DCIT, New Delhi V. M/s. J.P. Kenny Pty Ltd.- Indian Project, Gurgaon

ITA 5093/DEL/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4340 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 10-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANU MUKHARJEE
• Keywords: Double taxation relief

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH C, NEW DELHI BEFORE : SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 5093/DEL/2015 ASSESSMENT YEAR: 2010-11 DCIT, CIRCLE 2(1)(2), NEW DELHI. (APPELLANT) VS. J.P. KENNY PTY LTD. INDIAN PROJECT, C/O WOOD GROUP KENNY INDIA PVT. LTD., 15 TH FLOOR, TOWER BUILDING NO. 5, DLF CYBER CITY, PHASE-III, GURGAON. PAN AABCJ 3994L (RESPONDENT) APPELLANT BY SMT. RANU MUKHARJEE, SR. DR RESPONDENT BY NONE ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-43, NEW DELHI DATED 22.05.15 FOR THE ASSESSMENT YEAR 20 10-11 ON THE FOLLOWING SOLITARY GROUNDS : 1. THE LD. CIT(A) HAS ERRED IN QUASHING THE PENALTY U/S. 271(1)(C) IMPOSED BY THE ASSESSING OFFICER. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A AUSTRALIA BASED COMPANY. IT CLAIMED TO HAVE OPENED A PROJECT OFFICE (PO) IN INDIA. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING EN GINEERING AND CONSULTANCY SERVICES IN INDIA. DURING THE YEAR, THE ASSESSEE EN TERED INTO A CONTRACT WITH DATE OF HEARING 22.10.2018 DATE OF PRONOUNCEMENT 31 .10.2018 ITA NO. 5093/DEL/2015 2 GAIL AND TOTAL AMOUNT RECEIVED DURING THE YEAR ON T HE SERVICES RENDERED WERE AT RS.2,03,29,890/- AND OTHER INCOME OF RS.39, 63,202/-. ON THIS ENTIRE RECEIPT, THE ASSESSEE DID NOT PAY ANY TAX. ON COMPL ETION OF ASSESSMENT PROCEEDINGS, PENALTY WAS IMPOSED BY THE ASSESSING O FFICER U/S. 271(1)(C). THE ASSESSING OFFICER OBSERVED THAT THERE WAS PROJE CT OFFICE IN INDIA DURING THE DISPUTED YEAR, WHICH CONSTITUTED PE OF ASSESSEE FOR THE PURPOSE OF INCOME-TAX ACT AND AS PER DTAA BETWEEN INDIA AND AU STRALIA, HE OFFERED ITS INCOME FOR TAXATION ON NET BASIS. DURING THE ASSESS MENT PROCEEDINGS, THE ASSESSEE HAD SUBMITTED THAT IN ORDER TO BUY PEACE O F MIND AND AVOID ANY LITIGATION, IT OFFERED ITS REVENUE TO TAX AT 10% ON GROSS BASIS CONSISTENT WITH THE ASSESSMENT MADE IN ASSESSMENT YEAR 2009-10 WHIC H WAS ACCEPTED BY THE ASSESSEE. THE ASSESSEE ACCEPTED THE DECISION OF THE ASSESSING OFFICER AND DID NOT FILE ANY OBJECTION BEFORE THE LD. DRP OR BEFORE THE CIT(A). THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE HAS ACCEPTED TH E FACT THAT THERE WAS PE IN INDIA FOR THE INCOME-TAX PURPOSE AND FURTHER ITS IN COME WOULD BE TAXABLE IN INDIA ON GROSS BASIS AS FTS AND NOT ON NET BASIS. T HE ASSESSEE MADE WRITTEN SUBMISSIONS IN SUPPORT AND RELIED ON MANY CASE LAWS BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER CONCLUDED THAT THE A SSESSEE HAS MADE INCORRECT DISCLOSURE OF HIS INCOME AND FURNISHED INACCURATE P ARTICULARS IN THE RETURN LEADING EVENTUALLY TO CONCEALMENT OF INCOME. THEREF ORE, HE IMPOSED PENALTY U/S. 271(1)(C) OF THE ACT OF RS.24,29,309/-. FEELIN G AGGRIEVED FROM THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE APPEALED BEF ORE THE LD. CIT(A) WHO AFTER CONSIDERING ALL THE SUBMISSIONS OF THE ASSESSEE DEL ETED THE PENALTY. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. ITA NO. 5093/DEL/2015 3 3. NONE IS PRESENT ON BEHALF OF THE ASSESSEE DESPIT E NOTICE ISSUED FOR HEARING. THEREFORE, THE APPEAL IS BEING DISPOSED OF EXPARTE QUA ASSESSEE AFTER HEARING THE LD. DR. THE LD. DR SUBMITTED THAT THE A SSESSEE HAD FILED INCORRECT RETURN OF INCOME WHEREAS THE ASSESSEE HAD ACCEPTED IN PREVIOUS ASSESSMENT YEAR REGARDING TAXABILITY ON RECEIPT IN INDIA AND N O APPEAL WAS FILED AGAINST THE ORDER OF THE ASSESSING OFFICER. THEREFORE, THER E IS PE IN INDIA, WHICH IS TAXABLE IN INDIA ON GROSS BASIS. THEREFORE, THE ASS ESSING OFFICER WAS JUSTIFIED TO IMPOSE PENALTY U/S. 271(1)(C) OF THE ACT. 4. AFTER HEARING THE LD. DR, WE OBSERVE THAT THE LD . CIT(A) HAS DONE GOOD REASONED ORDER. THE FINDINGS OF THE LD. CIT(A) ARE AS UNDER : 5.1. I HAVE DULY CONSIDERED VARIOUS CONTENTIONS RA ISED BY THE APPELLANT AND THE MATERIAL PLACED ON RECORD. THE RELEVANT FACTS ARE T HAT THE NON-RESIDENT APPELLANT HAS EXECUTED 3 PROJECTS IN INDIA DURING THE YEAR UNDER CONSIDERATION. THESE PROJECTS ARE FOR PROVIDING PROJECT MANAGEMENT CONSULTANCY SERVIC ES TO GAIL (INDIA) LIMITED FOR LAYING OF CROSS-COUNTRY NATURAL GAS PIPELINES IN IN DIA. ENTIRE SCOPE OF WORK WAS SUB- CONTRACTED BY THE APPELLANT AND THE ENTIRE SERVICES WERE PROVIDED BY SUB-CONTRACTOR IN INDIA AT. GAIL PREMISES. THE APPELLANT TOOK A PO SITION THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THERE EXISTS IN INDIA A FIXED PLACE PE, SUPERVISORY PE AND SERVICE PE UNDER INDO-AUSTRALIA DTAA AND THEREFORE IN ITS RETURN OF INCOME, OFFERED THE CONTRACT REVENUE FOR TAX PURPOSE AS BUSINESS RE CEIPTS ON NET BASIS. DURING THE COURSE OF ASSESSMENT, THE ASSESSEE SUO-MOTO, IN ORD ER TO BUY PEACE AND AVOID LITIGATION, FILED REVISED COMPUTATION OF INCOME DUR ING ASSESSMENT PROCEEDINGS AND OFFERED ITS GROSS REVENUES TO TAX @ 10% ON GROSS BA SIS (AS DONE BY AO IN PREVIOUS YEAR ASSESSMENT). THE AO ACCEPTED THE SAME AND HELD THAT THERE EXIST NO PE IN INDIA AND HENCE ASSESSED THE CONTRACT REVENUE AS FTS TAXA BLE ON GROSS BASIS @ 10%. THE APPELLANT DID NOT FILE APPEAL AGAINST THE ASSESSMEN T ORDER. THE AO LEVIED PENALTY U/S 271(1)(C) AT RS 24,29,309/- BEING 100% OF THE T AX SOUGHT TO BE EVADED HOLDING THAT THE APPELLANT HAS CONCEALED AND FURNISHED WRON G PARTICULARS OF ITS INCOME. 5.2 IT IS SEEN THAT THE APPELLANT HAS ENTERED INTO 3 CONTRACTS WITH GAIL AND THESE HAVE BEEN SUB-CONTRACTED BY THE APPELLANT AS UNDER: NAME OF CONTRACT ENTERED INTO BY THE APPELLANT. SUB - CONTRACTOR AGREEMENT ITA NO. 5093/DEL/2015 4 JAGOTI TO PITHAMPUR PIPELINE PROJECT DATED 06.10.2005 . (LOA/ GAIL/JP / 087/ 44 / 560000171/ II SB) - J P KENNY TRUINE ENGINEERING PVT. LTD. - J P KENNY LTD. DATED 30.11.2005 CHAINSA - JHAJJAR - BAMNOLI PIPELINE PROJECT DATED 25.04.2008 (LOA/ GAIUND/C&P / PROPPMC/ CJBPL / 07- 017/01/ C-08 / 07) - WOOD GROUP ENGINEERING INDIA PVT. LTD. - J P KENNY LTD. DATED 15.05.2008 ANNUAL RATE CONTRACT FOR GAIL'S SPUR/ SMALL PIPELINE PROJECT, DATED 11.03.2008 036/0 L/C-07/48) (LOA GA.IL/ND/C&P/PROPPMC / 07 - WOOD GROUP ENGINEERING INDIA. PVT. LTD. DATED 06.05.2008 5.3 IT IS NOTED THAT ON SIMILAR SET OF FACTS, MY PR EDECESSOR HAD IN HIS ORDER FOR AY 2009-10, IN APPEAL NO. 59/2012-13, VIDE ORDER DATED 03.10.2013, DELETED THE PENALTY LEVIED U/S 271(L)(C). THE ID. CIT(A) WHILE GRANTING RELIEF TO THE APPELLANT HAD NOTED AS FOLLOWS:- IT IS PERTINENT TO MENTION THAT ENTIRE SCOPE OF WO RK UNDER THE ABOVE 3 CONTRACTS HAS BEEN SUB-CONTRACTED BY THE APPELLANT. THERE IS A FOR CE IN APPELLANT'S CONTENTION THAT THOUGH THE ENTIRE SCOPE OF WORK HAS BEEN SUB-CONTRAC TED. THE CONTRACTS BELONG TO THE APPELLANT. THE APPELLANT IS RESPONSIBLE FOR ALL THE OBLIGATIONS UNDER THE CONTRACTS AND. REVENUE ARISING OUT OF THE CONTRACTS BELONGS TO THE APPELLANT. SUB-CONTRACTOR IS PROVIDING SERVICES TO GAIL IN INDIA FOR AND ON BEHAL F OF THE APPELLANT. THEREFORE, A VIEW CAN BE TAKEN THAT THERE EXIST FIXED PLACE PE IN INDI A INFORM OF OFFICE OF THE SUB CONTRACTOR IN INDIA. THE APPELLANT HAS ALSO SUBMITTE D THAT UNDER INDO-AUSTRALIA DTAA, MAKE AVAILABLE' REQUIREMENT HAS TO BE SATISFIED BEFOR E SERVICES CAN BE CHARACTERIZED AS TECHNICAL SERVICES UNDER ARTICLE 12 OF SAID DTAA . HOWEVER, THE AO HAS NOWHERE IN THE ASSESSMENT ORDER GIVEN THE FINDING THAT 'MAKE A VAILABLE' REQUIREMENT HAS BEEN SATISFIED IN THE PRESENT CASE. THE APPELLANT TOOK V IEW THAT SINCE SERVICES PROVIDED, ARE NOT IN NATURE OF TECHNICAL SERVICES WITHIN THE MEAN ING OF ARTICLE 12 OF RELEVANT DTAA, THERE EXIST IN INDIA SERVICE PE UNDER ARTICLE 5(3)( C) OF RELEVANT DTAA AS PERIOD OF CONTRACT EXCEEDED 90 DAYS IN EACH CASE. THIS VIEW T AKEN BY THE APPELLANT IS ALSO ONE OF THE PLAUSIBLE VIEWS REGARDING EXISTENCE OF PE IN IND IA. SINCE ENTIRE SERVICES HAVE BEEN PROVIDED BY THE SUB-CONTRACTORS IN INDIA, IT IS POS SIBLE TO TAKE A VIEW THAT SINCE SERVICES ARE EFFECTIVELY CONNECTED WITH PE IN INDIA, THESE A RE TAXABLE IN INDIA ON NET BASIS U/S 44DA EVEN IF IT IS ASSUMED, THAT SERVICES ARE IN NA TURE OF TECHNICAL SERVICES WITHIN MEANING OF ARTICLE 12 OF DTAA BECAUSE ALL THE AGREEM ENTS ARE DATED BEYOND 31.03.2003. THEREFORE, IT CANNOT BE SAID THAT VIEW T AKEN BY THE APPELLANT IN ITS RETURN OF INCOME IS NOT PLAUSIBLE ONE. 5.4. THE LD.CTT(A) HAD FURTHER AT PARA 5.4 OF HIS O RDER NOTED AS FOLLOWS:- ITA NO. 5093/DEL/2015 5 THERE IS A FORCE IN ARGUMENT OF THE APPELLANT THAT IT HAS NEITHER CONCEALED NOR FURNISHED, INACCURATE PARTICULARS OF ITS INCOME. EN TIRE CONTRACT REVENUE WAS DECLARED IN THE RETURN OF INCOME THOUGH OFFERED FOR TAX ON N ET BASIS. IF DIFFERENCE IN POSITION TAKEN BY THE APPELLANT AND THE AO IS REGARDING CHAR ACTERIZATION OF INCOME ONLY, IT CANNOT BE SAID THAT INACCURATE PARTICULARS OF INCOME HAVE BEEN FURNISHED, BY THE APPELLANT, AS HELD, BY HON'BLE DELHI HIGH COURT, IN CASE OF C1T VS AMIT JAIN 351 1TK 74. FURTHER, HON'BLE. SUPREME COURT IN CASE OF RELIANCE PETROPRODUCTS P. LTD. [(.2010) 230 CTR 320] HAS HELD THAT IF A CLAIM MADE BY THE ASSES SEE IS NOT FOUND SUSTAINABLE BY THE AO, IT DOES NOT AUTOMATICALLY LEAD, TO CONCEALMENT OF INCOME. 5.5. THE AO HAS ALSO NOT ESTABLISHED HOW PROVISIONS CONTAINED IN EXPLANATION 1 TO SECTION 271 (1 ){C) ARE APPLICABLE IN THIS CASE. THE PRESENT CASE DOES NOT FALL UNDER CLAUSE (A) OF EXPLANATION 1 AS THE APPELLANT HAS OF FERED AN EXPLANATION AND IT HAS NOT FOUND BY THE AO TO BE FALSE. FURTHER, EVEN CLAUSE ( B) OF EXPLANATION 1 DOES NOT APPLY AS THE APPELLANT HAS BEEN ABLE TO SUBSTANTIATE HIS EXPLANATION AND ALSO COULD PROVE THAT EXPLANATION IS BONAFIDE AND ALL THE FACTS MATE RIAL TO COMPUTATION OF INCOME HAVE BEEN DISCLOSED. 5.6. IT IS ESTABLISHED PRINCIPLE OF LAW THAT ASSESS MENT AND PENALTY PROCEEDINGS ARE ENTIRELY DIFFERENT & INDEPENDENT AND STANDARD OF EV IDENCE WHICH MAY BE GOOD FOR ASSESSMENT PURPOSE MAY NOT BE GOOD FOR LEVYING PENA LTY U/S 271(L)(C). IT IS ALSO SETTLED PRINCIPLE OF LAW THAT WHERE TWO VIEWS ARE P OSSIBLE, TAKING OF ONE OF THE PLAUSIBLE VIEWS DOES NOT AMOUNT TO FURNISHING OF IN ACCURATE PARTICULARS OF INCOME. 5.7. IN VIEW OF DISCUSSION SUPRA, AND IN VIEW OF O RDER OF ID. CIT(A) FOR AY 2009- 10 AS REFERRED ABOVE, I HOLD THAT NONE OF THE PRE-C ONDITIONS FOR LEVYING PENALTY AS MENTIONED IN SECTION 271 (1)(C) AND EXPLANATION 1 T O SECTION 271(1)(C) ARE SATISFIED IN THE PRESENT CASE. ACCORDING THE IMPUGNED PENALTY ORDER U/S 271(1)(C) IS QUASHED. THE AO IS DIRECTED TO GRANT RELIEF ACCORDINGLY. SIN CE ALL THE GROUNDS OF APPEAL RAISED BY THE APPELLANT CONTAIN ONLY ONE ISSUE, THESE ARE DISPOSED OFF ACCORDINGLY. WE DO NOT FIND ANY INFIRMITY IN THE ABOVE ORDER. TH E ASSESSEE ACCEPTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THAT HE IS CH ARGEABLE TO TAX IN INDIA ON THE RECEIPTS OF SERVICES RENDERED. THEREFORE, HE AC CEPTED THE RECEIPTS AS INCOME AND PAID TAXES THEREON IN THE COMPUTATION OF INCOME FILED. WE UPHOLD THE ORDER OF THE LD. CIT(A). THE LD. CIT(A) HAS RIG HTLY DELETED THE PENALTY AFTER RELYING ON VARIOUS CASE LAWS CITED BY THE ASSESSEE. THE ASSESSEE HAS EXPLAINED ITA NO. 5093/DEL/2015 6 ALL THE OBJECTIONS OF THE ASSESSING OFFICER IN THE APPELLATE PROCEEDINGS. WE, THEREFORE, DO NOT FIND ANY MATERIAL ON RECORD TO IN TERFERE WITH THE IMPUGNED ORDER. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2018. SD/- SD/- (H.S. SIDHU) (L.P. SA HU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31 ST OCTOBER, 2018 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI