TaxTMI 
TaxTMI 
2021 (2) TMI 230
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....9,14,32,767 paid to the assessee towards Head Quarter service fee, which was claimed by the assessee to be not chargeable to tax in India because of it not having any Permanent Establishment (PE) in India. The assessment order was passed on 10-03-2015 accepting the assessee's claim. The ld. CIT opined that the service charges received by the assessee from NWIL were in the nature of Royalty/Fees for included services as per the DTAA. He observed from the order sheet of the assessment proceedings that only two effective hearings took place and the AO accepted the receipt of Rs. 9.14 crore as not chargeable to tax. On being show caused, the assessee tendered explanation that the costs incurred by it in rendering services were allocated amongst the group companies including NWIL and that its case was covered under the non-taxability clause of Article 12 of the DTAA. The ld. CIT observed from the Agreement, under which such services were rendered, that those were in the nature of technical services as these were special, exclusive and customised. Relying on certain Tribunal orders, rulings of the AAR and the judgment of the Hon'ble Supreme Court in the case of GVK Industries Limited Vs.....
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....emed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person." 6. This Explanation came to be inserted by the Finance Act, 2015 w.e.f. 01-06-2015. It is nobody's case that it is retrospective. The controversy is about its prospectivity qua the assessment year as put forth on behalf of the assessee or qua the proceedings as claimed by the Revenue. 7. Normally, most of the provisions are inserted/amended w.e.f. 1st April of a particular year. Such insertions or amendments from the beginning of a financial or assessment year do not pose a serious chall....
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....ceipts at Rs. 9.14 crore and thereafter computed income at Nil after claiming exemption of the equal amount. The return of income was filed on 17-11-2011. The assessee's case was selected for scrutiny for which the AO issued notice u/s.143(2) on 31-07-2012. Thereafter, the case was transferred to DDIT(IT), 2(1) vide transfer memo dated 30-03-2013. Pursuant to that, a notice u/s.142(1) dated 03-11-2013 was issued to the assessee. Consequently, as per the restructuring order dated 15-11-2014, the case was transferred to the DCIT, Circle-1(2), Kolkata and notice was issued u/s.142(1) of the Act. The assessee's representative appeared on 15-12-2014. The case was discussed. He was requested to produce certain documents as requisitioned u/s.142(1). The case was adjourned for hearing on 23-12-2014. On 27-01-2015, counsel of the assessee appeared and he was required to produce certain more documents by 04-02-2015. Details of such documents running into 10 in number have been set out by the ld. CIT at page 3 of his order. Item at Sl.No.9 is "Details and nature of transactions with NLC Nalco, India Ltd.' The assessee furnished reply to the AO on 04-02-2015, a copy of which has been placed at....
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....idence of provision of services on sample basis, giving 8 samples under different heads of services, such as, Safety; Health and Environment; Operation, Planning; Information Technology; Procurement. In Summary on page 10 of the reply, the assessee submitted before the AO that the services rendered by it to Nalco, India were to facilitate running its day-to-day management activities effectively and efficiently and it did not 'make available' any technical knowledge, experience, skill etc. to NWIL. Under point D dealing with Method of Computation of Head Quarter Common Expenses, the assessee submitted a copy of 'Report of the Independent Accountant' certifying the allocation mechanism used by it to determine portion of management service cost charged to Nalco India. This reply of the assessee runs into 14 pages. It was on the basis of such two detailed replies that the AO treated the Head Quarter service fee of Rs. 9.14 crore received by the assessee from NWIL as not chargeable to tax and did not consider it expedient to expressly discuss this issue in the body of the assessment order impliedly as a covered matter from the preceding year. 10. Now the moot question is whether the ....
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....essee's point of view, wherever it is so required, one may presume that he applied his mind. The third ingredient as to whether or not the AO took a possible view, one can find out if the view so taken by the AO in favor of the assessee is legally sustainable having regard to the relevant facts and the applicable provisions or it is just a fanciful acceptance of claim not backed by any legal force. At the cost of repetition, it is reiterated that in the case of a debatable issue, the power of the CIT to revise the assessment order is ousted when the AO takes one of such possible views. To summarize, if the AO makes inquiry; examines the issue which is borne out from the record of the assessment proceedings; and then reaches a conclusion in favor of the assessee, which is legally possible, the assessment order cannot be characterized as erroneous and prejudicial to the interest of the revenue falling within the ken of section 263 notwithstanding no discussion of such an issue in the body of the assessment order. To put it conversely, CIT can revise an assessment order on the point constituting foundation of the revision, if non-discussion of such an issue in the assessment order is ....
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....partment itself accepted the same as not chargeable to tax for the immediately preceding assessment year. The ld. CIT took support from the assessment order passed for the assessment year 2014-15, when it was for the first time that the AO disputed non taxability of the amount of Head Quarter service fees and included the same in the total income. Greatly enthused by such an assessment order, the ld. CIT swung into action and initiated revisionary proceedings for the assessment year under consideration overlooking the fact that the assessment order for the A.Y. 2014-15 was passed on 06-02-2017, that is, almost two years after the passing of the assessment order for the year under consideration. When the order for the immediately preceding assessment year passed u/s.143(3) treating the amount of Head Quarter fees as not chargeable to tax was available on record before the AO, in our considered opinion, he was well justified in adopting such a possible view on the non-taxability of the amount for the year under consideration as well. 13. Having found that the ld. CIT was not justified in revising the assessment order under the normal provisions of section 263, let us have a look a....
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....been made in accordance with an order of direction or instruction issued by the Board u/s.119. The ld. CIT has not referred to violation by the AO of any order, direction or instruction issued by the CBDT. 18. Clause (d) is attracted when the order passed by the AO is not in accordance with any decision rendered by the jurisdictional High Court or the Supreme Court in the case of the assessee or any other person. This clause refers to the decisions rendered by the jurisdictional High Court or Supreme Court only and not other judicial authorities. The ld. CIT, in the impugned order, has referred to certain decisions to support his case which have been discussed on pages 17 to 19 of his order. The first decision is of the Tribunal, the second of the AAR, the third and the fourth again of the Tribunal and the last of the AAR, which do not satisfy the requirement of the decisions rendered by the jurisdictional High Court or Supreme Court. Only one decision satisfying the requirement of clause (d) is that of Hon'ble Supreme Court in GVK Industries Ltd. (supra). That was a case in which the appellant, an Indian company, was incorporated for setting up the MW Gas based power project in....