2017 (12) TMI 572 - AT - Income Tax

Order passed beyond the time limit prescribed under section 144C(4) - Action of the Dispute Resolution Panel - 2 day delay in receipt of draft assessment order against the date recorded by the Assessing Officer - Held that - In our considered opinion on the facts and circumstances of the case the two day delay in furnishing the objections to the DRP s objections deserves to be condoned. Accordingly we condone the delay in submission of the objection of the DRP. The ld. DRP is directed to pass the direction on the objections. Appeal by the assessee is allowed for statistical purpose.

Summary

Issues Involved:

1. Jurisdiction of the Commissioner of Income Tax (Appeals) versus ITAT.
2. Timeliness of filing objections before the Dispute Resolution Panel (DRP).
3. Validity of the assessment order under section 143(3) r.w.s. 144C(13).
4. Additions to the total income and their nature (Royalties, Fees for Included Services, Business Profits).
5. Application of Rule 10 of the Income-tax Rules, 1962.
6. Reimbursement of expenses.
7. Rate of tax applied.
8. Short credit of TDS.
9. Levy of interest under sections 234A, 234B, and 234D.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Commissioner of Income Tax (Appeals) versus ITAT:

The assessee appealed against the order of the Assessing Officer (AO) passed under section 143(3) read with section 144C(13) of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) held that the appeal should have been filed before the ITAT and not before him. The Commissioner dismissed the appeal on these grounds, stating that the correct forum for appeal was the ITAT. The ITAT confirmed this decision, agreeing that the appeal should have been filed before the ITAT and not the Commissioner of Income Tax (Appeals). The appeal by the assessee was dismissed.

2. Timeliness of filing objections before the Dispute Resolution Panel (DRP):

The DRP held that the objections filed by the appellant were beyond the time limit prescribed in section 144C(2) of the Income-tax Act, 1961, and treated them as non-est. The appellant contended that the objections were filed within 30 days from the date of receipt of the draft assessment order. The ITAT found that there was a two-day delay in furnishing the objections to the DRP and decided to condone the delay. The DRP was directed to pass directions on the objections.

3. Validity of the assessment order under section 143(3) r.w.s. 144C(13):

The appellant argued that the assessment order dated December 09, 2014, was passed beyond the time limit prescribed under section 144C(4) of the Act. The ITAT did not address this issue in detail as the appellant did not press this plea after the delay in filing objections was condoned.

4. Additions to the total income and their nature (Royalties, Fees for Included Services, Business Profits):

The appellant challenged the addition of ?5,52,50,130 to the total income, arguing that 90% of the receipts were wrongly classified as 'Royalties' and 10% as 'Fees for Included Services' under the DTAA between India and the USA. The appellant contended that the entire payment was for services rendered and not royalties, and thus not taxable under Article 12(3) and Article 12(4)(b) of the DTAA. The ITAT did not provide a final ruling on this issue as the matter was remanded to the DRP for reconsideration.

5. Application of Rule 10 of the Income-tax Rules, 1962:

The appellant argued against the DCIT's invocation of Rule 10 for attributing 90% of the total receipts as Royalties and the remaining 10% as Fees for Included Services. The ITAT did not provide a final ruling on this issue as the matter was remanded to the DRP for reconsideration.

6. Reimbursement of expenses:

The appellant contested the inclusion of ?47,24,930 as part of the total income, arguing that these were reimbursements for actual expenses incurred and should not constitute taxable income. The ITAT did not provide a final ruling on this issue as the matter was remanded to the DRP for reconsideration.

7. Rate of tax applied:

The appellant argued that the DCIT erred in applying a 15% rate of tax instead of the 10% rate applicable under section 115A of the Act for agreements entered after June 1, 2005. The ITAT did not provide a final ruling on this issue as the matter was remanded to the DRP for reconsideration.

8. Short credit of TDS:

The appellant contended that the DCIT did not grant TDS credit to the extent of ?32,96,715. The ITAT did not provide a final ruling on this issue as the matter was remanded to the DRP for reconsideration.

9. Levy of interest under sections 234A, 234B, and 234D:

The appellant argued against the levy of interest under sections 234A, 234B, and 234D of the Act. The ITAT did not provide a final ruling on this issue as the matter was remanded to the DRP for reconsideration.

Conclusion:

The ITAT found merit in the appellant's contention regarding the delay in filing objections and directed the DRP to reconsider the objections. Other grounds raised by the appellant were not adjudicated on merits as the matter was remanded to the DRP. The appeal by the assessee was allowed for statistical purposes.