MAXIS MOBILE SERVICES SDN. BHD.,MALAYSIA V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2(2)(1), INTERNATIONAL TAXATION

ITA 2746/DEL/2024

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Maxis Mobile Services Sdn. Bhd., a foreign company engaged in telecommunications, appealed against the order of the ACIT, International Taxation, Delhi, which had added INR 12,94,43,028 as Fees for Technical Services (FTS) to their income for the Assessment Year 2014-15. The addition was based on remittances received from Vodafone Mobile Services, which were allegedly not subjected to tax deduction at source. The Tribunal found that the amount considered by the Assessing Officer was incorrectly noted as INR 12,94,43,028 instead of INR 12,94,430.28, leading to an erroneous assumption of jurisdiction. Furthermore, the notice under Section 148 was issued beyond the permissible period for reassessing income below INR 50 lakhs, rendering the proceedings time-barred.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 33641 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 22-08-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 28-05-2024
• Other Referred Cases: UOI Vs Ashish Aggarwal, Ganesh Dass Khanna
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIJAY B.VASANTA
• Assessee Lawyers: KAMAL SAWHNEY
• Keywords: Reassessment proceedings; Period of limitation; TDS; Initiation of penalty proceedings; Time period of passing order
• Section: 147; 148; 144; 195; 271(1)(c); 56; 234B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘D’ BENCH, NEW DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No.2746/DEL/2024 [A.Y. 2014-15] Maxis Mobile Services Sdn. Bhd Vs. The A. C.I.T Level 21, Menara Maxis, Circle -2(2)(1) Kuala Lumpur City Centre New Delhi Off Jalan Ampang, Kulasekarapattinam, Malaysia PAN – AAQCM 466 P (Applicant) (Respondent) Assessee By : Shri Kamal Sawhney, Adv Shri Arun Bhadauria, Adv Shri Puru Medhira, Adv Department By : Shri Vijay B. Vasanta, CIT-DR Date of Hearing : 22.08.2024 Date of Pronouncement : 14.11.2024 ORDER PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:- This appeal by the assessee is preferred against the order of the ld. ACIT, International Taxation, Delhi dated 29.03.2024 u/s 144C(1) of the Income-tax Act, 1961 [the Act, for short] pertaining to A.Y. 2014- 15. 2 2. The assessee has raised the following grounds of appeal: “1. Assessment proceedings and impugned order passed for the subject AY are time barred and bad in law and thus invalid. 1.1 On the facts and circumstances of the case and in law, the impugned order passed by the learned AO under section 144 read with section 144C(13) of the Act is bad in law and thus, is liable to be quashed. 1.2 On the facts and circumstances of the case and in law, the notice issued under section 148 of the Act is barred by limitation by the application of first proviso of section 149 of the Act and thus, is liable to be quashed. 1.3 On the facts and circumstances of the case and in law, the learned AO has erred in recognizing cellular roaming charges as \"asset\" and accordingly erred in issuing notice under section 148 of the Act. 1.4 On the facts and circumstances of the case and in law, the amount of income escaping assessment is less than INR 50 lakhs and thus the notice issued under section 148 is liable to be quashed. 2. Non-taxability of Cellular Roaming Charges/Interconnect Usage Charges ('IUC') on payments received from Vodafone Mobile Services ('VMSL') 2.1 That on the facts and in the circumstances of the case and in law, the learned AO vide impugned order has erred in making an addition of INR 12,94,43,028 on account of IUC and taxed the income as Fee for Technical Services ('FTS') in the hands of the 3 Appellant under the Act and Double taxation Avoidance Agreement ('DTAA'). 2.2 That on the facts and circumstances of the case, the learned AO has failed to consider the fact that during AY 2014-15, the Appellant only received remittances amounting to INR12,94,430.28 instead of INR 12,94,43,028 and made an addition of the later amount to the income of the Appellant. 2.3 That on the facts and circumstances of the case and in law, without prejudice to above, the learned AO has erred in considering that the IUC income received by the Appellant would be taxable under the residual clause as \"other income\" under D'TAA and section 56 of the Act 3. Levy of interest under section 234B and 234C of the Act 3.1 That on the facts and circumstances of the case and in law, the learned AO erred in levying interest under section 234B and 234C of the Act. 4. Initiation of penalty proceedings 4.1 That on the facts and circumstances of the case and in law, the learned AO has erred in initiating penalty proceedings under section 271(1)(c) of the Act, being against the provisions of the Act. 5. General 5.1 Each of the above ground is independent and without prejudice to the other grounds of appeal preferred by the Appellant. 5.2 The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time 4 before or at, the time of hearing, of the appeal, so as to enable your Honour to decide this appeal according to law.” 3. Representatives of both the sides were heard at length. Case records carefully perused. Relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules. 4. Briefly stated, the facts of the case are that the assessee is foreign company incorporated in Malaysia and engaged in the activity of providing mobile telecommunications products and services. During the F.Y 2016, the assessee transferred all its operation to Maxis Broadband SDN BHD. Information was available with the department that the assessee has received Cellular Roaming Charges amounting to Rs.12,94,43,028/- from M/s Vodafone Mobile Services during the F.Y 2013-14, relevant to the A.Y 2014-15. The information received in the case is as under:- \"As per the information, during the F.Y 2013-14 relevant to AY 2014-15, M/s Vodafone Mobile Services had made foreign remittances of Rs. 12,94,43,028/- to M/s Maxis Mobile Services SDN BHD Malaysia on account of Cellular Roaming Charges without deduction of tax\". 5 5. On the basis of judgment of Hon'ble Supreme Court in the case of UOI Vs Ashish Aggarwal and subsequent CBDT's instructions No.01/2022, the AO issued and served notice u/s 148 of the Act dated 25.06.2021. After following the due procedure, the AO finally proposed the addition of Rs 12,94,43,028/- as Fees from Technical Services. The DRP confirmed the findings of the Assessing Officer that the remittances received from Vodafone are in the nature of FTS and to be taxed on substantive basis. The DRP also held that the same be taxed as income from ‘other source’ on protective basis. 6. Aggrieved, the assessee is in appeal before us 7. At the very outset, the ld. counsel for the assessee contended that the proceedings u/s 148 of the Act itself is invalid as the escaped income is below Rs. 50 lakhs and the notice u/s 148 of the Act has been issued after a period of three years. The ld. counsel for the assessee further pointed out that the Assessing Officer ignored the decimal in the amount informed to the Assessing Officer and by ignoring this decimal, he took the amount as 12,94,43,028/-. Since this amount is below Rs. 50 lakhs and notice has been issued 6 beyond 3 years, the Assessing Officer cannot assume jurisdiction and prayed for quashing the assessment. 8. Per contra, the ld. DR relied upon the orders of the Assessing Officer. 9. We have heard the rival submissions and have perused the relevant material on record. A perusal of page 8 of the Paper Book, which is letter by the Income tax officer, International Taxation, Ward -3(1)(1), New Delhi to the DCIT, Circle 2(2)(1), New Delhi, reveals the information states that Maxis Mobile Services had received an amount of Rs. 12,94,430.28 on account of Cellular Roaming Charges during FY 2013-14 and TDS u/s 195 has not been deducted. The amount is further verified from the detailed information which is annexed at pages 42 to 45 of the Paper. These pages show that Cellular Roaming charges amounting to Rs 12,94,430.28 has been paid to the assessee under acknowledgement no. R2013020KBOB. We find force in the arguments of the ld. counsel for the assessee that the Assessing Officer mistook the amount by ignoring the decimal and considered the said amount as Rs.12,94,43,028/-. We 7 also find that when the decimal is taken into account, the amount is only Rs. 12,94,430/- which is below Rs. 50 lakhs. 10. We also find that the AY involved is AY 2014-15 for which the first notice u/s 148 was issued on 25.06.2021. As per the provision of section 148 r.w section 149(1)(a) of the Act , the time to issue notice u/s 148 for reassessing income which is less than 50 lakh should be within 3 years from the end of the relevant assessment year. We find that in the instant case, the escaped amount is less than Rs 50 lakh and the notice u/s 148 was issued after the period of three years from the end of relevant assessment year. We therefore hold that the re-assessment proceedings were time-barred as limitation period of three years for the relevant assessment year since the notice u/s 148 was issued post June 2021. 11. This view finds support from the decision of the Hon'ble High Court of Delhi in the case of Ganesh Dass Khanna 460 ITR 546 wherein it has been held as under: “The notice issued under section 148 was issued for AY 2016-17 on 30 June 2021 and for AY 2017-18 was issued on 28 June 2021. Thereafter, pursuant to the judgment of UOI vs Ashish Agrawal (2022) (444 ITR 1) (SC) order under section 148A(d) was 8 passed. On appeal to the Hon’ble Delhi High Court, it was held that as per the new 148 provision, the time to complete the reassessment proceedings for income which is less than 50 lakhs should be within 3 years from the relevant assessment year. In the instant case the re-assessment proceedings were time-barred as limitation period of three years for the relevant assessment year since the notice issued for post June 2021. Hence, the orders issued under Section 148A(d) and the notice under Section 148 of the amended 1961 Act, for AY 2016-17 and AY 2017- 18 are not valid.” 12. In view of the above, we are of the considered view that the orders issued under Section 148A(d) and the notice under Section 148 of the amended 1961 Act, for A.Y 2014-15 are not valid and consequently the assumption of jurisdiction for passing order u/s 147 r..w.s 144C(1) of the Act is illegal and liable to be quashed. Ground No 1 with its sub-ground are allowed. 12. The ground no 2 pertains to the merits of the additions. As we have decided the issue on the jurisdictional ground, we are not expressing our opinion on the merits of the case. 9 13. The ground no 3 pertains to interest u/s 234B and 234C which is consequential in nature. 14. The ground 4 pertains to initiation of penalty u/s 271(1)(c). The same is premature and is, accordingly, dismissed as such. 15. In the result, the appeal of the assessee in ITA No. 2746/DEL/2024 is partially allowed. The order is pronounced in the open court on 14.11.2024. Sd/- Sd/- [VIKAS AWASTHY] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 14th November, 2024. VL/ Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi 10 Date of dictation Date on which the typed draft is placed before the dictating Member Date on which the typed draft is placed before the Other Member Date on which the approved draft comes to the Sr.PS/PS Date on which the fair order is placed before the Dictating Member for pronouncement Date on which the fair order comes back to the Sr.PS/PS Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order "