ADIT (IT) 4(1), MUMBAI V. MERRIL LYNCH INTERNATIONAL, MUMBAI

ITA 4988/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75530 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 03-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KUMAR
• Keywords: Double taxation relief

Judgement Text

, ,, , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI , ! . ' , , #$ # ## # % % % % BEFORE SRI VIJAY PAL RAO, JM AND SHRI D. KARUNAKARA RAO, AM ./ I.T.A. NO. 4988/MUM/2012 ( & ' & ' & ' & ' (' (' (' (' / ASSESSMENT YEAR: 2009-10 ) ASSISTANT DIRECTOR OF INCOME TAX (IT)-4(1), 133, SCINDIA HOUSE, BALLARD PIER MUMBAI-400038 & & & & / VS. M/S MERILL LYNCH INTERNATIONAL C/O-M/S G.M. KAPADIA & CO, 1001, RAHEJA CHAMBERS, 213, NARIMAN POINT, MUMBAI-400021 ) #$ ./ * ./ PAN/GIR NO . : AABCM1026G ( )+ / ASSESSEE ) .. ( ,-)+ / RESPONDENT ) )+ . / # / ASSESSEE BY : SHRI NARENDRA KUMAR ,-)+ . / # / RESPONDENT BY : S HRI NITESH JOSHI & . 0!$ / DATE OF HEARING : 10/02/2014 12( . 0!$ / DATE OF PRONOUNCEMENT : 12 /02/2014 #3 / O R D E R PER VIJAY PAL RAO, JM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 25/05/2012 OF CIT(A) FOR THE ASSESSMENT YEAR 2009-1 0. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE HONBLE CIT(A) ERRED IN HOLDING THAT THE UNDERWRITING COMMISSION AND REIMBU RSEMENT OF EXPENSES RECEIVED BY THE ASSESSEE FOR ISSUE OF GDR/FCCB ETC. FROM INDIAN CO MPANIES IS NOT TAXABLE AS FEES FOR TECHNICAL SERVICES UNDER U.K. TREATY WITHOUT CONSID ERING THE FOLLOWING FACTS. CONFIRMING THE ACTION OF A.O. IN DISALLOWING RS.10,00,000 BEIN G SUB- (I) ALL RECEIPTS ON ACCOUNT OF ISSUE OF GDR & FCCB ARE IN THE NATURE OF NORMAL FUND FOR THE ISSUING COMPANY AND IT LOSES ITS SPECIAL CH ARACTER OF HAVING BEEN RECEIVED 2 ITA NO.4988/MUM/2012 M/S. MERRILL LYNCH INTERNATIONAL OUTSIDE INDIA, ONCE THE SAME HAS BEEN RECEIVED BY T HE ISSUING COMPANY AND THE ISSUING COMPANY CAN UTILIZE FOR ITS OWN PURPOSE. (II) THE ULTIMATE BENEFIT OF THE SERVICES RENDERED BY TH E ODB IS ULTIMATELY WITH THE ISSUING INDIAN COMPANY AND HENCE THE SERVICES RENDE RED HAVE BEEN ULTIMATELY BEEN UTILIZED IN INDIA AND ACCORDINGLY THE SAID REC EIPT IS ACCRUING OR ARISING IN INDIA. (III) THE SERVICES OF INVESTMENT BANKING DEFINITELY FALL WITHIN THE DEFINITION OF FEES FOR TECHNICAL SERVICES (FTS) WITHIN THE MEANING OF INCO ME TAX ACT AND HENCE IS TAXABLE IN INDIA. (IV) THE MAKE AVAILABLE COMPONENT IS PRESENT WITH THE RECEIPT AS IN TERMS OF LATEST RULINGS IN PERFETTI VAN MELLE HOLDING B.V. IN AAR N O.869 OF 2010 DATED 09.12.2011, THE EXPRESSION MAKE AVAILABLE WOULD M EAN THAT THE RECIPIENT OF THE SERVICE SHOULD DERIVE FROM SIMILAR SERVICE INDEPEND ENT OF THE PARTY RENDERING THE SERVICES. 2. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND C ONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT AN I DENTICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY THIS TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEARS 2005-06 AND 2008-09. FOR THE ASSE SSMENT YEAR 2008-09, THE TRIBUNAL HAS CONSIDERED AND DECIDED IDENTICAL I SSUES VIDE ORDER DATED 8 TH AUGUST 2013 IN ITA NO.940/MUM/2012 IN PARA 2 TO 5 I S AS UNDER:- 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE UNDERWRITING COMMISSION A ND REIMBURSEMENT OF EXPENSES RECEIVED BY THE ASSESSEE FOR ISSUE OF GDR/ FCCB ETC. FROM INDIAN COMPANIES IS NOT TAXABLE AS FEES FOR TECHNIC AL SERVICES UNDER INDIA-UK TREATY WITHOUT CONSIDERING THE FOLLOWING F ACTS:- I. ALL RECEIPTS ON ACCOUNT OF ISSUE OF GDR & FCCB A RE IN THE NATURE OF NORMAL FUND FOR THE ISSUING COMPANY AND IT LOSES ITS SPECIAL CHARACTER OF HAVING BEEN RECEIVED OUTSIDE INDIA, ON CE THE SAME HAS BEEN RECEIVED BY THE ISSUING COMPANY AND THE ISSUIN G COMPANY CAN UTILIZE FOR ITS OWN PURPOSE. II. THE ULTIMATE BENEFIT OF THE SERVICES RENDERED B Y THE 0DB IS ULTIMATELY WITH THE ISSUING INDIAN COMPANY AND HENC E THE SERVICES RENDERED HAVE BEEN ULTIMATELY BEEN UTILIZED IN INDI A AND ACCORDINGLY THE SAID RECEIPT IS ACCRUING OR ARISING IN INDIA. III. THE SERVICES OF INVESTMENT BANKING DEFINITELY FALL WITHIN THE DEFINITION OF FEES FOR TECHNICAL SERVICES (FTS) WIT HIN THE MEANING OF INCOME TAX ACT AND HENCE IS TAXABLE IN INDIA. 3 ITA NO.4988/MUM/2012 M/S. MERRILL LYNCH INTERNATIONAL IV. THE MAKE AVAILABLE COMPONENT IS PRESENT WITH THE RECEIPT AS IN TERMS OF LATEST RULINGS IN PERFETTI VAN MELLE HOLDI NG B.V. IN AAR NO. 869 OF 2010 DATED 09.12.2011, THE EXPRESSION MAKE AVAILABLE WOULD MEAN THAT THE RECIPIENT OF THE SERVICE SHOULD DERIV E AN ENDURING BENEFIT AND WOULD BE IN A POSITION TO DERIVE BENEFI T FROM SIMILAR SERVICE INDEPENDENT OF THE PARTY RENDERING THE SERV ICES. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) ON THE ABOVE GROUND(S) BE SET ASIDE AND THAT OF THE ASSESSING OF FICER RESTORED. 3. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND C ONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. AR HAS POINTED OUT THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY THIS TRIBU NAL IS ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 IN ITA NO. 275 9/M/2009 VIDE ORDER DATED 30.8.2011 THEREFORE, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW. 4. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CARE FUL PERUSAL OF THE RECORD WE NOTE THAT THE ASSESSEE IS A COMPANY INCOR PORATED UNDER THE LAWS OF UNITED KINGDOM AND OPERATING AS FII IN INDIA. THE A SSESSEE ALSO ACTS AS LEAD MANAGER AND UNDERWRITER TO THE ADRS/GDRS ISSUED BY INDIAN COMPANIES ABROAD FOR RAISING CAPITAL. SINCE THE ASSESSEE HAS UNDERTAKEN INVESTMENT BANKING TRANSACTIONS OVERSEAS IN RESPECT OF WHICH I T HAD RECEIVED CERTAIN AMOUNT FROM INDIAN COMPANIES, IT WAS CLAIMED BY THE ASSESSEE THAT THE AFORESAID ACTIVITY CARRIED ON OUTSIDE INDIA AND HEN CE THERE IS NO INCOME FOR SUCH ACTIVITIES WHICH IS RECEIVED OR DEEMED TO BE R ECEIVED BY THE ASSESSEE IN INDIA. THUS THE ASSESSEE CONTENDED BEFORE THE AO TH E INCOME FROM THESE TRANSACTIONS OUTSIDE INDIA DOES NOT FALL WITHIN THE SCOPE OF TOTAL INCOME U/S 5 OF THE ACT. SINCE IT DID NOT ACCRUE OR ARISE IN IND IA ALTERNATIVELY THE ASSESSEE CONTENDED THAT THE SAID INCOME WOULD NOT BE TAXABLE AS PER ARTICLE 13 OF INDO-UK DTAA AS THE ACTIVITY OF RENDERING SERVICES DO NOT SATISFY THE MAKE AVAILABLE CLAUSE. THE AO DID NOT ACCEPT THE CONTEN TION OF THE ASSESSEE AND HELD THAT THE SERVICES RENDERED BY THE ASSESSEE HAV E BEEN UTILISED IN INDIA, THEREFORE, THEY ARE TAXABLE AS FEES FOR TECHNICAL S ERVICES U/S 9(1)(VII) OF THE ACT. ON APPEAL, THE CIT(A) DECIDED THE ISSUE IN FAV OUR OF THE ASSESSEE BY FOLLOWING THE ORDER OF THIS TRIBUNAL IS ASSESSEES OWN CASE IN ASSESSMENT YEAR 2005-06. WE NOTE THAT FOR THE ASSESSMENT YEAR 2005- 06 THE TRIBUNAL HAS DECIDED THIS ISSUE IN PARA 6 AS UNDER: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY TH E DECISION OF ITAT MUMBAI BENCHES IN THE CASE OF RAYMOND LTD. V. DCJT (SUPRA), WHEREIN IT WAS HELD THAT NEITHER MANAGEMENT COMMISSION, NO R UNDERWRITING COMMISSION NOR EVEN SELLING COMMISSION/CONCESSION W OULD AMOUNT TO 4 ITA NO.4988/MUM/2012 M/S. MERRILL LYNCH INTERNATIONAL FEES FOR TECHNICAL SERVICES WITHIN MEANING OF DTA W ITH UK AND, CONSEQUENTLY, THERE WAS NO OBLIGATION ON PART OF AS SESSEE-COMPANY TO DEDUCT TAX UNDER SECTION 195. THE CIT(A) FOLLOWING THE SAID DECISION HELD THAT THE FEE RECEIVED BY THE ASSESSEE IS NOT L IABLE TO TAX IN INDIA AS THE SAME DOES NOT CONSTITUTE FEES FOR TECHNICAL SER VICES UNDER THE INDIA- UK DTAA READ WITH THE MEMORANDUM OF UNDERSTANDING F ORMING PART OF THE INDIA- USA DTAA AS THE TECHNICAL SERVICES WERE NOT MADE AVAILABLE BY THE ASSESSEE TO THE INDIAN COMPANIES. THEREFORE, WE FIND NO INFIRMITY IN THE FINDINGS OF THE CIT(A) AND HENCE, THE ORDER OF THE CIT(A) IS HEREBY UPHELD. 5. FOLLOWING THE EARLIER ORDER OF THIS TRIBUNAL WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE CIT(A). 3. IT IS CLEAR THAT THE GROUNDS RAISED BY THE REVEN UE FOR THE A.Y. 2008- 09 AND FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ARE IDENTICAL. THEREFORE, FOLLOWING THE EARLIER ORDER OF THIS TRIB UNAL WE DECIDE THIS ISSUE AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 4. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 12 /02/2014 . #3 . 12( $# 4& 12/02/2014 , 2 . 5 SD/- ( D.KARUNAKARA RAO ) SD/- ( VIJAY PAL RAO) #$ / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 4& /DATED : /02/ 2014 F{X~{T? P.S. #3 . ,0 6#(0 / COPY OF THE ORDER FORWARDED TO : (1) & '70 / THE ASSESSEE; (2) / THE REVENUE; (3) 8 ( ) / THE CIT(A); (4) 8 / THE CIT, MUMBAI CITY CONCERNED; 5 ITA NO.4988/MUM/2012 M/S. MERRILL LYNCH INTERNATIONAL (5) 95 ,0& , , / THE DR, ITAT, MUMBAI; (6) 5 ' : / GUARD FILE. -0 ,0 / TRUE COPY #3& / BY ORDER ; / < / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI