Appeal Details
Counselvise Citation
[2024] 101 COUNSELVISE.COM (IT) 5834 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
9 month(s) 19 day(s)
Appellant
Respondent
Appeal Type
Miscellaneous Application
Pronouncement Date
10-07-2024
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
D
Next Hearing Date
11-04-2024
Assessment Year
2019-2020
Appeal Filed On
21-09-2023
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “D” BENCH: NEW DELHI BEFORE SHRI G.S.PANNU, VICE PRESIDENT & SHRI KUL BHARAT, JUDICIAL MEMBER M.A.Nos.381 & 382/Del/2023 [In ITA Nos.1756 & 1776/Del/2022] [Assessment Years : 2018-19 & 2019-20] NCR Global Solutions Ltd., Lakeview Dr. Airside Business Park, Swords Co. Dublin Ireland, Dublin-999999. PAN-AADCN5762E vs DCIT, Circle-2(2)(2), Int.Taxation, New Delhi. APPELLANT RESPONDENT Appellant by Shri Nageshwar Rao & Ms. Viyushti Rawat, Adv. Respondent by Shri Kanv Bali, Sr.DR Date of Hearing 12.04.2024 Date of Pronouncement 11.07.2024 ORDER PER KUL BHARAT, JM : By way of these two Miscellaneous applications, the assessee is seeking modification of the order dated 10.04.2023 passed by the Tribunal in ITA Nos.1756 & 1776/Del/2022 for the Assessment Years 2018-19 & 2019-20 respectively. The contention of the assessee in both the years are identical hence, both the Miscellaneous Applications are being disposed off by way of common order for the sake of brevity. M.A.No.381/Del/2023 [In ITA No.1756/Del/2022] [Assessment Year : 2018-19] 2. First, we take up assessee’s Miscellaneous Application No.381/Del/2023 in ITA No.1756/el/2022 for the Assessment Year 2018-19. Page | 2 3. Ld. Counsel for the assessee reiterated the submissions as made in the application. For the sake of clarity, the relevant contents of the application of the assessee are reproduced as under:- “APPLICATION UNDER SECTION 254(2) OF INCOME-TAX ACT, 1961 ('THE ACT) SEEKING RECTIFICATION OF ORDER DATED 10 APRIL 2023 PASSED IN RESPECT OF THE CAPTIONED APPEAL JITA NO. 1756/DEL/2022] FOR ASSESSMENT YEAR ("AY") 2018-19 MOST RESPECTFULLY SHOWETH: 1. Captioned order of Bench 'D' of Hon'ble Income Tax Appellate Tribunal, New Delhi (Hon'ble Tribunal') dated 10.04.2023 deletes addition, made to Applicant's returned income on pretext of profit attribution. Applicant is most grateful for deletion of the unlawful addition, However, present Miscellaneous Application respectfully seeks rectification of mistakes apparent, by way of non- adjudication of main contention about non-existence of Permanent Establishment of any type. Copy of order is enclosed herewith as Annexure I for your Honours kind reference. 2. Relevant background/facts of the case and our submission in this regard is stated below for kind consideration: (A) Recapitulation of relevant background/facts for ready reference: 3. Applicant is a company incorporated in Ireland and is a tax resident of Ireland. Applicant is eligible for benefits under India-Ireland Tax Treaty ('the Tax Treaty' or 'DTAA'), Applicant does not have any presence or office in India. 4. Applicant is engaged in the business of development of software and manufacturing of other information technology related hardware products. Applicant designs, develops and produces application software, hardware and other related services for banks, retailer, Page | 3 restaurants, small business and telecommunication industry. In India, NCR Corporation (India) Private Limited (NCR India") was appointed as distributor of the hardware and software on a non-exclusive basis under Distributor Agreement dated 01.01.2001 ("Distributor Agreement") (Pg 151-168 of factual PB). 5. Applicant also provides licenses/rights to NCR affiliates in GSL- licensed trade name, trademark and technology intangibles. NCR affiliates pay royalty to the Applicant for the use of the same NCR India also manufactures goods using the brand name, proprietary information and technology owned by the Applicant, for which NCR India pays royalty fee, in respect of the goods sold by it to third parties. 6. During FY 2017-18, the Applicant received consideration from NCR India under following heads: - Sale of software: INR 142,12,58,503 - Sale of goods: INR 37,10,69,493 - Royalty for use of technology and brand: INR 28,89,94,067 - Reimbursement of expenses: INR 56,17,152 7. Applicant filed Return of Income ('RoI') for AY 2018-19 on 30.11.2018, which was subsequently revised on 30.03.3019 u/s 139(5) and 07.06.2019 u/s 139(9) of the Act declaring total income of INR 28,89,94,067. 8. Ld. Assessing Officer ("AO") passed draft assessment order dated 29.09.2021 under Section 143(3) read with Section 144C(1) of the Act, wherein it was inter alia alleged that NCR India constitutes fixed place and dependent agent permanent establishment ("PE") of the Applicant in India. Applicant's returned income was proposed be assessed al INR 72,81,14,426 after attributing a sum of INR 43,91,20,359 i.e., 70% of net profit (calculated at 35% of gross revenue from sale of sale of software and goods) to the alleged PE. Page | 4 Applicant's objections before Ld. Dispute Resolution Panel (DRP") against draft assessment order were routinely rejected. Copy of directions issued by Ld. DRP on 17.05.2022 are enclosed herewith as Annexure II. 9. In final assessment order 06.06.2022 Ld. AO determined income of INR 72.81,14,426. Copy of final assessment order dated 06.06.2022 is enclosed herewith as Annexure III. 10. Applicant preferred appeal before this Hon'ble Tribunal bearing ITA No. 1756/Del2022. Copy of Form 36 along with grounds of appeal are enclosed herewith as Annexure IV. 11. Appeal was heard on 28.02.2023. By common order dated 10 April 2023, Hon'ble Tribunal decided the appeals for AY(s) 2018-19 and 2019-20 involving identical issues. Some errors apparent from record crept in as detailed herein below, which deserve to be kindly considered for rectification by Hon'ble Tribunal, hence this present Miscellaneous Application. B) Non adjudication of grounds of appeal nos. 2 to 5 (along with sub-grounds) 12. Conclusion reached by Ld. AO/DRP in holding that Applicant had fixed place PE and agency PE in India in the form of NCR India was objected to vide grounds of appeal nos. 2 to 5 (reproduced in para 2 of the order). It was the Applicant's submission that tax department had failed to discharge initial burden of proof to establish PE of Applicant in India. Reliance in this context was placed on decisions of Hon'ble Supreme Court in case of ADIT vs. E-Funds IT Solution Inc. [2017] 399 ITR 34 (SC), It was further submitted that the basic tests laid down for constitution of a fixed place PE in the case of Formula One World Championship (2017) 394 ITR 80 (SC) were not satisfied in the present case (kind reference is invited to para 5, internal pages 7, 8 and 11 of Hon'ble Tribunal's order). Page | 5 13. On a without prejudice basis (ground no. 6), it was submitted that since the impugned transactions of sale of software/ hardware undertaken from outside India were subjected to transfer pricing scrutiny in hands of the alleged PE (NCR India), which was found to be compensated at arm's length, nothing further would be attributable to the alleged PE in India following decision of Hon'ble Supreme Court in case of DIT vs. Morgan Stanley & Co. (2007) 292 ITR 416 (SC), Summary chart was filed on 10.03.2023 providing required details. Copy of chart filed on 10.03.2023 is enclosed herewith as Annexure V. 14. Hon'ble Tribunal considered the details in para 5 of the order. Findings of Hon'ble Tribunal are in para 7 to 9 of the order, wherein the addition made by Ld. AO/ DRP was directed to be deleted by accepting alternate plea of the Applicant qua no further attribution to be made to the alleged PE. 15. It is respectfully submitted that Hon'ble Tribunal has inadvertently not adjudicated on the main contentions raised in grounds of appeal nos, 2 to 5 i.e., absence of any material to show existence of fixed place and agency PE in India. While applicant is grateful for relief granted, the basic issue of absence of material to establish existence of PE also deserves consideration of this Hon'ble Tribunal, for which the Applicant respectfully prays. 16. It may kindly be appreciated that the plea against incorrect attribution of income was raised and argued by Applicant's authorised representative only on without prejudice basis in the event the main contentions did not meet approval of this Hon'ble Tribunal. Non- adjudication of grounds of appeal 2 to 5 relating to main contentions constitutes mistake apparent qualifying for rectification u/s 254(2) of the Act. Page | 6 17. Applicant respectfully prays for adjudication on aforementioned grounds of appeals, after giving suitable opportunity of being heard to the Applicant. 18. Applicant affirms that it has not filed any other Miscellaneous Application against the captioned ITA 1756/Del/2022. 