TaxTMI 
TaxTMI 
2023 (12) TMI 203
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....set aside the Assessment Order dated 30/05/2021, passed under Section 143(3) of the Act holding the same to be erroneous in so far as prejudicial to the interest of the Revenue. 3. The Appellant has raised following grounds of appeal: "1. Assumption of jurisdiction under section 263 of the Income- tax Act, 1961 is bad in law 1.1 On the facts and circumstances of the case and in law, the impugned Revision Order passed by Ld. CIT under section 263 of the Act, holding that the Assessment Order passed by the AO under section 143(3) of the Act is erroneous and prejudicial to the interest of the revenue, bad in law, illegal, non-est and ultra-vires the provisions of section 263 of the Act. 1.2 On the facts and circumstances of the case and in law, the Ld. CIT erred in holding that AO has failed to conduct proper verification and enquiry regarding offshore services rendered by the Appellant outside India and regarding the Appellant's claim under the Double Taxation Avoidance Agreement between India and Korea ("DTAA") of non-taxability of revenue from such off-shore services in India, without appreciating that the aspect of rendition of offshore services b....
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.... circumstances of the case and in law, the Ld. CIT erred in denying the DTAA benefits to the Appellant and concluding that revenue from off-shore services provided by the Appellant amounting to INR 44.35 crores was attributable to operations in India and hence taxable in India 3. Without prejudice, on the facts and circumstances of the case and in law, the Ld. CIT erred in arbitrary taxing the entire revenue from offshore services and attributing 100% of such offshore revenue to the project office(s) in India." 4. The relevant facts in brief are that the Appellant, i.e. Kepco Plant Service & Engineering Co. Ltd [Formerly known as Korea Plant Service & Engineering Co. Ltd] is tax resident of South Korea being a company incorporated as per the laws of South Korea. The Appellant was engaged, inter alia, in the operation and maintenance of power plants and had entered into a number of India companies engaged in generation of power (hereinafter referred to as 'Indian Project Owners') for operation and maintenance of power plants in India in the capacity of Operation & Maintenance Contractor. 5. For providing the operation & maintenance services, the Appellant had set up p....
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.... to Refund TDS relating to Section Claim 195 1. TDS credit under Section 195 in 26AS, 2. Part B - TTI of ITR 10. During the Assessment proceedings, notices under Section 142(1) were issued by the Assessing Officer and response thereto, the Appellant filed replies furnishing the required details, documents and reconciliation statements. 11. Since the Project Office and the Head Office were to be considered as separate enterprises, the Assessing Officer was of the view that the contractual terms between the Project Offices and the Project Owners were determined by the contract between the Project Owner and the Head Office, and therefore, according to the Assessing Officer the transactions between the Indian Project Owners and the Project Offices were in the nature of deemed international transactions. Accordingly, the transaction between the Project Office and the Project Owners were referred to the Transfer Pricing Officer (TPO) by the Assessing Officer for the determination of the Arm's Length Price (ALP). The TPO it's order, dated 28/01/2021, passed under Section 92CA(3) of the Act did not propose any transfer pricing adjustment. The Assessing Officer completed the assess....
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....e u/s 142(1) of the Act dated 15.10.2019 was issued by the AO to the assessee, the relevant portion of which is reproduced as under: "11. Details along with quantum of income claimed to be exempt during the year under consideration under any provisions of the Act or the concerned DTAA Kindly furnish supporting documentary evidence of the same." 5. The assessee vide submission dated 22.10.2019 has submitted copies of contract agreement of contract agreement. The assessee claimed to have provided services rendered outside India', however, the nature of services as well as whether the services were actually applied in India was not properly examined by the assessing officer. Further, the attribution of income of PE was not done by the assessing officer. The AO has passed the order without conducting proper enquiry and without proper verification of facts. The AO was required to ascertain the income attributable to the assessee in India. No application of mind in this regard has been made and the extent of income to the PE has not been attributed. The AO has passed the order allowing relief claimed by the assessee under DTAA without enquiring into the allowability....
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....2 was also filed. The gist of the written submissions is as under: 1. The case of the assessee has been assessed in India for past several years and the non-taxability of offshore portion of revenue has been scrutinized on year-on-year basis. 2. The nature of content of the contracts is the same in A.Y. 2017-18 as it was in A.YS. 2011-12 to 2015-16. The erstwhile assessing officers have examined the applicability of treaty benefits and subsequently allowed relief to the assessee. 3. The assessee relied upon the decision of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT regarding non applicability of section 263 stating that the assessment order dated 02.09.2021 is neither erroneous nor prejudicial to the interest of revenue as the AO has made complete enquiry into all aspects. 4. The assessee relied upon various judicial pronouncements and submitted that the AO while passing assessment order dated 30.05.2021 has made diligent enquiry into all aspects and there is no justification to revise the assessment order." 14. However, the CIT was not convinced. The CIT noted that despite making consistent losses from Indian....
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....revision under Section 263 of the Act, the Appellant has preferred the present appeal. 16. The Ld. Senior Counsel for the Appellant appearing in the appeal took us through the various notice issued under Section 142(1) of the Act during the assessment proceedings and replies filed by the Appellant in response thereto (placed at page 433 to 466 of the paper-book) to show that the relevant enquiry/verification was made by the Assessing Officer. He submitted that all the relevant details and documents including copy of the agreement and reconciliation statements were filed by the Appellant during the course of assessment proceedings. He vehemently contended that once the payments made by the Indian Project Owners to the Project Offices were treated as arm's length by the TPO, it could be inferred that the payments made by the Indian Project Owners to the Head Office had been examined and the same were also at arm's length. The scope of services provided by the Project Office to the Project Owners was examined by the TPO and the payments made by the Project Owners for the same to Project Office was also found to be at Arm's Length. Therefore, no further inquiry/investigation was req....
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....g Officer without application of mind relied upon the order passed by the TPO while accepting the returned income as assessed income. Further, placing reliance on paragraph 4.3 to 5.8 of the order passed by the CIT, he submitted that all the maintenance activities and necessary services were provided in India and no part of the services were performed outside in India. Even during the proceedings before the CIT, the Appellant had failed to provide any proof that any offshore services were rendered. Therefore, the entire payments made by the Indian Project Owners to the Head Office were liable to tax in India. Thus, the CIT was justified in setting aside the Assessment Order as being erroneous insofar as prejudicial to the interest of revenue and also directing the assessing officer to tax foreign payments of INR 44.35 Crores in India. On the strength of the aforesaid, Learned Departmental Representative submitted that the order passed by the CIT under Section 263 of the Act be sustained. 18. In rejoinder, the Ld. Senior Counsel for the Appellant submitted that the Appellant was never put to notice about the issue of taxability of payments made by the Indian Project Owners to the....
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....our operations in India during the year under consideration; (b) quantum of income earned through operations in India and offered to tax; (c) quantum of income claimed to be exempt during the year under consideration under any provisions of the Act or the concerned Tax Treaty. We have gone through the aforesaid notices and reply including the Annexure 3 (placed at page 448 of the paper-book) giving details of income reconciliation with Form 26AS, and Annexure 9 (placed at page 449 of the paper-book) giving details of reconciliation of income as per income tax and the income as per service tax. While the Assessing Officer has called for the details, the material on record does not shown application of mind to the same. We agree with the Revenue that there were no follow- up queries by the Assessing Officer reflecting any inquiry or investigation into nature or scope of offshore services was not made by the Assessing Officer. 21. The details submitted by the Appellant (relevant extract reproduced herein below), showed that around 27% of the total payments were made directly by the Indian Project Owner to Head Office. Particulars HZL Amount (INR) VAL Amount (INR) GMDC A....
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....mation furnished by the Appellant) were such that warranted further enquiry/investigation into the nature, scope and payment for offshore services made directly by the Indian Project Owners to the Head Office. However, we find that the Assessing Officer made reference to TPO only in respect of domestic payments made by the Indian Project Owners to the Project Offices. The TPO carried out inquiry/investigation as per the reference which was limited to determining the ALP of the domestic payments made by the Indian Project Owners to the Project Offices. Though, in response to notice dated 19/02/2020, the Appellant had, vide letter dated 24/02/2020, provided to the TPO copies of Contracts/Agreements executed with Indian Project Owners and the details and bifurcation of offshore and onshore activities. The foreign payments made directly by the Indian Project Owners to Head Office, and the nature/scope of offshore services were not examined either by the TPO or by the Assessing Officer during the assessment proceedings. The TPO, vide order dated 28/01/2021, accepted the domestic payments made by the Indian Project Owners to Project Offices to be at arm's length and thereafter, on 30/05/....