ION Geophysical Corporation, Gurgaon V. ADIT, Dehradun

ITA 6414/DEL/2012

• Counselvise Citation: 641420114 RSA 2012
• Duration Of Justice: 1 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 09-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 27-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: POONAM SIDHU
• Assessee Lawyers: GAURAV SAXENA
• Keywords: Double taxation relief; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH C CC C : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND PRESIDENT AND PRESIDENT AND PRESIDENT AND SHRI SHRI SHRI SHRI H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU, JUDICIAL , JUDICIAL , JUDICIAL , JUDICIAL MEMBER MEMBER MEMBER MEMBER ITA NO ITA NO ITA NO ITA NO. .. .6414/DEL/2012 6414/DEL/2012 6414/DEL/2012 6414/DEL/2012 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2009 2009 2009 2009- -- -10 1010 10 M/S ION GEOPHYSICAL M/S ION GEOPHYSICAL M/S ION GEOPHYSICAL M/S ION GEOPHYSICAL CORPORATION, CORPORATION, CORPORATION, CORPORATION, (FORMERLY KNOWN AS INPUT (FORMERLY KNOWN AS INPUT (FORMERLY KNOWN AS INPUT (FORMERLY KNOWN AS INPUT OUTPUT INC.), OUTPUT INC.), OUTPUT INC.), OUTPUT INC.), C/O DELOITTE HASKINS & SELLS, C/O DELOITTE HASKINS & SELLS, C/O DELOITTE HASKINS & SELLS, C/O DELOITTE HASKINS & SELLS, 7 77 7 TH THTH TH FLOOR, BUILDING 10, FLOOR, BUILDING 10, FLOOR, BUILDING 10, FLOOR, BUILDING 10, TOWER B, DLF CYBER CITY TOWER B, DLF CYBER CITY TOWER B, DLF CYBER CITY TOWER B, DLF CYBER CITY COMPLEX, DLF CITY, PHASE COMPLEX, DLF CITY, PHASE COMPLEX, DLF CITY, PHASE COMPLEX, DLF CITY, PHASE- -- -II, II,II, II, GURGAON GURGAON GURGAON GURGAON 122 002, 122 002, 122 002, 122 002, HARYANA. HARYANA. HARYANA. HARYANA. PAN : AABCI6763Q. PAN : AABCI6763Q. PAN : AABCI6763Q. PAN : AABCI6763Q. VS. VS. VS. VS. ASSISTANT DIRECTOR OF ASSISTANT DIRECTOR OF ASSISTANT DIRECTOR OF ASSISTANT DIRECTOR OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, INTERNATIONAL TAXATION, INTERNATIONAL TAXATION, INTERNATIONAL TAXATION, INTERNATIONAL TAXATION, DEHRADUN. DEHRADUN. DEHRADUN. DEHRADUN. (APPELL ANT) (RESPONDENT) APPELLANT BY : SHRI PIYUSH KAUSHIK, ADVOCATE AND SHRI GAURAV SAXENA, CA. RESPONDENT BY : SMT. POONAM SIDHU, CIT-DR. ORDER ORDER ORDER ORDER PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP : :: : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E DIRECTIONS OF LEARNED DISPUTE RESOLUTION PANEL-II, DELHI DATED 17 TH SEPTEMBER, 2012 FOR THE AY 2009-10. 2. GROUND NO.1 OF THE ASSESSEES APPEAL READS AS UN DER:- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED BY THE LD. ASSESSING O FFICER (AO') IS BAD IN LAW AND VOID AB-INITIO. 3. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED COUNSEL FOR THE ASSESSEE THAT THIS GROUND IS OF GEN ERAL NATURE AND ITA-6414/DEL/2012 2 SHOULD BE TREATED AS NOT PRESSED. ACCORDINGLY, THE SAME IS REJECTED BEING NOT PRESSED. 4. GROUND NO.2 OF THE ASSESSEES APPEAL READS AS UN DER:- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/LD. DRP HAS ERRED IN APPLYIN G TAX RATE OF 15 PER CENT ON FEE FOR TECHNICAL SERVICES (FTS) UNDER ARTICLE 12 OF THE INDIA-USA DTAA ON TRAINING SERVICES RENDERED BY THE APPELLANT, IGNORI NG THE FACT THAT SECTION 115A OF THE ACT PROVIDES FOR BENEFICIAL TAX RATE OF 10% (EXCLUSIVE OF SURCHARGE/ CESS) ON FTS. 5. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED COUNSEL THAT THE ASSESSEE IS A NON-RESIDENT CORPORA TION BASED IN USA. THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSES SEE HAD RECEIVED FEE FOR TECHNICAL SERVICES WHICH IS TAXED BY THE AS SESSING OFFICER AT THE RATE OF 15% AS PER DTAA BETWEEN INDIA AND USA. HE STATED THAT AS PER SECTION 115A(BB) OF THE INCOME-TAX ACT, 1961, FEE F OR TECHNICAL SERVICES IS CHARGEABLE TO TAX AT THE RATE OF 10%. THAT AS PER SUB- SECTION (2) OF SECTION 90, THE PROVISION OF THE INC OME-TAX ACT OR DTAA, WHICHEVER IS BENEFICIAL TO THE ASSESSEE, SHOULD BE APPLIED. HE, THEREFORE, SUBMITTED THAT SINCE THE RATE OF TAX CHA RGEABLE IN RESPECT OF FEE FOR TECHNICAL SERVICES IS LOWER UNDER THE INCOM E-TAX ACT, THE SAME SHOULD BE APPLIED AND INSTEAD OF 15%, THE TAX SHOUL D BE CHARGED AT THE RATE OF 10% OF THE FEE FOR TECHNICAL SERVICES. 6. LEARNED DR, ON THE OTHER HAND, STATED THAT THE A SSESSEE ITSELF HAS OFFERED THE INCOME UNDER ARTICLE 12 OF THE DTAA AND THEREFORE, THE ASSESSING OFFICER ASSESSED THE FEE FOR TECHNICAL SE RVICES AS PER ARTICLE 12 OF THE DTAA BETWEEN INDIA AND USA. THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT AND NO CLAIM WAS MA DE BEFORE THE ASSESSING OFFICER THAT THE TAX SHOULD BE CHARGED AS PER SECTION 115A ITA-6414/DEL/2012 3 AND NOT AS PER DTAA. SHE SUBMITTED THAT IN VIEW OF THE DECISION OF HONBLE APEX COURT IN THE CASE OF GOETZE (INDIA) LT D. VS. CIT (2006) 284 ITR 323, THE ASSESSEE IS PRECLUDED FROM MAKING THE FRESH CLAIM BEFORE THE AUTHORITIES. SHE FURTHER SUBMITTED THAT THE ASSESSEE HAS A PE IN INDIA AND, THEREFORE, SECTION 115A IS NOT APP LICABLE IN THE CASE OF THE ASSESSEE. 7. IN THE REJOINDER, IT IS STATED BY THE LEARNED CO UNSEL THAT THE DECISION OF GOETZE (INDIA) LTD. (SUPRA) RELIED UPON BY THE LEARNED DR WOULD NOT BE APPLICABLE BECAUSE THE ABOVE DECISION WAS WITH REGARD TO THE CLAIM OF SOME EXPENSES WHICH WAS MADE BY THE AS SESSEE BEFORE THE ASSESSING OFFICER WITHOUT FILING THE REVISED RE TURN. IN THAT CONTEXT, HONBLE APEX COURT HELD THAT THE ASSESSEE OUGHT TO HAVE FILED THE REVISED RETURN FOR MAKING ANY ADDITIONAL CLAIM OF E XPENSES. THAT IN THIS CASE, THE ASSESSEE IS NOT CLAIMING ANY ADDITIO NAL EXPENSES BUT ASSESSEE IS ONLY DISPUTING THE RATE OF TAX. THE RA TE OF TAX APPLIED BY THE ASSESSING OFFICER BECAME KNOWN TO THE ASSESSEE ONLY AFTER THE RECEIPT OF THE FINAL ORDER AND THEREFORE, ASSESSEE HAD NO OCCASION TO RAISE THIS ISSUE EITHER BEFORE THE ASSESSING OFFICE R OR BEFORE THE DRP. HE ALSO SUBMITTED THAT IT IS THE DUTY OF THE ASSESS ING OFFICER TO LEVY TAX AT THE CORRECT RATE. HE FURTHER POINTED OUT THAT T HE ASSESSING OFFICER HAS APPLIED ARTICLE 12 OF THE DTAA WHICH WOULD NOT BE APPLICABLE IF THERE IS A PE IN INDIA. MOREOVER, IF THERE IS A PE IN INDIA, THEN THE ASSESSING OFFICER OUGHT TO HAVE ESTIMATED THE INCOM E FROM FEE FOR TECHNICAL SERVICES AND THE GROSS RECEIPT FOR FEE FO R TECHNICAL SERVICES CANNOT BE CHARGED TO TAX. HE, THEREFORE, SUBMITTED THAT THE ASSESSING OFFICER HAS CHARGED THE GROSS RECEIPT OF THE FEE FO R TECHNICAL SERVICES FOR THE PURPOSE OF THE INCOME TAX AND THE ONLY DISP UTE IN THIS APPEAL IS THE RATE AT WHICH THE GROSS FEE FOR TECHNICAL SERVI CES CAN BE CHARGED TO TAX. AS PER ARTICLE 12 OF THE DTAA, THE RATE IS 15 % WHILE AS PER SECTION ITA-6414/DEL/2012 4 115A(BB), IT IS 10%. THE ONLY REQUEST OF THE ASSES SEE IS THAT WHICHEVER IS BENEFICIAL TO THE ASSESSEE SHOULD BE A PPLIED. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AND PERUSED RELEVANT MATERIAL PLACED BEFORE US. AF TER CONSIDERING THE FACTS OF THE CASE AND THE ARGUMENTS OF BOTH THE SID ES, WE ARE OF THE OPINION THAT THE DECISION OF HONBLE APEX COURT IN THE CASE OF GOETZE (INDIA) LTD. (SUPRA) RELIED UPON BY THE LEARNED CIT -DR WOULD NOT BE APPLICABLE. IN THIS APPEAL BEFORE US, THE ONLY DIS PUTE IS WITH REGARD TO THE RATE OF TAX AND THE ASSESSEE RIGHTLY POINTED OU T THAT THE ISSUE OF RATE OF TAX AROSE ONLY AFTER THE RECEIPT OF THE ASS ESSMENT ORDER. MOREOVER, IT IS THE DUTY OF THE ASSESSING OFFICER T O CHARGE THE TAX AT THE CORRECT RATE. THEREFORE, IN OUR OPINION, THE A SSESSEE CAN AGITATE FOR THE FIRST TIME BEFORE THE ITAT THE ISSUE REGARDING THE RATE OF TAX IN RESPECT OF FEE FOR TECHNICAL SERVICES. 9. SECTION 90, SUB-SECTION (2) READS AS UNDER:- (2) WHERE THE CENTRAL GOVERNMENT HAS ENTERED INTO AN AGREEMENT WITH THE GOVERNMENT OF ANY COUNTRY OUTSID E INDIA OR SPECIFIED TERRITORY OUTSIDE INDIA, AS THE CASE MAY BE, UNDER SUB-SECTION (1) FOR GRANTING RELIEF O F TAX, OR AS THE CASE MAY BE, AVOIDANCE OF DOUBLE TAXATION , THEN, IN RELATION TO THE ASSESSEE TO WHOM SUCH AGREEMENT APPLIES, THE PROVISIONS OF THIS ACT SHALL APPLY TO THE EXTENT THEY ARE MORE BENEFICIAL TO THAT ASSESSEE. 10. FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSEE CAN CLAIM THE APPLICABILITY OF THE INCOME-TAX ACT IF THE PROVISIO N OF THE INCOME-TAX ACT IS MORE BENEFICIAL TO THE DTAA. AS PER SECTION 115A(BB) AS IT STOOD AT THE RELEVANT TIME READS AS UNDER:- ITA-6414/DEL/2012 5 THE AMOUNT OF INCOME-TAX CALCULATED ON THE INCOME BY WAY OF FEES FOR TECHNICAL SERVICES, IF ANY, INCLUDE D IN THE TOTAL INCOME, AT THE RATE OF TEN PER CENT IF SUCH F EES FOR TECHNICAL SERVICES ARE RECEIVED IN PURSUANCE OF AN AGREEMENT MADE ON OR AFTER THE 1 ST DAY OF JUNE, 2005; AND. 11. IT IS NOT IN DISPUTE THAT THE FEES FOR TECHNICA L SERVICES WAS IN PURSUANCE TO AN AGREEMENT MADE AFTER THE FIRST DAY OF JUNE, 2005. THUS, THE PROVISION OF SUB-SECTION (BB) OF SECTION 115A WAS APPLICABLE. LEARNED DR CONTENDED THAT SINCE THE ASSESSEE HAS A PE IN INDIA, THEREFORE, SECTION 115A WAS NOT APPLICABLE. HOWEVE R, SHE FAIRLY ADMITTED THAT WHEN PE IS THERE IN INDIA, THEN, THE INCOME HAS TO BE APPORTIONED AND THE GROSS RECEIPT CANNOT BE CHARGED TO TAX. ADMITTEDLY, IN THIS CASE, THE ASSESSING OFFICER HAS CHARGED TO TAX THE GROSS AMOUNT OF FEES FOR TECHNICAL SERVICES. MOREO VER, AS POINTED OUT BY THE LEARNED COUNSEL, ARTICLE 12 OF THE DTAA WOUL D NOT BE APPLICABLE IF THERE IS A PE IN INDIA. IN VIEW OF THE ABOVE, W E ARE OF THE OPINION THAT CLAUSE (BB) OF SECTION 115A WAS APPLICABLE WHICH PR OVIDES FOR TAX RATE OF 10% IN RESPECT OF FEES FOR TECHNICAL SERVICES. THIS BEING A MORE BENEFICIAL PROVISION THAN THE ARTICLE 12 OF DTAA, T HEREFORE, ASSESSEE HAD A RIGHT TO CLAIM THE APPLICABILITY OF THIS PROV ISION OF THE INCOME-TAX ACT IN VIEW OF THE PROVISION OF SECTION 90(2) OF TH E INCOME-TAX ACT. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO APPLY SE CTION 115A(BB) AND TAX THE FEES FOR TECHNICAL SERVICES AT THE RATE OF 10%. 12. GROUND NO.3 READS AS UNDER:- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO HAS ERRED IN NOT GRANTING CR EDIT FOR TAX DEDUCTED AT SOURCE (TDS) AMOUNTING TO RS.36,98,688 WHILE ISSUING NOTICE UNDER SECTION 156 OF THE ACT READ WITH THE ASSESSMENT ORDER UNDER SECTIO N 143(3)/144C(13) OF THE ACT. ITA-6414/DEL/2012 6 13. AT THE TIME OF HEARING BEFORE US, BOTH THE PART IES FAIRLY ADMITTED THAT LET THIS MATTER BE SET ASIDE TO THE FILE OF TH E ASSESSING OFFICER AND ASSESSEE BE DIRECTED TO PRODUCE EVIDENCE/CERTIFICAT ES OF THE TAX DEDUCTED AT SOURCE AND THEREAFTER ASSESSING OFFICER WOULD BE DIRECTED TO ALLOW CREDIT OF THE SAME AFTER VERIFICATION. WE , THEREFORE, SET ASIDE THE ISSUE RAISED BY THE ASSESSEE VIDE GROUND NO.3 O F ITS APPEAL AND DIRECT THE ASSESSEE TO PRODUCE NECESSARY EVIDENCE/C ERTIFICATES IN RESPECT OF TAX DEDUCTED AT SOURCE BEFORE THE ASSESS ING OFFICER. THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE SAME AN D ALLOW CREDIT AS PER LAW. 14. GROUND NO.4 READS AS UNDER:- THAT THE LD.AO HAS ERRED IN FACTS AND LAW IN DETERMINING AND LEVYING INCOME TAX ON INCOME ARISIN G FROM INSTALLATION AND INSPECTION ACTIVITIES, WHICH HAS BEEN ASSESSED IN THE IMPUGNED ASSESSMENT ORDER ON PROTECTIVE BASIS. 15. AT THE TIME OF HEARING BEFORE US, A LIMITED PRA YER HAS BEEN MADE BY THE LEARNED COUNSEL THAT THE RECOVERY OF THE TAX IN RESPECT OF PROTECTIVE ADDITION SHOULD NOT BE MADE. HE POINTED OUT THAT CERTAIN INCOME HAS BEEN OFFERED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. LEARNED DRP WAS OF THE OPINION THAT THE INCOME IS LIABLE TO BE TAXED IN THE PRECEDING YEAR AND THEREF ORE, DRP DIRECTED THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT OF T HE PRECEDING YEAR AND TAX THE INCOME ON SUBSTANTIVE BASIS IN THAT YEA R. HOWEVER, THE INCOME OFFERED BY THE ASSESSEE HAS BEEN DIRECTED BY THE DRP TO BE ASSESSED ON PROTECTIVE BASIS. THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT AT PRESENT, THE ASSESSEE IS NOT DISPUTI NG THE PROTECTIVE ASSESSMENT OF THE INCOME OF THIS YEAR. HIS ONLY PR AYER IS THE DIRECTION TO THE ASSESSING OFFICER FOR NON-RECOVERY OF THE TA X ON PROTECTIVE ADDITION. ITA-6414/DEL/2012 7 16. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SID ES, WE AGREE WITH THE CONTENTION OF THE LEARNED COUNSEL. IT IS A SET TLED POSITION OF LAW THAT THE REVENUE CANNOT INSIST ON RECOVERING THE TA X ON PROTECTIVE ASSESSMENT OF INCOME. WE, THEREFORE, SET ASIDE THI S MATTER TO THE FILE OF THE ASSESSING OFFICER AND DIRECT HIM NOT TO RECO VER THE TAX ON PROTECTIVE ADDITION. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 26 TH DECEMBER, 2014. SD/- SD/- ( (( (H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU) )) ) (G.D. AGRAWAL (G.D. AGRAWAL (G.D. AGRAWAL (G.D. AGRAWAL) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 26.12.2014 VK. COPY FORWARDED TO: - 1. APPELLANT : M/S ION GEOPHYSICAL CORPORATION, M/S ION GEOPHYSICAL CORPORATION, M/S ION GEOPHYSICAL CORPORATION, M/S ION GEOPHYSICAL CORPORATION, (FORMERLY KNOWN AS INPUT OUTPUT INC.), (FORMERLY KNOWN AS INPUT OUTPUT INC.), (FORMERLY KNOWN AS INPUT OUTPUT INC.), (FORMERLY KNOWN AS INPUT OUTPUT INC.), C/O DELOITTE HASKINS & SELLS, C/O DELOITTE HASKINS & SELLS, C/O DELOITTE HASKINS & SELLS, C/O DELOITTE HASKINS & SELLS, 7 77 7 TH THTH TH FLOOR, BUILDING 10, TOWER B, DLF CYBER CITY FLOOR, BUILDING 10, TOWER B, DLF CYBER CITY FLOOR, BUILDING 10, TOWER B, DLF CYBER CITY FLOOR, BUILDING 10, TOWER B, DLF CYBER CITY COMPLEX, DLF CITY, PHASE COMPLEX, DLF CITY, PHASE COMPLEX, DLF CITY, PHASE COMPLEX, DLF CITY, PHASE- -- -II, GURGAON II, GURGAON II, GURGAON II, GURGAON 122 002, 122 002, 122 002, 122 002, HARYANA. HARYANA. HARYANA. HARYANA. 2. RESPONDENT : ASSISTANT DIRECTOR OF INCOME TAX, ASSISTANT DIRECTOR OF INCOME TAX, ASSISTANT DIRECTOR OF INCOME TAX, ASSISTANT DIRECTOR OF INCOME TAX, INTERNATION INTERNATION INTERNATION INTERNATIONAL TAXATION, DEHRADUN. AL TAXATION, DEHRADUN. AL TAXATION, DEHRADUN. AL TAXATION, DEHRADUN. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR