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TMI Blog2022 (9) TMI 1236X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer wrongly assumed jurisdiction u/s 144C of the Act when there is no variation in the income returned by the assessee. See IPF INDIA PROPERTY CYPRUS (NO. 1) LTD. [ 2020 (2) TMI 1500 - ITAT MUMBAI] We hold that the AO wrongly assumed jurisdiction u/s 144C of the Act, and therefore, the final assessment order framed in Assessment Years 2007-08 and 2010-11 to 2015-16 are barred by limitation and accordingly, the impugned assessment orders are liable to be quashed as void ab initio. This additional ground is, accordingly, allowed. Determination of income - consideration for use of brand [ie for Royalties ] in India as liable td tax Tat 40% as Business Income under Article 7 instead of being liable to tax as Royalties [at 15%] under Article 13 of DTAA between UK and India - assessee moved an application u/r 29 of the ITAT Rules requesting for admission of additional evidences - HELD THAT:- It is true that the entire assessment has been based on the reading of the trade mark license agreement dated August 08, 2002. It is equally true that supplementary trade mark licence agreement dated April 04, 2013 changes the color of the entire transaction. Such an agreement which goes t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iating that there was no variation in income returned by the appellant and, therefore the impugned order passed by the Assessing Officer is void ab initio and, therefore, is liable to be quashed. 8. In all the captioned Assessment Years, the assessee has also moved an application for admission of additional evidences except in Assessment Years 2013-14, 2014-15 and 2015-16. 9. The ld. DR strongly objected to the additional evidences furnished by the assessee stating that additional evidences should have been furnished by way of a separate Paper Book. 10. A perusal of our record shows that this contention of the ld. DR is factually incorrect because as per order sheet entry dated 24.10.2011, this Bench has noted that the assessee has filed additional evidences by way of a separate paper book alongwith application u/r 29 of the ITAT Rules. 11. We further find that the assessee has, for the convenience of the Bench and the ld. DR, rearranged additional evidences and merged them in a common Paper book, though filed separately as per Rules on 24.10.2011. Additional evidences are accordingly placed on record. 12. The ld. DR also strongly objected to the admission of additional grounds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee as defined in Section 144C of the Act in respect of his income/loss, the Assessing Officer has made variation which is prejudicial to the interest of such assessee, the Assessing Officer is mandatorily required to pass proposed order of assessment, which is termed as Draft Assessment order . 20. Provisions of section 144C as they stood at the relevant point of time of the captioned Assessment Years read as under: The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. (15) For the purposes of this section,- (a) Dispute Resolution Panel means a collegium comprising of three Commissioners of Income-tax constituted by the Board54 for this purpose; (b) eligible assessee means,- (i ) any person in whose case the variation referred to in subsection (1) arises as a consequence of the order of the Transfer Pricing Officer pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s DTAA, the Assessing Officer has declined the said treaty protection on the ground that the assessee was not beneficial owner of the said interest, and, accordingly, brought the income is to tax@ 40% thereof. There is, quite clearly, no variation in the quantum of income. The question whether it was a case in which the Assessing Officer could have issued the draft assessment order, on the facts of this case, needs to be examined in the light of provisions of Section 144C(1) which provides that, The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward5 a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee [Emphasis, by underlining, supplied by us]. The assessee before us is a non-resident company incorporated, and fiscally domiciled, in Cyprus. Accordingly, in terms of Section 144C(15)(b)(ii), the assessee is an eligible assessee but then there is no change in the figure of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation [84a Words in the income or loss returned omitted by the Finance Act, 2020, w.e.f. 1-4-2020] which is prejudicial to the interest of such assessee. 9. A perusal of the aforesaid provisions shows that the Assessing Officer shall forward the draft of the proposed order if he proposes to make any variation in the income or loss returned. The aforestated proposal in the draft assessment order clearly show that the Assessing Officer did not intend to make any variation in the income of the assessee, therefore, the assessment order should have been framed as per the provisions of section 153 r.w.s. 143(3) of the Act meaning thereby that the assessment order dated 7-9-2018 is barred by limitation. 10. In the light of the facts mentioned elsewhere when considered within the provisions of section 144C(1) supra, we have no hesitation to hold that the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the course of the assessment proceedings before the expiry of the period to pass an assessment order. The TPO after considering the documents submitted by the assessee is to pass an order under Section 92CA(3) of the Act. As per Section 92CA (3A), the order has to be passed before the expiry of 60 days prior to the date on which the period of limitation under Section 153 expires. As per Section 153, no order of assessment can be passed at any time after the expiry of 21 months. As per 92CA (4), the assessing officer has to pass an order in conformity with the order of the TPO. After the receipt of the order from the TPO determining ALP, the assessing officer is to forward a draft assessment order to the assessee, who has an option either to file his acceptance of the variation of the assessment or file his objection to any such variation with the Dispute Resolution Panel and also the Assessing Officer. Sub-Section (5) of Section 144C of the Act provides that if any objections are raised by the assessee before the Dispute Resolution Panel, the Panel consisting of top and expert functionaries of the department, is empowered to issue such direction as it thinks fit for the guidan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion and Findings. 18. The main contentions of the Department, through their counsel are that Section 144C is a code in itself and hence on remand by the ITAT, the power of DRP to take up the dispute on additions by TPO, is not circumscribed by Section 153 and that in the absence of any express time limits contemplated under the Act, the time limits under Section 153 for reassessment cannot be read into Section 144C more particularly when the provisions of Section 153 are excluded by the non-obstante clause in section 144C(13) and hence the proceedings are not barred by limitation. Per contra, it has been contended by the learned senior counsels appearing for the respondent(s)/assessees that the outer time limit under Section 153 is applicable to every proceedings on remand and the department having slept over the issue for several years, cannot now redo the proceedings afresh, after certain rights have vested with the assessees. Even if specific provisions are not there to deal with this situation, the proceedings must be concluded within a reasonable time and hence the impugned proceedings are liable to be struck down and rightly done so by the learned Judge. 19. Admittedly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the appellants / revenue was to hold some water, they must have passed the draft assessment order immediately on receipt of the order from the Tribunal, but instead, notice was issued by the DRP. In any case, it is a far cry for the revenue as because no order has been passed for more than 5 years. 21. As held above, the assessment has to be concluded within 21 months when there is no reference and when there is a reference, it has to be concluded within 33 months. In the additional 12 months, the draft order is to be passed, the objections have to be filed, the DRP has to issue the directions and the final order is to be passed. The provisions under section 144C and section 153 are not mutually exclusive as both contain provisions relating to Section 92CA and are inter-dependant and overlapping. On remand, prior to amendment as per Section 153 (2A), the Assessing officer is given 12 months to pass a fresh assessment order. Therefore, it is incumbent on him to do so, irrespective of the fact that DRP has completed the hearing and issued the directions or not. As rightly held by the learned judge, we are of the view that the DRP ought to have concluded the proceedings within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to defeat the other provisions unless the court, in spite of its efforts, finds it impossible to effect reconciliation between them. (3) It has to be borne in mind by all the courts all the time that when there are two conflicting provisions in an Act, which cannot be reconciled with each other, they should be so interpreted that, if possible, effect should be given to both. This is the essence of the rule of harmonious construction . (4) The courts have also to keep in mind that an interpretation which reduces one of the provisions as a dead letter or useless lumber is not harmonious construction. (5) To harmonise is not to destroy any statutory provision or to render it otiose. (ii) CIT v. Hindustan Bulk Carriers, (2003) 3 SCC 57 : 2002 SCC OnLine SC 1226: 16. The courts will have to reject that construction which will defeat the plain intention of the legislature even though there may be some inexactitude in the language used. (See Salmon v. Duncombe [(1886) 11 AC 627 : 55 LJPC 69 : 55 LT 446 (PC)] AC at p. 634, Curtis v. Stovin [(1889) 22 QBD 513 : 58 LJQB 174 : 60 LT 772 (CA)] referred to in S. Teja Singh case [AIR 1959 SC 352 : (1959) 35 ITR 408]). 18. The statute must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same limited purpose to imply, even though there might be a larger time limit under Section 153, once the order of TPO is accepted or not objected to, causing a deeming fiction of acceptance, the final order is to be passed immediately. The object is to conclude the proceedings as expeditiously as possible and the authority need not wait for the last date to pass the orders. The limitation prescribed under the statute is for the assessing officer and therefore, it is his duty to pass order in time irrespective of whether the directions are received from DRP or not. As held by us above, the DRP will have no authority to issue directions after nine months and a further period of one month as per section 144C (13) and three months under section 153 (2A) is available, within which period no orders have been passed in the present cases. The reference made by the learned senior counsels on the judgments in Nokia India Private Ltd (supra) and Vedanta Ltd (Supra) is well founded. The timeline given under the Act is to be strictly followed. 30. The Hon'ble High Court concluded as under: (a) The provisions of Sections 144C and 153 are not mutually exclusive, but are rather mutually inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities below have erred in holding that the consideration for use of brand [ie for Royalties ] in India as liable td tax Tat 40%1 as Business Income under Article 7 instead of being liable to tax as Royalties [at 15%] under Article 13 of DTAA between UK and India. 3 The authorities below have erred holding that the assessee has a Permanent Establishment/ PE in India under Article 5 of DTAA between UK and India through the person responsible for paying the Royalty from India. 4. That the above grounds are independent and without prejudice to each other. 5. That the appellant seeks leave to add, amend, alter, abandon or substitute any of the above grounds at the time of heavy: of appeal. 34. The underlying facts in issues are that the assessee company is incorporated under the laws of England and Wales and is in the business of publishing and printing of books which contain the write up of selected different companies. Select Indian companies and their products get advertised through the said book. To bring out the book SuperBrand in respect of Indian companies and their products, the assessee has entered into an agreement with Shri Anmol Dar and as per the said agreement, Shri An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... royalty from the said company which was offered for tax as such in the return of income. The ld. counsel for the assessee further stated that this royalty was treated as business income by the Assessing Officer holding that Shri Anmol Dar is a DAPE of the assessee in terms of Article 5(4) of DTAA. The ld. counsel for the assessee vehemently stated that the Assessing Officer has not correctly appreciated the operations/activities undertaken by SuperBrand Pvt Ltd in India. 44. The ld. counsel for the assessee explained that in order to post facto record activities undertaken by SuperBrand India Pvt Ltd, it entered into a fresh trade mark licence agreement dated 04.04.2013 and which was made effective from 09.08.2002, which agreement goes to the root of the matter and has been filed as an additional evidence. 45. To this, the ld. DR vehemently stated that this agreement is nothing but an afterthought as the same was entered into in April 2013 and given retrospective effect from August 2002 as the assessee was well aware of the fate of original agreement dated August 08, 2002. 46. We have given thoughtful consideration to the submissions of the ld. counsel for the assessee and have al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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