURT IN ZUARI ESTATE DEVELOPMENT AND INVESTMENT CO. LTD. (SUPRA). IN FACT, THE SUPREME COURT IN ZUARI ESTATE DEVELOPMENT AND INVESTMENT CO. LTD. (SUPRA) MAKES A SPECIFIC REFERENCE TO ITS DECISION IN RAJESH JHAVERI STOCK BROKERS P. LTD. (SUPRA) TO HOLD THAT WHERE THE ASSESSMENT HAS BEEN COMPLETED BY INTIMATION UNDER SECTION 143(1) OF THE ACT, THERE CAN BE NO QUESTION OF CHANGE OF OPINION. 4. WE FURTHER FIND THAT THE APEX COURT IN ZUARI ESTATE DEVELOPMENT AND INVESTMENT CO. LTD. (SUPRA) HAS NOT DEALT WITH THE ISSUE WHETHER BEFORE INVOKING SECTION 148 OF THE ACT, THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, WHERE THE ORIGINAL ASSESSMENT HAS BEEN COMPLETED BY INTIMATION UNDER SECTION 143(1) OF THE ACT. THE REVENUE IS TRYING TO INFER THAT BECAUSE THE APEX COURT IN ZUARI ESTATE DEVELOPMENT AND INVESTMENT CO. LTD. (SUPRA) 7 HAS SET ASIDE THE ORDER OF THIS COURT AND RESTORED THE ISSUE TO BE DECIDED ON MERITS BY THE TRIBUNAL, IT MUST BE INFERRED THAT THE APEX COURT HAD COME TO THE CONCLUSION THAT REASON TO BELIEVE WAS NOT NECESSARY FOR ISSUING REASSESSMENT NOTICES WHERE THE REGULAR ASSESSMENT WAS COMPLETED UNDER SECTION 143(1) OF THE ACT. AS RIGHTLY POINTED OUT BY MR. PARDIWALLA, IT CAN EQUALLY BE INFERRED THAT THE APEX COURT IN THE ABOVE CASE HAD COME TO THE CONCLUSION THAT THERE IS REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT AND CONSEQUENTLY RESTORED THE ISSUE TO THE TRIBUNAL TO DECIDE THE REASSESSMENT PROCEEDINGS ON MERITS. 18. THUS, IN VIEW OF THE FACTS OF THE PRESENT CASE AND THE CASE LAWS DISCUSSED ABOVE WE HOLD THAT THE ASSESSING OFFICER HAD NO TANGIBLE MATERIAL TO JUSTIFY HIS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THE REASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSING OFFICER U/S.147 ARE WITHOUT JURISDICTION AND HENCE, ARE NOT SUSTAINABLE. ACCORDINGLY GROUND NO.1 TO 3 RAISED BY DEPARTMENT IN APPEAL ARE DISMISSED. 7. ON THE ISSUE OF DRP HAVING POWER TO ANNUL ASSESSMENT THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ITA NO.128/PUN/2014 AND C.O.NO.10/PUN/2015 ORDER DT.28.12.2016 HELD AS UNDER : 19. THE SECOND ISSUE IN APPEAL IS, WHETHER THE DRP HAS POWER TO ANNUAL ASSESSMENT. BEFORE PROCEEDING FURTHER TO DECIDE THE ISSUE, IT WOULD BE RELEVANT TO FIRST SEE THE RELEVANT PROVISIONS OF THE ACT WHICH DEFINE THE POWERS OF DRP. REFERENCE TO DRP IS MADE U/S.144C. THE SCOPE OF DRPS JURISDICTION IS ENVISAGED IN SUBSECTION (5) TO (8) OF SECTION 144C. FOR THE SAKE OF QUICK REFERENCE, THE RELEVANT PROVISIONS OF SECTION 144C ARE REPRODUCED HEREINUNDER : (5) THE DISPUTE RESOLUTION PANEL SHALL, IN A CASE WHERE ANY OBJECTION IS RECEIVED UNDER SUB-SECTION (2), ISSUE SUCH DIRECTIONS, AS IT THINKS FIT, FOR THE GUIDANCE OF