2016 (3) TMI 117 - AT - Income Tax

Section 44 BBB applicability to the remittance made to Atomstroyexport(ASE) - whether all the payments were in the nature of fees for technical services that same were liable to tax in India? - Intergovernmental- Agreement - Held that - Income-tax proceedings the doctrine of res judicata is not applicable but consistency and definiteness has to be maintained unless there is a manifest distinguishable feature. We find that the FAA while passing orders in subsequent proceedings brought any distinguishable feature on record. We are unable to endorse the view of the FAA that Intergovernmental Agreement should not be considered for deciding the issue. The Intergovermental Agreement was source of all subsequent agreements and it was entered in to by two Sovereign Countries. It cannot be brushed aside. If all the agreements are considered jointly it becomes clear that the orders of his predecessors were in accordance with the provisions of law. Similarly the argument of the FAA with regard to introduction of section 44BB is not at all convincing. International transactions are governed by the DTAA. s. and Inter-govermental Agreements. Considering the above discussion we are of the opinion that the appeals filed by the assessee have to be allowed. Therefore revising the orders of the FAA we decide the effective grounds of appeal in favour of the assessee.

Summary

Issues:
1. Interpretation of section 44BBB of the Income Tax Act.
2. Application of principles of res judicata in income tax proceedings.

Issue 1: Interpretation of section 44BBB of the Income Tax Act:
The case involved appeals challenging the orders of the AO regarding the applicability of section 44BBB of the Income Tax Act to remittances made to a foreign entity for services related to the construction of a Nuclear Power Station. The AO held that the payments were 'fees for technical services' and subject to taxation in India. The FAA, however, considered the agreements in conjunction with the Intergovernmental Agreement and ruled in favor of the assessee, stating that the foreign entity was actively involved in the construction process, providing end-to-end services beyond just designs and drawings. The Tribunal upheld the FAA's decision, emphasizing the holistic view taken by the FAA and the active involvement of the foreign entity in the project.

Issue 2: Application of principles of res judicata in income tax proceedings:
In the subsequent appeals, the FAA reversed the decisions of his predecessors, holding that the principles of res judicata did not apply to income tax proceedings. The Tribunal disagreed with the FAA, citing previous judgments emphasizing consistency in treatment when facts are identical across different assessment years. The Tribunal highlighted that the doctrine of res judicata may not apply, but consistency and definiteness must be maintained unless there are material changes in facts. The Tribunal concluded that the Intergovernmental Agreement should be considered in deciding the issue, and the earlier decisions align with the provisions of the law. Therefore, the appeals filed by the assessee were allowed, and the orders of the FAA were revised in favor of the assessee, dismissing the AO's appeal.

In conclusion, the Tribunal's judgment addressed the interpretation of section 44BBB of the Income Tax Act and the application of principles of res judicata in income tax proceedings, emphasizing the importance of consistency in treatment when facts remain identical across different assessment years.