DY. DIRECTOR OF INCOME TAX (INT. TAX.)-4(1), MUMBAI V. M/S. ZEE TELEFILMS LTD.AS AGENT OF MLLBANK TWEED HADLEY & MCCLOY, MUMBAI

ITA 6245/MUM/2008

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3200 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 06-10-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 21-10-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJIV M SHAH
• Assessee Lawyers: SHRIDHAR E
• Keywords: Double taxation relief
• Section: 69

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN , AM AND PAWAN SINGH , JM ./ I.T.A. NO . 6245 / MUM/20 08 ( / ASSESSMENT YEA R : 200 1 - 02 ) DY.DIRERCTOR OF I NCOME TAX (INTERNATIONAL TAXATION) - 4(1), 13 3 , SCINDIA HOUSE, BALLARD PIER, MUMBAI - 400038 / VS. M/S ZEE TELEFILMS LTD., AS AGENT OF MILLBANK TWEED HADLEY AND MCCLOY, CONTINENTAL BUILDING, 135, DR A B ROAD, MUMBAI - 400018 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN. : AAACZO243R / APPELLANT BY SHRI SHRIDHAR E. / R EVENUE BY SHRI SANJIV M SHAH / DATE OF HEARING : 6 .10. 201 5 / DATE OF PRONOUNCEMENT: 09. 10. 201 5 / O R D E R P ER B R BASKARAN, AM : THE REVENUE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 10.07.2008 PASSED BY LD CIT(A) - 31 , MUMBAI FOR ASSESSMENT YEAR 200 1 - 02 . 2. TH E FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENUE: 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE BENEFIT OF DTTA TO THE ASSESSEE BY HOLDING THAT PARTNERSHIP FIRM IS A TAX RESIDENT OF UK.; 2. O N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING ARTICLE - 15 OF THE INDO - UK TREATY WILL BE APPLICABLE AS AGAINST THE TAXABILITY OF THE RECEIPTS AS PER DOMESTIC LAW OF INDIA SINCE THE PARTNERSHIP IS NOT A PERSON AS PER ARTICLE 3(F) OF THE INDO - UK TREATY; ITA NO. 6245 / MUM/20 08 2 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A), MUMBAI ON THE ABOVE GROUNDS BE SET ASIDE AND THE ORDER OF THE AO BE RESTORED 3. A CAREFUL PERUSAL OF THE ABOVE SAID GROUNDS WOULD SHOW THAT THE REVENU E IS AGGRIEVED BY THE DECISION OF THE LD.CIT(A) IN ALLOWING THE BENEFIT OF INDO - UK DT A A TO THE ASSESSEE HEREIN. 4. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE FACTS RELATING TO THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME AS REPRESENTATIV E ASSESSEE OF A FIRM OF SOLICITOR BASED IN UK , NAMED M ILLBANK TWEED HADLEY AND MCCLOY . M/S ZEE TELEFILMS LTD HAD ENGAGED THE ABOVE SAID SOLICITOR FOR ITS PROPOSED ADR OFFERING. M/S ZEE TELEFILMS LTD PAID FEES TO THE SOLICITORS AND DEDUCED TAX AT SOURC E OF RS.70.16 LAKHS. LATER IT FILED RETURN OF INCOME AS A REPRESENTATIVE OF THE ABOVE SAID SOLICITOR FIRM DECLARING THE TOTAL INCOME AS NIL . A CCORDINGLY, THE ENTIRE AMOUNT OF TDS DEDUCTED BY M/S ZEE TELEFILMS LTD WAS CLAIMED AS REFUND. THE AO NOTICED T HAT A PARTNERSHIP FIRM IS NOT LIABLE FOR TAXATION IN THE UK AND HENCE IT IS NOT A TAXABLE ENTITY UNDER THE LAWS OF UK . THE AO TOOK THE VIEW THAT THE BENEFITS OF INDO UK TAX TREATY COULD BE AVAILED ONLY IF THE SOLICITOR FIRM CAN BE CONSIDERED AS TAX RESI DENT OF UK. SINCE THE SOLICITOR FIRM IS NOT A TAXABLE ENTITY, THE AO TOOK THE VIEW THAT IT CANNOT CLAIM THE BENEFIT OF INDO - UK TREATY . THE AO FURTHER TOOK THE VIEW THAT THE FEE RECEIVED BY THE SOLICITOR FIRM IS IN THE NATURE OF FEE FOR TECHNICAL SERVICE S. ACCORDINGLY, THE AO COMPUTED THE INCOME OF THE ASSESSEE AT RS.2.85 CRO R ES. 5 . IN THE APPELLATE PROCEEDINGS , TH E LD. CIT(A) HELD THAT THE FEES RECEIVED BY THE ASSESSEE S OLICITOR FIRM DOES NOT FALL IN THE CATEGORY OF FEE FOR TECHNICAL SERVICES , BUT IT WOULD FALL UNDER THE CATEGORY OF FEE OF INDEPENDENT PERSONAL SERVICES. SINCE THE PERIOD OF STAY OF THE LAWYERS , WHO VISITED INDIA WAS LESS THAN 90 DAYS, THE LD.CIT(A) HELD THAT THE ITA NO. 6245 / MUM/20 08 3 ASSESSEE DOES NOT HAVE FIXED BASE IN INDIA AND ACCORDINGLY HELD TH AT FEE RECEIVED BY THE ASSESSEE - SOLICITOR IS NOT TAXABLE IN INDIA. THUS, THE LD CIT(A) GRANTED RELIEF BY CONSIDERING THE PROVISIONS OF INDO - UK DTAA. THE REVENUE IS AGGRIEVED BY THE DECISION OF LD. CIT(A) IN GRANTING THE BENEFIT OF INDO - UK TREATY TO THE ASSESSEE . 6. BEFORE US, THE LD. AR PLACED RELIANCE ON THE DECISION RENDERED BY THE HONBLE CALCUTTA HIGH COURT IN P & O NEDLLOYD LTD. & ORS VS ASSISTANT DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION - II, KOLKATA) ON 7 NOVEMBER, 2014 IN W.P. NO. 457 OF 2005 AND W.P. NO.458 OF 2008 AND SUBMITTED THAT THE HONBLE HIGH COURT HAS HELD THAT THE BENEFIT OF INDO UK TREATY IS AVAILABLE TO THE PARTNERSHIP FIRM S FORMED IN UK ALSO. T HE LD.AR FURTHER SUBMITTED THAT THE CO - ORDINATE BENCH OF THE TRIBUNAL , VIDE IT S ORDER DATED 16.7.2010 RENDERED IN THE CASE OF LINKLATERS LLP V/S INCOME TAX OFFICER ( INTERNATIONAL TAXATION) - 1(1)(2) ) IN ITA NO.4896/MUM/2003 RELATING TO AY - 1995 - 96 , HAS ALSO TAKEN AN IDENTICAL VIEW. ACCORDINGLY , THE LD. AR SUBMITTED THAT THE APPEAL FI LED BY THE REVENUE IS LIABLE TO BE DISMISSED. 7 . THE LD. DR COULD NOT BRING TO OUR NOTICE ANY CONTRARY DECISION. 8 . WE NOTICE THAT THE HONBLE CALCUTTA HIGH COURT HAS EXPRESSED THE VIEW THAT THE BENEFIT OF INDO UK TREATY IS AVAILABLE TO THE PARTNERSHIP FIRM REGISTERED IN UK EVEN THOUGH THE FIRM IS NOT RECOGN IZED AS TAXABLE ENTITY UNDER THE TAXATION PROVISION S OF UK. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELLOW THE RELEVANT DISCUSSION MADE BY THE HONBLE HIGH COURT OF CALCUTTA IN THE ABOVE SAID CASE: IT IS THE OTHER OBJECTION REGARDING ATTEMPT ON THE PART OF THE REVENUE TO SUBJECT THE PETITIONERS TO DOUBLE TAXATION ON THE GROUND ITS INCOME WAS NOT SAVED FROM THE CHARGE OF INCOME TAX BY THE ITA NO. 6245 / MUM/20 08 4 INDIA - UK TREATY, THAT THE REVENUE HAS NOT BEEN ABLE TO OVE RCOME . IN DEALING WITH SUCH OBJECTION IT IS NECESSARY TO REPRODUCE BELOW. CERTAIN CLAUSES , RELEVANT FOR THE PURPOSE, OF THE INDIA - UK TREATY NOTIFIED ON 11TH FEBRUARY, 1944. ' ARTICLE 1 - SCOPE OF THE CON VENTION 1. THIS CONVENTION SHALL APPLY TO PERSONS WHO ARE RESIDENTS OF ONE OR BOTH OF THE CONTRACTING STATES. ARTICLE 3 - GENERAL DEFINITIONS 1(F) THE TERM 'PERSON' INCLUDES AN INDIVIDUAL, A COMPANY A ND ANY OTHER ENTITY WHICH IS TREATED AS A TAXABLE UNIT UNDER THE TAXATION LAWS IN FORCE IN THE RESPECTIVE CONTRACTING STATES, BUT, SUBJECT TO PARAGRAPH 2 OF THIS ARTICLE, DOES NOT INCLUDE A PARTNERSHIP: 1(H) THE TERMS 'ENTERPRISE OF A CONTRACTING STATE' A ND 'ENTERPRISE OF THE OTHER CONTRACTING STATE' MEAN RESPECTIVELY AN ENTERPRISE CARRIED ON BY A RESIDENT OF A CONTRACTING STATE AND AN ENTERPRISE CARRIED ON BY A RESIDENT OF THE OTHER CONTRACTING STATE. 2. A PARTNERSHIP WHICH IS TREATED AS A TAXABLE UNIT U NDER THE INCOME TAX ACT, 1961 (43 OF 1961), OF INDIA SHALL BE TREATED AS A PERSON FOR THE PURPOSES OF THIS CONVENTION. ARTICLE 4 - FISCAL DOMICILE 1. FOR THE PURPOSES OF THIS CONVENTION, THE TERM 'RESI DENT OF A CONTRACTING STATE' MEANS ANY PERSON WHO, UNDER THE LAW OF THAT STATE, IS LIABLE TO TAXATION THEREIN BY REASON OF HIS DOMICILE, RESIDENCE, PLACE OF MANAGEMENT OR ANY OTHER CRITERION OF A SIMILAR NATURE. ARTICLE 9 - SHIPPING 1. INCOME OF AN ENTERPRISE OF A CONTRACTING STATE FROM THE OPERATION OF SHIPS IN INTERNATIONAL TRAFFIC SHALL BE TAXABLE ONLY IN THAT STATE. 5. THE PROVISIONS OF THIS ARTICLE SHALL APPLY ALSO TO INCOME DERIVED FROM PARTICIPAT ION IN A POOL A JOINT BUSINESS OR AN INTERNATIONAL OPERATING AGENCY.' ITA NO. 6245 / MUM/20 08 5 THE EFFECT OF THE RELEVANT PROVISIONS OF THE INDIA - UK TREATY AS REPRODUCED ABOVE IS THAT THE CONVENTION APPLIES TO PERSONS WHO ARE RESIDENTS OF ONE OR BOTH OF THE CONTRACTING STATES BY OPERATION OF CLAUSES 1(F) AND 2 OF ARTICLE 3 OF THE CONVENTION. IT IS FOUND THE SAID PARTNERSHIP, PARTNERS OF WHICH ARE REGISTERED IN THE UK, IS NOT A PERSON TREATED AS A TAXABLE UNIT UNDER THE TAXATION LAWS IN FORCE IN THE UK. UNDER SECTION 2(31) (IV) OF THE INCOME TAX ACT, 1961, PERSON INCLUDES A FIRM AND UNDER SECTION 2(23)(I) THEREOF , A FIRM SHALL HAVE THE MEANING ASSIGNED TO IT IN THE INDIAN PARTNERSHIP ACT , 1932 AND SHALL INCLUDE A LIMITED LIABILITY PARTNERSHIP AS DEFINED IN THE LIMITED LIABI LITY PARTNERSHIP ACT , 2008. THE PROVISIONS OF THE INDIAN PARTNERSHIP ACT , 1932 IN PARTICULAR SECTIONS 4 AND 69 WHEN APPLIED FOR THE PURPOSE OF DETERMINING WHETHER THE SAID PARTNERSHIP IS A FIRM WITHIN THE MEANING OF THE SAID ACT, LEADS THIS COURT TO CONCLUDE IN THE AFFIRMATIVE. THAT OBVIATES THE NECESSITY OF APPLICABILITY OF THE PROVISIONS OF THE LIMITED LIABILITY PARTNERSHIP ACT , 2008. ONCE IT IS FOUND THE SAID PARTNERSHIP IS A FIRM UNDER SECTION 2(23)(I) OF THE INCOME TAX ACT, 1961, IT BECOMES A P ERSON UNDER SECTION 2(31)(IV) OF THE SAID ACT, ATTRACTING THE OPERATION OF PARAGRAPH 2 OF ARTICLE 3 OF THE SAID CONVENTION. SUCH CONCLUSION IS INESCAP ABLE AS THE REVENUE MUST BRING A CHARGE OF INCOME TAX AGAINST A PERSON UNDER SECTION 4 OF THE INCOME TAX ACT, 1961. THE REVENUE IN TREATING THE SAID PARTNERSHIP AS AN ASSESSEE AND SEEKING TO ASSESS INCOM E OF IT WHICH HAD ESCAPED ASSESSMENT IS FOR THE PURPOSE OF CHARGING TAX ON THE INCOME OF THE SAID PARTNERSHIP , TREATING IT AS A PERSON LIABLE TO BE CHARGED WITH THE LEVY OF INCOME GTAX UNDER THE SAID SECTION. IN DOING SO THE REVENUE HAS TO TREAT THE SAI D PARTNERSHIP AS A PERSON WITHIN THE DEFINITION PROVIDED OF PERSON UNDER SECTION 2(31)(IV) OF THE SAID ACT. THUS THE REVENUES CASE THE SAID PARTNERSHIP IS NOT COVERED BY THE SAID CONVENTION FAILS. IN AS MUCH AS IN THE FACTS AND CIRCUMSTANCES AFORESAID IT WOULD BE UNJUST TO COMPEL THE SAID PARTNERSHIP OR THE PETITIONERS TO SUBMIT THEMSELVES TO THE ASSESSMENT SOUGHT BY THE IMPUGNED NOTICE , THE WRIT PETITION SUCCEEDS 9. BY RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE HIGH COURT, WE HOLD THAT THE A SSESSEE IS ENTITLED TO INDO - UK DTAA BENEFITS AND ACCORDINGLY DISMISS THE APPEAL FILED BY THE REVENUE. ITA NO. 6245 / MUM/20 08 6 10 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 9TH OCTOBER, 2 015. 9TH OCTOBER, 2 015 SD SD ( PAWAN SINGH ) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 9TH OCTOBER, 2 015. . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI