Mott MacDonald Ltd., JHANSI V. CIT, BIKANER

ITA 4/JODH/2009

• Counselvise Citation: 423314 RSA 2009
• Duration Of Justice: 5 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-01-2014
• Assessment Year: 1996-1997
• Appeal Filed On: 06-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: S K AGARWAL
• Keywords: Double taxation relief; Opportunity of being heard; Permanent establishment; Advance ruling
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL: JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 04/JODH/2009 (A.Y. 1996-97) M/S. MOTT MACDONALD LTD., VS ACIT, CIRCLE-2, C/O M/S. SKA & ASSOCIATES, BIKANER. 352, SADAR BAZAR, JHANSI GIR/PAN NO. M-1/JCIT (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.K. AGARWAL DEPARTMENT BY : SHRI N.A. JOSHI- DR. DATE OF HEARING : 07/01/2014. DATE OF PRONOUNCEMENT : 26/02/2014. O R D E R PER HARI OM MARATHA, J.M.: THIS APPEAL OF THE ASSESSEE-COMPANY FOR A.Y. 1996- 97 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), BIKANER, DATED 14/ 10/2008. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A FOREIGN COMPANY HAVING ITS REGISTERED OFFICE IN UNI TED KINGDOM (UK). THE ASSESSEE ENTERED INTO AN AGREEMENT WITH COMMAND AREA DEVELOPMENT (CAD) AND WATER UTILIZATION DEPARTMENT (WUD) OF THE GOVERNMENT OF RAJASTHAN TO PROVIDE CONSULTANCY REGA RDING INDIRA 2 GANDHI NAHAR PARIYOJNA (IGNP) STUDIES. THE CAD REC EIVED FUNDS FROM INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA), WHICH IS A FINANCIAL WING OF WORLD BANK TOWARDS THE COST OF AGRICULTURE DEVEL OPMENT PROJECT IN RAJASTHAN. FOR A.Y. 1996-97, THE ASSESSEE-COMPANY FILED ITS RETURN OF INCOME (ROI) ON 06/02/1997 DECLARING TOTAL INCOME O F RS. 1,37,33,023/-. AS AGAINST DECLARED TOTAL INCOM E, THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE I.T. ACT, 1961 (HER EINAFTER REFERRED TO AS THE ACT IN SHORT) ON 31.12.1998 AT A TOTAL INC OME OF RS. 1,95,34,902/-. FEELING AGGRIEVED THE ASSESSEE PREFERRED FIRST APPEAL AND THE LD. CIT(A), JAIPUR VIDE ORDER DATED 17.1.2007, GAVE A PART RELIEF TO THE ASSESSEE-COMPANY. THE ASSESSEE BEING NOT SATISFIED, WENT IN SECOND APPEAL AND THE APPELLATE TRIBUNAL (A T) VIDE THEIR ORDER DATED 26.5.2006, HAS SET ASIDE THE MATTER TO THE FI LE OF THE A.O. ON VARIOUS POINTS. BEFORE THE TRIBUNAL, ASSESSEE-COMP ANY HAD RAISED SOME ADDITIONAL GROUNDS, WHICH BEING LEGAL GROUND S WERE ADMITTED AND TAKEN ON BOARD. THESE ADDITIONAL GROUNDS WERE SENT BACK FOR CONSIDERATION TO THE FILE OF ASSESSING OFFICER IN O RDER TO SETTLED THOSE ISSUES FOR GOOD, HOWEVER, THE FACTS PERTAINING TO T HEM WERE AVAILABLE ON RECORD. 3. THE ORIGINAL ASSESSMENT DATED 31/12/1998 HAD BEE N COMPLETED UNDER THE PROVISIONS OF SUB-SECTION (3) OF SECTION 115 OF THE ACT. IN 3 FACT, THE ASSESSEE-COMPANY HAD RECEIVED 2,50,915 ST ERLING POUNDS (EQUIVALENT TO INR 1,37,33,023/-). THE APPELLANT-C OMPANY ALSO RECEIVED A SUM OF RS. 58,01,879/- IN THE INDIAN CUR RENCY TOWARDS REIMBURSEMENT OF EXPENSES ALLEGEDLY INCURRED BY THE ASSESSEE. AS PER THE ASSESSEE-COMPANY, A SUM OF RS. 58,01,879/- HAD BEEN PAID BY IT WHICH INCLUDED SUM OF RS. 20,16,150/-, ALLEGEDLY, P AID TO ASSOCIATE CONSULTANTS M/S. DALAL CONSULTANTS & ENGINEERS, AHM EDABAD AND THE BALANCE AMOUNT HAD BEEN PAID TOWARDS ADMINISTRATIO N-EXPENSES AND TOWARDS PROCUREMENT OF ASSETS WHICH WERE TO BE TRAN SFERRED TO CAD. AFTER COMPLETION OF PROJECT, AS PER CLAUSE 3.11 AT PAGE 11 OF THE AGREEMENT, THE CAD HAD PAID 15% OF INCOME TAX OUT O F THE PAYMENT MADE TO THE ASSESSEE IN FOREIGN CURRENCY AND DEDUCT ED 5% TAX OUT OF THE PAYMENT MADE IN INDIAN CURRENCY. HOWEVER, THE ASSESSEE- COMPANY HAS TREATED THE ENTIRE AMOUNT OF RS. 58,01, 879/- AS REIMBURSEMENT OF EXPENSES AND THEREFORE, HAS TREATE D THE SAME AS NON-TAXABLE. THEREFORE, THE ASSESSEE-COMPANY CLAIM ED REFUND OF THE TDS QUA RECEIPT OF INDIAN CURRENCY. HOWEVER, THE A SSESSING OFFICER WAS NOT AGREEABLE AND HAS ADDED THE ENTIRE AMOUNT O F RS. 58,01,879/- IN THE TOTAL INCOME OF THE ASSESSEE OF THIS YEAR. 4. AFTER HEARING RIVAL SUBMISSIONS, THE APPELLATE TRIBUNAL RESTORED THIS ISSUE WITH A VIEW TO ASCERTAIN IF THE ASSESSEE COMPANY HAS A 4 PERMANENT ESTABLISHMENT (PE) IN INDIA OR NOT. THE ENTIRE APPEAL WAS RESTORE ONLY ON THIS POINT TO THE FILE OF THE ASSES SING OFFICER. HOWEVER, AFTER COMPLIANCE OF THE T.O. THE ASSESSING OFFICER HAS REPEATED THE ORIGINAL ADDITIONS. 5. IN THE SECOND ROUND BEFORE THE LD. CIT(A), BIKAN ER, HAS DISMISSED THE ASSESSEES APPEAL VIDE ORDER DATED 14/10/2008. THE APPELLANT- COMPANY HAS COME IN APPEAL BEFORE THE APPELLATE TRI BUNAL IN THE SECOND ROUND. THE FOLLOWING GROUNDS HAVE BEEN RAIS ED BEFORE US:- 1. THE LD. CIT(A), BIKANER HAS GROSSLY ERRED IN LA W BY COMPLETELY IGNORING THE PROVISIONS OF SECTION. 245S OF THE INC OME TAX ACT, 1961 AND CONFIRMING THE ADDITION OF RS. 58,01,879/- ON THE BASIS OF ORDER GIVEN BY AUTHORITY OF ADVANCE RULING. 2. THE LD. CIT(A), BIKANER HAS GROSSLY ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF CASE BY COMPLETELY MISINTERPRE TING THE VARIOUS CLAUSES AND SUB-CLAUSES OF THE AGREEMENT WH ICH WAS ENTERED INTO BETWEEN THE ASSESSEE AND COMMAND AREA DVELOPMENT (CAD) AND TREATING THE REIMBURSEMENT OF EXPENSES HAS INCOME OF ASSESSEE. 3. THE LD. CIT(A), BIKANER HAS GROSSLY ERRED IN LAW BY IGNORING THE PROVISIONS OF SECTION 160 TO 163 AND SECTION 195 TO 201 OF ACT. 4. THE LD. CIT(A), BIKANER HAS GROSSLY ERRED IN LAW IN UPHOLDING THE APPLICATION OF INTEREST U/S 234B & 23 4C OF THE ACT, IGNORING THE FACT THAT WHEN THE ENTIRE TAX LIABILIT Y WAS DEDUCTIBLE AT SOURCE AS PER THE PROVISIONS OF SECTION. 