ITO, Bangalore V. M/s ABB Inc., Bangalore

ITA 255/BANG/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7295 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 06-07-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 26-02-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VANDANA SAGAR
• Assessee Lawyers: SAMPATH RAGHUNATHAN
• Keywords: Double taxation relief; Permanent establishment
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C BEFORE SHRI A RUN KUMAR GARODIA , ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO , JUDICIAL MEMBER I.T. (T.P) A. NO. 255 /BANG/201 6 (ASSESSMENT YEAR : 20 11 - 12 ) INCOME TAX OFFICER (INTERNATIONAL TAXATIO N), WARD 1(1), BANGALORE. VS. M/S. ABB INC., C/O ABB INDIA LIMITED, 21 ST FLOOR, WTC, DR. RAJKUMAR ROAD, MALLESWARAM (WEST), BANGALORE. APPELLANT RESPONDENT. I.T. (T.P) A. NO. 9 /BANG/201 4 (ASSESSMENT YEAR : 20 10 - 11 ) M/S. ABB INC., C/O ABB INDIA LIMITE D, BANGALORE. VS. ASST. DIRECTOR OF INCOME TAX, (INTERNATIONAL TAXATION) CIRCLE 1(1), BANGALORE. APPELLANT RESPONDENT. ASSESSEE BY : SHRI SAMPATH RAGHUNATHAN, ADVOCATE. REVENUE BY : SMT. VANDANA SAGAR, CIT (D.R) DATE OF H EARING : 24.10.2017. DATE OF P RONOUNCEMENT : 21 .11. 201 7 . O R D E R PER SHRI VIJAY P AL RAO, J. M. : TH E S E ARE TWO APPEAL S , ON E BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2010 - 11 DIRECTED AGAINST THE ORDER DT. 19.11.2013 PASSED UNDER SECTION 143(3) R.W.S. 144C OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') AND ANOTHER BY THE 2 IT (TP) A NO S . 9 /BANG/ 201 4 & 255/BANG/2016 REVENUE FOR THE ASSESSMENT YEAR 2011 - 12 DIRECTED AGAIN ST THE ASSESSMENT ORDER DT.25.1.2016 PASSED UNDER SECTION 143(3) R.W.S. 144C OF THE ACT. 2. FIRST WE TAKE UP THE APPEAL OF THE ASSESSEE WHEREIN THE ASSESSEE RAISED THE FOLLOWING GROUNDS : 3 IT (TP) A NO S . 9 /BANG/ 201 4 & 255/BANG/2016 4 IT (TP) A NO S . 9 /BANG/ 201 4 & 255/BANG/2016 3. GROUND NO.1 IS REGARDING FEES RECEIVED BY THE ASSESSEE FROM ABB LIMITED AND ABB GLOBAL INDUSTRIES & SERVICES LIMITED HAVE BEEN BROUGHT TO TAX BY THE ASSESSING OFFICER BY TREATING THE SAME AT FEES FOR TECHNICAL SERVICES (FTS). THE ASSESSEE IS A NON - RESIDENT COMPANY INCORPORATED IN USA AND ENGAGED IN THE BUSINESS OF SUPPLYING POWER AND AUTOMATION TECHNOLOGY TO UTILITY AND INDUSTRY CUSTOMERS. THE ASSESSEE COMPANY IS PROVIDING BUSINESS DEVELOPMENT, MARKETING SERVICES AND OTHER SUPPORT SERVICES TO ABB LIMITED AS WELL AS ABB GLOBAL INDUSTRIES & SERVICES L IMITED. THE ASSESSEE CLAIMED THAT THE INCOME OF THE ASSESSEE BEING FEES RECEIVED FROM ABB LIMITED AS WELL AS ABB GLOBAL INDUSTRIES & SERVICES LIMITED IS NOT TAXABLE IN INDIA AS THE ASSESSEE HAS NO PERMANENT ESTABLISHMENT (PE) IN INDIA. FURTHER AS PER THE INDO - USA DOUBLE TAXATI ON AVOIDANCE AGREEMENT (DTAA) T HE SAID FEES CANNOT BE TREATED AS FTS FOR WANT OF THE TECHNICAL SERVICE MADE AVAILABLE. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND TREATED THE FEES RECEIVED BY THE ASSESSEE FROM INDIAN COUNTERPART AS FTS AND BROUGHT TO TAX. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER BEFORE THE DRP AND SUBMITTED THAT THE FEES RECEIVED BY THE ASSESSEE IN QUESTION DOES NOT FALL IN THE AMBIT OF 5 IT (TP) A NO S . 9 /BANG/ 201 4 & 255/BANG/2016 TECHNICAL SERVICE AS PER THE IT A CT AS WELL AS INDO - USA DTAA . THIS SERVICE WOULD NOT BE TREATED AS INCLUDED SERVICES UNDER THE DTAA. THE DRP CONCURRED WITH THE VIEW OF THE ASSESSING OFFICER AND HELD THAT THE SERVICES RENDERED BY THE ASSESSEE ARE IN THE NATURE OF TECHNICAL SERVICES AND CONSEQUENTLY THE FEES RECEIVED BY THE ASSESSEE WILL FALL IN THE AMBIT OF FTS AS PER THE INDO - USA DTAA. 4. BEFORE US, THE LEARNED AUTHORISED REPRESENTATIVE HAS SUBMITTED THAT THE ASSESSEE COMPANY IS PROVIDING THE SERVICES ONLY WITH RESPECT TO THE RISK ANALYSIS FOR VARIOUS PROJECTS TO BE UNDERTAKEN BY THE INDIAN COUNTERPART AND THEREFORE , SUCH SERVICE OF RISK ANALYSIS BEING DONE BY THE COMMITTEE ESTABLISHED BY THE ASSESSEE WOULD NOT FALL IN THE DEFINITION OF FTS UNDER INDO - USA DTAA. HE HAS FURTHER CONTE NDED THAT THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2009 - 10 VIDE ORDER DT.30.6.2015 HAS CONSIDERED AND DECIDED AN IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE. F URTHER THE DRP HAS TAKEN A SIMILAR VIEW FOR THE ASSESSMENT YEAR 2009 - 10 AND THE REFORE THIS ISSUE IS COVERED BY THE ORDER OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2009 - 10. THE LEARNED AUTHORISED REPRESENTATIVE HAS FURTHER POINTED OUT THAT IN PARA NO.6.2.10 TO 6.2.4, THE DRP HAS GIVEN AN IDENTICAL FINDING AS FOR THE ASSESSMENT YEAR 2009 - 10. HE HAS RELIED UPON THE EARLIER ORDER OF THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2009 - 10. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO THE OBSERVATION AND FINDING OF THE ASSESSING OFFICER AND SUBMITTED THAT THE ASSESSING OFFICER HAS CONDUCTED A THOROUG H ENQUIRY IN THE MATTER. HOWEVER, DESPITE REPEATED REQUESTS AND OPPORTUNITY GIVEN TO THE ASSESSEE, THE ASSESSEE DID NOT FILE THE RELEVANT DETAILS IN SUPPORT OF THE CLAIM THAT THE SERVICES 6 IT (TP) A NO S . 9 /BANG/ 201 4 & 255/BANG/2016 RENDERED BY THE ASSESSEE AND PAYMENT RECEIVED BY THE ASSESSEE WOULD NOT FALL UNDER THE CATEGORY OF FEES FOR TECHNICAL SERVICES. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS ALSO RELIED UPON THE DECISION ON THE POINT WHEN THE ASSESSEE FAI LED TO PRODUCE THE RELEVANT RECORD THEN THE ASSESSING OFFICER IS JUSTIFIED TO TREAT THE RECEIPT IN QUESTION AS FEES FOR TECHNICAL SERVICES AS THE ASSESSING OFFICER HAS CONSIDERED THE RELEVANT TERMS AND CONDITIONS OF THE AGREEMENT. HE HAS ALSO POINTED OUT THAT THE ASSESSEE ITSELF HAS ACCEPTED THIS RECEIPT AS FEES FOR TECHNICAL SERVICES FOR THE ASSESSMENT YEAR 2012 - 13 AND OFFERED THE SAME TO TAX. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS FILED A COPY OF RETURN OF INCOME FILED BY THE ASSESSEE AND POINTED O UT THAT THE ASSESSEE HAS ADMITTED THIS RECEIPT AS FEES FOR TECHNICAL SERVICES. FURTHER THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT ONLY AT THIS STAGE THE ASSESSEE HAS FILED VOLUMINOUS DOCUMENTS IN SUPPORT OF THE CLAIM WHICH WAS NOT FILED B EFORE THE AUTHORITIES BELOW AND THEREFORE , IN ANY CASE THE RELEVANT RECORD HAS TO BE EXAMINED AND VERIFIED BY THE ASSESSING OFFICER. 6. IN REJOINDER THE LEARNED AUTHORISED REPRESENTATIVE HAS SUBMITTED THAT THE DOCUMENTS NOW FILED BY THE ASSESSEE B EFORE THE TRIBUNAL ARE AS PER THE DIRECTIONS OF THE TRIBUNAL AND THEREFORE WHEN THE TRIBUNAL HAS DESIRED TO CONSIDER THE DOCUMENTS AND DIRECTED THE ASSESSEE TO PRODUCE ALL RELEVANT DOCUMENTS THEN THE ASSESSEE THOUGH HAD A RESERVATION TO FILE SUCH CONFIDENT IAL DOCUMENTS WHICH WILL DISCLOSE THE CONFIDENTIAL INFORMATION REGARDING THE BUSINESS DECISIONS OF THE ASSESSEE AS WELL AS VARIOUS ECONOMIC AND BUSINESS ASPECTS INVOLVED IN THE PROCESS OF PROVIDING THE SERVICES HOWEVER, THE ASSESSEE 7 IT (TP) A NO S . 9 /BANG/ 201 4 & 255/BANG/2016 TO PRODUCE THE DOCUMENT S THEREFORE THE ASSESSEE HAS PRODUCED THESE DOCUMENTS. 7. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD, WE NOTE THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEA R 2009 - 10 VIDE ORDER DT.30.6.2015 IN IT(TP)A NO. 1613/BANG/2012 IN PARAS 6 TO 8 AS UNDER : 8 IT (TP) A NO S . 9 /BANG/ 201 4 & 255/BANG/2016 9 IT (TP) A NO S . 9 /BANG/ 201 4 & 255/BANG/2016 10 IT (TP) A NO S . 9 /BANG/ 201 4 & 255/BANG/2016 11 IT (TP) A NO S . 9 /BANG/ 201 4 & 255/BANG/2016 12 IT (TP) A NO S . 9 /BANG/ 201 4 & 255/BANG/2016 13 IT (TP) A NO S . 9 /BANG/ 201 4 & 255/BANG/2016 14 IT (TP) A NO S . 9 /BANG/ 201 4 & 255/BANG/2016 15 IT (TP) A NO S . 9 /BANG/ 201 4 & 255/BANG/2016 THUS IT IS CLEAR THAT THE TRIBUNAL FOR THE ASSESSMENT YEAR 2009 - 10 HELD THAT THE ASSESSING OFFICER HAS NOT GIVEN THE FINDING THAT THERE IS A TRANSFER OF TECHNOLOGY AND CONSEQUENTLY IN THE ABSENCE OF TRANSFER OF TECHNOLOGY THE SERVICE RENDERED BY THE ASSESSEE WILL NOT FALL IN THE AMBIT OF THE SERVICES WHICH MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL AND KNOW HOW ETC. HENCE THE RECEIPT IN QUESTION IS NOT TAXABLE AS PER THE ARTICLE 12(4)(B) OF THE INDO - US TAX TREATY. FOR WANT OF MAKE AVAILABLE CLAUSE BEING SPECIFIED. FOR THE YEAR UNDER CONSIDERATION, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS POINTED OUT THAT THE ASSESSING OFF ICER HAS COND UCTED A THOROUGH ENQUIRY AND IN THE ABSENCE OF RELEVANT RECORD THE ASSESSING OFFICER HAS GIVE N A FINDING ON THIS ISSUE OF TRANSFER OF TECHNOLOGY TO SPECIFY THE MAKE AVAILABLE CLAUSE . T HE ASSESSEE HAS NOW FILED THE RELEVANT RECORD TO SHOW THAT THERE IS NO TRANSFER OF TECHNOLOGY INVOLVED IN THE PROCESS OF PROVIDING THE SERVICES TO INDIAN COUNTERPART AND THEREFORE THE FEES RECEIVED BY THE ASSESSEE WOULD NOT FALL IN THE AMBIT OF FEES FOR TECHNICAL 16 IT (TP) A NO S . 9 /BANG/ 201 4 & 255/BANG/2016 SERVICES. SINCE THE RELEVANT RECORD NOW FILED BY THE AS SESSEE IS REQUIRED TO BE VERIFIED AND EXAMINED BY THE ASSESSING OFFICER AND IN ORDER TO ASCERTAIN WHETHER THE SERVICES RENDERED BY THE ASSESSEE WOULD FALL IN THE AMBIT OF FEES FOR TECHNICAL SERVICES AS PER INDO - US TAX TREATY . T HEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF JUSTICE WE SET ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING OFFICER TO VERIFY AND EXAMINE THE RELEVANT RECORD AND FURTHER THE ASSESSEE HAS TO CO - OPERATE IN THE PROCEEDINGS BEFORE THE ASSESSING OFFIC ER. THE ASSESSING OFFICER HAS TO ADJUDICATE THIS ISSUE ON THE BASIS OF THE OUTCOME OF THE VERIFICATION AND EXAMINATION OF THE RECORD AS WELL AS IN THE LIGHT OF THE EARLIER ORDER OF THIS TRIBUNAL CITED SUPRA. FURTHER IN THE LIGHT OF THE FACT THAT THE ASSE SSEE HAS SUBSEQUENTLY ACCEPTED THIS RECEIPT AS FEES FOR TECHNICAL SERVICES AS PER THE INDO - US DTAA AND OFFERED TO TAX FOR THE ASSESSMENT YEAR 2012 - 13. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS FILED A COPY OF RETURN OF INCOME TO SHOW THAT THE ASSESSEE HAS ACCEPTED THE RECEIPT IN QUESTION AS FEES FOR TECHNICAL SERVICES AND OFFERED THE SAME TO TAX. THE ASSESSING OFFICER WHILE ADJUDICATING THIS ISSUE IN THE REMAND PROCEEDINGS HAS TO CONSIDER THE FACTS AS WELL AS ANY OBJECTION BY THE ASSESSEE ON THIS POIN T. 8. GROUND NO.2 IS REGARDING TREATING THE AMOUNT RECEIVED BY THE ASSESSEE FROM ABB GLOBAL INDUSTRIES AND SERVICES LIMITED UNDER SALE AND D ISTRIBUTION OF HARMONY PRODUCTS AGREEMENT AS ROYALTY AND BROUGHT TO TAX. 9. WE HAVE HEARD THE LEARNED A UTHORISED REPRESENTATIVE AS WELL AS LEARNED DEPARTMENTAL REPRESENTATIVE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. SINCE THE ASSESSEE HAS FILED FRESH RECORD AS PER THE DIRECTIONS OF THE TRIBUNAL WHICH IS REQUIRED TO BE EXAMINED BY THE ASSESSING OFF ICER THEREFORE , WE ARE OF 17 IT (TP) A NO S . 9 /BANG/ 201 4 & 255/BANG/2016 THE CONSIDERED VIEW THAT THIS ISSUE IS REQUIRED TO BE CONSIDERED AFRESH AFTER EXAMINATION AND VERIFICATION OF THE RELEVANT RECORD AS WELL AS THE AGREEMENTS BETWEEN THE PARTIES IN THIS ASPECT. HENCE THIS ISSUE IS SET ASIDE TO THE RECORD OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. NEEDLESS TO SAY THE ASSESSEE BE GIVEN AN OPPORTUNITY OF HEARING. 10. GROUND NO.3 IS REGARDING TAXABILITY OF THE AMOUNT RECEIVED FROM THE ABB GLOBAL INDUSTRIES AND SERVICES LIMITED BY TREATIN G THE ABB GLOBAL INDUSTRIES AND SERVICES LIMITED AS DEPENDANT AGENCY PE OF THE ASSESSEE. ALTERNATIVE STAND OF THE ASSESSING OFFICER IS THAT EVEN IF THE SAID AMOUNT IS NOT CONSIDERED AS ROYALTY IN NATURE THE SAME IS TAXABLE IN INDIA AS THE ASSESSEE IS HA VING A DEPENDANT AGENCY PE IN INDIA. 11. WE HAVE HEARD THE LEARNED AUTHORISED REPRESENTATIVE AS WELL AS LEARNED DEPARTMENTAL REPRESENTATIVE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE TRIBUNAL FOR THE ASSESSMENT YEAR 2009 - 10 HAS CONSIDERED TH IS ISSUE IN PARA 8 AS REPRODUCED IN THE FOREGOING PART OF THIS ORDER AND THEREFORE , IT WAS OBSERVED BY THE TRIBUNAL THAT WHEN THE AE OF THE ASSESSEE IS COMPENSATED AT ARM S LENGTH THEN NO FURTHER INCOME CAN BE ATTRIBUTED TO THE P E TO BE TAXED IN THE HAND OF THE ASSESSEE. THOUGH THE SAID OBSERVATION OF THE TRIBUNAL IS FORTIFIED BY VARIOUS DECISIONS HOWEVER , WHETHER THE AE OF THE ASSESSEE IS COMPENSATED AT ARM S LENGTH IS AN ANOTHER ASPECT TO BE EXAMINED BY THE ASSESSING OFFICER. SINCE WE HAVE ALREADY SET ASIDE THE ISSUE TO THE RECORD OF THE ASSESSING OFFICER THEREFORE , THIS ISSUE IS ALSO SET ASIDE TO THE RECORD OF THE ASSESSING OFFICER FOR VERIFICATION WHETHER THE AE OF THE ASSESSEE HAS BEEN 18 IT (TP) A NO S . 9 /BANG/ 201 4 & 255/BANG/2016 COMPENSATED AT ARM S LENGTH AS IT IS TO BE ASCERTAINED F R OM THE ASSESSMENT ORDER PASSED IN THE CASE OF THE ABB GLOBAL INDUSTRIES AND SERVICES LIMITED. 12. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS FOR A.Y.2011 - 12 : 13. THE GROUNDS RAISED BY THE REVENUE IN THIS APPEAL IS COMMON AS IN THE ASSESSEE'S APPEAL REGARDING THE FEES RECEIVED BY THE ASSESSEE IS TREATED AS FEES FOR TECHNICAL SERVICES. 14. WE HAVE HEARD THE LEARNED DR AS WELL AS LEARNED AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS ASSESSED THE RECEIPT ON ACCOUNT OF SERVICES RENDERED BY THE ASSESSEE TO THE INDIAN COUNTERPART BY TREATING THE SAME AS FEES FOR TECHNICAL SERVICES. THE DRP GRANTED RELIEF TO THE ASSESSEE BY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2009 - 10. SIN CE THIS ISSUE IS COMMON AS INVOLVED IN THE 19 IT (TP) A NO S . 9 /BANG/ 201 4 & 255/BANG/2016 ASSESSEE'S APPEAL FOR THE ASSESSMENT YEAR 2011 - 12 AND WE HAVE SET ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION AFTER VERIFICATION AND EXAMINATION OF THE RECORD FILED BY THE ASSE SSEE AT THIS STAGE. HENCE THE ISSUE RAISED BY THE REVENUE FOR THE ASSESSMENT YEAR 2011 - 12 IS SET ASIDE TO THE RECORD OF THE ASSESSING OFFICER ON SAME TERMS AND DIRECTIONS. 15. IN THE RESULT, THE APPEALS OF REVENUE AND ASSESSEE ARE ALLOWED FOR STAT ISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF NOV., 201 7 . SD/ - (A RUN KUMAR GARODIA ) ACCOUNTANT MEMBER SD/ - (V IJAY PAL RAO) JUDICIAL MEMBER BANGALORE, DT. 21 .11. 2017. *REDDY GP COPY TO : 1 APPELLANT 4 CIT(A) 2 RESPONDENT 5 DR. ITAT, BANGALORE 3 CIT 6 GUARD FILE SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL BANGALORE.