DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS LTD, MUMBAI V. ADIT (IT) RG 1(2), MUMBAI

ITA 8978/MUM/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71188 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: L
• Next Hearing Date: 11-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 23-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEERAJA PRADHAN
• Assessee Lawyers: PRASHANT MAHESHWARI
• Keywords: Rectification of order; Double taxation relief; Opportunity of being heard; Principle of natural justice; Services rendered outside India; Deemed to accrue or arise in india; Permanent establishment; Non-deduction of tax
• Section: 154; 234B

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - L BENCH. . .. . . .. . , ,, , !' !' !' !' , ! ! ! ! BEFORE S/SH.I.P.BANSAL, JUDICIAL MEMBER & RAJEND RA,ACCOUNTANT MEMBER ./ ITA NO.8978/MUM/2010 , # # # # $ $ $ $ / ASSESSMENT YEAR-2007-08 DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS LTD. C/O DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS LTD., 1107, TAJ LANDS END, BANDSTAND, BANDRA (WEST), MUMBAI- 400 050 VS. ASSISTANT DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)- RANGE 1(2), MUMBAI. PAN: AACCD8920H ( &' / APPELLANT) ( ()&' / RESPONDENT) ./ ITA NO.9049/MUM/2010 , # # # # $ $ $ $ / ASSESSMENT YEAR-2007-08 DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS LTD. C/O DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS LTD., 1107, TAJ LANDS END, BANDSTAND, BANDRA (WEST), MUMBAI- 400 050 VS. ASSISTANT DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)- RANGE 1(2), MUMBAI. PAN: AABCD8623L ( &' / APPELLANT) ( ()&' / RESPONDENT) &' &' &' &' * * * * ! !! ! / APPELLANT BY :SHRI PRASHANT MAHE SHWARI ()&' + * ! / RESPONDENT BY :SHRI NEERAJA PRADHAN # # # # + ++ + ,- ,- ,- ,- / DATE OF HEARING : 11/09/2013 ./$ + ,- / DATE OF PRONOUNCEMENT : 18/09/2013 # # # # , 1961 + ++ + 254(1) ! !! ! ,0, ,0, ,0, ,0, !1 !1 !1 !1 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, A.M: ITA NO.8978/MUM/2010 FOLLOWING GROUNDS OF APPEAL HAVE BEEN FILED BY THE ASSESSEE-COMPANY AGAINST THE ORDER DATED 26. 10.2010 OF THE ASSESSING OFFICER(AO),PASSED U/S.143(3) R.W. S.144C(13) OF THE ACT. GROUND NO. 1- DISALLOWANCE OF EXPENSES OF RS. 89,24,851 DEBITED TO THE AUD ITED PROFIT AND LOSS ACCOUNT OF THE INDIA PERMANENT ESTABLISHMENT (PE) 1.1.ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO ERRED IN DISALLOWING THE EXPENSES OF THE INDIAN PE OF THE APPELLANT AGGREGATING TO RS. 89,24,851 AND THE D RP FURTHER ERRED IN GIVING NO SPECIFIC DIRECTIONS TO THE OBJECTION NO. 1 RAISED BY THE APPELLANT IN THIS REGARD. 2 ITA NO. 8978/MUM/2010 & 9049/MUM/2010(AY-2007-08) DIAMOND MANAGEMENT & TECHNOLOGY CO NSULTANTS LTD. 1.2.THE APPELLANT SUBMITS THAT THE AO AND THE D~ FAILED TO APP RECIATE THE AUDITED FINANCIAL STATEMENT OF THE INDIAN PE, THE DOCUMENTARY EVIDENCES AND THE EXPLANATION FURNISHED DURING ASSESSMENT INCLUDING REASONS FOR NON-DEDUCTION OF TAXES AND CLARIFICATION ON THE FACT THAT THERE WAS NO DOU BLE CLAIM OF DEDUCTION AS ALLEGED. 1.3.THE APPELLANT PRAYS THAT THE DISALLOWANCE OF EXPENSES OF RS. 89,24,851 BY THE AO IS UNWARRANTED AND BE DELETED. GROUND NO. 2- NON-TAXABILITY OF MANAGEMENT CONSULTAUCY FEES OF RS. 32,42,1 49 FOR SERVICES RENDERED OUTSIDE INDIA 2.1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO ERRED IN TAXING THE CONSULTANCY FEES OF RS. 32,42,149 FOR SERVICES RENDERED OUTSIDE INDIA (IN KUWAIT) AS ATTRI BUTABLE TO THE INDIAN FE AND THE DRP ERRED IN DIRECTING AS GROUND NO. 1 THEIR TAXATION ON GROSS BASIS AS FEES FOR TECHNICAL SERVICES (FTS) UNDER SECTION 9(1)(VII) / I 15A OF THE ACT. THE AO FUTRHER ERRED IN NOT GIVING PR OPER EFFECT TO THE INSTRUCTIONS OF DRP IN PASSING THE FINAL ASSESSMENT ORDER. 2.2.THE APPELLANT SUBMITS THAT THE AO AND DRP FAILED TO APPRECIAT E THAT THESE SERVICES WERE RENDERED ENTIRELY OUTSIDE INDIA IN KUWAIT AND RELATE TO MAKING OR EARNING OF INCOME FROM A SOURCE OUTSIDE INDIA AND ARE THEREFORE NEITHER ATTRIBUTABLE TO THE INDIAN PE NOR CAN BE DEEMED TO ACCRUE OR ARISE IN INDIA UNDER SECTION 9(L)(VII) OF THE ACT. 2.3.THE APPELLANT PRAYS THAT THE TAXATION OF CONSULTANCY FEES OF RS. 32,42,149 FOR SERVICES RENDERED OUTSIDE INDIA IS UNWARRANTED AND BE DELETED. GROUND NO. 3 - WITHOUT PREJUDICE GROUND, NO PE IS CONSTITUTED IN INDIA UNDER SECTION 92F(IIIA) OF THE ACT FOR THE DEPUTATION / ASSIGNMENT OF EMPLOYEE 3.1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO ERRED IN CONCLUDING THAT THE APPELLANT HAS PE IN INDIA, AND THE DRP ALSO ERRED IN GENERALLY CONSTRUING T HAT THE APPELLANT HAS A PE IN INDIA AND ALSO THE INCOME OF THE APPELLANT AS FTS DEEMED TO ACCRUE ARISE IN INDIA UNDER SECTION 9(L)(VII) OF THE ACT AND NOT GIVING SPECIFIC DIRECTION WITH RESPECT WITH RESPECT TO OBJECTION NO. 3 OF T HE APPELLANT. THE AO FURTHER ERRED IN NOT GIVING PROPER EFFECT TO THE DIRECTIONS ISSUED BY THE DRP IN THIS REGARD. 3.2.THE APPELLANT SUBMITS THAT DEPUTATION / ASSIGNMENT OF EMPLOYEE WOULD NOT RESULT IN PROVISION OF ANY SERVICES AND THUS THE APPELLANT HAS NEITHER CONSTITUTED PE IN INDIA NOR IT CAN BE CONSTRUED AS FEES FOR TECHNICAL SERVICES UNDER THE ACT OR UNDER THE INDIA UK TAX TREATY MORE SO AS IT IS MERE REIMBURSEMENT ARRANGEMENT WITH NO ELEMENT OF PROFIT. 3.3.WITHOUT PREJUDICE TO ABOVE, THE APPELLANT SUBMITS THAT THE A O BE DIRECTED TO TAX THE ENTIRE INCOME AT 10.46% ON GROSS BASIS UNDER SECTION 9(1)(VII) READ WITH SECTION LISA OF THE ACT IN ACCORDANCE WITH THE DIRECTION OF THE DRP. GROUND NO. 4-INSUFFICIENT/ADEQUATE OPPORTUNITY PROVIDED DURING THE ASSESS MENT PROCEEDINGS 4.1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO ERRED IN NOT GRANTING REASONABLE AND SUFFICIENT OPPORTUNITY TO THE APPELLANT BEFORE PASSING THE DRAFT ORDER UNDER SECTION 144C(L) OF THE ACT AND THE DRP FURTHER ERRED IN NOT GIVING THEIR DECISION ON THIS POINT RAISED BEFORE THEM AS OBJECTION NO. 4 WHILE GIVING DIRECTIONS UNDER SECTION 144C(5) OF THE ACT. 4.2.THE APPELLANT SUBMITS THAT THE ASSESSMENT ORDER OF THE AO AN D THE DIRECTIONS BY THE DRP ARE IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE AND BE QUASHED OR ALTERNATIVELY SET ASIDE FOR CONSIDERATION AFRESH. GROUND NO. 5-ERRONEOUS CHARGING OF INTEREST OF RS. 16,40, 696 UNDER SECTION 234B OF THE ACT 5.1ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO ERRED AND THE DRP FURTHER ERRED IN UPHOLDING / CONFIRMING THE ACTION OF AO IN CHARGING INTEREST UNDER SECTION 234B OF THE ACT. 5.2.THE APPELLANT SUBMITS THAT IT IS NON-RESIDENT COMPANY UNDER T HE ACT AND IS NOT LIABLE TO PAY ADVANCE TAX UNDER SECTION 208 / 209 OF THE ACT AS ITS ENTIRE INCOME IS SU BJECT TO WITHHOLDING TAX IN INDIA AND IN VIEW OF SAME THE QUESTION OF CHARGING INTEREST RS. 16,40,696 UNDER SECTION 234B OF THE ACT D OES NOT ARISE. 5.3.THE APPELLANT PRAYS THAT THE CHARGE OF INTEREST UNDER SECTION 234B OF THE ACT IS UNWARRANTED AND BE DELETED. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND THE ABOVE GROUN DS OF APPEAL AT ANY STAGE. DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS LTD.NA. INC(ITA.9049/MUM/2010) ALMOST IDENTICAL GROUNDS OF APPEAL HAVE BEEN FILED BY DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS LTD.NA.INC.IN ITA NO. 9049/MUM/2010 - THE ONLY DIFFERENCE IS GROUND NO.6 WHICH DEALS WITH CHARGING OF INTEREST U/S.234B OF THE ACT .THEREFORE,WE ARE ADJUDICATING BOTH THE APPEALS BY A COMMON ORDER.FIRST,WE WOULD LIKE TO REPRODUCE THE GROUNDS OF APPEAL FILED BY THE ASSESSEE: GROUND NO. 1 DISALLOWANCE OF EXPENSES OF RS. 1,32,12,035 DEBITED TO THE AUDIT ED PROFIT AND LOSS ACCOUNT OF THE INDIA PERMANENT ESTABLISHMENT (PE) 1.1.ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO ERRED IN DISALLOWING THE EXPENSES OF THE INDIAN PE OF THE APPELLANT AGGREGATING TO RS. 1,32,12,035 AND THE DRP FURTHER ERRED IN GIVING NO SPECIFIC DIRECTIONS TO THE OBJECTION NO. 1 RAISED BY THE APPELLANT IN THIS REGARD. 1.2.THE APPELLANT SUBMITS THAT THE AU AND THE DRP FAILED TO APPR ECIATE THE AUDITED FINANCIAL STATEMENT OF THE INDIAN PE, THE DOCUMENTARY EVIDENCES AND THE EXPLANATION FURNISHED DURI NG ASSESSMENT INCLUDING REASONS FOR NON- DEDUCTION OF TAXES AND CLARIFICATION ON THE FACT THAT THERE WAS NO DOUBLE CLAIM OF DEDUCTION AS ALLEGED. 1.3.THE APPELLANT PRAYS THAT THE DISALLOWANCE OF EXPENSES OF RS . 1,32,12,035 BY THE AU IS UNWARRANTED AND BE DELETED. 3 ITA NO. 8978/MUM/2010 & 9049/MUM/2010(AY-2007-08) DIAMOND MANAGEMENT & TECHNOLOGY CO NSULTANTS LTD. GROUND NO. 2 NON-TAXABILITY OF MANAGEMENT CONSULTANCY FEES OF RS. 33,82,196 FOR SERVICES RENDERED OUTSIDE INDIA 2.1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO ERRED IN TAXING THE CONSULTANCY FEES OF RS. 33,82,196 FOR SERVICES RENDERED OUTSIDE INDIA (IN KUWAIT) AS ATTRI BUTABLE TO THE INDIAN PB AND THE DRP ERRED IN DIRECTING AS GROUND NO. 1 THEIR TAXATION ON GROSS BASIS AS FEES FOR TECHNICAL SERVICES (FTS)UNDER SECTION 9(1)(VII) / LISA OF THE ACT. THE AO FURTHER ERRED IN NOT GIVING PROPER E FFECT TO THE INSTRUCTIONS OF DRP IN PASSING THE FINAL ASSESSMENT ORDER. 2.2.THE APPELLANT SUBMITS THAT THE AU AND DRP FAILED TO APPRECIAT E THAT THESE SERVICES WERE RENDERED ENTIRELY OUTSIDE INDIA IN KUWAIT AND RELATE TO MAKING OR EARNING OF INCOME FROM A SOURCE OUTSIDE INDIA AND ARE THEREFORE NEITHER ATTRIBUTABLE TO THE INDIAN PE NOR CAN BE DEEMED TO ACCRUE OR ARISE IN INDIA UNDER SECTION 9(I)(VII) OF THE ACT. 2.3.THE APPELLANT PRAYS THAT THE TAXATION OF CONSULTANCY FEES OF RS. 3 3,82,196 FOR SERVICES RENDERED OUTSIDE INDIA IS UNWARRANTED AND BE DELETED. GROUND NO. 3 REIMBURSEMENT OF EXPENSES OF RS. 35,16,090 NOT IN THE NATURE OF INCOME CONSTRUED AS TAXABLE 3.1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE AU ERRED IN TREATING REIMBURSEMENT OF EXPENSES OF RS. 35,16,090 AS TAXABLE IN INDIA AND THE DRP FURTHER ERRED IN GIVING NO SPECIFIC DIRECTIONS FOR THE OBJECTION NO. 3 RAISED BY THE APPELLANT IN THIS REGARD. 3.2.THE APPELLANT SUBMITS THAT REIMBURSEMENTS OF EXPENSES RECE IVED BY IT FROM ITS INDIAN AFFILIATE ARE AT COST WITH NO PROFIT ELEMENT EMBEDDED IN IT AND THESE CANNOT BE CONSIDERED A S TAXABLE INCOME. THE APPELLANT SUBMITS THAT EVEN IF TREATED AS ATTRIBUTABLE TO THE INDIAN PB OF THE APPELLANT, THE DEBIT AND CREDIT TO THE PROFIT AND LOSS ACCOUNT OF THE PB REMAINS THE SAME WITH NO EFFECT ON TAXABLE INCOME. 3.3.THE APPELLANT PRAYS THAT THE TAXATION OF REIMBURSEMENT OF EXPENSES OF RS. 33,82,196 IS UNWARRANTED AND BE DELETED. GROUND NO. 4 - WITHOUT PREJUDICE GROUND, NO PE IS CONSTITUTED IN INDIA UNDER SECTION 92F(IIIA) OF THE ACT FO R THE DEPUTATION / ASSIGNMENT OF EMPLOYEE AS WELL AS CONSULTANCY SERVICES RENDERED IN INDIA FOR SHORT PERIOD AND TAXATION OF THE LATER (I.E. CONSULTANCY FEE OF RS. 55,61 ,084/- UNDER SECTION 9(1)(VJI) OF THE ACT 4.1.UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE DRP WHILE AGREEING TO THE FACT THE APPELL ANT HAS NO PB IN INDIA ERRED IN NOT GIVING SPECIFIC DIRECTION WIT H RESPECT TO OBJECTION NO. 4 OF THE APPELLANT AND CONSTRUING IN GENERAL THE INCOME OF THE APPELLANT AS FTS DEEME D TO ACCRUE OR ARISE IN INDIA UNDER SECTION 9(L)(VII) OF THE ACT OR AS FEES FOR INCLUDED SERVICES UNDER INDIA-USA T AX TREATY AND TAXABLE ON GROSS BASIS, AND THE AO FURTHER ERRED IN NOT GIVING PROPER EFFECT TO THE DIRECTIONS ISS UED BY THE DRP IN THIS REGARD. 4.2.THE APPELLANT SUBMITS THAT THE DEEMED ACCRUAL OF INCOME AS FT S AND CONSEQUENTIAL TAXATION ON GROSS BASIS UNDER SECTION 9 (1)(VII) / LISA OF THE ACT IS TO BE RESTRICTED ONLY T O INCOME ARISING FROM CONSULTANCY SERVICES OF RS.55,61,084 RENDERED IN INDIA AND NOT WITH RESPECT TO THE DEPUTATION / ASSIGNMENT OF EMPLOYEE OR ANY OTHER RECEIPTS AND THE AO BE DIRECTED ACCORDINGLY. 4.3.WITHOUT PREJUDICE TO ABOVE, THE APPELLANT SUBMITS THAT THE A U BE DIRECTED TO TAX THE ENTIRE INCOME AT 10.46 ON GROSS BASIS UNDER SECTION 9(I)(VII) OF THE ACT READ WITH SEC TION LI5A IN ACCORDANCE WITH THE CONSOLIDATED DIRECTION OF THE DRP. GROUND NO. 5 - INSUFFICIENT / ADEQUATE OPPORTUNITY PROVIDED DURING THE ASSE SSMENT PROCEEDINGS 5.1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO ERRED IN NOT GRANTING REASONABLE AND SUFFICIENT OPPORTUNITY TO THE APPELLANT BEFORE PASSING THE DRAFT ORDER UNDER SECTION I44C(1) OF THE ACT AND THE DRP FURTHER ERRED IN NOT GIVING THEIR DECISION ON THIS POINT RAISED BEFORE THEM AS OBJECTION NO. 5 WHILE GIVING DIRECTIONS UNDER SECTION 144C(5) OF THE ACT. 5.2.THE APPELLANT SUBMITS THAT THE ASSESSMENT ORDER OF THE AU AN D THE DIRECTIONS BY THE DRP ARE IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE AND BE QUASHED OR ALTERNATIVELY SET ASIDE FOR CONSIDERATION AFRESH. GROUND NO. 6 ERRONEOUS CHARGING OF INTEREST OF RS. 18,82,428 UNDER SECTIO N 234B OF THE ACT 6.1.ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO ERRED AND THE DRP FURTHER ERRED IN UPHOLDING / CONFIRMING THE ACTION OF AO IN CHARGING INTEREST UNDER SECTION 234B OF THE ACT. 6.2.THE APPELLANT SUBMITS THAT IT IS NON-RESIDENT COMPANY UNDER T HE ACT AND IS NOT LIABLE TO PAY ADVANCE TAX UNDER SECTION 208 / 209 OF THE ACT AS ITS ENTIRE INCOME IS SU BJECT TO WITHHOLDING TAX IN INDIA AND IN VIEW OF SAME THE QUESTION OF CHARGING INTEREST RS. 18,82,428 UNDER SECTION 234B OF THE ACT DOES NOT ARISE. 6.3.THE APPELLANT PRAYS THAT THE CHARGE OF INTEREST UNDER SECTION 234B OF THE ACT IS UNWARRANTED AND BE DELETED. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND THE ABOVE GROUN DS OF APPEAL AT ANY STAGE. ITA.8978/MUM/2010 -FACTS OF THE CASE 2 .ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF CONSUL TANCY SERVICES, FILED ITS RETURN ON 23.07. 2008 DECLARING INCOME AT RS. NIL. DURING THE ASSESS MENT PROCEEDINGS, AO FOUND THAT ASSESSEE HAD RECEIVED RS. 89.24 LACS UNDER INTERNATIONAL TRANSFE R AGREEMENT.ASSESSEE FILED OBJECTIONS AGAINST THE DRAFT ORDER DATED 16.12.2009 OF THE AO BEFORE D ISPUTE RESOLUTION PANEL-1 MUMBAI (DRP).IT WAS SUBMITTED BY THE ASSESSEE THAT IT DID NOT HAVE PE IN INDIA,THAT IT HAD ENTERED INTO INTERNATIONAL TRANSFER AGREEMENT CONSULTANCY SERVICES AGREEMENT W ITH DIAMOND MANAGEMENT AND TECHNOLO 4 ITA NO. 8978/MUM/2010 & 9049/MUM/2010(AY-2007-08) DIAMOND MANAGEMENT & TECHNOLOGY CO NSULTANTS LTD. -GY CONSULTANT LTD.NA.INC,THAT IT RECEIVED A SUM OF RS. 85.71 LACS DURING THE ASSESSMENT YEAR UNDER CONSIDERATION ,THAT IT HAD INCURRED AN EXPEND ITURE OF RS.89.24 LACS, THAT INCOME EARNED BY IT WAS NOT TAXABLE IN INDIA,THAT SERVICES HAD BEEN REN DERED IN KUWAIT,THAT SERVICES WERE NOT PROVIDED BY PE CONSTITUTED IN INDIA,THAT SERVICES WERE NOT A TTRIBUTEABLE TO PE,THAT THE SERVICES FELL OUTSIDE THE AMBIT OF FEES FOR TECHNICAL SERVICES (FTS) UNDE R ARTICLE13 OF INDO-UK DTAA. 3 .AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE DRAFT ASSESSMENT ORDER,DRP HELD THAT THE ASSESSEE MADE TECHNOLOGY AVAILABLE TO THE INDIA N ENTITY,THAT SUCH SERVICES WERE IN NATURE OF FEES FOR TECHNICAL SERVICES,THAT SAME WERE TAXABLE IN INDIA.DRP FURTHER HELD THAT THE ARGUMENT OF THE ASSESSEE THAT IT HAD NOT MADE TECHNOLOGY AVAILA BLE TO ITS INDIAN RECIPIENTS WAS NOT SUPPORTED BY THE COPY OF THE AGREEMENT.AFTER OBTAINING A COPY OF THE AGREEMENT FROM THE ASSESSEE AND AFTER CONSIDERING THE SAME,DRP HELD THAT ARTICLE 1-3 OF T HE AGREEMENT MADE IT CLEAR THAT INDIAN RECIPIE -NTS HAD RECEIVED THE TECHNOLOGY AS MENTIONED IN PA RA-2.1.1 AND 3.2 OF THE AGREEMENT.FINALLY, DRP DIRECTED THE AO TO ASSESS THE AMOUNT RECEIVED B Y THE ASSESSEE AS FEE FOR TECHNICAL SERVICES.THE DIRECTIONS ISSUED U/S.144C(5) OF THE ACT,DATED 24.09.2010 OF DRP,WERE RECEIVED BY THE AO ON 29.09.2010.WHILE PASSING THE FINAL ASSESS MENT-ORDER,HE DETERMINED THE TOTAL INCOME OF THE ASSESSEE AS UNDER: TOTAL INCOME AS PER THE RETURN OF INCOME NIL ADD: ADDITIONS/DISALLOWANCES AS DISCUSSED ABOVE (I) DISALLOWANCE OF VARIOUS EXPENSES CLAIMED IN THE P & L A/C. RS. 89,24,851/- (II) RECEIPTS FROM KUWAIT PROJECT RS. 32,42,149/- TOTAL INCOME RS. 1,21,67,000/- 4 .BEFORE US,AUTHORISED REPRESENTATIVE(AR) SUBMITTED THAT AO HAD NOT PASSED THE ORDER AS PER THE DIRECTIONS GIVEN BY THE DRP,THAT THERE WAS VIOLATIO N OF PROVISIONS OF SECTION 144C(13) OF THE ACT. HE FURTHER SUBMITTED THAT IF AO WAS DIRECTED BY THE TRIBUNAL TO PASS FRESH ORDER AS PER THE DIRECTIONS OF THE DRP,ASSESSEE-COMPANY WAS NOT INTE RESTED IN PURSUING OTHER GROUNDS OF APPEAL. DEPARTMENTAL REPRESENTATIVE(DR)SUBMITTED THAT HE HA D NO OBJECTION IF SUITABLE INSTRUCTIONS WERE ISSUED. 5 .WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT DRP HAD ISSUED DIRECTIONS TO THE AO ON 24.09.2009 AND HAD S PECIFICALLY MENTIONED THAT AMOUNT RECEIVED BY THE ASSESSEE HAD TO BE TAXED AS FEE FOR TECHNICA L SERVICES. IN OUR OPINION,DIRECTIONS OF THE DRP WERE BINDING ON THE AO.SECTION 144C(13) USES WO RD SHALL WITH REGARD TO INSTRUCTIONS TO BE FOLLOWED BY THE AO. WE WILL LIKE TO RE-PRODUCE THE SECTION: UPON RECEIPT OF THE DIRECTIONS ISSUED UNDER SUB-SEC TION (5), THE ASSESSING OFFICER SHALL ( EMPHASIS BY US ), IN CONFORMITY WITH THE DIRECTIONS, COMPLETE, NOT WITHSTANDING ANYTHING TO THE CONTRARY CONTAINED **IN SECTION 153 OR SECTION 153B, THE ASS ESSMENT WITHOUT PROVIDING ANY FURTHER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE,WITHIN O NE MONTH FROM THE END OF THE MONTH IN WHICH SUCH DIRECTION IS RECEIVED. FROM THE PLAIN READING OF THE PROVISIONS OF THE SEC TION IT IS CLEAR THAT AO HAS NO CHOICE,BUT TO PASS AN ORDER AS PER THE DIRECTIONS OF THE DRP.PENAL CON SISTING OF THREE(3) SENIOR COMMISSIONERS OF INCOME TAX DEPARTMENT,HAS BEEN GIVEN POWERS TO DECI DE THE ISSUES RAISED IN THE DRAFT ORDERS SUBMITTED BY THE AOS.NATURALLY AOS, BEING THE JUNIO R MEMBERS OF THE DEPARTMENTAL HIERARCHY, ARE SUPPOSED TO FOLLOW THE ORDERS OF THE COLLEGIUMS OF THE COMMISSIONERS.THE REASON BEHIND IT IS NOT DIFFICULT TO COMPREHEND-COLLECTIVE WISDOM OF THE SE NIOR OFFICERS HAS TO PREVAIL OVER THE UNDERSTAN -DING OF AN INDIVIDUAL OFFICER.SECONDLY,PANEL HAS B ENEFIT OF THE SUBMISSIONS OF THE ASSESSEES ALSO BEFORE IT DECIDES THE ISSUES.WE ARE SURPRISED THAT IN SPITE OF THE CLEAR AND UNAMBIGUOUS MANDATE OF THE SECTION 144C(13) OF THE ACT,AO DID NOT CARRY OUT THE INSTRUCTIONS OF THE DRP AND ASSESSED 5 ITA NO. 8978/MUM/2010 & 9049/MUM/2010(AY-2007-08) DIAMOND MANAGEMENT & TECHNOLOGY CO NSULTANTS LTD. THE INCOME IN THE MANNER HE WANTED.ON A QUERY BY BE NCH, IT WAS BROUGHT TO OUR NOTICE THAT ASSESSEE-COMPANY HAD FILED AN APPLICATION U/S. 154 OF THE ACT FOR RECTIFICATION OF MISTAKES BEFORE THE AO VIDE LETTER DATED 23.11.2010.IN THE SAID APP LICATION, ASSESSEE-COMPANY HAD BROUGHT TO THE NOTICE OF THE AO, INADVERTENT NON-COMPLIANCE OF T HE INSTRUCTION OF THE DRP.WE WERE INFORMED THAT TILL THE DATE OF HEARING BEFORE US,ASSESSEE HA D NOT RECEIVED THE ORDER OF THE AO DISPOSING THE APPLICATION FILED BY IT U/S. 154 OF THE ACT. THE SEQUENCE OF THE EVENTS HAS REALLY PAINED US.OPE N DEFIANCE OF THE DIRECTIONS OF THE DRP BY AN ADAMANT AO,NON DISPOSAL OF APPLICATION OF THE ASSES SEE FILED U/S.154 OF THE ACT AND REQUEST OF THE ASSESSEE TO DIRECT THE AO TO FOLLOW THE ORDERS OF T HE DRP UNMISTAKABLY PROVE ONE THING THAT ASSESSEE HAS BEEN COMPELLED TO APPROACH THE TRIBUNA L BECAUSE OF THE DISOBEDIENCE AND INACTION OF THE AO.HELPLESSNESS OF THE ASSESSEE IS EVIDENT FROM THE FACT THAT IT IS READY NOT TO PRESS OTHER GROUNDS OF APPEAL,IF THE AO IS DIRECTED TO ACT AS P ER LAW.IF EVEN FOR ITS RIGHTFUL CLAIM AN ASSESSEE HAS TO APPROACH A JUDICIAL FORUM,THEN IT HAS TO BE HELD THAT AO HAD MISERABLY FAILED IN PERFORMING HIS DUTIES.AS A REPRESENTATIVE OF THE STATE,HE IS D UTY BOUND TO COLLECT ONLY DUE TAXES AND NOT ONLY TAXES.ON TWO COUNTS BEHAVIOR OF THE AO CAN BE HELD TO BE PERVERSE-FIRST HE DID NOT OBEY THE INSTRUCTIONS OF THE PANEL AND SECOND HE DID NOT TAK E ANY ACTION WITH REGARD TO THE RECTIFICATION APPLICATION FILED BY THE ASSESSEE. AS,ALL THE GROUNDS,EXCEPT GROUND NO.3.3,WERE NOT PR ESSED BY THE ASSESSEE,BEFORE US THEREFORE,SAME STAND DISMISSED.GROUND NO. 3.3. STANDS ALLOWED IN FAVOUR OF THE ASSESSEE.AO IS DIRECTED TO PASS FRESH ASSESSMENT ORDER AS PER THE DIRECTIONS OF THE DRP WITHIN 30 DAYS OF RECEIPT OF THIS ORDER. AS A RESULT,APPEAL FILED BY THE ASSES SEE STANDS PARTLY ALLOWED. ITA NO. 9049/MUM/2010 DIAMOND MANAGEMENT & TECHNOLO GY CONSULTANTS LTD.NA.INC. 6. WE FIND THAT EXCEPT THE GROUND NO.6 PERTAINING TO C HARGING OF INTEREST U/S. 234B OF THE ACT,ALL OTHER GROUNDS OF APPEAL ARE MORE OR LESS SAME AS TH E GROUNDS OF APPEAL FILED BY THE DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS LTD. (ITA/8978/ MUM/10). 7. BEFORE US,AUTHORISED REPRESENTATIVE(AR)SUBMITTED TH AT IF GROUND NO. 4.1 WAS DECIDED IN FAVOUR OF THE ASSESSEE,HE WOULD NOT PRESS THE OTHER GROUND S OF APPEAL. GROUND NO. 4.1 IS ABOUT NOT GIVING PROPER EFFECT TO THE DIRECTION ISSUED BY THE DRP. I N THIS CASE ALSO DRP HAS HELD THAT INCOME OF THE ASSESSEE HAS TO BE ASSESSED ON GROSS TAXATION BASIS AS PROVIDED U/S. 9(1)(VII) OF THE ACT AS WELL AS RELEVANT ARTICLE OF DTAA. IN THIS CASE ALSO WHILE F INALISING THE ASSESSMENT,AO DID NOT PASS THE ORDER AS PER THE DIRECTION OF THE DRP.ASSESSEE-COMP ANY HAD FILED AN APPLICATION U/S. 154 OF THE ACT ON 23.11.2010,BEFORE THE AO,FOR RECTIFICATION O F THE ORDER PASSED BY HIM.IT WAS BROUGHT TO THE NOTICE OF THE AO THAT HE HAD INADVERTENTLY NOT COM PLIED THE INSTRUCTIONS OF THE DRP AS WARRANTED BY SECTION 144C(13) OF THE ACT. FOLLOWING OUR ORDER IN THE CASE OF DIAMOND MANAGEME NT & TECHNOLOGY CONSULTANTS LTD. -ITA NO.8978/MUM/2010(SUPRA),WE DECIDE GROUND NO.4.1 IN FAVOUR OF THE ASSESSEE.AS THE REST OF THE GROUNDS ARE NOT PRESSED,SO,SAME ARE DISMISSED AS NO T PRESSED.AO IS DIRECTED TO PASS FRESH ORDER FOLLOWING THE DIRECTIONS ISSUED BY THE DRP U/S.144C (13) OF THE ACT DATED 24.09.2010 WITHIN 30 DAYS FROM THE DATE OF RECEIPT OF THIS ORDER. AS A RESULT, APPEALS FILED BY BOTH THE ASSESSEES STAND PARTLY ALLOWED. 2 3 /#4 #2,4 5 6 7 1 8 ! 9 + , :; . ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH SEPTEMBER, 2013 !1 + ./$ ! 7 <# 18, , 2013 / + 0 = 6 ITA NO. 8978/MUM/2010 & 9049/MUM/2010(AY-2007-08) DIAMOND MANAGEMENT & TECHNOLOGY CO NSULTANTS LTD. SD/- SD/- ( .. / I.P.BANSAL ) ( !' !' !' !' / RAJENDRA) / JUDICIAL MEMBER ! ! ! ! /ACCOUNTANT MEMBER / MUMBAI, <# /DATE: 18.09 . 2013 SK !1 !1 !1 !1 + ++ + ( (( (,> ,> ,> ,> ?!>$, ?!>$, ?!>$, ?!>$, / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / &' 2. RESPONDENT / ()&' 3. THE CONCERNED CIT(A)/ @ A , 4. THE CONCERNED CIT / @ A 5. DR L BENCH, ITAT, MUMBAI / >B0 (,# . , . . . 6. GUARD FILE/ 0 C )>, (, //TRUE COPY// !1# / BY ORDER, D / : DY./ASST. REGISTRAR , /ITAT, MUMBAI