LINKLATERS, MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX (IT) 3(1) (2), MUMBAI

MA 367/MUM/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 6775 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 01-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Assessment Year: 2009-2010
• Appeal Filed On: 28-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T A KHAN
• Assessee Lawyers: SSH J D MISTRI; NIRAJ SHETH ARS
• Keywords: Services rendered outside India; Permanent establishment
• Section: 234B

Judgement Text

M.A NO. 367/MUM/2017 A.Y 2009 - 10 LINKLATERS VS. DY. CIT 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI L BENCH, MUMBAI BEFORE SHRI G.S PANNU, AM & SHRI RAVISH SOOD, JM M.A.NO. 367/MUM/2017 (ARISING OUT OF ITA NO. 2297/MUM/2014) (ASST. YEAR : 2009 - 10) LINKLATERS C/O DELOITTEHASKINS & SELLS LLP, INDIABULLS FINANCE CENTRE, TOWER 3, 28 TH FLOOR, SENAPATI BAPAT MARG, ELPHINSTONE ROAD (WEST), MUMBAI 400 013. V S. DEPUTY COMMISSIONER OF INCOME - TAX (INTERNATIONAL TAXATION) 3(1)(2), MUMBAI. PAN NO. AABFL2160M (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SH. J.D MISTRI, SR. ADVOCATE AND NIRAJ SHETH., ARS DEPARTMENT BY : SHRI T.A KHAN, D.R DATE OF HEARING : 09/03/2018 DATE OF PRONOUNCEMENT : 01 /0 6 /2018 O R D E R PER RAVISH SOOD , JUDICIAL MEMBER THE PRESENT M ISCELLANEOUS A PPLICATION FILED BY THE ASSESSEE APPLICANT ARISES OUT OF THE ORDER DATED 08/02/2017 PASSED BY THE TRIBUNAL UNDER SEC. 254(1) OF THE INCOME - TAX ACT, 1961 (FOR SHORT ACT) IN ITA NO. 2297/MUM/2014 FOR ASSESSMENT YEAR 2009 - 10. 2. BRIEFLY STATED, THE ASSESSEE BEING AGGRIEVED WITH THE ORDER PASSED BY THE COMMISSIONER OF INCOME - TAX (APPEALS) - 10, MUMBAI [HEREINAFTER REFERRED TO AS CIT(A)] HAD FILED AN APPEAL WITH THE INCOME - TAX APPELLATE TRIBUNAL [FOR SHORT REFERRED TO AS TRIBUNAL] ON 04.04.2014. THE APPEAL M.A NO. 367/MUM/2017 A.Y 2009 - 10 LINKLATERS VS. DY. CIT 2 FILED BY THE ASSESSEE WAS ALLOWED FOR STATISTICAL PURPOSES BY THE TRIBUNAL, VIDE ITS ORDER DATED 08.02.2017 . 3. THE ASSESSEE HAD IN ITS APPEAL ASSAILED THE ORDER OF THE CIT(A) ON MULTIPLE GROUNDS, VIZ. (I). THE CIT(A) HAD WRONGLY CONCLUDED THAT THE ASSESSEE HAD A PERMANENT ESTABLISHMENT (FOR SHORT PE) IN INDIA UNDER ARTICLE 5(2)(K) OF THE INDIA - U.K TAX TREATY FOR THE ENTIRE YEAR; (II). THE CIT(A) HAD ERRED IN HOLDING THAT THE ENTIRE RECEIPTS OF THE ASSESSEE WERE LIABLE TO TAX IN INDIA; (III). THE CIT(A) WAS IN ERROR IN NOT SPECIFICALLY HOLDING THAT THE ASSESSEE DID NOT HAVE A FIXED BASE IN INDIA; (IV). THE CIT(A) HAD ERRED BY FAILING TO GIVE A SPECIFIC DIRECTION TO THE A.O TO DELETE THE ADDITION MADE ON ACCOUNT OF DISBURSEMENTS; ( IV). THE CIT(A) HAD FAILED TO GIVE A SPECIFIC DIRECTION TO THE A.O TO DELETE INTEREST CHARGED UNDER SEC. 234B; (V). THE CIT(A) WAS IN ERROR IN NOT ARRIVING AT A SPECIFIC FINDING THAT THE ASSESSEE WAS ENTITLED TO INDIA - U.K TAX TREATY; AND (VI). THE CIT(A) H AD ERRED IN NOT QUASHING THE PENALTY INITIATED BY THE A.O UNDER SEC. 271(1)(C). ALTERNATIVELY, THE ASSESSEE HAD ALSO CHALLENGED THE REJECTION OF ITS CLAIM BY THE CIT(A) THAT AS THE THRESHOLD PERIOD OF 90 DAYS CONTEMPLATED IN ARTICLE 5(2)(K)(I) DID NOT EXCE ED DURING THE 12 MONTHS PERIOD RELATING TO NOVEMBER, 2008 TO MARCH, 2009, HENCE AS THERE WAS NO PE IN INDIA FOR THE SAID PERIOD, THUS NO INCOME FOR SUCH PERIOD COULD BE BROUGHT TO TAX IN INDIA. 4. THE ASSESSEE HAS FILED THE PRESENT APPLICATION SEEKING REC TIFICATION OF CERTAIN MISTAKES, WHICH AS PER THE ASSESSEE HAD CREPT IN THE ORDER PASSED BY THE TRIBUNAL WHILE DISPOSING OFF THE APPEAL, VIDE ITS ORDER DATED 08.02.2017, AS UNDER: (I). THE MAIN CLAIM OF THE ASSESSEE THAT IT HAD NO PE IN INDIA AS PER ARTIC LE 5(2)(K) DURING THE ENTIRE YEAR, I.E ASSESSMENT YEAR 2009 - 10 HAD NOT BEEN ADJUDICATED BY THE TRIBUNAL. RATHER, THE MATTER HAD BEEN RESTORED TO THE FILE OF THE A.O FOR ADJUDICATING THE ALTERNATIVE CLAIM OF THE ASSESSEE THAT AS IT HAD NO PE IN INDIA DURING THE PERIOD M.A NO. 367/MUM/2017 A.Y 2009 - 10 LINKLATERS VS. DY. CIT 3 RELATING TO NOVEMBER, 2008 TO MARCH, 2009, HENCE ITS INCOME FOR THE SAID PERIOD COULD NOT BE TAXED IN INDIA. (II). THE TRIBUNAL WHILE RESTORING THE ISSUE AS TO WHETHER THE ASSESSEE HAD A PE IN INDIA DURING THE PERIOD RELATING TO NOVEMBER, 2008 TO MARCH, 2009 FOR FRESH ADJUDICATION TO THE FILE OF THE A.O, HAD INSTEAD OF DISPOSING OFF THE OTHER ISSUES WHICH WERE COVERED BY THE ORDERS OF THE COORDINATE BENCHES OF THE TRIBUNAL, ERRED IN RESTORING THE SAME ALSO TO THE FILE OF THE A.O, WITH A DIRECTI ON TO DECIDE THE SAME AFTER ADJUDICATING THE ISSUE OF EXISTENCE OF PE OF THE ASSESSEE IN INDIA FOR THE AFORESAID PERIOD. THUS, THE ASSESSEE HAD BY FILING THE PRESENT APPLICATION SOUGHT, VIZ. (I). ADJUDICATION OF GROUND NO. 1 AS TO WHETHER THE CIT(A) HAD ERRED IN HOLDING THAT THE ASSESSEE HAD A PE IN INDIA UNDER ARTICLE 5(2)(K) OF THE INDIA - U.K TAX TREATY FOR THE ENTIRE YEAR; AND (II) . ADJUDICATION OF GROUNDS OF APPEAL NOS. 4 TO 17 . 5. THE LD. AUTHORISED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE SH. J.D MISTRI, SENIOR COUNSEL, DURING THE COURSE OF HEARING OF THE APPLICATION TOOK US THROUGH THE ORDER PASSED BY THE TRIBUNAL IN CONTEXT OF THE AFORESAID ISSUES. IT WAS SUBMITTED BY THE LD. A.R THAT AS THE NON - ADJUDICATION OF THE AFORESAID ISSUES WHICH WERE SPECIFICALLY RAISED BEFORE THE TRIBUNAL DID TANTAMOUNT TO A MISTAKE APPARENT FROM RECORD, HENCE THE ORDER PASSED BY THE TRIBUNAL WAS AMENABLE FOR RECTIFICATION UNDER SEC. 254(2) OF THE ACT. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) DID NOT CONTROVERT THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE. 6. WE HAVE HEARD THE AUTHORISED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDER PASSED BY THE TRIBUNAL, DATED 08.02.2017 AND THE MATERIAL AVAILABLE ON RECORD. WE ARE PERSUADED TO SUBSCRIBE TO THE CONTENTION OF THE LD. A.R THAT THE ASSESSEE IN ITS APPE AL BEFORE US, HAD VIDE M.A NO. 367/MUM/2017 A.Y 2009 - 10 LINKLATERS VS. DY. CIT 4 GROUND OF APPEAL NO. 1 SPECIFICALLY ASSAILED THE FINDING OF THE CIT(A) THAT THE ASSESSEE HAD A PE IN INDIA UNDER ARTICLE 5(2)(K) OF THE INDIA - U.K TAX TREATY, FOR THE ENTIRE YEAR. HOWEVER, THE TRIBUNAL WHILE DISPOSING OFF THE APPEAL H AD INADVERTENTLY CONFINED ITS ADJUDICATION AS REGARDS THE ALTERNATE CONTENTION OF THE ASSESSEE, I.E IF AT ALL THERE WAS A PE IN INDIA, THE SAME COULD ONLY BE FOR A PART OF THE