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Income Tax Appellate Tribunal, DELHI BENCH “A”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI L.P. SAHU
Date of Hearing : 13 Date of Hearing : 13-01-201 2016 Date of Hearing : Date of Hearing : 13 13 201 201 Date of Order : Date of Order : 03-02-201 Date of Order : Date of Order : 201 2016 201 ORDER ORDER ORDER ORDER
PER H.S. SIDHU : JM PER H.S. SIDHU : JM PER H.S. SIDHU : JM PER H.S. SIDHU : JM
The Assessee has filed the present appeal against the impugned order dated 19/11/2012 passed by the Ld. Commissioner of Income Tax (Appeals)-II, Dehradun on the following grounds:-
“Based on the facts and circumstances of the case, your appellant respectfully submits the following grounds which are without prejudice to each other:
Ground No.1
That based on the facts and circumstances of the case, the Ld. CIT(A) erred in upholding the order of the AO and sustaining the disallowance under section 40(a)(i) with regards to payments of Rs. 90,504,600 made to MIs GX Technology Limited for the outright purchase of geological data.
Ground No.2
That based on the facts and circumstances of the case, the Ld. CIT(A) erred in holding that the payments of Rs. 90,504,600 to MIs GX Technology Limited for outright purchase of geological data was subject to withholding tax under section 195 of the Act.
Ground No.3
That based on the facts and circumstances of the case, the Ld. CIT(A) erred in not tletermining whether or not the payments of Rs. 90,504,600 to MIs GX Technology Limited for outright purchase of geological data constituted "income chargeable to tax in India".
Ground No.4
That based on the facts and circumstances of the case, the Ld. CIT(A) erred in not accepting the claim of the appellant that the payments to MIs GX Technology Limited for outright purchase of geological data was not chargeable to tax in terms of the Double Taxation Avoidance Agreement between India and United States of America.
Ground No.5
That based on the facts and circumstances of the case, the Ld. CIT(A) erred in denying natural justice to the appellant by not providing sufficient time to furnish the tax residency certificate of MIs GX Technology Limited.
Your appellant prays that the erroneous order be cancelled and appropriate relief may be granted to the appellant.
Your appellant craves leave to add to, alter, amend, vary, omit, substitute or delete any of the aforementioned grounds of appeal or add a new ground or grounds of appeal at any time before or at the time of hearing of the appeal.”
The facts narrated by the Revenue Authorities are not disputed by both the parties, therefore, not repeated here for the sake convenience.
At the time of hearing, Ld. Counsel of the Assessee, Shri Ajay Vohra, Sr.
Advocate alongwith Anshul Sachar, Adv. Filed the Application for admission of additional evidence in terms of Rule 29 of the Income Tax (Appellate Tribunal)
Rules, 1963 in which the assessee has stated that the additional evidences filed by the Assessee may be accepted and the addition in dispute may be deleted.
On the contrary, Ld. D.R. Shri Anuj Arora, CIT(DR) opposed the admission of additional evidences filed by the assessee at this stage and stated that the additional evidences filed by the assessee are required thorough investigation at the level of the AO and stated that it may be sent to the Assessing Officer for examination. Ld. DR further stated that the addition in dispute may not be deleted without verifying the veracity of the additional evidences filed by the Assessing Officer.
After hearing both the parties and perusing the relevant records especially the orders of the Revenue Authorities, the Application filed by the Asessee during the course of hearing in which the assessee has attached the additional evidences i.e. Tax Residency Certificate issued by the tax authorities of USA certifying that GX Technology Corporation is resident of USA for the purposes of taxation and Certificate dated 31.1.2006 issued by GX Technologies Corporation certifying that it is resident of USA in terms of Article 4 of the India US Double Taxation Avoidance Agreement (DTAA) and does not have Permanent Establishment in India in terms of Article 5 of the DTAA. The contents of the Application filed by the Ld. Counsel of the Assessee for admission of additional evidences under Rule 29 of the ITAT Rules are reproduced as under:-
“BG Group is present in India through branch office and project offices of its Cayman Islands entity, BG Exploration & Production
India Limited ("BGEPIL" or' "the Applicant") which is engaged in the business of prospecting for, exploration and production of crude oil and natural gas.
The Applicant is involved in the following Production Sharing Contracts (UpSCs") for exploration and production of Petroleum in the designated contract areas: a) Panna and Mukta Fields; b) Mid and South Tapti Gas Fields;
The Applicant operates through a Joint Venture ("JV") arrangement with other contractors such as Oil and Natural Gas Corporation Limited ("ONGC") and Reliance Industries Limited ("RIL") for its share of participating interest.
The Applicant had entered into a Master Geophysical Data-Use Licence Agreement dated 21.01.2006 with GX Technology Corporation ('GX Technology') for granting non-exclusive, non- transferable licence to use geophysical and geological information for prospecting and exploration of mineral oils. Title to the said information was not transferred to the Applicant and remained with GX Technology.
During the assessment year 2006-07, the applicant had paid Rs. 90,504,600 to GX Corporation for purchase of geophysical and geological information under the Master Geophysical Data-Use Licence Agreement dated 21.01.2006.
The applicant did not deduct tax at source under section 195 of the Income-tax Act, 1961 ('Act') on the aforesaid payments since such payments were not liable to tax in India as business income in absence of Permanent Establishment ('PE') of GX Corporation in India in terms of Article 5 read with Article 7 of the India- USA DTAA.
During the course of assessment proceedings initiated for the assessment year 2006-07, the assessing officer directed the applicant to provide detail of miscellaneous expenses. Accordingly, the applicant vide submission dated
16.12.2010 provided detail of such miscellaneous expenses which included, inter-alia, detail of aforesaid expenses of 90,504,600 paid by the applicant to GX Corporation.
The assessing officer, however, passed order dated 18.02.2011, under section 143(3) r.w.s. 263 of the Act disallowing all the expenses, including the aforesaid expense of 90,504,600 by summarily holding that the applicant had not filed detail of miscellaneous expenses without appreciating that details had already been filed vide submission dated 16.12.2010.
Aggrieved by the order dated 18.02.2011 passed by the assessing officer, the applicant filed appeal before the CIT(A), who, vide order dated 21.03.2011, disallowed the aforesaid expense of 90,504,600 by holding that the applicant had been to furnish Tax Residency Certificate (TRC') issued by the tax authorities of USA certifying that GX Technology was tax resident of USA.
In order to rebut the findings of the CIT(A), which became known from the appellate order, for the first time, the applicant now seeks to place on record the following documents:
• Tax Residency Certificate issued by the tax authorities of USA certifying that GX Technology Corporation is resident of USA for purposes of taxation • Certificate dated 31.01.2006 issued by GX Technologies certifying that it is resident of USA in terms of Article 4 of the India US DTAA and does not have PE in India in terms of Article 5 thereof.
The aforesaid evidence is crucial to rebut the allegations levelled by the CIT(A) and may kindly be admitted as additional evidence in terms of Rule 29 of the ITAT Rules for judicious disposal of the present appeal. The said evidence could not be filed earlier since the same was not requisitioned by the CIT (A), before deciding the issue against the appellant.
Judicial Precedents: Judicial Precedents: Judicial Precedents: Judicial Precedents:
Reference, in this regard, may be made to the decision of the jurisdictional Delhi High Court in the case of CIT vs. Text Hundred India Pvt. Ltd.:239 CTR 263. In that case, their Lordships held that Rule 29 of ITAT Rules, permitting the Tribunal to admit additional evidence is made to enable the Tribunal to admit any additional evidence which would be necessary to do substantial justice in the matter. Their Lordships further observed that the various procedures, including that relating to filing of additional evidence, is handmade for justice and justice should not be allowed to be choked only because of some inadvertent error or omission on the part of one of the parties to lead evidence.
The relevant observations of the Court are reproduced hereunder:
"13. The aforesaid case law clearly lays down a neat principle of law that discretion lies with the Tribunal to admit additional evidence in the interest of justice once the Tribunal affirms the opinion that doing so would be necessary for proper adjudication of the matter. This can be done even when application is filed by one of the parties to the appeal and it need not to be a suo motto action of the Tribunal. The aforesaid rule is made enabling the Tribunal to admit the additional evidence in its discretion if the Tribunal holds the view that such additional evidence would be necessary to do substantial justice in the matter. It is well settled that the procedure is handmade of justice and justice should not be allowed to be choked only because of some inadvertent error or omission on the part of one of the parties to'lead evidence at the appropriate stage. Once it is found that the party intending to lead evidence before the Tribunal for the first time was prevented by sufficient cause to lead such an evidence and that. This evidence would have material bearing on the issue which needs to be decided by the Tribunal and ends of justice demand admission of such an evidence, the Tribunal can pass an order to that effect." (emphasis supplied)
Kind attention is also invited to the decision of the Delhi High Court in the case ofCIT v. Virgin Securities & Credits (P) Ltd.: 332 ITR 396, wherein the High Court, in the context of powers of the CIT(A) to admit additional evidence, held that the CIT(A) may admit evidence after obtaining a remand report from the assessing officer, if the evidence sought to be adduced by the applicant is crucial, to the disposal of the appeal. The relevant observations of the Court are as under:
"8. The aforesaid contention appears to be devoid of any merit. It is a matter of record that before admitting the additional evidence, the CIT (A) had obtained remand report from the AG. While submitting his report, the A G had not objected to the admission of the additional evidence, but had merely reiterated the contentions in the assessment orders. It is only after considering the remand report, the CIT (A) had admitted the additional evidence. It cannot be disputed that this additional evidence was crucial to the disposal of the appeal and had a direct bearing on the guantum of claim made by the assessee. Plea of the assessee which was taken before the AO remains the same. The AO had taken adverse note because of non-production of certain documents to support the plea and it was in these circumstances, the additional evidence was submitted before the CIT (A). It cannot be said not is it the case of the Revenue that additional evidence is not permissible at all before the first 9 appellate authority. On the contrary, Rule 46A of the Act permits the CIT (A) to admit additional evidence if he finds that the same is crucial for disposal of the appeal. In the facts of this case, therefore, we are of the opinion that on this aspect, no substantial question of law arises." (Emphasis supplied).
Prayer Prayer Prayer Prayer
In view of the aforesaid, it is respectfully prayed that the afqresaid opinion~may kindly be admitted as additional evidence by exercising the discretion conferred on this Hon'ble Tribunal under Rule 29 of the ITAT Rules.
The applicant trusts that the request shall merit sympathetic consideration and shall be acceded to.
An opportunity of being heard is prayed for.”
After going through the impugend order as well as the contention of the Assessee raised in the Application for admission of additional evidences, we are of the consdiered view that the additional evidences i.e. Tax Residency Certificate issued by the tax authorities of USA certifying that GX Technology Corporation is resident of USA for the purposes of taxation and Certificate dated 31.1.2006 issued by GX Technologies Corporation certifying that it is resident of USA in terms of Article 4 of the India US Double Taxation Avoidance Agreement (DTAA) and does not have Permanent Establishment in India in terms of Article 5 of the DTAA are very much essential evidences for deciding the issue in dipsute which require thorough examination at the level of the Assessing Officer. Therefore, in the interest of justice, as agreed by both the parties, we accept the Application for admission of additional evidences filed by the assessee u/R 29 of the ITAT, Rules, 1963 and send back the issue in dispute to the file of the Assessing Officer for examination and verifying the aforesaid additional evidences and then decide the addition in dispute afresh, in accordance with law, after giving full opportunity to the assessee of being heard.
In the result, the appeal of the Assessee stands allowed for statistical purposes. Order pronounced in the Open Court on 03/02/2016.