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2023 (7) TMI 343
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....ing out of the order of the DCIT, International Taxation -1 (1), Chennai for the assessment year 2015-16 u/s. 143(3) r.w.s. 144C(13) of the Act vide order dated 25.10.2018 pursuant to the directions of the Dispute Resolution Panel, Bengaluru dated 24.09.2018. 2. When these two appeals were called for hearing, the ld.CITDR, Dr. S. Palanikumar along with ld. Senior DR, Shri P. Sajit Kumar raised preliminary objection on ''conflict of interest'' in case these two appeals will be argued by Shri Dinesh Inbavadivu belonging to M/s. V. Ramachandran Advocates. The ld.CIT-DR referred to one letter F.No.CIT-DR/D/ITAT/RTIMatter/2023-24 dated 26.04.2023 whereby they have raised this issue in connection with RTI appeal before Central Information Commissioner(in short 'CIC') [appeal filed by Dr. S. Palanikumar] was fixed for hearing on 19.04.2023 at 1.15 p.m., in the premises of NIC Studio, District Informatics Officer, Collectorate, 62, Rajaji Salai, Chennai. The contention of the ld.CIT-DR is that since Shri Manoj Kumar Aggarwal, who is Accountant Member and also CPIO, Income Tax Appellate Tribunal (in short 'ITAT') RTI Cell, Chennai engaged one Shri Dinesh Inbavadivu, Advocate and one more A....
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....ase of 'conflict of interest' as they being the counsels of the ITAT, Chennai cannot be presenting their clients cases before the members of the ITAT, who are again their clients b). It is a case of 'conflict of interest' and it will jeopardize the interest of revenue in Income tax appeal proceedings before ITAT, Chennai. c). To maintain the neutrality and impartiality it is brought on record that the above-mentioned advocates cannot represent their clients before ITAT, Chennai from date of appointment of these counsels by ITAT, Chennai. Yours sincerely, Sd/- (S. Palanikumar) Commissioner of Income-tax (DR) D' Bench, ITAT, Chennai Copy submitted to, 1. Chief Commissioner of Income Tax-1, Chennai for kind information 2. CIT-DR, ITAT-1, 2 and 3, Chennai for kind information 3. Sr. AR, ITAT-1,2,3 and 4, Chennai for kind information 2.1 The ld.CIT-DR before us argued, on the issue of ''conflict of interest'', that in the present case Shri Dinesh Inbavadivu and Shri Arjun are the advocates appearing on behalf of their clients in Income-tax appeals pending in ITAT and they are representing their assessee on day to day basis against Revenue and if ITAT engages these ....
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....7 8 Copy of order of CIC dated 19-04-2023 8 2.2 The ld.CIT-DR argued that it is evident from the email dated 18.04.2023 of Shri I. Dinesh, wherein he claimed that he has been authorized to appear on behalf of CPIO ITAT, RTI Cell, Chennai Benches before CIC. This one document is sufficient, according to him, that he is the counsel for ITAT, Chennai Benches and hence, representation of appeals of his assessees cases will be direct case of 'conflict of interest' for the Revenue. He stated that Shri I. Dinesh also filed a detailed written submission before CIC on behalf of CPIO, ITAT, Chennai Benches. He argued that there is no dispute that Shri I. Dinesh and Shri Arjun appeared before CIC on 19.04.2023 along with the CPIO, ITAT Chennai Benches and only these two advocates have argued the case on behalf of CPIO, ITAT, Chennai. He stated that when the appellant and his other colleague Shri P. Sajit Kumar, Senior AR, entered the court of CIC at Chennai on 19.04.2023 at 1.18 p.m., the hearing already commenced and both Shri I. Dinesh and Shri Arjun were found presenting the case of ITAT. Both the counsel argued before CIC that the ITAT did not record any of the proceedings conducted t....
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....2 and 15.12.2022 at the time of rejecting the RTI application and appeal. It was brought to the notice only by Sri. Dinesh Inbavadivu in his written submission filed on 18.04.2023 with CIC just one day prior to the date of hearing. This proves the 'conflict of interest' once again. He further stated that the issue of 'conflict of interest' is a fallout of this RTI proceedings where ITAT authorized the private advocates on behalf of Chennai ITAT benches who are regularly representing various assessees against Revenue before the same ITAT. As these counsels represented ITAT before CIC, the issue of 'conflict of interest' was brought to the notice of Asst. Registrar, ITAT. The email dated 18.04.2023 addressed by Sri.Dinesh Inbavadivu is evident that he has been authorized to appear on behalf ITAT Chennai benches. The ld.CIT-DR stated that he was afraid that if ITAT, Chennai once again proceeds to decide this issue of 'conflict of interest' raised, this will again violate principles of Nemo judex in casua sua. Apart from above arguments, Revenue also filed written submissions vide F.No./CITDR/ D/ITAT/RTI matter/2022-23/03 dated 30.05.2023 and F.No.CITDR/ D/ITAT/RTI matter/2022-23/04 da....
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....DR has filed an application before the Tribunal. The moot question was whether that Misc. Application, filed by DR, can be entertained or not. The ITAT, Cochin Bench had answered this in the case of DCIT vs. Saraj Trading Corporation, 73 TTJ 741 (2001). In that case, according to the AR of the assessee, as per sub-section (2) of section 254 of the Act is to the effect that the ITAT may, at any time within four years from the date of the order, with a view to rectify any mistake apparent from the record, amend any order passed by it under sub- section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the AO. Therefore the Representative of the assessee contended that the Misc. Application is to be filed either by the assessee or by the AO as the case may be and since, in this case the Misc. Petition is filed by the Ld. Departmental Representative, the same is not maintainable. After considering the submissions of both sides and upon perusing section 254(2) of the Act, the Tribunal observed that "we are satisfied that since the Misc. Application is filed by the Ld.DR and not by the Assessing Officer, the same is not maintainable. Hence, w....
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....Shri Dinesh has defended the Tribunal as an institution. There is a clear distinction between administrative functions and judicial functions of the Tribunal. The ld.counsel further stated that proceedings before the CIC is purely on administrative side and is nothing to do with the quasi-judicial functions. Therefore, since the engagement of Shri I Dinesh before the CIC by the ITAT purely comes under administrative side and nothing to do with quasi judicial function which Shri I Dinesh has defended. The ld.counsel also drew our attention to the procedures followed by the Hon'ble High Court for instance, as per their cause lists, wherein is mentioned that xxxx Vs. Registrar General of High Court, wherein Senior Advocate Shri Karthik Ranganathan is appearing on behalf of the Registrar General and defending the Registry. In case, if Shri K.Ranganathan appears for the Registrar General for administrative side, can it be possible to say he will be barred from appearing in High Courts in India or for limited purposes before Madras High Court. Similarly, Supreme Court also there are two sides one is judicial side and other is administrative side. Only because an advocate is appearing on ....
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....on is not going to affect the powers or function or remedies under the Act. Therefore, it is a frivolous petition filed by the Ld CIT-DR. 3.4 The learned counsel refers to Office Memorandum dated 16.01.2015 issued by Ministry of Law & Justice as stated in the written submissions of Ld.CIT-DR to say that engagement of the counsel Shri I Dinesh itself is wrong. But, Shri I Dinesh went before CIC and succeeded. The Ld.counsel reiterated last sentence of the said Office Memorandum wherein it is mentioned as "except in exceptional circumstances warranting emergent action in public interest". Therefore, exigency of the situation warranted immediate engagement of Shri I Dinesh as counsel, and ITAT has nominated as counsel on the administrative side in the public interest, because four days in advance only hearing notice of CIC was received, for which it cannot be cited as reason to be barred virtually from practising of Shri I Dinesh before the ITAT. Does it not an infringement of Article 19 under the Constitution of India? The Ld. Counsel also stated that the Ld.CIT-DR wants the matter to be referred to Ministry of Law & Justice. As per sub-section (5) of section 255 of the Act, subject....
