Mitsubishi Corporation, New Delhi V. DDIT, New Delhi

ITA 4659/DEL/2011

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4711 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 26-04-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 21-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Opportunity of being heard; Rule of consistency; Deemed to accrue or arise in india; Permanent establishment; Set aside
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE HONBLE VICE PRESIDENT, SHRI G.D. AGRAWAL AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.4659/DEL./2011 (ASSESSMENT YEAR : 2005-06) ITA NO.5769/DEL./2010 (ASSESSMENT YEAR : 2006-07) ITA NO.152/DEL./2012 (ASSESSMENT YEAR : 2007-08) ITA NO.193/DEL./2013 (ASSESSMENT YEAR : 2008-09) M/S. MITSUBISHI CORPORATION, VS. DDIT, BIRLA TOWERS, 3 RD FLOOR, CIRCLE 3 (1), REAR SIDE 25, BARAKHAMBA ROAD, INTERNATIONAL TAXAT ION NEW DELHI 110 001. NEW DELHI. (PAN : AACCM7020P) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.S. SYALI, SENIOR ADVOCATE SHRI TARANDEEP SINGH, ADVOCATE SHRI TARUN SINGH, ADVOCATE SHRI ADITYA RAJ SINGH, ADVOCATE REVENUE BY : SHRI G.K. DHALL, CIT DR (INTERNATION AL TAXATION) DATE OF HEARING : 15.05.2019 DATE OF ORDER : 30.05.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : ITA NO.4659/DEL./2011 ITA NO.5769/DEL./2010 ITA NO.152/DEL./2012 ITA NO.193/DEL./2013 2 SINCE COMMON QUESTIONS OF FACTS AND LAW HAVE BEEN R AISED IN THE AFORESAID APPEALS, THE SAME ARE BEING DISPOS ED OFF BY WAY OF COMPOSITE ORDER TO AVOID REPETITION OF DISCUSSION. 2. SINCE IDENTICAL ISSUES ARE INVOLVED IN ALL THE A PPEALS AND FOR THE SAKE OF CONVENIENCE AND TO AVOID REPETITION OF FACTS, WE ARE TAKING UP THE FACTS OF ITA NO.4659/DEL/2011 FOR AY 2005-06 TO ADJUDICATE THE ISSUE IN CONTROVERSY. 3. APPELLANT, M/S. MITSUBISHI CORPORATION (HEREINAF TER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 02.08.2011 PASSED BY THE C OMMISSIONER OF INCOME-TAX (APPEALS)-VII, NEW DELHI QUA THE ASSE SSMENT YEAR 2005-06 ON THE GROUNDS INTER ALIA THAT :- 1. THAT ON THE FACTS AND IN LAW, THE LEARNED CIT( A) HAS ERRED IN NOT ADJUDICATING THE ADDITIONAL GROUNDS OF APPEAL ON ITS RESPECTIVE MERITS AND IN DISMISSING SUMMARILY ON TH E PRINCIPLE OF CONSISTENCY. 2. WITHOUT PREJUDICE TO THE ABOVE, PRINCIPLE OF CO NSISTENCY CANNOT BE DISCRETIONALLY APPLIED ONLY ON ONE STREAK OF INCOME IGNORING OTHERS. 3. THAT ON THE FACTS AND IN LAW, THE LEARNED CIT(A ) HAS ERRED IN UPHOLDING THE ORDER OF THE LEARNED AO TO I NCLUDE PURCHASE FROM INDIA IN THE TURNOVER WHILE COMPUTING THE TOTAL INCOME ATTRIBUTABLE TO THE ACTIVITIES OF THE LIAISO N OFFICE ('LO') IN COMPLETE DISREGARD OF THE PROVISIONS OF INCOME T AX ACT, 1961 ('ACT') WHICH CLEARLY STATES THAT INCOME SHALL NOT BE DEEMED TO ACCRUE OR ARISE IN INDIA ON ACCOUNT OF PURCHASE OPE RATIONS FOR THE PURPOSE OF EXPORT FROM INDIA. 4. THAT ON THE FACTS AND IN LAW, THE LEARNED CIT(A ) HAS ERRED IN UPHOLDING THE ORDER OF THE LEARNED AO TO I NCLUDE ITA NO.4659/DEL./2011 ITA NO.5769/DEL./2010 ITA NO.152/DEL./2012 ITA NO.193/DEL./2013 3 PURCHASE FROM INDIA IN THE TURNOVER WHILE COMPUTING THE TOTAL INCOME ATTRIBUTABLE TO THE ACTIVITIES OF THE LIAISO N OFFICE ('LO') IN COMPLETE DISREGARD OF THE PROVISIONS OF TAX TREA TY BETWEEN INDIA AND JAPAN WHICH CLEARLY STATES THAT NO PROFIT S CAN BE ATTRIBUTED TO THE PURCHASE FUNCTION. 5. THAT ON THE FACTS AND IN LAW, THE LEARNED CIT(A ) HAS ERRED IN NOT APPRECIATING THAT THE LA OF THE APPELL ANT HANDLED ONLY THE MACHINERY DIVISION AND NEW BUSINESS INITIA TIVE DIVISION AND SINCE LA WAS HELD TO BE A PERMANENT ES TABLISHMENT (PE), THE SALES MADE BY OTHER DIVISIONS OF MC JAPAN (WITHOUT ANY INVOLVEMENT OF LA) SHOULD NOT BE INCLUDED IN TH E TURNOVER FOR THE PURPOSE OF COMPUTING THE TOTAL INCOME. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERIN G THE ACTUAL GROSS PROFIT RATE OF 1.98% FROM THE NON-CONSOLIDATE D FINANCIAL STATEMENTS OF THE APPELLANT FOR THE SUBJECT YEAR FO R THE PURPOSE OF COMPUTATION OF INCOME ATTRIBUTABLE TO THE ACTIVITIE S OF THE LO IN INDIA AND HAS WRONGLY APPLIED THE ADHOC GROSS PROFI T RATE OF 2.75% AS WAS USED IN THE EARLIER YEARS. 7. THAT ON THE FACTS OF THE CASE AND IN LAW, THE L EARNED CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION FOR THE EXPENSES INCURRED IN RELATION TO THE OPERATIONS OF THE LO ON LY TO THE EXTENT OF 50% INSPITE OF THE FACT THAT AS PER THE PROVISIO NS OF THE LAW SUCH EXPENSES SHOULD BE ALLOWED TO THE EXTENT OF 10 0%. 8. THAT ON THE FACTS ON THE CASE AND IN LAW, THE L EARNED AO/HON'BLE DRP ERRED IN APPLYING THE RATE OF 50% FO R THE PURPOSE OF ATTRIBUTING INCOME TO THE OPERATIONS OF LO WITHOUT CONSIDERING THE FACT THAT THE MAJOR REVENUE GENERAT ING ACTIVITIES WERE PERFORMED OUTSIDE INDIA AND NOT BY THE LO. 9. THAT ON THE FACTS OF THE CASE AND IN LAW, THE L EARNED CIT(A) HAS ERRED IN NOT APPRECIATING THAT THE INDIA N SUBSIDIARY IS NOT A PE OF THE APPELLANT. 9.1 THAT ON THE FACTS OF THE CASE AND IN LAW, THE L EARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE INDIAN SU BSIDIARY DOES NOT CONSTITUTE A PE FOR THE APPELLANT IN INDIA AND THE OBSERVATION / PASSING REFERENCE MADE BY THE AO IN EARLIER YEARS ORDER WAS WITHOUT EXAMINING ANY FACTS IN RELATION TO THE INDI AN SUBSIDIARY. 9.2 WITHOUT PREJUDICE TO ABOVE, THE SALES MADE TO INDIAN SUBSIDIARY ON PRINCIPAL TO PRINCIPAL BASIS SHOULD B E EXCLUDED FROM THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTIN G THE TOTAL ITA NO.4659/DEL./2011 ITA NO.5769/DEL./2010 ITA NO.152/DEL./2012 ITA NO.193/DEL./2013 4 INCOME AS THE INDIAN SUBSIDIARY WAS SELLING GOODS O N ITS OWN ACCOUNT AND NOT ON BEHALF OF THE APPELLANT. 9.3 WITHOUT PREJUDICE TO ADDITIONAL GROUND NOS.9, 9.1 AND 9.2, THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED T HAT SINCE THE INDIAN SUBSIDIARY IS REMUNERATED ON ARM'S LENGTH, A NY PE WHICH IS CONSTITUTED OF THE APPELLANT ON ACCOUNT OF THE A CTIVITIES OF THE INDIAN SUBSIDIARY, GETS EXTINGUISHED. 9.4 WITHOUT PREJUDICE TO ABOVE, IF AN INDIAN SUBSI DIARY IS HELD TO BE A PE IN RELATION TO SUPPORT SERVICES PROVIDED TO THE APPELLANT, THE COMMISSION PAID TO SUBSIDIARY SHOULD -BE ALLOWED AS DEDUCTION. 10. THAT THE LEARNED CIT(A) ERRED IN LAW AND IN FA CTS IN UPHOLDING LEARNED AO'S ORDER AND IN NOT APPRECIATIN G THE COST PLUS METHODOLOGY ADOPTED BY THE APPELLANT FOR OFFER ING DMRC REVENUE TO TAX (TO THE EXTENT ATTRIBUTABLE TO THE A CTIVITIES PERFORMED BY APPELLANT'S PROJECT OFFICE, MC PO) IN INDIA. IN DOING SO: THE LEARNED AO/CIT(A) FAILED TO APPRECIATE THAT APPELLANT'S INCOME PERTAINING TO ACTIVITIES OF ITS PROJECT OFFICE IN INDIA HAS BEEN OFFERED TO TAX AT COST-PLU S ARM'S LENGTH MARK UP BASIS I.E., 9 PERCENT; AND THE LEARNED AO/CIT(A) HAS ERRED IN LAW IN NOT APPRECIATING THAT ONCE AN ARM'S LENGTH MARK UP HAS BEEN ATTRIBUTED TO THE PERMANENT ESTABLISHMENT (PE) IN I NDIA, NO ADDITIONAL INCOME CAN BE BROUGHT TO TAX IN INDIA . 11. WITHOUT PREJUDICE TO GROUND 10, THE LEARNED AO / CIT(A) HAS ERRED ON FACTS OF THE CASE IN NOT APPREC IATING THAT 'DMRC SALES' WERE ATTRIBUTED TO APPELLANT'S LO BY H IS OFFICE IN EARLIER ASSESSMENT YEARS AND APPELLANT TO BUY PEACE HAS NOT OBJECTED TO SAME, AND FOLLOWED THE SAME BASIS (AS A PPLIED BY THE THEN LEARNED AO) IN FUTURE YEARS. THUS, WITH NO CHA NGE IN FACTS, THE SAME CANNOT BE ATTRIBUTED TO APPELLANT'S PO BY THE LEARNED AO IN SUBSEQUENT YEARS. 12. WITHOUT PREJUDICE TO ABOVE, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THAT 'DMRC SALES' ARE EFFECTED THROUGH APPELLANT'S PO. FURTHER, THE CIT(A) HAS GROSSLY ERR ED IN LAW IN UPHOLDING THAT PRINCIPLE OF RESTRICTED FORCE OF ATT RACTION IS APPLICABLE TO 'DMRC SALES' AND EVEN 'DIRECT SALES M ADE BY HO WILL BE ATTRIBUTED TO THE PO'. 12.1 THE LEARNED AO ERRED ON FACTS AND IN LAW IN HO LDING THAT ALL THE ACTIVITIES REQUIRED TO ACHIEVE VARIOUS MILE STONES UNDER DIFFERENT COST CENTRES COVERED UNDER THE 'INTERIM P AYMENT INVOICES' WERE CARRIED OUT IN INDIA. ITA NO.4659/DEL./2011 ITA NO.5769/DEL./2010 ITA NO.152/DEL./2012 ITA NO.193/DEL./2013 5 13. WITHOUT PREJUDICE, THE LEARNED CIT(A) ERRED IN FOLLOWING DIRECTIONS ISSUED BY HON'BLE DISPUTE RESOLUTION PAN EL FOR ASSESSMENT YEAR 2002-03 & 2006-07 IN APPELLANT'S CA SE AND DIRECTING THE LEARNED AO TO APPLY A DEEMED PROFIT R ATE OF 10% ON THE TOTAL SALES MADE TO DMRC AND ATTRIBUTING 50% OF SUCH PROFITS TO THE APPELLANT. 14. WITHOUT PREJUDICE TO ABOVE, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING LEARNED AO'S ORDER AND HAS FAILED TO A PPRECIATE THAT 'DMRC SALES' OFFERED TO TAX BY APPELLANT AS PA RT OF LO REVENUE OUGHT TO EXCLUDE THE SHARE OF REVENUE OF OT HER CONSORTIUM MEMBER I.E., HYUNDAI ROTEM COMPANY, KORE A ('ROTEM''). IN DOING SO, LEARNED CIT(A) FAILED TO A PPRECIATE: THE FACT THAT APPELLANT MERELY COLLECTED THE SHAR E OF ROTEM UNDER RS1 CONTRACT FROM DMRC AND PASSED ON THE SAME TO ROTEM; AND THAT THE SHARE OF ROTEM IS BEING BROUGHT TO TAX S EPARATELY AND INDEPENDENTLY IN HANDS OF THE SAID CONSORTIUM MEMBER, THUS, VIOLATING THE BASIC PRINCIPLE OF TAXA TION BY BRINGING THE SAME INCOME TO TAX TWICE. 15. DOUBLE TAXATION OF INCOME 15.1 THAT ON THE FACTS AND IN LAW, THE LEARNED CIT( A) HAS FAILED IN NOT APPRECIATING THAT DMRC SALES OF RS.2, 348, 868, 060 INCLUDES RECEIPTS AMOUNTING TO RS.7,458,204 IN RESP ECT OF CC 'J' WHICH WAS SUO-MOTE OFFERED TO TAX AS FEES FOR TECHN ICAL SERVICES ON GROSS BASIS BY THE APPELLANT IN VIEW OF THE AAR RULING IN APPELLANT'S CASE AND HAS THUS BEEN SUBJECTED TO TAX TWICE. 15.2 WITHOUT PREJUDICE TO GROUND NO.1 0, ON THE FA CTS AND IN LAW, THE LEARNED CIT(A) HAS FAILED IN NOT APPRECIAT ING THAT THE DMRC SALES OF RS.2,348, 868, 060 ALSO INCLUDES THE PORTION OF RECEIPTS ON THE BASIS OF WHICH INCOME OF RS.41, 636 , 466 HAS ALREADY BEEN OFFERED TO TAX BY THE APPELLANT AS INC OME FROM PO AND HAS BEEN SUBJECTED TO TAX TWICE. 16. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN UPHOLDING THAT THE CONTRACT IN QUESTION , I.E., RS1 CONTRACT IS A 'WORKS' CONTRACT AND NOT A 'SALES' CO NTRACT.' 3. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSEE FILED REVISED RE TURN AT TAXABLE ITA NO.4659/DEL./2011 ITA NO.5769/DEL./2010 ITA NO.152/DEL./2012 ITA NO.193/DEL./2013 6 INCOME ON TURNOVER OF RS.61,05,41,430/- VOLUNTARILY OFFERING INCOME TO TAX FROM ACTIVITIES IN INDIA TO THE TUNE OF RS.56,89,04,966/- (RS.53.82 CRORES ATTRIBUTED TO T HE ACTIVITIES OF ITS LIAISON OFFICE (LO) + RS.3.06 CRORES ATTRIBUTED TO ACTUAL SALE MADE TO DELHI METRO RAIL CORPORATION (DMRC). ASSESSEE, AFTER ASSUMING GP RATE OF 2.75% AND A PROFIT ATTRIBUTION RATE OF 50%, ESTIMATED IT INCOME FROM ACTIVITIES IN INDIA AT RS. 56.89 CRORES. ASSESSEE ALSO OFFERED TO TAX INCOME FROM PROJECT OF FICE (PO) IN INDIA TO THE TUNE OF RS.4.16 CRORES WHICH INCLUDES RS.74.58 LAKHS AS INCOME FROM FEE FOR TECHNICAL SERVICES. 4. HOWEVER, AO IGNORING THE SETTLEMENT ARRIVED AT B ETWEEN THE ASSESSEE AND THE REVENUE DEPARTMENT IN AYS 1998-99 TO 2004-05 PROCEEDED TO COMPUTE THE INCOME FROM ACTIVITIES OF LO IN INDIA @ A GP RATE OF 5% AS AGAINST 2.75% AGREED UPON; AND I NCOME FROM TOTAL TURNOVER QUA LO WAS HELD ATTRIBUTABLE TO INDI A IN RESPECT OF ATTRIBUTION RATE OF 50%; AND TAKING TURNOVER FROM D MRC SALES OF RS.234.88 CRORES PERTAINING TO ACTIVITIES CARRIED O UT IN PO IN INDIA AND CHARGED THE SAME SEPARATELY TO TAX BY APPLYING GP RATE OF 10% AND PROFIT ATTRIBUTION RATE OF 100% AND THEREBY ASS ESSED THE TOTAL INCOME OF RS.1,31,44,92,200/- AND TAXED THE SAME @ 20% AS PER ARTICLE 12 OF THE DOUBLE TAXATION AVOIDANCE AGREEME NT (DTAA). ITA NO.4659/DEL./2011 ITA NO.5769/DEL./2010 ITA NO.152/DEL./2012 ITA NO.193/DEL./2013 7 5. ASSESSEE CARRIED THE MATTER BY WAY OF APPEALS BE FORE THE LD. CIT (A) WHO HAS PARTLY ALLOWED THE APPEALS. FEELIN G AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEALS. 6. 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. 7. UNDISPUTEDLY, INITIALLY ASSESSEE HAS SOUGHT RELI EF FROM LD. CIT (A) BY APPLYING THE AGREED FORMULA FOR AYS 19 98-99 TO 2004-05 BY FOLLOWING THE RULE OF CONSISTENCY. IT I S ALSO NOT IN DISPUTE THAT DURING THE APPELLATE PROCEEDINGS, ASSE SSEE RAISED ADDITIONAL GROUNDS WHICH WERE ADMITTED. FOR READY PERUSAL, ADDITIONAL GROUNDS ARE EXTRACTED AS UNDER :- 1. THAT ON THE FACTS OF THE CASE AND IN LAW, THE A SSESSING OFFICER HAS ERRED IN TAXING PURCHASES WHILE TAXING SALES AND NOT EXCLUDING THE TURNOVER FROM EXPORT OF GOODS FROM IN DIA WHILE COMPUTING THE TOTAL INCOME ATTRIBUTABLE TO THE ACTI VITIES OF THE LIAISON OFFICE ('LO') IN COMPLETE DISREGARD OF THE PROVISIONS OF INCOME TAX ACT, 1961 ('ACT'') WHICH CLEARLY STATES THAT INCOME SHALL NOT BE DEEMED TO ACCRUE OR ARISE IN INDIA ON ACCOUNT OF PURCHASE OPERATIONS FOR THE PURPOSE OF EXPORT FROM INDIA. 2. THAT ON THE FACTS OF THE CASE AND IN LAW, THE AS SESSING OFFICER HAS ERRED IN TAXING PURCHASES WHILE TAXING SALES AND NOT EXCLUDING THE TURNOVER FROM EXPORT OF GOODS FROM IN DIA WHILE COMPUTING THE TOTAL INCOME ATTRIBUTABLE TO THE ACTI VITIES OF THE LO IN COMPLETE DISREGARD OF THE PROVISIONS OF TAX TREA TY BETWEEN INDIA AND JAPAN WHICH CLEARLY STATES THAT NO PROFIT S CAN BE ATTRIBUTABLE TO THE PURCHASE FUNCTION. ITA NO.4659/DEL./2011 ITA NO.5769/DEL./2010 ITA NO.152/DEL./2012 ITA NO.193/DEL./2013 8 3. WITHOUT PREJUDICE TO THE APPELLANTS MERE INTENT ION TO BUY PEACE AND AVOID LITIGATION IN NOT CHALLENGING THE A SSESSMENT ORDER, THE ASSESSING OFFICER ERRED IN NOT APPRECIAT ING THAT THE LO OF THE APPELLANT HANDLED ONLY THE MACHINERY DIVISIO N AND SINCE LO WAS HELD TO BE A PE, THE SALES MADE BY OTHER DIV ISIONS OF ME JAPAN (WITHOUT ANY INVOLVEMENT OF LO) SHOULD NOT BE INCLUDED IN THE TURNOVER FOR THE PURPOSE OF COMPUTING THE TOTAL INCOME. 4. THAT ON THE FACTS OF THE CASE AND IN LAW, THE AS SESSING OFFICER ERRED IN NOT APPRECIATING THAT THE INDIAN S UBSIDIARY IS NOT A PERMANENT ESTABLISHMENT (,PE,) OF THE APPELLA NT. 4.1 IN ANY CASE THE SALES MADE TO INDIAN SUBSIDIARY ON PRINCIPAL TO PRINCIPAL BASIS SHOULD BE EXCLUDED FRO M THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING THE TOTAL INC OME AS THE INDIAN SUBSIDIARY WAS SELLING GOODS ON ITS OWN ACCO UNT AND NOT ON BEHALF OF THE APPELLANT. 4.2 THAT ON THE FACTS OF THE CASE AND IN LAW, THE A SSESSING OFFICER OUGHT TO HAVE APPRECIATED THAT THE INDIAN S UBSIDIARY DOES NOT CONSTITUTE A PE FOR THE ASSESSEE IN INDIA AND T HE OBSERVATION / PASSING REFERENCE MADE BY THE AO IN EARLIER YEARS O RDER WAS WITHOUT EXAMINING ANY FACTS IN RELATING TO THE INDI AN SUBSIDIARY. 4.3 WITHOUT PREJUDICE TO THE GROUND NOS.4, 4.1 AND 4.2 ABOVE, THE ASSESSING OFFICER OUGHT TO HAVE APPRECIA TED THAT SINCE THE INDIAN SUBSIDIARY IS REMUNERATED ON ARM'S LENGT H, ANY PE WHICH IS CONSTITUTED OF THE APPELLANT ON ACCOUNT OF THE ACTIVITIES OF THE INDIAN SUBSIDIARY, GETS EXTINGUISHED. 5. THAT ON THE FACTS OF THE CASE AND IN LAW, THE AS SESSING OFFICER ERRED IN ALLOWING THE DEDUCTION FOR THE EXP ENSES INCURRED IN RELATION TO THE OPERATIONS OF THE LA ONLY TO THE EXTENT OF 50% INSPITE OF THE FACTS THAT AS PER THE PROVISIONS OF THE LAW SUCH EXPENSES SHOULD BE ALLOWED TO THE EXTENT OF 100%. 6. THAT ON THE FACTS OF THE CASE AND IN LAW, THE AS SESSING OFFICER ERRED IN APPLYING THE RATE OF 50% FOR THE P URPOSE OF ATTRIBUTING INCOME TO THE OPERATIONS OF LA WITHOUT CONSIDERING THE FACT THAT THE MAJOR REVENUE GENERATING ACTIVITI ES WERE PERFORMED OUTSIDE INDIA AND NOT BY THE LO.' ITA NO.4659/DEL./2011 ITA NO.5769/DEL./2010 ITA NO.152/DEL./2012 ITA NO.193/DEL./2013 9 8. ASSESSEE BY RAISING ADDITIONAL GROUNDS SOUGHT NO T TO DECIDE THE ISSUE ON THE BASIS OF SETTLEMENT BETWEEN THE AS SESSEE AND THE REVENUE FOR AYS 1998-99 TO 2004-05. 9. BY WAY OF RAISING ADDITIONAL GROUNDS, THE ASSESS EE HAS CHALLENGED THE TAXABILITY WHEREAS LD. CIT (A) HAS O NLY DECIDED GP RATE, SO THE ISSUE AS TO CHALLENGING THE TAXABILITY WAS IN FACT NOT BEFORE THE AO EARLIER. 9. NOW, THE GRIEVANCE OF THE ASSESSEE IS THAT LD. C IT (A) AFTER ADMITTING THE ADDITIONAL GROUNDS RAISED BY THE ASSE SSEE HAS SUMMARILY REJECTED THE CLAIMS MERELY BY APPLYING TH E PRINCIPLE OF CONSISTENCY WITHOUT GOING INTO THE MERITS OF THE IS SUE RAISED VIDE ADDITIONAL GROUNDS. FOR READY PERUSAL, OPERATIVE P ART OF THE ORDER PASSED BY THE LD. CIT (A) IS EXTRACTED AS UNDER :- '3.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS M ADE ON BEHALF OF THE APPELLANT & FINDINGS OF THE ASSESS ING OFFICER AND FACTS ON RECORD. IN THE INSTANT CASE TH E ASSESSING OFFICER MADE ORIGINAL ASSESSMENT ORDERS F OR SEVEN ASSESSMENT YEARS FROM ASSESSMENT YEAR 1998-99 TO ASSESSMENT YEAR 2004-05 BY TAKING LIAISON OFFICE (LO) TO BE A PERMANENT ESTABLISHMENT (PE) AND BRINGING THE ENTIRE SALES OF THE APPELLANT TO INDIA AND ALSO THE PURCHASES MADE FROM INDIA (FOR ALL DIVISIO NS INCLUDING MACHINERY DIVISION) TO TAX. THE GROSS PRO FIT OF 2.75% OF TOTAL SALES AND PURCHASE WAS TAKEN BY T HE ASSESSING OFFICER IN ALL THE SEVEN ASSESSMENT YEARS WHICH WAS NOT CHALLENGED BY THE APPELLANT. FROM THE GROSS PROFIT (2.75% OF TOTAL SALES AND PURCHASE), C ERTAIN INDIA RELATED EXPENSES WERE DEDUCTED I.E., EXPENSE OF ITA NO.4659/DEL./2011 ITA NO.5769/DEL./2010 ITA NO.152/DEL./2012 ITA NO.193/DEL./2013 10 LO AND EXPATRIATE SALARIES AND 50% OF THE RESULTANT PROFITS WERE ATTRIBUTED TO INDIA AND DEDUCTION U/S 44C WAS ALLOWED. THE APPELLANT DID NOT CHALLENGE THE AB OVE ACTION OF THE AO BEFORE THE APPELLANT AUTHORITIES A ND ALSO FILED RETURN OF ITS INCOME FOR THE SUBSEQUENT YEARS INCLUDING THE ASSESSMENT YEAR 2005-06 ON THE BASIS OF FORMULA DETERMINED BY THE DEPARTMENT IN THE SAID SE VEN YEARS. AT NO POINT OF TIME IN THE ORIGINAL ROUND OF ASSESSMENT PROCEEDINGS THE ASSESSEE RAISED ANY OBJECTION TO THE ACTION TAKEN BY THE ASSESSING OFFI CER AND SUBMITTED HIMSELF TO THE JURISDICTION OF THE ASSESSING OFFICER WITHOUT DEMUR. SIMILARLY DURING T HE COURSE OF PROCEEDINGS UNDER SECTION 143(3) READ WIT H SECTION 144C FOR ASSESSMENT YEAR 2006-07 NO OBJECTI ONS TO THIS REGARD WERE RAISED BY THE ASSESSEE BEFORE T HE ASSESSING OFFICER AS WELL AS BEFORE THE DISPUTE RESOLUTION PANEL (DRP). THE ASSESSEE'S OBJECTION AS MADE OUT IN THE ADDITIONAL GROUNDS OF APPEAL AT THI S BELATED STAGE DEFIES THE PRINCIPLES OF CONSISTENCY. IT IS SETTLED LAW THAT IN THE ABSENCE OF ANY CHANGE EITHE R IN FACTS OR IN LAW, PRINCIPLES OF CONSISTENCY ITSELF C AN BE MADE A BASIS TO UPHOLD OR REJECT THE CLAIM OF THE APPELLANT COMPANY. THE HON'BLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG VS. CIT (1992) 1931TR 321 (SC) HAS HELD AS UNDER: . 3.8 APPLYING THE ABOVE RULE TO THE FACTS OF THE IN STANT CASE, IT IS EVIDENT THAT ONCE THE GROSS PROFIT RATE DECLARED BY THE ASSESSEE HAS BEEN ALLOWED AND ACCEP TED BY THE DEPARTMENT IN THE PROCEEDING AND SUCCEEDING YEAR(S) THEN THERE IS NO JURISDICTION EITHER TO INC REASE OR DECREASE THE GROSS PROFIT RATE DECLARED BY THE ASSE SSEE IN THE YEAR UNDER CONSIDERATION THAT SUCH GROSS PRO FIT RATE WAS NOT JUSTIFIED. IN VIEW OF THE DISCUSSION M ADE ABOVE, ADDITIONAL GROUND OF APPEAL NO.1 TO 6 ARE DISMISSED.' . ITA NO.4659/DEL./2011 ITA NO.5769/DEL./2010 ITA NO.152/DEL./2012 ITA NO.193/DEL./2013 11 6.1 AS THE FACTS AND CIRCUMSTANCES OF THE CASE UND ER CONSIDERATION ARE PARI MATERIA IN THE CASE OF THE APPELLANT FOR THE ASSESSMENT YEAR 2002-03 & 2006-07 , FOR THE REASONS AS DISCUSSED IN THE AFOREMENTIONED ORDER OF THE HON'BLE DISPUTE RESOLUTION PANEL-II, N EW DELHI, THE ASSESSING OFFICE IS DIRECTED TO APPLY PR OFIT RATE OF 10% ON THE TOTAL SALES MADE TO DMRC AND ATTRIBUTE 50% OF SUCH PROFIT TO THE APPELLANT, AS A RESULT, GROUNDS OF APPEAL NOS 3 TO 6 ARE PARTLY ALLOWED.' 10. LD. AR FOR THE ASSESSEE CHALLENGING THE AFORESA ID FINDINGS CONTENDED INTER ALIA THAT THE LD. CIT (A) HAS NOT D ECIDED THE ADDITIONAL GROUNDS OF APPEAL ON MERITS; THAT THE LD . CIT (A) BY IGNORING THE NEW GROUNDS AND CHANGE IN THE FACTUAL POSITION PROCEEDED TO DECIDE THE APPEAL ON THE BASIS OF PRIN CIPLE OF CONSISTENCY AND RELIED UPON THE DECISION CITED AS BHARAT SANCHAR NIGAM LTD. 282 ITR 273 (SC), M/S. N.R. PAPER & BOAR D LTD. 234 ITR 733 (GUJ.), M/S. ONWARD TECHNOLOGIES LTD. 147 I TD 534 (MUM.) AND M/S. KRISHAK BHARATI COOPERATIVE 350 I TR 24 (DELHI) AND CONTENDED TO DECIDE THE CONTROVERSY AS PER LAW APPLICABLE AND NOT ON THE BASIS OF PRINCIPLE OF EQU ITY ADOPTED IN THE PAST. 11. TO REPEL THE ARGUMENTS ADDRESSED BY THE LD. AR FOR THE ASSESSEE, THE LD. DR FOR REVENUE SUPPORTED THE ORDE R PASSED BY THE ITA NO.4659/DEL./2011 ITA NO.5769/DEL./2010 ITA NO.152/DEL./2012 ITA NO.193/DEL./2013 12 LD. CIT (A) DECIDED ON THE BASIS OF CLAIM AND ARGUM ENTS RAISED BY THE ASSESSEE. 12. WE ARE OF THE CONSIDERED VIEW THAT WHEN THE LD. CIT (A) HAS ADMITTED THE ADDITIONAL GROUNDS RAISED BY THE ASSES SEE TO DECIDE THE ISSUE ON MERIT, THE ISSUE WAS NOT TO BE DECIDED BY THE LD. CIT (A) ON THE BASIS OF AGREED SETTLEMENT FORMULA BY APPLYI NG THE RULE OF CONSISTENCY. THE LD. CIT (A) HAS MERELY DECIDED TH E ISSUE PERTAINING TO APPLICABILITY OF CORRECT GROSS PROFIT RATE BY APPLYING THE RULE OF CONSISTENCY. THE LD. CIT (A) HAS ALSO DECIDED THE APPLICABILITY OF GROSS PROFIT RATE OF 10% PERTAININ G TO DMRC PROJECT BUT HAS NOT DECIDED THE ISSUE OF EXCLUSION FROM TURNOVER. LD. CIT (A) IN ORDER TO TEST THE APPLICABILITY OF G ROSS PROFIT RATE OF 10% HAS MERELY RELIED UPON THE ORDER OF AY 2006-07. ALL OTHER GROUNDS REMAINED UNADJUDICATED. 13. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT SINCE THE ASSESSEE HAS SET UP A NEW CASE BY RAISING ADDITIONAL GROUNDS BY DEPARTING FROM THE RU LE OF CONSISTENCY, ALL THE GROUNDS WERE REQUIRED TO BE DE CIDED BY THE LD. CIT (A) ON MERITS. HOWEVER, AT THE SAME TIME, WE A RE OF THE CONSIDERED VIEW THAT SINCE THE ASSESSEE HAS RAISED MANY OF THE NEW GROUNDS FIRST TIME BEFORE THE LD. CIT (A) QUA WHICH NO MATERIAL ITA NO.4659/DEL./2011 ITA NO.5769/DEL./2010 ITA NO.152/DEL./2012 ITA NO.193/DEL./2013 13 WAS THERE BEFORE THE AO AT THE TIME OF FRAMING ASSE SSMENT, IT WOULD BE IN THE INTEREST OF JUSTICE TO REMAND THE C ASE BACK TO AO TO DECIDE AFRESH AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. CONSEQUENTLY, THE APPEAL BEING ITA NO.46 59/DEL/2011 FOR AY 2005-06 IS ALLOWED FOR STATISTICAL PURPOSES. 14. IN THE LIGHT OF THE FINDINGS RETURNED IN THE PR ECEDING PARAS, WE ARE OF THE CONSIDERED VIEW THAT SINCE ISSUE PERT AINING TO AYS 2006-07, 2007-08 AND 2008-09 ARE ALSO IDENTICAL TO AY 2005-06 EXCEPT THE DIFFERENCE THAT FOR THESE YEARS, THE ASS ESSEE HAS FILED APPEAL BEFORE THE TRIBUNAL CHALLENGING THE ASSESSME NT ORDER PASSED BY THE AO PURSUANT TO THE DIRECTION OF LD. DRP BUT ISSUES RAISED IN THE GROUNDS ARE IDENTICAL IN AYS 2006-07, 2007-08 & 2008-09 TO AY 2005-06. 15. IN AY 2006-07, GROUNDS AS HAVE BEEN RAISED BY T HE ASSESSEE BEFORE THE LD. CIT (A) BY WAY OF ADDITIONAL GROUNDS IN AY 2005-06 HAVE BEEN RAISED BEFORE THE TRIBUNAL. LIKEWISE, IN AY 2007-08 AND 2008-09, SIMILAR CLAIM AS HAS BEEN RAISED BY WA Y OF ADDITIONAL GROUNDS IN AY 2005-06 WAS MADE BEFORE THE AO AS WEL L AS LD. DRP WHICH HAS BEEN REJECTED BY FOLLOWING THE DECISI ON RENDERED BY THE HONBLE APEX COURT IN GOETZE INDIA LTD. 284 ITR 323 (SC) WHICH IS NOT APPLICABLE ON THE POWER OF APPELLATE AUTHORITY TO ITA NO.4659/DEL./2011 ITA NO.5769/DEL./2010 ITA NO.152/DEL./2012 ITA NO.193/DEL./2013 14 CONSIDER THE REVISED CLAIM AS HAS BEEN HELD IN RITES LTD. VS. CIT (2017) 83 TAXMANN.COM 267 (DEL.) AND CIT VS. JAI PA RABOLIC SPRINGS LTD. 306 ITR 42 (DEL.) . 16. ISSUE AS TO ADMISSIBILITY OF INDIA PROJECT OFFI CE IN AYS 2006- 07, 2007-08 & 2008-09 IS ALSO IDENTICAL TO AY 2005- 06, SO WE ARE OF THE CONSIDERED VIEW THAT IN VIEW OF THE FINDINGS RETURNED IN THE PRECEDING PARAS PERTAINING TO APPEAL FOR AY 2005-06 , APPEALS PERTAINING TO AYS 2006-07, 2007-08 & 2008-09 ARE AL SO REMANDED BACK TO THE AO TO DECIDE AFRESH AFTER PROVIDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 16. RESULTANTLY, ALL THE APPEALS FILED BY THE ASSES SEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF MAY, 2019. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH) VICE PRESIDENT JUDICIAL MEMBE R DATED THE 30 TH DAY OF MAY, 2019 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-VII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.