DCIT, New Delhi v. M/s. Mastercard Intl. Inc., Gurgaon

ITA 5109/DEL/2015 | 2006-2007
Pronouncement Date: 22-11-2017 | Result: Dismissed

Appeal Details

RSA Number 510920114 RSA 2015
Assessee PAN AACCM7670F
Bench Delhi
Appeal Number ITA 5109/DEL/2015
Duration Of Justice 2 year(s) 3 month(s) 11 day(s)
Appellant DCIT, New Delhi
Respondent M/s. Mastercard Intl. Inc., Gurgaon
Appeal Type Income Tax Appeal
Pronouncement Date 22-11-2017
Appeal Filed By Department
Tags No record found
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 22-11-2017
Last Hearing Date 06-11-2017
First Hearing Date 06-11-2017
Assessment Year 2006-2007
Appeal Filed On 11-08-2015
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI H.S. SIDHU JUDICIAL MEMBER AND SHRI L.P. SAHU ACCOUNTANT MEMBER I.T.A. NO. 5109 /DEL/201 5 A.Y. : 2006-07 DCIT CIRCLE GURGAON INTERNATIONAL TAXATION ROOM NO. 411 4 TH FLOOR BLOCK E-2 CIVIC CENTRE NEW DELHI 110 002 VS. M/S MASTERCARD INTERNATIONAL INC. C/O AUTHORIZED REPRESENTATIVE SRBC & ASSOCIATED LLP. GOLF VIEW CORPORATION TOWER B 7 TH FLOOR SECTOR-42 SECTOR ROAD GURGAON (HARYANA-122001) (PAN:AACCM7670F) (ASSESSEE) (RESPONDENT) REVENUE BY : SH. GAURAV DUDEJA SR. DR ASSESSEE BY : SH. SANDEEP KARHAIL ADV. ORDER PER H.S. SIDHU : JM THE REVENUE HAS FILED THIS APPEAL AGAINST THE IMP UGNED ORDER DATED 13.05.2015 OF THE LD. CIT(A)-43 NEW DELHI RELE VANT TO ASSESSMENT YEAR 2006-07. 2. THE FOLLOWING ARE THE GROUNDS RAISED BY THE REVEN UE:- 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE INTEREST CHARGEABLE U/S. 234B BY HOLDING THAT INTEREST IS NOT LEVIABLE IN RESPECT OF PAYMENTS TO THE NON-RESIDENT APPELLANT BEING SUBJECT TO TAX DEDUCTION AT SOURCE U/S. 195 OF THE I.T. ACT 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW BY IGNORING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KARANVIR SINGH GHOSA VS. CIT IN CIVIL APPEAL NO. 1937 OF 2007 SEPTEMBER 6 2012 AND CIT VS. ANJUM MH GHASWALA & OTHERS (2001) 252 ITR 1 WHEREIN THE SUPREME COURT HAS HELD THAT INTEREST U/S. 234B IS MANDATORY IN NATURE. 3. THE APPELLANT CRAVES TO ADD AMEND MODIFY OR ALTER ANY GROUNDS OF APPEAL AT THE TIME OR BEFORE THE HEARING OF THE APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FIL ED RETURN OF INCOME ON 30.11.2006 DECLARING A TOTAL INCOME OF RS. 9 17 24 589/- 3 NOTICE DATED 27.3.2012 WAS ISSUED TO THE ASSESSEE UNDER SECTION 148 OF THE I.T. ACT 1961 INITIATING REASSESSMENT PROCE EDINGS FOR THE SUBJECT ASSESSMENT YEAR WHEREIN THE ASSESSEE WAS AS KED TO FURNISH ITS RETURN OF INCOME FOR THE YEAR ENDED 31.3.2006. T HIS NOTICE WAS SERVED UPON THE ASSESSE ON 9 TH APRIL 2012. IN RESPONSE TO THE NOTICE THE AR OF THE ASSESSEE COMPANY ATTENDED THE PR OCEEDINGS. THE ASSESSEE IN ITS LETTER DATED 23.4.2012 SUBMITTED THA T THE ORIGINAL RETURN OF INCOME FILED ON 30.11.2006 MAY BE CONSIDERED AS FILED U/S. 148 OF THE ACT. THE ASSESSEE ALSO SOUGHT REASONS FOR INITIATING PROCEEDINGS U/S. 148 OF THE ACT. A COPY OF REASONS WAS GIVEN TO THE ASSESSEE. THE ASSESSEE VIDE ITS LETTER DA TED 4.3.2013 RAISED VARIOUS OBJECTIONS AGAINST THE ASSESSMENT PROCE EDINGS WHICH WERE DULY DISPOSED OFF. SUBSEQUENTLY NOTICES U/S. 14 2(1) AND 143(2) OF THE ACT WERE ISSUED TO THE ASSESSEE. THE ASS ESSEE IS A COMPANY INCORPORATED IN USA AND IS ENGAGED IN THE B USINESS OF ADMINISTERING AND OPERATING A GLOBAL ELECTRONIC PAYM ENT SYSTEM WHICH ENABLES ITS MEMBERS OF COMMERCIAL BANKS AND O THER FINANCIAL INSTITUTIONS TO AUTHORIZE AND SETTLE TRANSACTIONS BETWE EN THEMSELVES. THE ASSESSEE HAD BEEN FILING A NIL RETU RN OF INCOME IN EARLIER YEARS ON THE BASIS THAT ALTHOUGH IT HAS BUSIN ESS CONNECTION IN INDIA BUT THE INCOME ARISING THERE FROM IS NOT TAXAB LE IN INDIA SINCE IT DOES NOT HAVE ANY PERMANENT ESTABLISHMENT (P E) IN INDIA. 4 THIS ISSUE HAS HOWEVER BEEN SETTLED AFTER IT WAS T AKEN UP IN THE MAP PROCEEDINGS. THE INDIAN COMPETENT AUTHORITY IN CON SULTATION WITH THE US COMPETENT AUTHORITY PASSED THE MAP ORDERS FO R AY 1996-97 TO AY 2001-02 WHICH STATED THAT THE ASSESSEE H AS A PE IN INDIA AS PER ARTICLE 5 OF THE DTAA AND THE INCOME ATTR IBUTABLE TO SUCH PE IS TAXABLE IN INDIA ON A NET INCOME BASIS. IN THE INSTANT YEAR THE ASSESSEE HAS AGAIN FILED ITS RETURN OF INCOME ON GNOM BASIS WHICH IS IN CONSULTATION TO THE SYSTEM BEING FOLLOWED FROM ASSESSMENT YEAR 2005-06. IN THIS RETURN THE ASSESSEE D ECLARED TOTAL REVENUES OF RS. 46 68 64 577/- AND GLOBAL OPERATING MARGIN OF 16.55%. IT HAS BEEN OBSERVED THAT THE GLOBAL OPERATI NG MARGIN PERCENTAGE OF THE ASSESSEE HAS GRADUALLY INCREASED OVER THE YEARS WITH THE MARGIN BEING 14.64% IN AY 2005-06 22.85% I N AY 2007- 08 30.76% IN AY 2008-09 40.16% IN AY 2009-10 AND SO AND SO FORTH. IN THE ASSESSMENT YEARS 2009-10 AND 2010-11 TH E ASSESSMENT HAS BEEN MADE ON NET MARGIN METHOD AND THE ASSESSEE HAS GONE FOR MAP RESOLUTION WHICH IS PENDING. IN VIE W OF THE ABOVE PAST HISTORY OF THE ASSESSEE AND THE MAP RESOLUTION FOR AY 2005-06 AY 2007-08 AND AY 2008-09 IN FAVOUR OF GNOM METHOD THE GNOM METHOD FOR COMPUTATION OF INCOME FOR THE SUBJECT ASSES SMENT YEAR IS ACCEPTED. THIS ALSO IN LINE WITH THE METHOD BEING F OLLOWED IN THE SUBSEQUENT ASSESSMENT YEARS TILL ASSESSMENT YEAR 2013 -14 THE 5 RETURN UP TO WHICH ASSESSMENT YEAR HAVE BEEN FILED TIL L DATE. THE CURRENT ASSESSMENT YEAR (AY 2006-07) BEING THE INTERVEN ING YEAR BETWEEN THE YEARS FOR WHICH MAP RESOLUTION HAS BEEN P ASSED AND CONSIDERING THE INCREASING TREND OF THE OPERATING MAR GIN IT IS ESTIMATED THAT THE PERCENTAGE FOR AY 2006-07 SHOULD F ALL BETWEEN MARGIN PERCENTAGES FOR AY 2005-06 AND AY 2007-08. T HE MARGIN PERCENTAGE AS COMPUTED BY COMPETENT AUTHORITIES UNDE R THE MAP RESOLUTION FOR AY 2005-06 IS 18.14% AND FOR AY 2007 -08 IT IS 23.85%. ACCORDINGLY THE MARGIN PERCENTAGE APPLICABL E ON THE ASSESSEE FOR THE SUBJECT YEAR IS INCREASED FROM 16.5 5% TO 20% AND ACCORDINGLY THE INCOME OF THE ASSESSEE WAS ASSESSE D AT RS. 10 78 31 687/- AND INTER U/S. 234B OF THE ACT HAS ALS O BEEN LEVIED VIDE ORDER DATED 28.5.2014 PASSED U/S. 144C(3) READ WITH SECTION 148/143(3) OF THE I.T. ACT 1961. AGAINST THE AFO RESAID AOS ORDER DATED 28.5.2014 ASSESSEE APPEALED BEFORE THE LD. CIT (A)-43 NEW DELHI WHO VIDE HIS IMPUGNED ORDER DATED 13.5.2015 H AS HELD THAT INTEREST U/S. 234B IS NOT LEVIABLE AS ALL PAYMENTS AT S OURCE U/S. 195 AND ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED WI TH THE ORDER OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE THE TR IBUNAL. 4. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. 6 5. LD. COUNSEL OF THE ASSESSEE RELIED UPON THE ORDER OF THE LD. CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEV ANT RECORDS ESPECIALLY THE IMPUGNED ORDER. WE FIND THAT T HE SOLITARY ISSUE RAISED BY THE REVENUE IS AGAINST THE DECISION OF THE LD. CIT(A) IN HOLDING THAT INTEREST U/S.234B IS NOT LEVIAB LE IN RESPECT OF PAYMENTS TO THE NON-RESIDENT ASSESSEE BEING SUBJECT TO TAX DEDUCTION AT SOURCE U/S. 195 OF THE ACT. WE FIND THAT TH E ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE DELHI HIGH COURT IN EARLIER ASSESSMENT YEARS IN ASSESEES OWN CASE. FURTHER THE LD. CIT(A) IN ASSESSEES OWN CASE FOR AY 2005- 06 AND 2008-09 IN APPEAL NOS. 160 AND 162/10-11 VIDE ORDER DATED 1 4.2.2013 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY ADJUDI CATING THE ISSUE IN DISPUTE VIDE PARA NO. 4 OF HIS ORDER AS UNDER: - GROUND OF APPEAL NO. 5 IS REGARDING LEVYING OF INTEREST U/S. 234B OF THE ACT. THE APPELLANT HAS SUBMITTED THAT SINCE TAX IS DEDUCTIBLE U/S. 195 ON ALL PAYMENTS MADE TO IT THERE IS NO ADVANCE TAX PAYABLE U/S. 208 R.W.S. 209(1)9D) OF THE ACT. IN THE ABSENCE OF ANY LIABILI TY TO PAY ADVANCE TAX THE PROVISIONS OF SECTION 234B 7 ARE NOT APPLICABLE. THE APPELLANT HAS RELIED UPON FOLLOWING CASE LAWS: - DIT VS. JACOBS CIVIL INCORPORATED 330 ITR 578 (DEL). - DIT VS. NGC NETWORK ASIA LLC 313 ITR 187 (BOM). - MOTOROLA COMMUNICATIONS INC. 95 ITD 269 (DELHI-SB) ITAT - CIT VS. SEDCO FOREX INTERNATIONAL DRILLING INC. 264 ITR 320 (UTTARANCHAL) IN VIEW OF JURISDICTIONAL DELHI HIGH COURT DECISION I HOLD THAT INTEREST U/S. 234B IS NOT LEVIABLE AS ALL PAYMENTS TO THE NON- RESIDENT APPELLANT ARE SUBJECT TO TAX DEDUCTION AT SOURCE U/S. 195. THE AO IS DIRECTED TO DELETE THE INTEREST LEVIED U/S. 234B. THIS GROUND OF APPEAL IS ALLOWED. 6.1 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND RESPECTFULLY FOLLOWING THE ABOVE MENTIONED PRECEDENTS WE HOLD THAT INTEREST U/S. 234B IS NOT LEVIABLE AS ALL PAYMENTS TO THE NON- RESIDENT ASSESSEE ARE SUBJECT TO TAX DEDUCTION AT SOURC E U/S. 195. 8 HENCE THE DECISION OF THE LD. CIT(A) IN DIRECTING TH E AO TO DELETE THE INTEREST LEVIED U/S. 234B IS CORRECT WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART HENCE WE UPHOLD THE ACTIO N OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND REJECT THE GROUND R AISED BY THE REVENUE. 7. IN THE RESULT THE APPEAL FILED BY THE DEPARTMEN T STANDS DISMISSED. ORDER PRO NOUNCED ON 22/11/2017. SD/- SD/- [L.P. SAHU] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 22/11/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. ASSESSEE - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT DELHI BENCHE S