19. This is a bona fide application and made in the interest of justice. Our Submission; 20. Above inadvertent errors in the subject order, deserve to be rectified in the larger interests of justice for which applicant prays. 21. Reliance in this regard is placed on the decision of Hon'ble Supreme Court in the case of Honda Siel Power Product Ltd. vs. CIT (2007) 295 ITR 466 (SC) wherein Hon'ble SC laid down the principle that if error or omission is a manifest error, then Hon'ble Tribunal would be justified in rectifying such mistake. 22. It is further respectfully submitted that decision of Hon'ble Supreme Court in case of CIT vs. Reliance Telecom Ltd.: C.A. Nos. 7110 and 7111 of 2021 wherein powers of Hon'ble Tribunal under section 254(2) of the Act were held to be restrictive, would not alter the situation. In this context kind attention is invited to larger bench decision of Hon'ble Supreme Court in case of S. Nagaraj and Ors. vs. State of Karnataka and Ors.: (1993) Supp. (4) SCC 595, wherein it was held that technicalities cannot come in the way of doing justice by correcting errors, and it is legal and constitutional obligation of the Court to set it right by recalling its order. It appears that this larger bench decision was not placed before Hon'ble Supreme Court while deciding case of Reliance Telecom (supra). It is our respectful submission that larger bench decision in S Nagaraj (supra), still holds the field. 23. Thus, in view of the factual and legal submissions made above, it is respectfully prayed that the Hon'ble Tribunal may recall order dated Page | 7 10.04.2023 and may kindly adjudicate grounds 2 to 5 relating to non- existence of PE. 24. Appellant shall be grateful for an opportunity of hearing in this matter. Applicant prays accordingly.” 4. On the other hand, Ld. Sr. DR for the Revenue opposed these submissions of the assessee. He submitted that there is no mistake apparent from records which need rectification. The present application filed by the assessee for this reason deserves to be rejected. 5. Heard the Ld. Representatives of the parties and perused the material placed before us. During the appellate proceedings, the assessee had raised the following grounds of appeal in ITA No.1756/Del/2022 (Assessment Year 2018-19):- “Based on the facts and circumstances of the case and in law, NCR Global Solutions Limited ("NCR GSL" or "the Company" or "the Appellant") respectfully craves, leave to prefer an appeal under Section 253(1)(d) of the Income-tax Act, 1961 ("the Act") against final assessment order dated 6 June 2022 ("impugned order") (received by the Company on 7 June 2022) issued under Section 143(3) read with Section 144C(13) of the Act, by the Deputy Commissioner of Income-tax, Circle-2(2)(2), International Tax, New Delhi ("Ld. AO") purportedly in pursuance of the Directions dated 17 May 2022 issued under Section 144C(5) by the Dispute Resolution Panel -2 ("Ld. DRP"), New Delhi, interalia on the following grounds which are without prejudice to each other: 1. That Ld. AO/ Ld. DRP erred, in law and on facts, in computing the total income of the Appellant at INR 72,81,14,426 as against returned income of INR 28,89,94,067. Page | 8 2. Impugned Order and Directions issued by Ld. DRP are based on non/ incorrect appreciation of facts, ignoring to consider submissions and material on record as also wrong interpretation and application of law and therefore, are bad in law. 3. Impugned order and Directions issued by Ld. DRP, grossly erred, in alleging that Appellant has a Fixed place Permanent Establishment ("PE") for business in India, to carry on the business of sale of software products without indicating any basis for same. 3.1. Ld. AO! Ld. DRP have failed to provide even a vague indication on why contentions of Appellant are incorrect and further in substituting their own imaginary facts as basis for alleging that the Appellant has a Fixed place of business in India to carry on the business. 3.2. Impugned order erred in ignoring relevant and complete facts brought on record explaining Appellant's business with Indian entity and proceeded on unsubstantiated and imaginary presumptions to hold existence of PE and further perpetuated such error by attributing income on imaginary and baseless presumptions. 3.3. Ld. AO erred and Ld. DRP erred in confirming existence of a Fixed place of business in India through NCR Corporation India Private Limited ("NCR India"), an independent legal entity conducting its own business, without indicating an iota of evidence to support that the place of business of NCR India is used or is at the disposal of the Appellant, either formally or informally and in the process ignoring material placed on record by the Appellant. 3.4. Impugned order erred in assuming that the Appellant is procuring orders and executing sales to Indian customers through NCR India without appreciating that NCR India transacts with Indian customers on its own account on a Page | 9 principal-to-principal basis and not as an Agent of the Appellant. 3.5. Ld. AO! Ld. DRP have lightly ignored the fact on record that significant portion of the goods and software sold by the Appellant to NCR India were used by NCR India itself in its manufacturing business and thus, the allegation of NCR India procuring orders and executing sales on behalf of Appellant is ex- facie erroneous and without any basis consequently destroying very basis of allegation on existence of Agency PE. 4. Ld. AO erred and Ld. DRP erred in confirming the allegation that NCR India is acting as a agent on behalf of the Appellant and thus, the Appellant has an Agency PE in India without any factual foundation / citing any basis. 4.1. The Ld. AOI Ld. DRP has failed to prove on facts or provide any cogent reason or basis for concluding that the Appellant has an Agency PE in India. 4.2. The Ld. AOI Ld. DRP has erred, in law and on facts, in alleging Agency PE on the surmise that NCR India works mainly or wholly on behalf of the Appellant, NCR India has authority to conclude contracts on behalf of the Appellant and NCR India habitually secures orders in India, mainly or wholly for the Appellant. 4.3. Impugned order has failed to appreciate that business activities undertaken by the Appellant and NCR India are on principal-to- principal basis and that NCR India is not an agent appointed by the Appellant. 5. Ld. AO/Ld. DRP has failed to discharge the burden of proof while arbitrarily holding that Appellant has a place of business in India and that NCR India has satisfied the conditions to be treated either as a Fixed place PE or has an Agency PE in India. Page | 10 5.1. Ld. DRP has erred in law and on facts, in drawing adverse conclusion on existence of Agency PE and Fixed place PE merely by placing reliance on clause 6.1 (a) and 6.1 (b) of the Distribution Agreement in vacuum without appreciating the business model of the Appellant and NCR India. 5.2. Both Ld. AOI Ld. DRP have erred, in law and on facts, by not passing a speaking order, not considering material brought on record and assuming facts without bringing on record any material to establish the allegations made against Appellant. 6. Without prejudice to the above grounds of appeal, Ld. AO/ Ld. DRP have erred, in law and on fact, in attributing income to alleged PE without indicating any valid basis, purely based on speculations and without taking cognizance of the fact that profits/ income earned in relation to activities in India (by alleged PE, i.e., NCR India), have already been offered to tax in India and margin earned on such activities has been accepted to be at arm's length. 7. Without prejudice to the above grounds of appeal, Ld. AO/Ld. DRP have erred, in law and on fact, in attributing the profit to the alleged PE in India, in an arbitrary manner and not as per the authorized OECD approach, which is based on a separate and distinct enterprise approach. 8. Without prejudice to the above grounds of appeal, Ld. AO/ Ld. DRP erred, in law and on fact, in including consideration received towards sale of hardware amounting to INR 37,10,69,493 while computing the alleged income attributable to the PE without appreciating that existence of PE has been alleged only in respect of the software distribution activities and sale of hardware has not even been alleged to be connected to the PE. 9. Without prejudice to the above grounds of appeal, Ld. AO/ Ld. DRP has erred, in law and on fact, in assuming 35% of the gross amount of international transactions as the business income accruing from the Page | 11 business of Appellant in India on an arbitrary basis without any basis, explanation and reasoning. 10. Without prejudice to the above grounds of appeal, Id. AO/ Ld. DRP has erred, in law and on fact, in arbitrarily considering 70% of the business income to be attributable to the alleged PE in India, on the pretext that substantial sales and marketing activities are being carried out in India. Other grounds: 11. The Ld. AO has erred in levying interest of INR 2,43,96,870 under Section 234B of the Act. 12. The Ld. AO has erred, in law and on facts, in initiating penalty proceedings under Section 270A of the Act. The Appellant submits that each of the above grounds is independent and without prejudice to one another. The Appellant craves leave to add, alter, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable the Hon'ble Tribunal to decide on the appeal in accordance with law.” 6. Vide order dated 10.04.2023, the Tribunal had decided all the grounds of appeal together by observing as under:- 9. “Looking to the facts of the present case, we find merit into the contention of the assessee that the Assessing Authority was not justified in making addition in the hands of the assessee when in the case of alleged PE of the assessee, the transactions have been treated to be arm’s length price. Furthermore, the assessee has pointed out that while making addition, the AO has also included the transaction related to hardware whereas allegation of PE is related to software. In the light of the binding precedents, we are of the considered view that the authorities below erred in making the impugned additions. We Page | 12 therefore, direct the AO to delete the same. Ground Nos. 1 to 10 raised by the assessee are hence, allowed.” 7. From the above, it is evident that there is merit in the contention of Ld. Counsel for the assessee as the question whether the assessee is having its Permanent Establishment (“P.E”)/Agency P.E. has inadvertently been not adjudicated by way of a specific finding. Respectfully following the binding precedents as cited in the preceding paragraphs, we hereby, recall our order dated 10.04.2023 in ITA No.1756/Del/2023 for limited purpose of adjudication of issue of P.E. and Agency P.E. as raised by the assessee by way of Ground Nos. 2 to 5 in ITA No.1756/Del/2022. The Registry is hereby, directed to fix the hearing of appeal No.1756/Del/2022 at its original Number for the afore- mentioned limited purpose. 8. In the result, the Miscellaneous Application of the assessee is allowed. M.A.No.382/Del/2023 [In ITA No.1776/Del/2022] [Assessment Year : 2019-20] 9. Now, we take up assessee’s Miscellaneous Application No.382/Del/2023 in ITA No.1776/Del/2022 for the Assessment Year 2019-20. 10. Facts are identical as well in M.A. No.381/Del/2023 for the Assessment Year 2018-19. Ld. Representatives of both the parties have adopted the same arguments. We have disposed M.A.No.381/Del/2023 by observing as under:- 7. “From the above, it is evident that there is merit in the contention of Ld. Counsel for the assessee as the question whether the assessee is having its Permanent Establishment (“P.E”)/Agency P.E. has inadvertently been not adjudicated by way of a specific finding. Respectfully following the binding presents as cited in the preceding Page | 13 paragraphs, we hereby, recall our order dated 10.04.2023 in ITA No.1756/Del/2023 for limited purpose of adjudication of issue of P.E. and Agency P.E. as raised by the assessee by way of Ground Nos. 2 to 5 in ITA No.2756/Del/2022. The Registry is hereby, directed to fix the hearing of appeal No.1756/Del/2022 at its original Number for the afore-mentioned limited purpose.” 11. Since the facts are identical and parties have adopted the same arguments, this Miscellaneous application of the assessee is also allowed for limited purpose of adjudication of Ground Nos. 2 to 5 which are raised by the assessee in ITA No.1776/Del/2022. The Registry is directed to fix the ITA No.1776/Del/2022 at its original Number for the limited purpose of adjudication of Ground Nos. 2 to 5. 12. In the result, the Miscellaneous Application of the assessee is allowed. 13. In the final result, both M.A. Nos.381 & 382/Del/2023 of the assessee in ITA Nos. 1756 & 1776/Del/2022 for the Assessment Years 2018-19 & 2019- 20 respectively, are disposed off in terms indicated herein above. Order pronounced in the open Court on 11 th July, 2024. Sd/- Sd/- (G.S.PANNU) (KUL BHARAT) VICE PRESIDENT JUDICIAL MEMBER * Amit Kumar * Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI
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