DE BEERS UK LTD ( FORMERLY KNOWN AS THE DIAMOND TRADING CO LTD), MUMBAI v. DDOT (IT) 1(2), MUMBAI

ITA 1530/MUM/2011 | 2006-2007
Pronouncement Date: 13-11-2014 | Result: Allowed

Appeal Details

RSA Number 153019914 RSA 2011
Assessee PAN AACCT5530B
Bench Mumbai
Appeal Number ITA 1530/MUM/2011
Duration Of Justice 3 year(s) 8 month(s) 21 day(s)
Appellant DE BEERS UK LTD ( FORMERLY KNOWN AS THE DIAMOND TRADING CO LTD), MUMBAI
Respondent DDOT (IT) 1(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 13-11-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted L
Tribunal Order Date 13-11-2014
Date Of Final Hearing 13-11-2014
Next Hearing Date 13-11-2014
Assessment Year 2006-2007
Appeal Filed On 22-02-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL L BE NCH MUMBAI . !' #$ %&'( #) *+ # ' BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI N.K. BILLAIYA ACCOUNTANT MEMBER ./I .T.A. NO. 1530/MUM.2011 ( / ASSESSMENT YEAR : 2006-07 DE BEERS UK LIMITED (FORMERLY KNOWN AS THE DIAMOND TRADING CO. LTD. ) C/O M/S. S.R. BATILIBOI & CO. 1 ST FLOOR JALAN MILLS COMPOUND 95 GANPATRAO KADAM MARG LOWER PAREL MUMBAI-400 013 / VS. THE DY. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-1(2) SCINDIA HOUSE MUMBAI ./I .T.A. NO. 1530/MUM.2011 ( / ASSESSMENT YEAR : 2006-07 THE DY. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-1(2) SCINDIA HOUSE MUMBAI / VS. DE BEERS UK LIMITED (FORMERLY KNOWN AS THE DIAMOND TRADING CO. LTD. ) C/O M/S. S.R. BATILIBOI & CO. 1 ST FLOOR LOWER PAREL MUMBAI-400 013 +- #) ./ ./ ./ PAN/GIR NO. : AACCT 5530B ( -0 / APPELLANT ) .. ( 12-0 / RESPONDENT ) -0 3 # / ASSESSEE BY: SHRI M.P. LOHIA 12-0 4 3 # / DEPARTMENT BY: SHRI NARENDRA KUMAR 4 5) / DATE OF HEARING :13.11.2014 6 4 5) / DATE OF PRONOUNCEMENT :13.11.2014 ITA NOS. 1530 & 1765/M/2011 2 *#7 / O R D E R PER N.K. BILLAIYA AM: THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENU E ARE PREFERRED AGAINST THE ORDER OF THE LD. CIT(A)-10 MUMBAI DT. 31.12.2010 PERTAINING TO A.Y.2006-07. BOTH THESE APPEALS WERE HEARD TOGE THER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AN D BREVITY. ITA NO. 1530/MUM/2011 ASSESSEES APPEAL 2. THE ASSESSEE HAS RAISED THREE SUBSTANTIVE GROUN DS OF APPEAL. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT HE IS NOT PRESSING GROUND NO. 1. THEREFORE GROUND NO. 1 IS DISMISSED AS NOT PRESSED . 3. THE LD. COUNSEL FOR THE ASSESSEE FURTHER STATED THAT THE ISSUES RAISED VIDE GROUND NO. 2 & 3 HAVE ALREADY BEEN DECI DED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2007-08. THE LD. C OUNSEL SUPPLIED THE COPY OF THE TRIBUNAL ORDER. 4. THE LD. DEPARTMENTAL REPRESENTATIVE FAIRLY CONCE DED TO THIS. 5. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW AND THE ORDER OF THE TRIBUNAL IN ITA NO. 8831/M/2010 F OR A.Y. 2007-08. THE ISSUES RAISED VIDE GROUND NO. 2 OF THE PRESENT APPEAL ARE IDENTICAL TO THE ISSUE RAISED IN GROUND NO. 5 IN ITA NO. 8831/M /2010 WHICH HAS BEEN CONSIDERED BY THE TRIBUNAL AT PARA-7 OF ITS O RDER AND AT PARA- 7.31 ON PAGE-45 THE TRIBUNAL HELD AS UNDER: ITA NOS. 1530 & 1765/M/2011 3 IN VIEW OF THE FORE-GOING DISCUSSION AND FOR THE R EASONS GIVEN EARLIER WE ARE OF THE VIEW THAT THE PAYMENT FOR VAS RECEIVED BY THE ASSESSEE HAS TO BE CONSIDERED PARTLY AS ROYA LTY UNDER PARA 3(A) OF ARTICLE-13 BEING THE PAYMENT FOR VARIOUS TY PES OF INFORMATION OF COMMERCIAL NATURE ACQUIRED BASED ON EXPERIENCE PROVIDED TO SIGHTHOLDERS AND PARTLY AS FTS UNDER PA RA 4(A) BEING THE PAYMENT ATTRIBUTABLE TO THE SERVICES RENDERED B Y THE KAM OR THROUGH WORKSHOPS ETC. WHICH WERE ANCILLARY AND SU BSIDIARY TO APPLICATION OR ENJOYMENT OF THE INFORMATION OR AS FTS BEING PAYMENT FOR MARKETING CONSULTANCY SERVICES WHICH WE RE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF N AKSHATRA BRAND OR FOREVERMARK. THE AO WILL TAX THE PAYMENTS AS ROY ALTY AND FTS ACCORDINGLY. AS THE TAX RATE IS THE SAME FOR TAXATI ON OF ROYALTY AND FTS ATTRIBUTION OF THE PAYMENT TOWARDS ROYALTY AND FTS IS NOT NECESSARY. AS NO DISTINGUISHING FACTS/DECISION HAS BEEN BROUG HT TO OUR NOTICE BY THE LD. DR RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO ORDINATE BENCH GROUND NO. 2 IS DECIDED IN LINE WITH THE DEC ISION OF THE TRIBUNAL IN ITA NO. 8831/M/10. GROUND NO. 2 IS ACCORDINGLY DISMISSED. 6. THE ISSUES RAISED VIDE GROUND NO. 3 OF THE PRESE NT APPEAL ARE SIMILAR TO THE ISSUE RAISED VIDE GROUND NO. 6 IN IT A NO. 8831/M/10. THE TRIBUNAL HAS CONSIDERED THE ISSUE AT PARA-8 AT PAGE -46 OF THE ORDER AND AT PARA-8.3 THE TRIBUNAL HELD AS UNDER: WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MAT TER CAREFULLY. THE DISPUTE IS REGARDING ADDITION OF RS. 3 65 89 942/- TO THE VAS RECEIPTS ON ACCOUNT OF DISCREPANCIES WITH T HE FOUR PARTIES AS MENTIONED EARLIER WHICH HAD SHOWN MORE PAYMENTS THAN THE RECEIPTS DECLARED BY THE ASSESSEE. THE DISCREPANCY HAD BEEN EXPLAINED BY THE ASSESSEE DUE TO DIFFERENCE IN METH OD OF ACCOUNTING FOLLOWED BY THE TWO PARTIES. IT HAS BEEN CLAIMED THAT THE ASSESSEE WAS RAISING INVOICES ONLY TWICE A YEAR I.E. IN THE MONTHS OF JUNE AND DECEMBER OF THE RELEVANT YEAR I. E. ON SIX MONTHLY BASIS AND THEREFORE THE RECEIPTS OF LAST QUARTER OF THE PREVIOUS YEAR WERE ACCOUNTED IN THE CURRENT YEAR WH EREAS THE CONCERNED PARTY HAD SHOWN THE SAID INCOME IN THE EA RLIER YEAR ITA NOS. 1530 & 1765/M/2011 4 WHICH WAS THE REASON FOR DISCREPANCY. THERE WAS NO DISCREPANCY IN RESPECT OF INVOICES RAISED FOR THE PERIOD JULY T O DECEMBER BECAUSE THE PERIOD FELL IN THE SAME FINANCIAL YEAR FOR BOTH THE PARTIES. THE ASSESSEE HAD FILED A RECONCILIATION ST ATEMENT WHICH HAS BEEN PLACED AT PAGE-107 OF THE PAPER BOOK . IT HAS ALSO BEEN CLAIMED THAT THE ASSESSEE HAD BEEN FOLLOWING THE SA ME METHOD REGULARLY IN THE EARLIER YEAR WHICH HAD BEEN ACCEPT ED. THEREFORE IN OUR VIEW IT WILL NOT BE APPROPRIATE TO REJECT T HE METHOD FOLLOWED BY THE ASSESSEE WHICH HAS BEEN ACCEPTED BY THE DEPA RTMENT IN THE EARLIER YEAR. HOWEVER THE CLAIMS OF THE ASSESSEE IN RELATION TO THE DISCREPANCIES NEED VERIFICATION WITH RESPECT TO ORI GINAL DOCUMENTS SUCH AS INVOICES ETC. WE THEREFORE RESTORE THIS I SSUE TO THE FILE OF THE AO FOR PASSING A FRESH ORDER AFTER NECESSARY VE RIFICATION IN THE LIGHT OF THE OBSERVATIONS MADE ABOVE AND AFTER ALLO WING OPPORTUNITY OF HEARING TO THE ASSESSEE. AS THE RECONCILIATION STATEMENT HAS BEEN FILED BEF ORE THE AO AS STATED BY THE AR AND THE DR HAS NOT DISPUTED THE SA ME WE THEREFORE RESTORE THIS ISSUE TO THE FILE OF THE AO FOR PASSIN G A FRESH ORDER AFTER NECESSARY VERIFICATION IN THE LIGHT OF THE DETAILED OBSERVATIONS MADE BY THE TRIBUNAL IN ITA NO. 8831/M/10 FOR A.Y. 2007-08. GROUND NO. 3 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 1765/M/2011 REVENUES APPEAL 7. THE SOLE GRIEVANCE OF THE REVENUE RELATES TO THE LEVY OF INTEREST U/S. 234B OF THE ACT. 8. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE ISSUE RAISED BY THE REVENUE HAS BEEN DECIDED AGAINST THE REVENUE BY THE TRIBUNAL IN ITA NO. 1766/M/2011 FOR A.Y. 2005-06. 9. THE LD. DR COULD NOT BRING ANY DISTINGUISHING FA CT/DECISION TO CONTROVERT THE STATEMENT OF THE LD. AR. ITA NOS. 1530 & 1765/M/2011 5 10. WE HAVE CAREFULLY PERUSED THE ORDER OF THE TRI BUNAL IN ITA NO. 1766/M/2011. WE FIND THAT THE TRIBUNAL HAS CONSIDE RED A SIMILAR ISSUE AT PARA-6 OF ITS ORDER AND AT PARA-8 ON PAGE-3 OF ITS ORDER THE TRIBUNAL HELD AS UNDER: FROM THE ABOVE IT IS CLEAR THAT THE METHOD OF COMPU TATION OF ADVANCE TAX AS ENVISAGED IN SECTION 209 AND AS PER CLAUSE (D) OF SUB SECTION-1 OF THAT SECTION INCOME TAX CALCULATE D FOR THE PURPOSE OF ADVANCE TAX HAS TO BE REDUCED BY THE AMOUNT OF I NCOME TAX WHICH IS DEDUCTIBLE OR COLLECTIBLE AT SOURCE DURING THE SAID FINANCIAL YEAR. THEREFORE IF ANY INCOME IS SUBJECT TO DEDUCTION OF TAX AT SOURCE SAME HAS TO BE REDUCED FROM THE ADVA NCE TAX IRRESPECTIVE OF THE FACT WHETHER TAX HAS BEEN DEDUC TED AT SOURCE OR NOT BECAUSE OF THE WORDS DEDUCTIBLE / COLLECTABLE IN THE PROVISIONS. THE SAME VIEW WAS ALSO SUPPORTED THE JU DGMENT OF THE HONBLE JURISDICTIONAL COURT IN THE CASE OF NGC NET WORK ASIA LLC (313 ITR 197). THEREFORE CONSIDERING THE SETTLED N ATURE OF THE ISSUE WE ARE OF THE OPINION THAT THE GROUNDS RAISE D BY THE REVENUE SHOULD BE DECIDED IN FAVOUR OF THE ASSESSEE. ACCORD INGLY GROUNDS RAISED BY THE REVENUE ARE DISMISSED RESPECTFULLY FOLLOWING THE DECISION OF THE CO ORDI NATE BENCH GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 11. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE AND THE APPEAL FILED BY THE REV ENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.11.2014 SD/- SD/- (D.MANMOHAN ) (N.K. BILLAIYA) !' /VICE PRESIDENT #) *+ / ACCOUNTANT MEMBER MUMBAI; 8* DATED : 13.11.2014 . . ./ RJ SR. PS ITA NOS. 1530 & 1765/M/2011 6 *#7 *#7 *#7 *#7 4 44 4 15% 15% 15% 15% 9#% 5 9#% 5 9#% 5 9#% 5 / COPY OF THE ORDER FORWARDED TO : 1. -0 / THE APPELLANT 2. 12-0 / THE RESPONDENT. 3. : ( ) / THE CIT(A)- 4. : / CIT 5. %;< 15 / DR ITAT MUMBAI 6. < = / GUARD FILE. *#7 *#7 *#7 *#7 / BY ORDER 2%5 15 //TRUE COPY// / . . . . (DY./ASSTT. REGISTRAR) / ITAT MUMBAI