ADIT (IT) 3(1), MUMBAI V. J. RAY MC DERRMOTT EASTERN HEMISPHERE LTD, MUMBAI

ITA 2535/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59730 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 1997-1998
• Appeal Filed On: 31-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B JAYA KUMAR
• Assessee Lawyers: BHA VIN SHETH
• Keywords: Permanent establishment
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NO. 2535/MUM/2011 ASSESSMENT YEAR : 1997-98. DY. COMMISSIONER OF INCOME-TAX, J. RAY MCDERROMOTT EASTERN 3(1), MUMBAI. VS. HIMISPHERE LTD. C/O P.W.C. PVT. LTD., PWC HOUSE, 18/A, GURU NANAK ROAD,(STATION RO AD), BANDRA (W), MUMBAI-400050. PAN AABCM1087F. APPELLANT. RESPONDENT APPELLANT BY : SHRI B. JAYAKUMAR. RESPONDENT BY: SHRI BHA VIN SHETH. DATE OF HEARING : 24-01-2012. DATE OF PRONOUNCEMENT : 31-01-2012. O R D E R. PER P.M. JAGTAP, A.M. : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF LEARNED CIT(APPEALS)-10, MUMBAI DATED 28-01-2011 WHEREBY HE CANCELLED THE PENALTY OF RS.3,94,36,925/- IMPOSED BY THE AO U/S 271(1)(C). 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY IN CORPORATED UNDER THE LAWS OF MAURITIUS AND IS A TAX RESIDENT OF THAT COUNTRY. IT IS ENGAGED IN THE BUSINESS OF 2 ITA NO.2535/MUM/2011 ASSESSMENT YEAR : 1997-98. DESIGNING, FABRICATION, CONSTRUCTION AND INSTALLATI ON OF PLATFORMS ETC. AND VARIOUS OTHER SIMILAR ACTIVITIES WHICH ARE INVOLVED IN EXPL ORATION AND PRODUCTION OF MINERAL OILS. THE RETURN OF INCOME FOR THE YEAR UND ER CONSIDERATION WAS FILED BY THE ASSESSEE ON 28-11-1997 SHOWING TOTAL INCOME AT NIL ON THE BASIS THAT IT HAD NO PERMANENT ESTABLISHMENT IN INDIA. IN THE ASSESSMENT COMPLETED U/S 143(3) VIDE AN ORDER DATED 24-03-2000, THE TOTAL INCOME OF THE ASS ESSEE WAS COMPUTED BY THE AO AT RS.7,15,01,240/-. IT WAS HELD BY THE AO IN THE S AID ASSESSMENT THAT THE ASSESSEE COMPANY HAD A PERMANENT ESTABLISHMENT IN INDIA DURI NG THE YEAR UNDER CONSIDERATION AND THE TOTAL CONTRACT RECEIPTS IN CO NNECTION WITH MINERAL OIL EXPLORATION IN INDIA WERE CHARGEABLE TO TAX AS PER THE PROVISIONS OF SECTION 44BB. ACCORDINGLY THE TOTAL INCOME OF THE ASSESSEE WAS CO MPUTED BY THE AO AT RS.7,15,01,240/- BEING 10% OF SUCH RECEIPTS UNDER T HREE CONTRACTS EXECUTED IN THE YEAR UNDER CONSIDERATION AGGREGATING TO RS.71,50,12 ,430/-. PENALTY PROCEEDINGS U/S 271(1)(C) WERE ALSO INITIATED BY THE AO AND ON CONF IRMATION OF THE ADDITION MADE IN THE ASSESSMENT BY THE LEARNED CIT(APPEALS), THE AO IMPOSED A PENALTY OF RS.3,94,36,925/-, HOLDING THAT THE PARTICULARS OF I TS INCOME TO THAT EXTENT WERE FURNISHED BY THE ASSESSEE INACCURATELY. 3. THE PENALTY IMPOSED BY THE AO U/S 271(1)(C) WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFORE THE LEARNED CIT( APPEALS). MEANWHILE THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEAR NED CIT(APPEALS) IN THE QUANTUM PROCEEDINGS CAME TO BE DISPOSED OF BY THE TRIBUNAL VIDE ITS ORDER DATED 22 ND MARCH, 2010 PASSED IN ITA NO. 8084/MUM/04 WHEREBY T HE MATTER RELATING TO THE EXISTENCE OF PE IN INDIA WAS REMANDED BY THE TRIBUN AL TO THE LEARNED CIT(APPEALS) WITH SOME SPECIFIC DIRECTIONS. AS PER THE SAID DIRECTIONS OF THE TRIBUNAL, THE LEARNED CIT(APPEALS) DISPOSED OF THE MATTER HOLDING THAT THE ASSESSEE DID NOT HAVE PE IN INDIA DURING THE YEAR UNDER CONS IDERATION AND ACCORDINGLY 3 ITA NO.2535/MUM/2011 ASSESSMENT YEAR : 1997-98. DELETED THE ENTIRE ADDITION MADE BY THE AO VIDE HIS APPELLATE ORDER DATED 27-01- 2011. TAKING NOTE OF THE SAID ORDER PASSED IN THE QUANTUM PROCEEDINGS AS WELL AS OTHER RELEVANT ASPECTS OF THE CASE, THE LEARNED CIT (APPEALS) CANCELLED THE PENALTY IMPOSED BY THE AO U/S 271(1)(C) FOR THE FOLLOWING R EASONS GIVEN IN PARAGRAPH NO. 1.5 OF HIS IMPUGNED ORDER : I HAVE CONSIDERED THE FACTS AND PERUSED THE MATERI AL ON RECORD. I FIND THAT THE ISSUE OF PE HAS BEEN DECIDED BY ME VIDE ORDER C IT(A)-10/JCIT/SPECIAL RANGE-12/(ADIT(III) 3(1) IT-100/09-10 DATED 27-1-20 11 WHEREIN I HAVE HOLD THAT THE APPELLANT DOES NOT HAVE PE IN INDIA A S DURATION OF EACH PROJECT EXECUTED BY THE APPELLANT DOES NOT EXCEED THE THRES HOLD LIMIT OF NINE MONTHS, THEREFORE THE INCOME OF THE ASSESSEE IS NOT TAXABLE IN INDIA. IN VIEW OF THE ABOVE, AS THE MAIN QUANTUM APPEAL HAS BEEN H ELD IN FAVOUR OF THE APPELLANT AND THE SINCE THE ADDITION MADE ITSELF WA S DELETED, THE VERY BASIS FOR LEVY DOES NOT EXIST A PENALTY CANNOT BE SUSTAIN ED. IN THE CASE OF DCIT V INDIAN PLYWOOD MANUFACTURING CO. PVT. LTD. (2009- T IOL-495-ITAT- MUM) IT WAS HELD WITH REGARD TO LEVY OF PENALTY ON SHORT TERM CAPITAL GAINS, SINCE IT HAS BEEN SET-ASIDE BY THE TRIBUNAL TO THE FILES OF AO, THE PENALTY WOULD NOT SURVIVE ANYMORE. ACCORDINGLY THE PENALTY LEVIED BY THE AO U/S 271(1)(C) OF RS.3,94,36,925 IS DELETED. CIT V RELIANCE PETROPRODUCTS PVT. LTD. (322 ITR 158 (SC) HELD THAT MERELY BECAUS E THE ASSESSEE HAS CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPT ED OR WAS NOT ACCEPTABLE BY THE REVENUE, PENALTY U/S 271(1)(C) OF THE ACT CANNOT BE ATTRACTED. THERE IS NO CONCEALMENT OF ANY FACT NOR HAVE ANY ADDITIONAL FACTS BEEN DISCOVERED PROVING THE EARLIER DISCLOSURE IN T HE RETURN TO BE FALSE OR WRONG. CONSIDERING AFORESAID DISCUSSION, IT IS HELD THAT NO PENALTY UNDER SECTION 271(1)(C) FOR THE YEAR UNDER CONSIDERATION IS LEVIABLE IN CASE OF THE APPELLANT AS THE APPELLANT HAS MADE APPROPRIATE DIS CLOSURE IN THE COMPUTATION OF INCOME, PROVIDED DETAILS AND THE CLA IM WAS BONAFIDE AND THE ISSUE WAS DEBATABLE. I AM THEREFORE, SATISFIED THAT THE AO WAS NOT JUSTIFIED IN IMPOSING THE PENALTY. THEREFORE, THE PENALTY OF RS. 3,94,36,925 IS CANCELLED. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEALS), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4 ITA NO.2535/MUM/2011 ASSESSMENT YEAR : 1997-98. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE LEARNED CIT(APPEALS) CANCELLED THE PENALTY IMPOSED BY THE AO ON THE GROUND THAT THE AD DITION MADE TO THE TOTAL INCOME OF THE ASSESSEE IN RESPECT OF WHICH THE SAID PENALTY WAS IMPOSED, HAS BEEN ENTIRELY DELETED IN THE QUANTUM PROCEEDINGS. 5. AT THE TIME OF HEARING BEFORE US, THE LEARNED DR HAS NOT BEEN ABLE TO BRING ANY THING ON RECORD TO SHOW THAT THE ORDER OF THE T RIBUNAL DATED 22 ND MARCH, 2010 (SUPRA) OR THE ORDER OF THE LEARNED CIT(APPEALS) DA TED 27-01-2011 (SUPRA) PASSED IN THE QUANTUM PROCEEDINGS GIVING RELIEF TO THE ASS ESSEE BY DELETING THE ADDITION MADE BY THE AO HAS BEEN DISTURBED BY ANY HIGHER APP ELLATE AUTHORITY. THE POSITION AS IT STANDS TODAY THUS IS THAT THE ENTIRE ADDITION IN RESPECT OF WHICH THE IMPUGNED PENALTY WAS IMPOSED HAS BEEN DELETED AND THE SAID P ENALTY THUS IS LIABLE TO BE CANCELLED HAVING NO LEGS TO STAND AS RIGHTLY HELD B Y THE LEARNED CIT(APPEALS). WE, THEREFORE, FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) CANCELLING THE PENALTY IMPOSED BY THE AO U/S 271(1) (C) AND DISMISS THIS APPEAL PREFERRED BY THE REVENUE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF JANUARY, 2012. SD/- SD/- (V. DURGA RAO) (P.M. J AGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED : 31 ST JANUARY, 2012. 5 ITA NO.2535/MUM/2011 ASSESSMENT YEAR : 1997-98. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A)-10, MUMBAI. 5. DR, J-BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI. WAKODE