PRINCIPAL COMMISSIONER OF INCOME TAX-1, KOLKATA vs. APOLLO GLENEAGLES HOSPITAL LIMITED

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ITAT/164/2024HC CalcuttaWBCHCO001913202406 November 2024Bench: THE HON'BLE THE CHIEF JUSTICE T.S SIVAGNANAM,HON'BLE JUSTICE HIRANMAY BHATTACHARYYA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court, while admitting the appeal on substantial questions of law, ultimately disposed of the appeal on the ground of low tax effect. The Court noted that the tax effect in the appeal was Rs.1,67,07,950/, which was below the threshold limit fixed by the CBDT in its Circular dated 17.9.2024. Consequently, the Court held that the revenue could not prosecute the appeal further. The substantial questions of law, as suggested, were left open. The operative direction was that the appeal stands disposed of on the ground of low tax effect, and the stay application also stands disposed of. No decision was made on the merits of the substantial questions of law.

What were the facts?

The Principal Commissioner of Income Tax -1, Kolkata (the revenue) filed an appeal under Section 260A of the Income Tax Act, 1961, against an order dated 27th April, 2023, passed by the Income Tax Appellate Tribunal, “C” Bench, Kolkata. The appeal pertains to assessment year 2012-13 and concerns the assessee, Apollo Gleneagles Hospital Limited. The tax effect in the appeal is stated to be Rs.1,67,07,950/. The revenue argued that the Tribunal erred in not appreciating that payments made by the assessee to its foreign Associated Enterprise (AE) were for stewardship services, which should warrant an arm's length price of NIL. The revenue also contended that the Tribunal failed to consider international rulings and OECD guidelines regarding intra-group services that are stewardship in nature and do not require compensation. Furthermore, the revenue argued that the assessee failed to prove the benefit test for paying the support services fee.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the Learned Income Tax Appellate Tribunal committed a substantial error in law by not appreciating that the assessee's payments to its foreign AE were for stewardship services, thus the arm's length price should be NIL, as per Section 92F of the Income Tax Act, 1961. 2. Whether the Learned Income Tax Appellate Tribunal committed a substantial error in law by not appreciating international rulings and OECD guidelines which suggest that stewardship services do not warrant compensation, as per Section 92F of the Income Tax Act, 1961. 3. Whether the Learned Income Tax Appellate Tribunal committed a substantial error in law by not appreciating that the assessee failed to prove the benefit test for paying the support services fee, which is a prerequisite for determining a charge for the alleged service, as per Section 92F of the Income Tax Act, 1961. Assessee's Contentions: The judgment does not record specific contentions made by the assessee. The assessee was represented by learned counsel. Revenue's Contentions: The revenue contended that the services rendered by the foreign AE were stewardship in nature and therefore the arm's length price should be NIL. They also argued that international rulings and OECD guidelines support the view that such intra-group services do not warrant compensation. Additionally, the revenue argued that the assessee failed to prove the benefit test for the support services fee.

Which sections of the Income-tax Act were involved?

Section 260A,Section 92F

AI-generated summary — verify with the full judgment below

OD 34

IN THE HIGH COURT AT CALCUTTA SPECIAL JURISDICTION (INCOME TAX) ORIGINAL SIDE

ITAT/164/2024 IA NO: GA/2/2024

PRINCIPAL COMMISSIONER OF INCOME TAX -1, KOLKATA VS. APOLLO GLENEAGLES HOSPITAL LIMITED

BEFORE : THE HON’BLE THE CHIEF JUSTICE T.S. SIVAGNANAM

And THE HON’BLE JUSTICE HIRANMAY BHATTACHARYYA Date : 6th November, 2024 Appearance : Mr. Om Narayan Rai, Adv. Mr. Soumen Bhattacharjee, Adv. …for Appellant Mr. Akhilesh Gupta, Adv. Mr. Siddharth Das, Adv. Mr. Indranil Banerjee, Adv. …for respondent

The Court : This appeal filed by the revenue under Section 260A of the Income Tax Act, 1961 (the Act) is directed against the order dated 27th April, 2023 passed by the Income Tax Appellate Tribunal, “C” Bench, Kolkata (the Tribunal) in ITA No. 1501/Kol/2019 for the assessment year 2012-13. We have heard Mr. Om Narayan Rai, learned standing counsel appearing for the appellant/revenue and Mr. Akhilesh Gupta, learned counsel appearing for the respondent/assessee.

The appeal is admitted on the following substantial questions of law :

(i) Whether the Learned Income Tax Appellate Tribunal has committed substantial error in law in not appreciating that the assessee is making payment to its foreign AE for those alleged services which are stewardship in nature, and therefore the arm’s length price for such services should be NIL ? (ii) Whether the Learned Income Tax Appellate Tribunal has committed substantial error in law in not appreciating the international rulings and OECD guidelines for such alleged intra- group services which tantamount to be stewardship services do not warrant compensation ? (iii) Whether the Learned Income Tax Appellate Tribunal has committed substantial error in law in not appreciating that the assessee has failed to prove the benefit test for paying the support services fee which is a prerequisite for determination of a charge for the alleged service ?

As could be seen from paragraph 8 of the Memorandum of appeal, the tax effect in this appeal is Rs.1,67,07,950/-, which is well below the threshold limit fixed by the CBDT in its Circular dated 17.9.2024. In the light of the same, the revenue cannot prosecute this appeal further.

Accordingly, the appeal stands disposed of on the ground of low tax effect. The stay application also stands disposed of. However, the substantial questions of law as suggested are left open.

(T.S. SIVAGNANAM, CJ.)

(HIRANMAY BHATTACHARYYA, J.)

SN./S.Das AR(CR)

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