ADIT, New Delhi V. Sh. Sanjiv Ghai, New Delhi

ITA 5868/DEL/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5807 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 30-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURINDER PAL
• Assessee Lawyers: S R WADHWA
• Keywords: Business income; Double taxation relief; Services rendered outside India; Permanent establishment; Tax effect
• Section: 142(1); 147; 148; 28; 90; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DLEHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER I.T.A. NOS.5681 TO 5686/DEL/2014 ASSESSMENT YEARS: 2005-06 TO 2010-11 SHRI SANJIV GHAI, VS DY. DIRECTOR OF INCOME-TAX, C/O RAJESH CHOPRA, CA, CIRCLE 1(2), NEW DELHI. E-59, PANCHSHEEL PARK, NEW DELHI. (PAN: ACFPG9695L ) I.T.A. NOS.5864 TO 5868/DEL/2014 ASSESSMENT YEARS: 2006-07 TO 2010-11 ADDL. DIRECTOR OF INCOME-TAX, VS SHRI SANJIV G HAI, CIRCLE 1(2), NEW DELHI. C/O RAJESH CHOPRA, CA, E-59, PANCHSHEEL PARK, NEW DELHI. (PAN: ACFPG9695L ) (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI S. R. WADHWA, ADVOCATE DEPARTMENT BY: SHRI SURINDER PAL, SR. DR ORDER DATE OF HEARING: 03.05.2018 DATE OF PRONOUNCEMENT: 27 .06.2018 PER BENCH ALL THESE APPEALS ARE EMANATING FROM THE ORDER DATE D 14.8.2018 IN APPEAL NOS.27 TO 32/13-14 PASSED BY THE CIT(A)-29, NEW DELH I IN RESPECT OF ASSESSMENT YEARS 2005-06 TO 2010-11. PARTIES, FACTS AND QUEST ION OF LAW INVOLVED IN ALL THESE 2 MATTERS ARE SIMILAR. IT IS, THEREFORE, JUST AND CON VENIENT TO DISPOSE THEM OFF BY THIS COMMON ORDER. 2. ONE SANJIV GHAI IS AN INDIVIDUAL AND NON-RESIDEN T OF INDIA RESIDING IN UNITED KINGDOM. FOR THE ASSESSMENT YEAR 2005-06 TO 2010- 11, HE HAD FILED THE RETURNS OF INCOME, THE DETAILS OF WHICH ARE AS FOLLOWS:- A.Y. DATE OF FILING THE RETURN INCOME SHOWN (RS.) 2005-06 31.03.2006 7,71,890/- 2006-07 12.03.2007 8,80,592/- 2007-08 31.03.2008 8,45,939/- 2008-09 30.03.2009 32,75,970/- 2009-10 15.01.2010 21,53,167/- 2010-11 26.11.2010 22,97,962/- 3. HE INCLUDED IN SUCH RETURNS THE PROFESSIONAL FEE RECEIVED FROM THE FOLLOWING INDIAN COMPANIES AFTER CLAIMING EXPENSES. (I) M/SRICH KWALITY PRODUCTS PVT. LTD. (II) M/S KWALITY FROZEN FOODS PVT. LTD. (III) M/SBASKIN ROBBINS FRANCHISE CO. PVT. LTD. (IV) M/S FOOD TOPPERS PVT. LTD. (V) M/S GRAVISS HOLDINGS PVT. LTD. 4. THESE COMPANIES ARE UNDER THE CONTROL AND MANAGE MENT OF THE ELDER BROTHER OF THE ASSESSEE AND WHILE MAKING PAYMENT TO THE ASSESSEE, THESE COMPANIES HAVE DEDUCTED TAX AT SOURCE U/S 194J OF T HE INCOME-TAX ACT, 1961 (THE ACT@) I.E. FEE FOR PROFESSIONAL OR TECHNICAL SERVICES AND THE PAYMENTS AFTER DEDUCTING THE TAX AT SOURCE WERE DEPOSITED IN NRO A CCOUNT OF THE ASSESSEE WITH THE CITI BANK, NEW DELHI. 3 5. SUBSEQUENTLY, HAVING RECEIVED INFORMATION FROM TH E DEPUTY DIRECTOR OF INCOME-TAX (INVESTIGATION), UNIT-II(1), MUMBAI, ON 21.3.2010, THE AO RECORDED THE FOLLOWING REASONS PROPOSING TO REOPEN THE CONCLUDED ASSESSMENTS FOR THE ASSTT. YEARS 2005-06 TO 2009-10: 'REASONS FOR REOPENINQ:- 1) IN THIS CASE, AS PER THE INFORMATION RECEIVED FRO M THE DEPUTY DIRECTOR OF INCOME TAX (INV.) UNIT -11(1) MUMBAI, THE ASSESSEE H AS RECEIVED GROSS AMOUNT OF RS. 36,00,000 FROM RICH KWALITY PRODUCTS PRIVATE L IMITED UNDER THE HEAD PROFESSIONAL 'FEES' FOR THE F.Y. 2004-05, AFTER THE PERUSAL O THE RETURN OF INCOME OF THE ASSESSEE FOR THE A.Y. 2005-06 THIS AM OUNT HAS NOT BEEN SHOWN AS INCOME. 2) ALSO, FROM THE PERUSAL OF THE COMPUTATION OF INCO ME, IT IS SEEN THAT, HE HA DECLARED A NET INCOME FROM PROFESSION AT RS.7,21,763, HOWEVER, AFTER EXAMINATION OF THE TDS CERTIFICATE, IT IS OBSERVED T HAT, IN THE F. Y. 2004-01 RELEVANT TO A.Y. 2005-06, HE HAS RECEIVED AN AMOUNT OF R. 39,25,000 FROR RICH KWALITY PRODUCTS PRIVATE LIMITED, 1 ST FLOOR, 'C' WING PARAGON CONDOMINIUM P.B. ROAD, MUMBAI MAHARASHTRA INDIA, 4000 13. THE NATURE C PAYMENT AS REFLECTED IN THE TDS CERTIFICATE IS SHOW N AS 'FEES FOR PROFESSION, OR TECHNICAL SERVICES (S.194J), 3) AS SHOWN IN TDS CERTIFICATE ISSUED BY RICH KWALI TY PRODUCTS PRIVA1 LIMITED, AGAINST THE TOTAL AMOUNT OF RS. 39,25,000 RE CEIVED, THE ASSESSEE HAS SHOWN A NET INCOME FROM PROFESSION AT RS. 7,21,763. T HEREFORE THERE IS HUGE AMOUNT OF GAP BETWEEN THE AMOUNT RECEIVED AND AMOUN T SHOWN , INCOME FROM PROFESSION. ALSO, NO DETAILS OF EXPENDITURE IN CURRED (IF ANY) HAVE BEEN GIVEN BY THE ASSESSEE. 4) KEEPING IN VIEW THE FACTS AND THE CIRCUMSTANCES AS ABOVE, I HAVE REASONS BELIEVE THAT AN AMOUNT OF RS. 32,03,237 (DIFFERENCE O F 39,25,000 AI 7,21,763) HAS ESCAPED ASSESSMENT...' HE ALSO ISSUED NOTICE U/S 143(2) OF THE ACT DATED 2 0.9.2011 IN RESPECT OF THE ASSTT. YEAR 2010-11. 6. ASSESSEE FILED RETURNS OF INCOME FOR ALL THESE YE ARS DECLARING THEREIN THE SAME INCOME AS DECLARED IN THE ORIGINAL RETURNS AND ALSO SOUGHT THE REASONS TO BE 4 FURNISHED TO HIM. REASONS WERE COMMUNICATED TO THE ASSESSEE BY LETTER DATED 14.2.2013 AND THE ASSESSEE FILED OBJECTIONS THERETO . OBJECTIONS WERE DISPOSED OF BY THE LEARNED AO BY ORDER DATED 13.3.2013. 7. LEARNED AO REJECTED THE OBJECTIONS OF THE ASSESS EE TO REOPEN THE PROCEEDINGS IN RESPECT OF THE AY 2005-06 TO 2009-10 AND NOTICE U/S 143(2) OF THE ACT IN RESPECT OF THE AY 2010-11. HE ALSO REJECTED THE CONTENTIONS OF THE ASSESSEE THAT ALL THESE RECEIPTS ARE COMMERCIAL RECEIPTS REC EIVED BY THE ASSESSEE FOR THE SERVICES RENDERED OUTSIDE INDIA, AS SUCH, THEY ARE N OT LIABLE FOR TAX IN INDIA. AT THE SAME TIME, LEARNED AO DISALLOWED 90% OF THE EXPENSE S CLAIMED BY THE ASSESSEE IN HIS RETURN OF INCOME. IN ADDITION TO THIS LD. AO MA DE AN ADDITION OF RS. 3.25 LAKHS ON ACCOUNT OF DIFFERENCE OF RECEIPTS FROM RICH KWAL ITY PRODUCTS PRIVATE LIMITED AND RS. 5 LACS ON ACCOUNT OF RECEIPT FROM THE KWALI TY FROZEN FOODS PRIVATE LIMITED IN RESPECT OF THE ASSESSMENT YEAR 2007-08, B EING THE DIFFERENCE IN RECEIPTS SHOWN BY THE ASSESSEE AS PER THE INFORMATI ON RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT IN RESPECT OF THESE COMPANIES. FINALLY, THE LD. AO ASSESSED AS INCOME OF THE ASSESSEE AS FOLLOW S:- ASSTT. YEAR INCOME ASSESSED (RS.) 2005-06 36,54,803/- 2006-07 41,04,811/- 2007-08 44,30,563/- 2008-09 88,10,636/- 2009-10 82,43,678/- 2010-11 51,98,079/- 5 8. IN THE APPEAL PREFERRED BY THE ASSESSEE, LEARNED CIT(A) UPHELD THE VALIDITY OF THE NOTICES U/S 148 IN RESPECT OF THE ASSTT. YEA R 2005-06 TO 2009-10 AND THE NOTICE U/S 143(2) OF THE ACT IN RESPECT OF ASSTT. Y EAR 2010-11. IN RESPECT OF THE NATURE OF THE RECEIPTS, LEARNED CIT(A) HELD THAT TH EY PARTAKE THE CHARACTER OF FEE FOR TECHNICAL SERVICES UNDER EXPLANATION 2 TO SECTI ON 9(1)(VII) OF THE ACT. ON THIS PREMISE, HE CONCLUDED THAT THESE RECEIPTS BECOME TA XABLE ON GROSS BASIS @ 20% AS PER THE DTAA AND THE QUESTION OF ALLOWING ANY EXP ENSES FROM THE GROSS RECEIPT DOES NOT ARISE. 9. HOWEVER, IT IS A MATTER OF RECORD THAT SUBSEQUEN TLY, WHEN THE RECTIFICATION APPLICATION WAS FILED BY THE ASSESSEE, LEARNED CIT(A ) VIDE ORDER DATED 5.1.2015 U/S 154 OF THE ACT HELD THAT FOR THE FIRST FIVE YEAR S, VIZ., 2005-06 TO 2009-10, THE FEE FOR TECHNICAL SERVICES SHALL BE TAXABLE @ 20% A ND FOR THE ASSTT. YEAR 2010-11, THE RATE OF TAX SHALL BE 15% IN VIEW OF ARTICLE 13( 2) OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) BETWEEN INDIA AND UK. 10. CONTENDING THAT UNDER DTAA, THE FTS IS TAXABLE ONLY AT 15% FOR ALL THE YEARS UNDER APPEAL, THE ASSESSEE HAS FILED ANOTHER RECTIF ICATION APPLICATION U/S 154 OF THE ACT REQUESTING THE CIT(A) TO MODIFY THE ORDER. I T IS SUBMITTED THAT SUCH A RECTIFICATION APPLICATION IS STILL PENDING. 11. ASSESSEE, THEREFORE, FILED APPEAL NOS. 5681 TO 5686/DEL/2014 CHALLENGING THE ORDER OF THE LEARNED CIT(A). THE GROUNDS IN TH ESE APPEALS ARE BROADLY CHALLENGING THE I. NOTICE U/S 148 OF THE ACT IN RESPECT OF THE ASSTT. YEAR 2005-06 TO 2009-10 AND NOTICE UNDER SECTION 143 (2) IN RESPECT OF THE ASSESSMENT YEAR 2010-11, 6 II. CHARACTERIZATION OF THE RECEIPTS AS FEE FOR TECHNIC AL SERVICE UNDER EXPLANATION 2 TO SECTION 9(1)(VII) AND ARTICLE 13(4 ) OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND UK A ND III. BRINGING THEM TO TAX ON GROSS BASIS @ 20% BY NOT ACC EPTING THE CONTENTION OF THE ASSESSEE THAT THESE ARE THE COMME RCIAL RECEIPTS FOR SERVICES RENDERED OUTSIDE INDIA, AS SUCH, NOT ALLOW ABLE FOR TAX IN INDIA, AND IV. THE ADDITION OF RUPEES RS. 3.25 LAKHS ON ACCOUNT OF DIFFERENCE OF RECEIPTS FROM RICH KWALITY PRODUCTS PRIVATE LIMITED AND RS. 5 LACS ON ACCOUNT OF RECEIPT FROM THE KWALITY FROZEN FOODS PRI VATE LIMITED. 12. IN THE ALTERNATIVE, THE ASSESSEE ALSO PRAYED TO DIRECT THE TAXING OF THIS FEE FOR TECHNICAL SERVICES AT 10% IN VIEW OF SECTION 115A(1)(BB) OF THE ACT PRIOR TO ITS SUBSTATION BY THE FINANCE ACT, 2013 READ WITH SECTIO N SUB-SECTION (2) OF SECTION 90 OF THE INCOME-TAX ACT. FURTHER, IT IS ALSO PRAYED TO D ELETE THE ADDITION OF RS.8.25 LACS ON ACCOUNT OF DIFFERENCE OF RECEIPTS FROM RICH KWAL ITY PRODUCTS P. LTD. AND KWALITY FROZEN FOODS P. LTD. RESPECTIVE IN THE ASSTT. YEAR 2007-08 AND RS.31 LACS ON ACCOUNT OF UNEXPLAINED MONEY U/S 69A OF THE ACT IN R ESPECT OF ASSTT. YEAR 2009- 10. ASSESSEE IS FURTHER CHALLENGING THE LEGALITY OF NOTICE U/S 143(2) OF THE ACT ISSUED IN RESPECT OF ASSTT. YEAR 2010-11. 13. REVENUE IS ALSO AGGRIEVED BY THE FINDINGS OF THE LEARNED CIT(A) IN THE IMPUGNED ORDER IN SO FAR AS THE LEARNED CIT(A) ASSU MED THAT THE NATURE OF SERVICES RENDERED BY THE ASSESSEE TO THE OTHER COMPA NIES ARE SIMILAR IN RESPECT OF BASKIN ROBBINS FRANCHISE CO. P. LTD. WHERE NO AGREE MENTS WERE FURNISHED BY THE ASSESSEE INDICATING THE NATURE OF SERVICES. ACCORD ING TO THE REVENUE, LEARNED CIT(A) ERRED IN ACCEPTING THE PLEA THAT THE NATURE OF RECEIPTS IN FTS INSTEAD OF OTHER SOURCES AND AS DECLARED IN THE RETURN OF INCO ME AS WELL AS IN THE RETURN U/S 148. THEREFORE, THE REVENUE ALSO PREFERRED APPEALS IN RESPECT OF ASSTT. YEARS 2005-06 TO 2010-11. HOWEVER, REVENUES APPEAL FOR ASSTT. YEAR 2005-06 IN ITA 7 NO.5863/DEL/14 WAS DISMISSED ON THE GROUND THAT THE TAX EFFECT WAS LESS THAN RS. 10 LACS AND NO APPEAL SHOULD HAVE BEEN FILED IN VIE W OF BOARDS CIRCULAR 21/2015 DATED 10.12.2015. AS SUCH, THE REVENUES APPEAL FO R THE ASSTT. YEARS 2006-07 TO 2010-11 NEEDS CONSIDERATION NOW IN THIS BATCH. 14. NOW COMING TO THE QUESTION RELATING TO THE VALI DITY AND SERVICE OF NOTICE U/S 148 /143(2), WHICH IS THE SUBJECT MATTER OF GRO UNDS 2 AND 2.1 OF ALL THE APPEALS OF THE ASSESSEE, IT IS THE CONTENTION ON BE HALF OF THE ASSESSEE THAT MERELY BASING ON THE INFORMATION RECEIVED FROM THE INVESTI GATION WING OF THE DEPARTMENT AND WHEN ANY FRESH MATERIAL COMING INTO T HE POSSESSION OF THE AO AFTER FILING OF THE RETURN OF INCOME U/S 139(1) OF THE ACT, NOTICE U/S 148 WAS ISSUED AND THE INFORMATION FROM INVESTIGATION WING DOES NO T CONSTITUTE A VALID REASON FOR VITIATING THE RE-ASSESSMENT PROCEEDINGS. IT IS ARGUED ON BEHALF OF THE ASSESSEE THAT THE INFORMATION ALLEGED TO HAVE BEEN RECEIVED FROM THE INVESTIGATION WING WAS ALREADY IN THE POSSESSION OF THE LEARNED AO AND INASMUCH AS THE TDS CERTIFICATES RELATING TO THE RECEIPTS FROM THE FIVE COMPANIES REVEALING THE GROSS RECEIPTS AND TDS THEREON WERE ALREADY FILED WITH TH E RETURNS OR PARTICULARS THEREOF IN SCHEDULE TDS 2, AND THE QUANTUM OF EXPEN SES CLAIMED FOR ALL THESE YEARS WAS ALSO TO BE FOUND FROM THE ORIGINAL RETURNS . IF AT ALL, LEARNED AO ENTERTAINED ANY DOUBT ABOUT THE QUANTUM OF EXPENSES CLAIMED OR THE NET RECEIPTS SHOWN IN THE RETURNS, THE PROPER COURSE WA S TO ISSUE NOTICE U/S 142(1) AND 143(2) OF THE ACT BUT NOT TO RESORT TO REOPENIN G ON MERE SUSPICION. SEEKING TO REOPEN THE CONCLUDED ASSESSMENT MERELY ON THE GROUND THAT THERE IS A HUGE GAP BETWEEN THE GROSS RECEIPTS AND NET RECEIPTS TANTAMO UNTS TO AO PRESUMING THAT THE CONDUCT OF BUSINESS BY THE ASSESSEE DID NOT INC UR ANY EXPENSES WHATSOEVER, 8 AS SUCH, MERE STATEMENT THAT THERE IS GAP BETWEEN G ROSS RECEIPTS AND NET RECEIPTS, IS NOT A GROUND TO SEEK REOPENING OF THE PROCEEDINGS. 15. FURTHER, BASING ON THE DECISIONS REPORTED IN TH E CASE OF (I)CIT VS KELVINATOR OF INDIA LTD. (2010) 320 ITR 561(SC); (II)IOT INFRA STRUCTURE & ENERGY SERVICES LTD VS ACIT (2011) 332 ITR 587 (BOM.); (III) CIT VS ORIENT CRAFT LTD. ITA NO. 555 / 2012 DATED 12.12.2012; (IV) CIT VS SFIL STOCK BROKING LT D. (2010) 233 ITR (DEL.) 69 - DELHI HIGH COURT; (V) CIT VS SMT. PARAMJIT KAUR (20 09) 311 ITR 38 (P&H); (VI) GKN DRIVESHAFTS (INDIA) PVT. LTD VS ITO (2003) 259 ITR 19 (SC), THE ASSESSEE OBJECTED THE REOPENING OF PROCEEDINGS BUT WITHOUT A CCEPTING THEM, LEARNED AO PASSED THE ORDERS BY PLACING RELIANCE ON (I) GKN DRIVESHAFT VS ITO, 259 ITR 19 (SC); (II) KISHORE TEXTILES VS ITO (1995) 82 TRAXMA N 312 AND ACIT VS RAJESH JHAVERI STOCK BROKERS P. LTD., 291 ITR 500 (SC); (III) BAWA ABHAI SINGH VS DCIT (2001) 117 TAXMAN 12, CENTRAL; PROVINCES MANGANESE ORE CO. LTD . VS IT (1991) 98 CTR SC 161, (1991) 191 ITR 662 (SC). 16. IT IS FURTHER ALLEGED ON BEHALF OF THE ASSESSEE THAT THE ASSESSEE FURNISHED THE NEW ADDRESS BY WAY OF LETTER DATED 4.1.2012 FILED WITH THE LEARNED AO ON 17.1.2012. THE NOTICES WERE NOT SENT TO THE LONDON ADDRESS OF THE ASSESSEE BUT WERE SENT TO THE OLD ADDRESS OF THE ASSESSEE AT NEW DELHI. THE PROOF OF DISPATCH OR THE DELIVERY THEREOF IS NOT PROPER AND THE ASSESS EE NEVER RECEIVED THE NOTICES ALLEGED TO HAVE BEEN ISSUED BY THE DEPARTMENT. 17. REFERRING TO THE DECISIONS RELIED UPON BY THE LE ARNED AO IN SO FAR AS LEGALITY OF THE NOTICE U/S 148 IS CONCERNED, LEARNED AR SUBM ITTED THAT THEY HAVE NO APPLICATION TO THE FACTS OF THE CASE. 9 18. LEARNED DR PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW AND REASONS GIVEN THERE UNDER TO UPHOLD THE LEGALITY OF SUCH NOTICE. 19. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES B ELOW AND FIND THAT ALL THESE CONTENTIONS WERE TAKEN BY THE ASSESSEE BEFORE BOTH T HE AUTHORITIES. IN SO FAR AS ISSUANCE OF SERVICE OF NOTICE WAS CONCERNED, IT IS THE OBSERVATION OF THE LEARNED AO THAT THE NOTICES TO PROPER ADDRESS WITH POSTAGE PREPAID AND SENT BY REGISTERED MAIL WERE NOT RECEIVED BACK IN HIS OFFIC E UNSERVED, AS SUCH, A PRESUMPTION U/S 27 OF THE GENERAL CLAUSES ACT HAS T O BE RAISED AND THERE IS A PRESUMPTION THAT THE OFFICIAL ACTS ARE DONE PROPERL Y AND REGULARLY AND A PARTICULAR COURSE OF ACTION WAS FOLLOWED IN A PARTICULAR CASE, AS SUCH, WHEN THE NOTICE WAS NOT RETURNED BACK UNSERVED, IT SHALL BE PRESUMED TH AT THE NOTICE WAS PROPERLY SERVED. LEARNED AO PLACED RELIANCE ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF VINS OVERSEAS INDIA LTD. , 165 TAXMAN 95 (DEL); (II) CIT VS ATEDHSY FILMS P. LTD., 301 ITR 69 (DEL); AND (III) C IT VS YAMU INDUSTRIES LTD., 306 ITR 309 (DEL) AND REACHED THE CONCLUSION THAT THE OBJECTION REGARDING THE NON SERVICE OF NOTICE WAS NOT ACCEPTABLE . 20. IN SO FAR AS THE PROPRIETARY OF THE REOPENING OF THE PROCEEDINGS IS CONCERNED, IT IS RECORDED IN THE ORDERS OF THE AUTH ORITIES BELOW THAT IT IS PERMISSIBLE U/S 147 OF THE ACT TO ASSESS AND RE-ASS ESS THE PROCEEDING, AS SUCH WHEN THE RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE ACT, THERE WAS NO APPLICATION OF MIND ON THE PART OF THE AO TO THE FA CTS AND FIGURES INCORPORATED IN THE RETURN OF INCOME, AS SUCH, AT A SUBSEQUENT POIN T OF TIME BASING ON THE INFORMATION RECEIVED FROM A VALID SOURCE AND HAVING FORMED A BELIEF NOT ON THE 10 ASSUMPTIONS OR IRRATIONAL MATERIAL BUT AFTER TAKING INTO CONSIDERATION ALL THE RELEVANT FACTS AND RECORDING REASONS IF THE ASSESSM ENT IS MADE, IT IS NOT VITIATED. 21. LEARNED AO FURTHER RECORDED THAT THE BELIEF FOR MED IN THIS MATTER IS MORE THAN A RUMOR, GOSSIP OR HUNCH BUT IT IS ON THE BASI S OF A COMMUNICATION OR RECEPTION OF KNOWLEDGE OR INTELLIGENCE AND THE RESU LT O F HIS STUDY AND INVESTIGATION WHICH HE CONSIDERED AS RELIABLE. APA RT FROM THIS, LEARNED CIT(A) RECORDED THAT THE ASSESSEE HAD SHOWN INCOME FROM BU SINESS OR PROFESSION ON NET BASIS. EVEN IN SHEET OF COMPUTATION OF TAXABLE INCO ME ATTACHED, INCOME FROM PROFESSION HAS BEEN TAKEN ON NET BASIS. FOR ASSTT. YEAR 2007-08 AND 2009-10, THE ASSESSEE HAD DECLARED INCOME FROM OTHER SOURCES IN THE RETURN AND NET INCOME WAS DECLARED UNDER THE HEAD BUSINESS INCOME, AS S UCH, THE CLAIM OF THE ASSESSEE THAT ALL THE PARTICULARS WERE ALREADY THERE IN THE RETURNS IS NOT CORRECT. 22. INSOFAR AS OBSERVATIONS OF THE AUTHORITIES BELO W ARE CONCERNED, THERE IS NO DENIAL OF THESE FACTS. IT IS NOT THE CASE OF THE A SSESSEE THAT INSTEAD OF ON NET BASIS, HE HAD DECLARED THE INCOME FROM BUSINESS AND PROFESSION ON GROSS BASIS. IT IS NOT THE CASE OF THE ASSESSEE THAT IN THE SHEET O F COMPUTATION OF TAXABLE INCOME ATTACHED TO THE RETURN OF INCOME RELATING TO THE AS STT. YEARS 2005-06 AND 2006- 07, THE INCOME FROM PROFESSION AND THE EXPENSES WER E SHOWN SEPARATELY. HAVING SHOWN THE VERY SAME INCOME AS FROM BUSINESS OR PROFE SSION FOR THE ASSTT. YEARS 2005-06 AND 2006-07, ADMITTEDLY THE ASSESSEE HAD SHO WN IT AS INCOME FROM OTHER SOURCES FOR THE YEARS 2007-08 TO 2009-10. THESE ARE ALL THE FACTS TO BE FOUND ON THE FACE OF THE RECORD AND COULD NOT BE DISPUTED OR REBUTTED BY THE ASSESSEE. IN SUCH A SITUATION, THE LEARNED AO CANNOT KEEP QUIET AND ON THE FACE OF THE INFORMATION RECEIVED FROM THE INVESTIGATION WING AN D SITUATION DEFINITELY 11 WARRANTS FURTHER INVESTIGATION THAT TOO IN THE PRES ENCE OF THE ASSESSEE ONLY BY WAY OF REOPENING. WE, THEREFORE, ARE OF THE CONSID ERED OPINION THAT FOR THE REASONS RIGHTLY RECORDED BY THE AUTHORITIES BELOW, I T IS NOT OPEN FOR THE ASSESSEE TO CHALLENGE THE VALIDITY OF THE REOPENING OF PROCEE DINGS AND NOTICE U/S 148 OF THE ACT OR THE SERVICE OF NOTICE UNDER SECTION 143(2) O F THE ACT. HENCE GROUNDS NO 2 AND 2.1 OF ALL THE APPEALS ARE DISMISSED. 23. NEXT ISSUE RELATES TO THE CHARACTERIZATION OF T HE RECEIPTS IN THE HANDS OF THE ASSESSEE, WHICH IS THE SUBJECT MATTER OF GROUNDS NO . 3 TO 3.1 OF ALL THE ASSESSEES APPEALS AND GROUNDS NO. 1 AND 2 OF THE REVENUES AP PEALS, ACCORDING TO THE LEARNED AO, THOSE ARE RECEIPTS FROM OTHER SOURCES W HEREAS ACCORDING TO THE LEARNED CIT(A) THOSE RECEIPTS PARTAKE THE CHARACTER OF TECHNICAL SERVICES. HOWEVER, ASSESSEE CONTENDS THAT THESE ARE THE RECEI PTS FOR THE COMMERCIAL SERVICE RENDERED OUTSIDE INDIA, AS SUCH, IN VIEW OF THE FACT THAT THE ASSESSEE HAD NO PERMANENT ESTABLISHMENT IN INDIA, THEY ARE NOT C HARGEABLE TO TAX IN INDIA. 24. ARGUMENT OF THE LEARNED AR IS THAT THE ASSESSEE IS A NON RESIDENT INDIAN AND HIS PASSPORT HAS AN ENDORSEMENT TO THE EFFECT GIVEN INDEFINITE LEAVE TO ENTER TO UK AS ENDORSED ON PREVIOUS PASSPORT. LEA RNED AR SUBMITTED THAT WHERE A PERSON DOES NOT HOLD A UK PASSPORT BUT PERM ANENTLY RESIDING IN THE UK, SUCH PERSONS PASSPORT SHALL BE ENDORSED STATING IN DEFINITE LEAVE TO REMAIN IN UK. HE, THEREFORE, SUBMITS THAT THERE CANNOT BE ANY DOUB T THAT THE ASSESSEE IS A NON- RESIDENT INDIAN. HE SUBMITTED THAT AS A MATTER OF FACT, THE ASSESSEE VISITED INDIA ONLY THRICE BETWEEN 1.4.2004 AND 31.3.2010 AND HIS S TAY IN INDIA DID NOT EXCEED 182 DAYS IN THE ASSTT. YEARS 2005-06 TO 2010-11. HE , THEREFORE, SUBMITTED THAT 12 THE EARNINGS OF THE ASSESSEE FOR THE SERVICES RENDE RED OUTSIDE INDIA ARE NOT LIABLE TO TAX IN INDIA. 25. HE INVITED OUR ATTENTION TO A LETTER DATED 1.7. 2006 FROM BASKIN ROBINS FRANCHISE CO. P. LTD. TO SUBMIT THAT ALL THE AGREEM ENTS WITH OTHER CONCERNS ARE ALSO FOR SIMILAR SERVICES AND SUCH SERVICES ARE IN THE NATURE OF BUSINESS DEVELOPMENT SERVICES. SUCH A LETTER WAS NOTED BY THE LEARNED AO IN HIS ORDER. ACCORDING TO THIS LETTER THE SERVICES RENDERED BY TH E ASSESSEE CONSIST OF THE FOLLOWING: - (I) VISIT TO REPUTED HOTELS, INSTITUTIONS, AIRLINES AND FRANCHISEES OUTLETS TO ASSESS THEIR SATISFACTION WITH REGARD TO THE PRODUCTS OF V ARIOUS COMPANIES. (II) TO OFFER SUITABLE PROJECT DEVELOPMENT IDEAS SO AS TO MAKE APPROPRIATE IMPROVEMENT IN THE PRODUCTS WHEREVER FEASIBLE (III) RENDER PROFESSIONAL TECHNICAL AND ENVIRONMENTAL AD VICE ON MATTERS RELATING TO THE INDUSTRY. (IV) TO MAINTAIN LIASION AND RELATIONSHIPS WITH THE HOTE LS AND INSTITUTIONS SO AS TO SUPPLEMENT THE EFFORTS THE SALES TEAM OF THE COMPAN Y'S PRODUCTS. 26. THE MAIN ARGUMENTS ADVANCED BEFORE THE LEARNED AO ARE THAT THE ASSESSEE OFFERED THE RECEIPTS FOR TAX IN INDIA BY MISTAKE THO UGH THEY ARE NOT LIABLE TO TAX IN INDIA AND FURTHER THAT IN TERMS OF INDO UK DTAA WHE RE THE ASSESSEE HAD NO PERMANENT ESTABLISHMENT IN INDIA, SUCH RECEIPTS ARE NOT LIABLE TO TAX IN INDIA, INASMUCH AS THE SERVICES WERE RENDERED OUTSIDE INDI A. 27. LEARNED AO REJECTED BOTH THE CONTENTIONS OF THE ASSESSEE BY SPECIFICALLY OBSERVING THAT THE ASSESSEE HAS NOT FURNISHED ANY DO CUMENTARY EVIDENCE TO PROVE THE NATURE AND RENDITION OF SERVICES SAID TO HAVE BEEN PROVIDED BY THE ASSESSEE, OR THAT SUCH SERVICES WERE ACTUALLY PROVID ED OR WHETHER THE ASSESSEE 13 HAS HIMSELF ONLY PROVIDED THE SERVICES OR THEY ARE SO ME OTHER PERSONS ETC. LD. AO RECORDED THAT IN THE ABSENCE OF SUCH EVIDENCE IN TH E SHAPE OF AGREEMENTS WITH THE CONCERNED PARTIES, IT WOULD BE DIFFICULT TO ACC EPT HIS CONTENTIONS. 28. LEARNED AO FURTHER HELD THAT THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE RECEIPTS WERE OFFERED TO TAX IN I NDIA UNDER MISTAKEN IMPRESSION INASMUCH AS THE ASSESSEE HIMSELF ADMITTED THAT THE AMOUNTS WERE RECEIVED IN INDIA SEEMS THOSE WERE CREDITED TO NROACCOUNT OF TH E ASSESSEE IN THE CITI BANK, NEW DELHI. 29. LEARNED CIT(A) ALSO OBSERVED THAT EXCEPT THE LE TTER DATED 1.7.2006 INDICATING THE NATURE OF SERVICES IN RESPECT OF ONE INDIAN COMPANY VIZ. BASKIN ROBINS FRANCHISE CO. P. LTD. NO OTHER SCRAP OF PAPE R IS FORTHCOMING TO PROVE THE NATURE IS OR RENDITION OF SERVICE EITHER PERSONALLY OR THROUGH SOME AGENCY BY THE ASSESSEE. IN THE ABSENCE OF ANY SUCH EVIDENCE, LEAR NED CIT(A) RELIED UPON TWO FACTORS FOR THE PURPOSE OF CHARACTERIZATION OF THES E RECEIPTS. ONE IS THE NATURE OF SERVICE ENUMERATED IN THE LETTER DATED 1.7.2006 AND CHARACTERIZATION OF THE RECEIPT IN THE TDS CERTIFICATES ISSUED BY THE INDIAN COMPANIES. 30. WHILE REFERRING TO THE SERVICES ENUMERATED IN T HE LETTER DATED 1.7.2006 IN RESPECT OF BASKIN ROBINS LTD., LEARNED CIT(A) OBSER VED THAT SOME PROFESSIONAL EXPERTISE IS REQUIRED TO RENDER THESE SERVICES OTHE RWISE IN THE ABSENCE OF THE PROFESSION COMPETENCY OF THE ASSESSEE TO RENDER THES E SERVICERS, THE INDIAN COMPANIES WOULD NOT HAVE ENGAGED HIM FOR THE PURPOS E AND PAID HIM HANDSOME CONSIDERATION. LEARNED CIT(A) RELIED UPON THE TDS CERTIFICATES ISSUED BY THE INDIAN COMPANIES AS TO THE NATURE OF THE PAYMENT MEN TIONED THEREIN. 14 31. THERE IS NO DENIAL OF THE FACT THAT IN THE TDS CERTIFICATE ISSUED BY THE INDIAN COMPANIES, THE NATURE OF PAYMENT WAS MADE FOR FEE F OR PROFESSIONAL AND TECHNICAL SERVICES. IN THESE CIRCUMSTANCES, BY TAK ING PRAGMATIC VIEW AS AGAINST THE VIEW OF THE LEARNED AO THAT THE RECEIPTS FILED UNDER THE HEAD RECEIPTS FROM OTHER SOURCES, LEARNED CIT(A) FAIRLY AND REASONABLY ASSUMED THE NATURE OF SERVICES RENDERED BY THE ASSESSEE TO THE INDIAN COMP ANIES AS THE SAME AS WERE MENTIONED IN THE LETTER RELATING TO THE SERVICES RE NDERED TO BASKIN ROBINS. LEARNED CIT(A), THEREFORE, PLACING RELIANCE ON THE RECITALS OF THE LETTER DATED 1.7.2006 AND THE TDS CERTIFICATES REACHED A CONCLUS ION THAT THE CONSIDERATION RECEIVED BY THE ASSESSEE WAS IN THE NATURE OF FEE FO R TECHNICAL SERVICES UNDER EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT AND C ONSEQUENTLY, HELD THAT SINCE THE TAX ON FTS IS PAYABLE ON GROSS BASIS, QUESTION OF AL LOWING ANY EXPENSES FROM GROSS RECEIPTS DOES NOT ARISE. 32. THOUGH THE LEARNED AR VEHEMENTLY DISPUTED THE CO RRECTNESS OF THE FINDINGS OF THE AUTHORITIES BELOW, FACT REMAINS THAT EXCEPT THE LETTER DATED 1.7.2006, ASSESSEE COULD NOT PRODUCE ANY EVIDENCE WHATSOEVER T O PROVE THE NATURE OF SERVICES OR ACTUAL RENDERING OF SERVICES EITHER BY H IMSELF OR THROUGH SOME AGENTS. FURTHER, IT IS ALSO AN ADMITTED FACT THAT THE AMOUN TS WERE RECEIVED BY THE ASSESSEE IN INDIA INASMUCH AS THEY HAVE BEEN CREDITE D TO THE NRO SAVINGS ACCOUNT OF THE ASSESSEE IN THE CITI BANK, NEW DELHI . IT IS ALSO AN ADMITTED FACT THAT THE TDS CERTIFICATE CATEGORIZED THESE RECEIPTS AS FEE FOR PROFESSIONAL AND TECHNICAL SERVICES. SO FAR AS THE FINDINGS OF THE LEARNED CIT(A), BASING ON THE NATURE OF SERVICES DESCRIBED IN THE LETTER DATED 01 .07.2016 IN RESPECT OF THE SERVICES SAID TO HAVE BEEN RENDERED TO ONE BASKIN R OBINS LTD., WE FIND IT DIFFICULT TO ENDORSE THE VIEW OF THE LEARNED CIT(A) THAT SIMI LAR SERVICES WERE ACTUALLY 15 RENDERED TO THE OTHER COMPANIES ALSO OR THAT THE NA TURE OF SERVICES IS TECHNICALLY NATURE. IN THE ABSENCE OF ANY EVIDENCE TO ESTABLISH THE EXACT NATURE OF THE SERVICES OR THE ACTUAL RENDITION WE FIND IT DIFFICU LT TO GIVE A DEFINITE OPINION ON THAT BASIS. 33. HOWEVER, INSOFAR AS THE FINDINGS OF THE LEARNED CIT(A) BASING ON THE RECITALS OF TDS CERTIFICATES ISSUED BY THE COMPANIES WHEREIN THE NATURE OF PAYMENT IS MENTIONED AS FEE FOR PROFESSIONAL AND TECHNICAL SER VICES IS CONCERNED, WE FIND THAT THERE IS NO ESCAPE FOR THE ASSESSEE FROM THE S AME. FIRST OF ALL, THE ASSESSEE CANNOT DENY THESE DOCUMENTS. IT IS ASSESSEES OWN CA SE THAT ALONG WITH THE RETURNS OF INCOME FILED THE ASSESSMENT YEARS 2005-06 TO 2009-10 HE HAD FILED THE TDS CERTIFICATES ISSUED BY THE COMPANIES REVEALINGLY GROSS RECEIPTS AND THE TAX DEDUCTED AT SOURCE. THERE IS NO DENIAL OF THE FACT THAT ALL THESE CERTIFICATES REVEALED THAT WHILE MAKING THE PAYMENT TO THE ASSESS EE, ALL THE COMPANIES HAVE DEDUCTED TAX AT SOURCE UNDER SECTION 194J OF THE AC T SHOWING THE NATURE OF PAYMENT AS FEES FOR PROFESSIONAL OR TECHNICAL SERVI CES. THIS DEDUCTION OF TAX AT SOURCE WAS COUPLED WITH THE REMITTANCES INTO THE BA NK ACCOUNT OF THE ASSESSEE IN INDIA. ASSESSEE HAVING NEVER COMPLAINED AGAINST THE SAME BUT ON THE OTHER HAND OFFERED THE RECEIPTS TO TAX IN INDIA, NOW CANNOT TA KE A PLEA THAT HE DOES NOT KNOW WHY THE INDIAN COMPANIES MENTIONED THE NATURE OF PAYM ENT AS TOWARDS FEES FOR PROFESSIONAL OR TECHNICAL SERVICES OR THAT WHILE T HE PAYMENT WAS MADE BY WAY OF REMITTANCE INTO THE INDIAN BANK ACCOUNT OF THE ASSE SSEE. ASSESSEE CANNOT ESCAPE THE RESISTIBLE INFERENCE TO BE DRAWN AS TO THE GENU INENESS OF THE RECITALS OF THE TDS CERTIFICATES ARE THE PAYMENTS MADE BY THE INDIAN COMPANIES INTO THE INDIAN BANK ACCOUNTS OF THE ASSESSEE. 16 34. AN ATTEMPT IS MADE ON THE PART OF THE ASSESSEE TO GET RID OF THE RECITALS OF TDS BY STATING THAT HE DOES KNOW WHY WAS IT SO DONE B Y THE INDIAN COMPANIES. THE ASSESSEE FURTHER STATED THAT HE ALSO DOES NOT K NOW THE REASON WHY THE AMOUNTS WERE DEPOSITED IN THE NRO ACCOUNT IN INDIA INSTEAD OF PAYING DIRECTLY IN UK. IT IS SUBMITTED THAT SINCE THE ASSESSEE IS PRES ENTLY NOT ON GOOD TERMS WITH THE MANAGEMENT OF THOSE COMPANIES WHO HAVE SINCE SEVERE D ALL RELATIONS BETWEEN HIM AND HAVE DISPENSE WITH HIS SERVICES, THE AGREEM ENTS MAY HAVE TO BE PROCURED FROM THEM BY MAKING SUITABLE ENQUIRIES BY IS SUING COMMISSIONS TO MUMBAI WHERE THE OFFICES OF SUCH COMPANIES ARE LOCA TED AT THE ADDRESS AS MENTIONED IN THE TDS CERTIFICATES. 35. WHEN LEARNED CIT (A) RELIED UPON THE CONTENTS OF THE UNDISPUTED TDS CERTIFICATE PRODUCED BY THE ASSESSEE ALONG WITH THE RETURN OF INCOME, AND ASSESSEE DESIRES TO DISPUTE THE SAME, THE ONUS IS H EAVILY ON THE ASSESSEE. IT IS NOT OPEN FOR THE ASSESSEE TO SHIFT THE BURDEN TO THE RE VENUE BY SAYING THAT SHOULD THERE BE ANY DOUBT IN THE MIND OF THE AO AS TO THE N ATURE AND RENDERING OF THE SERVICES OR THE EXISTENCE OF ANY AGREEMENT, THEY MAY M AKE SUITABLE ENQUIRIES BY ISSUING SUMMON TO MUMBAI WHERE THE OFFICE OF THE VA RIOUS COMPANIES ARE LOCATED AT THEIR ADDRESSES MENTIONED IN THE TDS CER TIFICATE. SUCH A COURSE IS NOT PERMISSIBLE. 36. WHEN THE ASSESSEE RENDERED CERTAIN SERVICES AND RECEIVED SUCH HUGE REMUNERATION, IT IS NOT OPEN FOR HIM TO CONTEND THA T HE DOES NOT POSSESS ANY DOCUMENT WHATSOEVER IN PROOF OF THE NATURE AND REND ITION OF THE SERVICES. SHIFTING THE BURDEN UNJUSTLY TO THE REVENUE AND TO S EEK RELIEF ON THE FAILURE OF THE REVENUE TO FOLLOW HIS SUGGESTIONS IS NOT PERMISSIBL E UNDER LAW. ASSESSEE HAD TO 17 DISCHARGE HIS INITIAL BURDEN AND THEN TO ASK THE RE VENUE TO VERIFY THE CORRECTNESS OR OTHERWISE SUCH EVIDENCE IN CASE THE REVENUE DOUB TS IT. BUT HERE THE CASE IS OTHERWISE. LD. CIT(A) DOES NOT DOUBT THE CORRECTNE SS OF THE RECITALS OF THE TDS CERTIFICATE OR THE DEPOSIT OF THE REMUNERATION AMOU NT IN THE INDIAN ACCOUNT OF THE ASSESSEE. HENCE, THE VERIFICATION OF THE CORRECTNE SS OR OTHERWISE OF THE RECITALS OF THE TDS CERTIFICATES OR THE DEPOSITS IN INDIA DOES NOT ARISE AT THE END OF THE LEARNED CIT(A). 37. FURTHER, AT THE SAME TIME, THE REVENUE ALSO FAI LED TO ESTABLISH BEFORE US THE REASON FOR NOT CONSIDERING THE RECITALS OF THE TDS CERTIFICATES WHICH FORM PART OF THE RECORD FOR A QUITE LONG TIME. THIS IS THE ONL Y PIECE OF EVIDENCE AVAILABLE ON RECORD IN RESPECT OF THE NATURE AND CHARACTER OF TH E RECEIPTS IN THE HANDS OF THE ASSESSEE. UNLESS THE ORIGINAL ESTABLISHES WITH COGE NT REASONS THAT THESE CERTIFICATES SHALL NOT BE BELIEVED, WE DONT FIND A NY REASON TO DISBELIEVE THE CONTENTS OF THE CERTIFICATES WHICH WERE MADE AT THE EARLIEST POINT OF TIME THAT IS LONG PRIOR TO THE LITIGATION. MERELY BY CONJECTURES AND SURMISES THE DOCUMENTS WHICH ARE FORMING PART OF RECORD QUITE SOME TIME CA NNOT BE DISCARDED. WE, THEREFORE, FIND THAT THE CONCLUSION REACHED BY THE L EARNED CIT(A), IS QUITE REASONABLE AND DOES NOT WARRANT ANY INTERFERENCE. W E, THEREFORE, DISMISS GROUNDS NO. 3 AND 3.1 OF ASSESSEES APPEALS AND GRO UNDS NO. 1 AND 2 OF REVENUES APPEALS. 38. NOW COMING TO THE GROUND RELATING TO THE APPLIC ABLE RATE OF TAX WHICH IS THE SUBJECT MATTER OF GROUND NO. 3.3 OF ALL THE ASS ESSEES APPEALS, BASING ON SUB- SECTION (2) OF SECTION 90 OF THE INCOME-TAX ACT, 19 61, SECTION 115A OF THE ACT AND DEPARTMENTAL CIRCULAR NO. 3 OF 2006 DATED 27.02.200 6 LD. AR SUBMITTED THAT THE 18 RATE OF TAX ON 'FEE FOR TECHNICAL SERVICES' IS 10% AND, THEREFORE, THE SAME SHOULD HAVE BEEN APPLIED AS AGAINST THE RATE OF 20% AND 15 % SPECIFIED IN ARTICLE 13(2) OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN IND IA AND UK. HE FURTHER SUBMITTED THAT LD. CIT(A) WAS NOT JUSTIFIED IN HOLD ING THAT FOR THE FIRST FIVE YEARS, NAMELY A.YS. 2005-06 TO 2009-10, THE RATE OF TAX ON FEE FOR TECHNICAL SERVICES WOULD BE 20% AND 15% FOR A.Y. 2010-11. THE FEE FOR TECHNICAL SERVICES IS TAXABLE AT THE RATE OF 10% U/S 115A(L)(B)(BB) OF THE ACT PR IOR TO ITS AMENDMENT BY THE FINANCE ACT - 2013. 39. IT IS THE ARGUMENT OF THE LD. DR THAT AS REGAR D TAXABILITY OF AMOUNTS RECEIVED BY THE ASSESSEE FROM THE INDIAN COMPANIES, LD. CIT(A) HELD THAT THE SAME ARE TAXABLE AS FEE FOR TECHNICAL SERVICES (FTS ) ON GROSS BASIS @20% AS PER DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) BETWEEN INDIA AND UK, AND THE SAID ORDER WAS RECTIFIED ON 05.01.2015 HOLDING THAT 'THE RATE OF TAXATION OF FTS SHALL BE 20% FOR A.YS. 2005-06 TO 2009-10 WHEREAS F OR A.Y. 2010-11, THE RATE OF TAXATION FOR FTS SHALL BE 15%'. FURTHER, THE ASSESS EE HAS FILED ANOTHER RECTIFICATION APPLICATION U/S 154 REQUESTING THE CI T(A) TO MODIFY THE ORDER AND THE RECTIFICATION APPLICATION IS STILL PENDING. HE SUBM ITTED THAT THE LD. CIT(A)'S ORDER IS BASED ON THE MEANING OF THE EXPRESSION 'THIS CONVEN TION HAS EFFECT' USED IN ARTICLE 13(2) OF THE DTAA. NOW WE SHALL PROCEED TO EXAMINE THIS ISSUE. 40. SUB-SECTION (2) OF SECTION 90 OF THE INCOME-TA X ACT, 1961 PROVIDES THAT, - W HERE THE CENTRAL GOVERNMENT HAS ENTERED INTO AN AGR EEMENT WITH THE GOVERNMENT OF ANY COUNTRY OUTSIDE INDIA OR SPECIFIED TERRITORY OUTSID E INDIA, AS THE CASE MAY BE, UNDER SUB-SECTION (1) FOR GRANTING RELIEF OF TAX, OR AS THE CASE MAY BE, AVOIDANCE OF DOUBLE TAXATION, THEN, IN RELATION TO THE ASSESSEE TO WHOM SUCH AGREEMENT APPLIES, THE PROVIS IONS OF THIS ACT SHALL APPLY TO THE EXTENT THEY ARE MORE BENEFICIAL TO THAT ASSESSED'. 19 41. THE FINANCE ACT, 2005 HAD REDUCED THE RATE OF TAX ON ROYALTY AND FEE FOR TECHNICAL SERVICES IN THE CASE OF A NON-RESIDENT FR OM 20% TO 10% FROM A.Y. 2006- 07 ONWARDS AND PRIOR TO ITS SUBSTITUTION BY THE FINA NCE ACT, 2013, SUB-CLAUSE (BB) OF CLAUSE (B) OF SUB-SECTION (1) OF SECTION 115A OF THE ACT, PROVIDED THE RATE OF TAX OF 10% ON FEE FOR TECHNICAL SERVICES, AND IT RE ADS AS FOLLOWS:- 'SECTION 115A(1) ............... (B) A NON-RESIDENT (NOT BEING A COMPANY) OR A FOREI GN COMPANY, INCLUDES ANY INCOME BY WAY OF ROYALTY OR FEES FOR TECHNICAL SERVICES OTHER THAN INCOME REFERRED TO IN SUB-SECTION (1) OF SECTION 44DA] RECEIVED FROM GOVERNMENT OR AN IND IAN CONCERN IN PURSUANCE OF AN AGREEMENT MADE BY THE FOREIGN COMPANY WITH GOVERNME NT OR THE INDIAN CONCERN AFTER THE 31ST DAY OF MARCH, 1976, AND WHERE SUCH AGREEMENT I S WITH AN INDIAN CONCERN, THE AGREEMENT IS APPROVED BY THE CENTRAL GOVERNMENT OR WHERE IT RELATES TO A MATTER INCLUDED IN THE INDUSTRIAL POLICY, FOR THE TIME BEING IN FOR CE, OF THE GOVERNMENT OF INDIA, THE AGREEMENT IS IN ACCORDANCE WITH THAT POLICY, THEN, SUBJECT TO THE PROVISIONS OF SUB-SECTIONS (1A) AND (2), THE INCOME- TAX PAYABLE SHALL BE THE AGGREGATE OF (A) THE AMOUNT OF INCOME-TAX CALCULATED ON THE INCOME B Y WAY OF ROYALTY, IF ANY, INCLUDED IN THE TOTAL INCOME, AT THE RATE OF THIRTY PER CENT IF SUC H ROYALTY IS RECEIVED IN PURSUANCE OF AN AGREEMENT MADE ON OR BEFORE THE 31ST DAY OF MAY, 19 97 AND TWENTY PER CENT WHERE SUCH ROYALTY IS RECEIVED IN PURSUANCE OF AN AGREEMENT MA DE AFTER THE 31ST DAY OF MAY, 1997 BUT BEFORE THE 1ST DAY OF JUNE, 2005]; (AA)THE AMOUNT OF INCOME-TAX CALCULATED ON THE INCO ME BV WAV OF ROYALTY, IF ANY, INCLUDED IN THE TOTAL INCOME, AT THE RATE OF TEN PER CENT IF SUCH ROYALTY IS RECEIVED IN PURSUANCE OF AN AGREEMENT MADE ON OR AFTER THE 1ST DAY OF JUNE, 200 5:1 (B) THE AMOUNT OF INCOME-TAX CALCULATED ON THE INCOME B Y WAY OF FEES FOR TECHNICAL SERVICES, IF ANY, INCLUDED IN THE TOTAL INCOME, AT THE RATE OF T HIRTY PER CENT IF SUCH FEES FOR TECHNICAL SERVICES ARE RECEIVED IN PURSUANCE OF AN AGREEMENT MADE ON OR BEFORE THE 31ST DAY OF MAY, 1997 AND TWENTY PER CENT WHERE SUCH FEES FOR TECHNI CAL SERVICES ARE RECEIVED IN PURSUANCE OF AN AGREEMENT MADE AFTER THE 31ST DAY OF MAY, 199 7 [BUT BEFORE THE 1ST DAY OF JUNE, 2005]; AND (BB) THE AMOUNT OF INCOME-TAX CALCULATED ON THE INC OME BV WAV OF FEES FOR TECHNICAL SERVICES, IF ANV. INCLUDED IN THE TOTAL INCOME, AT THE RATE OFTEN PER CENT IF SUCH FEES FOR TECHNICAL SERVICES ARE RECEIVED IN PURSUANCE OF AN AGREEMENT MADE ON OR AFTER THE 1ST DAV OF JUNE, 2005'. 20 42. RELEVANT PORTION OF DEPARTMENTAL CIRCULAR NO. 3 OF 2006 DATED 27.02.2006 READS THAT,- '3.21 REDUCTION IN RATE OF TAX ON ROVAITV AND FEES FOR TECHNICAL SERVICES IN THE CASE OF A NON- RESIDENT FROM 20% TO 10% THE EXISTING PROVISIONS OF CLAUSE (B) OF SUB-SECTIO N (1) OF SECTION 115A PROVIDE FOR THE RATE AT WHICH INCOME-TAX SHALL BE PAYABLE WHERE THE TOTAL I NCOME OF A NONRESIDENT (NOT BEING A COMPANY) OR A FOREIGN COMPANY INCLUDES ANY INCOME B Y WAY OF ROYALTY OR FEES FOR TECHNICAL SERVICES OTHER THAN INCOME REFERRED TO IN SUBSECTIO N (1) OF SECTION 44DA RECEIVED FROM GOVERNMENT OR AN INDIAN CONCERN IN PURSUANCE OF AN AGREEMENT MADE BY THE FOREIGN COMPANY WITH GOVERNMENT OR THE INDIAN CONCERN AFTER 31ST MARCH, 1976, AND WHERE SUCH AGREEMENT IS WITH AN INDIAN CONCERN, THE AGREEMENT IS APPROVED BY THE CENTRAL GOVERNMENT OR WHERE IT RELATES TO A MATTER INCLUDED IN THE INDUSTRIAL POLICY, FOR THE TIME BEING IN FORCE, OF THE GOVERNMENT OF INDIA, THE AGR EEMENT IS IN ACCORDANCE WITH THAT POLICY. UNDER THE EXISTING PROVISIONS CONTAINED IN THE SAID CLAUSE (B), THE ROYALTY OR FEES FOR TECHNICAL SERVICES RECEIVED IN PURSUANCE OF AN AGREEMENT MADE ON OR BEFORE 31ST MAY, 1997 IS TAXABLE AT THE RATE OF THIRTY PER CENT, AND WHERE S UCH ROYALTY OR FEES FOR TECHNICAL SERVICES IS RECEIVED IN PURSUANCE OF AN AGREEMENT MADE AFTER 31 ST MAY, 1997, THE SAME IS TAXABLE AT TWENTY PER CENT. THE SAID CLAUSE (B) OF SUB-SECTION (1) HAS BEEN AME NDED SO AS TO REDUCE THE SAID TAX RATE FROM TWENTY PER CENT, TO TEN PER CENT, ON ROYALTY O R FEES FOR TECHNICAL SERVICES RECEIVED IN PURSUANCE OF AN AGREEMENT MADE ON OR AFTER 1ST JUNE , 2005. THE RATE OF TAX NOW APPLICABLE WILL BE AS FOLLOWS: CONSEQUENTIAL AMENDMENTS IN PART II OF THE FIRST SC HEDULE TO THE FINANCE ACT, 2005 WERE ALSO MADE REDUCING THE RATES FOR DEDUCTION OF TAX A T SOURCE IN THE CASE OF ROYALTY OR FEES FOR TECHNICAL SERVICES FROM TWENTY PER CENT, TO TEN PER CENT. APPLICABILITY: FROM A. Y. 2006-07 ONWARDS'. 43. ARTICLE 13(2) OF THE DTAA IS TO THE EFFECT THA T,- AAREEMENT ENTERED INTO DURINA RATE OF TAX 01-04-1976 TO 31-05-1997 30% 01-06-1997 TO 31-05-2005 20% ON OR AFTER 01-06-2005 10% 21 13(2). HOWEVER, SUCH ROYALTIES AND FEES FOR TECHNIC AL SERVICES MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH THEY ARISE AND ACCOR DING TO THE LAW OF THAT STATE; BUT IF THE BENEFICIAL OWNER OF THE ROYALTIES OR FEE S FOR TECHNICAL SERVICES IS A RESIDENT OF THE OTHER CONTRACTING STATE, THE TAX SO CHARGED SHALL NOT EXCEED: (A) IN THE CASE OF ROYALTIES WITHIN PARAGRAPH 3(A) OF THIS ARTICLES, AND FEES FOR TECHNICAL SERVICES WITHIN PARAGRAPHS (A) AND (C) OF THIS ARTI CLE, (I)DURING THE FIRST FIVE YEARS FOR WHICH THIS CONV ENTION HAS EFFECT: (AA) 15 PER CENT OF THE GROSS AMOUNT OF SUCH ROYALT IES OR FEES FOR TECHNICAL SERVICES WHEN THE PAYER OF THE ROYALTIES OR FEES FO R TECHNICAL SERVICES IS THE GOVERNMENT OF THE FIRST- MENTIONED CONTRACTING STATE OR A POLITICAL SUB-DIVISION OF THAT STATE, AN D (BB) 20 PER CENT OF THE GROSS AMOUNT OF SUCH ROYALTIES OR FEES FOR TECHNICAL SERVICES IN ALL OTHER CASES; AND (II) DURING SUBSEQUENT YEARS. 15 PER CENT OF THE GROSS AMOUNT OF SUCH ROYALTIES OR FEES FOR TECHNICAL SERVICES; AND 44. LD. AR SUBMITTED THAT THE WORDS USED IN SUB-CLAUSE (I) OF CLAUSE (A) OF ARTICLE 13(2) OF DTAA, NAMELY WILL 'DURING THE FIRS T FIVE YEARS FOR WHICH THIS CONVENTION HAS EFFECT' HAVE BE READ IN THE CONTEXT OF THE WORDS 'THIS CONVENTION SHALL ENTER INTO FORCE ON THE DATE OF THE LETTER OF THESE NOTIFICATIONS AND SHALL THEREUPON AS EFFECT' USED IN ARTICLE 13 'ENTERING INTO FORCE ' IN PARA-1 OF THE DTAA. THE NOTIFICATION NO. GSR-91/2 IS DATED 11.02.1994 A ND, THEREFORE, THE CONVENTION CAME INTO FORCE FROM THAT DATE. ACCORDING TO HIM I T IS THE FIRST FIVE YEARS FROM THE DATE OF NOTIFICATION I.E. 11.02.1994, FOR ALL THE A SSESSEES THAT THE HIGHER RATE OF 20% IN ARTICLE 13(2)(A)(I)(BB) WILL BE APPLICABLE N AMELY A.YS. 1995-96 TO 2000-01. THEREAFTER, THE RATE WILL BE 15% FOR ALL THE SUBSEQ UENT YEARS. 45. HE FURTHER SUBMITTED THAT APART FROM THE CLEAR LANGUAGE OF ARTICLES 13 AND 30 AND NOTIFICATION DATED 11.02.1994, THE INTERPRET ATION SUBMITTED IN PARA-3 ABOVE IS ALSO EVIDENT FROM THE DEPARTMENT'S CIRCULA R NO. 39 DATED 13.04.1970 ISSUED IN THE CONTEXT OF APPLICABILITY OF DTAA BETWE EN INDIA AND THE REPUBLIC OF 22 FRANCE THAT THE EXPRESSION 'CONVENTION HAS EFFECT' REFERS TO THE ASSESSMENT YEARS, IN THE CASE OF ALL THE ASSESSEES AND NOT WHEN A PARTICULARS ASSESSEE CLAIMING THE BENEFIT OF THE DTAA. 46. BE THAT AS IT MAY, THE FEE FOR TECHNICAL SERVIC ES IS TAXABLE @10% FOR ALL THE YEARS UNDER APPEAL NAMELY A.YS. 2005-06 TO 2010-11 AS SPECIFIED IN SECTION 115A(1)(BB) OF THE ACT PRIOR TO ITS SUBSTATION BY TH E FINANCE ACT, 2013 AS SUCH IN VIEW OF THE PROVISIONS UNDER SUB-SECTION (2) OF SEC TION 90 OF THE INCOME-TAX ACT THE PROVISIONS OF ACT SHALL APPLY TO THE EXTENT THE Y ARE MORE BENEFICIAL TO THAT ASSESSED. GROUND NO. 3.3 IN ALL THE ASSESSEES APPEALS IS, ACCORDINGLY, ALLOWED. 47. NOW TURNING TO GROUND NUMBER 3.2 OF ALL ASSESS EES APPEALS, IT RELATES TO THE DISALLOWANCE OF EXPENSES CLAIMED FOR THE PURPOSE OF BUSINESS, BY TH E LD. AO. ON THIS ASPECT LD. DRP GAVE A FINDING THAT ONCE THE RECEIPTS ARE CHARACTERISED IN THE HAN DS OF THE ASSESSEE AS FTS, THOSE BECOME TAXABLE ON GRASS BASIS AND THERE IS NO QUESTION OF ALLOWING ANY EXPENSES FROM GROSS RECEIPTS. THE SAID FINDING HOLDS GOOD IN RESPECT OF THE TAX ON FTS UND ER SECTION U/S 115A(L)(B)(BB) OF THE ACT ALSO. WE, THEREFORE, FIND THAT INASMUCH AS THE RECE IPTS ARE TO BE TAXED IN THE HANDS OF THE ASSESSEE U/S 115A(L)(B)(BB) OF THE ACT , NO QUESTION AS TO THE ALLOWING OF EXPENSES ARISES. WE, THEREFORE, DISMISS GROUND N O. 3.2 OF ALL THE ASSESSEE APPEALS. 48. GROUND NO. 4 TO 4.2 OF APPEAL NO. 5683/DEL/201 4 FOR ASSESSMENT YEAR 2007-08, IT RELATES TO THE THE ADDITION OF RUPEES RS. 3.25 LAKHS ON ACCOUN T OF DIFFERENCE OF RECEIPTS FROM RICH KWALITY PRODUCTS PRIVATE LIMITED AND RS. 5 LACS ON ACCOUNT OF RECEIPT FROM THE KWALITY FROZEN FOODS PRIVATE LIMITED. ON THIS AS PECT, LD. AO OBSERVED THAT AS PER THE INFORMATION RECEIVED FROM THE DEPUTY DIRECTO R OF INCOME TAX (INV) MUMBAI THE ASSESSEE RECEIVED GROSS AMOUNT OF RS. 13 LAKHS FROM RICH KWALITY 23 PRODUCTS PRIVATE LIMITED, RS. 5 LACS FROM QUALITY FR OZEN FOODS LTD AND RS. 29.25 LAKHS FROM BASKIN-ROBBINS FRANCHISE COMPANY PRIVATE LIMITED, BUT IN THE COMPETITION OF INCOME THE ASSESSEE HAS SHOWN A SUM OF RS. 9.75 LAKHS FROM WHICH QUALITY PRODUCTS PRIVATE LIMITED, AS SUCH A SUM OF R S. 3.25 LAKHS BEING THE DIFFERENCE BETWEEN 13 LAKHS AND 9.75 LAKHS WAS ADDE D BACK TO THE INCOME OF THE ASSESSEE. SO ALSO THE ASSESSEE HAD NOT SHOWN ANY REC EIPTS FROM KWALITY FROZEN FOODS PRIVATE LIMITED, AS SUCH AN AMOUNT OF RS. 5 L ACS WAS ADDED BACK TO THE INCOME OF THE ASSESSEE. LD. CIT(A) RECORDED THAT TH E ASSESSEE HAD NOT SUBMITTED ANYTHING ON THIS ASPECT. 49. ASSESSEE DOES NOT DISPUTE THIS FACTUAL FINDING S OF THE LD. AO. ARGUMENT ON BEHALF OF THE ASSESSEES THAT EVEN THESE RECEIPTS AL SO PARTAKE THE CHARACTER OF COMMERCIAL RECEIPTS FOR THE SERVICES RENDERED OUTSI DE INDIA AS SUCH THEY ARE NOT LIABLE TO BE BROUGHT TO TAX. IN THE PRECEDING PARAG RAPHS WE HAVE HELD THAT FOR WANT OF EVIDENCE TO PROVE THE NATURE AND RENDITION OF SERVICES, IS NOT POSSIBLE TO GIVE A DIFFERENT FINDING AS TO WHETHER THESE RECEIP TS ARE NOT TAXABLE TO IN INDIA AND MORE PARTICULARLY IN VIEW OF THE FACT THAT THESE AMO UNTS WERE PAID INTO THE NRO ACCOUNT OF THE ASSESSEE IN CITIBANK IN INDIA. WE, T HEREFORE, HOLD THAT THESE AMOUNTS SHOULD ALSO BE TAXED AS FEE FOR TECHNICAL SERVICES. GROUNDS NO. 4 TO 4.2 ARE ANSWERED ACCORDINGLY. 50. IN THE RESULT, I.T.A. NOS.5681 TO 5686/DEL/201 4 PREFERRED BY THE ASSESSEE ARE ALLOWED IN PART AND I.T.A. NOS.5864 TO 5868/DEL /2014 PREFERRED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JUNE , 2018. SD/- SD/- (N.K. SAINI) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER 24 DATED: JUNE, 2018 *VJ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSTT. REGISTRAR DRAFT DICTATED ON 1 5 . 5 . .2018 DRAFT PLACED BEFORE AUTHOR 1 7 .6.2018 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 2 5 . 6 . 2 0 1 8 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 2 5 . 0 6 . 2 0 1 8 APPROVED DRAFT COMES TO THE SR.PS/PS 2 7 . 0 6 . 2 0 1 8 KEPT FOR PRONOUNCEMENT ON 2 7 . 6 . 2 0 1 8 D A T E O F U P L O A D I N G O N W E B S I T E 2 8 . 6 . 2 0 1 8 FILE SENT TO THE BENCH CLERK 2 8 . 6 . 2 0 1 8 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.