2024 (6) TMI 731 - AT - Income Tax

Tribunal Grants Stay on Tax Recovery, Upholds Assessee's Arguments on Reassessment for 2013-2019 Tax Years.

Shimizu Corporation Versus Deputy Commissioner of Income Tax (International Taxation) -3 (1) (2), New Delhi

The Tribunal ruled in favor of the assessee regarding jurisdictional and merits issues concerning the reassessment proceedings for assessment years ... Stay of recovery of outstanding demand - primary issue in reassessment proceedings is salary paid to seconded employees reimbursed by Shimizu India Pvt. Ltd and held reimbursement of salary expenses as ‘fee received for technical services’ - AO and DRP held that, the reimbursement received by the assessee is taxable in India as the assessee is having project office in India which constitutes a Permanent Establishment (PE) in India - assessee contended that the aforesaid assessment order is unsustainable as it suffers from limitation and further submitted that the AO has erred in come to the conclusion that the payments received by the assessee from Shimizu India is taxable as business income on which tax is to be computed in accordance with provisions of Section 44BBB of the Act. The provisions of Section 44BBB are not applicable to the assessee HELD THAT:- After having preliminary look at the issues raised in appeal, prima facie, we are of view that the assessee has good case on jurisdictional issue as well as on merits. A specific query was made to the ld. Counsel for the assessee during the course of hearing regarding deposit of 20% of the outstanding demand. After seeking instructions from the assessee, he made statement at Bar that the assessee is willing to furnish indemnity bond cum undertaking to the extent of 20% of the total outstanding demand. Taking into consideration entire facts, the recovery of outstanding demand in the impugned assessment years is stayed subject to assessee furnishing security in the form of indemnity bound cum undertaking to the satisfaction of Assessing Officer equal to the amount of 20% of the outstanding demand. Subject to assessee furnishing security as aforesaid for each of the assessment years under appeal, the recovery of balance amount in the respective assessment years shall remain stayed for a period of 180 from the date of this order or till the disposal of appeal(s), whichever is earlier. Stay applications of the assessee are allowed. Issues involved: Stay of recovery of outstanding demand for assessment years 2013-14 to 2018-19.Jurisdictional Issue:The assessee, engaged in construction projects, challenged reassessment proceedings initiated by the Department regarding salary reimbursement, arguing the assessment order is time-barred u/s 148A(b) of the Act. Citing the decision in Union of India vs. Ashish Agarwal, the assessee contended that the reassessment proceedings exceeded the limitation period. Additionally, the AO's application of Section 44BBB for taxing payments from Shimizu India was disputed, as the provisions were deemed inapplicable to the assessee's business activities. The Tribunal found merit in the assessee's jurisdictional arguments and granted a stay of recovery, subject to furnishing security.Merits Issue:The assessee's representative highlighted that the payments received from Shimizu India were wrongly taxed as business income under Section 44BBB, which does not apply to the assessee's construction projects unrelated to turnkey power projects. The Tribunal acknowledged the prima facie strength of the assessee's case on merits and jurisdictional issues. Despite the Department's opposition to the stay applications, the Tribunal allowed the stay subject to the assessee providing an indemnity bond cum undertaking equal to 20% of the outstanding demand for each assessment year under appeal.Decision:After considering the submissions from both sides, the Tribunal found in favor of the assessee on jurisdictional and merits issues. The Tribunal granted a stay of recovery for the outstanding demand for the assessment years 2013-14 to 2018-19, contingent upon the assessee furnishing security in the form of an indemnity bond cum undertaking equal to 20% of the total outstanding demand. The recovery of the remaining balance in each assessment year was stayed for 180 days from the date of the order or until the disposal of the appeal, whichever is earlier.