ESPN Distribution (Mauritius) S.N.C. ET Compagnie, Mauritius V. Addl. DIT, New Delhi

ITA 5704/DEL/2011

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3171 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-06-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 20-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K DHALL
• Keywords: Transfer pricing; International transaction; Period of limitation
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : B : NEW DELHI BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NOS.5133 & 5134/DEL/2010 ASSESSMENT YEARS : 2005-06 & 2006-07 ITA NO.5704/DEL/2011 ASSESSMENT YEAR : 2007-08 ESS DISTRIBUTION (MAURITIUS) SNC ET COMPAGNIE, 605, ST. JAMES COURT, ST. DENIS STREET, PORT LOUIS, MAURITIUS. PAN: AABFE6800F VS. ADIT, CIRCLE-1(2), INTERNATIONAL TAXATION, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PORUS KAKA, SR. ADVOCATE & SHRI DIVESH CHAWLA, ADVOCATE DEPARTMENT BY : SHRI D.K. DHALL, CIT, DR DATE OF HEARING : 01.03.2018 DATE OF PRONOUNCEMENT : 01.03.2018 ORDER PER R.S. SYAL, VP: THESE THREE APPEALS FILED BY THE ASSESSEE RELATE T O THE ASSESSMENT YEARS 2005-06, 2006-07 AND 2007-08. SINCE COMMON I SSUE IS RAISED IN ALL ITA NOS.5133 & 5134/DEL/2010 ITA NO.5704/DEL/2011 2 THESE APPEALS, WE ARE, THEREFORE, DISPOSING THEM OF F BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ASSESSMENT YEAR 2005-06 2. THE ASSESSEE HAS RAISED AN ADDITIONAL GROUND, WH ICH READS AS UNDER:- IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE A PPELLANT NOT BEING AN ELIGIBLE ASSESSEE WITHIN THE MEANING OF SECTION 1 44C(15)(B) OF THE ACT, THE LEARNED ASSESSING OFFICER ERRED IN PASSING INVA LID DRAFT ORDER AND THEREAFTER ISSUING AN ORDER WHICH WAS BARRED BY LIM ITATION. 3. SINCE THE ABOVE GROUND INVOLVES A LEGAL ISSUE WH ICH DOES NOT REQUIRE ANY CONSIDERATION OF NEW FACTS AT OUR END, RESPECTF ULLY FOLLOWING THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F NATIONAL THERMAL POWER COMPANY LTD. VS. CIT (1998) 229 ITR 383 (SC) , WE ADMIT THE ADDITIONAL GROUND FOR CONSIDERATION AND DECISION . THE CONTENTION OF THE LD. DR FOR NOT ADMITTING THIS ADDITIONAL GROUND IS, THE REFORE, REPELLED. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF DISTRIBUTION OF PROGRAMMING SERVICE S BY NON-STANDARD TELEVISION. IT FILED RETURN DECLARING NIL INCOME, W HICH WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALS O CALLED `THE ACT) ON ITA NOS.5133 & 5134/DEL/2010 ITA NO.5704/DEL/2011 3 31.03.2007. NOTICE U/S 148 WAS ISSUED ON 10.06.200 8 AFTER RECORDING THE RELEVANT REASONS. THE ASSESSING OFFICER HAS NOTED IN THE FINAL ORDER DATED 20.09.2010 PASSED U/S 144C(1) OF THE ACT THAT: THE ASSESSEE IS A PARTNERSHIP FIRM ESTABLISHED UNDER THE LAW OF MAUR ITIUS ON MARCH 29, 2002 BY ESPN MAURITIUS LTD. (INCORPORATED IN MAURITIUS) AND ESS ASIA LTD. (INCORPORATED IN LABUAN, MALAYSIA). THE ASSESSEE IS A TAX RESIDENT OF MAURITIUS. IT HAS ALSO BEEN RECORDED ON PAGE 2 OF THE FINAL ASSESSMENT ORDER THAT THE ASSESSEE ENTERED INTO CERTAIN INTERN ATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISE. A REFERENCE WAS MADE TO THE TRANSFER PRICING OFFICER (TPO) U/S 92CA(1) OF THE ACT ON 18.09.2008, WHO, VI DE HIS ORDER DATED 07.09.2009, DID NOT DRAW ANY ADVERSE INFERENCE IN RESPECT OF THE INTERNATIONAL TRANSACTIONS. DRAFT ASSESSMENT ORDER WAS FINALIZED ON 30.12.2009 PROPOSING TOTAL INCOME AT RS.17,09,50,41 1/-. THE ASSESSEE FILED OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL (DRP ). THE DRP UPHELD THE DRAFT ASSESSMENT ORDER. THIS LED TO THE PASSIN G OF THE IMPUGNED FINAL ASSESSMENT ORDER ON 20.09.2010 COMPUTING TOTAL INCO ME AT RS.17,09,50,411/-. ITA NOS.5133 & 5134/DEL/2010 ITA NO.5704/DEL/2011 4 5. THE ASSESSEE THROUGH THE ABOVE ADDITIONAL GRO UND HAS URGED THAT AN INVALID DRAFT ORDER WAS PASSED AND, FURTHER, SUCH O RDER IS BARRED BY LIMITATION. 6. IN SO FAR AS THE QUESTION OF LIMITATION IS CO NCERNED, WE FIND THAT THE ASSESSMENT ORDER WAS PASSED ON 20.09.2010. SUB-SEC TION (2) OF SECTION 153 AT THE MATERIAL TIME PROVIDED THAT : `NO ORDER OF ASSESSMENT, RE-ASSESSMENT OR RE-COMPUTATION SHALL BE MADE UNDER SECTION 147 A FTER THE EXPIRY OF ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH NO TICE UNDER SECTION 148 WAS SERVED. THIRD PROVISO TO THIS SECTION READ A S UNDER:- PROVIDED ALSO THAT WHERE THE NOTICE U/S 148 WAS SE RVED ON OR AFTER THE 1 ST DAY OF APRIL, 2006, BUT BEFORE THE 1 ST DAY OF APRIL, 2010 AND DURING THE COURSE OF THE PROCEEDINGS FOR THE ASSESSMENT OR RE-ASSESSMENT OR RE- COMPUTATION OF TOTAL INCOME, A REFERENCE UNDER SUB- SECTION (1) OF SECTION 92CA (I) WAS MADE BEFORE THE 1 ST DAY OF JUNE, 2007 BUT AN ORDER UNDER SUB- SECTION (3) OF THAT SECTION HAS NOT BEEN MADE BEFOR E SUCH DATE; OR (II) IS MADE ON OR AFTER THE 1 ST DAY OF JUNE, 2007, THE PROVISIONS OF THIS SUB-SECTION SHALL, NOTWITHST ANDING ANYTHING CONTAINED IN THE SECOND PROVISO, HAVE EFFECT AS IF FOR THE WORDS ONE YEAR, THE WORDS `TWENTY-ONE MONTHS HAD BEEN SUBST ITUTED. 7. IT IS EVIDENT FROM A PERUSAL OF THE ABOVE PROVIS ION THAT WHERE NOTICE U/S 148 IS SERVED ON OR AFTER THE FIRST DAY OF APRI L, 2006 BUT BEFORE FIRST DAY ITA NOS.5133 & 5134/DEL/2010 ITA NO.5704/DEL/2011 5 OF APRIL, 2010 AND REFERENCE U/S 92CA HAS BEEN MADE ON OR AFTER 01.06.2007, THEN, THE PERIOD OF LIMITATION SHALL BE 21 MONTHS FROM THE END OF THE FINANCIAL YEAR IN WHICH NOTICE U/S 148 WAS I SSUED. ADVERTING TO THE FACTUAL MATRIX, IT CAN BE SEEN THAT NOTICE U/S 148 WAS ISSUED ON 10.06.2008 AND REFERENCE U/S 92CA WAS MADE THEREAFTER AND THE ORDER PASSED BY THE TPO IS DATED 07.09.2009. THE PERIOD OF 21 MONTHS F ROM THE END OF THE FINANCIAL YEAR 2008-09 WOULD EXPIRE ON 31.12.2010. SINCE THE ASSESSMENT ORDER IN THIS CASE WAS PASSED ON 20.09.2010, WE HOL D THAT THE ASSESSMENT ORDER CANNOT BE CONSIDERED AS BARRED BY LIMITATION. THIS PART OF THE ADDITIONAL GROUND IS, THEREFORE, DISMISSED. 8. WE NOW TURN TO THE FORMER PART OF THE ADDITIONAL GROUND IN WHICH IT HAS BEEN ALLEGED THAT THE ASSESSEE IS NOT AN ELIGI BLE ASSESSEE AND, HENCE, THE DRAFT ORDER AND CONSEQUENTLY THE FINAL ORDER WA S INVALID. 9. SECTION 144C(1) PROVIDES THAT : `THE ASSESSIN G OFFICER SHALL, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS ACT, IN THE FIRST INSTANCE, FORWARD A DRAFT OF THE PROPOSED ORDER OF ASSESSMENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE DRAFT ORDER) TO THE ELIGIBLE ASSESSEE IF HE ITA NOS.5133 & 5134/DEL/2010 ITA NO.5704/DEL/2011 6 PROPOSES TO MAKE, ON OR AFTER THE 1ST DAY OF OCTOBE R, 2009, ANY VARIATION IN THE INCOME OR LOSS RETURNED WHICH IS PREJUDICIAL TO THE INTEREST OF SUCH ASSESSEE. THE TERM ELIGIBLE ASSESSEE AS USED IN SUB-SECTION (1) HAS BEEN DEFINED IN CLAUSE (B) OF SECTION 144C(15), WHICH RE ADS AS UNDER:- 'ELIGIBLE ASSESSEE' MEANS, ( I ) ANY PERSON IN WHOSE CASE THE VARIATION REFERRED TO IN SUB-SECTION (1) ARISES AS A CONSEQUENCE OF THE ORDER OF THE TRANSFE R PRICING OFFICER PASSED UNDER SUB-SECTION (3) OF SECTION 92CA; AND (II) ANY FOREIGN COMPANY. 10. IT IS EVIDENT THAT THE FORWARDING OF A DRAFT OR DER AS STIPULATED IN SUB- SECTION (1) OF SECTION 144C(1) OF THE ACT IS REQUIR ED ONLY IN THE CASE OF AN `ELIGIBLE ASSESSEE. GOING BY THE DEFINITION OF TH E ELIGIBLE ASSESSEE AS REPRODUCED ABOVE, IT IS CLEAR THAT SUCH ASSESSEE MU ST EITHER BE A FOREIGN COMPANY OR ANY PERSON IN WHOSE CASE VARIATION IS MA DE IN THE INCOME OR LOSS RETURNED AS A CONSEQUENCE OF THE ORDER PASSED BY THE TPO U/S 92CA(3) OF THE ACT. 11. COMING TO THE FACTS OF THE EXTANT CASE, WE F IND THAT THE ASSESSING OFFICER HAS HIMSELF RECORDED THAT THE ASSESSEE IS A NON-RESIDENT (FOREIGN ITA NOS.5133 & 5134/DEL/2010 ITA NO.5704/DEL/2011 7 PARTNERSHIP FIRM). SECTION 2(23A) DEFINES A `FOREI GN COMPANY TO MEAN: A COMPANY WHICH IS NOT A DOMESTIC COMPANY AND SECTIO N 2(22A) DEFINES A `DOMESTIC COMPANY TO MEAN AN INDIAN COMPANY, ETC. WHICH IN RESPECT OF ITS INCOME HAS MADE THE PRESCRIBED ARRANGEMENTS FOR DECLARATION AND PAYMENT OF DIVIDENDS. `INDIAN COMPANY HAS BEEN DE FINED IN SECTION 2(26) TO MEAN A COMPANY, FORMED AND REGISTERED UNDER THE COMPANIES ACT, 1956 AND INCLUDES CERTAIN OTHER CORPORATIONS AND INSTIT UTIONS, ETC. SINCE THE ASSESSEE IS A NON-RESIDENT PARTNERSHIP FIRM, IT CAN NOT BE CHARACTERIZED AS AN INDIAN COMPANY AND, HENCE, SHEDS THE CHARACTER OF A `DOMESTIC COMPANY AND, CONSEQUENTLY, A FOREIGN COMPANY AS WELL. TH US, IT IS CLEAR THAT THE SECOND CONDITION TO QUALIFY FOR ELIGIBLE ASSESSEE IN TERMS OF SECTION 144C (15)(B) IS NOT FULFILLED. 12. WE NOW ESPOUSE THE FIRST CONDITION, BEING, ANY PERSON IN WHOSE CASE VARIATION IS PROPOSED IN THE INCOME RETURNED I N THE DRAFT ORDER CONSEQUENT UPON THE PASSING OF AN ORDER BY THE TPO. THOUGH THE ASSESSEE IS `ANY PERSON, BUT ADMITTEDLY, THE TPO HAS NOT PR OPOSED ANY VARIATION IN THE INCOME ARISING FROM THE INTERNATIONAL TRANSACTI ONS. THUS, IT BECOMES MANIFEST THAT THE ASSESSEE HAS NOT FULFILLED ANY OF THE CONDITIONS TO BECOME ITA NOS.5133 & 5134/DEL/2010 ITA NO.5704/DEL/2011 8 ELIGIBLE ASSESSEE IN TERMS OF SECTION 144C(15)(B) . A FORTIORI, NO DRAFT ASSESSMENT ORDER COULD HAVE BEEN PROPOSED U/S 144C( 1) OF THE ACT WHICH HAS, IN FACT, BEEN PROPOSED BY THE ASSESSING OFFICE R BEFORE PASSING THE FINAL IMPUGNED ASSESSMENT ORDER. 13. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE AS SESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010-11, SINCE REPORTED AS ESPN STAR SPORTS SPORTS MAURITIUS S.N.C. ET COMPAGNIE VS. UNION OF INDIA (2016) 388 ITR 0383 (DELHI), HAS ALLOWED THE ASSESSEES WRIT PETITION UNDER SIMI LAR CIRCUMSTANCES BY SETTING ASIDE THE DRAFT ASSESSMENT ORDER AND THE FINAL ASSESSMENT ORDER WITH THE FOLLOWING OBSERVATIONS MA DE IN PARA 30, WHICH ARE AS UNDER:- `IT APPEARS TO THE COURT THAT IT IS PLAIN THAT UNDE R SECTION 144C, THE AO SHOULD HAVE PROCEEDED TO PASS AN ORDER UNDER SECTIO N 143 (3) OF THE ACT. INSTEAD THE AO CONFIRMED THE DRAFT ASSESSMENT ORDER PASSED UNDER SECTION 144C (1) OF THE ACT. THIS, THEREFORE, VITIATED THE ENTIRE EXERCISE. THE COURT HAS NO HESITATION IN HOLDING THAT THE FINAL ASSESSMENT ORDER DATED 28TH JANUARY 2015 IS WITHOUT JURISDICTION AND NULL AND V OID. THE DRAFT ASSESSMENT ORDER DATED 28TH MARCH 2014, HAVING BEEN PASSED IN RESPECT OF ENTITIES WHICH WERE NOT 'ELIGIBLE ASSESSEES', IS AL SO HELD TO BE INVALID. 14. REVERTING TO THE ASSESSMENT YEAR UNDER CONSIDER ATION, WE FIND THAT THE ASSESSING OFFICER PASSED DRAFT ASSESSMENT ORDER U/S 144C(1) OF THE ACT ON ITA NOS.5133 & 5134/DEL/2010 ITA NO.5704/DEL/2011 9 RECEIPT OF THE ORDER FROM THE TPO. THEREAFTER, THE FINAL ASSESSMENT ORDER WAS PASSED AFTER ROUTING THE MATTER THROUGH THE DRP . AS THE ASSESSEE IS NOT AN `ELIGIBLE ASSESSEE, THE ASSESSMENT SHOULD HAVE BEEN COMPLETED U/S 143(3) INSTEAD OF ADOPTING THE PATH OF PASSING THE DRAFT ASSESSMENT ORDER U/S 144C(1). WE FIND THAT THE FACTS AND CIRCUMSTANCES FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ARE IDENTICAL TO THOSE CONSIDER ED AND DECIDED BY THE HON'BLE HIGH COURT IN WRIT PETITION FOR THE ASSESSM ENT YEAR 2010-11. RESPECTFULLY FOLLOWING THE BINDING PRECEDENT, WE SE T ASIDE THE FINAL ASSESSMENT ORDER. THE ADDITIONAL GROUND IS, THEREF ORE, ALLOWED TO THIS EXTENT. 15. IN VIEW OF OUR DECISION ON THE ADDITIONAL GROUN D SETTING ASIDE THE ASSESSMENT ORDER, THERE IS NO NEED TO DEAL WITH THE GROUNDS ON MERITS. ASSESSMENT YEARS 2006-07 & 2007-08 . 16. THE ASSESSEE HAS RAISED ADDITIONAL GROUND FOR T HESE TWO YEARS WHICH IS SIMILAR TO THE ONE REPRODUCED ABOVE FOR THE ASSESSM ENT YEAR 2005-06. SUCH AN ADDITIONAL GROUND IS ADMITTED FOR BOTH THE YEARS . ITA NOS.5133 & 5134/DEL/2010 ITA NO.5704/DEL/2011 10 17. BOTH THE SIDES ARE IN AGREEMENT THAT THE FAC TS AND CIRCUMSTANCES OF THE TWO YEARS UNDER CONSIDERATION ARE MUTATIS MUTANDIS SIMILAR TO THOSE OF THE ASSESSMENT YEAR 2005-06. FOR BOTH THESE YEARS, THE ASSESSEE DID NOT BECOME AN `ELIGIBLE ASSESSEE AS IT CONTINUED TO BE A PARTNERSHIP FIRM AND NO TRANSFER PRICING ADJUSTMENT WAS MADE. THE ASSES SING OFFICER FOR BOTH THE YEARS PASSED DRAFT ORDERS AND, THEREAFTER, THE FINAL ORDERS, AFTER THE ASSESSEE RAISING OBJECTIONS BEFORE THE DRP. FOLLOW ING THE VIEW TAKEN HEREINABOVE, WE SET ASIDE THE IMPUGNED ORDERS ON TH IS LEGAL ISSUE. 18. IN THE RESULT, ALL THE APPEALS ARE ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 01.03.201 8. SD/- SD/- [SUCHITRA KAMBLE] [R.S. SYAL] JUDICIAL MEMBER VICE PRESIDENT DATED, 01 ST MARCH, 2018. DK ITA NOS.5133 & 5134/DEL/2010 ITA NO.5704/DEL/2011 11 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.