Jaiprakash Associates Ltd., Noida V. DCIT(International Taxation), Noida

ITA 4906/DEL/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3957 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 30-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHEFALI SWAROOP
• Assessee Lawyers: ASHWANI GARG
• Keywords: Business income; Double taxation relief; Principle of natural justice; Bonafide belief; Advance ruling; Non-deduction of tax; TDS; Set aside
• Section: 201(1); 201

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C: NEW DELHI BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.4905 TO 4907/DEL/2019 A Y 2012-13 TO 2014-15 APPELLANT BY : SH. ASHWANI GARG, ADVOCATE RESPONDENT BY: MS. SHEFALI SWAROOP, CIT DR DATE OF HEARING 27 / 11 /201 9 DATE OF PRONOUNCEMENT 28 / 11 /201 9 O R D E R PER SUCHITRA KAMBLE, JUDICIAL MEMBER THESE THREE APPEALS ARE FILED BY THE ASSESSEE, AGAI NST THE COMMON ORDER DATED 14.01.2019 PASSED BY THE CIT(A)- 2, NOIDA FOR A.Y. 2012-13, 2013-14 AND 2014-15. JAI P RAKASH ASSOCIATES LTD., SECTOR128, NOIDA, U. P. PAN NO. AABCB1562A VS DCIT(INTERNATIONAL TAXATION), NOIDA-201301 (APPELLANT) (RESPONDENT) 2. THE GROUNDS OF APPEAL ARE COMMON IN ALL THE THRE E APPEALS THEREFORE, WE ARE TAKING UP GROUNDS OF APPEAL IN IT A NO. 1309/DEL/2017 FOR A.Y. 2012-13 WHICH ARE AS FOLLOWS : 1. THAT THE LEARNED CIT(A) HAS ERRED IN NOT QUASHIN G AS NULL AND VOID THE IMPUGNED ORDER UNDER S. 201 OF THE ACT (FOR NON DED UCTION OF TAX AT SOURCE) PASSED BY THE AO; IGNORING THAT - 1) THE SHOW-CAUSE NOTICE UNDER S. 201 WAS ISSUED BY TH E AO TO THE NON-EXISTENT JAYPEE SPORTS INTERNATIONAL LTD WHICH ALREADY STOOD AMALGAMATED (WITH JAIPRAKASH ASSOCIATES LIMITED). 2) THE ORDER UNDER S. 201 TOO WAS PASSED ON THE SAID N ON-EXISTENT COMPANY PURSUANT TO THE NOTICE ISSUED AND PROCEEDIN GS CONDUCTED ON THE SAME. THE AO DID NOT SUBSTITUTE THE AMALGAMATED COM PANY AS THE ASSESSEE DESPITE PROPER INTIMATION OF AMALGAMATION GIVEN BY THE AMALGAMATED COMPANY. 3) THE AO DID NOT SUBSTITUTE THE AMALGAMATED COMPANY A S THE ASSESSEE DESPITE PROPER INTIMATION OF AMALGAMATION GIVEN BY THE AMALGAMATED COMPANY. 1.1 THAT, THEREFORE, THE ORDER OF THE LEARNED CIT ( A) IS LIABLE TO BE SET ASIDE AND THE IMPUGNED ORDER OF THE AO UNDER S. 201 QUASHED AS NULL AND VOID. LIABILITY OF TAX UNDER S. 201(1) 2. THAT THE LEARNED CIT(A) HAS ERRED IN NOT DELETIN G THE TAX DEMAND ON THE APPELLANT UNDER S. 201(1) FOR NON-DEDUCTION OF TAX FROM THE FEE PAID TO A NON RESIDENT FOREIGN COMPANY; IGNORING THAT - 1) THE FOREIGN COMPANY HAD ALREADY BEEN ASSESSED IN R ESPECT OF ITS INCOME CHARGEABLE IN INDIA INCLUDING INCOME FROM TH E FEE RECEIVED FROM THE APPELLANT; AND HAD DISCHARGED ITS INDIAN TAX LIABIL ITY BY DIRECT PAYMENT. 2) THEREFORE, FOLLOWING HINDUSTAN COCA COLA BEVERAGE PVT. LTD. V. CIT [2007]293 ITR 226 (S.C.), CIT V. ELI LILLY & CO. (I NDIA) PVT. LTD. [2009] 312 ITR 225 (S.C.) AND THE CBDT CIRCULAR NO. 275/201/95 -IT(B) DATED 29.1.1997, THE SAME TAX COULD NOT BE DOUBLY COLLECT ED THE APPELLANT AS WELL. 2.1 THAT, THEREFORE, THE AO SHOULD BE DIRECTED TO D ELETE THE DEMAND ON THE APPELLANT UNDER S. 201(1) OF THE ACT. LIABILITY OF INTEREST UNDER S. 201(1A) 3. THAT THE LEARNED CIT (A) HAS ERRED IN NOT HOLDIN G THAT THE INTEREST PAYABLE BY THE APPELLANT UNDER S. 201 (1A) SHALL BE COMPUTED WITH REFERENCE TO THE TAX ON THE CHARGEABLE INCOME PAID AND ASSESSED IN THE HANDS OF THE FOREIGN COMPANY. 3.1 THAT, THEREFORE, THE ORDER OF THE LEARNED CIT(A) IS LIABLE TO BE SET ASIDE AND THE AO DIRECTED TO COMPUTE THE INTEREST P AYABLE BY THE APPELLANT WITH REFERENCE TO THE AFORESAID TAX; AND UP TO THE DATE OF PAYMENT OF SUCH TAX BY THE APPELLANT OR THE FOREIGN COMPANY WHICHEV ER IS EARLIER. ALL GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. FU RTHER, THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR FORGO ANY OF THE GROU NDS. 3. JAYPEE SPORTS INTERNATIONAL LIMITED (JPSI) DURING F Y 2011- 12, MERGED WITH JAIPRAKASH ASSOCIATES LIMITED PAID USD 40,124,120 TO FORMULA ONE WORLD CHAMPIONSHIP LTD (F OWC). THE PAYMENT WAS IN RESPECT OF THE MOTOR-RACING EVENT HE LD IN INDIA IN 2011 (GP-2011) UNDER THE DETAILED TERMS OF THE RELE VANT RACE PROMOTION CONTRACT. THE PAYMENT WAS MADE WITHOUT DE DUCTION OF TAX UNDER BONAFIDE BELIEF THAT IT WAS BUSINESS INCO ME AND, IN THE ABSENCE OF ANY PE OF FOWC IN INDIA, WAS NOT CHARGEA BLE. JPSI APPLIED TO AAR (26.09.2011) FOR ADVANCE RULING ON T HE ISSUE OF CHARGEABILITY. AAR HELD THAT FOWC HAD NO PE IN INDI A BUT THE FEE PAID WAS IN THE NATURE OF ROYALTY UNDER THE DTAA AN D HENCE WAS CHARGEABLE. THIS AAR RULING WAS ALTERED BY THE HON BLE DELHI HIGH COURT VIDE ORDER DATED 30.11.2016 WHEREIN IT IS HEL D THAT THE PAYMENT TO FOWC CONSTITUTED BUSINESS INCOME UNDER A RT. 7 OF THE DTAA AND THE JPSI RACING CIRCUIT CONSTITUTED FIXED- PLACE PE OF FOWC IN INDIA. HENCE THE COURT HELD THAT THE INCOME PAID WAS CHARGEABLE. THUS, ONE PART OF THE JPSI CONTENTION W AS UPHELD BY THE AAR AND THE OTHER PART BY THE HONBLE HIGH COUR T. POST THE ORDER OF THE HONBLE HIGH COURT, THE ASSESSING OFFI CER UNDER S. 195(2) DETERMINED THE CHARGEABLE INCOME (COMPRISED WITHIN THE AFORESAID GROSS PAYMENT) AT USD 11,451,023. THE ASS ESSING OFFICER APPLIED THE PROPORTIONATE METHOD TO THE GLO BAL TURNOVER & OPERATING PROFIT OF FOWC AND ATTRIBUTED 100% OPERAT ING PROFIT OF GP-2011 TO THEIR ALLEGED INDIAN PE. THE ASSESSING O FFICER PASSED THE ASSESSMENT ORDER UNDER SECTION 201 DATED 10.2.2 017 ON JPSI HOLDING IT LIABLE FOR TAX UNDER SECTION 201(1) AND INTEREST UNDER SECTION 201(1A). 4. BEING AGGRIEVED BY THE ORDER DATED 10.02.2017 PA SSED U/S. 201 (1)/201 (1A) OF THE INCOME TAX ACT, 1961 BY THE DCIT (INTERNATIONAL TAXATION), NOIDA, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASSE SSEE. 5. AS REGARDS GROUND NO.1 IN RESPECT OF MAINTAINABI LITY OF THE ASSESSMENT ORDER, THE LD. AR SUBMITTED THAT THE ASS ESSING OFFICER ISSUED SHOW CAUSE NOTICE U/S. 201 ON THE NON-EXISTE NT JAYPEE SPORTS INTERNATIONAL LTD. WHICH ALREADY STOOD AMALG AMATED. THUS, THE ASSESSMENT ORDER ITSELF IS BAD IN LAW. AS REGA RDS GROUND NO.2 AND 3 LIABILITY OF TAX U/S. 201 (1) AND LIABILITY O F INTEREST U/S. 201 (1A), THE LD. AR SUBMITTED THAT FOREIGN COMPANY I.E . FORMULA ONE WORLD CHAMPIONSHIP LTD. HAD ALREADY BEEN ASSESSED IN RESPECT OF ITS INCOME CHARGEABLE IN INDIA INCLUDING INCOME FRO M THE FEE RECEIVED FROM THE ASSESSEE AND HAD DISCHARGED ITS I NDIAN TAX LIABILITY BY DIRECT PAYMENT AS PER THE DECISION OF THE HONBLE APEX COURT IN CASE OF FORMULA ONE WORLD CHAMPIONSHIP LTD . VS. CIT- INTERNATIONAL TAXATION 394 ITR 80 (SC). THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE HAD DEDUCTED THE TDS AN D INTEREST THEREON AND PAID THE SAID AMOUNT, THEREFORE, BY FOL LOWING HINDUSTAN COCA COLA BEVERAGE PVT. LTD. VS. CIT [200 7] 293 ITR 226 (S.C.), CIT VS. ELI LILLY & CO. (INDIA) PVT. LTD. [ 2009] 312 ITR 225 (S. C.) THE SAME TAX COULD NOT BE DOUBLY COLLECTED FROM THE ASSESSEE AS WELL. THE LD. AR FURTHER SUBMITTED THAT THE QUESTI ON OF INTEREST PAYABLE BY THE ASSESSEE U/S. 201 (1A) DOES NOT ARIS E AS THE INCOME TAX WAS ASSESSED IN THE HANDS OF THE FOREIGN COMPAN Y WHICH WAS DONE BY THE REVENUE AUTHORITY BY PASSING ASSESSMENT ORDER IN M/S. FORMULA ONE WORLD CHAMPIONSHIP LTD. AND HAS BEEN TA XED IN THE HANDS OF THE FOREIGN ENTITY. THEREFORE, IN THE LIGH T OF THESE THE LD. AR SUBMITTED THAT THE MATTER MAY BE REMAND BACK TO THE FILE OF THE ASSESSING OFFICER TO MODIFY DEMAND AS PER THE DECIS IONS OF THE HONBLE SUPREME COURT IN THE CASE OF M/S. FORMULA O NE WORLD CHAMPIONSHIP LTD. (SUPRA) 6. THE LD. DR RELIED UPON THE ORDER U/S. 201(1)/ 20 1 (1A) OF THE INCOME TAX ACT AND THE ORDER OF THE CIT(A). 7. WE HAVE HEARD BOTH THE SIDES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS REGARDS GROUND NO .1 THE ASSESSMENT ORDER HAS CLEARLY MENTIONED THE NAME OF THE AMALGAMATED COMPANY AND, THEREFORE, THE ASSESSMENT PROCEEDINGS ARE VALID. THUS, GROUND NO.1 DOES NOT SUSTAINED AND HENCE DISMISSED. AS REGARDS TO GROUND NO. 2 AND 3, SINCE THE FOREIGN COMPANY I.E. FORMULA ONE CHAMPIONSHIP LTD. (SUPRA) HAS ALREADY BEEN TAXED AND THE HONBLE SUPREME COURT HAS CONFIR MED THE SAME IN FOREIGN COMPANYS CASE, IT WILL BE APPROPRIATE T O REMAND BACK THIS ISSUE FOR MODIFYING THE DEMAND IF ANY ARISE AF TER VERIFYING THE RECORDS AS PER DECISIONS OF THE HONBLE SUPREME COU RT IN FOREIGN COMPANYS CASE, AS THE ASSESSEE HAS ALREADY DEDUCTE D THE TDS AND PAID THE SAME WITH INTEREST. NEEDLESS TO SAY THE A SSESSEE BE GIVEN AN OPPORTUNITY OF HEARING BY FOLLOWING THE PRINCIPL ES OF NATURAL JUSTICE. GROUND NO.2 AND 3 ARE PARTLY ALLOWED FOR S TATISTICAL PURPOSES. ALL THE THREE APPEALS ARE IDENTICAL HENCE , ALL THE THREE APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE 8. IN RESULT, ALL THE THREE APPEALS FILED BY THE AS SESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 28.11.2019. SD/- SD/- (N. K. BILLAIYA ) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 28/11/2019 *NEHA* COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI DATE OF DICTATION 27.11.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 27.11.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 28.11.2019 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS 28.11.2019 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 28.11.2019 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS 28.11.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 28.11.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 28.11.2019 DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER