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TMI Blog2017 (3) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of the case and in light of the very fact that the lower authorities had failed to address the exhaustive submissions raised by the assessee before them and pass a well reasoned and speaking order, thus are unable to persuade ourselves to subscribe to such non-speaking orders of the lower authorities. We therefore in all fairness and in the very interest of justice restore the matter to the file of A.O for fresh adjudication. The A.O shall during the course of the set aside proceedings therein adjudicate upon the issue as regards the existence of a ‘PE’ in India of the assessee during the period November, 2008 to March, 2009, after taking due cognizance of and dealing with the submissions which were raised by the assessee during the course of the original assessment proceedings, as well as during the course of the appellate proceedings. - I.T.A. No. 2297/Mum/2014 - - - Dated:- 8-2-2017 - SHRI G.S. PANNU, AM AND SHRI RAVISH SOOD, JM For The Appellant : Shri J.D. Mistry and Shri Niraj Sh For The Respondent : Shri Jasbir Chouhan ORDER PER BENCH : The present appeal filed by the assessee is directed against the order passed by the CIT(A)-10, Mumba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer to exclude fees related to non-Indian projects for services rendered outside India. 9. Without prejudice to the above, the learned Commissioner (Appeals) ought to have appreciated that as per Explanation 3 to Section 9(1)(i) only income related to operations carried out in India can be brought to tax and hence no part of income related to operations carried outside India can be brought to tax in India. 10. The learned Commissioner (Appeals) erred in not applying provisions of Article 7(3) of the India-UK Tax Treaty while adjudicating the issue of attribution of income to the service permanent establishment in India. 11. The learned Commissioner (Appeals) erred in not applying decision of the Mumbai Special Bench in the case of Clifford Chance 33 Taxmann.com 200. The learned Commissioner (Appeals) erred in relying on the decision of the Mumbai Tribunal order dated July 16, 2010 in appellant s own case for the assessment year 1995-96 in upholding the action of the Assessing Officer in taxing entire fees without appreciating the fact that the observation of the Divisional bench in the appellant s case regarding attribution of income was not accepted by the Mumb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endered in India are taxable under article 7(3) of the India UK tax treaty. The Tribunal in order for the assessment year 1995-96 has held that in respect of Indian client or Indian projects both services rendered in India and outside India are taxable. The assessee has preferred appeal the Bombay High Court against the Tribunal order dated July 16, 2010. The assessee has also filed a Miscellaneous Application against the aforesaid Tribunal order dated July 16, 2010. Further in view of the conflicting decisions, the Tribunal has formed a Special Bench to deal with the issue regarding portion of income attributable to the service PE in India. 5. Under the above circumstances, and relying on Commissioner (Appeals) order in the assessee s own case for the earlier years and view of the decision of Appellate tribunal in the below cases: i. DDIT Vs. Set Satellite (Singapore) Pte Ltd.- 106 ITD 175 Mum ii. Airlines Rotables Ltd. UK Vs. Jt. Director of Income Tax - International Taxation 131 TTJ 385 (Mum) the above return is prepared on the basis that income related to the services rendered in India are liable to tax as being directly or indirectly attributable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fees for work done outside India 31,19,573 GBP Towards disbursements 1,04,045 GBP Total 34,06,972 GBP , therein proceeded with and assessed the income of the assessee at ₹ 23,30,69,251/-. 4. The assessee being aggrieved with the assessment order therein carried the same in appeal before the CIT(A). That during the course of the appellate proceeding it was submitted by the assessee that it had offered its income to tax in India only pursuant to the directions of the CIT(A) in its case for the preceding years, wherein it was held that as during the said year as the threshold of 90 days had been breached, therefore the assessee was held as having a Permanent establishment (for short PE ) in India, and the income relating to services rendered in India were liable to be taxed under Article 7(3) of the India U.K. Tax Treaty. The assessee further submitted before the CIT(A) that on appeal the Tribunal vide its order passed in the case of the assessee for A.Y. 1995-96 had held that in respect of Indian client or Indian projects, both services rendere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of his aforesaid observations held that the assessee had a PE in India for the entire year. 4.1 The CIT(A) after observing that the assessee had a PE in India for the entire year, therein inter alia dealt with its contentions, which to the extent the same had been assailed by the assessee before us, are culled out as under:- (i). The assessee had alternatively submitted before the CIT(A) that the scope and gamut of taxability of its income in India (which contention was raised without prejudice to its claim that it had no PE in India during the period November, 2008 to March, 2009 ) was liable to be restricted only to the income of 183,354 GBP pertaining to work performed by the assessee in India, as against the entire receipt of 34,06,972 GBP that had been assessed by the A.O. The CIT(A) however did not accept the claim of the assessee, and taking cognizance of the fact that as the said issue had already been decided by the Tribunal against the assessee in its own case for A.Y. 1995-96, therefore rejected the aforesaid claim of the assessee. (ii). That it was further averred by the assessee before the CIT(A) that the AO had erred in not specifically holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been breached by the assessee , therefore it was to be taken that it had a PE in India and income relating to services rendered in India were taxable under Article 7(3) of the India U.K. Tax Treaty. The Ld. AR vehemently submitted that the fact that the income was offered for tax in the return of income only in the backdrop of the findings of the CIT(A) in its own case for the earlier years, was duly clarified and was mentioned beyond any scope of doubt by the assessee at Sr. No. 5 of the Notes (supra) forming part of the Statement of Total Income . It was further submitted by the Ld. A.R that the fact that during the year under consideration the threshold limit of 90 days mentioned in Article 5(2)(k)(i) was not exceeded in any twelve months period between November, 2008 to March, 2009, as a result whereof it was claimed that the income in respect of services rendered during this period was not liable to tax in India, also found a categorical mention at S.No. 6 of the Notes (supra). Thus in the backdrop of the aforesaid submissions, it was averred by the Ld. A.R that the lower authorities had gravely erred in loosing sight of the fact that though the assessee had reflected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous year , because the same coincides with the period of which the profit of the assessee is to be assessed. It was thus submitted by the Ld. A.R that the lower authorities had in a whimsical and fanciful manner summarily rejected the claim of the assessee that it had no service PE under Article 5(2)(k)(i) of the India U.K. Tax Treaty, and had most arbitrarily drawn adverse inferences in the hands of the assessee. That on the other hand the Ld. Departmental representative (for short D.R ) submitted that as the assessee had accepted in its return of income that it had a permanent establishment and as such offered its income for tax, therefore it was not permissible for the assessee to now raise a claim contrary to what has been claimed by him in the return of income itself. It was thus further submitted by the Ld. D.R that the CIT(A) had rightly discarded the contention of the assessee that as the threshold limits of 90 days in any twelve month period mentioned in Article 5(2)(k)(i) had exceeded only during the period April, 2008 to October,2008, therefore the assessee could not be held to be having a service PE in India for the period November, 2008 to March, 2009, and thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee had never accepted that it had a PE in India during the period November, 2008 to March, 2009, but rather as a matter of fact had in clear and unambiguous terms claimed that as the threshold limit of 90 days mentioned in Article 5(2)(k)(i) of the India U.K. tax treaty had not exceeded in any twelve months period between November, 2008 to March, 2009, therefore the income in respect of services rendered during the said period were not liable to tax in India. Thus from the aforesaid facts as they so remain, we are of the considered view that the lower authorities had failed to appreciate the facts as emerge from the records which were very much before them, in the right perspective, and thus erred in observing that the claim so made by the assessee during the assessment proceedings was not found to be in conformity with the fact that the assessee had on its own offered its income for tax in the return of income for the year under consideration. We are of the considered view that the Statement of total income appended by the asssessee along with its return of income, which thus forms part of the return of income filed by the assessee and clearly reveals the state of mind o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h for the sake of clarity are briefly culled out as under:- ARTICLE 5(2)(K)(i) BEFORE A.O : (i). The assessee as observed by us hereinabove had categorically stated in the Notes forming part of the Statement of total Income filed alongwith the return of income, that as the threshold limit of 90 days in any twelve month period mentioned in Article 5(2)(k)(i) had exceeded only during the period April, 2008 to October,2008, therefore the assessee could not be held to be having a service PE in India for the period November, 2008 to March, 2009. The said claim was thereafter raised by the assessee before the A.O during the course of the assessment proceedings, who though took cognizance of the said claim and reproduced the same in the body of the assessment order, but thereafter instead of adjudicating the said claim of the assessee on merits, rather justified the rejection of the same for the reason that the assessee had on its own offered its income for tax in the return of income, which conduct of the assessee , as per the A.O , proved that it accepted that it had a PE in India during the year under consideration. The A.O still further is found to have justi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee that it had no PE during the period Novemer, 2008 to March, 2009, which we find had been demonstrated at length by the assessee before the CIT(A) on the basis of strong reasonings, coupled with the fact that any interpretation to the contrary as against that adopted by the assessee, would lead to incongruous and illogical results, we find had not been dealt with by the CIT(A) at all. Thus to be brief and explicit, the CIT(A) on the basis of a non-speaking and unreasoned order had rejected the claim of the assessee that it had no PE for the period November, 2008 to March, 2009, and as such no income earned by it from services rendered during the said period was liable to be taxed in India. ARTICLE 5(2)(K)(ii) BEFORE A.O : (i). Though the assessee had categorically claimed in the Statement of total income filed alongwith the return of income, as under: Further assessee is of the view that the threshold of 30 days provided in Article 5(2)(k)(ii) applies only in the situation where the services are provided to an associated enterprise located in India. , however the A.O on its own assumed that the assessee had prepared the return of income on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the CIT(A) also falling short of words had chosen to reject the said claim of the assessee on the basis of his findings which are not found to be happily worded and can safely be characterized as nothing short of vague observations which had culminated into an unreasoned and a non-speaking order. We find that the contentions raised by the assessee at length before the CIT(A) in support of its claim under consideration had been put to rest by the CIT(A) on the basis of vague observations and a non-speaking order. We are sad to observe that the CIT(A) instead of meeting out the contentions of the assessee as were raised before him, on merits, had rather characterized the same as absurd , and shirked from the statutory obligation of disposing of the same on the basis of a well reasoned and speaking order. Thus the modus operandi so adopted by the CIT(A) in dealing with and disposing of the claim of the assessee and the contentions raised in support thereof, thus does not inspire much confidence. That we are afraid to say that the claim of the assessee that it did not had any PE in India during the period November, 2008 to March, 2009 and the contentions raised in support thereof, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of self suiting adverse inferences in the hands of the assessee. Thus in the backdrop of the aforesaid facts as they so remain, specifically the fact that the assessee had raised exhaustive averments before the lower authorities in support of its contention that it had no PE u/s 5(2)(k) of the India-U.K tax treaty for the period November, 2008 to March, 2009, specifically when such a claim as observed by us hereinabove, was clearly discernible from a perusal of the Statement of total income , wherein the assessee had categorically claimed that it was not having a PE for the aforesaid period, either under Article 5(2)(k)(i) or Article 5(2)(k)(ii), and had substantially at length during the course of proceedings before the A.O as well as the CIT(A) therein fortified his contention, which interpretation and explanation of the assessee to our understanding could not have been summarily rejected and scrapped on the basis of a vague, unreasoned and non-speaking order, which we are sad to observe had as a matter of fact happened in the present case. We have given a thoughtful consideration to the facts of he case and in light of the very fact that the lower authorities had failed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the other grounds of appeal so assailed by the assessee before us, we therefore refrain from adjudicating the said respective grounds of appeal at this stage, and in all fairness and in the very interest of justice restore the same for fresh adjudication to the file of the A.O. The A.O is herein directed that after adjudicating the issue as to whether the assessee had a PE in India, or not, during the aforesaid period, he shall thereafter proceed with and adjudicate the remaining issues emerging from the Ground of appeal No(s). 4 to 19 as had been restored by us for the purpose of fresh adjudication to his file. We thus in all fairness, and in the very interest of justice restore the matter to the file of A.O for fresh adjudication of the issues pertaining to and emerging from the Ground of appeal No.(s). 4 to 19 so assailed by the assessee before us. The A.O is herein directed to pass a speaking order as regards the issue under consideration, after duly considering all the contentions of the assessee. Needless to say, the A.O shall afford reasonable opportunity of being heard to the assessee during the course of the set aside proceedings and the assessee shall remain at a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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