Income Tax Appellate Tribunal - Delhi
Oil & Natural Gas Corporation Ltd. As ... vs Department Of Income Tax on 13 February, 2015
ITA No.652/Del/2012
Asstt.Year: 2005-06
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'E'NEW DELHI
BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER
AND
SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER
ITA NO. 652/DEL/2012
ASSTT.YEAR: 2005-06
ADIT, vs Oil & Natural Gas Corporation Ltd.,
International Taxation, (as representative assessee of Foster
13A-Subhash Road, Wheeler Energy Ltd. UK),
Aayakar Bhawan, ONGC Ltd., Corporate Tax Division,
Dehradun. Room No. 244, Tel Bhawan, Dehradun.
(PAN: AAACO1598A)
(Appellant) (Respondent)
Appellant by: Shri Kaveesh Syal, AR
Respondent by: Shri Vivek Kumar, Sr. DR
ORDER
PER C.M. GARG, JUDICIAL MEMBER
This appeal has been preferred by the revenue against the order of the CIT(A)- II, Dehradun dated 17.11.2011 in Appeal No.17/11/2011 in Appeal NO. 246/DDN/2010-11 for AY 2005-06.
2. The grounds raised by the revenue read as under:-
"1. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in holding that the notice under section 148 of the Act was issued in this case beyond the statutory limit and that the provisions of section 149(3) were applicable for determining the time limit for the issue of the notice.1 ITA No.652/Del/2012 Asstt.Year: 2005-06
2. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in holding that the notice under section 148 of the Act was issued against ONGC as the representative assessee of the non-resident company namely M/s Foster Wheeler Energy Ltd. UK and not against the NRC itself and that the time limit for the issue of notice was not to be reckoned as per the provisions of section 149(3) of the Act.
3. Whether on the facts and circumstances of the case, the Ld CIT(A) has erred in not giving the finding on merits that the income of the assessee was in the nature of technical services being rendered and taxable as per the provisions of section 115A r.w.s. 9(1)(vii) of the Act."
3. Briefly stated the facts giving rise to this appeal are that the return of income u/s 139 was filed on 19.10.2005 at an income of Rs.15798145/- and the same was revised on 28.11.2006 claiming the entire revenue as exempt in view of Article 7 of DTAA between India and UK and filed at nil income. Subsequently, notice u/s 148 of the Act was issued on 31.3.2010, after recording reasons in the case and taking due approval u/s 151 of the Act of the DIT-II (International Taxation), New Delhi which was granted vide letter dated 30.3.2010 requiring the assessee to file its return of income for AY 2005-06. In response to the notice, the authorised representative of the assessee vide its letter dated 20.4.2010 submitted that the revised return filed on 28.11.2006 may be treated as return in compliance to notice u/s 148 of the Act. Further, the AO issued notices u/s 143(2) and 142(1) of the Act and reasons for reopening of assessment were also provided to the assessee. The objections of the assessee to the reopening of assessment u/s 147/148 of the Act were disposed of by the AO vide order dated 09.12.2010.
2 ITA No.652/Del/2012 Asstt.Year: 2005-06
4. The assessee, thereafter, instead of filing details in the case contended that the notices issued in the names of M/s Foster Wheeler Energy Ltd. and not in the name of ONGC as representative assessee of M/s Foster Wheeler Energy Ltd. The AO noticed and observed that the notice dated 31.3.2010 u/s 148 of the Act has been issued in the name of the assessee M/s Foster Wheeler Energy Ltd. and not in the name of representative assessee M/s ONGC Ltd. and, therefore, it is not barred by limitation of time u/s 149(3) of the Act as contended by the assessee. The related operative part of assessment order reads as under:-
"3. The assessee, thereafter, instead of filing details in the case, has contended that the notices are issued in the name of M/s Foster Wheeler Energy Ltd. and not in the name of ONGC as representative assessee of M/s Foster Wheeler Energy Ltd. In this regard it is noted that the revised return of Income has been filed in the name of ONGC as representative assessee of M/s Foster Wheeler Energy Ltd. Further, the notices have been issued in the name of ONGC as "M/s Foster Wheeler Energy Ltd.-ONGC". Nevertheless, such mistake, defect or omission is covered under the provisions of section 2928 of the Act. However, instead of filing details in the case at the fag end of the year, when the assessment is getting barred by limitation, the assessee is resorting to dubious methods.
4. The assessee during the year under consideration has derived revenues from ONGC for undertaking the functional technical ITB preparation for C2/C3 extraction plant at Dahej LNG facilities the assessment of which has completed u/s 44BB of I.T. Act accepting the submission of the assessee. The Hon'ble High court of Uttrakhand in the case of ONGC as agent of MS Foramer France has held that the services which are technical in nature are not covered u/s 44BB of the LT. Act. Further, the Hon'ble Finance Minister while introducing Finance Bill 2010 has clarified in the explanatory note to 3 ITA No.652/Del/2012 Asstt.Year: 2005-06 Finance Bill that "Combine effect for the provisions of sections 44BB, 44DA and 115A is that if the income of the Non resident is in the nature of fee of technical services it shall be taxable under provision of either 44DA or section 115A irrespective of the business of which it relates. Section 44BB applies only in a case where consideration is for services and another facilities relating to exploration activity which are not in the nature of technical service."
Further, the notice dated 31.03.2010 u/s 148 of the I.T. Act has been issued in the name of the assessee M/s Foster Wheeler Energy Ltd and not in the name of the representative assessee M/s ONGC Ltd. and therefore it is not barred by limitation of time under section 149(3) I.T. Act, 1961 as submitted by the assessee. The objection of the assessee has no legal merit and is hereby rejected."
5. Being aggrieved by the above rejection order, the assessee preferred an appeal before the CIT(A) which was allowed by passing the impugned order with following observations and conclusions:-
"4. After a perusal of the facts as narrated above (which are borne out of the AO's order and related documents filed during appellate proceedings), this issue may be analysed.
4.1 A perusal of the Id. AO's order, order disposing of objections to issuance of notice u/s 148 of the Act, and the Id. ARs submissions that no reassessment could be done on ONGC as a representative assessee u/s 163 of the Act for M/s Foster Wheeler Energy Ltd. beyond the time prescribed in section 149(3) of the Act reveals that in this case the first return was filed on 19.10.2005 (for AY 2005-06). This was revised on 28.1l.2006 and a notice u/s 148 of the Act was issued on 3l.03 .20] O. It is seen that the notice dated 3l.03.2010 was issued to "M/s Foster Wheeler Energy Ltd. UK, C/o ONGC, Dehradun". Thereafter, while disposing off the objections to reopening of the case vide order dated 4 ITA No.652/Del/2012 Asstt.Year: 2005-06 09.12.2010 it is seen that in para 3 at page 2 of this order it is categorically mentioned as under:-
"Further, the notice doted 31.03.2010 u/s 148 of the IT Act has been issued in the name of the assessee M/s Foster Wheeler Energy Ltd. and nor in the name of the representative assessee ONGC Ltd ... "
It is also seen that the impugned order and notice or demand clearly mentions ('ONCC as rep (sic) assessee of M/s Foster Wheeler Energy Ltd. UK, C/o ONGC, Corporate Tax Division, IDT, ONGC Kaulagarh Road, Dehradun ". [Here the PAN of ONGC is seen to have been used].
4.2 Considering the above mentioned facts it is seen that the assessment has been framed on M/s ONGC by treating it as a representative assessee of M/s foster Wheeler Energy Ltd.. This action would bring into play the limitation against issuing a notice u/s 148 of the Act beyond two years to a representative assessee u/s 163 of the Act from the end of the assessment year as mandated in section 149(3) of the Act. In view of this fact the notice u/s 148 of the Act is held to have been issued beyond the period prescribed u/s 149(3) of the Act and thus the proceedings initiated through this notice are hereby cancelled since they have been initiated beyond the statutory time period.
5. Since the very reassessment has been cancelled, all other grievances sought to be ventilated through other grounds of appeals are rendered academic and infructuous."
Ground No. 1 & 2
6. Apropos ground no. 1 and 2, we have heard arguments of both the sides and carefully perused the relevant material placed on record. Ld. DR submitted that the CIT(A) has erred in holding that the notice du/s 148 of the Act was issued beyond the statutory limit and that the provisions of section 149(3) of the Act were applicable for determining the time limit for the issue of notice. Ld. DR further contended that the CIT(A) has grossly erred in holding that the 5 ITA No.652/Del/2012 Asstt.Year: 2005-06 notice u/s 148 of the Act was issued against the ONGC as the representative assessee of the non-resident company namely M/s Foster Wheeler Energy Ltd. UK and not against the Non-Resident Company (NRC) itself.
7. Ld. DR vehemently contended that the CIT(A) misunderstood the provisions of limitation for issuance of notice u/s 148 of the Act as envisaged u/s 149 of the Act and the conclusion of the CIT(A) is contrary to the letter and spirit of the provisions of section 149(3) of the Act that the time limit for issuance of notice u/s 148 of the Act in the extant case was to be reckoned as per provisions of section 149(3) of the Act. Placing reliance on the decision of ITAT Mumbai Special Bench "L" in ITA No.2965/M/06 for AY 1998-99 to 2002-03 in the case of J.M. Baxi & Co. vs DDIT dated 5.3.2009, ld. AR strenuously contended that the legal issue in the present appeal is squarely covered in favour of the revenue by the said decision of Special Bench and since the CIT(A) has not adjudicated the appeal on merits, therefore, the case may kindly be restored to the file of CIT(A) for adjudication of issues on merit.
8. Replying to the above, ld. AR supporting the impugned order submitted that no reassessment u/s 147/148 of the Act could be done on ONGC as representative assessee u/s 163 of the Act for M/s Foster Wheeler Energy Ltd. UK beyond the time prescribed in section 149(3) of the Act. Ld. AR further contended that in this case first return was filed on 19.10.2005 (for AY 2005-06) and the same was revised on 28.11.2006 and a notice u/s 148 of the Act was 6 ITA No.652/Del/2012 Asstt.Year: 2005-06 issued on 31.3.2010. Ld. DR further pointed out that from the notice dated 31.3.2010, it is clear that the notice iu/s 148 of the Act was isused to M/s Foster Wheeler Energy Ltd. UK C/o ONGC Dehradun and while disposing of the objections for reopening of the case vide order dated 9.12.2010 in para 3 at page 3, it was categorically mentioned that the notice dated 31.3.2010 u/s 148 of the Act has been issued in the name of the assessee M/s Foster Wheeler Energy Ltd. UK and not in the name of representative asessee ONGC Ltd.
9. Ld. AR has further drawn our attention towards impugned order and the notice of demand and submitted that it is clearly mentioned that "ONGC as rep (sic) assessee of M/s Foster Wheeler Energy Ltd. UK C/o ONGC, Corporate Tax Division, IDT, ONGC Kaulagarh Road, Dehradun" which shows that the assessment has been framed on M/s ONGC Ltd. by treating it as a representative assessee of M/s Foster Wheeler Energy Ltd. Ld. AR vehemently contended that this action would bring into play the limitation against the issuance of notice u/s 148 of the Act beyond two years to a representative assessee u/s 163 of the Act from the end of the assessment year as mandated in section 149(3) of the Act. Supporting the impugned order, ld. AR submitted that in view of this Act that notice u/s 148 of the Act is held to have been issued beyond the period prescribed u/s 143 of the Act and, therefore, the notice was rightly quashed by the first appellate authority viz. CIT(A), Dehradun.
7 ITA No.652/Del/2012 Asstt.Year: 2005-06
10. On careful consideration of above rival submissions of both the parties and vigilant perusal of the decision of Special Bench of ITAT Mumbai dated 5.3.2009 (supra), at the outset we note that identical controversy was decided against the assessee and in favour of the revenue with following observations, findings and conclusion:-
"27. Having regard to above terms, it cannot be disputed that assessee is agent of the non-resident. The assessee never disputed its liability to be assessed as agent of the non-resident. Not only income tax returns were signed and filed as agent for and on behalf of the non-resident, but several other documents were furnished with the income tax authorities including an undertaking that taxes due from the non-resident would be paid by the assessee agent. Having regard to above clear and undisputed facts, it was not necessary for authorities in this case to provide any opportunity of being heard to the assessee as regards his liability to be treated as an agent under the Act. In fact, it would have looked absurd to provide such an opportunity of being heard to a person who has accepted and never disputed his liability to be assessed as an agent. Therefore, there was no occasion to pass any order u/s 163(2) of the I.T. Act. In other words, there was no question of "treating the assessee as an agent of the non-resident" and, therefore, provision of Section 149(3) had no application in this case. As noted earlier with reference to provisions of old Act and Section 163(2) of the Act, these provisions are for the benefit of the agent relating to his liabilities under the Act. The benefit of provision (opportunity of being heard) can be waived by the agent as authoritatively held by their Lordships of Bombay High Court. Having regard to the act and conduct of the assessee noted above in detail, it is difficult to dispute that the assessee did not waive this benefit or privilege under the statutory provision. Therefore, the assessee agent can not turn around and raise an objection of failure to provide an opportunity of being heard u/s 163(2). The assessee was not and could not be treated as an agent u/s 163 of the Act. Besides, the circumstances under which original returns in all 8 ITA No.652/Del/2012 Asstt.Year: 2005-06 the assessment years under reference were filed u/s 139, accepting position of "agent of non-resident" remained unaltered. These unaltered circumstances are to be considered at the time of application of Section 147/148 of the Act for assessment of non-resident through the agent. As pointed out by their Lordships of Bombay High Court, assessment includes reassessment. It is not possible to contend that he is an agent for filing returns u/s 139(1) and for regular assessment but not for reassessment. Therefore, on the facts and circumstances of the case, provision of Section 149(3) has no application in this case nor was there any necessity to pass any order in terms of Section 163(2) of the Act in this case.
28. Having given our view as above, we deem it necessary to deal with other contentions raised on behalf of the assessee. It was vehemently contended that the assessee, as a law abiding citizen, had suo moto filed return of income as agent of the non-resident and, therefore, the assessee should not be placed at a disadvantage. We do not find any force in the above contention. In our considered opinion, the assessee, by submitting returns as agent of the non-resident, only discharged its obligation under the law. If as a law abiding citizen, the assessee chose to submit returns suo moto u/s 139(1) of the Act, it should not hesitate to do so u/s 148 of the Act. We do not see any disadvantage to the assessee in this case. Let the assessee remain a law abiding citizen and comply with the provisions in a proceeding u/s 147/148 of the Income Tax Act."
11. In the case of J.M. Baxi (supra), Special Bench noticed that the assessee never disputed its liability to be assessed as agent/representative assessee of the non-resident company viz. M/s Foster Wheeler Energy Ltd. UK. Not only income tax returns were signed and filed as agent for and on behalf of the non- resident, but several other documents were furnished with the income tax authorities including an undertaking that taxes due from the non-resident would be paid by the assessee agent. The Special Bench having regard to above clear 9 ITA No.652/Del/2012 Asstt.Year: 2005-06 and undisputed facts further held that in this situation, it was not necessary for authorities in this case to provide any opportunity of being heard to the assessee as regards his liability to be treated as an agent under the Act. The Special Bench further held that it would have looked absurd to provide such an opportunity of being heard to a person who has accepted and never disputed his liability to be assessed as an agent of Non-resident company. Therefore, there was no occasion to pass any order u/s 163(2) of the I.T. Act and thus, there was no question of "treating the assessee as an agent of the non-resident" and, therefore, provision of Section 149(3) had no application in this case.
12. In the present case, the original return was field on 19.10.2005 and revised return was filed on 28.11.2006 mentioning "ONGC as representative assessee of M/s Foster Wheeler Energy Ltd. UK (Paper Book page no. 61 to 66). We further observe that notice u/s 148 of the Act dated 31.3.2010 was issued to "M/s Foster Wheeler Energy Ltd. UK, Dehradun" to the similar address (PB page 68 & 69). We further note that the ONGC filed reply dated 29.4.2010 to the AO mentioning "Sub: reassessment proceedings in the case of M/s Foster Wheeler Energy Ltd. UK for AY 2005-06". At this juncture, it would be appropriate and relevant to consider the agreement dated 7.7.2004 clause 11 at internal page 12 of the agreement (PB page no. 40) wherein it has been agreed that the consultant viz. M/s Foster Wheeler Energy Ltd. UK shall bear all applicable duties, levy etc. including both the corporate and personal taxes. It 10 ITA No.652/Del/2012 Asstt.Year: 2005-06 was also agreed between ONGC and non-resident company M/s Foster Wheeler Energy Ltd. UK that if any tax benefit is available to the consultant as a result of credits claimed of withholding taxes paid by ONGC, the same shall be passed on to ONGC by the consultant NRC. The relevant clause is being reproduced for the sake of clarity and transparency:-
"11.0 Duties and Taxes 11.1 . Consultant shall bear all applicable taxes, duties, levies etc, including both corporate arid personnel taxes but not limited to taxes on income levied on the Consultant or on its affiliated companies on account of payments received by it from the Company for the scope of work done under the, contract except all taxes payable in India which will be to ONGC account. 11.2 If any tax benefit is available to the consultant as a result of credits claimed of withholding taxes paid by ONGC, the same shall be passed on to ONGC by the consultant."
13. Under above noted and facts and circumstances of the present case, we are inclined to hold that it cannot be disputed that the ONGC is an agent/representative assessee of the non-resident and the assessee ONGC never disputed its liability to be assessed as agent/representative assessee of the non- resident company M/s Foster Wheeler Energy Ltd. UK. From the factual matrix of the present case, we clearly observe that not only income tax return were signed and filed as agent/representative assessee for and on behalf of the non- resident, but several other documents replies to the notices were furnished with the income tax authorities and this liability was fastened on ONGC as per clause 11 ITA No.652/Del/2012 Asstt.Year: 2005-06 11 of the agreement dated 7.7.2004 between ONGC and non-resident company M/s Foster Wheeler Energy Ltd.
14. In view of aforesaid conclusion and undisputed fact of the extant case, it was not necessary for the revenue authorities to provide any opportunity of being heard to the assessee ONGC as regards his liability to be treated as an agent under the Act. Practically, it would have been futile and absurd exercise to provide such an opportunity of being heard to a person who has accepted and never disputed the liability to be assessed as an agent and therefore, there was no necessity to pass any order u/s 163(2) of the Act.
15. The facts of the present case are analogous to the facts of the case of J.M. Baxi (supra) wherein it was held by the Special Bench of ITAT Mumbai that with reference to the provision of section 163(2) of the Act, the same are for the benefit of the agent relating to his liabilities under the Act and the benefit of provision viz. opportunity of being heard can be waived by the agent/representative assessee. We also respectfully take note of the decision of Hon'ble Bombay High Court wherein it was authoritatively held by their lordships of Bombay High Court having regard to the fact and conduct of the assessee in the case of Ram Narayan Rajmal vs CIT 24 ITR 442. In the present case, as we have noted earlier that the ONGC filed original return and revised return as representative assessee of non-resident M/s Foster Wheeler Energy Ltd. voluntarily and adhering to clause 11 of the agreement between ONGC and 12 ITA No.652/Del/2012 Asstt.Year: 2005-06 M/s Foster Wheeler Energy Ltd., non-resident company and this act and conduct of the assessee ONGC clearly shows that the ONGC waived benefit of privilege available u/s 163(2) of the Act. In this situation, the assessee agent i.e. ONGC cannot turn around and raise an objection of failure to provide an opportunity of being heard u/s 163(2) of the Act as the circumstances clearly reveal that original return for the year under consideration as well as revised return under appeal was filed u/s 139 of the Act accepting the position of agent/representative assessee of non-resident company M/s Foster Wheeler Energy Ltd. UK remained unaltered.
16. We further hold that at the time of application of 147/148 of the Act for reassessment of non-resident through the agent/representative assessee, the facts and circumstances remained the same. In the light of well-accepted legal proposition that assessment includes reassessment it is not possible to accept the contention of the assessee that the ONGC is an agent for filing of original return as well as revised return u/s 139(1) of the Act but not for reassessment. Therefore, on the existence of aforesaid facts and circumstances of the present case, we are inclined to hold that the case is squarely covered in favour of the revenue and against the assessee by the order of the Special Bench "L", Mumbai ITAT dated 5.3.2009 (supra) and respectfully following the same, we are inclined to hold that the provisions of section 149(3) of the Act have no 13 ITA No.652/Del/2012 Asstt.Year: 2005-06 application in this case nor was there any necessity to pass any order in terms of section 163(2) of the Act.
17. It would also be just and proper to adjudicate other contentions of the assessee that the ONGC is a sincere tax payer and had suo moto filed return of income as agent/representative assessee of non-resident M/s Foster Wheeler Energy Ltd. UK and, therefore, the assessee ONGC should not be put at a disadvantageous position. Ld. DR replied that by submitting original and revised return, the ONGC only discharged its obligation incumbent upon it under clause 11 of the agreement between assessee ONGC and non-resident M/s Foster Wheeler Energy Ltd. UK and if assessee chooses to submit returns suo moto u/s 139(1) of the Act to discharge its liability as well as to enjoy tax benefit available for the non-resident company as a result of credits claimed of withholding taxes, then it should not escape itself from reassessment proceedings u/s 147/148 of the Act.
18. In view of above legal position, we reach to a logical conclusion that as per conduct of the assessee and decision of the Special Bench Mumbai ITAT in the case of J.M. Baxi (supra) the provisions of section 149(3) of the Act and limit prescribed therein for issuance of notice u/s 148 of the Act is not applicable to the present case. Finally, we reach to a conclusion that the CIT(A) was not justified in holding that since the assessment has been framed on M/s ONGC by treating it as a representative assessee of non-resident M/s Foster Wheeler 14 ITA No.652/Del/2012 Asstt.Year: 2005-06 Energy Ltd., therefore the limitation for issuance of notice u/s 148 of the Act beyond two years to the representative assessee u/s 163 of the Act from the end of assessment year.
19. On the basis of foregoing discussion, we hold that the conclusion of the CIT(A) in the impugned order is not only perverse but also carries ambiguity and misinterpretation of legal provisions of the Act and inconsistent with the ratio of the decision of Special Bench in the case of J.M. Baxi (supra) and, therefore, we set aside the same by holding that the notice issued to the assessee was well within the period prescribed under the Act. Accordingly, ground no. 1 and 2 of the revenue are allowed.
Ground No.3 of the Revenue
20. Apropos ground no. 3, the ld. DR pointed out that the CIT(A) has also erred in not giving a finding on merits that the income of the assessee was in the nature of Technical Services being rendered and taxable as per provisions of the section 115A r/w section 9(1)(vii) of the Act by following the decision of ITAT "I" Bench Delhi dated 17.7.2014 in the case of CGG Marine SAS vs ADIT in ITA No.234/Del/2013 for AY 2005-06. Ld. Counsel of the assessee replied that when the notice u/s 148 of the Act was found to be issued beyond prescribed limit period, therefore, there was no necessity to adjudicate the other issues on merits.
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21. On careful consideration of above submissions of both the parties, we are of the view that since by the earlier part of this order, we have decided the issue of limitation in favour of the Revenue and thus, it has been held that the CIT(A) was not correct in holding that the notice u/s 148 of the Act was issued beyond prescribed limitation period and the impugned order of the CIT(A) has been set aside, therefore, we deem it appropriate to restore the other issues on merits to the file of the first appellate authority i.e. CIT(A) for adjudication on merits. Accordingly, ground no. 3 of the revenue is also allowed and CIT(A) is directed to adjudicate the other issues raised by the assessee on merits after affording due opportunity of hearing for the assessee as per provisions of the Act and as per legal provisions held by various authorities on the issue including decision of ITAT "I" Bench Delhi in the case of CGG Marine SAS vs ADIT (supra).
22. In the result, appeal of the revenue is allowed.
Order pronounced in the open court on 13.2.2015.
Sd/- Sd/- (S.V.MEHROTRA) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 13th February, 2015 'GS' 16 ITA No.652/Del/2012 Asstt.Year: 2005-06 Copy forwarded to:- 1. Appellant 2. Respondent 3. C.I.T.(A) 4. C.I.T. 5. DR By Order Asstt. Registrar 17