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

ITA 3630/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5043 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 22-05-2017
• Assessment Year: 1998-1999
• Appeal Filed On: 18-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR SENIOR
• Assessee Lawyers: SHAILESH GUPTA S
• Keywords: Permanent establishment; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE HONBLE PRESIDENT, SHRI G.D. AGRAWAL AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.3630/DEL./2014 (ASSESSMENT YEAR : 1998-99) DCIT, VS. M/S. MESCO PHARMACEUTICALS LTD., CENTRAL CIRCLE 7, H 1, ZAMRUDPUR COMMUNITY CENT RE, NEW DELHI. KAILASH COLONY, NEW DELHI 110 030. (PAN : AAACM8308F) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SALIL AGGARWAL & SHAILESH GUPTA , ADVOCATES REVENUE BY : SHRI MANOJ KUMAR, SENIOR DR DATE OF HEARING : 14.08.2017 DATE OF ORDER : 23.08.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, DEPUTY COMMISSIONER OF INCOME-TAX, CENTR AL CIRCLE 7, NEW DELHI (HEREINAFTER REFERRED TO AS TH E REVENUE), BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE I MPUGNED ORDER DATED 12.03.2014 PASSED BY THE COMMISSIONER OF INCO ME-TAX (APPEALS)-XXV, NEW DELHI, FOR THE ASSESSMENT YEAR 1 998-99 ON THE GROUNDS INTER ALIA THAT :- 1. THE ORDER OF LD. CIT (A) IS NOT CORRECT IN LAW AND FACTS. ITA NO.3630/DEL./2014 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.4,30,21,774/- ON ACCOUNT OF PROFIT EARNED FROM FOREIGN OPERATIONS RECEIVED FROM PERMANENT ESTABLISHMENT IN RUSSIA. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND ANY/ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 3. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : DURING THE SCRUTINY PROCE EDINGS, ASSESSING OFFICER NOTICED FROM THE ANNUAL REPORT TH AT THE ASSESSEE COMPANY HAS EARNED PROFIT FROM FOREIGN OPERATION TO THE TUNE OF RS.4,30,21,774/- DURING THE YEAR UNDER ASSESSMENT. AO BY FURTHER NOTICING THAT THE ASSESSEE COMPANY HAS NEVER BEEN P ERMITTED BY THE RESERVE BANK OF INDIA (RBI) FOR ANY MANUFACTURING A CTIVITIES IN THE FOREIGN COUNTRY EXCEPT FOR TRADING ACTIVITIES I N RUSSIA AND GERMANY. AO PROCEEDED TO OBSERVE THAT SINCE NO MAN UFACTURING ACTIVITIES HAVE BEEN PERMITTED / CARRIED OUT IN RUS SIA AND GERMANY, THE ASSESSEE COMPANY HAS NOT INCURRED ANY EXPENSES ON ACCOUNT OF MANUFACTURING IN THOSE COUNTRIES AND THEREBY DISALL OWED THE MANUFACTURING EXPENSES MATERIAL CONSUMED BY THE ASS ESSEE DEBITED TO THE PROFIT & LOSS ACCOUNT AND MADE ADDITION THER EOF TO THE INCOME OF THE ASSESSEE. 4. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF AN APPEAL WHO HAS ALLOWED THE APPEAL. FEELING AGGR IEVED, THE ITA NO.3630/DEL./2014 3 REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF C HALLENGING THE IMPUGNED ORDER PASSED BY LD. CIT (A). 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. LD. DR FOR THE REVENUE CHALLENGING THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) RELIED UPON THE ORDER PAS SED BY AO. 7. HOWEVER, ON THE OTHER HAND, LD. AR FOR THE ASSES SEE CHALLENGING THE ASSESSMENT ORDER SUPPORTED THE IMPU GNED ORDER PASSED BY THE LD. CIT (A) ON THE GROUND THAT THE IS SUE IN CONTROVERSY HAS ALREADY BEEN DECIDED IN FAVOUR OF T HE ASSESSEE IN ASSESSEES OWN CASE IN AY 1997-98 WHICH HAS BEEN AF FIRMED BY THE TRIBUNAL VIDE ORDER DATED 05.12.2013 IN ITA NO.3323/DEL/2013. THE LD. AR FOR THE ASSESSEE FURT HER CONTENDED THAT THIS ISSUE HAS ALREADY BEEN SET AT REST BY THE HONBLE DELHI HIGH COURT IN CASE OF M/S. MIDEAST INDIA LTD. FOR AY 1998-99 IN ITA 1349/2009 ORDER DATED 15.12.2009 . 8. FROM THE GROUNDS OF APPEAL, ARGUMENTS ADDRESSED BY LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE AP PEAL AND FACTS & CIRCUMSTANCES OF THE CASE, THE SOLE QUESTION ARISES FOR DETERMINATION IN THIS CASE IS :- ITA NO.3630/DEL./2014 4 AS TO WHETHER THE PROFIT EARNED BY THE ASSESSEE TO THE TUNE OF RS.4,30,21,774/- FROM FOREIGN OPERATION IS TAXABLE IN INDIA, THE ASSESSEE COMPANY IS HAVING A FOREIGN PERMANENT ESTABLISHMENT AND HAS NOT INCURRED ANY EXPENSES ON THE MANUFACTURING ACTIVITIES IN RUSSIA AND GERMANY? 9. UNDISPUTEDLY, THE ISSUE IN CONTROVERSY RAISED IN PRESENT APPEAL BY THE REVENUE HAS ALREADY BEEN SET AT REST BY THE HONBLE DELHI HIGH COURT IN CASE OF M/S. MIDEAST INDIA LTD. FOR AY 1998- 99, WHICH HAS FURTHER BEEN FOLLOWED BY THE COORDINA TE BENCH OF THE TRIBUNAL IN ITA NO.3323/DEL/2013 ORDER DATED 05.12. 2013 IN ASSESSEES OWN CASE FOR AY 1997-98. FOR FACILITY O F REFERENCE, FINDINGS RETURNED BY THE COORDINATE BENCH OF THE TR IBUNAL BY RELYING UPON THE ORDER PASSED BY HONBLE DELHI HIGH COURT IN CASE OF M/S. MIDEAST INDIA LTD. (SUPRA) ARE REPRODUCED AS UNDER :- 6. HAVING CONSIDERED THE MATTER, WE FIND THAT THE HON'BLE DELHI HIGH COURT IN THE CASE OF MIDEAST IND IA LTD. FOR ASSESSMENT YEAR 1998-99 HAS HELD AS FOLLOW S:- 'ITA NO.1349/2009 IN THE DETAILED ORDER PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, ALL ASPECTS OF THE MATTER ARE DULY CONSIDERED, HOLDING THAT THE APPELLANT, WHICH IS PERMANENT ESTABLISHMENT IN USSR (SINCE THE CASE RELATES TO THE YEAR 1991) AND THE INCOME EARNED BY THE ASSESSEE COMPANY IN USSR WOULD NOT BE TAXABLE IN INDIA BY VIRTUE 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 ASSESSMENT YEAR. FURTHER FINDING OF FACT, WHICH IS NOTICED IS THAT THE TRIBUNAL HAD DECIDED THE SIMILAR ISSUE IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEARS 1991- ITA NO.3630/DEL./2014 5 92, 1992-93 & 1993-94. THOUGH THE DEPARTMENT HAD FILED REFERENCE PETITIONS AGAINST THAT DECISION OF THE TRIBUNAL, LEARNED COUNSEL FOR THE ASSESSEE INFORMS US THAT THOSE REFERENCES WERE RETURNED UNANSWERED BY THIS COURT. WE ALSO FIND THAT THE TRIBUNAL HAS RELIED UPON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF PAVL KULANDAGAN CHETTIAR VS. ITO, [267 ITR 654 J. THEREFORE, NO SUBSTANTIAL QUESTION OF LAW ARISES IN THIS APPEAL, WHICH IS ACCORDINGLY DISMISSED. SD/- A.K. SIKRI, J. SD/- SIDDHARTH MRIDUL, J.' 10. SO, FOLLOWING THE DECISION RENDERED BY THE COOR DINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 1997- 98, NO DISPUTE LEFT TO BE ADJUDICATED AND AS SUCH, INCOME EARNED B Y THE ASSESSEE COMPANY IN USSR IS NOT TAXABLE IN INDIA UNDER SECTI ON 7 OF INDO- USSR DOUBLE TAXATION AVOIDANCE ACT (DTAA). SO, IN THESE CIRCUMSTANCES, WE FIND NO ILLEGALITY OR PERVERSITY IN THE IMPUGNED ORDER PASSED BY THE LD. CIT (A), HENCE PRESENT APPE AL FILED BY THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 23 RD DAY OF AUGUST, 2017. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH) PRESIDENT JUDICIAL MEMBER DATED THE 23 RD DAY OF AUGUST, 2017 TS ITA NO.3630/DEL./2014 6 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-1, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.