YEAR I.E APRIL, 2008 TO OCTOBER, 2008 AND HAD ONLY TO THE SAID EXTENT RESTORED T HE ISSUE FOR FRESH ADJUDICATION TO THE FILE OF THE A.O. WE THUS, ARE OF THE CONSIDERED VIEW THAT PURSUANT TO THE NON - ADJUDICATION OF THE AFORESAID SPECIFIC GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE THAT IT HAD NO PE IN INDIA UNDER ARTICLE 5(2)(K)(I) FOR THE ENTIRE YEAR, THE ORDER PASSED BY THE TRIBUNAL IS SUFFERING FROM A MISTAKE, WHICH BEING GLARING, APPARENT, PATENT AND OBVIOUS FROM RECORD, RENDERS THE SAME AMENABLE FOR RECTIFICATION. WE THUS, RECALL THE ORDER PASSED BY THE TRIBUNAL ON 08.02.2017 FOR T HE LIMITED PURPOSE OF ADJUDICATING THE GROUND OF APPEAL NO. 1, WHICH READS AS UNDER: 1. THE LEARNED COMMISSIONER (APPEALS) ERRED IN HOLDING THAT THE APPELLANT HAD A PERMANENT ESTABLISHMENT IN INDIA UNDER ARTICLE 5(2)(K) OF THE INDIA - UK TAX TREATY FOR THE ENTIRE YEAR. 7. WE ARE FURTHER PERSUADED TO BE IN AGREEMENT WITH THE CLAIM OF THE LD. A.R THAT AS THE OTHER ISSUES ASSAILED BY THE ASSESSEE IN ITS APPEAL WERE COVERED BY THE ORDERS OF THE COORDINATE BENCHES OF THE TRIBUNAL, HENCE THEY SHOULD NOT HAVE BEEN RESTORED TO THE FILE OF THE A.O WITH A DIRECTION TO ADJUDICATE THE SAME AFTER THE ISSUE AS TO WHETHER THE ASSESSEE HAD A PE IN INDIA DURING THE PERIOD NOVEMBER, 2008 TO MARCH, 2009 WAS DETERMINED BY HIM. WE FIND OURSELVES TO BE IN AGREEMENT WITH THE CLAIM OF THE LD. A.R THAT THE NON - ADJUDICATION OF THE OTHER ISSUES RAISED BY THE ASSESSEE HAD LED TO A MISTAKE APPARENT FROM RECORD. WE THUS, PROCEED WITH AND ADJUDICATE THE GROUNDS OF APPEAL NOS. 4 TO 17 WHICH WERE RAISED BY THE ASSESSEE IN APPEAL BEF ORE US, AS UNDER: - M.A NO. 367/MUM/2017 A.Y 2009 - 10 LINKLATERS VS. DY. CIT 5 GROUND S OF APPEAL NO S . 4 , 6, 7 AND 1 0 : 8 . THE ASSESSEE SUBMITTED THAT THE CIT(A) HAD ERRED IN UPHOLDING THE ACTION OF THE A.O IN TAXING THE ENTIRE RECEIPTS OF GBP 33,02,927 IN INDIA. IT IS THE CLAIM OF THE ASSESSEE THAT ONLY THE FEES RELATABLE TO THE SERVICES RENDERED BY THE ASSESSEE IN INDIA COULD BE TAXED AS ATTRIBUTABLE TO THE PE IN INDIA UNDER ARTICLE 7 OF THE INDIA - U.K TAX TREATY. THE ASSESSEE IN ORDER TO FORTIFY ITS CLAIM, SUBMITTED THAT THE TRIBUNAL WHILE DISPOSING OFF THE MISCELLANEOUS APPLICATION NO. 392/MUM/2014 FILED BY THE ASSESSEE, HAD VIDE ITS ORDER DATED 20.02.2015 FOR A.Y 1997 - 98 CONCLUDED THAT ONLY THE INCOME RELATED TO THE SERVICES RENDERED BY THE ASSESSEE IN INDIA WOULD BE LIABLE TO TAX IN INDIA. THE ASSESSEE HA D FURTHER SUBMITTED THAT THE TRIBUNAL WHILE DISPOSING OFF THE APPEALS OF THE REVENUE FOR A.YS 1998 - 99 TO 2001 - 02, VIDE ITS ORDER DATED 07.09.2015, HAD CONCLUDED THAT ONLY THE INCOME IN RESPECT OF THE WORK PERFORMED BY THE ASSESSEE IN INDIA WAS LIABLE TO BE BROUGHT TO TAX IN INDIA. IT WAS THUS THE CLAIM OF THE ASSESSEE BY TAKING SUPPORT OF THE AFORESAID FACTS, THAT THE CIT(A) IN THE PRESENT CASE OUGHT TO HAVE ISSUED DIRECTIONS TO THE A.O ON THE SAME TERMS. THE ASSESSEE HAD FURTHER SUBMITTED THAT THE CIT(A) H AD ERRED IN NOT APPLYING THE PROVISIONS OF THE ARTICLE 7(3) OF THE INDIA - U.K TAX TREATY. IN ORDER TO DRIVE HOME ITS AFORESAID CONTENTION, IT IS SUBMITTED BY THE ASSESSEE THAT A SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL IN THE ASSESSES OWN CASE FOR A.YS 200 3 - 04 AND 2007 - 08, WHILE DISMISSING THE APPEALS OF THE REVENUE. PER CONTRA, THE LD. D.R RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 9 . WE HAVE HEARD THE AUTHORISED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE THAT ONLY THE FEES RELATABLE TO THE SERVICES RENDERED IN INDI A COULD BE TAXED AS ATTRIBUTABLE TO THE ASSESSES PE IN INDIA IS SQUARELY COVERED BY THE ORDER PASSED BY THE M.A NO. 367/MUM/2017 A.Y 2009 - 10 LINKLATERS VS. DY. CIT 6 TRIBUNAL WHILE DISPOSING OFF THE MISCELLANEOUS APPLICATION OF THE ASSESSEE FOR A.Y 1997 - 98, VIZ. M.A NO. 392/MUM/2014 (ARISING OUT OF ITA NO. 1711/ MUM/2004), DATED 20.02.2015. THE TRIBUNAL IN ITS AFORESAID ORDER HAD OBSERVED AS UNDER: WE HAVE HEARD THE LD. D.R AND ALSO PERUSED THE RECORD. ADMITTEDLY, THE LD. A.R HAD PLACED RELIANCE ON THE DECISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF CLI FFORD CHANCE (SUPRA) AT THE TIME OF HEARING. THERE SHOULD NOT BE ANY DISPUTE THAT THE DECISION RENDERED BY THE SPECIAL BENCH SHOULD BE PREFERRED OVER TO THE DECISION OF THE DIVISION BENCH. HENCE, THE IMPUGNED ORDER OF THE TRIBUNAL SUFFERS FROM THE MISTAKE APPARENT FROM RECORD IN NOT FOLLOWING THE DECISION OF SPECIAL BENCH AND HENCE THE SAME REQUIRES TO BE CORRECTED. THE ISSUE REGARDING THE QUANTUM OF INCOME ATTRIBUTABLE TO PERMANENT ESTABLISHMENT IS DISCUSSED IN PARAGRAPH 12 OF THE ORDER. IN VIEW OF THE DIS CUSSIONS MADE SUPRA, WE ORDER THE EXISTING PARAGRAPH 12 OF THE ORDER OF THE TRIBUNAL DATED 8.8.2004 PASSED IN ITA NO. 1711/MUM/2004 RELATING TO AY 1997 - 98 SHALL BE DELETED AND IN THAT PLACE FOLLOWING PARAGRAPH SHALL BE INSERTED: 12. WE SHALL TAKE UP THE APPEAL FILED BY THE REVENUE. T H E GROUNDS NUMBERED AS 1 & 4 RELATE TO THE ASSESSMENT O F PROFESSIONAL RECEIPTS. THOUGH THE ASSESSING OFFICER HAS ASSESSED THE ENTIRE PROFESSIONAL RECEIPTS AS THE INCOME OF THE ASSESSEE, WE NOTICE THAT THE LD. CIT(A) HAS HELD T HAT, ONLY THAT PORTION OF THE INCOME RELATING TO THE SERVICES PERFORMED IN INDIA ALONE IS ASSESSABLE UNDER THE ACT. BOTH THE PARTIES ADMITTED THAT THE TRIBUNAL HAS CONSIDERED IDENTICAL ISSUE IN AY 1995 - 96 AND HAS HELD THAT THE ENTIRE PROFITS DIRECTLY OR IN DIRECTLY ATTRIBUTABLE TO THE PERMANENT ESTABLISHMENT IS ASSESSABLE AND ACCORDINGLY UPHELD THE ORDER OF THE ASSESSING OFFICER IN THAT YEAR. HOWEVER, THE LD. A.R SUBMITTED THAT THE SPECIAL BENCH OF TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE IN THE CASE OF CI T VS. CLIFFORD CHANCE (143 ITD 1), WHEREIN THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY HE SUBMITTED THAT THE ORDER OF THE LD. CIT(A) ON THIS ISSUE SHOULD BE UPHELD. WE AGREE WITH THE CONTENTIONS OF THE LD. A.R. SINCE THE DECISION OF SPECIAL BENCH IS BINDING ON US, WE DIRECT THE ASSESSING OFFICER TO ASSESS THE INCOME IN ACCORDANCE WITH DECISION RENDERED BY THE SPECIAL BENCH IN THE ABOVE CITED CASE. ACCORDINGLY WE REJECT THE GROUND URGED BY THE REVENUE ON THIS ISSUE. WE FURT HER FIND THAT THE TRIBUNAL GOING BY THE BINDING PRECEDENCE OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ADIT VS. CLIFFORD CHANCE (2013) 143 ITD 1 (SB)(MUM), HAD WHILE DISPOSING OFF THE APPEALS