GE Engine Services Malaysia SDN BHD, Gurgaon V. DCIT, (International Taxation), circle-1(3)(1), New Delhi

ITA 694/DEL/2019

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3015 (ITAT-DELHI)
• Duration Of Justice: 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2002-2003
• Appeal Filed On: 31-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Period of limitation; Permanent establishment; Question of law
• Section: 271(1)(c); 14A; 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI. BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER STAY NO.155/DEL/2019 (IN ITA NO.694/DEL./2019) (ASSESSMENT YEAR : 2002-03) AND ITA NO.694/DEL./2019 (ASSESSMENT YEAR : 2002-03) M/S. GE ENGINE SERVICES MALAYSIA SDN BHD, VS. DCIT 6 TH FLOOR, BUILDING NO.7A, (INTERNATIONAL TAXATION ), STANDARD CHARTERED BUILDING, CIRCLE 1(3)(1), DLF CYBER CITY, NEW DELHI. PHASE III, GURUGRAM 122 002. (PAN : AADCG1773E) STAY NO.156/DEL/2019 (IN ITA NO.753/DEL./2019) (ASSESSMENT YEAR : 2008-09) AND ITA NO.753/DEL./2019 (ASSESSMENT YEAR : 2008-09) M/S. GE ENGINE SERVICES LLC, VS. DCIT 6 TH FLOOR, BUILDING NO.7A, (INTERNATIONAL TAXATION ), STANDARD CHARTERED BUILDING, CIRCLE 1(3)(1), DLF CYBER CITY, NEW DELHI. PHASE III, GURUGRAM 122 002. (PAN : AADCG1809R) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SACHIT JOLLY, ADVOCATE SHRI AARUSH BHATIA, ADVOCATE REVENUE BY : SHRI J.K. MISHRA, CIT DR DATE OF HEARING : 26.02.2019 DATE OF ORDER : 27.02.2019 ITA NO.694/DEL./2019 ITA NO.753/DEL./2019 2 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : SINCE COMMON QUESTIONS OF FACTS AND LAW HAVE BEEN R AISED IN THE AFORESAID APPEALS, THE SAME ARE BEING DISPOS ED OF BY WAY OF COMPOSITE ORDER TO AVOID REPETITION OF DISCUSSION. 2. THE APPELLANT, M/S. GE ENGINE SERVICES MALAYSIA SDN BHD (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATE D 22.11.2018 PASSED BY LD. CIT (APPEALS)-42, NEW DELHI QUA THE ASSESSMENT YEAR 2002-03 ON THE GROUNDS INTER ALIA THAT :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) ['CIT (A)'] ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER ('AO') IN LEVYING PENALTY OF RS.17,32,920/- UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 ('THE ACT') 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN PASSING THE PENALTY ORDER UNDER SECTION 271(1)(C) OF THE ACT WHICH ARE WHOLLY WITHOUT JURIS DICTION AND CLEARLY BARRED BY LIMITATION INASMUCH AS THE SAME H AVE BEEN PASSED BEYOND THE PERIOD OF LIMITATION PRESCRIBED U NDER SECTION 275(1)(A) OF THE ACT. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE INITIATION O F PENALTY BY WAY OF ISSUE OF PENALTY NOTICE UNDER SECTION 274 OF THE ACT WITHOUT SPECIFYING WHETHER THE PENALTY IS INITIATED FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURA TE PARTICULARS OF INCOME. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN ALLEGING THAT THE APPELLAN T HAD ITA NO.694/DEL./2019 ITA NO.753/DEL./2019 3 CONCEALED PARTICULARS OF INCOME, WITHOUT APPRECIATI NG THAT THE APPELLANT MADE COMPLETE DISCLOSURE IN THE NOTES ACC OMPANYING THE RETURN OF INCOME. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE LEVY OF PENA LTY, WITHOUT APPRECIATING THAT ON IDENTICAL FACTS, PENALTY HAD B EEN DELETED BY THE PREDECESSOR OF THE CIT(A) IN THE CASE OF GE CAL EDONIAN LTD. AND GE AVIATION SERVICE OPERATION LLP FOR THE A Y 2 011-12. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE LEVY OF PENA LTY, WITHOUT APPRECIATING THAT THE HON'BLE HIGH COURT HAVING ADM ITTED THE APPEAL OF THE APPELLANT FOR THE SAME AY ON A SUBSTA NTIAL QUESTION OF LAW QUA EXISTENCE OF A PERMANENT ESTABL ISHMENT, THE ISSUE WAS PRIMA FACIE DEBATABLE, ON WHICH NO PENALT Y COULD HAVE BEEN LEVIED. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE LEVY OF PENA LTY, WITHOUT APPRECIATING THAT PENALTY UNDER SECTION 271 (1)( C) OF THE ACT HAD BEEN DELETED IN THE CASE OF ROLLS ROYCE, WHICH FORM ED THE BEDROCK AND SOLE BASIS OF THE ADDITION MADE BY THE AO, ON WHICH PENALTY HAS NOW BEEN LEVIED. 8. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE LEVY OF PEN ALTY UNDER SECTION 271 (1)( C) OF THE ACT ON THE BASIS OF PROF ITS ATTRIBUTED TO THE ALLEGED PE OF THE APPELLANT, WHICH WAS BASED ON ESTIMATION, AND, THEREFORE, DO NOT TANTAMOUNT TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 3. THE APPELLANT, M/S. GE ENGINE SERVICES LLC (HERE INAFTER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESEN T APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 22.11.2018 PASSE D BY LD. CIT (APPEALS)-42, NEW DELHI QUA THE ASSESSMENT YEAR 200 8-09 ON THE GROUNDS INTER ALIA THAT :- ITA NO.694/DEL./2019 ITA NO.753/DEL./2019 4 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) ['CIT (A)'] ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER ('AO') IN LEVYING PENALTY OF RS.26,35,620/- UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 ('THE ACT') 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN PASSING THE PENALTY ORDER UNDER SECTION 271(1)(C) OF THE ACT WHICH ARE WHOLLY WITHOUT JURIS DICTION AND CLEARLY BARRED BY LIMITATION INASMUCH AS THE SAME H AVE BEEN PASSED BEYOND THE PERIOD OF LIMITATION PRESCRIBED U NDER SECTION 275(1)(A) OF THE ACT. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE INITIATION O F PENALTY BY WAY OF ISSUE OF PENALTY NOTICE UNDER SECTION 274 OF THE ACT WITHOUT SPECIFYING WHETHER THE PENALTY IS INITIATED FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURA TE PARTICULARS OF INCOME. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN ALLEGING THAT THE APPELLAN T HAD CONCEALED PARTICULARS OF INCOME, WITHOUT APPRECIATI NG THAT THE APPELLANT MADE COMPLETE DISCLOSURE IN THE NOTES ACC OMPANYING THE RETURN OF INCOME. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE LEVY OF PENA LTY, WITHOUT APPRECIATING THAT ON IDENTICAL FACTS, PENALTY HAD B EEN DELETED BY THE PREDECESSOR OF THE CIT(A) IN THE CASE OF GE CAL EDONIAN LTD. AND GE AVIATION SERVICE OPERATION LLP FOR THE A Y 2 011-12. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE LEVY OF PENA LTY, WITHOUT APPRECIATING THAT THE HON'BLE HIGH COURT HAVING ADM ITTED THE APPEAL OF THE APPELLANT FOR THE SAME AY ON A SUBSTA NTIAL QUESTION OF LAW QUA EXISTENCE OF A PERMANENT ESTABL ISHMENT, THE ISSUE WAS PRIMA FACIE DEBATABLE, ON WHICH NO PENALT Y COULD HAVE BEEN LEVIED. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN UPHOLDING THE LEVY OF PENA LTY, WITHOUT APPRECIATING THAT PENALTY UNDER SECTION 271 (1)( C) OF THE ACT HAD BEEN DELETED IN THE CASE OF ROLLS ROYCE, WHICH FORM ED THE ITA NO.694/DEL./2019 ITA NO.753/DEL./2019 5 BEDROCK AND SOLE BASIS OF THE ADDITION MADE BY THE AO, ON WHICH PENALTY HAS NOW BEEN LEVIED. 8. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE LEVY OF PEN ALTY UNDER SECTION 271 (1)( C) OF THE ACT ON THE BASIS OF PROF ITS ATTRIBUTED TO THE ALLEGED PE OF THE APPELLANT, WHICH WAS BASED ON ESTIMATION, AND, THEREFORE, DO NOT TANTAMOUNT TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 5. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ON THE BASIS OF COMPLETED ASSESSMENT UNDER SECTION 143 (3) READ WITH SECTION 144C (5) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) AT AN INCOME OF RS. 48,59,954/- & RS.86,11,525/- FOR AYS 2002-03 & 2008-09 RESPECTIV ELY, PENALTY PROCEEDINGS WERE INITIATED BY THE AO U/S 271(1)(C) OF THE ACT, BY WAY OF ISSUANCE OF NOTICE U/S 274 READ WITH SECTION 271(1)(C) OF THE ACT. DECLINING THE CONTENTIONS RAISED BY THE ASSES SEE, AO PROCEEDED TO CONCLUDE THAT THE ASSESSEE HAS NOT DIS CLOSED FULL MATERIAL FACTS REGARDING THE ISSUE OF PERMANENT EST ABLISHMENT (PE) IN INDIA ATTRIBUTABLE TO THE ACTIVITIES CARRIED OUT FROM THIS PE AND HAS THEREBY CONCEALED THE PARTICULARS OF ITS INCOME . CONSEQUENTLY, AO LEVIED THE PENALTY OF RS.17,32,921/- & RS.26,35, 620/- IN AYS 2002-03 & 2008-09 RESPECTIVELY @ 100%. 6. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF APPEALS WHO HAS CONFIRMED THE PENALTY LEVIED BY AO BY DISMISSING ITA NO.694/DEL./2019 ITA NO.753/DEL./2019 6 THE APPEALS. FEELING AGGRIEVED, THE ASSESSEE HAS C OME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEALS. 7. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. UNDISPUTEDLY, ASSESSMENT ORDERS FRAMED BY THE AO HAVE BEEN UPHELD BY THE LD. CIT (A) AS WELL AS BY THE TR IBUNAL, WHO HAVE HELD THAT GE OVERSEAS ENTITIES HAVE PES IN VAR IOUS FORMS AND THESE ARE FIXED PLACE PE, OFFICE PE, CONSTRUCTION P E AND AGENCY PE AND IN CASE OF OIL AND GAS BUSINESS, INVOLVES IN INSTALLATION AND COMMISSIONING WOULD ALSO CONSTITUTE CONSTRUCTION PE AND SINCE THE ASSESSEE HAS EARNED GLOBAL PROFIT OF 10% ON THE SAL ES MADE TO THE CUSTOMER IN INDIA, THE INCOME CHARGEABLE TO TAX AS ATTRIBUTABLE TO THE PE WAS COMPUTED AT 3.5% OF THE SALES MADE. IT IS ALSO NOT IN DISPUTE THAT THE FINDINGS RETURNED BY THE TRIBUNAL HAVE BEEN CHALLENGED BEFORE THE HONBLE DELHI HIGH COURT IN A BATCH OF PETITIONS BEARING NO. ITA 660/2017 & ORS. AND VIDE ORDER DATED 15.01.2018 , QUESTIONS OF LAW HAVE BEEN FRAMED WHICH ARE EXTRA CTED FOR READY PERUSAL AS UNDER :- (1) DID ITAT FELL INTO ERROR IN ITS FINDINGS WITH RESPECT TO EXISTENCE OF A FIXED PLACE PERMANENT ESTABLISHMENT (PE) OF THE ASSESSEE IN INDIA; ITA NO.694/DEL./2019 ITA NO.753/DEL./2019 7 (2) DID ITAT FELL INTO ERROR IN CONCLUDING THAT ASSESSEE/APPELLANT'S SEPARATELY INDEPENDENT AGENT P E, WAS LOCATED IN INDIA; AND, (3) WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND THE LAW, THE ITAT WAS JUSTIFIED IN ATTRIBUTING AS HIGH AS 35% OF THE PROFITS TO THE AL LEGED MARKETING ACTIVITIES AND THEREAFTER, ATTRIBUTING 75 % OF SUCH 35% PROFITS TO THE ALLEGED PE OF THE APPELLANT IN INDIA? 9. FROM THE ORDER PASSED BY HONBLE HIGH COURT (SUP RA), IT HAS BECOME CLEAR THAT THE QUESTION AS TO WHETHER THE AS SESSEE IS HAVING FIXED PLACE PE IN INDIA IS DEBATABLE ONE AND IN T HESE CIRCUMSTANCES, PENALTY LEVIED BY THE AO IS NOT SUST AINABLE IN THE EYES OF LAW. IDENTICAL ISSUE HAS BEEN DECIDED IN F AVOUR OF THE ASSESSEE BY THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AYS 2001-02, 2006-07, 2007-08 & 2008-09 VIDE ITA NO S. 6403/DEL./2018, 695/DEL./2019, 696/DEL./2019 & 697/ DEL./2019 ORDER DATED 25.02.2019 . 10. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, SINCE SUBSTANTIAL QUESTION OF LAW HAS BEEN FRAMED BY HONBLE HIGH COU RT ON THE ISSUE IF THE ASSESSEE IS HAVING FIXED PLACE PE IN I NDIA, WHICH IS THE BASIS OF LEVYING/CONFIRMING THE PENALTY U/S 271(1) (C) OF THE ACT, THE ISSUE BECOMES DEBATABLE, HENCE PENALTY U/S 271( 1)(C) IS NOT LEVIABLE. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION RENDERED ITA NO.694/DEL./2019 ITA NO.753/DEL./2019 8 BY HONBLE DELHI HIGH COURT IN ITA 240/2009 IN CIT-II VS. LIQUID INVESTMENT AND TRADING CO. ORDER DATED 05.10 .2010 WHEREBY IDENTICAL ISSUE IS DECIDED AS UNDER :- BOTH THE CIT(A) AS WELL AS THE ITAT HAVE SET ASIDE THE PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271 (1)(C) OF THE INCOME TAX ACT, 1961 ON THE GROUND THAT THE ISSUE OF DEDUCTION UNDER SECTION 14A OF THE ACT WAS A DEBATABLE ISSUE . WE MAY ALSO NOTE THAT AGAINST THE QUANTUM ASSESSMENT HEREUNDER DEDUCTION UNDER SECTION 14A OF THE ACT WAS PRESCRIBED TO THE ASSESSEE, THE ASSESSEE HAS PREFERRED AN APPEAL IN THIS COURT UNDER SECTION 260A OF THE ACT WHICH HAS ALSO BEEN ADMITTED AND SU BSTANTIAL QUESTION OF LAW FRAMED. THIS ITSELF SHOWS THAT THE ISSUE IS DEBATABLE. FOR THESE REASONS, WE ARE OF THE OPINIO N THAT NO QUESTION OF LAW ARISES IN THE PRESENT CASE. THIS APPEAL IS ACCORDINGLY DISMISSED . 11. CONSEQUENTLY, PENALTY LEVIED BY THE AO AND CONF IRMED BY LD. CIT (A) OF RS.17,32,921/- & RS.26,35,620/- IN A YS 2002-03 & 2008-09 RESPECTIVELY IS ORDERED TO BE DELETED AND B OTH THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. 12. KEEPING IN VIEW THE FACT THAT SINCE APPEALS BEA RING ITA NOS. 694/DEL/2019 & 753/DEL/2019 HAVE BEEN DECIDED, AFOR ESAID STAY PETITIONS FILED THEREIN STAND DISMISSED HAVING BEEN BECOME INFRUCTUOUS. ORDER PRONOUNCED IN OPEN COURT ON THIS 27 TH DAY OF FEBRUARY, 2019. SD/- SD/- (ANADEE NATH MISSHRA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 27 TH DAY OF FEBRUARY, 2019 TS ITA NO.694/DEL./2019 ITA NO.753/DEL./2019 9 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-42, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.