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Income Tax Appellate Tribunal, “L” BENCH, MUMBAI
Before: SHRI G.S. PANNU, AM & SHRI RAVISH SOOD, JM
(A.Y. 2009-10) M/s. Linklaters आदेश / O R D E R PER BENCH :
The present appeal has been filed by the revenue against the order of the CIT(A) – 10, Mumbai, dated 31.10.2013, arising out of the order passed u/s 143(3) of the Income Tax Act, 1961, (for short ‘Act’), dated 28.12.2011.
The revenue assailing the relief granted to the assessee by the CIT(A), had filed the present appeal before us, raising the following grounds of appeal:-
i. “On the facts and circumstances of the case and in law, the Ld. CIT(A) was not justified in giving relief in respect of the disbursement, particularly when complete details were not produced by the assessee. ii. On the facts and circumstances of the case and in law, the Ld. CIT(A) was not justified in holding that the assessee was taxable in respect of only that portion of income that was related to the service performed in India. The Ld. CIT(A) has not appreciated the ‘force of attraction’ principle in Article 7 of the Indo UK DTAA. iii. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the interest u/s 234B of the IT Act, 1961 was not chargeable in the case of the assessee on the ground that in the case of a non resident assessee, all sums chargeable to tax are liable to deduction of tax at source u/s 195 of the IT Act.
(A.Y. 2009-10) M/s. Linklaters iv. Without prejudice to the above, the Ld. CIT(A) should have denied benefit of the Indo UK DTAA as the assessee is a partnership firm in the UK where it is not taxed. Hence, it is not a resident of UK under the said DTAA. The entire income would be, thus, liable to taxation as per the Income Tax Act, 1961. v. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary”.
That at the very outset, the Ld. Authorized representative for the assessee (for short ‘A.R’) submitted that all the grounds of appeal raised by the revenue in the present appeal were covered in favor of the assessee on the basis of the orders passed by the Tribunal involving the same issues in the other years. The grounds of appeal so raised by the revenue before us are taken up in a chronological manner, as under:-
GROUND NO. (I) The Ld. A.R adverting to ground of appeal No. 1, wherein the revenue had challenged the relief allowed by the CIT(A) in respect of disbursement expenses, therein submitted that CIT(A) had deleted the addition of £104,045 equivalent to Rs. 74,92,280/- pertaining to reimbursement expenditure after duly appreciating the contention of the assessee that as reimbursement of expenditure is not income, therefore the same cannot be brought to tax. The CIT(A) while deleting the aforesaid addition had relied on the order passed by the Tribunal in the case of the assessee for A.Y. 1995-96, titled as Linklaters LLP Vs ITO, International Tax, Bombay (ITA No. 4896 and 5085) (Mumbai)
(A.Y. 2009-10) M/s. Linklaters of 2003; dated 16th July, 2010, wherein the Tribunal dealing with the issue of taxability of reimbursement of expenditure had therein held as under:
“The reimbursements received by the assessee are in respect of specific and actual expenses incurred by the assessee and do not involve any mark up, there is reasonable control mechanism in place to ensure that these claims are not inflated, and the assessee has furnished sufficient evidence to demonstrate the incurring of expenses. There is thus no good reason to make any addition to income in respect of these reimbursements of expenses. The action of the CIT(A), as learned counsel rightly contends, on pure surmise and conjectures. In view of the above discussions, we direct the Assessing Officer to delete the disallowance of expenses as sustained by the CIT(A) and hold that no part of reimbursements of expenses received by the assessee, on the facts of this case, be treated as income of the asssessee. The assessee gets the relief accordingly.”
It was submitted by the Ld. A.R that thereafter similar finding on the aforesaid issue pertaining to reimbursement of expenditure had consistently been adopted by the Tribunal in the case of the asssessee for the succeeding years, as under:- Particulars Assessment Year Tribunal vide its order, dated: 7th May, 2014. 1996-97 (ITA No. 5730/M/03 and 6557/M/03) Tribunal vide order, dated: 8th August, 2014. 1997-98 (ITA No. 1711/M/04 and 1354/M/04) Tribunal vide order, dated:September 7, 1998-99 to 2001-02
(A.Y. 2009-10) M/s. Linklaters 2015. (ITA No. 1355-57/M/04, 2812/M/05, 1712-1714/M/04, 3596/M/05). Tribunal vide order, dated: December 16, 2003-04 and 2007-08 2015. (ITA Nos. 897/M/07, 3185/M/10, 1532/M/07, 4908/M/10).
That on the other hand, the Ld. Departmental Representative (for short ‘D.R’) could not take us to the relevant part of the order of the lower authorities from where it could be gathered that the assessee had failed to furnish complete details as regards the disbursement expenses during the course of the assessment proceedings, as had been so averred by the revenue in the ground of appeal no.1 so raised before us. Thus following the order of the Tribunal in the case of the assessee for the aforesaid years, we herein uphold the order of the CIT(A). The ground of appeal No. (i) so raised by the revenue is thus dismissed.
GROUND NO. (II)
That as regards the aforesaid ground of appeal, wherein the revenue had claimed that the CIT(A) was not justified in holding that the asssessee was taxable in respect of only that portion of income that was related to the service performed in India, it was submitted by the Ld. A.R that the said ground of appeal so raised by the revenue was absolutely misconceived and did not arise from the order of the CIT(A). It was submitted by the Ld. A.R that as a matter of fact the CIT(A) had dismissed the ground of appeal on the said issue as was so raised by the assessee before him, and had held that the entire income from service rendered in and outside India was liable to be taxed in the hands of the (A.Y. 2009-10) M/s. Linklaters assessee. It was averred by the Ld. A.R that the aforesaid issue had however been settled by the Tribunal in favor of the assessee, in the following cases:
Particulars of order Assessment Years MA order, dated: February 20, 2015. (MA 1997-98 No. 392/M/14). Tribunal order, dated: September 7, 2015. 1998-99 to 2001-02 (ITA No 1355-57/M/04, 2812/M/05, 1712- 1714/M/04 and 3596/M/05). Tribunal order, dated: December 16, 2015. 2003-04 and 2007-08 (ITA Nos. 897/M/07, 3185/M/10, 1532/M/07, 4908/M/10).
The Ld. A.R further submitted that the said issue was even otherwise covered in favor of the assessee on the basis of the order passed by the ‘Special bench’ of the Tribunal in the case of ADIT vs Clifford Chance, Bombay (143 ITD 1). In this regard, the Ld. A.R further pointed out that the sole issue which had weighed in the mind of the CIT(A) while adjudicating the same against the assesses was that the Tribunal had already decided the said issue against the assessee in its case for A.Y. 1995-96. It was further submitted by the Ld. A.R that the Tribunal while disposing of the appeals of the assessee for the succeeding years had followed the order of the ‘Special bench’ of the Tribunal in the case of Clifford Chance (supra), and had consistently decided the issue in favor of the assessee. It was further clarified by the Ld. A.R that the Tribunal while disposing of the Misc. Application No. 392/MUM/2014, arising out of of the assessee for A.Y. 1997-98, after taking due cognizance of the fact that the said issue had earlier been decided by the co-
(A.Y. 2009-10) M/s. Linklaters ordinate Bench of the Tribunal in the assessee’s own case for A.Y. 1995-96 against the assessee, however going by the subsequent order of the ‘Special Bench’ of the Tribunal in the case of : Clifford Chance (Supra), had therein allowed the Misc. Application of the assessee. That on the other hand, the Ld. D.R relied on the order of the AO and therein submitted that the order of the CIT(A) allowing relief to the assessee as regards the issue under consideration may therein by set aside.
We have duly considered the submissions of both the parties and after perusing the material available on record find that the present issue as regards this scope and gamut of taxability of the income of the assessee from services rendered in and outside India had already been decided by the Tribunal in favor of the assessee in the aforementioned cases. We further find that the co-ordinate bench of the Tribunal by following the order of the ‘Special bench’of the Tribunal in the case of : CIT Vs. Clifford Chance (143 ITD 1), had allowed the Misc. Application filed by the assessee in A.Y. 1997-98, therein holding as under:-
“We shall now take up the appeal filed by the revenue. The grounds numbered as 1 & 4 related to the assessment of professional receipts. Though the assessing officer has assessed the entire professional receipts as the income of the assessee, we notice that the Ld. CIT(A) has held that only that portion of the income relating to the services preformed in India alone is assessable under the ‘Act’. Both the parties admitted that the Tribunal has considered identical issue in A.Y. 1995-96 and has held that the entire profits directly or indirectly attributable to the Permanent establishment is assessable and accordingly upheld the order of the (A.Y. 2009-10) M/s. Linklaters assessing officer in that year. However, the Ld. A.R submitted that the Special Bench of Tribunal has considered an identical issue in the case of CIT vs Clifford Chance (143 ITD 1), wherein the issue has been decided in favour of the assessee. Accordingly he submitted that the order of the Ld. CIT(A) on this issue should be upheld. We agree with the contentions of the Ld A.R. Since the decision of Special Bench is binding on us, we direct the assessing officer to assess the income in accordance with the decision rendered by the Special Bench in the above cited case. Accordingly we reject the ground urged by the revenue on this issue.
Thus following the aforesaid order of the coordinate Bench of the Tribunal, we herein restore the issue to the file of the CIT(A) for fresh adjudication, in light of the aforementioned subsequent orders of the Tribunal so passed in the case of the assessee. The ground of appeal No. 2 raised by the revenue is thus disposed of in light of our aforesaid observations.
GROUND OF APPEAL NO. (III)
8. That as regards, the contention of the revenue that the CIT(A) has erred in holding that interest u/s 234B of the ‘Act’ was not chargeable in the case of the assessee, on the ground that in the case of a non-resident assessee all sums chargeable to tax are liable to deduction of tax at source u/s 195 of the ‘Act’, it was submitted by the Ld. A.R that the CIT(A) had decided the said issue in favor of the assesee by relying on the order of the Tribunal so passed in the case of the asssessee for A.Y. 1995-96, wherein the Tribunal taking note of the decision of the Hon’ble High Court of Bombay in the case of DIT vs NGC Network Asia LLC (313 ITR 187) (Bombay), therein held as under:
(A.Y. 2009-10) M/s. Linklaters “Respectfully following the esteemed views of the Hon’ble High Court in the case of NGC Network Asia LLC (supra), we approve the conclusions arrived at by the CIT(A)and decline to interfere on the matter on this count as well. Ground No. 1 o Assessing officer is thus rejected.”
Particulars Assessment Year Tribunal vide its order, dated: 9th July, 1996-97 2014. (ITA No. 6557/M/03). Tribunal vide its order, dated: 8th August, 1997-98 2014. (ITA No. 1711/M/04 and 1354/M/04). Tribunal vide its order, dated : September 1998-99, 2001-02 7, 2015. (ITA No. 1355-57/M/04, 2812/M/05, 1712-1714/M/04, 3596/M/05). Tribunal vide its order, dated : December 2003-04 and 2007-08 16, 2015. (ITA Nos. 897/M/07, 3185/M/10, 1532/M/07, 4908/M/10).
We have heard both the parties, perused the material on record and are of the considered view that as the issue pertaining to levy of interest u/s 234B in the case of non-resident assessee is squarely covered by the judgement of the Hon’ble jurisdictional High Court in the case of NGC Network Asia (supra), which thereafter had consistently been followed by the coordinate Bench of the Tribunal, we therefore uphold the order of the CIT(A) on the said issue. The ground of appeal No. (iii) of the revenue is thus dismissed.
(A.Y. 2009-10) M/s. Linklaters GROUND OF APPEAL NO. (IV)
10. That as regards the contention of the revenue that the CIT(A) had erred in allowing to the assessee the benefit of the Indo – UK DTAA, as the assessee is a partnership firm in UK where it is not taxed, as a result whereof its entire income was liable to be taxed as per the Income Tax Act, 1961, it was at the very outset submitted by the Ld. A.R that the said issue is clearly covered by the orders passed by the Tribunal, in favor of the assessee, in the latters own cases for preceding years, as under:
Particulars Assessment Year Tribunal vide its order, dated : 16th July, 1995-96 2010. (ITA No. 4896/M/03 and 5085/M/03) Tribunal vide its order, dated 8th August, 1997-98 2014. (ITA No. 1711/M/04 and 1354/M/04) Tribunal vide its order, dated September 7, 1998-99 to 2001-02 2015. (ITA No. 1355-57/M/04, 2812/M/05, 1712-1717/M/04, 3596/M/05).
That on the other hand, the Ld. D.R relied on the order of the AO and submitted that the same may be upheld and the order of the CIT(A) be set aside.
We have heard both the parties, perused the material on record and find that the issue as regards the eligibility of the assessee to claim benefit of Indo – UK DTAA already stands adjudicated by the coordinate benches of the Tribunal in favor of the assessee. The ITAT, ‘L’ Bench, while disposing of the (A.Y. 2009-10) M/s. Linklaters appeals of the assessee for A.Y. 1998-99 to 2001-02, relying on its earlier orders so passed in the case of the assessee for A.Y. 1995-96, as regards the issue under consideration, had held as under:
“Lastly, regarding ground no. 5 relating to denial of benefit under Indo – UK DTAA, it has been admitted that the treaty benefit of Indo – UK DTAA has been allowed by the Tribunal in the earlier years, therefore, in A.Y. 1995-96, this issue has been concluded in favor of the assessee in the following manner:-
‘In view of the above discussions, as also bearing in mind the entirety of the case, we hold that the assessee was indeed eligible to the benefits of India-UK tax treaty, as long as entire profits and the partnership firm are taxed in UK whether in the hands of the partnership firm though the taxable income is determined in relation to the personal characteristics of the partners, or in the hands of the partners directly. To that extent, objection taken by the learned Departmental Representative, on the question of admissibility of India-UK tax treaty benefits, is held as maintainable but rejected on merits’ ”.
That in light of the orders so passed by the coordinate bench of the Tribunal in the case of the assessee for the preceding years as regards the issue under consideration, we herein following the same thus uphold the order of the CIT(A) to the said extent. The ground of appeal No.(iv) so raised by the revenue is thus dismissed.
(A.Y. 2009-10) M/s. Linklaters GROUND OF APPEAL NO. V :
13 That as the said ground of appeal is general in nature and the same during the course of hearing of the appeal had not been adverted to by the Ld. D.R, therefore the same is dismissed as not pressed.
The appeal of the revenue is thus dismissed, in terms of our observations recorded hereinabove.
Order pronounced in the open court on 08/02/2017