TaxTMI 
TaxTMI 
2020 (6) TMI 4
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....nd domestic systems software and applications installed on various computing platforms. The company had entered into an agreement with American Express (India) Pvt. Ltd., a company incorporated in India and having a presence in New Delhi and which catered to needs of Japan, Asia Pacific, Austria, New Zealand, EMEA, US and LAC Regions and various other countries and locations. 2.1 The return of income for the year under consideration was filed in the capacity of the representative assessee on 16.02.2006 and assessment was completed under section 143(3) of the Act. Subsequently, the Assessing Officer noticed that there was an agreement under which the assessee company would develop and maintain applications and would also allow the use of systems software and such applications including use of incidental software to American Express (India) Pvt. Ltd. As per the said agreement, a consideration of US Dollars 263, 523 was paid by American Express (India) Pvt. Ltd. to the assessee company. The Assessing Officer was of the opinion that the consideration received as compensation for the use of or the right to use of the systems software and applications software by American Express (Ind....
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....provisions of Income Tax Act, 1961 ("the Act") and Article 12 of the tax treaty between India and USA. The royalties deemed to arise in India, as the payment is by the Indian company. Considering the provisions of Section 9(1)(vi) and provisions of Article 12(2) of the tax treaty between Indierand USA, such royalties are taxable in India @15% of the gross amount of such royalties. The assessee has filed return of income for A. Y. 2003-04 on 16.02.2006, however, this royalty income is not offered to tax. In the notes attached to the statement of total income, even the facts relating to the receipts of such income is not disclosed. The assessee was also carrying out the business related to customer focused sales '("CFS") business through AEIPL. In this service American Express, US provided better to its existing card members. As per the assessee such services were rendered during the period 01.10.2002 to 31.01.2003 and around 90 employees at the Gurgaon facility participated in this service. The process is explained below: 1. Receive card member call 2. Under take steps to verify callers identity 3. Card Member request for information/....
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.... of business of the assessee in India. As the products of the assessee were sold by AEIPL and the record was maintained in the systems is amounts to concluding the contracts on behalf of the enterprise, therefore, AEIPL also constitutes the agency Permanent Establishment (uPEn) of the assessee in India. The income relating to CFS services has been taxed in the case of American Express International Inc., an affiliated company of the assessee for A.Y. 2003-04. That company has claimed that no such business belonged to them, however such claim is not substantiated by American Express International Inc. As the AEIPL had the agreement with the assessee only, therefore, the CFS business is also considered to the belonging to the assessee and such income has escaped assessment. This is without prejudice to the finding given in the assessment order of American Express International Inc. In the return of income, the income attributable to such PE is not disclosed. 4. The assessee has set up an equipment in the form of midrange and mainframe computer and network at Phoenix USA and AEIPL was using this computer and network from 01.04.2002. The assessee was....
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....s as below: AND WHEREAS AETRSCO had been desirous of engaging AEIPL to perform Export Activities from AEIPL's new facility: AND WHEREAS it was understood between the parties that AETRSCO may provide strict specifications and standards than as may be ordinarily required for performing Export Activities by AEIPL from the new facility in the normal course.' AND WHEREAS it was agreed by AETRSCO to reimburse certain initial set-up costs, incurred by AEIPL for the new facility viz. American Express Global Service Centre (AEGSC). AND WHEREAS AEIPL has set up the new facility to perform the above Export Activities in accordance with the specifications and standards as suggested by AETRCO from time to time; AND WHEREAS AETRSCO and AEIPL have concluded a separate Export Agreement' dated 2CP day of December 2002 to document the terms and conditions of their arrangement inter alia for AEIPL to undertake Export Activities from the said new AEGSC facility for exports to AETRSCO end AETRSCO Designated Offices. NOW THEREFORE, in consideration of the mutual convenants hereinafter set forth, the parties agree that the above recitals are made a....
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.... AEIPL is rendering the services directly to the customers of the assessee and accordingly the same are being rendered as per the specifications and requirements of such customers. The AEIPL is also fully economically dependent on the assessee. As mentioned in the agreements, the AEIPL facilities have been set up as per the strict specifications and standards of the assessee and also the rendering of services are subject to instruction of the assessee and the deputed employees of the assessee are comprehensively controlling the business of AEIPL, therefore, the AEIPL is also a dependent agent PE of the assessee. The assessee in the return of income filed has not shown any income, which is attributable to the PE of the assessee, as discussed. The assessee has not shown the income from various sources mentioned above in the return of income filed for A.Y. 2003-04 on 16.02.2006. The order u/s 143(3) was passed on 31.03.2006. As discussed in the preceding paragraphs, the assessee had not disclosed fully and truly all material facts and income accruing, arising or deemed to accrue or arise in India to the assessee as per the provisions of Section 5(2) r.w.s. 9....
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....work, electric mail etc. was covered by the definition of royalties and that since this royalty income was not offered to tax, the income had escaped assessment, it was the assessee's submissions that this royalty of USD 3,661,721 equivalent to Rs. 176,145,689/- was duly disclosed and offered to tax in the return of income filed by the America Express (India) Pvt. Ltd. in the capacity of representative assessee for the assessee company. 2.7 With respect to the fourth reason, as stated in the reasons recorded, that the assessee had seconded some employees to American Express (India) Pvt. Ltd. which continued to be the employees of the assessee and that American Express (India) Pvt. Ltd. was reimbursing the assessee company an amount equal to the compensation and other benefits incurred by the assessee from time to time for the seconded employees which thus constituted a permanent establishment in terms of provisions of Article-5(1) of DTAA between India and USA and since the assessee had not shown any income attributable to the permanent establishment of the assessee, the resultant income had escaped assessment, it was submitted that the agreement relating to the second-ment of t....
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....n'ble Dispute Resolution Panel - I ("DRP"), Delhi on the following grounds: 1 That on facts and circumstances of the case and in law, the order passed by the Learned Assessing Officer on the directions of the Hon'ble DRP is bad in law in as much as failed to appreciate the facts involved and the law thereon. Validity of re-assessment proceedings 2.1 That on the facts and circumstances of the case and in law, the Learned Assessing Officer has erred in completing reassessment proceedings which is without jurisdiction and bad in law as the proceedings are initiated * without bringing on records any fresh information and material to form basis of reasons to believe of income having escaped assessment. * merely on a change of opinion viz-a-viz original assessment. 2.2 That on the facts and circumstances of the case and in law, the Learned Assessing Officer has erred in requiring the appellant to furnish the details not relating to the reasons for initiation of reassessment under section 147 of the Act and thus, making roving enquiries on matters, un-connected with the reasons for opening of the reassessment proceedings. Ad-h....
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.... law, the Learned Assessing Officer has erred in disregarding the advance ruling (cited in 238 ITR 296) obtained by the appellant from the Hon'ble Authority of Advance Ruling on taxability of payments by AEIPL in respect of use of CDN/CPU etc under which the payments were held to be royalty taxable @ 15% under Article 12 of the India US Treaty. (Not Pressed) Non grant of credit of tax deducted at source ("TDS") 2.7 That on the facts and circumstances of the case and in law, the Learned Assessing Officer has erred in not allowing the corresponding credit of TDS by AEIPL on the aforesaid receipts of INR 201,626,798 added to the income of the appellant (without prejudice to the ground no. 2.6 and without admitting additions so made). (Not Pressed) Interest under section 234A and 234B 2.8 That on the facts and circumstances of the case and in law, the Learned Assessing Officer has erred in levying interest under section 234A of the Act. 2.9 That on the facts and circumstances of the case and in law, the Learned Assessing Officer has erred in charging the interest under section 234B of the Act. 3.1 That on the facts and circumstances....
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....s 154/147/144C(1) of the Act was passed on 01.06.2011 in which the credit of Rs. 3,02,44,020/- was allowed. 3.0 The Ld. Authorized Representative (AR), at the outset, submitted that in view of the order passed u/s 154 of the Act as aforesaid, ground Nos.2.5, 2.6 & 2.7 were not being pressed. The Ld. Authorized Representative further submitted that ground Nos.2.1, 2.2, 2.3 and 2.4 only were being pressed. 3.1 The Ld. AR submitted that the reassessment proceedings were without jurisdiction and were bad in law as the proceedings were initiated without brining on record any fresh information or/and material to form basis of reasons to believe of income having escaped assessment. The Ld. Authorized Representative argued that it was merely a case of change of opinion vis a vis the original assessment. It was also submitted that the Assessing Officer, while initiating the reassessment proceedings, had made incorrect allegations in as much as the assessee had duly filed the copies of various agreements (which are now part of the Paper Book) in response to the query raised by the Assessing Officer during the course of original assessment proceedings. It was submitted that, therefore, ....
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....sary. It was also submitted that the assessee had filed the return of income in response to the notice issued u/s 142(1) at Nil income and therefore, the Assessing Officer had no option but to initiate reassessment proceedings when he felt that income from royalty and CFS business has escaped assessment. It was also submitted that as per the agreement of second-ment of employees between the assessee company and American Express (India) Pvt. Ltd. it was apparent that there was a fixed place PE of the assessee in India. It was also apparent that no compensation was given for assets and risk assumed by the other company and, therefore, attribution was required. The Ld. CIT-DR vehemently argued that the reassessment proceedings were legally correct. 5.0 We have heard the rival submissions and have also perused the material on record. We have also gone through the reasons as were recorded prior to the assumption of jurisdiction for reassessment. It is seen that the reassessment proceedings were initiated on the basis of the information which was already available with the Department at the time of completion of the original assessment proceedings. It is apparent that no new informati....
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....ting the issue without there being any fresh material having been brought on record by the Assessing Officer. Thus, on this count also, the action of the Assessing Officer in invoking the jurisdiction u/s 147 of the Act would fall outside the purview of the said section. 5.2 The third reason, as stated in the reasons recorded for initiation of the reassessment proceedings, is that the assessee had set up equipment in the form of mid-range and mainframe computer and network in the USA and amount of USD 3661,721 was payable by American Express (India) Pvt. Ltd. to the assessee company for the relevant period as consideration for the use of computer, server, network etc. which was covered by the definition of royalty both under the Act as well as the DTAA but was not offered to tax. In this regard again it is seen that this observation of the Assessing Officer is incorrect in as much as the assessee had duly offered the royalty of USD 3661,721 equivalent to Rs. 17,61,45,689/- in the return of income filed by the American Express (India) Pvt. Ltd. in the capacity of the representative assessee for the assessee company. Thus, on this count the reassessment has been initiated on an is....