TMI Blog2010 (3) TMI 894X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that:- No opportunity has been provided by the Assessing Officer for final determination of income under sub-section (4) of section 92C read with sub-section (4) of section 92CA of the Act – matter remanded to AO - IT APPEAL NOS. 2052 (MUM.) OF 2007 AND 2568 (MUM.) OF 2008 C.O. NOS. 180 (MUM.) OF 2007 AND 128 (MUM.) OF 2008 - - - Dated:- 26-3-2010 - D.K. AGARWAL AND B. RAMAKOTAIAH, JJ. Narender Singh for the Appellant. W. Hasan for the Respondent. ORDER D.K. Agarwal, Judicial Member. - These two appeals preferred by the revenue and the cross-objection by the assessee are directed against the separate orders dated 13-11-2006 and 31-1-2008 passed by the ld. CIT(A) for the assessment years 2003-04 and 2004-05 respectively. Since facts are identical and issues involved are common, these appeals and cross-objections are disposed of by this common order for the sake of convenience. 2. Briefly stated facts extracted from ITA No.2052/M/07 for the assessment year 2003-04 are that the assessee-company is a non-resident company established in USA and operates its branch office from India. It is engaged in the business of distribution of films and has derive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applying section 145(1) of the Act. 6. At the time of hearing the ld. DR after giving background of the issuance of Board s letter F.No. 485/2/85-FTD, dated 3-3-1987 ( supra ), submits that since in the immediately preceding year i.e., in assessment year 2002-03 the assessee itself has offered its income as per Board s letter ( supra ), by applying net rate of profit at 25 per cent of rental income, therefore, the Assessing Officer was fully justified in applying net rate of profit @ 25 per cent of the rental income and the ld. CIT(A) has erred in directing the Assessing Officer to compute the income as per books by applying provisions of section 145(1) of the Act. The reliance was also placed on the decision of the Special Bench of the Tribunal in Jt. CIT v. Warner Bros. (F.E.) Inc. [2006] 282 ITR (AT) 90 1 (Mum.). 7. On the other hand the ld. Counsel for the assessee while reiterating the same submissions as submitted before the ld. CIT(A) further submits that since the assessee has worked out its business income from distribution of films on the basis of its audited accounts filed before the Assessing Officer, the Assessing Officer failed to point out any mistake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer was not justified in rejecting the book profit shown by the assessee. 9. With regard to the decision of the Special Bench of the Tribunal in Warner Bros. (F.E.) Inc. s case ( supra ), the ld. Counsel for the assessee submits that it is the consistent stand of the department that the concession given by the CBDT vide letter dated 3-3-1987 ( supra ) is applicable up to 31-3-1987. Even the Board vide subsequent letter dated 19-2-1998 issued in F.No. 485/2/85-FTD has clarified that the plea that the settlement was also applicable to the subsequent years was not accepted. He further submits that the Tribunal in assessee s own case for the assessment year 1995-96 ( supra ), has restored the matter to the file of the ld. CIT(A) with the directions that he should decide the appeal afresh, on merits, uninfluenced by 1987 settlement with the Board. In the light of the above, he submits that the decision of the Special Bench of the Tribunal relied on by the ld. DR is not applicable to the facts of the assessee s case. Reliance was also placed on the assessment order made under section 143(3) of the Act for the assessment year 2005-06 wherein the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Scheme of the Act.....". We further find that the ld. Counsel for the assessee has placed heavy reliance on the decision of the Tribunal in assessee s own case in Columbia Pictures Industries Inc. ( supra ), wherein the Tribunal has restored the issue to the file of the ld. CIT(A) vide para-7 of its order dated 23-10-2003 which is reproduced as under : "7. In view of the above discussion we are of the view that the ld. CIT(A) should have decided the appeal of the assessee on merits based on the relevant facts and circumstances of the case and not merely on the basis of the settlement with Board in 1987. We, therefore, restore this issue to the file of the ld. CIT(A) with the directions that he should decide the appeal afresh, on merits, uninfluenced by 1987 settlement with the Board." 11. However, at the time of hearing, the ld. Counsel for the assessee submits that pursuant to the aforesaid order of the Tribunal the ld. CIT(A) after considering the facts of the case has applied 25 per cent of film rental as stated in Board s letter ( supra ), and no appeal has been filed by the assessee against the said order of the ld. CIT(A). We further find that the Special Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded any meaningful alternative to the principles laid down in "settlement" accepted by the Central Board of Direct Taxes on March 3, 1987. On a plain discussion in the light of the facts and history of the issue as well as the legal provisions, we find that the principles laid down in the "settlement" dated March 3, 1987 is to be followed for the assessments even after the period March 31, 1987. It is, in this context, we have to reiterate the relevance of the "settlement" arrived at by the Central Board of Direct Taxes dated March 3, 1987. It is after facing practical difficulties in completing the assessments of the member companies of MPA operating in India, that the Central Board of Direct Taxes has come down to formulate a presumptive taxation. It was to avoid the complexities involved in the determination of income of the assessees. It is only after a series of thoughtful deliberations that the "settlement" was agreed to between the Central Board of Direct Taxes and the MPA. The Board has conducted extensive research on the subject. It is on the basis of such serious study that the Central Board of Direct Taxes has agreed to the settlement which was finally approved by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese reasonings, in the absence of any material change justifying the Revenue to take a different view of the matter and, if there was no change, it was in support of the assessee. We do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-tax in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12 of the Income-tax Act of 1961." 13. In the absence of any material change justifying to take a different view from that taken by the Special Bench of the Tribunal ( supra ), and keeping in view the rule of consistency ( supra ), we are of the view that the principles embodied in " settlement" dated March 3, 1987 shall also apply to the year under consideration and accordingly the order passed by the ld. CIT(A) in this regard is reversed and that of Assessing Officer is upheld. The ground taken by the revenue is there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the Act as explained hereinabove. They can indeed guide the Assessing Officer while taking up the exercise of computing the ALP in terms of section 92C..." Since in the case before us no opportunity has been provided by the Assessing Officer for final determination of income under sub-section (4) of section 92C read with sub-section (4) of section 92CA of the Act, we are of the view that in the interest of justice the matter should go back to the file of Assessing Officer and accordingly, we set aside the orders passed by the revenue authorities on this account and restore the issue to file of the Assessing Officer who shall decide the same afresh and according to law after providing reasonable opportunity of being heard to the assessee. The ground taken by the revenue is therefore partly allowed for statistical purposes. CO. No. 180/Mum./2007 (assessment year 2003-04)(By Assessee): 19. Ground Nos. 1 and 2 read as under : "1. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in holding that there is no mistake in the failure of the Assessing Officer in giving an opportunity of being heard before determining the total income. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2004-05. 26. That being so and in the absence of any distinguishing feature brought on record by the parties we direct the Assessing Officer to follow our finding recorded in para -13 of this order. We hold and order accordingly. The ground taken by the revenue is, therefore, allowed. CO No. 128/M/(assessment year 2004-05) (By Assessee) : 27. Ground Nos. 1 and 2 read as follows : "1. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in holding that the provisions of section 92B and Chapter-X of the Income-tax Act,1961 are applicable to the appellant. 2. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in holding that there is no mistake in the failure of the Assessing Officer in giving an opportunity of being heard before determining the total income." 28. After hearing the rival parties and perusing the material available on record and keeping in view of our finding recorded in Ground No. 2 of Revenue s appeal for the assessment year 2003-04 in para-18 of this order we are of the view that in the interest of justice the matter should go back to the file of the Assessing Officer and accordingly, we set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X
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