Appeal details
Counselvise Citation
[2014] 140 COUNSELVISE.COM (IT) 75724 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 2 month(s) 14 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
07-03-2014
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
L
Next Hearing Date
04-03-2014
Assessment Year
2006-2007
Appeal Filed On
24-12-2009
Judgement Text
, IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI . . , . , ! BEFORE SHRI I.P. BANSAL, JM AND RAJENDRA, AM ./ I.T.A. NO.6562/MUM/2009 ( ' ' ' ' # # # # / ASSESSMENT YEAR : 2006-07 ATOS ORIGIN HONGKONG PRIVATE LIMITED, C/O. ATOS ORIGIN INDIA PVT. LTD., 126/127, SDF-IV, SEEPZ, ANDHERI (EAST), MUMBAI 400096 ' ' ' ' / VS. THE DY. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) 1 (1), MUMBAI. $ ./ % ./ PAN/GIR NO. : AAKCS 8720L ( $& / APPELLANT ) .. ( '($& / RESPONDENT ) ./ I.T.A. NO.219/MUM/2010 ( ' ' ' ' # # # # / ASSESSMENT YEAR : 2006-07 THE DY. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)1(1), MUMBAI. ' ' ' ' / VS. ATOS ORIGIN HONGKONG PRIVATE LIMITED, C/O. ATOS ORIGIN INDIA PVT. LTD., 126/127, SDF-IV, SEEPZ, ANDHERI (EAST), MUMBAI 400096 $ ./ % ./ PAN/GIR NO. : AAKCS 8720L ( $& / APPELLANT ) .. ( '($& / RESPONDENT ) ./ I.T.A. NO.6888/MUM/2011 ( ' ' ' ' # # # # / ASSESSMENT YEAR : 2006-07 ./ I.T.A. NO.6889/MUM/2011 ( ' ' ' ' # # # # / ASSESSMENT YEAR : 2008-09 ATOS INFORMATION TECHNOLOGY HK LIMITED, C/O. ATOS ORIGIN INDIA PVT. LTD., ' ' ' ' / VS. THE DY. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)1(1), MUMBAI. ATOS ORIGIN HONGKONG PRIVATE LIMITED , 2 126/127, SDF-IV, SEEPZ, ANDHERI (EAST), MUMBAI 400096 $ ./ % ./ PAN/GIR NO. : AAKCS 8720L ( $& / APPELLANT ) .. ( '($& / RESPONDENT ) ./ I.T.A. NO.8892/MUM/2010 ( ' ' ' ' # # # # / ASSESSMENT YEAR : 2007-08 ATOS ORIGIN HONGKONG LIMITED, MUMBAI. ' ' ' ' / VS. THE DY. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)1(1), MUMBAI $ ./ % ./ PAN/GIR NO. AAKCS 8720L ( $& / APPELLANT ) .. ( '($& / RESPONDENT ) ASSESSEE BY : S/SHRIKANCHAN KAUSHA L & DHANESH BAFNA REVENUE BY : SHRI AJAY SHRIVASTAVA ' ) *+ / DATE OF HEARING : 04/03/2014 ,-# ) *+ / DATE OF PRONOUNCEMENT : /03/2014 . / O R D E R PER I.P.BANSAL,J.M: ITA NO.6562/MUM/2009 & 219/MUM/2010 ARE CROSS APP EALS DIRECTED AGAINST ORDER PASSED BY LD. CIT(A)-10, MUMBAI DATED 29/10/2009 FOR ASSESSMENT YEAR 2006-07. ITA NO.6888/MUM/2011 IS A N APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER DATED 11/8/2011 F OR ASSESSMENT YEAR 2006- 07 PASSED UNDER SECTION 144C(13) R.W.S. 143(3) R.W. S. 147 OF THE INCOME TAX ACT, 1961 (THE ACT). ITA NO.8892/MUM/2010 AND ITA NO.68 89/MUM/2011 ARE ALSO APPEALS FIELD BY THE ASSESSEE AGAINST ASSESSMENT OR DERS DATED 27/10/2010 AND 10/8/2011 PASSED UNDER SECTION 144(C)(13) R.W.S. 14 3(3) OF THE ACT FOR ASSESSMENT YEARS 2007-08 AND 2008-09 RESPECTIVELY. ATOS ORIGIN HONGKONG PRIVATE LIMITED , 3 2. IN ITA NO.6888/MUM/2011 & 6889/MUM/2011 THE ASS ESSEE HAS ALSO FILED ADDITIONAL GROUNDS. THE GROUNDS OF APPEAL I N ALL THE APPEALS AND ADDITIONAL GROUNDS OF RAISED IN ITA NO.6888 & 6889/MUM/2011 AR E REPRODUCED BELOW: GROUNDS OF APPEAL IN ITA NO.NO.6562/MUM/2009(ASSESS EES APPEAL): ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN A W THE EARNED COMMISSIONER OF INCOME-TAX (APPEALS)-10[CIT (A)] ER RED IN CONFIRMING THE FOLLOWING GROUND: 1.1 THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE C ASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-10, MUMBAI (HE REINAFTER REFERRED TO AS CIT(A)) ERRED IN CONFIRMING THE DE CISION OF THE ASSESSING OFFICER (AC) THAT THE AMOUNT OF RS.117, 820,808 PAYABLE TO ATOS ORIGIN HONGKONG PRIVATE LIMITED (ATOS) IS TA BLE TO TAX IN INDIA AS ROYALTY INCOME UNDER SECTION 9(1)(VI) OF THE INC OME TAX ACT, 1961 (THE ACT). GROUNDS OF APPEAL IN ITA NO.NO.219/M/2010(REVENUES APPEAL): 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT THE INCOME FROM ROYALTY IN THE CASE OF THE ASSESSEE IS TAXABLE @ 10% AS THE CONTRACT BETWEEN THE ASSESSEE AND STANDARD C HARTERED BANK WAS ENTERED INTO AFTER 01/06/2005 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED HOLDING THAT THE CONTRACT BETWEEN THE ASSESSEE AND STANDARD CHARTERED BANK HAS BEEN ENTERED AFTER 01/06/2005 DESPITE THE FACT THAT THE SERVICES WERE PROVIDED BY THE ASSESSEE UNDER THE COCTEAU AGREEMENT DATED 12/0 2/2004 GROUNDS OF APPEAL IN ITA NO.NO.6888/M/2010(ASSESSEE S APPEAL): 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE DEPUTY DIRECTOR OF INCOME- TAX, (INTERNATIONAL TAXATION) R ANGE 1(1), MUMBAI (THE LEARNED AO) ERRED IN INITIATING REASSESSMENT PROCEEDINGS U NDER SECTION 147 OF THE INCOME- TAX ACT, 1961 (THE ACT). 1.2 WITHOUT PREJUDICE TO ABOVE GROUND NO. 1.1, THE LEARNED AO AND THE DISPUTE RESOLUTION PANEL (THE DRP) ERRED IN HOLDING THE S UM OF RS.11,78,20,808 AS ROYALTY UNDER SECTION 9(1)(VI) OF THE ACT. IN DOI NG SO, THE LEARNED AO AND THE DRP DISREGARDED THE CONTRACT FORPROVISION OF COMPUTING SERVICES ENTERED INTO BETWEEN THE ASSESSEE AND SCB INDIA FOR THE SERVICES REN DERED BY THE ASSESSEE TO STANDARD CHARTERED BANK INDIA (SCB INDIA). 1.3 WITHOUT PREJUDICE TO ABOVE GROUND NO. 1.2, THE LEARNED AO AND THE DRP ERRED IN APPLYING A HIGHER RATE OF TAX I.E. 20% (EXCLUDIN G SURCHARGE AND CESS) AS PER SECTION IN 115A(1)(B)(A) OF THE ACT TO THE PAYMENTS MADE BY SCB INDIA TO THE ASSESSEE, DISREGARDING THE REVISED RATE OF TAX APP LICABLE FOR AGREEMENTS ENTERED INTO AFTER JUNE 1, 2005, I.E. 10% (EXCLUDING SURCHA RGE AND CESS). IN DOING SO, THE ATOS ORIGIN HONGKONG PRIVATE LIMITED , 4 LEARNED AO FAILED TO TAKE COGNIZANCE OF THE FACT TH AT THE ASSESSEE STARTED RENDERING SERVICES TO SCB INDIA FROM HONGKONG ONLY FROM AUGUS T 2005. 