TORAY INTERNATIONAL (SINGAPORE) PTE LTD, MUMBAI V. ADIT (IT) 1(2), MUMBAI

ITA 4813/MUM/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0273 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 18-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Assessee Lawyers: KISHOR PATEL
• Keywords: Business income; Permanent establishment; Reasonable cause
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE D.T. GARASIA, JUDICIAL MEMBER AND SHRI N. K. PRADHAN, ACCOUNTANT MEMBER ITA NO.4813/M/2014 ASSESSMENT YEAR: 2008-09 M/S. TORAY INTERNATIONAL (SINGAPORE) PVT. LTD. 801 & 802 VAIBHAV CHAMBERS, BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI - 400051 PAN:AACCT2870L VS. ASST. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) 1(2) SCINDIA HOUSE MUMBAI - 400038 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI KISHOR PATEL REVENUE BY : SHRI V. JUSTIN DATE OF HEARING : 30.01.2018 DATE OF PRONOUNCEMENT : 14.02.2018 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE ABOVE TITLED APPEAL HAS BEEN PREFERRED BY THE A SSESSEE AGAINST THE ORDER DATED 31.01.2014 OF THE COMMISSIONER OF INCOME TAX (APPEALS) 10, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2008-09. THE ONLY GROUND IN THIS APPEAL IS REGARDING LEVYING PENALTY U/S.271B[HEREINAFTER REFERRED AS THE ACT]. 2. THE SHORT FACTS OF THE CASE IS THAT ASSESSEE COM PANY SUBMITTED THE RETURN OF INCOME ON 24.09.2008 DECLARING THE VALUE OF FRIN GE BENEFITS AND TAXES PAID THEREON. AS PER THE RBI APPROVAL, THE LO WAS NOT P ERMITTED TO CONDUCT ANY COMMERCIAL TRANSACTION IN INDIA AND HENCE, DECLARED NIL TAXABLE INCOME IN THE RETURN OF INCOME. DURING THE COURSE OF ASSESSMENT ASSESSING OFFICER ASKED FOR THE DETAILS OF THE SALES MADE BY THE HO TO THE INDI AN CUSTOMERS DURING THE RELEVANT A.Y. ASSESSEE COMPANY PROVIDED THE INFORM ATION AND ALSO SUBMITTED THAT LO DID PLAY ANY ROLE IN SUCH TRANSACTION. THE PENALTY PROCEEDING ITA NO.4813/M/14 A.Y.2008-09 2 U/S.271B OF THE ACT WAS INITIATED BY ISSUING THE NO TICE. ASSESSEE SUBMITTED THAT ASSESSEE COMPANY DID NOT CARRY ANY ACTIVITY OF TRADING OR COMMERCIAL IN NATURE. THERE WAS NO SALES OF INCOME OR GROSS RECE IPT IN THE RELEVANT YEAR UNDER CONSIDERATION HENCE THERE IS NO REQUIREMENT O F TAX AUDIT IN CASE OF ASSESSEE COMPANY AS PROVISION OF SECTION 44AB OF TH E ACT. EVEN IF THE AMOUNT OF RS.29,43,030/- IS ASSESSED AS INCOME IN HANDS OF ASSESSEE. THE TAX AUDITED REPORT PROVISION U/S.44AB IS NOT APPLICABLE SINCE I T IS LIMIT OF RS.40 LACS, HOWEVER, THE ASSESSING OFFICER HAS LEVIED THE PENAL TY. 3. THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS DISM ISSED THE APPEAL. 4. DURING THE COURSE OF HEARING THE LEARNED AR SUBM ITTED THAT ASSESSEE WAS CARRYING OUT ONLY LIAISONING WORK AS PER THE RBI PE RMISSION IN INDIA VIDE LETTER DATED 26.03.2007 WHICH IS ON 4-5 OF THE PAPE R BOOK AND RBI LETTER DATED 30.03.2007 EXTENDED THE PERMISSION FOR FURTHER PERI OD OF THREE YEARS WHICH IS ON PAGE 6-7 OF THE PAPER BOOK. AUDITED STATEMENT O F ACCOUNTS OF LIAISON OFFICE IS AT PAGE 8 -15 OF THE PAPER BOOK. THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAS ESTABLISHED A LIAISON OFFICE AS PER THE PERMISS ION OF THE RBI AND ASSESSEE WAS CARRYING OUT LIAISON WORK SINCE INCEPTION OF TH E COMPANY. THE ASSESSEE WAS CARRYING LIAISON WORK IN A.Y.2006-07 AND 2007-0 8 AND NO PENALTY WAS IMPOSED U/S.271B OF THE ACT. IN THIS YEAR THE ASSE SSING OFFICER HAS LEVIED THE PENALTY WITHOUT CONSIDERING THE SUBMISSION OF THE A SSESSEE. LEARNED AR FAIRLY SUBMITTED THAT IN THE A.Y. UNDER CONSIDERATION THE ASSESSEES INCOME WAS TAXED AS BUSINESS INCOME AND THE TOTAL INCOME WAS ASSESSE D AT RS.29,43,030/-. THE LEARNED AR SUBMITTED THAT UNDER THE RBI GUIDELINES LIAISON OFFICER WHO CARRY OUT ANY BUSINESS ACTIVITY. THEREFORE, NO BUSINESS ACTIVITY WAS ACTUALLY CARRIED OUT BY THE LIAISON OFFICE. THEREFORE, SIMPLY TREAT ING THE LIAISON OFFICE AS PE, TURNOVER OF PARENT COMPANY CANNOT BE CONSIDERED TUR NOVER OF PE IN INDIA FOR THE PURPOSE OF SECTION 44AB. THE LEARNED DR SUBMIT TED THAT THE ASSESSEE COMPANYS TURNOVER IS RS.73 CRORES WHICH IS FIND PL ACE OF MENTION IN PARA 6 OF ITA NO.4813/M/14 A.Y.2008-09 3 THE ASSESSMENT ORDER. THEREFORE, IT IS COMPULSORY TO GET IS BOOKS OF ACCOUNTS AUDITED AS PER SECTION 44AB OF THE ACT. 5. WE HAVE HEARD THE RIVAL CONTENTION. WE FIND THA T THE ASSESSEE COMPANY HAS A ESTABLISHED LIAISON OFFICE IN INDIA AFTER TAK ING APPROVAL FROM RBI. UNDER THE RBI GUIDELINES /CIRCULARS/NOTIFICATION, LIAISON OFFICE ARE NOT SUPPOSE TO CARRY OUT ANY BUSINESS ACTIVITY. THEREFORE, NO BUS INESS ACTIVITY WAS ACTUALLY CARRIED OUT BY LIAISON OFFICE. WE FIND THAT THE AS SESSEE COMPANY WAS ESTABLISHED AS PER THE RBI GUIDELINES, THEREFORE, A SSESSEE ASSESSEE IS CONTESTING THAT ASSESSEE IS NOT CARRYING OUT ANY BUSINESS ACTI VITIES ONLY LIAISONING ACTIVITIES, THEREFORE ASSESSEE HAS NOT AUDITED HIS BOOKS OF ACCOUNTS. MOREOVER, WE FIND THAT IN SIMILAR SAID OF FACTS IN A.Y.2006-0 7 AND 2007-08 ON IDENTICAL FACTS NO PENALTY UNDER 271B OF THE ACT HAS BEEN LEV IED BY THE DEPARTMENT. THEREFORE, WE ARE OF THE VIEW THAT ASSESSEE HAS REA SONABLE CAUSE FOR NOT GOT HIS ACCOUNTS AUDITED U/S.44AB OF THE ACT. MOREOVER, AS SESSEE HAS ALSO GAVE THE DETAILS OF SALES MADE BY THE HO TO THE INDIAN CUSTO MERS AND COMPANY DID NOT PROVIDE INFORMATION AND SUBMISSION THAT LIAISON OFF ICER DID NOT PLAY ANY ROLE IN SUCH TRANSACTION. THE ASSESSING OFFICER HAS HELD T HAT THE ASSESSEE IS CARRYING OUT BUSINESS ACTIVITIES FROM LIAISON OFFICE THAT CO NSTITUTE HEAD OFFICE IN INDIA, THAT CONSTITUTE PERMANENT ESTABLISHMENT OF HEAD OFF ICE IN INDIA, HENCE THERE IS A BUSINESS CONNECTION IN INDIA AS PER THE SECTION 9 OF THE ACT. THE ASSESSEE IS CONTENDING THAT ASSESSEE DID NOT CARRY OUT ANY ACTI VITIES OF TRADING OR COMMERCIAL IN NATURE. WE FIND THAT THE ASSESSEES CONTENTION IS THAT HE IS DOING ONLY LIAISON WORK, THEREFORE, ASSESSEE HAD REASONAB LE CAUSE FOR GOT HIS ACCOUNTS AUDITED U/S.44AB OF THE ACT. THE ASSESSEES SECOND CONTENTION THE AMOUNT OF RS.29,43,030/- IS ASSESSED AS INCOME IN THE HANDS O F LIAISON OFFICE. THE TAX AUDIT PROVISION IS NOT APPLICABLE, SINCE IT IS BELO W THRESHOLD LIMIT OF RS.40 LACS. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT ASS ESSEE HAD REASONABLE CAUSE FOR NOT CARRY OUT HIS BOOKS OF ACCOUNTS AUDITED U/S .44AB OF THE ACT. THEREFORE, WE DELETE THE PENALTY. ITA NO.4813/M/14 A.Y.2008-09 4 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.02.2018. SD/- SD/- (N. K. PRADHAN) (D. T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 14.02.2018. * MP . / 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