Deputy Director of Income-tax, V. M/s. Sandvik AB., Pune

ITA 498/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9153 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-03-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 22-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIRUPAMA KOTRU
• Keywords: Double taxation relief
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE , , , BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 498 /P U N/201 6 / ASSESSMENT YEAR : 20 11 - 12 DY. DIRECTOR OF INCOME TAX, (INTERNATIONAL TAXATION), CIRCLE 2, PUNE ....... / APPELLANT / V/S. M/S. SANDVIK AB, C/O SANDVIK ASIA LIMITED, MUMBAI - PUNE ROAD, DAPODI, PUNE 411012 PAN : AAHCS7486E / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SMT. NIRUPAMA KOTRU / DATE OF HEARING : 2 1 - 0 3 - 2018 / DATE OF PRONOUNCEMENT : 23 - 0 3 - 201 8 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ASSESSMENT ORDER DATED 27 - 01 - 2016 PASSED U/S. 144C(13) R.W.S. 143(3) O F THE INCOME TAX 2 ITA NO . 498/PUN/2016, A.Y. 2011 - 12 ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR THE ASSESSMENT YEAR 20 11 - 12. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS IN THE APPEAL : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE DRP, MUMBAI ERRED IN CONCLUDING THAT THE SERVICES PROVIDED BY THE ASSESSEE DO NOT QUALIFY AS FEES FOR TECHNICAL SERVICE UNDER CLAUSE (B)OF PARA 4 OF ARTICLE 12 OF DOUBLE TAXAT ION AVOIDANCE AGREEMENT BETWEEN INDIA AND PORTUGUESE REPUBLIC BY REFERRING TO THE PROTOCOL OF INDIA - SWEDEN DTAA. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE DRP, MUMBAI ERRED IN CONCLUDING THAT THE TERM 'MAKE AVAILABLE' MEANS SUPPLYI NG OR TRANSFERRING OF TECHNICAL KNOWLEDGE OR TECHNOLOGY TO ANOTHER. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE DRP, MUMBAI ERRED IN ALLOWING ASSESSEE'S APPEAL WITHOUT GIVING A CATEGORICAL FINDING AS TO HOW THE SERVICES ARE NOT TAXAB LE IN INDIA AS PER INDIA - PORTUGUESE DTAA. 4. THE APPELLANT CRAVES TO LEAVE TO ADD TO MODIFY ANY OF THE GROUNDS OF APPEAL. 3. SHRI NIKHIL PATHAK APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 30 - 11 - 2011 DECLARING TOTAL INCOME AS NIL. THE ASSESSEE IS A NON RESIDENT COMPANY INCORPORATED IN SWEDEN. DURING THE PERIOD REL EVANT TO THE ASSESSMENT YEAR UNDER APPEAL THE ASSESSEE ENTERED INTO TRANSACTIONS WITH ITS SUBSIDIARIES IN INDIA AND RECEIVED PAYMENTS FOR THE SERVICES PROVIDED AS UNDER : SR. NO. NAME OF THE AE NATURE OF TRANSACTION AMOUNT IN RS. 1 SANDVIK ASIA LTD. MANAGEMENT SERVICE FEES 21,24,70,400 2 WALTER TOOLS INDIA PVT. LTD. TECHNICAL SERVICES 1,04,98,188 TOTAL 22,29,68,588 3 ITA NO . 498/PUN/2016, A.Y. 2011 - 12 4. THE LD. AR POINTED THAT THE ASSESSING OFFICER HELD THE SERVICES RENDERED BY THE APPELLANT TO ITS INDIAN SUBSIDIARIES AS FEE FOR TECHNICAL SERVICES AFTER DRAWING INFERENCE FROM SWEDEN TAX TREATY. THE LD. AR CONTENDED THAT SIMILAR ADDITIONS WERE MADE IN ASSESSMENT YEARS 2008 - 09 AND 2010 - 11. THE ASSESSEE CARRIED THE MATTER IN APPEAL IN ITA NO. 47/PN/2013 FOR ASSESSMENT YEA R 2008 - 09 DECIDED ON 22 - 05 - 2015 BEFORE THE TRIBUNAL. THE TRIBUNAL DELETED THE ADDITIONS BY PLACING RELIANCE ON THE DECISION OF TRIBUNAL ORDER IN ASSESSEES OWN CASE IN ITA NO. 1720/PN/2011 FOR ASSESSMENT YEAR 2007 - 08 DECIDED ON 28 - 11 - 2014. SIMILARLY, IN ASSESSMENT YEAR 2010 - 11 THE ADDITION WAS MADE BY THE AUTHORITIES BELOW FOR IDENTICAL REASONS. THE TRIBUNAL IN ASSESSEES APPEAL FOR ASSESSMENT YEAR 2010 - 11 IN ITA NO. 384/PUN/2015 DECIDED ON 20 - 12 - 2017 DELETED THE ADDITIONS. IN THE ASSESSMENT YEAR UNDER APPEAL THE RELIEF HAS BEEN GRANTED BY THE DISPUTE RESOLUTION PANEL (DRP) ON THE BASIS OF DECISION OF TRIBUNAL IN ASSESSEES CASE FOR ASSESSMENT YEARS 2007 - 08 AND 2008 - 09. THE LD. AR FURNISHED COPY OF ORDER OF THE TRIBUNAL IN ITA NO. 47/PN/2013 (SUPRA) AND ITA NO. 384/PUN/2015 (SUPRA). 5. SMT. NIRUPAMA KOTRU REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE ADDITIONS MADE BY ASSESSING OFFICER IN DRAFT ASSESSMENT ORDER DATED 23 - 03 - 2015. HOWEVER, THE LD. DR FAIRLY ADMITTED THAT THE ISSUE RAISED BY THE REVENUE IN APPEAL IS IDENTICAL TO THE ONE ALREADY ADJUDICATED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER ASSESSMENT YEARS. 6. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BELOW PERUSED. THE SOLITARY ISSUE RAISED BY THE REVENUE IN APPEAL IS AGAINST THE FINDINGS OF ASSESSING OFFICER/ D RP IN HOLDING THAT THE SERVICES PROVIDED BY THE 4 ITA NO . 498/PUN/2016, A.Y. 2011 - 12 ASSESSEE TO SANDVIK ASIA LTD. AND WALTER TOOLS INDIA PVT. LTD. DO NOT FALL WITHIN THE AMBIT OF FEE FOR TECHNICAL SERVICES UNDER CLAUSE (B) OF PARA 4 OF ARTICLE 12 OF DOUBLE TAXATION AVOIDANCE AGREEMENT (DTA A) BETWEEN INDIA AND PORTUGUESE REPUBLIC. WE FIND THAT THE ADDITIONS ON THIS COUNT WERE MADE BY ASSESSING OFFICER IN EARLIER ASSESSMENT YEAR S AS WELL. THE MATTER TRAVELLED TO THE TRIBUNAL FOR THE FIRST TIME IN ASSESSMENT YEAR 2007 - 08. THE TRIBUNAL AFTER ANALYZING THE FACTS OF CASE, DTAA BETWEEN INDIA AND PORTUGUESE REPUBLIC, PROTOCOL TO THE TAX TREATY BETWEEN INDIA AND SWEDEN AND VARIOUS CASE LAW S HELD THAT THE PAYMENTS RECEIVED BY ASSESSEE ON ACCOUNT OF MANAGEMENT SERVICES FEE FROM SANDVIK ASIA LTD. AND TECHNICAL SERVICES FEE FROM WALTER TOOLS INDIA PVT. LTD. CAN NOT BE BROUGHT TO TAX IN VIEW OF PRINCIPLE OF THE MOST FAVOURED NATION (MFN) CLAUSE IN THE TAX TREAT Y . IT IS AN UNDISPUTED FACT THAT THE NATURE OF PAYMENTS RECEIVED BY ASSESSEE IN ASSESSMENT YEAR UNDER APPEAL IS IDENTICAL TO THE ONE RECEIVED IN EARLIER ASSESSMENT YEARS. FOR THE SAKE OF COMPLETENESS THE RELEVANT EXTRACT OF THE FINDINGS OF TRIBUNAL IN ASSESSEES OWN CASE IN IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2010 - 11 ARE REPRODUCED HERE - IN - BELOW : 12. WE FIND NO MERIT IN THE ORDERS OF AUTHORITIES BELOW THAT ALTERNATIVELY THE RECEIPTS FOR MANAGEMENT SERVICES BE TREATED IN THE NATURE OF DIVIDEND AND TAXED UNDER ARTICLE 10 TO THE TAX TREATY BETWEEN INDIA AND SWEDEN AS WELL A S UNDER SECTION 9(1)(IV) OF THE ACT. THE TRIBUNAL IN THE CASE OF PAYER I.E. SANDVIK ASIA PVT. LTD. IN ITA NO.1750/PUN/2013 WITH CROSS APPEAL IN ITA NO.1804/PUN/2013, RELATING TO ASSESSMENT YEAR 2005 - 06 VIDE ORDER DATED 14.06.2017 HELD THAT MANAGEMENT FEES PAID TO SANDVIK AB, SWEDEN I.E. THE ASSESSEE BEFORE US WAS INCOME ON ACCOUNT OF RENDERING OF MANAGEMENT SERVICES AND COULD NOT BE TREATED AS DIVIDEND. FOLLOWING THE SAME PARITY OF REASONING, WE DISMISS THE ALTERNATIVE STAND OF THE DRP/ASSESSING OFFICER I N TAXING THE MANAGEMENT SERVICE CHARGES IN THE HANDS OF ASSESSEE. THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 5 ITA NO . 498/PUN/2016, A.Y. 2011 - 12 7. THUS, FOR THE AFORESAID REASONS WE FIND THAT NO MERIT IN THE APPEAL BY THE DEPARTMENT. ACCORDINGLY , THE IMPUGNED ORDER IS UPHELD AND THE APPEAL OF THE REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 23 RD DAY OF MARCH, 2018 . SD/ - SD/ - ( / ANIL CHATURVEDI ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 23 RD MARCH, 2018 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE DISPUTE RESOLUTION PANEL - 3, MUMBAI 4. THE CIT (TP/IT), PUNE 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE