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Income Tax Appellate Tribunal, “L” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI SANDEEP GOSAIN, JM
आयकर अपील�य अ�धकरण “एल” �यायपीठ मुंबई म�। IN THE INCOME TAX APPELLATE TRIBUNAL “L” BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI SANDEEP GOSAIN, JM आयकर अपील सं./I.T.A. Nos. 747/Mum/2015 & 3609/Mum/2016 (�नधा�रण वष� / Assessment Year: 2011-12) Partners Medical International, Inc. Dy. CIT (Intl. Taxation)-3(3)(2), (Earlier known as Partners Harvard Mumbai Medical International, Inc.) बनाम/ C/o. Pricewaterhouse Coopers (P) Vs. Ltd., PWC House, Plot No. 18/A, Guru Nanak Road, Bandra (W), Mumbai-400 050 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. AABCH 2171 F (अपीलाथ� /Appellant) (��यथ� / Respondent) : अपीलाथ� क� ओर से / Appellant by : Shri Dhanesh Bafna & Shri Ravi Sawana ��यथ� क� ओर से/Respondent by : Shri Samuel Darse
सुनवाई क� तार�ख / : 22.11.2017 Date of Hearing घोषणा क� तार�ख / : 04.12.2017 Date of Pronouncement आदेश / O R D E R Per Shamim Yahya, A. M.: These are appeals by the assessee’s directed against the order of the Assessing Officer passed u/s. 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 dated 09.12.2014 for the assessment year 2011-12.
2 ITA Nos. 747/M/2015 & 3609/M/2016 (A.Y. 2011-12) Partners Medical International, Inc. vs. Dy. CIT (Intl. Taxation) ITA No. 3609/Mum/2016 2. The assessee has appealed against the order of the ld. Commissioner of Income
Tax (Appeals) dated 28.02.2016. The assessee has raised multiple grounds but the fact
of the case are that the ld. Commissioner of Income Tax (Appeals) has held that the
assessee should have filed the appeal before the ITAT and not before him, hence, he
has dismissed the appeal. The order of the ld. Commissioner of Income Tax (Appeals)
in this regard may be referred as under:
I have gone through the facts of this ground. I find that from the facts brought out that the draft order of the A.O. was issued under section 144C(1) and received by the appellant on February 24, 2014. However, the appellant has not been able to demonstrate as to the contention of the AO that such draft order was received by the assessee on February 22, 2014 as the receipt was stamped by the assessee’s authorized representatives office should not be accepted. In this background the DRP have decided the objections to be non-este, the having been filed on March 26, 2014. Therefore, as per the AO, a stand supported by the DRP the appellant was late in filing its objections before the DRP. It is seen that the A.O. finally passed the order on 9 December, 2014. The present appeal has been filed in this office on 13 Jan, 2015 with the order having been received by the appellant on 17 December, 2014. However, the appellant has not been able to demonstrate as to the contention of the A.O. that such draft order was received by the assessee on February 22, 2014 as the receipt was stamped by the assessee’s authorized representatives office. By virtue of this the appeal filed in this office is within 30 days of the receipt of the final order after the objections filed before the DRP have been held as non-este, the appellant needed to file an appeal before the Hon’ble Tribunal, Mumbai Bench. Therefore, in light on this finding the ground of appeal in this regard is dismissed. Considering therefore that the said appeal cannot be taken to be admitted, since the correct forum was the Honorable ITAT the grounds are not adjudicated on merit.
In light of his above order, the ld. Commissioner of Income Tax (Appeals) has
dismissed the other grounds raised by the assessee.
3 ITA Nos. 747/M/2015 & 3609/M/2016 (A.Y. 2011-12) Partners Medical International, Inc. vs. Dy. CIT (Intl. Taxation) 4. Against the above order of the ld. Commissioner of Income Tax (Appeals), the
assessee has filed an appeal before us.
Upon careful consideration, we find ourselves in agreement with the order of
the ld. Commissioner of Income Tax (Appeals) that if the assessee is aggrieved by the
order of the Assessing Officer passed u/s. 144C(13) in this case, the appeal should
have been filed before the ITAT and not before the ld. Commissioner of Income Tax
(Appeals). Hence, we do not find any infirmity in the order of the ld. Commissioner of
Income Tax (Appeals) and, accordingly, we confirm the same. Hence, this appeal by
the assessee stands dismissed.
ITA No. 747/Mum/2015
The grounds of appeal read as under:
Ground No. 1 - Action of the Dispute Resolution Panel
On the facts and circumstances of the case, and in law, the Dispute Resolution Panel ('DRP') erred in holding that the objections were filed by the Appellant before it beyond the time limit prescribed in section 1440(2) of the Income-tax Act, 1961 ('the Act'), and in treating the same (objections filed) as non-est.
The Appellant prays that requisite directions be given so as to restate the objections filed by the Appellant/treat the objections filed as valid.
Ground No. 2 - Learned AO's observation on date of service of order
On the facts and circumstances of the case, and in law, the learned Deputy Commissioner of Income Tax (International] Taxation) -3(3)(2) ('learned DCIT'/'learned AO') has erred in observing that the Appellant has provided wrong information in Form No. 35A ignoring the fact that the draft order issued under section 1440(1) of the Act was in effect received by the authorised
4 ITA Nos. 747/M/2015 & 3609/M/2016 (A.Y. 2011-12) Partners Medical International, Inc. vs. Dy. CIT (Intl. Taxation) representatives of the Appellant on February 24, 2014 (i.e. the date mentioned in Form No. 35A filed by the Appellant).
It is prayed that the said observation of the learned DCIT ought not to be considered as the Appellant had not provided any wrong information in Form 35A.
Ground No, 3 - Validity of the learned AO's order dated December 09, 2014
On the facts and circumstances of the case, and in law, the learned DCIT erred in passing the assessment order, dated December 9, 2014, under section 143(3) r.w.s. 1440(13) of the Income-tax Act, 1961 ('the Act') as the order has been passed beyond the time limit prescribed under section 144C(4) of the Act.
The Appellant prays that the above order be quashed as the same is bad in law.
Ground No. 4 - General - Total Income On the facts and circumstances of the case, and in law, the learned DCIT erred in making additions and assessing the total income of the Appellant for the year at Rs. 5,52,50,130 as against the returned income of NIL.
It is prayed that the learned DCIT be directed to delete the additions made.
Ground No. 5 - Addition on Account of Royalty
On the facts and circumstances of the case, and in law, the learned DCIT erred in concluding that 90% of the receipts of the Appellant during the year amounting to Rs. 4,97,25,117 are in nature of 'Royalties' under the provisions of Article 12(3) of the Double Taxation Avoidance Agreement between India and USA ('DTAA') and thus, liable to tax in India.
It is prayed that the learned DCIT be directed to hold that the entire payment received by the Appellant is for services rendered, and no part is in the nature of Royalties, and hence, the payment falls outside the scope of Article 12(3) of the DTAA.
Ground No. 6 - Addition on account of Fees for Included Services
6.1 On the facts and circumstances of the case, and in law, the learned DCIT erred in concluding that 10% of the receipts of the Appellant during the year
5 ITA Nos. 747/M/2015 & 3609/M/2016 (A.Y. 2011-12) Partners Medical International, Inc. vs. Dy. CIT (Intl. Taxation) amounting to Rs. 55,25,013 constitute 'Fees for Included Services' ('FIS') under Article i2(4)(b) of the DTAA and thus liable to tax in India.
It is prayed that the learned DCIT be directed to hold that the entire payment received by the Appellant is for services rendered, and are not 'Included Services' within the meaning of Article i2(4)(b) of the DTAA read with the Memorandum of Understanding to the DTAA and hence, payments received for such services fall outside the scope of Article i2(4)(b) of the DTAA.
6.2 Without prejudice to the above, on the facts and circumstances of the case, and in law, the learned DCIT erred in disregarding the Appellant's submissions that in terms of Article I2(s)(c) of the DTAA, fees received for providing teaching/ educational services are not taxable as FIS.
The Appellant prays that the learned DCIT be directed to hold that the Appellant is not liable to tax in India on payments attributable to the teaching services by virtue of Article i2(s)(c) of the DTAA. Ground No. 7 - Business profits not taxable in absence of a Permanent Establishment
On the facts and circumstances of the case, and in law, the learned DCIT erred in not appreciating that, if at all, the payments received by the Appellant during the year are in the nature of 'Business Profits', and hence, not taxable in India under Article 7 of the DTAA in the absence of a Permanent Establishment in India (under Article 5 of the DTAA).
The Appellant prays that the learned DCIT be directed to hold that the payments received by the Appellant are not liable to tax in India in the absence of a Permanent Establishment in India.
Ground No. 8 - Invoking Rule 10 of the Income-tax Rules, 1962
On the facts and circumstances of the case, and in law, the DCIT erred in invoking the provisions of Rule 10 of the Income-tax Rules, 1962 for attributing 90% of the total receipts as Royalties and the balance 10% as FIS.
The Appellant prays that the learned DCIT be directed not to invoke the provisions of Rule 10 of the Income-tax Rules, 1962.
Ground No. 9 - Addition on account of reimbursement of expenses
6 ITA Nos. 747/M/2015 & 3609/M/2016 (A.Y. 2011-12) Partners Medical International, Inc. vs. Dy. CIT (Intl. Taxation) On the facts and circumstances of the case, and in law, the learned DCIT erred in including as part of the total income, a sum of Rs. 47,24,930, being reimbursements received for actual expenses incurred by the Appellant on the ground that the facts of the current year are identical with the facts of Assessment Year ('AY1) 2000-01 and subsequent years, where addition has been made by the learned DCIT's predecessor on this account. It is prayed that the learned DCIT be directed to delete the addition to the Appellant's income on account of reimbursement of expenses, as the same does not constitute taxable income.
Ground No. 10 – General – Rate of tax Without prejudice to the above, the learned AO has erred in applying a 15% rate of tax instead of a 10% rate as applicable under section 115A of the Act for such agreements entered after June 1, 2005.
The Appellant prays that the learned DCIT be directed to delete the erroneous rate of tax applied.
Ground No. 11- Short credit of TDS
On the facts and circumstances of the case, and in law, the learned DCIT erred in not granting TDS credit to the extent of Rs.32,96,715.
The Appellant prays that the learned DCIT be directed to grant full TDS credit of Rs.51,33542 as claimed by the Appellan tin the return of income.
Ground no. 12- Levy of interest under section 234B
On the facts and circumstances of the case, and in law, the learned DCIT erred in levying interest of Rs.28,97,862 under section 234B of the Act.
The Appellant prays that the learned DCIT be directed to delete the interest levied under section 234B of the Act.
Ground No. 13 – Levy of interest under section 234A and 234D
On the facts and circumstances of the case, and in law, the learned DCIT erred in levying interest under sections 234A and 234D of the Act amounting to Rs.1,93,191 and Rs.1,62,006 respectively.
7 ITA Nos. 747/M/2015 & 3609/M/2016 (A.Y. 2011-12) Partners Medical International, Inc. vs. Dy. CIT (Intl. Taxation) The Appellant prays that the learned DCIT be directed to delete the interest levied under the said sections.
In this case, the draft assessment order was passed by the Assessing Officer on
21.2.2014. according to the Assessing Officer the date of service of the draft assessment order was 22.2.2014, however, the assessee claimed that the date of
service of draft assessment order was 24.2.2014. The assessee filed objection against
the draft assessment order before DRP-3 on 26.3.2014. The DRP obtained report from the Assessing Officer on 22.8.2014. In this report on 22.8.2014, the Assessing Officer
stated to the DRP that draft assessment order was served on 22.2.2014 and thus
objection were filed late by two days. On 12.11.2014, the DRP treated the objection as
non-est, the DRP’s order in this regard reads as under: As per the provisions of Section 144C(2) of the Act, the eligible assessee shall within thirty days of receipt of the draft order, file his objections to the Dispute Resolution Panel and the Assessing Officer. The concerned provisions of Act for the sake of ready reference are reproduced herein under :-
“On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order, - (a) file his acceptance of the variations to the Assessing Officer, or (b) file his objections, if any, to such variation with, (i) the Dispute Resolution-Panel; and (ii) the Assessing Officer.”
It can be seen from the provisions of section 144C(2) of the Act that on receipt of the draft order, the eligible assessee shall, within thirty-days of the receipt by him of the draft order either would file his acceptance of the variations to the Assessing Officer or file his objections, if any, to such variations with the Dispute Resolution Panel and the Assessing Officer. Therefore, as per the-aforesaid provisions of the Act, the eligible assessee has to file his objections, if any, to the variations proposed in the draft order within thirty days of the receipt by him of the said draft order. In the provisions
8 ITA Nos. 747/M/2015 & 3609/M/2016 (A.Y. 2011-12) Partners Medical International, Inc. vs. Dy. CIT (Intl. Taxation) relating to filing of objections before Dispute Resolution Panel, there is no provision which allows the delayed filing of objections by the eligible assessee.
In the facts of the case, the objections filed are beyond the period of thirty days and against such factual position of the delayed, filing of the objections before this Panel by the assessee. There is no dispute or contention which has been put forward by the assessee or its Ld. Authorised Representatives. Accordingly, in the facts and circumstances of the case, as the objection so filed in Form No. 35A are beyond the period prescribed in the section l44C(2),of the Act, the same cannot be entertained for any decision on merits. We, therefore, treat such objections/Form No. 35 filed as non-est.
Against this order, the assessee has filed this appeal. The preliminary
contention of the ld. Counsel of the assessee are twofold. Firstly, the ld. Counsel of
the assessee submitted that there was two day delay in receipt of draft assessment
order against the date recorded by the Assessing Officer. Hence, it is the assessee’s
contention that the objections have been filed within 30 days as mandated in the Act.
Further it has been submitted that even it is presumed that the objection have been
filed late and are non-est, in such situation, the Act mandated the Assessing Officer to
pass the order within one month from the end of the month in which the period of
filing objection expires as per section 144C(1)(b). However, in the present case, the
Assessing Officer have passed the final assessment order on 09.12.2014, which is
beyond the time limit prescribed u/s. 14C(4) of the Act.
We have heard both the counsels and perused the records o the above issue. In
our considered opinion, on the facts and circumstances of the case, the two day delay
in furnishing the objections to the DRP’s objections deserves to be condoned.
9 ITA Nos. 747/M/2015 & 3609/M/2016 (A.Y. 2011-12) Partners Medical International, Inc. vs. Dy. CIT (Intl. Taxation) Accordingly, we condone the delay in submission of the objection of the DRP. The ld. DRP is directed to pass the direction on the objections.
The ld. Counsel of the assessee has duly agreed to the above proposition, and he has not pressed his other plea that the final assessment order is passed beyond the specified time and, hence, the same is bad in law. Accordingly, this appeal by the assessee is allowed for statistical purpose.
In the result, the appeal by the assessee is allowed for statistical purpose. Order pronounced in the open court on 04.12.2017 Sd/- Sd/- (Sandeep Gosain) (Shamim Yahya) �या�यक सद�य / Judicial Member लेखा सद�य / Accountant Member मुंबई Mumbai; �दनांक Dated : 4.12.2017 व.�न.स./Roshani, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. आयकर आयु�त(अपील) / The CIT(A) 3. आयकर आयु�त / CIT - concerned 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 5. गाड� फाईल / Guard File 6. आदेशानुसार/ BY ORDER,
उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, मुंबई / ITAT, Mumbai