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....side, because these proceedings arose on administrative side and in fitness of things, contempt proceedings may be initiated against the Ld. CIT-DR for filing of such frivolous Misc. Application. 3.6 The learned counsel for the assessee also refers 'Independent functioning of Tribunal' wherein it is stated that to begin with Finance Department of the Government of India (Central Board of Revenue), was initially in-charge of the ITAT. However from 30.05.1942 in deference of public opinion, the ITAT was put in the charge of Legislative Department, the predecessor of Ministry of Law & Justice. As stated by the then Secretary of Ministry of Law, Shri R.S.Gae, the ITAT is functioning as an independent authority without any interference by any Ministry or Department of Govt. of India in discharge of functions entrusted to it. This was affirmed by the Hon'ble Supreme Court in the case of ITAT Vs. V.K.Agarwal wherein it was observed that Tribunal's functioning was under administrative control of executive wing of the Government i.e. Ministry of Law & Justice & Company Affairs was not accepted and it was held that Union Law Secretary has no control over judicial functioning of the Trib....
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....of Law." 3.7 The learned counsel also drew our attention to the 115th report of Law Commission while examining the necessity and expediency of setting up National Tax Court vis-à-vis a Tribunal under Article 323B complimented working of the Tribunal in the following words:- "There is near unanimity of opinion that Income Tax Appellate Tribunal has immensely justified its existence and largely vindicated the trust reposed in it. It has, therefore, to be retained with its regional jurisdiction. It would be the fact finding authority." Learned counsel submitted that instead of finding of facts merely on suspicion, Misc. Application has been filed by the ld.CIT-DR without any facts and his arguing on the same point for tenth time. The ld.counsel has concluded his argument by saying that this application is absolutely frivolous and not only needs to be rejected but also exemplary cost has to be awarded, so that this case sets as precedent and a copy of this order has to be forwarded to Chairman of the CBDT, New Delhi. 3.8 He submitted that he is not discharging his duties as CIT-DR as he bunked the Tribunal by taking adjournment on the ground that he is going to attend some ....
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....nly on assumption of bias, which is not so in this application. 4. Another Senior Counsel Shri S Sridhar Advocate also interjected for the reason that ld.CIT-DR, Dr.S. Palanikumar and ld. Senior DR Shri P. Sajit Kumar, is objecting to appearance of Shri Arjun, Advocate. He submitted that his name is N. Arjun Raj, Chartered Accountant and he is not advocate as alleged by revenue. He referred to various correspondence filed by Revenue before the Benches on various dates in different cases. He submitted that the 'conflict of interest' alleged by Dr. S. Palanikumar, CIT-DR Chennai 'D' Bench on Shri N. Arjun Raj, CA appearing on behalf of his clients and further on behalf of the Counsel on Record is completely absurd and not tenable in law. He submitted that Shri N. Arjun Raj assisted Shri Dinesh Inbavadivu, Advocate who was the Counsel on Record for the ITAT under the RTI Act, 2005 and hence the distinction between engagement of a lawyer for making representation on behalf of a client and assisting a lawyer by a Chartered Accountant in a proceeding is completely overlooked and brushed aside by not bringing the full facts before this Bench while making the objections. 4.1 Moreover....
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....ificate of Practise under the said Central Act. Therefore, he has every right to appear before this Bench as he is entitled to legally and the objections are accordingly baseless, absurd, mis-directed, motivated and not sustainable both on facts and in law. Moreover, Shri N. Arjun Raj, even on the presumption, is one of the Counsels represented CPIO, ITAT before the CIC under the RTI Act, the said professional function undertaken by him is only limited to the said matter and therefore, the presumption of 'conflict of interest' based on the wrong further presumption of Shri N. Arjun Raj, CA holding General POA (Retainer) on behalf of the ITAT is factually misleading and not correct on the factual matrix of the case. In one of the cases Dr.S Palanikumar in the capacity of CIT-DR of D' Bench sought for an adjournment in a stay granted matter represented by the undersigned which was posted for hearing on 19.04.2023 by stating that he was in another official assignment connected with Tribunal before another authority, which according to the undersigned is a misleading/false statement inasmuch as the information sought for under the RTI Act is basically for protecting his personal in....
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....23 when he has received the notice( stated by DR S Palanikumar but not fact. Fact is that the notice is dated 29.03.2023 but received on 10.04.2023), it required to file some written submissions in support of that case and accordingly he has filed and a copy was served on the CPIO on 15.04.2023 in connection with RTI matter. On 18.04.2023 there was e-mail received from Shri I Dinesh at 11.39 saying that written submissions filed along with reference and the above appeal was posted for hearing before CIC on 19.04.2023 and Shri I Dinesh has been authorized to appear on behalf of ITAT, Chennai and written submissions were attached thereto. The Ld.DR submitted that he do not know who is Shri I Dinesh, when he went to CIC, he found both Shri I Dinesh and Shri Arjun, Advocates were representing the case along with written submissions. The Bench clarified that Shri I Dinesh, appeared in the case before CIC, at Chennai through VC on behalf of ITAT Chennai. 5.1 The ld.CIT-DR further stated that the learned counsel for the assessee made false allegation that the he is blocking judicial proceedings in this appeal by way of filing Misc. Application, but he is not at all blocking the proceedin....
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.... conferencing just to have an experience as to how the proceedings before CIC are conducted. When a colleague officer can go along with DR, then why not Shri Arjun could go along with Shri I Dinesh. But, the ld.CIT-DR stated that the crux of the issue was "in two of the appeals, arguments of the DR was not recorded" and therefore, video recording footage was sought for. In that case, first CPIO had taken one decision and therefore, we went to CIC because the CPIO has given a reply that entire judicial proceedings were not recorded. For this purpose, the ITAT has engaged two counsels and was given SOP and contract agreement entered into vendor. The Ld.CIT-DR asked who has engaged Shri I Dinesh as counsel, for which they don't have any data so far. 8. Now, on coming to the issue of assumed bias, the ld.CIT DR stated if the same counsel appeared before the CIC on behalf of the ITAT and the same counsel is appearing before the same bench of ITAT, this may lead to 'conflict of interest'. In regard to Office Memorandum dated 16.01.2015, as per Annexure-5, in regard to para no.3, the CIT-DR submitted that no exceptional circumstances warranted for engagement of Shri I Dinesh to appear be....
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.... to Shri Dinesh, some sort of relationship has happened, so, the concerned Member has to recuse himself from hearing Shri I Dinesh in the ITAT and it is purely conscious issue. He also argued that since the administrative issue is pending, not to continue with hearing of Shri I Dinesh in order to prevent any further damage. 10.1 The Bench posed a query to the Ld.DR as to whether CPIO has given vakalath in his personal case in individual capacity or as CPIO in dual capacity? The Govt. of India has appointed him CPIO of ITAT under RTI Act and he is also discharging duties as Accountant Member of the ITAT, Chennai, for which the Ld.DR replied that they are not computers and he has already addressed the issue. 11. We have heard ld.CIT-DR Dr. S.Palanikumar and ld. Senior DR Shri P. Sajit Kumar on the preliminary issue of 'conflict of interest' regarding objection for appearance of advocate Shri I. Dinesh of Shri V. Ramachandran, Advocates in appeals filed by him and Shri N Arjun Raj, Chartered Accountant before ITAT. First of all, we have to clarify the background of the case. Shri Manoj Kumar Aggarwal is appointed as CPIO, ITAT, Chennai Benches by President ITAT to decide the RTI app....
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....ountant not an Advocate) of Sriram Advocates is a direct case of 'conflict of interest' as they appear before ITAT in their clients cases. The allegation of Dr. S. Palanikumar, CIT-DR is that as the said counsels have been appointed by CPIO, ITAT and they have represented CPIO, ITAT before CIC, there is a direct case of 'conflict of interest' as they being counsel of the ITAT, Chennai cannot present their clients case before the Members of ITAT, who were again their clients. According to him, it is direct case of 'conflict of interest' and it will jeopardize the interest of Revenue in income-tax proceedings before ITAT, Chennai. 11.2 For this we have to go to the Principles of Administrative Law, where the issue of 'conflict of interest' is discussed. The 'conflict of interest' in the context of lawyer refers to a situation where the lawyers personal or financial interest conflicts with their professional obligation to their clients. The lawyers have a duty to provide competent and zealous representation to their clients while maintaining their independence and loyalty. Any litigation or disputes over profession, lawyers conduct most frequently involves 'conflict of interest', a s....
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.... before ITAT Benches. It is not the case of the Ld.CIT-DR that there is any financial interest, personal interest between the client or any of the Member constituting the Bench neither it is the case of the Ld.CIT-DR that any of the Member of ITAT constituting the Bench has represented the client during their professional services. This is a simple case of lawyer Shri I. Dinesh has been appointed by President, ITAT to represent CPIO by virtue of power vested in him u/s. 255(5) and 255(6) of the Act, who happens to be a Member of ITAT. Ld. Counsel before us filed few of instances by filing a judgment of Hon'ble Madras High Court in W.P No.7215 of 2020 and W.M.P. Nos.8626 & 20587 of 2020 in the case of Shri N.R.S. Ganesan vs. 1. Union of India, 2. Income Tax Appellate Tribunal & others wherein for ITAT, Shri R. Sankara Narayanan, Additional Solicitor General of India assisted by Mr.K.Srinivasamurthy, Senior Panel Counsel for Central Government appeared before Hon'ble High Court and the same Additional Solicitor General of India is appearing for Income-tax Department to argue their appeals before the Benches of ITAT particularly one example is of Cognizant Tecnology Solutions India Pr....
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.... filed by one Dr S. Palanikumar. 11.6.1 The personal Capacity of Ld. CIT-DR Dr. S. Palanikumar and not official. It is not known whether Dr. S. Palanikumar has filed this appeal before CIC in his individual capacity or as CIT-DR. It is neither explained nor replied by Dr. S. Palanikumar, whether any prior approval from competent authority is obtained or not ? Whether the AO has consented in filing of this RTI or not ? This has not been answered by Dr. S. Palanikumar despite queries raised from Bench. In case, the appeal before CIC is filed by Dr.S. Palanikumar in personal capacity, he has no business to raise this objection before Tribunal on the issue of 'conflict of interest'. In case, he is raising as CIT-DR in official capacity whether any permission is obtained from competent authority of the income tax department, nothing is on record. Even it seems that the AO has not been authorized to file this petition. 11.7 We noted that there is a procedure for filing petitions before ITAT and for that there are functions of the DR as enshrined in office procedure of the Department. The Department has filed copy of Manual of Office Procedure Volume-I Administrative, issued on February....
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.... assigned another official duty and hence, all the appeals fixed on 19.04.2023 before 'D' bench and assigned to him be adjourned. But it is noted that and fact brought before the Bench that Dr. S. Palanikumar was to attend the hearing before CIC, Delhi through VC at Chennai at 1.15 p.m. but, he did not attend that hearing also as is evident from the order of CIC. It means that Ld.CIT-DR in the capacity of DR of 'D' Bench sought for an adjournment of 'D' Bench listed cases including stay granted matters, which were posted for hearing on 19.04.2023 by stating that he was on another official assignment connected with Tribunal before another authority. Going by the order of CIC, it seems that the adjournment petitions filed for 19.04.2023 is misleading and false statement made in adjournment petitions by CIT-DR, Dr. S. Palanikumar. This fact is ascertained from records and CBDT can take cognisance of the same. 11.9 Another objection raised by ld.CIT-DR, Dr.S. Palanikumar that the matter may be referred to Ministry of Law and Justice, we want to clarify that ITAT is a quasi judicial authority and it is an independent Tribunal that hears appeals against the orders of income-tax authorit....
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.... bench has been disrupted and obstructed. We are of the view that it is imperative and it is compelling that functioning of the bench should not be put to mockery by means of such frivolous, mischievous, illegal and baseless applications which has successfully stalled a judicial proceeding without any substance. If application of such nature is entertained and if such application could stand as an impediment to the tribunal functioning than it would result in untold misery to the tax payers and therefore it is just and expedient to hear the present application as a preliminary issue to the appeal intended for hearing and obstructed by the ld.CIT-DR. In our view, in case, ld.CIT-DR, Dr. S. Palanikumar seems to be aggrieved personally either from the counsels or from the Bench, he should have sat with the Bar and Bench and could have resolved the issue and should not have put the functioning of Bench on hold. This application is on account of narrow, parochial and sedentary approach to a sensitive matter involving bar and bench. The application only exposes the lack of knowledge on the part of the person who files it. It is unfortunate that we have to deal with this issue where the D....
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....om imposing any cost as income tax department will take everything into consideration. We further direct the Registry to send a copy of this order to the Chairman, Central Board of Direct Taxes, New Delhi, and also to the Principal Chief Commissioner of Income Tax of Tamil Nadu & Puducherry, for necessary information. Accordingly, the preliminary objection raised by ld.CIT-DR, Dr.S. Palanikumar is rejected. IT(TP)A No.101/CHNY/2018 12. The only issue in this appeal of assessee is as regards to the order of Assessing Officer passed on the directions of the Dispute Resolution Panel concluding that the guarantee fee received by the assessee to the extent of Rs. 5,22,88,362/- is liable to tax in India. For this, assessee has raised following Ground Nos. 3 to 8 :- 3. The Assessing Officer/ Dispute Resolution Panel erred in concluding that guarantee fee received by the Appellant to the extent of Rs. 5,22,88,362/- was liable to tax in India. 4. The Assessing Officer/ Dispute Resolution Panel erred in holding that guarantee fee was liable to tax u/s. 9 of the Income Tax Act, 1961. 5. The Assessing Officer/ Dispute Resolution Panel erred in concluding that guarantee fee was taxable ....
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....d into for the limited purpose of enabling its subsidiaries to secure loans and the guarantee income is incidental in nature, since the assessee was not in the business of providing corporate/bank guarantee to earn income. The AO noted that the guarantee fee cannot be treated as business income, which in the absence of permanent establishment (PE) in India is not taxable in India under Article 7 of the India Republic of Korea Tax Treaty. The AO noted that guarantee fee received by assessee of Rs. 5,22,88,362/- from Indian subsidiaries namely DISPL and KMSIPL is accrued and arised in India. Hence, he proposed to make assessment of the above said guarantee fee and for this a proposal was issued. The assessee moved to DRP u/s. 144C(2) of the Act and the DRP vide F.No.162/DRP- 2/Bang/2017-18 dated 24.09.2018 directed the AO to tax the guarantee fee as income from other sources as normal income of the foreign company to be taxed at 40% plus surcharge and education cess. For this, the DRP observed in para 6.6, 6.7 & 6.8 as under:- 6.6 On the aspect of the rate to be applied, being 10% as made out by the assessee or 40% as undertaken by the Assessing Officer, it is found that the rate o....
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....larly at page 93, wherein Article 23 defines where 'other income' is taxable. The Article 23 reads as under:- "Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention, shall be taxable only in that State." In view of the above Article, the ld.counsel for the assessee stated that the DRP failed to adjudicate the additional ground raised in respect of taxation of guarantee fee as per Indo-Korea DTAA. The ld.counsel argued that the AO as well as the DRP having accepted the fact that the guarantee fee income falls under 'income from other sources' and the AO having himself relied on Article 23 of the Indo-Korean DTAA, failed to comply the same because DTAA clearly stipulates that the taxation of other incomes can be charged only in contracting state i.e., Korea. The ld.counsel for the assessee also drew our attention to the order of the AO and that of the DRP and both having denied the fact that the income received is neither the business income nor interest income and having not disputed that the same is an international transaction, both ought to have gone by the DTAA of Indo-Korea. 15. On the other hand,....
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....a. However, this ground is devoid of any merit that the assessee themselves filed the return of income and admitted the guarantee fee accrued in India that was subsequently paid by the subsidiaries, carrying out business in India as per section 5(2) and section 9 of the IT Act, 1961. The ld.DR stated that the assessee relied upon the decision of ITAT, Mumbai in the case Capgemini SA v. ADIT in ITA No. 7198/Mum/2012 in support of its contention but the facts and circumstances of this case is not at all relevant to the facts of the assessee. In the assessee's case, the assessee themselves duly admitted the income accrued in India in the return of income filed for AYs 2014-15 to 2017-18 (4 Assessment years) consecutively. Only in AY 2018-19, this was not admitted. The assessee also relied upon the decision of Hon'ble ITAT, Delhi in the case of Johnson Matthey Public Ltd [2017] 88 taxmann 127. This is the decision rendered in favour of Revenue. Hon'ble tribunal examined the changeability of guarantee fee in the light of section 9, section 2(28A) of the Act as well as the DTAA. From the paragraph 17 this issue was analysed in depth. The finding given by the Tribunal in parag....
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....ircumstances of the case. We noted that the assessee is a foreign company incorporated in Korea which is engaged in the manufacture of automobile and auto parts. During financial year 2014-15 relevant to assessment year 2015-16, the assessee entered into guarantee agreement with its subsidiaries DISPL and KMSIPL to provide guarantees to foreign banks namely Standard Chartered Bank to provide loan to above subsidiary companies. Pursuant to guarantee agreements, the assessee received a sum of Rs. 5,22,88,362/- from its subsidiaries after deducting TDS @ 10%. We noted that the Assessing Officer in his draft assessment order passed on 29.12.2017 treated the guarantee fee as 'other income' by observing as under:- "The Guarantee agreement is entered into for the limited purpose of enabling its subsidiaries to secure loans and the guarantee income is incidental in nature, since the assessee was not in the business of providing corporate / bank guarantee to earn income on a regular basis. Accordingly, the guarantee fee cannot be treated as business income which, in the absence of a permanent establishment in India is not taxable in India under Article 7 of the Treaty. As a result, the ....
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....ommission received by French Company in that case neither accrued in India nor deemed to be accrued in India and therefore, not taxable in India under the Act. For this, the Tribunal observed in para 2.4 as under:- "2.4 If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld.representative counsels, if kept in juxtaposition and analyzed, broadly, the ld.DRP has followed its own order, in the case of assessee, for Assessment Year 2012-13 on the reasons that the Tribunal has not still overrules the order of the ld.DRP and further the guarantee is normally sought at the instance of the guarantee seeker and not at the instance of guarantor. However, under the facts available before us, we find that for Assessment Year 2012-13, the Tribunal vide its order dated 13/07/2016 (ITA No.888/Mum/2016), by following the order of the Tribunal, in the case of assessee itself, for Assessment Year 2009-10 (ITA No.7198/Mum/2012) dated 28/03/2016, decided the issue in favour of the assessee. The relevant portion from the order of the Tribunal is reproduced hereunder ....
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.... permanent establishment in India. During the year assessee has given a corporate guarantee BNP Paribas, a French Bank in France, on behalf of its various subsidiaries worldwide. During the year under consideration, in India, two subsidiaries of the assessee M/s.Capgemini India Pvt. Ltd. and Capgemini Business Services (India) Ltd. were sanctioned credit facilities by the Indian Branches of BNP Paribas, which credit facilities to the extent of USD 15 million4and 2 million respectively, were secured by the said corporate guarantee given by the assessee. The assessee has charged guarantee commission @ 0.5% per annum for the corporate guarantees given on behalf of its subsidiaries in India. The AO has taxed the same by holding it to be "Other Income" under Article 23 of the DTAA between India and France. 4. The assessee is before us against the said addition. 5. We have considered rival contentions and found that the AO taxed the guarantee commission on the plea that guarantee has been provided for the purpose of raising finance by an India company. As per the AO finance was raised in India. The AO further observed that finance requirement is met by a Indian branch of the bank, th....