THE ASSESSING OFFICER TO ENABLE HIM TO COMPLETE THE ASSESSMENT. (6) THE DISPUTE RESOLUTION PANEL SHALL ISSUE THE DIRECTIONS REFERRED TO IN SUB- SECTION (5), AFTER CONSIDERING THE FOLLOWING, NAMELY: (A ) DRAFT ORDER; (B ) OBJECTIONS FILED BY THE ASSESSEE; (C ) EVIDENCE FURNISHED BY THE ASSESSEE; (D ) REPORT, IF ANY, OF THE ASSESSING OFFICER, VALUATION OFFICER OR TRANSFER PRICING OFFICER OR ANY OTHER AUTHORITY; (E ) RECORDS RELATING TO THE DRAFT ORDER; (F ) EVIDENCE COLLECTED BY, OR CAUSED TO BE COLLECTED BY, IT; AND (G ) RESULT OF ANY ENQUIRY MADE BY, OR CAUSED TO BE MADE BY, IT. (7) THE DISPUTE RESOLUTION PANEL MAY, BEFORE ISSUING ANY DIRECTIONS REFERRED TO IN SUB-SECTION (5), (A ) MAKE SUCH FURTHER ENQUIRY, AS IT THINKS FIT; OR (B ) CAUSE ANY FURTHER ENQUIRY TO BE MADE BY ANY INCOME-TAX AUTHORITY AND REPORT THE RESULT OF THE SAME TO IT. 8 (8) THE DISPUTE RESOLUTION PANEL MAY CONFIRM, REDUCE OR ENHANCE THE VARIATIONS PROPOSED IN THE DRAFT ORDER SO, HOWEVER, THAT IT SHALL NOT SET ASIDE ANY PROPOSED VARIATION OR ISSUE ANY DIRECTION UNDER SUB-SECTION (5) FOR FURTHER ENQUIRY AND PASSING OF THE ASSESSMENT ORDER. A PERUSAL OF THE PROVISIONS SHOW THAT DRP ON RECEIPT OF OBJECTIONS SHALL ISSUE SUCH DIRECTIONS, AS IT THINKS FIT AFTER CONSIDERING THE RELEVANT DOCUMENTS AND RECORDS AS SPECIFIED IN SUB-SECTION (6). A FURTHER STUDY OF SUB-SECTION (8) CLARIFIES THAT THE DRP HAS POWER TO CONFIRM, REDUCE OR ENHANCE THE VARIATIONS PROPOSED IN THE DRAFT ORDER, BUT HAS NO POWER TO SET ASIDE ANY PROPOSED VARIATION OR ISSUE ANY DIRECTIONS TO PASS ASSESSMENT ORDER AFTER FURTHER ENQUIRY. 20. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF VODAFONE INDIA SERVICES PVT. LTD. VS. UOI AND OTHERS (SUPRA) AND VODAFONE-II CASE HAD EXPLAINED THE PROVISIONS OF SECTION 144C RELATING TO THE POWERS OF DRP IN ADJUDICATING VARIOUS ISSUES INCLUDING JURISDICTIONAL ISSUES. THE HONBLE HIGH COURT HELD THAT THE DRP HAS WIDE POWERS TO ADJUDICATE OBJECTIONS FILED BY THE ASSESSEE. THE DRPS POWER TO CONFIRM WOULD ALSO INCLUDE THE POWER NOT TO CONFIRM. THE RELEVANT EXTRACT OF THE JUDGMENT RENDERED BY HONBLE APEX COURT IN THE CASE OF VODAFONE INDIA SERVICES PVT. LTD. VS. UOI AND OTHERS IS AS UNDER : 85. ONCE THIS IS ACCEPTED THE FALLACY IN THE PETITIONERS INTERPRETATION OF SECTION 144C(8) IS CLEAR. THE WORDS THE VARIATIONS PROPOSED IN THE DRAFT ORDER USED IN SUB-SECTION (8) OBVIOUSLY REFER TO THE VARIATIONS IN THE INCOME OR LOSS RETURN IN THE DRAFT ASSESSMENT ORDER REFERRED TO IN SUB-SECTION (1)OF SECTION 144-C. THUS, SUB-SECTION (8) OF SECTION 144-C EMPOWERS THE DRP TO CONFIRM, REDUCE OR ENHANCE THE VARIATIONS PROPOSED IN THE DRAFT ORDER AS A WHOLE AND NOT THE VARIATIONS IN THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS ALONE. THE DRP, THEREFORE, IS ENTITLED TO CONFIRM, REDUCE OR ENHANCE ANY VARIATIONS IN THE DRAFT ORDER AND THE DRAFT ORDER, AS WE HAVE HELD, MAY CONTAIN VARIATIONS IN THE INCOME OR LOSS RETURN GENERALLY. 86. WE ALSO AGREE WITH THE ADVOCATE GENERAL THAT IF THE ASSESSEE CHOOSES TO FILE AN OBJECTION BEFORE THE DRP, HE MUST DO SO IN RESPECT OF THE ENTIRE DRAFT ORDER AND NOT MERELY IN RESPECT OF A PART THEREOF. IN OTHER WORDS, ONCE AN ASSESSEE OPTS TO FILE OBJECTIONS BEFORE THE DRP HE CANNOT RESTRICT THE SAME ONLY INSOFAR AS IT RELATES TO THE INTERNATIONAL TRANSACTIONS. A VIEW TO THE CONTRARY WOULD RENDER THE ENTIRE ASSESSMENT PROCEEDINGS UNWORKABLE. THE ASSESSEE CANNOT POSSIBLY HAVE A PART OF THE ASSESSMENT ORDER DECIDED BY THE DRP AND A PART OF IT DECIDED IN AN APPEAL BEFORE THE CIT(APPEALS). THERE IS, IN ANY EVENT, NO PROVISION FOR THE SAME IN THE ACT. 87. MOREOVER, THE DRP HAS VIDE JURISDICTION AS IS EVIDENT, INTER-ALIA, FROM SUB-SECTION (8) OF SECTION 144-C. THE DRP IS REQUIRED TO ISSUE DIRECTIONS UNDER SUB-SECTION (5) AFTER CONSIDERING A VARIETY OF MATTERS MENTIONED IN SUB-SECTION (6) OF SECTION 144-C. FIRST, CLAUSE (A) OF SUB-SECTION (6) DOES NOT RESTRICT THE DRPS CONSIDERATION TO ANY PARTICULAR ASPECT OR ASPECTS OF THE DRAFT ORDER. CLAUSE (B) OF SUB-SECTION (2) OF SECTION 144-C DOES NOT RESTRICT THE NATURE OF THE OBJECTIONS THAT CAN BE FILED BEFORE THE DRP. SIMILARLY, CLAUSE (B) OF SUB- SECTION (6) OF SECTION 144-C DOES NOT RESTRICT THE DRPS CONSIDERATION TO ANY PARTICULAR TYPE OF THE OBJECTIONS. IT MERELY REFERS TO OBJECTIONS FILED BY THE ASSESSEE. SUB-SECTION (6)(C) DOES NOT LIMIT THE DRPS CONSIDERATION OF THE EVIDENCE TO ANY PARTICULAR ASPECT OR ISSUE. IT REFERS IN GENERAL TO THE EVIDENCE FURNISHED BY THE ASSESSEE. CLAUSE (D) ALSO DOES NOT LIMIT THE CONSIDERATION BY THE DRP TO ANY PARTICULAR ASPECT OF THE REPORT OF THE AO OR 9 THE TPO. NOR DOES IT LIMIT THE CONSIDERATION BY THE DRP TO THE NATURE OF THE REPORT RELATING TO THE DRAFT ASSESSMENT ORDER. SUB-SECTION (6) AND ESPECIALLY CLAUSES (A) AND (B) THEREOF ILLUSTRATE THAT THE DRP WOULD ALSO BE ENTITLED TO CONSIDER WHETHER OR NOT THE TPO WAS ENTITLED TO EXERCISE JURISDICTION. 88. THIS VIEW IS NOT REPUGNANT TO THE WORDS CONFIRM, REDUCE OR ENHANCE IN SECTION 144C(8). THE SUGGESTION THAT THESE THREE WORDS REFER ONLY TO THE VALUATION OR QUANTIFICATION OF THE ARMS LENGTH PRICE IS UNFOUNDED. A REDUCTION OR AN ENHANCEMENT INDEED RELATE TO THE VALUATION OR QUANTIFICATION. THE WORD CONFIRM, HOWEVER, IS MUCH WIDER. THE DRPS POWER TO CONFIRM WOULD INCLUDE THE POWER NOT TO CONFIRM. IT WOULD INCLUDE THE POWER TO ANNUL THE VARIATIONS OR ANY OF THEM. THE DOUBT, IF ANY, IS SET TO REST BY THE USE OF THE WORDS MAY CONFIRM. ONCE THE ENTIRE DRAFT ORDER IS BEFORE THE DRP FOR CONFIRMATION, IT IS AXIOMATIC THAT IT WOULD HAVE THE POWER TO CONSIDER THE ENTIRE DRAFT ASSESSMENT ORDER, INCLUDING THE QUESTION AS TO WHETHER THE UNREPORTED TRANSACTIONS ARE INTERNATIONAL TRANSACTIONS OR NOT OR EVEN WHETHER THE TPO CONSIDERED WAS A TRANSACTION AT ALL. THE DIVISION BENCH OF THE GUJARAT HIGH COURT IN VEER GEMS (SUPRA) ALSO HELD THAT THE ISSUE WHETHER THERE WAS AN INTERNATIONAL TRANSACTION OR NOT CAN ALSO BE EXAMINED BY THE DRP. 89. THIS VIEW, IN FACT, PROTECTS THE RIGHT OF AN ASSESSEE WHO WOULD OTHERWISE BE DEPRIVED OF A VALUABLE RIGHT OF ONE APPEAL. AN APPEAL AGAINST THE ORDER OF THE DRP LIES ONLY TO THE ITAT. THE LEGISLATURE COULD HARDLY BE EXPECTED TO HAVE INTENDED TO DEPRIVE AN ASSESSEE OF A VALUABLE RIGHT OF AN APPEAL WITHOUT EXPRESS WORDS TO THAT EFFECT. WE DO NOT SUGGEST THAT THE LEGISLATURE IS NOT COMPETENT TO DO SO. WE ARE NOT INCLINED, HOWEVER, TO ASCRIBE TO THE LEGISLATURE AN INTENTION TO DEPRIVE AN ASSESSEE OF SUCH A RIGHT IN THE ABSENCE OF ANY PROVISION OR EVEN WORDS TO THAT EFFECT. AGAIN IN VODAFONE-II CASE, WHERE THE PETITIONER/ASSESSEE HAD CONTENDED THAT THE POWERS OF DRP ARE LIMITED AND THE DRP HAS NO POWER TO SET ASIDE ANY PROPOSED VARIATION, THE HONBLE HIGH COURT REITERATED THE LAW LAID DOWN IN VODAFONE INDIA SERVICES PVT. LTD. VS. UOI (SUPRA) AND HELD : 28. THUS IT WOULD BE OPEN TO DRP TO CONSIDER ALL ISSUES, INCLUDING THE JURISDICTIONAL ISSUE OF NO INCOME ARISING AND/OR AFFECTED BY THE INTERNATIONAL TRANSACTION. THIS THE DRP CAN DO BY ISSUING FINAL DIRECTIONS UNDER SECTION1 44C(5) TO THE ASSESSING OFFICER OR BEFORE ISSUING FINAL DIRECTIONS, BY ISSUING DIRECTIONS UNDER SECTION 144C(7) TO THE ASSESSING OFFICER TO MAKE A FURTHER ENQUIRY AND REPORT. 21. IN VIEW OF THE LAW LAID DOWN BY THE HONBLE BOMBAY HIGH COURT WE ANSWER THE SECOND QUESTION IN AFFIRMATIVE. THUS, IT CAN BE SAFELY CONSTRUED THAT THE DRP HAS POWER TO ADJUDICATE JURISDICTIONAL ISSUES AND HAS ALSO HAS POWER TO SET ASIDE ANY PROPOSED VARIATIONS. 7. BEFORE US , REVENUE HAS NOT PO I NTED OUT ANY FAL L ACY I N THE F I NDINGS OF DRP OR ANY DISTINGUISHING FEATURE IN THE FACTS OF ASSESSEES CASE AND THAT OF ASSESSEES SISTER CONCERN. WE THEREFO R E F I ND NO REASON TO INTERFERE WITH THE ORDER OF DRP AND T HUS THE GROUNDS OF REVENUE ARE DISMISSED . SINCE THE REOPENING I S ITSE L F HELD 10 TO BE INVALID , WE ARE OF THE V I EW TH AT T H E GROUNDS RAISED BY THE ASSESSEE IN I TS CROSS-OBJECTION ARE THEREFORE RENDE R ED ACADEM I C AND REQ UI RES N O ADJUDICATION . 8. IN ANY CASE THE ISSUE RAISED BY THE ASSESSEE IN ITS CROSS- OBJECTION THAT WHETHER IT SUPPORT SERVICES IS ROYALTY OR FTS, HAS BEEN DECIDED BY THE PUNE BENCH OF ITAT IN ASSESSEES OWN CASE IN ITA NO.93/PN/2011 FOR A.Y. 2007-08 ORDER DT.31.01.2013. THE RELEVANT FINDING IS AS UNDER : 16. IN THE PRESENT CASE, AS PER THE TERMS OF THE AGREEMENT BETWEEN THE ASSESSEE COMPANY AND SANDVIK ASIA LTD., DOES NOT SUPPORT THE CASE OF THE REVENUE THAT THE ASSESSEES CASE IS COVERED IN CLAUSE (G) OF PARA 3 TO ARTICLE 12 OF THE INDIA AUSTRALIA TREATY AS THE ASSESSEE HAS NOT MADE AVAILABLE ANY TECHNICAL KNOWLEDGE OR EXPERTISE TO THE RECIPIENT INDIAN COMPANY. IN OUR OPINION, THE ASSESSEE HAS ONLY PROVIDED THE BACK-UP SERVICES AND IT SUPPORT SERVICES FOR SOLVING IT RELATED PROBLEMS TO ITS INDIAN SUBSIDIARY. HENCE, UNLESS AND UNTIL THE SERVICES ARE NOT MADE AVAILABLE, SAME CANNOT BE TAXABLE IN INDIA. WE, THEREFORE HOLD THAT THE SERVICES RENDERED BY ASSESSEE COMPANY TO ITS INDIAN GROUP COMPANIES, THOUGH ARE IN THE NATURE OF TECHNICAL SERVICES, BUT IS NOT COVERED IN PARA (3)(G) TO ARTICLE 12 OF THE INDIA AUSTRALIA TREATY AND HENCE, THE SAME IS NOT TAXABLE IN INDIA. WE ALSO HOLD THAT THE AMOUNT RECEIVED BY THE ASSESSEE CANNOT BE TREATED AS A ROYALTY EVEN UNDER THE NORMAL PROVISIONS OF I.T. ACT. BUT UNDER THE NORMAL PROVISION OF THE I.T. ACT THE SAME CONSTITUTE CONSIDERATION FOR RENDERING THE TECHNICAL SERVICES COVERED U/S 9(1)(VII) OF THE I.T. ACT. ACCORDINGLY, GROUND NO.1 IS ALLOWED AND ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. FOLLOWING SAME REASONING, WE ALLOW THE CLAIM OF ASSESSEE THAT IT SUPPORT SERVICES IS NEITHER ROYALTY OR FEES FOR TECHNICAL SERVICES (FTS), THUS, THE ISSUE IS ALLOWED ON MERITS. THUS, THE APPEAL OF REVENUE IS DISMISSED AND CROSS-OBJECTION OF ASSESSEE IS ALLOWED. 9. IN THE RESULT, THE APPEAL OF REVENUE IN ITA NO.250/PUN/2015 AND CROSS-OBJECTION OF ASSESSEE IN C.O.NO.48/PUN/2016 IS ALLOWED. 11 10. AS FAR AS A.Y. 2008-09 IS CONCERNED, REVENUE IS IN APPEAL AGAINST THE ORDER OF DRP ON DECIDING THE ISSUE ON MERITS IN FAVOUR OF ASSESSEE AND ASSESSEE HAS FILED CROSS-OBJECTION AGAINST THE RE- OPENING OF ASSESSMENT. BOTH THESE ISSUES ARE SQUARELY COVERED BY THE ORDER FOR A.Y. 2006-07 AS ABOVE. HENCE, THE APPEAL OF REVENUE IN ITA NO.251/PUN/2015 IS DISMISSED AND CROSS-OBJECTION OF ASSESSEE IN C.O.NO.49/PUN/2016 IS ALLOWED. 11. IN THE RESULT, BOTH THE APPEALS OF REVENUE ARE DISMISSED AND CROSS-OBJECTIONS OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON 18 TH DAY OF AUGUST, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 18 TH AUGUST, 2017. YAMINI / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT (IT-TP), PUNE 4. THE CIT(A)-13, PUNE. 5. , , / DR, ITAT, A PUNE; 6. [ / GUARD FILE. / BY ORDER , // / // // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE