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Income Tax Appellate Tribunal, PUNE BENCH, ‘C’ PUNE
Before: SHRI R.S. SYAL & SHRI PARTHA SARATHI CHAUDHURY
आदेश / ORDER
PER R.S.SYAL, VP :
These two appeals by the assessee relate to the assessment
years 2012-13 & 2013-14. Since common issues are raised in these
appeals, we are, therefore, proceeding to dispose them off by this
consolidated order for the sake of convenience.
A.Y. 2012-13 :
The first issue challenged by the assessee is against the
initiation of reassessment proceedings.
Briefly stated, the facts of the case are that the assessee is a
foreign company who filed its return declaring total income of
2 ITA Nos.265 & 211/PUN/2021 Aktiebolaget Tetra Pak
Rs.1,89,73,041/- on 12-03-2014. The assessment u/s. 143(3) of the
Income-tax Act, 1961 (hereinafter also called `the Act’) was
completed on 28-03-2016. Thereafter, the AO issued notice u/s.148
dated 29-03-2019 on the ground that a sum of Rs.7,81,23,918/-
declared by the assessee as non-taxable got accepted in the
assessment as such, which ought to have been charged to tax. The
AO notified the draft assessment order u/s.143(3) r.w.s. 147 and
section 144C(1) of the Act on 27-12-2019 computing total income at
Rs.9,46,20,724/-. The assessee remained unsuccessful before the
Dispute Resolution Panel (DRP) on its contention that the initiation
of re-assessment proceedings after four years from the end of the
assessment year was not valid. That is how, the final assessment
order was passed u/s.143(3) r.w.s.147 and 144C(13) of the Act on
16-04-2021 computing total income at Rs.11,16,96,461-. The
assessee has come up in appeal before the Tribunal.
We have heard the rival submissions and gone through the
relevant material on record. The reasons recorded by the AO before
initiating reassessment proceedings, have been reproduced on pages
3 to 6 of the draft assessment order, which read as under :
“Reasons for reopening of the assessment in the case of For A.Y. 2012-13 u/s.147 of the I.T. Act, 1961
3 ITA Nos.265 & 211/PUN/2021 Aktiebolaget Tetra Pak
The return of income for the assessment year 2012-13 was filed by the assessee M/s. Aktiebolaget Tetra Pak on 12.03.2014 offering receipts of Rs.1,89,73,041/- as tabulated below for taxation as fees for technical services at the rate of 10% under Article 12 of the India Sweden DTAA :
Sr.No. Description of Receipt Amount (in Rs.) 1 Network charges, i.e. WAN and 1,84,46,949/- lease line, DATA charges, CIC charges 2 Training Expenses 5,26,092/- Total taxable transactions 1,89,73,041/-
The return of income for the assessment year 2012-13 was selected for scrutiny and vide notice u/s.142(1) dated 24.11.2014, the assesee was asked to furnish the details of all payments received by the assessee from any person in India and whether the entire receipts has been considered as taxable in India. In response to the said notice, the assessee has vide letter dated 10.02.2015 submitted that an amount of Rs.7,81,23,918/- as tabulated below was also received and the same has not been considered taxable in India.
Sr.No. Description of Receipt Amount (in Rs.) 1 Other Consultancy Income 12,589/- 2 Testing Charges 3,11,957/- 3 Training Expenses 40,19,007/- 4 Reimbursement of expenses 4,82,100/- received 5 Import of Carton components & 7,28,182/- spares 6 Credit Notes/Reversals -72,99,886/- 7 Service Income-IT support & 7,98,69,699/- maintenance allocation Total non taxable transactions 7,81,23,918/-
4 ITA Nos.265 & 211/PUN/2021 Aktiebolaget Tetra Pak
Order u/s.143(3) read with section 92CA was passed by the Assessing Officer on 28.03.2016 accepting the submissions made by the assessee and assessing the total income at the income returned by the assessee. No supporting invoices or documents has been filed by the assessee in respect of the receipts not considered taxable in India. With regard to the major receipt of service income of Rs.7,98,69,699/-, it is submitted by the assessee that the same is not considered taxable under the Most Favoured Nation clause inserted in the India Sweden DTAA and hence, the restrictive definition of ‘fees for technical services’ as defined in Article 12(4) of the India Portugal DTAA will apply and as the services do not make available any technical knowledge, experience, skill, know-how etc. to Tetra Pak India, the services are not taxable in India. However no supporting documents has been furnished by the assessee in the course of the assessment proceedings to establish that the services rendered by the assessee to Tetra Pak India, i.e. IT support & maintenance do not make available any technical knowledge, experience or skill. Further an amount of Rs.5,26,092/- received on account of training expenses has been offered for taxation. However training expenses of Rs.40,19,007/- has not been offered for taxation with no supporting documents to establish how the two receipts were different and considered for taxation independently and differently. It has been held in a plethora of cases (ITO v Veeda Clinical Research Pvt. Ltd. 2013-TII-122-ITAT-AHM- INTL., MOU to the India-USA Tax Treaty (Example 6), Sahara Airlines Ltd. V DCIT (2003) 79 TTJ 268 (Del.), Hindalco Industries Ltd. V. ACIT (2005) 94 TTJ 944 (Mum), JCIT v. Kaiser Aluminium Technical Services Inc. ITA No.826/Mum/99, International Tire Engineering Resources LLC In re (2009) 319 ITR 228 (AAR)) that the receipts from the area of technical training are taxable as ‘fees for technical services’ as the said services could not make technology available to the recipient. Further it has been held by the Hon’ble Mumbai Bench of the ITAT in the case of WNS North America Inc v. ADIT (International Taxation)-2(2), Mumbai (2013) 141 ITD 117 (Mumbai – Trib.) that the onus is on the taxpayer to produce adequate documentation before the Revenue to demonstrate that it has merely received ‘reimbursement’ of expenditure actually incurred on behalf of
5 ITA Nos.265 & 211/PUN/2021 Aktiebolaget Tetra Pak
the service recipient without any markup. No supporting documents have been filed by the assessee to support the claim that the receipts of Rs.4,82,100/- was purely on account of reimbursement of expenses and that there was no markup with regard to the said expenses.
It is clear from the records that the Assessing Officer while passing the order dated 28.03.2016 has not formed an opinion on the basis of documentary & supporting evidences that the receipts to the tune of Rs.7,81,23,918/- are not taxable in India. Reliance is placed on the decision of the Hon‘ble Supreme Court in the case of ITO v. TechSpan India Private Limited (2018) 255 Taxman 152 (SC) wherein the Hon’ble Supreme Court has in Para 12 of its order dated 24.04.2018 observed as under ;
“Before interfering with the proposed re-opening of the assessment on the ground that the same is based only on a change in opinion, the court ought to verify whether the assessment made earlier has either expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. If the assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the AO any opinion on the questions that are raised in the proposed re-assessment proceedings. Every attempt to bring to tax, income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where the order of assessment does not address itself to a given aspect sought to be examined in the re-assessment proceedings.”
In the light of the discussion in the preceding paragraphs, I have reason to believe that income chargeable to tax of Rs.7,81,23,918/- has escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year 2012-2013. The assessee has during the course of the original assessment proceedings failed to furnish the bills, invoices & supporting documents to establish its case that the receipts to the tune of
6 ITA Nos.265 & 211/PUN/2021 Aktiebolaget Tetra Pak
Rs.7,81,23,918/- are not taxable in India. The income which has escaped assessment amounts to or is likely to amount to Rupees One Lakh or more for the said assessment year.”
A bare perusal of the above reasons deciphers that the AO
wanted to bring the sum of Rs.7,81,23,918/- within the ambit of
chargeability, which was considered by the assessee as not taxable in
India and got accepted by the AO during the original assessment. At
this stage, it is relevant to note the mandate of first proviso to section
147 of the Act which provides that where an assessment has been
completed u/s.143(3), no action shall be taken under this section after
expiry of four years from the end of the relevant assessment year,
unless any income chargeable to tax has escaped assessment by
reason of failure on the part of the assessee to disclose fully and truly
all material facts necessary for assessment. The assessment year
under consideration is 2012-13. Original assessment u/s.143(3) of
the Act was completed on 28-03-2016. A copy of the assessment
order has been placed at pages 2 onwards of the paper book. The
period of four years from the end of the relevant assessment year
draws to close on 31-03-2017. Notice u/s.148, a copy placed at page
10 of the paper book, was issued on 29-03-2019, which is obviously
beyond a period of four years from the end of the relevant assessment
year. In such circumstances, we need to ascertain if there was any
7 ITA Nos.265 & 211/PUN/2021 Aktiebolaget Tetra Pak
failure on the part of the assessee to disclose fully and truly all
material facts necessary for assessment. From the reasons
reproduced above, it is seen that the AO initiated reassessment on the
ground that the assessee received a sum of Rs.7.81 crore which was
not offered for taxation. It is seen that during the course of original
assessment proceedings, the AO conducted inquiry on this point vide
notice u/s.142(1) dated 24-11-2014, as has also been referred to in
the reasons extracted above. In response thereto, the assessee
submitted details of its taxable transactions at Rs.1,89,73,041/- and
non-taxable transactions totalling to Rs.7,81,23,918/- vide letter
dated 10-02-2015, a copy of which has been placed at page 101 of
the paper book. Bifurcation of such non-taxable transactions has
been given in tabular form. First column of such Table is `Nature of
services’; next column is `amount received’; next is `whether taxable
in India’; and the last column is `Remark’. The assessee gave item-
wise details of the amounts totalling Rs.7.81 crore with respective
amounts and specifically mentioning that the amount is not
chargeable to tax in India. Not only that, the assessee also gave
detailed submissions as to why the respective amounts were not
chargeable to tax. For example, as against the `Testing Charges’, the
assessee gave copious reasons at page 125 of the paper book as to
8 ITA Nos.265 & 211/PUN/2021 Aktiebolaget Tetra Pak
why the amount is not chargeable to tax. In the like manner, the
assessee gave detailed reasons at page 129 of the paper book for
receipt of `Training Expenses’. Similar is position for all other
items. On perusal of the details and reasons furnished by the
assessee as to why amounts were not offered for taxation, the AO got
convinced and completed the assessment u/s.143(3) of the Act on 28-
03-2016 accepting the returned income as total income. The AO in
the reasons has fairly taken note of this fact that the assessee was
asked to furnish the details of all the amounts received by it from any
person in India during the course of original assessment proceedings
and the assessee complied with the same by submitting that a sum of
Rs.7.81 crore was received but was not chargeable to tax.
Notwithstanding that, the AO initiated reassessment proceedings by
observing in the reasons that “No supporting documents have been
furnished by the assessee in the course of assessment proceedings to
establish that the services rendered by the assessee to Tetra Pak
India, i.e. IT Support and Maintenance did not make available any
Technical Knowledge, Experience or Skill.” On going through the
relevant material on record, it becomes emphatically clear that the
assessee disclosed fully and truly all material facts necessary for the
assessment during the course of original proceedings completed
9 ITA Nos.265 & 211/PUN/2021 Aktiebolaget Tetra Pak
u/s.143(3) and there was nothing which was withheld by it. What
inference the AO draws from the material placed before him is a
secondary question and matter of concern for the Department only.
Insofar as the proviso to section 147 is concerned, the same gets
immediately magnetized when it is proved that the original
assessment was completed u/s.143(3) and a period of four years has
elapsed form the end of the relevant assessment year and further
there was no failure on the part of the assessee to disclose fully and
truly all material facts necessary for assessment.
Adverting to the facts of the instant case, we find that there was
no failure on the part of the assessee to disclose fully and truly all
material facts necessary for assessment completed u/s.143(3). Since
the period of four years from the end of the relevant assessment year
expired at the time when the AO issued notice u/s.148, we hold that
such a notice and the consequential assessment order are bad in law
and hence vitiated.
A.Y. 2013-14 :
The factual panorama for this year is almost similar to that of
the assessment year 2012-13. For this year also, the assessee filed
return declaring total income of Rs.1,83,93,865/-. The original
10 ITA Nos.265 & 211/PUN/2021 Aktiebolaget Tetra Pak
assessment u/s.143(3) was completed on 28-03-2016 on the returned
income. Thereafter, the AO issued notice u/s.148 on 29-03-2019 on
the ground that a sum of Rs.9,26,60,482/- declared by the assessee in
the original assessment as not chargeable to tax, was, in fact,
includible in the total income of the assessee. The draft assessment
u/s.143(3) r.w.s. 144C(1) and section 147 of the Act was notified on
27-12-2019 computing total income at Rs.11,10,54,350/-. The
assessee unsuccessfully challenged the initiation of reassessment
proceedings before the DRP. The final assessment order u/s. 143(3)
r.w.s. 147 and section 144C(13) was passed on 01-04-2021
determining total income at Rs.11.10 crore. Aggrieved thereby, the
assessee has come up in appeal before the Tribunal.
We have heard the rival submissions and gone through the
relevant material on record. Initiation of reassessment has been
challenged on the same basis as is for the assessment year 2012-13.
The original assessment in this case was finalised on 28-03-2016.
Notice u/s.148 was issued on 29-03-2019 which is beyond a period
of four years from the end of the relevant assessment year. Proviso
to section 147 mandates that no reassessment can take place after
four years from the end of the relevant assessment year when the
original assessment was completed u/s.143(3) and there is no failure
11 ITA Nos.265 & 211/PUN/2021 Aktiebolaget Tetra Pak
on the part of the assessee to disclose fully and truly all material facts
necessary facts for reassessment. Here again, we find that the AO
inquired about the amounts received by the assessee not offered for
taxation during the course of original assessment proceedings by
means of a notice u/s.142(1) of the Act. The assessee furnished
details of income of Rs.9.26 crore not offered for taxation in its reply
with the necessary justification. A copy of the assessee’s reply dated
07-03-2016 has been placed at page 110 of the paper book. Thus, it
is evident that the AO initiated reassessment proceedings by means
of notice u/s.148 dated 29-03-2019 after four years from the end of
the relevant assessment year when the original assessment was
completed u/s.143(3) and there was no failure on the part of the
assessee to disclose fully and truly all material facts necessary for
assessment. Following the view taken hereinabove, we quash the
notice u/s.148 and the consequential assessment order.
In the result, both the appeals are allowed.
Order pronounced in the Open Court on 09th December, 2021.
Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; िदनांक Dated : 09th December, 2021 सतीश
ITA Nos.265 & 211/PUN/2021 Aktiebolaget Tetra Pak
आदेश की �ितिलिप अ�ेिषत/Copy of the Order is forwarded to: अपीलाथ� / The Appellant; 1. 2. The Respondent ��थ� / The DRP-3, Mumbai-1/ DRP-3, Mumbai-2/ 3. DRP-3, Mumbai-3/ 4. The CIT(IT & TP), Pune 5. DR, ITAT, ‘C’ Bench, Pune गाड� फाईल / Guard file. 6.
आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune
Date 1. Draft dictated on 09-12-2021 Sr.PS 2. Draft placed before author 09-12-2021 Sr.PS 3. Draft proposed & placed before JM the second member 4. Draft discussed/approved by JM Second Member. 5. Approved Draft comes to the Sr.PS Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *