9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (4) TMI 1381 - AT - Income TaxValidity of the assessment under section 153C - Search in case on non resident Mr. Jean Louis Deniot, French architect and designer and his companies have rendered services for designing, decorating and renovation of palatial farm house and this farm house is used as residence of assessee - HELD THAT - As per the provisions of Section 153C, one of the important jurisdictional requirement is that the seized document on the basis of which jurisdiction is being assumed must belong to the person other than the searched person i.e the non-resident being assessed to tax in the hands of a representative assessee, as per law applicable to search action prior to the amendment in section 153C. The amendment in section 153C modifying this requirement to the words pertains to or relates to came into effect from 1.06.2015 and is prospective in nature So far as the Hard Disc seized from the premises C-134, Defence Colony, New Delhi and recorded in the Panchnama in the name of AMQ Agro India Pvt. Ltd., is concerned, we find merit in the arguments of the Learned Counsel for the Assessee that the same would definitely belong to the AMQ group of cases and not the non-resident. The non-resident individual/entity did not have an office in India is an uncontroverted position. Even the assessing authorities have nowhere alleged that the nonresident had an office in India. Therefore, these hard discs, in our opinion, cannot be said to be belonging to the person other than the searched person. So far as the printouts of emails retrieved from the hard discs mentioned above are concerned, we find merit in the arguments of the Learned Counsel for the Assessee that the exchange of mail may be between the non-resident and AMQ group employees, but the mails found in inbox or outbox of the AMQ group employees would belong to the respective employee(s) and not the non-resident. In our opinion, although, the mail may have been initiated by the non-resident or its staff and may figure name of Jean Louis Deniot/Cabinet Jean Louis/Design Inc. but it cannot be said that the email found from the hard disc of the AMQ group, located at the premises in India, in inbox/outbox of the respective employee belongs to the non-resident. As regards the invoices raised by Jean Louis Deniot/Cabinet Jean Louis retrieved from the emails are concerned, we find merit in the arguments of the Learned Counsel for the Assessee that having raised the invoice on Mr. Mrs. Qureshi, the said invoice would be the property of the person on whom it has been raised. Even a copy of the said invoice found in the email of the respective employee would belong to the said employee and not the non-resident. In our opinion, what is to be examined is the ownership of the seized material. The authorship of the document or the fact that name of the non-resident individual/entity figure in the document is not relevant. We are of the considered opinion that none of the seized material mentioned in the satisfaction note belongs to the non-resident individual/entity and hence the jurisdictional requirement for assumption of jurisdiction u/s 153C is not met. Thus, the order passed u/s 153C being not in accordance with law has to be quashed. Respectfully following the decision of Hon ble Delhi High Court in the case of Pepsico India Holdings 2014 (8) TMI 898 - DELHI HIGH COURT we are of the considered opinion that the assumption of jurisdiction under section 153C of the I.T. Act, 1961 is not in accordance with Law. Treating the assessee as representative assessee of Jean Louis Deniot on the basis of the order passed under section 163 - Even otherwise on merit also, we find the A.O. as well as the Ld. CIT(A) have categorically held that Jean Louis Deniot is a non-resident. Further the non-resident being a resident of France and rendering independent personal services in the nature of Architectural services is covered by the provisions of Article 15 of the DTAA between India and France. We find merit in the arguments of the Learned Counsel for the Assessee that on the facts and circumstances of the present case the necessity to bring on record copy of Passport of the non-resident is not required. The provisions of section 163 through which the assessee has been treated as representative assessee can only be applied in the case of a non-resident. In our opinion, if the said non-resident had stayed in India for 183 days or more during the relevant assessment year, automatically his status would not remain that of a non-resident. If that is the case, then provisions of section 163 would no longer remain applicable - We, therefore, hold that Jean Louis Deniot and his associate concern M/s. Cabinet Jean Louis Denior and Design-39 Inc. being a non-resident is entitled to claim the benefit of Article-15 of DTAA between India and France and, therefore, any income accruing to a resident of France is not taxable in India who has not stayed in India for a period of more than 180 days. We find the Hon ble Delhi High Court in the case of Comverse Networks System India Pvt. Ltd. 2014 (8) TMI 6 - DELHI HIGH COURT has held that where a person in respect of whom an Agent is sought to be made the representative-assessee does not attain the status of non-resident from the relevant accounting period, provisions of Section 163 cannot be invoked in such a case. We are of the considered opinion that the Ld. CIT(A) was not justified in upholding the action of the A.O. in making the addition by treating the assessee as representative assessee of Jean Louis Deniot on the basis of the order passed under section 163 - Appeal of assessee allowed.
Issues Involved:
1. Validity of the assessment under section 153C of the I.T. Act, 1961. 2. Addition of income in the hands of the assessee as a representative assessee/agent of Jean Louis Deniot and his associate companies. 3. Applicability of Article 15 of the DTAA between India and France. 4. Procedural and jurisdictional aspects concerning the seized documents. 5. Treatment of reimbursement of expenses. Detailed Analysis: 1. Validity of the assessment under section 153C of the I.T. Act, 1961: The Tribunal examined whether the jurisdictional requirements under section 153C were met, focusing on whether the seized documents belonged to the non-resident entities. The Tribunal noted that the documents (hard discs, email printouts, and invoices) were found at the premises of AMQ Agro India Pvt. Ltd. and not the non-resident entities. The Tribunal held that the hard discs and emails found in the possession of AMQ employees belonged to the AMQ group and not the non-residents. The ownership of the invoices was attributed to the person on whom they were raised, not the issuer. Citing the Delhi High Court's decision in PepsiCo India Holdings vs. ACIT, the Tribunal concluded that the documents did not belong to the non-resident entities, thus invalidating the jurisdiction under section 153C. 2. Addition of income in the hands of the assessee as a representative assessee/agent: The AO treated the assessee as a representative assessee/agent of Jean Louis Deniot and his associate companies, attributing income based on payments made for services rendered in India. The Tribunal found that the AO and CIT(A) had not adequately considered the submissions regarding the applicability of Article 15 of the DTAA. The Tribunal also noted that the AO had not provided specific details or supporting evidence to justify the addition. 3. Applicability of Article 15 of the DTAA between India and France: The Tribunal emphasized that Jean Louis Deniot, being a non-resident and a resident of France, was entitled to the benefits of Article 15 of the DTAA. This article stipulates that income from professional services performed by a resident of France is taxable only in France unless the individual has a fixed base in India or stays in India for more than 183 days. The Tribunal held that since Jean Louis Deniot did not have a fixed base in India and there was no evidence of him staying in India for more than 183 days, his income was not taxable in India. 4. Procedural and jurisdictional aspects concerning the seized documents: The Tribunal scrutinized the procedural aspects, particularly the satisfaction note and the classification of seized documents. It concluded that the documents did not meet the criteria to belong to the non-resident entities as required under section 153C. The Tribunal highlighted that the authorship of the documents or the mention of the non-resident entities' names was not sufficient to establish ownership. 5. Treatment of reimbursement of expenses: The assessee argued that the payments made were reimbursements of expenses and not income. The Tribunal noted that the AO and CIT(A) had not provided specific details or evidence to refute this claim. The Tribunal found merit in the assessee's argument that only the income element should be taxed, and reimbursements should be excluded. Conclusion: The Tribunal quashed the assessment order passed under sections 144 r.w.s. 163 r.w.s. 153C of the I.T. Act, 1961, due to the invalid assumption of jurisdiction and the improper treatment of income. The Tribunal allowed the appeals, directing the AO to delete the additions made.
|