195 THE N THERE WAS NO LIABILITY TO PAY ADVANCE TAX IN THE RELEVANT PREVIO US YEAR, HENCE, THERE WAS NO QUESTION OF INTEREST U/S 234B & 234C O F THE ACT. 5 5. THE APPELLANT SEEKS PERMISSION TO ADDITIONAL OR MODIFY ANY GROUNDS OF APPEAL AS THE CIRCUMSTANCES OF THE CASE MIGHT REQUIRE TO JUSTIFY. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE ALSO GO NE THROUGH THE WRITTEN SUBMISSIONS AS WELL AS PAPER BOOK FILED BEF ORE US. WE HAVE ALSO TREADED THROUGH THE ORDER OF THE APPELLATE TRI BUNAL PASSED IN THE FIRST ROUND. 7. REGARDING GROUND NO1 OF THE APPEAL, IT WAS ARGUE D BY THE LEARNED A.R. SHRI AGARWAL, THAT THE AUTHORITIES HAVE NOT DE CIDED THE ISSUE RAISED UNDER SECTIN145S OF THE ACT. IT WAS ARGUED THAT THE TRIBUNAL IN THE FIRST ROUND HAS DISCUSSED ON THIS ISSUE IN THEI R ORDER IN PARA 8 AT PAGE 6 AND HAS EXPRESSED THEIR OPINION THAT THE NAT URE OF ACTIVITIES CARRIED ON REGULARLY AND CONTINUOUSLY IN A SYSTEMIC MANNER BY THE ASSESSEE-COMPANY WITH THE HELP OF LABOUR AND SKILL EMPLOYEES WITH A VIEW TO EARN INCOME WILL PARTAKE THE CHARACTER OF BUSINESS. IT HAS FURTHER BEEN OBSERVED THAT IF THE ASSESSEE COMPANY DOES NOT HAVE A PE IN INDIA, THE ASSESSEE WILL BE ENTITLED TO THE BENE FIT OF ARTICLE 7 OF DTAA BETWEEN INDIAN AND UNITED KINGDOM. IT WAS ARG UED THAT THE HON'BLE TRIBUNAL HAS MENTIONED THAT NO SHRED OF PR OOF REGARDING PE AS TO WHETHER THE ASSESSEE COMPANY IS IN INDIA OR NOT IS FOUND TO HAVE BROUGHT ON RECORD. THEREFORE, THE TRIBUNAL HAD SE T ASIDE THE ISSUE TO 6 EXAMINE THE CORRECTNESS OF THE CLAIM AS TO WHETHER THE ASSESSEE- COMPANY DOES NOT HAVE A PE IN INDIA. IT WAS FURTHE R ARGUED THAT IN A.YS. 1997-98 TO 1999-2000, THE ASSESSING OFFICER H IMSELF HAS COME TO THE CONCLUSION THAT THE ASSESSEE COMPANY DOES NOT H AVE ANY PE IN INDIA. IN RESPECT OF THIS CONTENTION, COPIES OF ASS ESSMENT ORDERS PERTAINING TO THESE ASSESSMENT YEARS HAVE BEEN FILE D ON RECORD. IT WAS ARGUED THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY FINDING ON THIS MATERIAL ASPECT WHICH ITSELF CAN ESTABLISH THAT THE CONTENTION AND CLAIM OF THE ASSESSEE THAT IT DOES NOT HAVE ANY PE IN INDIA IS CORRECT. IT WAS STATED THAT INSTEAD THE ASSESSING OFFICER HA S DISCUSSED THE ISSUE REGARDING THE NATURE OF TECHNICAL SERVICES AND RATE OF TAX THEREON IN THE LIGHT OF PROVISIONS OF SECTION 44BB/44D/115A AN D ARTICLES 7, 13 & 26 OF THE DTAA BETWEEN INDIA AND UNITED KINGDOM AND HAS COME TO THE SAME CONCLUSION AS WAS TAKEN ORIGINALLY. IT WAS SU BMITTED THAT THE ASSESSEE COMPANY HAS NEVER DISPUTED THE RATE OF TAX ATION BUT FROM THE VERY BEGINNING IT HAS BEEN OBJECTING TO CHARGE TAX ON THIS AMOUNT. LD. A.R. ARGUED THAT THE AUTHORITY OF ADVANCE RULIN G ON WHICH THE ASSESSING OFFICER HAS RELIED IS NOT APPLICABLE TO T HE FACTS OF THE CASE. HE HAS SUBMITTED THAT THE PROVISIONS OF SECTION 245 S OF THE ACT THAT A AUTHORITY OF ADVANCE RULING AS PER SECTION 245R BIN DS ONLY ON THE APPLICANT, WHO HAD SOUGHT THIS RULING OR TO THE TRA NSACTION IN RELATION 7 TO WHICH THE RULING IS SOUGHT AND ON THE COMMISSION ER AND THE INCOME TAX AUTHORITY SUBORDINATE TO HIM IN RESPECT OF APPL ICANT AND THE SAID TRANSACTION. IT WAS ARGUED THAT IT IS CLEAR FROM P LAIN READING OF SECTION 245S OF THE ACT, THE ADVANCE RULING ON THE BASIS OF WHICH THE ASSESSING OFFICER HAS GIVEN HIS FINDING IS BINDING ON THE ASS ESSEE, HENCE, THE CLAIM OF THE ASSESSEE HAS TO BE ACCEPTED AS PER THE ORDER OF THE APPELLATE TRIBUNAL GIVEN IN THE FIRST ROUND. 8. PER CONTRA , LD. D.R. HAS VOCIFEROUSLY SUPPORTED THE FINDINGS OF THE AUTHORITIES BELOW AND HAS REITERATED ALL THE RE ASONS GIVEN TO DENY THE CLAIM AND TO REFUTE THE CONTENTIONS OF THE ASSE SSEE BOTH BY THE ASSESSING OFFICER AND THE LD. CIT(A). 9. AFTER CONSIDERING THE SUBMISSIONS, WE HAVE FOUND THAT IN THE FIRST ROUND, THE TRIBUNAL HAS ACCEPTED AND GIVEN A FINDIN G THAT THE NATURE OF ACTIVITIES CARRIED ON CONTINUOUSLY AND SYSTEMATICAL LY BY THE ASSESSEE WOULD PARTAKE A CHARACTER OF BUSINESS, IN CASE IT IS FOUND IT DOES NOT HAVE ITS PE IN INDIA AND WOULD BE ENTITLED TO BENEF IT OF ARTICLE 7 OF DTAA IN QUESTION. FOR THE READY REFERENCE, WE INCO RPORATE PARA 8 (AT PAGE 6) OF THE APPELLATE TRIBUNALS ORDER DATED 26/ 05/2006 HEREIN AS BELOW:- 8. AFTER CONSIDERING THE ARGUMENTS ADVANCE BY THE PARTIES AND HAVING GONE THROUGH THE ORDERS OF THE LOWER AUT HORITIES, 8 MATERIAL AVAILABLE ON RECORD AS WELL AS THE DECISIO N RELIED ON BY THE LD. A/R IN THE CASE OF BARENDRA PRASAD ROAY VS. ITO (SUPRA), WE ARE OF THE VIEW THAT THE NATURE OF ACTIVITY CARR IED ON CONTINUOUSLY AND SYSTEMATICALLY BY THE ASSESSEE BY APPLICATION OF ITS LABOUR AND SKILL WITH A VIEW TO EARNING INCOME WILL PART THE CHARACTER OF BUSINESS AND THUS IF IT IS NOT HAVING A PERMANENT ESTABLISHMENT IN INDIA, THE ASSESSEE WOULD BE VERY MUCH ENTITLED TO TAKE BENEFIT OF ARTICLE 7 OF DTAA BETWEEN INDIA AND U.K. HOWEVER, AS RIGHTLY POINTED OUT BY LD. D/R, THERE I S NO EVIDENCE ON RECORD TO ESTABLISH THE CLAIM OF THE ASSESSEE THAT IT HAS NO PERMANENT ESTABLISHMENT IN INDIA. WE, THUS, IN THE INTEREST OF JUSTICE REMAND THE MATTER TO THE FILE OF THE A.O. T O EXAMINE THE CORRECTNESS OF THIS CLAIM OF THE ASSESSEE AFTER AFF ORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND GIVE HIS FINDING ON THE ISSUE ACCORDINGLY. ADDITIONAL GROUND NO.1 IS, T HUS PARTLY ALLOWED. 