DCIT, New Delhi V. M/s. Cargill International Trading Pte. Ltd., Singapore

ITA 3415/DEL/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5924 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 28-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Double taxation relief
• Section: 234B

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH F, NEW DELHI BEFORE : SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 3415/DEL/2015 ASSESSMENT YEAR: 2009-10 DCIT CIRCLE 1(1)(1), INTL. TAXATION, NEW DELHI (APPELLANT) VS. CARGILL INTERNATIONAL TRADING PTE LTD., 300 BEACH ROAD, 23-01, THE CONCOURSE SINGAPORE (PAN- AACCC4644D) (RESPONDENT) A PPELLANT BY SH. SURENDER PAL, SR. DR RE SPONDENT BY NONE ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-42, NEW DELHI DATED 30.03.2015 FOR THE ASSES SMENT YEAR 2009-10 ON THE FOLLOWING GROUNDS : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERED IN HOLDING THAT REIMBURSEMENT RECEIVED BY THE ASSESSEE FOR RENDERING ADVISORY SERVICES/TECHNICAL SERVICES FOR MANAGING T HE AFFAIRS OF CIPL THROUGH ITS EMPLOYEE IS IN THE NATURE OF FTS AND TAX ABLE IN INDIA AS PER THE PROVISION OF ACT AS WELL AS UNDER DTAA. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING INTEREST U/S. 234B. DATE OF HEARING 19.06.2018 DATE OF PRONOUNCEMENT 21 .06.2018 ITA NO. 3415/DEL/2015 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED RETURN ON 30.09.2009 DECLARING INCOME OF RS.27,20,98,254/-. T HE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES WERE ISSUED TO THE A SSESSEE. THE ASSESSEE IS A COMPANY INCORPORATED IN 1974 UNDER THE LAWS OF SING APORE. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF INTERNATIONAL TRADE IN G RAINS, OIL SEEDS AND EDIBLE OILS, COAL, FERROUS AND OTHER AGRICULTURAL PRODUCTS . THE ASSESSING OFFICER OBSERVED FROM NOTES TO THE RETURN OF INCOME FILED O N 30.09.2009 THAT THE ASSESSEE HAD STATED ABOUT THE REIMBURSEMENT OF RS.2 ,41,55,248/- RECEIVED FROM CARGILL INDIA PVT. LTD. (CIPL), WHICH WAS CLAI MED AS EXEMPT. THE RELEVANT NOTE RELATING TO REIMBURSEMENT OF EXPENSES IS AS UN DER : DURING THE SUBJECT YEAR, CITPL HAS RECEIVED THE REI MBURSEMENT OF ACTUAL EXPENDITURE INCURRED BY IT ON BEHALF OF ITS GROUP C OMPANY, CARGILL INDIA PRIVATE LIMITED (CIPL). AIPL HAS REIMBURSED EXPENSE S AMOUNTING TO RS.24,155,248 DURING THE SUBJECT YEAR ON WHICH TAX AMOUNTING TO RS.71,625 HAS BEEN DEDUCTED AT SOURCE BY CIPL. ACCO RDINGLY, TAX AMOUNTING TO RS.71,625/- DEDUCTED AT SOURCE BY CIPL HAS BEEN CLAIMED AS DEFINED BY CIPTL. IN THIS REGARD THE ASSESSEE WAS ISSUED SHOW CAUSE N OTICE, IN RESPONSE TO WHICH THE ASSESSEE SUBMITTED THAT THE SAID REIMBURSEMENT DID NOT CONSTITUTE INCOME EITHER UNDER THE ACT OR UNDER THE TAX TREATY. THE A SSESSEE ALSO RELIED ON VARIOUS JUDGMENTS. THE ASSESSING OFFICER OBSERVED T HAT THIS PAYMENT MADE BY THE ASSESSEE ON BEHALF OF CIPL ON ACCOUNT OF HOTEL STAY, PROFESSIONAL FEES FOR TAX RETURNS, SALARY ETC. ARE IN NO WAY RESULT OF BU SINESS OBLIGATIONS OF THE ITA NO. 3415/DEL/2015 3 ASSESSEE. THE SAID SERVICES, IN FACT, AMOUNTED TO M ANAGING SERVICES OF CIPL. THESE ARE THEREFORE CLEARLY IN THE NATURE OF FTS AN D TAXABLE IN THE SOURCE STATE, I.E., IN INDIA. THE ASSESSING OFFICER RELIED ON THE PROVISIONS OF SECTION 91(7) AND SECTION 115A(1B). HE ALSO REFERRED TO TAX TREATY BETWEEN INDIA & SINGAPORE. THE ASSESSING OFFICER CONSIDERING THE SU BMISSIONS OF THE ASSESSEE AND RELYING ON SOME CASE LAWS, TREATED IT AS FTS AN D APPLIED THE TAX RATE ON THE PAYMENT OF RS.2,41,55,248/- AS PER DTAA BETWEEN INDIA AND SINGAPORE. THE ASSESSING OFFICER ALSO CHARGED INTEREST U/S. 23 4B APPLICABLE ON THE ABOVE ADDITION. AGGRIEVED, THE ASSESSEE APPEALED BEFORE T HE LD. CIT(A), WHO AFTER CONSIDERING THE DETAILED SUBMISSIONS OF THE ASSESSE E AND THE ORDER OF THE ASSESSING OFFICER ALLOWED THE APPEAL OF THE ASSESSE E ON BOTH THE ISSUES. THE REVENUE IS, THEREFORE, IN THIS APPEAL BEFORE THE TR IBUNAL, CHALLENGING THE IMPUGNED ORDER. 3. WE HAVE HEARD THE LD. DR AND HAVE GONE THROUGH T HE ENTIRE MATERIAL ON RECORD. NONE IS PRESENT ON BEHALF OF THE ASSESSEE. THEREFORE, WE HAVE NO OPTION BUT TO DECIDE THE APPEAL EXPARTE QUA ASSESSE E. THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER AND ALSO REFERRED TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CENTRICA INDIA OFFSHOR E (P) LTD. VS. CIT (2014) 51 ITA NO. 3415/DEL/2015 4 TAXMANN.COM 386 (SC).HE, THEREFORE, URGED FOR RESTO RATION OF ASSESSING OFFICERS ORDER. 4. AFTER HEARING THE LD. DR AND PERUSING THE ENTIRE MATERIAL ON RECORD, WE OBSERVE THAT THE LD. CIT(A) HAS DISCUSSED THIS ISSU E IN DETAIL IN HIS ORDER, WHEREIN WE DO NOT FIND ANY INFIRMITY. THE FINDINGS REACHED BY THE LD. CIT(A) ON BOTH THE ISSUES READ AS UNDER : 7.1. I HAVE DULY CONSIDERED SUBMISSIONS OF THE AP PELLANT. THE RELEVANT FACTS ARE THAT MR. JITESH AVLANI, ONE OF EXPATRIATE OF THE APPELLANT WAS SECONDED TO C1PL WHO WORKED AS CHAIRMAN OF CIPL FOR THE PERIOD FROM 01.02.2007 TO 14.08.2008 AND HE WAS ON PAYROLL OF C IPL. THE SALARY COSTS PAID BY CIPL TO MR. JITESH HAVE BEEN OFFERED TO TAX IN INDIA. PART OF SALARY COSTS IN NATURE OF BONUS, REST AND RECREATION EXPEN SES AND EXPENSE FOR FILING OF INCOME TAX RETURN OF MR. JITESH IN SINGAP ORE WERE PAID BY THE APPELLANT TO MR. JITESH AND CIPL REIMBURSED TO THE APPELLANT. BONUS AND REST AND RECREATION EXPENSES WERE ALSO OFFERED TO T AX IN INDIA. THE CASE OF THE APPELLANT IS THAT RECEIPTS ARE PURELY REIMBURSE MENT IN NATURE AND NOT IN NATURE OF FTS AS HAS BEEN HELD BY THE AO IN THE I MPUGNED ASSESSMENT ORDER. 7.2. IT IS SEEN THAT THERE DOES NOT EXIST ANY SERVI CE AGREEMENT BETWEEN APPELLANT AND CIPL. THE APPELLANT IS ALSO NOT IN BUS INESS OF PROVIDING ANY SERVICES. THE PAYMENTS IN DISPUTE ARE MADE IN RELATI ON TO EMPLOYMENT OF MR. JITESH AVLANI WHO WAS ON PAYROLL OF CIPL. PAYME NT OF SALARY COSTS TO MR. JITESH WAS RESPONSIBILITY OF CIPL. PART OF SUCH COSTS HAS BEEN PAID BY THE APPELLANT TO JITESH WHICH WERE LATER ON REIMBUR SED BY CIPL. ALL THE SALARY COSTS INCLUDING THOSE PAID BY THE APPELLANT HAVE BEEN OFFERED TO TAX IN INDIA. THE PAYMENTS MADE BY THE APPELLANT TO MR. JITESH WERE INFACT OBLIGATIONS OF CIPL AND THEREFORE SUBSEQUENT PAYMEN TS MADE BY CIPL TO THE APPELLANT ARE REIMBURSEMENT IN NATURE. THEREFORE , IT CANNOT BE HELD THAT APPELLANT HAS PROVIDED ANY TECHNICAL SERVICE W ITHIN MEANING OF SECTION 9(1)(VII) OF THE ACT OR ARTICLE 12(4) OF DT AA. ITA NO. 3415/DEL/2015 5 7.3. IN VIEW OF DISCUSSION ABOVE, I HOLD THAT IMPUG NED PAYMENTS ARE NOT IN NATURE OF FTS AND HENCE NOT TAXABLE IN INDIA. THE AO IS DIRECTED TO GRANT RELIEF ACCORDINGLY. THE GROUND OF APPEAL IS AL LOWED. 9.1. THE APPELLANT HAS SUBMITTED THAT INTEREST U/S 2 34B OF THE ACT IS NOT LEVIABLE BECAUSE ALL THE PAYMENTS MADE TO THE APPEL LANT ARE SUBJECT TO WITHHOLDING TAX U/S 195. FOR THIS PROPOSITION, THE APPELLANT HAS RELIED UPON VARIOUS CASE LAWS AS UNDER: DIT VS JACABS CIVIL INCORPORATED, MITSUBISHI CORPN. & ORS. 330 ITR 578 (DELHI) CJT VS SEDCO FOREX INTERNATIONAL DRILLING CO. LTD. 2 64 ITR 320 (UTTAR) DIT VS NGC NETWORK ASIA LLC 222 CTR 86 (BOM) 9.2. THE CONTENTION OF THE APPELLANT HAS BEEN DULY CONSIDERED. IN VIEW OF JURISDICTIONAL HIGH COURT'S DECISION AND OTHER AUTH ORITIES ON THE ISSUE, I HOLD THAT INTEREST U/S 234B OF THE ACT IS NOT LEVIA BLE IN THIS CASE AS PAYMENTS MADE TO THE APPELLANT WERE SUBJECT TO WITH HOLDING TAX U/S 195 OF THE ACT. THE GROUND OF APPEAL IS ALLOWED. 5. A PERUSAL OF THE AFORESAID FINDINGS, WE FIND THA T THE LD. CIT(A) HAS DONE A GOOD REASONED ORDER WHICH DOES NOT REQUIRE ANY INTE RFERENCE. THE CASE LAW CITED BY THE REVENUE IS NOT APPLICABLE TO THE PRESE NT CASE BECAUSE OF DIFFERENT FACTS OF THE CASE IN HAND. ON THE SECOND ISSUE OF I NTEREST U/S. 234B, WE FIND THAT THE CONCLUSION REACHED BY THE LD. CIT(A) IS BA SED ON THE DECISION RENDERED BY HONBLE JURISDICTIONAL HIGH COURT ON TH E ISSUE OF INTEREST WHETHER LEVIABLE ON THE NON-RESIDENT ASSESSEE OR NO T, AS PER PROVISIONS OF SECTION 234B OF THE ACT, AS THE ASSESSEE WAS SUBJEC T TO WITHHOLDING TAX U/S. 195 OF THE ACT. NO COUNTER DECISION IS PLACED ON RE CORD ON BEHALF OF THE REVENUE. WE, THEREFORE, FINDING NO INFIRMITY IN THE IMPUGNED ORDER, ARE NOT ITA NO. 3415/DEL/2015 6 INCLINED TO INTERFERE WITH THE SAME. ACCORDINGLY, T HE APPEAL OF THE REVENUE DESERVES TO BE DISMISSED ON BOTH THE ISSUES. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JUNE, 2018. SD/- SD/- (H.S. SIDHU) (L.P . SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 21 ST JUNE, 2018 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI