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Income Tax Appellate Tribunal, “I” Bench, Mumbai
Per Shamim Yahya (AM) :-
This appeal by the assessee is directed against the order of Assessing Officer dated 3.10.2018 under section 143(3) read with section 254 and 144C(13) of the I.T. Act.
The grounds of appeal read as under :- 1. On the facts and in the circumstances of the case and in law, the Learned Deputy Commissioner of Income-tax (International Taxation) 1(1)(2), Mumbai ('the Learned AO') and the Dispute Resolution Panel ('the DRP') erred in holding the sum of Rs.40,46,45,646/- as 'Royalty' under Section 9(1)(vi) of the Income-tax Act, 1961 ('the Act'). The Appellant humbly prays that the Learned AO be directed to not treat the aforesaid receipts as 'Royalty' u/s. 9(1)(vi) of the Act. 2. On the facts and in the circumstances of the case and in law, the Learned AO and the DRP erred in holding the sum of Rs.40,46,45,646/- as 'Fees for Technical Services' under Section 9(1)(vii) of the Act. The Appellant humbly prays that the Learned AO be directed to not treat the aforesaid receipts as 'Fees for Technical Services' u/s. 9(1)(vii) of the Act.
2 Atos Information Technology HK Limited
On the facts an in the circumstances of the case and in law, the Learned AO erred in considering business connection issue for the first time, which was not a subject matter at the time of appellate proceedings before the Hon’ble ITAT. While doing so, the Learned AO has not appreciated that no directions were provided by the Hon'ble ITAT with respect to the same.
The Appellant humbly prays that the action of the Learned AO in considering the business connection issue be held as bad in law since remand proceedings are conducted beyond the directions provided by the Honourable ITAT.
Without prejudice to the above Ground, the Learned AO and DRP erred in holding the sum of Rs. 40,46,45,646/- by SCB India to the Appellant as 'Business Income' under Section 9(1)(i) of the Act.
The Appellant humbly prays that the Learned AO be directed to not treat the aforesaid receipts as 'Business Income' under Section 9(1)(i) of the Ac
Without prejudice to the above Ground nos. 3 and 4, even if it is alleged that the aforesaid receipts are 'Business Income' under Section 9(1)(i) of the Act, such receipts cannot be taxed in India in view of clause (a) of Explanation l to Section 9(i)(i) of the Act as no activities are carried out by the Appellant in India.
The Appellant humbly prays that the Learned AO be directed to not treat the aforesaid receipts as 'Business Income' under Section 9(1)(i) of the Act.
Without prejudice to above Ground Nos. 1, 2, 3, 4 and 5, the Learned AO and the DRP erred in denying the benefit of the rate prescribed under section u/s. 115A of the Act.
The Appellant humbly prays that the Learned AO be directed to compute the tax liability at the rate prescribed under section 115A of the Act.
On the facts and in the circumstances of the case and in law, the Learned AO has erred in giving short credit for the taxes paid on regular assessment. In the Income Tax Computation Form, credit of taxes paid is Rs. 12,19,39,066 instead of Rs. 14,53,46,828 resulting in short credit of taxes amounting to Rs. 2,34,07,762.
The Appellant humbly prays for allowance of full credit of taxes paid on regular assessment
On the facts and in the circumstances of the case and in law, the Learned AO erred in initiating penalty proceedings under section 271(1)(c) of the Act.
The Appellant humbly prays that the Learned AO be directed to not initiate the penalty proceedings.”
3 Atos Information Technology HK Limited 3. Brief facts of the case are that this is the second round of appeal before the ITAT. In the original round ITAT has remitted the issue to the file of the Assessing Officer. Grounds of appeal before the Tribunal in the first round read as under :-
"1.1 On the facts and in the circumstances of the case and in law, the Learned Deputy Commissioner of Income-tax (International Taxation)-1(1)(2), Mumbai ('the Learned AO') and the Dispute Resolution Panel ('the DRP') erred in holding the sum of Rs.40,46,45,646 as 'Royalty' and 'Fees for Technical Services' under Section 9(l)(vi) and 9(l)(vii) of the Income-tax Act, 1961 ('the Act'). In doing so, the Learned AO and the DRP disregarded the Contract for Provision of Computing Services entered into between the Appellant and Standard Chartered Bank, India ('SCB India') for the services rendered by the Appellant to SCB India.
The Appellant humbly prays that the aforesaid receipts should not be taxed in India and the Learned AO be directed accordingly.
1.2 Without prejudice to above Ground No. 1.1, the Learned AO and the DRP erred in denying the benefit of the rate prescribed under section 1 ISA of the Act. In doing so, the Learned AO and the DRP held that SCB India being a non resident company does not fall within the ambit of the term 'Indian concern' as per the provisions of section 1 ISA of the Act and accordingly, the provisions of section 1 ISA of the Act do not apply to the payments made by SCB India.
The Appellant humbly prays that the Learned AO be directed to apply the rate as prescribed under section 115A of the Act.
1.3 Without prejudice to Ground Nos. 1.1 to 1.2, on the facts and in the circumstances of the case and in law, while calculating the tax liability of the Appellant, the Learned AO has erred in taxing income on gross receipts instead of net receipts received by the Appellant, (i.e. after deducting the expenses attributable to gross receipts).
The Appellant humbly prays that the Learned AO be directed to compute the chargeable income of the Appellant by adopting net receipts instead of gross receipts.
On the facts and in the circumstances of the case and in law, the Learned AO erred in granting a short credit of TDS amounting to Rs.4,33,02,870.
The Appellant humbly prays that the Learned AO be directed to grant a credit for the aforesaid TDS as per the section 199 of the Act read with Rule 37BA of the Income-tax Rules, 1962.
On the facts and in the circumstances of the case and in law, the Learned AO erred in levying interest under section 234B of the Act
4 Atos Information Technology HK Limited amounting to Rs. 5,83,38,488 without appreciating that the entire income of the Appellant is subject to deduction of tax at source and hence, the question of advance tax does not arise.”
The ITAT in the said case after noting the facts and the orders of the authorities below has remanded the matter by observing as under :-
“9. At the time of hearing, the AR submitted that the issue was and reached the ITAT in the case of the assessee in assessment years 2006-07 and 2008- 09 in ITAs no. 6562/Mum/2009 and 6889/Mum/2011, wherein the coordinate Bench mentions,
“......... that the liability or otherwise of the assessee regarding its receipts has to be re-adjudicated in the light of aforementioned retrospective amendment. The orders passed in the assessee's case by the AO, DRP and ITAT are prior to the aforementioned amendment in the Statute. Therefore, we are of the opinion that it would serve the interest of Justice if all these appeal except STA No. 6888/Mum/201 1 are restored back to the file of the AO with a direction to re-adjudicate the issues in accordance with law after giving further opportunity to the assessee and placing all the material required for adjudication of the issues raised in the present appeals. After giving opportunity the AO will readjudicate all the issues raised in the present appeals as per provisions of law.
7.1 Similar is the position in respect of Ground No. 1.3 & l.4and additional ground No. 1.5 in which the assesses has raised grievances regarding rates of tax to be applied on the above receipts. All these issues on merits are to be readjudicated as per law in ITA No. 6762/Mum/2009 & 219/Mum/2010 being cross appeals in respect of assessment year 2006-07 against original assessment.
7.2 The other issues raised in ITA No. 6888/Mum/2011 regarding leviability of interest under section 234B which was admitted to be consequential and with a rider that assessee has liberty to show before AO why it is not liable for levy of interest under section 234B, the matter would be re-adjudicated in original assessment proceedings as discussed in para 5.3 of this order".
Based on the above decision of the ITAT in the preceding year(s), the AR submitted that for the sake of consistency, the issue, in the current years, deserved to be restored to the file of the AO.
The DR did not object to the submission of the AR for restoration of the issue to the file of the AO.
On hearing both the sides, we are of the view that since the preceding years were awaiting adjudication at the AO stage, it would be inappropriate for us, to come to any conclusion. We, therefore, set aside the orders of the
5 Atos Information Technology HK Limited revenue authorities and restore the issue to the file of the AO for afresh adjudication, in line with the decision taken by the AO in the preceding years(s). Needless to mention, adequate and reasonable opportunity shall be given to the assessee, to present its case.
Grounds no. 1.2 & 1.3 pertain to rates of tax to be applied.
These grounds being linked to ground no. 1, This issue is also set aside to the file of the AO, who shall compute the tax as per the amended provisions, after giving adequate opportunity to the assessee.
Ground no. 1.1 is therefore, allowed for statistical purposes.
Ground no. 2 pertains to not giving credit of TDS of Rs. 9,54,980/-.
The AO is legally bound to allow TDS to the assessee as per law. We, therefore, direct the AO to allow the undisputed and legally correct claim of TDS & on doing so, the AO shall allow the benefit of TDS, as claimed in the GOA.
Grounds no. 3 & 4 pertain to chargeability of interest u/s 234A and
The eligibility of interest is consequential to the tax computed. Bend consequential, the AO is directed to recompute the interest u/s & 234B as per law. 19. In the result, the appeal as filed by the assessee is allowed for statistical purposes."
Respectfully following the afore-stated orders of the co-ordinate Bench of the Mumbai-Tribunal in the assessee company's own case for the assessment year 2009-10 in ITA No. 7321/Mum/2012, we also set aside the orders of the Revenue Authorities in the instant appeal in ITA No. 1464/Mum/2015 for the assessment year 2011-12 and restore all the issues raised by the assessee company in the ground of appeal filed with the Tribunal to the file of the A.O. for de-novo determination of all the afore-stated issues on merits in accordance with law and also keeping in view the direction given by the Tribunal hereinabove in the appeal in ITA No, 7321/Mum/2012 for the assessment year 2009-10. Needless to say, the adequate and proper opportunity of hearing will be granted by the AO to the assessee company in accordance with the principles of natural justice in accordance with law. We order accordingly.
In the result, the appeal filed by the assessee company in ITA No. l464/Mum/2015 for the assessment year 2011-12 is allowed for statistical purposes.”
Pursuant to the said remand present assessment was framed. In assessment order the Assessing Officer has noted that the ITAT in ITA No. 1464/Mum/2015 had passed an order dated 4.3.2016 in which the additions are deleted and the issue has been set aside to the file of the Assessing Officer
6 Atos Information Technology HK Limited for denova adjudication of all the issues. The Assessing Officer noted that the submissions of the assessee during assessment proceedings were same as in A.Y. 2009-10. That contention of the assessee was already rejected by the Department and it has been held that the receipts from SCB, India are Royalty/FTS specially after the retrospective amendments section 9 of the Act. Without prejudice to the above the Assessing Officer held that :-
“15. Without prejudice to the assessee's submission and, further, without prejudice to the stand of the Department that the payments by SCB India to the assessee can be taxed in India as royalty and/or FTS, it is also held that the said payments can also be taxed as 'business income' under section 9(l)(i) of the Act. Section 9(l)(i) of the Act is reproduced hereunder :
Income deemed to accrue or arise in India.
(1) The following incomes shall be deemed to accrue or arise in India '—
(i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India.
Explanation 1.—For the purposes of this clause— (a) in the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India;
Explanation 4.—For the removal of doubts, it is hereby clarified that the expression "through" shall mean and include and shall be deemed to have always meant and included "by means of, "in consequence of or "by reason of.
Thus, as per the provisions of section 9(l)(i), if a non-resident person has a source of income in India then such income shall be deemed to accrue or arise in India, and thereby taxable in India. It is an undeniable fact of the case that SCB India is a source of income for the assessee in India. Therefore, the income of the assessee out of the receipts from SCB India is taxable under the third leg of section 9(l)(i), read with section 4 and 5(2)(b) of the Act.
The business income of the assessee is taxable under the first leg of section 9(l)(i) of the Act read with its Explanation 1. In the instant case, a number of services are carried out by the assessee, either directly or through its representative, in the various branches in India. Besides, the risks
7 Atos Information Technology HK Limited associated with the performance of the obligations under the Contract are assumed by the assessee in India. Therefore, a number of 'operations' are carried out by the assessee in India. The income attributable to such 'operations' is, therefore, taxable in India where it is finally adjudicated by appellate authorities that the receipts from SCB, India, do not constitute as Royalty/FTS. Since, the receipts from SCB, India, already treated as Royalty/ FTS, no attribution of profits is being made of now as the same is not required.”
Above order was also proposed in the draft assessment order and the appeal before the DRP. Learned DRP rejected the assessee’s contention and confirmed the Assessing Officer’s order.”
Against the above order, Assessee is in appeal before us.
We have heard both the parties and perused the records. Learned Counsel of the assessee has submitted that as regards Ground No. 1&2 the same is covered in favour of the assessee by the ITAT’s order in assessee’s own case by a series of orders for seven years. He submitted that in ITA No. 237 to 240/Mum/2016 for A.Y. 2006-07 to 2012-13 vide order dated 9.2.2017 the matter was identically remanded to the Assessing Officer and subsequent to that remand the ITAT has held as under :-
The ITAT’s order for taxability of payment received from assessee from SCB India read as under :- 18. We have carefully considered the entire gamut of facts as discussed above, relevant findings given in the impugned order as well as the rival submissions made before us. The main issue involved, which has been raised vide ground no. 1.1 is, whether the payments made by Standard Chartered Bank India (SCB) to the assessee is in the nature of ‘royalty’ u/s 9(1)(vi) or ‘fees for technical services’. Since the assessee-company is incorporated in Hong Kong and is providing services/facilities for processing data to SCB from Hong Kong, therefore, the payment made by SCB India to assessee has to be seen from the perspective of domestic law, i.e. Income-tax Act and not under any treaty. The assessee-company is mainly engaged in the business of providing services/facilities for data processing through computer hardware and software to banking entities. It had entered into an agreement which has been termed as "Cocteau agreement" with SCB for provision of data processing support, which is for 68 countries with various branches. Under the said ‘Cocteau agreement’, the role and responsibilities of assessee in respect of providing data processing services has already been discussed in detail in the earlier part of the order including the manner in which the entire processing activity is carried out. The Revenue’s case is that first of all, it is in the nature of royalty and for coming to this conclusion, the main
8 Atos Information Technology HK Limited contention of Assessing Officer is that, firstly, the assessee is not merely providing data processing services, but also providing technology in the form of data centre, infrastructure, connectivity and application technology for its banking operations; and secondly, it has created and provided facility in the form of dedicated centres for exclusive use of SCB with disaster recovery facility and storage facility. These infrastructure facilities in the form of data centre, storage area network, disaster recovery facility and dedicated network connectivity is translated into functional process by defined service flow for the various geographic locations for various business application which would constitute process. The assessee in this process has also made available SCB use of its equipment, model, design, invention and process. After coming to the conclusion that the payment is in the nature of "royalty" within the scope of section 9(1)(vi), the revenue went further to hold that, since assessee has provided technical, managerial and consultancy services to SCB, therefore, it also falls in the nature of „FTS‟ and for coming to this conclusion, certain clauses in the Cocteau agreement has been referred to. 19. First of all, we will deal with the issue whether the said payment falls within the realm of ‘royalty’ or not. From the perusal of the various clauses of the agreement which has been referred to extensively by both the parties at the time of hearing and discussed herein above, we find that the main objective of the ‘Cocteau agreement’ is to provide SCB group all across the world, processing of data through a network of computer systems in Hong Kong. In the entire agreement there is no whisper of any technology transfer or application of technology per se to SCB. This is a kind of outsourcing activity which has been given by SCB to Atos to process its data from various branches across the country. We agree with the contention of the ld. Counsel that the reference to the various details in the agreement is merely to ensure quality, standard and various safeguards which are to be adopted in the course of processing data especially looking the volume of data required to be processed from all around the Globe. The provisions mainly contains assessee’s responsibility to ensure adequate facility, systems and software which are located in Hong Kong and to ensure that all the hardware which is used in Hong Kong is maintained and housed in secured building space and infrastructure, manage proper performance of the hardware and operating systems, ensure adequate technical support of operating systems, to ensure system performance, maintain adequate security measures and effective internal control environment and also put in place appropriate disaster recovery plan. All these are to be maintained by the assessee to conduct the processing of data through computers. There is no providing or giving any use or right to use of any process to SCB. The technology, infrastructure, data centre, connectivity, etc. is solely used by the assessee for its own purposes and not to make available any such thing to SCB as explained by the ld. Counsel. At the first stage, SCB transmits raw data through operating software owned by it to the hardware facility of assessee in Hong Kong. The assessee in Hong Kong mainly receives the data so transmitted and at this stage there is absolutely no use or right to use of any process of assessee in Hong Kong by SCB. At the second stage, the raw data transmitted by SCB is processed by the assessee in its computer system/hardware as per the requirement of SCB and at times may be using the application software owned by SCB. At this stage also, SCB does not use or have any right to use any process. At the third stage, the processed data is transmitted
9 Atos Information Technology HK Limited electronically to SCB in India and at this stage also there is no use or right to use of any process which is given or made available to SCB. Here, in this case there is absolutely no use of equipment also as alleged by the Department within the definition given in clause (iv a) of Explanation 2 to Sec. 9(1)(vi) of the Act. The said clause deals mainly with the ‘use’ or ‘right to use’ any industrial, commercial or scientific equipment and applies only to income from leasing of such industrial, commercial or scientific equipment. This is borne out from the Memorandum to the Finance Bill, 2001 through which the said clause was inserted w.e.f. 1.4.2002, the relevant extract of the Memorandum has already been incorporated in the earlier part of our order and same proposition is also held by Mumbai Bench in Yahoo India P, Ltd. Vs DCIT (supra). Here, in the case of assessee, there is no income from leasing of any equipment. The legislature thus, has clearly envisaged that clause (iva) is to cover lease rent of industrial, commercial and scientific equipment in the definition of royalty and the said definition has been widened to that extent only. Thus, there is no concept of right to use of equipment here in this case. So far as applicability of Explanation 5 & 6 are concerned, we agree with the contentions of ld. Counsel, as reproduced above, that same would not be applicable at all in the case of assessee because, firstly, Explanation 6 enlarges the scope of process to include transmission by satellite cable, fibre optic, etc.; and secondly, Explanation 5 is applicable where consideration is of any right, property or information as defined in clauses (i) to (v) of Explanation 2 only and not in clause (iva) for the reason that Explanation 5 has been inserted with retrospective effect from June 1, 1976. In other words, Explanation 5 has been inserted retrospectively from the birth of Section 9(1)(vi) to clarify the intention behind the legislation. Hence, Explanation 5 is to be read with the Section 9(1)(vi) which was there on the statute as on April 1, 1976. Whereas clause (iva) to Explanation 2 was inserted from April 1, 2002. Thus, retrospective effect of clause (iva) cannot be deemed from 1.06.1976 and hence it cannot be held that Explanation 5 also applies to the said clause as this clause never existed as on April 1, 1976 and accordingly, the legislation cannot clarify the intention of the clause which never existed on the said date. Hence Explanation 5 & 6 would not be applicable in the case of assessee.
Further, for any payment to fall within the term of "royalty" it is sine qua non that there should be some kind of a transfer of any right in respect of various items as given in Explanation - 2 or any imparting of any information or use of any patent, invention, model, design, secret formula, process, etc. Here, in this case, there is neither transfer of any of right in respect of any patent, invention, model, design, secret formula or process or trademark or any similar property by the assessee to SCB, nor there is any imparting of any information or use of any of similar nature of things. Here, the entire equipment and technology which are used for processing the data is solely for performing the activity of assessee for itself while rendering data processing services to SCB. There is absolutely no transfer of any technology, information, knowhow or any of the terms used in Explanation 2 or any kind of providing of technology in the form of data centre, infrastructure, connectivity and application technology by the assessee to SCB for SCB’s banking operations. Thus, we are of the opinion that the payment made by
10 Atos Information Technology HK Limited SCB to assessee-company does not fall within the realm of "royalty" and hence cannot be taxed in India as royalty u/s 9(1)(vi) of the Act.
As regards whether the payment is in the nature of FTS or not, we find that the provision regarding services provided by assessee to SCB is mainly a standard facility and there is no constant human endeavour or human intervention which is required to provide the data servicing service. As stated earlier, raw data fed into by SCB India are transmitted to assessee and the data so transmitted stands captured by the mainframe computers owned by assessee wherein such data are processed automatically and the final result is then transmitted to SCB India. All these transmission and processing of data is done automatically by computers and there is not much human involvement or intervention. There is no application of mind by the employees of assessee on said data because, they are processed through programmed software and neither any verification nor any analysis is carried out by the assessee on such data. The employees of the assessee-company are only required to oversee as to whether the computer systems are functioning properly and performing well and if there is any breakdown or fault, then same needs to be taken care of. The human intervention if at all is mainly for repairing and monitoring the hardware and software of the assessee which are processing the raw data of SCB and there is no human involvement or endeavour for rendering any kind of technical or consultancy services in data processing. It has been stated that before us that even the faults are corrected automatically. Further, looking to the number of volume of transactions transmitted by SCB to assessee, it would be impossible for any number of humans to apply their mind and generate reports. This has been demonstrated by the ld. Counsel before us by way of an example which has been already incorporated above. Thus, the magnitude of transactions undertaken by assessee itself goes to show that the computer systems installed by the assessee in Hong Kong is standard facility through which data is processed. In this regard, strong reliance was placed on the decision of ITAT, Mumbai Bench in the case of Siemens Limited (supra), wherein the Tribunal has emphasised upon the element of human intervention for rendering of technical services. The relevant observation in this regard reads as under:- "------------------------In our opinion, this cannot be the criteria for understanding the term "technical services" as contemplated in Explanation 2 to section 9 (1)(vii). If any person delivers any technical skills or services or make available any such services through aid of any machine, equipment or any kind of technology, then such a rendering of services can be inferred as "technical services". In such a situation there is a constant human endeavour and the involvement of the human interface. On the contrary, if any technology or machine developed by human and put to operation automatically, wherein it operates without any much of human interface or intervention, then usage of such technology cannot per se be held as rendering of "technical services" by human skills. It is obvious that in such a situation some human involvement could be there but it is not a constant endeavour of the human in the process. Merely because certificates have been provided by the humans after a test is carried
11 Atos Information Technology HK Limited out in a Laboratory automatically by the machines, it cannot be held that services have been provided through the human skills.
Even in the latest decision of Hon'ble Supreme Court in the case of M/s. Kotak Securities Ltd. (supra), (the relevant portion of which has already been reproduced above), the Hon’ble Court opined that, if services are provided through fully automated standard facility, the same cannot be reckoned as rendering of technical services as contemplated u/s 9(1)(vii) of the Act. The relevant observation reads as under:-
"8. ..... All such services, fully automated, are available to all members of the stock exchange in respect of every transaction that is entered into. There is nothing special, exclusive or customized service that is rendered by the Stock Exchange. "Technical services" like "Managerial and Consultancy service" would denote seeking of services to cater to the special needs of the consumer/user as may be felt necessary and the making of the same available by the service provider. It is the above feature that would distinguish/identify a service provided from a facility offered. While the former is special and exclusive to the seeker of the service, the latter, even if termed as a service, is available to all and would therefore stand out in distinction to the former. The service provided by the Stock Exchange for which transaction charges are paid fails to satisfy the aforesaid test of specialized, exclusive and individual requirement of the user of consumer who may approach the service provider for such assistance/service. It is only service of the above kind that according to us, should come within the ambit of the expression "technical services" appearing in Explanation 2 of Section 9(1)(vii) of the Act. In the absence of the above distinguishing feature, service, though rendered, would be mere in the nature of a facility offered or available which would not be covered by the aforesaid provision of the Act." Before us, the ld. Counsel has also pointed out that assessee is also providing similar services to other clients like Hong Kong Government and other big MNEs and there is nothing special or exclusive about the services which are being rendered to SCB. In view of the entire gamut of facts as discussed above, we are of the opinion that the payment made by SCB to assessee- company does not fall within the realm of ‘fees for technical services’ as contained in Sec. 9(1)(vii), albeit the assessee has only provided a standard facility for data processing without any human intervention. Accordingly, we hold that the said payment is not taxable in India as ‘fees for technical services’ in terms of Sec. 9(1)(vii) of the Act. Thus, the issue raised in ground no. 1.1 is decided in favour of the assessee.” 8. As regards ground No 3&4, learned Counsel of the assessee stated that this issue was not at all remanded by the ITAT and the fresh round is pursuant to the remand on specific direction of examining royalty under section 9(1)(vi) and 9(1)(vii). The Assessing Officer has discussed this issue and
12 Atos Information Technology HK Limited made addition without prejudice basis. He submitted that since the matter was remanded for specific purpose the Assessing Officer cannot be allowed to venture into a new area. He submitted that noting by learned DRP and Assessing Officer that the ITAT has remanded the matter for denovo adjudication is absolutely incorrect. He further submitted that even on merit the said issue is in favour of the assessee.
Per contra learned Departmental Representative relied upon the orders of the authorities below. She also relied upon the written submission of the learned Departmental Representative dated 17.9.2021 submitted earlier. In the said submission on the issue of taxability of payment as royalty/FTS, learned Departmental Representative had tried to distinguish the ITAT’s order in assessee’s own case by submitting that the ITAT erred in allowing assessee’s appeal by accepting assessee’s contention. Thereafter learned DR also supported without prejudice new issue raised by the assessee on the ground that learned DRP has noted that the ITAT has set aside the issue for denovo consideration. Learned CIT-DR conspicuously did not mention to ITAT order itself pointing out as to where it is mentioned to be for denovo consideration.
Upon careful consideration in this regard, we note that the issue of taxability under section 9(1)(vi) & 9(1)(vii) has been duly dealt with by the ITAT pursuant to similar remand in favour of the assessee. It is not the case that Hon'ble Jurisdictional High Court has reversed the said decision. The contention of learned Departmental Representative that the said order is erroneous is not at all sustainable, as review of the Coordinate Bench of the ITAT of the same assessee is not permissible by another Bench of the ITAT. Hence, ground No. 1&2 is allowed in favour of the assessee.
In ground No. 3 raised by the assessee it is urged that the issue of business connection developed by the Assessing Officer is without jurisdiction as this is a remand proceeding for specific examination and not for denovo
13 Atos Information Technology HK Limited examination. Hence, assessee’s plea is that the Assessing Officer’s order is not sustainable.
In the present case we have noted that in the remand by the ITAT the issue was remanded for specific purpose. It was remanded to examine the issue of taxability in term of section 9(1)(vi) and 9(1)(vii). This without prejudice to order by the Assessing Officer taxing the receipt as business income u/s. 9(1)(i) was never dealt with by the Assessing Officer in the original proceedings nor the ITAT has made any such remand for denovo adjudication. Hence, this issue raised by the assessee is allowed and orders of the authorities are set aside being devoid of jurisdiction in remand proceedings. In view of our adjudication as above the other grounds raised without prejudice are held to be infructuous.
Ground No. 7 is consequential. The Assessing Officer will give effect to the same accordingly as per law.
In the result, the appeal by the assessee stands partly allowed. Order pronounced in the open court on 1.3.2022.
Sd/- Sd/- (KAVITHA RAJAGOPAL) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai; Dated : 01/03/2022 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) PS ITAT, Mumbai