LINKLATERS SINGAPORE PTE. LTD. (FORMERLY KNOWN AS LINKLATERS ALLEN & GLEDHILL PTE. LTD.), MUMBAI V. DCIT (INTL. TAX) RANGE 3(1)(2), MUMBAI

ITA 854/MUM/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8149 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Assessment Year: 2013-2014
• Appeal Filed On: 07-02-2017
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR , ACCOUNTANT MEMBER ITA NO. 854 /MUM./2017 ( ASSESSMENT YEAR : 20 13 14 ) LINKLATERS SINGAPORE PTE. LTD. (FORMERLY KNOWN AS LINKLATERS ALIEN & GIEDHILL PTE LTD.) C/O DELOITTE HASKINS & SELLS LLP TOWER 3, 27 32 FLOOR INDIABULLS FINANCE CENTRE ELPHINSTONE MILL COMPOUND SENAPATI BAPAT MARG ELPHINSTONE (W), MUMBAI 400 013 PAN AABCL5295L . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX (I.T) CIRCLE 3(1)(2), MUMBAI . RESPONDENT REVENUE BY : SHRI S.E. DASTUR A/W SHRI NIRAJ SHETH ASSESSEE BY : SHRI SHISHIR DHAMEJA A/W SHRI V. SREEKAR DATE OF HEARING 2 9 . 1 0.2018 DATE OF ORDER 26.12.2018 O R D E R PER SAKTIJIT DEY, J.M. AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 14 TH DECEMBER 2016 , PASSED UNDER SECTION 144C(13) R/W SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) FOR THE ASSESSMENT YEAR 2013 14, IN PURSUANCE TO THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL 1 (DRP), MUMBAI. 2 LINKLATERS SINGAPORE PTE. LTD. 2 . TH OUGH, THE ASSESSEE IN TOTAL HAS RAISED 21 GROUNDS, HOWEVER, SHRI S.E. DASTUR, LEARNED SR. COUNSEL APPEARING FOR THE ASSESSEE AT THE OUTSET , SUBMITTED THAT GROUNDS NO.1, 2, 3, 20 AND 21 BEING GENERAL IN NATURE DO NOT REQUIRE ADJUDICATION. FURTHER, HE SUBMITTED , GROUND NO.19 BEING CON SEQUENTIAL AND PRE MATURE AT THIS STAGE, DOES NOT REQUIRE ADJUDICATION. IN VIEW OF THE AFORESAID SUBMISSIONS, ALL THESE GROUNDS ARE DISMISSED. 3 . THE LEARNED SR. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED , IF ASSESSEES CONTENTION IN RESPECT OF GROUNDS NO.9 TO 14, THAT FEES RECEIVED ARE NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES UNDER THE INDIA SINGAPORE DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) IS ACCEPTED , GROUNDS NO.4 TO 8 WILL BECOME REDUNDANT, HENCE, NO T REQUIRED TO BE DECIDED. 4 . IN VIEW OF THE AFO RESAID SUBMISSIONS OF THE LEARNED SR. COUNSEL, WE PROCEED TO DECIDE GROUNDS NO.9 TO 14 AT THE FIRST INSTANCE. 5 . BRIEF FACTS ARE, THE ASSESSEE, A COMPANY INCORPORATED IN SINGAPORE IS ALSO A TAX RESIDENT OF SINGAPORE. AS OBSERVED BY THE ASSESSING OFFICER , THE ASSESSEE OFFERS LEGAL CONSULTANCY SERVICES TO ITS CLIENTS ALL OVER THE WORLD INCLUDING INDIA. FOR THE ASSESSMENT YEAR UNDER DISPUTE THE ASSESSEE FILED ITS RETURN OF INCOME ON 30 TH SEPTEMBER 2013, DECLARING NIL INCOME. DURING THE ASSESSMENT 3 LINKLATERS SINGAPORE PTE. LTD. PROCEEDINGS , THE ASSESSING OFFICER NOTICED THAT IN THE RELEVANT PREVIOUS YEAR HAS PROVIDED LEGAL SERVICES TO CLIENTS IN INDIA. FURTHER, HE OBSERVED THAT THE ASSESSEE HAS PROVI DED LEGAL SERVICES TO LINKLATE RS LLP, LONDON, WHO IN TURN PROVIDED SERVICES TO CLIENTS IN IN DIA. FROM THE BREAK UP OF INCOME FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS RECEIVED AN AMOUNT OF ` 65,64,623 , TOWARDS SERVICES RENDERED IN INDIA AND ` 3,14,999, TOWARDS DISBURSEMENT. THUS, THE TOTAL AMOUNT RECEIVED BY T HE ASSESSEE DURING THE ASSESSMENT YEAR WAS ` 68,79,622. AFTER CALLING UPON THE ASSESSEE TO EXPLAIN WHY THE AFORESAID AMOUNT SHOULD NOT BE BROUGHT TO TAX IN INDIA AND CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE , THE ASSESSING OFFICER HELD THAT THE INCO ME RECEIVED BY THE ASSESSEE COME S WITHIN THE PURVIEW OF FEES FOR TECHNICAL SERVICES UNDER THE PROVISIONS OF INCOME TAX ACT, 1961, AS WELL AS FEE FOR INCLUDED SERVICES AS PER INDO U.K. TAX TREATY. REFERRING TO A NUMBER OF JUDICIAL PRECEDENTS, THE ASSESSING OFFICER ULTIMATELY HELD THAT THE AMOUNT OF ` 68,79,622, BEING IN THE NATURE OF FEES FOR TECHNICAL SERVICES IS TAXABLE IN INDIA UNDER THE PROVISIONS OF INDIA SINGAPORE DTAA. ACCORDINGLY, HE COMPLETED THE DRAFT ASSESSMENT ORDER BY IMPOSING TAX @ 10% AS PER T HE DTAA ON THE TOTAL INVOICED AMOUNT OF ` 68,79,622, WHICH WORKED OUT TO ` 6,87,962. AFTER ADDITION OF TAX ON INTEREST EARN ED ON INCOME TAX REFUND AMOUNTING TO ` 17,885, THE TOTAL TAX COMPUTED WAS ` 4 LINKLATERS SINGAPORE PTE. LTD. 7,05,847. AGAINST THE DRAFT ASSESSMENT ORDER SO PASSED, T HE ASSESSEE RAISED OBJECTIONS BEFORE THE DRP. 6 . HOWEVER, THE DRP REJECTED THE OBJECTIONS OF THE ASSESSEE . I N TERMS WITH THE ORDER PASSED BY THE DRP, THE ASSESSING OFFICER PASSED THE IMPUGNED ASSESSMENT ORDER. 7 . SHRI S.E. DASTUR, LEARNED SR. COUNSEL FOR THE A SSESSEE SUBMITTED , FEES RECEIVED BY THE ASSESSEE FOR PROVIDING LEGAL CONSULTANCY CANNOT BE TREATED AS FEES FOR TECHNICAL SERVICES UNDER ARTICLE 12 OF INDIA SINGAPORE TAX TREATY. REFERRING TO THE RELEVANT PROVISIONS OF ARTICLE 12 OF INDIA SINGAPORE TAX TREA TY, HE SUBMITTED , UNLESS THE SERVICE PROVIDED BY THE ASSESSEE MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOWHOW OR PROCESSES, WHICH ENABLES THE PERSON ACQUIRING THE SERVICES TO APPLY THE TECHNOLOGY THEREIN , IT CANNOT BE TREATED AS FEES FOR TEC HNICAL SERVICES. HE SUBMITTED , ONCE THE FEES RECEIVED BY THE ASSESSEE IS NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES , IT HAS TO BE TREATED AS BUSINESS PROFIT AND IN THE ABSENCE OF A P ERMANENT ESTABLISHMENT (P.E) IN INDIA IT CANNOT BE BROUGHT TO TAX. THE LEARNED SR. COUNSEL SUBMITTED , ARTICLE 12 OF INDIA SINGAPORE DTAA IS PARI MATERIA WITH ARTICLE 13 OF INDIA U.K. DTAA. HE SUBMITTED , WHILE DECIDING IDENTICAL ISSUE WHETHER FEES RECEIVED BY LINKLATERS LLP IS TO BE TAXED AS FEES FOR TECHNICAL SERVICES UN DER ARTICLE 12 OF INDIA U.K. DTAA , THE TRIBUNAL HAS NOT ONLY HELD THAT THE 5 LINKLATERS SINGAPORE PTE. LTD. ASSESSEE IS ELIGIBLE TO AVAIL THE BENEFIT OF INDIA U.K. TAX TREATY, BUT IT ALSO HELD THAT THE FEES RECEIVED IS NOT FEES FOR TECHNICAL SERVICES AS PER ARTICLE 13 OF INDIA U.K. DTAA. THE LEARNED SR. COUNSEL SUBMITTED , FOLLOWING THE AFORESAID DECISION OF THE TRIBUNAL IN LINKLATERS LLP V/S DICT, ITA NO.1450/MUM./2016, DATED 29 TH AUGUST 2018, THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2011 12 IN ITA NO.1642/ MUM./201 5 , DATED 2 9 TH AUGUST 2018, HAS HELD THAT THE FEES RECEIVED BY THE ASSESSEE FOR RENDERING LEGAL SERVICES IS NOT TAXABLE AS FEES FOR TECHNICAL SERVICES UNDER ARTICLE 12 OF INDIA SINGAPORE DTAA. THUS, HE SUBMITTED , THE ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL I N ASSESSMENT YEAR 2011 12. 8 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELYING UPON THE OBSERVATIONS OF THE DRP SUBMITTED , SINCE THE UNDERLYING ASSETS ARE IN INDIA , THERE IS A NEXUS WITH THE INCOME EARNED. HE SUBMITTED , THE ASSESSEE HAS ENGAGED MANY TECHNICA L PERSONS TO PREPARE REPORTS OF PROJECT S . THEREFORE, THE PAYMENT MADE IS IN THE NATURE OF FEES FOR TECHNICAL SERVICES. IN THIS CONTEXT, HE DREW OUR ATTENTION TO THE OBSERVATIONS OF THE DRP. 9 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. THE ISSUE WHICH FALLS FOR OUR CONSIDERATION IS , WHETHER THE FEES RECEIVED BY THE ASSESSEE IS FEES FOR TECHNICAL SERVICES UNDER ARTICLE 12 OF INDIA SINGAPORE DTAA. IF IT IS HELD THAT THE FEES RECEIVED IS NOT IN 6 LINKLATERS SINGAPORE PTE. LTD. THE NATURE OF FEES FOR TECHNICAL SERVI CES UNDER ARTICLE 12 OF INDIA SINGAPORE DTAA, IT CANNOT BE BROUGHT TO TAX UNDER THE PROVISIONS OF ACT , SINCE , THE ASSESSEE IS ELIGIBLE TO AVAIL BENEFIT UNDER THE INDIA SINGAPORE TAX TREATY. NOTABLY, WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011 12, IN ITA NO.1642/ MUM./2015, DATED 29 TH AUGUST 2018, THE TRIBUNAL HAS HELD THAT THE FEES RECEIVED BY THE ASSESSEE IS NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES UNDER ARTICLE 12 OF INDIA SINGAPORE DTAA AND ACCORDINGLY DELETED T HE ADDITION MADE BY THE ASSESSING OFFICER. THERE BEING NO MATERIAL DIFFERENCE IN FACTS BROUGHT TO OUR NOTICE BY THE DEPARTMENT IN THE IMPUGNED ASSESSMENT YEAR , RESPECTFULLY FOLLOWING THE DECISION OF THE CO ORDINATE BENCH IN ASSESSEES OWN CASE AS REFERRED TO ABOVE, WE HOLD THAT THE FEE RECEIVED BY THE ASSESSEE BEING NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES UNDER THE INDIA SINGAPORE TAX TREATY , IS NOT TAXABLE IN INDIA. GROUNDS ARE ALLOWED. 10 . IN VIEW OF OUR AFORESAID DEC ISION, GROUNDS NO.4 TO 8, HAVE BECOME REDUNDANT, HENCE, DISMISSED. 11 . IN GROUND NO.15 AND 16, THE ASSESSEE HAS CHALLENGED THE INCLUSION OF REIMBURSEMENT OF EXPENDITURE AMOUNTING TO ` 3,14,999, IN THE GROSS RECEIPT AND TREATING IT AS FEES FOR TECHNICAL SERVICES. 12 . HAVING CONSIDERED RIVAL SUBMISSIONS WE FIND THAT THE AFORESAID ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL WHILE 7 LINKLATERS SINGAPORE PTE. LTD. DECIDING ASSESSEES APPEAL FOR ASSESSMENT YEAR 2011 12 IN ITA NO.1642/MUM. /2015, DATED 29 TH AUGUST 2018. FOLLOWING OUR DECISION THEREIN, WE HOLD THAT THE AFORESAID AMOUNT IS NOT TAXABLE IN INDIA. THESE GROUNDS ARE ALLOWED. 13 . IN G ROUNDS NO.17 AND 18, THE ASSESSEE HAS CHALLENGED LEVY OF EDUCATION CESS . 14 . THE LEARNED SR. COUNSEL SUBMITTED , AS PER ARTICLE 11(2)(B) OF THE ACT, TOTAL TAX COMPUTED CANNOT EXCEED 15% OF THE GROSS AMOUNT. THUS, HE SUBMITTED , SINCE LEVY OF EDUCATION CESS ENHANCES THE TAX BEYOND 15%, IT VIOLATES THE PROVISIONS OF INDIA SINGAPORE TAX TREATY, HENCE, CANNOT BE LEVIED. FURTHER, HE SUBMITTED , SINCE THE ASSESSING OFFICER HAS NOT LEVIED EDU CATION CESS IN THE DRAFT ASSESSMENT ORDER, HE CANNOT DO SO IN THE FINAL ASSESSMENT ORDER IN THE ABSENCE OF ANY DIRECTIONS FROM THE DRP. IN SUPPORT OF HIS CONTENTION THAT THE TAX RATE CANNOT EXCEED MORE THAN 15 %, THE LEARNED SR. COUNSEL RELIED UPON A DECISI ON OF THE TRIBUNAL IN SUNIL V. MOTIANI V/S ITO, [2013] 33 TAXMAN.COM 252. 15 . THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , THE ASSESSEE HAS NOT AGITATED THIS ISSUE BEFORE THE DRP, HENCE, THERE CANNOT BE ANY DIRECTION BY THE DRP ON THE ISSUE. FURTHER, H E SUBMITTED , SINCE TAX COMPUTATION IS NOT PART OF DRAFT ASSESSMENT 8 LINKLATERS SINGAPORE PTE. LTD. ORDER, THE ASSESSING OFFICER CAN ONLY DO SO IN THE FINAL ASSESSMENT ORDER. 16 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. THOUGH, WE ARE CONSCIOUS OF THE FACT THAT BY VIRTUE OF OUR DECISION IN GROUNDS NO. 9 TO 14 HEREINAB OVE THE INCOME OF THE ASSESSEE MAY NOT BE CHARGEA BLE TO TAX IN INDIA, HOWEVER, K EEPING IN VIEW THE RELEVANT PROVISIONS CONTAINED UNDER ARTICLE 11 OF INDIA S INGAPORE DTAA, IN PRINCIPLE , WE AGREE WITH THE LEARNED SR. COUNSEL THAT THE TAX CHARGEABLE ON THE ASSESSEE CANNOT EXCEED 15%. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO COMPUTE TAX , IF ANY , @ NOT EXCEEDING 15% OF THE GROSS AMOUNT. GROUND IS ALLOWED. 17 . IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.12.2018 SD/ - RAJESH KUMAR ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 26.12.2018 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ( SR. PRIVATE SECRETARY ) ITAT, MUMBAI