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2021 (2) TMI 230 - ITAT PUNERevision u/s 263 - Income taxable in India or not? - assessee is a foreign company incorporated under the laws of Delaware, United States of America (USA) - sum 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 - 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 - HELD THAT:- AO applied his mind to the fact situation obtaining before him and impliedly relying on the assessment order for the immediately preceding assessment year, accepted the assessee’s claim for the current year too. We fail to comprehend as to how such an assessment order can be construed as erroneous as well as prejudicial to the interest of Revenue for not having included ₹ 9.14 crore in the total income, when the Department itself accepted the same as not chargeable to tax for the immediately preceding assessment year. 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 An assessment order shall be deemed to be erroneous and prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner, the assessment order is deficient on any one or more of the four counts. The words `if, in the opinion of the Principal Commissioner or Commissioner’, used in the opening part of the Expl. 2 before referring to four situations as discussed in clauses (a) to (d), do not denote any arbitrary, subjective or unsubstantiated opinion of the CIT. Such an opinion as to the prevalence of one or more of such situations must be objective, logical and tenable in law. If albeit the Pr. CIT or CIT opines about the existence of one of the four clauses, but, on the facts and in the circumstances of the case, the same is non-existent, then the formation of such an opinion cannot be countenanced. To put it differently, the existence of one or more of the four situations discussed in the clauses (a) to (d) is a sine qua non for exercise of the jurisdiction under the Explanation 2. Even though the ld. CIT was rightfully entitled to take recourse to the Explanation 2, but thereafter he needed to bring the case with in any one or more of the four clauses given therein. It is palpable that none of the four clauses of the Explanation 2 applies to the case under consideration. The sequitur is that the revisionary power, even under the enlarged scope of the Explanation 2, was not legally exercisable. Ex consequenti, we set aside the impugned order. The revision in this case has been held to be not valid because the AO took a possible view. We clarify as not having expressed any opinion on the merits of the case as to whether or not the amount of Head Quarter service fees is chargeable to tax in the hands of assessee, which aspect will be considered and determined as and when it comes up for hearing - Decided in favour of assessee.
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