10. SINCE THE VIEW TAKEN BY THIS VERY BENCH, MAY BE CONSTITUTED BY DIFFERENT MEMBERS, IS TO BE TREATED IN CONTINUITY A ND BY MAINTAINING CONSISTENCY, WE ARE OF THE CONSIDERED OPINION THAT THE MATTER WAS REMANDED ONLY WITH A VIEW TO ASCERTAIN AS TO WHETHE R THE APPELLANT COMPANY HAS A PE IN INDIA OR NOT? THIS FACT, WHETH ER THE ASSESSEE HAS DOES NOT ANY PE IN INDIA STAND ESTABLISHED FROM THE ORDERS OF ASSESSING OFFICER HIMSELF RENDERED IN ASSESSMENT YEAR 1997-98 TO 1999-2000. WE HAVE GONE THOUGH THESE ORDERS AND ARE VERILY SATISF IED WITH THE FACT THAT THE ASSESSEE COMPANY DOES NOT HAVE ITS PE IN I NDIA. THE REVENUE HAS NOWHERE DISPUTED THIS FACT AND EVEN BEFORE US, IT WAS NOT DISPUTED. IT IS ALSO TRUE THAT IN THE SET ASIDE AS SESSMENT ORDER, NEITHER ASSESSING OFFICER NOR LD. CIT(A) HAS DISCUSSED THIS ASPECT RAISED BY THE 9 APPELLANT COMPANY. BE THAT AS IT MAY, THE ASSESSIN G OFFICER WAS DIRECTED TO INVESTIGATE AND VERIFY THE LIMITED QUES TION REGARDING EXISTENCE OF PE OF THE APPELLANT COMPANY IN INDIA A ND NOTHING MORE. THE JURISDICTION OF THE ASSESSING OFFICER WAS CIRCU MSCRIBED BY THE DIRECTIONS GIVEN BY THE APPELLATE TRIBUNAL. THE AS SESSING OFFICER WAS DUTY BOUND TO COMPLETE THE SET ASIDE ASSESSMENT BY SCRUPULOUSLY FOLLOWING THE DIRECTIONS OF THE TRIBUNAL. SINCE TH E ASSESSING OFFICER HAS NOT ADHERED TO ABOVE MENTIONED DIRECTIONS AND H AS GONE BEYOND THE PRESCRIBED LIMITS, HE HAS FLOUTED THE JUDICIAL DISCIPLINE. WE FIND SUPPORT FROM THE DECISIONS RENDERED IN THE CASES OF BANK OF BARODA VS. H.C. SHRIVASTAVA REPORTED IN 256 ITR 385 (BOMBABY H IGH COURT ); ORISSA CERAMIC SALES VS. ITO REPRTED IN 145 ITR 464 (ORISSA HIGH COURT) AND BASUDEV PRASAD AGARWALA VS. ITO REPORTED IN 180 ITR 388 (CALCUTTA HIGH COURT), INTER ALIA. IN VIEW OF THE FOREGOING DISCUSSION, W E ARE LEFT WITH NO OTHER OPTION, BUT TO ALLOW GROUND NO.1 OF T HIS APPEAL. 11. NOW COMING TO THE GROUND NOS. 2 & 3 OF THIS APP EAL. WE HAVE NOTED THAT THE FACTS RELATING TO THEM ARE THAT IN I NDIA AS HAVING DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) WITH UNITED KIN GDOM (UK) AND AS PER SECTION 90(2) OF THE ACT WHERE DTAA APPLIES, THE PROVISIONS OF THE ACT SHALL APPLY TO THE EXTENT THEY ARE MORE BEN EFICIAL TO THE 10 ASSESSEE. THE ABOVE FACTS WERE SUPPORTED BY THE AP PELLANT COMPANY WITH THE HELP OF RATIO LAID DOWN BY THE OF HON'BLE APEX COURT RENDERED IN THE CASE OF CIT VS. P.V.AL. KULANDAGAN CHETTIAR (2004) 267 ITR 654 WHEREIN IT HAS BEEN HELD THAT THE PROVISIONS OF DTA A WOULD PREVAIL OVER PROVISIONS OF INCOME-TAX ACT. THE APPELLANT H AS FURTHER RELIED ON THE DECISION OF HON'BLE SUPREME COURT RENDERED IN T HE CASE OF UNION OF INDIA & ANOTHER VS. AZADI BACHAO ANDOLAN, 263 ITR 7 06 WHEREIN IT HAS BEEN HELD THAT THE PROVISIONS OF DTAA WITH RESPECT TO THE CASES TO WHICH THEY APPLY WOULD OPERATE EVEN IF IT IS INCONS ISTENT WITH THE PROVISIONS OF INCOME-TAX ACT. AS PER ARTICLE 7 OF DTAA BETWEEN INDIA AND UNITED KINGDOM, THE PROFITS OF AN ENTERPRISE OF A CONTRACTING STATE SHALL BE TAXABLE ONLY ON THAT STATE UNLESS THE ENTE RPRISE CARRIES ON BUSINESS IN THE OTHER CONTRACTING STATE THROUGH ITS PE. IF THE PROFITS OF THE ENTERPRISE ARE TAXED IN THE OTHER STATE BUT ONL Y TO THE EXTENT AS IT IS DIRECTLY OR INDIRECTLY ATTRIBUTABLE TO THAT PE I N INDIA CANNOT BE SUBJECTED TO TAX UNDER THE INDIAN TAX LAWS. IN THA T BACK GROUND ONLY, THE TRIBUNAL HAS DIRECTED THE ASSESSING OFFICER TO ESTABLISH WHETHER THE ASSESSEE COMPANY WAS HAVING PE IN INDIA OR NOT. THERE ARE TWO SETS OF SECTIONS UNDER INCOME TAX ACT WHICH DEALS W ITH THE ASSESSMENT OF A NON-RESIDENT CORPORATE ASSESSEE NOT HAVING PE IN INDIA. ONE SET IS COVERED UNDER SECTIONS 162 & 163 OF THE ACT AND THE OTHER UNDER 11 SECTIONS 195 TO 201. BOTH THESE SETS OF PROVISIONS ARE MUTUALLY EXCLUSIVE AND INDEPENDENT. IN CASE OF A NON-RESIDE NT CORPORATE, THE ASSESSEE IS TO BE TAXED IN INDIA THEN SECTIONS 162 &163 OF THE ACT HAVE TO BE INVOKED BECAUSE A NON-RESIDENT ASSESSEE CAN B E TAXED IN THIS COUNTRY ONLY IN A REPRESENTATIVE CAPACITY AND IN TH AT EVENTUALITY, TDS CANNOT BE DEDUCTED UNDER SECTION 195 OF THE ACT OUT OF THE PAYMENTS MADE TO NON-RESIDENT CORPORATE ASSESSEE. IN CASE T DS HAS TO BE DEDUCTED QUA PAYMENTS MADE TO NON-RESIDENT CORPORAT E ASSESSEE THEN RECOURSE HAS TO BE TAKEN UNDER SECTIONS 195 TO 201 OF THE ACT. IN THIS CASE TAX HAD BEEN DEDUCTED AS PER THE REVENUE BY MI STAKE, THEN SECTION 201 OF THE ACT WILL COME INTO PLAY AND THE ASSESSEE CANNOT BE SUBJECTED TO TAX BY MAKING ASSESSMENT UNDER SECTION 143(3) OF THE ACT. THEREFORE, BY KEEPING IN MIND THE PROVISIONS OF SEC TIONS 162, 163 & 195 TO 201 OF THE ACT VIS--VIS THE PROVISIONS AND ARTICLES OF THE DTAA, THE CONTRACT-OF-CONSULTANCY-AGREEMENT HAS BEEN PROV IDED IN CLAUSE 1.9 SPECIFICALLY, TO AVOID ANY KIND OF DISPUTE IN FUTUR E. IN THIS REGARD, THE TRIBUNAL HAS OBSERVED IN FIRST ROUND AS UNDER:- AFTER HAVING CAREFULLY GONE THOUGH THESE IMPORTAN T CLAUSES OF THE AGREEMENT, WE PRIMA FACIE FIND SUBSTANCE IN THE CONTENTION OF THE ASSESSEE THAT THE PAYMENT RELATED TO THE SUB-CO NSULTANTS AND OTHER EXPENDITURE CAN BE TREATED AS REIMBURSEMENT O F EXPENSE. HOWEVER, IT NEEDS FURTHER VERIFICATION FROM THE CAD TO EXAMINE THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. WE T HUS, IN THE INTEREST OF JUSTICE REMAND THE MATTER TO THE FILE O F THE AO TO EXAMINE THE CORRECTNESS OF THE CLAIM AFRESH FROM TH E RECORD OF THE 12 CAD AS WELL AND DECIDE THE MATTER ACCORDINGLY AFTER AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . THE ORDER OF THE LOWER AUTHORITIES ARE, THUS SET ASIDE. 12. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE HAV E FOUND THAT THE AGREEMENT BETWEEN CAD AND THE ASSESSEE WAS EXECUTED IN THE YEAR 1995 AND SEPARATE AGREEMENT WAS EXECUTED BETWEEN CA D AND M/S. DALAL CONSULTANTS & ENGINEERS LTD. ON 01/06/2000. BUT, TILL THE DATE OF EXECUTION OF SEPARATE AGREEMENT BETWEEN CAD & M/S. DALAL CONSULTANTS & ENGINEERS LTD. ANY PAYMENT WAS MADE T O M/S. DALAL CONSULTANTS & ENGINEERS LTD. IT WAS MADE THROUGH TH IS ASSESSEE COMPANY. THE TRIBUNAL HAS DISCUSSED THIS ISSUE IN FIRST ROUND AT PAGES 11 & 12 OF ITS ORDER. AS PER CLAUSE 1.1(B) OF THE AGREEMENT, THE DEFINITION OF ASSOCIATED CONSULTANTS HAS BEEN PRO VIDED WHERE THE NAME OF M/S. DALAL CONSULTANTS & ENGINEERS LTD. IS MENTIONED. ONE CAN EASILY INFER THE INTENTION OF THE CAD THAT BEFO RE EXECUTION OF SEPARATE AGREEMENT, THE STATUS OF M/S. DALAL CONSUL TANTS & ENGINEERS LTD. WAS THAT OF ASSOCIATE CONSULTANTS AND AFTER ITS EXECUTION, ITS STATUS IS CHANGED TO SUB-CONSULTANTS OUT OF THE PAY MENTS @ 5% AND AGAIN ASSESSEE COMPANY DEDUCED TAX WHEN THE SAME PA YMENT WAS MADE TO THE M/S. DALAL CONSULTANTS & ENGINEERS LTD. TO ANSWER SUCH A SITUATION, A SEPARATE AGREEMENT WAS EXECUTED ON 01/ 06/2000 AND CAD STARTED MAKING PAYMENT DIRECTLY TO M/S. DALAL CONSU LTANTS & ENGINEERS 13 LTD. THESE FACTS ARE FOUND TO BE NOT CONTESTED BY THE REVENUE. THE ASSOCIATE CONSULTANTS WERE ALSO PARTY TO THIS AGREE MENT. IT BECOMES VERY CLEAR THAT BEFORE EXECUTION OF THIS AGREEMENT ALL THE PAYMENTS MADE TO M/S. DALAL CONSULTANTS & ENGINEERS LTD. WER E MADE THROUGH THE ASSESSEE AS PER CLAUSE 1.9 OF THE AGREEMENT, WH ICH IS REPRODUCED AS UNDER:- THE CLIENT WARRANTS THAT THE CLIENT SHALL PAY ON BEHALF OF THE CONSULTANTS AND THE PERSONNEL ANY TAXES, DUTIES, FE ES, LEVIES AND OTHER IMPOSITIONS IMPOSED, UNDER THE APPLICABLE LAW, ON T HE CONSULTANTS AND THE PERSONNEL IN RESPECT OF: (A) ANY PAYMENT WHATSOEVER MADE TO CONSULTANTS, ASSOCI ATED CONSULTANTS, SUB-CONSULTANTS AND THE PERSONAL OF AN Y OF THEM (OTHER THAN NATIONALS OF THE GOVT. OR PERMANENT RESIDENTS OF THE GOVERNMENTS COUNTRY), IN CONNECTION WITH THE CARRY ING OUT OF THE SERVICES. IT IS ALSO FOUND FROM THE RECORD THAT ALL THE PAYM ENTS MADE TOWARDS THE CIVIL WORKS WERE MADE THROUGH THE ASSES SEE AND THE SAME CANNOT BE ADDED TO THE ASSESSEES INCOME. SINCE WE HAVE ALREADY HELD THAT THE APPELLANT COMPANY DOES NOT HAVE ITS PE, TH EREFORE, GROUNDS NOS. 2 & 3 HAVE TO BE ANSWERED IN FAVOUR OF THE ASS ESSEE. 12. GROUND NO.4 OF THIS APPEAL IS REGARDING CHARGIN G OF INTEREST UNDER SECTION 234A & 234B & 234C OF THE ACT. CHARGING O F INTEREST UNDER OR ABOVE SECTIONS IS NOW MANDATORY. HOWEVER, THE ASSE SSEE IS ENTITLED TO CONSEQUENTIAL RELIEF. THEREFORE, THIS GROUND CANNOT BE ALLOWED. 14 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH FEBRUARY, 2014. SD/- SD/- [N.K. SAINI] [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 26 TH FEBRUARY, 2014. VR/- COPY TO : 1. THE APPELLANT 2. THE RESPONDENT BY ORDER 3. THE CIT 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR ITAT, JODHPUR