TaxTMI 
TaxTMI 
2024 (1) TMI 114
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....eing amount received on sale of software to Indian companies by treating the same as fees for technical services without appreciating the fact that the Appellant has not rendered any technical services by selling the software to the Indian companies. Thus, the said amount received on sale of software is not chargeable to tax in India. Therefore, the addition of Rs. 3,91,30,966/- made by the Ld. A.O. / DRP is unjustified and the same may be deleted. 2. The Ld. A.O./ DRP failed to appreciate that the Appellant has not transferred any right, title, interest or license on sale of software. Hence, the Ld. A.O. / DRP is unjustified in taxing the consideration received on sale of software as 'Fees for Technical Services' in India. Therefore, the addition of Rs. 3,91,30,966/- made by the Ld. A.O./DRP is unjustified and the same may be deleted. 3. The Ld. A.O./DRP, further, failed to appreciate that the Appellant is a Non-Resident company and not having any business operations in India. Thus, the amount received on sale of software to the Indian entities is not taxable in India. The said amount has duly been disclosed by the Appellant while filing the return in Finland and the t....
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....d objections before the learned DRP on 23/03/2021, against the findings of the A.O. in the draft assessment order. While the objections filed by the assessee before the learned DRP were pending for adjudication, the A.O. passed the order dated 15/04/2021 under section 143(3) r/w section 144C(3) of the Act computing the total income of the assessee at Rs. 3,91,30,966, by considering the income received from Indian companies by the assessee as Fees for Technical Services under section 9(1)(vii) of the Act and Article-12(3) of the India-Finland DTAA. 6. Subsequently, the learned DRP, vide its directions dated 29/11/2021, issued under section 144C(5) of the Act, rejected the objections filed by the assessee and held that the payment made by the companies in India to the assessee is in the nature of Fees for Technical Services and is liable to be taxed in India under the provisions of the Act as well as under Article-12(3) of India-Finland DTAA. In conformity with the directions issued by the learned DRP, the A.O. passed the impugned final assessment order dated 27/12/2021, under section 143(3) r/w section 144C(13) of the Act. Being aggrieved, the assessee is in appeal before us. 7. A....
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....nging the legality and validity of the impugned final assessment order. The learned D.R. further submitted that two final assessment orders are passed in the present case as the assessee did not file any intimation before the A.O. regarding the filing of objections before the learned DRP on 23/03/2021. The learned D.R. submitted that the learned DRP after considering all the subsequent events rightly issued directions resulting in the impugned final assessment order. 9. We have considered the submissions of both sides and perused the material available on record. Vide its application dated 10/11/2023, the assessee has sought admission of the following additional grounds of appeal:- "1. The Ld. DRP fell error in law in passing the order dated 29th November 2021 under section 144C(5) of the Income Tax Act, 1961 [hereinafter referred to as 'the Act"] without appreciating that the Ld. A.O. has already passed the final assessment order dated 15th April 2021 under section 144C(5) of the Act. Hence, the impugned assessment order dated 27th December 2021 passed under section 143(3) read with section 144C(13), in pursuant to the above directions of the Ld. DRP, is void-ab-initio and ....
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....assessment itself is challenged can be urged before any authority for the first time, even in the second round of proceedings. Therefore, in view of the above, since the issue raised by the assessee by way of additional grounds of appeal is a legal issue, which can be decided on the basis of facts available on record, we find no merits in the submissions of the Revenue and accordingly we admit the additional grounds of appeal filed by the assessee. 12. The grievance of the assessee is that the directions dated 29/12/2021 issued by the learned DRP, and consequently the impugned final assessment order dated 27/12/2021, passed under section 143(3) r/w section 144C(13) of the Act is void ab initio as the A.O. had already completed the assessment proceedings and passed the final assessment order under section 143(3) r/w section 144C(3) of the Act on 15/04/2021. From the record, it is evident that in the present case, the A.O. passed the draft assessment order under section 143(3) r/w section 144C(1) of the Act on 26/02/2021. Further, on receipt of the draft assessment order, the assessee filed its objections before the learned DRP on 23/03/2021, within the time prescribed under the pro....
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....necessary to apply our mind to one of the peculiar fact of the case. It has been submitted that the draft order was passed by the AO on 26.02.2021 and the assessee filed its objections before the DRP on 23.03.2021 which is within the time permitted u/s 144C(2) of the Income Tax Act. However, final order u/s 143(3) has been passed by the AO, even while objections of the assessee were pending before the DRP for issue of directions u/s 144C(5), on 15.04.2021. The assessee has filed an appeal before CIT(A) on 29.04.2021. 5.2 The Panel notes that section 144C provides for a separate assessment mechanism for eligible assessee, as defined u/s 144C(15)(b), whose income are subject to transfer pricing variation or who are non-residents or foreign companies. Section 144C starts with a non-obstante clause and thus the provisions contained u/s 144C require its compliance irrespective of the other provisions that may be contained in the IT Act. The scheme of section 144C contemplates issue of a 'draft order' u/s 144C1) following which the assessee can choose to file objections before the DRP u/s144C(2). If the assessee chooses to file objections before the DRP, then as per provisions ....
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....nch in the case of Century Plyboards (India) v. ACIT in ITA No. 278/Kol/2020 has held that when DRP is in seisn of the case of assessee and till the DRP gives direction as per section 144C(5) of the Act, the AO does not enjoy jurisdiction over the assessee's case. 5.5 In view of above, the Panel is of the considered view that irrespective of the fact that AO has passed an order u/s 143(3) even while objections of the assessee. were pending before the DRP, the DRP is duty bound to assume jurisdiction and issue directions u/s 144C(5) on the basis of draft order issued by the AO." 14. Accordingly, the learned DRP assumed the jurisdiction and issued the directions dated 29/11/2021 under section 144C(5) of the Act rejecting the objections raised by the assessee on merits. In conformity with the directions issued by the learned DRP, the A.O. passed the impugned final assessment order dated 27/12/2021. 15. In its application seeking condonation of delay in filing the present appeal, the assessee after placing on record the aforesaid facts submitted that it has filed the appeal before the learned CIT(A) against the first assessment order passed on 15/04/2021, which is currently pen....
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....lready passed the final assessment order prior to the directions issued by the learned DRP, the Hon'ble Jurisdictional High Court held that the learned DRP has no power to pass any directions as contemplated under section 144C(5) of the Act. As a result, the Hon'ble Jurisdictional High Court set aside the directions issued by the learned DRP and the consequent final assessment order challenged by the taxpayer. The relevant findings of the Hon'ble Jurisdictional High Court, in the aforesaid decision, are reproduced as under:- "9. Section 144C of the Act reads as under: 144C. Reference to dispute resolution panel. - (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) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation which is prejudicial to the interest of such assessee. (2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order, - (a) file his acceptance of the variati....
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....not by the eligible assessee). (9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members. (10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer. (11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest of the revenue, respectively. (12) No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee. (13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 [or Section 153B], the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received. xxxxxxxxxxxxxxxxxxxx (15) For the purposes of this section, - ....
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....irections issued under sub-section 5, the Assessing Officer shall, in conformity with the directions, complete, .......... the assessment ..........". Therefore, the DRP could give directions only in pending assessment proceedings. Once assessment order is passed, rightly or wrongly, the assessment proceedings come to an end. Therefore, the DRP would have no power to pass any directions contemplated under sub- section 5 of Section 144C of the Act. 11 While concluding, Mr. Suresh Kumar submitted that in view of what is stated in the affidavit in reply where respondents have admitted that the assessment order dated 24th December 2018 could not have been passed, the appeal pending before the CIT (A) will naturally get allowed/the assessment order would get set aside. That would result in the Revenue not able to pass assessment order under Section 143(3) of the Act or even under Section 147 of the Act. The Rajasthan High Court in Sudesh Taneja V/s. ITO' held that (a) taxing statute must be interpreted strictly. Equity has no place in taxation. Nor while interpreting taxing statute intendment would have any place. (b) There is nothing unjust in the tax payer escaping if the le....
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....must be interpreted so as to favour the assessee. Making a clear distinction between a charging provision of a taxing statute and exemption notification which waives a tax or a levy normally imposed, the Supreme Court observed as under :- 14. We may, here itself notice that the distinction in interpreting a taxing provision (charging provision) and in the matter of interpretation of exemption (98 of 113) [CW-969/2022] notification is too obvious to require any elaboration. Nonetheless, in a nutshell, we may mention that, as observed in Surendra Cotton Oil Mills Case, in the matter of interpretation of charging Section of a taxation statute, strict Rule of interpretation is mandatory and if there are two views possible in the matter of interpretation of a, charging section, the one favourable to the Assessee need to be applied. There is, however, confusion in the matter of interpretation of exemption notification published under taxation statutes and in this area also, the decisions are galore. 24. In construing penal statutes and taxation statutes, the Court has to apply strict Rule of interpretation. The penal statute which tends to deprive a person of right to life and libert....