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TMI Blog2022 (12) TMI 921X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in upholding/confirming the action of the Ld Assessing Officer in 1.1 Concluding that the appellant is not the beneficial owner of interest income and consequently denying benefits under India- Cyprus Double Taxation Avoidance Agreement (DTAA) 1.2 Treating XE Advisors India Private Limited (XE Advisors) as he beneficiary of interest income attributable one of the shareholders, Vitelina Holdings Co. Limited . 2. On the facts and in circumstances of the case and in law, the learned Hon'ble CIT(A) has erred in passing order without giving an opportunity of being heard to the Appellant. 3. On the facts and circumstances of the case, and in law, the A.O has erred on the facts and in law in initiating penalty proceeding under Section 271(l)(c) of the Act." 3. The assessee had also filed a petition for admission of additional grounds and challenged final assessment order passed by the Assessing Officer u/s.143(3) Income Tax Act, 1961, being time barred by limitation. The learned A.R for the assessee referring to petition filed by the assessee for admission of additional grounds submitted that facts in relation to additional grounds were already on record and since, add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Company. The assessee has investments in India in the form of equity and Fully and Compulsorily Convertible Debentures (FCCDs) on which it earns interest income. The assessee has earned interest income of Rs.22,89,76,090/- which has been offered to tax in its return of income filed on 25.09.2014 for Assessment Year 2014-I5, and paid for tax @ 10% in terms of the India and Cyprus DTAA. The assessee claimed a refund of 20% of TDS deducted in the return filed, claiming applicability of the provisions of India-Cyprus Double Taxation Avoidance Agreement, as per which only 10% tax rate is chargeable on the interest income. The case of the assessee was selected for scrutiny, and during the course of assessment proceedings, the Assessing Officer denied treaty benefit to the assessee and taxed interest income at 30%. Subsequently, the Assessing Officer passed the draft assessment order under Section I44C of the Act on 30.12.2016 and thereafter, a final assessment order was passed under section 144C(3)(b) r.w.s 143(3) of the Act dated 28.02.2017. 8. The learned A.R for the assessee submitted that despite no variation in the returned income of the assessee, the Assessing Officer had invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this regard at the outset, it would be pertinent to refer to the section 144C of the Act, Reference to dispute resolution panel. 144C. (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. (2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order, (a) file his acceptance of the variations to the Assessing Officer; or (b) file his objections, if any, to such variation with, (i) the Dispute Resolution Panel; and (ii) the Assessing Officer. ................... (15) For the purpose of this section- (a) ............ b) "eligible assessee" means, (i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Explanatory Note to Finance Bill, 2009 while inserting the provisions of Section 144C which are extracted hereunder. Extract from Budget speech of Hon'ble Finance Minister "96. In order to further improve the investment climate in the country, we need to facilitate the resolution of tax disputes faced by foreign companies within a reasonable time frame. This is particularly relevant for such companies in the Information Technology (IT) sector. I, therefore, propose to create an alternative dispute resolution mechanism within the Income Tax Department for the resolution of transfer pricing disputes. To reduce the impact of judgemental errors in determining transfer price in international transactions, it is proposed to empower the Central Board of Direct Taxes (CBDT) to formulate 'safe harbour' rules." Dispute Resolution Panel. The subjects of transfer pricing audit and the taxation of foreign company are at nascent stage in India. Often the Assessing Officers and Transfer Pricing Officers tend to take a conservative view. The correction of such view take very long time with the existing appellate structure. With a view to provide speedy disposal, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and pass a draft assessment order therein. The first pre-condition is that the assessee should be eligible assessee as defined u/s.144C(15) of the Act. The second condition is that the Assessing Officer should propose to make any variation in income or loss returned by an assessee, which is prejudicial to the interest of the assessee. In this case, it is an undisputed fact that the assessee is eligible assessee for the purpose of above said section, which is the first condition. However, it is also evident from above provision that jurisdictional precondition must exist before the Assessing Officer can invoke proceedings u/s.144C of the Act, and pass draft assessment order, as per the Assessing Officer should propose to make any variation in income or loss returned by the assessee, which is prejudicial to the interest of the Revenue. In this case, this condition is not satisfied, because, the assessee has declared total income of Rs.22,89,76,090/- and the Assessing Officer had also assessed total income of Rs.22,89,76,090/-, however, proposed to levy tax @ 30% as against 10% tax admitted by the assessee in terms of Article 11 of Indo-Cyprus DTAA. From the above, it is very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his argument, including decision of the ITAT., Mumbai Benches in the case of DCIT Vs. IPF India Property Cyprus (No.1) Ltd. in ITA No.6077/Mum/2018 dated 25.02.2020. The Mumbai Bench of this Tribunal has considered an identical issue in light of provisions of section 144C(1) and amended provisions u/s.144C(1) w.e.f. 01.04.2020 and held that when there is no variation in income or loss returned by the assessee, which is prejudicial to the interest of the assessee, then question of issuing draft assessment order does not arise and consequently, the Assessing Officer does not get extended period for completion of assessment u/s.143(3) of the Income Tax Act, 1961. The relevant findings of the Tribunal are as under:- "4. We have heard the rival submissions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 5. So far as the first issue is concerned, we find that, in the present case, there are no variations in the returned income and the assessee income. The controversy is thus confined to the question as to what will be the rate on which income returned by the assessee is to be taxed. While the assessee has claime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his objection to the DRP, a collegium of three Principal Commissioners or Commissioners of Income tax. DRP has nine months to pass directions which are binding on the AO. It is proposed that the provisions of section 144C of the Act may be suitably amended to:- (A) include cases, where the AO proposes to make any variation which is prejudicial to the interest of the assessee, within the ambit of section 144C; (B) expand the scope of the said section by defining eligible assessee as a non-resident not being a company, or a foreign company. This amendment will take effect from 1st April, 2020. Thus, if the AO proposes to make any variation after this date, in case of eligible assessee, which is prejudicial to the interest of the assessee, the above provision shall be applicable. 6. Once this amendment is being introduced with effect from 1st April 2020, it is beyond any doubt of controversy that so far as the period prior to 1st April 2020 is concerned, the cases in which no variations in the returned income or loss were proposed, the draft assessment orders were not required to be issued. We, therefore, uphold the plea of the assessee on this point. 7. Coming to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not made any variation in the income or the loss returned by the assessee. The Assessing Officer has simply accepted the income returned by the assessee, and the variations, if at all, are in the computation of tax payable in respect of income returned by the assessee. The variation, as the statutory provision unambiguously states, has to be vis-a-vis returned income or loss. That is certainly not the case before us. The assessee's contention is that the income returned by the assessee was an inadvertent mistake and the Assessing Officer ought to have corrected the mistake as all the relevant facts were on record and what the Assessing Officer can bring to tax is income of the assessee in accordance with the law. We will deal with that aspect of the matter separately as and when the occasion comes to deal with the matter on merits. So far as the application of Section 144C is concerned, in our considered view, it is a condition precedent that the Assessing Officer proposes a "variation in the income or loss returned by the assessee which is prejudicial to the interest of the assessee", and since this condition is admittedly not satisfied on the facts of this case, no fault can ..... X X X X Extracts X X X X X X X X Extracts X X X X
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