DCIT, New Delhi V. M/s. Mesco Pharmaceuticals Ltd., New Delhi

ITA 3323/DEL/2013

• Counselvise Citation: 332320114 RSA 2013
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 1997-1998
• Appeal Filed On: 24-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GUNJAN P RASAD
• Assessee Lawyers: GAUTAM JAIN S
• Keywords: Double taxation relief; Permanent establishment; Question of law
• Section: 6

Judgement Text

ITA NOS.3322 & 3323/DEL/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : E : NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO.3322/DEL/2013 ASSESSMENT YEAR : 1997-98 D CIT, CENTRAL CIRCLE-7, NEW DELHI. VS. MIDEAST INDIA LTD., H-1, ZAMRUDPUR COMMUNITY CENTRE, KAILASH COLONY, NEW DELHI. PAN : AAACM0319F ITA NO.3323/DEL/2013 ASSESSMENT YEAR : 1997-98 D CIT, CENTRAL CIRCLE-7, NEW DELHI. VS. MESCO PHARMACEUTICALS LTD., H-1, ZAMRUDPUR COMMUNITY CENTRE, KAILASH COLONY, NEW DELHI. PAN : AAACM8308F ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI SALIL A G GARWAL & SHRI GAUTAM JAIN, ADVOCATES DEPARTMENT BY : S HRI GUNJAN PRASAD, CIT, DR ORDER PER A.D. JAIN, JUDICIAL MEMBER: THESE ARE DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 1997-9 8 AGAINST THE ORDERS DATED 06.03.2013, PASSED BY THE CIT (A)-I, NEW DELHI. ITA NOS.3322 & 3323/DEL/2013 2 2. THE ASSESSING OFFICER MADE ADDITIONS OF ` 35,54,49,00 0/- IN THE CASE OF M/S MIDEAST INDIA LTD. AND OF ` 13,05,01,000/- IN THE CASE OF M/S MESCO PHARMACEUTICALS LTD., BEING THE INCOME DERIVED BY TH E RESPECTIVE PERMANENT ESTABLISHMENT OF MIDEAST INDIA LTD. IN RUSSIA AND GERMA NY AND OF MESCO PHARMACEUTICALS LTD. IN RUSSIA. THE ASSESSING OFFICER MAD E THE ADDITIONS ON THE GROUND THAT THE DEPARTMENT HAD GONE IN REFERENC E BEFORE THE HONBLE HIGH COURT AGAINST THE ORDER OF THE TRIBUNAL, WHERE BY IT WAS HELD THAT INCOME OF FOREIGN PE, IN RUSSIA AND GERMANY, WAS NOT CHARGEA BLE TO TAX IN INDIA. 3. THE LD. CIT (A) DELETED THESE ADDITIONS, FOLLOWING THE TRIBUNAL ORDERS IN THE CASES OF M/S PAVL KULANDAGAN CHETTIAR VS. ITO, AS FOLLOWED IN THE CASE OF M/S MESCO PHARMACEUTICALS LTD. FOR ASSESSMENT YEAR 19 98-99. 4. BEFORE US, THE DEPARTMENT CONTENDS THAT THE LD. CI T (A) HAS ERRED IN DELETING THE ADDITIONS CORRECTLY MADE BY THE ASSESSING O FFICER ON ACCOUNT OF PROFIT EARNED BY FOREIGN BRANCHES OF THE ASSESSEES AT RUS SIA AND GERMANY AND RUSSIA, RESPECTIVELY, OPERATED AS PERMANENT ESTABLISH MENT; THAT THE LD. CIT (A) HAS ERRED IN FOLLOWING THE DECISION OF THE T RIBUNAL IN THE CASE OF M/S PAVL KULANDAGAN CHETTIAR VS. ITO; THAT THE LD. CIT (A), WHILE DOING SO, HAS WRONGLY NOT CONSIDERED THAT AS PER SECTIONS 4 TO 6 OF T HE IT ACT, IN RESPECT OF AN INDIAN COMPANY, ALL THE GLOBAL INCOME OF THE COM PANY IS TAXABLE AND WHERE THE ASSESSEE IS OPERATING PERMANENT ESTABLISHMENT I N FOREIGN COUNTRIES, WITH WHOM DTAA IS ENTERED, THE TAXES PAID BY THE PERMANENT ESTABLISHMENT IN THE FOREIGN COUNTRIES IS TO BE DEDUCTE D FROM THE TAX LIABILITIES OF THE INDIAN COMPANY FROM ITS GLOBAL INC OME, AS PER THE RELEVANT FINANCE ACT. 5. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS PLACED RELIANCE ON THE IMPUGNED ORDERS. ATTENTION HAS BEEN DRAWN TO THE ORDER OF THE HONBLE DELHI HIGH COURT DATED 15.12.2009 IN TH E CASE OF MIDEAST INDIA LTD. FOR ASSESSMENT YEAR 1998-99 (COPY AT PAGES 26-27 OF THE ASSESSEES PAPER BOOK). ITA NOS.3322 & 3323/DEL/2013 3 6. HAVING CONSIDERED THE MATTER, WE FIND THAT THE HO NBLE DELHI HIGH COURT IN THE CASE OF MIDEAST INDIA LTD. FOR ASSESSMENT YE AR 1998-99 HAS HELD AS FOLLOWS:- ITA NO.1349/2009 IN THE DETAILED ORDER PASSED BY THE INCOME TAX APPELLA TE TRIBUNAL, ALL ASPECTS OF THE MATTER ARE DULY CONSIDERE D, HOLDING THAT THE APPELLANT, WHICH IS PERMANENT ESTABLISHMENT IN USSR (SI NCE THE CASE RELATES TO THE YEAR 1991) AND THE INCOME EARNED BY THE ASSESSEE COMPANY IN USSR WOULD NOT BE TAXABLE IN INDIA BY VIRTU E OF ARTICLE 7 OF INDO-USSR DOUBLE TAXATION AVOIDANCE ACT (DTAA). IT IS ALSO RECORDED THAT THE ASSESSEE PAID THE TAX IN USSR FOR THE RELEVANT AS SESSMENT YEAR. FURTHER FINDING OF FACT, WHICH IS NOTICED IS THAT THE TRIBUNAL HAD DECIDED THE SIMILAR ISSUE IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1991-92, 1992-93 & 1993-94. THOUGH THE DEPARTM ENT HAD FILED REFERENCE PETITIONS AGAINST THAT DECISION OF THE TRIBUNA L, LEARNED COUNSEL FOR THE ASSESSEE INFORMS US THAT THOSE REFERENC ES WERE RETURNED UNANSWERED BY THIS COURT. WE ALSO FIND THAT THE TRIBUNAL HAS RELIED UPON THE JUDGMENT OF THE SUPREME COURT IN THE CAS E OF PAVL KULANDAGAN CHETTIAR VS. ITO, [267 ITR 654]. THEREFORE, NO SUBSTANTIAL QUESTION OF LAW ARISES IN THI S APPEAL, WHICH IS ACCORDINGLY DISMISSED. SD/- A.K. SIKRI, J. SD/- SIDDHARTH MRIDUL, J. 7. NO DECISION TO THE CONTRARY HAS BEEN BROUGHT TO OU R NOTICE. 8. THE LD. CIT (A) HAS NOT COMMITTED ANY ERROR IN FO LLOWING THE AFORESAID ORDER PASSED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ONE OF THE PRESENT ASSESSEES, I.E., MIDEAST INDIA LTD. THEREFORE, FINDING NO MERIT THEREIN, THE GRIEVANCE SOUGHT TO BE RAISED BY THE DEP ARTMENT IS REJECTED. 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE DEPAR TMENT ARE DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 05.12.201 3. SD/- SD/- [ G.D. AGRAWAL] [A.D. JAIN] VICE PRESIDENT JUDICIAL MEMBER DATED,05 TH DECEMBER, 2013. ITA NOS.3322 & 3323/DEL/2013 4 DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.