Doosan Infracore Co. Ltd., CHENNAI V. DCIT International Taxation 1(1), CHENNAI

ITTPA 97/CHNY/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3605 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 10-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 20-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Source of fund
• Section: 143(3)

Judgement Text

आयकर अपीलीय अिधकरण ’डी’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI माननीय ,ी महावीर िसंह, उपा23 एवं माननीय ,ी मनोज कु मार अ8वाल ,लेखा सद; के सम3। BEFORE HON’BLE SHRI MAHAVIR SINGH, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ IT(TP)A No.97/Chny/2018 (िनधाCरण वषC / Assessment Year: 2010-11) Doosan Infracore Co. Ltd. C/o Doosan Infracore Construction Equipment India Pvt. Ltd., HTC Towers, 6th Floor, No.41, GST Road, Guindy, Chennai – 600 032. बनाम/ V s. DCIT, International Taxation-1(1), Chennai. थायी लेखा सं./जीआइ आर सं./P AN /GI R No . AAC C D -5 2 8 6 - A (अपीलाथ /Appellant) : ( थ / Respondent) अपीलाथ की ओरसे/ Appellant by : Shri Ashik Shah (C.A) – Ld. AR थ की ओरसे/Respondent by : Shri M. Murali (CIT) –Ld. DR सुनवाई की तारीख/Date of Hearing : 11-07-2022 घोषणा की तारीख /Date of Pronouncement : 11-07-2022 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2010-11 arises out of the final assessment order passed by Ld. AO on 25.10.2018 u/s. 143(3) r.w.s. 144C(13) of the Act pursuant to the directions of Ld. Dispute Resolution Panel-2, Bengaluru u/s. 144C(5) of the Act. The grounds taken by the assessee are as under: 1.1 The lower authorities have erred in finalizing an order of assessment which suffers such as being passed in violation of principles of natural justice and the provisions devoid of merits and are contrary to facts on record and applicable law, and without adequate inquiries and as such is liable to be quashed. IT(TP)A No.97/Chny/2018 - 2 - 1.2 The lower authorities have finalized their order with improper adjustments to the Appellant, as a result of misapplying the provisions of the Act and by adopting procedure to finalize the adjustment, without considering the information, arguments provided by the Appellant. 2. Repatriation of Surplus funds treated as income chargeable to tax Appellant 2.1 The lower authorities have, in the facts and circumstances of the case and in law surplus funds received from LO as income chargeable to tax. 2.2. The lower authorities have, in the facts and circumstances of the case and specifying the nature of income and the head under which the same will be subjected provisions of the Act. 2.3. The lower authorities have, in the facts and circumstances of the case and in law that the Appellant failed to prove the source and evidence of fund transfer without appreciating the evidences including certificate from RBI permitting to establish LO in India, Form 15CB obtained from Chartered Accountant, and copy of letters filed with RBI for closure of LO. 2.4 The lower authorities have, in the facts and circumstances of the case and in law, failed to appreciate principle of mutuality, which states that no one can derive profit from oneself. The receipt in question is Appellant’s own contributions to its LO and does not represent any income earned in India. 2.5 The lower authorities have, in the facts and circumstances of the case and in law, erred in not considering plethora of judicial decisions which highlight that the AO does carry out business activity in India, thus failing to appreciate that there could be no other source of funds to LO except contribution from HO. The Appellant prays that directions be given to grant all such relief arising from the grounds of appeal mentioned supra and all consequential relief thereto. The grounds of appeal raised by the Appellant herein are without prejudice to each other. The Appellant craves leave to add to and/or to alter, amend, rescind, modify the grounds herein above or produce further documents before or at the time of hearing of this Appeal. 2. The Ld. AR, at the outset, submitted that assessee’s own money as given to liaison office has been remitted back and the same could not be construed as the income of the assessee. For the same, Ld. AR filed additional evidence and other documentary evidences which are placed on record. The additional evidence is in the shape of RBI approval for incurring the expenditure and approval of RBI for remittance of Rs.123.76 Lacs to the assessee on closure of liaison office. The Ld. CIT-DR, on the other hand, submitted that the onus was not discharged by the assessee to show that the remittances did not IT(TP)A No.97/Chny/2018 - 3 - have income element. Having heard rival submissions, our adjudication would be as under. 3. The material facts are that the assessee is a non-resident company. It transpired that the assessee received a sum of Rs.123.76 Lacs. It was explained by the assessee that it set up a liaison office in Mumbai during the year 2006 with Reserve Bank of India (RBI) approval for the limited purpose of collating market intelligence for starting a company for purchase and sale of construction equipment in India. It was further submitted that liaison office was merely functioning as a communication channel as per RBI norms. The main objective of setting up the liaison office in India was to collect information about possible market opportunities for construction machinery in India. All expenses in connection with the liaison office were entirely met through inward remittances of foreign exchange from the assessee as per RBI norms. However, during AY 2010-11, the liaison office ceased its activities and the surplus funds of Rs.123.76 Lacs left with it after meeting all the expenses was remitted to the head office. However, in the absence of sufficient documentary evidences forthcoming from the assessee, Ld. AO treated the same as the income of the assessee. 4. During proceedings before Ld. DRP, the assessee produced additional evidences which were subject to remand report. However, the position remained the same and Ld. DRP rejected the submissions of the assessee for want of sufficient documentary evidences Aggrieved, the assessee is in further appeal before us. 5. From the facts, we find certain strength in the arguments of Ld. AR that the remittance did not have income element and only the IT(TP)A No.97/Chny/2018 - 4 - surplus funds as left out with liaison office was remitted back to the assessee. Apparently, all the transactions have been done with RBI approval. However, the assessee could not fully discharge the onus to establish the fact that the remittance did not have income element. Therefore, considering the facts of the case as well as in the light of additional documents filed by the assessee before us, we deem it fit to grant another opportunity to assessee to substantiate its case before Ld. AO. Therefore, the matter is remitted back to the file of Ld. AO for fresh adjudication with a direction to the assessee to substantiate it stand as aforesaid. No other ground has been urged in the appeal. 6. The appeal stands allowed for statistical purposes. Order pronounced on 11th July, 2022. Sd/- (MAHAVIR SINGH) उपा23 /VICE PRESIDENT Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद; / ACCOUNTANT MEMBER चे*ई / Chennai; िदनांक / Dated : 11-07-2022 EDN/- आदेश की Wितिलिप अ 8ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आयु (अपील)/CIT(A) 4. आयकर आयु /CIT 5. िवभागीय ितिनिध/DR 6. गाड फाईल/GF