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Income Tax Appellate Tribunal, HYDERABAD BENCHES “B”: HYDERABAD
Before: SHRI SATBEER SINGH GODARA & SHRI LAXMI PRASAD SAHU
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B”: HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER
ITA Nos. 1132, 1133, 1134, 1135, 1136, 1137, 1138 & 1139/H/2015 with Cross Objections 6, 7, 8, 9, 10, 11, 12 & 13/H/2017 AY: 2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12 & 2012-13 Dy. Commissioner of Vs. Madhucon Sino Hydro JV, Income-tax, Hyderabad. (International Taxation), Hyderabad. PAN – AANFM 1541G
(Appellant) (Respondent/ Cross Objector ) Revenue by: Shri Y.V.S.T. Sai Assessee by: Shri P. Murali Mohan Rao Date of hearing: 27/10/2021 Date of pronouncement: 28/10/2021
O R D E R PER BENCH:
The instant batch of sixteen cases pertaining to a single assessee i.e. M/s Madhucon Sino Hydro JV, Hyderabad involves the following relevant particulars:
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Sl. ITA No. & CIT(A) Order, date & Proceedings u/s No. Assessment Case No. Year 1 1132/Hyd/2015 ITA No. 0036/CIT(A)- U/s 163 of the 2006-07 X/2014-15, 19/06/2015 Income-tax Act. 2 1133/Hyd/2015 ITA No. 0156/CIT(A)- U/s 163 (1)(C) 2006-07 X/2014-15, 19/06/2015 of the Income- tax Act. 3 1134/Hyd/2015 ITA No. 0028/CIT(A)- U/s 163 of the X/2014-15, 19/06/2015 Income-tax Act. 2007-08 4 1135/Hyd/2015 ITA No. 0029/CIT(A)- U/s 163 of the Income-tax Act. 2008-09 X/2014-15, 19/06/2015 5 1136/Hyd/2015 ITA No. 0031/CIT(A)- U/s 163 of the Income-tax Act. 2010-11 X/2014-15, 19/06/2015 6 1137/Hyd/2015 ITA No. 0032/CIT(A)- U/s 163 ) of the Income-tax Act. 2011-12 X/2014-15, 19/06/2015 7 1138/Hyd/2015 ITA No. 0033/CIT(A)- U/s 163 of the Income-tax Act. 2012-13 X/2014-15, 19/06/2015 1139/Hyd/2015 ITA No. 0030/CIT(A)- U/s 163 of the 2009-10 X/2014-15, 19/06/2015 Income-tax Act.
Heard both the parties. Case files perused.
The Revenue’s appeals ITA Nos. 1132, 1133, 1134, 2. 1135, 1136, 1137, 1138 & 1139/H/2015 raise the following identical substantive grounds:- “1. The learned CIT(A) erred in law in entertaining and deciding the appeal (No.36/2014-15 instituted on 11-4- 2014) when another appeal (No.156/201314) had earlier been instituted on 17-04-2013 against the same order of the AO and in deciding the two appeals by two separate orders on the same date i.e,19-06-2015. 2. The learned CIT (A) erred in law in entertaining and adjudicating an appeal which had been instituted beyond the prescribed time limit and even though delay was not condoned.
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The learned CIT(A) erred in fact and on law in not appreciating that M/s. Madhucon Sino Hydro (JV) had been treated as the agent of Sino Hydro Corporation, China in order to give effect to the finding and direction contained in ITAT order in ITA Nos.646 and 701/Hyd/2010 dated 27-11-2012 and, that being the case, the correctness of that action was not open to adjudication by the learned. CIT(A). 4. The learned CIT(A) erred in fact and law in holding that M/s. Madhucon Hydro (JV) could not be treated as the agent of Sino Hydro Corporation u/s.163 of the Income Tax Act.”
The assessee’s Cross Objections COs 6, 7, 8, 9, 10, 11, 3. 12 & 13/H/2017, on the other hand, raise the following identical pleadings: “1. The ground no 1 raised by the revenue in the appeal has become Infructuous as the order of the ITAT in ITA Nos. 646 and 701/Hyd/2010 has subsequently been modified by the MA order of ITAT in MA No 33 & 34/H/2016 dated 12.08.2016. 2. The ground no. 1 raised by the revenue is not correct as there is no direction by the ITAT in ITA Nos. 646 and 701 jHydj2010 in respect of proceedings u/s 163 of Act as held by the Hon'ble ITAT, Hyderabad in its order dated 15.07.2 in ITA No. 246/H/2015. 3. The ground no. 1 raised by the revenue is not correct as the action of the assessing officer in treating the assessee as agent of non-resident was without any basis and without any directions of the IT AT as agitated by the revenue.”
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We notice, at the outset, that assessee’s foregoing cross objections suffer from 553 days delay in filing CO Nos. 6 & 7/Hyd/2017 and 554 days delay in filing CO Nos. 8 to 13/Hyd./2017 before the ITAT. To this effect, the assessee filed an affidavit affirming, inter-alia, therein that since the Tribunal modified its order against the MA filed by the assessee, caused the delay in filing the C.Os. Case law Collector Land Acquisition Vs. Mst. Katiji & Ors, 1987 AIR 1353 (SC) and University of Delhi Vs. Union of India, Civil Appeal No. 9488 & 9489/2019 dated 17 December, 2019, hold that such a delay; supported by cogent reasons, deserves to be condoned so as to make way for the cause of substantial justice. We accordingly hold that assessee’s impugned delay in filing these Cross Objections is neither intentional nor deliberate but due to the circumstances beyond its control. The same stands condoned. Cases are now taken up for adjudication on merits.
Both the learned representatives next invited our attention to the CIT(A)’s detailed discussion accepting the assessee’s contentions challenging invocation of section 163 proceedings by the Assessing Officer; as under:
“The appellant is a Joint venture of Madhucon properties Ltd. and Sino Hydro corporation, China (previously known as China National water Resources and Hydro Engineering). The said JV is constituted by the above mentioned two companies for bidding various
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developmental works for Government of Andhra Pradesh and other Governmental organizations. According to the Joint venture Agreement, the Sino Hydro corporation is a lead partner and shall be responsible in participation of bids. It shall also participate in the contract works undertaken by the JV· It is also agreed by both the concerns that the share of Indian company shall be 98% and whereas the Sino Hydro shall be entitled for a share of 2%. The JV is successful bidder for a number of projects and obtained the contract works. The Sino Hydro provided the technical data to the JV and also provided other Engineering services as per the Joint Venture agreement. The JV paid 2% of the contract amount to Sino Hydro. At the time of payment, the JV deducted tax at source at 10% of the amount paid and remitted the same to the Government account. The total amount deducted was Rs.2, 17,51,274/-. During the course of assessment proceedings in the case of JV the amounts paid to its constituents for rendering the engineering services were not allowed as a deduction as the JV did not pay the tax deducted at source within time. The matter went upto the Tribunal and the ITAT, Hyderabad for the assessment year 2006- 07 decided the issue vide order in ITA No.646 & 701/Hyd/2010 dated 27.11.2012. The ITAT while disposing the appeal observed that in case the Chinese concern has not filed the return of income, the same may be brought to tax by taking suitable action for bringing the amount to tax in accordance with the provisions of the Act. Consequently, the Assessing Officer proposed to pass order u/s 163 of the I.T. Act against the JV treating the JV as the agent of Sino Hydro Corporation For the assessment year 2006-07, the order u/s 163 was passed on 30.3.2013 without providing opportunity to the appellant and whereas for the rest of the years, the
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Assessing officer issued show cause notice on 26.2.2013. The Assessing officer passed order u/s 163 of the LT. Act for the assessment year 2006-07 on 30.3.2013 and for the rest of the assessment years on 10.3.2014. The present appeals are directed against the orders passed by the Assessing Officer u/s 163 of the LT. Act. The appeals are posted for hearing and Sri S. Rama Rao is present. He filed the written submissions for the assessment years 2006-07 to 2012-13. The written submissions are identical for all the assessment years. Therefore, the submissions made for the initial assessment year i.e. Asst. years 2006-07 are reproduced hereunder: "The appellant is a company registered in China and having a permanent establishment in India. It entered into a Joint Venture Agreement on 20.01.2005 with Madhucon Private Ltd. The JV is known as Madhucon Sino Hydro JV. According to the JV agreement, it proposes to undertake the works through tender in the irrigation projects of Andhra Pradesh. The participation is accepted to be 98% for Madhucon Projects Ltd., and 2% for Sino Hydro. The Sino Hydro is the leading partner of the JV. The company accepted to negotiate with the employer; incur all costs with regard to preparation and filing of the tenders. The participation of Sino Hydro in the developmental activity is towards providing all designs etc. and is entitled to receive 2% of the amount sanctioned by the Government. The other activities to be undertaken by Syno Hydro are also enumerated in the agreement. For the assessment year 2006-07, the JV was awarded works of the value of Rs.135,69,37,509/- by the Government of Andhra Pradesh out of which works worth of Rs.132,97,60,010/- was allotted to Madhucon Projects Ltd., and the works of the value of Rs.2,71,77,499/- is entrusted to the Syno Hydro. The Assessing Officer while completing the assessment of
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the JV held that the amounts paid to the constituent of the JV i.e. Madhucon Private Limited and Sino Hydro are not allowable as tax was not deducted at source. The JV filed appeals and the matter was decided by the Hon'ble ITAT in ITA Nos.646/2010 and 701/2010. It was held that tax need not be deducted at source by the JV for the payments made to its constituents. However, the Hon'ble ITAT observed that the person responsible for making the payment to the non resident may be proceeded against as per law if the Chinese company did not offer this amount as part of the taxable income in India. The ITAT observed that the Assessing Officer may take suitable action for bringing the amount to tax in accordance with the provisions of the Act. A copy of the order of the Hon'ble ITAT is placed in the paper book. The Assessing Officer based on the observations of the Hon'ble ITAT issued notice u/s 163 on 30.03.2013 requiring the appellant to state the reasons as to why the JV should not be treated as the Agent of the Chinese company. The Assessing Officer without providing any opportunity passed an order u/s 163 on the same date i.e. 30.03.2013. In the said letter, the Assessing Officer held as under: a) The Hon'ble ITAT in its order dated 27.11.2012 directed to assess the JV on behalf of the Chinese company. b) The Sino Hydro Corporation is in receipt of the income from Madhucon Sino Hydro JV as per the terms of subscription agreement entered into between the two parties; c) The Madhucon Sino Hydro JV, Hyderabad, therefore, can be regarded as an Agent to Sino Hydro Corporation, China.
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The Assessing Officer, accordingly. treated the Madhucon Sino Hydro JV, Hyderabad as the Agent of Sino Hydro Corporation, China. It is against the said order u/s 163 of the I.T. Act passed by the Assessing Officer, the Madhucon Sino Hydro JV filed the present appeal: In this regard the appellant submits the following explanations for perusal of the Hon'ble CIT (A). a) The Assessing Officer did not provide opportunity to the appellant before an order uls 163 was passed; b) It can be seen from the order passed uls 163 that the Assessing Officer did not provide opportunity for the assessment years 2006-07 and passed the order without providing such opportunity. It can be seen from the order that the order uls 163 was passed on the same date. The appellant submits that the order passed without issue of notice u/s 163 is bad in law. The appellant relies on the following decisions: a) The decision of the Calcutta High Court in the case of CIT vs. T.I.&M. ud., reported in 114 ITR 59. b) The decision of the Madras High Court in the case of CIT vs. Express News Papers Ltd., reported in 111 ITR 347. c) The decision of the Bombay High Court in the case of CIT vs. Belapur Sugar & Allied Industries Ltd., reported in 141 ITR 404.
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d) The decision of the punjab & Haryana High Court in the case of CIT vs. Prem Kumar Bhagat reported in 311 ITR 266. Therefore, the appellant submits that the order is not valid. The appellant submits that the Chinese Company i.e, Sino Hydro Corporation was allotted PAN AACCC0705F. The DDIT (International Taxation),New Delhi issued a letter to the said company on 27.02.2003; the Dy. Registrar of Companies, NCT of Delhi and Haryana issued a Certificate of Establishment of Place of Business in India vide Certificate dated 13.06.2003. The Registrar of Companies, Delhi & Haryana, Government of India wrote a letter with regard to compliance of Sec. 593 of the Companies Act, 1956 on 20.01.2004. The Reserve Bank of India, Exchange control Department, New Delhi permitted the State Government to open Project Office at New Delhi to execute the contract. According to Art.7 of the DTAA between India and China, if the company has permanent establishment in India, the income is taxable in India. In view of the above, the appellant submits that the foreign company Sino Hydro, China ties: a permanent place of establishment in India and, therefore, there is no requirement of passing an order u/s 163 of the I. T. Act. The appellant is submitting copies of the challans for payment of tax deducted at source on the sums paid to the Chinese Company. It can be seen that the appellant paid in all tax of Rs.2,17,51,274/-. The entire tax was paid to the Government account. The Hon'ble ITAT in order in the case of DCIT vs. PVP ventures t.to., in ITA No.1158 to 1162/2010 dated 31.07.2013 held that wherever the tax was deducted at source by the person
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responsible to pay the amount, the provisions of Sec.163 can not be applied. In view of the above, the appellant submits that it should not have been treated as an Agent of the Chinese Company, Sino Hydro Corporation". I find from the information that Sino Hydro corporation has a permanent establishment in India. The following documents filed by the appellant prove the fact that Sino Hydro possessed permanent establishments in India:
PAN Copy of China National Water Resources and Hydro Engineering corporation, issued by Commissioner of Income- Tax, Level III, East Block II, Vivekananda Marg, R.K. Puram, New Delhi 110 066 PAN AACC0705F 2. Copy of the letter issued by DDIT (Int. Tax) to China National Water Resources and Hydro Engineering Corporation Dated 27-02-2003. 3. Copy of the letter issued by RESERVE BANK OF INDIA to China National Water Resources and Hydro Engineering Corporation Dated 17-08-2002 permission to open a Project Office at New Delhi 4. Copy of the Form No.44 for registration by a Foreign Company of China National Water Resources and Hydro Engineering corporation of New Delhi Address with the details of their President and Vice President and their Residential Address at China 5. Copy of the F 2168 Certificate of Establishment of Place of Business in India relating to China National Water Resources and Hydro Engineering Corporation of New Delhi Address dated 13-06-2003 issued by Dy. Registrar of Companies NCT of Delhi & Haryana.
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Copy of the compliance of Sec.593 of the Companies Act 1956 for the name change of China National Water Resources and Hydro Engineering Corporation to SINO HYDRO CORPORATION issued by Registrar of Companies NCT of Delhi & Haryana dated 20-01-2004. 7. Copy of the letter issued by Foreign Exchange Department advising the functioning of Project Office in India to SINO HYDRO CORPORATION dated 07-02-2005. 8. Copy of the Certificate issued by China council for the promotion of International Trade Corporation China dated 08-09-2003. 9. Copy of the Certificate with regard to name change of China National Water Resources and Hydro Engineering Corporation to Sino Hydro corporation. All the above information was filed by the appellant before the Assessing officer and also before me. A perusal of the above documents indicates that the appellant was having permanent establishment in India and is registered u/s 592 of the Companies Act in India. Sino Hydro is having permanent establishment in India and is assessable to tax on the income derived in India. There is no requirement for treating the JV as an agent. I also find that the JV deducted tax at source at 10% of the gross amount paid and remitted the amounts to the Government account. The ITAT, Hyderabad in the case of DCIT Vs PVP ventures Ltd. in ITA No.1158 to 1162/2010 dated 31.7.2013 held that wherever the tax was deducted at source, the Assessing officer shall not treat the deductor as the agent. In the case of the appellant, I find that deduction of tax was property made and the adequacy of tax deducted is not the subject matter of any proceedings.
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In view of the above, I find that contentions of the appellant are to be accepted. I hold that the Assessing Office is not correct in treating the Madhucon Sino Hydro JV as the agent of Sino Hydro Corporation, China. In view of the above, the appeals for all the above assessment years are treated as allowed. In the result, the appeal is allowed.”
Learned CIT-DR vehemently contended during the course of hearing that not only the ld. CIT(A) has erred in law and on facts in deciding the impugned issue of assessee as not assessable as an agent of M/s Sino Hydro Corporation u/s 163 of the Act but also he has patently erred in passing two separate orders in tune with the above extracted Ground No. 1 (supra).
We find no merit in the Revenue’s foregoing legal as well as technical arguments. This is for the precise reason that the assessing authority appears to have set into motion section 163 mechanism in order to assess the taxpayer herein as an agent of M/s Sino Hydro Corporation (JV Partner) in tune by treating the tribunal’s discussion in Revenue’s and latter’s cross appeals appeal ITA No. 646 & 701/Hyd/2010 for AY 2006-07 decided on 27/11/2012. The Revenue’s endeavor all along; in light of the Assessing Officer’s order in issue herein dated 30 th March, 2013, is that the earlier coordinate bench directions has settled the issue of the assessee’s having acted as other entity’s
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JV/agent so as to be liable for section 163 assessment. There is yet another coordinate bench’s order dated 30/04/2016 deciding Revenue’s MA No. 115/Hyd/2015 making it clear that its plea seeking clarification of the earlier order that ; it in fact, involved clear cut directions to initiate the foregoing proceedings to this effect does not carry wait. We, thus, hold that the instant issue is no more res-integra between the parties since there were no such section 163 direction(s) against the assessee involved in the earlier order of the Tribunal and more so, when Revenue’s appeal ITTA/2015; raising the very issue, is stated to be pending before the hon’ble jurisdictional high court. Coupled with this, it has further brought on record that the Revenue has lost on the very issue in DRP’s directions dated 24/12/2014 in AY 2006-07 as well. We accordingly conclude that in this factual back-drop that the CIT(A) has rightly held that the impugned section 163 mechanism set into motion by the Assessing Officer against the assessee is not sustainable in law. The Revenue’s all legal as well as technical arguments/ substantive grounds and accepting assessee’s twin contentions in its cross objections involving ITA Nos. 1132 to 1139/Hyd/2015 and CO Nos. 6 to 13/Hyd/2017; are rejected and accepted respectively.
No other ground has been pressed before us.
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In the result, Revenue’s eight appeals ITA Nos. 1132 to 1139/Hyd/2015 are dismissed and assessee’s Cross Objections in CO Nos. 6 to 13/Hyd/2017 thereto are allowed in above terms. A copy of this common order be placed in the respective case files. Pronounced in the open court on 29th October, 2021.
Sd/- Sd/- (L.P. SAHU) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, Dated: 29th October, 2021. kv Copy to : 1 DCIT – 2, International Taxation, Room No. 348, 3rd Floor, “D” Block, IT Towers, AC Guards, Hyderabad. 2 M/s Madhucon Sino Hydro JV, 8-2-293/82/A, 1192/A, Road No. 36, Jubilee Hills, Hyderabad 3 CIT(A) – X, Hyderabad 4 CIT (IT & TP), Hyderabad ITAT, DR, Hyderabad. 5 6 Guard File.
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S.No. Details Date 1 Draft dictated on 2 Draft placed before author Draft proposed & placed before the Second 3 Member 4 Draft discussed/approved by Second Member 5 Approved Draft comes to the Sr. PS/PS 6 Kept for pronouncement 7 File sent to Bench Clerk 8 Date on which the file goes to Head Clerk 9 Date on which file goes to A.R. 10 Date of Dispatch of order