Appeal details
Counselvise Citation
[2011] 135 COUNSELVISE.COM (IT) 0556 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 month(s) 3 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
09-02-2011
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Assessment Year
2007-2008
Appeal Filed On
06-12-2010
Judgement Text
ITA NO. 5496/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 5496/DEL/2010 A.Y. : 2007-08 M/S DIGITE INC., 82, PIONEER WAY, SUIT NO. 102, MOUNTAIN VIEW, CALIFORNIA (PAN/GIR: AACCCD 7140 F) VS. ADIT, CIRCLE 1(1), DELHI (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. KETAN DHOOT, CA DEPARTMENT BY : SH. STEPHEN GEORGE, C.I.T.(D.R.) ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED WITH RESP ECT TO THE ORDER OF THE ASSESSING OFFICER DATED 3.9.2010 AND PERTAI NS TO ASSESSMENT YEAR 2007-08. 2. DRAFT ORDER OF THE ASSESSING OFFICER WAS PASSED PURSUANT TO DIRECTION U/S 144C BY THE DISPUTE RESOLUTION PANEL D ATED 30.8.2010. 3. AT THE OUTSET, LD. COUNSEL OF THE ASSESSEE ASSAI LED THAT THE DISPUTE RESOLUTION PANEL (DRP) HAS NOT AT ALL CONSIDER ED THE ASSESSEES SUBMISSIONS AND PASSED A VERY LACONIC AND NON-SPEAKING DIRECTION. ASSESSEE VIDE ITS GROUND HAS ALSO RAIS ED THAT DRP ERRED IN LAW AND FACTS IN NOT PASSING SPEAKING ORDER AND ERRED IN NOT STATING ANY JUSTIFICATION FOR THE REJECTION OF ASSESSEES O BJECTION. ITA NO. 5496/DEL/2010 2 4. IN THIS CASE, THE DRPS ADJUDICATION IS AS UNDER :- THE ASSESSEE HAS FILED THE OBJECTION U/S. 144C OF THE ACT VIDE APPEAL NO. 416 DATED 11.2.2010. THE CASE WAS FIXED FOR HEARING ON 2.8.2010 AND 11.8.2010. ON THE DATE OF HEARING S HRI KRISHNA PADHKE, CHARTERED ACCOUNTANT ATTEND THE HEARING. THE OBJECTION WAS FILED AS UNDER:- 1. THE ASSESSING OFFICER ERRED IN LAW AND ON FACTS IN PROPOSING TO TREAT THE AMOUNT OF ` 20151292/- RECEIVED BY THE AS SESSEE COMPANY AS CONSIDERATION FOR SALE OF SOFTWARE LICENS ES AS ROYALTY, AS PER SECTION 9(1)(VI) OF THE IT ACT, 196 1 AND ALSO AS PER ARTICLE 12(3) OF THE INDO-USA DTAA. 2. THE ASSESSEE COMPANY CRAVES LEAVE TO ADD/ MODIFY/ DEL ETE / AMEND ALL / ANY OF THE GROUNDS OF OBJECTION. SHRI KRISHNA PHADKE APPEARED AND EXPLAINED THE NATU RE OF SOFTWARE. THE SOFTWARE IN QUESTION IS A PROJECT MANA GEMENT SOFTWARE. ASSESSEE HAS SUBMITTED AS UNDER:- ON PAGE 7 OF THE ORDER AND AT PARA 3.1., THE ASSES SING OFFICER HAS REPRODUCED A SUMMARY OF REVENUE FIGURES OF THE APPELLANT. THESE FIGURES WERE REPRODUCED ON TH E BASIS OF SUBMISSION MADE BY THE APPLICANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT IS SUBMITTED, AN ERROR HA S CREPT IN WHILE SUBMITTING THE SAID FIGURES. THROUGH, THE ENTRIES DISCUSSION AND SUBJECT MATTER RELATES TO A PURE LEG AL ISSUE, THE APPLICANT FEELS DUTY BOUND TO CLARIFY THE ERROR S CREPT INTO THE COMPLIANCE, AND, CONSEQUENTLY IN THE DRAFT ORDER U/S 144C. KINDLY REFER TO THE FOLLOWING TABLE IN THIS RESPECT. ITA NO. 5496/DEL/2010 3 REPORTED FIGURES (AS PER 144C ORDER) PARTICULARS INFOSYS HCL TOTAL LICENSE REVENUE $ 200,000.00 - $ 200,000.00 PROFESSIONAL SERVICES $ 208436.61 $ 14249.47 $ 222,686.08 AMC $ 25898.00 $ 15539.00 $ 41437.00 TOTAL $ 434343.61 $ 29,788.47 $ 464,123.08 CORRECT FIGURES : THIS IS THE REVENUE ON WHICH THE TDS HAS BEEN DEDUCTED. PARTICULARS INFOSYS HCL TOTAL LICENSE REVENUE $ 250,000 $ 275,000 $ 525,000 PROFESSIONAL SERVICES - - - AMC - - - TOTAL $ 250,000 $ 275,000 $ 525,000 THE APPLICANT HAS SUBMITTED THE REPORTED FIGURES CONTAINED THE ERROR OF INCLUDING SERVICE REVENUE A S INVOICED REVENUE OF THE APPELLANT. THE SAID MISTAK E CREPT INTO THE THEN SUBMISSION DUE TO WRONG COMPILATION OF DATA, AS THE YEAR AND OF DIGITE INC. IS DECEMBER AND HENCE WHILE COMPILING THE DETAILS FOR APRIL TO MARCH BASIS SOME WRONG ENTRIES WERE ADDED FOR AMC AND PROFESSIONAL SERVICES. THE FACT REMAINS THAT DIGITE INC HAS BILLED ONLY FOR LICE NSES OF COPYRIGHT SOFTWARE PRODUCTS. ITA NO. 5496/DEL/2010 4 THE ASSESSMENT ORDER DISCUSSED WITH THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE. THE FA CT OF THE CASE ARE WHEN THE APPLICANT RAISED BILLS ON INF OSYS AND HCL, THESE CUSTOMERS PREFERRED TO MAKE TDS CONSIDERING THE UNDERSIGNED OF PROVISIONS OF IT ACT, 1961. THE APPLICANT TAKE A POSITION THAT, THE INCOME ARISING FROM THE S ALE OF COPY RIGHTED SOFTWARE LICENSES IS NOT TAXABLE IN I NDIA. AS SUCH, THE APPLICANT FILED THE RETURN OF INCOME BY C LAIMING REFUND OF ` 2535599/-. THE ASSESSING OFFICER HAS RELIED ON 9(1)(I), 9(1)(II), 9(1)(III), 9(1)(IV) AND 9(1)(V) OF THE INCOME TAX ACT, 1961. ASSESSING OFFICER HAS RIGHTLY HELD SUM OF USD 464, 123 EQUIVALENT TO ` 20151292 (1 USD = INR 43.4180) SHOWN AS SOFTWARE CONSIDERATION AS ROYALTY. 5. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT SECTION 144C ENVISAGES FOLLOWING ON THE P ART OF THE DRP:- (5) THE DISPUTES RESOLUTION PANEL SHALL, IN CASE W HERE ANY OBJECTION IS RECEIVED UNDER SUB-SECTION (2), IS SUE SUCH DIRECTIONS, AS IT THINKS FIT, FOR THE GUIDANCE OF THE ASSESSING OFFICER TO ENABLE HIM TO COMPLETE THE ASSESSMENT. (6) THE DISPUTE RESOLUTION PANEL SHALL ISSUE THE DIR ECTIONS REFERRED TO IN SUB-SECTION (5), AFTER CONSIDERING T HE FOLLOWING, NAMELY :- (A) DRAFT ORDER; (B) OBJECTIONS FILED BY THE ASSESSEE; (C) EVIDENCE FURNISHED BY THE ASSESSEE; ITA NO. 5496/DEL/2010 5 (D) REPORT, IF ANY, OF THE ASSESSING OFFICER, VALUA TION OFFICER OR TRANSFER PRICING OFFICER OR ANY OTHER AUTHORITY; (E) RECORDS RELATING TO THE DRAFT ORDER; (F) EVIDENCE COLLECTED BY, OR CAUSED TO BE COLLECTE D BY, IT; AND (G) RESULT OF ANY ENQUIRY MADE BY, OR CAUSED TO BE MADE BY, IT. (7) THE DISPUTE RESOLUTION PANEL MAY, BEFORE ISSUING ANY DIRECTIONS REFERRED TO IN SUB-SECTION (5), - (A) MAKE SUCH FURTHER ENQUIRY, AS IT THINKS FIT; OR (B) CAUSE ANY FURTHER ENQUIRY TO BE MADE BY ANY INCOME TAX AUTHORITY AND REPORT THE RESULT OF THE SAME TO IT. (8) THE DISPUTE RESOLUTION PANEL MAY CONFIRM, REDUCE OR ENHANCE THE VARIATIONS PROPOSED IN THE DRAFT ORDER SO, HOWEVER, THAT IT SHALL NOT SET ASIDE ANY PROPOSED V ARIATION OR ISSUE ANY DIRECTION UNDER SUB-SECTION (5) FUR FU RTHER ENQUIRY AND PASSING OF THE ASSESSMENT ORDER. (9) IF THE MEMBERS OF THE DISPUTE RESOLUTION PANEL DIF FER IN OPINION ON ANY POINT, THE POINT SHALL BE DECIDE D ACCORDING TO THE OPINION OF THE MAJORITY OF THE MEMBER S. (10) EVERY DIRECTION ISSUED BY THE DISPUTE RESOLUTIO N PANEL SHALL BE BINDING ON THE ASSESSING OFFICER. ITA NO. 5496/DEL/2010 6 (11) NO DIRECTION UNDER SUB-SECTION (5) SHALL BE IS SUED UNLESS AN OPPORTUNITY OF BEING HEARD IS GIVEN TO TH E ASSESSEE AND THE ASSESSING OFFICER ON SUCH DIRECTI ONS WHICH ARE PREJUDICIAL TO THE INTEREST OF THE ASSESS EE OR THE INTEREST OF THE REVENUE, RESPECTIVELY. (12) NO DIRECTION UNDER SUB-SECTION (5) SHALL BE IS SUED AFTER NINE MONTHS FROM THE END OF THE MONTH IN WHICH THE DRAFT ORDER IS FORWARDED TO THE ELIGIBLE ASSESSEE. (13) UPON RECEIPT OF THE DIRECTIONS ISSUED UNDER SU B- SECTION (5), THE ASSESSING OFFICER SHALL, IN CONFO RMITY WITH THE DIRECTIONS, COMPLETE, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 153, THE ASSESSMENT W ITHOUT PROVIDING ANY FURTHER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, WITHIN ONE MONTH FROM THE END OF THE MONT H IN WHICH SUCH DIRECTION IS RECEIVED. 6. AS AGAINST THE ABOVE PROVISIONS OF THE ACT HERE THE DRP HAS PASSED A VERY LACONIC ORDER. LD. COUNSEL OF THE AS SESSEE CONTENDED THAT VOLUMINOUS SUBMISSIONS HAVE BEEN MADE BEFORE THE DRP AGAINST THE DRAFT ASSESSMENT ORDER. BUT THE DRP HAS BRUSHED ASIDE EVERYTHING WITHOUT PROPERLY CONSIDERING THE ASSESSEES OBJECTI ONS AND THE SUBMISSIONS OF THE ASSESSEE. UNDER THE CIRCUMSTAN CES, IN OUR OPINION, THE DIRECTIONS OF THE DRP ARE TOO LACONIC T O BE LEFT UNCOMMENTED. THE DIRECTIONS GIVEN BY THE DRP ALMOST T ANTAMOUNT TO SUPERVISING THE ASSESSING OFFICERS DRAFT ORDER AN D IN THAT SENSE IT CAN BE EQUATED THAT APPELLATE JURISDICTION BEING EXERCI SED. WE FIND THAT H ONBLE APEX COURT IN THE CASE M/S SAHARA INDIA (FARMS) VS. C IT & ANR. ITA NO. 5496/DEL/2010 7 IN [2008] 300 ITR 403 HAS HELD THAT EVEN AN ADMINI STRATIVE ORDER HAS TO BE CONSISTENT WITH THE RULES OF NATURAL JUSTICE . 7. IN THIS REGARD, WE ALSO NOTE THAT HONBLE JURISD ICTIONAL HIGH COURT IN THE CASE OF VODAFONE ESSAR LTD. VS. DISPUTES RESO LUTION PANEL VIDE ORDER DATED 2.12.2010 THE HONBLE COURT HAS HELD TH AT WHEN A QUASI JUDICIAL AUTHORITY DEALS WITH THE LIS, IT IS OBLIGA TORY ON ITS PART TO ASCRIBE COGENT AND GERMANE REASON AS THE SAME IS A HEART AND SOUL OF THE MATTER AND FURTHER THE SAME ALSO FACILITATES APP RECIATION WHEN THE ORDER IS CALLED IN QUESTION BEFORE THE SUPERIOR FOR UM. ACCORDINGLY, THE HONBLE COURT HAS REMANDED THE MATTER FOR FRESH ADJUD ICATION. 8. UNDER THE CIRCUMSTANCES, IN THE BACKGROUND OF TH E AFORESAID DISCUSSION AND PRECEDENT ABOVE, WE FIND THAT CONSID ERABLE COGENCY IN THE ASSESSEES COUNSEL SUBMISSION THAT THE ASSESSEE S SUBMISSION HAS BEEN BRUSHED ASIDE WITHOUT GIVING PROPER CONSIDERAT ION BY THE DRP. 9. LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROV ERT THIS PROPOSITION. 10. UNDER THE CIRCUMSTANCES, IN OUR CONSIDERED OPI NION, THE ISSUE IS REMITTED TO THE FILES OF THE DRP TO CONSIDER THE ISSU E ONCE AGAIN TO PASS A PROPER AND SPEAKING DIRECTION U/S 144C OF TH E IT ACT. SINCE WE ARE REMITTING THE MATTER TO THE FILES OF THE DRP FOR P ASSING A FRESH DIRECTION, MERITS OF THE CASE ARE NOT BEING ADJUDICA TED. NEEDLESS TO ADD THAT THE ASSESSEE SHOULD BE GIVEN ADEQUATE OPPO RTUNITY OF BEING HEARD. ITA NO. 5496/DEL/2010 8 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 09/2/2011 UPO N CONCLUSION OF HEARING. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [ [[ [I.P. BANSAL I.P. BANSAL I.P. BANSAL I.P. BANSAL] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUN ACCOUN ACCOUN ACCOUNTANT MEMBER TANT MEMBER TANT MEMBER TANT MEMBER DATE 09/2/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES
