CUPINO LTD.,MUMBAI vs. DY CIT (IT)-2(1)91), MUMBAI
In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that since there was no variation in the returned income, the issuance of a draft assessment order was not legally required. Consequently, the assessment order passed beyond the time limit under Section 153 was quashed.
What were the facts?
The assessee, a Cyprus-based company, offered interest income at 10% as per the India-Cyprus tax treaty. The Assessing Officer (AO) proposed taxing it at 20% under Section 115A of the Income Tax Act, despite no variation in the returned income. The assessment order was passed beyond the time limit prescribed under Section 153.
What were the issues?
Whether the assessment order is barred by limitation when no variation in returned income was proposed, and a draft assessment order was issued unnecessarily. Whether the AO correctly applied the tax rate on interest income as per domestic law or the tax treaty.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cases cited in this judgment(2)Show listHide list
Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.
- National Thermal Power Co. Ltd. v. CIT5,834 citing229 ITR 383 · 1998 · SC
- IPF India Property Cyprus (No.1) Ltd. v. DCIT14 citing183 ITD 46 · 2020 · ITAT
Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
Before: HON’BLE SHRI MAHAVIR SINGH, VP & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आयकर अपीलीय अधिकरण “आई” न्यायपीठ म ुंबई में। IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI माननीय श्री महावीर स िंह, उपाध्यक्ष एवुं माननीय श्री मनोज कुमार अग्रवाल ,लेखा दस्य के मक्ष। BEFORE HON’BLE SHRI MAHAVIR SINGH, VP AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM (Hearing Through Video Conferencing Mode) आयकरअपील िं./ (धििाारण वर्ा / Assessment Year: 2015-16) CUPINO LIMITED DCIT(Intl. Taxn.)-2(1)(1) 1713, 16th Floor C/o Pricewaterhouse Coopers Pvt. Ltd. बिाम/ PWC House, Plot No.18 A Air India Office Vs. Guru Nanak Road, Bandra (W) Nariman Point Mumbai-400 050 Mumbai-400 021 स्थायीलेखा िं./ जीआइआर िं./ PAN/GIR No. AADCC-8438-N (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : Assessee by : Shri Madhur Agarwal – Ld. AR Revenue by : Shri Vijaykumar Subrahmaniyam –Ld. DR ुनवाई की तारीख/ : 02/03/2021 Date of Hearing घोषणा की तारीख / 05/04/2021 : Date of Pronouncement आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member)
Aforesaid appeal by assessee for Assessment Year (AY) 2015-16 contest final assessment order passed u/s 143(3) r.w.s. 144C(13) of the Act by Ld. DCIT (Int. Taxation)-2(1)(1) on 27/09/2019. We find that though the final assessment order has accepted the returned income of Rs.34.12 Crores as filed by the assessee, however, the dispute has arisen on account of applicable rate of tax to the said income. The assessee has offered the income @10% in terms of Article 11 of the Tax-Treaty provisions between India and Cyprus. However, Ld. AO, has opined that the income would be chargeable @20% plus applicable surcharge and cess in terms of Section 115A(1)(a)(ii) of the Act. The income earned by the assessee is in the shape of interest on fully & compulsorily convertible debentures (FCCB) from Shree Ahuja Properties and Realtors Private Limited. The assessee is a company incorporated in Cyprus.
The Ld. AR, at the outset, drew our attention to the additional ground raised
by the assessee and submitted that since there is no variation in the returned income / loss, there was no requirement to issue the draft assessment order and in that eventuality, final assessment order as passed by Ld. AO would be barred by limitation as per the provisions of Section 153. The Ld. AR also drew attention to the fact that assessee’s appeal for earlier Assessment Years i.e. 2013-14 & 2014-15 has already been heard by this very bench on identical ground and therefore, the adjudication in those appeals would equally apply to this appeal also. However, Ld. DR, by referring to the amendment brought into Section 144C(1) w.e.f. 01/04/2020, submitted that the amendment was intended to protect the interest of an eligible assessee and provide a fast track dispute resolution mechanism whereby only a draft assessment order will be issued which would be subject to the scrutiny of collegiums of Three Commissioners of Income Tax to rule out any judgmental errors of the assessing office including tax demand arising on account of denial of treat benefits absent variation in the returned income. With effect from 01/04/2020, the phrase ‘variation in the income or loss returned which is prejudicial to the interest of the assessee’ in Section 144C(1) has been replaced by the phrase ‘any variation which is prejudicial to the interest of the assessee’.
3. The additional ground as raised by the assessee read as under: - On facts, in the circumstances of the case, in law and without prejudice to earlier grounds, the Ld.AO has erred in not passing the assessment order within the time limit prescribed for completion of assessment proceedings under Section 153 of the Act.
Since this is purely legal ground and contest the very validity of the assessment order and do not require appreciation of new facts, the same is admitted in terms of decision of Hon’ble Apex court in National Thermal Power Co. Ltd. V/s CIT (1998 229 ITR 383). Since this ground goes to the root of the matter, we proceed to adjudicate the same in succeeding paragraphs.
For the purpose of adjudication, it would be worthwhile to take note of few dates. The assessment year involved is AY 2015-16 and the final assessment order has been passed on 27/09/2019. The date of directions given by Ld. DRP is 29/08/2019. Upon perusal of final assessment order, it could be observed that there is no proposed variation in the income or losses reported by the assessee. The matter before Ld. AO was only with respect to the applicable rate of tax on the interest income earned by the assessee. In such a case, the provisions of Section 144C(1) would not apply and the due date for completion of assessment proceedings and passing the assessment order as per Section 153 would be 31/12/2018. As against this, the final assessment, in the present case, has been passed on 27/09/2019 and therefore clearly barred by limitation. The fact of issuance of draft assessment order, when it was not legally required to be issued, could not end up enhancing the time limit for completion of the assessment u/s 143(3).
We find that we have already adjudicated this issue in assessee’s own case for AYs 2013-14 & 2014-15 (ITA Nos. 7130/Mum/2017 & 7236/Mum/2018 common order dated 26/03/2021). In the said order, relying upon the decision of coordinate bench of Tribunal in IPF India Property Cyprus (No.1) Ltd. V.s DCIT (2020 183 ITD 46), we have allowed additional ground with following observations: - 7. We noted that the draft assessment order was issued on 29.12.2016 under section 143(3) read with section 144C(1) of the Act and in that eventuality, finally the assessment order was passed on 16.10.2017. From the above, we find that there is no dispute that if there would not have draft assessment order, the assessment would have been time barred as on 31.12.2016, the present assessment order dated 16.10.2017. Once, we hold that no draft assessment order would have been issued in this case as the provisions of Section 144C(1) of the Act could not have been invoked in this case. The time limit for completion assessment was available only to 31.12.2016, hence, we are of the view that the issuance of draft assessment order cannot end up increasing the time limit for completion of the assessment under section 143(3) of the Act. This issue has been adjudicated by the co-ordinate bench of this Tribunal in the case of IPF India Property Cyprus (No.1) Ltd. Vs. DCIT (2020) 183 ITD 46 (Mumbai-Trib.), wherein it is held as under: - “6. Once this amendment is being introduced with effect from 1st April 2020, it is beyond any doubt of controversy that so far as the period prior to 1st April 2020 is concerned, the cases in which no variations in the returned income or loss were proposed, the draft assessment orders were not required to be issued. We, therefore, uphold the plea of the assessee on this point. 7. Coming to the second point, we find that there is no dispute that if no draft assessment order was to be issued in this case, the assessment would have been time barred on 31st December 2017 but the present assessment order is passed on 17th August 2018. Once we hold that no draft assessment order could have been issued in this case, as the provisions of Section 144C(1) could not have been invoked in this case, the time limit of completion of assessment was available only upto 31st December 2017. The mere issuance of draft assessment order, when it was legally not required to be issued, cannot end up enhancing the time limit for completing the assessment under section 143(3). We, therefore, uphold the plea of the assessee on this point as well. The impugned assessment order is indeed, in our considered view, time barred. We, accordingly, hold so. 8. As the impugned assessment order itself is held to be time barred, all other grievances raised in appeal, which deal with the merits of stand taken by the Assessing Officer in the assessment order, are rendered academic and infructuous. No adjudication, therefore, is required on these grievances at this stage.”
We noted that in the present case neither the learned Sr. DR nor the assessee has disputed the fact and there is proposed variation in the income or losses reported by the assessee to the Income Tax Authorities. The matter before the Assessing Officer was only with respect to the rate of tax chargeable by the assessee and actually there is no variation in income or losses. Once, this is a fact the issue is squarely covered by the decision of this Tribunal in the Case of IPF India Property Cyprus (No.1) Ltd. (supra). Respectfully following the same, we allow this additional ground of the assessee and hold that the assessment framed by Assessing Officer is time barred and hence quashed.
Following our earlier view, we allow the additional ground of appeal and hold that the assessment framed by learned Assessing Officer was time barred and hence quashed. Consequently, other grounds raised in the appeal have been rendered academic in nature.
6. The appeal stand allowed in terms of our above order. Order pronounced on 5th April, 2021. Sd/- Sd/- (Mahavir Singh) (Manoj Kumar Aggarwal) उपाध्यक्ष / Vice President लेखा दस्य / Accountant Member मुिंबई Mumbai; सदनािंक Dated : 05/04/2021 Sr.PS, Jaisy Varghese आदेशकीप्रधिधलधपअग्रेधर्ि/Copy of the Order forwarded to : 1. अपीलाथी/ The Appellant 2. प्रत्यथी/ The Respondent आयकरआयुक्त(अपील) / The CIT(A) 3. 4. आयकरआयुक्त/ CIT– concerned 5. सवभागीयप्रसतसनसध, आयकरअपीलीयअसधकरण, मुिंबई/ DR, ITAT, Mumbai 6. गार्डफाईल / Guard File आदेशाि सार/ BY ORDER,
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