Income Tax Appellate Tribunal - Delhi
M/S. Technip Uk Ltd., Gurgaon vs Dcit, New Delhi on 1 September, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "D", NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
AND
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
I.T.A. No. 6841/DEL/2014
A.Y. : 2008-09
DCIT, CIRCLE 3(1)(2), M/s TECHNIP UK Ltd.,
Intl. Taxation, VS. C/o BMR & Associates LLP
New Delhi 22nd floor, Building No. 5,
Tower-A,
DLF Cyber City, DLF Phase-III,
Gurgaon-122002
Haryana
(PAN: AACCT8268N)
AND
C.O. NO. 200/DEL/2015
(IN ITA NO. 6841/DEL/2014)
A.Y. : 2008-09
M/s TECHNIP UK Ltd., DCIT, CIRCLE 3(1)(2),
C/o BMR & Associates LLP VS. Intl. Taxation,
22nd floor, Building No. 5, Tower- New Delhi
A,
DLF Cyber City, DLF Phase-III,
Gurgaon-122002
Haryana
(PAN: AACCT8268N)
(APPELLANT) (RESPONDENT)
Revenue by : Sh. Vijay Verma, CIT(DR)
Assessee by : Sh. Anshul Sachar, Adv. & Sh.
Gaurav Barchha, CA
ORDER
PER H.S. SIDHU : JM This Appeal by the Revenue and Cross Objection by the Assessee are directed against the assessment order dated 21.11.2014 of the Assessing Officer passed u/s. 143(3)/144C/263 of the Income Tax Act, 1 1961 (hereinafter referred as the Act) pertaining to assessment year 2008-09. The grounds raised by the Assessee read as under:-
"1. Whether on the facts and circumstances of the case, the Hon'ble Dispute Resolution Panel ('DRP') has erred in directing the Assessing Officer to apply the deemed profit rate of 10% u/s 44BB of the Income Tax Act, 1961 ( 'the Act') on the revenues earned by the assessee from M/s Aker Installation FP AS ('Aker') on account of provision of services for executing contracts with M/s Reliance Industries Ltd ( 'RIL').
2. Whether on the facts and in the circumstances of the case, the Hon'ble DRP has erred in holding that the amount received by the assessee from M/s Aker on account of the services rendered was not in the nature of Fee for Technical Services ( 'FTS') as defined u/ s 9(1)(vii) of the Act and was not taxable under the provisions of see 44DA r.w.s. 115A of the Act.
3. Whether on the facts and in the circumstances of the case, the Hon'ble DRP has erred in holding that the revenues earned by the assessee on account of provision services to a non-resident company were in connection with prospecting etc of mineral oil and hence eligible for treatment u/ s 44BB of the Act, without 2 adjudicating the aspect of eligibility in terms of second limb of the exclusionary proviso ( Explanation to section 9(1)(vii) of the I T Act, 1961) i.e. "for a project undertaken by the recipient" in terms of the proposition confirmed by Hon'ble Delhi High Court in CIT V Rio Tinto Technical Services [2012-TII-01-HC- DEL-INTL]
4. Whether on the facts and circumstances of the case, the Hon'ble DRP has erred in holding that the case of the assessee is covered by CBDT's Instruction No. 1862 dated 22.11.1990, not appreciating the fact that the said Instruction No. 1862 was not issued u/ s 44BB but was issued to clarify the expression "mining or like project" in Expn 2 below section 9(1)(vii)(b) of the Act and the second limb of the exception ("for a project undertaken by the recipient") was not the subject matter of the said Instruction.
5. Whether on the facts and in the circumstances of the case, the Hon'ble DRP has erred in not appreciating the fact in the present case the services were not rendered by the assessee directly to an entity (M/ s RIL) which is engaged in prospecting etc of mineral oil and is directly a member of the Production Sharing Contract.
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6. Whether on the facts and circumstances of the case, the Hon'ble DRP has erred in holding that no distinction can be made between receipts from Production Sharing Participants ( 'PSC Partners') and Non-Production Sharing Participants ('Non-PSC' Partners') and between services rendered by first-leg and second-leg vendors, ignoring' the fact that the receipts from second-leg are in respect of contracts which are entered into with companies not directly engaged in Oil Production and Exploration and, therefore, are liable to tax u/s 44DA read with section 9(1)(vi)j9(1)(vii and not uj s n 44BB of the IT Act, 1961.
7. Whether on the facts and circumstances of the case the Hon'ble DRP has erred in its interpretation of the legislative intent behind the scheme of taxation envisaged in 9(1)(vii) read with sections 44DA and 44BB , ignoring the decisions in the cases of M/s Rolls Royce Pvt Ltd [2007-TII-03-HC- UKHAND-INTL] and M/s ONGC As Agent of Mjs Foramer 'France [(2008) 299 ITR 438 Uttarakhand]
8. Whether on the facts and circumstances of the case, the Hon'ble DRP has erred in ignoring the distinct 4 scheme of taxation of FTS/ royalty and disregarding the insertion of provisos in section 44BB/ 44DA/ 115A and the rationale behind the introduction of said clarificatory provisos in the Finance Bill 2010 in holding that the income of the assessee company was covered under the provisions of section 44BB.
9. Whether on the facts and in the circumstances of the case, the Hon'ble DRP has erred in not appreciating that since sections 44DA/115A are special provisions for taxation of income in the nature of royalties and FTS and if a special provision is made respecting a certain matter that matter is excluded from the general provision under the rule of "Generallia specialibus non derogant".
10. Whether on the facts and circumstances of the case, the Hon'ble DRP has erred in holding that the provisions of section 44BB of the Act are more special provisions which shall prevail over the provisions of section 9(1)(vii) read with sections 44DA and 115A of the Act, not appreciating the fact that both set of provisions are special in nature which operate in their own clearly defined' spheres and therefore, once a particular receipt or income takes on the character of 5 FTS as defined in section 9(1)(vii), it cannot be considered for treatment uj s 44BB of the Act.
11. Whether on the facts and circumstances of the case, the Hon'ble DRP has erred in holding that sections 44DA and section 115A apply only to cases where- the income by way of -Royalty or FTS is earned by a non- resident by way of royalty or FTS from Government or an Indian entity and where an income is received by a non-resident from another non-resident, the provisions of section 44DAj115A do not apply.
12. Whether on the facts and circumstances of the case, the Hon'ble DRP has erred in not appreciating that proviso to section 44BB is not inserted per majorem cautelam' but explains and clarifies the main provision as the terms services or facilities used therein are not defined and the two terms used are too general in nature and therefore, once the payments take the character of FTS u/ s 9(1)(vii), they go outside the purview of section 44BB and have to be taxed as FTS at applicable FTS rates as prescribed under the Act and / or DTAA.
13. Whether on the .facts and circumstances of the case, the Hon'ble DRP has erred in not appreciating the 6 fact that proviso to section 44DA brought about by the Finance Act 2011 was only clarificatory in nature and its application has to be read into the main provisions with effect from the time the main provision came into effect in view of the decision of the Hon'ble Supreme Court in the case of Sedco Forex International Drilling v / s CIT.
14. The appellant prays for leave to add, amend, modify or alter any grounds of appeal at the time or before the hearing of the appeal."
2. The Assessee has raised the following grounds in the Cross Objection:-
1. That on facts and circumstances of the case and in law, the DRP and the DCIT, Int. Taxation, New Delhi have erred in holding that both in country as well as out-country receipts from the contract with Aker Installation FP AS shall be taxable in India under section 44AB of the I.T. Act, 1961. 1.1 That the DRP / AO erred on facts and in law in not holding that out-country receipts are not liable to tax in India in terms of the India-UK Double Taxation Avoidance Agreement.
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2. That the DRP/AO have erred on facts and in law in not appreciating that interest under sections 234A, 234B, 234C and 234D of the Act is not leviable in the case of the respondent.
The respondent craves leave to add, modify, amend or withdraw any ground of cross objections at the time of or before the hearing."
3. The brief facts of the case are that the assessee filed its e-return of income declaring income of Rs.39,63,29,420/- on 31.3.2009. The case of the assessee was selected of Rs. 39,63,29,420/- u/s. 44BB of the Income Tax Act, 1961 (hereinafter referred as the Act). Thereafter, the Ld. DIT(IT)-II, New Delhi found the assessment completed by the AO, is erroneous and prejudicial to the interest of revenue and accordingly, the Director of Income Tax (International Taxation)-II, New Delhi examined the assessment order and considering the all facts and circumstances of the case after according assessee opportunity of being heard, he passed the order u/s. 263(1) of the Act by holding that AO's order is hereby cancelled with the direction to the AO to make a fresh assessment after conducting proper enquiries and, after giving the assessee adequate opportunity of being heard and disposed off the proceedings u/s. 263 of the Act vide order dated 28.3.2013. Subsequently, notice u/s. 143(2)/142(1) alongwith detailed questionnaire were issued and duly served upon the assessee. In response to the same, the AR of the 8 assessee attended the proceedings and after going through the facts of the case narrated in the order u/s. 263(1) of the Act the contention of the assessee was not found tenable and liable to rejected. AO observed that as held by the DIT(Int. Tax)-II, New Delhi in her order u/s. 263(1) of the I.T. Act, 1961 dated 28.3.2013, the income of the assessee is to be assessed as business income taxable @40% u/s. 44DA of the Act, with permanent establishment. AO further observed that since the assessee has not maintained books of accounts and its entire income with connected to PE in India, therefore, the entire receipt is to be taxed as business income. During the assessment proceedings or while replying show cause notice u/s. 263 of the Act, proceedings before the DIT(Int. Tax.)-II, New Delhi the assessee has not submitted the details of expenses. Accordingly, the entire receipts of the assessee amounting to Rs. 562,57,88,223/- is required to be assessed as business income @40% under section 44DA of the Act and accordingly, the income of the assessee was computed at Rs. 562,57,88,223/- vide order dated 21.11.2014 passed u/s. 143(3)/144C/263 of the Act. 3.1 The draft order in this case framed on 3.3.2014 determining income as per preceding paragraphs. Aggrieved, the assessee filed objections against this draft order before DRP-II, New Delhi on 9.4.2014. The DRP issued directions vide its order dated 7.11.2014 adjudicated the objections filed by the assessee and as per the DRP-III, New Delhi directions issued vide on 07.11.2014 has recomputed the income of the assessee and assessed the same at Rs. 56,25,78,820/- being income 9 @10% thereof u/s. 44BB of the Act. Aggrieved with the above, the Revenue has filed the appeal and Assessee has filed the Cross Objection before the Tribunal.
4. Ld. DR relied upon the order of the AO and reiterated the contentions raised in the grounds of appeal.
5. On the other hand, during the hearing, Ld. Counsel of the assessee stated that in this case assessment has been completed in compliance with order u/s. 263(1) of the Act, which has been later cancelled by the ITAT vide order dated 24.4.2017 passed in ITA No. 4284/Del/2013 (AY 2008-09) in the case of the assessee.
6. We have heard both the parties and perused the relevant records available with us, especially the order of the Revenue Authorities. We find considerable cogency in the submissions of the Ld. Counsel of the assessee that in the present case assessment has been completed in compliance with order u/s. 263(1) of the Act of the Ld. DIT, which has been later cancelled by the ITAT vide order dated 24.4.2017 passed in ITA No. 4284/Del/2013 (AY 2008-09) in the case of assessee by holding as under:-
"64. Since in the instant case the AO after considering the various submissions made by the Assessee from time to time and has taken a possible view, therefore, merely because the DIT does not agree with the opinion of the AO, he cannot invoke the provisions of section 10 263 to substitute his own opinion. It has further been held in several decisions that when the AO has made enquiry to his satisfaction and it is not a case of no enquiry and the DIT/CIT wants that the case could have been investigated / probed in a particular manner, he cannot assume jurisdiction u/s. 263 of the Act. In view of the above discussion, we hold that the assumption of jurisdiction by the DIT u/s. 263 of the Act is not in accordance with law. We, therefore, quash the same and grounds raised by the assessee are allowed."
7. Keeping in view of the facts and circumstances of the case as explained above, we are of the considered view that in the present case assessment has been completed in compliance with order u/s. 263(1) of the Act of the Ld. DIT, which has been later cancelled by the ITAT vide order dated 24.4.2017 passed in ITA No. 4284/Del/2013 (AY 2008-09) in the case of assessee, hence, the Revenue's appeal has become infructuous and dismissed as such.
8. As regards Assessee's Cross Objection is concerned, since we have dismissed the Revenue's appeal as infructuous, the Cross Objection filed by the Assessee has also become infructuous and the same is dismissed as such.
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9. In the result, the Appeal filed by the Revenue as well as Cross Objection filed by the Assessee stand dismissed.
Order pronounced in the Open Court on 01/09/2017.
Sd/- Sd/-
[PRASHANT MAHARISHI] [H.S. SIDHU]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date 01/09/2017
"SRBHATNAGAR"
Copy forwarded to: -
1. Appellant -
2. Respondent -
3. CIT
4. CIT (A)
5. DR, ITAT TRUE COPY By Order,
Assistant Registrar,
ITAT, Delhi Benches
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