THE DDIT (IT) 3(2), V. M/S. LARSEN & TOUBRO LTD.,

ITA 9168/MUM/2004

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3174 (ITAT-MUMBAI)
• Duration Of Justice: 11 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2016
• Appeal Filed By: Department
• Bench Allotted: L
• Next Hearing Date: 23-02-2016
• Assessment Year: 1999-2000
• Appeal Filed On: 16-12-2004
• Court: TRIBUNAL
• Department Lawyers: JASBIR CHOUHAN
• Assessee Lawyers: PARAG A VYAS
• Keywords: Permanent establishment; Non-deduction of tax

Judgement Text

, , L, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NOS.9163-68/MUM/2004 ASSESSMENT YEAR: NOT APPLICABLE D D IT (IT) 3 (2) , SCINDIA HOUSE, R.NO.132. 1 ST FLOOR, N. M. ROAD, MUMBAI-38 / VS. M/S. LARSEN & TOUBRO, L & T HOUSE, BALLARD ESTATE MUMBAI- 400038 (REVENUE) ( RESPONDENT ) P.A. NO. A AACL0 140P ITA NOS.9275/MUM/2004 ASSESSMENT YEAR: NOT APPLICABLE M/S. LARSEN & TOUBRO, L & T HOUSE, BALLARD ESTATE MUMBAI- 400038 / VS. DDIT (IT) 3(2), SCINDIA HOUSE, R.NO.132. 1 ST FLOOR, N. M. ROAD, MUMBAI-38 (REVENUE) (RESPONDENT ) P.A. NO. AAACL0140P ITA NOS.9276-78/MUM/2004 ASSESSMENT YEAR: NOT APPLICABLE M/S. LARSEN & TOUBRO, L & T HOUSE, BALLARD ESTATE MUMBAI- 400038 / VS. D C IT ( TDS ) CIRCLE - 1 , SCINDIA HOUSE, R.NO.132. 1 ST FLOOR, N. M. ROAD, MUMBAI-38 LARSEN & TOUBRO LTD. 2 (REVENUE) (RESPONDENT ) P.A. NO. AAACL0140P / ASSESSEE BY SHRI PARAG A. VYAS (AR) / REVENUE BY SHRI JASBIR CHO UHAN , (DR) / DATE OF HEARING : 20/05/2016 / DATE OF ORDER: 15/06/2016 / O R D E R PER BENCH: THESE APPEALS ARE FILED BY THE ASSESSEE AND REVENUE PERTAINING TO SAME ASSESSEE AND FILED AGAINST SEPAR ATE ORDERS OF LD. ORDER OF LD. COMMISSIONER OF INCOME TAX (APP EALS), {(IN SHORT CIT(A)}, PASSED AGAINST ASSESSMENT ORDER U/ S 195(2) OF THE ACT BY THE AO. 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI PARAG A. VYAS, AUTHORISED REPRESENTATIVE (AR) ON BEHALF OF THE ASSESSEE AND BY SHRI JASBIR CHAUHAN, DEPARTM ENTAL REPRESENTATIVE (CIT-DR) ON BEHALF OF THE REVENUE 3 . IN ALL THESE APPEALS, THE SOLITARY ISSUE INVOLVE D IS WITH REGARD TO HOLDING THE ASSESSEE AS ASSESSEE-IN-DEFA ULT ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE, ON THE A MOUNT OF PAYMENTS MADE BY THE ASSESSEE TO M/S. J. RAY MC DER MOTT EASTERN HEMISPHERE LTD. THE STAND OF THE ASSESSEE I N ALL THESE YEARS BEFORE US WAS THAT IT WAS NOT REQUIRED TO DED UCT TAX AT LARSEN & TOUBRO LTD. 3 SOURCE ON THE PAYMENTS MADE TO AFORESAID PAYEE COMP ANY FOR THE REASON THAT INCOME OF THE SAID PAYEE COMPANY WA S NOT TAXABLE IN INDIA AS IT DID NOT HAVE ANY PERMANENT ESTABLISHMENT (PE) IN INDIA. BUT THE CLAIM OF THE A SSESSEE WAS NOT ACCEPTED AND ORDER WAS PASSED U/S 195(2) WHEREI N ASSESSEE WAS HELD TO BE LIABLE FOR DEDUCTION OF TAX AT SOURCE MAINLY ON THE GROUND THAT THE SAID PAYEE HAD A PERM ANENT ESTABLISHMENT IN INDIA AND THEREFORE, ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE ON THE PAYMENTS MADE BY IT TO THE SAID PAYEE. 3.1. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT(A) AND RAISED VARIOUS GROUNDS IN THE APPEAL BEFORE THE LD. CIT(A). IT WAS OBSERVED BY THE LD. CIT(A) IN HI S APPEAL ORDER THAT SINCE IT HAS BEEN HELD IN THE ORDERS PAS SED BY THE AO OF THE PAYEE COMPANY THAT IT (I.E. PAYEE COMPANY ) HAD A PERMANENT ESTABLISHMENT IN INDIA, THEREFORE, THE AS SESSEES BELIEF WAS ERRONEOUS AND THEREFORE ITS CLAIM WAS RE JECTED AND THE ASSESSEE WAS HELD TO BE LIABLE FOR DEDUCTION OF TAX AT SOURCE. ON THE ASPECT OF COMPUTATION OF QUANTUM OF PROFITS AND QUANTIFICATION OF AMOUNT OF TDS RELATING TO GRA NTING UP OF TAX LIABILITY ETC. PART RELIEF WAS GIVEN BY THE LD. CIT(A). 3.2. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT(A). 3.3. DURING THE COURSE OF HEARING BEFORE US, LD. COUNSE L OF THE ASSESSEE, SUBMITTED A COPY OF ORDER PASSED BY THE T RIBUNAL LARSEN & TOUBRO LTD. 4 DATED 06.05.2016 IN THE CASE OF THE SAID PAYEE COMP ANY. ON THE BASIS OF THIS ORDER, IT WAS CONTENDED BY HIM TH AT THE TRIBUNAL HAS HELD THAT PE OF THE SAID COMPANY WAS T O BE ASCERTAINED ON THE BASIS OF PROJECT OF THE SAID COM PANY AND NOT ON THE BASIS OF ITS OFFICE AND SINCE THE PROJEC T OF THE SAID COMPANY DID NOT HAVE WORK DURATION OF MORE THAN 9 M ONTHS, IT DID NOT HAVE A PE IN INDIA. IT WAS SUBMITTED THA T UNDER THESE CIRCUMSTANCES THIS CASE SHOULD BE DECIDED IN FAVOUR OF THE ASSESSEE. IT WAS ALSO SUBMITTED THAT FOR THE PU RPOSE OF LIMITED VERIFICATION OF FACTS THESE CASES MAY BE SE NT BACK TO THE FILE OF THE AO TO ENABLE HIM TO APPLY THE APPEAL OR DERS AS MAY BE PASSED IN CONSEQUENCE TO THE ORDER OF THE TRIBUN AL OF THE PAYEE COMPANY. 3.4. LD. DR RELIED UPON THE ORDERS OF THE AO BUT DID NO T HAVE ANY SERIOUS OBJECTION TO THE SUBMISSIONS MADE BY TH E LD. COUNSEL OF THE ASSESSEE. 3.5. WE HAVE GONE THROUGH THE SUBMISSION MADE BEFORE US AS WELL AS OF ORDERS OF THE LOWER AUTHORITIES. THE ISS UES INVOLVED IN THE APPEALS BEFORE US PERTAIN TO DETERMINATION O F THE LIABILITY OF ASSESSEE FOR DEDUCTION OF TAX AT SOURC E ON THE PAYMENTS MADE BY IT TO THE AFORESAID PAYEE COMPANY IN PURSUANCE TO A CONTRACT ENTERED WITH THE SAID COMPA NY. THE BONE OF CONTENTION AND POINT OF DETERMINATION OF TH ESE ISSUES HAS BEEN THAT WHETHER THE INCOME OF THE PAYEE COMPA NY WAS TAXABLE IN INDIA OR NOT, WHICH DEPENDED IN TURN UPO N THE FACT THAT WHETHER THE SAID PAYEE COMPANY HAD ITS PERMANE NT LARSEN & TOUBRO LTD. 5 ESTABLISHMENT IN INDIA OR NOT. THE ORDERS BY THE LO WER AUTHORITIES WERE PASSED UNDER THE PREMISE THAT THE SAID PAYEE COMPANY HAD A PE IN INDIA, BUT, NOW THE TRIBUNAL HA S IN PRINCIPLE HELD THAT THE SAID PAYEE COMPANY DID NOT HAVE PE IN INDIA AND FOR THE LIMITED PURPOSE OF VERIFICATION O F SOME FACTS, THE APPEALS WERE SENT BACK TO THE FILE OF THE AO. N OW, THE AO HAS TO PASS FRESH ORDERS IN THE HANDS OF PAYEE COMP ANY TO GIVE EFFECT TO THE ORDER OF THE TRIBUNAL. UNDER THESE CI RCUMSTANCES, WE ARE INCLINED TO SEND THE ISSUES RAISED BEFORE US IN ALL THESE APPEALS BACK TO THE FILE OF THE AO. THE AO SHALL PA SS THE ORDER AFTER FRESH ORDERS ARE PASSED BY THE CONCERNED ASSE SSING OFFICER IN THE HANDS OF THE PAYEE COMPANY. IN CASE IT IS HELD BY THE SAID OFFICER THAT THE SAID PAYEE COMPANY DID NO T HAVE PE IN INDIA, THEN THE ASSESSEE CANNOT BE HELD LIABLE F OR DEDUCTION OF DEDUCT TAX AT SOURCE AND THEREFORE, THE ORDERS I N THE CASE OF ASSESSEE COMPANY SHALL BE PASSED ACCORDINGLY. IN CA SE IT IS HELD BY THE AO IN HANDS OF PAYEE THAT IT HAD A PE I N INDIA DURING THE RELEVANT PERIOD, THEN THE AO OF THE ASSE SSEE SHALL BE FREE TO PASS FRESH ORDER AND SHALL ALSO DECIDE O THER CONNECTED ISSUES AFRESH WHICH HAVE BEEN RAISED BEFO RE US. THE AO SHALL GIVE ADEQUATE OPPORTUNITY OF HEARING TO TH E ASSESSEE TO ENABLE IT TO FILE REQUISITE DETAILS AND DOCUMENT ARY EVIDENCES. THE ASSESSEE IS FREE TO TAKE ALL LEGAL AND FACTUAL ISSUES AS MAY BE DEEMED APPROPRIATE UNDER THE LAW. THUS, WITH THE SE DIRECTIONS ALL THE ISSUES RAISED BEFORE US ARE SENT BACK TO THE FILE OF THE AO WITH THE AFORESAID DIRECTIONS. LARSEN & TOUBRO LTD. 6 4. IN THE RESULT, ALL THESE APPEALS ARE TREATED AS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JUNE, 2016. SD/- (C.N. PRASAD) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER MUMBAI; DATED : 15/ 06 /2016 CTX? P.S/. .. # $%&'&($ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !'# / THE RESPONDENT. 3. $# $# % ( ) / THE CIT, MUMBAI. 4. $# $# % / CIT(A)- , MUMBAI 5. ()* # !+ , $# # +- , / DR, ITAT, MUMBAI 6. *. / / GUARD FILE. / BY ORDER, '#( ! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI