2018 (3) TMI 942 - AT - Income Tax

Tribunal Upholds Revision of Assessment Order for Expatriate Tax Liability

The Tribunal upheld the Commissioner of Income-tax's decision to revise the assessment order under Section 263 of the Income-tax Act, 1961, concerning the ... Payment made to expatriate technicians in India - Non deduction of tds - revision u/s 263 - considering the residential status u/s 6 - DTAA between India and Japan - reference to Section 9(1)(ii) - assessee in default - revision u/s 263 - Held that:- It is not in dispute that in the original assessment order dated 3.5.2005, AO did not advert to the applicability of the provisions u/s 9(1)(ii) or the provisions of the DTAA between India and Japan but considered the case only u/s 6 of the Act in respect of the residential status of the employee. In view of the later decision of the Tribunal dated 21st October 2005 to the effect that the payment made to the expatriate technicians in India is taxable in India irrespective of their stay, CIT correctly held that the original assessment order passed by the AO is erroneous in so far as the provisions of Section 9(1)(ii) of the Act and the DTAA between India and Japan have not been taken into account is pre judicial to the interest of the revenue. AO did not consider the applicability of the provisions u/s 9(1)(ii) of the Act and the DTAA to the facts of this case, while respectfully following the decision of the Hon’ble Apex Court in the case of Malabar Industrial Co. Ltd. vs CIT (2000 (2) TMI 10 - SUPREME Court) - not open for the assessee to challenge the same on the ground that such an exercise amounts only to change of opinion. Coming to the merits of the case, as rightly held by the learned CIT in his order, the deduction of tax on the payments made to all the four employees requires consideration and for that purpose all the employees stand on the same footing. Since the case of two employees, namely, Mr. Masao Koga and Mr. Kiyonori Yana has already been decided by this Tribunal as being covered by the decision in the case of Pradeep J. Mehta vs CIT [2008 (4) TMI 6 - Supreme Court], we do not think it necessary to take a different view in respect of these two employees, viz. Mr. Takashi Suzuki and Mr.Tetsuo Mitera. Admittedly, the matter relating to the employees covered by the original assessment order is set aside to the file of the learned AO, we, therefore, set aside this matter also to the file of the AO for considering the case afresh in the light of the established principles after affording an opportunity to the assessee - Decided in favour of assessee for statistical purposes. Issues Involved:1. Jurisdiction of CIT under Section 263 of the Income-tax Act, 1961.2. Applicability of provisions under Section 9(1)(ii) of the Act and Double Taxation Avoidance Agreement (DTAA) between India and Japan.3. Condonation of delay in filing the appeal.4. Residential status of the assessee and tax liability on payments made to expatriate employees.5. Revision of assessment order by CIT and its legality.Jurisdiction of CIT under Section 263 of the Income-tax Act, 1961:The case involved an appeal against the order dated 6.12.2006 passed by the Commissioner of Income-tax, Delhi-XVII, under Section 263 of the Income-tax Act, 1961. The CIT sought revision of the order passed earlier under Section 201/201(1A) of the Act, citing errors in considering the tax liability of expatriate employees. The Tribunal found that the CIT's exercise of jurisdiction under Section 263 was justified as the original assessment did not consider the provisions of Section 9(1)(ii) of the Act and the DTAA between India and Japan, leading to a tax liability oversight. Citing legal precedents, the Tribunal upheld the CIT's decision.Applicability of provisions under Section 9(1)(ii) of the Act and Double Taxation Avoidance Agreement (DTAA) between India and Japan:The Tribunal analyzed the applicability of Section 9(1)(ii) of the Act and the DTAA between India and Japan in determining the tax liability of a non-resident foreign company's expatriate employees. It was highlighted that the original assessment order did not consider these provisions, focusing solely on the residential status under Section 6 of the Act. Following a precedent where payments to expatriate technicians in India were deemed taxable in India, the Tribunal agreed that the CIT's revision under Section 263 was valid. The Tribunal emphasized the importance of considering all relevant provisions and agreements in determining tax liabilities.Condonation of delay in filing the appeal:The Tribunal addressed the delay of 120 days in filing the appeal, considering the reasons provided by the assessee for the delay. Despite opposition from the Departmental Representative, the Tribunal accepted the explanation offered by the assessee, emphasizing the need for substantial justice over technicalities. The delay was condoned, and the Tribunal proceeded to decide the matter on its merits, ensuring the just tax liability determination as per law.Residential status of the assessee and tax liability on payments made to expatriate employees:The case involved assessing the tax liability of payments made to expatriate employees by a non-resident foreign company. The Tribunal highlighted the significance of considering the residential status under Section 6 of the Act along with the provisions of Section 9(1)(ii) and the DTAA between India and Japan. The Tribunal noted that the original assessment order did not adequately address these aspects, leading to the revision by the CIT under Section 263. The Tribunal emphasized the need to determine tax liabilities in accordance with all relevant provisions and agreements.Revision of assessment order by CIT and its legality:The Tribunal reviewed the CIT's revision of the assessment order under Section 263, focusing on the tax liability of expatriate employees. Considering legal precedents and the failure to account for relevant provisions in the original assessment, the Tribunal upheld the CIT's decision. The Tribunal set aside the matter to the file of the Assessing Officer for a fresh consideration in line with established principles, ensuring a comprehensive review of the tax liabilities of all employees involved.---