1.4 WITHOUT PREJUDICE TO ABOVE GROUND NO. 1.3, THE LEARNED AO AND THE DRP ERRED IN DENYING THE BENEFIT OF THE RATE PRESCRIBED UNDER SECTION 11 5A OF THE ACT. IN DOING SO, THE LEARNED AO AND THE DRP HELD THAT SCB INDIA IS A NON RESIDENT COMPANY AND DOES NOT FALL WITHIN THE AMBIT OF THE TERM IND IAN CONCERN AS PER THE PROVISIONS OF SECTION 115A OF THE ACT AND ACCORDINGLY, THE PRO VISIONS OF SECTION 115A OF THE ACT DO NOT APPLY TO THE PAYMENTS MADE BY SCB INDIA. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO ERRED IN LEVYING INTEREST UNDER SECTION 234B OF THE ACT WITHOUT APPRECIATING THAT THE ENTIRE INCOME OF THE ASSESSEE IS SUBJECT TO DEDUCTI ON OF TAX AT SOURCE AND HENCE, THE QUESTION OF ADVANCE TAX, DOES NOT ARISE. ADDITIONAL GROUNDS OF APPEAL: THE UNDER MENTIONED GROUNDS OF APPEAL ARE WITHOUT P REJUDICE TO OTHER GROUNDS - 1. WITHOUT PREJUDICE TO GROUND NOS. 1.1 TO 1.4, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WHILE CALCULA TING THE TAX LIABILITY OF THE APPELLANT, THE LEARNED AO HAS ERRED IN ADOPTING CHA RGEABLE INCOME AS GROSS RECEIPTS INSTEAD OF NET RECEIPTS RECEIVED BY THE AP PELLANT (I.E. AFTER DEDUCTING THE EXPENSES ATTRIBUTABLE TO GROSS RECEIPTS). THE APPEL LANT HUMBLY PRAYS THAT THE LEARNED AO BE DIRECTED TO COMPUTE THE CHARGEABLE IN COME OF THE APPELLANT BY ADOPTING NET RECEIPTS INSTEAD OF GROSS RECEIPTS. THE APPELLANT HUMBLY PRAYS THAT THE LEARNED AO BE D IRECTED TO COMPUTE THE CHARGEABLE INCOME OF THE APPELLANT BY ADOPTING NET RECEIPTS INSTEAD OF GROSS RECEIPTS. GROUNDS OF APPEAL IN ITA NO.NO.6889/M/2011(ASSESSEE S APPEAL): 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED AO AND THE DISPUTE RESOLUTION PANEL (THE DRP) ERRED IN HOLDING THE SUM OF RS.13,99,38,383 AS ROYALTY AND FEES FOR TECHNICA L SERVICES UNDER SECTION 9(1)(VI) AND 9(1)(VII) OF THE INCOME TAX ACT, 1961 (THE ACT ). IN DOING SO, THE LEARNED AO AND THE DRP DISREGARDED THE CONTRACT FOR PROVISION OF C OMPUTING SERVICES ENTERED INTO BETWEEN THE ASSESSEE AND SCB INDIA FOR THE SERVICES RENDERED BY THE ASSESSEE TO STANDARD CHARTERED BANK, INDIA (SCB INDIA). 1.2 WITHOUT PREJUDICE TO ABOVE GROUND NO. 1.1, THE LEARNED AO AND THE DRP ERRED IN DENYING THE BENEFIT OF THE RATE PRESCRIBED UNDER SECTION 115A OF THE ACT. IN DOING SO, THE LEARNED AO AND THE DRP HELD THAT SCB INDIA IS A NON RESIDENT COMPANY AND DOES NOT FALL WITHIN THE AMBIT OF THE TERM IND IAN CONCERN AS PER THE PROVISIONS OF SECTION 115A OF THE ACT AND ACCORDINGLY, THE PRO VISIONS OF SECTION 11 5A OF THE ACT DO NOT APPLY TO THE PAYMENTS MADE BY SCB INDIA. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO ERRED IN LEVYING INTEREST UNDER SECTION 234B OF THE ACT WITHOUT APPRECIATING THAT THE ENTIRE INCOME OF THE ASSESSEE IS SUBJECT TO DEDUCTI ON OF TAX AT SOURCE AND HENCE, THE QUESTION OF ADVANCE TAX DOES NOT ARISE. ATOS ORIGIN HONGKONG PRIVATE LIMITED , 5 ADDITIONAL GROUNDS OF APPEAL: THE UNDER MENTIONED GROUNDS OF APPEAL ARE WITHOUT P REJUDICE TO OTHER GROUNDS - 1.3 WITHOUT PREJUDICE TO GROUND NOS. 1.1 TO 1.2, O N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WHILE CALCULA TING THE TAX LIABILITY OF THE APPELLANT, THE LEARNED AD HAS ERRED IN ADOPTING CHA RGEABLE INCOME AS GROSS RECEIPTS INSTEAD OF NET RECEIPTS RECEIVED BY THE AP PELLANT (I.E. AFTER DEDUCTING THE EXPENSES ATTRIBUTABLE TO GROSS RECEIPTS). THE APPELLANT HUMBLY PRAYS THAT THE LEARNED AD BE D IRECTED TO COMPUTE THE CHARGEABLE INCOME OF THE APPELLANT BY ADOPTING NET RECEIPTS INSTEAD OF GROSS RECEIPTS. GROUNDS OF APPEAL IN ITA NO.NO.8892/M/2010(ASSESSEE S APPEAL): 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ADDITIONAL DIRECTOR OF INCOME-TAX, RANGE 1, MUMBAI (THE LEARN ED AO) AND THE DISPUTE RESOLUTION PANEL (THE DRP) ERRED IN HOLDING THE S UM OF RS.20,08,93,494 AS ROYALTY AND FEES FOR TECHNICAL SERVICES UNDER SE CTION 9(1)(VI) AND 9(1)(VII) OF THE INCOME TAX ACT, 1961 (THE ACT). 1.2 WITHOUT PREJUDICE TO ABOVE GROUND NO. 1.1, THE LEARNED AO AND THE DRP ERRED IN APPLYING A HIGHER RATE OF TAX I.E. 20% (EXCLUDIN G SURCHARGE AND CESS) AS PER SECTION IN 115A(1)(B)(A) OF THE ACT TO THE PAYMENTS MADE BY SCB INDIA TO THE ASSESSEE. IN DOING SO. THE AO AND THE DRP DISREGARD ED THE CONTRACT FOR PROVISION OF COMPUTING SERVICES ENTERED BETWEEN THE ASSESSEE AND SCB INDIA. 3. ALL THESE APPEALS WERE ARGUED TOGETHER BY BOTH T HE PARTIES AND FOR THE SAKE OF CONVENIENCE ALL THESE APPEALS ARE BEING DISPOS ED OF BY THIS CONSOLIDATED ORDER. 4. IT MAY BE MENTIONED HERE THAT ASSESSEE IN THE PR ESENT CASES HAD FILED APPLICATION FOR EXTENSION OF STAY AND VIDE ORDER D ATED 4/10/2013 PASSED BY THE ITAT THE APPLICATIONS FILED BY THE ASSESSEE FOR EX TENDING THE STAY OF DEMAND IN RESPECT OF ASSESSMENT YEAR 2006-07 AND 2008-09 WERE DISMISSED. AGAINST SUCH ORDER OF ITAT THE ASSESSEE HAD FILED WRIT PETITI ONS BEFORE HONBLE BOMBAY HIGH COURT WHICH HAVE BEEN DECIDED VIDE ORDER DATED 26/1 1/2013, COPY OF WHICH WAS PLACED ON OUR RECORD. THEIR LORDSHIPS OF HONBLE B OMBAY HIGH COURT HAVE GRANTED THE STAY OF OUTSTANDING DEMAND IN RESPECT O F ASSESSMENT 2006-07 AND 2008-09 AND HAVE ALSO DIRECTED TO DISPOSE OF THE AP PEALS RELATING TO ASSESSMENT YEAR 2006-07 AND 2008-09 EXPEDITIOUSLY AND IN ANY CASE WITHIN A PERIOD OF FOUR ATOS ORIGIN HONGKONG PRIVATE LIMITED , 6 MONTHS FROM THE DATE OF THE ORDER. ACCORDINGLY, TH ESE APPEALS OF THE ASSESSEE WERE FIXED FOR HEARING ALONG WITH APPEAL OF THE ASS ESSEE FOR 2007-08. 5. THE ASSESSEE COMPANY IS INCORPORATED IN HONGKONG AND PROVIDING SERVICES/FACILITIES FOR THE PROCESSING OF DATA THRO UGH COMPUTER SOFTWARE FROM HONGKONG. THE ASSESSEE IS A NON-RESIDENT IN INDIA. IT ENTERED INTO A CONTACT FOR PROVISION OF COMPUTING SERVICES, FOR THE PROVISION OF DATA PROCESSING SUPPORT TO STANDARD CHARTERED BANK, INDIA (SCB INDIA) ENGAGED IN THE BUSINESS OF BANKING IN INDIA. UNDER THE SAID CONTRACT THE ASSESSEE IS PROCESSING DATA FOR SCB INDIA IN HONGKONG AND SUCH SERVICES ARE BEING PROVIDED BY THE ASSESSEE TO SCB INDIA SINCE 07/08/2005 FROM HONGKONG. ACCORDING TO THE ASSESSEE THE SAME AGREEMENT PRIOR TO 7/8/2005 WAS PREVAILING AND THE SERVICES WERE PROVIDED BY THE ASSESSEE TO SCB INDIA FROM SINGAPORE. SO FAR AS IT RELATES TO PERIOD PRIOR TO AUG.2005, IT WAS SUBMITTED THAT THE ISSUES RAISED I N THE PRESENT APPEALS ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF T HE TRIBUNAL DATED 11/5/2011 IN WHICH IT WAS HELD THAT THE PAYMENTS RECEIVED BY THE ASSESSEE FROM SCB INDIA FOR THE PROVISION OF SERVICES OF SPECIALIZED DATA, PROCESSING OF RAW DATA, USING MAINFRAME COMPUTERS CANNOT BE CHARACTERIZED AS A ROYALTY U/S. 9(1)(VI) OF THE ACT AS WELL AS UNDER ARTICLE 12(3) OF THE DTAA PRE VAILING BETWEEN INDIA AND SINGAPORE INSTEAD OF IN THE NATURE OF BUSINESS PROF IT. HOWEVER, THE RECEIPTS OF THE ASSESSEE IN THE YEARS UNDER CONSIDERATION ARE F ROM HONGKONG AND INDIA DOES NOT HAVE ANY DTAA WITH HONGKONG, THEREFORE, THE TAX ABILITY OR OTHERWISE OF THE RECEIPTS OF THE ASSESSEE IN ITS HAND IN INDIA IS RE QUIRED TO BE EXAMINED UNDER THE DOMESTIC PROVISIONS WHICH ALSO HAVE BEEN AMENDED BY THE FINANCE ACT, 2012 BY WAY OF INSERTION OF EXPLANATIONS 4, 5 & 5 TO SECTIO N 9(1)(VI) OF THE ACT. THEREFORE, THOUGH THE ORDERS RENDERED BY THE TRIBUNAL MAY BE H ELPFUL TO SOME EXTENT BUT THE ISSUES RAISED IN THE PRESENT APPEALS ARE REQUI RED HAS TO BE EXAMINED IN THE LIGHT OF AMENDED PROVISIONS OF SECTION 9(1)(VI) WHICH HAVE NOT BEEN EXAMINED EITHER BY THE AO, DRP OR BY THE TRIBUNAL. THUS THE MAIN ISSUE WHICH INVOLVED IN ALL THESE APPEALS IS REGARDING THE TAXABILITY O R OTHERWISE OF THE RECEIPTS OF THE ASSESSEE IN THE LIGHT OF THE AFOREMENTIONED AMENDED PROVISIONS. THE AFOREMENTIONED AMENDMENT IS APPLICABLE FROM RETROSPECTIVE EFFECT I.E. FROM 1/6/1976. SINCE THE SAID RETROSPECTIVE AMENDMENT HAS BEEN BROUGHT BY THE FINANCE ACT, ATOS ORIGIN HONGKONG PRIVATE LIMITED , 7 2012 AND THE ORDERS PASSED BY THE LOWER AUTHORITI ES AND TRIBUNAL WERE RENDERED BEFORE INCORPORATION OF THE AMENDED PROVI SIONS, IT IS THE CASE OF LD. AR THAT IT WILL SERVE THE INTEREST OF JUSTICE IF THE MATTER IS RESTORED BACK TO THE FILE OF A.O. LD. A.R HAS PREPARED A CHART SHOWING APPEA L WISE GRIEVANCES OF THE ASSESSEE AS WELL DEPARTMENT. THE CHART IS AS FOLL OWS: ASST.YEAR ITA NO. ISSUES INVOLVED 2006-07 (ORIGINAL ASSESSMENT) 6562/MUM/2009 (APPELLANTS APPEAL) WHETHER PAYMENTS MADE BY SCB INDIA TO THE APPELLANT AE PAYMENT FOR ROYALTY U/S. 9(1)(VI) OF INCOME TAX ACT, 1961 (THE ACT)? (GROUND 1.1) 2006-07 219/MUM/2010 (DEPTS APPEAL) WHETHER THE CIT(A) ERRED IN HOLDING THAT INCOME FROM ROYALTY IS TAXABLE @ 10% (GROUND NO. 1.4) 2007-08 8892/MUM/2010 WHETHER PAYMENTS MADE BY SCB INDIA TO THE APPELLANT ARE PAYMENT FOR ROYALTY AND FEES FOR TECHNICAL SERVICES U/S. 9(1)(VI) OF THE INCOME TAX ACT, 1961(THE ACT)? (GROUND 1.1) WITHOUT PREJUDICE TO GROUND NO.1.1, WHETHER THE LD. AO/DRP ERRED IN APPLYING A HIGHER RATE I.E. 20% (EXCLUDING SURCHARGE AND CESS) AS PER THE SECTION 115A(1)(B)(A) OF THE ACT? (GROUND NO.1.2) 2008-09 6889/MUM/2011 WHETHER PAYMENTS MADE BY SCB INDIA TO THE APPELLANT ARE PAYMENT FOR ROYALTY AND FEES FOR TECHNICAL SERVICES U/S.9(1)(VI) OF THE INCOME TAX ACT, 1961 (THE ACT)? (GROUND 1.1) WITHOUT PREJUDICE GROUND 1.1 WHETHER BENEFIT OF SECTION 115A OF THE ACT IS AVAILABLE SIENCE SCB INDIA FALLS WITHIN THE AMBIT OF TERM INDIAN CONCERN? (GROUND NO.1.2) WITHOUT PREJUDICE GROUND 1.1 AND GROUND NO.1.2, WHETHER WHILE CALCULATING THE INCOME TAX LIABILITY, NET RECEIPTS (I.E. AFTER DEDUCTING THE EXPENSES INCURRED FOR THE PURPOSE OF EARNING SUCH INCOME) HAS BEEN TAKEN AS CHARGEABLE INCOME OR GROSS RECEIPTS AS TAKEN BY THE LD. AO? (GROUND NO.1.3) WHETHER INTEREST U/S. 234B OF THE ACT IS CHARGEABLE ? GROUND NO.2) ATOS ORIGIN HONGKONG PRIVATE LIMITED , 8 5.1 LD. AR HAS ALSO SPECIFIED VARIOUS ORDERS AND T HEIR DATES TO SHOW THAT THE AFOREMENTIONED RETROSPECTIVE AMENDMENT DID NOT EXIS T ON THE DATES WHEN THESE ORDERS WERE PASSED. . THE CHART READS AS UNDER: ASSESSMENT YEAR DRAFT ASSESSMENT ORDER DRPS/CIT(A)S ORDER FINAL ASSESSMENT ORDER. 2006-07 NA OCTOBER 29, 2009 (CIT(A) ORDER) DEC.18, 2008 2007-08 DEC.12, 2009 SEPT. 23, 2010 (DRP DIRECTIONS) OCT.27, 2010 2008-09 DEC.23, 2010 JUNE 30, 2011 (DRP DIRECTIONS) AUG.2011 5.2 ON THE ABOVE MENTIONED FACTS IT WAS SUBMITTED B Y LD. AR THAT AS THE MATTER HAS TO BE EXAMINED AFRESH IN THE LIGHT OF A FOREMENTIONED RETROSPECTIVE AMENDMENT, IT WOULD SERVE THE INTEREST OF JUSTICE IF THE APPEALS EXCEPT ITA NO.6888/MUM/2011 ARE RESTORED BACK TO THE FILE OF A O. LD. AR HAS ALSO FILED A LETTER AND REFERRING TO THE ABOVE FACTS IT IS PLEA DED IN THE LETTER THAT THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF AO. THE RELE VANT PORTION OF THE SAID LETTER IS REPRODUCED BELOW: 4.1 THE LD. AO WHILE PASSING THE ORDER FOR AY 2006 -07 FOLLOWED HIS PREDECESSORS ORDER IN THE CASE OF ATOS SINGAPORE TO HOLD THAT TH E PAYMENT MADE BY SCB INDIA TO THE APPELLANT IS PAYMENT FOR ROYALTY. FURTHER, THE CIT(A) FOLLOWED HIS PREDECESSORS ORDER IN THE CASE OF ATOS SINGAPORE TO CONFIRM THE ACTION OF THE AO. 4.2 IN AY 2007-08 & 2008-09, THE AO IN ADDITION TO HOLDING THE PAYMENT RECEIVED IS TAXABLE AS ROYALTY, ALSO, ALTERNATIVELY, ALLEGED IT TO BE TAXABLE AS FEES FOR TECHNICAL SERVICES (FTS) .THE DRP CONFIRMED THE ACTION OF T HE AU IN BOTH THE YEARS. 4.3 AT THE OUTSET, IT MAY BE STATED THAT WHILE PASS ING THE ABOVE ORDERS (REFER TABLE GIVEN AT POINT NO. 3), NONE OF THE LOWER AUTHORITIE S CONSIDERED THE FAVOURABLE ORDER OF THE HONBLE TRIBUNAL PASSED IN THE CASE OF ATOS SINGAPORE AND SCB INDIA (ITA NO.3824/M/O6 TO 3828/M/O6, 1932/M/O8 TO 1938/M/O8, 1457/M/O8) (ORDER DATED MAY II, 2011) HOLDING THAT THE PAYMENT RECEIV ED FROM THE SCB INDIA FOR THE PROVISION OF SERVICES OF SPECIALIZED DATA PROCESSIN G OF RAW DATA USING MAINFRAME COMPUTERS CANNOT BE CHARACTERIZED AS A ROYALTY U/ S 9(1)(VI) OF THE INCOME TAX ACT, 1961 (THE ACT) AS WELL AS UNDER ARTICLE 12(3) OF THE DTAA BETWEEN INDIA AND SINGAPORE BUT INSTEAD IS IN THE NATURE OF BUSINESS PROFITS. 4.4 FURTHER, THE AUTHORITIES ALSO DID NOT CONSIDERE D THE RETROSPECTIVE INSERTION OF EXPLANATION 4, 5, & 6 TO SECTION 9(1)(VI) OF THE AC T BY THE FINANCE ACT 2012. 5) IN VIEW OF THE ABOVE, AS UNANIMOUSLY CONSIDERED DURING THE HEARING, THAT IN THE MERIT OF JUSTICE THE MATTER MAY BE RESTORED TO THE FILES OF THE LD. AO TO DECIDE BY ATOS ORIGIN HONGKONG PRIVATE LIMITED , 9 ALLOWING THE APPELLANT REASONABLE OPPORTUNITY AND T HE LIBERTY TO FILE ANY EVIDENCES! MATERIALS NECESSARY TO SUBSTANTIATE ITS CONTENTION. 5.3 ON THE AFOREMENTIONED SUBMISSIONS OF LD. AR, LD . DR DID NOT HAVE ANY OBJECTION. HOWEVER, HE SUBMITTED THAT IF THE ISSUE RAISED IN ALL THE APPEALS EXCEPT APPEAL NO.6888/MUM/2011 ARE BEING RESTORED T O THE FILE OF AO THEN THE APPEAL OF THE ASSESSEE IN ITA NO.6888/MUM/2011 WIL L BECOME INFRUCTUOUS AS THE ONLY ISSUE ON MERITS RAISED BY THE ASSESSEE IS REGARDING TAX LIABILITY OF THE ASSESSEE AND THE RATE OF TAX APPLICABLE THEREON. I T WAS SUBMITTED THAT THE SAME ISSUE IS INVOLVED IN THE APPEAL OF THE DEPARTMENT FOR THE SAME YEAR I.E. ITA NO.219/MUM/2010. IT WAS SUBMITTED THAT AS THE ISSU E REGARDING RATE OF TAX HAS TO BE RE-EXAMINED AND RE-ADJUDICATED BY THE AO AS P ER LAW THEN THE APPEAL FILED BY THE ASSESSEE WITH REGARD TO RATE OF TAX APPLICAB LE WILL BECOME INFRUCTUOUS. LD. DR FURTHER SUBMITTED THAT THE OTHER ISSUE RAISED B Y THE ASSESSEE IN ITA NO.6888/MUM/2011 IS REGARDING INTEREST LEVIED UND ER SECTION 234B OF THE ACT. ACCORDING TO LD. DR THE SAID ISSUE IS CONSEQUENTIAL TO THE ASSESSED INCOME WHICH HAS ALSO TO BE CONSIDERED BY THE AO WHILE EXAMINING THE LIABILITY OF THE ASSESSEE AND ASSESSEE WILL BE HAVING RIGHT TO FILE OBJECTION S AGAINST SUCH LEVY WHICH WILL BE DECIDED BY THE AO AS PER LAW. TO SUCH SUBMISSION O F LD. DR, LD. AR SUBMITTED THAT THE ISSUE REGARDING LEVY OF INTEREST UNDER SEC TION 234B THOUGH IS CONSEQUENTIAL BUT ITS LEVY CAN BE CHALLENGED BY TH E ASSESSEE AS PER LAW IF THE MATTER IS RESTORED BACK TO THE FILE OF AO. 6. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. FROM THE ABOVE DISCUSSION IS CLEAR THA T THE LIABILITY OR OTHERWISE OF THE ASSESSEE REGARDING ITS RECEIPTS HAS TO BE RE-AD JUDICATED IN THE LIGHT OF AFOREMENTIONED RETROSPECTIVE AMENDMENT. THE ORDER S PASSED IN THE ASSESSEES CASE BY THE AO, DRP AND ITAT ARE PRIOR TO THE AFORE MENTIONED AMENDMENT IN THE STATUTE. THEREFORE, WE ARE OF THE OPINION THAT IT WOULD SERVE THE INTEREST OF JUSTICE IF ALL THESE APPEALS EXCEPT ITA NO.6888/MUM /2011 ARE RESTORED BACK TO THE FILE OF AO WITH A DIRECTION TO RE-ADJUDICATE TH E ISSUES IN ACCORDANCE WITH LAW AFTER GIVING FURTHER OPPORTUNITY TO THE ASSESSEE AN D PLACING ALL THE MATERIAL REQUIRED FOR ADJUDICATION OF THE ISSUES RAISED IN T HE PRESENT APPEALS. AFTER GIVING ATOS ORIGIN HONGKONG PRIVATE LIMITED , 10 SUCH OPPORTUNITY THE AO WILL RE-ADJUDICATE ALL THE ISSUES RAISED IN THE PRESENT APPEALS AS PER PROVISIONS OF LAW. 7. SO FAR AS IT RELATES TO GRIEVANCES OF THE ASSE SSEE IN ITA NO.6888/MUM/2011, THE MAIN GRIEVANCE OF THE ASSESS EE IS REGARDING INITIATION OF RE-ASSESSMENT PROCEEDINGS IN RESPECT OF TAX LIAB ILITY OF THE ASSESSEE REGARDING ITS RECEIPTS FROM SCB INDIA AND FOR THE SAME ASSESS MENT YEAR IN ORIGINAL PROCEEDINGS, THE SAME IS RESTORED BACK TO THE FILE OF AO FOR RE-ADJUDICATION. 7.1 SIMILAR IS THE POSITION IN RESPECT OF GROUND NO .1.3 & 1.4 AND ADDITIONAL GROUND NO.1.5 IN WHICH THE ASSESSEE HAS RAISED GRIE VANCES REGARDING RATES OF TAX TO BE APPLIED ON THE ABOVE RECEIPTS. ALL THESE I SSUES ON MERITS ARE TO BE RE- ADJUDICATED AS PER LAW IN ITA NO.6562/MUM/2009 & 2 19/MUM/2010 BEING CROSS APPEALS IN RESPECT OF ASSESSMENT YEAR 2006-07 AGAINST ORIGINAL ASSESSMENT. 7.2 THE OTHER ISSUES RAISED IN ITA NO.6888/MUM/2011 REGARDING LEVIABILITY OF INTEREST UNDER SECTION 234B WHICH WAS ADMITTED TO B E CONSEQUENTIAL AND WITH A RIDER THAT ASSESSEE HAS LIBERTY TO SHOW BEFORE AO W HY IT IS NOT LIABLE FOR LEVY OF INTEREST UNDER SECTION 234B, THE MATTER WOULD BE RE -ADJUDICATED IN ORIGINAL ASSESSMENT PROCEEDINGS AS DISCUSSED IN PARA 5.3 O F THIS ORDER. 7.3 IN VIEW OF ABOVE DISCUSSION SINCE ALL THE ISSUE S RAISED ON MERITS IN ITA NO.6888/MUM/2011 ARE RESTORED BACK TO THE FILE OF A .O IN ITA NO.6562/MUM/2009 & ITA NO.219/MUM/2010(BEING CROSS APPEALS IN RESPECT OF ASSESSMENT YEAR 2006-07, I.E. ORIGINAL ASSESSMENT P ROCEEDINGS) AND ARE DIRECTED TO BE RE-ADJUDICATED AS PER LAW, THEN THE VALIDITY OF REASSESSMENT PROCEEDINGS CANNOT BE UPHELD. UPHOLDING THE VALIDITY OF REASSE SSMENT IN THE PRESENT CASE WILL TANTAMOUNT TO UPHOLDING THE VALIDITY OF THE T WO ASSESSMENTS AT A TIME OF THE SAME ASSESSEE IN RESPECT OF SAME ASSESSMENT YEA R, WHICH IS NOT PERMISSIBLE IN THE EYES OF LAW. THEREFORE, GROUND NO.1 OF ITA NO.6888/MUM/2011 IS ALLOWED AND OTHER GROUNDS OF THE SAID APPEAL ARE DISMISSED HAVING BECOME INFRUCTUOUS IN THE LIGHT OF OUR DECISION IN ITA NO.6562/MUM/200 9 & ITA NO.219/MUM/2010 ATOS ORIGIN HONGKONG PRIVATE LIMITED , 11 7.4. IN THE RESULT, ITA NO 6888/MUM/2011 IS PARTLY ALLOWED. 8. TO SUM UP ITA NO.6888/MUM/2011 IS PARTLY ALLOWE D AND ALL OTHER APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 07/03/2014 . . ) ,-# / 0'1 07 /03/2014 - ) 2 SD/- SD/- (RAJENDRA) . . (I.P.BANSAL) /ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; 0' DATED /03/2014 . ' . .VM , SR. PS . . . . ) )) ) '*3 '*3 '*3 '*3 43#* 43#* 43#* 43#* / COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. '($& / THE RESPONDENT. 3. 5 ( ) / THE CIT(A)- 4. 5 / CIT 5. 362 '*' , , / DR, ITAT, MUMBAI 6. 27 8 / GUARD FILE. .' .' .' .' / BY ORDER, (3* '* //TRUE COPY// 9 99 9 / : : : : (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI
