Income Tax Appellate Tribunal - Mumbai
Dimension Data Asia Pacific Pte. Ltd, vs Dcit (It) 2(1)(2), on 29 March, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL "K" BENCH, MUMBAI
BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND
SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER
S.A. Nos. 179/M/2017&180/M/2017
(Arising out of ITA Nos1635/Mum/17& 1636/Mum/2017
Assessment Years: 2012-13 & 2013-14
Dimension Data Asia Pacific Pvt. DCIT (IT) 2 (1) (2) 17th Floor, Air
Ltd.Formerly Known As Datacraft India Bldg, Nariman Point, Nariman
Asia PTE. Mumbai Pin 400013 Vs. PointMumbai Pin 400021
PANNo-AADCD4348L
(Applicant) (Respondent)
Appellant by : Shri Sunil M. Lala
Respondentby : Shri. A.K. Nayak (DR)
Date of Hearing : 24/03/2017
Date of Order : 29/03/2017
ORDER
PER ASHWANI TANEJA:
Both the above stay petitions pertain to same assessee for AYs. 2012-13 & 2013-14 involving identical issues.
2. During the course of hearing, it was stated by Ld. Counsel of the assessee at the very outset that in identical circumstances order was passed by the lower authorities in AY. 2011-12 in assessee's own case and the demand was raised accordingly. Petition for stay was allowed in full by Tribunal for AY 2011-12vide Tribunals order dated 8.3.2016in S.A No. 72/M/2016 granting stay of full 2 Dimension Data Asia demand. It was submitted that facts and circumstances are identical in AYs. 2011-12, 2012-13 & 2013-14. Further, the lower authorities have followed order for AY. 2011-12. Therefore, the stay of demand should be granted in pursuance to the order passed by the Tribunal in AY. 2011-12.It was also submitted that additionsmade by lower authorities were prima facie illegal and unjustified. Therefore, balance of convenience lies in favour of the assessee.
3. Per contra, Ld. DR relied upon orders of the lower authorities and did not raise any serious objection in this regard since matter was covered with the order of Ay. 2011-12.
4. We have gone through the facts and circumstances of the case.The brief background is that assessee company was incorporated as Pvt. Ltd. Company in Singapore and during these years it was engaged in the business of providing management support services to its group entities. The assessee rendered the services to its wholly own indian subsidiary namely Dimension Data India Ltd. and earned management fee in pursuance to the agreement in lieu of services rendered. The assessee was remunerated at the rate of 10% of the cost. However, the AO held that the assessee had a service PE in India and accordingly the aforesaid amount was taxable in India. Further, the AO allowed only 10% of the expenses and held balance 90% as business income of the alleged service PE on the basis of order passed by AO for AY. 2011-12. During the course of hearing before us, it has been submitted by the Ld. Counsel of the assessee that high pitched assessment was made by AO disregarding provisions of law and facts of the case and if, existence of service PE of the assessee is accepted, though denied, even then, taxing the income at the rate of 90% is highly unfair and unjustified and without any reasoning at all. Therefore, the demand raised is absolutely illegal and balance of convenience lies in favour of the assessee.
5. It is further noted that in the identical facts and circumstances the Tribunal has granted stay of the entire demand outstanding for AY. 2011-12 vide its order dated 8.3.2016 passed in assessee's own case by observing as under:-
"We have heard the arguments advanced by the learned representative of the parties and have gone through the record carefully. The contention of the learned representative of the assessee is that the case is fixed on 29.11.2017 and the department is pressing hard for his unreasonable demands to the tune of 3 Dimension Data Asia Rs.98,239,480/-, therefore, the demand is liable to be stayed in the interest of justice. It is stated that the Assessing Officer has assessed the income of Rs.20 crore (appx), i.e., about 10 times to the returned income, violating CBDT Instruction No.96 datedAugust 21, 1969, therefore requisite demand is required to be stayed and also place reliance upon Soul v. DCIT [2010] 323 ITR 305 (Delhi High Court), Taneja Developers & Infrastructure Ltd. v. ACIT [2009] 222 CTR 0521 (Delhi High Court), Valvoline Cummins Limited v. DCIT [2008] 307 ITR 103 (Delhi High Court), N. Jegatheesan v. DCIT - [2015] 64 taxmann.com 339 (Madras High Court) and JR Tantia Charitable Trust v. ACIT [2013] 155 TTJ 0535 (Jodhpur ITAT).
It is also argued that the Petitioner is not a permanent establishment in India because 9 days services was rendered which is less than the threshold of 30 days as per Article 5(6) of the India- Singapore Double Tax Avoidance Agreement and 89 days activity was in India and 89 days stayed in connection with the shareholder activity / BSNL project for which the assessee company did not charge any fees and only travel cost was recovered, therefore, it is not essential period for PE but the Assessing Officer has wrongly accounted the same hence the provision of PE is not liable to be applicable upon the assessee. It is also argued that without the prejudice of earlier arguments that the petitioner was remunerated on cost plus 10% basis but the Assessing Officer made arbitrary deduction of only 10% as expenses and taxed 90% of management fees as administrative expenses which is quite wrong. Keeping in view the argument learned representative of the parties and perused the record carefully it is apparent on record that the AssessingOfficer assessed the Rs. 20 crores times to the returned income which is under question. Therefore, we are of the view that the demand is liable to be stayed in view of the CBDT Instruction No.96 dated August 21, 1969 and also law settled in Soul v. DCIIT [2010] 323 ITR 305 (Delhi High Court), Taneja Developers & Infrastructure Ltd. v. ACIT [2009] 222 CTR 0521 (Delhi High Court), Valvoline Cummins Limited v. DCIT [2008] 307 ITR 103 (Delhi High Court), N. Jegatheesan v. DCIT - [2015] 64 taxmann.com 339 (Madras High Court) and JR Tantia Charitable Trust v. ACIT [2013] 155 TTJ 0535 (Jodhpur ITAT). The appellant admitted the 9 days services was rendered in India which is less than the threshold period of 30 days as per Article 5(6) of the India- Singapore Double Tax Avoidance Agreement and the appellant contested that the 89 days because he did not render any kind of service for payment and entered into the project for which no fees of management was charged only travelling cost were recovered from BSNL Undoubtedly, the 4 Dimension Data Asia question of PE is still required to be decide by the Tribunal in the appeal before it. Moreover, it is also observed that the fee of the appellant is reimbursed on cost--plus 10%, basis. whereas the Assessing Officer allowed deduction only 10% and taxed 90% of the management fees as business income. As per agreement the appellant has earned a mark-up of only 10% and the TPO in the Petitioner's own case has accepted the mark up of 10% to be at Arm's Length Price. No doubt, in view of the said circumstances the maximum income that could be attributed in India would be Rs.2,05,17,397 (i.e. 10% of Rs.205,173,968). Consequently, tax demand raised to the tune of Rs.8,664,497 (i.e. 42.33% of Rs.2,05,17,397) which is far less than the tax deducted at source in case of the Petitioner (i.e. Rs.23,601,635). Moreover TDS is also more than the tax liability if assessed upon the receipt @ 10%. In view of the said circumstances, it is argued that the assessee has a prima facie case in his favour. Reliance placed upon DIT V. NGC Network Asia LLC (2009) 313 ITR 187 (Bom). Therefore, in the given facts and circumstances and without going into merits of the case we are of the view that the demand is liable to be stayed in the interest of justice. We ordered accordingly till the pendency of the appeal. The case is fixed for 11.04.2016 for hearing. There is no need to issue the notice to the parties being this order has been pronounced before parties and they are well aware of the date of hearing. The demand of the Revenue is hereby stayed till the disposal of the appeal."
6. It is further brought to our notice that the lower authorities in AYs. 2012- 13 & 2013-14 have followed the orders passed in AY. 2011-12. No distinction whatsoever on law or fact has been made by Ld. DR before us. Therefore, taking into account totality of facts and circumstances of the case and respectfully following the order of the Tribunal of AY. 2011-12, we find it to be a fit case for granting stay or demand. Therefore, entire demand pending for AYs. 2012-13& 2013-14 is hereby stayed for the period of 180 days from the date of this order or disposal of main appeal, whichever is earlier. No coercive measures shall be taken by the AO during the operation of our stay order.But,if assessee seeks adjournment without any sufficient cause, then our stay order shall automatically stand vacated.Further, our stay order shall have no bearing on the merits of the case. Further the registry is directed to fix the main appeal for hearing on priority on 27.4.2017. Both the parties were formed in the open court, therefore requirement of service of notice for hearing is hereby waived.
5 Dimension Data Asia Thus, both stay petitions filed by assessee are hereby allowed in terms of directions given as above.
Sd/- Sd/- (C.N. Prasad) (Ashwani Taneja) Judicial Member Accountant Member मुंबई Mumbai; िदनां कDated : 29.03.2017 V. Pal Singh
आदे शकी ितिलिपअ े िषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. थ / The Respondent
3. आयकरआयु (अपील) / The CIT(A)
4. आयकरआयु / CIT- concerned
5. िवभागीय ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai
6. गाड फाईल / Guard File आदे शानुसार/ BY ORDER, उप/सहायकपं जीकार (Dy./Asstt.Registrar) आयकरअपीलीयअिधकरण, मुंबई / ITAT, Mumbai