LINKLATERS, MUMBAI V. DDIT (IT) 4(1), MUMBAI

ITA 3185/MUM/2010

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1833 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: L
• Next Hearing Date: 27-10-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 23-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JASBIR CHA UHAN
• Assessee Lawyers: S E DASTURMADHUR AGAR WAL
• Keywords: Double taxation relief; Permanent establishment; Initiation of penalty proceedings; Bad and doubtful debts
• Section: 143(3); 5(2); 234B

Judgement Text

, , L, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.897/MUM/2007 ASSESSMENT YEAR: 2003-04 LINK L AT ERS, C/S. C.C. CHOKSHI & CO. PLOT NO.12, DR. ANNIE BESANT ROAD, OPP. SHIVSAGAR ESTATE, WORLI, MUMBAI -400018 / VS. ASST. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-3(2), MUMBAI-400 018 (ASSESSEE ) ( REVENUE ) P.A. NO. AABFL2160M ITA NO.1532/MUM/2007 ASSESSMENT YEAR: 2003-04 ASST. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-3(2), MUMBAI-400 018 / VS. LINKL ATERS, C/S. C.C. CHOKSHI & CO. PLOT NO.12, DR. ANNIE BESANT ROAD, OPP. SHIVSAGAR ESTATE, WORLI, MUMBAI -400018 ( REVENUE ) (RES PONDENT ) P.A. NO. AABFL2160M ITA NO.3185/MUM/2010 ASSESSMENT YEAR: 2007-08 LINK L ATERS, C/S. C.C. CHOKSHI & CO. PLOT NO.12, DR. ANNIE BESANT ROAD, OPP. SHIVSAGAR ESTATE, WORLI, MUMBAI -400018 / VS. DEPUTY DIRECTOR OF INCOME TAX(INTERNATIONAL TAXATION)-4(1), MUMBAI-400 018 (ASSESSEE ) ( REVENUE ) P.A. NO. AABFL2160M LINKLATERS, 2 ITA NO.4908/MUM/2010 ASSESSMENT YEAR: 2007-08 DEPUTY DIRECTOR OF INCOME TAX(INTERNATIONAL TAXATION)-4(1), MUMBAI-400 018 / VS. LINKL ATERS, C/S. C.C. CHOKSHI & CO. PLOT NO.12, DR. ANNIE BESANT ROAD, OPP. SHIVSAGAR ESTATE, WORLI, MUMBAI -400018 ( REVENUE ) (RESPONDENT ) P.A. NO. AABFL2160M APPELLANT BY SHRI S.E. DASTUR/ MA DHUR AGARWAL (AR) REVENUE BY SHRI JASBIR CHAUHAN CIT, DR / DATE OF HEARING : 28/10/2015 / DATE OF ORDER: 16/12/2015 / O R D E R PER BENCH: THESE CROSS APPEALS HAVE BEEN FILED BY THE ASSESSEE AS WELL REVENUE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), MUMBAI {(IN SHORT LD. CIT(A)} FOR TH E ASSESSMENT YEARS 2003-04 & 2007-08, DECIDED AGAINST THE ASSESSMENT ORDER PASSED BY THE U/S 143(3) OF THE AC T. 2 . DURING THE COURSE OF HEARING SHRI S.E. DASTUR & S HRI MADHUR AGARWAL, AUTHORISED REPRESENTATIVES (LD COUN SEL) ON BEHALF OF THE ASSESSEE AND SHRI JASBIR CHAUHAN CIT, LINKLATERS, 3 DEPARTMENTAL REPRESENTATIVE (LD CIT-DR) ON BEHALF O F THE REVENUE, ARGUED THE CASE. WE FIRST TAKE UP ITA NO.897/MUM/2007 FOR A.Y. 2003- 04 THE ASSESSEE OBJECTS TO THE ORDER DATED OCTOBER 30, 2006 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) XXXIII, MUMBAI FOR THE ASSESSMENT YEAR 2003-04, ON THE FOLL OWING GROUNDS: - 1. THE LEARNED COMMISSIONER (APPEALS) ERRED IN HOLD ING THAT THE APPELLANT HAS A PERMANENT ESTABLISHMENT IN INDIA UNDER ARTICLE 5(2)(K) OF THE TAX TREATY BETWE EN INDIA AND THE U.K. 2. WITHOUT PREJUDICE, THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE SPECIFICALLY DIRECTED THE ASSESSING OFFICER TO ASSESS THE APPELLANT ONLY IN RESPECT OF FEES OF 2,15,692.75, WHICH WERE RELATA BLE TO WORK PERFORMED IN INDIA. 3. THE LEARNED COMMISSIONER (APPEALS) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN TR EATING DISBURSEMENTS AS PART OF INCOME OF THE APPELLANT. 4. WITHOUT PREJUDICE TO GROUND 6 ABOVE, THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE IN RESPECT OF DISBURSEMENT TO THE EXTE NT OF 15% OF THE DISBURSEMENT CLAIM PROPORTIONATE TO THE FEE RELATING TO SERVICES RENDERED IN INDIA AS COMPARED TO THE TOTAL FEES. THE COMMISSIONER (APPEALS) OUGHT TO HAVE ENTIRELY DELETED THE DISALLOWANCE. LINKLATERS, 4 5. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT SPECIFICALLY DIRECTING THE ASSESSING OFFICER TO ALL OW DEDUCTION FOR BAD DEBTS OF 2,55,255.14 6. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION FOR BAD DEBTS IN RESPECT OF SERVICES RENDERED OUTSIDE I NDIA IF, INCOME IN RESPECT OF SERVICES RENDERED OUTSIDE INDI A WAS ULTIMATELY HELD AS TAXABLE IN INDIA. 7. THE LEARNED COMMISSIONER (APPEALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO APPLY THE RATE O F TAX APPLICABLE FOR A FIRM. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE CORREC T RATE OF TAX APPLICABLE IS THAT OF ASSOCIATION OF PERSONS I.E. 30%. 8. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT ENTIRELY DELETING THE INTEREST LEVIED UNDER SECTION 234B. 9. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT QUASHING THE PENALTY PROCEEDINGS UNDER SECTION 271(L)(C) OF THE INCOME-TAX ACT INITIATED BY THE LE ARNED ASSESSING OFFICER. 10. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT DECIDING THE FOLLOWING GROUNDS IN THE APPEAL: '6. THE LEARNED ASSISTANT DIRECTOR OF INCOME TAX ERRED IN NOT ALLOWING DEDUCTION FOR REMUNERATION PAID BY THE APPELLANT TO ITS EMPLOYEES FOR SERVICES PERFORMED OUTSIDE INDIA. 7. THE LEARNED ASSISTANT DIRECTOR OF INCOME TAX ERR ED IN HOLDING THAT THE APPELLANT WAS LIABLE TO TAX IN INDIA UNDER ARTICLE 15 OF THE TAX TREATY BETWEEN INDIA AND U.K. THE ASSISTANT DIRECTOR OF INCOME TAX OUGHT TO HAVE APPRECIATED THAT ARTICLE 15 WAS LINKLATERS, 5 APPLICABLE ONLY TO INDIVIDUALS AND WAS NOT APPLICABLE TO THE CASE OF THE APPELLANT. 8. THE LEARNED ASSISTANT DIRECTOR OF INCOME TAX ERR ED IN HOLDING THAT THE APPELLANT HAD A FIXED BASE IN INDIA FROM WHICH THE APPELLANT WAS PERFORMING ITS ACTIVITIES.' 11. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WITH OUT PREJUDICE TO ANY OF THE OTHERS. 3. GROUND NO.1 : IN THIS GROUND THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN HOLDING THAT THE ASSESS EE HAS A PERMANENT ESTABLISHMENT IN INDIA UNDER ARTICLE 5(2) (K) OF DTAA BETWEEN INDIA AND THE UK. 3.1. DURING THE COURSE OF HEARING IT HAS BEEN FAIRLY ST ATED AT THE VERY OUTSET BY LD. SENIOR COUNSEL THAT THIS ISS UE HAS ALREADY BEEN DECIDED AGAINST THE ASSESSEE IN ASSESS EES OWN CASE AS PER PARTICULARS GIVEN BELOW: (I) LINKLATERS LLP V. ITO A.Y. 1995-96 132 TTJ 20 (MUMBAI) 16 TH JULY, 2010 (II) LINKLATERS FOR THE A.Y.1996-97 ORDER DATED 7 TH MAY 2014. (III) LINKLATERS V. DIT FOR THE A.Y. 1997-98 IN ITA NO.1711/M/2004 ORDER DATED 8 TH AUGUST 2014 (IV) LINKLATERS FOR THE A.YS.1998-99 TO 2001-02 ORDER DATED 7.09.2015 3.2. ON THE OTHER HAND, LD. DR HAS ALSO SUPPORTED THE O RDER OF LOWER AUTHORITIES AS WELL AS ORDERS OF THE TRIBU NAL OF EARLIER YEARS PASSED IN ASSESSEES OWN CASE. LINKLATERS, 6 3.3. WE HAVE GONE THROUGH THE SUBMISSIONS MADE BY BOTH THE SIDES, ORDERS OF THE LOWER AUTHORITIES AS WELL AS O RDERS OF THE TRIBUNAL PASSED IN ASSESSEES OWN CASE FOR EARLIER YEARS. ON THIS ISSUE, THE LATEST ORDER PASSED BY THE TRIBUNAL IS ORDER DATED 07.09.2015 IN WHICH IDENTICAL ISSUE HAS BEEN DECIDED, THE RELEVANT PARA FROM THIS ORDER IF REPRODUCED BEL OW: 5. IN GROUND NO. 2, THE ASSESSEE HAS CHALLENGED TH E ISSUE OF PERMANENT ESTABLISHMENT IN INDIA UNDER ARTICLE 5 (2)(K) OF INDIA UK DTAA. 6. AS STATED ABOVE, THE ASSESSEE IS PROVIDING LEGAL SERVICES IN VARIOUS AREAS AND DURING THE RELEVANT P REVIOUS YEAR, THE ASSESSEE HAD RENDERED LEGAL CONSULTANCY SERVICES IN CONNECTION WITH THE DIFFERENT PROJECTS TO VARIOUS CONCERNS BOTH WITHIN AND OUTSIDE INDIA. THE DETAILS OF THE DIFFERENT PROJECTS FOR WHICH SOME PART OF THE WORK WERE PERFORMED IN INDIA, FOR WHICH INVOICES WERE RAISED HAVE BEEN INCORPORATED AT PAGES 2 & 3 OF THE IMPUGNED ASSESSMENT ORDER. ASSESSEES CASE BEFORE THE REVENU E AUTHORITIES HAD BEEN THAT, IT HAD NOT OPENED ANY BR ANCH OR OFFICE IN INDIA AND NEITHER IT HAS ANY OFFICE OR PL ACE OF WORK IN INDIA FOR RENDERING THE SERVICES. ALL THE L EGAL SERVICES ARE PROVIDED BY THE PARTNERS AND STAFF IN UK AND THE EXPENSES OF TRAVEL, STAY AT HOTELS AND OTHER LO CATIONS AND OTHER INCIDENTAL EXPENSES WERE BORNE BY THE CLI ENTS. THUS, THERE IS NO PERMANENT ESTABLISHMENT OF THE ASSESSEE IN INDIA WITHIN THE AMBIT OF ARTICLE 5 OF THE DTAA LINKLATERS, 7 BETWEEN INDIA AND UK. NOT EVEN WITHIN THE MEANING O F ARTICLE 5(2)(K) DOES THE ASSESSEE HAS ANY SERVICE P E, BECAUSE THE PARTNERS AND STAFF OF THE ASSESSEE WHO HAVE PERFORMED SERVICES IN INDIA HAVE NOT EXCEEDED THE S TAY OF 90 DAYS. THE ASSESSEES SUBMISSIONS IN THIS REGARD BEFORE THE ASSESSING OFFICER HAVE BEEN INCORPORATED BY THE ASSESSING OFFICER FROM PAGES 3 TO 5 OF THE ASSESSME NT ORDER. HOWEVER, THE ASSESSING OFFICER, HELD THAT AS SESSEE HAS SERVICE PE IN INDIA AND COMPUTED THE INCOME OF THE ASSESSEE IN ACCORDANCE WITH ARTICLE 7 AS PER THE DISCUSSION APPEARING AT PAGES 10 TO 12 OF THE ASSES SMENT ORDER. 7. THE LD. CIT(A) FOLLOWING THE EARLIER YEAR ORDERS OF THE CIT(A), DECIDED THIS ISSUE AGAINST THE ASSESSEE. 8. BEFORE US, SHRI DASTUR POINTED OUT THAT THIS MAT TER HAS BEEN DECIDED AGAINST ASSESSEE BY THE TRIBUNAL IN ASSESSMENT YEAR 1995-96, VIDE ORDER DATED 16TH JULY , 2010, (REPORTED IN 130 TTJ 20). THIS ORDER HAS AGAI N BEEN FOLLOWED BY THE TRIBUNAL IN AYS 1996-97 & 1997-98. THE FINDING OF THE TRIBUNAL IN AY 1995-96 ARE GIVEN IN PARA 86 TO 107 AND FINAL CONCLUSION ARE IN PARA 106 & 107 W HICH FOR SAKE OF READY REFERENCE IS REPRODUCED HEREUNDER :- 106. WE ARE IN CONSIDERED AGREEMENT WITH THIS ANALYSIS IN THE UN MODEL CONVENTION COMMENTARY. WE ARE THUS OF THE CONSIDERED VIEW THAT, IN A SITUATION LIKE THE ONE THAT WE ARE IN SEISIN OF, I. E. IN WHICH SPECIFIC PROVISIONS FOR PROFESSIONAL SERVICES OR LINKLATERS, 8 INDEPENDENT PERSONAL SERVICES OR INCLUDED SERVICES EXIST UNDER ART. 15, WHEN SERVICES ARE RENDERED BY THE ENTERPRISE, ART. 5(2)(K) WILL COME INTO PLAY, A ND WHEN SERVICES ARE RENDERED BY AN INDIVIDUAL, ART. 1 5 WILL FIND APPLICATION. THEREFORE, WHILE WE AGREE WI TH THE LEARNED COUNSEL THAT ART. 15 WILL NOT BE APPLIC ABLE ON THE FACTS OF THE PRESENT CASE, THIS FINDING DOES NOT REALLY COME TO THE RESCUE OF THE ASSESSEE SINCE, AS WE HAVE ALREADY HELD, THE ASSESSEE DID HAVE A PE IN INDIA UNDER ART. 5(2)(K) OF THE INDIA-UK TAX TREATY , AND, ACCORDINGLY, PROFITS ATTRIBUTABLE TO THE PE AR E TAXABLE UNDER ART. 7 OF THE INDIA-UK TAX TREATY. 107. IN VIEW OF THE ABOVE DISCUSSIONS, WE ARE UNABL E TO UPHOLD THE PLEA SO STRENUOUSLY ARGUED BY THE LEARNED COUNSEL FOR THE ASSESSEE, AND WE HOLD THAT THE AUTHORITIES BELOW HAVE RIGHTLY INVOKED THE PROVISIONS OF ART. 5(2)(K). WE APPROVE THE SAME, AN D DECLINE TO INTERFERE IN THE MATTER. ON ADJUSTMENTS REQUIRED CLAIMED BY THE ASSESSEE IN EARNINGS OF THE PE, ON THE BASIS OF PREVAILING MARKET PRICES OF SIM ILAR SERVICES, IN VIEW OF INDEPENDENCE FICTION OF ART. 7 (2). 9. THUS, RESPECTFULLY FOLLOWING THE EARLIER YEARS O RDERS AND THE JUDICIAL PRECEDENCE, WHICH IS APPLICABLE ON THE FACTS PERMEATING IN THIS YEAR, ALSO WE DECIDE THE IMPUGNE D ISSUE AGAINST THE ASSESSEE. ACCORDINGLY, GROUND NO. 2 STANDS DISMISSED. LINKLATERS, 9 3.4. WE FIND THAT THE FACTS ARE SAME IN THIS YEAR AS WE LL. NO DISTINCTION HAS BEEN MADE BY THE ASSESSEE. THE ISSU E INVOLVED BEFORE US IS IDENTICAL TO THE ISSUE THAT WAS INVOLV ED IN THE AFORESAID ORDER, AND THEREFORE, RESPECTFULLY FOLLOW ING THE SAME THIS GROUND IS DECIDED AGAINST THE ASSESSEE. ACCORD INGLY, GROUND NO.1 IS DISMISSED. 4. GROUND NO. 2: IT HAS BEEN SUBMITTED BY THE LD. SENIOR COUNSEL OF THE ASSESSEE THAT THE ASSESSING OFFICER IN THE ORDER GIVING EFFECT TO THE ORDER PASSED BY LD. CIT(A) HAS ALLOWED APPROPRIATE RELIEF TO THE ASSESSEE AND THEREFORE, T HIS GROUND HAS BECOME ACADEMIC AND IS NOT REQUIRED TO BE ADJUD ICATED, THEREFORE, IT IS DISMISSED AS INFRUCTUOUS. 5. GROUND NOS. 3 & 4: IN THESE GROUNDS, THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN HOLDING THE ACTION OF THE AO IN TREATING REIMBURSEMENT OF THE EXPENSES AS PAR T OF THE INCOME OF THE ASSESSEE. DURING THE COURSE OF HEARIN G, LD. COUNSEL HAS SUBMITTED THAT IDENTICAL ISSUE WAS INVO LVED IN THE EARLIER YEARS AND THE SAME HAS BEEN DECIDED IN FAVO UR OF THE ASSESSEE IN THE VARIOUS ORDERS PASSED BY THE TRIBUN AL, PARTICULARS OF WHICH HAVE ALREADY BEEN GIVEN IN GRO UND NO.1 ABOVE. 5.1. ON THE OTHER HAND, LD. DR HAS SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 5.2. WE HAVE GONE THROUGH THE SUBMISSIONS MADE BY BOTH THE SIDES AND LOWER AUTHORITIES AND ORDER PASSED BY THE TRIBUNAL LINKLATERS, 10 IN EARLIER YEARS. WE FIND IT APPROPRIATE TO PRODUCE RELEVANT PARA FROM THE ORDER OF THE TRIBUNAL DATED 7 TH SEPTEMBER 2015. 12. AS REGARDS THE ISSUES RAISED IN GROUND NO. 5 & 6 TO REIMBURSEMENT OF EXPENSES WHICH HAS BEEN CONSIDER ED AS INCOME, BY THE REVENUE AUTHORITIES, IT HAS BEE N SUBMITTED BY THE LD. SENIOR COUNSEL THAT, THIS ISSU E HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE FROM THE AYS 1995- 96 TO 1997-98, THE RELEVANT OBSERVATION BY THE TRIB UNAL IN AY 1995-96 ARE AS UNDER :- 133. HAVING HEARD THE RIVAL SUBMISSIONS AND HAVING PERUSED THE MATERIAL ON RECORD, WE ARE INCLINED TO UPHOLD THE GRIEVANCE OF THE ASSESSEE. T HE REIMBURSEMENTS RECEIVED BY THE ASSESSEE ARE IN RESPECT OF SPECIFIC AND ACTUAL EXPENSES INCURRED BY THE ASSESSEE AND DO NOT INVOLVE ANY MARKUP, THERE I S REASONABLE CONTROL MECHANISM IN PLACE TO ENSURE THA T THESE CLAIMS ARE NOT INFLATED, AND THE ASSESSEE HAS FURNISHED SUFFICIENT EVIDENCE TO DEMONSTRATE THE INCURRING OF EXPENSES. THERE IS THUS NO GOOD REASON TO MAKE ANY ADDITION TO INCOME IN RESPECT OF THESE REIMBURSEMENTS OF EXPENSES. THE ACTION OF THE CIT(A), AS LEARNED COUNSEL RIGHTLY CONTENDS, ON PUR E SURMISES AND CONJECTURES. IN VIEW OF THE ABOVE DISCUSSIONS, WE DIRECT THE AO DELETE THE DISALLOWANCE OF EXPENSES AS SUSTAINED BY THE CIT(A) AND HOLD THAT NO PART OF REIMBURSEMENTS OF EXPENSES RECEIVED BY THE ASSESSEE, ON THE FACTS OF THIS CASE , BE LINKLATERS, 11 TREATED AS INCOME OF THE ASSESSEE. THE ASSESSEE GET S THE RELIEF ACCORDINGLY. 13. THUS, RESPECTFULLY FOLLOWING THE SAME, WE ALLOW THESE GROUNDS IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE THAT THE ENTIRE REIMBURSEMENT OF EXPENSES H ERE IN THE FACTS OF THE ASSESSEES CASE CANNOT BE TREATED AS INCOME. 14. SO FAR AS ISSUES RAISED IN GROUND NO. 7, 8 & 9, THE LD. SENIOR COUNSEL FOR THE ASSESSEE SUBMITTED THAT, AS OF NOW, THE ISSUES RAISED IN THESE GROUNDS HAVE BECOME PURE LY ACADEMIC. ACCORDINGLY, GROUND NO. 7, 8 & 9 ARE TREA TED AS INFRUCTUOUS, BEING PURELY ACADEMIC IN VIEW OF THE I SSUES DECIDED IN THE FOREGOING GROUNDS. 5.3. WE HAVE GONE THROUGH THE FACTS OF THE CASE AND FIN D THAT THE FACTS ARE SIMILAR AND ISSUED DECIDED BY THE TRI BUNAL IS IDENTICAL AND THEREFORE, WE ALLOW THESE GROUNDS IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE AND DIRECT THE AO TO FOLLOW THE AFORESAID ORDER OF THE TRIBUNAL. 6. GROUND NOS. 5 & 6: WITH REGARD TO THESE GROUNDS IT HAS BEEN SUBMITTED BY THE LD. COUNSEL THESE HAVE BECOME INFRUCTUOUS AS THE ASSESSEE HAS RIGHTLY GIVEN EFFEC T TO THE ORDER PASSED BY THE LD. CIT(A), AND THEREFORE, NO G RIEVANCE OF THE ASSESSEE WAS LEFT. 6.1. IN VIEW OF THE AFORESAID SUBMISSIONS THESE GROUNDS ARE DISMISSED AS INFRUCTUOUS. LINKLATERS, 12 7. GROUND NO.7: THIS GROUND HAS NOT BEEN PRESSED BY THE LD. SENIOR COUNSEL OF THE ASSESSEE, AND THEREFORE, THE SAME IS DISMISSED. 8. GROUND NO. 8: IN THIS GROUND, THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN NOT ENTIRELY DELETING T HE INTEREST LEVIED U/S.234B. 8.1. DURING THE COURSE OF HEARING, LD. SENIOR COUNSEL H AS SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED IN FAVOU R OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES OWN CASE, PA RTICULARS OF WHICH HAVE ALREADY BEEN GIVEN IN GROUND NO.1 ABOVE, WHEREIN HONBLE TRIBUNAL HAS FOLLOWED THE JUDGMENT OF HONB LE BOMBAY HIGH COURT IN THE CASE OF DIT VS. NGC NETWOR KS LLC 313 ITR 187. 8.2. ON THE OTHER HAND, LD. DR HAS SUPPORTED THE ORDER OF THE LOWER AUTHORITIES. 8.3. IN THIS REGARD WE REFER TO THE JUDGMENT OF TRIBUNA L DATED 7 TH SEPTEMBER 2015, AND THE RELEVANT PARA IS REPRODUCE D BELOW: 20. REGARDING GROUND NO. 2, MR. DASTUR, POINTED OUT THAT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESS EE RIGHT FROM ASSESSMENT YEAR 1995-96 TO 1997-98 BY THE TRIBUNAL, FOLLOWING THE DECISION OF HONBLE JURISDI CTIONAL HIGH COURT IN THE CASE OF DIT VS NGC NETWORKS LLC, REPORTED IN 313 ITR 87. HE FURTHER POINTED OUT THAT THE HIGH COURT IN THE CASE OF THE ASSESSEE ITSELF HAS A LSO LINKLATERS, 13 DISMISSED THE REVENUES APPEAL ON THIS ISSUE AND HE NCE THE ISSUE OF CHARGEABILITY OF INTEREST U/S 234B HAS ATTAINED FINALITY IN THE CASE OF THE ASSESSEE. ACCO RDINGLY, WE ALSO FOLLOWING THE BINDING PRECEDENCE, DIRECT TH E ASSESSING OFFICER TO DELETE THE INTEREST CHARGED U/ S 234B. 8.4. RESPECTFULLY FOLLOWING THE ABOVE SAID ORDER, WE DI RECT THE AO TO DELETE THE INTEREST CHARGED U/S 234B, THUS, A LLOWING THIS GROUND IN FAVOUR OF THE ASSESSEE. 9. GROUND NO. 9: IN THIS GROUND, THE ASSESSEE HAS RAISED INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C). IN OUR OPINION THIS GROUND IS PREMATURE AND THEREFORE, DISMISSED. 10. GROUND NO.10: WITH RESPECT TO THESE GROUNDS IT HAS BEEN REQUESTED BY THE LD. SENIOR COUNSEL THAT SIMILAR DI RECTION BE GIVEN AS WAS IN THE ORDER PASSED BY THE TRIBUNAL FO R A.Y. 1998-99. 10.1. NO OBJECTION HAS BEEN RAISED BY THE LD. DR IN THIS REGARD. IN VIEW OF THE AFORESAID SUBMISSIONS, WE DI RECT THE AO TO FOLLOW THE DIRECTIONS AS WERE GIVEN IN PARA 14 A T PAGE 10 OF THE ORDER OF THE TRIBUNAL FOR A.Y. 1998-99. 11. AS A RESULT, THE APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. ITA NO.1532/MUM/2007 (2003-04) THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: LINKLATERS, 14 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT('A) ERRED IN HOLDING THAT ONLY THE INCOME RELATABLE TO WORK PERFORMED IN INDI A IS LIABLE FOR TAXATION IN INDIA. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW 85% OF DISBURSEMENT CLAI M PROPORTIONATE TO THE FEE RELATING TO THE SERVICES RENDERED IN INDIA AS COMPARED TO TOTAL FEES. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LD.CIT (A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO RESTORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 12. GROUND NO.1: IN THIS GROUND, THE REVENUE IS AGGRIEVED WITH THE ACTION OF LD. CIT(A) IN HOLDING THAT ONLY THE INCOME RELATABLE TO WORK PERFORMED IN INDIA IN LIABLE FOR TAXATION IN INDIA. IN THIS REGARD LD. SENIOR COUNSEL OF THE ASS ESSEE HAS SUBMITTED THAT THIS ISSUE ALSO STANDS COVERED IN FA VOUR OF THE ASSESSEE ON THE BASIS OF ORDERS OF THE TRIBUNAL PAS SED IN THE CASE OF THE ASSESSEE FOR A.Y. 1997-98 M.A.NO.392/M/ 2004 ORDER DATED 20.02.2015 AND ORDER DATED 7.9.2014 (FO R A.Y. 1998-99 AND 2001-02), WHEREIN IT WAS HELD THAT ONLY INCOME RELATED TO SERVICES RENDERED IN INDIA, IS LIABLE TO TAX IN INDIA. FURTHER, RELIANCE WAS ALSO PLACED BY HIM UPON THE J UDGMENT OF HONBLE MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF CLIFFORD CHANCE, 143 ITD 1 (SB) WHEREIN IT WAS H ELD THAT ONLY INCOME RELATED TO SERVICES RENDERED IN INDIA W AS LIABLE TO BE TAXED RENDERED IN INDIA. 13.1. ON THE OTHER HAND, LD. DR HAS SUPPORTED THE ORDERS OF THE AO. LINKLATERS, 15 13.2. WE HAVE GONE THROUGH THE FACTS OF THE CASE BEFORE US AS WELL AS ORDER PASSED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER YEARS AND FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. WE FIND THAT IN ASSESSEES OWN CASE FOR A.Y.1998-99 TO 2001-02 VIDE ORDER DATED 7.9.2015, T HE TRIBUNAL HAS HELD THAT THE PROFIT WHICH IS ATTRIBUT ABLE TO THE PE, CAN ONLY BE ASSESSED IN INDIA. RELEVANT PARA OF THE TRIBUNALS ORDERS IS REPRODUCED BELOW: 19. IN GROUND NO. 1, THE REVENUE HAS CHALLENGED TH E TAXABILITY OF INCOME RELATED TO WORK PERFORMED IN I NDIA. ASSESSING OFFICER HAS TAKEN A VIEW THAT EVEN WHERE ONLY PART OF SERVICES WAS PERFORMED IN INDIA, ENTIRE INC OME WAS TAXABLE IN INDIA. WHEREAS, THE LD. CIT(A) HAS HELD THAT ONLY INCOME IN RESPECT OF SERVICES RENDERED IN INDI A WHICH ARE ATTRIBUTABLE TO THE PE ONLY THAT INCOME WOULD B E TAXABLE IN INDIA. THE TRIBUNAL THOUGH IN AY 1995-96 HAD DECIDED THIS ISSUE AGAINST THE ASSESSEE AFTER INVOK ING THE PRINCIPLE OF FORCE OF ATTRACTION, HOWEVER, LATER ON, THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ADIT V S CLIFFORD CHANCE REPORTED IN [2013], (143 ITD 1) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGA INST THE REVENUE, WHEREBY THE SPECIFIC FINDING OF THE TR IBUNAL ON THIS ISSUE HAS BEEN REVERSED. ACCORDINGLY, FOLLO WING THE BINDING PRECEDENCE OF SPECIAL BENCH IN THE CASE OF ADIT VS CLIFFORD CHANCE (SUPRA). WE HOLD THAT THE PROFITS, WHICH ARE ATTRIBUTABLE TO THE PE CAN ONLY BE ASSESSED IN INDIA LINKLATERS, 16 AND THUS GROUND NO.1 RAISED BY THE REVENUE STANDS DISMISSED. 13.2. RESPECTFULLY FOLLOWING THE AFORESAID ORDER AND ORD ER OF THE HONBLE SPECIAL BENCH IN THE CASE OF CLIFFORD C HANCE, (SUPRA), IT IS HELD THAT THE ONLY INCOME IN RESPECT OF SERVICES RENDERED IN INDIA, WHICH ARE ATTRIBUTABLE TO PE ONL Y, WOULD BE TAXABLE IN INDIA. THUS, GROUND NO. RAISED BY THE RE VENUE STANDS DISMISSED. 14. GROUND NO.2: IN THIS GROUND, THE REVENUE IS AGGRIEVED WITH THE ACTION OF LD. CIT(A) IN DIRECTING THE AO T O ALLOW 85% OF DISBURSEMENT CLAIM PROPORTIONATE TO THE FEE RELA TED TO THE SERVICES RENDERED IN INDIA AS COMPARED TO TOTAL FEE S. WITH RESPECT TO THIS GROUND ALSO, IT HAS BEEN SUBMITTED BY THE LD. SENIOR COUNSEL THAT THIS ISSUE ALSO STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDERS OF THE TRIBUNAL IN ASSES SEES OWN CASE, PARTICULARS OF WHICH HAVE ALREADY BEEN GIVEN IN GROUND NO.1 OF ASSESSEES APPEAL. FOR THE SAKE OF READY RE FERENCE, WE REFER TO THE ORDER OF THE TRIBUNAL DATED 7.9.2015 A ND REPRODUCED RELEVANT PARA HEREUNDER: 21. AS REGARDS ISSUE RAISED IN GROUND NO. 3, THAT IS, RESTRICTING THE DISALLOWANCE OF REIMBURSEMENT TO TH E EXTENT OF 25% AS AGAINST 100%, IT HAS BEEN POINTED BY LD. SENIOR COUNSEL THAT THE TRIBUNAL HAS ALREADY HELD THAT NO AMOUNT IS DISALLOWABLE AND THIS GROUND IS SIMILAR TO GROUN D NO. 5 & 6 OF THE ASSESSEES APPEAL. ACCORDINGLY, IN VIEW OF THE LINKLATERS, 17 FINDING GIVEN THEREIN THAT NONE OF THE REIMBURSEMEN T OF EXPENSES AMOUNT CAN BE CONSIDERED AS INCOME OF THE ASSESSEE THIS ISSUE IS DECIDED IN FAVOUR OF THE ASS ESSEE AND AGAINST REVENUE. ACCORDINGLY, GROUND NO. 3 AS R AISED BY THE REVENUE IS DISMISSED. 14.1. WE DIRECT THE AO TO FOLLOW THE AFORESAID ORDER OF THE TRIBUNAL, AND HOLD THAT NO AMOUNT SHOULD BE DISALLO WED. THUS, GROUND NO.2 OF THE REVENUES APPEAL STANDS DI SMISSED. 15. AS A RESULT APPEAL OF THE REVENUE STANDS DISMISSE D. ITA NO.3185/MUM/2010 ASSESSEES APPEAL FOR A.Y. 200 7- 08. IN THE APPEAL ASSESSEE HAS FILED FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED COMMISSIONER (APPEALS) ERRED IN HOLDING THAT THE APPELLANT HAS A PERMANENT ESTABLISHMENT IN INDIA UNDER ARTICLE 5(2)(K) OF THE TAX TREATY BETWEEN INDIA AND THE U.K. 2. WITHOUT PREJUDICE, THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE SPECIFICALLY DIRECTED THE ASSESSING OFFICER TO ASSESS THE APPELLANT ONLY IN RESPECT OF FEES OF E 758,535.35, WHICH WERE RELATAB LE TO WORK PERFORMED IN INDIA. 3. THE LEARNED COMMISSIONER (APPEALS) ERRED IN UPHO LDING THE ACTION OF THE ASSESSING OFFICER IN TREATING DISBURSEMENTS AS PART OF INCOME OF THE APPELLANT. 4. WITHOUT PREJUDICE TO GROUND 3 ABOVE, THE LEARNED LINKLATERS, 18 COMMISSIONER (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE IN RESPECT OF DISBURSEMENT TO THE EXTE NT OF 15% OF THE DISBURSEMENT CLAIM PROPORTIONATE TO THE FEE RELATING TO SERVICES RENDERED IN INDIA AS COMPARED TO THE TOTAL FEES. THE COMMISSIONER (APPEALS) OUGHT TO HAV E ENTIRELY DELETED THE DISALLOWANCE. 5. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT DECIDING THE FOLLOWING GROUNDS IN THE APPEAL: '7. THE LEARNED DEPUTY DIRECTOR OF INCOME TAX ERRED IN NOT ALLOWING DEDUCTION FOR REMUNERATION PAID BY THE APPELLANT OF 866,864.31 TO ITS EMPLOYEES FOR SERVICES PERFORMED OUTSIDE INDIA. 8. THE LEARNED DEPUTY DIRECTOR OF INCOME TAX ERRED IN HOLDING THAT THE APPELLANT WAS LIABLE TO TAX IN IND IA UNDER ARTICLE 15 OF THE TAX TREATY BETWEEN INDIA AN D U.K. THE DEPUTY DIRECTOR OF INCOME TAX OUGHT TO HAV E APPRECIATED THAT ARTICLE 15 WAS APPLICABLE ONLY TO INDIVIDUALS AND WAS NOT APPLICABLE TO THE CASE OF THE APPELLANT. 9. THE LEARNED DEPUTY DIRECTOR OF INCOME TAX ERRED IN HOLDING THAT THE APPELLANT HAD A FIXED BASE IN INDI A FROM WHICH THE APPELLANT WAS PERFORMING ITS ACTIVITIES.' 6. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WITHO UT PREJUDICE TO ANY OF THE OTHERS. 7. THE APPELLANT RESERVES THE RIGHT TO ADD, ALTER O R AMEND ANY OF THE ABOVE GROUNDS OF APPEAL. 16. IT IS NOTED THAT GROUNDS RAISED IN THIS YEAR ARE I DENTICAL TO THE GROUNDS RAISED IN A.Y. 2003-04. BOTH THE PARTIE S AGREED THAT FACTS ARE IDENTICAL AND ISSUES STAND COVERED W ITH THE LINKLATERS, 19 ORDERS OF EARLIER YEARS THUS, WE DIRECT THE AO TO F OLLOW OUR ORDER FOR A.Y. 2003-04 17. AS A RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED. ITA NO.4908/MUM/2010 REVENUES APPEAL FOR A.Y. 2007 - 0-8 IN THIS APPEAL REVENUE HAS FILED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT ON LY THE INCOME RELATABLE TO THE WORK PERFORMED IN INDIA IS LIABLE FOR TAXATION IN INDIA. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW 85% OF DISBURSEMENT CLAIM PROPORTIONATE TO THE FEE RELATING TO THE SERV ICES RENDERED IN INDIA AS COMPARED TO TOTAL FEES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) ERRED IN DELETING INTEREST CHARGED ULS.234B OF THE ACT HOLDI NG THAT TAX IS DEDUCTIBLE AT SOURCE IN THIS CASE IGNOR ING THE FACT THAT ASSESSEE HAD NOT APPLIED FOR ORDER FO R NIL DEDUCTION OF TAX OR LOWER DEDUCTION OF TAX AT SOURC E. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A), MUMBAI ON THE ABOVE GROUND BE SET ASIDE AND THE ORDER OF THE ASSESSING OFFICER BE RESTORED. LINKLATERS, 20 18. BOTH THE PARTIES AGREED THAT THE ISSUES INVOLVED A RE IDENTICAL TO A.Y. 2003-04, AND THEREFORE WE DIRECT THE AO TO FOLLOW OUR ORDER FOR A.Y. 2003-04 HERE ALSO. THUS, APPEAL OF REVENUE IS DISMISSED. 19. IN THE RESULT, APPEALS FILED BY THE ASSESSEE ARE P ARTLY ALLOWED AND APPEALS FILED BY THE REVENUE STAND DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH DECEMBER, 2015. SD/- (SAKTIJIT DEY ) SD/- (ASHWANI TANEJA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 16/12/2015 CTX? P.S/. .. !'#$%&%'# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT, MUMBAI. 4. / CIT(A)- , MUMBAI 5. #$% &' , &' ) , / DR, ITAT, MUMBAI 6. %*+ , / GUARD FILE. / BY ORDER, # //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI