9911796707
TMI Blog2007 (3) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... ence to the Special Bench itself restricts powers of such a Special Bench, as may be expedient and necessary, to deal only with a limited aspect of the appeal. In our considered view, therefore, once this Special Bench comes be in seisin of the entire appeals, it is for this bench to decide whether or not to admit the grounds of appeal; all the powers of the Tribunal, so far as these appeals are concerned, are to be exercised by the Special Bench alone. The objection taken by the assessee respondent to the effect that this Special Bench has no powers to admit an additional ground of appeal, in this view of the matter, is devoid of legally sustainable merits. We reject the same. We agree that the Tribunal does indeed have the powers of admitting an additional ground of appeal which may not arise out of the orders of the authorities below. There is no longer any dispute or controversy about the powers of the Tribunal to admit an additional ground of appeal, as has been laid down by the Hon ble Supreme Court in the case of National Thermal Power Co. Ltd.[ 1996 (12) TMI 7 - SUPREME COURT] . However, whether, in a particular situation, the Tribunal should exercise such powers or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admit only the following additional ground of appeal and decline to admit the remaining two additional grounds of appeal : That the learned CIT(A) has erred in law and on facts in concluding that the assessee has no permanent establishment in India. The appeal shall, accordingly, be heard on the merits on the ground raised in the original memorandum of appeal and the above additional ground of appeal. - G.E. VEERABHADRAPPA AND K.P.T. THANGAL AND PRAMOD KUMAR, JJ. Girish Dave for the Appellant. S.E. Dastur, P.J. Pardiwala and Ketan Dalal for the Respondent. ORDER Pramod Kumar, Accountant Member. - By way of this order, we seek to dispose of petition dated 24th August, 2006, filed by the revenue - Appellant praying for admission of the following additional grounds of appeal : "1. The learned CIT(A) has erred in law and on facts in concluding that the assessee has no permanent establishment in India. 2. Without prejudice to the above, the learned CIT(A) has failed to consider that a part of entire revenue arising to the assessee from inbound and outbound consignments were taxable in India, as royalties under section 9(1)( vi ) of the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... connection in India, that the assessee did not carry out any business operations in India, that the assessee s transactions with AFL were on principal to principal basis, and that no part of its income accrues or arises, or is deemed to accrue or arise, in India. The assessee also contended that since the assessee did not have any permanent establishment in India, no part of its business profits in India could be taxable in India in the light of Article 7 of the India - Netherlands Double Taxation Avoidance Agreement. 5. None of these contentions, however, impressed the Assessing Officer. Relying upon the assessment order for the assessment year 1990-91, the Assessing Officer computed the taxable income of the assessee as follows : " Income from outbound shipments. 55 per cent of the amount of bills raised by the assessee-company to the AFL, in respect of outbound shipments, was taken as relatable to the activity carried on in India. Income, on the amount so arrived at in respect of the activity carried out in India, was estimated at 8.36 per cent. Income from inbound shipment. In the absence of actual figures for revenue generated by India bound shipments accepted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that the assessee had a permanent establishment in India in the form of AFL. This order was passed by the Division Bench on 3rd October, 2000. 9. When the present appeals came up for hearing before a Division Bench of this Tribunal, the respondent assessee, inter alia , submitted that Tribunal s decision on the issue of existence of assessee s permanent establishment in India needed to be reconsidered by a larger bench. This plea was accepted by the Division Bench on 21st May, 2004, and the parties were asked to file draft questions to be referred to the Special Bench. On 4th June, 2004, Director of Income-tax (International Taxation), DIT in short, filed a letter seeking reference of the following questions to the Special Bench : "Whether, on the facts and in the circumstances of the case and in law, the Tribunal was right in holding the view in regard to outbound shipment, that no operations were being carried out in India by the assessee-company, and, therefore, no income is attributable in India within the meanings of Explanation ( a ) of section 9(1)( i ) of the Income-tax Act, despite the fact that the assessee-company has business connection in India, and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, the appellant revenue yet again sought to raise the following additional ground of appeal : "Without prejudice to the above, the amount remitted by Airfreight Limited to DHL Operations BV, the Netherlands, i.e., the assessee, towards network fee in respect of outbound shipments are liable to be taxed as royalties under section 9(1)( vi ) of Explanation 2(1)( i ) and/or ( iv ) of the Income-tax Act, 1961, read with article 12 of the India - Netherlands DTAA." 13. It was in the backdrop of these efforts by the revenue appellant, to raise the questions which were not originally referred to the Special Bench, that the scope of the Special Bench was subsequently enlarged by the Hon ble President, vide order dated 8th August, 2006, by accepting the following recommendation made us : "Today, in the course of the hearing of the above matter, the revenue was agitating the issue that there is an additional ground which needs to be disposed of by the Special Bench, Shri Dastur, Advocate and appearing on behalf of the assessee, vehemently argued that there is no question of additional ground being entertained and it is out of the scope of question referred to the Special B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, the learned CIT(A) has failed to consider that remaining part of the entire revenue arising to the assessee from inbound and outbound consignments were taxable in India, as fees for technical services under section 9(1)( vii ) read with Explanation (2) of the Income-tax Act, 1961, and read with article 12 of the India - Netherlands Double Taxation Avoidance Agreement." 16. In this long journey of proceedings, spanning almost one and a half decade, from the assessment stage to the hearing of these appeals before this Special Bench, the case of the Assessing Officer has completely changed. While at the assessment stage, the only question considered by the Assessing Officer was confined to taxability of business profits, as represented by income attributable to India operations in respect of inbound and outbound shipments of the assessee-company, the Assessing Officer s case today extends to treating all revenues generated by assessee-company from India related consignments partly as royalties and partly as fees for technical services . 17. The question then arises whether it can be open to the Assessing Officer to raise these new issues at this stage, and whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain as wrong act done in the suppression of vital evidence, in the form of supplementary agreement, cannot go to the advantage of the respondent assessee. He adds that it is a well settled legal principle that if a man by his own tortuous act withholds evidence by which the nature of his case would be manifested, every presumption to the disadvantage of such person will be adopted. The main thrust of Shri Dave s argument, therefore, was that it was due to assessee s mala fide conduct that revenue was prevented and pre-empted from examining this aspect of the matter earlier and since this lapse is on account of assessee s malicious conduct, the revenue should not be placed at any disadvantageous position. Learned Departmental Representative labouriously took us through various documents and judicial precedents in support of the factual and legal contentions embedded in this line of argument. 19. Shri S.E. Dastur, learned Senior Advocate for the assessee, strongly opposed the petition for admission for additional grounds so far as ground numbers 2 and 3 are concerned, i.e. the grounds which seek adjudication by the Tribunal on the question whether or not the assessee s reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also submitted that Tribunal s decision in the case of Blue Dart Express Ltd. v. Jt. CIT [2000] 75 ITD 414 cannot be said to be proximate reason of filing of the additional ground of appeal because while this decision was rendered on 3rd December, 1999, the additional grounds were filed only now and also in any of the assessments subsequently framed by the Assessing Officer no effort is made to assess the revenues of the assessee as fees for technical services. Further, according to the learned counsel, the grounds raised by the Assessing Officer are vague inasmuch as it is not pointed out as to which part of the revenues is required to be treated as royalties and which part is required to be treated as fees for technical services. Learned counsel also submits that to decide the issue whether amounts received by the assessee are required to be treated as fees for technical services or royalties will require a fresh investigation into facts, and, for this reason also, these additional grounds should not be admitted by the Tribunal. It is further submitted that it would result grave hardship and prejudice to the respondent if the Assessing Officer is allowed to raise these addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the powers to admit the additional grounds in question, but, assuming that such a power vested in the Tribunal under rule 11, this is not a fit case for exercise of that discretion. Learned counsel also referred to various judicial precedents and labouriously took us through the same, but it is not really necessary to deal with these erudite contentions at this stage. 20. We find that section 255(1) of the Act provides that powers and functions of the Tribunal are to be exercised and performed by the benches constituted by the President from among the members thereof. Section 255(3), inter alia , further provides that the President may constitute a special bench for disposal of a particular case . It is therefore clear that it is the bench so formed which will exercise the powers of the Tribunal, unless, of course, reference to the Special Bench itself restricts powers of such a Special Bench, as may be expedient and necessary, to deal only with a limited aspect of the appeal. In our considered view, therefore, once this Special Bench comes be in seisin of the entire appeals, it is for this bench to decide whether or not to admit the grounds of appeal; all the powers of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee should be prevented from raising that question before the Tribunal for the first time, so long as relevant facts are on record in respect of that item. We do not see any reasons to restrict the powers of the Tribunal under section 254 only to decide those grounds which arise from the order of the CIT(A). Both the assessee, as well as the department, have a right to file an appeal/cross-objection before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings though not raised earlier. In the case of Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688 (SC), this Court, while dealing with the powers of the AAC, observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations. If any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of power of the AAC in entertaining an additional g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been applied, with equal force, to the additional grounds raised by the Assessing Officer. A Division Bench of this Tribunal in the case of Jt. CIT v. Sakura Bank Ltd. [2006] 100 ITD 215 has observed that "As long an issue has relevance to the correct determination of taxes in respect of the year, and particularly when relevant facts can be found from the material already on record, it is open to the appellant and the cross-objector, whether assessee or the revenue, to raise that issue, provided the issue so raised is bona fide and the same could not have been raised earlier for good reasons". These views are in conformity with the views of Hon ble Madras High Court, as expressed in the case of Wilson Industries ( supra ), holding that it is open to the Tribunal to permit even the Assessing Officer to raise a new ground of appeal if no new facts are required to be ascertained . One limitation on the admission of the additional ground, therefore, is that no new facts are required to be investigated upon such admission of the additional grounds. 25. The question then arises whether admission of these two additional grounds of appeal will require any fresh investigation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liance on the supplementary agreement has been only with a view to fortify his case that the assessee-company had a paramount establishment in India. To the extent PE controversy is involved, we consider it appropriate to admit the related additional ground of appeal, i.e. first additional ground of appeal. 27. However, the Assessing Officer s explanation for taking up the other two additional grounds of appeal, i.e. , ground numbers two and three relating to the revenues of the assessee being in nature of royalties and fees for technical services , does not simply seem to be these two events. Having given our careful consideration to the factual matrix of the case before us, we are of the considered view that much more than the decision of Blue Dart Express Ltd. s case ( supra ), which was delivered about half a decade before the ground of appeal was taken before us, and discovery of supplementary agreement , even after which scrutiny assessments were completed without taking the stand as is taken in these additional grounds of appeal, it is a simple case of fresh application of mind by the successor Assessing Officer and/or his supervising authorities and an effort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be subject to revision proceedings. No remedy lies with the revenue authorities. As a creature of the statute, it cannot be open to this Tribunal to exercise its powers in such a manner so as to run contrary to, or to frustrate, the scheme of the Act. The position of the Hon ble High Courts and the Hon ble Supreme Court is obviously much different as Their Lordships, in dispensation of effective justice, are certainly not constrained by the provisions of the Income-tax Act. Their Lordships powers are unfettered. We are therefore not impressed by the learned Departmental Representative s argument that since the assessee s conduct is not above board, assuming it is so, it cannot be open to the assessee to oppose admission of additional grounds by us. The large number of judicial precedents relied upon by him deal with the unfettered powers of the Hon ble High Courts and the Hon ble Supreme Court in dealing with unscrupulous litigants. These decisions do not have bearing on our powers of admitting additional ground of appeal. We have to perform our duties within the framework of, and in accordance with, the scheme of the Act. However, admission of the remaining two additional grou ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