FILED BY THE REVENUE IN THE ASSESSES OWN CASE FOR A.Y 1998 - 99 TO 2001 - 02, DATED 07.09.2015 (COPY PLACED AT PAGE 46 - 70 ) OF APB, CONCLUDED THAT THE PROFITS WHICH ARE ATTRIBUTABLE TO THE PE CAN ONLY BE ASSESSED IN INDIA. M.A NO. 367/MUM/2017 A.Y 2009 - 10 LINKLATERS VS. DY. CIT 7 1 0 . WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ISSUE BEFORE US AND ARE PERSUADED T O BE IN AGREEMENT WITH THE LD. A.R THAT AS OBSERVED BY US HEREINABOVE, THE ISSUE THAT ONLY THE FEES RELATABLE TO THE SERVICES RENDERED IN INDIA CAN ONLY BE TAXED AS ATTRIBUTABLE TO THE ASSESS E ES PE IN INDIA UNDER ARTICLE 7 OF THE INDIA - U.K TAX TREATY, IS SQUARELY COVERED BY THE ORDERS PASSED BY THE TRIBUNAL IN THE ASSESSES OWN CASE FOR THE AFOREMENTIONED YEARS. WE THUS, ARE OF THE CONSIDERED VIEW THAT AS OBSERVED BY THE TRIBUNAL IN THE ASSESSES OWN CASE FOR A.Y 1997 - 98 AND A.YS 1998 - 99 TO 2001 - 02 BY FOLLO WING THE ORDER OF THE SPECIAL BENCH OF THE ITAT, MUMBAI IN THE CASE OF ADIT VS. CLIFFORD CHANCE (2013) 143 ITD 1 (SB)(MUM), THE FEES RELATABLE TO THE SERVICES RENDERED IN INDIA CAN ONLY BE TAXED AS ATTRIBUTABLE TO THE PE IN INDIA. THUS, IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS WE DIRECT THE A.O TO TAX THE FEES WHICH IS RELATABLE TO THE SERVICES RENDERED IN INDIA AS ATTRIBUTABLE TO THE ASSESSES PE IN INDIA. THE GROUNDS OF APPEAL NOS . 4, 6, 7 AND 10 RAISED BY THE ASSESSEE ARE ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. GROUND OF APPEAL NO. 5 : 1 1 . THE ASSESSEE HAS CLAIMED BEFORE US THAT THE CIT(A) OUGHT TO HAVE DIRECTED THE A.O TO EXCLUDE THE INCOME OF THE ASSESSEE FOR THE PERIOD NOVEMBER, 2008 TO MARCH, 2009. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE SAID CONTENTION OF THE ASSESSEE. AS WE HAVE ALREADY, VIDE OUR ORDER DATED 08.02.2017 DIRECTED THE A.O FOR ADJUDICATING THE ISSUE AS TO WHETHER THE ASSESSEE HAD A SERVICE PE IN INDIA DURING THE PERIOD NOVEMBER, 2008 TO MARCH, 2009, HENC E THE ADJUDICATION OF THE PRESENT GROUND OF APPEAL WOULD BE CONSEQUENTIAL TO THE DETERMINATION OF THE PE ISSUE FOR THE AFORESAID PERIOD BY THE A.O. THUS, THE GROUND OF APPEAL NO. 5 HAVING BEEN RENDERED AS CONSEQUENTIAL TO THE ADJUDICATION OF THE PE ISSUE F OR THE PERIOD NOVEMBER, 2008 TO MARCH, 2009, IS DISPOSED OF IN TERMS OF OUR AFORESAID OBSERVATIONS. M.A NO. 367/MUM/2017 A.Y 2009 - 10 LINKLATERS VS. DY. CIT 8 GROUND OF APPEAL NO. 8 : 1 2 . IT IS CLAIMED BY THE ASSESSEE THAT WITHOUT PREJUDICE TO ITS AFORESAID CONTENTIONS, EVEN OTHERWISE THE CIT(A) OUGHT TO HAVE DIRECTED THE A.O TO HAVE EXCLUDED THE FEES RELATED TO NON - RESIDENT PROJECTS FOR SERVICES RENDERED OUTSIDE INDIA. WE ARE OF THE CONSIDERED VIEW THAT IN TERMS OF OUR OBSERVATIONS RECORDED AT PARA 10 HEREINABOVE, THE GROUND OF APPEAL NO. 8 WOULD BE RENDERED AS INFRUCTUOUS. GROUND OF APPEAL NO. 9 : 1 3 . THE ASSESSEE HAD CLAIMED THAT WITHOUT PREJUDICE TO ITS AFORESAID CONTENTIONS, THE CIT(A) OUGHT TO HAVE APPRECIATED THAT AS PER EXPLANATION 3 OF SEC. 9(1)(I ), ONLY INCOME RELATED TO OPERATIONS CARRIED OUT IN INDIA CAN BE BROUGHT TO TAX IN INDIA, AND NO PART OF THE INCOME RELATED TO SERVICES CARRIED OUTSIDE INDIA CAN BE BROUGHT TO TAX IN INDIA. WE ARE OF THE CONSIDERED VIEW THAT ON THE BASIS OF OUR OBSERVATION S RECORDED AT PARA 10 HEREINABOVE, AS ONLY THE FEES RELATABLE TO THE SERVICES RENDERED IN INDIA CAN ONLY BE TAXED AS ATTRIBUTABLE TO THE PE IN INDIA, THE GROUND OF APPEAL NO. 9 WOULD BE RENDERED AS INFRUCTUOUS.. GROUND OF APPEAL NO. 11 : 1 4 . THE ASSESSEE HAD CLAIMED THAT THE CIT(A) HAD ERRED IN NOT APPLYING THE DECISION OF SPECIAL BENCH OF ITAT, MUMBAI IN THE CASE OF CLIFFORD CHANCE 33 TAXMANN.COM 200. IT IS STATED BY THE ASSESSEE THAT THE CIT(A) WHILE RELYING ON THE ORDER OF THE TRIBUNAL IN THE ASSESSE S OWN CASE FOR A.Y 1995 - 96, HAD FAILED TO APPRECIATE THAT THE SAID OBSERVATIONS OF THE TRIBUNAL AS REGARDS ATTRIBUTION OF INCOME WAS NOT ACCEPTED BY THE SPECIAL BENCH OF THE ITAT, MUMBAI IN THE CASE OF ADIT VS. CLIFFORD CHANCE (2013) 143 ITD 1 (SB)(MUM) . THE ASSESSEE IN SUPPORT OF ITS CONTENTION HAD RELIED ON THE ORDER PASSED BY TRIBUNAL WHILE DISPOSING OFF THE MISCELLANEOUS APPLICATION IN ITS OWN CASE FOR A.Y 1997 - 98, DATED M.A NO. 367/MUM/2017 A.Y 2009 - 10 LINKLATERS VS. DY. CIT 9 20.02.2015. WE ARE OF THE CONSIDERED VIEW THAT AS WE HAVE ALREADY OBSERVED AT PA RA 10 HEREINABOVE, THAT AS CONCLUDED BY THE TRIBUNAL IN THE ASSESSES OWN CASE FOR A.YS 1998 - 99 TO 2001 - 02 BY FOLLOWING THE ORDER OF THE SPECIAL BENCH OF THE ITAT, MUMBAI IN THE CASE OF ADIT VS. CLIFFORD CHANCE (2013) 143 ITD 1 (SB)(MUM), ONLY THE FEES R ELATABLE TO THE SERVICES RENDERED IN INDIA CAN ONLY BE TAXED AS ATTRIBUTABLE TO THE PE IN INDIA, HENCE THE GROUND OF APPEAL NO. 11 WILL BE RENDERED AS INFRUCTUOUS. GROUND OF APPEAL NOS. 12 & 13 : 1 5 . THE ASSESSEE HAD FURTHER ASSAILED THE ORDER OF THE CIT( A) ON THE GROUND THAT HE HAD ERRED IN NOT SPECIFICALLY HOLDING THAT THE ASSESSEE DID NOT HAVE A FIXED BASE IN INDIA. IT IS FURTHER CLAIMED BY THE ASSESSEE THAT THE CIT(A) HAD ERRED IN NOT SPECIFICALLY HOLDING THAT USE OF HOTELS OR PLACES PROVIDED BY CLIENT CANNOT BE CONSIDERED AS AN OFFICE OR PLACE OF WORK. WE ARE OF THE CONSIDERED VIEW THAT AS THE CIT(A) HAD UPHELD THE ORDER OF THE A.O THAT THE ASSESSEE HAD A PE IN INDIA AS PER ARTICLE 5(2)(K), HENCE THE GROUNDS OF APPEAL NO. 12 & 13 WOULD BE RENDERED AS I NFRUCTUOUS. GROUND OF APPEAL NO. 14 : 1 6 . THE ASSESSEE HAD SUBMITTED THAT THE CIT(A) OUGHT TO HAVE DIRECTED THE A.O TO HAVE DELETED THE ADDITIONS MADE ON ACCOUNT OF REIMBURSEMENTS. THE LD. A.R IN ORDER TO SUPPORT HIS AFORESAID CONTENTION HAD SUBMITTED THAT THE TRIBUNAL IN THE ASSESSES OWN CASE FOR A.Y 1995 - 96 IN LINKLATERS LLP VS. ITO (INTERNATIONAL TAXATION) (2010) 132 TTJ 20 (MUM) HAD CONCLUDED THAT REIMBURSEMENT OF EXPENSES CANNOT BE TREATED AS THE INCOME OF THE ASSESSEE. IT IS FURTHER SUBMITTED BY THE ASSESSEE THAT A SIMILAR VIEW HAD ALSO BEEN TAKEN IN ITS OWN CASE FOR A.Y 1996 - 97, VIDE ORDER DATED 07.05.2014. 1 7 WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE AFORESAID CONTENTION OF THE ASSESSEE AND ARE PERSUADED TO BE IN AGREEMENT WITH THE SAME . WE FIND THAT THE ISSUE THAT REIMBURSEMENT OF EXPENSES CANNOT BE TREATED AS THE INCOME OF THE ASSESSEE IS COVERED BY THE ORDER OF THE M.A NO. 367/MUM/2017 A.Y 2009 - 10 LINKLATERS VS. DY. CIT 10 TRIBUNAL IN THE ASSESSES OWN CASE FOR A.Y 1995 - 96, VIZ. LINKLATERS LLP VS. ITO (INTERNATIONAL TAXATION) (2010) 132 TTJ 2 0 (MUM). THE TRIBUNAL WHILE CONCLUDING AS HEREINABOVE, HAD OBSERVED AS UNDER: 133. HAVING HEARD THE RIVAL SUBMISSIONS AND HAVING PERUSED THE MATERIAL ON RECORD, WE ARE INCLINED TO UPHOLD THE GRIEVANCE OF THE ASSESSEE. THE REIMBURSEMENTS RECEIVED BY THE AS SESSEE ARE IN RESPECT OF SPECIFIC AND ACTUAL EXPENSES INCURRED BY THE ASSESSEE AND DO NOT INVOLVE ANY MARK - UP, THERE IS REASONABLE CONTROL MECHANISM IN PLACE TO ENSURE THAT THESE CLAIMS ARE NOT INFLATED, AND THE ASSESSEE HAS FURNISHED SUFFICIENT EVIDENCE T O DEMONSTRATE THE INCURRING OF EXPENSES. THERE IS THUS NO GOOD REASON TO MAKE ANY ADDITION TO INCOME IN RESPECT OF THESE REIMBURSEMENTS OF EXPENSES. THE ACTION OF THE CIT(A), AS LEARNED COUNSEL RIGHTLY CONTENDS, ON PURE SURMISES AND CONJECTURES. IN VIEW OF THE ABOVE DISCUSSIONS, WE DIRECT THE AO DELETE THE DISALLOWANCE OF EXPENSES AS SUSTAINED BY THE CIT(A) AND HOLD THAT NO PART OF REIMBURSEMENTS OF EXPENSES RECEIVED BY THE ASSESSEE, ON THE FACTS OF THIS CASE, BE TREATED AS INCOME OF THE ASSESSEE. THE ASSES SEE GETS THE RELIEF ACCORDINGLY. WE THUS, BEING OF THE CONSIDERED VIEW THAT THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY THE ORDER PASSED BY THE TRIBUNAL IN THE ASSESSES OWN CASE FOR A.Y 1995 - 96, HENCE FINDING NO REASON TO TAKE A DIFFERENT VIEW, RESPECTFULLY FOLLOW THE SAME. WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS DIRECT THE A.O TO DELETE THE ADDITION OF RS. 74,92,280/ - CLAIMED BY THE ASSESSEE TO HAVE BEEN RECEIVED TOWARDS REIMBURSEMENT OF EXPENSES, AFTER MAKING NECESSARY VERIFICATIONS AND SATISFYING HIMSELF WITH THE SAID CLAIM OF THE ASSESSEE. THE GROUND OF APPEAL NO.1 4 IS ALLOWED, SUBJECT TO OUR AFORESAID OBSERVATIONS.. GROUND OF APPEAL NO. 15 : 18 . THE ASSESSEE HAD ASSAILED THE ORDER OF THE CIT(A ) ON THE GROUND THAT HE HAD FAILED TO SPECIFICALLY DIRECT THE A.O TO DELETE THE INTEREST LEVIED UNDER SEC. 234B. THE ASSESSEE IN SUPPORT OF ITS CONTENTION HAD RELIED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: (I) DIT VS. NGC NETWORKS LLC (2009) 313 ITR 187 (BOM); (II) LINKLATERS LLP VS. ITO (INTERNATIONAL TAXATION) (2010) 132 TTJ 20 (MUM); AND. M.A NO. 367/MUM/2017 A.Y 2009 - 10 LINKLATERS VS. DY. CIT 11 (III) ORDERS PASSED BY ITAT, MUMBAI IN ASSESSES OWN APPEALS, VIZ. (I). ADIT VS. LINKLATERS (2014) 40 CCH 478 (MUM) (II).ITO (INTERNATIONAL TAXATION) VS. LINKLATERS & PAINES (2014) 41 CCH 239 (MUM) ; (III). ITO (IT) - 31, MUMBAI VS. LINKLATERS (ITA NO, 1712/MUM/2014; DT. 07.09.2015; AND (IV). DDIT (INTL. TAXATION), MUMBAI VS. LINKLATERS (ITA NO. 4908/MUM/2010; DT. 16/12/2015). 19 . WE FIN D THAT THE ISSUE THAT WHEN A DUTY IS CAST ON THE PAYER TO PAY THE TAX AT SOURCE, ON FAILURE, NO INTEREST CAN BE IMPOSED ON THE PAYEE ASSESSEE , IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF DIT VS. NGC NETWORKS LL C (2009) 313 ITR 187 (BOM). THE AFORESAID JUDGMENT OF THE HONBLE HIGH COURT HAD THEREAFTER BEEN FOLLOWED BY THE TRIBUNAL WHILE DISPOSING OFF THE REVENUES APPEALS IN THE ASSESSES OWN CASE FOR A.YS 1995 - 96, 1996 - 97, 1997 - 98, 1998 - 99 TO 2001 - 02 AND A.YS. 200 3 - 04 TO 2007 - 08. WE THUS , FINDING THAT THE ISSUE INVOLVED IS SQUARELY COVERED BY THE AFORESAID JUDGMENT OF THE HONBLE HIGH COURT AND THE ORDERS OF THE TRIBUNAL IN THE ASSESSES OWN CASE , THUS, RESPECTFULLY FOLLOW THE SAME. THE A.O IS DIRECTED TO DELETE THE INTEREST IMPOSED UNDER SEC. 234B . THE GROUND OF APPEAL NO.15 IS ALLOWED. GROUND OF APPEAL NO. 16 : 2 0 . THE ASSESSEE HAD FURTHER SUBMITTED THAT THE CIT( A) HAD ERRED IN NOT SPECIFICALLY HOLDING THAT THE ASSESSEE WAS ENTITLED TO THE BENEFITS OF THE INDIA - U.K TAX TREATY. THE LD. A.R SUBMITTED THAT THE TRIBUNAL WHILE DISPOSING OFF THE APPEALS IN THE ASSESS E ES OWN CASE, VIZ. (I). A.Y 1995 - 96, ORDER DATED 16.07 .2010; (II). A.Y 1997 - 98, ORDER DATED 08.08.2014; AND (III). A.YS 1998 - 99 TO 2001 - 02, VIDE ORDER DATED 07.09.2015, HAD CATEGORICALLY OBSERVED THAT THE ASSESSEE WAS ENTITLED FOR THE BENEFITS OF THE INDIA - U.K TAX TREATY. M.A NO. 367/MUM/2017 A.Y 2009 - 10 LINKLATERS VS. DY. CIT 12 2 1 . WE HAVE GIVEN A THOUGHTFUL CONSI DERATION TO THE ISSUE BEFORE US AND FIND THAT THE SAME IS COVERED BY THE AFORESAID ORDERS OF THE TRIBUNAL IN THE ASSESSE E S OWN CASE. WE FIND THAT THE TRIBUNAL WHILE CONCLUDING THAT THE ASSESSEE WAS INDEED ELIGIBLE TO THE BENEFITS OF INDIA - U.K TAX TREATY AS LONG AS ENTIRE PROFITS OF THE PARTNERSHIP FIRM ARE TAXED IN U.K, HAD OBSERVED AS UNDER: 79. IN VIEW OF THE ABOVE DISCUSSIONS, AS ALSO BEARING IN MIND THE ENTIRETY OF THE CASE, WE HOLD THAT THE ASSESSEE WAS INDEED ELIGIBLE TO THE BENEFITS OF INDIA - UK TAX TREATY, AS LONG AS ENTIRE PROFITS OF THE PARTNERSHIP FIRM ARE TAXED IN UK WHETHER IN THE HANDS OF THE PARTNERSHIP FIRM THOUGH THE TAXABLE INCOME IS DETERMINED IN RELATION TO THE PERSONAL CHARACTERISTICS OF THE PARTNERS, OR IN THE HANDS OF THE PARTNERS DIRECTLY. WE THUS, FINDING OURSELVES TO BE IN AGREEMENT WITH THE AFORESAID VIEW OF THE TRIBUNAL, THUS RESPECTFULLY FOLLOW THE SAME IN TERMS OF THE OBSERVATIONS THEREIN RECORDED. THE GROUND OF APPEAL NO. 16 RAISED BY THE ASSESSEE IS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS . GROUND OF APPEAL NO. 17 : 2 2 . THE ASSESSEE HAS CLAIMED THAT THE CIT(A) HAD ERRED IN NOT QUASHING THE PENALTY PROCEEDINGS INITIATED BY THE A.O UNDER SEC. 271(1)(C). WE ARE OF THE CONSIDERED VIEW THAT AS THE A.O HAD O NLY INITIATED THE PENALTY PROCEEDING, HENCE THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS NOT ONLY PREMATURE BUT ALSO DOES NOT ARISES FROM THE IMPUGNED ORDER. THE GROUND OF APPEAL NO. 17 IS DISMISSED. THE MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE I S ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRONOUNCED ON 01 /0 6 /2018 SD/ - SD/ - (G.S PANNU) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 01 .0 6 .2018. M.A NO. 367/MUM/2017 A.Y 2009 - 10 LINKLATERS VS. DY. CIT 13 COPY TO: 1. THE ASSESSEE - M/S. LINKLATERS C/O DELOITTE HASKINS & SELLS LLP, INDIABULLS FINANCE CENTRE, TOWER - 3, 28 TH FLOOR, SENAPATI BAPAT MARG, ELPHINSTONE ROAD (WEST), MUMBAI 400 013. 2. THE REVENUE DEPUTY COMMISSIONER OF INCOME - TAX (INTERNATIONAL TAX), 3(1)(2), MUMBAI. 3. LD.CIT (INTERNATIONAL TAXATION), MUMBAI. 4. LD. CIT(A) - 10, MUMBAI. 5. THE D.R., MUMBAI. 6. GUARD FILE. BY ORDER (DY./ASST. REGISTRAR), ITAT, MUMBAI.