M/s. Rolls-Royce International Limited, Derby Derbyshire V. Assistant Commissioner Of Income Tax, International Taxation,Circle- 2(1), Bangalore

ITA 2607/BANG/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6006 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-09-2020
• Assessment Year: 2010-2011
• Appeal Filed On: 24-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief; Reassessment proceedings; Set aside
• Section: 271(1)(c); 143(3); 234B; 195; 144C; 192; 13; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER IT (IT) A NO . 2607 /BANG/201 9 ASSESSMENT Y EAR : 20 1 0 - 1 1 M/S. ROLLS-ROYCE INTERNATIONAL LIMITED, ROLLS ROYCE MOOR LANE, DERBY DERBYSHIRE, ENGLAND DE248BJ, UNITED KINGDOM. PAN : A AICR 3813 K VS. THE ASSTT. COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION, CIRCLE 2[1], BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : SHRI. KEERTHI NARAYANAN , CA REVENUE BY : SHRI. HARINDER KUMAR , CIT(DR)(ITAT), BENGALURU DATE OF HEARING : 17 .09.20 20 DATE OF PRONOUNCEMENT : 25 . 09 .20 20 O R D E R PER A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME IS DIRECTED AGAINST THE ASSESSMENT ORDER DATED 14.10.2019, PASSED BY THE AO UNDER SECTION 143(3) R.W.S. 147 AND ALSO R.W.S. 144C OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) AS PER THE DIRECTIONS OF DRP FOR ASSESSMENT YEAR 2010-11. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THAT THE FINAL ASSESSMENT ORDER PASSED BY ASSISTANT COMMISSIONER OF INCOME TAX, (INTERNATIONAL TAXATION), IT(IT)A NO. 2607/BANG/2019 PAGE 2 OF 6 CIRCLE 2(1), BANGALORE ('LD. AO') UNDER SECTION 143(3) R.W.S 147 R.W.S 144C OF THE ACT SUBSEQUENT TO DIRECTIONS ISSUED BY LEARNED DISPUTE RESOLUTION PANEL ('HON'BLE DRP') IS BAD IN LAW AND ARBITRARY, CONTRARY TO FACTS, LAW AND CIRCUMSTANCES OF THE CASE AND LIABLE TO BE QUASHED. 2. THAT THE HON'BLE DRP AND LD. AO HAS ERRED ON FACTS AND IN LAW IN ASSESSING THE APPELLANT'S TOTAL INCOME AT INR 4,96,46,611 AS AGAINST ITS RETURNED INCOME OF NIL. 3. THAT THE HON'BLE DRP AND LD. AO HAS ERRED ON FACTS AND IN LAW IN ISSUING THE NOTICE U/S 148 OF THE ACT AND INITIATING THE REASSESSMENT PROCEEDINGS AND PASSING THE ORDER, WHICH IS BAD IN LAW AND LIABLE TO BE QUASHED. 4. THAT THE HON'BLE DRP AND LD. AO HAS ERRED ON FACTS AND IN LAW IN CONCLUDING THE REASSESSMENT PROCEEDING BASED ON 'MODIFIED' REASONS RECORDED FOR INITIATION OF REASSESSMENT PROCEEDINGS WITHOUT APPRECIATING THE FACT THAT NO ADDITION OR DELETION OR SUBSTITUTION IS ALLOWED IN THE REASONS ORIGINALLY RECORDED. 5. THAT THE HON'BLE DRP HAS GROSSLY ERRED IN REFERRING/ TREATING THE INDIAN COMPANY I.E. ROLLS-ROYCE OPERATION (INDIA) PVT. LTD. ('RROIPL') AS ASSESSEE INSTEAD OF APPELLANT AS ASSESSEE IN THE DIRECTIONS PASSED DATED 30 SEPTEMBER 2019. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE DRP AND LD. AO HAVE ERRED IN TREATING THE SECONDEE'S AS EMPLOYEE OF APPELLANT WITHOUT APPRECIATING THE FACT THAT RROIPL IS THE EFFECTIVE AND ECONOMIC EMPLOYER OF SECONDEE DURING THE PERIOD OF SECONDMENT EVEN AFTER ACCEPTING IN THE ORDER/ DIRECTIONS PASSED THAT SECONDEE'S WORK UNDER THE CONTROL AND SUPERVISION OF RROIPL. 7. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE DRP AND LD. AO HAVE ERRED IN CONCLUDING THAT THE APPELLANT ULTIMATELY BEARS THE SALARY COST OF THE SECONDEE'S. 8. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE DRP AND LD. AO HAVE ERRED IN NOT APPRECIATING THE FACT THAT PAYMENT MADE BY RROIPL TO IT(IT)A NO. 2607/BANG/2019 PAGE 3 OF 6 APPELLANT IS IN THE NATURE OF 'REIMBURSEMENT', FURTHER MADE BY APPELLANT ON BEHALF OF RROIPL AND NOT INCOME CHARGEABLE TO TAX UNDER THE ACT/ DTAA. 9. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW AND WITHOUT APPRECIATING THE JUDICIAL PRECEDENT, THE HON'BLE DRP AND THE LD. AO HAVE ERRED IN HOLDING THAT THE PAYMENT RECEIVED BY APPELLANT TOWARDS REIMBURSEMENT OF SALARY AND RELATED COST FROM RROIPL IS IN THE NATURE OF FEES FOR TECHNICAL SERVICES ('FTS') AS DEFINED IN SECTION 9(1)(VII) OF THE ACT AND ARTICLE 13 OF INDIA - UK DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). 10. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE HON'BLE DRP AND LD. AO HAS ERRED IN LAW AND IN FACTS, IN NOT APPRECIATING THE FACT THAT RROIPL HAS ALREADY DEDUCTED TAXES UNDER SECTION 192 OF THE ACT FOR PAYMENT OF SALARY TO SECONDED EMPLOYEES BEING THE ECONOMIC AND EFFECTIVE EMPLOYER AND FAILED TO APPRECIATE THAT SUCH PAYMENT SHOULD NOT BE AGAIN SUBJECT TO DEDUCTION OF TAX UNDER SECTION 195 OF THE ACT. 11. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE DRP HAS GROSSLY ERRED IN CONCLUDING THAT A SERVICE PE IS CONSTITUTED IN TERMS OF ARTICLE 5 OF THE INDIA UK DTAA. 12. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN LEVYING INTEREST U/S 234A AND 234B OF THE ACT. 13. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN INITIATING THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, SUPPLEMENT, AMEND, VARY, WITHDRAW OR OTHERWISE MODIFY THE GROUND MENTIONED HEREIN ABOVE OF OR BEFORE THE TIME OF HEARING. 3. IN THE COURSE OF HEARING, IT WAS SUBMITTED BY LEARNED AR OF THE ASSESSEE THAT THE FIRST ISSUE INVOLVED IN THE PRESENT APPEAL IS REGARDING SECONDMENT ISSUE AND THEREFORE, THIS APPEAL SHOULD BE KEPT IN ABEYANCE IT(IT)A NO. 2607/BANG/2019 PAGE 4 OF 6 BECAUSE THIS ISSUE IS PENDING BEFORE SPECIAL BENCH OF THE TRIBUNAL. AT THIS JUNCTURE, THE BENCH WANTED TO KNOW AS TO WHETHER ON THIS ASPECT, A CLEAR FINDING OF FACT IS GIVEN BY DRP AS TO WHETHER THE PAYMENT IN QUESTION IS ON ACCOUNT OF SECONDMENT OF EMPLOYEES OR NOT. IN REPLY, IT WAS SUBMITTED BY LEARNED AR OF THE ASSESSEE THAT IN PARA 3 OF ITS ORDER, THE DRP HAS NOTED ABOUT OBJECTION NOS.1.2 TO 1.6 RAISED BY THE ASSESSEE BEFORE DRP AND IT HAS BEEN POINTED OUT THAT IN THESE OBJECTIONS, THIS WAS THE ISSUE RAISED BY THE ASSESSEE BEFORE DRP THAT THE AO HAS GROSSLY ERRED IN FACTS AND IN LAW IN TREATING THE SECONDEES AS EMPLOYEES OF THE ASSESSEE BUT THERE IS NO CATEGORICAL FINDING OF DRP ON THIS FACTUAL ASPECT AS TO WHETHER THE SECONDMENT ISSUE IS THERE OR NOT AND AS PER PARA 3.1 OF THIS ORDER, THE DRP HAS PROCEEDED ON THIS BASIS THAT THIS IS THE ISSUE RAISED BEFORE DRP AS TO WHETHER THE SERVICES RENDERED BY THE SECONDED EMPLOYEES MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE, SKILL, KNOW-HOW, ETC. TO RROIPL. AT THIS POINT OF TIME, THIS WAS THE PROPOSITION PUT FORWARD BY THE BENCH THAT UNDER THESE FACTS, THIS ISSUE SHOULD GO BACK TO THE FILE OF DRP FOR A FRESH DECISION AFTER RECORDING A CATEGORICAL FINDING ON THIS FACTUAL ASPECT AS TO WHETHER SECONDMENT ISSUE IS THERE OR NOT AND THEREAFTER, THE ISSUE SHOULD BE DECIDED ON MERIT BY THE DRP AND NO PURPOSE WILL BE SERVED BY KEEPING THIS APPEAL PENDING IN THE ABSENCE OF SPECIFIC FACTUAL FINDING OF DRP ON THIS IMPORTANT ASPECT. IN REPLY, IT WAS SUBMITTED BY LEARNED AR OF THE ASSESSEE THAT THE ENTIRE ISSUE MAY BE RESTORED BACK TO DRP FOR A FRESH DECISION. LEARNED DR OF THE REVENUE ALSO AGREED TO THIS PROPOSITION PUT FORWARD BY THE BENCH. IT(IT)A NO. 2607/BANG/2019 PAGE 5 OF 6 4. AS PER ABOVE DISCUSSION, WE FIND THAT THE ASSESSEE WANTS TO KEEP THIS APPEAL PENDING TO AWAIT THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL REGARDING THE SECONDMENT ISSUE BUT WE HAVE NOTED THAT THERE IS NO SPECIFIC FINDING OF THE DRP ON THE FACTUAL ASPECT AS TO WHETHER THE SECONDMENT ISSUE IS THERE OR NOT IN THE PRESENT CASE AND HENCE, WE SET ASIDE THE ORDER OF AO AND DRP AND RESTORE THE ENTIRE MATTER BACK TO THE FILE OF DRP FOR A FRESH DECISION BY WAY OF A SPEAKING AND REASONED ORDER. WE DIRECT THE DRP TO FIRST DECIDE THIS FACTUAL ASPECT AS TO WHETHER SECONDMENT ISSUE IS INVOLVED IN THE PRESENT CASE OR NOT AND THEREAFTER DECIDE THE ISSUE AS PER LAW AND IF THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IS AVAILABLE BY THAT TIME, THE DRP SHOULD FOLLOW THAT ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL. IN VIEW OF THIS DECISION, NO FURTHER ADJUDICATION IS CALLED FOR AT THE PRESENT STAGE AND WE MAKE IT CLEAR THAT ALL THE ISSUES RAISED IN THE PRESENT APPEAL OF THE ASSESSEE ARE LEFT OPEN AND WE EXPRESS NO OPINION ON ANY OF THE ISSUES. 5. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- ( GEORGE GEORGE K ) (A.K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 25 TH SEPTEMBER, 2020 /NS/* IT(IT)A NO. 2607/BANG/2019 PAGE 6 OF 6 COPY TO: 1. APPELLANT S 2. RESPON DENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.