VAN OORD ACZ INDIA (P) LTD.,MUMBAI vs. DCIT, CIRCLE-17(1), NEW DELHI
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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI
Before: SHRI G.S. PANNU, HON’BLE & SHRI SAKTIJIT DEY
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘D’ NEW DELHI
BEFORE SHRI G.S. PANNU, HON’BLE PRESIDENT AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER
ITA No.8331/Del/2019 Assessment Year: 2003-04
Van Oord ACZ India Pvt. Ltd., Vs. DCIT, C-9, Basement F/P Gulmohar Circle-17(1), Park, New Delhi New Delhi PAN :AABCV0555B (Appellant) (Respondent)
Appellant by Sh. Neeraj Jain, Advocate Sh. Tavish Verma, Advocate Respondent by Sh. Virendra Singh, Sr. DR
Date of hearing 18.05.2023 Date of pronouncement 29.05.2023
ORDER PER SAKTIJIT DEY, JM: Captioned appeal by the assessee arises out of order dated
30.08.2019 of learned Commissioner of Income Tax (Appeals)-34,
New Delhi, for the assessment year 2003-04.
We have heard Sh. Neeraj Jain, learned counsel appearing
for the assessee and Sh. Virendra Singh, learned Senior
ITA No.8331/Del/2019 AY: 2003-04
Departmental Representative. We have also perused the materials
on record.
The dispute in the present appeal relates to disallowance of
reimbursement of mobilization and demobilization expenses of
Rs.8,65,57,909/-.
Before we proceed to deal with the aforesaid substantive
issue, it is necessary to provide a brief factual backdrop. The
assessee, a resident corporate entity, is a wholly owned
subsidiary of M/s. Van Oord ACZ BV, Netherlands (now M/s Van
Oord ACZ Marine Contractors BV) (in short ‘VOAMC’). As stated,
the assessee is engaged in the business of dredging, contracting
reclamation and marine activities. For the assessment year under
dispute, the assessee filed its return of income on 24.11.2003
declaring loss of Rs.1,94,87,912/-, after claiming deduction, inter
alia, of Rs.8,42,62,240/- in respect of reimbursement of
mobilization and demobilization cost of dredgers incurred by
holding company on behalf of the assessee. While framing the
original assessment under section 143(3) of the Income-tax Act,
1961 (for short ‘the Act’) vide order dated 16.03.2006, the
Assessing Officer disallowed the amount of Rs.8,65,57,909/-
representing reimbursement of mobilization and demobilization 2 | P a g e
ITA No.8331/Del/2019 AY: 2003-04
cost paid to the holding company. Against the disallowance so
made, the assessee preferred an appeal before the first appellate
authority and, being unsuccessful, went before the Tribunal.
While deciding the appeal, the Tribunal restored the matter
to the Assessing Officer with a direction to verify whether the
assessee has deducted tax at source from payment made towards
mobilization and demobilization charges in terms of order passed
under section 195(2) of the Act and, in case, it was found that the
assessee had deducted tax at source, the deduction claimed
should be allowed. Against the aforesaid decision of the Tribunal,
the Revenue went in appeal before the Hon’ble Delhi High Court.
Before the Hon’ble High Court, it was pleaded by the assessee and
its holding company that the claim of the holding company that it
is not liable to pay any tax in India, has been accepted by Income
Tax Authorities. Therefore, there is no requirement to deduct tax
at source. Considering the aforesaid submission, the Hon’ble High
Court held as under:
“25. We, thus, answer the question No.1 in favour of the appellant/assessee holding that the assessee was not liable to deduct tax at source under section 195(1) of the Act in respect of the mobilization and demobilization costs reimbursed by the appellant to VOAMC. The assessment proceedings in VOAMC are reopened and the final view taken is that the VOAMC is assessable to tax, the assessee herein would also be treated as assessee in “default”,
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which would attract the consequence provided under section 40(a)(i).”
As it appears, challenging certain observations of the
Hon’ble Delhi High Court, the assessee filed a Special Leave
Petition (SLP) before the Hon’ble Supreme Court. While deciding
the SLP filed by the assessee, the Hon’ble Supreme Court, in
order dated 23rd March, 2023, quashed and set aside the
observations of Hon’ble Delhi High Court, insofar as, it related to
treat the assessee as an assessee in default, in the event, the
holding company is held to be assessable to tax in India.
Accordingly, the consequences of section 40(a)(i) would be
attracted. Thus, by virtue of the aforesaid decision of the Hon’ble
Supreme Court, the dispute was set at rest. However, in the
meanwhile, the Assessing Officer reopened the assessment for the
impugned assessment year by invoking the provisions of section
147 of the Act. In the reassessment proceeding, the Assessing
Officer taking note of the observations of the Hon’ble Delhi High
Court (now quashed and set aside by Hon’ble Supreme Court)
again disallowed mobilization and demobilization cost of
Rs.8,65,57,909/- under section 40(a)(i) of the Act, alleging that
the assessee failed to deduct tax at source on such payment. 4 | P a g e
ITA No.8331/Del/2019 AY: 2003-04
As could be seen from the aforesaid narration of facts, while
deciding Revenue’s appeal arising out of earlier order of the
Tribunal, the Hon’ble Delhi High Court in ITA No. 439 of 2008
has clearly and categorically held that the assessee was not liable
to deduct tax at source under section 195(1) of the Act in respect
of mobilization and demobilization costs reimbursed to the
holding company, hence, cannot be treated as assessee in default.
The further observations of the Delhi High Court - “The
assessment proceedings in VOAMC are reopened and the final
view taken is that the VOAMC is assessable to tax, the assessee
herein would also be treated as assessee in “default”, which would
attract the consequence provided under section 40(a)(i).” has been
quashed and set aside by the Hon’ble Supreme Court while
deciding the SLP filed by the assessee. Thus, as on date, in view
of the observations of Hon’ble Delhi High Court and Hon’ble
Supreme Court, there was no legal obligation under section
195(1) on the assessee to deduct tax at source under section
195(1) of the Act on the reimbursement of mobilization and
demobilization cost to the holding company (VOAMC). That being
the case, the disallowance made under section 40(a)(i) of the Act
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ITA No.8331/Del/2019 AY: 2003-04
amounting to Rs.8,65,57,909/-, being unsustainable, is hereby
deleted.
In the result, the appeal is allowed, as indicated above.
Order pronounced in the open court on 29th May, 2023
Sd/- Sd/- (G.S. PANNU) (SAKTIJIT DEY) PRESIDENT JUDICIAL MEMBER Dated: 29th May, 2023. RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi
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