LINKLATERS, MUMBAI V. ADDL. DIT (INTERNATIONAL TAXATION), MUMBAI

ITA 4691/MUM/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0286 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 11-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V SREEKAR CHAITANYA ANJARINCIT
• Assessee Lawyers: S E DASTUR
• Keywords: Business income; Permanent establishment
• Section: 13

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL I BE NCH, MUMBAI BEFORE SHRI SAKTIJIT DAY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER / // / I II I .TA NO.4691/MUM/2016 ( / / / / ASSESSMENT YEAR:2011-12 M/S.LINKLATERS, C/O.DELOITTE HASKINS & SELLS LLP INDIA BULLS FINANCE CENTRE, ELPHINSTONE MILL COPOUND,SENAPATI BAPAT MARG,ELPHINSTONE(W), MUMBAI 400 013. / VS. THE ADDL. DIT(INTERNATIONAL TAXATION) SCINDIA HOUSE, N. M. ROAD, BALLARD ESTATE, MUMBAI. ./ ./ PAN/GIR NO.AABFL2160 M ( / // / APPELLANT ) .. ( / RESPONDENT ) / I II I .TA NO.4644/MUM/2016 ( / / / / ASSESSMENT YEAR:2011-12 THE ADDL. DIT(INTERNATIONAL TAXATION) SCINDIA HOUSE, N. M. ROAD, BALLARD ESTATE, MUMBAI. / VS. M/S.LINKLATERS, C/O.DELOITTE HASKINS & SELLS LLP INDIA BULLS FINANCE CENTRE, ELPHINSTONE MILL COPOUND,SENAPATI BAPAT MARG,ELPHINSTONE(W), MUMBAI 400 013. ./ ./ PAN/GIR NO.AABFL2160 M ( / // / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY: SHRI V.SREEKAR CHAITANYA ANJARIN,CIT DR ASSESSEE BY: SHRI S.E.DASTUR, & SHRI NIRAJ SHETH / DATE OF HEARING : 06.12.2019 /DATE OF PRONOUNCEMENT : 18.12.2019 / O R D E R PER RAJESH KUMAR ACCOUNTANT MEMBER THE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-57, MUMBAI-51 DATED 22.3.2016 PERTAINING TO ASSESSMENT YEAR 2011- 12 AND THESE ARE HEARD TOGETHER AND DISPOSED OF THROUGH THIS COMMON ORDER. M/S.LINKLATERS 2. GROUND NOS.1 TO 7 HAS NOT BEEN PRESSED AT THE T IME OF HEARING AND THEREFORE NEED NOT TO BE ADJUDICATED. 3. GROUND NOS.14 & 15 ARE AGAINST THE ORDER OF THE LD.CIT(A) IN NOT SPECIFICALLY HOLDING THAT THE APPELLANT IS NOT HAVING PERMANENT ESTABLI SHMENT IN INDIA DURING THE FINANCIAL YEAR AS THE NUMBER DAY OF DAYS FOR WHICH THE SERVICES WE RE RENDERED DO NOT EXCEED 90 DAYS . THE GROUND NOS.14 & 15 ARE EXTRACTED AS UNDER:- 14. THE LD.CIT(A) ERRED IN NOT SPECIFICALLY HOLDIN G THAT THE PROVISIONS OF ARTICLE 5 OF INDIA-UK TAX TREATY ARE NOT APPLICABLE TO THE FACTS OF THE A PPELLANT. 15. THE LD.CIT(A) ERRED IN NOT SPECIFICALLY HOLDIN G THAT THE APPELLANT DID NOT HAVE A FIXED BASE IN INDIA. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGA GED IN THE BUSINESS OF PROVIDING LEGAL ADVICE SERVICES WORD OVER TO VARIOUS CLIENTS AND DURING THE YEAR FILED RETURN OF INCOME ON 29.09.2011 DECLARING THE TOTAL INCOME OF RS.30,37,690/-. THEREAFTER, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. THE ASSE SSEE IN ITS RETURN OF INCOME HAS STATED THAT ASSESSEE HAS NO BRANCH OR OFFICE IN INDIA DURI NG THE FINANCIAL YEAR 2010-11 NOR THE ASSESSEE HAS ESTABLISHED ANY OFFICE OR PLACE OF BUS INESS IN INDIA DURING THE FINANCIAL YEAR 2010-11. IT WAS ALSO SUBMITTED THAT DURING THE 12 MONTHS PERIOD PERTAINING TO FINANCIAL YEAR 2010-11, THE RENDERING OF SERVICES INCLUDING S ERVICES ON BEHALF OF GROUP CONCERNS BY ASSESSEES PERSONNEL HAS NOT EXCEEDED 90 DAYS AN D ACCORDINGLY, ASSESSEE HAS NO PERMANENT ESTABLISHMENT IN INDIA FOR THE A.Y. 2011- 12 IN TERMS OF THE INDIA-UK TAX TREATY ARTICLE-5(2)(K)(I) AND NO INCOME IS LIABLE TO TAX IN INDIA AS PER ARTICLE-7(1) OF THE TAX TREATY. 5. FURTHER, THE ARTICLE-5(2)(K)(I) OF THE TREATY P ROVIDES THAT FOR THE PURPOSE OF THIS TREATY , THE TERM PERMANENT ESTABLISHMENT MEANS A FIXED PLACE OF BUSINESS THROUGH WHICH THE BUSINESS OF AN ENTERPRISE IS WHOLLY OR PA RTLY CARRIED ON. ARTICLE 5(2)(K) FURTHER PROVIDES THAT THE TERM PERMANENT ESTABLISHMENT SHAL L INCLUDE ESPECIALLY THE PROVIDING OF SERVICES INCLUDING MANAGERIAL SERVICES, OTHER TH AN THOSE TAXABLE UNDER ARTICLE-13 (ROYALTIES AND FEES FOR TECHNICAL SERVICES), WITHIN A CONTRACTING STATE BY AN ENTERPRISE THROUGH EMPLOYEES OR OTHER PERSONNEL, BUT ONLY IF A CTIVITIES OF THAT NATURE CONTINUE WITHIN THAT STATE FOR A PERIOD OR PERIODS AGGREGATI NG TO MORE THAN 90 DAYS WITHIN ANY TWELVE MONTH PERIOD. BEFORE THE BENCH, THE LEARNED A.R. OF THE ASSESSEE SUBMITTED THAT M/S.LINKLATERS THE INCOME OF THE ASSESSEE COULD ONLY BE BROUGHT TO TAX, IF THE ASSESSEE CARRIES ON ACTIVITIES OF THAT NATURE FOR MORE THAN 90 DAYS WIT HIN ANY TWELVE MONTH PERIOD, BUT IN THE CASE OF THE ASSESSEE, THE PERIOD DURING WHICH T HESE ACTIVITIES WERE FURNISHED BY THE ASSESSEE, DOES NOT EXCEED 90 DAYS AND THEREFORE, WH ATEVER INCOME, IF THE ASSESSEE HAS RECEIVED, IS NOT TAXABLE UNDER BUSINESS INCOME. TH E LEARNED A.R. OF THE ASSESSEE REFERRED TO THE STATEMENT OF SHOWING DETAILS OF THE NUMBER OF DAYS, THE ASSESSEE FURNISHED SERVICES/ACTIVITIES IN INDIA, A COPY OF W HICH IS FILED AT PAGE 70 OF PAPER BOOK, WHICH SHOWS THAT THE TOTAL NUMBER OF MANDAYS /CUMUL ATIVE WERE ONLY 21 DAYS, WHICH ARE LESS THAN 90 DAYS AND THEREFORE, THE INCOME OF THE ASSESSEE CANNOT BE BROUGHT TO TAX IN INDIA. THE LEARNED A.R. OF THE ASSESSEE SUB MITTED THAT THE SAID FACTOR HAS BEEN STATED CLEARLY IN THE STATEMENT OF INCOME BY WAY OF NOTE. THE LEARNED A.R. OF THE ASSESSEE REFERRED TO THE ORDER PASSED BY LD.CIT(A) AND SPECIFICALLY POINTED OUT AT PAGE-7 OF HIS ORDER THAT IN RESPONSE TO DIRECTION FROM THE ADIT TO FURNISH NUMBER OF MANDAYS SPENT BY THE EMPLOYEES IN INDIA, THE ASSESSEE FILED DETAILED SUMMARY CONTAINING NUMBER OF DAYS SPENT BY EMPLOYEES IN INDIA FOR REND ERING SERVICES DURING FINANCIAL YEAR 2010-11, WHICH HAS NOT BEEN CONTROVERTED BY THE LD. ADIT. THE LEARNED A.R. OF THE ASSESSEE FURTHER POINTED OUT THAT THE LD.CIT(A) FUR THER NOTED THAT ADIT HAS FAILED TO APPRECIATE THAT THE INCOME EARNED BY THE ASSESSEE D URING THE ORDINARY COURSE OF BUSINESS WAS IN NATURE OF BUSINESS INCOME AND ACCOR DINGLY GOVERNED OF ARTICLE-7 OF TAX TREATY. THE LEARNED A.R. OF THE ASSESSEE VEHEMENTL Y SUBMITTED FOR THE BENCH THAT IN VIEW OF THE SAID FACT THERE IS NO QUESTION OF ASSES SING THE INCOME OF THE ASSESSEE UNDER ARTICLE-7 AS LD.CIT(A) HAS ALSO ADMITTED THE FACT O F HAVING FURNISHED THE DETAILS OF NUMBER OF DAYS SPENT BY EMPLOYEES IN INDIA FOR REND ERING SERVICES, WHICH WERE 21 DAYS DURING THE YEAR, FAR BELOW 90 DAYS AND THEREFORE TH E ASSESSEE WAS NOT HAVING ANY PERMANENT ESTABLISHMENT IN INDIA IN TERMS OF ARTICL E- ARTICLE 5(2)(K)(I) OF THE TREATY . LEARNED A.R. OF THE ASSESSEE THEREFORE PRAYED THAT THE ORDER OF THE LD.CIT(A) MAY KINDLY BE REVERSED AND DIRECTION MAY BE GIVEN TO THIS EFFE CT THAT THE INCOME OF THE ASSESSEE IS NOT TAXABLE AT ALL IN INDIA. 6. ON THE OTHER HAND, LEARNED D.R. RELIED ON THE OR DER OF THE AO AND THE LD.CIT(A) AND LEFT THE ISSUE TO THE DECISION OF THE BENCH. 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE OBSERVE THAT UNDISPUTED FACTS ARE THAT THAT TOTAL NUMBER OF DAYS SPENT BY THE M/S.LINKLATERS EMPLOYEES IN INDIA BY RENDERING SERVICES DURING THE YEAR WERE 21 DAYS AS IS CLEAR FROM THE STATEMENT FILED BY THE ASSESSEE AT PAGE-70 OF T HE PAPER BOOK, WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE:- SL.NO NAME OF EMPLOYEE PERIOD NO.OF DAYS CUMULATIVE OF DAYS IN PREVIOUS YEAR 2010-11 1 JONATHAN HORAN 30.05.2010 1 1 2 JONATHAN HORAN & JERERNY WEBB 31.05.2010 - 01.06.2010 2 3 3 LEE RANDAL & HYUNG AHN 17.6.2010 - 18.6.2010 2 5 4 PHILIP BADGE 22.6.2010 1 6 5 LEE RANDAL 28.6. 2010 1 7 6 LEE RANDAL, HYUNG AHN & SAMNATHA KIM 29.6.2010 - 30.6.2010 2 9 7 HYUNG AHN & SAMNATHA KIM 01.7.2010 1 10 8 HYUNG AHN 02.7.2010 1 11 9 HYUNG AHN 07.7.2010 1 12 10 HYUNG AHN & SAMNATHA KIM 08.7.2010 1 13 11 JERERNY WEBB 25.8.2010 - 27.8.2010 3 16 12 DAVID LUDWICK 7.9.2010-9.9.2010 3 19 12 JERERNY WEBB 18.01.2011 19.1.2011 2 21 THE SAID FACT HAS BEEN ACKNOWLEDGED BY THE LD.CIT(A ) IN THE APPELLATE ORDER AT PAGE-37, PARA-3 WHEREIN LD.CIT(A) HASNOTED AS UNDER:- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE L D.ADIT DIRECTED THE APPELLANT TO PROVIDE THE NUMBER OF DAYS SPENT BY THE EMPLOYEES. IN THIS CONNECTION, THE APPELLANT SUBMITTED DETAILS OF NUMBER OF DAYS SPENT BY EMPLOY EES IN INDIA FOR RENDERING SERVICES DURING THE FINANCIAL YEAR 2010-11. AS PER THE SAID STATEMENT THE NUMBER OF DAYS SPENT BY EMPLOYEES IN INDIA FOR RENDERING SERVICES DURING THE FINANCIAL YEAR 2010-11 WAS 21 DAYS. THE SAID DETAIL HAS NOT BEEN CONTROVERTED BY THE LD.ADIT. 7.1 NOW THE ONLY ISSUE FOR OUR CONSIDERATION IS WHE THER THE ASSESSEE HAS PERMANENT ESTABLISHMENT IN INDIA OR NOT. AS APPARENT FROM THE RECORDS BEFORE US, THE TOTAL NUMBER OF MANDAYS SPENT BY THE EMPLOYEES OF ASSESSEE IN I NDIA ARE LESS THAN 90 MORE SPECIFICALLY 21 DAYS. ARTICLE-7 PROVIDES THAT THE P ROFITS OF AN ENTERPRISE OF A CONTRACTING STATE SHALL BE TAXABLE ONLY IN THAT STATE, UNLESS T HE ENTERPRISE CARRIES ON BUSINESS IN THE OTHER CONTRACTING STATE THROUGH A PERMANENT ESTABLI SHMENT SITUATED THEREIN. THE PROFITS OF THE ENTERPRISE MAY BE TAXED IN THE OTHER STATE BUT ONLY SO MUCH OF THEM, AS IS DIRECTLY OR INDIRECTLY ATTRIBUTABLE TO THAT PERMANE NT ESTABLISHMENT. BUT, IN THE PRESENT CASE, THE ASSESSEE IS NOT HAVING ANY PERMANENT ESTA BLISHMENT IN INDIA AS IS CLEARLY FROM THE FACT THAT THE TOTAL NUMBER OF DAYS SPENT BY EMP LOYEES BY PROVIDING SERVICES IN INDIA WHICH ARE ONLY 21 DAYS AND IT IS NOT QUALIFIED TO P ERMANENT ESTABLISHMENT IN TERMS OF ARTICLE-5(2)(K)(I) OF INDIA-U.K TAX TREATY AS IT H AS BEEN SPECIFICALLY PROVIDED UNDER ARTICLE 5(2)(K)(I) THAT THE TOTAL NUMBER OF DAYS SHOULD BE MORE THAN 90 DAYS WITHIN A PERIOD OF 12 MONTHS AND THE PERIOD OF 12 MONTHS HAS BEEN INTE RPRETED TO BE AS FINANCIAL YEAR. M/S.LINKLATERS 7.2 IN VIEW OF THESE FACTS, WE HAVE CONSIDERED THE VIEW THAT THE ASSESSEE IS NOT HAVING ANY PERMANENT ESTABLISHMENT IN TERM OF ARTIC LE-5(2)(K)(I) OF INDIA-U.K TAX TREATY AND ACCORDINGLY, THE INCOME OF THE ASSESSEE IS NOT TAXABLE IN INDIA. 7 .3 SINCE WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, THE OTHER GROUNDS RAISED BY THE ASSESSEE IN THIS APPEAL BECOMES ACADE MIC AND NEEDS NO ADJUDICATION. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ITA NO.4644/MUM/2016 ( REVENUES APPEAL) 9. SINCE WE HAVE DECIDED IN ASSESSEES APPEAL IN IT A NO.4691/MUM/2016 THAT THE ASSESSEE IS NOT HAVING ANY PERMANENT ESTABLISHMENT IN INDIA FOR FINANCIAL YEAR 2010-11, THEREFORE, THE ISSUE RAISED BY THE REVENUE IN ITS A PPEAL BECOME ACADEMIC AND NEEDS NO ADJUDICATION. 10. IN THE RESULT, THE APPEAL OF REVENUE IS PARTLY ALLOWED. 11. TO SUM UP, BOTH THE APPEAL OF THE ASSESSEE AND THE REVENUE ARE PARTLY ALLOWED. (PRONOUNCED IN THE OPEN COURT ON 18 TH DECEMBER, 2019.) SD/- SD/- (SAKTIJIT DAY) (RAJESH KUMAR) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 18 TH DECEMBER, 2019 KSS , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI