MARUBENI CORPORATION, MUMBAI V. ADDL DIT (IT) 4(1), MUMBAI

ITA 5697/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71907 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 10-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJAY SHRIVASTAVA
• Assessee Lawyers: V K DUGGAL
• Keywords: Presumptive income; Business income; Depreciation; Rectification of order; Double taxation relief; Permanent establishment; Difference of opinion; Change of opinion
• Section: 143(3); 154; 15

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL L B ENCH, MUMBAI . . , , , ! ' BEFORE SHRI I.P. BANSAL, JM AND SHRI SANJAY AROR A, AM ./ I.T.A. NO.7986/MUM/2010 ( # # # # $ $ $ $ / ASSESSMENT YEAR :2004-05 A N D ./ I.T.A. NO.5697/MUM/2012 ( # # # # $ $ $ $ / ASSESSMENT YEAR :2009-10 M/S. MARUBENI CORPORATION, C/O MARUBENI INDIA PVT. LTD., 25, MITTAL CHAMBERS, 2 ND FLOOR, NARIMAN POINT, MUMBAI-400 021 THE DCIT (INTERNATIONAL TAXATION) 4(1), 133 SCINDIA HOUSE, BALLARD PIER, N.M. ROAD, MUMBAI-400 038 % ! ./ & ./PAN/GIR NO. : AAACM 7682D ( %' /APPELLANT ) .. ( ()%' / RESPONDENT ) %' * / APPELLANT BY : ` SHRI V.K.DUGGAL ()%' + * /RESPONDENT BY : SHRI AJAY SHRIVASTAVA # + ,-! / DATE OF HEARING :11.12.2013 .$ + ,-! / DATE OF PRONOUNCEMENT :11.12.2013 / / O R D E R PER I.P BANSAL, JM: BOTH THESE APPEALS ARE FILED BY THE ASSESSEE. THEY ARE DIRECTED AGAINST THE TWO SEPARATE ORDERS OF THE LD. CIT(A)-1 1, MUMBAI DT. 19.8.2010 AND 28.6.2012 FOR A.YRS 2004-05 AND 2009- 10 RESPECTIVELY. ITA NOS.7986 & 5697/M/2012 2 2. GROUNDS OF APPEAL IN EACH OF THE YEAR READ AS UN DER: ITA NO. 7986/M/2010 A.Y. 2004-05 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN THE LAW, THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN RECTIFY ING THE ORDER U/S 154 BY CHANGING HIS OPINION ON RATE OF TAX. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN THE LAW, THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN PASSING NON-SPEAKING ORDER DEALING WITH ALL GROUNDS OF APPEAL. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN THE LAW, THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN CHANGIN G ITS OPINION ON TAX RATE WHILE IT APPLIED ITS MIND ON DEDUCTION OF TDS ON INTEREST ON DELAYED INCOME TAX REFUND TO ASSESSEE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN THE LAW, THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN RELATIN G INTEREST TO THE PERMANENT ESTABLISHMENT IN INDIA. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN THE LAW, THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN TREATIN G INTEREST INCOME EFFECTIVELY CONNECTED TO PERMANENT ESTABLISHMENT IN INDIA. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN THE LAW, THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN TREATIN G THE INTEREST EARNED ON DELAYED PAYMENT IN FOREIGN CURRENCY WHICH HAS NO RELATION WITH PERMANENT ESTABLISHMENT IN INDIA AND APPLYING NORMAL TAX RATE. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN THE LAW, THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN NOT SET TING OFF THE LOSS FROM PROJECT OFFICE FIRST AGAINST INTEREST INCOME A ND THEN AGAINST THE FEE FOR TECHNICAL SERVICES. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN THE LAW, THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN APPLYIN G TAX RATE OF 41% ON FOREIGN INTEREST INCOME INSTEAD OF TAX RATE OF 20% AS PROVIDED IN THE SECTION 115(A)(II) READ WITH EXPLAN ATION B. 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN THE LAW, THE DDIT WAS NOT JUSTIFIED IN PASSING ORDER WITHOUT GIVING SECOND OPPORTUNITY TO ASSESSING TO REPRESENT AGAIN ON THE MATTER. ITA NOS.7986 & 5697/M/2012 3 10. THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDI CE TO EACH OTHER. ITA NO. 5697/M/2012 A.Y. 2009-10 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WA S NOT JUSTIFIED ON FACTS AND CIRCUMSTANCES OF THE CASE AN D ERRED IN LAW IN SUSTAINING ADIT ORDER FOR ASSESSING THE AMOUNT O F SERVICE TAX AS RECEIPTS AND CONSEQUENTLY LEVYING TAX HEREON. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED ON FACTS AND ERRED IN LAW IN SUSTAINING A DIT ORDER FOR APPLYING TAX RATE OF 42.23% ON BANK INTEREST INSTEA D OF TAX RATE OF 20% AS PROVIDED IN THE SECTION 115(A)(II) READ WITH EXPLANATION B. 3. WITHOUT PREJUDICE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED ON FACTS AND ERRED IN L AW IN SUSTAINING ADIT ORDER FOR RELATING ENTIRE BANK INTE REST TO THE PERMANENT ESTABLISHMENT OF ASSESSEE IN INDIA AND IN NOT APPORTIONING IT WITH DUE CONSIDERING FOR THE EXCHAN GE CURRENCY RISK AND COST INCURRED BY HEAD OFFICE ON FUNDS DEPL OYED. 4. THE ABOVE GROUNDS OF APPEAL ARE ALL INDEPENDEN T AND WITHOUT PREJUDICE TO ONE AND ANOTHER. THE APPELLANT CRAVES LEAVE TO SUPPLEMENT, TO CANCEL, AMEND, ADD AND/OR OTHERWI SE ALTER/MODIFY ANY OR ALL THE GROUNDS OF THE APPEAL S TATED HEREINABOVE. ITA NO. 7986/M/2010 A.Y. 2004-05 3. FOR ASSESSMENT YEAR 2004-05, THE ASSESSEE HAS FI LED ITS RETURN OF INCOME ON 31.10.2004 DECLARING INCOME OF RS. 3,89,3 5,032/- IN WHICH THE FOLLOWING INCOME WAS SHOWN UNDER THE HEAD INCOME F ROM OTHER SOURCES WHICH WERE SHOWN TO BE LIABLE FOR TAX AT THE RATE OF 15%. 1)INTEREST INCOME FROM BANKS AND BOTHERS - RS. 30 ,07,693/- 2)INTEREST ON INCOME TAX REFUND FROM INCOME TAX DEPARTMENT - RS . 7,83,357/- 3) INTEREST INCOME FROM BANKS -RS. 15,626/- 4)INTEREST FOR DELAYED PAYMENT ON FOREIGN SUPPLY CONTRACT WITH PPN IN -RS. 72,9 4,775/- FOREIGN CURRENCY ---------------------- ITA NOS.7986 & 5697/M/2012 4 TOTAL -RS.1,11,01,452/- ============= 4. THE CLAIM OF THE ASSESSEE THAT THE AFOREMENTION ED INCOME IS LIABLE TO BE TAXED AT 15% WAS ACCEPTED BY THE AO IN THE A SSESSMENT ORDER DT. 26 TH DECEMBER 2006 PASSED UNDER THE PROVISIONS OF SEC. 143(3) OF THE ACT. SUBSEQUENTLY ON 10.12.2008, THE AO ISSUED NOT ICE U/S. 154 OF THE ACT TO THE ASSESSEE ON THE GROUND THAT THE ASSESSEE WAS HAVING PROJECT OFFICE AND WAS HAVING A PERMANENT ESTABLISHMENT WIT HIN THE MEANING OF DTAA BETWEEN INDIA AND JAPAN, THEREFORE, THE AFOREM ENTIONED INTEREST INCOME WAS LIABLE TO BE TAXED AS PER THE NORMAL PRO VISIONS OF THE INCOME-TAX ACT IN ACCORDING WITH ARTICLE 11(6) OF T HE INDO-JAPAN DTAA. THE ASSESSEE DID NOT REPLY TO SUCH NOTICE ISSUED BY THE AO. IN ABSENCE OF REPLY FILED BY THE ASSESSEE, THE AO TAXED THE SAID AMOUNT OF RS. 1,11,01,452/- @ 40% +SURCHARGE @ 2.5%. THIS ORDER U/S. 154 WAS PASSED BY THE AO ON 28.1.2009. THE AFOREMENTIONED ACTION OF THE AO WAS CHALLENGED IN AN APPEAL FILED BY THE ASSESSEE B EFORE THE LD. CIT(A) WHICH HAS BEEN DECIDED VIDE AFOREMENTIONED IMPUGNED ORDER DT. 19 TH AUGUST 2010. 4. THE LD. CIT(A) HAS HELD THAT THERE WAS A MISTAKE IN THE ORDER PASSED BY THE AO U/S. 143(3) OF THE ACT WHEREBY HE DIRECTED TO TAX THE AFOREMENTIONED AMOUNT AT THE RATE OF 15% IN ACCORDA NCE WITH DTAA BETWEEN INDIA AND JAPAN. SUBSEQUENTLY, WHEN HE FOU ND THAT SUCH INCOME WAS LIABLE TO BE TAXED AS PER NORMAL PROVISIONS OF I.T. ACT AS PER ARTICLE 11(6) OF THE TREATY, AN OPPORTUNITY WAS GIVEN TO TH E ASSESSEE TO FILE THE OBJECTION, IF ANY. HOWEVER, NO COMPLIANCE WAS MADE BY THE ASSESSEE. LD. CIT(A) HAS HELD THAT THE AO WAS RIGHT IN PASSIN G THE RECTIFICATION ORDER AFTER GIVING REASONABLE OPPORTUNITY OF HEARIN G TO THE ASSESSEE. SUCH MISTAKE WAS APPARENT FROM RECORD WHICH CAN BE RECTI FIED BY THE AO TO ITA NOS.7986 & 5697/M/2012 5 AVOID LOSS OF THE REVENUE. THEREFORE, HE DECLINED TO INTERFERE IN THE ORDER PASSED BY THE AO. 5. THE ASSESSEE IS AGGRIEVED AND HAS RAISED THE AFO REMENTIONED GROUNDS. IT MAY ALSO BE MENTIONED HERE THAT THE GR OUNDS OF APPEAL WHICH HAS BEEN RAISED BEFORE US WERE ALSO RAISED BY THE A SSESSEE BEFORE THE LD. CIT(A). HOWEVER, LD. CIT(A) DID NOT ADJUDICATE AL L THE GROUNDS RAISED BY THE ASSESSEE BEFORE HIM AND HE HAS SIMPLY DISMI SSED THE APPEAL FILED BY THE ASSESSEE ON THE GROUND THAT SEC. 154 WAS RI GHTLY APPLIED BY THE AO. 6. AFTER NARRATING THE FACTS, IT WAS SUBMITTED BY T HE LD. AR THAT THE SUBSEQUENT ACTION OF THE AO IN INVOKING PROVISIONS OF SEC. 154 WAS BASED ON CHANGE OF OPINION, THEREFORE POWER U/S. 15 4 WAS WRONGLY EXERCISED. 7. ON THE OTHER HAND, IT WAS THE CASE OF THE LD. DE PARTMENTAL REPRESENTATIVE THAT THERE IS NO CHANGE OF OPINION B Y THE AO AS THERE WAS MISTAKE IN THE ASSESSMENT ORDER PASSED BY HIM. IN THE ORIGINAL ASSESSMENT ORDER, THE AO ACCEPTED THE CLAIM OF THE ASSESSEE AS PER ITS RETURN AND NO OPINION WAS FORMED BY THE AO, THEREFO RE, LD. DR PLEADED THAT THE ORDER U/S. 154 CANNOT BE HELD TO BE INVALI D SIMPLY ON THE BASIS OF CHANGE OF OPINION. 8. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE BEEN CAREFULLY CONSIDERED. THE AFOREMENTIONED INCOME WA S CONSIDERED TO BE LIABLE FOR TAX AT THE RATE OF 15% BY THE ASSESSEE I TSELF IN ITS RETURN OF INCOME. NO MATERIAL HAS BEEN BROUGHT ON RECORD TO SHOW THAT APPLICABILITY OF RATE OF 15% WAS EXAMINED BY THE AO DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. EVEN DURING THE CO URSE OF RECTIFICATION ITA NOS.7986 & 5697/M/2012 6 PROCEEDINGS, THE ASSESSEE DID NOT SUBMIT ANY REPLY TO THE AO. IT IS ALSO NOT THE CASE OF THE ASSESSEE THAT AO DID NOT GIVE O PPORTUNITY TO EXPLAIN THAT AS TO WHY 15% RATE OF TAX WAS JUSTIFIED. IN T HESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THERE WAS NO CHANGE OF OPI NION AS HAS BEEN ARGUED BY LD. AR. THE LEVY RATE OF TAX HAS TO BE I N ACCORDANCE WITH THE STATUTORY PROVISIONS. IF THERE IS LESS LEVY, THEN IT IS LIABLE FOR RECTIFICATION. ACCORDINGLY, WE HOLD THAT AO WAS NOT WRONG IN EXERC ISING HIS RIGHT U/S. 154 OF THE ACT. 9. NOW COMING TO THE MERITS OF THE ISSUE, IT HAS AL READY BEEN POINTED OUT THAT THE IMPUGNED INTEREST HAS THREE COMPONENTS NAMELY (1) INTEREST FROM BANK (2) INTEREST ON INCOME TAX REFUND AND (3) INTEREST FOR DELAYED PAYMENT ON FOREIGN SUPPLY CONTRACT WITH PPN IN FORE IGN CURRENCY. ALL THESE ISSUES WERE STATED TO BE COVERED AS UNDER: I) INTEREST INCOME FROM BANK IS COVERED IN FAVOUR OF T HE REVENUE BY THE DECISION OF THE ITAT IN ASSESSEES O WN CASE WHICH IS DT. 28 TH AUGUST, 2013 IN ITA NO. 1087/M/2012 FOR ASSESSMENT YEAR 2007-08. THE ISSUE HAS BEEN DECID ED AS UNDER: GROUND NO. 6 & 7 PERTAINS TO ATTRIBUTION OF AND TA XABILITY OF INTEREST ON FDRS. THE CIT(A) HELD THAT INTEREST IS DIRECTLY CONNECTED WITH THE INCOME OF THE PE. THOUGH THE AR ARGUED THAT THE HO TAKES CARE OF ALL TYPES OF EXPENSES AND RISK S, THEREFORE, THE RATE APPLICABLE SHOULD BE 20% & NOT 41.82% AS APPLI ED BY THE AO. IT IS A FACT THAT THE INTEREST INCOME PERTAINS TO D EPOSITS MADE BY THE PE ON BEHALF OF ITS PARENT, I.E. THE ASSESSEE. SINC E THE COST IS ATTRIBUTABLE TO THE ASSESSEE, THE ASSESSEE SHALL NO T BE ENTITLED TO THE PREFERENTIAL RATE AS CLAIMED BY THE ASSESSEE, AS PE R INDIA JAPAN DTAA. ITA NOS.7986 & 5697/M/2012 7 WE HAVE HEARD THE ARGUMENTS AND WE ARE OF THE CONSI DERED VIEW THAT THERE IS NO INFIRMITY IN THE ORDERS OF THE REV ENUE AUTHORITIES, WHICH WE SUSTAIN. GROUND NO. 6 & 7 ARE THEREFORE RE JECTED. THEREFORE, SO FAR AS IT RELATES TO INTEREST EARNED BY THE ASSESSEE FROM BANK, IT IS HELD THAT THE SAME IS TAXABLE AT THE RA TE OF 40+2.5% AS HAS BEEN LEVIED BY THE AO IN ORDER PASSED U/S. 154 OF THE AC T. (II) INTEREST ON INCOME TAX REFUND. THIS IS COVERE D IN FAVOUR OF THE ASSESSEE VIDE ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE DT. 8 TH AUGUST, 2013 IN ITA NO. 939/M/2012 FOR ASSESSMENT Y EAR 2007-08. THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL READ AS UNDER: 2. THE ONLY GROUND RAISED BY THE REVENUE IS AS UND ER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO TA X THE INTEREST ON INCOME TAX REFUND AT A LOWER RATE 10% A S PROVIDED IN THE DTAA BETWEEN INDIA AND JAPAN WITHOU T CONSIDERING THE FACT THAT INTEREST RECEIPT HAS NEXU S WITH ASSESSEES PE. 3. THE ASSESSEE IS A COMPANY INCORPORATED IN JAPAN AND IT IS HAVING A PERMANENT ESTABLISHMENT (PE) IN INDIA. THE ASSESSEE FILED RETURN OF INCOME SHOWING NIL INCOME AFTER ADJUSTING THE BROUGHT FORWARD BUSINESS LOSS AND UNA BSORBED DEPRECIATION. THE ASSESSMENT WAS COMPLETED ON INCOM E OF ` 17,00,22,100/- BY TAXING VARIOUS INCOME INCLUDING I NTEREST ON INCOME TAX REFUND OF ` 22,15,213/-. THE AO TAXED THE SAID INTEREST INCOME AS PER THE PROVISIONS OF THE A CT WHICH HAS BEEN CHALLENGED BY THE ASSESSEE BEFORE THE CIT( A) AND CLAIMED THAT THE INTEREST ON INCOME TAX REFUND ATTR ACT THE TAX RATE AS PROVIDED IN INDO-JAPAN DTAA. THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN CASE OF CLOUGH ENGINEERI NG LTD. VS ACIT 130 ITD 137 AND DIRECTED THE AO TO TAX THE INT EREST ON INCOME TAX REFUND AT LOWER RATE AS PROVIDED IN THE DTAA. 4. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT THE ISSUE IS COVERED BY THE DECISION OF S PECIAL BENCH OF THIS TRIBUNAL IN CASE OF ACIT VS CLOUGH EN GINEERING LTD. (SUPRA). WE FURTHER NOTE THAT THE CO-ORDINATE BENCH OF ITA NOS.7986 & 5697/M/2012 8 THIS TRIBUNAL IN CASE OF BECHTEL INTERNATIONAL INC. VS ADIT IN ITA NO. 5198/M/2010 AND 6998/M/2011 VIDE ORDER DATE D 8.2.2012 HAS ALSO CONSIDERED AND DECIDED THE IDENTI CAL ISSUE BY FOLLOWING THE DECISION OF SPECIAL BENCH IN CASE OF CLOUGH ENGINEERING LTD. (SUPRA) IN PARA 10 AS UNDER: 10. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE R IVAL SUBMISSIONS. WE ARE OF THE VIEW THAT IN THE LIGHT O F THE COMMENTARY OF KLAUS VOGEL ON THE REASON FOR USE OF THE WORD ATTRIBUTABLE IN THE US CONVENTIONS, THEY ARE IN NO WAY DIFFERENT FROM THE EXPRESSION EFFECTIVELY CONNECTED. US MODEL CONVENTION DEVIAT ES FROM OECD AND UN MODEL CONVENTIONS (MCS) BECAUSE THE TERM EFFECTIVELY CONNECTED IS A TECHNICAL TER M OF US DOMESTIC TAX LAW AND THAT IT IS DEFINED IN DETAI L IN I.R.C. SEC.864(C) WHEREAS ATTRIBUTABLE, THOUGH US ED IN US DOMESTIC TAX LAW AS WELL, IS NOT DEFINED. IF US MC WERE TO REFER TO EFFECTIVELY CONNECTED, THE QUEST ION WOULD ARISE WHETHER THAT TERM WOULD BE REQUIRED BY ARTICLE 3(2) MC TO BE INTERPRETED ON THE US SIDE IN ACCORDANCE WITH ITS DEFINITION UNDER US TAX LAW, US E OF THE TERM ATTRIBUTABLE AVOIDS THAT PROBLEM AND THA T IS THE REASON THE EXPRESSION ATTRIBUTABLE IS USED IN US MODEL CONVENTIONS. THEREFORE THE TERM APPEARING IN US MODEL CONVENTIONS HAVE THE SAME MEANING AS THE EXPRESSION EFFECTIVELY CONNECTED. THE EXPRESSION ATTRIBUTABLE AS USED IN ARTICLE 11(5) OF THE INDI A-USA DTAA HAS THEREFORE TO BE CONSTRUED AS EQUIVALENT TO EFFECTIVELY CONNECTED. THE TECHNICAL EXPLANATION REFERRED TO BY THE LEARNED COUNSEL FOR THE ASSESSEE WHEREBY IT HAS BEEN OBSERVED THAT THE TERM ATTRIBUTABLE IS TO BE GIVEN A NARROWER MEANING TH AN THE EXPRESSION EFFECTIVELY CONNECTED, WE FIND THA T THE SAID TECHNICAL EXPLANATION IS IN THE CONTEXT OF ATTRIBUTION OF PROFITS OF THE PE AND IS RELEVANT TO TAXATION OF AN INDIAN ENTERPRISE HAVING PE IN USA. NEVERTHELESS, THE EXPRESSION ATTRIBUTABLE EVEN IF HELD TO BE EQUIVALENT TO THE EXPRESSION EFFECTIVEL Y CONNECTED IN THE LIGHT OF THE COMMENTARY BY KLAUS VOGEL, REFERRED TO ABOVE, THEN THE CASE OF THE ASSESSEE WOULD STAND SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE SPECIAL BENCH I N THE CASE OF CLOUGH ENGINEERING LTD. (SUPRA). FOLLOW ING THE SAME, WE HOLD THAT THE INTEREST INCOME ON INCOM E TAX REFUND IS TO BE CHARGED TO TAX ONLY UNDER ARTIC LE 11(2) OF THE INDO-USA DTAA AND NOT UNDER ARTICLE 11(5) THEREOF. ITA NOS.7986 & 5697/M/2012 9 5. FOLLOWING THE DECISION OF THIS SPECIAL BENCH IN CASE OF CLOUGH ENGINEERING LTD. AS WELL AS THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN CASE OF BECHTEL INTERNATIONAL INC. WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. ACCORDINGLY T HE ORDER OF THE CIT(A) QUA THIS ISSUE IS UPHELD. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ACCORDINGLY, IT IS HELD THAT THE INTEREST ON INCOM E TAX REFUND IS LIABLE FOR LOWER RATE OF TAXATION AS PER DTAA. (III) INTEREST FROM DELAYED PAYMENTS ON FOREIGN SU PPLY CONTRACT WITH PPN IN FOREIGN CURRENCY. FOR THIS COMPONENT, IT IS THE CASE OF THE ASSESSEE THAT THIS IS LIABLE FOR LOWER RATE OF TAXA TION AS PER SEC. 115(A)(II) R.W. EXPLANATION-B. IT IS THE CASE OF THE LD. AR T HAT THIS ASPECT, THOUGH RAISED BEFORE THE LD. CIT(A) HAS NOT BEEN ADJUDICAT ED