DDIT, Dehradun v. M/s Maersk Co. Ltd, Mumbai

ITA 2598/DEL/2010 | misc
Pronouncement Date: 08-12-2010

Appeal Details

RSA Number 259820114 RSA 2010
Assessee PAN AACCT3646G
Bench Delhi
Appeal Number ITA 2598/DEL/2010
Duration Of Justice 40 year(s) 11 month(s) 7 day(s)
Appellant DDIT, Dehradun
Respondent M/s Maersk Co. Ltd, Mumbai
Appeal Type Income Tax Appeal
Pronouncement Date 08-12-2010
Appeal Filed By Department
Assessment Year misc
Appeal Filed On 01-01-1970
Judgment Text
ITA NOS. 1796 1797 & 2598/DEL/2010 A.Y. 2003-04 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI R.P. TOLANI JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER I.T.A. NOS. 1796 1797 & 2598/DEL/2010 A.Y. : 2003-04 DY. DIRECTOR OF INCOME TAX (INT. TAXATION) 13-A SUBHASH ROAD AAYAKAR BHAWAN DEHRADUN VS. M/S MAERSK COMPANY LTD. UK C/O A.F. FERGUSON & CO. MAKER TOWERS E WING 4 TH FLOOR CUFFE PARADE MUMBAI (PAN/GIR NO. : AACCT3646G) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. PORUS KAKA ADVOCATE DEPARTMENT BY : SH. SUDESH GARG SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE RESPECTIVE ORDERS OF THE LD. COMMISSIONER OF INCOME T AX (APPEALS) PERTAINING TO ASSESSMENT YEAR 2003-04. 2. SINCE THE ISSUES INVOLVED ARE COMMON AND CONNECTE D HENCE THESE ARE BEING CONSOLIDATED AND DISPOSED OFF TOGET HER FOR THE SAKE OF CONVENIENCE BY THIS COMMON ORDER. 3. ITA NO. 1796: ITA NO. 1796: ITA NO. 1796: ITA NO. 1796:- -- - THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE ASSE SSEE COMPANY WAS NOT AN AGENT OF THE 13 TECHNICIANS U/S 163 OF THE I T ACT. ITA NOS. 1796 1797 & 2598/DEL/2010 A.Y. 2003-04 2 3.1 ITA NO. 1797: ITA NO. 1797: ITA NO. 1797: ITA NO. 1797:- -- - THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN HOLDING THAT THE ASSESSEE COMPANY AS NOT AN AGENT OF A.P. MOLAR MAERSK A/S U/S 163 OF T HE IT ACT. 3.2 ITA NO. 2598: ITA NO. 2598: ITA NO. 2598: ITA NO. 2598:- -- - THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN RELYING ON ITS OW N DECISION HOLDING THAT M/S MAERSK CO. LTD. CANNOT BE TREATED AS AGENT OF M/S AP MOLLER MAERSK AS. 4. THUS FROM THE ABOVE IT IS EVIDENT THAT THESE AP PEALS REVOLVED AROUND COMMON FACTS. WE TAKE UP ITA NO. 1796 FIRST FOR ADJUDICATION. 4.1 IN THIS CASE DURING THE COURSE OF ASSESSMENT ASSESSEE COMPANY WAS ASKED TO PROVIDE ALL DETAILS OF TECHNICIANS PRO VIDED BY THE ASSESSEE COMPANY. ON GOING THROUGH THE DETAILS FILED BY THE COMPANY IT WAS NOTICED THAT 13 TECHNICIANS WERE RESIDENT OF INDIA FOR A PERIOD OR FOR CERTAIN NUMBER OF DAYS. ASSESSEE COMPANY WAS A CCORDINGLY ISSUED NOTICE U/S 163(2) READ WITH SECTION 149(3) CALLING UPON PLAUSIBLE EXPLANATION AS TO WHY THE COMPANY SHOULD N OT BE TREATED AS AGENT OF THE AFOREMENTIONED TECHNICIANS ACCORDINGLY NOTICE WAS ISSUED TO THE ASSESSEE COMPANY U/S 148 OF THE IT AC T. ASSESSEE CONTENDED THAT COMPANY CANNOT BE TREATED AS AGENT OF THE AFOREMENTIONED TECHNICIANS BECAUSE THE WHOLE CREW ENGAGED BY THE ASSESSEE WERE IN FACT EMPLOYEES OF A.P. MOLLER MAERSK A /S AND NOT OF THE ASSESSEE COMPANY I.E. MAERSK COMPANY LTD. ALL THE TECHNICIANS WERE NON-RESIDENT AND THE COMPANY WAS ASSESSED IN T HE STATUS OF NON-RESIDENT. IN ADDITION IT WAS MENTIONED THAT A LL THE CREW MEMBERS ARE RESIDENTS OF DENMARK AND BY VIRTUE OF ARTICLE 16 OF THE AGREEMENT FOR AVOIDANCE OF DOUBLE TAXATION BETWEEN INDIA AND DENMARK THEIR INCOME IS NOT ASSESSABLE TO TAX IN INDIA AS THEIR STAY IN INDIA IS LESS ITA NOS. 1796 1797 & 2598/DEL/2010 A.Y. 2003-04 3 THAN 183 DAYS. ASSESSING OFFICER DID NOT FIND FORC E IN THE SUBMISSIONS. HE CAME TO THE CONCLUSION THAT INCOME OF ALL THE TE CHNICIANS EMPLOYEES WAS LIABLE TO BE BROUGHT TO TAX IN INDIA. M/S MEASERK COMPANY LTD. I.E. THE ASSESSEE WAS LIABLE TO PAY T AXES FOR TECHNICIANS AND FILED THE RETURN OF INCOME. THERE FORE HE HELD THAT M/S MAERSK COMPANY LTD. WAS AN AGENT OF 13 TECHNICIANS AG ENTS EMPLOYEES. FURTHER ASSESSING OFFICER OBSERVED TO ISSUE NOTICE U/S 148 TO ALL THE 13 TECHNICIANS TREATING M/S MAERSK C OMPANY AS AGENT. 5. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) REFERRED TO THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 1347 TO 1353 AND 1355 TO 1365/DEL/2 008 FOR A.Y. 2002- 03 AND 2003-04 DATED 30.10.2009 WHEREIN THE TRIBUNA L HAS STRUCK DOWN THE ASSESSMENT ON THE BASIS THAT THE ASSESSIN G OFFICERS PRIMARY ACTION OF TREATING THE ASSESSEE AS AN AGENT OF THE EMPLOYEES ITSELF WAS ERRONEOUS AND THEREFORE THE ASSESSMENT MADE PURSUAN T TO THE SAID ACTION HAS BEEN SET ASIDE. FOLLOWING THE ABOVE PRE CEDENT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DIRECTED THE AS SESSING OFFICER TO ALLOW CONSEQUENTIAL RELIEF. ITA NO ITA NO ITA NO ITA NOS SS S. 1797 & 2598 . 1797 & 2598 . 1797 & 2598 . 1797 & 2598 6. THE ASSESSING OFFICER HAS TREATED M/S MAERSK COMPA NY AS AN AGENT OF A.P. MOLLER MAERSK A/S U/S 163 OF THE IT AC T AND ACCORDINGLY FRAMED THE ASSESSMENT. 7. LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GRA NTED RELIEF FOLLOWING THE SAME ITAT ORDER AS REFERRED ABOVE. 8. AGAINST THESE ORDERS THE REVENUE IS IN APPEAL BE FORE US. ITA NOS. 1796 1797 & 2598/DEL/2010 A.Y. 2003-04 4 9. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. BOTH THE COUNSEL FAIRLY AGREED THAT THE ISSUE INVOLVED I S COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION AS MENTI ONED ABOVE VIDE ORDER DATED 30.10.2009. THE OPERATIVE PORTION OF THE SAID ORDER ARE AS UNDER:- 8. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE AN D HAVE PERUSED THE MATERIAL WITH REGARD THERETO AS PLACED ON RECORD. UNDISPUTED FACTS ARE THAT MCL A NON RESIDENT COMPANY ENTERED INTO A CONTRACT FOR SUPPLY OF PSV TO ONGC. IT RECEIVED HIRE CHARGES WITH RESPE CT TO SUCH SUPPLY OF PSV. MCL WAS ALSO TO PROVIDE CR EW MEMBERS TO ONGC. IT DID SO BY OBTAINING A CREW FROM ITS GROUP COMPANY I.E. FROM RAPM OF DENMARK. THE ASSESSING OFFICER TREATED MCL TO BE AN AGENT OF THE CREW MEMBERS / EXPATRIATE PERSONNEL UNDER SECTION 163(1) OF THE ACT. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ENDORSED THIS ACTION OF THE ASSESSING OFFICER HOLDING THAT THE EXPATRIATE PERSONNEL WHO RENDERED SERVICE IN INDIA WORKED UNDER THE DIRECT CONTROL OF MCL; THAT THEY WERE WORKING ON THE PSV UNDER THE DIRECT SUPERVISION AND CONTROL OF MCL; T HAT MCL WAS RESPONSIBLE FOR MAKING PROVISION OF CREW TO ONGC IN TERMS OF ITS CONTRACT WITH ONGC; AND THAT THEREFORE THE ASSESSING OFFICER HAD CORRECTLY TRE ATED MCL AS THE AGENT OF THE EXPATRIATE PERSONNEL. 9. THE QUESTION BEFORE US IS AS TO WHETHER THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS RIGHT IN ITA NOS. 1796 1797 & 2598/DEL/2010 A.Y. 2003-04 5 RATIFYING THE AFORESAID ACTION OF THE ASSESSING OF FICER. NOW WHAT IS TO BE SEEN IS AS TO WHETHER THE CONDITIONS OF SEC. 163(1) OF THE ACT ARE FULFILLED IN THE PRESENT CASE SO AS TO MAKE MCL LIABLE TO BE TREATED AS THE AGENT OF THE EXPATRIATE PERSONNEL. AS PER S EC. 163(1) OF THE ACT FOR THE PURPOSES OF THE INCOME T AX ACT AGENT IN RELATION TO A NON-RESIDENT INCLU DES ANY PERSON IN INDIA FROM OR THROUGH WHOM THE NON RESIDENT IS IN RECEIPT OF ANY INCOME WHETHER DIRECTLY OR INDIRECTLY. IT WAS IN FURTHERANCE OF MCLS CONTRACT WITH ONGC THAT MCL ARRANGED FOR SUPPLY OF A CREW OF TECHNICIANS/ PERSONNEL FROM ITS GROUP CONCERN RAPM TO ONGC. IT HAS BEEN CONTENDED THAT NO WRITTEN AGREEMENT WAS DRAWN UP FOR THIS PURPOSE SINCE THE ARRANGEMENT FOR SUPPLY OF CREW WAS BETWEEN TWO GROUP COMPANIES. UNDISPUTEDLY PAYMENTS TO THE CREW WERE MADE BY RAPM AND NOT BY MCL. 10. SEC. 163(1)(C) STATES THAT IT IS ANY PERSON IN INDIA FROM OR THROUGH WHOM THE NON-RESIDENT IS IN RECEIPT OF ANY INCOME WHETHER DIRECTLY OR INDIRECTLY WHO CA N BE TREATED AS AN AGENT IN RELATION TO A NON-RESIDENT. NOW MCL ITSELF IS A NON-RESIDENT COMPANY AND AS SUCH IT COULD NOT HAVE BEEN TREATED AS AN AGENT OF THE NON RESIDENT EXPATRIATE PERSONNEL. THEREFORE ON THIS SCORE ITSELF THE WHOLE ASSESSMENT GOES. EVIDENTLY THE ACTION OF THE AUTHORITIES BELOW IS VIOLATIVE OF THE PROVISIONS OF SEC. 163(1)(C) OF THE ACT. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WHILE ITA NOS. 1796 1797 & 2598/DEL/2010 A.Y. 2003-04 6 ENDORSING THE ACTION OF THE ASSESSING OFFICER FAI LED TO CONSIDER THIS ASPECT OF THE MATTER. MCL HAD MADE SPECIFIC WRITTEN SUBMISSIONS IN THIS REGARD BEFORE T HE ASSESSING OFFICER VIDE LETTER DATED 03.01.05 WHIC H ARGUMENTS WAS NOT TAKEN INTO CONSIDERATION. 11. APROPOS THE PAYMENT ASPECT THE SALARY PAID TO T HE EXPATRIATE PERSONNEL WAS NOT BORNE BY MCL. MCL WAS ALSO NOT HAVING ANY PERMANENT ESTABLISHMENT IN INDIA. THE INCOME OF THE EXPATRIATE PERSONNEL WAS ASSESSED IN DENMARK. THAT BEING SO ARTICLE 16(3) OF THE INDO DENMARK DTAA WAS APPLIED. THE EXPATRIATE PERSONNEL WERE EMPLOYEES OF RAPM. THEY WERE TAX RESIDENTS OF DENMARK. IT HAS NOT BEEN ESTABLISHED BY THE DEPARTMENT THAT THEIR CONTENTION THAT IT WAS MC L WHO WAS ACTUALLY CONTROLLING THE WORKING OF THE EXPATRIATE PERSONNEL WHILE ON SERVICE IN INDIA STA NDS BUTTRESSED OR SUBSTANTIATED BY ANY MATERIAL ON RECORD. IT HAS ALSO FAILED TO PROVE THAT IT WAS MCL WHICH WAS RESPONSIBLE FOR THE ENTIRE OPERATION OF T HE PSV. IT HAS NOT BEEN SHOWN THAT MCL WAS HAVING RIGHTS ON THE WORK PRODUCED AND BEARING THE RELATI VE RESPONSIBILITY AND RISKS OF THE SERVICE OF THE EXPA TRIATE ITA NOS. 1796 1797 & 2598/DEL/2010 A.Y. 2003-04 7 PERSONNEL. EVEN PARA 2 OF THE OECD COMMENTARY AS RELIED ON BY THE ASSESSING OFFICER STATES THAT EA CH CASE SHOULD BE EXAMINED TO SEE WHETHER THE FUNCTIONS OF EMPLOYER WERE EXERCISED MAINLY BY THE INTERMEDIARY OR BY THE USER. IN THIS CASE NO SUCH THING HAS BEEN ESTABLISHED. THERE IS NO CIRCUMSTA NCE WHATSOEVER INDICATING THAT IT WAS MCL WHO WAS THE REAL EMPLOYER OF THE EXPATRIATE PERSONNEL. WHAT MCL DID WAS UNDER ITS OBLIGATION TO CARRY OUT THE TERMS OF ITS AGREEMENT WITH ONGC. THIS AGREEMENT HAS NOWHERE BEEN PUT TO CHALLENGE BY THE DEPARTMENT. RATHER IT IS THE TERMS OF THIS VERY AGREEMENT THAT THE DEPARTMENT IS REFERRING TO HOLD MCL TO BE THE ACTU AL EMPLOYER OF THE EXPATRIATE PERSONNEL. 9.1 THE TRIBUNAL FURTHER DISTINGUISHED THE CASE LAW REFERRED AND CONCLUDED IN PARA 27 IS AS UNDER:- 27. IN VIEW OF THE ABOVE THE GRIEVANCE OF THE ASSESSEE IN THIS REGARD IS FOUND TO BE JUSTIFIED AND IS ACCEPTED AS SUCH. WE HOLD ON THE BASIS OF THE ABOVE DISCUSSION THAT MCL HAS WRONGLY BEEN HELD TO BE THE AGENT OF THE EXPATRIATE PERSONNEL. ITA NOS. 1796 1797 & 2598/DEL/2010 A.Y. 2003-04 8 ACCORDINGLY ALL THAT SUCCEEDS SUCH TREATMENT IS ALSO QUASHED. 9.2 SINCE THE FACTS OF THE PRESENT CASES ARE IDENTI CAL IN ASSESSEES OWN CASE ADHERING TO THE DOCTRINE OF STAIRE DECISE S WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 10. IN THE RESULT ALL THE APPEALS FILED BY THE REV ENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/12/2010 U PON CONCLUSION OF HEARING. SD/- SD/- [ [[ [R.P. TOLANI R.P. TOLANI R.P. TOLANI R.P. TOLANI] ]] ] [SHAMIM [SHAMIM [SHAMIM [SHAMIM YAHYA] YAHYA] YAHYA] YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 08/12/2010 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES