JC Bamford Excavators Ltd., England V. DCIT (International Taxation), Circle-2(1)(2), New Delhi

ITA 7457/DEL/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1751 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 26-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIG K DHALL
• Keywords: Business income; Transfer pricing; Double taxation relief; International transaction; Permanent establishment; Set aside
• Section: 271(1)(c); 143(3); 244A; 142(1); 234B; 201; 143(2); 115A; 13(2); 13; 145

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI C BEN CH, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI KULDIP SINGH, JUDICIAL MEM BER ITA NO. 7457/DEL/2018 [A.Y 2014-15] M/S JC BAMFORD EXCAVATORS LTD VS. THE DY. C.I.T ROCESTER, UTTOXETER, ST 145 JP CIRCLE 2(1)( 2) STAFFORDSHIRE, ENGLAND NEW DELHI PAN: AABCJ 6004 D (APPLICANT) (RESPONDENT) ASSESSEE BY : SHRI RAVI SHA RMA, ADV DEPARTMENT BY : SHRIG.K. DHALL, C IT- DR DATE OF HEARING : 09.12.2019 DATE OF PRONOUNCEMENT : 10.12.2019 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER DATED 24.09.2018 FRAMED U/S 144C(13) R,W,S 143(3) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT']. 2 2. THE GRIEVANCES OF THE ASSESSEE READ AS UNDER: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED DISPUTE RESOLUTION PANEL (LD. DRP) AND LE ARNED ASSESSING OFFICER (LD. AO) HAS ERRED IN PASSING T HE ASSESSMENT ORDER WITHOUT GIVING DUE CONSIDERATION T O THE SUBMISSIONS OF THE APPELLANT. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. DRP AND LD. AO HAS ERRED IN HOLDING THAT APPELL ANT HAS A SERVICE PERMANENT ESTABLISHMENT (PE) IN INDIA WIT HIN THE MEANING OF ARTICLE 5 OF INDIA UK DOUBLE TAXATION AV OIDANCE AGREEMENT (DTAA). 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. AO ERRED IN PROPOSING THAT THE APPELLANT HAS A SERVICE PE IN INDIA UNDER ARTICLE 5(2)(K) OF THE DTAA WITHOUT APPRECIATING THAT: 3.1 TECHNOLOGY TRANSFER AGREEMENT (TTA) DATED MARCH 5 , 2004 AND INTERNATIONAL PERSONNEL ASSIGNMENT AGREEME NT (IPAA) DATED DECEMBER 5, 2005 ARE INDEPENDENT CON TRACTS FOR MATERIALLY DIFFERENT PURPOSES. 3.2 IPAA BETWEEN JCB EXCAVATORS (JCBE) AND JCB INDIA LIMITED (JCB INDIA) PROVIDES FOR EMPLOYEES SENT B Y JCBE TO JCB INDIA ON DEPUTATION (SECONDMENT) WHICH IS ADMIT TEDLY AS PER SPECIFIC REQUIREMENTS OF JCB INDIA AND NOT FOR SERVICES IN RELATION TO TTA. 3 3.3 SECONDED EMPLOYEES SENT AS PER ARRANGEMENT UNDER IP AA ARE EMPLOYEES OF JCB INDIA. 4. WITHOUT PREJUDICE TO GROUND NO. 3, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND UNDER LAW, THE LD. DR P AND LD. AO HAS GROSSLY ERRED IN HOLDING THAT ROYALTY EARNED BY THE APPELLANT IS EFFECTIVELY CONNECTED TO ALLEGED SERVI CE PE OF THE APPELLANT IN INDIA AND HAS FAILED TO APPRECIATE THAT: 4.1 INTANGIBLE PROPERTY IN RESPECT OF WHICH ROYALTY HAS BEEN PAID WAS WHOLLY DEVELOPED OUTSIDE INDIA; 4.2 NO FUNCTIONS, ASSETS, OR RISK ASSOCIATED WITH SUCH INTANGIBLE PROPERTY IS UNDERTAKEN OR PRESENT IN INDIA. 4.3 THE LD. AO ERRED IN INADVERTENTLY INCLUDING THE ROY ALTY RECEIVED BY THE APPELLANT TOWARDS BACKHOE-LOADER P- 106 UNDER A DIFFERENT TTA DATED OCTOBER 21, 2010 AMOUNT ING TO RS. 3,40,31,604 AS ALSO EFFECTIVELY CONNECTED WITH THE ALLEGED SERVICE PE WITHOUT ASSIGNING ANY REASON FOR THE SAM E. WITHOUT PREJUDICE TO ABOVE GROUNDS, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. DRP AND LD. AO H AS ERRED IN NOT APPLYING THE DESIRED COMPUTATION MECHANISM F OR CHARGEABILITY OF ROYALTY INCOME ALLEGED TO BE COVER ED UNDER PROVISIONS OF ARTICLE 7 OF THE DTAA BETWEEN INDIA A ND UK. THE LD. DRP AND LD. AO FAILED TO APPRECIATE THAT: 4 5.1 UNDER ARTICLE 7(1) READ WITH ARTICLE 7(2) AND 7(3) OF THE DTAA BETWEEN INDIA AND UK, THE ENTIRE ROYALTY RECEI VED FROM INDIA CANNOT BE SUBJECTED TO TAX IN INDIA SINC E NO FUNCTIONS, ASSETS AND RISKS ARE ASSOCIATED WITH THE ALLEGED PE IN INDIA; 5.2 ROYALTY INCOME ALLEGED TO BE CONSIDERED AS BUSINESS INCOME UNDER ARTICLE 7 OF THE DTAA BETWEEN INDIA AND UK CA N BE TAXED ONLY TO THE EXTENT OF PROFITS ATTRIBUTABLE TO INDIAN OPERATIONS. THE LD. DRP AND LD. AO THUS GROSSLY ERR ED IN DETERMINING THE TAXABILITY APPLYING ARBITRARY MECHA NISM UNDER RULE IO(III) OF THE INCOME TAX RULES, 1962 AND IGNO RING THE PRINCIPLE OF APPORTIONMENT AS LAID DOWN UNDER RULE IO(II) OF THE INCOME TAX RULES, 1962 WHICH IS CONSISTENT WITH THE PROVISIONS OF ARTICLE 7(3) OF THE DTAA BETWEEN INDIA AND UK. 6. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE LD. DRP AND LD. AO HAS FAILED TO APPRECIATE THAT THE INDIAN COMPANY I.E. JCB INDIA IS A PROFITABLE COMPANY AND AS LONG AS THE SA ME IS EARNING PROFIT AT ARMS LENGTH, NO FURTHER ATTRIBUT ION IS POSSIBLE EVEN IN CASE OF AN ALLEGED PE. 7. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. DRP AND LD. AO HAS ERRED IN NOT FOLLOWING THE H ONBLE INCOME TAX APPELLATE TRIBUNAL ORDER IN APPELLANTS CASE FOR AY 2006-07 WHERE IT HAS BEEN HELD THAT ROYALTY EARN ED BY 5 THE APPELLANT IS NOT EFFECTIVELY CONNECTED TO ALLEG ED SERVICE PE OF THE APPELLANT IN INDIA. 8. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. AO ERRED IN LEVYING THE INTEREST UNDER SECTION 234A & 234B OF THE ACT. 9. THE LD. AO ERRED IN INITIATING PENALTY PROCEEDIN GS U/S 271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PART ICULARS OF INCOME. 2. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSE SSEE STATED THAT THE ENTIRE GRIEVANCES HAVE BEEN CONSIDERED AND DECI DED BY THE TRIBUNAL IN EARLIER YEARS IN ASSESSEES OWN CASE. THE LD. COUNSEL FOR THE ASSESSEE SUPPLIED COPIES OF THE ORDER OF THE TR IBUNAL. 3. IT IS THE SAY OF THE LD. COUNSEL FOR THE ASSESSE E THAT PRECISELY, THE ISSUE OF PE HAS BEEN DECIDED AGAINST THE ASSESSEE W HEREAS THE ISSUE RELATING TO ROYALTY HAS BEEN DECIDED IN FAVOUR OF T HE ASSESSEE. THE ISSUE RELATING TO ATTRIBUTION OF PROFIT HAS BEEN SE T ASIDE BY THE TRIBUNAL. 6 4. PER CONTRA, THE LD. DR FAIRLY CONCEDED AND STATE D THAT IN EARLIER ASSESSMENT YEAR THE TRIBUNAL HAS DECIDED THE ISSUES IN DISPUTE. 5. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE O RDERS OF THE AUTHORITIES BELOW. WE FIND FORCE IN THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE. THE CO-ORDINATE BENCH IN ASSESSE ES OWN CASE FOR ASSESSMENT YEAR 2013-14 IN ITA NO. 6787/DEL/2017 VI DE ORDER DATED 11.09.2018 HAS CONSIDERED ALL THE ISSUES UNDER APPE AL BEFORE US. THE RELEVANT FINDINGS OF THE TRIBUNAL READ AS UNDER: 5. WITHOUT PREJUDICE TO ABOVE GROUNDS, UNDER THE F ACTS AND CIRCUMSTANCES OF THE CASE, THE LD. DRP AND LD. AO H AS ERRED IN NOT APPLYING THE DESIRED COMPUTATION MECHANISM FOR CHAR GEABILITY OF ROYALTY INCOME ALLEGED TO BE COVERED UNDER PROVISIO NS OF ARTICLE 7 OF THE DTAA BETWEEN INDIA AND UK. THE LD. DRP AND LD. AO FAILED TO APPRECIATE THAT: 5.1 UNDER ARTICLE 7(1) READ WITH ARTICLE 7(2) AND 7(3) OF THE DTAA BETWEEN INDIA AND UK, THE ENTIRE ROYALTY RECEIVED F ROM INDIA CANNOT BE SUBJECTED TO TAX IN INDIA SINCE NO FUNCTI ONS, ASSETS AND RISKS ARE ASSOCIATED WITH THE ALLEGED PE IN INDIA; 5.2.ROYALTY INCOME ALLEGED TO BE CONSIDERED AS BUSI NESS INCOME UNDER ARTICLE 7 OF THE DTAA BETWEEN INDIA AND UK CAN BE TAXED ONLY TO THE EXTENT OF PROFITS ATTRIBUTABLE TO INDIA N OPERATIONS. THE LD. DRP AND LD. AO THUS GROSSLY ERRED IN DETERMININ G THE TAXABILITY 7 APPLYING ARBITRARY MECHANISM UNDER RULE IO(III) OF THE INCOME TAX RULES, 1962 AND IGNORING THE PRINCIPLE OF APPORTION MENT AS LAID DOWN UNDER RULE IO(II) OF THE INCOME TAX RULES, 1962 WHI CH IS CONSISTENT WITH THE PROVISIONS OF ARTICLE 7(3) OF THE DTAA BETWEEN INDIA AND UK. 6. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE LD. DRP AND LD. AO HAS FAILED TO APPRECIATE THAT THE INDIAN COMPANY I. E. JCB INDIA IS A PROFITABLE COMPANY AND AS LONG AS THE SAME IS EARNI NG PROFIT AT ARM'S LENGTH, NO FURTHER ATTRIBUTION IS POSSIBLE EV EN IN CASE OF AN ALLEGED PE. 7. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. DRP AND LD. AO HAS ERRED IN NOT FOLLOWING THE H ON'BLE INCOME TAX APPELLATE TRIBUNAL ORDER IN APPELLANT'S CASE FO R AY 2006-07 WHERE IT HAS BEEN HELD THAT ROYALTY EARNED BY THE A PPELLANT IS NOT EFFECTIVELY CONNECTED TO ALLEGED SERVICE PE OF THE APPELLANT IN INDIA. 8. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW: 8.1 THE LD. A.O HAS ERRED IN LEVYING INTEREST U/S 2 34B OF THE ACT. 8.2. THE LD. A.O ERRED IN GRANTING LOWER CREDIT OF TAX DEDUCTED AT SOURCE AMOUNTING TO RS.18,65,04,610/- INSTEAD OF RS.26,71,90,946/-, THEREBY LEVYING INTEREST U/S 234 B OF THE ACT ON A HIGHER AMOUNT. 9. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. A.O ERRED IN LAW: 8 9.1. IN CHARGING THE INTEREST AMOUNTING TO RS. 18,6 3,010/- UNDER SECTION 234C OF THE ACT. 9.2. IN LEVYING THE INTEREST UNDER SECTION 234A AND 234D OF THE ACT. 9.3. IN WITHDRAWING THE INTEREST UNDER SECTION 244A OF THE ACT. 10. THE LD. AO ERRED IN INITIATING PENALTY PROCEEDI NGS UNDER SECTION 271(I)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS O F INCOME. THAT THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUD ICE TO EACH OTHER THAT THE APPELLANT RESERVES ITS RIGHT TO ADD, ALTER, AMEND OR WITHDRAW ANY GROUND OF APPEAL EITHER BEFORE OR AT T HE TIME OF HEARING OF THIS APPEAL.' 3. JC BAMFORD EXCAVATORS LTD., U.K. ('JCBE' HEREAFT ER), IS A COMPANY INCORPORATED UNDER THE LAWS OF THE UNITED K INGDOM AND HAS ITS PRINCIPAL OFFICE AT ROCESTER STAFFORDSHIRE ENGLAND ST 14 5JP. IT IS A NON-RESIDENT COMPANY FOR THE PURPOSES OF THE INDIAN TAX LAWS AND IS A TAX RESIDENT OF U.K. UNDER ARTICLE 4 OF THE TAX TREATY ENTERED INTO BETWEEN INDIA AND U.K. IT IS TH E FLAGSHIP COMPANY OF JCB IN U.K. WHICH DEVELOPS AND MANUFACTU RES EXCAVATORS. THE RETURN OF INCOME WAS FILED BY THE A SSESSEE ON 29.11.2013 DECLARING TOTAL INCOME OF RS. 1,81,07,24 ,365/-. THE CASE WAS SELECTED FOR SCRUTINY AND INITIAL NOTICE U/S 14 3(2) OF THE INCOME TAX ACT , 1961 WAS ISSUED TO THE ASSESSEE ON 16.09.2014 BY DDIT(I.T.), CIRCLE 3(1), NEW DELHI. A FTER INTERNAL RESTRUCTURING OF THE INCOME-TAX DEPARTMENT, THE JUR ISDICTION OF THE CASE WAS TRANSFERRED TO CIRCLE 2(1)(2), NEW DEL HI. ACCORDINGLY, 9 NOTICE U/S 142(1) AND 143(2) OF THE ACT ALONGWITH A DETAILED QUESTIONNAIRE DATED 26.08.2016 WAS ISSUED TO THE AS SESSEE. THE CASE WAS REFERRED TO TPO FOR COMPUTATION OF ARM'S L ENGTH PRICE U/S 92CA OF THE ACT. AS PER TPO ORDER DATED 31.08.2 016, NO ADVERSE INTERFERENCE HAS BEEN DRAWN BY THE TPO OFFI CER IN RESPECT OF ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION FOR THE YEAR UNDER CONSIDERATION. ON MARCH 5, 2004 JCBE ENTERED INTO TECHNOLOGY TRANSFER AGREEMENT ('TTA') WITH JCB INDI A LTD. (HEREAFTER JCB INDIA) TO LICENCE THE KNOW-HOW AND R ELATED TECHNICAL DOCUMENTS CONSISTING OF ALL DRAWINGS AND DESIGNS WITH AN EXCLUSIVE RIGHT TO MANUFACTURE AND MARKET THE 'EXCA VATOR LOADER (P-92 VERSION)' IN THE TERRITORY OF INDIA UNDER THE BRAND NAME 3DX. ON OCTOBER 21, 2010, JCBE AND JCB INDIA ENTERE D INTO ANOTHER TECHNOLOGY TRANSFER AGREEMENT PURSUANT TO L ICENCE THE KNOW- HOW AND RELATED TECHNICAL DOCUMENTS CONSISTIN G OF ALL DRAWINGS AND DESIGNS WITH AN EXCLUSIVE RIGHT TO MAN UFACTURE THE 'BACKHOE LOADER (P106)' IN THE TERRITORY OF INDIA. JCBE AND JCB INDIA HAD ALSO ENTERED INTO AN IPAA DATED DECEMBER 5, 2005 PURSUANT TO WHICH JCBE SENT SOME OF ITS EMPLOYEES O N DEPUTATION TO JCB INDIA TO MANAGE THE OVERALL OPERATIONS OF JC B LNDIA. ON DECEMBER 17, 2007, JCBE, JCB INDIA AND JC BAMFORD I NVESTMENTS LIMITED (HEREAFTER JCB) ENTERED INTO AN INTELLECTUA L PROPERTY AGREEMENT ('IPA') PURSUANT TO WHICH THE HEAD LICENC E (PERTAINING TO TTA) UNDER ITS INTELLECTUAL PROPERTY TO MANUFACT URE AND MARKET 3DX WAS TRANSFERRED BY JCBE TO JCBI IN CONSIDERATIO N OF THE PAYMENT OF ROYALTY BY JCBI TO JCBE. IN OTHER WORDS, JCBE LICENSED ITS TECHNOLOGY TO JCBI WHICH IN TURN SUB-L ICENSED IT TO JCB INDIA. THIS SUB- LICENSING WAS DULY AUTHORISED BY C LAUSE 2.2 OF THE 10 1PA. FURTHER, WITH EFFECT FROM JULY 1, 2011, JCBI H AD AGREED TO BE RELEASED AND DISCHARGED FROM ITS OBLIGATIONS UNDER THE IPA AND ROYALTY ACCRUED TO THE JCBE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS EARNED 'ROYALTY INCOME' AND 'FEE F OR TECHNICAL SERVICES' FROM JCB INDIA AMOUNTING TO RS. 1,73,77,7 7,504/- AND RS.7,29,46,861/-RESPECTIVELY. THE SAID RECEIPTS ARE SUBJECT TO TAX @ 15%/10.506% OF THE GROSS AMOUNT AS 'ROYALTY & FEE FOR TECHNICAL SERVICES', BEING THE TAX RATE PROVIDED UN DER ARTICLE 13(2) OF DOUBLE TAXATION AVOIDANCE AGREEMENT ENTERED BET WEEN INDIA AND UK ('DTAA') AND SECTION 115A OF THE ACT, AS THE CASE MAY BE. THE DETAILS OF THE ROYALTY INCOME EARNED FO RM JCB INDIA ARE AS UNDER:- S. PARTICULARS AMOUNT IN INR NO. 1 ROYALTY RECEIVED FROM MODEL 3DX 1,71,22,15,010/- 2 ROYALTY RECEIVED OTHER THAN MODEL 2,55,62,494/- 3DX TOTAL 1,73,77,77,504/- IT IS NOTEWORTHY THAT JCBE USED TO RECEIVE ROYALTY IN THE EARLIER YEARS, I.E. A.Y. 2006-07 & A.Y. 2007-08, IT WAS HEL D BY THE ASSESSING OFFICER IN THE CASE OF JCBE THAT THE SECO NDMENT OF EMPLOYEES BY JCBE TO INDIA RESULTED IN ESTABLISHMEN T OF A PERMANENT ESTABLISHMENT (PE) OR A 'SERVICE PE' OF T HE JCBE AS PER ARTICLE 5(2)(K)(I) OF THE DTAA BETWEEN INDIA AND UK. AND FURTHER TO IT, BASED ON THE FACTS OF THE CASE, IT W AS HELD THAT THE PAYMENT OF ROYALTY MADE BY JCB INDIA TO THE JCBE IN RESPECT OF 11 THE RIGHTS GRANTED BY THE JCBE TO JCB INDIA UNDER T HE TTA, IS EFFECTIVELY CONNECTED WITH THE SUCH 'SERVICE PE' OF THE ASSESSEE IN INDIA. AND ACCORDINGLY, THE TAXATION OF SUCH ROYALT IES WAS HELD TO BE GOVERNED BY ARTICLE 7 OF THE TREATY AND WAS TAXED ACCORDINGLY. 3. THE LD. AR SUBMITTED THAT GROUND NO. 1 IS GENERA L IN NATURE. THE LD. AR FURTHER SUBMITTED THAT GROUND NOS. 2, 3, 3.1 , 3.2, 3.3 ARE DECIDED AGAINST THE ASSESSEE IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2006-07 BY THE TRIBUNAL BEING ITA N O. 540/DEL/2011 ORDER DATED 14 TH MARCH 2014 AS WELL A S FOR A.Y. 2012-13 BEING ITA NO. 1700/DEL/2017 ORDER DATED 31. 07.2017. 4. THE LD. DR RELIED UPON THE ASSESSMENT ORDER. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIAL AVAILABLE ON RECORD. GROUND NO. 1 IS GENER AL IN NATURE HENCE DISMISSED. AS REGARDS GROUND NO. 2, 3, 3.1, 3 .2, AND 3.3 IN ASSESSEE'S OWN CASE FOR A.Y. 2006-07 AS WELL AS 201 2-13, THE TRIBUNAL DISMISSED THESE GROUNDS. THE RELEVANT EXTR ACT OF THE TRIBUNAL'S DECISION FOR A.Y. 2012-13 ARE AS UNDER: '6. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSE E BOTH THE PARTIES AGREED BEFORE US THAT THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE COMPARED TO THE AY 2006-0 7 WHEREIN, THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE IN THE PRECEDING YEAR VIDE AFORESAID REFERRED TO ORDER DATED 14.03.2 014 WHEREIN RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 7 WHICH R EAD AS UNDER: '7. IT IS THUS SEEN THAT ALL THE REQUISITE CONDITIO NS FOR ATTRACTING THE MANDATE OF ART. 5(2)(K)(I) STAND SATISFIED INASMUCH AS I, THERE 12 IS FURNISHING OF SERVICES INCLUDING MANAGERIAL SERV ICES; II. SUCH SERVICES ARE OTHER THAN THOSE TAXABLE UNDER ARTICLE 13 (ROYALTIES AND FEES FOR TECHNICAL SERVICES); III. SUCH SERVICES ARE RENDERED WITHIN INDIA; IV. SUCH SERVICES ARE RENDER ED BY THE ASSESSEE THROUGH ITS EMPLOYEES; AND V. SUCH ACTIVIT IES CONTINUED FOR A PERIOD OF MORE THAN NINETY DAYS WITHIN TWELVE MON THS PERIOD. EX CONSEQUENTI, WE HOLD THAT JCB INDIA CONSTITUTED A S ERVICE P.E OF THE ASSESSEE IN INDIA. THE IMPUGNED ORDER ON THIS S CORE IS SET ASIDE AND THE VIEW TAKEN BY THE AO IS RESTORED.' 7. THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID ORDER IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2006-07 , THE ISSUE AGITATED VIDE GROUND NOS. 1 TO 3 IS DECIDED AGAINST THE ASSESSEE BY HOLDING THAT THE ASSESSEE HAS A SERVICE PE IN INDIA . IN THE RESULT GROUND NOS 1 TO 3 OF THE APPEAL OF THE ASSESSEE ARE DISMISSED.' THUS, THE ISSUE IS SQUARELY COVERED AGAINST THE ASS ESSEE AS THE FACTS ARE IDENTICAL IN THE PRESENT ASSESSMENT YEAR. HENCE GROUND NO. 2, 3, 3.1, 3.2, AND 3.3 ARE DISMISSED. 6. AS REGARDS GROUND NO.4, 5 & 7, THE LD. AR SUBMIT TED THAT THE SAME ARE DECIDED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE TRIBUNAL FOR ASSESSMENT YEAR 2006-07 AS WELL AS FOR A.Y. 2012-13 BEING ITA NO. 1700/DEL/2017 ORDER DATED 31.07.2017. 7. THE LD. DR RELIED UPON THE ASSESSMENT ORDER. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIAL AVAILABLE ON RECORD. AS REGARDS GROUND NO. 4, 5 & 7, IN ASSESSEE'S OWN CASE FOR A.Y. 2006-07 AS WELL AS 201 2-13, THE 13 TRIBUNAL ALLOWED THESE GROUNDS IN FAVOUR OF THE ASS ESSEE. THE RELEVANT EXTRACT OF THE TRIBUNAL'S DECISION FOR A.Y . 2012-13 ARE AS UNDER: '10. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENT IONS AND ALSO PERUSED THE ARGUMENTS OF THE PARTIES THAT ISSUE IS SQUARELY COVERED BY ORDER OF THE COORDINATE BENCH AND THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE COORDI NATE BENCH VIDE ORDER DATED 14.03.2014 IN ITA NO. 540/DEL/2011 WHEREIN RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 16.5 & 18 WHICH READ AS UNDER: '16.5 IN SO FAR AS THE QUESTION OF ROYALTY REPRESEN TING CONSIDERATION FOR THE TRANSFER OF IP RIGHTS SIMPLIC ITOR IS CONCERNED, IT IS CLEAR THAT THE SERVICE PE REPRESEN TING EIGHT DEPUTATIONISTS HAD ABSOLUTELY NO ROLE TO PLAY EITHE R IN CREATING OR MAKING IT AVAILABLE TO JCB INDIA. IT IS NOT EVEN TH E CASE OF THE A.O. THAT THESE EIGHT DEPUTATIONISTS HAD ANYTHING TO DO IN THE GRANT OF IP RIGHTS TO JCB INDIA. THE SERVICE PE, AS THE VERY NAME SUGGESTS AND THE ACTUAL POSITION INDICATES, IS CONCERNED ONL Y WITH THE ACTIVITIES OF RENDERING SERVICES AFTER THE GRANT OF IP RIGHTS. THE LD. DR WAS ALSO FAIR ENOUGH TO CANDIDLY ACCEPT THIS POSITION. THUS, IT FOLLOWS THAT ALBEIT THE AMOUNT OF ROYALTY RECEIVED BY THE ASSESSEE ARISES OUT OF IP RIGHTS WHICH ARE IN THE NATURE OF RIGHT OR PROPERTY BUT THE SAME CANNOT BE CONSIDERED UNDER PARA 6 OF ARTICLE 13 BECAUSE IT IS NOT EFFECTIVELY CONNECTED WITH THE S ERVICE PE OF THE ASSESSEE IN INDIA. 18......' 14 11. THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID DECISION REGARDING WHETHER ROYALTY IS EFFECTIVELY COLLECTED TO THE PE OF THE ASSESSEE IS DECIDED IN FAVOUR OF THE ASSESSEE...' THUS, THE ISSUE IS SQUARELY COVERED IN FAVOUR OF TH E ASSESSEE AS THE FACTS ARE IDENTICAL IN THE PRESENT ASSESSMENT YEAR. THEREFORE, GROUND NO. 4, 5 & 7 ARE ALLOWED. 9. THE LD. AR FURTHER SUBMITTED THAT GROUND NO. 6 H AS TO BE SET ASIDE IN LIGHT OF TRIBUNAL'S DECISION IN THE ASSESS EE'S OWN CASE FOR A.Y. 2006-07 AND 2012-13 AND ALSO IN LIGHT OF APPEA L EFFECT ORDER DATED 16 TH DECEMBER 2016 FOR ASSESSMENT YEAR 2006- 07. 10. THE LD. DR RELIED UPON THE ASSESSMENT ORDER. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. GROUND NO. 6 REGARDIN G ATTRIBUTION OF INCOME HAS ALREADY DECIDED IN ASSESSEE'S OWN CASE F OR A.Y. 2006- 07 AS WELL AS 2012-13, THE TRIBUNAL SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER. THE RELEVANT EXTRACT OF T HE TRIBUNAL'S DECISION FOR A.Y. 2012-13 ARE AS UNDER: '10. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENT IONS AND ALSO PERUSED THE ARGUMENTS OF THE PARTIES THAT THE ISSUE IS SQUARELY COVERED BY ORDER OF THE COORDINATE BENCH AND THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE COORDI NATE BENCH VIDE ORDER DATED 14.03.2014 IN ITA NO.540/DEL/2011 WHEREIN RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 16.5 & 18 WHICH READ AS UNDER: 15 16.5...... 18. ....SINCE SEPARATE DETAILS OF SUCH RECEIPTS AND ACTUAL EXPENSES INCURRED FOR EARNING THEM ARE NOT AVAILABLE ON RECO RD, WE REMIT THIS MATTER TO THE FILE OF ASSESSING OFFICER FOR FR ESH DETERMINATION OF THE AMOUNT OF INCOME IN TERMS OF ARTICLE 7 AS PER OUR ABOVE DISCUSSION AFTER ALLOWING A REASONABLE OP PORTUNITY OF BEING HEARD TO THE ASSESSEE.' 11. THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID DECISION REGARDING WHETHER ROYALTY IS EFFECTIVELY COLLECTED TO THE PE OF THE ASSESSEE IS DECIDED IN FAVOUR OF THE ASSESSEE. FURT HER, THE ISSUE OF DETERMINATION INCOME OF THE SERVICE OF PE OF THE AS SESSEE IS SET ASIDE TO THE FILE OF THE LD ASSESSING OFFICER AND D ECIDE IT, IN ACCORDANCE WITH THE LAW AND AS DIRECTED BY PARA NO. 18 IN THE IMPUGNED ORDER OF THE COORDINATE BENCH FOR AY 2006- 07. IN RESULT GROUND NOS. 4, 5 AND 6 OF THE APPEAL OF THE ASSESSE E ARE DECIDED ACCORDINGLY.' IN LIGHT OF THE ABOVE FINDINGS AND ALSO THE FACTS A RE SIMILAR IN THE PRESENT YEAR, WE SET ASIDE THIS ISSUE TO THE FILE O F THE ASSESSING OFFICER WITH THE DIRECTION TO DECIDE THIS ISSUE FOR FRESH DETERMINATION AFTER FOLLOWING THE PRINCIPLES OF NAT URAL JUSTICE GIVEN TO THE ASSESSEE. GROUND NO. 6 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE . 6. RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-OR DINATE BENCH, WE HOLD ACCORDINGLY. 16 7. THE ONLY OTHER ISSUE RELATES TO CHARGING OF INTE REST U/S 234A/234B OF THE ACT. 8. THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESS EE THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME HAS TO BE VERIFIED BY THE ASSESSIN G OFFICER AND IF FOUND CORRECT, THE ASSESSING OFFICER IS DIRECTED TO CHARGE INTEREST AS PER PROVISIONS OF LAW. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO. 7457/DEL/2018 IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 10.12. 2019. SD/- SD/- [ KULDIP SINGH ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 10 TH DECEMBER, 2019 VL/ 17 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER