M/S PHILIPS ELECTRONICS NEDERLAND B.V.,KOLKATA vs. ACIT, (INT. TAX), CIR.-24(1), KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH KOLKATA BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.74/Kol/2021 Assessment Year: 2016-17

Philips Electronics Nederland Assistant Commissioner of B.V., Income Tax (International C/o Deloitte Haskins & Sells Taxation), Circle-2(1), LLP, Bengal Intelligent Park, Kolkata. Building Omega, 13th & 14th Vs. Floor, Block-EP&GP, Sector-V, Salt Lake Electronic Complex, Kolkata-700091. (PAN: AAFCP4361F) (Appellant) (Respondent)

Present for: Appellant by : Shri P. J. Pardiwalla & Shri Ketan Ved, AR Respondent by : Shri G. Hukugha Sema, CIT Date of Hearing : 11.01.2023 Date of Pronouncement : 15.03.2023 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of DCIT, Circle-2(1), International Taxation, Kolkata u/s. 143(3) of the Income- tax Act, 1961 (hereinafter referred to as the “Act”), dated 04.01.2021 against the order of Dispute Resolution Panel-2, New Delhi vide Order No. F. No. DRP-2/Del/2020-21/262, dated 19.10.2020, passed u/s. 144C(5) of the Act.

2 ITA No.74/Kol/2021 Philips Electronics Nederland BV AY 2016-17 “1. The Learned Assessing Officer and the Hon’ble Dispute Resolution Panel have erred in disregarding the claim made by the Appellant during the course of the assessment proceedings and in thereby holding the amount of Rs.88,78,26,867 received by the Appellant during the year under consideration from Philips India Limited ['PIL'] and Preethi Kitchen Appliances Private Limited ['Preethi'] pursuant to the Global Service Unit Agreement ['GSU'] is taxable in India.

3 ITA No.74/Kol/2021 Philips Electronics Nederland BV AY 2016-17 taxable in India since the services provided by the assessee to the two entities do not ‘make available’ technical knowledge, skills, experience etc. In the course of assessment proceeding, Ld. AO noted that the decision of Hon’ble Supreme Court in the case of Goetz India Ltd. v. CIT (2006) 289 ITR 323 (SC) had held that claim of deduction before the AO cannot be entertained otherwise than by filing revised return within the limitation prescribed u/s. 139(5) of the Act. Since assessee did not claim the said deduction in the original return filed by it and failed to file revised return u/s. 139(5) of the Act in support of its claim, it was not allowed by the ld. AO. 3.1. Draft of the proposed order u/s. 144C(1) read with section 143(3) of the Act was issued on 10.12.2019, against which assessee raised its objection before the ld. DRP. Objections of the assessee were rejected by the ld. DRP and it issued the directions u/s. 144C(1) of the Act vide order dated 14.10.2020. Directions given by the ld. DRP are reproduced as under, for ease of reference: “Ground No.1 The Learned Assessing Officer ('Ld. AO') erred in not considering the additional claim made by the Company before him during the course of assessment proceedings, for non-taxability of payment received by the Assessee from Philips India Limited ('PIL') and Preetihi Kitchen Appliances Private Limited ('Preethi') pursuant to the Global Service Unit Agreement ('GSU'), by contending that the said claim was not made through a revised return and placing reliance on the decision of the Supreme Court in the case of Goetze (India) Ltd. [(2006) 157 Taxman 1]. DRP Directions: 3.1 This is a general ground subsumed in the other ground considered separately and needs no separate directions. 4. Ground No.2 Taxability of payments received from PIL and Preethi pursuant to GSU is bad in law and on facts

4 ITA No.74/Kol/2021 Philips Electronics Nederland BV AY 2016-17 The Ld. AD erred in taxing the payments of Rs. 87,98,10,834 and Rs. 80,16,033 received from PIL and Preethi pursuant to GSU without appreciating that the said payments ought not to be taxable under Article 12(5) of the India-Netherlands DTAA as the Company does not 'make available' technical knowledge, experience, skill, etc. to PIL/Preethi. DRP Directions: 4.1 Identical issue was decided against the assessee in AY 2015- 16 wherein DRP had discussed the issue in detail vide Para 4.1 to 4.13 of the directions dated 05.07.2019 and had concluded at para 4.13 as under: "4.13 In view of the above facts, Panel is of the view that the assessee has made a new claim vide a letter filed before the AO during the assessment proceedings. We are also of the view that the ratio of the decision of the judgement in the case Goetz India Ltd. (supra) squarely applies to the present case wherein it was held that the Assessing officer does not have power to entertain additional claim, unless such a claim is made in the revised return filed within the due date for revised return. Hence, the action of the AO is confirmed. Ground of objection is rejected.” 4.2 Since the issue is identical in the relevant assessment year, we have no reason to differ from the decision of the DRP taken in the A.Y 2015-16. Ground of objection is therefore,”

3.2. From the perusal of the directions of ld. DRP, it is noted that directions were based on the directions which were given for immediately preceding assessment year i.e. AY 2015-16 in the case of the assessee itself, wherein the issues were identical. Ld. AO completed the assessment on receipt of the said direction of the DRP and rejected the claim of the assessee. Aggrieved, assessee is in appeal before the Tribunal. 4. Before us, Shri P. J. Pardiwalla & Shri Ketan Ved, AR represented the assessee and Shri G. Hukugha Sema, CIT represented the revenue. 5. Ld. Counsel for the assessee at the outset, submitted that the issue in the present appeal is squarely covered by the decision of the Coordinate Bench of ITAT, Kolkata in

5 ITA No.74/Kol/2021 Philips Electronics Nederland BV AY 2016-17 assessee’s own case for the immediately preceding AY 2015- 16 vide ITA No. 2241/Kol/2019 dated 15.09.2022. According to Ld. Counsel, the issues are identical except for variation in amount. Ld. Counsel referred to para 2 of the order for AY 2015-16 to point out that in the remand report by the Ld. AO, it had been accepted by the Revenue that ‘the services referred by the assessee might be technical in nature but does not involve share of technical know-how or transfer of technical knowledge, skills or experience not does not ‘make available’ any technical knowledge, skills, experience etc. to the said two entities.’ To support its claim, Ld. Counsel also placed a copy of remand report relevant to AY 2015-16 dated 14.06.2019 wherein such finding has been noted. 5.1. Ld. Counsel also referred to para 4 of the said order to point out that view taken by the Ld. AO on the application of judgment of Hon’ble Supreme Court in the case of Goetz India Ltd. (supra) has also been dealt with by the Coordinate Bench. He submitted that Hon’ble Supreme Court in the case of Goetz India Ltd. (supra) has clarified that “the decision was restricted to the power of assessing authority to entertain a claim for deduction otherwise than by a revised return, and did not impinge on the power in the appellate tribunal u/s. 254 of the I. T. Act, 1961.” 6. Per contra, ld. CIT, DR placed reliance on the order of Ld. DRP and the Ld. AO.

6 ITA No.74/Kol/2021 Philips Electronics Nederland BV AY 2016-17 assessee’s own case, except for variation in the amount. From the order of Ld. DRP, we have already noted that it has issued directions by placing its observations recorded for AY 2015-16 (extracted above). We also note from the remand report though for AY 2015-16 that Ld. AO has accepted the fact that services rendered by the assessee are not in the nature which ‘make available’ any technical knowledge, experience, skill etc. to the two entities. Further, in the present case before us also, the claim was made in the course of assessment proceeding which was rejected by the Ld. AO by referring to the decision of Hon’ble Supreme Court in the case of Goetz India Ltd. (supra). All these aspects have already been dealt by the Coordinate Bench in assessee’s own case whereby claim of the assessee was allowed.

7.1. The observations and findings in this respect from the order for AY 2015-16 of assessee’s own case, are reproduced as under: “2. At the time of hearing, ld. AR of the assessee submitted that the dispute resolution panel (Hon’ble DRP) have erred in disregarding the claim made by the appellant during the course of assessment proceedings by holding that the amount of Rs. 85,82,15,139/- received by the appellant during the year under consideration from Philips India Limited (PIL) and Preethi Kitchen Appliances Private Limited (Preethi) pursuant to Global Service Unit Agreement (GSU) is taxable in India in the hands of assessee appellant. He submitted before us that inspite of accepting the remand report and the ld. AO erred in not admitting the additional claim made by the appellant during the courses of assessment proceedings by holding that the amount of Rs. 85,82,15,139/- received by the appellant assessee during the year from PIL & Preethi pursuant to GSU taxable in India and submitted that the alleged amount of Rs. 85,82,15,139/- received by the appellant during the year under consideration is not taxable in India as the AO himself accepts the remand report dated 14.06.2019 wherein stated that the services provided by the appellant to PIL & Preethi do not ‘make available’ technical knowledge, skills, experience etc., therefore, direction may be given to AO to accept the claim made by the appellant during the course of assessment proceedings, as the receipts are not taxable in India as the ld. AO himself accepts in remand report about the service provided by the appellant to PIL & Preethi do not make available technical knowledge, skills, experience etc.

7 ITA No.74/Kol/2021 Philips Electronics Nederland BV AY 2016-17 2.1. The ld. AR further submitted that while passing the impugned order the time of hearing by the authorities below without considering the facts and circumstances of the case mechanically dismissed the claim of the assessee by holding that the original return was filed by the assessee on 28.11.2015 and assessee failed to file revised return u/s 139(5) of the Act in support of its claim, hence the claim made by the assessee cannot be allowed. As such the impugned order passed by the DCIT (International Taxation) needed to be interference and direction may be given to accept the claim made by the appellant during the course of assessment proceedings. The ld. AR substantiate his claim to bring to our notice of order passed by the co-ordinate bench in the case of Howrah Mills Company Ltd. in ITA No. 1994/Kol/2014 and in similar situation relief was granted to assessee and where the limit for revising return u/s 139(5) had expired and the DRP had accepted the revised claim of the assessee. He brought to our notice by stretching in the contents (supra) para no. 18 & 19 held as under: “18. As far as ground no.2 raised by the revenue is concerned the facts are that the assessee in the return of income did not make any claim that receipts on account of carbon credit is not taxable. The facts are that the assessee in the return of income did not make any claim that receipts on account of carbon credit is not taxable but such a claim was made only in the course of assessment proceedings before the AO. The CIT(A) allowed the claim of the assessee. It is the plea of the revenue in ground no.2 that the claim that carbon credit is not chargeable to tax being capital receipt was made by the Assessee without filing the revised return of income and therefore ought not to have been accepted taking up for consideration by CIT(A) in view of the decision of the Hon’ble Supreme Court in the case of Goetz India Ltd. 289 ITR 323(SC) wherein it was held that the AO is not competent to entertain any claim which is not made either in the return or by filing a revised return. 19. On this issue we have heard the rival submissions and are of the view that there is no merit in this ground raised by the revenue. The CIT(A) being the First Appellate Authority has the power to entertain a new claim even in the absence of a revised return of income. The Supreme Court in case of Goetze (India) Ltd. (supra) has clarified that "the decision was restricted to the power of the assessing authority to entertain a claim for deduction otherwise than by a revised return, and did not impinge on the power of the Appellate Tribunal under section 254 of the Income-tax Act, 1961”. This has been interpreted in several judicial pronouncements as applicable even to the first appellate authorities. The Hon’ble Delhi High Court in the case of Jai parabolic Springs 306 ITR 42 (Delhi) has held that the appellate authorities under the Act, were free to consider a claim made by an Assessee even in the absence of a revised return of income and that the requirement for filing a revised return of income as laid down by the Hon’ble Supreme Court in the case of Goetz India Ltd. (supra) is applicable only when a claim is made contrary to the return of income before the AO. The Hon’ble Delhi High Court in the case of Bharat Aluminium 163 Taxman 430J, has inter-alia ruled that assessee can file revised computation in the course of ongoing assessment proceedings under the Act, without making recourse to revised return, despite

8 ITA No.74/Kol/2021 Philips Electronics Nederland BV AY 2016-17 the fact that time limit for revising return under section 139(5) had expired. In the light of the aforesaid decisions, we are of the view that the DRP was right in accepting the revised claim that sales tax remission received is capital receipt and not chargeable to tax.” 3. On the other hand, ld. DR vehemently argued and in support of the order passed by the authorities below. 4. We after hearing the rival submission and material available on record and examined the impugned order, we find that the assessee did not claim the said deduction in original return filed on 28.11.2015 and failed to file the revised return u/s 139(5) of the Act in support of its claim and claim of the assessee was disallowed by the ld. DCIT (International Taxation) by following the judgement of Hon’ble Apex Court in the case of Goetz India Ltd. 289 ITR 323 (SC). However, after perusing the ld. co-ordinate bench’s order, while deciding the similar issue in the case of Howrah Mills Co. Ltd. held that while the assessee in the return of income did not make any claim in respect of carbon credit not taxable but such claim was made only in the assessment proceedings before the AO and such claim of the assessee has been allowed by the ld. co-ordinate bench. We followed the view taken by the co-ordinate bench and allow the claim of the assessee and directed the AO to accept the revised claim made by the assessee. Accordingly, grounds raised by the assessee are allowed.” 8. Considering the facts on record with no material change in the same as compared to the preceding year and the view taken by the Coordinate Bench in assessee’s own case in the immediately preceding year, the claim of the assessee is allowed in the year under consideration before us by adopting a consistent approach. Accordingly, grounds raised by the assessee in this respect are allowed.

Sd/- Sd/- (Rajpal Yadav) (Girish Agrawal) Vice President Accountant Member

Dated: 15th March, 2023 JD, Sr. P.S.

9 ITA No.74/Kol/2021 Philips Electronics Nederland BV AY 2016-17 Copy to: 1. The Appellant: 2. The Respondent: 3. DRP, Panel-2, New Delhi 4. DCIT, Circle-2(1), International Taxation, Kolkata 5. DR, ITAT, Kolkata Bench, Kolkata //True Copy// By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata