PERFETTI VAN MELLE ICT B.V.,NETHERLANDS V. ACIT(INTL. TAX), GURGAON

SA 54/DEL/2025

AI Insights

The case involves M/s Perfetti Van Melle ICT B.V., a Netherlands-based company, which filed a stay application against the recovery of an outstanding demand of Rs. 14,83,83,320 raised by the Assistant Commissioner of Income Tax, Gurgaon. The demand was initially based on an assessment order that significantly increased the assessee's declared income. However, following a rectification order, the demand was revised to Rs. 1,60,97,077. The primary contention revolves around the characterization of certain payments as royalty/FTS and the applicability of DTAA provisions. The Tribunal considered previous rulings and the Supreme Court's decision in Engineering Analysis Centre of Excellence Pvt. Ltd. to grant a partial stay on the recovery of the demand, subject to certain conditions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471950 (ITAT-DELHI)
• Appeal Type: Stay Application
• Pronouncement Date: 28-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2022-2023
• Other Referred Cases: Engineering Analysis Centre of Excellence Pvt. Ltd. (CA No. 8733-8734 of 2018), Nestle SA v. CIT (2023) 155 taxmann.com 384(SC)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY KUMAR
• Assessee Lawyers: DEEPAK CHOPRA; MANASWANI BAJPAYEE
• Keywords: TDS; Rectification of order; Double taxation relief; Application of stay
• Section: 143(3); 154

Judgement Text

"1 SA no. 54/D/2025 (In ITA no. 422/Del/2025) A.Y. 2022-23 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: ‘D’: NEW DELHI) BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT, AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER SA No.: 54/Del/2025 Arising Out of ITA No.: 422/Del/2025 (Assessment Year: 2022-23) M/s Perfetti Van Melle ICT B.V. Zoete Inval 20, Breda 4815 HK Netherlands. v. Asstt. Commissioner of Income Tax (International Taxation), Gurgaon. PAN No: AAICP1554F APPELLANT RESPONDENT Assesseeby : Shri Deepak Chopra, Adv. & Ms. Manaswani Bajpayee, Adv. Revenue by : Shri Sanjay Kumar, Sr. DR Date of Hearing : 28.02.2025 Date of Pronouncement : 28.02.2025 ORDER PER RAMIT KOCHAR, AM: This stay application in SA no. 54/Del/2025, arising out of ITA no. 422/Del/2025 for A.Y. 2022-23, has been filed by the assessee, seeking stay on recovery of outstanding demand raised by the ld. Assessing Officer towards income tax and interest thereon ,amounting to Rs. 14,83,83,320/-,arising out of the notice of demand u/s 156 of the Income-tax Act, 1961 (“the Act”)-DIN & Notice no. 2 SA no. 54/D/2025 (In ITA no. 422/Del/2025) A.Y. 2022-23 ITBA/AST/S/156/2024-25/1071647030(1) and the computation sheet-DIN & Document no. ITBA/AST/S/622/2024-25/ 1071647026(1) ,both dated 27.12.2024.The assessment has been framed by the AO , vide assessment order dated 27.12.2024 passed u/s 143(3) read with Section 144C(13), computing income of the assessee at Rs.22,30,11,928/- as against returned income of Rs. Nil. 2. At the outset learned counsel for the assessee submitted that now the outstanding demand of income-tax and interest thereon payable by the assessee has been revised by AO to 1,60,97,077/- vide rectification orderdated 11.02.2025 passed by the AO u/s 154 read with section 143(3) bearing DIN & Order no. ITBA/REC/S/154_1/ 2024-25/1073134743(1)and computation sheet bearing DIN & Document No. ITBA/REC/S/622/2024-25/1073135094(1), both dated 11.02.2025. It was submitted by ld. Counsel for the assessee that the assessee filed its return of income declaring total income at Rs. Nil. The assessee is a company incorporated in Netherlands on 25.08.2014 ,and is engaged in provision of ICT/IT Support services including supply of software to group companies. The assessee is providing IT support services within Perfetti group. During the year , the assessee has provided software and ICT/IT support services to its Indian AE M/s Perfetti Van Melle India Private Limited. It was submitted by ld. Counsel for the assessee that the assessee filed its return of income declaring total income at Rs. Nil. It was submitted that income-tax was deducted at source to the tune of Rs. 3 SA no. 54/D/2025 (In ITA no. 422/Del/2025) A.Y. 2022-23 1,75,20,510/- , and claim of refund of prepaid taxes was set up in the return of income, as the income declared was Rs. Nil. The total income of the assessee was computed by the AO vide assessment order dated 27.12.2024 at Rs. 22,30,11,928/-u/s 143(3) read with section 144C(13) of the Act, as against returned income of Rs. Nil. It was submitted by ld. Counsel for the assessee that there are two additions being made by the AO – firstly, with respect to payment of Rs. 4,98,11,544/-made by its Indian AE to the assessee towards SAP software licenses fee and Microsoft license fee and further addition of Rs. 17,32,00,384/- has been made by the AO with respect to payments made by its Indian AE to the assessee towards ICT/IT support charges ,as Royalty/FTS. It was submitted that the assessee has provided SAP license and Microsoft license to various group entities globally including its Indian AE Perfetti Van Melle India Pvt. Ltd., and the said Perfetti Van Melle India Pvt. Ltd. made payment of Rs. 4,98,11,544/- to the assesseetowards the said licenses. The assessee is a tax resident of Netherland and holds TRC certificate. It was submitted that there is no royalty involved in the payments made towards the software provided by the assessee, and the Tribunal has taken a consistent view in favour of the assessee in assessee’s own case, keeping in view the judgment and order of Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. (CA No. 8733-8734 of 2018). Reference was drawn to decision of ITAT, Delhi Benches, Delhi to the appellate order in ITA no.139/Del/2021 for A.Y. 2017-18, dated 28.02.2022, and also in 4 SA no. 54/D/2025 (In ITA no. 422/Del/2025) A.Y. 2022-23 subsequent years ITAT, Delhi Benches, Delhi common order in assessee’s own case for assessment year 2018-19 and 2019-20 in ITA Nos. 1600 & 1601/Del/2022 , dated 27.07.2022, which are placed on record in file. Thus, it was submitted that keeping in view the consistent decisions of the Tribunal in favour of the assessee in assessee’s own case, no addition as were made by the AO is likely to be sustained. So far as other addition of Rs. 17,32,00,384/- made by the AO towards ICT/IT support services charges received by the assessee from its Indian AE by treating the same as FTS/Royalty, it was submitted that income tax at source was deducted @ 10%by its Indian AE from the ICT/IT support charges. The provisions of DTAA will apply. The AO has brought to tax , the aforesaid addition to tax @10% + surcharge + cess. This issue has also been decided in favour of the assessee by Tribunal in earlier years. It was submitted by ld. Counsel for the assesssee that the recent judgment and order of Hon’ble Supreme Court in the case of Nestle SA v. CIT (2023) 155 taxmann.com 384(SC) has no applicability. It was submitted that in any case, it is a matter to be decided at the time of adjudication of the appeal by ITAT on merits.Thus it was prayed that the recovery of the balance outstanding demand towards income-tax and interest be stayed. 3. Learned Sr. DR on the other hand submitted that the assessee be asked to deposit the entire outstanding demand of Rs. 1,60,97,080/- (vide rectification order dated 11.02.2025). It was submitted that in 5 SA no. 54/D/2025 (In ITA no. 422/Del/2025) A.Y. 2022-23 case ITAT decides to grant stay on recovery of outstanding demand , the assessee be asked to deposit at least 20% of the outstanding demand. 4. We have heard rival contentions and perused the material on record.We have observed, without commenting on the merits of the issue’s, that so far as the first issue regarding payment towards SAP and Microsoft license charges amounting to Rs. 4,98,11,544/- paid by assessee’s Indian AE M/s Perfetti Van Melle India Pvt. Ltd. to the assessee is concerned, the Tribunal has taken a stand in the preceding assessment years 2017-18 to 2019-20 in favour of the assessee on this issue. The reliance was placed by assessee on the judgment and order of Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited(supra). Thus, without commenting on the merits of the issue, the assessee has made out a prima-facie case for grant of stay on recovery of outstanding demand so far as this issue is concerned. So far as the second issue of ICT/IT support charges of Rs. 17,32,00,384/- paid by its Indian AE to the assessee is concerned ,it is the say of the learned counsel for the assessee that the assessee is challenging the additions so made by the AO in its appeal filed with ITAT, but in any case the said receipts were subjected to deduction of income tax at source @ 10% totalling Rs. 1,75,20,510/-,thus the interest of Revenue is duly protected, and hence , the assessee should not be asked to deposit any further amount. The AO has brought to tax the aforesaid 6 SA no. 54/D/2025 (In ITA no. 422/Del/2025) A.Y. 2022-23 additions so made @10% + surcharge+ cess. We have observed that while granting stay on recovery of outstanding demand in SA no. 441/Del/2023 arising out of ITA no. 3328/Del/2023 for A.Y. 2021-22, the Tribunal vide its order dated 08.12.2023 has granted stay of outstanding demand with respect to the additions so made by the AO towards ICT/IT support services income , on the ground that income- taxes @10% were withheld and deposited by the payer i.e. assessee’s Indian AE M/s Perfetti Van Melle India Pvt. Ltd. . Similar situation exists in the instant case. The AO has brought to tax the aforesaid addition @10%+surcharge+cess. The TDS has been deducted by the payer @10%.It will not be appropriate for us to comments on the merits of the issue at this stage. We, however, have observed that Revenue has issued refund to the tune of Rs. 78,11,541/- to the assessee as is reflected in serial no. 55 of the computation sheet dated 11.02.2025 and 27.12.2024out of the income tax at source deducted @10% by assessee’s India AE M/s Perfetti Van Melle India Pvt. Ltd. on the aforesaid ICT/IT support charges, which amount of refund granted by Revenue is now directed to be deposited back by the assessee to the Government-Income Tax Department(along with cess, surcharge and interest thereon), as a pre-condition for grant of stay on recovery of the remaining outstanding demand of income-tax and interest thereon. So, we grant the stay on the recovery of the remaining outstanding demand of income-tax and interest thereon, with the pre- condition that the assessee deposits back an amount of Rs. 78,11,541/-(along with cess, surcharge and interest thereon) with 7 SA no. 54/D/2025 (In ITA no. 422/Del/2025) A.Y. 2022-23 Government-Income Tax Department , being the refund issued by Revenue to the assessee, and then the remaining outstanding demand of income-tax and interest thereon shall remain stayed for a period of 180 days or till disposal of the appeal whichever is earlier. Further, that the assessee will fully co-operate in speedy disposal of the appeal by ITAT, and the assessee will not seek any un-necessary adjournments before the Tribunal in the appellate proceedings in ITA No. 422/Del/2025. On breach of aforesaid conditions, the stay granted by us on recovery of outstanding demand shall stand vacated . The appeal of the assessee in ITA no. 422/Del/2025 for assessment year 2022-23 shall now come up for hearing before “D’ Bench, ITAT, Delhi, on 09.04.2025. The terms of stay of demand were announced by Division Bench during the course of hearing of stay application in open Court. We once again clarify that we have not commented on the merits of the issues arising in the appeal. We order accordingly. 5. In the result, Stay Application is partly allowed in the manner as indicated above. Order pronounced in the open court on 28th February, 2025. Sd/- Sd/- (MAHAVIR SINGH) (RAMIT KOCHAR) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 05/03/2025. *mpverma* 8 SA no. 54/D/2025 (In ITA no. 422/Del/2025) A.Y. 2022-23 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. DRP 5. DR Asst. Registrar, ITAT, New Delhi 1. Date of dictation of Tribunal Order 03.03.2025 2. Date on which the typed draft Tribunal Order is placed before the Dictating Member 04.03.2025 3. Date on which the typed draft Tribunal Order is placed before the Other Member 4. Date on which the approved draft Tribunal Order comes to the Sr. P.S./P.S. 5. Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 6.. Date on which the signed order comes back to the Sr. P.S./P.S. 7. Date on which the final Tribunal Order is uploaded by the Sr.P.S./P.S. on official website. 8. Date on which the file goes to the Bench Clerk alongwith Tribunal Order 9. Date of killing off the disposed off files on the judisis portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor(Judicial) 11. The date on which the file goes to the Assistant Registrar for endorsement of the order.. 12. Date of Dispatch of the order "