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TMI Blog2023 (7) TMI 343X X X X Extracts X X X X X X X X Extracts X X X X ..... d he also represents his clients before ITAT Benches. It is not the case of the Ld.CIT-DR that there is any financial interest, personal interest between the client or any of the Member constituting the Bench neither it is the case of the Ld.CIT-DR that any of the Member of ITAT constituting the Bench has represented the client during their professional services. This is a simple case of lawyer Shri I. Dinesh has been appointed by President, ITAT to represent CPIO by virtue of power vested in him u/s. 255(5) and 255(6) of the Act, who happens to be a Member of ITAT. This tribunal has seen members from Indian Revenue Services who have all along been with the Revenue becoming members of this Tribunal and have unblemished record of dispensing justice without fear or favour. This Tribunal has also seen emergence of some of the finest members who have been representing the department in their professional careers later to become Members of the Tribunal and judges of the High Court and Supreme Court If these are to be considered as instance of Conflict of interest than no departmental representative and no member from Indian Revenue Services would be eligible to become members of tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e & Shri Arjun Raj, CA as Interveners on preliminary issue only For the Respondent : Dr. S. Palanikumar, CIT And Shri P. Sajit Kumar, JCIT ORDER PER MAHAVIR SINGH, VICE PRESIDENT: The appeal filed by the assessee in ITA No.1643/CHNY/2019 is directed against the order of the Commissioner of Income Tax (International Taxation), Chennai in No.CIT/IT/CHE/ 113(263)2018- 19 dated 29.03.2019. The assessment was framed by the DCIT, International Taxation -1 & 1(2), Chennai for the assessment year 2014-15 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter the 'Act') vide order dated 07.12.2016. The appeal in IT(TP)A 101/CHNY/2018 is arising out of the order of the DCIT, International Taxation -1 (1), Chennai for the assessment year 2015-16 u/s. 143(3) r.w.s. 144C(13) of the Act vide order dated 25.10.2018 pursuant to the directions of the Dispute Resolution Panel, Bengaluru dated 24.09.2018. 2. When these two appeals were called for hearing, the ld.CITDR, Dr. S. Palanikumar along with ld. Senior DR, Shri P. Sajit Kumar raised preliminary objection on ''conflict of interest'' in case these two appeals will be argued by Shri Dinesh Inbavadivu belonging to M/s. V. Ramachandran Advocate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en and presented the case on behalf of the Respondent and the Respondent, Sri.Manoj Kumar Agarwal, CPIO chose to remain silent. Since these advocates Shri Dinesh Inbavadivu of M/s V Ramachandran Advocates and Shri Arjun of Sriraman Advocates are regularly appearing before ITAT, Chennai in representing their clients against Revenue, it is my duty to bring the following observations and reservations to your kind perusal; a). As the said counsels have been appointed by CPIO, ITAT and they have represented CPIO of ITAT, there is direct case of 'conflict of interest' as they being the counsels of the ITAT, Chennai cannot be presenting their clients cases before the members of the ITAT, who are again their clients b). It is a case of 'conflict of interest' and it will jeopardize the interest of revenue in Income tax appeal proceedings before ITAT, Chennai. c). To maintain the neutrality and impartiality it is brought on record that the above-mentioned advocates cannot represent their clients before ITAT, Chennai from date of appointment of these counsels by ITAT, Chennai. Yours sincerely, Sd/- (S. Palanikumar) Commissioner of Income-tax (DR) D' Bench, ITAT, Chennai Copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 26-04-2023 1 2 Written submission given by Sr.AR of C Bench 2 3 Copy of the email dated 18-04-2023 addressed by Shri Dinesh Inbavadivu 3 4 Written submission dated 17-04-2023 filed by Shri Dinesh Inbavadivu on behalf of respondent, ITAT to CIC 4 5 Copy of the office memorandum of Ministry of Law and Justice dated 16-01-2015 5 6 Acknowledgement of submission made by the appellant to CIC on 19-04-2023 at 03:24 PM 6 7 Appellate tribunal code of ethics for the members issued by the then President ITAT 20-06-2008 7 8 Copy of order of CIC dated 19-04-2023 8 2.2 The ld.CIT-DR argued that it is evident from the email dated 18.04.2023 of Shri I. Dinesh, wherein he claimed that he has been authorized to appear on behalf of CPIO ITAT, RTI Cell, Chennai Benches before CIC. This one document is sufficient, according to him, that he is the counsel for ITAT, Chennai Benches and hence, representation of appeals of his assessees cases will be direct case of 'conflict of interest' for the Revenue. He stated that Shri I. Dinesh also filed a detailed written submission before CIC on behalf of CPIO, ITAT, Chennai Benches. He argued that there is no dispute that Shri I. Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Conferencing, the contract agreement entered between ITAT and the service provider Godrej and Boyce Mfg Co Ltd etc were revealed to these private counsels engaged by ITAT and it was referred by these advocates in their written submission for not providing the information (video recordings) sought under RTI Act. However, it was not shared when RTI application was filed. It shows the close proximity of these advocates with ITAT Chennai. Neither CPIO nor First Appellate Authority has cited this reason in their proceedings dated 14.3.2022 and 15.12.2022 at the time of rejecting the RTI application and appeal. It was brought to the notice only by Sri. Dinesh Inbavadivu in his written submission filed on 18.04.2023 with CIC just one day prior to the date of hearing. This proves the 'conflict of interest' once again. He further stated that the issue of 'conflict of interest' is a fallout of this RTI proceedings where ITAT authorized the private advocates on behalf of Chennai ITAT benches who are regularly representing various assessees against Revenue before the same ITAT. As these counsels represented ITAT before CIC, the issue of 'conflict of interest' was brought to the notice of Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal/cross objection/ Miscellaneous Application etc. His function commences the moment appeal is filed in the Registry of the Tribunal either by the Department or by the assessee. The Ld. counsel submitted that unfortunately the Ld.DR blocked disposal of appeal proceedings in this case and also other cases during almost fifteen days wherever Sh I Dinesh is representing. The ld.counsel drew our attention to the procedure of filing Reference Application before the Tribunal and he cited an instance of ITAT Cochin Bench, wherein the Ld.DR has filed an application before the Tribunal. The moot question was whether that Misc. Application, filed by DR, can be entertained or not. The ITAT, Cochin Bench had answered this in the case of DCIT vs. Saraj Trading Corporation, 73 TTJ 741 (2001). In that case, according to the AR of the assessee, as per sub-section (2) of section 254 of the Act is to the effect that the ITAT may, at any time within four years from the date of the order, with a view to rectify any mistake apparent from the record, amend any order passed by it under sub- section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the AO. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city. 3.2 The second issue raised by the ld.CIT DR-in his letter dated 26.04.2023 is, it is a case of 'Conflict of Interest' and it will jeopardize the interest of revenue in the appeal proceedings before the ITAT, Chennai. The ld.counsel submitted that had Shri I Dinesh appeared for any matter for any Member or Vice-President of the Tribunal as a party in the proceedings as an individual, then possibly there may be bias, because he has represented the Members in their individual capacity, but in this case it is not so. In this case, Shri Dinesh has defended the Tribunal as an institution. There is a clear distinction between administrative functions and judicial functions of the Tribunal. The ld.counsel further stated that proceedings before the CIC is purely on administrative side and is nothing to do with the quasi-judicial functions. Therefore, since the engagement of Shri I Dinesh before the CIC by the ITAT purely comes under administrative side and nothing to do with quasi judicial function which Shri I Dinesh has defended. The ld.counsel also drew our attention to the procedures followed by the Hon'ble High Court for instance, as per their cause lists, wherein is mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Department, wherein at Sr.No.268 for the O/o.CIT DR, the CPIO is ITO (HQrts) in the O/o. CIT DR, ITAT, Chennai-90 and Appellate Authority is CIT (DR)(Admn), Besant Nagar, Chennai-90. So, the CIT-DR is appellate authority. Whether it can be stated that CIT-DR is an income-tax authority and he cannot act an appellate authority? The roles are totally different. Under the RTI Act, information procedure is purely administrative side and nothing to do with the quasi- judicial power. Getting information or not getting information is not going to affect the powers or function or remedies under the Act. Therefore, it is a frivolous petition filed by the Ld CIT-DR. 3.4 The learned counsel refers to Office Memorandum dated 16.01.2015 issued by Ministry of Law & Justice as stated in the written submissions of Ld.CIT-DR to say that engagement of the counsel Shri I Dinesh itself is wrong. But, Shri I Dinesh went before CIC and succeeded. The Ld.counsel reiterated last sentence of the said Office Memorandum wherein it is mentioned as "except in exceptional circumstances warranting emergent action in public interest". Therefore, exigency of the situation warranted immediate engagem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in these circumstances cannot be accepted. We, therefore, hold the first respondent guilty of contempt of Court. Looking, however, to the fact that he has since retired as the Law Secretary and is not in a position to inflict further damage , the ends of justice will be met if he is fined a sum of Rs. 2,000/- as punishment for contempt. We order accordingly." Therefore, the Ld.counsel for the assessee submitted that contempt proceedings can be initiated by this Tribunal against the Ld. CIT-DR both on judicial as well as administrative side, because these proceedings arose on administrative side and in fitness of things, contempt proceedings may be initiated against the Ld. CIT-DR for filing of such frivolous Misc. Application. 3.6 The learned counsel for the assessee also refers 'Independent functioning of Tribunal' wherein it is stated that to begin with Finance Department of the Government of India (Central Board of Revenue), was initially in-charge of the ITAT. However from 30.05.1942 in deference of public opinion, the ITAT was put in the charge of Legislative Department, the predecessor of Ministry of Law & Justice. As stated by the then Secretary of Ministry of Law, Shri R.S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Chartered Accountants. So far as the later are concerned, there can be no reason to think that they cannot be independent. The independence of the members recruited to the Tribunal from the officers of the Income Tax Department is secured by so arranging things that they cannot look forward to anything from the Income tax Department or the Ministry of Finance they cannot go back to higher posts in that Department. Their promotion and tenure of office are not controlled by the Ministry of Finance. These are in the hands of the Ministry of Law." 3.7 The learned counsel also drew our attention to the 115th report of Law Commission while examining the necessity and expediency of setting up National Tax Court vis-à-vis a Tribunal under Article 323B complimented working of the Tribunal in the following words:- "There is near unanimity of opinion that Income Tax Appellate Tribunal has immensely justified its existence and largely vindicated the trust reposed in it. It has, therefore, to be retained with its regional jurisdiction. It would be the fact finding authority." Learned counsel submitted that instead of finding of facts merely on suspicion, Misc. Applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able, then such contracts shall be entered only with the prior permission of the superior authority." The learned counsel submitted that the above conduct rules are no way concerned and irrelevant with the Misc. Application filed by the Ld.CIT DR. The CIT-DR has only violated conduct rules by filing this Misc. Application. The ld.counsel also submitted that the CIT-DR has raised the issues of 'conflict of interest', dual representation, adverse interests, personal interests, business relationships, previous involvement and extrajudicial activities only on assumption of bias, which is not so in this application. 4. Another Senior Counsel Shri S Sridhar Advocate also interjected for the reason that ld.CIT-DR, Dr.S. Palanikumar and ld. Senior DR Shri P. Sajit Kumar, is objecting to appearance of Shri Arjun, Advocate. He submitted that his name is N. Arjun Raj, Chartered Accountant and he is not advocate as alleged by revenue. He referred to various correspondence filed by Revenue before the Benches on various dates in different cases. He submitted that the 'conflict of interest' alleged by Dr. S. Palanikumar, CIT-DR Chennai 'D' Bench on Shri N. Arjun Raj, CA appearing on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e objections for making appearance by N. Arjun Raj C.A. by Dr. S. Palanikumar is a serious issue to be noticed by this Bench by providing appropriate solution/decision and the obstruction of the judicial proceedings and discharging the professional function by N. Arjun Raj as an officer of this Court to defend his client is a criminal offence punishable in terms of Sections 186, 166, 228, 499 and other related provisions of The Indian Penal Code 1860.The Chartered Accountants Act, 1949 is an act of Parliament and Shri N. Arjun Raj is holding the Certificate of Practise under the said Central Act. Therefore, he has every right to appear before this Bench as he is entitled to legally and the objections are accordingly baseless, absurd, mis-directed, motivated and not sustainable both on facts and in law. Moreover, Shri N. Arjun Raj, even on the presumption, is one of the Counsels represented CPIO, ITAT before the CIC under the RTI Act, the said professional function undertaken by him is only limited to the said matter and therefore, the presumption of 'conflict of interest' based on the wrong further presumption of Shri N. Arjun Raj, CA holding General POA (Retainer) on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on this preliminary untenable objection before the CBDT for information and appropriate action. 5. In reply, the learned CIT-DR, Dr.S. Palani Kumar argued on the point of possibility of bias submitted that it is a simple letter, he has handed over to the Asst. Registrar, ITAT to bring the issue to the notice of the Bench. He submitted that he has received one mail from Shri I Dinesh saying that he received hearing notice of CIC dated 29.03.2023 and the CIC has posted the case for hearing by mentioning appellant's name and CPIO's name. On 29.03.2023 when he has received the notice( stated by DR S Palanikumar but not fact. Fact is that the notice is dated 29.03.2023 but received on 10.04.2023), it required to file some written submissions in support of that case and accordingly he has filed and a copy was served on the CPIO on 15.04.2023 in connection with RTI matter. On 18.04.2023 there was e-mail received from Shri I Dinesh at 11.39 saying that written submissions filed along with reference and the above appeal was posted for hearing before CIC on 19.04.2023 and Shri I Dinesh has been authorized to appear on behalf of ITAT, Chennai and written submissions were attached thereto. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench intervened and observed that 'if this is an administrative issue why the Ld.CIT-DR has raised it before the Bench. In case it is raised, bench is duty bound to decide this issue. 7. At this juncture, the learned counsel brought to the notice of the Bench stating that one application made by the other DR, in other Bench, that in a case before CIC filed by a colleague officer against ITAT with respect to an application submitted under RTI Act, the officer on 19.04.2023 accompanied the colleague officer to the venue fixed for hearing through video conferencing just to have an experience as to how the proceedings before CIC are conducted. When a colleague officer can go along with DR, then why not Shri Arjun could go along with Shri I Dinesh. But, the ld.CIT-DR stated that the crux of the issue was "in two of the appeals, arguments of the DR was not recorded" and therefore, video recording footage was sought for. In that case, first CPIO had taken one decision and therefore, we went to CIC because the CPIO has given a reply that entire judicial proceedings were not recorded. For this purpose, the ITAT has engaged two counsels and was given SOP and contract agreement entered into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but are human beings. The Bench observed that if the CIT-DR don't want the appearance of Shri I Dinesh, as an Advocate before ITAT, it is better they can approach the Bar Council of India. In reply, the Ld.DR submitted that he is requesting the bench to take a call. If the CPIO has given vakalath to Shri I Dinesh, then the CPIO has to recuse himself. If CPIO has authorized Shri I Dinesh, then the CPIO should recuse himself from hearing wherever Shri I Dinesh is appearing before ITAT. He argued that because of vakalath has been given by the CPIO, ITAT to Shri Dinesh, some sort of relationship has happened, so, the concerned Member has to recuse himself from hearing Shri I Dinesh in the ITAT and it is purely conscious issue. He also argued that since the administrative issue is pending, not to continue with hearing of Shri I Dinesh in order to prevent any further damage. 10.1 The Bench posed a query to the Ld.DR as to whether CPIO has given vakalath in his personal case in individual capacity or as CPIO in dual capacity? The Govt. of India has appointed him CPIO of ITAT under RTI Act and he is also discharging duties as Accountant Member of the ITAT, Chennai, for which the Ld.DR rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng before ITAT regularly for his assessees] was engaged by ITAT to argue on behalf of CPIO, ITAT Chennai. This is totally false and contumacious argument and beyond facts on record. Hence as far as the objection of Dr S Palanikumar is concerned the same is rejected as totally false and without any basis and beyond facts on record. 11.1 Now the question arises, whether application dated 26.04.2023 objecting appearance, before Tribunal, of Shri I. Dinesh belonging to Sri Ramachandran Advocates and others of his group and Shri N Arjun Raj(Chartered Accountant not an Advocate) of Sriram Advocates is a direct case of 'conflict of interest' as they appear before ITAT in their clients cases. The allegation of Dr. S. Palanikumar, CIT-DR is that as the said counsels have been appointed by CPIO, ITAT and they have represented CPIO, ITAT before CIC, there is a direct case of 'conflict of interest' as they being counsel of the ITAT, Chennai cannot present their clients case before the Members of ITAT, who were again their clients. According to him, it is direct case of 'conflict of interest' and it will jeopardize the interest of Revenue in income-tax proceedings before ITAT, Chennai. 