TMI Blog2023 (7) TMI 343X X X X Extracts X X X X X X X X Extracts X X X X ..... al interest, personal interest between the client or any of the Member constituting the Bench neither it is the case of the Ld.CIT-DR that any of the Member of ITAT constituting the Bench has represented the client during their professional services. This is a simple case of lawyer Shri I. Dinesh has been appointed by President, ITAT to represent CPIO by virtue of power vested in him u/s. 255(5) and 255(6) of the Act, who happens to be a Member of ITAT. This tribunal has seen members from Indian Revenue Services who have all along been with the Revenue becoming members of this Tribunal and have unblemished record of dispensing justice without fear or favour. This Tribunal has also seen emergence of some of the finest members who have been representing the department in their professional careers later to become Members of the Tribunal and judges of the High Court and Supreme Court If these are to be considered as instance of Conflict of interest than no departmental representative and no member from Indian Revenue Services would be eligible to become members of tribunal. Now, this issue raised by ld.CIT-DR, Dr.S. Palanikumar before us is totally out of context, without any ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Shri Arjun Raj, CA as Interveners on preliminary issue only For the Respondent : Dr. S. Palanikumar, CIT And Shri P. Sajit Kumar, JCIT ORDER PER MAHAVIR SINGH, VICE PRESIDENT: The appeal filed by the assessee in ITA No.1643/CHNY/2019 is directed against the order of the Commissioner of Income Tax (International Taxation), Chennai in No.CIT/IT/CHE/ 113(263)2018- 19 dated 29.03.2019. The assessment was framed by the DCIT, International Taxation -1 1(2), Chennai for the assessment year 2014-15 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter the Act ) vide order dated 07.12.2016. The appeal in IT(TP)A 101/CHNY/2018 is arising out of the order of the DCIT, International Taxation -1 (1), Chennai for the assessment year 2015-16 u/s. 143(3) r.w.s. 144C(13) of the Act vide order dated 25.10.2018 pursuant to the directions of the Dispute Resolution Panel, Bengaluru dated 24.09.2018. 2. When these two appeals were called for hearing, the ld.CITDR, Dr. S. Palanikumar along with ld. Senior DR, Shri P. Sajit Kumar raised preliminary objection on conflict of interest in case these two appeals will be argued by Shri Dinesh Inbavadivu belonging to M/s. V. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs, it was only these two advocates who have spoken and presented the case on behalf of the Respondent and the Respondent, Sri.Manoj Kumar Agarwal, CPIO chose to remain silent. Since these advocates Shri Dinesh Inbavadivu of M/s V Ramachandran Advocates and Shri Arjun of Sriraman Advocates are regularly appearing before ITAT, Chennai in representing their clients against Revenue, it is my duty to bring the following observations and reservations to your kind perusal; a). As the said counsels have been appointed by CPIO, ITAT and they have represented CPIO of ITAT, there is direct case of conflict of interest as they being the counsels of the ITAT, Chennai cannot be presenting their clients cases before the members of the ITAT, who are again their clients b). It is a case of conflict of interest and it will jeopardize the interest of revenue in Income tax appeal proceedings before ITAT, Chennai. c). To maintain the neutrality and impartiality it is brought on record that the above-mentioned advocates cannot represent their clients before ITAT, Chennai from date of appointment of these counsels by ITAT, Chennai. Yours sincerely, Sd/- (S. Palanikumar) Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sl.No. Particulars Annexure 1 Copy of the letter addressed to Assistant Registrar dated 26-04-2023 1 2 Written submission given by Sr.AR of C Bench 2 3 Copy of the email dated 18-04-2023 addressed by Shri Dinesh Inbavadivu 3 4 Written submission dated 17-04-2023 filed by Shri Dinesh Inbavadivu on behalf of respondent, ITAT to CIC 4 5 Copy of the office memorandum of Ministry of Law and Justice dated 16-01-2015 5 6 Acknowledgement of submission made by the appellant to CIC on 19-04-2023 at 03:24 PM 6 7 Appellate tribunal code of ethics for the members issued by the then President ITAT 20-06-2008 7 8 Copy of order of CIC dated 19-04-2023 8 2.2 The ld.CIT-DR argued that it is evident from the email dated 18.04.202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 07.05. 1997 is the basis for the aforesaid circular issued by the President of ITAT. Bar Council of India Rules 1975 explained the conflict of interest in relation to advocates duty. This conflict of interest is even well substantiated and explained in the works of Fordham Law Review, by Prof. Dr. Bruce A Green of Columbia University in the international perspective that applies to India and Global nations. The ld.CIT-DR further submitted that the manner in which ITAT conducted proceedings under Cisco Webex, SOP for the Video Conferencing, the contract agreement entered between ITAT and the service provider Godrej and Boyce Mfg Co Ltd etc were revealed to these private counsels engaged by ITAT and it was referred by these advocates in their written submission for not providing the information (video recordings) sought under RTI Act. However, it was not shared when RTI application was filed. It shows the close proximity of these advocates with ITAT Chennai. Neither CPIO nor First Appellate Authority has cited this reason in their proceedings dated 14.3.2022 and 15.12.2022 at the time of rejecting the RTI application and appeal. It was brought to the notice only by Sri. Dinesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer cannot appear himself, the officers at the rank of Additional/Joint/ Deputy/Assistant Commissioner of Income Tax are appointed as Senior/Junior Departmental Representative respectively to represent the case of revenue before the ITAT. The Senior or Junior DRs are expected to present and argue the case of the Department independently and also to render assistance to CIT DR. The functions of the Departmental Representatives are primarily to represent the Department before the ITAT. The DRs to assist the Tribunal to dispose of the appeal/cross objection/ Miscellaneous Application etc. His function commences the moment appeal is filed in the Registry of the Tribunal either by the Department or by the assessee. The Ld. counsel submitted that unfortunately the Ld.DR blocked disposal of appeal proceedings in this case and also other cases during almost fifteen days wherever Sh I Dinesh is representing. The ld.counsel drew our attention to the procedure of filing Reference Application before the Tribunal and he cited an instance of ITAT Cochin Bench, wherein the Ld.DR has filed an application before the Tribunal. The moot question was whether that Misc. Application, filed by DR, can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the administrative side of the Tribunal. The functions of the Tribunal are twofold i.e.one is quasi-judicial and the other is administrative side work. The order of the CIC itself says Petitioner is an individual and even in his pleadings before the CIC, the Ld.CIT-DR stated that I filed this petition in my individual capacity . He also stated as to whether the Ld.CIT-DR has taken permission to file this petition before CIC or only to subvert the judicial proceedings before ITAT, the Ld.DR has filed Misc. Application in his individual capacity. 3.2 The second issue raised by the ld.CIT DR-in his letter dated 26.04.2023 is, it is a case of Conflict of Interest and it will jeopardize the interest of revenue in the appeal proceedings before the ITAT, Chennai. The ld.counsel submitted that had Shri I Dinesh appeared for any matter for any Member or Vice-President of the Tribunal as a party in the proceedings as an individual, then possibly there may be bias, because he has represented the Members in their individual capacity, but in this case it is not so. In this case, Shri Dinesh has defended the Tribunal as an institution. There is a clear distinction between administrative fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... safeguard/ constitutional protection and that safeguard cannot be thrown away on the mere allegation of bias. The learned counsel drew our attention to the written submissions filed by the Ld.CIT-DR that No man can be judge of his own cause . Ld counsel stated that he is arguing assessee s cause and Ld.CIT-DR is arguing for department s cause and Hon ble Member cannot decide his own cause. There could be reasonable thinking of bias, but here it is not so. 3.3 The learned counsel drew our attention to list of CPIOs/Appellate Authorities of the Income Tax Department, wherein at Sr.No.268 for the O/o.CIT DR, the CPIO is ITO (HQrts) in the O/o. CIT DR, ITAT, Chennai-90 and Appellate Authority is CIT (DR)(Admn), Besant Nagar, Chennai-90. So, the CIT-DR is appellate authority. Whether it can be stated that CIT-DR is an income-tax authority and he cannot act an appellate authority? The roles are totally different. Under the RTI Act, information procedure is purely administrative side and nothing to do with the quasi- judicial power. Getting information or not getting information is not going to affect the powers or function or remedies under the Act. Therefore, it is a frivolous peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es from a person of his rank. It is rightly perceived by the President as well as two concerned Members of the Tribunal as a threat to their independent functioning in the course of deciding appeals coming up before them. 19. The first respondent has offered his apology to us. However, looking to all the circumstances of the present case, we cannot accept the apology offered. He has travelled far beyond exercising administrative control over the Tribunal. He has tried to influence or question the decision making process of the Tribunal. An apology in these circumstances cannot be accepted. We, therefore, hold the first respondent guilty of contempt of Court. Looking, however, to the fact that he has since retired as the Law Secretary and is not in a position to inflict further damage , the ends of justice will be met if he is fined a sum of Rs. 2,000/- as punishment for contempt. We order accordingly. Therefore, the Ld.counsel for the assessee submitted that contempt proceedings can be initiated by this Tribunal against the Ld. CIT-DR both on judicial as well as administrative side, because these proceedings arose on administrative side and in fitness of things, contempt proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cialised in tax matters, and also from the State civil Judiciary. The present President of the Tribunal, Shri T.P.Mukherjee, before he joined the Tribunal, was an illustrious member of the State Judiciary of Bihar, having last held the office of a District and Sessions Judge in that State. I suppose people selected can be expected to be as independent as anybody else. The Accountant Members of the Tribunal are selected from among the higher officers of the Income Tax Dept, usually Commissioner and Senior Appellate Asst. Commissioners and from the practising Chartered Accountants. So far as the later are concerned, there can be no reason to think that they cannot be independent. The independence of the members recruited to the Tribunal from the officers of the Income Tax Department is secured by so arranging things that they cannot look forward to anything from the Income tax Department or the Ministry of Finance they cannot go back to higher posts in that Department. Their promotion and tenure of office are not controlled by the Ministry of Finance. These are in the hands of the Ministry of Law. 3.7 The learned counsel also drew our attention to the 115th report of Law Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereupon it shall be the duty of the official superior to confirm the direction in writing. 3.9 The learned counsel also drew our attention to the written submissions filed by the Ld.DR in ITA No.959/Chny/2018 on 01.05.2023 before C Bench, wherein para 4 reads as under:- 4 It is for the same reason and spirit. Rule 4(3) of the Central Civil Service (Conduct) Rules was laid out. This rule even prohibits entering into any contract, not only by the Government Servant but also their family members. Even if, entering into such contract is inevitable, then such contracts shall be entered only with the prior permission of the superior authority. The learned counsel submitted that the above conduct rules are no way concerned and irrelevant with the Misc. Application filed by the Ld.CIT DR. The CIT-DR has only violated conduct rules by filing this Misc. Application. The ld.counsel also submitted that the CIT-DR has raised the issues of conflict of interest , dual representation, adverse interests, personal interests, business relationships, previous involvement and extrajudicial activities only on assumption of bias, which is not so in this application. 4. Another Senior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d thereby demonstrating the intentions in blocking the judicial proceedings. Under the Chartered Accountants, Act 1949 any member holding Certificate of Practice is entitled to appear in the capacity of CA in any quasi-judicial forum under the Act in view of Section 288 of the said Act and it is a classic case of obstruction by Dr.S Palanikumar in pursuing his professional work before this Bench thereby clearly violating the fundamental rights guaranteed more specifically Article 19(1)(g) under the Constitution of India, 1950. 4.2 He further stated that the objections for making appearance by N. Arjun Raj C.A. by Dr. S. Palanikumar is a serious issue to be noticed by this Bench by providing appropriate solution/decision and the obstruction of the judicial proceedings and discharging the professional function by N. Arjun Raj as an officer of this Court to defend his client is a criminal offence punishable in terms of Sections 186, 166, 228, 499 and other related provisions of The Indian Penal Code 1860.The Chartered Accountants Act, 1949 is an act of Parliament and Shri N. Arjun Raj is holding the Certificate of Practise under the said Central Act. Therefore, he has every right t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cus standi to make the said pleading especially in the judicial proceedings conducted by this Bench who have the trappings of a civil court.The obstruction of the judicial proceedings may be dealt with appropriately by imposing cost on him recoverable personally from him in invoking the provisions of Section 254(2B) of the Act as Dr.S Palanikumar in the captioned case is representing the AO. It is prayed for imposing cost on Dr.S Palanikumar in blocking the judicial proceedings in the interest of justice and further it is prayed for placing the order to be passed on this preliminary untenable objection before the CBDT for information and appropriate action. 5. In reply, the learned CIT-DR, Dr.S. Palani Kumar argued on the point of possibility of bias submitted that it is a simple letter, he has handed over to the Asst. Registrar, ITAT to bring the issue to the notice of the Bench. He submitted that he has received one mail from Shri I Dinesh saying that he received hearing notice of CIC dated 29.03.2023 and the CIC has posted the case for hearing by mentioning appellant s name and CPIO s name. On 29.03.2023 when he has received the notice( stated by DR S Palanikumar but not fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that conflict of interest was raised in connection with two persons namely Shri I Dinesh Shri Arjun, Advocates appeared along with CPIO, ITAT, Chennai before CIC and represented the matter of CPIO FAA and this may lead to conflict of interest . Out of these two, one Shri Arjun, Advocate is not authorized to appear and both have filed written submissions on 18.05.2023 and that is the back ground of this letter dated 26.04.2023. However, the ld.CIT-DR stated that it is purely an administrative issue and he has nothing to do with this appeal. 6. The Bench intervened and observed that if this is an administrative issue why the Ld.CIT-DR has raised it before the Bench. In case it is raised, bench is duty bound to decide this issue. 7. At this juncture, the learned counsel brought to the notice of the Bench stating that one application made by the other DR, in other Bench, that in a case before CIC filed by a colleague officer against ITAT with respect to an application submitted under RTI Act, the officer on 19.04.2023 accompanied the colleague officer to the venue fixed for hearing through video conferencing just to have an experience as to how the proceedings be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lications and without anybody having to point out or even if no other person is on the know of such actions recuse themselves from hearing a case presented before them by their own client in the true spirit of upholding of the dignity and neutrality of the esteemed constitutional body of the Government of India. 10. The Bench clarified that bench do not engage any advocate and Shri I Dinesh, as an Advocate presented the case of ITAT Chennai, RTI Cell before the CIC and ITAT engaged him in administrative/institutional capacity. The Ld.DR stated that they are not computers but are human beings. The Bench observed that if the CIT-DR don t want the appearance of Shri I Dinesh, as an Advocate before ITAT, it is better they can approach the Bar Council of India. In reply, the Ld.DR submitted that he is requesting the bench to take a call. If the CPIO has given vakalath to Shri I Dinesh, then the CPIO has to recuse himself. If CPIO has authorized Shri I Dinesh, then the CPIO should recuse himself from hearing wherever Shri I Dinesh is appearing before ITAT. He argued that because of vakalath has been given by the CPIO, ITAT to Shri Dinesh, some sort of relationship has happened, so, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A/2022 135399 + CIC/ITCHN/A/2022/135678 dated 19.04.2023, wherein for appellant, none was present i.e., for Dr.S. Palanikumar whereas for respondent i.e., CPIO/APIO, ITAT Chennai, RTI Cell, Shri Dinesh Inbavadivu, Advocate representative of CPIO present through video conference. Admittedly, Shri I. Dinesh, Advocate represented CPIO/APIO, ITAT, Chennai, RTI Cell before CIC in the RTI proceedings initiated by Dr S. Palanikumar. It is totally denied by APIO/CPIO of ITAT that Shri N Arjun Raj [who is not an advocate by profession but he is Chartered Accountant by profession appearing before ITAT regularly for his assessees] was engaged by ITAT to argue on behalf of CPIO, ITAT Chennai. This is totally false and contumacious argument and beyond facts on record. Hence as far as the objection of Dr S Palanikumar is concerned the same is rejected as totally false and without any basis and beyond facts on record. 11.1 Now the question arises, whether application dated 26.04.2023 objecting appearance, before Tribunal, of Shri I. Dinesh belonging to Sri Ramachandran Advocates and others of his group and Shri N Arjun Raj(Chartered Accountant not an Advocate) of Sriram Advocates is a direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omes in a situation where there is dual representation, adverse interests, personal interests and business interests. The conflict of interest can be addressed as legal ethic rules requires a lawyer to identify and avoid conflicts wherever possible. This includes obtaining informed consent from clients after fully disclosing the nature and implications of the conflict. Hence the lawyers are bound by Bar Council of India rules i.e., rule 49 to 52 and also TamilNadu Civil Rules of practice. Apart from this, there can be conflict of interest viz-a-viz judges. A conflict of interest occurs when an individual, as a judge, is in a position where their personal, financial, previous involvement and extra judicial activities could potentially influence their judgment or decision making abilities in an unfair or biased manner but in the present case before us none of the situation is prevalent either from lawyers representing their cases or the Members of Tribunal conducting the Benches. In the instant case, Shri I. Dinesh as authorized representative of APIO, ITAT Chennai represented ITAT before CIC and he also represents his clients before ITAT Benches. It is not the case of the Ld.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otally out of context, without any basis, totally different and distinguished on facts. According to us, there is no conflict of interest in this matter. Hence, this should be rejected at the threshold. 11.6 The other facet is that the Tribunal is not the appropriate judicial forum to raise this issue. The reason for this is that the Tribunal is not to disqualify the lawyer or the law firm as a regulatory measure and it would not be a disciplinary body but there are appropriate forums for punishing professional mis-counduct, if any committed by lawyer. Hence, ld.CIT-DR raising this issue has himself tried to obstruct Shri I. Dinesh and his firm M/s. V.Ramachandran Advocates from appearing before ITAT. Here the simple litigation was before CIC where the order of CPIO is to be defended by the CPIO/APIO of ITAT, Chennai Benches, RTI Cell and for this purpose, ITAT have engaged advocate Shri I. Dinesh of Shri V. Ramachandran Advocates and which was successfully defended by him. APIO after taking due permissions from the Competent Authority i.e., President of ITAT has appointed Shri I. Dinesh as counsel to argue before CIC in RTI appeal filed by one Dr S. Palanikumar. 11.6.1 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r by the assessee. It means that this petition dated 26.04.2023 is filed by Ld CIT-DR in his personal capacity and no approval is obtained from competent authority. From the above functions of Departmental Representative, it is very clear that the role of the Departmental Representative is to represent the case and does not have any authority to append his signature in his official capacity to file additional grounds of appeal or miscellaneous application. The AO is authorized to file appeal, additional ground, any application or miscellaneous application and for that he has to seek permission from the competent authority. Hence in our view, the ld.CIT-DR has no locus standi to file this impugned application and further argue the same. It seems that ld.CIT-DR is acting in his individual or personal capacity as an aggrieved party for the reasons known to him. Hence, for this reason also this petition is dismissed as not-maintainable. 11.8 One more fact is noted here, that on 19.04.2023 Dr.S. Palanikumar, Ld.CIT-DR filed adjournment petitions enblock in Bench D , which is his assigned Bench by the Department, for the reasons stated that he is assigned another official duty an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore Bench are to be decided judicially and not administratively because ld.CITDR, Dr. S. Palanikumar and one Senior DR, Shri P. Sajit Kumar tried for almost 15 to 20 days to block the judicial proceedings by blocking Shri I. Dinesh, Advocate of V. Ramachandran Advocates and Shri N.Arjun Raj, Chartered Accountant of Sriram Associates. They took up this issue on judicial side of the functioning of the Tribunal by raising this issue before the benches. Hence, we decided to take up the matter on judicial side of the functioning of the Tribunal. Hence, this plea of ld.CIT-DR also rejected. 11.10 The present application dated 19.04.2023 by ld.CIT-DR is pitted as preliminary objection to cases to be represented by the Shri I. Dinesh and others and is a quintessential example of obstruction of justice. While it is a undisputed fact that Shri I. Dinesh has been appointed to represent ITAT, duly authorised by the President of the Tribunal through the registry, in discharging his administrative function, the present application is preferred to obstruct the judicial function of the Bench in disposing off the appeals. By this application the functioning of the bench has been disrupted and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal. As we are all aware, the ITAT is regulated by its own rules and procedures, and conducts open court hearing and affords opportunities to the Counsels of both sides to represent their cases. The Tribunal before delivering its order/judgment, considers the facts on record and arguments advanced by both the Counsels and pass the orders accordingly. Although in some cases, there can be a mistake apparent from records and for that a remedy is provided in the Act itself. But in any case, the DRs cannot file letters or petition in personal capacity which will hinder the justice delivery system. Since, DR S Palanikumar LD CIT DR is representing the AO, we expect him to be conversant with open Court crafts and procedures, which should not hindering the justice delivery system. We, therefore, deprecate this kind of behaviour of Dr.S.Palani Kumar and advise the Revenue to give proper training to him before he is posted in any judicial forum. Since, he has obstructed judicial functioning of the Tribunal by filing frivolous application and letters, we are of the considered view that it is a fit case for imposing a cost, but we are refraining ourselves from imposing any cost as inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iefly stated facts are that the assessee company received a sum of Rs. 5,22,88,362/- as guarantee fee from Daechang India Seat Pvt. Ltd., (DISPL) and KM Seat India Pvt. Ltd., (KMSIPL) during the relevant assessment year 2015-16. The assessee company entered into a corporate guarantee agreement with certain banks for providing guarantee for loans granted by bank to its group companies across various countries. In term of the corporate guarantee agreement, the assessee received this guarantee fee from the above stated two group companies. The AO noted that the foreign banks extended loan facility to these two subsidiaries which are resident companies of India and in term of that received loans from foreign banks and the loan was availed in India. According to AO, since the loans were availed in India, the income accrued from the guarantee fee has arisen in India only. According to AO, the guarantee fee is not in the nature of business income, since the assessee company was predominantly engaged in the manufacturing business and not in the business of providing corporate / bank guarantee to earn income on regular basis. The AO noted that the guarantee agreement is entered into for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is not a party to the loan transactions and the guarantee contract is different from the loan contract, the guarantee fee does not fall within the definition of the interest either under the provisions of the Act or the Treaty. Therefore, the position taken by the Assessing Officer to tax the income from other sources of Rs. 5,22,88,362 as normal income of the foreign company and tax it @40% + SC @5% and EC@2% is upheld. The objection of the assessee on this aspect of taxation is rejected. In term of the above directions of DRP, the AO framed assessment order and brought the above mentioned guarantee fee of Rs. 5,22,88,362/- to tax. Aggrieved assessee preferred appeal before the Tribunal. 14. Before us, the ld.counsel for the assessee drew our attention to the additional ground raised before DRP stating that guarantee fee received by assessee is not taxable in India inasmuch as the Indo-Korean DTAA under Article 23, Other Income clearly clarifies the position that the same is taxable in the contracting state i.e., Korea only. The ld.counsel for the assessee, during the course of hearing drew our attention to pages 68 to 98 of assessee s paperbook and particularly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccrued to them in India. The dispute in AY 2014-15 and 2015-16 was the rate of which tax to be deducted. The AO charged higher rate of tax. From the AYs 2014-15 to 2018-19, the assessee duly admitted the royalty income. From the AYs 2014-15 to 2017-18, the assessee apart from admitting royalty income, income accrued on account of guarantee fee was admitted in its return of income. He further submitted that the assessee consistently admitted the guarantee fee accrued and received as income accrued received in India in all the returns filed upto AY 2017-18. The return of income filed for AY 2016-17 2017-18 was not selected for scrutiny whereas, it was duly processed u/s 143(1) of the IT Act by accepting the returned income. In AY 2018-19, the assessee did not admit this guarantee fee income accrued to them in its return of income filed on 28.03.2019. However, TDS credit of Rs. 1,28,71,498/- was claimed by the assessee. In the AY 2018-19, the assessee admitted only the royalty income received. In the AYs 2014-15 and 2015-16, the assessee raised a common ground that by virtue of Article-22 of Indo-Korea DTAA, the other income shall be taxable only in the contracting state, ie. Korea. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld.CIT-DR has no business to exceed his briefing and now come to Tribunal and say that the income is business receipt. He also argued that the reliance placed by ld.CIT-DR in the case of Johnson Matthey Public Ltd., supra, to say that guarantee fee is taxable under DTAA of India-UK, he argued that the case law relied on by the ld.CIT-DR relates to India-UK Treaties and the subject appeal or subject issue before us is Indo-Korea DTAA and the same cannot be relied on by the Revenue now. The ld.counsel for the assessee relied on the decision of Co-ordinate Bench in the case of M/s. Draegerwerk Co. KGAA vs. ACIT in ITA No.547/MUM/2022 dated 09.11.2022, wherein the Tribunal has clearly distinguished the decision of Johnson Mathey Public Ltd., supra. In term of the above, the ld.counsel for the assessee again made emphasis on Article 23 of Indo-Korea DTAA which specifically provides that taxability of other income is only in Korea i.e., contracting state and not in India. Hence, he requested the Bench to set aside the orders of Assessing Officer and that of the DRP and allow this additional ground raised before DRP. 17. We have heard rival contentions and gone through facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporate / bank guarantee to earn income on regular basis. Hence, the Assessing Officer held that the guarantee fee received from Indian Subsidiaries namely DISPL and KMSIPL has accrued and arised in India as income from other sources. We noted that this is a clear cut case of applicability of DTAA of Indo-Korea, whereby by virtue of Article 23, the other income has to be taxed in the contracting state i.e., Korea and not India. We also noted that reliance placed by ld.CIT-DR on the decision of Johnson Matthey Public Ltd., supra relates to Indo-UK Treaties and this has been distinguished by Co-ordinate Bench of ITAT, Mumbai in the case of M/s. Draegerwerk AG Co. KGAA, wherein while dealing with Indo-German Treaty it has clearly distinguished the decision cited by ld.CIT-DR. We noted that this issue has been considered by Co-ordinate Bench of Mumbai in the case of Capgemini SA vs. DCIT (International Taxation) in ITA No.6323/Mum/2016, dated 09.01.2017, wherein the Tribunal considering another decision of the same assessee for AY 2012-13, in ITA No.888/MUM/2016, order dated 13.07.2016 and further following AY 2009-10 in ITA No.7198/MUM/2012, order dated 28.03.2016 held that the guar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the credit facilities extended by BNP Paribas, France to the associate concerns in India. Before the Assessing Officer the plea of the assessee was that such guarantee commission was not chargeable to tax in India either under the domestic law or even in terms of Double Taxation Avoidance Agreement (DTAA) between India and France. The pertinent point made out by the assessee was that no service was rendered by the assessee, much less a professional/ Technical service, and in any case, no service can be said to have been rendered in India. The plea of the assessee did not find favour even with the DRP and accordingly, the Assessing Officer held the guarantee commission of Rs. 33,40,347/- as taxable. 5. At the time of hearing, the learned representative for the assessee pointed out that an identical controversy was considered by the Mumbai Bench of the Tribunal in the assessee s own case for Assessment Year 2009-10 vide ITA No. 7198/Mum/2012 dated 28.3.2016. The relevant discussion in the order of the Tribunal dated 28.3.2016 (supra) reads as under :- 3. Rival contentions have been heard and record perused. Facts in brief are that the assessee is a resident of France and do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned by the assessee from the two associate Indian concerns cannot be held to be taxable in India. As a consequence, on this aspect, the assessee succeeds. In the light of the foregoing order, the one of the reason that the order for Assessment Year 2012-13 of Ld.DRP has not been reversed by Tribunal, no more survives. The Tribunal in order dated 28/03/2016 for Assessment Year 2009-10 (ITA No.7198/Mum/2012) found that guarantee commission, received by France Company neither accrued in India nor deemed to be accrued in India, therefore, not taxable in India under the Income Tax Act. Furthermore, as per Article-23.3, income can be taxed in India only if arises in India and since, in the instant case, the income arose in France, as the guarantee was given by the assessee, a French company to BNP Paribas, a French Bank, in France, therefore, Article-23.3 has no applicability as income arose out of India. Respectfully, following the decisions of the Tribunal, these grounds of the assessee are allowed. 17.1 In view of the above and following Article 23 of Indo-Korea DTAA which specifically provides that taxability of other income is only in the contracting state and in the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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