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2023 (7) TMI 343 - AT - Income TaxConflict of interest - Appointment of private counsels in connection with CIC proceedings (RTI) - Counsel appeared before the CIC on behalf of the ITAT - The same counsel are appearing before the same bench of ITAT on behalf of clients and against the revenue - HELD THAT - We are of the view a conflict of interest in the context of lawyers refers to a situation where lawyer s personal or financial interest conflicts with their professional obligations to their clients. The conflict of interest comes in a situation where there is dual representation, adverse interests, personal interests and business interests. The conflict of interest can be addressed as legal ethic rules requires a lawyer to identify and avoid conflicts wherever possible. In the instant case, Shri I. Dinesh as authorized representative of APIO, ITAT Chennai represented ITAT before CIC and he also represents his clients before ITAT Benches. It is not the case of the Ld.CIT-DR that there is any financial interest, personal interest between the client or any of the Member constituting the Bench neither it is the case of the Ld.CIT-DR that any of the Member of ITAT constituting the Bench has represented the client during their professional services. This is a simple case of lawyer Shri I. Dinesh has been appointed by President, ITAT to represent CPIO by virtue of power vested in him u/s. 255(5) and 255(6) of the Act, who happens to be a Member of ITAT. This tribunal has seen members from Indian Revenue Services who have all along been with the Revenue becoming members of this Tribunal and have unblemished record of dispensing justice without fear or favour. This Tribunal has also seen emergence of some of the finest members who have been representing the department in their professional careers later to become Members of the Tribunal and judges of the High Court and Supreme Court If these are to be considered as instance of Conflict of interest than no departmental representative and no member from Indian Revenue Services would be eligible to become members of tribunal. Now, this issue raised by ld.CIT-DR, Dr.S. Palanikumar before us is totally out of context, without any basis, totally different and distinguished on facts. According to us, there is no conflict of interest in this matter. Hence, this should be rejected at the threshold. Whether Tribunal is not the appropriate judicial forum to raise this issue? - From the functions of Departmental Representative, it is very clear that the role of the Departmental Representative is to represent the case and does not have any authority to append his signature in his official capacity to file additional grounds of appeal or miscellaneous application. The AO is authorized to file appeal, additional ground, any application or miscellaneous application and for that he has to seek permission from the competent authority. Hence in our view, CIT-DR has no locus standi to file this impugned application and further argue the same. It seems that ld.CIT-DR is acting in his individual or personal capacity as an aggrieved party for the reasons known to him. Hence, for this reason also this petition is dismissed as not-maintainable. Income taxable in India - income accrues and arises in India - AO treated the guarantee fee as other income - contracting state - Indo-Korea DTAA - assessee is a foreign company incorporated in Korea which is engaged in the manufacture of automobile and auto parts - HELD THAT - As following Article 23 of Indo-Korea DTAA which specifically provides that taxability of other income is only in the contracting state and in the present case, the contracting state is Korea and not India, hence taxability under the Income Tax Act is not at all desirable. Hence, we delete the addition and allow this appeal of assessee on this very issue. The appeal of the assessee is allowed. Revision u/s 263 - payments received on account of guarantee fee as taxable under the Income-tax Act - HELD THAT - As, as already adjudicated the issue in assessment year 2015-16 in preceding paras and finding is given that the guarantee fee is not taxable in India in view of Article 23 of Indo-Korea DTAA, we quash the revision order passed by PCIT u/s. 263 of the Act. The appeal of the assessee is allowed.
Issues Involved:
1. Conflict of Interest 2. Taxability of Guarantee Fee under the Income Tax Act and Indo-Korea DTAA Issue 1: Conflict of Interest The ld.CIT-DR, Dr. S. Palanikumar, raised a preliminary objection on the issue of "conflict of interest" concerning the representation by Shri Dinesh Inbavadivu and Shri Arjun in the appeals. The ld.CIT-DR argued that since these advocates regularly appear before ITAT Chennai Bench on behalf of their clients, their appointment by ITAT to represent its case before CIC constitutes a direct case of 'conflict of interest.' He contended that this situation could jeopardize the interest of revenue in income tax appeal proceedings before ITAT, Chennai. The ld.Advocate Shri G. Baskar countered that the application filed by ld.CIT-DR is not maintainable and obstructs judicial proceedings. He argued that there is a clear distinction between administrative and quasi-judicial functions, and the engagement of Shri Dinesh before CIC was on the administrative side. He emphasized that the Tribunal's independence and neutrality are not compromised by such representation. The Tribunal, after considering the arguments, concluded that there is no 'conflict of interest' in this matter. It noted that the engagement of Shri Dinesh was purely for administrative purposes and did not influence the judicial functions of the Tribunal. The Tribunal also highlighted that the issue raised by ld.CIT-DR is not appropriate for the Tribunal to decide and should be addressed by the Bar Council of India if necessary. The application by ld.CIT-DR was dismissed as not maintainable, and the Tribunal advised the Revenue to provide proper training to its representatives to avoid such frivolous applications in the future. Issue 2: Taxability of Guarantee Fee under the Income Tax Act and Indo-Korea DTAAThe assessee company received a sum of Rs. 5,22,88,362/- as guarantee fee from its subsidiaries during the relevant assessment year. The AO and DRP treated this income as 'income from other sources' and taxed it in India. The assessee contended that the guarantee fee is not taxable in India under Article 23 of the Indo-Korea DTAA, which stipulates that 'other income' shall be taxable only in the contracting state, i.e., Korea. The Tribunal, after considering the arguments and relevant case laws, concluded that the guarantee fee received by the assessee is not taxable in India under the Indo-Korea DTAA. It noted that the income clearly arises in Korea, and as per Article 23 of the DTAA, it is taxable only in the contracting state. The Tribunal relied on previous decisions, including the case of Capgemini SA vs. DCIT, to support its conclusion. Consequently, the addition made by the AO was deleted, and the appeal of the assessee was allowed. In the related appeal for assessment year 2014-15, the Tribunal quashed the revision order passed by PCIT u/s. 263 of the Act, holding that the guarantee fee is not taxable in India in view of Article 23 of Indo-Korea DTAA. Both appeals filed by the assessee were allowed.
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