TMI Blog2019 (4) TMI 2098X X X X Extracts X X X X X X X X Extracts X X X X ..... As relying on ESS DISTRIBUTION (MAURITIUS) SNC ET COMPAGNIE [ 2018 (8) TMI 2106 - ITAT DELHI] , HONDA CARS INDIA LIMITED [ 2016 (2) TMI 527 - DELHI HIGH COURT] and M/S ESPN STAR SPORTS MAURITIUS S.N.C. ET COMPAGNIE [ 2016 (4) TMI 45 - DELHI HIGH COURT] unless the assessee is an eligible assessee under section 144C(15)(b) of the Act, the Assessing Officer cannot pass a draft assessment order under section 144C of the Act. Keeping in view the principle of law propounded in the aforesaid judicial precedents, we have no hesitation in holding that the draft assessment order passed in case of the assessee for the impugned assessment year is invalid. Therefore, all the proceedings consequent thereupon are also invalid. Consequently, the draft assessment order as well as the final assessment order passed in pursuance thereof is quashed. - ITA No. 2572/Mum./2017 - - - Dated:- 12-4-2019 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER For the Assessee : Shri Milin Thakore For the Revenue : Shri Manoj Kumar ORDER PER SAKTIJIT DEY. J.M. Aforesaid appeal filed by the assessee is directed against the assessment order dated 27th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of its business, it has provided various services to its group entity in India. For the assessment year under dispute, the assessee filed its return of income on 30th November 2013 declaring total income of ₹ 4,351. In the course of assessment proceedings, the Assessing Officer after calling for necessary details and examining them found that as per the software licensing agreement, the amount received from its Indian Group entity for use of software license and training fees is in the nature of fees for technical services. Therefore, he called upon the assessee to show cause why the amount received should not be treated as royalty/fees for technical services and brought to tax in India. Though, the assessee relying upon various clauses of the double taxation avoidance agreement (DTAA) between India and Germany submitted that the amount received cannot be treated as royalty or fees for technical services, however, the Assessing Officer rejecting the submissions of the assessee ultimately concluded that the amount of ₹ 68,19,769, received by the assessee from the Indian Group company has to be treated as royalty under Article 12 of India Germany Tax Treaty. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order as well as the final assessment order passed in consequence thereof is void ab initio. 7. Further, he submitted, as per section 153(1) of the Act, the limitation to pass the assessment order under section 143(3) of the Act expired in January 2016. Therefore, the final assessment order passed on 27th January 2017, is also not saved by limitation. In support of his contention, learned Authorised Representative relied upon the following decisions: i) ESS Advertising (Mauritius) S.N.C. et Compagnie v/s ADIT, ITA no.5131, 5132/Del./2010, dated 20.08.2018; ii) Honda Cars India Ltd. v/s DCIT, [2016] 67 taxmann.com 29 (Del.); iii) Pankaj Extrusion Ltd. v/s ACIT, [2011] 198 taxman 6 (Guj.) iv) ESS Distribution (Mauritius) SNC ET Compagnie v/s DIT, [2018] 93 taxmann.com 53 (Del.); v) ESPN Star Sports Mauritius S.N.C. ET Compagnie v/s Union of India, [2016] 68 taxmann.com 377 (Del.); and vi) CTBC Bank Co. Ltd. v/s DCIT, [2017] 88 taxmann. com 141 (Del. Trib.). 8. The learned Departmental Representative opposing the contentions of the assessee submitted that the assessee being a foreign company is an eligible assessee as per section 144C(15)(b) of the Act. He sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er has passed any order under section 92CA(3) of the Act. Therefore, the variation proposed in the draft assessment order is not as a consequence of any order passed by the Transfer Pricing Officer. Therefore, the first condition of section 144C(15)(b) of the Act is not satisfied. Thus, it requires to be seen whether the assessee can fit into the definition of a foreign company as provide du/s 144C(15)(b)(ii) of the Act. As per the definition of foreign company under section 2(23A) of the Act, it means a company which is not a domestic company. Section 2(22A) of the Act defines domestic company to be an Indian Company or any other company which declares and pays dividend within India out of its income. Whereas, from the documentary evidences placed before us including the return of income filed by the assessee as well as the residency certificate issued under section 10F of the Act, it is seen that the status of the assessee has been shown as limited liability partnership. In fact, the Department has allotted PAN to the assessee in the status of a partnership firm. The definition of firm under section 2(23) of the Act includes a limited liability partnership. Further, in the draft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen provision of section 144C could not have been resorted to, because the assessee cannot be reckoned as eligible assessee in whose case the draft order of assessment is required to be passed. Section 144 C(1) reads as:- 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. 8. The aforesaid provision which is a non obstante clause, provides that the AO has to forward a draft of the proposed order of assessment to the eligible assessee‟, if he proposes to make an order after the first day of October, 2009 making any variation in income and or loss returned which is prejudicial to the interest of such assessee. The eligible assessee has been defined in clause (b) of sub section 15 which reads as under:- 144C(15)(b) eligible assessee means (i) any person in whose case the variation refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of section 144C(15)(b). A fortiori, no draft assessment could have been proposed u/s 144C(1) of the Act which has in fact been proposed by the Assessing Officer before passing the final impugned assessment order. 13. The Hon‟ble jurisdictional High Court in the assessee‟s own case for the assessment year 2010-11, since reported as ESPN Star Sports Mauritius S.N.C.ET Compagnie v. Union of India (2016) 388 ITR 383/241 Taxman.38/68 taxmann.com 377 (Delhi), has allowed the assessee‟s writ petition under similar circumstances by setting aside the draft assessment order and the final assessment order with the following observations made in para 30, which are as under:- It appears to the Court that it is plain that under Section 144C, the AO should have proceeded to pass an order under Section 143(3) of the Act. Instead the AO confirmed the draft assessment order passed under section 144C(1) of the Act. This, therefore, vitiated the entire exercise. The Court has no hesitation in holding that the final assessment order dated 28th January, 2015 is without jurisdiction and null and void. The draft assessment order dated 28th March, 2014 having been passed in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of an order of the Transfer Pricing Officer and (ii) any foreign company. The use of the word means indicates that the definition eligible assessee for the purposes of Section 144(C)(15)(b) is a hard and fast definition and can only be applicable in the above two categories. 12. First of all, the petitioner is admittedly not a foreign Company. Secondly, the Transfer Pricing Officer has not proposed any variation to the return filed by the petitioner. The consequence of this is that the Assessing Officer cannot propose an order of assessment that is all variance in the income or loss return. The Transfer Pricing Officer has accepted the return filed by the petition. In view of the which, neither of the two conditions are satisfied in the case of the petitioner and thus the petitioner for the purposes of Section 144C(15)(b) is not an eligible assessee . Since the petitioner is not an eligible assessee in terms of Section 144C(15)(b), no draft order can be passed in the case of the petitioner under Section 144C(1). 13................................. 14. In view of the above, it is clear that the petitioner, not being an eligible assessee in terms of Section 144C(15) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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