OWENS-CORNING INSULATING SYSTEMS CANADA LP, MUMBAI V. DCIT (IT) RG 3(2)(2), MUMBAI

ITA 7583/MUM/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8478 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 26-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMIR TEKRIWAL LD DR
• Assessee Lawyers: J D MISTRILD
• Keywords: Double taxation relief; Opportunity of being heard
• Section: 143(3); 234B

Judgement Text

1 ITA NO.7583/MUM/2016 OWENS CORNING INSULATING SYSTEMS CANADA LP ASSESSMENT YEAR-2013-14 IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI , , BEFORE HONBLE SHRI SANDEEP GOSAIN, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.7583/MUM/2016 ( / ASSESSMENT YEAR: 2013-14) OWENS CORNING INSULATING SYSTEMS CANADA LP C/O. OWENS CORNING (INDIA) PRIVATE LIMITED 7 TH FLOOR, ALPHA BUILDING HIRANANDANI GARDENS, POWAI MUMBAI-400 076. / VS. D CIT (IT) - RANGE 3(2)(2) 16 TH FLOOR, AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 021. ./ ./PAN/GIR NO. AADFO-2598-L ( /APPELLANT ) : ( ! / RESPONDENT ) '# / APPELLANT BY : SHRI J.D. MISTRI-LD. DR ! '# / RESPONDENT BY : SHRI SAMIR TEKRIWAL- LD. DR '# & / DATE OF HEARING : 09/07/2019 '# & / DATE OF PRONOUNCEMENT : 16/07/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2013-14 CONTEST THE FINAL ASSESSMENT OR DER DATED 21/11/2016 2 ITA NO.7583/MUM/2016 OWENS CORNING INSULATING SYSTEMS CANADA LP ASSESSMENT YEAR-2013-14 PASSED BY LD. DY. COMMISSIONER OF INCOME TAX (INTER NATIONAL TAXATION) - 3(2)(2), MUMBAI [AO] U/S. 143(3) R.W.S. 144C(13) OF THE INCOME TAX ACT PURSUANT TO THE DIRECTIONS OF LD. DISPUTE RESOLUTIO N PANEL-2, MUMBAI, [IN SHORT REFERRED TO AS DRP] U/S 144C(5) DATED 21/10/2 016. THE GROUND RAISED BY THE ASSESSEE READ AS UNDER: - 1. RE.: TREATING SALARY AND OTHER RELATED COSTS REI MBURSED BY OWENS - CORNING (INDIA) PVT. LTD. [OCIL] TO THE APPELLANT AS FEES FOR TECHNICAL SERVICES: 1.1 THE DISPUTE RESOLUTION PANEL / ASSESSING OFFIC ER HAS ERRED IN TAXING THE AMOUNT OF RS.1,49,96,676/- RECEIVED BY THE APPELLANT DURIN G THE YEAR UNDER CONSIDERATION AS REIMBURSEMENT OF THE SALARY AND OT HER RELATED COSTS AS 'FEES FOR TECHNICAL SERVICES' IN TERMS OF SECTION 9(1)(VII) O F THE INCOME-TAX ACT, 1961 AS WELL AS UNDER ARTICLE 12 OF THE DOUBLE TAXATION AVOIDANC E AGREEMENT ENTERED INTO AND SUBSISTING BETWEEN INDIA AND CANADA ('INDIA-CAN ADA DTAA'). 1.2 THE APPELLANT SUBMITS THAT CONSIDERING THE FACT S AND CIRCUMSTANCES OF ITS CASE AND THE LAW PREVAILING ON THE SUBJECT THE REIMBURSE MENT OF SALARY AND OTHER RELATED COSTS RECEIVED BY IT DOES NOT FALL WITHIN T HE PURVIEW OF THE TERM 'FEES FOR TECHNICAL SERVICES' NOR 'INCOME' EITHER UNDER TH E INCOME-TAX ACT, 1961 NOR UNDER THE PROVISIONS OF THE INDIA-CANADA DTAA AND T HE STAND TAKEN BY THE ASSESSING OFFICER IN THIS REGARD IS MISCONCEIVED, I LLEGAL, ERRONEOUS AND INCORRECT. 1.3 THE APPELLANT SUBMITS THAT THE ASSESSING OFFIC ER BE DIRECTED TO DELETE THE ADDITION OF RS.1,49,96,676/- AND TO RE-COMPUTE ITS TOTAL INCOME ACCORDINGLY. 2. RE: LEVY OF INTEREST U/S. 234B OF THE INCOME TAX ACT, 1961: 2.1 THE ASSESSING OFFICER HAS ERRED IN LEVYING INT EREST U/S. 234B OF THE INCOME TAX ACT, 1961 ON THE APPELLANT 2.2 THE APPELLANT SUBMITS THAT CONSIDERING THE FAC TS AND CIRCUMSTANCES OF ITS CASE AND THE LAW PREVAILING ON THE SUBJECT NO INTEREST U /S. 234B IS LEVIABLE AND THE STAND TAKEN BY THE ASSESSING OFFICER IN THIS REGARD IS MISCONCEIVED, INCORRECT, ERRONEOUS AND ILLEGAL. 2.3 THE APPELLANT SUBMITS THAT THE ASSESSING OFFICE R BE DIRECTED TO DELETE THE INTEREST U/S. 234B SO LEVIED ON IT AND TO RE-COMPUT E ITS TAX LIABILITY ACCORDINGLY. 2.1 FACTS AS NOTED BY LD. AO WERE THAT THE ASSESSEE BEING A FOREIGN COMPANY INCORPORATED IN USA WAS A GROUP CONCERN OF OWENS CORNING GROUP COMPANIES (LEADING MANUFACTURER OF GLASS). TH E ASSESSMENT WAS 3 ITA NO.7583/MUM/2016 OWENS CORNING INSULATING SYSTEMS CANADA LP ASSESSMENT YEAR-2013-14 FRAMED FOR IMPUGNED AY VIDE FINAL ASSESSMENT ORDER PASSED U/S 143(3) R.W.S 144C(13) ON 21/11/2016 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.149.96 LACS AS AGAINST NIL RETURN E-FILED BY THE ASSESSEE ON 26/11/2013. 2.2 THE SOLE ADDITION OF RS.149.96 LACS STEM FROM T HE FACT THAT THE ASSESSEE, DURING THE YEAR, WAS IN RECEIPT OF AGGREG ATE SUM OF RS.149.96 LACS AS REIMBURSEMENT OF SALARY EXPENDITURE & RELAT ED COSTS FROM GROUP ENTITY NAMELY M/S OWENS CORNING INDIA PVT. LTD. THE SAID REIMBURSEMENT, IN THE OPINION OF LD. AO, FALL WITHIN THE MEANING O F FEES FOR TECHNICAL SERVICES [FTS] AND TAXABLE IN THE HANDS OF THE ASSESSEE. IN DEFENSE, THE ASSESSEE SUBMITTED THAT IN TERMS OF ARTICLE 12(4) O F INDIA-CANADA DOUBLE TAXATION AVOIDANCE AGREEMENT [DTAA], THE SERVICES S HOULD MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW HOW OR PROCESSES ETC. BEFORE THE SAME COULD BE TERMS AS FEES FOR INCLUDED SERVICES . THE ATTENTION WAS DRAWN TO THE FACT THAT THE WORK PERFORMED BY ASSESS EES EMPLOYEE NAMELY MR. ANINDYA GHOSH WAS MORE IN THE NATURE OF MANAGER IAL SERVICES AND THE SAME DO NOT QUALIFY AS TECHNICAL OR CONSULTANCY SER VICES AND THEREFORE, DO NOT FALL WITHIN THE AMBIT OF FEES FOR INCLUDED SERVICES . 2.3 HOWEVER, DISREGARDING THE SAME, LD.AO OPINED TH AT ROYALTY PAID TO NON-RESIDENTS WERE TAXABLE IN INDIA IF SOURCED IN I NDIA AND THE AMOUNT SO RECEIVED WOULD BE CHARGEABLE TO TAX IN INDIA WITHIN THE MEANING OF SECTION 9(1)(VII) OF THE ACT. ACCORDINGLY, THE SAME WAS ADD ED TO THE INCOME OF THE ASSESSEE IN THE DRAFT ASSESSMENT ORDER. 4 ITA NO.7583/MUM/2016 OWENS CORNING INSULATING SYSTEMS CANADA LP ASSESSMENT YEAR-2013-14 3. AGGRIEVED, THE ASSESSEE RAISED OBJECTIONS BEFORE LD. DRP, BY WAY OF ELABORATE WRITTEN SUBMISSIONS. THE ATTENTION WAS DR AWN, INTER-ALIA, TO ERRONEOUS OBSERVATIONS MADE BY LD. AO IN THE DRAFT ASSESSMENT ORDER. IT WAS SUBMITTED THAT THE ASSESSEE WAS LIMITED PARTNERSHIP INCORPORATED IN CANADA AND NOT A FOREIGN COMPANY INCORPORATED IN US A. FURTHER, THE CORRECT NAME OF EMPLOYEE WAS MR. ANINDYA GHOSH WHO RENDERED SERVICES IN MANAGERIAL FIELD AS AGAINST THE OBSERVATION OF L D. AO THAT THE SERVICE WAS RENDERED BY MR. ANIL GUPTA WHO WAS STATED TO BE A QUALIFIED ENGINEER. HOWEVER, LD. DRP, WHILE CONFIRMING THE STAND OF LD. AO IN TREATING THE AFORESAID PAYMENT AS FTS, DIRECTED LD. AO TO APPLY CORRECT RATE OF TAX AS PER STATUTORY PROVISIONS. PURSUANT TO THE AFORESAID DIRECTIONS, FINAL ASSESSMENT ORDER WAS PASSED BY LD. AO ON 27/11/2016 DETERMINING INCOME AT RS.149.96 LACS, BEING TAXABLE @10%. AGGRI EVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. SR. COUNSEL FOR ASSESSEE [AR], AT THE OU TSET, DREW ATTENTION TO THE FACT THAT LD. AO PROCEEDED ON WRONG ASSUMPTION OF FACTS SINCE THE PAYMENT WAS IN RELATION TO AN EMPLOYEE NAMELY MR. A NINDYA GHOSH WHO RENDERED MANAGERIAL SERVICE AS AGAINST THE OBSERVAT ION OF LD. AO, AT PARA 6.4 & 6.5 OF THE FINAL ASSESSMENT ORDER THAT THE SE RVICES WERE RENDERED BY MR. ANIL GUPTA WHO WAS A QUALIFIED ENGINEER. TO SUP PORT THE SAID SUBMISSIONS, OUR ATTENTION HAS BEEN DRAWN TO EMPLOY EE SECONDMENT AGREEMENT DATED 01/01/2012 ENTERED INTO BY THE ASSE SSEE WITH THE INDIAN ENTITY, SUBMISSIONS ON ROLE AND RESPONSIBILITY OF M R. ANINDYA GHOSH, FORM NO. 16 AND SALARY DETAILS IN FORM NO.12BA AND OTHER DOCUMENTS AS PLACED 5 ITA NO.7583/MUM/2016 OWENS CORNING INSULATING SYSTEMS CANADA LP ASSESSMENT YEAR-2013-14 IN THE PAPER-BOOK. THE LD. DR SUBMITTED THAT THE MATTER MAY BE REMANDE D BACK FOR RE-APPRECIATION OF CORRECT FACTS BY LD. AO . 5. UPON CAREFUL CONSIDERATION, WE FIND SUBSTANCE IN THE SUBMISSIONS MADE BY LD. SR. COUNSEL SINCE THE PERUSAL OF DOCUME NTS ON RECORD REVEAL THAT THE ASSESSEE HAS ENTERED INTO EMPLOYEE SECONDM ENT AGREEMENT DATED 01/01/2012 WITH THE INDIAN ENTITY. PURSUANT TO CLAU SE (6) OF THE AGREEMENT, THE ASSESSEE WAS TO BE REIMBURSED WITH DIRECT WAGES AND BENEFIT COSTS. THE ROLE AND RESPONSIBILITIES OF MR. ANINDYA GHOSH, HAS BEEN REMUNERATED IN THE SUBMISSIONS DATED 29/03/2016. THE PERUSAL OF FORM 16 & 12BA, AS PLACED ON RECORD, WOULD REVEAL THAT THE INDIAN ENTI TY HAS DEDUCTED DUE TAXES AGAINST THE AFORESAID PAYMENTS. 6. IN THE STATED FACTS AND CIRCUMSTANCES, THE MATTE R WOULD GO BACK TO LD. AO FOR RE-APPRECIATION OF CORRECT FACTS AND RE-ADJU DICATION OF THE MATTER IN THE LIGHT OF SUBMISSIONS MADE BY LD. SR. COUNSEL. N EEDLESS TO ADD HAT ADEQUATE OPPORTUNITY OF BEING HEARD SHALL BE GRANTE D TO THE ASSESSEE TO SUBSTANTIATE ITS STAND. 7. IN RESULT, THE APPEAL STANDS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH JULY, 2019. SD/- SD/- (SANDEEP GOSAIN) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 16/07/2019 SR.PS:-JAISY VARGHESE / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 6 ITA NO.7583/MUM/2016 OWENS CORNING INSULATING SYSTEMS CANADA LP ASSESSMENT YEAR-2013-14 2. !' / THE RESPONDENT 3. # ( ) / THE CIT(A) 4. # / CIT CONCERNED 5. $%!& ' , ' , / DR, ITAT, MUMBAI 6. %)*+ / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.