9911796707
TMI Blog2011 (4) TMI 441X X X X Extracts X X X X X X X X Extracts X X X X ..... ts to be made to the petitioners. The revenue, vide orders dated 6.6.2000, 23.5.2001 and 28.12.2001, passed orders for tax deduction only in respect of the payments made to the petitioner on Offshore contract and Onshore services contract at 10% on gross basis in respect of the payment made for training charges and 10% on gross basis in respect of the payments made for maintenance and service charges respectively and on other payments, deduction was to be made at Nil rate. It is averred that the determination was preceded by an enquiry which included scrutiny of the relevant agreements whereunder payments were made to the petitioner, the relevant law including the past period, the provisions of the DTAA between India and France and the submissions of the petitioner. The other payments on which the tax deduction was to be made at Nil rate included payments made on supply of software consisting of scada software and information storage and retrieval, hardware consisting of processors, servers, hard discs, etc., mandatory spares and test equipments like digital multimeter, varmeter, etc. 4. As set forth, the petitioner had been regularly filing applications under section 197(1) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucted at 1.055%. Keeping the same analysis in view, the first respondent directed the said rate to be applicable not only to payments yet to be received but also for payments received in the earlier assessment years for which Nil rate of tax deduction had been prescribed and which had been received by the petitioner without any deduction of tax at source. Thus, the earlier orders stood reviewed or modified to that extent. 6. Aggrieved by the said order dated 11.12.2007, the petitioner approached this Court under Articles 226 and 227 of the Constitution of India contending, inter alia, that the order passed under section 197(1) of the Act could not have retrospective operation nullifying the earlier orders issued after due application of mind. This court, by order dated 7.5.2008, disposed of the petitions filed by the petitioner holding that the order dated 11.12.2007 passed by the respondent No.1 would apply prospectively, that is, only for the financial year 2007-08. 7. When the matter stood thus, the petitioner received notice dated 19.5.2008 issued under section 148 of the Act alleging that the income of the petitioner for the assessment year 2005-06 had escaped assessment and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Constitution especially when the revenue while dealing with the objection of the assessee has dealt with the same in detail and ascribed elaborate reasons. It is the stand of the respondents that the basic contention of the petitioner that the notice under section 148 has been issued only on change of opinion is totally untenable inasmuch as authorization / certificate issued under section 195 / 197 of the Act is provisional in nature and cannot be equated with regular assessment or other proceedings under the Act. The certificate has been issued as an interim measure on the request of the petitioner and it cannot be compared with the final determination of tax liability by making an assessment under section 143(3) of the Act. It is put forth that in the case of the petitioner, no regular assessment has been carried out as he never filed the return of income and, therefore, the question of change of opinion does not arise. It is contended that the order passed under section 197 does not connote/convey that it is a final order and in fact, the order dated 6.8.2002 passed under section 197(1) clearly mentions that considering the urgency expressed by the assessee, in view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... going to pass, we would refrain from adverting to the same. We shall only confine ourselves to dwell upon the initiation of proceeding under section 147 of the Act and the legal substantiality of the order of rejection or the objections filed by the assessee petitioner. 12. The submission that has been propounded by Mr. Vohra is that there has been a change of opinion and a mere change of opinion does not confer jurisdiction on the authority to initiate a proceeding under section 147 of the Act. It is canvassed by him that the reason to believe has its own sanctity and it is imperative that before any action is taken by the assessing officer, he should record his satisfaction and the said satisfaction has to be in the realm of objective analysis of fact within the statutory boundaries which would not include change of opinion. The learned counsel has commended us to the decision in Commissioner of Income-tax v. Kelvinator of India Ltd., [2010] 320 ITR 561 (SC). With regard to fresh information, the learned counsel has also drawn inspiration from the decisions rendered in Shipra Srivastava v. Assistant Commissioner of Income-tax, [2009] 319 ITR 221 (Delhi), Commissioner of Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le under the provisions of this Act (not being income chargeable under the head "Salaries") shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force: Provided that in the case of interest payable by the Government or a public sector bank within the meaning of clause (23D) of section 10 or a public financial institution within the meaning of that clause, deduction of tax shall be made only at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode: Provided further that no such deduction shall be made in respect of any dividends referred to in section 115-O. Explanation: For the purposes of this section, where any interest or other sum as aforesaid is credited to any account, whether called "Interest payable account" or "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the case may be, at the time of payment at the rates in force under the provisions of sections 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA and 195, the Assessing Officer is satisfied that the total income of the recipient justifies the deduction of income-tax at any lower rates or no deduction of income-tax, as the case may be, the Assessing Officer shall, on an application made by the assessee in this behalf, give to him such certificate as may be appropriate. (2) Where any such certificate is given, the person responsible for paying the income shall, until such certificate is cancelled by the Assessing Officer, deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be. (2A) The Board may, having regard to the convenience of assessees and the interests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an application may be made for the grant of a certificate under sub-section (1) and the conditions subject to which such certificate may be granted and providing for all other matters connected therewith." 17. In this conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... always remained in the possession and control of the assessee or its sub-contractor and it was responsible for delivering the facilities as per the contract. (vii) In no circumstances, three different suppliers could have performed the part of one contract. The assessee's part of the contract did not get over at the time of loading the equipments on the mode of transport. (viii) It was not a case of export of finished goods/raw materials from outside India to PGCIL who will be using the same as per their requirement, the PGCIL had awarded the whole composite contract to the assessee and it was splitted up as per the requirement of payments in various currencies. The imports could have been paid in foreign currency, but the onshore parts were to be paid mostly in Indian Rupee. These are as per the terms and conditions of the funding agencies like World Bank. (ix) The full contract was awarded to the assessee and the substance of the transaction as reflected from the actual execution of the contract requires to be considered for deciding the taxability and not the form that the offshore supply is totally separate from the contract. If it was a separat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upply, onshore supply and onshore services. There is a possibility that the most of the profits are loaded to the offshore supply resulting into less than the normal profits to the Indian subsidiary. In addition to the loading of profit to offshore supply, part of which is taxable in India, the profits attributable to the marketing / sales functions / after sale services by the PE in India are taxable in India. The ITAT, Delhi Bench, New Delhi in the case of Rolls Royce Plc. on similar facts has held that the profit accruing directly or indirectly in respect of the marketing activities in India shall be taxable in India. With regard to onshore supplies and services, also the profits earned by the assessee are taxable in India. As mentioned above, the assessee has always obtained orders under section 197 of the Act without disclosing the full facts relating to the contracts, some of these facts are discussed in these reasons and assessee has not filed its return of income for any of the assessment years. 5. The Areva T&D SA, has undertaken 4 contracts from PGCIL, which are executed during all the years starting 1998-99 and payments are still continuing. As mentioned above, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited (PGCIL) under the Onshore Supply and Onshore Services Contracts relating to EMS/SCADA Package under System Co-ordination and Control Project for Northern Region. The assessee has also submitted the estimated Profit & Loss Accounts for the both the contracts showing the profitability at NIL. This is so as the sub-contracts had been awarded by the assessee at the same price, at which the contracts were awarded to the assessee by PGCIL. The assessee has submitted that there is total certainty that the profit shall be NIL for the above. Onshore Contracts in view of the sub-contracts. The assessee has filed the last two orders passed under section 195(2) of the Income-tax Act, 1961, in regard to the Onshore Supply and Onshore Services contracts for the financial years 2000-01 and 2001-02. In both these orders, the tax deduced at source was authorized at Nil rate for the onshore supply contract and for the onshore services contract at Nil rate except for maintenance and training charges which were to be subjected to 10% tax withholding. Considering the urgency expressed by the assessee, in view of the sub-contractor being in acute need of funds and the contracts being time bound, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject matter related to imposition of a withholding tax or of tax deducted at source in respect of payments made to the petitioner for firm function services. The petitioner had made an application under section 197 for the assessment year 2010-2011 to the Deputy Director of Income-tax (International) seeking a nil tax withholding certificate in respect of payments received for firm function services rendered by the petitioner to the Indian branches of McKinsey and Company Inc. for the financial year 2009-2010. The petitioner had informed the second respondent that in the meantime, orders have been passed under section 264 of the Act by the Commissioner and under section 197 by the Assessing Officer for the assessment years 2007-2008 to 2009-2010 specifying tax withholding rates at 1.5% and 1.30%. By the impugned order dated 29th March, 2010, the application filed by the petitioner for a nil tax withholding certificate for the assessment year 2010-2011 was rejected and a direction was issued that the tax should be withheld at the rate of 15% on the gross amount to be paid or payable to the petitioner for the financial year 2009-2010. The Division Bench took note of the submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn has been filed. We may refer to section 147 of the Act: 147. Income escaping assessment - If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereinafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are of the view that if any opinion is expressed at the time of grant of certificate it is tentative or provisional or interim in nature and the same would not debar the assessing officer from initiating a proceeding under section 147 of the Act on the ground that there has been a change of opinion. Thus, we are compelled to repel the submission though assiduously urged by Mr. Vohra, the learned counsel for the petitioner. 29. At this juncture, we think it is pertinent to state that as the present Writ Petition has been disposed of on the basis of explanation 2(a) to section 147 of the Act, we are not required to examine other aspects and issues raised by the petitioner on the question whether or not there is any basis in the reason that the petitioner has any income chargeable to tax in India. In any case, it is well settled that at this stage only prima facie view is to be taken to determine and decide whether there are reasons to believe that income has escaped assessment. Whether or not any income of the petitioner is chargeable to tax in India, whether the petitioner has a permanent establishment in India, etc, are matters on merit which have to be decided in the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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