DZ BANK INDIA REPRESENTATIVE OFFICE, MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX (IT) RANGE 2(1)(2), MUMBAI

MA 467/MUM/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2665 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 4 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 08-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Assessment Year: 2011-2012
• Appeal Filed On: 04-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NITESH JOSHI LD ARS RESPON
• Keywords: Permanent establishment

Judgement Text

1 M.A.NO.467/MUM/2018 ARISING OUT OF ITA.NO.692/MUM/2016 DZ BANK, INDIA REPRESENTATIVE OFFICE ASSESSMENT YEAR: 2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE HONBLE SHRI RAM LAL NEGI, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM M.A NO. 467/MUM/2018 [ARISING OUT OF I.T.A. NO.692/MUM/2016] ( / ASSESSMENT YEAR: 2011-12) DZ BANK, INDIA REPRESENTATIVE OFFICE C/O SRBC & ASSOCIATES, LLP 14 TH FLOOR, THE RUBY SENPATI BAPAT MARG, DADAR (WEST) MUMBAI-400 028 / VS. D CIT (INT L . TAXATION) - RANGE - 2 1 (2) AIR INDIA BUILDING NARIMAN POINT MUMBAI- 400 020 ./ ./PAN/GIR NO. AABCD-6455-E ( /APPELLANT ) : ( / RESPONDENT ) !' / APPELLANT BY : S/SHRI PERCY J. PARDIWALA & NITESH JOSHI, LD.ARS !' / RESPONDENT BY : SUHAS KULKARNI, LD. DR ! # $% / DATE OF HEARING : 28/12/2018 &' #$% / DATE OF PRONOUNCEMENT : 08/03/2019 / O R D E R 2 M.A.NO.467/MUM/2018 ARISING OUT OF ITA.NO.692/MUM/2016 DZ BANK, INDIA REPRESENTATIVE OFFICE ASSESSMENT YEAR: 2011-12 PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. BY WAY OF THIS MISCELLANEOUS APPLICATION, THE AS SESSEE SEEKS CERTAIN RECTIFICATION / CORRECTION IN TRIBUNALS ORDER ITA NO. 692/MUM/2016 DATED 02/05/2018. 2. AS EXPLAINED BY LD. SR. COUNSEL, THE ASSESSEE IS AGGRIEVED BY THE DIRECTION OF TRIBUNAL GIVEN IN PARA-6 & 6.1 WHICH, FOR EASE OF REFERENCE, COULD BE EXTRACTED IN THE FOLLOWING MANNER: - 6.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL BEFORE US.WE FIND THAT THE DRP/AO HAD HELD THAT DZ INDIA BANK WAS THE PE O F THE GERMAN ENTITY, THAT THE SERVICES RENDERED BY THE INDIAN BANK WERE NOT AUXIL IARY OR PREPARATORY. THEY ALSO HELD THAT THE INDIAN BANK WAS AUTHORISED TO EXECUTE CONT RACTS ON BEHALF THE GERMAN ENTITY, THAT THE GERMAN BANK, HAVING PE IN FORM OF THE INDI AN ENTITY WAS LIABLE TO TAX FOR THE INTEREST INCOME AND COMMITMENT FEES. IN OUR OPINION , THE WHOLE CONTROVERSY REVOLVES AROUND THE STATUS OF INDIAN ENTITY I.E. AS TO WHETH ER IT COULD BE TREATED PE OF THE GERMAN BANK OR NOT. IF THE ANSWER IS POSITIVE THE ORDER OF THE AO HAS TO BE UPHELD. BUT, IN CASE OF A NEGATIVE REPLY THE CLAIM OF THE ASSESSEE HAD T O BE APPROVED. 6.1. WE FIND THAT THE AO/DRP AS WELL AS THE ASSESSE E HAVE DISCUSSED THEORIES ABOUT THE PE AND TAXABILITY OF INCOME EARNED BY THE ASSES SEE AT LENGTH I.E. CONCEPT OF PE AND THE BASIC INGREDIENTS OF THE PE. BUT, WE NOWHER E FIND ANY REFERENCE TO THE CONTRACTS ENTERED IN TO BY THE GERMAN BANK WITH ITS BORROWERS AND THE TERMS AND CONDITIONS OF SUCH TRANSACTIONS. THE ASSESSEE CLAIMS THAT INDIAN BANK WAS PERFORMING CERTAIN FUNCTION THAT WERE AUXILIARY OR PREPARATORY. BUT TH E CLAIM HAS NOT BEEN TESTED WITH REFERENCE TO THE LOAN TRANSACTIONS FOR THE YEAR UND ER CONSIDERATION. TAX HAS TO BE DETERMINED ON THE BASIS OF PECULIAR FACTS OF A YEAR . GENERAL OBSERVATIONS/GENERAL SUBMISSIONS ABOUT THE THEORY IS NOT SUFFICIENT TO L EVY TAXES OR CLAIM A PARTICULAR DEDUCTION. THUS, IN OUR OPINION BOTH OF THEM HAVE N OT DONE THEIR JOB SATISFACTORILY. THE MATTER NEEDS FURTHER VERIFICATION OF FACTS. IT BECO MES MORE IMPORTANT, WHEN WE FIND THAT ASSESSMENTS OF EARLIER THREE YEARS HAVE BEEN RE-OPE NED. SO, WE HOLD THAT IN THE INTEREST OF JUSTICE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION. AS FAR AS CASES RELIED UPON BY THE AS SESSEE ARE CONCERNED, IT IS SUFFICE TO SAY THAT IN ABSENCE OF BASIC FACTS NO CASE LAW IS O F ANY HELP. CASES ARE DECIDED ON THEIR PARTICULAR FACTS. IT HAS NOT BEEN PROVED THAT SIMIL AR FACTS WERE THERE IN THE CASE UNDER CONSIDERATION. SO, WE WOULD DIRECT THE AO TO GO THR OUGH THE VARIOUS TRANSACTIONS ENTERED IN TO BY THE GERMAN BANK WITH THE INDIAN BO RROWERS AND FIND OUT AS TO WHETHER THE FUNCTIONS PERFORMED BY THE DZ INDIA BANK WERE O F PREPARATORY /AUXILIARY NATURE OR IT 3 M.A.NO.467/MUM/2018 ARISING OUT OF ITA.NO.692/MUM/2016 DZ BANK, INDIA REPRESENTATIVE OFFICE ASSESSMENT YEAR: 2011-12 WAS WORKING AS AN AGENT OF THE GERMAN ENTITY. THE C ORRESPONDENCE BETWEEN THE BORROWERS, THE LENDER AND THE INDIAN BANK AS WELL A S THE DOCUMENTS RELATED WITH MONEY LENDING TRANSACTIONS SHOULD TO EXAMINED TO ARRIVE A T A DEFINITE CONCLUSION. AS THE MAIN ISSUE I.E. EXISTENCE OF PE IN INDIA IS BEING RESTOR ED BACK TO THE FILE OF THE AO, SO, WE ARE NOT ADJUDICATING THE OTHER ISSUES. THE LD. COUNSEL POINTED OUT THAT THE BENCH IN PARA-6 OBSERVED THAT IF INDIAN ENTITY I.E. THE ASSESSEE WAS TO BE TREATED AS PERMANENT ESTABLISHMENT [PE] OF THE GERMAN BANK THEN THE ORDER OF AO WAS TO BE U PHELD. CONVERSELY, IN CASE OF NEGATIVE, THE CLAIM OF THE ASSESSEE WAS TO BE APPROVED. HOWEVER, AT THE SAME TIME, THE BENCH WHILE RESTORING THE MAI N ISSUE I.E. DETERMINATION OF THE FACT WHETHER OR NOT THE ASSESS EE CONSTITUTE PE IN INDIA, TO THE FILE OF AO, HAS NOT ADJUDICATED THE OTHER IS SUES RAISED BY THE ASSESSEE. THEREFORE, THERE WAS INCONSISTENCY IN THE ORDER SINCE THE ASSESSEES ALTERNATIVE GROUNDS WOULD REMAIN TO BE A DJUDICATED. THESE ALTERNATIVE GROUNDS WOULD NEED ADJUDICATION, IN CAS E THE ASSESSEE IS TREATED AS PE OF FOREIGN ENTITY. THESE ALTERNATIVE GROUNDS CONTE ST TAXABILITY OF INTEREST INCOME IN TERMS OF ARTICLE 7 / ARTICLE 11 OF THE INDIA-GERMANY TREATY AND ALSO CONTEST THE APPLICABLE TAX RATES. THE ASSE SSEES ANOTHER ALTERNATIVE GROUND NO.3 THAT INTEREST INCOME SHOULD BE TAXABLE @20% ON GROSS BASIS AS PER THE PROVISIONS OF SECTION 115A(1 ) WOULD ALSO REQUIRE ADJUDICATION IN CASE THE ASSESSEE IS TREATED AS PE OF FOREIGN ENTITY. UNDER THESE CIRCUMSTANCES, LD. SR. COUNSEL PLEADED FOR SU ITABLE RECTIFICATIONS IN THE STATED ORDER. PER CONTRA, LD. DR SUBMITTED THAT THE ISSUE HAS ALREADY BEEN RESTORED BACK TO THE FILE OF LD. AO AND THEREF ORE, ALL THESE ISSUES MAY BE CONSIDERED THEREIN. 4 M.A.NO.467/MUM/2018 ARISING OUT OF ITA.NO.692/MUM/2016 DZ BANK, INDIA REPRESENTATIVE OFFICE ASSESSMENT YEAR: 2011-12 3. UPON DUE CONSIDERATION, FINDING CREDENCE IN ASSE SSEES SUBMISSIONS AS EXPLAINED BY LD. AR, WE DEEM IT FIT TO MAKE CERT AIN CORRECTIONS IN THE STATED ORDER, WHICH ARE ENUMERATED IN THE SUCCEEDIN G PARAGRAPHS. 4. THE FOLLOWING CONCLUDING OBSERVATIONS AS GIVEN I N PARA 6 STANDS DELETED: - IF THE ANSWER IS POSITIVE THE ORDER OF THE AO HAS T O BE UPHELD. BUT, IN CASE OF A NEGATIVE REPLY THE CLAIM OF THE ASSESSEE HAD TO BE APPROVED. 5. THE FOLLOWING LINES STANDS ADDED AT THE END OF PARA 6.1 : - IT IS MADE CLEAR THAT THE ISSUE HAS BEEN RESTORED B ACK TO THE FILE OF LD. AO KEEPING ALL THE ISSUES OPEN, INCLUDING ALTERNATIVE GROUNDS RAIS ED BY THE ASSESSEE. 6. THE APPLICATION STANDS ALLOWED IN TERMS OF OUR A BOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH MARCH, 2019. SD/- SD/- (RAM LAL NEGI) (M ANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 08/03/2019 SR.PS:-JAISY VARGHESE 5 M.A.NO.467/MUM/2018 ARISING OUT OF ITA.NO.692/MUM/2016 DZ BANK, INDIA REPRESENTATIVE OFFICE ASSESSMENT YEAR: 2011-12 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. !'#$ , $ , / DR, ITAT, MUMBAI 6. '&'( / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI