TaxTMI 
TaxTMI 
2022 (4) TMI 91
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....0.2017 (Assessment Year 2014-15) finalised in light of the DRP-1, Bangalore's direction in F. No. 397/DRP-1/BNG/2017-18 dt. 4.9.2017 (Assessment Year 2016-17), assessment dt. 16.05.2019 made by the ADIT, International Taxation-1, Hyderabad dt. 16.5.2019 in light of the DRP-1, Bangalore's direction dt. 30.4.2019 in F. No. 59/DRP-1/BNG/2019-20 and ADIT, International Taxation-1, Hyderabad assessment dt. 23.12.2020 consequent to DRP-1, Bangalore's direction in F. No. 51/DRP-1/BNG/2019-20 dt. 18.11.2020 (Assessment year 2017-18), involving proceedings u/s. 143(3) r.w.s. 144C of the Income Tax Act, 1961 ('the Act'); respectively. Heard both the parties. Case files perused. 2. We first come to the assessee's common substantive grounds in all these cases challenging correctness of the learned lower authorities' action taxing its income from off-shore supplies; involving varying sums; respectively. We deem it appropriate at this stage to reproduce the assessee's identical pleadings to this effect read as under: "2. On the fact and in the circumstances of the case, the Ld. A.O. has erred in law and in facts in alleging that the contracts with S....
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...., the Ld. A.O. has erred in alleging that an amount equal to 35% of the offshore supply was attributable to the domestic operations and that the profits from offshore supply was 50% of gross revenue of offshore supply, even though no part of the activity relating to offshore supply of equipment/spares was carried out by appellant's Project Office in India." 3. We next note during the course of hearing that all the later four assessment years also raise the very issue. Case records suggest that this tribunal's co-ordinate bench order in assessee's own case itself involving ITA No. 1842/Hyd/2012 dt. 28.04.2017 has already decided the very issue of taxability of its off-shore supplies against the department as under: "15. Having regard to the rival contentions and the material on record, the following questions emerge for adjudication: (i) Whether all the three contracts are interlinked interdependent and indivisible and therefore whether they are to be considered as a single and a composite contract? (ii) Whether there was a PE of the assessee in India before establishment of project office in India and if so, since when? (i) What is....
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....the project. The technical document of the tender starts from page 269 of the paper book and at page 279 is clause No. 23 specifying the bidder responsibility as per which the relevant responsibilities are as under: 1) Shall conduct scientific site investigations, prepare study reports, obtain DGMS approval for the mining method/technology and shall quote for these. 2) Shall supply continuous Miner, shuttle cars, Multi Roof Bolter, Mobile feeder breaker J & complete electrical equipment as one package and shall quote for these in detail for each individual item. The bidder shall quote for 2 Nos. of shuttle cars/Coal Haulers with 15 Tonne pay/load capacity or 3 Nos. of shuttle cars with 10.0 Tonne pay load capacity. (To quote for both options). 3) Shall operate and maintain the equipment with required spares and consumables for a period of 5 (five) years and to quote separately for spares and services on per tonne basis, year-wise. Note: The contract for supply, operation & maintenance of the equipment will come into force after the DGMS approvals for the scientific site investigations mining method/technology are obtained. 4) a)....
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....ices - Consumables on a USD/tone Basis The full "Scope of Supply" for the above proposed contracts is detailed in "Cover A Technical Volume" of this Bid. All contracts are signed simultaneously, however: * Contract No. 1 above comes into force immediately upon signing the contract. * Contracts No. 2 and No. 3 come into force upon receipt of the DGMS Mining Method Approval". 19. At page 421 of the paper book is the specimen copy of the price bid submitted by the assessee in cover-C and in accordance with this bid, the assessee has divided the whole contract into three different contracts and has also apportioned the payment accordingly. Further, from the Errata issued by SCCL which is placed at Page 362 to 376 of the paper book, we find that as per the original tender document, the contract for supply portion and maintenance of the equipment will come into force after DGMS approval for the scientific site investigation/mining method/technology is obtained but as per the amended document, there can be 3 separate contracts for (i) scientific site investigation (ii) supply of equipment and (iii) maintenance of spares and services and it has ....
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.... 1 of this contract. Clause 34 of the contract reads as under: "34. COMING INTO FORCE OF THE CONTRACT 34.1 The contract shall come into force upon fulfilling all the following: (a) Signing of the contract by all the parties; (b) Receipt of all DGMS approvals under clause 3.1, 3.2, 3.3 of General Conditions. (c) Sanction from Govt. of India and RBI (d) Letter of indicative support for the Contract from a first class Indian Bank/Financial Institution as per Annexure IV. 34.2 In the event the contract does not come into force within nine (9) months from the date of signing of the Contract, either party may withdraw from the contract without any obligation there under". 21. Further, clause 3 of section-I of the contract-II, RC-223 provides that for the introduction of the Continuous Miner mining system in GDK-11A Mines of SCCL, DGMS approval for the mining method would be obtained by the SCCL and scientific investigation (scientific site investigation and obtaining DGMS approval) to be carried out for securing DGMS approval would be part of a separate contract to be awarded by SCCL and that the results of scientifi....
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....tention to be paid during handling and storage. It shall also book shipping space in a Vessel on behalf of the SCCL and shall arrange the shipment of goods to reach their port of destination according to the time schedule mentioned in the contract. All costs of packaging, internal transportation, fees of forwarding agents, warehousing charges, port charges, dock and harbor dues and all other expenses as may be incurred for the purpose and up to the point of delivery of the goods on board the nominated ship shall be paid by the DBT and the DBT shall be liable for all expenses, including dead and extra freight, demurrage of vessels etc, arising from delay in shipment due to lack of shipping opportunities, or delay in providing documents, which are for any cause attributable to the DBT and it is also agreed that the risk of the goods shall remain with DBT until delivery has been effected free on board (FOB). 26. Clause 11 of the contract provides that SCCL shall take insurance cover for equipment on a full replacement cost basis from FOB, port of shipment, till the time the equipment is successfully commissioned underground at the Mine Site on the basis of shipping advice giv....
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....s are either interlinked and interdependent or consequent to one another. The Hon'ble Supreme court in the case of Ishikawajima Harima (cited supra) was dealing with the case of a turnkey project by a consortium in which the scope of work of each of the constituent of consortium was specified. The role of the assessee therein was to develop, design, engineer and procure equipment, material and supplies, to erect and construct storage tanks of 5 MMTPA capacity, with potential expansion to 10 MMTPA capacity at the specified temperatures. Thus, the activities of the assessee involved both off-shore supply, offshore services and on shore supply and services. The contention of the revenue before the Hon'ble Supreme Court was that the contract being a composite and integrated one, the assessee was liable to tax on the offshore supply and services also. The Hon'ble Supreme Court has held that A contract must be construed keeping in view the intention of the parties. Even in the case before us, though SCCL had issued a single tender document for whole of the project, the intention of the assessee to segregate the contract into three contracts was clear from the beginning. It ne....
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....acts I and II, only such income which is attributable to activities of the assessee in India is taxable. There is no dispute that the entire activity of designing, (albeit with the information gathered during evaluation of the site and finalization of the project report during contract I), manufacture and delivery of the equipment including the payment was made outside India. Therefore, even if there was a PE for contract II, it cannot be said that the PE of the assessee had any role to play in any of the above activities. The AO and DRP had relied upon some case law to hold that the income contract No. II is taxable in India. In the case of Ansaldo Energia SPA (cited supra) there is a specific finding by the department that the price of Contract No. 1 was loaded to take in a portion of the contract price for contract No. II to IV and while discount was offered for contract Nos. II to IV, with regard to Contract No. I no discount was offered. Further, there is also a finding that the assessee therein, a foreign company, had set up a subsidiary company in India, namely ASPL, which was alter ego of the assessee and that ASPL was its PE in India as the site office was jointly occupied....
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..... 2011-12." We have given our thoughtful consideration to rival pleadings against and in support of the impugned customs duty disallowance. 6. Learned CIT-DR vehemently contended during the course of hearing that the lower authorities have rightly held that the impugned customs duty expenses are in the nature of prior period expenditure pertaining to earlier assessment years which are not allowable in the impugned assessment year as per mercantile system of accounting. The assessee has strongly emphasized that the corresponding liability on account of customs duty has crystallized only in these twin relevant assessment years. Learned counsel invited our attention to page 3 in the assessment order dt. 20.02.2015 for Assessment Year 2011-12 involving the corresponding vouchers between 31.08.2010 to 30.10.2011. We thus find prima facie merit in the assessee's argument indicating the impugned expenditure which have been crystallized much later in these assessment years and direct the Assessing Officer to verify the corresponding factual position and allow the same as per law in consequential proceedings. This identical later substantive ground in assessment years 2010-11 and ....
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....tly framed. 12. We have given our thoughtful consideration to rival pleadings and find no merit in assessee's instant additional substantive ground. There is hardly any dispute that we are dealing with an assessment framed under Chapter X of the Act in the nature of an anti tax avoidance provision. The Act itself specifies that chapter X is a " SPECIAL PROVISION RELATING TO AVOIDANCE OF TAX". It is further not an issue that this chapter comes into play in case the assessee enters into international transaction w.e.f. 1.4.2002. Suffice to say, the Transfer Pricing Officer (TPO) decides the corresponding reference made by the Assessing Officer u/s. 92CA(3) of the Act to determine arm's length price (ALP) in relation to the international transactions and sends a copy of his order to both the assessing authority as well as the tax payer concerned. It is at this stage that section 144C(1) of the Act comes into play reading as under: ["144C. (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order)....
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....em it appropriate to quote hon'ble jurisdictional high court's decision in CIT Vs. B R Constructions (1993) 202 ITR 222 as to what amounts to a binding precedent as follows: "37. The effect of binding precedents in India is that the decisions of the Supreme Court are binding on all the courts. Indeed, article 141 of the Constitution embodies the rule of precedent. All the subordinate courts are bound by the judgments of the High Court. A single judge of a High Court is bound by the judgment of another single judge and a fortiori judgments of Benches consisting of more judges than one. So also, a Division Bench of a High Court is bound by judgments of another Division Bench and Full. A single judge or Benches of High Courts cannot differ from the earlier judgments of co-ordinate jurisdiction merely because they hold a different view on the question of law for the reason that certainty and uniformity in the administration of justice are of paramount importance. But, if the earlier judgment is erroneous or adherence to the rule of precedents results in manifest injustice, differing from the earlier judgment will be permissible. When a Division Bench differs from the j....
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....r court misconstrued a statute, or ignored a rule of construction, is no ground for impugning the authority of the precedent. A precedent on the construction of a statute is as much binding as any other, and the fact that it was mistaken in its reasoning does not destroy its binding force." 43. In Choudhry Brothers' case, as noticed above, the Division Bench treated the judgment in Ch. Atchaiah's case, as per incuriam on the ground that the earlier Division Bench did not notice the significant changes the charging section 3 has undergone by the omission of the words "or the partners of the firm or the members of the association individually"-. In our view, this cannot be a ground to treat an earlier judgment as per incuriam. The change in the provisions of the Act was present in the mind of the court which decided Ch. Atchaiah's case. Merely because the conclusion arrived at on construing the provisions of the charging section under the old Act as well as under the new Act did not have the concurrence of the latter Bench, the earlier judgment cannot be called per incuriam. 44. Though a judgment rendered per incuriam can be ignored even by a lower court....