9911796707
TMI Blog2017 (1) TMI 1247X X X X Extracts X X X X X X X X Extracts X X X X ..... nafter) dated 28.03.2013 for assessment year (AY) 2010-11. 2. The back ground facts of the case are that the assessee, a Korea based foreign company, did not return its income by way of guarantee fee, charged at 1% of the amount of the borrowings of its Indian subsidiary guaranteed by it. While the Assessing Officer (AO) brought it to tax as 'interest', the ld. CIT(A) confirmed the same, albeit on the ground that it was 'fee for technical services'. Aggrieved, the assessee is in second appeal. 3. Before us, the assessee's plea was two-fold. That guarantee fee, though interest within the meaning of the term as defined under section 2(28A) of the Act, is not so as defined under Article 5 of the Indo-Korean tax treaty, even as held by the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any, so that only where both the conditions are satisfied would the person concerned qualify to be an eligible assessee. Further, even if considering the assessee as one, so that the AO ought to have followed the procedure envisaged in sec. 144C before passing the assessment order, the only consequence of not doing so is that the assessment is to be restored to the stage where the procedural lapse has occurred. The decision in the case of Vijay Television (P.) Ltd. (supra) is distinguishable in-as-much as in that case the AO lacked the inherent jurisdiction to pass the order and, further, there were incidents indicting the order, vitiating it. It was under these circumstances that the same was considered as a nullity. On merits, guarantee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the word 'and' instead of 'or' in s. 144C(15) must be regarded as the law prescribing two categories of persons in whose case sec. 144C shall apply. That is, persons falling under sub-clauses (i) and (ii) of clause (b) of section 144C(15). This is apparent from a plain reading of the provision; the identification of a 'foreign company' being preceded by the word "means", and followed by the sub-clauses (a) and (b), and not, for example, by the words to the effect or signifying a person satisfying the conditions as set out in the said sub-clauses. As such, a foreign company is an eligible assessee, independent of the variation to its returned of income being by way of a transfer pricing adjustments - the other condition set out in s. 144C(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the assessment order, which stands already expired on 31.03.2013. The same, i.e., the order dated 26.03.2013, having been passed contrary to s. 144C was, therefore, bad in law. Further, any order that would now stand to be passed by the AO, i.e., treating the order dated 26.03.2013 as a draft order, would be, being beyond 31.03.2013, a nullity in law. That being so, the order dated 26.03.2013 was only a final assessment order. Why, the Department had even raised a demand on the assessee on that basis, which had not been withdrawn, as well as issued penalty notice in pursuance thereto. The second reason that prevailed with the Hon'ble High Court, relying on several authorities, was that the order passed without observing the mandatory proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the AO assumes jurisdiction to assess on issue of a valid notice, and which obtained till the same remained to be disposed of. The proceedings completed without allowing the assessee an opportunity of being heard was an illegality, vitiating the proceedings, which would relate back in time, having occurred during the course of the assessment proceedings itself. The impugned order was to be set aside, and the proceedings to commence from the stage the illegality or the irregularity had occurred. In the present case too, the order has been passed by the AO by, in effect, without allowing the assessee the opportunity of being heard by the DRP, i.e., prior to it being finalized. That there is no vested right against procedure is well-se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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