11.2 F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... occurs when an individual, as a judge, is in a position where their personal, financial, previous involvement and extra judicial activities could potentially influence their judgment or decision making abilities in an unfair or biased manner but in the present case before us none of the situation is prevalent either from lawyers representing their cases or the Members of Tribunal conducting the Benches. In the instant case, Shri I. Dinesh as authorized representative of APIO, ITAT Chennai represented ITAT before CIC and he also represents his clients before ITAT Benches. It is not the case of the Ld.CIT-DR that there is any financial interest, personal interest between the client or any of the Member constituting the Bench neither it is the case of the Ld.CIT-DR that any of the Member of ITAT constituting the Bench has represented the client during their professional services. This is a simple case of lawyer Shri I. Dinesh has been appointed by President, ITAT to represent CPIO by virtue of power vested in him u/s. 255(5) and 255(6) of the Act, who happens to be a Member of ITAT. Ld. Counsel before us filed few of instances by filing a judgment of Hon'ble Madras High Court in W.P N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has himself tried to obstruct Shri I. Dinesh and his firm M/s. V.Ramachandran Advocates from appearing before ITAT. Here the simple litigation was before CIC where the order of CPIO is to be defended by the CPIO/APIO of ITAT, Chennai Benches, RTI Cell and for this purpose, ITAT have engaged advocate Shri I. Dinesh of Shri V. Ramachandran Advocates and which was successfully defended by him. APIO after taking due permissions from the Competent Authority i.e., President of ITAT has appointed Shri I. Dinesh as counsel to argue before CIC in RTI appeal filed by one Dr S. Palanikumar. 11.6.1 The personal Capacity of Ld. CIT-DR Dr. S. Palanikumar and not official. It is not known whether Dr. S. Palanikumar has filed this appeal before CIC in his individual capacity or as CIT-DR. It is neither explained nor replied by Dr. S. Palanikumar, whether any prior approval from competent authority is obtained or not ? Whether the AO has consented in filing of this RTI or not ? This has not been answered by Dr. S. Palanikumar despite queries raised from Bench. In case, the appeal before CIC is filed by Dr.S. Palanikumar in personal capacity, he has no business to raise this objection before Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the competent authority. Hence in our view, the ld.CIT-DR has no locus standi to file this impugned application and further argue the same. It seems that ld.CIT-DR is acting in his individual or personal capacity as an aggrieved party for the reasons known to him. Hence, for this reason also this petition is dismissed as not-maintainable. 11.8 One more fact is noted here, that on 19.04.2023 Dr.S. Palanikumar, Ld.CIT-DR filed adjournment petitions enblock in Bench 'D', which is his assigned Bench by the Department, for the reasons stated that he is assigned another official duty and hence, all the appeals fixed on 19.04.2023 before 'D' bench and assigned to him be adjourned. But it is noted that and fact brought before the Bench that Dr. S. Palanikumar was to attend the hearing before CIC, Delhi through VC at Chennai at 1.15 p.m. but, he did not attend that hearing also as is evident from the order of CIC. It means that Ld.CIT-DR in the capacity of DR of 'D' Bench sought for an adjournment of 'D' Bench listed cases including stay granted matters, which were posted for hearing on 19.04.2023 by stating that he was on another official assignment connected with Tribunal before anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application dated 19.04.2023 by ld.CIT-DR is pitted as preliminary objection to cases to be represented by the Shri I. Dinesh and others and is a quintessential example of obstruction of justice. While it is a undisputed fact that Shri I. Dinesh has been appointed to represent ITAT, duly authorised by the President of the Tribunal through the registry, in discharging his administrative function, the present application is preferred to obstruct the judicial function of the Bench in disposing off the appeals. By this application the functioning of the bench has been disrupted and obstructed. We are of the view that it is imperative and it is compelling that functioning of the bench should not be put to mockery by means of such frivolous, mischievous, illegal and baseless applications which has successfully stalled a judicial proceeding without any substance. If application of such nature is entertained and if such application could stand as an impediment to the tribunal functioning than it would result in untold misery to the tax payers and therefore it is just and expedient to hear the present application as a preliminary issue to the appeal intended for hearing and obstructed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R S Palanikumar LD CIT DR is representing the AO, we expect him to be conversant with open Court crafts and procedures, which should not hindering the justice delivery system. We, therefore, deprecate this kind of behaviour of Dr.S.Palani Kumar and advise the Revenue to give proper training to him before he is posted in any judicial forum. Since, he has obstructed judicial functioning of the Tribunal by filing frivolous application and letters, we are of the considered view that it is a fit case for imposing a cost, but we are refraining ourselves from imposing any cost as income tax department will take everything into consideration. We further direct the Registry to send a copy of this order to the Chairman, Central Board of Direct Taxes, New Delhi, and also to the Principal Chief Commissioner of Income Tax of Tamil Nadu & Puducherry, for necessary information. Accordingly, the preliminary objection raised by ld.CIT-DR, Dr.S. Palanikumar is rejected. IT(TP)A No.101/CHNY/2018 12. The only issue in this appeal of assessee is as regards to the order of Assessing Officer passed on the directions of the Dispute Resolution Panel concluding that the guarantee fee received by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diaries which are resident companies of India and in term of that received loans from foreign banks and the loan was availed in India. According to AO, since the loans were availed in India, the income accrued from the guarantee fee has arisen in India only. According to AO, the guarantee fee is not in the nature of business income, since the assessee company was predominantly engaged in the manufacturing business and not in the business of providing corporate / bank guarantee to earn income on regular basis. The AO noted that the guarantee agreement is entered into for the limited purpose of enabling its subsidiaries to secure loans and the guarantee income is incidental in nature, since the assessee was not in the business of providing corporate/bank guarantee to earn income. The AO noted that the guarantee fee cannot be treated as business income, which in the absence of permanent establishment (PE) in India is not taxable in India under Article 7 of the India Republic of Korea Tax Treaty. The AO noted that guarantee fee received by assessee of Rs. 5,22,88,362/- from Indian subsidiaries namely DISPL and KMSIPL is accrued and arised in India. Hence, he proposed to make assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 5,22,88,362/- to tax. Aggrieved assessee preferred appeal before the Tribunal. 14. Before us, the ld.counsel for the assessee drew our attention to the additional ground raised before DRP stating that guarantee fee received by assessee is not taxable in India inasmuch as the Indo-Korean DTAA under Article 23, "Other Income" clearly clarifies the position that the same is taxable in the contracting state i.e., Korea only. The ld.counsel for the assessee, during the course of hearing drew our attention to pages 68 to 98 of assessee's paperbook and particularly at page 93, wherein Article 23 defines where 'other income' is taxable. The Article 23 reads as under:- "Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention, shall be taxable only in that State." In view of the above Article, the ld.counsel for the assessee stated that the DRP failed to adjudicate the additional ground raised in respect of taxation of guarantee fee as per Indo-Korea DTAA. The ld.counsel argued that the AO as well as the DRP having accepted the fact that the guarantee fee income falls under 'income from other sources' and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or scrutiny whereas, it was duly processed u/s 143(1) of the IT Act by accepting the returned income. In AY 2018-19, the assessee did not admit this guarantee fee income accrued to them in its return of income filed on 28.03.2019. However, TDS credit of Rs. 1,28,71,498/- was claimed by the assessee. In the AY 2018-19, the assessee admitted only the royalty income received. In the AYs 2014-15 and 2015-16, the assessee raised a common ground that by virtue of Article-22 of Indo-Korea DTAA, the other income shall be taxable only in the contracting state, ie. Korea. However, this ground is devoid of any merit that the assessee themselves filed the return of income and admitted the guarantee fee accrued in India that was subsequently paid by the subsidiaries, carrying out business in India as per section 5(2) and section 9 of the IT Act, 1961. The ld.DR stated that the assessee relied upon the decision of ITAT, Mumbai in the case Capgemini SA v. ADIT in ITA No. 7198/Mum/2012 in support of its contention but the facts and circumstances of this case is not at all relevant to the facts of the assessee. In the assessee's case, the assessee themselves duly admitted the income accrued in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No.547/MUM/2022 dated 09.11.2022, wherein the Tribunal has clearly distinguished the decision of Johnson Mathey Public Ltd., supra. In term of the above, the ld.counsel for the assessee again made emphasis on Article 23 of Indo-Korea DTAA which specifically provides that taxability of 'other income' is only in Korea i.e., contracting state and not in India. Hence, he requested the Bench to set aside the orders of Assessing Officer and that of the DRP and allow this additional ground raised before DRP. 17. We have heard rival contentions and gone through facts and circumstances of the case. We noted that the assessee is a foreign company incorporated in Korea which is engaged in the manufacture of automobile and auto parts. During financial year 2014-15 relevant to assessment year 2015-16, the assessee entered into guarantee agreement with its subsidiaries DISPL and KMSIPL to provide guarantees to foreign banks namely Standard Chartered Bank to provide loan to above subsidiary companies. Pursuant to guarantee agreements, the assessee received a sum of Rs. 5,22,88,362/- from its subsidiaries after deducting TDS @ 10%. We noted that the Assessing Officer in his draft assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of M/s. Draegerwerk AG & Co. KGAA, wherein while dealing with Indo-German Treaty it has clearly distinguished the decision cited by ld.CIT-DR. We noted that this issue has been considered by Co-ordinate Bench of Mumbai in the case of Capgemini SA vs. DCIT (International Taxation) in ITA No.6323/Mum/2016, dated 09.01.2017, wherein the Tribunal considering another decision of the same assessee for AY 2012-13, in ITA No.888/MUM/2016, order dated 13.07.2016 and further following AY 2009-10 in ITA No.7198/MUM/2012, order dated 28.03.2016 held that the guarantee commission received by French Company in that case neither accrued in India nor deemed to be accrued in India and therefore, not taxable in India under the Act. For this, the Tribunal observed in para 2.4 as under:- "2.4 If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld.representative counsels, if kept in juxtaposition and analyzed, broadly, the ld.DRP has followed its own order, in the case of assessee, for Assessment Year 2012-13 on the reasons that the Tribunal has not still ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer held the guarantee commission of Rs. 33,40,347/- as taxable. 5. At the time of hearing, the learned representative for the assessee pointed out that an identical controversy was considered by the Mumbai Bench of the Tribunal in the assessee's own case for Assessment Year 2009-10 vide ITA No. 7198/Mum/2012 dated 28.3.2016. The relevant discussion in the order of the Tribunal dated 28.3.2016 (supra) reads as under :- "3. Rival contentions have been heard and record perused. Facts in brief are that the assessee is a resident of France and does not have a permanent establishment in India. During the year assessee has given a corporate guarantee BNP Paribas, a French Bank in France, on behalf of its various subsidiaries worldwide. During the year under consideration, in India, two subsidiaries of the assessee M/s.Capgemini India Pvt. Ltd. and Capgemini Business Services (India) Ltd. were sanctioned credit facilities by the Indian Branches of BNP Paribas, which credit facilities to the extent of USD 15 million4and 2 million respectively, were secured by the said corporate guarantee given by the assessee. The assessee has charged guarantee commission @ 0.5% per annum fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be taxed in India only if arises in India and since, in the instant case, the income arose in France, as the guarantee was given by the assessee, a French company to BNP Paribas, a French Bank, in France, therefore, Article-23.3 has no applicability as income arose out of India. Respectfully, following the decisions of the Tribunal, these grounds of the assessee are allowed." 17.1 In view of the above and following Article 23 of Indo-Korea DTAA which specifically provides that taxability of 'other income' is only in the contracting state and in the present case, the contracting state is Korea and not India, hence taxability under the Income Tax Act is not at all desirable. Hence, we delete the addition and allow this appeal of assessee on this very issue. The appeal of the assessee is allowed. ITA No.1643/CHNY/2019 in AY 2014-15 18. We noted that the issue in assessment year 2014-15 in the present appeal is as regards to the order of CIT, International Taxation invoking the provisions of section 263 of the Act and setting aside the assessment framed u/s. 143(3) of the Act and concluding that the guarantee fee received by assessee accrues and arises in India and same would be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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