JOHNSON & JOHNSON PTE LTD,MUMBAI vs. COMMISSIONER OF INCOME TAX (APPEALS)-57 INCOME TAX DEPARTMETNT , MUMBAI

The sole ground raised by the assessee, in the present appeal, is as under:-

The present appeal is delayed by 375 days. Alongwith the present appeal, the assessee has filed an application seeking condonation of delay supported by an affidavit signed by the authorized signatory of the assessee. In the aforesaid application, the assessee submitted that the order dated 17/11/2022 passed by the learned CIT(A) was received by the assessee on the same date and therefore, as per the provisions of section 253 of the Act, the time limit for filing the appeal before the Tribunal was available till 16/01/2023. However, the present appeal was filed by the assessee on 25/01/2024. As per the assessee, it was awaiting the order giving effect to the impugned order passed by the learned CIT(A) before filing the appeal against the impugned order. However, since even after the expiry of six months from the date of the learned CIT(A)’s order the order giving effect was not passed, the assessee proceeded to file the present appeal.

The present case involves peculiar facts, therefore the same are discussed before deciding on the issue of condonation of delay in filing the present appeal. The brief facts of the case, as emanating from the record, are that for the year under consideration, the assessee filed its original return of income on 01/12/2018 declaring a total income of Rs.332,65,58,550/-, which included the income of Rs.5,65,94,465/- from Business Support Services (“BSS”) and royalty income of Rs.46,28,84,260/-. Subsequently, the assessee filed its revised return of income on 29/03/2019 declaring a total income of Rs.331,62,52,720/- after reporting income from BSS of Rs.8,08,20,170/- and royalty income of Rs.50,91,72,884/-. The revised return filed by the assessee was selected for scrutiny and statutory notices under section 143(2) as well as section 142(1) of the act were issued and served on the assessee. In the present case, vide draft assessment order dated 25/06/2021 total income of the assessee was proposed to be assessed as per the income declared by the assessee in its revised return of income. Vide its submission dated 23/07/2021, the assessee requested the Assessing Officer (“AO”) that it shall not file any objection before the Dispute Resolution Panel against the draft assessment order, and accordingly requested the AO to pass the final assessment order. Vide final assessment order dated 07/09/2021 passed under section 143(3) read with section 144C(3) of the Act, the AO accepted the submission of the assessee that the amount of BSS income is inadvertently reported at Rs.8,08,20,170/- instead of Rs.5,57,62,282/- as the effect of reversal of two debit notes was not factored. Further, the AO also accepted the submission of the assessee that the royalty income was inadvertently reported as Rs.50,91,72,686/- after grossing up the amount twice and the amount of royalty income of Rs.46,28,84,260/-, as reported in the original return of income, is the correct royalty income. Accordingly, vide final assessment order, the AO computed the total income of the assessee at Page | 3 Rs.332,57,26,578/-. The AO also levied a surcharge and education cess on the receipt of fees for technical services and royalties.

The learned CIT(A), vide impugned order, inter alia upheld the levy of surcharge and education cess on the assessed income. Being aggrieved by the aforesaid findings of the learned CIT(A), the assessee is in appeal before us. The primary contention of the assessee is that the assessee is a tax resident of Singapore and is eligible to be governed by the provisions of the India- Singapore DTAA. Further, as per Article-12 of the India-Singapore DTAA the tax on royalty or fee for technical services is charged at 10% on a gross basis and the same is inclusive of surcharge and education cess. In support of its submission, the assessee placed reliance upon various decisions of the Co- ordinate Bench of the Tribunal, wherein this issue has been decided in favour of the assessee.

During the hearing, the learned Authorised Representative (“learned AR”) furnished a flow-chart of sequence of events and submitted that the final assessment order dated 07/09/2021 was suo-moto rectified by the AO vide rectification order dated 07/09/2021, whereby the income was assessed in line with the draft assessment order dated 25/06/2021 and income from BSS was considered at Rs.8,08,20,170/- and royalty income was considered at Rs.50,91,72,884/-. The learned AR submitted that the aforesaid rectification order was quashed by the learned CIT(A) since notice u/s 154(3) of the Act was not issued and no opportunity of being heard was provided to the assessee. It was further submitted that on 29/11/2023 second rectification order u/s 154 read with section 143(3) of the act was passed by the AO Page | 4 assessing the income in line with the draft assessment order. The learned AR submitted that neither in the first rectification order dated 07/09/2021 nor in the second rectification order dated 29/11/2023 surcharge and education cess was levied by the AO. The learned AR further submitted that the AO passed a third rectification order dated 21/12/2023 u/s 154 read with 143(3) of the Act levying penalty u/s 270A of the Act, however, even in the third rectification order surcharge and education cess was not levied. In support of his submission, the learned AR furnished the copy of the computation sheet of the rectification order dated 21/12/2023 passed u/s 154 read with 143(3) of the Act. From the perusal of the aforesaid computation sheet, it is discernible that no surcharge or education cess was levied by the AO. The learned AR submitted that the assessee has filed an appeal against the aforesaid rectification order dated 21/12/2023 before the learned CIT(A), which is currently pending. The learned AR further submitted that despite the aforesaid development, the present appeal was filed as the surcharge and education cess, which now stands deleted, may again be levied.

The aforesaid sequence of facts not only supports the contention of the assessee in its application seeking condonation of the delay that there have been instances wherein the Income Tax Department’s tax computation system did not levy surcharge and education cess on the DTAA rates but also makes it evident that the AO has rectified the final assessment order and did not levy the education cess and surcharge as was levied in the final assessment order. Thus, in the peculiar facts of the present case, we find that the reasons stated by the assessee for seeking condonation of delay fall within the parameters for grant of condonation laid down by the Hon'ble Supreme Court in the case of Collector Land Acquisition, Anantnag Vs. MST Katiji and others: 1987 SCR (2) 387. Accordingly, we are of the considered view that there exists sufficient cause for not filing the present appeal within the limitation period and therefore, we condone the delay in filing the appeal by the assessee.

Since the AO has rectified the final assessment order dated 07/09/2021, which in turn has resulted in the present appeal before us, and deleted the surcharge and education cess initially levied, therefore, we are of the considered view that the solitary grievance of the assessee in the present appeal is rendered academic and therefore the ground raised by the assessee is dismissed as infructuous. Needless to mention if the levy of surcharge and education cess is resurrected in the future then the assessee can avail the remedy as available under the law against such levy and merely on the apprehension of the assessee the present appeal has no basis at present, as the surcharge and education cess has already been deleted by the AO vide its rectification order.

In the result, the appeal by the assessee is dismissed. Order pronounced in the open Court on 04/06/2024