HIGH COURT OF DELHI
Meinhardt Singapore Pte. Ltd.
Versus
Assistant Director of Income-tax, (International Taxation)
WRIT PETITION (CIVIL) NOS. 14076, 14077, 14085, AND 14096 OF 2009
Date of pronouncement – 04.12.2012
ORDER
Sanjiv Khanna, J.
The present judgment will decide the challenge to the reassessment proceedings initiated against the petitioner Meinhardt Singapore Pte Ltd. for the assessment years 2002-03 to 2005-06 vide reasons recorded on 25th-26th March, 2009. The said reassessment proceedings have been initiated by the Deputy Director of Income Tax, Circle-3(1), New Delhi.
2. Reasons have been separately recorded for each assessment year, but they are virtually identical. For the sake of convenience, we are reproducing the reasons recorded in the assessment year 2002-03, which read as under:-
“Assessee filed its return of Income declaring an income of Rs. 74,77,927 on 26-02-2004. The assessment was completed under section 143(3) on the Returned income on 23-03-2005.
2. The assessee is a Singapore based company, having a Branch Officer (B.O.) in India and is engaged in providing technical consultancy in the area of road construction in India.
It has offered the income out of its activities in India for tax as Fee for Technical Services (FTS) under section 44D of the Act.
3.1 During the year, the assessee was indulged in providing technical consultancy services to National Highway Authority of India (NHAI) in respect of NHAI Allahabad project, the contract in respect of which was signed on January 30, 2001. In terms of provisions contained under section 44D read with 115A of the Act, the receipts from this project are taxable as FTS on gross basis @ 20%.
3.2 From the Profit & Loss account filed during the assessment proceedings, it is noticed that the Assessee declared total receipts of Rs. 74,77,925/- under section 44D which were offered for tax @ 15%. However, in the assessment order u/s 143(3) dated 23-03-2005 the same was taxed @ 20%.
4.1 It is observed that the assessee entered into a Sub- consultancy contract dated February 01, 2001 with respect to the same NHAI Allahabad project with one M/s Quest International Consultants, a copy of which was submitted during the assessment proceedings for the A.Y. 2006-07. It has been the assessee claim that it had only provided team leader to the project whose salary was added back in computation of Income; while other expenses were borne by the Sub-consultants, which were reimbursed directly to it by the NHAI. Enquiries have been conducted with M/s Quest International Consultants and it is seen that following payments have been received directly by the Sub-consultants from the NHAI in various financial years:
