DDIT, New Delhi V. M/s. Western Union Financial Services Inc., Gurgaon

ITA 5551/DEL/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1841 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 10-09-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 02-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MISHRA
• Keywords: Double taxation relief; Period of limitation; Permanent establishment; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: H NEW DELHI BEFORE SMT . DIVA SINGH, JUDICIAL MEMBER AND SH.O.P.KANT, ACCOUNTANT MEMBER I.T.A .NO. - 5551 & 5552 /DEL/20 12 (ASSESSMENT YEAR - 2004 - 05 & 2009 - 10 ) DDIT, CIRCLE - 2(2), NEW DELHI. (APPELLANT) VS WESTERN UNION FINANCIAL SERVICES INC., C/O - KPMG, BUILDING NO.10, 8 TH FLOOR, TOWER - B, DLF CYBER CITY, PHASE - II, GURGAON - 12 2 002. PAN - AAACW1936E (RESPONDENT ) APPELLANT BY SH.A.K.MISHRA, CIT DR RESPONDENT BY SH. TARANDEEP SINGH, CA ORDER PER DIVA SINGH, JM THE PRESENT APPEALS HAVE BEEN FILED BY THE REVENUE ASSAILING THE CORRECTNESS OF THE CONSOLIDATED ORDER DATED 14.08.2012 PERTAINING TO 2004 - 05 & 2009 - 10 ASSESSMENT YEAR PASSED BY CIT(A) - XXIX, NEW DELHI. THE APPEALS FIRST COME UP FOR HEARING ON 14.09.2015 O N WHICH DATE LD. CIT DR SOUGHT TIME. THE LD. AR HAD OBJECTED TO THE DEPARTMENTAL PETITION SEEKING TIME ON THE GROUND THAT THE ISSUE IS FULLY COVERED IN FAVOUR OF THE ASSESSEE BY VIRTUE OF THE CONSISTENT ORDERS OF THE ITAT ON IDENTICAL FACTS AND LAW DECIDE D AND CONCLUDED IN 2001 - 02; 2002 - 03; 2003 - 04 & 2005 - 06 ASSESSMENT YEARS. PAPER BOOK RUNNING INTO 57 PAGES ALREADY ON RECORD WAS RELIED UPON STATING THAT IT INCLUDED COPIES OF THE SAID DECISIONS. REFERRING TO THE SAME THE LD.AR MADE A BRIEF ARGUMENT TO SH OW HOW THE ISSUE IS COVERED IN ASESSEE S FAVOUR. OVER RULING THE OBJECTION POSED IT WAS DEEMED APPROPRIATE TO AFFORD AN OPPORTUNITY TO THE REVENUE TO CONSIDER THE CLAIM OF THE ASSESSEE AND THE HEARING WAS ADJOURNED TO THE NEXT DATE. DATE OF HEARING 15 .0 9 .2015 DATE OF PRONOUNCEMENT 10 .12 .2015 I.T.A .NO. - 5551 & 5552/ DEL/20 12 PAGE 2 OF 19 2. IN THE SAID BACKGROU ND, THE APPEAL CAME UP FOR HEARING ON THE NEXT DATE. IT WAS A COMMON STAND OF THE PARTIES BEFORE THE BENCH THAT SINCE THE FACTS, CIRCUMSTANCES AND THE ISSUES IN BOTH THE APPEALS REMAINED IDENTICAL THUS ARGUMENTS ADVANCED IN 2004 - 05 ASSESSMENT YEAR WOULD ADDRESS THE GROUNDS RAISED IN 2009 - 10 ASSESSMENT YEAR ALSO. THE ONLY DIFFERENCE IN 2004 - 05 ASSESSMENT YEAR IT HAS BEEN STATED IS THAT IN THE SAID YEAR, THE REVENUE HAS ALSO CHALLENGED THE RE - OPENING OF THE ASSESSMENT QUASHED BY THE CIT(A) WHICH ISSUE IS NOT UNDER CHALLENGE IN 2009 - 10 ASSESSMENT YEAR. IN THE ABOVE - STATED POSITION THE APPEALS WERE HEARD. 3. CONSIDERING THE ARGUMENTS ADVANCED ON BEHALF OF THE ASSESSEE, THE LD. CIT DR PLACED RELIANCE UPON THE ASSESSMENT ORDERS. ADDRESSING THE ORDERS OF T HE TRIBUNAL AVAILABLE ON RECORD IN ASSESSEE S CASE ON MERITS IT WAS SUBMITTED THAT THE ISSUE IS BEING KEPT ALIVE AS THE CLAIM HAS NOT BEEN GIVEN UP BY THE REVENUE. HOWEVER, NO DISTINGUISHING FACT OR POSITION OF LAW WAS BROUGHT TO THE NOTICE OF THE BENCH. IN THESE CIRCUMSTANCES, HE HAD NO OBJECTION IF THE LD. AR ADVANCED HIS ARGUMENTS IN ORDER TO SUPPORT HIS CLAIM THAT THE GROUNDS RAISED BY THE REVENUE ARE COVERED IN ASSESSEE S FAVOUR. 4. ACCORDINGLY IN VIEW OF THE ABOVE STATED POSITION THE LD.AR INVITED ATTENTION TO THE GROUNDS RAISED BY THE REVENUE IN ITA NO. - 5551/DEL/2012 WHICH READ AS UNDER: - 1. WHETHER ON FACTS CIRCUMSTANCES OF THE CASE, INCOME EARNED FROM CUSTOMERS OUTSIDE INDIA IS LIABLE TO TAX IN INDIA UNDER DTAA WITH USA. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN QUASHING THE CASE IGNORING THE FACT THAT SATISFACTION FOR REASSESSMENT PROCEEDINGS BY AO WAS BASED ON MATERIAL GATHERED DURING ASSESSMENT PROCEEDING WHICH LEAD TO STRONG BELIEF OF P E EXISTING UNDER ARTICLE 5(1) AND 5(2), WHICH ASSESSEE HAD FAILED TO DISCLOSE IN HIS 'NIL' RETURN. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN INFERRING THAT THE STAND ALONE MACHINES WHERE SOFTWARE APPLICATIONS OF THE ASS ESSEE ARE INSTALLED AND THE SAID MACHINES ARE DEDICATED TO BUSINESS OF MONEY TRANSFER CONSTITUTE FIXED PLACE PE OF THE ASSESSEE. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ITAT HAS ERRED IN IGNORING THE DETAILED ARGUMENTS OF THE AO INFERRIN G THAT THE STANDALONE MACHINES WHERE SOFTWARE APPLICATIONS OF THE ASSESSEE ARE INSTALLED, WHICH ARE DEDICATED TO BUSINESS OF MONEY TRANSFER AND HOLDING THAT THESE CANNOT BE TREATED AS FIXED PLACE PE OF THE ASSESSEE WITHOUT EXAMINING THAT THESE HAVE IN - BUIL T DIAL - UP MODEMS CONTROLLED BY USER IDS AND PASSWORDS THAT CONNECT TO INTERNATIONAL HOST SERVERS OF I.T.A .NO. - 5551 & 5552/ DEL/20 12 PAGE 3 OF 19 ASSESSEE THROUGH PROPRIETARY VOYAGER SOFTWARE AND THAT THESE CONSTITUTE A CLEARLY DEFINED SPACE AND EQUIPMENT PLACED AT THE ASSESSEE'S DISPOSAL, AT VARIOUS BRANCHES AND SUB - AGENT LOCATIONS SO AS TO CONSTITUTE A PE. 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE CIT(A) HAS ERRED IN IGNORING THE FACTUAL FINDING OF AO THAT LIAISON OFFICE OF THE ASSESSEE IN INDIA DID NOT CONSTITUTE ITS PE. 6. WHET HER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN IGNORING THE FACTUAL FINDINGS OF AO THAT THE REPRESENTATIVES OF THE ASSESSEE IN INDIA DO NOT CONSTITUTE ITS DEPENDENT AGENT PE UNDER ARTICLE 5(4)/5(5) OF THE INDO - US TREATY. 7. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ITAT HAS ERRED IN INFERRING THAT THE REPRESENTATIVES OF THE ASSESSEE IN INDIA DO NOT CONSTITUTE ITS DEPENDANT AGENT PE UNDER ARTICLE 5(4)/5(5) OF THE INDO - US TREATY IGNORING THE FACTS MARSHALED BY THE AO TO S HOW THAT THE AGENTS ARE NOT ACTING IN THE ORDINARY COURSE OF THEIR BUSINESS OR INDEPENDENT BOTH LEGALLY AND ECONOMICALLY WHEN WORKING FOR THE ASSESSEE AND, CANNOT HANDLE THE WORK OF CROSS - BORDER MONEY TRANSFERS WITHOUT THE ACTIVE AND CONSTANT SUPPORT OF AS SESSEE. 8. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN NOT ATTRIBUTING ANY PROFITS AGAINST THE ACTIVITIES BEING CARRIED OUT BY THE ASSESSEE THROUGH ITS PE IN INDIA. 9. THE APPELLANT PRAYS FOR LEAVE TO ADD, AMEND, MODIFY OR ALTER ANY GROUNDS OF APPEAL AT THE TIME OR BEFORE THE HEARING OF THE APPEAL. 4.1. ADDRESSING THE SAME IT WAS SUBMITTED THAT GROUND NO.1 IS GENERAL IN NATURE. ALONGWITH THE RESIDUARY GROUND NO.9 IT WAS SUBMITTED THAT THESE GROUNDS WOULD NOT REQUIRE ANY ADJUDICATION. 4.2. GROUND NO.2, IT WAS SUBMITTED ASSAILS THE RE - OPENING QUASHED BY THE CIT(A) WHICH IS QUESTIONED BY THE REVENUE. REFERRING TO THE SAID GROUND IT WAS SUBMITTED THAT IN ALL FAIRNESS, IT CANNOT BE ARGUED THAT THIS ISSUE IS COVERED BY THE OR DERS OF THE TRIBUNAL AND THUS FOR THE TIME BEING HE WOULD ONLY RELY UPON THE JUDGEMENT OF THE P&H HIGH COURT IN THE CASE OF SMT. ANCHI DEVI VS CIT [2008] 218 CTR 11 (P&H) AND PRASHANT PROJECTS LTD. VS. ACIT [9 TAXMANN.COM.237] BOMBAY AND ORDER DATED 08.05. 2015 ITA NO. 6871/MUM/2008 & 5639/MUM/2010 PLACED AT PAGES 50 - 57 IN THE CASE M/S SANG FASTNERS PVT. LTD. VS ACIT AND STATE THAT FOLLOWING THE JUDICIAL PRECEDENT, GROUND NO.2 OF THE REVENUE DESERVES TO BE DISMISSED. FURTHER ARGUMENTS IF SO WARRANTED ON FA CTS IT WAS SUBMITTED WOULD BE MADE AFTER LD. CIT DR WOULD MAKE HIS SUBMISSIONS. ACCORDINGLY IT WAS HIS SUBMISSION THAT ON FACTS THE ISSUE HAS RIGHTLY BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE CIT(A). I.T.A .NO. - 5551 & 5552/ DEL/20 12 PAGE 4 OF 19 4.3. ADDRESSING THE REMAINING GROUNDS IT WAS SUBMI TTED THAT IT HAS BEEN AGITATED BY THE REVENUE THAT THE ASSESSEE HAD A PE IN INDIA; FOR WHICH PURPOSE THE POINTS FOR CONSIDERATION ALSO ARE WHETHER THE VOYAGER SOFTWARE APPLICATION CAN BE TREATED AS A PE IN INDIA. REFERRING TO THE GROUNDS IT WAS SUBMITTED THAT THE STAND OF THE REVENUE IS THAT THERE WAS A LIAISON OFFICE OF THE ASSESSEE IN INDIA; THAT THERE WAS A DEPENDENT AGENT PE UNDER ARTICLE 5(4)/5(5) OF THE INDO - US TREATY IN INDIA AND THAT THE AGENTS WERE PART OF THE DEPENDENT AGENT PE. ALL THESE ISSUE S IT WAS SUBMITTED HAVE BEEN AGITATED VIDE GROUND NO.3 TO 7 AND ARE IDENTICAL TO GROUND NOS.2 TO 6 IN ITA NO.5552/DEL/2012. THESE ISSUES IT WAS SUBMITTED ARE FULLY CONSIDERED AND DECIDED BY THE TRIBUNAL IN ASSESSEE S OWN CASE IN THE AFORE - MENTIONED ORDER S AND THERE IS NO CHANGE IN LAW OR FACT. 4.4. GROUND NO.8 IN ITA NO.5551/DEL/2012 & GROUND NO.7 IN ITA NO.5552/DEL/2012 IT WAS SUBMITTED CANNOT BE STATED TO BE A COVERED ISSUE AS THE ISSUE OF ATTRIBUTION OF PROFITS NEVER AROSE AS THE ISSUES WERE CONSISTE NTLY DECIDED IN ASSESSEE S FAVOUR. 5. IN THE LIGHT OF THESE SUBMISSIONS, ATTENTION WAS INVITED TO THE FACT THAT IN 2004 - 05 ASSESSMENT YEAR THE ORIGINAL RETURN FILED BY THE ASSESSEE ASSESSED U/S 143(3) WAS RE - OPENED BY ISSUANCE OF NOTICE U/S 148. INVITING ATTENTION TO PAGE 6 & 7 OF THE ASSESSMENT ORDER, IT WAS SUBMITTED THAT THE AO REJECTED THE ASSESSEE S CLAIM THAT LIAISON OFFICE DOES NOT CONSTITUTE PE IN INDIA. THE ASSESSEE BEFORE THE AO HAD RELIED UPON THE ORDER OF THE TRIBUNAL DATED 10.03.2006 IN 2001 - 02 ASSESSMENT YEAR AND THE CONSOLIDATED ORDER OF THE CIT(A) DATED 01.01.2010 FOR 2002 - 03; 2003 - 04 AND 2005 - 06 ASSESSMENT YEARS. 5.1. INVITING ATTENTION TO PAGES 7 TO 9 OF THE ASSESSMENT ORDER IT WAS SUBMITTED THAT THE ASSESSEE S CLAIM THAT THE REPRESENTAT IVES OF THE ASSESSEE IN INDIA DID NOT CONSTITUTE A PE OF THE ASSESSEE WAS SUPPORTED BY THE FINDINGS OF THE TRIBUNAL WHICH HAD BEEN FOLLOWED BY THE CIT(A) IN 2002 - 03; 2003 - 04 AND 2005 - 06 ASSESSMENT YEARS. 5.2. REFERRING TO PAGES 10 - 12 OF THE ASSESSMENT OR DER, IT WAS SUBMITTED THAT THE ASSESSEE S CLAIM THAT THE SOFTWARE PROVIDED TO THE REPRESENTATIVES DID NOT CONSTITUTE PE WAS ALSO SUPPORTED BY THE FINDING IN THE AFORESAID ORDERS OF THE ITAT AND THE CIT(A). DESPITE THE PRECEDENTS AVAILABLE IT WAS SUBMITTED THAT THE CLAIM WAS REJECTED BY THE AO. I.T.A .NO. - 5551 & 5552/ DEL/20 12 PAGE 5 OF 19 5.3. INVITING ATTENTION TO PAGE 20 - 21 OF THE ASSESSMENT ORDER IT WAS SUBMITTED THAT IGNORING ALL THESE ORDERS THE AO WRONGLY CONCLUDED ON THE VERY SAME FACTS AND LAW THAT THE ASSESSEE HAD A PE IN INDIA. 5.4. ADDRESS ING PAGE 22 OF THE ASSESSMENT ORDER IT WAS SUBMITTED THAT THE AO CONCLUDED THAT IN TERMS OF SECTION 9(1) OF THE INCOME TAX ACT, 1961 THE INCOME ACCRUING OR ARISING ON ACCOUNT OF ITS BUSINESS CONNECTION IN INDIA IS LIABLE TO TAX AS PER INCOME TAX ACT, 1961. 5.5. ON THE BASIS OF THE ABOVE FACTS ON RECORD IT WAS SUBMITTED THAT DESPITE THE ORDERS OF THE ITAT AND THE CIT(A) IN 2001 - 02; 2002 - 03; 2003 - 04 AND 2005 - 06 ASSESSMENT YEARS, THE AO ON SIMILAR SETS OF FACTS AND CIRCUMSTANCES CONCLUDED IN THE RE - ASSESS MENT PROCEEDINGS THAT INCOME HAS ESCAPED ASSESSMENT AND EXAMINING THE VERY SAME AGREEMENTS AND MANNER OF RUNNING BUSINESS CAME TO THE IDENTICAL CONCLUSION AS WAS DRAWN BY THE AO IN 2001 - 02 AND OTHER YEARS WHICH ISSUE STOOD SETTLED BY THE ORDERS OF THE ITA T AND THE CIT(A) AT THAT POINT OF TIME . 5.6. REFERRING TO THE IMPUGNED ORDER IT WAS SUBMITTED THAT THE CIT(A) APPRECIATING THE FACTS, ARGUMENTS AND POSITION OF LAW AFTER MAKING A DETAILED RECORDING OF THE ASSESSEE S SUBMISSIONS QUASHED THE RE - OPENING HOLDI NG THAT THERE IS NO FRESH MATERIAL AVAILABLE ON RECORD TO JUSTIFY THE RE - OPENING WHICH FINDING HAS NOT BEEN ASSAILED BY THE REVENUE. EVEN ON MERITS, IT WAS SUBMITTED THE CIT(A) FOLLOWED THE VIEW TAKEN BY THE ITAT WHICH FINDING HAS ALSO NOT BEEN ASSAILED. IT WAS ALSO SUBMITTED THAT THE FINDINGS OF THE ITAT TILL DATE HAVE NOT BEEN UPSET BY ANY HIGHER FORUM . 5.7. INVITING ATTENTION TO THE DECISION OF THE ITAT IN 2001 - 02 ASSESSMENT YEAR WHICH IS REPORTED IN THE CASE OF WESTERN UNION FINANCIAL SERVICE INC. V S ADIT REPORTED IN 104 ITD 34 (DEL) IT WAS SUBMITTED THAT THE ITAT HAS DWELL ON EACH OF THESE POINTS WHEREIN THE ISSUE HAS BEEN CONSIDERED AT LENGTH BY A DETAILED ORDER. 5.8. IT WAS SUBMITTED THAT THE FINDING OF THE CIT(A ) IN ASSESSEE S FAVOUR WAS ALSO C HALLENGED BY THE REVENUE BEFORE THE ITAT IN 2002 - 03; 2003 - 04 AND 2005 - 06 ASSESSMENT YEARS AND AS PER THE DECISION REPORTED IN THE CASE OF DIT VS WESTERN UNION FINANCIAL SERVICE REPORTED IN 50 SOT 109 (DEL) COPY PLACED AT PAGES 20 TO 39 IT WAS SUBMITTED IT WAS AGAIN DECIDED IN ASSESSEE S FAVOUR. REFERRING TO THE SAID DECISION IT WAS SUBMITTED THAT DETAILED ARGUMENTS WERE ADVANCED THEREIN ON I.T.A .NO. - 5551 & 5552/ DEL/20 12 PAGE 6 OF 19 BEHALF OF THE REVENUE RELYING UPON THE DECISION RENDERED IN THE CASE OF AMADEUS GLOBAL TRAVEL DISTRIBUTION SA V DCIT [ 2011] 11 TAXMANN.COM 153 (DEL.). THE ITAT CONSIDERING THE ENTIRE ISSUE AFRESH HELD THAT THE ORDER IN THE CASE OF AMADEUS GLOBAL TRAVEL DISTRIBUTION SA WAS DISTINGUISHABLE ON FACTS AND THE VIEW TAKEN IN ASSESSEE S OWN CASE WAS FOLLOWED. 5.9. IN THESE AFOR E - MENTIONED FACTS AND CIRCUMSTANCES, IT WAS SUBMITTED THAT THE ISSUE HAS BEEN CONSIDERED AND DISCUSSED THREAD BARE AND IT IS FULLY COVERED IN ASSESSEE S FAVOUR. 6. CONSIDERING THE SUBMISSIONS THE LD. CIT DR RELIED UPON THE ASSESSMENT ORDER RE - ITERATING HIS EARLIER POSITION THAT THE DEPARTMENT IS KEEPING THE ISSUE ALIVE. NO CONTRARY FACT OR SUBMISSION CANVASSING A CONTRARY VIEW WAS BROUGHT TO THE NOTICE OF THE BENCH. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. CO NSIDERING THE GRIEVANCE POSED BY THE REVENUE IN GROUND NO.2, WE FIND ON CONSIDERATION OF THE FACTS ON RECORD WHICH ARE NOT IN DISPUTE AND THE JUDICIAL PRECEDENT WE FIND THAT IN THE ABSENCE OF ANY CONTRARY FACT OR DECISION ON THE POINT AT ISSUE THE DETAILED AND WELL - REASONED FINDING OF THE CIT(A) UNDER CHALLENGE CANNOT BE FAULTED WITH. IN THE ABSENCE OF ANY CONTRARY FACT OR POSITION OF LAW, WE UPHOLD THE FOLLOWING FINDING THEREBY DISMISSING GROUND NO.2 OF THE REVENUE . THE RELEVANT FINDING UPHELD BY US IS E XTRACTED HEREUNDER FROM THE IMPUGNED ORDER : - 4.2 FINDING: 4.2.1. I HAVE CAREFULLY GONE THROUGH SUBMISSIONS OF THE APPELLANT AND OTHER MATERIAL ON RECORD. I HAVE GONE THROUGH VARIOUS CASE LAWS RELIED UPON BY THE APPELLANT. THE UNDISPUTED FACTS ARE THAT THE APPELLANT HAD FILED ITS RETURN OF INCOME FOR AY 2004 - 05 ON 30 - 10 - 2004 DECLARING THEREIN NIL INCOME. IN NOTES ATTACHED ALONG WITH RETURN OF INCOME, IT WAS MENTIONED THAT THE APPELLANT DID NOT HAVE PE IN INDIA IN VIEW OF RELEVANT TAX TREATY AND HENCE ITS INCOME IS NOT TAXABLE IN INDIA. ASSESSMENT WAS MADE U/S 143(3) VIDE ORDER DATED 26 - 12 - 2006 IN PURSUANCE OF NOTICE ISSUED U/S 143(2) DATED 04 - 08 - 2006. LD. CIT(A) HELD THAT THE SERVICE OF THE NOTICE UNDER SECTION 143(2) OF THE ACT WAS NOT WITHIN THE STATUTORY TIME LIMIT AND ACCORDINGLY, THE ASSESSMENT PROCEEDINGS FOR AY 200 4 - 05, WERE VOID AND TIME BARRED AND WERE CONSEQUENTLY QUASHED. FURTHER, THE ID. CIT(A), EVEN ON MERITS, HELD THAT THE APPELLANT DOES NOT HAVE A PE IN INDIA AND HENCE, THE INCOME OF THE APPELLANT IS NOT TAXABLE IN INDIA. THIS ORDER WAS ACCEPTED AND NOT CHAL LENGED BY THE DEPARTMENT BEFORE ITAT. SUBSEQUENTLY, AO ISSUED NOTICE U/S 148 DATED 01 - 11 - 2010. IN 'REASONS TO BELIEVE' RECORDED BY THE AO, HE HAS ACCEPTED THAT ORDER OF ID. CIT(A) QUASHING THE ASSESSMENT ORDER U/S 143(3) DATED 26 - 12 - 2006 IS FACTUALLY CORRE CT. I.T.A .NO. - 5551 & 5552/ DEL/20 12 PAGE 7 OF 19 IN PURSUANCE TO NOTICE U/S 148, THE APPELLANT AGAIN FILED RETURN OF INCOME ON 07 - 12 - 2010 DECLARING NIL INCOME. THE APPELLANT HAS CHALLENGED THE RE - OPENING PROCEEDINGS IN THIS GROUND OF APPEAL. 4.2.2. I HAVE CAREFULLY GONE THROUGH REASONS RECORDED BY THE AO. THE AO HAS ACCEPTED THAT ORIGINAL ASSESSMENT U/S 143(3) WAS TIME BARRED. THE RE - OPENING IS BASED ON THE SAME MATERIAL WHICH WAS CONSIDERED DURING ASSESSMENT U/S 143(3), WHICH HAS BEEN QUASHED BY THE ID. CIT(A). THUS, BY RE - OPENING PROCEEDINGS, THE AO HAS ATTEMPTED TO INFUSE LIFE INTO AN ASSESSMENT WHICH HAS ALREADY BECOME DEAD, ON THE BASIS OF SAME MATERIAL WHICH WAS CONSIDERED DURING ORIGINAL ASSESSMENT. THERE IS WAS NO NEW MATERIAL AVAILABLE BEFORE THE AO FOR REOPENING THE ASSESSMENT. THE RATIO O F DECISION IN CASE OF SMT. ANCHI DEVI VS. CIT (2008) 218 CTR 11 (P&H) IS SQUARELY APPLICABLE TO FACTS OF THE PRESENT CASE WHEREIN IT HAS BEEN HELD THAT: 'IT MAY BE SEEN THAT THE AO HAD NO FRESH MATERIAL BEFORE HIM. A PERUSAL OF THE REASONS RECORDED BY HIM FOR REOPENING THE ASSESSMENT PROCEEDINGS VIDE NOTICE DT. 22ND MARCH, 2004 SHOWS THAT THE SAME REASONS HAVEN RECORDED WHICH WERE STATED IN THE EARLIER NOTICE SERVED UNDER S. 148 OF THE ACT ON THE BASIS OF WHICH THE ASSESSMENT WAS MADE ON 14TH FEBRUARY, 200 3 AND WHICH WAS QUASHED BEING BARRED BY LIMITATION. THUS, FROM THE FACTS ITSELF, IT IS CRYSTAL CLEAR THAT THOUGH THE PRESENT PROCEEDINGS WERE INITIATED BY THE AO WITHIN THE PRESCRIBED PERIOD OF LIMITATION YET IT IS CLEAR THAT THE SAME WERE INITIATED ONLY T O CIRCUMVENT THE EARLIER ORDER OF THE TRIBUNAL VIDE WHICH THE ASSESSMENT DT. 14TH FEBRUARY. 2003 WAS HELD TO BE TIME - BARRED. THUS, THE AO CANNOT BE ALLOWED TO INITIATE FRESH PROCEEDINGS ON IDENTICAL FACTS AS THE FIRST ASSESSMENT PROCEEDINGS HAD FAILED TO R ESULT IN A VALID ASSESSMENT DUE TO LAPSE ON THE PART OF THE IT AUTHORITY. ' 4.2.3. FURTHER, NOTICE U/S 148 HAS BEEN ISSUED BEYOND FOUR YEARS FROM END OF THE RELEVANT ASSESSMENT YEAR AND ORIGINAL ASSESSMENT HAS BEEN COMPLETED U/S 143(3). THEREFORE, 1 ST P ROVISO TO SECTION 147 IS APPLICABLE. THERE IS PRE - REQUIREMENT OF FAILURE ON PART OF THE APPELLANT TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. IN PRESENT CASE, THE APPELLANT HAS FURNISHED MATERIAL FACTS IN NOTES ATTACHED TO THE RETURN. THE APPELLANT HAS TAKEN A REASONED VIEW THAT THERE IS NO PE IN INDIA AND HENCE NO INCOME IS TAXABLE IN INDIA. THIS VIEW OF THE APPELLANT HAS BEEN UPHELD BY CIT(A) AND ITAT IN PRECEDING AND SUCCEEDING AY'S. SO THERE IS NO FAILURE ON PART OF APPELLA NT TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. THE AO HAS ALSO NOT POINTED OUT IN THE REASONS RECORDED AS TO WHICH MATERIAL FACTS HAVE NOT BEEN FULLY AND TRULY DISCLOSED BY THE APPELLANT. FURTHER, CIT(A) HAS ALSO DECIDED ON MERITS THAT THERE EXIST NO P E IN INDIA AND HENCE NO INCOME IS TAXABLE IN INDIA. IN COMING TO THIS CONCLUSION, CIT(A) HAS FOLLOWED HON'BLE ITAT DECISION IN CASE OF APPELLANT FOR AY 2001 - 02. 4.2.4. IN VIEW OF DISCUSSION SUPRA, I HOLD THAT REOPENING PROCEEDINGS INITIATED BY THE AO IS NOT AS PER LAW ON THE ISSUE AND HENCE IT IS QUASHED. THIS GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE APPELLANT. I.T.A .NO. - 5551 & 5552/ DEL/20 12 PAGE 8 OF 19 7.1. ADDRESSING THE REMAINING DEPARTMENTAL GROUNDS, WE FIND THAT IT WOULD BE APPROPRIATE FOR THE PURPOSES OF THE PRESENT PROCEEDINGS TO EXT RACT THE BACKGROUND OF THE ASSESSEE FROM THE LEADING ORDER OF THE CO - ORDINATE BENCH IN 2001 - 02 ASSESSMENT YEAR WHICH HAS CAPTURED THE MATERIAL FACTS AND THE ASSESSEE S FUNCTIONING. THUS, KEEPING IN MIND THE STAND OF THE PARTIES THAT THE MATERIAL FACTS AND CIRCUMSTANCES ARE IDENTICAL THE RELEVANT EXTRACT IS REPRODUCED HEREUNDER: - FACTS THE ASSESSEE, A NON - RESIDENTIAL COMPANY, INCORPORATED IN USA, WAS ENGAGED IN THE BUSINESS OF RENDERING MONEY TRANSFER SERVICES WORLDWIDE THROUGH AN ORGANISATION UNDER WHICH ANY RESIDENT OF ITS COUNTRY, DESIROUS OF TRANSFERRING MONIES TO HIS RELATIVE IN INDIA, WOULD APPROACH THE ASSESSEE S OUTLETS IN USA FIRST WITH THE MONEY TOGETHER WITH CHARGES FOR WHICH A RECEIPT WITH A COMPUTER GENERATED UNIQUE NUMBER (MTCN) WOULD BE GIVEN TO THE REMITTER FOR ONWARD TRANSMISSION TO HIS RELATIVE IN INDIA, WHO WOULD TAKE IT TO THE ASSESSEE S REPRESENTATIVE/AGENT IN INDIA. THE SAID AGENT, IN TURN, WOULD FEED THE ALLOTTED MTCN INTO THE COMPUTER WITH THE HELP OF A SOFTWARE (VOYAGER) THEREBY GAIN ING ACCESS TO THE ASSESSEE S MAINFRAME COMPUTER IN USA. THEREAFTER, HE WOULD MAKE THE PAYMENT TO THE CLAIMANT AFTER ASCERTAINING HIS BONA FIDES THROUGH DOCUMENTARY EVIDENCE. ON COMPLETION OF THE TRANSACTION, THE AGENT WAS TO BE REMUNERATED BY THE ASSESSEE BY WAY OF A COMMISSION AT AN AGREED PERCENTAGE FOR HIS SERVICES. FOR THE PURPOSE OF CARRYING OUT BUSINESS IN INDIA, THE ASSESSEE ENTERED INTO AGREEMENTS APPOINTING FOUR TYPES OF AGENTS IN INDIA, THE DEPARTMENT OF POSTS, COMMERCIAL BANKS, NON - BANKING FINANC IAL COMPANIES AND TOUR OPERATORS. GENERALLY, SAID APPOINTMENTS WERE FOR AN INITIAL PERIOD OF FIVE YEARS WHICH WAS EXTENDABLE FOR ANY NUMBER OF TIMES FOR PERIODS OF ONE YEAR AT A TIME. IN TERMS OF AGREEMENT, THE MONEY SO TRANSFERRED BY IT WAS REQUIRED TO BE FIRST PAID OUT BY THOSE AGENTS AND THEREAFTER HE WOULD BE REIMBURSED THE SAME TOGETHER WITH THE COMMISSION DUE TO HIM, WHICH WAS CALLED THE BASE COMMISSION IN THE AGREEMENT. THE AGENTS WERE GIVEN THE POWER TO APPOINT SUB - AGENTS AT THEIR OWN COSTS BUT THEI R SERVICES COULD BE TERMINATED BY THE ASSESSEE IF IT WAS FOUND THAT THE APPOINTED SUB - AGENT WAS ACTING IN A MANNER PREJUDICIAL TO ITS INTEREST. PURSUANT THERETO, AFTER OBTAINING THE RBI S REQUISITE PERMISSION, THE ASSESSEE SET UP ITS LIAISON OFFICE (LO) WI TH ITS OWN STIPULATION THAT IT WOULD NOT REPRESENT ANY PARTY OTHER THAN THE ASSESSEE. THEREAFTER, IN ACCORDANCE WITH THE LEGAL REQUIREMENTS AND THE ARRANGEMENTS WITH THE AGENTS, THE ASSESSEE KEPT THE RBI POSTED WITH THE ACTIVITIES OF ITS LO AND ALSO STARTE D REMITTING MONIES TO INDIA FOLLOWED BY COMMISSION PAYABLE THEREON AS REMUNERATION. HOWEVER, THE ASSESSEE DID NOT FILE ITS RETURN ON THE GROUND THAT IT WAS NOT TAXABLE IN INDIA BUT ULTIMATELY FILED THE SAME DECLARING NIL INCOME PURSUANT TO THE NOTICE ISSUE D UNDER SECTION 142(1). THE ASSESSING OFFICER HOLDING THAT THE INCOME ARISING TO THE ASSESSEE IN INDIA FROM THE ACTIVITIES CARRIED OUT IN INDIA WAS TAXABLE BOTH UNDER THE ACT AND THE AGREEMENT (DTAA) BETWEEN INDIA AND THE USA, FRAMED ITS ASSESSMENT ACCORDI NGLY. ON APPEAL, THE COMMISSIONER (APPEALS) UPHELD THE IMPUGNED ORDER. I.T.A .NO. - 5551 & 5552/ DEL/20 12 PAGE 9 OF 19 7.2. THE ISSUES RELATABLE TO GROUND NOS.3 TO 7 IT IS SEEN HAVE BEEN DECIDED BY THE LD. CIT(A) RELYING UPON THE ABOVE MENTIONED LEADING ORDER AND ALSO FOLLOWING THE CIT(A) S CONSOLIDATED ORDER FOR 2002 - 03, 2003 - 04 AND 2005 - 06 ASSESSMENT YEAR WHICH ORDER WE ALSO FIND HA S BEEN UPHELD BY THE CO - ORDINATE BENCH VIDE ITS AFORE - SAID ORDER DATED 06.01.2012. A PERUSAL OF THE LEADING ORDER IN 2001 - 02 ASSESSMENT YEAR SHOWS THAT AFTER CONSIDERING TH E POSITION OF LAW IN A SITUATION WHERE THERE IS A DTAA BETWEEN INDIA AND ANOTHER COUNTRY ; THE CO - ORDINATE BENCH HELD THAT IT WAS FIRST REQUIRED TO BE CONSIDERED WHETHER THERE WAS A TAXABLE EVENT UNDER THE ACT AND AFTER CONCLUDING THAT THERE WAS A TAXABLE EVENT IN SUCH A SITUATION THE ASSESSEE S CLAIM MADE WAS REQUIRED TO BE CONSIDERED UNDER THE RELEVANT PROVISIONS OF THE DTAA TO SEE WHETHER TH ERE IS NO TAX LIABILITY OR THAT WHE THER THE TAX LI ABILITY W AS LESS AS CLAIMED BY THE ASSESSEE. AFTER CONSIDERING THE SAID ISSUE THE ISSUES COULD BE SAID TO BE CONSIDERED. ON MAKING THIS ENQUIRY AND CONSIDERING THE FACTS AND THE RELEVANT PROVISIONS THE CO - ORDINATE BENCH CONCLUDED THAT ON FACTS THERE WAS A BUSINESS CONNECTION WITHIN THE MEANING OF SECTION 9(1) OF ACT AND TO THAT EXTENT THE DEPARTMENTAL VIEW HAS BEEN UPHELD. THE FOLLOWING EXTRACTS OF THE HEAD NOTES OF 104 ITD 34 (DELHI) ARE WORTH REPRODUCING HEREUNDER AT TH IS POINT OF TIME: - WHEREVER THERE IS A DTAA BETWEEN INDIA AND ANOTHER COUNTRY, THEN THE PROVISIONS OF THE DTAA WILL OVERRIDE THOSE OF THE ACT. [PARA 17] THEREFORE, THE INSTANT CASE HAD TO BE APPROACHED FIRST FROM THE POINT OF VIEW OF THE ACT AND IT WAS REQUIRED TO BE SEEN IF ANY TAX LIABILITY COULD ARISE. IN CASE, NO TAX LIABILITY ARISES UNDER THE ACT, NOTHING FURTHER REQUIRES TO BE DONE. BUT IF THERE IS A TAX LIABILITY ARISING UNDER THE ACT, IT IS OPEN TO THE NON - RESIDENT TO CLAIM THAT EITHER THERE IS NO OR LESS TAX LIABILITY IF THE PROVISIONS OF THE DTAA ARE APPLIED AND IF SUCH A CLAIM I S MADE, IT HAS TO BE ENQUIRED INTO. IF THE CLAIM IS FOUND TO BE CORRECT, THEN IT HAS TO BE GIVEN EFFECT IN PREFERENCE TO THE PROVISIONS OF THE ACT. THUS, IN THE INSTANT CASE, ONE WOULD NEED TO FIRST EXAMINE WHETHER THE INCOME - TAX AUTHORITIES WERE RIGHT IN APPLYING SECTION 9 TO HOLD THAT THERE WAS A BUSINESS CONNECTION. ONLY IF IT WAS FOUND THAT THERE WAS A BUSINESS CONNECTION, ONE WOULD NEED TO EXAMINE THE DTAA WITH USA TO FIND OUT IF THE CASE COULD BE BROUGHT UNDER THOSE PROVISIONS AS CLAIMED BY THE ASSESS EE. [PARA 19] THE TERM BUSINESS CONNECTION IS SO BROAD IN SCOPE ACCORDING TO THE JUDGMENTS THAT IT WAS NOT POSSIBLE TO HOLD IN THE INSTANT CASE THAT THERE WAS NO BUSINESS CONNECTION. EXPLANATION 2 INSERTED BELOW SECTION 9(1) BY THE FINANCE ACT, 2003 WITH EFFECT FROM 1 - 4 - 2004 EXPANDS THE SCOPE OF THE EXPRESSION. THOUGH THE EXPLANATION DID NOT APPLY TO THE YEAR UNDER CONSIDERATION, EVEN APPLYING THE TESTS LAID DOWN IN DECIDED CASES, THE ISSUE HAD TO BE RESOLVED AGAINST THE ASSESSEE. THE BUSINESS OF THE ASSESSEE WAS TO TRANSFER MONIES ACROSS COUNTRIES. THERE WAS, THUS, A RECEIVING ASPECT AND A PAYING ASPECT TO I.T.A .NO. - 5551 & 5552/ DEL/20 12 PAGE 10 OF 19 THE TRANSACTION. THEY COULD NOT BE SEGREGATED; TO DO SO WOULD BE ARTIFICIAL. THERE WAS A SEAMLESS INTEGRATION BETWEEN THE TWO. THE TRANSACTION, AS HAD BEEN RIGHTLY NOTICED BY THE INCOME - TAX AUTHORITIES, WAS NOT COMPLETE UNLESS THE MO NIES WERE PAID IN INDIA TO THE CLAIMANT. FURTHER, THE AGREEMENTS WITH THE AGENTS WERE INITIALLY FOR A TERM OF 5 YEARS, RENEWABLE FOR PERIOD OF ONE YEAR AT A TIME, BUT THAT COULD GO ON ENDLESSLY. THE AGENTS WERE BOUND TO RENDER SERVICES FOR THE ASSESSEE AS STIPULATED IN THE AGREEMENTS. THE AGREEMENT PROVIDED FOR SECURITY AND CONFIDENTIALITY. THE ASSESSEE HAD PROVIDED THE SOFTWARE TO THE AGENTS, THOUGH RETAINING THE COPYRIGHT IN THE SAME, TO ENABLE THEM TO ACCESS THE ASSESSEE S MAINFRAMES IN THE USA. ALL THOS E WERE SUFFICIENT TO JUSTIFY THE CONCLUSION THAT THERE WAS BUSINESS CONNECTION WITHIN THE MEANING OF SECTION 9(1). THE CONCLUSION OF THE INCOME - TAX AUTHORITIES TO THAT EFFECT WAS TO BE UPHELD. [PARA 20] 7.3. THEREAFTER IT IS SEEN THE CO - ORDINATE BENCH CON SIDERING THE PROVISIONS OF ARTICLE 5.1 AND ARTICLE 5.2 OF THE DTAA AND CONSIDERING THE SPECIFIC FACTS OF THE ASSESSEE CONCLUDED THAT THERE WAS NO FIXED PLACE PE OF THE ASSESSEE IN INDIA AS IS BORNE OUT FROM THE FOLLOWING EXTRACT FROM THE HEAD NOTE OF THE A FORE - SAID DECISION: - AS REGARDS THE QUESTION AS TO WHETHER THERE WAS A PE AS ALLEGED BY THE INCOME - TAX AUTHORITIES UNDER ANY OF THE FOUR CATEGORIES ( A ) FIXED PLACE PE, ( B ) DEPENDENT AGENTS PE. ( C ) SOFTWARE AS PE OR ( D ) LO AS PE, A QUESTION MIGHT ARISE AS TO WHETHER HAVING HELD THAT THERE WAS A BUSINESS CONNECTION , IT WAS AT ALL OPEN OR NECESSARY TO EXAMINE THE QUESTION WHETHER THERE WAS A PE. IN OTHER WORDS, A DOUBT MAY ARISE AS TO WHETHER THERE IS ANY DIFFERENCE BETWEEN THE TWO CONCEPTS - THE CONCEPT O F BUSINESS CONNECTION AND THE CONCEPT OF PE - AND WHETHER ONCE A FOREIGN ENTERPRISE IS FOUND TO HAVE A BUSINESS CONNECTION IN INDIA, CAN IT NOT ALSO AUTOMATICALLY BE HELD TO HAVE A PE IN INDIA. THERE IS A DISTINCTION BETWEEN THE TWO. BUSINESS CONNECTI ON SEEMED TO BE A MUCH WIDER CONCEPT THAN A PE. THE FORMER HAS NOT BEEN STATUTORILY DEFINED WHEREAS THE LATTER HAS BEEN DEFINED IN THE DTAA WHERE THE CRITERIA HAS BEEN MORE SPECIFICALLY LAID DOWN. THE BOARD, IN ITS CIRCULAR NO. 23, DATED 23 - 7 - 1969, RECOGN IZES THAT THE EXPRESSION BUSINESS CONNECTION , ADMITS OF NO PRECISE DEFINITION. [PARA 21] ARTICLE 5.1 OF THE DTAA SAYS THAT PE MEANS A FIXED PLACE OF BUSINESS THROUGH WHICH THE BUSINESS OF AN ENTERPRISE IS WHOLLY OR PARTLY CARRIED ON. ARTICLE 5.2 INCLUDES SEVERAL PLACES AS A PE OF THE FOREIGN ENTERPRISE. NEITHER THE ASSESSING OFFICER NOR THE COMMISSIONER (APPEALS) HAD PIN - POINTED WHICH PARTICULAR DESCRIPTION OF THE PE IN ARTICLE 5.2 WOULD APPLY TO THE ASSESSEE. THE GENERAL DEFINITION OF THE PE IN THE FIRST PART OF THE ARTICLE POSTULATES ( A ) THE EXISTENCE OF A FIXED PLACE OF BUSINESS IN INDIA AND ( B ) THAT THE BUSINESS OF THE FOREIGN ENTERPRISE SHALL BE CARRIED ON (WHOLLY OR PARTLY) THROUGH THE SAID PLACE. THE ASSESSEE, ADMITTEDLY DID NOT HAVE AN OUTLET OF IT S OWN IN INDIA. THAT WAY, THERE WAS NO FIXED PLACE OF BUSINESS IN INDIA. A PE SHOULD PROJECT THE FOREIGN ENTERPRISE IN INDIA. THE ASSESSEE HAD APPOINTED DIFFERENT AGENTS IN INDIA. THOSE AGENTS WERE THE DEPARTMENT OF POSTS OF THE GOVERNMENT OF INDIA, COMMER CIAL BANKS, NON - BANKING FINANCIAL COMPANIES AND TOUR OPERATORS. THOSE AGENTS HAD THEIR OWN OR HIRED PREMISES FROM WHICH I.T.A .NO. - 5551 & 5552/ DEL/20 12 PAGE 11 OF 19 THEY OPERATED. ALL THAT THEY HAD TO SHOW THAT THEY WERE AGENTS OF THE ASSESSEE, WAS A DISPLAY BOARD WHICH WOULD SHOW THAT THEY WERE THE AGENTS OF THE ASSESSEE. THAT COULD NOT BY ANY STRETCH OF IMAGINATION, AMOUNTED TO PROJECTION OF THE ASSESSEE IN INDIA. IT COULD NOT BE POSTULATED THAT THE POST OFFICES OF THE DEPARTMENT OF POSTS WHICH FUNCTIONS UNDER THE CONCERNED MINISTRY OF THE GOVERNMEN T OF INDIA WOULD PERMIT THEMSELVES TO BE LOOKED UPON AS PROJECTING THE PRESENCE OF THE ASSESSEE IN INDIA. THE SAME WOULD BE THE CASE OF COMMERCIAL BANKS AND OTHERS WHICH HAD BEEN APPOINTED AS AGENTS. THEY HAD THEIR OWN PRESENCE AND BUSINESS WITH WHICH THEY WERE PERHAPS MORE CONCERNED AND MAY BE SURPRISED TO FIND THEMSELVES CHARACTERISED AS PROJECTING THE ASSESSEE IN INDIAN SOIL. THERE WAS NO EVIDENCE TO SHOW THAT THE ASSESSEE COULD, AS A MATTER OF RIGHT, ENTER AND MAKE USE OF THE PREMISES OF THOSE AGENTS FO R ITS BUSINESS. THEREFORE, THERE WAS NO FIXED PLACE PE OF THE ASSESSEE IN INDIA WITHIN THE MEANING OF ARTICLE 5.1 OF THE DTAA. [PARA 23] 7.4. THE CO - ORDINATE BENCH F U RTH ER CONSIDERING THE FACTS ON RECORD AND THE RELEVANT PROVISIONS OF THE DTAA CONCLUDED T HAT THE LIAISON OFFICE COULD NOT BE CONSIDERED TO BE A FIXED PLACE PE OF THE ASSESSEE. FOR READY - REFERENCE, WE EXTRACT THE RELEVANT PORTION FROM THE AFORE - SAID HEAD NOTES ITSELF: - UNDER ARTICLE 5.3( E ), THE MAINTENANCE OF A FIXED PLACE OF BUSINESS SOLELY FOR THE PURPOSE OF ADVERTISING, FOR THE SUPPLY OF INFORMATION, FOR SCIENTIFIC RESEARCH OR FOR OTHER ACTIVITIES WHICH HAVE A PREPARATORY OR AUXILIARY CHARACTER CANNOT BE CONSIDERED TO BE A PE. THE LO HAD ACTED AS COMMUNICATION LINK BETWEEN THE AGENTS AND T HE ASSESSEE S HEAD OFFICE, HAD TRAINED AND INSTALLED AGENTS AFTER OBTAINING APPROVAL FROM THE RBI, HAD VISITED THE AGENTS AND OFFERED TRAINING AND REFRESHER COURSES IN CONNECTION WITH THE OPERATIONS OF THE ASSESSEE, ABOUT THE STANDARDS OF SERVICE AND SECUR ITY, ACCOUNTING PROCEDURES, TELECOMMUNICATION SYSTEMS AND CONFIGURATION, MERCHANDISING STANDARDS ETC. IT HAD ALSO HELPED THE AGENTS TO OVERCOME THE Y2K PROBLEM. IT HAD ORGANIZED LOCAL PRODUCTION OF POSTERS FOR DISPLAY AT THE AGENTS LOCATIONS. FURTHER, THE LO HAD FACILITATED THE VISIT OF THE DIRECTOR - OPERATIONS OF THE ASSESSEE TO THE AGENTS SO THAT HE COULD SATISFY HIMSELF ABOUT THE QUALITY STANDARDS. FINALLY, THE LO HAD PROVIDED THE MANAGEMENT SOFTWARE (VOYAGER) TO THE AGENTS (FREE OF COST) AND TRAINED THE IR STAFF ON THE USAGE AND VERSATILITY THEREOF. THOSE ACTIVITIES WERE IN LINE WITH THE ACTIVITIES MENTIONED IN THE ANNEXURE TO THE APPLICATION TO THE RBI SEEKING PERMISSION TO OPEN THE LO. THE ANNEXURE ALSO STATED WHAT ACTIVITIES WOULD NOT BE UNDERTAKEN BY THE LO. THERE WERE NO ACTIVITIES WHICH THE LO HAD UNDERTAKEN, WHICH DID NOT CONFORM TO THE LIST OF ACTIVITIES GIVEN IN THE ANNEXURE. THERE WAS NO ALLEGATION OF ANY VIOLATION OF THE CONDITIONS OF APPROVAL. [PARA 24] ON THE SAID FACTS, THE LO COULD NOT BE CO NSIDERED TO BE THE FIXED PLACE PE OF THE ASSESSEE AS IT CARRIED OUT ACTIVITIES WHICH WERE OF A PREPARATORY OR AUXILIARY CHARACTER. IT HAD NOT CARRIED ON ANY TRADING ACTIVITY FOR THE ASSESSEE IN INDIA. IT HAD ONLY A SMALL NUMBER OF EXECUTIVES AND A SUPPORT STAFF. THE LO HAD ALSO FILED STATUS REPORTS TO THE RBI LISTING OUT THE ACTIVITIES WHICH IT ACTUALLY CARRIED ON DURING THE YEARS. NONE OF THE ACTIVITIES COULD BE DESCRIBED AS ANYTHING OTHER THAN I.T.A .NO. - 5551 & 5552/ DEL/20 12 PAGE 12 OF 19 OF PREPARATORY OR AUXILIARY CHARACTER. THEREFORE, THE LO COULD NOT BE CONSIDERED TO BE THE PE OF THE ASSESSEE IN INDIA. [PARA 25] 7.5. THE CO - ORDINATE BENCH IT IS FURTHER SEEN ALSO CONSIDERED THE RAMIFICATION OF THE FACTS WHETHER THE LIMITED USAGE OF THE SOFTWARE VOYAGER PERMITTED BY THE ASSESSEE TO ITS AGENTS WO ULD CONSTITUTE A PE IN INDIA AND CONSIDERING THE FACTS AND THE AGREEMENTS ANSWERED IT ON FACTS IN FAVOUR OF THE ASSESSEE IN THE FOLLOWING MANNER: - AS REGARDS THE QUESTION AS TO WHETHER THE SOFTWARE VOYAGER WAS THE PE OF THE ASSESSEE, THERE WAS NO EVIDENCE TO SHOW THAT THE ASSESSEE COULD AS A MATTER OF RIGHT ENTER AND MAKE USE OF THE PREMISES FOR THE PURPOSE OF ITS BUSINESS. THE SOFTWARE WAS THE PROPERTY OF THE ASSESSEE AND IT HAD NOT PARTED WITH ITS COPYRIGHT THEREIN IN FAVOUR OF THE AGENTS. THE AG ENTS HAD ONLY BEEN ALLOWED THE USE OF THE SOFTWARE IN ORDER TO GAIN ACCESS TO THE MAINFRAME COMPUTERS IN THE USA. MERE USE OF THE SOFTWARE FOR THE PURPOSE FROM THE PREMISES OF THE AGENTS COULD NOT LEAD TO THE DECISION THAT THE PREMISES - CUM - SOFTWARE WOULD BE THE PE OF THE ASSESSEE IN INDIA. UNDER ARTICLE 5.2( J ), AN INSTALLATION MIGHT, AMOUNT TO A PE, PROVIDED IT IS USED FOR THE EXPLORATION OF NATURAL RESOURCES. THEREFORE, EVEN IF THE SOFTWARE WAS TO BE CONSIDERED AS AN INSTALLATION, SINCE IT WAS NOT USED F OR EXPLORATION OR EXPLOITATION OF NATURAL RESOURCES, IT COULD NOT PER SE BE TREATED AS A PE. [PARA 26] 7.6. THE ARGUMENTS OF THE REVENUE THAT THE ASSESSEE PERMITTED WITHDRAWAL OF MONEY FROM ITS OUTLETS BY USING CREDIT CARDS ON FACTS WAS ALSO NOT ACCEPTED BY THE CO - ORDINATE BENCH FOR WANT OF EVIDENCE AS WOULD BE EVIDENT FROM THE FOLLOWING EXTRACT: - THERE WAS NO MATERIAL, EITHER IN THE ASSESSMENT ORDER OR IN THE COURSE OF THE ARGUMENTS FROM WHICH IT COULD BE GATHERED THAT THE ASSESSEE PERMITTED WITHDRAWAL OF MONIES FROM ITS OUTLETS BY THE USE OF CREDIT CARDS. IN FACT, THE EXISTENCE OF THE ASSESSEE S OWN OUTLETS IN INDIA HAD BEEN STOUTLY DENIED. THE OBSERVATIONS OF THE ASSES - SING OFFICER NOT BEING SUPPORTED BY ANY EVIDENCE AND THE COMMISSIONER (APPEALS) N OT HAVING SPECIFICALLY APPROVED THEM, THERE COULD BE NO PE ON ACCOUNT OF THE USE OF THE CREDIT CARDS. [PARA 27] 7.7. THE CO - ORDINATE BENCH ALSO EXAMINED THE CLAIM OF THE REVENUE ON FACTS WHETHER THE AGENTS WERE INDEPENDENT AGENTS UNDER ARTICLE 5.4 ON T HE BASIS OF THE AGREEMENTS WHICH CONTINUE TO REMAIN THE SAME. AFTER EXAMINING THE ROLES, RESPONSIBILITIES AND THE TERMS OF THE AGREEMENTS, THE REVENUE S STAND WAS NOT ACCEPTED. THE RELEVANT EXTRACT IS REPRODUCED HEREUNDER: - AS REGARDS THE QUESTION AS TO WHETHER THE AGENTS WERE INDEPENDENT AGENTS UNDER ARTICLE 5.4, THREE CONDITIONS WERE REQUIRED TO BE SATISFIED IN ORDER THAT AN AGENT MIGHT BE SAID TO BE AN INDEPENDENT AGENT: (1) HE SHOULD BE ACTING IN THE ORDINARY COURSE OF HIS BUSINESS; (2) HIS I.T.A .NO. - 5551 & 5552/ DEL/20 12 PAGE 13 OF 19 ACTIVITIES SHOULD NOT BE DEVOTED WHOLLY OR ALMOST WHOLLY ON BEHALF OF THE FOREIGN ENTERPRISE FOR WHOM HE IS ACTING AS AGENT AND (3) THE TRANSACTIONS BETWEEN THE FOREIGN ENTERPRISE AND THE AGENT SHOULD BE AT ARM S LENGTH. [PARA 30] ANY ACTIVITY WHICH IS BEING SYSTEMATICALLY AND CONTINUOUSLY CARRIED ON WITH THE OBJECT OF EARNING PROFITS IS A BUSINESS ACTIVITY. THAT WAY, THE ACTIVITY ENGAGED IN BY THE AGENTS OF PAYING THE MONIES TO THE BENEFICIARIES OR CLAIMANTS IN INDIA, AFTER SATISFYING THEMSELVES ABOUT THEIR IDENTITY AND AFTER ACCESSING THE MTCN NUMBER TO VERIFY THE GENUINENESS OF THE CLAIM, AMOUNTS TO CARRYING ON OF THE BUSINESS OF MONEY TRANSFER. THE AGREEMENT OF AGENCY WAS INITIALLY FOR A PERIOD OF 5 YEARS AND TO BE RENEWED FOR SUCCE SSIVE PERIODS OF ONE YEAR EACH. THE AGENTS COULD APPOINT SUB - AGENTS FOR CARRYING OUT THE ACTIVITY. THEY HAD TO MAINTAIN RECORDS AND MEASURE UP TO THE STANDARDS SET BY THE ASSESSEE. THEY HAD RECEIVED TRAINING FROM THE ASSESSEE IN THE USE OF THE SOFTWARE AND IN THE COMMUNICATION SYSTEMS. ALL THOSE WERE ACTIVITIES WHICH WERE CARRIED ON SYSTEMATICALLY AND CONTINUOUSLY WITH A SET PURPOSE AND, HENCE, AMOUNTED TO BUSINESS. [PARA 31] HAVING REGARD TO THE VARIEGATED SERVICES PROVIDED BY THE BANKS THESE DAYS, WHICH C ANNOT BE IGNORED, ALL WITH A BUSINESS MOTIVE, IT SEEMED TOO TECHNICAL AN OBJECTION TO SAY THAT THE ACTIVITY CARRIED ON BY THE ASSESSEE S AGENTS IN INDIA WAS NOT A BUSINESS ACTIVITY IN THE ORDINARY COURSE OF THEIR BUSINESS. NON - BANKING FINANCIAL COMPANIES D EAL WITH MONEY BELONGING TO OTHERS AND THE ACTIVITY OF PAYING OUT MONIES ON BEHALF OF THE ASSESSEE MUST BE VIEWED AS PART OF THEIR BUSINESS ACTIVITY. IN THE CASE OF TOUR OPERATORS, ACTING AS AGENTS OF AN ESTABLISHED FIRM ENGAGED IN THE INTERNATIONAL MONEY TRANSFER BUSINESS MAY BE CONDUCIVE TO THEIR BUSINESS. A BROAD VIEW OF THE MATTER HAS TO BE TAKEN IN THESE MATTERS. THEREFORE, THE OBJECTION OF THE DEPARTMENT COULD NOT BE ACCEPTED. [PARA 32] 7.8. SIMILARLY THE ARGUMENT THAT THE AGENTS WERE DEPENDENT AGEN TS WAS ALSO SHOT DOWN BY THE CO - ORDINATE BENCH SO AS TO FINALLY CONCLUDE THAT THE AGENTS WERE INDEPENDENT AGENTS UNDER ARTICLE 5.5 OF THE TREATY AS WOULD BE EVIDENT FROM THE FOLLOWING EXTRACT: - THE INCOME - TAX AUTHORITIES HAD NOT BROUGHT OUT ANY DATA, AS THEY OUGHT TO HAVE, TO SHOW THAT THE ACTIVITIES UNDERTAKEN BY THE DEPART - MENT OF POSTS ON BEHALF OF THE ASSESSEE CONSTITUTED SUCH A LARGE PART OF THEIR ACTIVITIES THAT IT COULD BE SAID THAT THE DEPARTMENT OF POSTS WERE DEPENDENT ON THE ASSESSEE FOR THEIR R EVENUES. THE POSITION WAS THE SAME IN THE CASE OF COMMERCIAL BANKS, NON - BANKING FINANCIAL COMPANIES AND TOUR OPERATORS APPOINTED AS THE AGENTS OF THE ASSESSEE. THERE WAS NO EVIDENCE TO SHOW THAT THE EXTENT OF THEIR ACTIVITIES FOR THE ASSESSEE, COMPARED TO ALL THEIR ACTIVITIES, WAS SO LARGE THAT IT COULD BE SAID THAT THEY WERE DEPENDENT ON THE ASSESSEE FOR THEIR EARNINGS OR REVENUES. THE AGENTS IN THE INSTANT CASE HAD NOT BEEN SHOWN TO BE ECONOMICALLY DEPENDENT ON THE ASSESSEE. THE AGENTS HAD THEIR OWN BUSIN ESSES OR ACTIVITIES AMOUNTING TO BUSINESS. THEY WERE NOT CARRYING ON THE ACTIVITY FOR THE ASSESSEE, AS AGENTS, IN EXCLUSION OF THEIR OTHER BUSINESSES OR ACTIVITIES. IN THAT SITUATION, JUST BECAUSE THEY WERE NOT ACTING AS AGENTS FOR ANY OTHER COMPANY CARRYI NG ON MONEY TRANSFER BUSINESS, IT COULD NOT BE SAID THAT THEIR I.T.A .NO. - 5551 & 5552/ DEL/20 12 PAGE 14 OF 19 ACTIVITIES WERE WHOLLY OR ALMOST WHOLLY DEVOTED TO THE ASSESSEE. [PARA 33] THE AGREEMENTS FILED SHOWED THAT THE BASIC COMPENSATION WAS 30 PER CENT IN THE CASE OF THE DEPARTMENT OF POSTS AND 2 5 PER CENT IN THE CASE OF OTHERS. THERE WAS NO MATERIAL TO SHOW THAT THE RATES OF COMPENSATION WERE HIGHER IN OTHER CASES SO AS TO INDICATE THAT THE AGENTS WERE DISCRIMINATED AGAINST. THE HIGHER RATE OF COMPENSATION IN THE CASE OF THE DEPARTMENT OF POSTS W AS PROBABLY BECAUSE ITS REACH WAS MUCH WIDER COMPARED TO THE COMMERCIAL BANKS, NBFCS OR TOUR OPERATORS. THE TERMS OF APPOINTMENT OF SUB - AGENTS WERE UNIFORM IN ALL CASES. THUS, THERE SEEMED TO BE NO BASIS FOR THE CHARGE THAT THE COMPENSATION PAID WAS NOT AD EQUATE FOR THE SERVICES RENDERED BY THE AGENTS. THERE WAS NO FINDING CONTRARY TO THE CLAIM MADE BY THE ASSESSEE THAT THE RATES OF COMPENSATION WERE UNIFORM THROUGHOUT THE WORLD. THEREFORE, THERE WAS NO MERIT IN THE CLAIM THAT THE TRANSACTIONS BETWEEN THE A SSESSEE AND THE AGENTS WERE NOT UNDER ARM S LENGTH. [PARA 35] THE RESULT WAS THAT (1) THE AGENTS WERE ACTING IN THE ORDINARY COURSE OF THEIR BUSINESS; (2) THEIR ACTIVITIES WERE NOT DEVOTED WHOLLY OR ALMOST WHOLLY TO THE FOREIGN ENTERPRISE AND (3) THE TRANS ACTIONS WERE UNDER ARM S LENGTH. THEREFORE, THE AGENTS WERE INDEPENDENT AGENTS UNDER ARTICLE 5.5 OF THE TREATY. [PARA 36] 7.9. THEREAFTER PROCEEDING TO CONSIDER THE CONSEQUENCES OF THE SAID CONCLUSION WHICH IT WAS HELD DID NOT AUTOMATICALLY LEAD TO THE C ONCLUSION THAT THEY ARE DEPENDENT AGENTS AS THE SAID QUESTION IT WAS CONSIDERED HAD TO BE EXAMINED UNDER ARTICLE 5.4 OF THE DTAA. CONSIDERING THE MATERIAL DISTINCTION IN THE TERMS AUTHORITY AND DUTY AS PER THE ROLES AND THE RESPONSIBILITIES ASSIGNE D IN IDENTICAL AGREEMENTS THE CO - ORDINATE BENCH CONCLUDED ON FACTS THAT THERE WAS NO AGENCY PE OF THE ASSESSEE IN INDIA. THUS HOLDING THAT THOUGH THERE WAS A BUSINESS CONNECTION CONSEQUENTLY IT WAS TO BE HELD THAT THE ASSESSEE WAS LIABLE TO TAX UNDER SECTION 9(1) OF THE INCOME TAX ACT, 1961 BUT ON CONSIDERATION OF FACTS IT WAS HELD THAT SINCE THERE WAS NO PE IN INDIA UNDER ARTICLE 5 OF THE DTAA BETWEEN INDIA AND THE USA, NO PROFITS COULD BE ATTRIBUTED TO THE INDIAN OPERATIONS OF THE ASSESSEE AND TAXED IN INDIA. THE RELEVANT EXTRACT FROM THE DECISION OF THE CO - ORDINATE BENCH IS ALSO REPRODUCED HEREUNDER: - IT IS NOW WELL - SETTLED THAT MERELY BECAUSE THE AGENTS ARE NOT INDEPENDENT AGENTS , IT DOES NOT AUTOMATICALLY FOLLOW THAT THEY ARE DEPENDENT AGENTS UNDER THE DTAA AND THAT THE QUESTION HAS TO BE FURTHER EXAMINED UNDER ARTICLE 5.4 OF THE DTAA. IN OTHER WORDS, EVEN IF THE AGENT IS SHOWN TO BE NOT AN INDEPENDENT AGENT, IT HAS TO BE FURTHER SHOWN THAT HE IS A DEPENDENT AGENT WITHIN ARTICLE 5.4 AND THAT IT MUST BE SHOWN THAT HE HAS AND HABITUALLY EXERCISES AN AUTHORITY IN INDIA TO CONCLUDE CONTRACTS IN THE NAME OF THE FOREIGN ENTERPRISE. [PARA 38] THE FACT THAT THE AGENTS HAD THE AUTHORITY TO APPOINT SUB - AGENTS DID NOT MEAN THAT THEY HAD THE AUTHORITY TO CO NCLUDE CONTRACTS. THE TERMS I.T.A .NO. - 5551 & 5552/ DEL/20 12 PAGE 15 OF 19 OF APPOINTMENT OF SUB - AGENTS LISTED THE DUTIES AND RESPONSIBILITIES OF THE SUB - AGENTS REGARDING MONEY TRANSFER SERVICE REQUIREMENTS, ADVERTISING AND PROMOTION, EXCLUSIVITY, LOCATIONS AND HOURS OF OPERATIONS, PAYMENT FOR THE SERV ICE, DELIVERY STANDARDS, MAINTENANCE OF RECORDS, SECURITY AND CONFIDENTIALITY, ACCOUNTING, USE OF SOFTWARE, INDEMNITY, CONDITIONS OF TERMINATION ETC. NOWHERE, IN THE SUB - AGENCY AGREEMENT HAD ANY AUTHORITY TO CONCLUDE CONTRACTS HAD BEEN GIVEN TO THEM. IN FA CT, WHEN THE AGENTS THEMSELVES HAD NO SUCH AUTHORITY UNDER THEIR AGREEMENT, THEY COULD NOT DELEGATE THE SAME TO THEIR SUB - AGENTS. [PARA 39] THERE WAS ALSO NO MATERIAL TO HOLD THAT THE AGENTS HAD HABITUALLY EXERCISED THE AUTHORITY TO CONCLUDE CONTRACTS. T HE AUTHORITY MUST BE TO CONCLUDE CONTRACTS IN THE PROPER CONDUCT OF THE BUSINESS OF THE FOREIGN ENTERPRISE. THE FACT THAT THE AGENTS CONCLUDED IN INDIA THE COMMITMENT OF THE ASSESSEE MADE ABROAD COULD NOT BE CONSIDERED AS AN AUTHORITY TO CONCLUDE CONTRACTS . THE CONTRACT WAS BETWEEN THE REMITTER ABROAD AND THE ASSESSEE. IT WAS ENTERED INTO OUTSIDE INDIA. THE AGENTS WERE NOT PARTY THERETO. THE AGENTS MERELY CARRIED OUT THE CONCLUDING STEP IN THE ARRANGEMENT EMBODIED IN THE CONTRACT. IN OTHER WORDS, THE ASSESS EE UNDERTOOK, OUTSIDE INDIA TO TRANSFER THE MONEY TO INDIA. IT WAS ONLY THE PAYMENT PART OF THE UNDERTAKING THAT WAS EXECUTED BY THE AGENTS IN INDIA. THE CONTRACT WAS ALREADY CONCLUDED OUTSIDE INDIA. THE AGENT HAD NO SAY OVER THE CONTRACT. HE HAD TO MERELY EXECUTE THE PAYMENT PART, AFTER SATISFYING HIMSELF AS TO THE GENUINENESS OF THE TRANSACTION AND THE IDENTITY OF THE BENEFICIARY IN INDIA. BY EXECUTING THE LAST LEG OF THE CONTRACT WHICH HAD ALREADY BEEN CONCLUDED, HE WAS NOT CONCLUDING THE CONTRACT FOR TH E ASSESSEE, MUCH LESS HABITUALLY. THE APPOINTMENT OF SUB - AGENTS WAS MERELY TO FACILITATE THE WORK OF THE AGENT. THAT APART, WHAT WAS CONSIDERED TO BE A DUTY COULD NOT BE CONSIDERED TO BE AN AUTHORITY . BY MAKING PAYMENT TO THE BENEFICIARY, THE AGENT IN INDIA WAS ONLY PERFORMING HIS DUTY UNDER THE AGREEMENT OF AGENCY, FOR WHICH HE WAS REMUNERATED; HE WAS NOT EXERCISING ANY AUTHORITY , CERTAINLY NOT AN AUTHORITY TO CONCLUDE CONTRACTS ON BEHALF OF THE ASSESSEE. THE WORDS DUTY AND AUTHORITY ARE INCOMPAT IBLE WITH EACH OTHER. THE DICTIONARY MEANING OF THE WORD DUTY IS ASSIGNMENT/BURDEN/COMMITMENT THAT ONE IS OBLIGED TO DO BY LAW OR BY CALLING OF ONE S BUSINESS . IT CONNOTES AN OBLIGATION, WHICH A PERSON IS BOUND TO PERFORM. PER CONTRA, AUTHORITY IN LA W BELONGS TO THE PROVINCE OF POWER. THE FACT THAT THE AGENTS IN INDIA WOULD PAY OUT THE MONEY TO THE BENEFICIARIES OF CLAIMANTS, WHICH THEY WERE BOUND TO UNDER THE AGREEMENT WITH THE ASSESSEE FOR WHICH THEY WERE REMUNERATED DID NOT APPEAR TO BE A CASE OF E XERCISE OF ANY AUTHORITY. THUS, THE AGENTS DID NOT HABITUALLY EXERCISE THE AUTHORITY TO CONCLUDE THE CONTRACTS ON BEHALF OF THE ASSESSEE. [PARA 40] THEREFORE, THERE WAS NO AGENCY PE OF THE ASSESSEE IN INDIA. IN THE ABSENCE OF ANY PE IN INDIA, IT FOLLOWED T HAT THE PROFITS, IF ANY, ATTRIBUTABLE TO THE INDIAN OPERATIONS COULD NOT BE ASSESSED AS BUSINESS PROFITS UNDER ARTICLE 7 OF THE TREATY. [PARA 41] 7.10. THE SAME ISSUE IT IS SEEN HAS BEEN CONSIDERED BY THE CO - ORDINATE BENCH IN ITS CONSOLIDATED ORDER DATED 06.01.2012 IN 2002 - 03; 2003 - 04 AND 2005 - 06 ASSESSMENT YEARS WHEREIN AGAIN RE - EXAMINING THE ISSUE IN THE LIGHT OF THE CLAIM I.T.A .NO. - 5551 & 5552/ DEL/20 12 PAGE 16 OF 19 MADE BY THE REVENUE THAT FOLLOWING THE JUDICIAL PRECEDENT AS LAID DOWN IN AMADEUS GLOBAL TRAVEL DISTRIBUTION SA VS DCIT [2011] 11 TAXMANN.COM 153 (DELHI) WHICH IT WAS URGED SHOULD BE FOLLOWED AS OPPOSED TO THE DECISION RENDERED IN ASSESSEE S OWN CASE IN 2001 - 02 ASSESSMENT YEAR . T HE CO - ORDINATE BENCH DID NOT ACCEPT THE REVENUE S ARGUMENTS AND THE ISSUE WAS CONCLUDED IN ASSESSEE S FAVOUR. IT IS SEEN THAT THE REVENUE S CLAIM ON EXAMINATION WAS FOUND TO BE INCORRECT ON FACTS AS THE REVENUE IT WAS FOUND FAILED TO DRAW ANY PARALLEL WITH THE FACTS AND CIRCUMSTANCES OF ASSESSEE S CASE WITH THE FACTS AND CIRCUMSTANCES OF AMADEUS GLOBAL TRAVEL DISTRIBUTION SA (CITED SUPRA) . INFACT THE CO - ORDINATE BENCH FOUND THE FACTS OF THE TWO SETS OF CASES WERE ENTIRELY DISTINGUISHABLE AND AFTER DISCUSSING THEREIN THE ARGUMENTS IN DETAIL AND CONSIDERING THE JUDICIAL PRE CEDENT CITED RELYING UPON STATE OF A. P. VS M. RADHA KRISHNA MURTHY [CRIMINAL APPEAL NO.386 OF 2002] AND CIT VS SUN ENGINEERING WORKS PVT. LTD. [1992] 198 ITR 297 (SC) FOLLOWED THE LEADING ORDER OF THE ITAT IN ASSESSEE S OWN CASE. FOR READY - REFERENCE, THE RELEVANT PARAS ARE REPRODUCED HEREUNDER: - 6.2. THE ID. DR CONTENDED IN HIS WRITTEN SUBMISSIONS THAT THE AFORESAID DECISION OF THE ITAT IN THE ASSESSEE'S OWN CASE FOR THE AY 2001 - 02 WAS NOT APPLICABLE IN THE YEARS UNDER CONSIDERATION ON THE ISSUE OF PE IN VIEW OF DECISION OF THE ITAT IN AMADEUS GLOBAL TRAVEL DISTRIBUTION SA (SUPRA). WE ARE NOT INCLINED TO ACCEPT THIS CONTENTION OF THE ID. DR. THERE IS NOTHING TO SUGGEST THAT THE FACTS AND CIRCUMSTANCES IN THE CITED DECISION ARE SIMILAR TO THE FACTS AND C IRCUMSTANCES IN THE CASE BEFORE US. IN THE AMADEUS CASE, THE ISSUE WAS AS TO WHETHER COMPUTER HARDWARE/SOFTWARE PROVIDED BY THE ASSESSEE TO TRAVEL AGENTS IN INDIA FOR BOOKING TICKETS CONSTITUTED PE OF THE ASSESSEE IN INDIA. IN THAT CASE, THE PASSENGER IN I NDIA THROUGH THE TRAVEL AGENT IN INDIA, WHO USED THE HARDWARE AND SOFTWARE SYSTEM CRS SUPPLIED BY THE ASSESSEE FOR BOOKING TICKETS IN INDIA, APPROACHED HIM FOR BOOKING TICKET. BY VIRTUE - OF THE SOFTWARE AND COMMUNICATION LINKS THE COMPUTER AT THE DESK OF TH E TRAVEL AGENT BECAME THE INTERFACE OF THE MAINFRAME OF THE ASSESSEE IN GERMANY. THE ENTIRE EQUIPMENT (BOTH HARDWARE AND SOFTWARE) WAS SUPPLIED TO THE SUBSCRIBERS AT THE ASSESSEE'S COST THROUGH THE AGENCY OF AMADEUS INDIA AND THE SUBSCRIBER OPERATED CRS IN HIS OFFICE AND MADE THE BOOKING BY GIVING NECESSARY COMMANDS ON HIS COMPUTER AND THEREBY PROCESSED INFORMATION DISPLAYED ON HIS SCREEN. IN THAT CASE, PURCHASE ORDER WAS MADE BY THE SUBSCRIBER IN INDIA; BOOKING WAS MADE IN INDIA; SALE OF THE TICKET BY VEND ORS WAS MADE IN INDIA: AND SUBSCRIBER MADE THE PAYMENT IN RUPEES TO THE BRANCH OFFICE OF THE VENDORS IN INDIA. THE TICKET, WHICH WAS THE CONTRACT BETWEEN THE PASSENGER AND THE AIRLINES WAS MADE AND DELIVERED IN INDIA. THUS, INCOME ACCRUED TO THE ASSESSEE A S SOON AS THE CONTRACT BETWEEN THE SUBSCRIBER AND THE VENDOR WAS EXECUTED IN INDIA. THE CRS, WHICH WAS THE SOURCE OF I.T.A .NO. - 5551 & 5552/ DEL/20 12 PAGE 17 OF 19 REVENUE, WAS FOUND TO BE PARTIALLY EXISTENT IN THE MACHINES NAMELY VARIOUS COMPUTERS INSTALLED AT THE PREMISES OF THE SUBSCRIBERS AND IN SO ME CASES, THE ASSESSEE ITSELF PLACED THOSE COMPUTERS AND IN ALL THE CASES THE CONNECTIVITY IN THE FORM OF NODES LEASED FROM SITA WERE INSTALLED BY THE ASSESSEE THROUGH ITS AGENT AND THE COMPUTERS SO CONNECTED AND CON FIGURED WHICH COULD PERFORM THE FUNCTIO NS OF RESERVATION AND TICKETING WAS A PART AND PARCEL OF THE ENTIRE CRS AND WITHOUT THE AUTHORITY OF AIPL SUCH COMPUTERS WERE NOT CAPABLE OF PERFORMING THE RESERVATION AND TICKETING PART OF THE CRS SYSTEM. THE COMPUTER SO INSTALLED COULD NOT BE SHIFTED FRO M ONE PLACE TO ANOTHER EVEN WITHIN THE PREMISES OF THE SUBSCRIBER, LEAVE APART THE SHIFTING OF SUCH COMPUTER FROM ONE PERSON TO ANOTHER. ON THESE FACTS, THE ITAT CONCLUDED THAT THE ASSESSEE EXERCISED COMPLETE CONTROL OVER THE COMPUTERS INSTALLED AT THE PRE MISES OF THE SUBSCRIBERS AND THIS AMOUNTED TO A FIXED PLACE OF BUSINESS FOR CARRYING ON THE BUSINESS OF THE ENTERPRISE IN INDIA. BUT FOR THE SUPPLY OF COMPUTERS, THE CONFIGURATION OF COMPUTERS AND CONNECTIVITY WHICH WERE PROVIDED BY THE ASSESSEE EITHER DIR ECTLY OR THROUGH ITS AGENT AIPL WOULD AMOUNT TO OPERATE PART OF ITS CRS SYSTEM THROUGH SUCH SUBSCRIBERS IN INDIA AND ACCORDINGLY, ASSESSEE COULD BE SAID TO HAVE ESTABLISHED A PE WITHIN THE MEANING OF PARA 1 OF ART.5 OF INDO - SPAIN TREATY. BESIDES, THE ITAT FOUND THAT AIPL WAS DEPENDENT AGENT OF THE ASSESSEE AND HAD AUTHORITY TO CONCLUDE CONTRACT ON BEHALF OF THE ASSESSEE AND IN FACT, ENTERED INTO CONTRACT WITH THE TRAVEL AGENTS IN INDIA ON BEHALF OF THE ASSESSEE. ACCORDINGLY, THE ITAT CONCLUDED THAT THE ASS ESSEE HAD A PE IN INDIA. BUT SUCH ARE NOT THE FACTS AND CIRCUMSTANCES IN THE INSTANT CASE THE ASSESSEE DID NOT EXERCISE ANY CONTROL OVER THE COMPUTER SYSTEMS WHICH WERE INDEPENDENTLY OWNED BY AGENTS AND WERE NOT PROVIDED BY THE ASSESSEE. THE ACTIVITIES OF THE AGENTS WERE NOT WHOLLY OR ALMOST WHOLLY DEVOTED ON BEHALF OF THE ASSESSEE AND THAT THE AGENTS WERE NOT 'DEPENDENT AGENTS' OF THE ASSESSEE NOR HAD THEY ANY AUTHORITY TO CONCLUDE CONTRACTS IN INDIA ON BEHALF OF WESTERN UNION .IN THE INSTANT CASE BEFORE U S, THE CONTRACT IS BETWEEN THE REMITTER ABROAD AND THE ASSESSEE AND IS ENTERED INTO OUTSIDE INDIA. THE AGENTS ARE NOT PARTY THERETO. THE AGENTS MERELY CARRIED OUT THE CONCLUDING STEP IN THE ARRANGEMENT EMBODIED IN THE CONTRACT. IN OTHER WORDS, THE ASSESSEE UNDERTAKES OUTSIDE INDIA TO TRANSFER THE MONEY TO INDIA AND IT IS ONLY THE PAYMENT PART OF THE UNDERTAKING THAT IS EXECUTED BY THE AGENTS IN INDIA. THE CONTRACT WAS ALREADY CONCLUDED OUTSIDE INDIA, THE ITAT CONCLUDED IN THE AY 2001' - 02. IN VIEW OF THE FOR EGOING, ESPECIALLY WHEN THE REVENUE HAVE NOT EVEN ATTEMPTED TO EXPLAIN AS TO HOW FACTS AND CIRCUMSTANCES IN THE DECISION RELIED UPON BY THEM ARE PARALLEL TO THE FACTS AND CIRCUMSTANCES IN THE CASE BEFORE US, WE ARE OF THE OPINION THAT THE RELIANCE BY THE I D. DR ON THE DECISION OF THE ITAT IN AMADEUS GLOBAL TRAVEL DISTRIBUTION SA (SUPRA), RENDERED IN DIFFERENT CONTEXT AND CIRCUMSTANCES, IS TOTALLY MISPLACED. IN THIS CONTEXT, WE MAY REFER TO THE - FOLLOWING OBSERVATIONS OF THE HON'BLE SUPREME COURT' IN THE CAS E OF CIT V. SUN ENGINEERING WORKS (P) LTD., [1992] 198 ITR 297/ 64 TAXMAN 442 : 'IT IS NEITHER DESIRABLE NOR PERMISSIBLE TO PICK OUT A WORD OR A SENTENCE FROM THE JUDGMENT OF THIS COURT, DIVORCED FROM THE CONTEXT OF THE QUESTION UNDER CONSIDERATION AND TR EAT IT TO BE THE COMPLETE' LAW' DECLARED BY THIS COURT. THE JUDGMENT MUST BE READ AS A WHOLE AND THE OBSERVATIONS FROM THE JUDGMENT HAVE I.T.A .NO. - 5551 & 5552/ DEL/20 12 PAGE 18 OF 19 TO BE CONSIDERED IN THE LIGHT OF THE QUESTIONS WHICH WERE BEFORE THIS COURT. A DECISION OF THIS COURT TAKES ITS COLOUR FROM THE QUESTIONS INVOLVED IN THE CASE IN WHICH IT IS RENDERED AND, WHILE APPLYING THE DECISION TO A LATER CASE, THE COURTS MUST CAREFULLY TRY TO ASCERTAIN THE TRUE PRINCIPLE LAID DOWN BY THE DECISION OF THIS COURT AND NOT TO PICK OUT WORDS OR SENTENCES F ROM THE JUDGMENT, DIVORCED FROM THE CONTEXT OF THE QUESTIONS UNDER CONSIDERATION BY THIS COURT, TO SUPPORT THEIR REASONINGS. IN MADHAV RAO JIVAJI RAO SCINDIA BAHADUR V. UNION OF INDIA [1971] 3 SCR 9; AIR 1971 SC 530, THIS COURT CAUTIONED (AT PAGE 578 OF AI R 1971 SC).' 6.3 HON'BLE SUPREME COURT CAUTIONED IN THEIR DECISION DATED 6.3.2009 IN THE CASE OF STATE OF AP V. M.RADHA KRISHNA MURTHY, [CRIMINAL APPEAL NO. 386 OF 2002] '6. COURTS SHOULD NOT PLACE RELIANCE ON DECISIONS WITHOUT DISCUSSING AS TO HOW THE FACTUAL SITUATION FITS IN WITH THE FACT SITUATION OF THE DECISION ON WHICH RELIANCE IS PLACED. OBSERVATIONS OF COURTS ARE NEITHER TO BE READ AS EUCLID'S THEOREMS NOT AS PROVISIONS OF THE STATUTE ARID THAT TOO TAKEN OUT OF THEIR CONTEXT. THESE OBSERVATIONS MUST BE READ IN THE CONTEXT IN WHICH THEY APPEAR TO HAVE BEEN STATED. JUDGMENTS OF COURTS ARE NOT TO BE CONSTRUED AS STATUTES. TO INTERPRET WORDS, PHRASES AND PROVISIONS OF A STATUTE, IT MAY BECOME NECESSARY FOR JUDGES TO EMBARK INTO LENGTHY DISCUSSIONS BU T THE DISCUSSION IS MEANT TO EXPLAIN AND NOT TO DEFINE. JUDGES INTERPRET STATUTES, THEY DO NOT INTERPRET JUDGMENTS. THEY INTERPRET WORDS OF STATUTES; THEIR WORDS ARE NOT TO BE INTERPRETED AS STATUTES. 8. CIRCUMSTANTIAL FLEXIBILITY, ONE ADDITIONAL OR DIFFE RENT FACT MAY MAKE A WORLD OF DIFFERENCE BETWEEN CONCLUSIONS IN TWO CASES. DISPOSAL OF CASES BY BLINDLY PLACING RELIANCE ON A DECISION IS NOT PROPER. 9. THE FOLLOWING WORDS OF LORD DENNING IN THE MATTER OF APPLYING PRECEDENTS HAVE BECOME LOCUS CLASSICUS: 'EACH CASE DEPENDS ON ITS OWN FACTS AND A CLOSE SIMILARITY BETWEEN ONE CASE AND ANOTHER IS NOT ENOUGH BECAUSE EVEN A SINGLE SIGNIFICANT DETAIL MAY ALTER THE ENTIRE ASPECT, IN DECIDING SUCH CASES, ONE SHOULD AVOID THE TEMPTATION TO DECIDE CASES (AS SAID BY CORDOZO) BY MATCHING THE COLOUR OF ONE CASE AGAINST THE COLOUR OF ANOTHER. TO DECIDE THEREFORE, ON WHICH SIDE OF THE LINE A CASE FALLS, THE BROAD RESEMBLANCE TO ANOTHER CASE IS NOT AT ALL DECISIVE. 7.11. ACCORDINGLY IN THE ABSENCE OF ANY CONTRARY FACTS , ARGUMENTS OR POSITION OF LAW CANVASSED ON BEHALF OF THE REVENUE IN THE FACE OF THE JUDICIAL PRECEDENT CITED, WHICH WE HAVE DISCUSSED AT LENGTH IN THE EARLIER PARTS OF THIS ORDER, WE FIND THAT GROUND NOS.3 TO 7 RAISED IN ITA NO.5551/DEL/2012 HAVE TO BE DI SMISSED. 7.12. IN VIEW OF THE ABOVE CONCLUSION WHEREIN WE FIND THAT THERE IS NO AGENCY PE OF THE ASSESSEE IN INDIA, GROUND NO.8 ALSO HAS TO BE REJECTED. AS IN THE ABSENCE I.T.A .NO. - 5551 & 5552/ DEL/20 12 PAGE 19 OF 19 OF ANY PE IN INDIA THE PROFITS IF ANY ATTRIBUTABLE TO THE INDIAN OPERATIONS CANNOT B E ASSESSED AS BUSINESS PROFITS UNDER ARTICLE 7 OF THE TREATY. ITA NO.5552/DEL/2012 8. IN ITA NO.5552/DEL/2012, GROUND NO.1 BEING A GENERAL GROUND AND GROUND NO.8 BEING A RESIDUARY GROUND WHEREIN THE OPTION VESTED THEREIN WAS NOT EXERCISED BY THE REVENUE , WE HOLD THAT THE GROUNDS DO NOT NEED ANY SPECIFIC ADJUDICATION . 8.1. GROUND NOS.2 TO 6 OF THE REVENUE FOLLOWING THE REASONS IN ITA NO.5551/DEL/2012 ARE DISMISSED AS THE STAND OF THE PARTIES BEFORE THE BENCH ALL ALONG HAS BEEN THAT THERE IS NO CHANGE IN FACTS AND CIRCUMSTANCES AND ARGUMENT ADVANCED IN ITA NO.555 1 /DEL/2012 INFACT WOULD ADDRESS THE ISSUE IN ITA NO.5552/DEL/2012. 8.2. FOR SIMILAR REASONS, GROUND NO.7 FOLLOWING THE REASONING IN ITA N O.5551/DEL/2012 IS ALSO DISMISSED. 9. IN THE RESULT, ITA NO S .5551/DEL/2012 AND 5552/DEL/2012 ARE DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 1 0 T H OF DECEMBER , 2015. S D / - S D / - (O.P.KANT) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 0 /12 /2015 * AMIT KUMAR * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI