Fraport AG Frankfurt Airport Services Worldwide, New Delhi V. Asstt. DIT, New Delhi

ITA 5019/DEL/2010

• Counselvise Citation: 501920114 RSA 2010
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 15-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K GUPTA
• Assessee Lawyers: ROOPESH J AIN
• Keywords: Business income; Double taxation relief
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI G.D. AGRAWAL, HONBLE VICE-PRESIDENT AND SHRI RAJPAL YADAV: HONBLE JUDICIAL MEMBER ITA NO. 5019/DEL/2010 ASSESSMENT YEAR: 2007-08 FRAPORT AG FRANKFURT AIRPORT SERVICES VS. ASST. DIR ECTOR OF IT, WORLDWIDE C/O. MOHINDER PURI & CO., CA CIRCLE 1(2) , 1 A-D, VANDHNA, 11 TOLSTOY MARG, NEW DELHI. NEW DELHI. (PAN: AAACF9749E) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI AJAY VOH RA & ROOPESH JAIN, ADV. RESPONDENT BY: SHRI DK GUPTA, C IT(DR) ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE AS SESSMENT ORDER DATED 15.09.2010 PASSED UNDER SEC. 143(3) READ WITH SECTI ON 144C OF THE INCOME- TAX ACT, 1961. GROUND NOS. 1 TO 3 ARE GENERAL IN NA TURE. IN GROUND NOS.4 TO 6, ASSESSEE HAS PLEADED THAT IT HAS A PERMANENT EST ABLISHMENT AND ITS INCOME HAS TO BE ASSESSED AS A BUSINESS INCOME UNDER ARTIC LE 5 READ WITH ARTICLE 7 OF THE DTAA BETWEEN INDIA AND GERMANY, INSTEAD OF A SSESSING THE GROSS TOTAL RECEIPT OF RS.40,23,04,478 AS FEE FOR TECHNIC AL SERVICES, TAXABLE @ 10% ON THEE GROSS AMOUNTS. IN GROUND NO. 7, ASSESSEE HA S PLEADED THAT LEARNED ASSESSING OFFICER HAS ERRED IN REJECTING THE CLAIM FOR EXEMPTION OF RS.1,46,52,283 WHICH WAS CLAIMED BY THE ASSESSEE TH AT THESE RECEIPTS ARE NOT 2 ATTRIBUTABLE TO PE IN INDIA, THEY ARE RELATED TO TH E SERVICES RENDERED BY HEAD OFFICE AND IN TERMS OF PARA 1(B) OF PROTOCOL TO DTA A BETWEEN INDIA AND GERMANY THEY CANNOT BE TAXED IN INDIA. IN GROUND N OS. 8 AND 9, ASSESSEE HAS SUBMITTED THAT LEARNED ASSESSING OFFICER HAS E RRED IN DISALLOWING MOBILIZATION EXPENSES AMOUNTING TO RS.287,90,000, O FFICE AND ADMINISTRATIVE EXPENSES AMOUNTING TO RS.192,91,285. ACCORDING TO THE ASSESSEE, ONCE ASSESSING OFFICER HAS BROUGHT TO TAX THE GROSS RECEIPT @ 10% THEN THERE IS NO JUSTIFICATION TO DISALLOW ANY PART OF EXPENDITURE AGAIN. IN GROUND NO.10, ASSESSEE IS IMPUGNING CHARGING OF INT EREST UNDER SEC. 234B OF THE INCOME-TAX ACT, 1961 AMOUNTING TO RS.253,41, 977. 2. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEARS, ASSE SSING OFFICER HAS ACCEPTED THE EXISTENCE OF PE AS WELL AS THE PROFIT ATTRIBUTABLE TO SUCH PE. HENCE, INCOME OF THE ASSESSEE HAS BEEN ASSESSED AS A BUSINESS INCOME AS PER ARTICLES 5 & 7 OF THE DTAA. HE PLACED ON RECORD COP Y OF THE ASSESSMENT ORDER DATED 6.2.2012 PASSED UNDER SEC. 143(3) IN AS SESSMENT YEAR 2008-09. HE POINTED OUT THAT IN THE LIGHT OF THIS ORDER, THE GROUND NOS. 4 TO 6 DESERVE TO BE ALLOWED AND THE INCOME OF THE ASSESSEE DESERV E TO BE RECOMPUTED. HE FURTHER CONTENDED THAT LEARNED DRP HAS NOT CONSIDE RED OBJECTIONS OF THE 3 ASSESSEE AND PASSED A NON-SPEAKING ORDER. THE LEARN ED COUNSEL FOR THE ASSESSEE ADDRESSED ARGUMENTS QUA GROUND NO.7 TO 10 ALSO. BUT AFTER LOOKING INTO THE ORDER OF DRP, WE EXPRESSED OUR OPINION THA T ALL THESE ISSUES DESERVE TO BE SET ASIDE TO THE FILE OF THE LEARNED DRP FOR RE-ADJUDICATION OF THE OBJECTIONS RAISED BY THE ASSESSEE. LEARNED DR WAS U NABLE TO SUPPORT THE ORDER OF THE LEARNED DRP BECAUSE IT DOES NOT DISCLO SE ANY FACTS OR REASONS AS TO WHY THE LEARNED DRP DID NOT FIND ANY FORCE I N THE OBJECTIONS OF THE ASSESSEE. 3. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVE, W E HAVE GONE THROUGH THE RECORD CAREFULLY. THE ASSESSEE IS A COMPANY INC ORPORATED IN GERMANY HAVING ITS REGISTERED OFFICE AT 60547 FRANKFURT A.M . MAIN, FRANKFURT, GERMANY. IT HAS FILED ITS RETURN OF INCOME FOR ASSE SSMENT YEAR 2007-08 DECLARING NIL INCOME. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT. IT EMERGES OUT THAT THE ASSESSEE IS A R ESIDENT OF GERMANY AND, THEREFORE, FOR THE PURPOSE OF INDIAN INCOME-TAX ACT , IT IS A NON-RESIDENT ASSESSEE. THE ASSESSEE HAS SET UP ITS PROJECT OFFIC E IN INDIA FOR ADJUDICATION OF CONTRACT ENTERED INTO BETWEEN FRAPORT A.G. AND D IAL (DELHI INTERNATIONAL AIRPORT LTD. ) RELATING TO MODERNIZATION, EXPANSION AND OPERATION OF INDIRA GANDHI INTERNATIONAL AIRPORT IN INDIA. THE ASSESSEE HAS FURNISHED DETAILS OF INCOME AND EXPENSES AS SHOWN IN THE P & L ACCOUNT O F THE PROJECT OFFICE 4 ESTABLISHED IN INDIA WHICH INCLUDES PAYMENT OF SALA RY OF PERSONNEL DEPUTED BY THE HEAD OFFICE, CONSULTANCY FEE PAID TO SUB-CON TRACTOR M/S. GMR ENERGY LTD. AND GMR HOLDINGS PVT. LTD., TRAVELING L EGAL AND PROFESSIONAL EXPENSES. LEARNED ASSESSING OFFICER HAS PREPARED A DRAFT ASSESSMENT ORDER WHICH WAS SERVED UPON THE ASSESSEE. THE ASSESSEE HA S FILED OBJECTIONS ON THE DRAFT ASSESSMENT ORDER BEFORE THE LEARNED DRP. THE SE OBJECTIONS ALONG WITH SUBMISSIONS HAVE BEEN PLACED ON PAGE NOS. 251 TO 29 4 OF THE PAPER BOOK. LEARNED DRP WITHOUT LOOKING INTO ANY OF THE OBJECT IONS HAS PASSED THE FOLLOWING ORDER: THE ASSESSEE FILED OBJECTIONS BEFORE THE DRP VIDE ITS APPLICATION NO. 375 ON 2.2.2010 FOR THE ASSESSMENT YEAR 2007-08. THE CASE WAS FIXED FOR HEARING FOR 28.7.2010. IN RESPONSE TO NOTICE SHRI C.S. MATHUR AND SMT. RAD HIKA MATHUR APPEARED AND WERE HEARD. THE MAIN OBJECTIONS PERTAINED TO CONSIDERATION OF GROSS RECEIPT OF RS.40,23,04,478 A S TAXABLE INCOME BEING FEE FOR TECHNICAL SERVICES, REJECTION FOR THE CLAIM FOR EXEMPTION OF RS.1,46,52,283 IN RESPECT OF SERVICES RENDERED B Y HEAD OFFICE AND ALSO DISALLOWANCE OF MOBILIZATION EXPENSES AMOUNTIN G TO RS.2,87,90,000. THE ASSESSEE HAS ALSO OBJECTED TO L EVY OF INTEREST U/S. 234A, 234B AND 234C AND ALSO INITIATION OF PENALTY U/S. 271(1)(C). 5 WE CONSIDERED THE ARGUMENTS FORWARD BY THE ASSESSEE REPRESENTATIVES AS ALSO WRITTEN SUBMISSION VIS--VI S THE DRAFT ASSESSMENT ORDER. WE FIND THAT ALL THE OBJECTIONS O F THE ASSESSEE HAVE BEEN ANSWERED IN DETAILS BY THE AO WHO HAS GIVEN RE ASONABLE AND COGENT REPLIES TO THE OBJECTIONS. THERE IS ONE ISSU E WHICH IS REGARDING THE TECHNICAL SUPPORT FEE, PROVIDED BY HEAD OFFICE AMOUNTING TO RS.1,46,56,283. THE ASSESSEE HAS CLAIMED THAT THIS AMOUNT HAD ALREADY BEEN INCLUDED IN THE TOTAL RECEIPT OF RS.40,23,04,4 78 THAT BEING THE CASE THE ASSESSEE CLAIMS THAT THIS AMOUNTS TO DOUBL E ADDITION. THE A.O. IS, THEREFORE, DIRECTED TO VERIFY THIS VIS--V IS THE ACCOUNT OF THE ASSESSEE AND ALLOW THE RELIEF IN CASE IT AMOUNTS TO DOUBLE ADDITION. AS REGARDS THE OTHER ISSUES THE DRP DOES NOT FIND ANY PRESSING REASONS TO INTERFERE WITH THE DRAFT ORDER. THE ISSUE OF LEVY OF INTEREST AND INITIATION OF PEN ALTY IS PREMATURE AND HENCE NO INTERFERENCE IS WARRANTED AT THIS STAGE. SD/- SD/- SD/- (VIJAY SHARMA) (J.P. MISSAR) (GOPTAL KAMAL) CIT-I, NEW DELHI. CIT-II, NEW DELHI CIT-X I, NEW DELHI 4. ON DUE CONSIDERATION OF THE DRPS ORDER, WE FIND THAT LEARNED DRP HAS NOT LOOKED INTO ANY OF THE OBJECTIONS POINTED O UT BY THE ASSESSEE. IN THE SUBSEQUENT ASSESSMENT YEAR, THE ASSESSING OFFICER H IMSELF ACCEPTED THE CASE OF THE ASSESSEE THAT IT IS HAVING A PE AND ITS PROF IT ATTRIBUTABLE TO THE PE IS 6 ASSESSABLE AS A BUSINESS INCOME AS PER ARTICLE 5 RE AD WITH ARTICLE 7. THE OBSERVATIONS OF THE LEARNED ASSESSING OFFICER READ AS UNDER: BASED ON THE FACTS OF THE CASE AND THE DECISIONS A S CITED ABOVE, I AM OF THE CONSIDERED OPINION THAT SINCE THE CONTRACTUA L ACTIVITIES IN RELATION TO THE PROJECT HAVE BEEN CARRIED OUT IN IN DIA BY TECHNICAL EXPERTS DEPUTED TO THE PROJECT SITE FOR LONG TERM T ENURE, ALSO CONSIDERING THAT PROJECT CONTINUED FOR MORE THAN SI X MONTHS I.E. FROM IST MAY 2006 TILL ITS COMPLETION, IT HAS TO BE ACCE PTED THAT ACTIVITIES UNDERTAKEN BY THE ASSESSEE ARE EFFECTIVELY CONNECTE D WITH THE PE OF THE ASSESSEE IN INDIA. AS SUCH, IT HELD THAT ENTIRE INCOME EXCEPT THE TECH NICAL PLANNING FEES RECEIVED BY PE SHALL BE TREATED AS BUSINESS INCOME AND SHALL BE TAXABLE ON NET PROFIT BASIS, IN TERMS OF ARTICLE 7 OF THE DTAA BETWEEN INDIA AND GERMANY. 5. THE ORDER OF THE LEARNED DRP DID NOT DISCLOSE A NY REASON AND IT IS NOT A SPEAKING ORDER. HON'BLE SUPREME COURT IN THE CASE OF MAHABR PRASAD SANTOSH KUMAR VS. STATE OF UP REPORTED IN AIR 1970 S.C. 1302 HAS OBSERVED AS UNDER: RECORDING OF REASONS IN SUPPORT OF A DECISION ON A DISPUTED CLAIM BY A QUASI-JUDICIAL AUTHORITY ENSURES THAT THE DECISIO N IS REACHED ACCORDING TO LAW AND IS NOT THE RESULT OF CAPRICE, WHIM OR FANCY OR REACHED ON GROUNDS OF POLICY OR EXPEDIENCY. A PARTY TO THE DISPUTE IS 7 ORDINARILY ENTITLED TO KNOW THE GROUNDS ON WHICH TH E AUTHORITY HAS REJECTED HIS CLAIM. IF THE ORDER IS SUBJECT TO APPE AL, THE NECESSITY TO RECORD REASONS IS GREATER, FOR WITHOUT RECORDED REA SONS THE APPELLATE AUTHORITY HAS NO MATERIAL ON WHICH IT MAY DETERMINE WHETHER THE FACTS WERE PROPERLY ASCERTAINED, THE RELEVANT LAW WAS COR RECTLY APPLIED AND THE DECISION WAS JUST. 6. LEARNED DRP DID NOT TAKE COGNIZANCE OF ANY OF T HE OBJECTIONS RAISED BY THE ASSESSEE. THEREFORE, THE IMPUGNED ORDER IS N OT SUSTAINABLE. IT DESERVES TO BE SE ASIDE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LEARNED DRP AND RESTORE ALL THESE ISSUES TO THE FILE OF THE LEARNED DRP FOR READJUDICATION. 7. IN THE RESULT, THE APPEAL FILED BY THE A SSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 22.06.20 12 SD/- SD/- ( G.D. AGRAWAL ) ( RA JPAL YADAV ) VICE-PRESIDENT JUDICIAL MEMBER DATED: 22/06/2012 MOHAN LAL 8 COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR