OWENS CORNING INDIA P. LTD ( FORMERLY KNOWN AS OWENS CORNING INDIA LTD), MUMBAI V. ADDL DIT (IT) RG 4, MUMBAI

ITA 7747/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71698 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 31-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 16-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O C TEJPAL
• Assessee Lawyers: K K VED
• Keywords: Opportunity of being heard
• Section: 234B; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH, MUMBAI , BEFORE SHRI H.L.KARWA , PRESIDENT & SHRI N.K.BILLAIYA , AM ITA NO. 7 747 / MUM/ 20 1 1 ( ASSESSMENT YEAR : 20 0 7 - 0 8 ) OWENS - CORNING INDIA PVT. LTD.(FORMERLY KNOWN AS OWENS CORNING INDIA LTD.), ALPHA BUILDING, 7 TH FLOOR, HIRANANDANI GARDENS, POWAI, MUMBAI - 76 VS. ADIT(INTERNATIONAL TAXATION), RANGE - 4, MUMBAI - 38 PAN/GIR NO. : A A ACO 3242 R ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI J.D.MISTRY , SR. ADV. WITH MR. NEERAJ SETH & MR. K.K.VED /REVEN UE BY : SHRI O.C.TEJPAL DATE OF HEARING : 31 ST DATE OF PRONOUNCEMENT : 8 TH NOVEMBER , 2013 O R D E R PER N.K.BILLAIYA , A.M : THIS APPEAL BY THE ASSESSEE IS DIRECTED AG AINST THE ASSESSMENT ORDER DATED 17 - 10 - 2011, WHICH WAS PASSED BY THE AO PURSUANT TO DIRECTIONS OF THE DISPUTE RESOLUTION PENAL (IN SHORT DRP) UNDER SECTION 144C(5) OF THE ACT, DATED 27 - 9 - 2011. 2 . THE SHORT GRIEVANCE OF THE ASSESSEE RELATES TO NON - GRANT ING OF CREDIT FOR TAX DEDUCTED AT SOURCE OF RS. 89,81, 645/ - . 3 . THE JURISPRUDENCE OF INCOME TAX ACT SHOW THAT NOT ONLY THE CORRECT INCOME SHOULD BE ASSESSED TO TAX BUT ALSO THE SAME SHOULD BE TAXED IN THE HANDS OF CORRECT PERSON. THEREFORE, IT IS IMPERATIV E TO ITA NO. 7 747 /1 1 2 UNDERSTAND THE FACTS OF THE CASE UNDER CONSIDERATION WHICH IS FULL OF HUMAN ERRORS. M/S OWENS CORNING FIBERGLASS TECHNOLOGY (HEREINAFTER REFERRED TO AS OCFT) WAS THE OWNER OF CERTAIN TECHNOLOGY. BY INTERNAL ARRANGEMENT THE OWNERSHIP OF THE SAID TECH NOLOGY VESTED INTO M/S OWENS CORNING (HEREINAFTER REFERRED TO AS OC ). THE OWENS CORNING INDIA LIMITED (HEREINAFTER CALLED AS OCIL) WAS THE USER OF THE SAID TECHNOLOGY AND, THEREFORE, LIABLE TO PAY ROYALTY FOR THE USAGE OF THE SAID TECHNOLOGY. IT PAID ROYALTY OF RS. 601,83,646/ - TO OCFT AFTER DEDUCTING TAX AT SOURCE AMOUNTING TO RS. 89,81,645/ - . THIS CONSTITUTES THE FIRST ERROR. THE OCFT IN ITS RETURN OF INCOME OFFERED ROYALTY INCOME AND CLAIMED THE CREDIT OF TDS, THIS CONSTITUTES THE SECOND ERROR. THE RE TURN OF OCFT WAS FILED BY OCIL AS REPRESENTATIVE ASSESSEE. THE OCIL ALSO FILED RETURN OF OC AGAIN AS REPRESENTATIVE ASSESSEE, WHICH WAS SCRUTINIZED BY THE AO AND THIS ASSESSMENT IS UNDER CONSIDERATION IN THIS APPEAL . DURING THE COURSE OF SCRUTINY ASSESSMEN T PROCEEDINGS OF OC, THE AO NOTICED THAT THE ASSESSEE HAS SHOWN ROYALTY AMOUNTING TO RS. 601,83,646/ - . IT WAS POINTED OUT BY THE ASSESSEE THAT THIS ROYALTY HAS BEEN OFFERED IN THE RETURN OF OCFT AND, THEREFORE, THE SAME SHOULD NOT BE CONSIDERED HERE. IN ALT ERNATIVE, THE ASSESSEE CLAIMED THAT IF THE ROYALTY INCOME IS TAXED IN THE HANDS OF THE ASSESSEE THEN THE CREDIT OF TDS SHOULD ALSO BE GIVEN TO THE ASSESSEE. THIS DID NOT FIND FAVOUR FROM THE AO NOR THE SUBMISSION WAS ACCEPTED BY THE DRP, WHICH HAS RESULTED INTO THE PRESENT GRIEVANCE OF THE ASSESSEE. ITA NO. 7 747 /1 1 3 4 . BEFORE US, LEARNED SENIOR COUNSEL FOR ASSESSEE CLAIMED THAT BECAUSE OF THE HUMAN ERROR THE INCOME FROM ROYALTY HAS BEEN WRONGLY OFFERED IN THE HANDS OF THE OCFT AND THE SAME HAS ALSO BEEN ASSESSED IN THE HAN DS OF THE OCFT AND CREDIT FOR TDS HAS ALSO BEEN ALLOWED IN THE HANDS OF OCFT. IT IS THE SAY OF THE LEARNED SENIOR COUNSEL THAT IF THE SAME ROYALTY IT TO BE TAXED IN THE HANDS OF THE ASSESSEE THEN THE ASSESSEE IS ALSO ENTITLED FOR THE CREDIT OF TDS MADE BY OCIL. 5 . LEARNED DR, SUPPORTING THE ORDERS OF THE LOWER AUTHORITIES, STRONGLY CONTENDED THAT THE RETURN OF OCFT WAS FILED VOLUNTARILY WHICH WAS PROCESSED UNDER SECTION 143(1) IN WHICH CREDIT FOR TDS WAS NOT GIVEN. LEARNED DR FURTHER SUBMITTED THAT THE R EPRESENTATIVE ASSESSEE MOVED AN APPLICATION UNDER SECTION 154 OF THE ACT FOR THE CLAIM OF TDS, WHICH WAS GRANTED BY THE AO BY AN ORDER UNDER SECTION 154, DATED 10 - 11 - 2009. IT IS THE SAY OF THE LEARNED DR THAT ONCE THE ISSUE OF TAXABILITY OF ROYALTY IS SETT LED IN THE HANDS OF THE OCFT BY ASSESSEES OWN MOTION, THE SAME CANNOT BE CONSIDERED AS HUMAN ERROR BEFORE THE TRIBUNAL. 6. WE HAVE CAREFULLY PERUSED THE ORDER S OF THE LOWER AUTHORITIES AND THE PECULIAR FACTS OF THE CASE. THE UNDISPUTED FACT IS THAT THE ROYALTY WAS PAID BY OCIL. THE OCIL WAS TO PAY THE ROYALTY TO OC AS OC WAS VESTED WITH THE OWNERSHIP OF THE SAID TECHNOLOGY AS PER AMENDED AND REINSTATED TECHNOLOGY LICENSE AGREEMENT DATED 8 - 5 - 2002. FURTHER, THE ITA NO. 7 747 /1 1 4 OCIL PAID THE ROYALTY TO THE ERSTWHILE OWNER OF THE SAID TECHNOLOGY I.E. OCFT AND ISSUED TDS CERTIFICATE IN FAVOUR OF THE OCFT. IT IS ALSO AN UNDISPUTED FACT THAT THE SAID ROYALTY INCOME HAS BEEN TAXED IN THE HANDS OF THE OCFT AND CREDIT FOR TDS HAS ALSO BEEN GIVEN TO OCFT. NOW, BEFORE US, IT IS THE CLAIM OF THE ASSESSEE THAT THE SAID ROYALTY SHOULD HAVE BEEN PAID TO OC AND THE CREDIT OF TDS SHOULD ALSO BE GIVEN TO OC I.E. THE ASSESSEE. WE ALSO FIND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HIMSELF HAS MADE OBSERVATION THAT AS THE REA SON AND NATURE OF PAYMENT TO OCFT IS NOT KNOWN AND THE PAYMENT SUM DOES NOT TALLY, THIS ALSO SHOWS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF THE ASSESSEE, THE AO HIMSELF WAS NOT SURE AS TO WHY THE ROYALTY PAYMENT WAS MADE TO OCFT. OTHER REASON C ITED BY THE AO IS THAT THERE IS A DIFFERENCE IN THE AMOUNT OF ROYALTY AS SHOWN BY OCFT AND AS SHOWN IN ASSESSEES AUDIT REPORT. WE FIND THAT THE MARGINAL DIFFERENT IS DUE TO FOREIGN EXCHANGE FLUCTUATION RATE. AS WE HAVE POINTED OUT HEREINABOVE THAT THE COR RECT INCOME SHOULD BE ASSESSED IN THE HANDS OF THE CORRECT PERSON AND THE CORRECT PERSON IN THIS CASE IS THE ASSESSEE I.E. OC, HOWEVER, WE FIND THAT THE INCOME HAS ALREADY BEEN ASSESSED IN THE HANDS OF THE OCFT. IN THE INTEREST OF JUSTICE AND FAIR - PLAY AND KEEPING IN MIND THAT THERE SHOULD NOT BE ANY LOSS TO EITHER PARTY, WE RESTORE THIS ISSUE BACK TO THE FILES OF THE AO. THE REPRESENTATIVE ASSESSEE IS DIRECTED TO FILE AN APPLICATION IN THE CASE OF OCFT FOR RECTIFICATION OF ITS RETURN STATING THAT THE INCOM E FROM ROYALTY HAS BEEN OFFERED ERRONEOUSLY. THE REPRESENTATIVE ASSESSEE IS ITA NO. 7 747 /1 1 5 ALSO DIRECTED TO WITHDRAW THE CLAIM OF TDS FROM THE HANDS OF THE OCFT. SINCE THE OCIL IS THE REPRESENTATIVE ASSESSEE IN BOTH THE CASES, I.E. OCFT & OC, THEREFORE, WE DIRECT THE OCI L TO ISSUE FRESH TDS CERTIFICATE TO OC. THE REPRESENTATIVE ASSESSEE IS ALSO DIRECTED TO RECONCILE THE DIFFERENCE IN THE ROYALTY AMOUNT AND THE RECONCILIATION SHOULD BE TO THE SATISFACTION OF THE AO . THE AO IS DIRECTED TO CANCEL THE ASSESSMENT OF OCFT AND A LSO WITHDRAW THE GRANT OF CREDIT OF TDS FROM THE HANDS OF THE OCFT. THEREAFTER THE AO IS DIRECTED TO TAX THE ROYALTY INCOME IN THE HANDS OF THE ASSESSEE I.E. OC , ONLY IF HE IS SATISFIED WITH THE RECONCILIATION OF THE ROYALTY AMOUNT , AND THEN ALLOW THE CR EDIT OF TDS TO THE ASSESSEE , AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE , AS PER THE PROVISION OF LAW. HERE, WE WOULD LIKE TO MAKE ONE THING VERY CLEAR THAT OUR DECISION IS BASED ON THE PECULIAR FACTS OF THE PRESENT CASE AND THE SAME WILL NO T BE CONSIDERED AS A PRECEDENCE IN ANY OTHER CASE. IT IS ALSO MADE VERY CLEAR THAT IF THE ASSESSEE FAILS TO SATISFY THE DIFFERENCE IN AMOUNT OF ROYALTY , THEN THE STATUS - QUO SHALL BE MAINTAINED. 7. THE SECOND GRIEVANCE OF THE ASSESSEE RELATES TO LEVY OF INTEREST UNDER SECTION 234A & 234B OF THE ACT. THE LEVY OF INTEREST IS MANDATORY, THEREFORE, WE DIRECT THE AO TO LEVY THE INTEREST AS PER THE PROVISIONS OF LAW AFTER GIVING THE APPEAL EFFECT TO OUR ORDER. 8 . RESULTANTLY , APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ITA NO. 7 747 /1 1 6 ORDER PRONOUNCED IN THE OPEN COURT ON 08/11 /2013 SD/ - ( ) ( H.L.KAR WA ) SD/ - ( ) ( N.K.BILLAIYA ) / PRESIDENT / ACCOUNTANT MEMBER MUMBAI ; DATED : 08/11/ 2013 /PKM , PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) , MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //T RUE COPY// / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI