9911796707
TMI Blog2024 (11) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO for not making enquiries regarding the commercial substance of the assessee in Singapore and whether it was a conduit company form for obtaining the tax benefits under the DTAA. The said observations were made only for the purposes of calling upon the assessee to show cause why the proceedings not be initiated u/s 263 of the Act. However, thereafter, the learned CIT had not put the issue regarding treaty shopping to the assessee. Undisputedly, the tentative opinion formed by the learned CIT that the assessee was a conduit company for the reasons as articulated in the order dated 25.03.2022, was not put to the assessee. Clearly in the circumstances, the assessee had not given any opportunity to satisfy the learned CIT regarding its view, which has found its way in the aforesaid order of the learned CIT s conclusion. We are unable to find any fault with the decision of ITAT in setting aside the order dated 25.03.2022 on the ground that the assessee was not afforded an opportunity to counter the allegation that it was a conduit company without any substance. - HON'BLE MR. JUSTICE VIBHU BAKHRU AND HON'BLE MS. JUSTICE SWARANA KANTA SHARMA For the Appellant Through: Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had also explained that it had entered into the agreements with the third-party channel partners as well as an Indian entity that is, CTDIPL, to carry out repairs and maintenance services in India on behalf of the assessee. The assessment proceedings culminated by the AO in its assessment order dated 25.12.2019, whereby the income returned by the assessee was accepted. 6. The learned CIT initiated the proceedings under Section 263 of the Act by issuance of a Show Cause Notice dated 01.02.2022 (hereafter SCN). The said SCN is not on record. However, a copy of the same has been handed over to this Court. The same indicates that the learned CIT had concluded that the AO had not conducted the necessary inquiries and verified the facts for accepting the assessee s claim that its income was not chargeable to tax under the Act by virtue of the DTAA. The learned CIT noted that the AO had not called for the relevant details or taken any steps to verify whether the assessee had a PE in India during the relevant period. It was also observed that the AO had not carried out any inquiry to ascertain whether any commercial substance existed in Singapore. And, whether the assessee was merely a con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 of India-USA DTAA. Clause (a) of Article 12 (7) deems income to arise in India if the payer is a resident in India. Even though make available threshold is also available under India-USA DTAA, the deeming provision under Article 12 (7) (a) of India-USA DTAA would create taxation of such service income in India as in this case, the payers are Indian customers-users. Therefore, a subsidiary was interposed in Singapore with a primary objective to get the benefits of India-Singapore DTAA. India-Singapore DTAA does not have an article similar to Article 12 (7) of the India-USA and at the same time it has make available threshold for service income to be liable for taxation in India. 13.10 In addition to the above, the transactions are characterized as sale of services instead of fees for services. This was made to the transaction the colour of business income. The business income is taxable in India only when the non-resident creates a PE in India. By this way, the income could neither be taxed in India as FTS nor as the business income. As a result, the assessee avoids payment of any tax in India year after year. 13.11 The taxpayer not only avoid payment of taxes in India but also i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h year and, therefore, passing an order by allowing the benefits of Indian-Singapore DTAA by following the order of earlier assessment year without making detailed enquiry to find out that the Assessee is involved in treaty shopping thereby making it ineligible to chain DTAA benefits which makes the assessment order erroneous being prejudicial to the interest of revenue in view of legal provision under Explanation (2) in clause (a) and (b) of section 263 of the I.T. Act, which deems an order erroneous and prejudicial to the interest of revenue if passed without enquiry? 11. Mr Bhatia, fairly states that if the Revenue does not succeed in the aforesaid question, the other questions as projected would not arise. 12. Mr Bhatia referred to the SCN and submitted that the same clearly mentioned the issue regarding the assessee being a conduit company. He relied on the following statement made in the said SCN: AO had not carried out any inquiry to ascertain whether there existed any commercial substance in Singapore and whether any tax avoidance arrangement was made where in the form of a conduit company with an objective to obtain tax benefits under the India-Singapore DTAA. 13. A plain ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
