BOMBAY HIGH COURT

DIMENSION DATA ASIA PACIFIC PTE... VS. DCIT

DATED : 12.10.2018

Summarised Judgement (Scroll for Complete Judgement)

Introduction : The petitioner is engaged in the business of profit management support services to group entities in Asia Pacific Region.

Facts of the Case : During Assessment Year 2011-12 the Petitioner has rendered management support services to its 100 percent Indian subsidiary, DDIL and has received a management fee of INR 225,691,365/- pursuant to the Agreement for provision of Management, General Support and Administrative services entered into between the said parties.

In the return of income filed for the year under consideration, DD Asia claimed the said receipt as nontaxable in India, not being in the nature of Fees for Technical Services under Article 12(4) of the India-Singapore Double Tax Avoidance Agreement (DTAA) as it had not made available to DDIL, any technical knowledge, experience, skill know-how or processes which enabled DDIL to apply the technology contained therein. Accordingly, refund was claimed for the taxes withheld on the management fees.

It is also argued that the Petitioner is not a permanent establishment in India because 9 days services was rendered which is less than the threshold of 30 days as per Article 5(6) of the India Singapore Double Tax Avoidance Agreement and 89 days activity was in India and 89 days stayed in connection with the shareholder activity / BSNL project for which the assessee company did not charge any fees and only travel cost was recovered, therefore, it is not essential period for PE but the Assessing Officer has wrongly accounted the same hence the provision of PE is not liable to be applicable upon the assessee.

It is also argued that without the prejudice of earlier arguments that the petitioner was remunerated on cost plus 10% basis but the Assessing Officer made arbitrary deduction of only 10% as expenses and taxed 90% of management fees as administrative expenses which is quite wrong.

Decision of Court : No doubt, in view of the said circumstances the maximum income that could be attributed in India would be Rs.2,05,17,397 (i.e. 10% of Rs.205,173,968). Consequently, tax demand raised to the tune of Rs.8,664,497 (i.e. 42.33% of Rs.2,05,17,397) which is far less than the tax deducted at source in case of the Petitioner (i.e. Rs.23,601,635).

Moreover TDS is also more than the tax liability if assessed upon the receipt @ 10%. In view of the said circumstances, it is argued that the assessee has a prima facie case in his favour. Reliance placed upon DIT V. NGC Network Asia LLC (2009) 313 ITR 187 (Bom).

We ordered accordingly till the pendency of the appeal. The case is fixed for 11.04.2016 for hearing.

There is no need to issue the notice to the parties being this order has been pronounced before parties and they are well aware of the date of hearing. The demand of the Revenue is hereby stayed till the disposal of the appeal. 8. As a result, stay application filed by the assess stands allowed.

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Complete Judgement

BOMBAY HIGH COURT

DIMENSION DATA ASIA PACIFIC PTE... VS. DCIT

DATED : 12.10.2018

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

WRIT PETITION NO. 921 OF 2018

Dimension Data Asia Pacific Pte. Ltd. (formerly known as Datacraft Asia Pte. Ltd.) C/o Dhruva Advisors LLP 1101 and 1002, 11th Floor, One India bulls Centre, Tower 2B, 841 Senapa Bapat Marg, Elphinstone Road, Mumbai-400 013	Vs.	The Dy. Commissioner of Income Tax (International Tax) 2(1)(2), 17th Floor, Air India Building, Nariman Point, Mumbai 400 021
( Appellant)		(Respondent)

Appellant by : Shri Sunil Motilala, AR

  Respondent by : Shri Samuel Darse, DR

Date of hearing :	26-07-2018
Date of pronouncement :	12-10-2018

ORAL JUDGEMENT :

1. At the request of the Learned Counsel appearing for both sides, the petition is taken up for final hearing and disposal at the stage of admission.

2. This petition under Article 226 of the Constitution of India challenges the assessment order dated 31st January, 2018 passed by the Assessing Officer under Section 143(3) read with Section 144C(13) read with Section 254 of the Income-Tax Act, 1961 (the Act). The impugned order dated 31st January, 2018 disposes of the assessment for Assessment Year 2011-12.

3. At the outset, the Revenue contended that, this petition should not be entertained as an alternate remedy of an Appeal under the Act from the impugned order is available. It is the petitioner's case that the impugned order is without jurisdiction as it has been filed in the face of the mandatory provisions of Section 144C of the Act. We would therefore examine the contention of the petitioner and if the same is found to be correct, then the plea of invoking the self impose rule of not entertaining the petition as an alternate relief is available will not apply. It is a settled position in law that where the order challenged is without jurisdiction, then a writ could be entertained, as held by the Supreme Court in Whirlpool Rane *3/12 * WP-921-2018 (SR.25) Friday, 6.7.2018 Corporation vs. Registration of Trade Marks, 1998 (8) SCC 1 .

4. Briefly, the facts relevant to this petition are as under :

(a) The petitioner is Foreign Company and entitled to the procedure provided under Section 144C of the Act as it is an eligible Assessee as defined therein.

(b) On 30th November, 2011 the petitioner filed its return of income for the Assessment Year 2011-12. In its return, it declared Nil income.

(c) Thereafter, on 20th March, 2015 a draft assessment order as required under Section 144C(1) of the Act was passed for Assessment Year 2011-12. The petitioner filed its objections in terms of Section 144C(2)(b) of the Act to the Rane *4/12 * WP-921-2018 (SR.25) Friday, 6.7.2018 Dispute Resolution Panel (DRP).

(d) On 4th December, 2015 the DRP issued directions on the petitioner's objection to the draft assessment order dated 20th March, 2015.

(e) Consequent to the directions of the DRP, an order of assessment dated 11th January, 2016 was passed under Section 143(3) read with Section 144(C)(13) of the Act.

5. The petitioner's challenge to the impugned order dated 31st January, 2018 is that, it is without jurisdiction as it is passed in defiance of Section 144C of the Act. The petitioner is a Foreign Company. Therefore, in terms of Section 144C of the Act, a separate procedure for passing Assessment orders and appellate procedure thereupon is provided for eligible assessee as defined in Section 144C(15) of the Act, which includes Foreign Company. Therefore, in terms thereof, the petitioner is Rane *5/12 * WP-921-2018 (SR.25) Friday, 6.7.2018 entitled to a draft assessment order being passed under Section 144(1) of the Act before the final assessment order as passed in this case under Section 143(3) read with Section 144(13) of the Act being the impugned order. Thus, the impugned order dated 31st January, 2018 ignores the mandate of Section 144C of the Act. Resultantly, it takes away the petitioner's right to object to the Draft Assessment Order before the DRP. Therefore, taking away a valuable right of the petitioner before the Assessing Officer passes a final order which can be subjected to appellate proceedings. In support, reliance was placed upon the decisions of this Court in International Air Transport Association Vs. Deputy Commissioner of Income-Tax, 241 Taxman 249 , and of Delhi High Court in JCB India Ltd. v. Deputy Commissioner of Income-tax, [2017] 85 taxmann.com 155 (Delhi).

6. As against the above, it is the respondent's contention that the order dated 5th May, 2017 of the Rane *6/12 * WP-921-2018 (SR.25) Friday, 6.7.2018 Tribunal does not set aside the original assessment order dated 11th January, 2016 and merely restores it to the Assessing Officer to give effect to its order dated 5 th May, 2017. This restoration to the Assessing Officer is only to determine the profits attributable to the P.E in India. In above circumstances, it is contended by the Revenue that the requirement of passing a draft assessment order in terms of Section 144C of the Act is not called for, as the order dated 31st January, 2018 is only an order giving effect to the order dated 5th May, 2017 of the Tribunal. The remedy, if any, of the petitioners according to the Revenue is filing an Appeal from the impugned order dated 31st January, 2018 to the Income Tax Appellate Tribunal and/or the Commissioner of Income-Tax (Appeals).

7. We note that, it is an undisputed position before us, that the petitioner is a Foreign Company and an eligible assessee as defined in Section 144C(15)(b)(ii) of the Act. It has been held by this Court in International Rane *7/12 * WP-921-2018 (SR.25) Friday, 6.7.2018 Air Transport Association (supra) that a Foreign Company is entitled to being assessed in accordance with Section 144C of the Act. It is the above Section 144C of the Act, which provides a separate scheme for the manner in which the Assessing Officer would pass assessment orders under the Act and a separate procedure to challenge an draft order i.e. before an assessment order which is subject to appeal under the Act is passed. The entire object is to ensure that the disputes of Foreign Companies are resolved expeditiously and final assessment orders are not passed without a re-look to the proposed order (draft order), if so desired by the Foreign Company. In essence, it obliges the Assessing Officer to first pass a draft of the proposed assessment order indicating the proposed variation in the income returned. This draft Assessment Order is to be passed under Section 144C(1) of the Act, which entitles an eligible assessee such as a Foreign Company to approach the DRP with its objection to the Draft Assessment order. This is so provided, so that an eligible assessee can have his Rane *8/12 * WP-921-2018 (SR.25) Friday, 6.7.2018 grievance addressed before the final assessment order is passed. In case, an assessee does not object to the draft assessment order, then a final assessment order is passed in terms of the draft assessment order by the Assessing Officer. It is only on passing of the final assessment order that the assessee, if aggrieved by it, would be able to approach the appellate authorities under the Act. These special rights are made available under Section 144C of the Act to an eligible assessee such as the petitioner. Therefore, it cannot be ignored by passing an final order under Section 144(13) of the Act without preceding it with a Draft Assessment order as required therein.

8. The contention of the Revenue that the requirement of passing a draft Assessment Order under Section 144C of the Act would only extend to the orders passed in the first round of proceedings or in respect of an order passed by the Assessing Officer in remand proceedings by the Tribunal which has entirely set aside the original assessment order. This distinction which is Rane *9/12 * WP-921-2018 (SR.25) Friday, 6.7.2018 sought to be drawn by the Revenue is not borne out by Section 144C of the Act. Infact, the Delhi High Court in JCB (India) Ltd. (supra) held that, even in partial remand proceedings from the Tribunal, the Assessing Officer is obliged to pass a draft assessment order under Section 144C(1) of the Act. According to us, the Assessing Officer, is obliged to, in terms of Section 144C of the Act to pass a Draft Assessment Order in all cases where he proposes to assess the Foreign Company under the Act by making a variation in the returned income. In this case, the impugned order dated 31st January, 2018 has been passed in terms of Section 143(3) read with Section 144C read with Section 254 of the Act and it certainly makes a variation to the returned income filed by the petitioner. This even if, one proceeds on the basis that the returned income stands varied by the order of the Tribunal in the first round, to the extent the petitioner accepts it. Therefore, the Assessing Officer correctly invokes Section 144C of the Act in the impugned order. Once having invoked Section 144C of the Act, the Assessing Officer is Rane *10/12 * WP-921-2018 (SR.25) Friday, 6.7.2018 obliged to comply with it in full and not partly. This impugned order was passed consequent to the order of the Tribunal dated 5th May, 2017 restoring some of the issues before it to the Assessing Officer for fresh adjudication.

9. This "fresh adjudication" itself would imply that it would be an order which would decide the lis between the parties, may not be entire lis, but the dispute which has been restored to the Assessing Officer. According to us, the order dated 31st January, 2018 is not an order merely giving an effect to the order of the Tribunal, but it is an assessment order which has invoked Section 143(3) of the Act and also Section 144C of the Act. This invocation of Section 144C of the Act has taken place as the Assessing Officer is of the view that it applies, then the requirement of Section 144C(1) of the Act has to be complied with before he can pass the impugned order invoking Section 144C(13) of the Act. Infact, Section 144C(13) of the Act can only be invoked in cases where the assessee has approached the DRP in terms of sub - Section 144(C)(2)(b) of the Act and the DRP gives direction in terms of Section 144C(5) of the Act. In this case, the assessment order has invoked Section 144C(13) of the Act without having passed the necessary draft Assessment Order under Section 144C(1) of the Act, which alone would make an direction under Section 144C(5) of the Act by the DRP possible. Thus, the impugned order is completely without jurisdiction.

10. Moreover, so far as a Foreign Company is concerned, the Parliament has provided a special procedure for its assessment and appeal in cases where the Assessing Officer does not accept the returned income. In this case, in the working out of the order dated 5 th May, 2017 of the Tribunal results in the returned income being varied, then the procedure of passing a draft assessment order under Section 144C(1) of the Act is mandatory and has to be complied with, which has not been done.

11. In the above view, the impugned order is Rane *12/12 * WP-921-2018 (SR.25) Friday, 6.7.2018 without jurisdiction. Thus, the plea of alternate remedy advanced by the Revenue so as to not entertain this petition, does not merit acceptance in the present facts.

12. In the above view, the impugned order dated 31st January, 2018 has been passed without complying with the mandatory requirements of Section 144C of the Act which is applicable to a Foreign Company such as the petitioner. Therefore, the impugned order is quashed and set aside. Needless to state, this order would not, in any way, stop the Revenue from taking such steps as are available to it in law and the petitioner also from contesting the action of the Revenue in accordance with law, if it so desires.

13. Petition allowed in above terms. No order as to costs.