DCIT, New Delhi V. M/s. Technip UK Ltd., Gurgaon

ITA 6841/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4923 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 10-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 18-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY VERMA
• Assessee Lawyers: ANSHUL SACHAR; GAURAV BARCHHA
• Keywords: Business income; Double taxation relief; Opportunity of being heard; Permanent establishment
• Section: 263; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO. 6841/DEL/2014 A.Y. : 2008 - 09 DCIT, CIRCLE 3(1)(2), INTL. TAXATION, NEW DELHI VS. M/S TECHNIP UK LTD., C/O BMR & ASSOCIATES LLP 22 ND FLOOR, BUILDING NO. 5, TOWER-A, DLF CYBER CITY, DLF PHASE-III, GURGAON-122002 HARYANA (PAN: AACCT8268N) AND C.O. NO. 200/DEL/2015 (IN ITA NO. 6841/DEL/2014) A.Y. : 200 8 - 0 9 M/S TECHNIP UK LTD., C/O BMR & ASSOCIATES LLP 22 ND FLOOR, BUILDING NO. 5, TOWER- A, DLF CYBER CITY, DLF PHASE-III, GURGAON-122002 HARYANA (PAN: AACCT8268N) VS. DCIT, CIRCLE 3(1)(2), INTL. TAXATION, NEW DELHI (APPELLANT) (RESPONDENT) REVENUE BY : SH. VIJAY VERMA, CIT(DR) ASSESSEE BY : SH. ANSHUL SACHAR, ADV. & SH. GAURAV BARCHHA, CA ORDER PER H.S. SIDHU : JM THIS APPEAL BY THE REVENUE AND CROSS OBJECTION B Y THE ASSESSEE ARE DIRECTED AGAINST THE ASSESSMENT ORDER DATED 21. 11.2014 OF THE ASSESSING OFFICER PASSED U/S. 143(3)/144C/263 OF TH E INCOME TAX ACT, 2 1961 (HEREINAFTER REFERRED AS THE ACT) PERTAINING TO ASSESSMENT YEAR 2008-09. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP') HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO APPLY T HE DEEMED PROFIT RATE OF 10% U/S 44BB OF THE INCOME TA X ACT, 1961 ( 'THE ACT') ON THE REVENUES EARNED BY TH E ASSESSEE FROM M/S AKER INSTALLATION FP AS ('AKER') ON ACCOUNT OF PROVISION OF SERVICES FOR EXECUTING CONT RACTS WITH M/S RELIANCE INDUSTRIES LTD ( 'RIL'). 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HON'BLE DRP HAS ERRED IN HOLDING THAT THE AMOUNT RECEIVED BY THE ASSESSEE FROM M/S AKER ON ACCOUNT OF THE SERVICES RENDERED WAS NOT IN THE NAT URE OF FEE FOR TECHNICAL SERVICES ( 'FTS') AS DEFINED U / S 9(1)(VII) OF THE ACT AND WAS NOT TAXABLE UNDER THE PROVISIONS OF SEE 44DA R.W.S. 115A OF THE ACT. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HON'BLE DRP HAS ERRED IN HOLDING THAT THE REVENUES EARNED BY THE ASSESSEE ON ACCOUNT OF PROVISION SERVICES TO A NON-RESIDENT COMPANY WERE I N CONNECTION WITH PROSPECTING ETC OF MINERAL OIL AND HENCE ELIGIBLE FOR TREATMENT U/ S 44BB OF THE ACT, WITHOU T 3 ADJUDICATING THE ASPECT OF ELIGIBILITY IN TERMS OF SECOND LIMB OF THE EXCLUSIONARY PROVISO ( EXPLANATION TO S ECTION 9(1)(VII) OF THE I T ACT, 1961) I.E. 'FOR A PROJECT UNDERTAKEN BY THE RECIPIENT' IN TERMS OF THE PROPOS ITION CONFIRMED BY HON'BLE DELHI HIGH COURT IN CIT V RIO TINTO TECHNICAL SERVICES [2012-TII-01-HC- DEL-INTL] 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE DRP HAS ERRED IN HOLDING THAT THE CASE OF THE ASSESSEE IS COVERED BY CBDT'S INSTRUCTION NO . 1862 DATED 22.11.1990, NOT APPRECIATING THE FACT TH AT THE SAID INSTRUCTION NO. 1862 WAS NOT ISSUED U/ S 4 4BB BUT WAS ISSUED TO CLARIFY THE EXPRESSION 'MINING OR LIKE PROJECT' IN EXPN 2 BELOW SECTION 9(1)(VII)(B) OF TH E ACT AND THE SECOND LIMB OF THE EXCEPTION ('FOR A PROJEC T UNDERTAKEN BY THE RECIPIENT') WAS NOT THE SUBJECT MATTER OF THE SAID INSTRUCTION. 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HON'BLE DRP HAS ERRED IN NOT APPRECIA TING THE FACT IN THE PRESENT CASE THE SERVICES WERE NOT RENDERED BY THE ASSESSEE DIRECTLY TO AN ENTITY (M/ S RIL) WHICH IS ENGAGED IN PROSPECTING ETC OF MINERAL OIL AND IS DIRECTLY A ME MBER OF THE PRODUCTION SHARING CONTRACT. 4 6. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE DRP HAS ERRED IN HOLDING THAT NO DISTINCTION CAN BE MADE BETWEEN RECEIPTS FROM PRODUCTION SHARING PARTICIPANTS ( 'PSC PARTNERS') A ND NON-PRODUCTION SHARING PARTICIPANTS ('NON-PSC' PARTNERS') AND BETWEEN SERVICES RENDERED BY FIRST-L EG AND SECOND-LEG VENDORS, IGNORING' THE FACT THAT THE RECEIPTS FROM SECOND-LEG ARE IN RESPECT OF CONTRACT S WHICH ARE ENTERED INTO WITH COMPANIES NOT DIRECTLY ENGAGED IN OIL PRODUCTION AND EXPLORATION AND, THEREFORE, ARE LIABLE TO TAX U/S 44DA READ WITH SE CTION 9(1)(VI)J9(1)(VII AND NOT UJ S N 44BB OF THE IT ACT , 1961. 7. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE HON'BLE DRP HAS ERRED IN ITS INTERPRETATION OF THE LEGISLATIVE INTE NT BEHIND THE SCHEME OF TAXATION ENVISAGED IN 9(1)(VII) READ WITH SECTIONS 44DA AND 44BB , IGNORING THE DECISIONS IN THE CASES OF M/S ROLLS ROYCE PVT LTD [2007-TII-03-HC- UKHAND-INTL] AND M/S ONGC AS AGENT OF MJS FORAMER 'FRANCE [(2008) 299 ITR 438 UTTARAKHAND] 8. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE DRP HAS ERRED IN IGNORING THE DIS TINCT 5 SCHEME OF TAXATION OF FTS/ ROYALTY AND DISREGARDING THE INSERTION OF PROVISOS IN SECTION 44BB/ 44DA/ 115A A ND THE RATIONALE BEHIND THE INTRODUCTION OF SAID CLARI FICATORY PROVISOS IN THE FINANCE BILL 2010 IN HOLDING THAT T HE INCOME OF THE ASSESSEE COMPANY WAS COVERED UNDER TH E PROVISIONS OF SECTION 44BB. 9. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HON'BLE DRP HAS ERRED IN NOT APPRECIA TING THAT SINCE SECTIONS 44DA/115A ARE SPECIAL PROVISION S FOR TAXATION OF INCOME IN THE NATURE OF ROYALTIES AND F TS AND IF A SPECIAL PROVISION IS MADE RESPECTING A CER TAIN MATTER THAT MATTER IS EXCLUDED FROM THE GENERAL PROVISION UNDER THE RULE OF 'GENERALLIA SPECIALIBUS NON DEROGANT'. 10. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE DRP HAS ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 44BB OF THE ACT ARE MORE SPEC IAL PROVISIONS WHICH SHALL PREVAIL OVER THE PROVISIONS OF SECTION 9(1)(VII) READ WITH SECTIONS 44DA AND 115A OF THE ACT, NOT APPRECIATING THE FACT THAT BOTH SET OF PROVISIONS ARE SPECIAL IN NATURE WHICH OPERATE IN T HEIR OWN CLEARLY DEFINED' SPHERES AND THEREFORE, ONCE A PARTICULAR RECEIPT OR INCOME TAKES ON THE CHARACTER OF 6 FTS AS DEFINED IN SECTION 9(1)(VII), IT CANNOT BE CONSIDERED FOR TREATMENT UJ S 44BB OF THE ACT. 11. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE DRP HAS ERRED IN HOLDING THAT SEC TIONS 44DA AND SECTION 115A APPLY ONLY TO CASES WHERE- TH E INCOME BY WAY OF -ROYALTY OR FTS IS EARNED BY A NON - RESIDENT BY WAY OF ROYALTY OR FTS FROM GOVERNMENT O R AN INDIAN ENTITY AND WHERE AN INCOME IS RECEIVED BY A NON-RESIDENT FROM ANOTHER NON-RESIDENT, THE PROVISI ONS OF SECTION 44DAJ115A DO NOT APPLY. 12. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE DRP HAS ERRED IN NOT APPRECIATING THAT PROVISO TO SECTION 44BB IS NOT INSERTED PER MAJOREM CAUTELAM' BUT EXPLAINS AND CLARIFIES THE MAIN PROVI SION AS THE TERMS SERVICES OR FACILITIES USED THEREIN AR E NOT DEFINED AND THE TWO TERMS USED ARE TOO GENERAL IN NATURE AND THEREFORE, ONCE THE PAYMENTS TAKE THE CHARACTER OF FTS U/ S 9(1)(VII), THEY GO OUTSIDE TH E PURVIEW OF SECTION 44BB AND HAVE TO BE TAXED AS FTS AT APPLICABLE FTS RATES AS PRESCRIBED UNDER THE ACT AN D / OR DTAA. 13. WHETHER ON THE .FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE DRP HAS ERRED IN NOT APPRECIATING THE 7 FACT THAT PROVISO TO SECTION 44DA BROUGHT ABOUT BY THE FINANCE ACT 2011 WAS ONLY CLARIFICATORY IN NATURE A ND ITS APPLICATION HAS TO BE READ INTO THE MAIN PROVISIONS WITH EFFECT FROM THE TIME THE MAIN PROVISION CAME INTO E FFECT IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COUR T IN THE CASE OF SEDCO FOREX INTERNATIONAL DRILLING V / S CIT. 14. THE APPELLANT PRAYS FOR LEAVE TO ADD, AMEND, MODIFY OR ALTER ANY GROUNDS OF APPEAL AT THE TIME O R BEFORE THE HEARING OF THE APPEAL. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THE CROSS OBJECTION:- 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP AND THE DCIT, INT. TAXATION, NEW DELHI HAVE ERRED IN HOLDING THAT BOTH IN COUNTRY AS WELL AS OUT-COUNTRY RECEIPTS FROM THE CONTRACT WITH AKER INSTALLATION FP AS SHALL BE TAXABLE IN INDIA UNDER SECTION 44AB OF THE I.T. ACT, 1961. 1.1 THAT THE DRP / AO ERRED ON FACTS AND IN LAW IN NOT HOLDING THAT OUT-COUNTRY RECEIPTS ARE NOT LIABLE TO TAX IN INDIA IN TERMS OF THE INDIA-UK DOUBLE TAXATION AVOIDANCE AGREEMENT. 8 2. THAT THE DRP/AO HAVE ERRED ON FACTS AND IN LAW I N NOT APPRECIATING THAT INTEREST UNDER SECTIONS 234A, 234B, 234C AND 234D OF THE ACT IS NOT LEVIABLE IN THE CASE OF THE RESPONDENT. THE RESPONDENT CRAVES LEAVE TO ADD, MODIFY, AMEND OR WITHDRAW ANY GROUND OF CROSS OBJECTIONS AT THE TIME OF OR BEFORE THE HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS E-RETURN OF INCOME DECLARING INCOME OF RS.39,63,29,420/- ON 31. 3.2009. THE CASE OF THE ASSESSEE WAS SELECTED OF RS. 39,63,29,420/- U/S . 44BB OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT). TH EREAFTER, THE LD. DIT(IT)-II, NEW DELHI FOUND THE ASSESSMENT COMPLETE D BY THE AO, IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E AND ACCORDINGLY, THE DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-II, NEW DELHI EXAMINED THE ASSESSMENT ORDER AND CONSIDERING THE ALL FACTS AND CIRCUMSTANCES OF THE CASE AFTER ACCORDING ASSESSEE OPPORTUNITY OF B EING HEARD, HE PASSED THE ORDER U/S. 263(1) OF THE ACT BY HOLDING THAT AO S ORDER IS HEREBY CANCELLED WITH THE DIRECTION TO THE AO TO MAKE A F RESH ASSESSMENT AFTER CONDUCTING PROPER ENQUIRIES AND, AFTER GIVING THE A SSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD AND DISPOSED OFF THE PRO CEEDINGS U/S. 263 OF THE ACT VIDE ORDER DATED 28.3.2013. SUBSEQUENTLY, NOTICE U/S. 143(2)/142(1) ALONGWITH DETAILED QUESTIONNAIRE WERE ISSUED AND DULY SERVED UPON THE ASSESSEE. IN RESPONSE TO THE SAME, THE AR OF THE 9 ASSESSEE ATTENDED THE PROCEEDINGS AND AFTER GOING THROUGH THE FACTS OF THE CASE NARRATED IN THE ORDER U/S. 263(1) OF THE A CT THE CONTENTION OF THE ASSESSEE WAS NOT FOUND TENABLE AND LIABLE TO RE JECTED. AO OBSERVED THAT AS HELD BY THE DIT(INT. TAX)-II, NEW DELHI IN HER ORDER U/S. 263(1) OF THE I.T. ACT, 1961 DATED 28.3.2013, THE INCOME OF T HE ASSESSEE IS TO BE ASSESSED AS BUSINESS INCOME TAXABLE @40% U/S. 44DA OF THE ACT, WITH PERMANENT ESTABLISHMENT. AO FURTHER OBSERVED THAT S INCE THE ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNTS AND ITS ENTIRE INCOME WITH CONNECTED TO PE IN INDIA, THEREFORE, THE ENTIRE RE CEIPT IS TO BE TAXED AS BUSINESS INCOME. DURING THE ASSESSMENT PROCEEDINGS OR WHILE REPLYING SHOW CAUSE NOTICE U/S. 263 OF THE ACT, PROCEEDINGS BEFORE THE DIT(INT. TAX.)-II, NEW DELHI THE ASSESSEE HAS NOT SUBMITTED THE DETAILS OF EXPENSES. ACCORDINGLY, THE ENTIRE RECEIPTS OF THE ASSESSEE AMOUNTING TO RS. 562,57,88,223/- IS REQUIRED TO BE ASSESSED AS B USINESS INCOME @40% UNDER SECTION 44DA OF THE ACT AND ACCORDINGLY, THE INCOME OF THE ASSESSEE WAS COMPUTED AT RS. 562,57,88,223/- VIDE O RDER DATED 21.11.2014 PASSED U/S. 143(3)/144C/263 OF THE ACT. 3.1 THE DRAFT ORDER IN THIS CASE FRAMED ON 3.3.201 4 DETERMINING INCOME AS PER PRECEDING PARAGRAPHS. AGGRIEVED, THE ASSESSEE FILED OBJECTIONS AGAINST THIS DRAFT ORDER BEFORE DRP-II, NEW DELHI ON 9.4.2014. THE DRP ISSUED DIRECTIONS VIDE ITS ORDER DATED 7.11 .2014 ADJUDICATED THE OBJECTIONS FILED BY THE ASSESSEE AND AS PER THE DRP -III, NEW DELHI DIRECTIONS ISSUED VIDE ON 07.11.2014 HAS RECOMPUTED THE INCOME OF THE ASSESSEE AND ASSESSED THE SAME AT RS. 56,25,78,820 /- BEING INCOME 10 @10% THEREOF U/S. 44BB OF THE ACT. AGGRIEVED WITH THE ABOVE, THE REVENUE HAS FILED THE APPEAL AND ASSESSEE HAS FILE D THE CROSS OBJECTION BEFORE THE TRIBUNAL. 4. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. 5. ON THE OTHER HAND, DURING THE HEARING, LD. COUN SEL OF THE ASSESSEE STATED THAT IN THIS CASE ASSESSMENT HAS BEEN COMPL ETED IN COMPLIANCE WITH ORDER U/S. 263(1) OF THE ACT, WHICH HAS BEEN LATER CANCELLED BY THE ITAT VIDE ORDER DATED 24.4.2017 PASSED IN ITA NO. 4284/DEL/2013 (AY 2008-09) IN THE CASE OF THE ASSESSEE. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDER OF THE REVE NUE AUTHORITIES. WE FIND CONSIDERABLE COGENCY IN THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE THAT IN THE PRESENT CASE ASSESSMENT HAS BE EN COMPLETED IN COMPLIANCE WITH ORDER U/S. 263(1) OF THE ACT OF THE LD. DIT, WHICH HAS BEEN LATER CANCELLED BY THE ITAT VIDE ORDER DATED 24.4.2017 PASSED IN ITA NO. 4284/DEL/2013 (AY 2008-09) IN THE CASE OF A SSESSEE BY HOLDING AS UNDER:- 64. SINCE IN THE INSTANT CASE THE AO AFTER CONSIDE RING THE VARIOUS SUBMISSIONS MADE BY THE ASSESSEE FROM TIME TO TIME AND HAS TAKEN A POSSIBLE VIEW, THEREFO RE, MERELY BECAUSE THE DIT DOES NOT AGREE WITH THE OPIN ION OF THE AO, HE CANNOT INVOKE THE PROVISIONS OF SECTI ON 11 263 TO SUBSTITUTE HIS OWN OPINION. IT HAS FURTHER BEEN HELD IN SEVERAL DECISIONS THAT WHEN THE AO HAS MADE ENQUIRY TO HIS SATISFACTION AND IT IS NOT A CASE OF NO ENQUIRY AND THE DIT/CIT WANTS THAT THE CASE COULD H AVE BEEN INVESTIGATED / PROBED IN A PARTICULAR MANNER, HE CANNOT ASSUME JURISDICTION U/S. 263 OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT THE ASSUMPTIO N OF JURISDICTION BY THE DIT U/S. 263 OF THE ACT IS NOT IN ACCORDANCE WITH LAW. WE, THEREFORE, QUASH THE SAME AND GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 7. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS EXPLAINED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT IN THE PRESENT CASE ASSESSMENT HAS BEEN COMPLETED IN COMPLIANCE WITH O RDER U/S. 263(1) OF THE ACT OF THE LD. DIT, WHICH HAS BEEN LATER CANCE LLED BY THE ITAT VIDE ORDER DATED 24.4.2017 PASSED IN ITA NO. 4284/DEL/20 13 (AY 2008-09) IN THE CASE OF ASSESSEE, HENCE, THE REVENUES APPEAL HAS BECOME INFRUCTUOUS AND DISMISSED AS SUCH. 8. AS REGARDS ASSESSEES CROSS OBJECTION IS CONCERN ED, SINCE WE HAVE DISMISSED THE REVENUES APPEAL AS INFRUCTUOUS, THE CROSS OBJECTION FILED BY THE ASSESSEE HAS ALSO BECOME INFRUCTUOUS AND THE SAME IS DISMISSED AS SUCH. 12 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AS WELL AS CROSS OBJECTION FILED BY THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/09/2017. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 01/09/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES