DCIT, New Delhi V. M/s. Convergys Customer Management Group Inc., Gurgaon

ITA 3418/DEL/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5680 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2008-2009
• Appeal Filed On: 28-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMAN CHAWLA
• Keywords: Permanent establishment; Question of law
• Section: 143(3); 27

Judgement Text

1 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 I.T.A. NO. 3418/DEL/2015 A.Y. : 2008-09 DCIT, CIRCLE 1(2)(1), INTERNATIONAL TAXATION, ROOM NO. 409, E-2 BLOCK 4 TH FLOOR, CIVIC CENTRE, NEAR MINTRO ROAD, NEW DELHI VS. M/S CONVERGYS CUSTOMER MANAGEMENT GROUP INC., C/O PRICEWATERHOUSE- COOPERS PVT. LTD., BUILDING NO. 10, 17 TH FLOOR, TOWER-C, DLY CYBER CITY, GURGAON-122002 HARYANA (PAN: AACCC8989M ) (ASSESSEE) (RESPONDENT) REVENUE BY : SH. RAMAN CHAWLA, CIT(DR) ASSESSEE BY : SH. RAVI SHARMA, ADV. ORDER PER H.S. SIDHU : JM THE REVENUE HAS FILED THIS APPEAL AGAINST THE IMPUGN ED ORDER OF THE LD. CIT(A)-42, NEW DELHI RELEVANT TO ASSESSME NT YEAR 2008-09. 2. THE GROUNDS RAISED READ AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN 2 QUASHING / DELETING THE PENALTY U/S. 271(1)(C) & 271AA OF THE I.T. ACT. 2. THE APPELLANT CRAVES TO ADD, AMEND, MODIFY, OR ALTER ANY GROUNDS OF APPEAL AT THE TIME OR BEFORE THE HEARING OF THE APPEAL. 3. LD. COUNSEL OF THE ASSESSEE AT THE OUTSET SUBMITTED THAT THE GROUND RAISED BY THE REVENUE RELATES TO THE ORDER OF T HE LD. CIT(A) IN QUASHING / DELETING THE PENALTY U/S. 271(1)(C) AN D 271AA OF THE I.T. ACT. HE FURTHER SUBMITTED THAT LD. CIT(A) HAS PASS ED A CONSOLIDATED ORDER FOR DELETING THE PENALTIES LEVIE D BY THE AO U/S. 271(1)(C) AND 271AA OF THE I.T. ACT. HOWEVER, THE R EVENUE HAS FILED A SEPARATE APPEAL BEFORE THE TRIBUNAL VIDE ITA NO. 3530/DEL/2015 CHALLENGING THE DELETION OF PENALTY LE VIED U/S. 271AA. THEREFORE, THIS APPEAL SHOULD BE CONFINED TO THE DELETION OF PENALTY U/S. 271(1)(C) OF THE I.T. ACT. HE FURTHER SUBMITTED THAT ON IDENTICAL FACTS AND CIRCUMSTANCES IN ASSESSEES CAS E FOR THE ASSESSMENT YEAR 2006-07 THE TRIBUNAL VIDE ORDER DATED 23.2.2018 IN ITA NO. 3417/DEL/2015 HAS DISMISSED THE APPEAL O F THE REVENUE, HENCE, THE ISSUE INVOLVED IN THE PRESENT A PPEAL IS SQUARELY COVERED BY THE AFORESAID DECISION AND THEREFORE, RES PECTFULLY 3 FOLLOWING THE AFORESAID PRECEDENT, THE APPEAL OF THE R EVENUE MAY BE DISMISSED. 3.1 LD. COUNSEL OF THE ASSESSEE ALSO SUBMITTED THAT ASS ESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 SHOWING INCOME OF RS. 37,93,300/-. THE ASSESSMENT ORDER U /S. 143(3) OF THE I.T. ACT, 1961 WAS PASSED ON 29.12.2008 AT AN INCO ME OF RS. 507,114,396/-. THE ADDITIONS WERE MADE ON ACCOUNT OF PROFITS ATTRIBUTABLE TO PE RS. 455,171,917/- AND IPLC CHARGES (TAXABLE@10%) RS. 4,81,48,179/-. 4. THE TRIBUNAL DECIDED THE ASSESSEES APPEAL VIDE O RDER DATED 10.5.2013 IN ITA NO. 5243/DEL/2011 IN WHICH ITAT UP HELD THAT ASSESSEE HAS A PERMANENT ESTABLISHMENT (PE) IN INDI A. THIS PE IS IN THE FORM OF FIXED PLACE PE. THE TRIBUNAL ATTRIBUTED 1 5% PROFITS GENERATED BY THE ASSESSEE TO THE INDIAN PE. ON THE THI RD ISSUE OF TAXABILITY OF IPLC CHARGES AS EQUIPMENT ROYALTY THE PA YMENT IS CONSIDERED NOT TAXABLE IN THE HANDS OF THE ASSESSEE. 5. REFERRING TO THE APPEAL FILED BY THE ASSESSEE BEFO RE THE HONBLE DELHI HIGH COURT AND VICE VERSA AGAINST THE ORDER OF THE TRIBUNAL, LD. COUNSEL OF THE ASSESSEE DREW OUR ATTEN TION TO THE FOLLOWING QUESTIONS OF LAW THAT HAVE BEEN ADMITTED BY THE HONBLE DELHI HIGH COURT VIDE ITS ORDER DATED 04.02.2015. 4 'THE FOLLOWING QUESTIONS OF LA ARISE IN ITA NOS.3 AND 4/2014: (9) WHETHER THE INCOME TAX APPELLATE TRIBUNAL WAS CORRECT IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSEE HAD A FIXED PLACE PERMANENT ESTABLISHMENT (PE) IN TERMS OF ARTICLE 5( I ) OF THE INDO US TAX TREATY? (10) WHETHER IN VIEW OF THE NATURE OF TRANSACTION WHICH WAS PROCURING OF COMPUTER SOFTWARE (IT ENABLED SERVICES) WITHIN THE MEANING OF SECTION 1OA OF THE ACT FROM ITS INDIAN SUBSIDIARY FOR THE PURPOSES OF EXPORT ANY INCOME COULD ACCRUE OR ARISE IN THE HANDS OF THE ASSESSEE IN INDIA IN VIEW OF CLAUSE (B) OF EXPLANATION 1 OF SUB-SECTION) OF SECTION 9 OF THE ACT READ WITH ARTICLE 7(4) OF THE INDO US TAX TREATY? THE FOLLOWING SUBSTANTIAL QUESTIONS OF LAW ARISE IN ITA NOS.679, 680 AND 681/2014: (13) DID THE ITAT ERR IN REDUCING THE QUANTUM OF PROFIT ATTRIBUTABLE TO THE 5 PERMANENT ESTABLISHMENT (PE). IN THE CIRCUMSTANCES OF THE CASE; (14) WAS THE METHOD OF CALCULATED PROFIT ADOPTED BY THE ITAT JUSTIFIED AND CORRECT; (15) WHETHER THE REVENUE IS CORRECT IN CONTENDING THAT THE PAYMENTS MADE ON ACCOUNT OF SOFTWARE EXPENSES IS ROYALTY AND WHETHER THE REVENUE IS JUSTIFIED IN ARGUING THAT THE FINDINGS OF THE ITAT OF ? LINK CHARGES? NOT BEING ROYALTY ARE JUSTIFIED. ADMIT LIST FOR HEARING ON 29 TH APRIL, 2015. 6. ALSO REFERRING TO THE DECISION OF THE HON'BLE DEL HI HIGH COURT IN THE CASE OF CIT VS. LIQUID INVESTMENT AND TRADING CO. VIDE ITA NO.240/2009 DATED 05.10.2010, HE SUBMITTED THAT THE H ON'BLE HIGH COURT IN THE SAID DECISION HAS HELD THAT WHEN SUBSTANTIA L QUESTION OF LAW IS ADMITTED BY THE HON'BLE HIGH COURT, THE ISSUE BE COMES DEBATABLE AND, THEREFORE, NO PENALTY U/S. 271(1)(C) IS LEVIABLE. HE ACCORDINGLY SUBMITTED THAT IN VIEW OF THE ABOVE LEGAL POSITION AND IN VIEW OF THE EARLIER DECISION OF THE ITAT IN ASSESSEE S CASE FOR THE 6 ASSESSMENT 2006-07, AS AFORESAID, THE PENALTY U/S 27 1(1)(C) CANNOT BE LEVIED. 7. LD. DR ON THE OTHER HAND SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 8. AFTER HEARING BOTH THE SIDES, WE FIND THE LD. CIT (A) WHILE DELETING THE PENALTY LEVIED BY THE ASSESSING OFFICER U/S 271(1)(C) HAS OBSERVED THAT THE HON'BLE HIGH COURT HAS ADMITTED THE SUBSTANTIAL QUESTION OF LAW. THEREFORE, IT IS CLEAR THAT THE ISSUE IS SUBJECT TO DIFFERENT INTERPRETATION. WE DO NOT FIND A NY INFIRMITY IN THE ORDER OF THE LD. CIT(A). AS MENTIONED EARLIER, TH E HON'BLE HIGH COURT HAS ALREADY ADMITTED THE SUBSTANTIAL QUESTION OF LA W WHICH HAS ALREADY BEEN REPRODUCED IN THE PRECEDING PARAGR APHS. THEREFORE, IN VIEW OF THE DECISION OF THE HON'BLE H IGH COURT IN THE CASE OF LIQUID INVESTMENT AND TRADING CO. (SUPRA), A CCORDING TO WHICH, PENALTY CANNOT BE LEVIED WHEN SUBSTANTIAL QUE STION OF LAW HAS BEEN FRAMED AND ADMITTED, THEREFORE, IN ABSENCE O F ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE. ALSO EXACTLY ON IDENTICAL AND SIMILAR FACTS IN ASSESSEES OWN CASE FOR THE ASS ESSMENT YEAR 2006-07 THE TRIBUNAL VIDE ORDER DATED 23.2.2018 IN I TA NO. 3417/DEL/2015 HAS DISMISSED THE APPEAL OF THE REVEN UE. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A), 7 HENCE, THE SAME IS UPHELD AND THE GROUND RAISED BY TH E REVENUE IS DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON 22/06/2018. SD/- SD/- [L.P. SAHU] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 22/06/2018 SRBHATNAGAR COPY FORWARDED TO: - 1. ASSESSEE - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHE S