TMI Blog2023 (7) TMI 1137X X X X Extracts X X X X X X X X Extracts X X X X ..... table issues which cannot be considered for exercising jurisdiction u/s 263. Except making vague allegation that the assessee has a project office in India which is in the nature of PE, learned CIT has not demonstrated how it fits into the definition of PE as per the treaty. Even assuming that there is a PE, unless, the offshore supplies made are with active involvement of the PE, profit in relation to such contract cannot be attributed to the PE. Therefore, merely on conjecture, surmises and suspicion, PE cannot be established. Issue of taxability of surety commission - As facts on record clearly establish that the assessee had offered the surety commission to tax in the return of income. Therefore, the allegation of learned CIT in this regard is completely unfounded. Allegation made regarding non-examination of transaction with Indian subsidiary from the point of view of transfer pricing, it is observed that in the year under consideration, the assessee has reported the transaction with Indian AEs in Form 3CEB. In the said report, the assessee has claimed the transaction to be at arm s length. Learned CIT has not demonstrated even remotely how the transactions are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment order dated 01.12.2016 as erroneous as well prejudicial to the interest of revenue on frivolous grounds. 2. On the facts and in the circumstances of the case and in law, the Order passed under Section 263 of Act by the CIT is void-ab-initio, without jurisdiction and untenable in law. 3. On the facts and in the circumstances of the case and in law, Ld. CIT erred in passing the order under Section 263 of the Act in gross violation of the principles of natural justice. 4. On the facts and in the circumstances of the case and in law, Ld. CIT has erred in directing the Assessing Officer to make enquiries regarding existence of PE which issue was already examined by the Ld. Assessing Officer to his satisfaction in the course of assessment proceedings. 5. On the facts and in the circumstances of the case and in law, Ld. CIT erred in directing the Ld. Assessing Officer to make verification of items contained in Paras (10) to (13) of his order which items were already examined by the Ld. Assessing Officer in the course of regular Assessment Proceedings. 6. On the facts and in the circumstances of the case and in law, the notices issued by Ld. CIT are vague, cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings under Section 143(3) of the Act by issuing notices under Section 142(1) and 143(2) seeking/calling for various information and details as well as explanation of the assessee on various issues. In response to the queries raised by the Assessing Officer, the assessee furnished the necessary details as well as submissions from time to time. Ultimately, the Assessing Officer completed the assessment under Section 143(3) of the Act vide order dated 01.12.2016 accepting the income returned by the assessee. Subsequent to the completion of assessment, learned CIT, in exercise of powers conferred under Section 263 of the Act, called for and examined the assessment record and while doing so was of the view that the assessment order is erroneous and prejudicial to the interest of the Revenue as the Assessing Officer has not carried out necessary inquiries and investigation on certain issues. Accordingly, she issued a show-cause-notice, purportedly, under Section 263 of the Act to the assessee seeking response on the following four issues: a) Why shouldn t Contract A (Offshore supply ) Contract B (Onshore services ) be regarded as one composite contract and assessment be framed accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn of income and actual receipts as per books of accounts of Samsung India; iv) The Assessing Officer failed to examine whether the receipts of more than Rs. 4,00,00,000 on account of surety was offered to tax; v ) The Assessing Officer failed to examine whether the assessee had any transaction with its Indian AEs and accordingly failed to examine the case from the point of view of transfer pricing issue. 7. Thus, on the aforesaid premises, she ultimately concluded that the assessment order passed is erroneous and prejudicial to the interest of Revenue and accordingly cancelled and set aside the assessment with a direction to make a proper enquiry on the issue enumerated in the revision order and frame a fresh assessment order. 8. Before us, learned counsel appearing for the assessee submitted, none of the issues on which learned CIT has held the assessment order to be erroneous and prejudicial to the interest of the Revenue are valid issues for invoking jurisdiction under Section 263 of the Act. He submitted, the amount received against offshore supply of plant and equipment cannot be made taxable in India, as, in terms of the contract, the material and equipments we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts and equipments, proceedings under Section 263 of the Act could not have been initiated. 11. Without prejudice, learned counsel submitted, in course of assessment proceedings, the Assessing Officer had conducted necessary inquiry with regard to the nature and character of receipts from offshore supply of plants and equipment by calling for copies of contracts, invoices raised and various other details. In this context, he drew our attention to notice dated 13.07.2016 issued under Section 142(1) of the Act. He submitted, in response to the notice issued, the assessee furnished his reply on 12th October, 2016 with all the details called for. He submitted in the reply, the assessee had very clearly and categorically submitted that it is a non-resident company and its entire control and management is situated outside India. He submitted, after considering the nature of contract, various other details and the submissions of the assessee, the Assessing Officer completed the assessment accepting the claim of the assessee. Thus, he submitted, it cannot be said that the assessment order is erroneous and prejudicial to the interest of the Revenue for non-examination of taxability of am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iction. As regards the allegation of the learned CIT regarding the difference in the receipts offered to tax as FTS and the actual FTS received by the assessee as per the information available in the financial of the subsidiary with the Ministry of Corporate Affairs website, learned counsel submitted, the issue was never confronted to the assessee either in the show cause notice issued under Section 263 of the Act or in course of the revisionary proceedings. Thus, he submitted, powers under Section 263 of the Act having been erroneously exercised,, the revision order should be declared as invalid and the assessment order be restored. 12. Strongly supporting the observations of the learned CIT in the revision order, learned Departmental Representative submitted that even during the pendency of proceeding before AAR, the Assessing Officer can proceed with the assessment and complete assessment, as, the exception provided under Section 245RR applies only to the resident applicant. Proceeding further, She submitted, as per Explanation 2(a) to section 263 of the Act, the revisionary authority can revise the assessment order, if, he is of the opinion that the order was passed without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds passed in favour of DMRC outside India. Even, the payments for offshore supply of plant and equipment were made in foreign currency through letter of credits and received by the assessee in Korea. Copies of the invoices, bill of lading and bill of entry demonstrate that goods have been consigned directly to DMRC from Korea. Thus, facts and material on record, prima facie, establish that offshore supply of plants and equipments concluded outside the territory of India. It is observed, the assessee had moved an application before AAR seeking a ruling on taxability of receipts under offshore supply contract. The specific issue admitted by the AAR is whether offshore and onshore services contract can be treated as composite contract. While the issue was pending before AAR, the Assessing Officer proceeded to complete the assessment under Section 143(3) of the Act, though, he was conscious of the fact that the issue relating to taxability of offshore receipts from offshore supply contract is pending before AAR. Probably, the Assessing Officer proceeded to complete the assessment under a misconception that the assessment is getting barred by limitation, being oblivious to the exception ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for all the payments made by you whether in India or abroad in respect of the contracts/agreements executed by you in India. Details to be filed along with documentary evidence wherever necessary. 18. As could be seen from the aforesaid notice, the Assessing Officer made detailed inquiry by calling for the copies of contract invoices, the nature of work executed under the contract, details of AEs and subsidiaries in India, details of work executed by AEs/subsidiaries. 19. In response to the queries raised by the Assessing Officer, the assessee furnished a detailed reply with supporting evidences. In so far as receipts from offshore supply contract, the assessee specifically submitted that the transfer of goods having taken place outside the territory of India, receipts are not taxable. Thus, the allegation of learned CIT that the Assessing Officer has not examined the issue is not borne out from the facts and material on record. In any case of the matter, whether the receipts from offshore supply contract are taxable in India or contracts are in the nature of composite contract or whether such receipts are linked to the PE are highly debatable issues which cannot be consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of subsequent notices issued by the learned CIT on 31.01.2019 and 12.02.2019. Though, learned CIT is empowered to consider fresh issues in course of proceedings under Section 263 of the Act, even, if they are not part of the show cause notice issued under Section 263 of the Act, however, it is trite law, learned CIT has to issue fresh show cause notice to the assessee confronting the fresh issues on which the revisionary authority seeks to revise the assessment order. This is not the case in the present appeal. 21. It is also relevant to observe, at the time of exercise of jurisdiction under Section 263 of the Act on the date of issuance of show cause notice i.e. on 11.12.2017, admittedly, proceedings before AAR was pending on the issue of taxability of receipts from offshore supply contract. That being the case, learned CIT being conscious of the fact that proceeding is pending before AAR should not have initiated proceedings under Section 263 of the Act as two parallel proceedings on the same issue, cannot be initiated at a given point of time. 22. Thus, on overall analysis of facts and material on record and in view of discussion made in the foregoing paragraphs, we a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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