DCIT (International Taxation), New Delhi V. M/s. American Asia Pacific LLC, New Delhi

ITA 596/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4248 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 04-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief; Assessment record
• Section: 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DLEHI BEFORE SHRI G.D. AGRAWAL, PRESIDENT AND SHRI K. NARSIMHA CHARY, JUDICIAL MEMBER I.T.A. NO.596/DEL/2016 ASSESSMENT YEAR: 2005-06 DY. COMMISSIONER OF INCOME-TAX, VS M/S AMERICOM ASIA PACIFIC LLC, INTERNATIONAL INDIA P.LTD. C/O PRICEWATERHOUSE CO OPERS, CIRCLE 1(1)(1), INTL. TAXATION, NEW DELHI. 11-A, S UCHETA BHAWAN, VISHNU DIGAMBER MARG, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: S/SHRI ARVIND RAJAN, DIVESH D HAWAN, ABHINAV VIJ RESPONDENT BY: SMT. RITU SHARMA ORDER PER K. NARSIMHA CHARY, JUDICIAL MEMBER CHALLENGING THE ORDER DATED 30/11/2015 IN APPEAL N O/52/14-15 PASSED BY LEARNED COMMISSIONER OF INCOME-TAX (APPEA LS)-42 (HEREINAFTER REFERRED TO AS LEARNED CIT(A)), REVENUE PREFERRED THIS APPEAL. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A NON-RE SIDENT LIMITED LIABILITY COMPANY INCORPORATED UNDER THE LAWS OF US A, AND FOR THE ASSESSMENT YEAR 2005-06 THEY HAVE FILED THEIR RETUR N OF INCOME ON 28/10/ 2005 DECLARING NIL INCOME COMPUTING THE REVE NUES AS IN THE NATURE OF BUSINESS PROFITS AND WERE NOT SUBJECTED T O TAX IN INDIA IN 2 ACCORDANCE WITH ARTICLE 7 OF THE INDO US A DOUBLE T AX AVOIDANCE AGREEMENT. DURING SCRUTINY ASSESSMENT, BY ORDER DAT ED 28/12/2007 PASSED UNDER SECTION 143 (3), LD. AO HELD THAT THE PROVISION OF SATELLITE TRANSMISSION SERVICES ARE LIABLE TO TAX IN INDIA AS ROYALTIES FOR THE USE OF PROCESS AS WELL AS EQUIPMENT FALLING WITHIN THE AMB IT OF SECTION 9 (1) (VI) AND ARTICLE 12 OF THE INDO USA DTAA. SUBSEQUENTLY B Y THE NOTICE DATED 20 82,012 UNDER SECTION 148 OF THE ACT, LD. AO SOUG HT TO REOPEN THE ASSESSMENT FOR THE PURPOSE OF TAXING THE ROYALTY IN COME AT A HIGHER RATE OF TAX OF 20% AS BEING ATTRIBUTABLE TO THE PE OF TH E ASSESSEE IN INDIA, AND ASSESSED INCOME CHARGEABLE TO TAX AT 20% ON A GROSS BASIS. IN APPEAL, LD. CIT(A) NOTICE OF THAT WHILE PASSING THE ORDER U NDER SECTION 143 (3) OF THE ACTS, THE CLAUSES OF THE AGREEMENT WITH THE CUS TOMER WAS EXAMINED IN DETAIL AND HELD THAT THE REVENUE SALAD UNDER THE SAID AGREEMENT FALL WITHIN THE TAXABLE AMBIT OF ROYALTY AS DEFINED UN DER SECTION 9 (1) (VI) OF THE ACT READ WITH ARTICLE 12 OF THE INDO USA DTAA. LD. CIT(A) ALSO OBSERVED THAT ANY NEW FACT WHICH WERE CONCEALED EAR LIER HAVE NOT COME TO THE NOTICE OF THE LD. AO BUT IT IS A CASE WHERE, ON A RECONSIDERATION OF THE SAME SET OF FACTS, THE LD. AO HAD DRAWN A DIFFE RENT INFERENCE ON THE APPLICATION OF THE ACT AND THE DTAA. HE, CONSEQUEN TLY, HELD THAT IT IS NOT A VALID GROUND TO INITIATE THE ASSESSMENT PROCE EDINGS. LD. CIT(A) ACCORDINGLY ALLOWED THE APPEAL. AGGRIEVED BY THIS O RDER REVENUE PREFERRED THIS APPEAL BEFORE US. 3. LD. DR PLACED RELIANCE ON THE ASSESSMENT ORDER. LD. AR BROUGHT TO OUR ATTENTION PARAGRAPH NO. 3 OF THE REASONS FOR IS SUANCE OF NOTICE UNDER SECTION 148 OF THE ACT AND SUBMITTED THAT IS ONLY O N THE CONSIDERATION OF THE VERY SAME MATERIAL WHICH LD. AO CONSIDERED AT T HE TIME OF ORIGINAL ASSESSMENT, LD. AO THOUGHT OF ENHANCING THE RATE OF TAX, AND FOR WANT OF 3 COMPLIANCE WITH THE REQUIREMENT OF PROVISO TO SECTI ON 147 OF THE ACT, THE PROCEEDINGS ARE BAD. 4. WE HAVE GONE THROUGH THE RECORD. LD. CIT(A) RECO RDED THAT WHILE PASSING THE ORDER UNDER SECTION 143 (3) OF THE ACT, THE CLAUSES OF THE AGREEMENT WITH THE CUSTOMER WAS EXAMINED IN DETAIL TO HOLD THAT THE REVENUES EARNED UNDER THE SAID AGREEMENT FALLS WITH IN THE TAXABLE AMBIT OF ROYALTY AS DEFINED UNDER SECTION 9 (1) (VI) OF THE ACT AS WELL AS ARTICLE 12 OF THE INDO USA DTAA. THE SAME AGREEMENT WAS CON SIDERED FOR THE REOPENING OF THE ASSESSMENT. THIS ASSERTION BY THE LD. CIT(A) GOES UNCONTROVERTED. IT COULD BE SEEN FROM THE RECORD T HAT THE ORIGINAL ASSESSMENT UNDER SECTION 143 (3) WAS DONE BY ORDER DATED 28/12/2007, NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 2 8/03/2012. SUCH A NOTICE WAS ISSUED WELL BEYOND THE EXPIRY OF THE PER IOD OF 4 YEARS FROM THE END OF THE ASSESSMENT YEAR. PROVISO TO SECTION 147 OF THE ACT REQUIRES THAT NO ACTION SHALL BE TAKEN UNDER SECTION 147 AFT ER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS INCOME CHARGEABLE TO TAX HAS ESCAPED THE ASSESSMENT FOR SU CH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSE E TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUBSECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THE ASSESSM ENT YEAR. VIDE PARAGRAPH NO. 3 OF THE REASONS FOR ISSUANCE OF NOTI CE UNDER SECTION 148 OF THE ACTOR, D EVER RECORDED THAT,- 3. PERUSAL OF THE ASSESSMENT RECORD REVEALS THAT I N THE ASSESSEES CASE, THE ROYALTY INCOME AMOUNTING TO RS. 11, 01, 33, 135/-WAS TAXED @15% UN DER THE DTAA. HOWEVER, AS THE ROYALTY INCOME HAD BEEN EARNED FROM THE DEPENDENT AGENT IN PE-BASED THE ON AN AGREEMENT DATED 21/8/2001, IT WAS TO BE TAXED AT THE RATE OF 20% ON GRASS BASIS INSTEAD OF 15%. 4 5. IT IS, THEREFORE, CLEAR THAT IT IS NOT IN CONSID ERATION OF ANY NEW MATERIAL OR BECAUSE OF FAILURE OF THE ASSESSEE TO D ISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, LD . AO PROPOSED TO REOPEN THE ASSESSMENT PROCEEDINGS, THAT TOO, BEYOND THE PERIOD OF 4 YEARS. THE CONDITIONS REQUIRED UNDER THE PROVISO TO SECTION 147 ARE CONSPICUOUSLY ABSENT IN THIS MATTER, AS SUCH, WE CO NCUR WITH THE FINDINGS OF THE LD. CIT(A) THAT SINCE IT IS A MATTE R WHERE, ON THE CONSIDERATION OF THE SAME SET OF FACTS, A DIFFERENT INFERENCE WAS DRAWN AND SUCH A COURSE IS NOT PERMISSIBLE. WE ACCORDINGL Y HOLD THAT THE REOPENING PROCEEDINGS CANNOT BE SUSTAINED IN LAW. W HILE UPHOLDING THE FINDINGS OF THE LD. CIT(A), WE FIND THAT THE GROUND S OF APPEAL ARE DEVOID OF ANY MERITS AND ARE LIABLE TO BE DISMISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS THE 5 TH DAY OF JANUARY, 2018. (G.D. AGRAWAL) (K. NARSIMHA CHARY) PRESIDENT JUDICIAL MEMBER DATED: 5 TH JANUARY, 2018 VJ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER 5 ASSTT. REGISTRAR