BY LD. CIT(A). HE SUBMITTED THAT IT WILL BE IN THE INTEREST OF JUSTIC E, IF THE ISSUE REGARDING THIS COMPONENT OF INTEREST IS RESTORED BACK TO THE FILE OF THE AO WITH A DIRECTION TO READJUDICATE THE SAME AFTER GIVING THE ASSESSEE REASONABLE OPPORTUNITY OF HEARING. HE FURTHER SUBMITTED THAT G ROUND NO. 7 RAISED BEFORE ITAT WAS ALSO RAISED BEFORE LD. CIT(A) WHICH HAS ALSO NOT BEEN ADJUDICATED. THE AO MAY BE DIRECTED TO ADJUDICATE THIS ISSUE IF THE MATTER IS RESTORED BACK TO THE AO. 10. ON THE OTHER HAND LD. DEPARTMENTAL REPRESENTATI VE RELIED UPON THE ORDER PASSED BY AO AND LD. CIT(A). 11. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTEN TIONS HAVE CAREFULLY BEEN CONSIDERED. THE CONTENTION OF THE ASSESSEE IS REQUIRED TO BE EXAMINED ON MERITS. THIS ISSUE WAS RAISED BY THE A SSESSEE BEFORE THE LD. CIT(A). HOWEVER, LD. CIT(A) HAS NOT ADJUDICATED TH E SAME. WE CONSIDER IT JUST AND PROPER TO RESTORE THIS ISSUE T O THE FILE OF THE AO WITH A DIRECTION TO READJUDICATE THIS ISSUE ON MERIT AFT ER GIVING THE ASSESSEE A ITA NOS.7986 & 5697/M/2012 10 REASONABLE OPPORTUNITY OF HEARING. SO FAR AS IT RE LATES TO CONSIDERATION OF GROUND NO. 7 WHICH IS ALTERNATIVE CONTENTION, AS WE ARE RESTORING THE MAIN ISSUE TO THE FILE OF THE AO, THIS ISSUE IS ALSO RE STORED BACK TO THE FILE OF THE AO FOR ADJUDICATION AS PER LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF HEARING. WE DIRECT ACCORDINGLY. 12. IN VIEW OF THE ABOVEMENTIONED DISCUSSION, THE A PPEAL FILED BY THE ASSESSEE IS CONSIDERED TO BE PARTLY ALLOWED FOR STA TISTICAL PURPOSE IN THE MANNER AFORESAID. ITA NO. 5697/M/2012-2009-10 13. AT THE OUTSET , IT WAS SUBMITTED BY LD. AR THAT GROUND NO. 1 IS COVERED IN FAVOUR OF THE ASSESSEE VIDE EARLIER OR DER OF THE TRIBUNAL IN ASSESSEES OWN CASE. REFERENCE IN THIS REGARD WAS MADE TO THE AFOREMENTIONED DECISION DT. 28 TH AUGUST, 2013 IN ITA NO. 1087/M/2012 WHEREIN SIMILAR WAS DECIDED IN FAVOUR OF THE ASSESS EE WITH THE FOLLOWING OBSERVATIONS: GROUND NO. 5 PERTAINED TO INCLUSION OF SERVICE TAX AS PART OF THE TRADING RECEIPTS. THE AR EXPLAINED THAT THE AO WHILE CONSIDERING THE RECEIPTS OF THE ASSESSEE AS PER TDS CERTIFICATES HAS NOT ALL OWED DEDUCTION FOR SERVICE TAX COLLECTED BECAUSE SERVICES TAX, AS SUCH IS NOT THE INCOME OF THE ASSESSEE, THOUGH IT IS INCLUDED IN TH E INVOICE. THE FACT IS THAT THE ASSESSEE HAS TO COLLECT THE SERVIC E TAX AND DEPOSIT THE SAME ON BEHALF OF THE VENDOR, THEREFORE, SERVIC E TAX RECEIPT IS NEVER THE INCOME OF THE ASSESSEE. THE AR FURTHER SU BMITS THAT THE ISSUE IS COVERED BY THE DECISION OF THE COORDINATE BENCH IN MUMBAI IN THE CASE OF ADIT V HALDOR TOPSOE A/C, ITA NO. 44 31/MUM/2005 & 6868/MUM/2007, WHEREIN IT WAS HELD, 6. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF AUTHORITIES BELOW AND SUBMISSIONS OF REPRESENTATIVE S ITA NOS.7986 & 5697/M/2012 11 OF BOTH THE PARTIES. WE HAVE ALSO GONE THROUGH THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN TH E CASE OF VEOLIA EA-COMPAGNIE (SUPRA). WE OBSERVE THAT IN THE SAID CASE, SIMILAR ISSUE AROSE I.E. AS TO WHETHER THE SERVICE TAX CHARGED AND COLLECTED BY TH E ASSESSEE, WHICH IS A FRANCE BASED FOREIGN COMPANY ENGAGED IN PROVIDING CONSULTANCY SERVICE TO CHENNAI METROPOLITAN WATER SUPPLY AND SEWERAGE BOARD (CMWSSB), IS ITS BUSINESS RECEIPTS SUBJECT TO TAX O N GROSS BASIS UNDER SECTION 115A R.W. 44D OF THE ACT. THE TRIBUNAL VIDE PARA 8 HAS HELD THAT REIMBURSEMEN T OF SERVICE TAX COULD NOT FORM PART OF TAXABLE INCOM E OF THE ASSESSEE. FEE FOR TECHNICAL SERVICES IS FOR THE SERVICES RENDERED BY THE ASSESSEE AND SERVICE TAX WOULD NOT FORM PART OF FEE FOR TECHNICAL SERVICES. THAT SERVICE TAX IS NOT EXPENDITURE INCURRED BY THE ASSE SSEE AND IT IS A STATUTORY LEVY ON THE PERSON WHO AVAIL SERVICES FROM THE ASSESSEE. IT WAS HELD THAT IT WO ULD HAVE BEEN A DIFFERENT CASE IF THE ASSESSEE HAD COLLECTED SERVICE TAX AND NOT PAID THE SAME TO GOVERNMENT ACCOUNT BUT THAT WAS NOT THE CASE AND IT WAS ONLY REIMBURSEMENT OF SERVICE TAX PAID BY THE ASSESSEE TO THE GOVERNMENT ACCOUNT. THUS, THE RECEI PT CANNOT BE TREATED AS A TRADING RECEIPT. HENCE, REIMBURSEMENT OF SERVICE TAX CANNOT FORM PART OF TO TAL INCOME OF THE ASSESSEE. IT WAS HELD THAT SECTION 4 4D PROVIDES FOR DEDUCTION FROM RECEIPTS IN THE NATURE OF ROYALTY AND FEE FOR TECHNICAL SERVICES ETC., WHICH IS CHARGEABLE @ 20% AS PER PROVISIONS OF SECTION 115A(1)(B)(B) OF THE INCOME TAX ACT, IF FEE IS CHAR GED PURSUANT TO AN AGREEMENT MADE AFTER 31.5.1997 BUT BEFORE 1.6.2005. THE AMOUNT IN QUESTION IS THE AMOU NT OF SERVICE TAX COLLECTED BY THE ASSESSEE ON WHICH T HE GOVERNMENT HAS OVERRIDING RIGHT ON THE SAME, CANNOT BE CONSIDERED FOR LEVY OF TAX IN THE HANDS OF THE ASSESSEE. IT IS RELEVANT TO STATE THAT IN THE SAID CASE, ITAT ALSO PLACED RELIANCE ON THE DECISION OF ITAT HYDERABAD BENCH IN THE CASE OF ACIT VS. LOUIS BERGER INTERNATIONAL INC,(2010) 40 SOT 370(HYD) AND IN THE SAID CASE THE DECISION OF HONBLE APEX COURT IN THE CASE OF CHOWRINGHEE SALES BUREAU (P) LTD (SUPRA ) WAS ALSO CONSIDERED AND DISTINGUISHED. ON BEHALF OF ITA NOS.7986 & 5697/M/2012 12 THE DEPARTMENT, NO CONTRARY DECISION WAS BROUGHT TO OUR NOTICE. THE CIT(A), IN HIS ORDER MENTIONS THAT NO DETAILS H AD BEEN PROVIDED AND THEREFORE, THE AO WAS CORRECT TO NOT G IVE ANY CREDIT. THE DR ALSO PLACED RELIANCE ON THE ORDERS OF THE RE VENUE AUTHORITIES. AFTER HEARING THE ARGUMENTS, WE ARE OF THE CONCERNE D VIEW THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION IN THE CASE OF HALDOR TOPSOE. RESPECTFULLY FOLLOWING THE SAME, WE SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE ADDITION MADE. 14. HOWEVER, LD. DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT AFTER PASSING THE SAID ORDER, MUMBAI TRIBUNAL IN ANOTHER DECISION THAT IS IN THE CASE OF CHINA SHIPPING CONTAINER LINES (HONG KONG) CO. LTD VS ADIT VIDE ITS DECISION DT. 23 RD AUGUST, 2013 IN ITA NO. 8516/M/2010 FOR ASSESSMENT YEAR 2007-08 HAS IN THE CONTEXT OF SEC. 44B HAS HELD THAT EXCISE DUTY SHOULD BE CONSIDERED TO BE PART OF GROS S RECEIPTS WHILE COMPUTING INCOME ON PRESUMPTIVE BASIS. HE SUBMITT ED THAT IN VIEW OF THE DECISION OF THE TRIBUNAL IN THE CASE OF CHINA SHIPPING CONTAINER LINES (HONG KONG) CO. LTD (SUPRA), THE DECISION REN DERED BY THE TRIBUNAL IN ASSESSEES OWN CASE SHOULD NOT BE FOLLO WED AND THE ORDER OF THE LD. CIT(A) IN THIS REGARD SHOULD BE UPHELD. 15. IN THE REJOINDER, IT WAS SUBMITTED BY LD. AR TH AT AS PER THE DECISION OF ITAT, MUMBAI IN THE CASE OF ISLAMIC RE PUBLIC OF IRAN SHIPPING LINES VS DCIT (INTERNATIONAL TAXATION) (20 11) 11 TAXMANN.COM 349 (MUM) COPY PLACED ON RECORD (AND TH E SAME HAS ALREADY BEEN GIVEN TO LD. DR), IT HAS BEEN HELD THA T THE SERVICE TAX WHICH IS A STATUTORY LIABILITY, WOULD NOT INVOLVE ANY ELE MENT OF PROFITS AND A ITA NOS.7986 & 5697/M/2012 13 SERVICE PROVIDER IS COLLECTING THE SAME FROM ITS CU STOMERS ON BEHALF OF THE GOVERNMENT AND, ACCORDINGLY, SAME CANNOT BE INCLUDE D IN THE TOTAL RECEIPTS FOR DETERMINING THE PRESUMPTIVE INCOME. T HEREFORE, THE ORDER OF THE DRP WAS TO BE SET ASIDE AND THE AO WAS TO BE DI RECTED NOT TO INCLUDE THE AMOUNT OF SERVICE TAX IN THE TOTAL RECEIPTS FO R DETERMINING THE INCOME U/S. 44B OF THE ACT. HE FURTHER SUBMITTED THAT THE PROVISIONS OF SEC. 44B ARE NOT SIMILAR TO THE PROVISIONS OF SEC. 44D WHICH IS APPLICABLE TO THE PRESENT CASE. THUS, HE SUBMITTED THAT THE DECISION RENDERED BY TRIBUNAL IN ASSESSEES OWN CASE SHOULD BE FOLLOWED. 16. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTEN TIONS HAVE CAREFULLY BEEN CONSIDERED. THE DECISION RELIED UPON BY THE LD . DR IS NOT APPLICABLE TO THE PRESENT CASE AS THE PROVISIONS CONSIDERED IN THE SAID DECISION ARE DIFFERENT FROM THE PROVISIONS APPLICABLE TO THE PRE SENT CASE. THE CO- ORDINATE BENCH OF THE TRIBUNAL, IN ASSESSEES OWN C ASE HAS ALREADY ADJUDICATED THIS ISSUE IN RESPECT OF ASSESSMENT YEA R 2007-08. AS A MATTER OF PRECEDENT, THE TRIBUNAL IS BOUND TO FOLLOW THE D ECISION RENDERED BY THE TRIBUNAL IN THE CASE OF THE ASSESSEE IN EARLIER YEA R, UNLESS THERE IS A CHANGE IN LAW, CHANGE IN THE FACTS AND CIRCUMSTANC ES OF THE CASE; AND THE SAME IS CONTRARY TO THE DECISION RENDERED BY THE J URISDICTIONAL HIGH COURT OR APEX COURT. IN ABSENCE OF ANY OF SUCH CIR CUMSTANCES, THE EARLIER DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE HAS TO BE APPLIED. ACCORDINGLY, WE DECIDED THE ISSUE RAISED IN THE PRE SENT APPEAL IN FAVOUR OF THE ASSESSEE. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL FROM EARLIER ORDER HAVE ALREADY BEEN REPRODUCED IN THE ABOVE APP EAL OF THIS ORDER. IN VIEW OF ABOVE DISCUSSION, GROUND NO. 1 IS ALL OWED. 17. SO FAR AS IT RELATES TO GROUND NO. 2 & 3, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE AS PER OUR OBSERVATIONS IN PARA 9(I) O F THIS ORDER FOR A.Y. ITA NOS.7986 & 5697/M/2012 14 2004-05 AS IN THESE GROUNDS ASSESSEE IS AGITATING T HE LEVY OF TAX RATE @ 42.23% ON BANK INTEREST IN PLACE OF 20% CLAIMED B Y IT IN ITS RETURN OF INCOME. ACCORDINGLY, GROUND NOS 2 & 3 ARE DISMISSE D. 17. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE PARTLY ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 11.12.2013 . / + $ ! 0 1#2 11.12.2013 + 3 SD/- SD/- (SANJAY ARORA) (I.P. BANSAL ) ! / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; 1# DATED 11/12 /2013 . # . ./ RJ , SR. PS / / / / + ++ + (,4 (,4 (,4 (,4 5 4$, 5 4$, 5 4$, 5 4$, / COPY OF THE ORDER FORWARDED TO : 1. %' / THE APPELLANT 2. ()%' / THE RESPONDENT. 3. 6 ( ) / THE CIT(A)- 4. 6 / CIT 5. 473 (,# , , / DR, ITAT, MUMBAI 6. 38 9 / GUARD FILE. /# /# /# /# / BY ORDER, )4, (, //TRUE COPY// : :: : / ; ; ; ; (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI