9911796707
TMI Blog2013 (11) TMI 429X X X X Extracts X X X X X X X X Extracts X X X X ..... holding certificate under Section 197 of the Act passed by Assistant Director of Income Tax (International Taxation) (respondent No.3). 3 Briefly, the facts leading to the present petition are: ( a) The petitioner is a Company incorporated in United States of America (USA) and is also a tax resident of USA. The petitioner is admittedly eligible to the benefit under the Double Taxation Avoidance Agreement (DTAA) entered into between USA and India; (b) The petitioner is engaged in the business of International Express Delivery and has developed an international network of transporting documents, parcels and other items from one country to another. In accordance with the agreement entered into with one UPS Jetair Express Pvt. Ltd., (respondent No.1), the petitioner renders services to respondent no.1 in respect of delivering documents/parcels outside India having originated in India, while respondent No.1 renders services to the petitioner in respect of documents/parcels to be delivered in India having originated outside India. For the services rendered for outbound documents, the petitioner receives compensation (forwarding fees) and in respect of inbound documents, the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that are subject to MAP proceedings for prior, current or future taxable years. However, during the pendency of the MAP proceedings, the assessee is required to furnish a bank guarantee securing the dues of the revenue of the Contracting State in which the income is the subject matter of tax to which the MAP procedure relate; (g) Consequent to the application made by the petitioner to respondent No.3 on 28 March 2007, 6 November 2007 and 5 February 2009, respondent No.3 issued Certificates under Section 197 of the Act for the Assessment Years 200708 to 200910. By the above certificates, it directed that there would be no obligation on the part of the respondent No.1 to deduct any tax while making payment to the petitioner in respect of services rendered by the petitioner to respondent No.1 i.e. Nil Tax Withholding orders; (h) On 29 March 2010, the petitioner filed an application under Section 197 of the Act with respondent No.3 and requested him to issue Nil Tax Withholding order for Assessment Year 201011. In the above letter, the petitioner pointed out that NIL Tax Withholding order/certificate were issued for earlier years and also its application dated 3 November 2009 to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f its above revision application. At the hearing, the petitioner pointed out that it understands that in November 2012, respondent No.4 had received a communication from FTD, stating that the competent authority of USA has invoked fresh MAP proceedings inter alia in respect of Assessment Year 201011. Thus seeking a direction to the Authorities under the MOU to suspend assessment and collection of taxes i.e. Withholding for Assessment Year 201011. (n) On 21 March 2013, respondent No.4 rejected the petitioner's application for revision of the order dated 15 December 2010 passed under Section 197 of the Act by respondent No.3. The respondent No.4 held that no MAP proceedings for the Assessment Year 201011 was pending at the time the petitioner filed an application under Section 197 of the Act with respondent No.3 nor when the order dated 15 December 2010 of respondent No.3 was passed, rejecting the application for issuance of Nil Tax Withholding order/certificate. The respondent No.4 reached the above conclusion on the ground that MAP proceedings for Assessment Year 201011 was admitted only on 21 September 2012 as informed by the FTD. Thus, holding that the order dated 15 December 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnished a bank guarantee for the requisite amount of tax payable; and (e) In any view of the matter, at the time when respondent No.4 passed his order, it is undisputed position that the issue arising in Assessment Year 201011 had been admitted for MAP proceedings and so also acknowledged by the competent authority in both USA as well as in India. In this view of the matter, the respondents ought to have take into account the subsequent development and granted the benefit of the MOU which suspended taxation of income at source pending the resolution of the issue before the authorities under MAP. 5 On the other hand, Mr. Vimal Gupta, learned Senior Counsel appearing for the Respondents supports the impugned order and submits as under: (a) In terms of Instruction No.2 of 2003 of CBDT dated 28 April 2003, the pendency of the MAP proceedings can be taken cognizance of only when it has been admitted by competent authority in India by confirmation to that effect being issued by FTD of CBDT. In this case, though bank guarantee has been furnished, the requirement of the Circular of obtaining the confirmation from the FTD of CBDT had not been fulfilled on 15 December 2010 when the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resolve the conflict by mutual agreement. 7 Consequent to the above, the competent authorities in USA and India, exercising powers under MAP procedure realized that during the pendency of MAP proceedings, it would be necessary to protect the assessees (tax payer) concerned till the successful resolution or failure of the issue referred to MAP. In view thereof, an MOU was arrived at between USA and India which inter alia, provides for deferment of assessment and/or suspension of collection of tax during MAP procedure. This MOU was arrived at so as to prevent unnecessary harassment and/or collection of taxes during the time the issue raised by the tax payers is under consideration of MAP. The fact that MOU was entered into between USA and India so as to obviate harassment and/or hardship to the tax payer is also stated in Instruction No.2 dated 28 April 2013 issued by Central Board of Direct Taxes (CBDT). 8 However, to protect the interest of the revenue, the MOU provides that deferment/suspension of assessment and collection of taxes to only available those tax payers who provide a security. The MOU provides that the security should be in the nature of irrevocable bank guarantee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .4. The respondent No.4 by an order dated 21 March 2013, rejected the petitioner's application on the ground that the MAP proceedings for Assessment Year 201011 had been admitted and initiated only on 21 September 2012. Consequently, it is submitted by Mr. Gupta on behalf of the revenue, no fault according to respondent No.4 can be found with the order of respondent No.3, rejecting the application for a Nil Withholding Tax order under Section 197 of the Act. The impugned order has proceeded on the basis that suspension of assessment and collection of taxes (including Withholding taxes) under MOU can only take place when the issue raised by a tax payer have been admitted for consideration under MAP proceedings. According to Mr. Gupta, Counsel appearing for respondent No.4, the trigger for the MOU coming into force is the MAP proceedings being admitted for consideration. This is not so for the reason that Article 27 of DTAA read with the MOU, makes it clear that the suspension of assessment and collection of tax takes place, no sooner an application is made to the Competent Authorities to settle the dispute under MOU proceedings and the revenue is secured by the tax payer furnishing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel appearing on behalf of the revenue that no fault can be found with the impugned order of respondent No.4 in view of Instruction No.2 dated 28 April 2003 issued by CBDT. In particular, learned Counsel place reliance upon the following observations of Instruction No.2 dated 28 April 2003 which reads as under:S. "A copy of the MOU is enclosed along with a model draft of bank guarantee to be furnished by the taxpayer. These are selfexplanatory. On receipt of a formal request in terms of this MOU form a tax payer resident of USA, the Assessing Officers (A.O.) are required to keep the enforcement of collection of outstanding taxes in abeyance in respect of such tax payers who have ( a) Invoked MAP through U.S. Competent Authorities and same has been admitted by the Indian Competent Authority (a confirmation to this effect to be obtained from the Foreign Tax Division of Central Board of Direct Taxes), and; (b) Furnished Bank Guarantee in the model draft format for an amount calculated in accordance with the manner indicated therein." Taking support for the above, it is contended that unless the application made to the Competent Authority under the MAP has been admitted, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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