DDIT, New Delhi V. M/s. Lucent Technologies International Sales Ltd., Gurgaon

ITA 4054/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65298 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 28-06-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 06-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PAWAN K UMAR CA HEARING ON
• Keywords: Permanent establishment
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE VICE-PRESIDENT AN D SHRI I.C.SUDHIR, JUDICIAL MEMBER I.T.A. NO. 4054/DEL/2011 ASSESSMENT YEAR: 2002-03 DY. DIT CIRCLE- 3 (1), M/S LUCENT TECHNOLOGIES INTERNATIONAL TAXATION VS. INT ERNATIONAL SALES LTD. C/O ROOM NO. 202, DRUM SHAPE P RICE WATER HOUSE COOPER PVT. BUILDING, I P ESTATE, NEW DELHI. LTD.., BUILDING N O. 10, TOWER-C 18 TH FLOOR DLF CYBER CITY, GURGAON, HARYANA 122002. PAN: AABCL6677Q (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SUNIL GAUTAM, SR. DR. RESPONDENT BY: SHRI PAWAN K UMAR, CA HEARING ON : 28/06/2012 ORDER PRONOUNCED ON THE DATE: 24.08.2012 ORDER PER I.C.SUDHIR, JM: THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER ON THE GROUND THAT THE LD. CIT (A) HAS ERRED IN HOLDING THAT INTEREST U/S 234 B IS NOT CHARGEABLE ON THE SHORT PAYMENT OF ADVANCE TAX BY THE ASSESSEE. 2. THE RELEVANT FACTS ARE THAT THE ASSESSEES COMPANY REGISTERED IN UNITED STATES OF AMERICA BELONGS TO ALCATEL LUCENT (ALU) G ROUP WHICH IS A LEADING MANUFACTURER OF TELECOM EQUIPMENTS IN THE W ORLD. ALU GROUP HAS A ITANO.4054/DEL/2011 2 SUBSTANTIAL PRESENCE IN INDIA. THE GROUP PROVIDES S ERVICES IN THE AREAS OF GSM AND CDMA INFRASTRUCTURE, 3G, BROADBAND, IP MULT IMEDIA SUB-SYSTEM (IMS), TRANSMISSION EQUIPMENT, DEVELOPMENT AND IMPL EMENTATION OF IN PLATFORM AND OTHER APPLICATIONS, EPABX, SPACE EQUIP MENT AND TELECOM INFRASTRUCTURE PROJECTS WITH RAILWAYS (DMRC), ROADS , DEFENCE AND AVIATION TO VARIOUS CLIENTS IN INDIA. THIS GROUP ST ARTED ITS INDIAN OPERATIONS IN THE YEAR 1982 WHEN IT ENTERED INTO AN AGREEMENT WITH INDIAN TELECOM INDUSTRIES LTD. (ITI). DURING THE YEAR UNDER CONSID ERATION, THE ASSESSEE SUPPLIED TELECOM EQUIPMENTS TO VARIOUS COMPANIES SU CH AS BHARAT SANCHAR NIGAM LTD. AND BHARTI AIRTEL LTD. ETC. ONE OF THE G ROUP ENTITY IS ALCATEL- LUCENT FRANCE WHICH IS A TAX RESIDENT OF FRANCE. TH IS ENTITY IS THE FLAGSHIP ENTITY OF ALU GROUP WHICH HAS BEEN REGULARLY FILING ITS RETURN OF INCOME IN INDIA. IN ITS RETURN OF INCOME FOR A.Y. 2006-07 THE INCOME FROM SERVICES RENDERED IN INDIA WAS OFFERED TO TAX. HOWEVER, INCO ME FROM OFFSHORE SUPPLIES MADE TO INDIAN CUSTOMERS WAS NOT OFFERED T O TAX. 3. A SURVEY U/S 133 A OF THE ACT WAS CARRIED OUT ON 22 .2.2009 AT THE OFFICE PREMISES OF ALCATEL LUCENT INDIA LTD. (INCLU DING ITS PREDECESSORS) LOCATED AT NEW DELHI AND GURGAON. BASED UPON THE DO CUMENTS FOUND, STATEMENT RECORDED DURING AND AFTER THE SURVEY AND SUBSEQUENT DISCUSSIONS, IT WAS HELD IN THE ASSESSMENT ORDER OF ALCATEL LUCENT FRANCE, FOR ASSESSMENT ITANO.4054/DEL/2011 3 YEAR 2006-07 THAT VARIOUS ALCATEL LUCENT OVERSEAS E NTITIES INCLUDING THE ASSESSEE HAD A PERMANENT ESTABLISHMENT (PE) IN INDI A. SUBSEQUENTLY, A NOTICE U/S 148 OF THE ACT WAS ISSUED UPON THE ASSES SEE. IN RESPONSE THE ASSESSEE FILED A RETURN OF INCOME DECLARING NIL I NCOME. BASED UPON THE FINDINGS MADE IN THE ASSESSMENT ORDER IN THE CASE O F ALCATEL LUCENT FRANCE, FOR THE ASSESSMENT YEAR 2006-07, IT WAS HELD BY THE AO THAT THE FACTS IN THE ASSESSEES CASE FOR THE ASSESSMENT YEAR 2004-05 TO 2007-08 ARE SIMILAR TO THAT IN THE CASE OF ALCATEL LUCENT FRANCE, FOR THE ASSESSMENT YEAR 2006-07 AND THE ASSESSEE HAD A BUSINESS CONNECTION AS WELL AS A PE IN INDIA HAVING THE FIXED PLACE OF BUSINESS AND INSTALLATION AND AG ENCY (PE) IN THE FORM OF ALIL. THE AO DETERMINED NET INCOME CHARGEABLE TO TA X AS ATTRIBUTABLE TO PE IN INDIA @ 2.5% OF THE SALES MADE BY THE ASSESSEE I N INDIA. ACCORDINGLY, ASSESSMENT WAS FRAMED AT AN INCOME OF RS.6,55,033/- AND ALSO LEVIED THE INTERESTS U/S 234 A, 234 B AND 234 C. 4. BEFORE THE LD. CIT (A) THE ASSESSEE QUESTIONED THE LEVY OF INTEREST U/S 234 B BY THE AO AT RS.3,46,360/-. THE LD. CIT (A) B EING CONVINCED WITH THE CONTENTION OF THE ASSESSEE HAS DELETED THE INTE REST LEVIED U/S 234 B FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HI GH COURT OF DELHI IN THE CASE OF DIRECTOR OF INCOME TAX VS. JACABS CIVIL INC ORPORATED / MITSUBISHI ITANO.4054/DEL/2011 4 CORPORATION (2010) 330 ITR 578 (DELHI) AND OTHERS. THIS ACTION OF THE LD. CIT (A) HAS BEEN QUESTIONED BEFORE THE TRIBUNAL. 5. IN SUPPORT OF THE GROUNDS THE LD. DR HAS BASICALLY PLACED RELIANCE ON THE ASSESSMENT ORDER. HE CONTENDED THAT THE LD. CIT (A) HAS FAILED TO APPRECIATE THAT AO HAD LEVIED INTEREST U/S 234 B OF THE ACT SINCE THE SHORT ADVANCE TAX PAYMENT WAS MADE BY THE ASSESSEE. HE SU BMITTED THAT THE SCHEME OF ADVANCE TAX PLACES PRIMARY RESPONSIBILITY OF THE ASSESSEE FOR PAYMENT OF TAX. A CONJOINT READING OF VARIOUS PROVI SIONS U/S 207 ONWARD WOULD MAKE IT CLEAR THAT THE ACT MAKES ASSESSEE RES PONSIBLE FOR ESTIMATION OF ITS CURRENT INCOME AND ALSO FOR PAYMENT OF ADVAN CE TAX. HE SUBMITTED THAT THE ASSESSEE HAVE NOT FILED REGULAR RETURN OF INCOM E AND THE ASSESSMENT ORDER HAS