THE COMMISSIONER OF INCOME TAX - INTERNATIONAL TAXATION -3 vs. SILVER BELLA HOLDING LTD.

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ITA/275/2023HC DelhiDLHC01000089202105 March 2024Bench: HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV,HON'BLE MR. JUSTICE YASHWANT VARMA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the appeal had no merit and dismissed it. The reasoning was based on the interpretation of Section 144C of the Income Tax Act, 1961, as it stood at the relevant time (Assessment Year 2014-2015), prior to the amendments by the Finance Act, 2020. The Court noted that Section 144C(1) would only be attracted if there was a 'variation in the income or loss returned'. In this case, as observed by the ITAT and uncontested before the High Court, there was no variation in the income returned by the assessee. The dispute solely concerned the assessee's entitlement to claim benefits under Article 11 of the DTAA, which led to the income offered being taxed at 20%, but the total income declared remained unvaried. Therefore, the AO was not empowered to frame a Draft Assessment Order under Section 144C(1). The ratio decidendi is that a Draft Assessment Order under the pre-amendment Section 144C(1) can only be issued if there is a variation in the returned income, not merely a dispute over treaty benefits that does not alter the returned income.

What were the facts?

The appeal was filed by the Commissioner of Income Tax - International Taxation - 3 (the Revenue) against an order of the Income Tax Appellate Tribunal (ITAT). The assessee is Silver Bella Holding Ltd. The assessment year in question is 2014-2015. The Revenue sought to challenge the ITAT's decision, but there was a significant delay of 300 days in re-filing the appeal, for which condonation was sought. The High Court noted that the issues raised in the present appeal were identical to those decided in a previous case, Commissioner of Income Tax International Taxation-3 v. S. A. Chitra Ventures Ltd. (ITA 606/2023).

What were the issues?

1. Whether the Assessing Officer (AO) was empowered to issue a Draft Assessment Order under Section 144C(1) of the Income Tax Act, 1961, as it stood prior to the amendments by the Finance Act, 2020, when there was no variation in the total income returned by the assessee, but only a dispute regarding the eligibility to claim benefits under Article 11 of the Double Taxation Avoidance Agreement (DTAA)? Assessee's Contention: The judgment does not record any specific contentions made by the assessee in this appeal. However, it relies on the ITAT's finding that the assessee was an eligible assessee under Section 144C(15)(b)(ii) and that the AO's action was not warranted as there was no variation in the income returned. Revenue's Contention: The Revenue sought to appeal the ITAT's decision. The High Court noted that the issues canvassed were identical to those in a prior appeal where the Revenue's contentions were decided against them.

Which sections of the Income-tax Act were involved?

Section 144C

AI-generated summary — verify with the full judgment below

$~16 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 275/2023 THE COMMISSIONER OF INCOME TAX - INTERNATIONAL TAXATION -3 ..... Appellant

Through: Mr.Ruchir Bhatia, Sr.SC with

Ms.Deeksha Gupta, Adv.

versus

SILVER BELLA HOLDING LTD.

..... Respondent

Through: Mr.S.S.Tomar and Mr.Vishal

Kalra, Advs.

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV

O R D E R %

05.03.2024 CM APPL. 24991/2023 (Delay in re-filing) 1. This is an application filed by the appellant seeking condonation of 300 days delay in re-filing the present appeal. 2. For the reasons stated in the application, the delay of 300 days in re-filing the appeal is condoned. 3. Application is disposed of. ITA 275/2023 1. Learned counsels for parties are ad idem that the issues which are sought to be canvassed on this appeal stand answered against the appellants in light of the decision rendered by this Court in The Commissioner of Income Tax International Taxation-3 v. S. A. Chitra Ventures Ltd. [ITA 606/2023]. 2. We note that the instant appeal also pertains to Assessment Year 2014-2015 and consequently, the issue will have to be considered bearing in mind the language which was employed in This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 11/03/2024 at 11:25:56

Section 144C of the Income Tax Act, 1961 ["Act"] at the relevant time. 3. On taking note of the challenge raised on identical terms, this Court in S. A. Chitra Ventures Ltd. had held as follows:- " 7. The ITAT has noticed that undisputedly the respondent was an eligible assessee in terms of Section 144C(15)(b)(ii) of the Act. It, however, took note of Section 144C of the Act as it stood at the relevant time and prior to the amendments which came to be introduced by virtue of Finance Act, 2020 w.e.f. 01 April 2020. It becomes pertinent to note that the provision as it stands presently uses the expression “any variation which is prejudicial to the interest of such assessee”. However, and prior to the provision being recast by Finance Act, 2020, the aforenoted provision employed the phrase “any variation in the income or loss returned”. It is thus manifest that it was only a “variation” which would impact the “income or loss returned” that Section 144C(1) of the Act would have stood attracted. 8. As has been noticed by the ITAT, and which fact remained uncontested even before us, there was no variation in the income as returned. The only point of disputation was with respect to whether the respondent was entitled to claim the benefits under Article 11 of the DTAA. It was that claim of the respondent which alone came to be negated by the AO. Accordingly, while the income offered became subject to tax at the rate of 20%, the total income as declared remained unvaried. As we read Section 144C of the Act as it stood at the relevant time, it would have empowered the AO to frame a Draft Assessment Order only if a variation in the income returned was suggested. This was clearly not the case which obtained."

4.

In view of the aforesaid, we find no merit in the instant appeal. It shall stand dismissed.

YASHWANT VARMA, J.

PURUSHAINDRA KUMAR KAURAV, J. MARCH 5, 2024/MJ This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 11/03/2024 at 11:25:56

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