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TMI Blog2013 (9) TMI 689X X X X Extracts X X X X X X X X Extracts X X X X ..... counts behavior of the AO can be held to be perverse-first he did not obey the instructions of the panel and second he did not take any action with regard to the rectification application filed by the assessee – Decided in favor of Assessee. - ITA No. 8978/Mum/2010, ITA No. 9049/Mum/2010 - - - Dated:- 18-9-2013 - Sh. I. P. Bansal And Rajendra, JJ. For the Appellant : Shri Prashant Maheshwari For the Respondent : Shri Neeraja Pradhan ORDER Per Rajendra, A. M:- ITA No. 8978/Mum/2010 Following grounds of appeal have been filed by the assessee-company against the order dated 26. 10. 2010 of the Assessing Officer(AO), passed u/s. 143(3) r. w. s. 144C(13) of the Act. "Ground No. 1-Disallowance of expenses of Rs. 89, 24, 851 debited to the Audited Profit and Loss Account of the India Permanent Establishment ('PE') 1. 1. On the facts and in circumstances of the case and in law, the AO erred in disallowing the expenses of the Indian PE of the Appellant aggregating to Rs. 89, 24, 851 and the DRP further erred in giving no specific directions to the Objection no. 1 raised by the Appellant in this regard. 1. 2. The Appellant submits that the AO and the D~ failed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Act or under the India -- UK Tax Treaty more so as it is mere reimbursement arrangement with no element of profit. 3. 3. Without prejudice to above, the Appellant submits that the AO be directed to tax the entire income at 10. 46% on gross basis under Section 9(1)(vii) read with Section liSA of the Act in accordance with the direction of the DRP. Ground No. 4-Insufficient/adequate opportunity provided during the assessment proceedings 4. 1. On the facts and in the circumstances of the case and in law, the AO erred in not granting reasonable and sufficient opportunity to the Appellant before passing the draft order under Section 144C(l) of the Act and the DRP further erred in not giving their decision on this point raised before them as Objection No. 4 while giving directions under Section 144C(5) of the Act. 4. 2. The Appellant submits that the assessment order of the AO and the directions by the DRP are in violation of the principles of natural justice and be quashed or alternatively set aside for consideration afresh. Ground No. 5-Erroneous charging of interest of Rs. 16, 40, 696 under Section 234B of the Act 5. 1On the facts and in circumstances of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in directing as Ground No. 1 their taxation on gross basis as Fees for Technical Services ('FTS')under Section 9(1)(vii) / liSA of the Act. The AO further erred in not giving proper effect to the instructions of DRP in passing the final assessment order. 2. 2. The Appellant submits that the AU and DRP failed to appreciate that these services were rendered entirely outside India in Kuwait and relate to making or earning of income from a source outside India and are therefore neither attributable to the Indian PE nor can be deemed to accrue or arise in India under Section 9(i)(vii) of the Act. 2. 3. The Appellant prays that the taxation of consultancy fees of Rs. 3 3, 82, 196 for services rendered outside India is unwarranted and be deleted. Ground No. 3 -- Reimbursement of expenses of Rs. 35, 16, 090 not in the nature of Income construed as taxable 3. 1. On the facts and in the circumstances of the case and in law, the AU erred in treating reimbursement of expenses of Rs. 35, 16, 090 as taxable in India and the DRP further erred in giving no specific directions for the Objection no. 3 raised by the Appellant in this regard. 3. 2. The Appellant submits that reimbursemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Objection No. 5 while giving directions under Section 144C(5) of the Act. 5. 2. The Appellant submits that the assessment order of the AU and the directions by the DRP are in violation of the principles of natural justice and be quashed or alternatively set aside for consideration afresh. Ground No. 6-- Erroneous charging of interest of Rs. 18, 82, 428 under Section 234B of the Act 6. 1. On the facts and in circumstances of the case and in law, the AO erred and the DRP further erred in upholding / confirming the action of AO in charging interest under Section 234B of the Act. 6. 2. The Appellant submits that it is non-resident company under the Act and is not liable to pay advance tax under Section 208 / 209 of the Act as its entire income is subject to withholding tax in India and in view of same the question of charging interest Rs. 18, 82, 428 under Section 234B of the Act does not arise. 6. 3. The Appellant prays that the charge of interest under Section 234B of the Act is unwarranted and be deleted. The Appellant craves leave to add, alter or amend the above grounds of appeal at any stage. " ITA. 8978/Mum/2010 -Facts of the case 2. Assessee-company, engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R) submitted that AO had not passed the order as per the directions given by the DRP, that there was violation of provisions of section 144C(13) of the Act. He further submitted that if AO was directed by the Tribunal to pass fresh order as per the directions of the DRP, assessee-company was not interested in pursuing other grounds of appeal. Departmental Representative(DR)submitted that he had no objection if suitable instructions were issued. 5. We have heard the rival submission and perused the material before us. We find that DRP had issued directions to the AO on 24. 09. 2009 and had specifically mentioned that amount received by the assessee had to be taxed as Fee for Technical Services. In our opinion, directions of the DRP were binding on the AO. Section 144C(13) uses word 'shall' with regard to instructions to be followed by the AO. We will like to re-produce the section: "Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall (emphasis by us), in conformity with the directions, complete, notwithstanding anything to the contrary contained **in section 153 or section 153B, the assessment without providing any further opportunity of bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obey the instructions of the panel and second he did not take any action with regard to the rectification application filed by the assessee. As, all the grounds, except ground no. 3. 3, were not pressed by the assessee, before us therefore, same stand dismissed. Ground no. 3. 3. stands allowed in favour of the assessee. AO is directed to pass fresh assessment order as per the directions of the DRP within 30 days of receipt of this order. As a result, appeal filed by the assessee stands partly allowed. ITA No. 9049/Mum/2010 Diamond Management Technology Consultants Ltd. NA. Inc. 6. We find that except the ground no. 6 pertaining to charging of interest u/s. 234B of the Act, all other grounds of appeal are more or less same as the grounds of appeal filed by the Diamond Management Technology Consultants Ltd. (ITA/8978/Mum/10). 7. Before us, Authorised Representative(AR)submitted that if ground no. 4. 1 was decided in favour of the assessee, he would not press the other grounds of appeal. Ground No. 4. 1 is about not giving proper effect to the direction issued by the DRP. In this case also DRP has held that income of the assessee has to be assessed on Gross Taxation Basis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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