BEEN PASSED PURSUANT TO NOTICE U/S 148 AFTER RE CORDING THE REASONS. HE SUBMITTED THAT SECTION 195 OF THE ACT PUTS AN OBLIG ATION ON THE PAYER THAT ANY PERSON RESPONSIBLE FOR PAYING TO A NON-RESIDENT TO DEDUCT INCOME TAX AT SOURCE AT THE SAKE IN FORCE. ONCE IT IS FOUND THAT THE LIABILITY WAS THAT OF PAYER AND THE SAID PAYER HAS DEFAULTED IN TAKING TH E TAX AT SOURCE THE DEPARTMENT IS HAVING NO OPTION BUT TO TAKE ACTION U NDER THE PROVISION OF SECTION 201 OF THE ACT. HE SUBMITTED THAT ON THE ON E HAND ASSESSEE AT THE TIME OF RECEIPT OF PAYMENT FROM RESIDENT HAS TAKEN A STAND THAT IT DOES NOT HAVE PE OR TAXABLE PRESENCE IN INDIA AND THEREFORE, PROVISIONS OF SECTION ITANO.4054/DEL/2011 5 195 WERE NOT ATTRACTED AND ON THE OTHER HAND NOW AT THE TIME OF APPELLATE PROCEEDINGS THEY HAVE ACCEPTED THE EXISTENCE OF PE IN INDIA. THUS THE ASSESSEE SHOULD NOT BE ALLOWED TO TAKE THE PLEA THA T SINCE ITS INCOME WAS CHARGEABLE TO TAX AND AS PER SECTION 195 IT WAS RES PONSIBILITY OF PAYER TO DEDUCT THE TAX AND FOR DEFAULT OF PAYER THE COMPANY SHOULD NOT BE VISITED WITH LIABILITY U/S 234 B OF THE ACT. 6. THE LD. AR ON THE CONTRARY TRIED TO JUSTIFY THE FIR ST APPELLATE ORDER AND REFERRED THE PROVISIONS LAID DOWN U/S 209 (1)(D) OF THE ACT. HE SUBMITTED FURTHER THAT THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF DIT VS. JACABS CIVIL INC/MITSUBISHI CORPORA TION (SUPRA) IS SQUARELY APPLICABLE IN THE CASE OF ASSESSEE. INFORMED FURTHE R THAT ON AN IDENTICAL ISSUE IN A BATCH OF NINE APPEALS IN THE CASE OF GROUP CO MPANIES I.E. ITAT VS. ALCATEL LUCENT USA INC ITA NO. 3821 AND 3824 DELHI 2011 AND ADIT VS. ALCATEL LUCENT WORLD SERVICES INC. ITA NOS. 3825 TO 3829 DELHI 2011, THE COORDINATE BENCH OF THE TRIBUNAL AT DELHI HAS BEEN PLEASED TO DELETE THE INTEREST LEVIED U/S 234 B OF THE ACT, VIDE ITS ORDE R DATED 21.10.2011, A COPY WHEREOF HAS BEEN MADE AVAILABLE AT PAGE NO. 143 TO 155 OF THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THE LD. AR HAS ALS O PLACED RELIANCE ON THE FOLLOWING DECISIONS: ITANO.4054/DEL/2011 6 I) DIRECTOR OF INCOME TAX VS. JACABS CIVIL INCORPORATED, 330 ITR 578 (DELHI) II) MOTOROLA INC. VS. DY. CIT 96 TTJ 1 (SB) (DEL.) III) SAMSUNG HEAVY INDUSTRIES CO. LTD. VS. ADIT ITA NO. 5237/DEL/2010 IV) CIT & ANR VS. SEDCO FOREX INTERNATIONAL DRILLING CO . LTD. 264 ITR 320 (UTTARAKHAND) V) MITSUI ENGG. & SHIP BUILDING CO. LTD. VS. ACIT 79 TTJ 447 (DEL.) VI) DCIT VS. METAPATH SOFTWARE INTERNATIONAL LTD. 9 SOT 305 (DEL.) VII) DCIT VS. PRIDE FORAMER SAS 24 SOT 59 (DEL.) 7. AFTER CONSIDERING THE ABOVE SUBMISSIONS IN VIEW OF THE ORDERS OF THE AUTHORITIES BELOW AND THE DECISIONS RELIED UPON, TH ERE IS NO DISPUTE THAT COMBINED READING OF THE PROVISIONS OF SECTION 209 ( 1) (D) WITH THE PROVISIONS OF SECTION 234 B OF THE ACT MAKES IT CLE AR THAT THE LIABILITY TO PAY INTEREST U/S 234 B WOULD ARISE ONLY IF ADVANCE TAX IS PAYABLE AFTER MAKING THE NECESSARY ADJUSTMENT FOR TAX DEDUCTIBLE AT SOUR CES. THE AMOUNT OF (TAX DEDUCTIBLE) WOULD OBVIOUSLY MEAN THE TAX AS WAS REQ UIRED TO BE DEDUCTED IN RESPECT OF A PARTICULAR INCOME AND NOT THE TAX WHIC H HAS ACTUALLY BEING ITANO.4054/DEL/2011 7 DEDUCTED AT SOURCE. RESPONSIBILITY OF AN ASSESSEE T O PAY ADVANCE TAX ARISES UNDER THE PROVISIONS OF SECTION 208 READ WITH SECTI ON 209 AND 210 THE MODE OF COMPUTATION OF ADVANCE TAX IS GIVEN IN SECTION 2 09 OF THE ACT. AS LONG AS THE ASSESSEE HAS DISCHARGED ITS OBLIGATION TO PAY A DVANCE TAX AS PER THE PROVISIONS OF SECTION 208 READ WITH SECTIONS 209 AN D 210 HE CANNOT BE HELD LIABLE FOR DEFAULTING IN PAYMENT OF ADVANCE TAX. SE CTION 234 B AND SECTION 234 C ONLY PROVIDE A METHOD OF COMPUTATION OF INTER EST IN CASE OF DEFAULT BY AN ASSESSEE TO PAY ADVANCE TAX AS STIPULATED IN SEC TIONS 208, 209 AND 210 OF THE ACT. THE UNDISPUTED FACT IN THE PRESENT CASE RE MAINED THAT THE TAX ON THE ENTIRE INCOME RECEIVED BY THE ASSESSEE WAS REQUIRED TO BE DEDUCTED AT APPROPRIATE RATES BY THE RESPECTIVE PAYERS U/S 195 (2) OF THE ACT. HAD THE PAYER MADE THE DEDUCTION OF TAX AT THE APPROPRIATE RATE, THE NET TAX PAYABLE BY THE ASSESSEE WOULD HAVE BEEN NIL. THUS THERE WAS NO LIABILITY TO PAY ADVANCE TAX BY THE ASSESSEE. UNDER SIMILAR FACTS, T HE HONBLE HIGH COURT OF DELHI IN THE CASE OF DCIT VS. JACABS CIVIL INCORPOR ATED/ MITSUBISHI CORPORATION (SUPRA) HAS BEEN PLEASED TO HOLD THAT S ECTION 195 PUTS AN OBLIGATION ON THE PAYER I.E. ANY PERSON RESPONSIBLE FOR PAYING ANY TAX AT SOURCE AT THE RATES IN FORCE FROM SUCH PAYMENTS AND IF PAYER HAS DEFAULTED IN DEDUCTING TAX AT SOURCE, THE DEPARTMENT CAN TAKE AC TION AGAINST THE PAYER UNDER THE PROVISIONS OF SECTION 201. IN SUCH A CASE , THE NON-RESIDENT IS ITANO.4054/DEL/2011 8 LIABLE TO PAY TAX BUT THERE IS NO QUESTION OF PAYME NT OF ADVANCE TAX AND THEREFORE, IT CANNOT BE HELD LIABLE TO PAY INTEREST U/S 234 B ON ACCOUNT OF DEFAULT OF THE PAYER IN DEDUCTING TAX AT SOURCE FRO M THE PAYMENTS MADE TO THE APPELLANT. THE CONTENTS OF PARA NO. 9 OF THE SA ID DECISIONS OF HONBLE DELHI HIGH COURT ARE BEING REPRODUCED HEREUNDER FOR A READY REFERENCE: THIS CLAUSE CATEGORICALLY USES THE EXPRESSION DE DUCTIBLE OR COLLECTIBLE AT SOURCE AND IT IS THIS CLAUSE WHICH IS INCORPORATED BY THE UTTARANCHAL HIGH COURT IN THE SAID JUDGMENT (SUPRA) IN THE MANNER ALREADY POINTED ABOVE. THE SCHEME OF THE ACT IN RESPECT OF NON-RESIDENTS IS CLEAR. SECTION 195 OF T HE ACT PUTS AN OBLIGATION ON THE PAYER, I.E., ANY PERSON RESPONSIB LE FOR PAYING TO A NON-RESIDENT, TO DEDUCT INCOME-TAX AT SOURCE A T THE RATES IN FORCE FROM SUCH PAYMENTS EXCLUDING THOSE INCOMES WH ICH ARE CHARGEABLE UNDER THE HEAD SALARIES. THEREFORE, TH E ENTIRE TAX IS TO BE DEDUCTED AT SOURCE WHICH IS PAYABLE ON SUC H PAYMENTS MADE BY THE PAYEE TO THE NON-RESIDENT. SECTION 201 OF THE ACT LAYS DOWN THE CONSEQUENCES OF FAILURE TO DEDUCT OR PAY. THESE CONSEQUENCES INCLUDE NOT ONLY THE LIABILITY TO PAY THE AMOUNT WHICH SUCH A PERSON WAS REQUIRED TO DEDUCT AT SOURC E FROM THE PAYMENTS MADE TO A NON-RESIDENT BUT ALSO PENALTIES, ETC. ONCE IT IS FOUND THAT THE LIABILITY WAS THAT OF THE PAYER A ND THE SAID PAYER HAS DEFAULTED IN DEDUCTING THE TAX AT SOURCE, THE DEPARTMENT IS NOT REMEDY-LESS AND, THEREFORE, CAN T AKE ACTION AGAINST THE PAYER UNDER THE PROVISIONS OF SECTION 2 01 OF THE INCOME-TAX ACT AND COMPUTE THE AMOUNT ACCORDINGLY. NO DOUBT, IF THE PERSON (PAYER) WHO HAD TO MAKE PAYMENTS TO T HE NON- RESIDENT HAD DEFAULTED IN DEDUCTING THE TAX AT SOUR CE FROM SUCH PAYMENTS, THE NON-RESIDENT IS NOT ABSOLVED FROM PAY MENT OF TAXES THEREUPON. HOWEVER, IN SUCH A CASE, THE NON-R ESIDENT IT LIABLE TO PAY TAX AND THE QUESTION OF PAYMENT OF AD VANCE TAX WOULD NOT ARISE. THIS WOULD BE CLEAR FROM THE READI NG OF SECTION 191 OF THE ACT ALONG WITH SECTION 209 (1) ( D) OF THE ACT. FOR THIS REASON, IT WOULD NOT BE PERMISSIBLE FOR TH E REVENUE TO CHARGE ANY INTEREST UNDER SECTION 234 B OF THE ACT. ITANO.4054/DEL/2011 9 7. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF HONBL E JURISDICTIONAL HIGH COURT IN THE CASE OF JACABS CIVIL INCORPORATED / MITSUBISHI CORPORATION (SUPRA) THE LD. CIT (A) HAS DELETED THE INTEREST CH ARGED U/S 234 B IN QUESTION. SINCE THE ISSUE RAISED IN THE GROUND OF T HE PRESENT APPEAL IS SQUARELY COVERED BY THE DECISION OF HONBLE JURISDI CTIONAL HIGH COURT IN THE CASE OF JACABS CIVIL INCORPORATED/MITSUBISHI CORPOR ATION (SUPRA) FOLLOWED BY THE LD. CIT (A), WE DO NOT FIND INFIRMITY IN THE FIRST APPELLATE ORDER IN THIS REGARD. THE SAME IS AFFIRMED. THE GROUND IS AC CORDINGLY REJECTED. 8. CONSEQUENTLY APPEAL IS DISMISSED. 9. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON THE DA Y 24/08/2012. SD/- SD/- ( G.D.AGRAWAL ) (I.C.SU DHIR) VICE-PRESIDENT JUDICIAL MEMBER DATED: 24/08/2012 *AK VERMA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR