DDIT (IT) 4(1), MUMBAI V. MERILL LYNCH INTERNATIONAL, MUMBAI

ITA 940/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70600 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 01-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 10-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY SHRIVASTAVA
• Keywords: Double taxation relief

Judgement Text

, IN THE IN IN THE IN IN THE IN IN THE INCOME TAX APPELLATE TRIBUNAL COME TAX APPELLATE TRIBUNAL COME TAX APPELLATE TRIBUNAL COME TAX APPELLATE TRIBUNAL L BENCH, L BENCH, L BENCH, L BENCH, MUMBAI MUMBAI MUMBAI MUMBAI . , !' !' !' !' , . BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI B. R B. R B. R B. RAMAKOTAIAH AMAKOTAIAH AMAKOTAIAH AMAKOTAIAH, AM , AM , AM , AM & && & SHRI SHRI SHRI SHRI VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO, ,, , JM JMJM JM ./ I.T.A. N I.T.A. N I.T.A. N I.T.A. NO. O.O. O. 940/MUM/2012 940/MUM/2012 940/MUM/2012 940/MUM/2012 ( #$ #$ #$ #$ % % % % / ASSESSMENT YEAR : 2008-09) ASSISTANT DIRECTOR OF INCOME TAX (IT)-4(1), 133, SCINDIA HOUSE, BALLARD PIER MUMBAI-400038 $ $ $ $ / VS. M/S MERILL LYNCH INTERNATIONAL C/O-M/S G.M. KAPADIA & CO, 1001, RAHEJA CHAMBERS, 213, NARIMAN POINT, MUMBAI-400021 & ./ '' ./ PAN/GIR NO. : AABCM1026G ( &( / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( )*&( / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) &( &( &( &( + + + + / APPELLANT BY : MR. AJAY SHRIVASTAVA )*&( )*&( )*&( )*&( , ,, , + + + + /RESPONDENT BY : MR. HARSH SHAH $ $ $ $ , ,, , - - - - / DATE OF HEARING : 1 ST AUGUST 2013 .% .% .% .% , ,, ,- - - - /DATE OF PRONOUNCEMENT: 8 TH AUGUST 2013 / / O R D E R PER : !' , . . / VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 14.11.2011 OF COMMISSIONER OF INCOME TAX(APPEALS) F OR THE ASSESSMENT YEAR 2008-09. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE UNDERWRITING COMMI SSION AND REIMBURSEMENT OF EXPENSES RECEIVED BY THE ASSESSEE FOR ISSUE OF GDR/FCCB ETC. FROM INDIAN COMPANIES IS NOT TAXABLE AS FEES FOR TECHNICAL SERVICES UNDER INDIA-UK TREATY WITHOUT CO NSIDERING THE FOLLOWING FACTS:- I. ALL RECEIPTS ON ACCOUNT OF ISSUE OF GDR & FCCB A RE IN THE NATURE OF NORMAL FUND FOR THE ISSUING COMPANY AND I T LOSES ITS ITA NO. 940/M/2012 MERILL LYNCH INTERNATIONAL 2 SPECIAL CHARACTER OF HAVING BEEN RECEIVED OUTSIDE I NDIA, ONCE THE SAME HAS BEEN RECEIVED BY THE ISSUING COMPANY A ND THE ISSUING COMPANY CAN UTILIZE FOR ITS OWN PURPOSE. II. THE ULTIMATE BENEFIT OF THE SERVICES RENDERED B Y THE 0DB IS ULTIMATELY WITH THE ISSUING INDIAN COMPANY AND HENC E THE SERVICES RENDERED HAVE BEEN ULTIMATELY BEEN UTILIZE D IN INDIA AND ACCORDINGLY THE SAID RECEIPT IS ACCRUING OR ARI SING IN INDIA. III. THE SERVICES OF INVESTMENT BANKING DEFINITELY FALL WITHIN THE DEFINITION OF FEES FOR TECHNICAL SERVICES (FTS) WIT HIN THE MEANING OF INCOME TAX ACT AND HENCE IS TAXABLE IN I NDIA. IV. THE MAKE AVAILABLE COMPONENT IS PRESENT WITH THE RECEIPT AS IN TERMS OF LATEST RULINGS IN PERFETTI VAN MELLE HOLDING B.V. IN AAR NO. 869 OF 2010 DATED 09.12.2011, THE EXPRESSIO N MAKE AVAILABLE WOULD MEAN THAT THE RECIPIENT OF THE SER VICE SHOULD DERIVE AN ENDURING BENEFIT AND WOULD BE IN A POSITI ON TO DERIVE BENEFIT FROM SIMILAR SERVICE INDEPENDENT OF THE PAR TY RENDERING THE SERVICES. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) ON THE ABOVE GROUND(S) BE SET ASIDE AND THAT OF THE ASSESS ING OFFICER RESTORED. 3. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND C ONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. AR HAS POINTED OUT THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY THIS TRIBU NAL IS ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 IN ITA NO. 275 9/M/2009 VIDE ORDER DATED 30.8.2011 THEREFORE, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW. 4. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CARE FUL PERUSAL OF THE RECORD WE NOTE THAT THE ASSESSEE IS A COMPANY INCOR PORATED UNDER THE LAWS OF UNITED KINGDOM AND OPERATING AS FII IN INDI A. THE ASSESSEE ALSO ACTS AS LEAD MANAGER AND UNDERWRITER TO THE ADRS/GD RS ISSUED BY INDIAN ITA NO. 940/M/2012 MERILL LYNCH INTERNATIONAL 3 COMPANIES ABROAD FOR RAISING CAPITAL. SINCE THE ASS ESSEE HAS UNDERTAKEN INVESTMENT BANKING TRANSACTIONS OVERSEAS IN RESPECT OF WHICH IT HAD RECEIVED CERTAIN AMOUNT FROM INDIAN COMPANIES, IT W AS CLAIMED BY THE ASSESSEE THAT THE AFORESAID ACTIVITY CARRIED ON OUT SIDE INDIA AND HENCE THERE IS NO INCOME FOR SUCH ACTIVITIES WHICH IS REC EIVED OR DEEMED TO BE RECEIVED BY THE ASSESSEE IN INDIA. THUS THE ASSESSE E CONTENDED BEFORE THE AO THE INCOME FROM THESE TRANSACTIONS OUTSIDE I NDIA DOES NOT FALL WITHIN THE SCOPE OF TOTAL INCOME U/S 5 OF THE ACT. SINCE IT DID NOT ACCRUE OR ARISE IN INDIA ALTERNATIVELY THE ASSESSEE CONTENDED THAT THE SAID INCOME WOULD NOT BE TAXABLE AS PER ARTICLE 13 OF INDO-UK D TAA AS THE ACTIVITY OF RENDERING SERVICES DO NOT SATISFY THE MAKE AVAILAB LE CLAUSE. THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND HELD THAT THE SERVICES RENDERED BY THE ASSESSEE HAVE BEEN UTILISED IN INDI A, THEREFORE, THEY ARE TAXABLE AS FEES FOR TECHNICAL SERVICES U/S 9(1)(VII ) OF THE ACT. ON APPEAL, THE CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSES SEE BY FOLLOWING THE ORDER OF THIS TRIBUNAL IS ASSESSEES OWN CASE IN AS SESSMENT YEAR 2005-06. WE NOTE THAT FOR THE ASSESSMENT YEAR 2005-06 THE TR IBUNAL HAS DECIDED THIS ISSUE IN PARA 6 AS UNDER: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF THE AU THORITIES BELOW. WE FIND THAT THE ISSUE UNDER CONSIDERATION IS SQUAR ELY COVERED BY THE DECISION OF ITAT MUMBAI BENCHES IN THE CASE OF RAYMOND LTD. V. DCJT (SUPRA), WHEREIN IT WAS HELD THAT NEITHER MANAGEMENT COMMISSION, NOR UNDERWRITING COMMISSION NOR EVEN SE LLING COMMISSION/CONCESSION WOULD AMOUNT TO FEES FOR TECH NICAL SERVICES WITHIN MEANING OF DTA WITH UK AND, CONSEQU ENTLY, THERE WAS NO OBLIGATION ON PART OF ASSESSEE-COMPANY TO DE DUCT TAX UNDER SECTION 195. THE CIT(A) FOLLOWING THE SAID D ECISION HELD THAT THE FEE RECEIVED BY THE ASSESSEE IS NOT LIABLE TO TAX IN INDIA AS ITA NO. 940/M/2012 MERILL LYNCH INTERNATIONAL 4 THE SAME DOES NOT CONSTITUTE FEES FOR TECHNICAL SER VICES UNDER THE INDIA-UK DTAA READ WITH THE MEMORANDUM OF UNDERSTAN DING FORMING PART OF THE INDIA- USA DTAA AS THE TECHNICA L SERVICES WERE NOT MADE AVAILABLE BY THE ASSESSEE TO THE INDIAN CO MPANIES. THEREFORE, WE FIND NO INFIRMITY IN THE FINDINGS OF THE CIT(A) AND HENCE, THE ORDER OF THE CIT(A) IS HEREBY UPHELD. 5. FOLLOWING THE EARLIER ORDER OF THIS TRIBUNAL WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE CIT(A). 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF AUGUST 2013 / , .% 0 1$2 8 TH 3 - , 3 SD/- SD/- ( . ) (B. RAMAKOTAIAH) ACCOUNTANT MEMBER ( !' ) # (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 8 TH AUGUST 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI