IBM India Private Limited, Bangalore V. ITO, Bangalore

ITA 297/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57540 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 16-03-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 21-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ETWA MUNDA CITIII
• Keywords: Double taxation relief; Question of law; Non-deduction of tax
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI N.K. SAINI, ACCOUNTANTMEMBER AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NOS.297 & 298(BANG)/2011 (ASSESSMENT YEARS: 2004-05 & 2005-07) M/S. IBM INDIA PRIVATE LTD. SUBRAMANYA ARCADE, NO.12, BANNERGHATTA MAIN ROAD, BANGALORE - 560029. PAN :AAACI 4403 L VS. APPELLANT INCOME - TAX OFFICER ( INTERNATIONAL TAXATION ) , WARD 1(2), BANGALORE. RESPONDENT APPELLANT BY: SHRI SHARATH RAO. C.A. RESPONDENT BY : SHRI ETWA MUNDA, CIT - III DATE OF HEARING: 16 - 03 - 2012 DATE OF PRONOUNCEMENT: 27 - 03 - 2012 O R D E R PER BENCH: THESE APPEALS, INSTITUTED BY THE ASSESSEE, ARE DIR ECTED AGAINST THE CONSOLIDATED ORDER OF THE CIT-IV, BANGA LORE, DATED 30-12-2010. THE RELEVANT ASSESSMENT YEARS ARE 2004 -05 AND 2005-06. 2. THE ORDER OF THE CIT(A) ARISES OUT OF THE ORDER PASSED BY THE AO U/S 201 OF THE INCOME-TAX ACT, 1961 [HERE INAFTER ITA 297 & 298(BANG)/2011 PAGE 2 OF 11 REFERRED TO AS 'THE ACT'] DETERMINING THE TOTAL TAX LIABILITY AT 6,34,60,217/- AND ` 21,54,31,076/-. IDENTICAL GROUNDS HAVE BEEN RAISED IN THESE APPEALS AND THEY READ AS FOLLO WS: 1. THE LEARNED CIT(A) HAS ERRED IN PASSING AN ORDER WHICH IS BAD IN LAW AND ON FACTS . 2. THE LEARNED CIT(A) HAS ERRED IN LAW IN HOLDING THE APPELLANT AS BEING LIABL E TO DEDU C T TAX ES UNDER THE PROVISIONS OF SECT I ON 195 OF THE INCOME TAX ACT , 1961 ( ' THE ACT ' ) WITH RESP E CT TO TH E PAYMENTS MADE TO IBM S I NGAPORE PTE L I MITED , WHICH WAS IN THE NATURE OF SHRINK WR A PP E D SOFTWARE . 3. THE LEARNED CIT(A) HAS ERRED IN LAW IN HOLDING THE PAYMENT TO BE IN THE NATURE OF ' ROYALTY ' UNDER THE PROVISIONS OF SECTION 9(1 )(VI) OF THE ACT 4. THE LEARNED CIT(A) HAS ERRED IN LAW IN DISREGARDING THE DECISION OF THE HONOURABL E INCOM E TAX APPELLATE TRIBUNAL ( 'I TAT ' ) IN THE APPELLANT ' S OWN CAS E FOR ASSESSMENT Y EA R ' AY ' ) 2000-01 TO AY 2003 - 04, WHEREIN THE JURISDICTIONAL IT AT HAD HELD THAT THE APPELLANT WA S NOT REQUIRED TO WITHHOLD TAXES IN RESPECT OF SHRINK WRAPPED SOFTWARE PAYMENTS . 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN PLACING RELIANCE ON THE DECISION OF TH E HONOURABLE HIGH COURT OF KARNATAKA ( ' HC ' ) IN THE CASE OF CIT AND ANOTHER VS SAMSUNG ELECTRONICS COMPANY LIMITED (320 ITR 209) , W I THOUT APPRECIATING THE FACT THAT THE HONOURABL E HC HAD NOT CONCLUDED ON THE CHARGEABILITY OF SOFTWARE PAYMENTS TO TAX IN INDIA AND HAD REQUIRED TAXES TO BE WITHHELD IN RESPECT OF ALL PAYMENTS MADE , WHETHER OR NOT SUCH PAYM E NT CONST I TUTED INCOME IN THE HANDS OF THE RECIPIENT . 6. THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THE DECISION OF THE HONOURABLE SUPR E M E COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE VS CIT (327 ITR 456) WHEREIN IT WA S H E LD THAT TAXES ARE REQUIRED TO BE DEDUCTED AT SOURCE ONLY IN CASE SUCH PAYMENTS ARE CHARG E ABL E TO TAX IN INDIA IN THE HANDS OF THE NON-RESIDENT RECIPIENT . ITA 297 & 298(BANG)/2011 PAGE 3 OF 11 3. GROUND NO.1 IS GENERAL IN NATURE AND NO SPECIFIC ADJUDICATION IS CALLED FOR. HENCE, THE SAME IS DIS MISSED. 4. GROUND NOS.2 TO 6: THE ABOVE GROUNDS RELATE TO THE ISSUE WHETHER THE CIT(A) IS JUSTIFIED IN HOLDING TH AT THE APPELLANT IS LIABLE TO DEDUCT TAX U/S 195 OF THE AC T IN RESPECT OF PAYMENTS MADE TO IBM, SINGAPORE PTE LTD. BRIEF FAC TS OF THE CASE IN RELATION TO THE ABOVE GROUNDS ARE AS FOLLOW S: THE APPELLANT IS A PRIVATE LIMITED COMPANY. IT IS ENGA GED IN THE BUSINESS OF MARKETING AND DEVELOPMENT OF SOFTWARE. THE APPELLANT COMPANY HAD PURCHASED SOFTWARE FROM IBM, SINGAPORE PTE LTD. THE AO NOTICED THAT A SUM OF ` 63,46,02,176/- AND ` 215,43,10,762/- WERE PAID TO IBM, SINGAPORE PTE LTD. DURING THE FINANCIAL YEARS 2003- 04 AND 2004-06 RELEVANT TO ASSESSMENT YEARS 2004-05 AND 20 05-06 RESPECTIVELY. THE APPELLANT WAS ISSUED A NOTICE DA TED 12-3-2008 CALLING UPON THE ASSESSEE TO SHOW CAUSE A S TO WHY IT SHOULD NOT BE TREATED AS ASSESSEE IN DEFAULT U/S 20 1 OF THE ACT FOR NON-DEDUCTION OF TAX IN RESPECT OF THE ABOVE PA YMENTS. IN RESPONSE TO THE NOTICE, IT WAS SUBMITTED THAT IN TH E APPELLANTS 7. NOTW I THSTANDING THE ABOVE , THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TH E L EARNED ASSESSING OFF I CER TO LEVY SURCHARGE AND APPLICABLE EDUCATION CESS , WITHOUT APPRECIATING THE FACT THAT TAXES WOULD BE REQUIRED TO BE DEDUCTED AT THE RATES WHICH A R E BENEFICIAL UNDER THE PROVISIONS OF THE ACT OR THE DOUBLE TAXATION AVOIDANCE AGR E EM E NT (DTAA) AND SURCHARGE/EDUCATION CESS WOULD NOT BE REQUIRED TO BE ADDED SEPARATELY WH E N TAXES ARE DEDUCTED AT THE RATE PRESCRIBED UNDER THE DTAA . ITA 297 & 298(BANG)/2011 PAGE 4 OF 11 OWN CASE FOR ASSESSMENT YEAR 2001-02 IN ITA NO.1000/BANG/2007, THE BANGALORE BENCH OF THE ITAT, VIDE ORDER DATED 29-11-2007 HELD THAT THE PAYMENTS/REMIT TANCES MADE BY THE APPELLANT WERE TOWARDS PURCHASE OF GOOD S OR ARTICLES AND NOT FOR ACQUIRING ANY COPYRIGHT IN THE GOODS AND CONSEQUENTLY COULD NOT BE TREATED AS ROYALTY WITHIN THE MEANING OF SECTION 9(1)(VI) OF THE ACT OR THE PROVISIONS OF THE DTAA BETWEEN INDIA AND SINGAPORE. 4.1 THE AO, HOWEVER, REJECTED THE CONTENTIONS RAISE D AND PASSED AN ORDER U/S 201(1) OF THE ACT DATED 25-3-20 08 HOLDING THAT THE PAYMENTS MADE BY APPELLANT FOR THE PURCHAS E OF SOFTWARE WERE LIABLE TO TAX IN INDIA IN THE HANDS O F THE NON- RESIDENT AND ACCORDINGLY TREATED THE APPELLANT AS T HE ASSESSEE IN DEFAULT U/S 201 OF THE ACT FOR NON-DEDUCTION OF TAX AT SOURCE U/S 195 OF THE ACT. BEING AGGRIEVED, THE APPELLANT FILED APPEALS BEFORE THE FIRST APPELLATE AUTHORITY. 4.2 THE CIT(A) DISMISSED THE APPELLANTS APPEAL. T HE RELEVANT FINDING OF THE FIRST APPELLATE AUTHORITY R EADS AS FOLLOWS: 7. IT IS TRUE THAT THE HON'BLE SUPREME COURT I N THE CAS E OF GE INDIA TECHNOLOGY CENTRE VS. CIT REPORT E D IN 32 7 ITR 4 56 HAS RE FERR E D TH E MATT E R BACK TO HON'BLE HIGH COURT TO DECIDE ON THE 'CHARGEABILITY' BEFORE CONCLUDING THAT ALL PAYMENTS MADE TO NON- RESIDENTS REQUIRE DEDUCTION U / S 195, STILL IN THE CASE OF M/S. SAMSUNG IT IS HELD THAT PAYMENT MADE TOWARDS SHRINK - WRAPPED SOFTWARE CONSTITUTE PAYMENT MADE TOWARDS RO Y ALT Y , UNLE S S THE HON'BLE HIGH COURT REVERSES ITS JUDGMENT, IT IS OBLIGATORY ON THE PART OF ITA 297 & 298(BANG)/2011 PAGE 5 OF 11 THE LOWER AUTHORITIES TO FOLLOW THE ORDER OF THE JURISDICTIONAL HIGH COURT . IT IS NOT TRUE THAT THE HON'BLE SUPREME COURT HAS TOTALLY REVERSED THE JUDGMENT OF M/S. SAMSUNG CASE BUT HAS STATED THAT THE HON'BLE SUPREM E COURT JUDGMENT IN THE CASE OF M / S. TRANSMISSION CORPORAT I ON O F A P LIMIT E D REPORTED IN 289 ITR 587 HAS NOT BEEN APPRECIATED FULLY BY TH E HONBLE HIGH COURT. THE ONLY ISSUE TO BE DECIDED BEFORE APPLYING SECTION 195 IS REGARDING THE CHARGEABILITY OF THE SUM I PART OF TH E SUM PAID TO THE NON-R E SID E N T AS T O WHETHER SUCH PART IS TA X ABLE IN INDIA. ' I F I T I S T AX ABL E , TH EN A UTOM ATICA L LY PRO V ISIONS OF S ECTION 195 APPL Y . IN THIS CASE S INC E TH E H O N ' BL E IT AT H A D RELIED MAINLY ON THE JUDGM E NT OF THE M/S . SAMSUN G C ASE O F T H E B A N GA LO RE TRIBUNAL , SINCE THIS JUDGMENT HAD BEEN REVERSED B Y TH E HON' B L E K A RN A T AKA HIGH COURT, THOUGH ON A LIMITED ISSUE OF CHARGEABILIT Y THE MATT ER HA S B EEN REMANDED BACK TO THE HON'BLE HIGH COURT BY THE HON'BLE SUP RE ME C OUR T, STILL THE RULING OF THE JURISDICTIONAL HIGH COURT ON THE I S SU E OF P AYMEN T S TOWARDS SHRINK- W RAPPED SOFTWAR E BE I N G LIABLE TO B E TA XE D A S RO YAL T Y H AS T O BE FOLLOWED. EVEN IN THE MICRO SOFT ' S CASE THE HON'BLE D E LH I TRI BUN AL H AS HELD THE ISSUE IN FAVOUR OF THE REVENUE AND AGAINST T H E ASS ESSEE . H E N CE , I T IS HELD THAT THE APPELLANT WAS REQUIRED TO DEDUCT TAX ON IT S PA Y M E NT S MAD E T O IBM, SINGAPORE. ONCE IT IS HELD AS ROYALTY PAYMENTS U / S 9 (1)(VI ) CON SE QU ENCES OF SECTION 195 AND 2 01(1) FOLLOW. ACCORDINGLY IT IS H E LD THAT TH E AO WAS CORRECT IN HOLDING THAT THE PA Y M E NTS MADE B Y TH E A PP E LL AN T . T O I BM , SINGAPOR E W A S LIAB LE FOR TA X D E DUCTI O N U/S 1 9 5 A ND H E N CE T H E OR D E R P ASSE D U / S 201(1) IS UPHELD. HOWEVER, SINCE THE APPELLANT HA S D E DU C T E D T AX ON TH E OTHER PAYMENTS OTHER THAN ITA 297 & 298(BANG)/2011 PAGE 6 OF 11 TO M / S. IBM, S I NGAPORE, A S R E PORT E D B Y THE A O I N HIS R E MAND REPORT, TH E AO I S D I RECTED TO R E MO VE TH A T P A RT A S H E LD A B OVE . 5. THE LEARNED AR OF THE APPELLANT SUBMITTED THAT T HE HONBLE HIGH COURT OF KARNATAKA IN THE APPELLANTS OWN CASE HAS DECIDED IN FAVOUR OF THE REVENUE IN ITA NO.540/08 D ATED 21-10-2010 FOLLOWING THE JUDGMENT OF THE SAME HIGH COURT IN THE CASE OF CIT VS. SAMSUNG ELECTRONICS CO. LTD. THOUGH THE HONBLE HIGH COURT HAS DECIDED THE ISSUE IN FAVOUR OF THE REVENUE, IT WAS ARGUED THAT, THE HONBLE HIGH COURT HAD FAILED TO APPRECIATE THE DISTINCTION INVOLVED IN THE APPEL LANTS CASE AS AGAINST THE DEFAULT INVOLVED IN THE SAMSUNGS CASE. THE DISTINCTION IN FACTS AND LEGAL SUBMISSIONS PUT FORT H IS SUMMARIZED AS FOLLOWS: I) THE SAMSUNG CASE DID NOT SPECIFICALLY LAY DOWN THE RATIO DECIDENDI ON TDS OBLIGATION U/S 195 OF THE ACT IN CASE OF A SOFTWARE RE-SELLER . II) IN THE SAMSUNG CASE, THE INDIAN DISTRIBUTORS WERE GIVEN EXCLUSIVE NON TRANSFERRABLE LICENSE TO DISTRIBUTE SOFTWARE LICENSES WHERE AS THE ASSESSEE DISTRIBUTES PURCHASED SOFTWARE UNDER A NON EXCLUSIVE DISTRIBUTION AGREEMENT. III) THE SAMSUNG CASE INVOLVED DISTRIBUTION OF SOFTWARE UNDER A LICENSE ARRANGEMENT WHERE AS THE ASSESSEE DISTRIBUTES UNDER A BUY - SELL ARRANGEMENT. IV) IN THE SAMSUNG CASE, THE INDIAN PARTY DID NOT BECOME THE OWNER OF THE SOFTWARE PURCHASED FOR SALE WHERE AS THE ASSESSEE BECOMES THE OWNER OF THE GOODS BOUGHT FOR RE-SALE. ITA 297 & 298(BANG)/2011 PAGE 7 OF 11 THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTH ER HAND, SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT I N APPELLANTS OWN CASE FOR ASSESSMENT YEARS 2000-01 TO 2003-04 IN ITA NO.540/2004. IT WAS FURTHER SUBMITTED THAT THE HON BLE JURISDICTIONAL HIGH COURT HAD DECIDED THE ISSUE AGA INST THE APPELLANT FOLLOWING ITS OWN JUDGMENT IN THE CASE OF SAMSUNG (IN ITA NO.2808/2005 AND CONNECTED CASE DECIDED ON 15-1 0- 2011). 6. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MAT ERIAL ON RECORD. IT IS AN ADMITTED FACT THAT IN APPELLAN TS OWN CASE, THE JURISDICTIONAL HIGH COURT HAS DECIDED THE MATTE R AGAINST IT, VIDE JUDGMENT DATED 21-10-2011. THE SUBSTANTIAL QUE STION RAISED BEFORE THE HONBLE HIGH COURT IS AS FOLLOWS: WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE, TH E ITAT WAS JUSTIFIED IN HOLDING THAT THE AMOUNT(S) PA ID BY THE APPELLANT(S) TO THE FOREIGN SOFTWARE SUPPLIE RS WAS NOT ROYALTY AND THAT THE SAME DID NOT GIVE RI SE TO ANY INCOME TAXABLE IN INDIA AND THEREFORE THE APPELLANT(S) WAS NOT LIABLE TO DEDUCT ANY TAX AT SOURCE? THE HONBLE HIGH COURT DECIDED THE MATTER IN FAVOUR OF THE REVENUE BY OBSERVING AS UNDER: THE ABOVE SUBSTANTIAL QUESTION OF LAW IN SIMILAR F ACTS REGARDING PAYMENT MADE TOWARDS SUPPLY OF SHRINK WRAP CASSETTES/CDS PURCHASED BY THE RESPONDENT TO THE NON-RESIDENT SUPPLIER OF SOFTWARE HAS BEEN HELD TO BE A ROYALTY BY ANSWERING THE SUBSTANTIAL QUESTI ON OF LAW IN FAVOUR OF THE REVENUE AND AGAINST THE ITA 297 & 298(BANG)/2011 PAGE 8 OF 11 ASSESSEE IN ITA NO.2808/2005 AND CONNECTED CASES, DECIDED ON 15-10-2011. FOLLOWING THE DETAILED REASONS ASSIGNED THEREIN, WE HOLD THAT THE ORDER PASSED BY THE ITAT IMPUGNED IN THIS APPEAL IS LIABL E TO BE SET ASIDE AND WE ANSWER THE SUBSTANTIAL QUESTION OF LAW IN FAVOUR OF THE REVENUE AND AGAINS T THE ASSESSEE. THE LEARNED AR OF THE APPELLANT HAD ADMITTED THAT T HE FACTS PERTAINING TO THE APPELLANTS OWN CASE CONSIDERED B Y THE HONBLE HIGH COURT ARE IDENTICAL TO THE FACTS CONSI DERED FOR THE ASSESSMENT YEAR 2004-05. SINCE THE FACTS ARE IDENTI CAL, THE RESPECTFULLY FOLLOWING THE DICTUM OF THE HONBLE HI GH COURT IN THE APPELLANTS OWN CASE, WE DECIDE THE MATTER IN F AVOUR OF THE REVENUE AND DISMISS THE GROUND NOS.2 TO 6 RAISED BY THE ASSESSEE. 7. GROUND NO.7: THE CIT(A), BY EXERCISING HIS POWER U/S 251 OF THE ACT DIRECTED THE AO TO INCLUDE SURCHARGE AND CESS AS APPLICATION IN ADDITION TO THE BASIC TAX RATE OF 10 %. THE RELEVANT FINDING OF THE CIT(A) IN HIS IMPUGNED ORDE R READS AS FOLLOWS: 9. HOWEVER, IT IS NOTICED THAT APPLICABLE SURCHAR GE HAS NOT BEEN CHARGED. NOTICE U/S 251(2) WAS ISSUED TO THE ASSESSEE TO REPLY ON OR BEFORE 29-12-2010. THE APPELLANTS A R IN THEIR LETTER DATED 30-12-2010 HAVE SOUGHT TIME TO REPLY T O THE ABOVE NOTICE. AS IT IS ONLY MANDATORY IN NATURE, TH E APPELLANT HAS NOT BEEN GIVEN FURTHER TIME TO REPLY AND THE AO IS DIRECTED TO CHARGE APPLICABLE SURCHARGE FOR THE TWO YEARS RESPECTIVELY. ITA 297 & 298(BANG)/2011 PAGE 9 OF 11 8. AGGRIEVED, THE APPELLANT IS IN APPEAL BEFORE US. THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE RATE OF TAX AT 10% AS ADOPTED BY THE AO WAS THE RATE PRESCRIBED UN DER ARTICLE 12 OF THE INDIA-SINGAPORE DOUBLE TAX AVOIDA NCE AGREEMENT (DTAA). THE RATES OF TAX PRESCRIBED UNDER THE DTAA ARE NOT REQUIRED TO BE FURTHER ENHANCED BY ADDITION AL SURCHARGE PRESCRIBED UNDER THE ACT. IT WAS FURTHER SUBMITTED THAT THE CIRCULAR NO.728 DATED 30-10-1995 EXPLICITLY STATES THAT TAXES ARE TO BE DEDUCTED AT SOURCE AS PER THE RATES IN FO RCE AS SPECIFIED IN THE FINANCE ACT OR THE RATES PRESCRIBE D UNDER THE DTAA. THE RATES PRESCRIBED UNDER THE FINANCE ACT A RE TO BE FURTHER ENHANCED BY SURCHARGE AS PER THE PROVISIONS OF THE FINANCE ACT. HOWEVER, THE RATES PRESCRIBED UNDER T HE DTAA ARE NOT REQUIRED TO BE FURTHER ENHANCED BY SURCHARGE AS THERE IS NO SUCH REQUIREMENT UNDER THE FINANCE ACT. THE LEARNE D AR OF THE APPELLANT, BY PLACING RELIANCE ON THE JUDGMENT OF T HE HONBLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT VS. ARTHUSA OFFSHORE CO. (216 CTR 86) CONTENDED THAT IN ORDER TO DETERMINE THE BENEFICIAL PROVISIONS, SURCHARGE WAS TO BE LEVIED O N RATES PRESCRIBED UNDER THE ACT WHICH THEREAFTER WAS TO BE COMPARED WITH THE RATES PROVIDED UNDER THE DTAA. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT SOFTWARE WAS PURCHASED UNDER A DISTRIBUTION AGREEME NT ENTERED INTO BETWEEN THE APPELLANT AND IB SINGAPORE AND ACC ORDINGLY ITA 297 & 298(BANG)/2011 PAGE 10 OF 11 PAYMENTS WERE MADE. THUS, THE DTAA GOVERNED BETWEEN INDIA AND SINGAPORE IN RESPECT OF INCOME AND TAXES THEREO N UNDER ARTICLE 2 OF THE DTAA BETWEEN INDIA-SINGAPORE, THE RELEVANT CLAUSE OF THE AGREEMENT IS: (A) IN INDIA INCOME-TAX INCLUDING ANY SURCHARGE TH EREON FURTHER AS PER FINANCE (NO.2) ACT, 2004, IN PARA-II OF THE FIRST SCHEDULE GIVING THE RATES FOR DEDUCTION OF TAX AT S OURCE. IN ITEM 2 OF PART-II, APPLICABLE TAX SHOULD BE INCREASED BY A SURCHARGE AT THE RATE OF TWO AND ONE HALF PERCENT OF SUCH INC OME-TAX. FROM THE PROVISIONS OF THE FINANCE ACT AND AS PER D TAA IT IS VERY MUCH CLEAR THAT TAX EVEN AS PER DTAA IS TO BE INCREASED BY SURCHARGE. LEARNED DEPARTMENTAL REPRESENTATIVE THER EFORE SUBMITTED THAT THE CIT(A) IS JUSTIFIED IN DIRECTING TO LEVY SURCHARGE ON TAX PAYABLE AND AS THERE IS NO MERIT I N THE ASSESSEES OBJECTION IS LIABLE TO BE REJECTED. 9. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE CIT(A), BY EXERCISING HIS POWER U/S 251 OF THE ACT ISSUED ENHANCEMENT NOTICE TO THE APP ELLANT FOR INCLUDING SURCHARGE AND CESS AS APPLICABLE IN ADDIT ION TO THE BASIC RATE OF TAX UNDER THE DTAA BETWEEN INDIA AND SINGAPORE. THE APPELLANT SOUGHT TIME TO FILE ITS REPLY TO THE ENHANCEMENT NOTICE, WHICH WAS REJECTED BY THE CIT(A). THE ASSE SSEE WAS GIVEN ONLY ONE OPPORTUNITY BY THE CIT(A). THE ASSES SEE IS RELYING ON THE BOARD CIRCULAR WHICH IS REFERRED TO IN THE JUDGMENT OF THE HONBLE UTTARAKHAND HIGH COURT CITE D SUPRA. IN THE INTERESTS OF JUSTICE, WE FEEL THAT THIS MATT ER REQUIRES ITA 297 & 298(BANG)/2011 PAGE 11 OF 11 CONSIDERATION AT THE LEVEL OF THE AO, DEHORS THE FI NDING RENDERED BY THE CIT(A). THEREFORE WE REMIT THIS IS SUE TO THE FILE OF THE AO. THE APPELLANT SHALL BE GIVEN A REA SONABLE OPPORTUNITY OF HEARING BEFORE A DECISION IS TAKEN I N THE MATTER. IT IS ORDERED ACCORDINGLY. 10. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH MARCH, 2012 SD/- SD/- (N.K. SAINI ) ACCOUNTANT MEMBER (GEORGE GEORGE K) JUDICIAL MEMBER PLACE: BANGALORE DATE : 27 TH MARCH, 2012 EKS COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) CONCERNED 4. CIT 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE