In absence of any material change revenue not justified to take a different view of the matter

M/s. Cargill Incorporated Vs. ADIT (ITAT Delhi)

There is no dispute between the parties on the issue that the addition involved in assessment year 2009-10 to assessment year 2014- 15 is same as involved in assessment year 2002-03 to 2008-09 before us. The fact that no appeal has been filed against the order of the Ld. CIT-(A) in assessment year 2009-10 to 2014-15, is also not disputed by the Ld. CIT(DR). The issue before us is that following the Rule of Consistency, whether the Revenue should still object these grounds of the assessee. On this issue, we take guidance from the decision of the Hon’ble Supreme Court in the case of RADHASOAMI SATSANG vs. COMMISSIONER OF INCOME TAX reported in 193 ITR 321. The relevant finding of the Hon’ble Supreme Court is reproduced as under:

“9. We are aware of the fact that, strictly speaking, res judicata does not apply to IT proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year.

One these reasonings, in the absence of any material change justifying the Revenue to take a different view of the matter— and, if there was no change, it was in support of the assessee— we do not think the question should have been reopened and contrary to what had been decided by the CIT in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under ss. 11 and 12 of the IT Act of 1961.”

(Emphasis supplied by us)

We find that Hon’ble Supreme Court has clearly observed that once the parties have allowed the position to sustain by not challenging the order, it is not appropriate to allow the position to be changed in subsequent years. In our opinion same applies to the earlier years also. Since issue in dispute involved in grounds mentioned above in assessment year 2002-03 to assessment year 2008-09 is identical to issue decided by the Ld. CIT-(A) in assessment year 2009-10 to assessment year 2014-15, accordingly, the objections of the Revenue are rejected and we allow the grounds raised by the assessee as listed above.

FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-

These seven appeals of the assessee are directed against different orders passed either by the Ld. Commissioner of Income-tax (Appeals) or by the Assessing Officer in compliance to the direction of the Ld. Dispute Resolution Panel (DRP) for assessment years from 2002-03 to assessment year 2008-09 respectively. In all these appeals, common grounds are involved; accordingly, we have heard these appeals to whether and disposed of by this consolidated order.

2. The grounds raised in various appeals are reproduced as under:

2.1 Grounds of appeal in ITA No. 491/Del/2012 for assessment year 2002-03

1. That the learned Assistant Director of Income Tax, Circle- 1(1), International Taxation, New Delhi (hereinafter referred to as ‘Learned AO’) and the Hon’ble Dispute Resolution Panel (‘the Hon’ble DRP’) have erred on the facts and in circumstances of the case and in law in initiating assessment/re-assessment proceedings under section 147 of the Act for the subject year based on mere change of opinion, without change in the material facts and circumstances on record giving rise to any valid reasons to believe that any income has escaped assessment. Thus, initiation of the assessment/re-assessment proceedings for the subject year is bad in law and void ab initio.

2. That the Learned AO and the Hon’ble DRP have erred in facts and in law in making addition amounting to Rs. 60,85,841 to the returned income by treating the actual reimbursements received under the Cost Sharing Agreement (‘the Agreement) on account of shared Corporate IT related services from its Indian group entity – Cargill India Private Limited (‘CIPL’) as Royalty under Article 12 of the Double Taxation Avoidance Agreement between India and USA (‘the treaty’).

2.1 That the learned AO and Hon’ble DRP have erred on facts and circumstances of the case and in law in treating the cost reimbursements received from CIPL on actual basis under the agreement as income chargeable to tax under the Act as well as the treaty and taxing the same on ‘gross basis’. Without prejudice to above, if the same is treated as services, the Learned AO and Hon’ble DRP has erred in facts and in law in holding that the same is not covered by the provisions of Article 12(4)(b) of the treaty.

2.2 That the learned AO and Hon’ble DRP have erred in facts and in law based on order for AY 2005-06 & 2006-07 in holding that the cost reimbursements received are charges for allowing the use of commercial and industrial information, use of equipment (hardware and software), accordingly, chargeable as Royalty as per Article 12(3)(b) of the treaty.

3. That without prejudice to above, the Ld AO have erred in facts and in law in not applying the correct rate @10% as prescribed in Article 12(2)(b) on amount considered as royalty in respect of use of Industrial, commercial or scientific equipment as described in Article 12(3)(b) of the treaty.

4. That the learned AO has erred in not allowing the credit of tax deducted to source amounting to Rs. 941,882.

5. That the learned AO has erred in levying interest amounting to 428,321 under section 234D and Rs. 94,939 under section 244A of the Act in the absence of any refund granted to the assessee.

5.1 Without prejudice to above, the learned AO has erred in law in charging interest under section 234D of the Act in the subject year whereas this section is applicable only for refund granted for AY 2004-05 and later years.

6. That the learned AO has erred in facts and in law in initiating the penalty proceedings u/s 271 (l)(c) of the Act against the appellant for concealing the particulars of income or for furnishing inaccurate particulars of income. Further, he has also erred in facts and in law in initiating penalty under section 271AA and 271 BA of the Act for non-compliance of various provisions of Chapter X of the Act in connection with the aforesaid international transaction which is not taxable in the hands of the assessee.

The above grounds are independent and without prejudice to each other.

The Appellant craves leave to add, alter, supplement, amend, vary, withdraw or otherwise modify the ground mentioned herein above at or before the time of hearing.

2.2 Grounds of appeal raised in ITA No. 492/Del/2012 for assessment year 2003-04:

1. That the learned Assistant Director of Income Tax, Circle- 1(1), International Taxation, New Delhi (hereinafter referred to as ‘Learned AO’) and the Hon’ble Dispute Resolution Panel (‘the Hon’ble DRP’) have erred on the facts and in circumstances of the case and in law in initiating assessment/re-assessment proceedings under section 147 of the Act for the subject year based on mere change of opinion, without change in the material facts and circumstances on record giving rise to any valid reasons to believe that any income has escaped assessment. Thus, initiation of the assessment/re-assessment proceedings for the subject year is bad in law and void ab initio.

2. That the Learned AO and the Hon’ble DRP have erred in facts and in law in making addition amounting to Rs. 52,82,359 to the returned income by treating the actual reimbursements received under the Cost Sharing Agreement (‘the Agreement) on account of shared Corporate IT related services from its Indian group entity – Cargill India Private Limited (‘CIPL’) as Royalty under Article 12 of the Double Taxation Avoidance Agreement between India and USA (‘the treaty’).

2.1 That the learned AO and Hon’ble DRP have erred on facts and circumstances of the case and in law in treating the cost reimbursements received from CIPL on actual basis under the agreement as income chargeable to tax under the Act as well as the treaty and taxing the same on ‘gross basis’. Without prejudice to above, if the same is treated as services, the Learned AO and Hon’ble DRP has erred in facts and in law in holding that the same is not covered by the provisions of Article 12(4)(b) of the treaty.

2.2 That the learned AO and Hon’ble DRP have erred in facts and in law based on order for AY 2005-06 & 2006-07 in holding that the cost reimbursements received are charges for allowing the use of commercial and industrial information, use of equipment (hardware and software), accordingly, chargeable as Royalty as per Article 12(3)(b) of the treaty.

3. That without prejudice to above, the Ld AO have erred in facts and in law in not applying the correct rate @10% as prescribed in Article 12(2)(b) on amount considered as royalty in respect of use of Industrial, commercial or scientific equipment as described in Article 12(3)(b) of the treaty.

4. That the learned AO has erred in not allowing the credit of tax deducted to source amounting to Rs. 11,99,547.

5. That the learned AO has erred in levying interest amounting to Rs. 355,463 under section 234D and Rs. 44,027 under section 244A of the Act in the absence of any refund granted to the assessee.

5.1. Without prejudice to above, the learned AO has erred in law in charging interest under section 234D of the Act in the subject year whereas this section is applicable only for refund granted for AY 2004-05 and later years.

6. That the learned AO has erred in facts and in law in initiating the penalty proceedings u/s 271(l)(c) of the Act against the appellant for concealing the particulars of income or for furnishing inaccurate particulars of income. Further, he has also erred in facts and in law in initiating penalty under section 271AA and 271 BA of the Act for non-compliance of various provisions of Chapter X of the Act in connection with the aforesaid international transaction which is not taxable in the hands of the assessee.

The above grounds are independent and without prejudice to each other. The Appellant craves leave to add, alter, supplement, amend, vary, withdraw or otherwise modify the ground mentioned herein above at or before the time of hearing.

2.3 Grounds of appeal raised in ITA No. 5647/Del/201 1 for assessment year 2004-05:

1. That the learned Assistant Director of Income Tax, Circle- 1(1), International Taxation, New Delhi (hereinafter referred to as ‘Learned AO’) and the Hon’ble Dispute Resolution Panel (‘Hon’ble DRP’) have erred on the facts and in circumstances of the case and in law in initiating re-assessment proceedings for the subject year based on mere change of opinion without any change in the material facts and circumstances on record giving rise to any valid reasons to believe that any income has escaped assessment. Accordingly, initiation of the re-assessment proceedings for the subject year is bad in law.

2. That the Learned AO and Hon’ble DRP has erred in facts and in law in making addition amounting to Rs. 57,42,882 to the returned income by treating the actual reimbursements received under the Cost Sharing Agreement on account of shared Corporate IT related services from Indian group entity as Royalty / Fees for Included services under Article 12 of the Double Taxation Avoidance Agreement between India and USA (‘the treaty’).

2.1 That the learned AO and Hon’ble DRP have erred on facts and circumstances of the case and in law in treating the cost reimbursements received from Indian Group Entity on actual basis under the agreement as income chargeable to tax under the provisions of Income Tax Act, 1961 (‘the Act’) and the treaty. Without prejudice to above, the learned AO and the Hon’ble DRP has erred in facts and in law in holding that the payment received by the appellant from the Indian group entities are not for services and thus provisions of Article 12(4)(b) of the Treaty are not applicable in the present case.

2.2 That the learned AO and Hon’ble DRP has erred in facts and in law in holding that the cost reimbursements are charges for allowing the use of commercial and industrial information, use of secret processes and use of equipment/ system containing hard equipments and soft equipments (software) based on the assessment order for subsequent years.

3. That without prejudice to above, the learned AO have erred in facts and in law in not applying the correct rate of 10% applicable on royalty as described in Article 12(3)(b) of the treaty.

4. That the learned AO has erred in facts and in law in levying interest under section 234D and withdrawing interest under section 244A of the Act. Further, the Learned AO has also erred in not allowing the full credit of tax deducted to source.

5. That the learned AO has erred in facts and in law in initiating the penalty proceedings u/s 271(1 )(c) of the Act against the appellant for concealing the particulars of income or for furnishing inaccurate particulars of income.

6. That the learned AO has erred in facts and in law in initiating penalty under section 271A A and 271 BA of the Act for non-compliance of various provisions of Chapter X of the Act in connection with the aforesaid international transaction which is not taxable in the hands of the assessee.

The above grounds are independent and without prejudice to each other.

The Appellant craves leave to add, alter, supplement, amend, vary, withdraw or otherwise modify the ground mentioned herein above at or before the time of hearing.

2.4 Grounds of appeal raised in ITA No. 446/Del/2012 for assessment year 2005-06:

1. That the Learned Assistant Commission of Income Tax, Cir 1(1), International tax, New Delhi (hereinafter referred as Ld AO) and Learned Commissioner of Income Tax (Appeals)-XI, New Delhi [hereinafter referred as Ld CIT(A)] has erred in facts and in law in making addition amounting to Rs 9,849,797 to the returned income of Rs. 64,25,861 by treating the actual reimbursements received under the Cost Sharing Agreement on account of shared Corporate IT and other services from its Indian group company, Cargill India Private Limited (CIPL) as Royalty/FIS under Article 12 of the Double Taxation Avoidance Agreement between India and USA (‘the treaty~). The order passed by the Ld AO and CIT(A) was based on conjectures and surmises, thus, bad in law.

1.1 That the Ld AO and CIT(A) has erred on facts and circumstances of the case and in law in treating the cost reimbursements received from CIPL on actual basis as income chargeable to tax under the provisions of Income Tax Act, 1961 (‘the Act~) and the treaty. Without prejudice to above, if the same is treated as services, the Ld AO and CIT(A) has erred in facts and in law in holding that the same is not covered by the provisions of Article 12(4)(b) of the treaty.

1.2 That the Ld AO and CIT(A) has erred in facts and in law in holding that the cost reimbursements for corporate IT recharges amounting to Rs. 95,16,056 are charges for allowing use of commercial and industrial information, accordingly, chargeable as Royalty as per Article 12(3) (a) of the treaty.

1.3 That the Ld. AO and CIT(A) has erred in facts and in law in holding that the cost reimbursements for Maintenance management system amounting to Rs. 3,33,741 is chargeable as Fee for included services (FIS) as per Article 12(4)(b) of the treaty.

The above grounds are independent and without prejudice to each other.

The Appellant craves leave to add, alter, supplement, amend, vary, withdraw or otherwise modify the ground mentioned herein above at or before the time of hearing.

2.5 Grounds of appeal raised in ITA No. 447/Del/2012 for assessment year 2006-07:

1. That the Learned Assistant Commission of Income Tax, Cir 1(1), International tax, New Delhi(hereinafter referred as Ld AO) and Learned Commissioner of Income Tax (Appeals)-XI, New Delhi [hereinafter referred as Ld CIT(A)] has erred in facts and in law in making addition amounting to Rs 125,12,899 to the returned income of Rs. 14,38,544 by treating the actual reimbursements received under the Cost Sharing Agreement on account of shared Corporate IT and other services from its Indian group company, Cargill India Private Limited (CIPL) as Royalty/FIS under Article 12 of the Double Taxation Avoidance Agreement between India and USA (‘the treaty~). The order passed by the Ld AO and CIT(A) was based on conjectures and surmises, thus, bad in law.

1.1 That the Ld AO and CIT(A) has erred on facts and circumstances of the case and in law in treating the cost reimbursements received from CIPL on actual basis as income chargeable to tax under the provisions of Income Tax Act, 1961 (‘the Act~) and the treaty. Without prejudice to above, if the same is treated as services, the Ld AO and CIT(A) has erred in facts and in law in holding that the same is not covered by the provisions of Article 12(4)(b) of the treaty.

1.2 That the Ld AO and CIT(A) has erred in facts and in law in holding that the cost reimbursements for corporate IT recharges amounting to Rs. 12 1,88,501 are charges for allowing use of commercial and industrial information, accordingly, chargeable as Royalty as per Article 12(3) (a) of the treaty.

1.3 That the Ld AO and CIT(A) has erred in facts and in law in holding that the difference amounting to Rs. 3,24,398 in the Form 3CEB of Indian group company (CIPL) and Appellant is chargeable as Fee for included services (FIS) as per Article 12(4)(b) of the treaty.

The above grounds are independent and without prejudice to each other.

The Appellant craves leave to add, alter, supplement, amend, vary, withdraw or otherwise modify the ground mentioned herein above at or before the time of hearing.

2.6 Grounds of appeal raised in ITA No.5503/Del/201 0 for assessment year 2007-08:

1. That the learned Assistant Director of Income Tax, Circle 1(1), International Taxation, New Delhi (hereinafter referred to as ‘Learned AO”)/Hon’ble Dispute Resolution Panel (“DRP~) has erred in facts and in law in making addition amounting to Rs. 19,294,953 to the returned income by treating the actual reimbursement charges on account of shared IT related services from Indian group entities as Royalty/Fee for Included Services under Article 12 of the Double Taxation Avoidance Agreement (DTAA) between India and USA.

1.1 That the learned AO/Hon’ble DRP has erred on facts and circumstances of the case and in law in treating the cost reimbursements received from its Indian group entities on actual basis as income chargeable to tax under the provisions of Income Tax Act, 1961 (Act) and DTAA between India and USA.

1.2 That the learned AO/Hon’ble DRP has erred in facts and in law in holding that the cost reimbursements are charges for allowing the use of commercial and industrial information, use of secret processes and use of equipment/ system containing hard equipments and soft equipments (software) while at the same time agreeing that the appellant has provided services to the Indian group entities.

1.3 Without prejudice to above, the learned AO/Hon’ble DRP has erred in facts and in law in holding that the payment received by the appellant from the Indian group entities are not for services and thus provisions of Article 12(4)(b) of DTAA between India and USA are not applicable in the present case.

1.4 Without prejudice to above, in case it is assumed that the payment received by the appellant is royalty for use of any industrial, commercial, or scientific equipment under Article 12(3)(b) of the DTAA between India and USA, the learned AO/Hon’ble DRP has erred in facts and in law in not applying the correct rate of 10% applicable on above royalty income.

2. That the learned AO/Hon’ble DRP has erred in facts and in law in initiating the penalty proceedings u/s 271(1) (c) against the appellant for concealing the particulars of income or furnishing inaccurate particulars of income.

3. That the learned AO has erred in facts and in law in initiating penalty under section 271AA and 271BA of the Act for non-compliance of various provisions of Chapter X of the Act relating to international transaction.

The above grounds are independent and without prejudice to each other.

The Appellant craves leave to add, alter, supplement, amend, vary, withdraw or otherwise modify the ground mentioned herein above at or before the time of hearing.

2.7 Grounds of appeal raised in ITA No. 5648/Del/2011 for assessment year 2008-09:

1 That the Learned Assessing Officer (‘AO’) and the Hon’ble Dispute Resolution Panel (‘Hon’ble DRP’) have erred in facts and in law in making addition amounting to Rs. 21,386,979 to the returned income of the appellant based on the assessment order for AY 2007-0 8 by treating the actual reimbursements received under the Cost Sharing Agreement on account of shared Corporate IT related services from its Indian group entities as Royalty under Article 12 of the Double Taxation Avoidance Agreement between India and USA (‘the treaty’).

1.1 That the learned AO and the Hon’ble DRP have erred on facts and circumstances of the case and in law in treating the cost reimbursements received from the Indian group entities on actual basis as income chargeable to tax under the provisions of Income Tax Act, 1961 (‘the Act’) and the treaty. Without prejudice to above, the learned AO and the Hon’ble DRP has erred in facts and in law in holding that the payment received by the appellant from the Indian group entities are not for services and thus provisions of Article 12(4)(b) of the Treaty are not applicable in the present case.

1.2 That the learned AO and Hon’ble DRP has erred in facts and in law in holding that the cost reimbursements are charges for allowing the use of commercial and industrial information, use of secret processes and use of equipment/ system containing hard equipments and soft equipments (software) based on the assessment order for AY 2007-08 and has further erred in law in not applying the ruling of Hon’ble Delhi High Court in case of Asia Satellite (2011) (ITA 131, 134 of 2003).

2 That without prejudice to above, the learned AO/Hon’ble DRP have erred in facts and in law in not applying the coiTect rate of 10% applicable on royalty as described in Article 12(3)(b) of the treaty on the ground that tax has been withheld by the Indian group entities at a higher rate. Further, the Learned AO has also erred in not allowing the full credit of tax deducted to the extent of Rs. 35,08,0 79.

3 That the learned AO has erred in facts and in law in initiating the penalty proceedings u/s 271(1) (c) against the appellant for concealing the particulars of income or furnishing inaccurate particulars of income.

4 That the learned AO has erred in facts and in law in initiating penalty under section 271AA and 271 BA of the Act for non-compliance of various provisions of Chapter X of the Act relating to international transaction.

The above grounds are independent and without prejudice to each other.

The Appellant craves leave to add, alter, supplement, amend, vary withdraw or otherwise modify the grounds mentioned herein above at or before the time of hearing.

3. Briefly stated facts of the case are that the assessee is a foreign company incorporated in the United States of America (USA) and also tax resident of USA. The assessee maintained an Information and Technology Department for providing Information and Technology (IT) related services to its group of companies and for this purpose, the assessee company entered into an agreement on 01/06/2001 with Indian group entity i.e. Cargill India Private Limited (CIPL) to provide a range of services including corporate (IT) related services like email box services, global core services, Internet web browsing, instant messaging services, storage services and mobility services etc. and other services. According to the assessee, the corporate IT charges received by the assessee pursuant to the agreement were, mere reimbursement of cost and therefore not taxable either under the domestic law or under the Double Tax Avoidance Agreement (DTAA). During assessment proceedings for assessment year 2005-06, the Assessing Officer rejected the contention of the assessee and held the charges received from services rendered under said agreement as income in the nature of Royalty/Fee for Included Services (FIS), under relevant articles of the DTAA. In view of the finding in assessment year 2005-06, the Assessing Officer reopened the assessment for assessment year 2002-03 to 2004- 05. The Assessing Officer also made additions in subsequent assessment years from 2006-07 to 2008-09 following his finding on the issue in assessment year 2005-06.

3.1 The assessee challenged or objected the addition made on merit in all the assessment years involved as well as the reassessment proceeding in assessment year 2002-03 to 2004-05 before either the Ld. Commissioner of Income-tax (Appeals) or the Ld. DRP.

4. The Grounds in raised in different appeals related to the issue of holding reimbursement of charges as royalty/FIS on merit, are summarized as under:

5. Before us, the Ld. counsel of the assessee in respect of the above ground submitted that issue in dispute has been allowed by the Ld. CIT-(A) in subsequent assessment years from 2009-10 to 2014-15 and the Revenue has not filed any appeal against the said finding of the Ld. CIT-(A) in those years. The Ld. counsel also furnished copy orders of the Ld. CIT-(A) for assessment year 2009-10 to 2014-15 and a copy of which were also provided to the Ld. CIT(DR). According to the Ld. counsel, the agreement involved in assessment year 2009-10 to 2014-14 has been continued from 01/06/2001. He submitted that corporate IT services rendered during assessment year 2002-03 to 2008-09 are also governed by the same agreement and reimbursed on cost-sharing basis only. According to him, when the Revenue has accepted the contention of the assessee in assessment year subsequent to 2008-09, the Revenue cannot be allowed to contest those issues before the Tribunal following the Rule of Consistency, as held in the case of Radhasoami Satsang Vs CIT, reported in 193 ITR 321. The Ld. CIT(DR) on last date of hearing was asked to verify, whether any appeal was preferred by the Revenue against the order of the Ld. CIT-(A) in assessment year 2009-10 to assessment year 2014-15. The Ld. CIT(DR) verified from the field authorities and confirmed the fact that no appeal has been filed by the Revenue against the said orders of the learned CIT-(A). He also concurred with the fact that services in assessment year 2009-10 to assessment year 2014-15 have been rendered under the same agreement, which was in existence in the assessment years 2002-03 to assessment year 2008-09, i.e. assessment years involved in appeals before us.

6. We have heard the rival submission and perused the relevant material on record. The issue involved in grounds mentioned above is whether the payment received by the assessee on providing corporate IT services etc. to group entities, which is claimed by the assessee as reimbursement on cost basis, is liable to be taxable in the hands of the assessee either as royalty or fee for included services under the relevant articles of the DTAA between India and USA. In assessment year 2009- 10 in appeal No. 96/13-14/CIT(A)-42, the Ld. CIT-(A) after considering the submission of the assessee in details; held as under:

“5.3.2 In support of above submission, the appellant filed before me the following supporting documents:

(i) Copy of agreement for services entered between the appellant and Indian group company, based on which corporate IT services were rendered.

(ii) Copy of invoices raised by the appellant on Indian group companies along with back up of sample invoice.

(iii) A certificate from the management to the effect that corporate IT charges are mere reimbursement of costs without any mark up and summary of corporate IT charges received from various Indian group companies.

In view of this, it was submitted that as no secret information was passed on to the Indian subsidiaries and the appellant provided for only arranging the corporate IT services, the payment received by it for such services was not for the right to use of equipment (hardware or software). Accordingly, it was pleaded that on the same grounds, such payment cannot be held as royalty in the hands of the appellant company. Without prejudice, the appellant pleaded that even if, such payment is treated as FIS, in view of the fact that in terms of Article 12 of the Indo- US treaty read with its MOU, it cannot be held as a taxable FIS, since there was no ‘make available’ of technoiogy by such payment. In view of this, it was submitted that the action of the AO of treating such payments as royaity was without any reasonable basis, it was also submitted that as such payments were merely reimbursement of the proportionate costs attributed to the appellant for the use of corporate IT related services facility, which was shared by the appellant company with its worldwide group entities and which does not have any mark-up element, in view of the settled law in this regard, such a reimbursement cannot be held as taxable income of the appellant.

DETERMINATION

6. I have carefully considered the facts of the case in the light of the applicable law as per the IT Act, 1961 and the Indo-US DTAA. Accordingly, my decision on the issue is as under:

6.2 On careful perusal of the Agreement for services signed by the appellant with M/s Cargill India Ltd. dated 01.06.2001, (Exhibit I) it is seen that the following corporate-IT infrastructure delivery services were to be provided by the appellant to its subsidiary companies:

“CORPORATE l/T

The Corporate l/T Infrastructure Delivery Organization (IDO) provides a menu of numerous services as follows:

(i) Application Integration

(ii) AS/400 server administration, technical consulting and processing services

(iii) Audio Conferencing capabilities

(iv) Call accounting

(v) Action Request System (ARS), an internal help desk service

(vi) Dedicated and shared servers for Cargill Global Office

(vii) Dedicated and shared servers for Cargill Cargili Group Environment

(viii) Telephone wireless services

(ix) Cargill- net and router support

(x) Local Area Network (LAN) facilities and management services

(xi) Corporate backbone

(xii) Corporate calling cards

(xiii) Desktop fax capabilities

(xiv) Development Architecture and Tools

(xv) Electronic commerce communication service and support, mapping and setup, development and project management

(xvi) Global database technical service, implementation and integration

(xvii) Internet Applications, including consulting, intranet (Webster) hosting, basic service, site set-up, specialized verity development, web logic application service additional disk, space, non-hosted site statistics processing, oracle business unit instance, oracle shared instance, internet hosting service, custom internet setup and consulting. Web Logic application server, web based news groups, web domain hosting, secondary web sites, oracle, web document, management, and web portal access.

(xviii) Maintenance communications and processing services

(xix) Novell server support management and NT technical services, including NT servers, Novell upgrade administration and support, NT server backup and recovery, shared applications and databases, and NT web hosting

(xx) File and Print services

(xxi) Directory services

(xxii) Corporate software devices (Novell MLA)

(xxiii) Operations Planning and Management Center of Expertise, including consulting services, cost/profitability analysis, planning/scheduling optimization, production, inventory and warehouse management.

(xxiv) Publication services

(xxv) Remote access

(xxvi) Strategic IT planning services

(xxvii) Unix technical service, including system administration, backup environment, MCservice guard, database hosting service

(xxviii) Video conference service

(xxix) Telephone toll voice communication system

(xxx) Virtual private network

(xxxi) Remote Lan management and integration, including support of trunks, switch ports, shared ports, wireless bridges, support enhanced services, special projects, consulting, and expediting.

(xxxii) Systems Management Environment (SME) Technical Services, including Norton Anti-virus installation and monitoring

(xxxiii) Electronic Data Interchange (EDI) service.”

In terms of para 2.4 of the said agreement, it is seen that ‘cost to be charged pursuant to this Agreement shall include the actual direct and indirect costs of the party providing the service’. The appellant filed before me the basis of classification in terms of nature of services rendered in respect of various corporate iT services, provided to its 7 group entities in India, in support of the argument that such cost was recovered on actual cost basis, the appellant filed before me, a copy of the relevant sample invoices, to claim that such charges were levied on the basis of actual usage by Indian group companies. A certificate from the management of the company was also filed to the effect that in order to facilitate globalization and maintain standardization together with cost effectiveness, the appellant and its group companies had decided to have a centralized information technology system based on the business needs of the ‘Cargill group’ as a whole. It was also certified that all direct and indirect costs incurred by the appellant on the centralized facility is recovered from the group entities in the form of corporate IT recharge on cost to cost basis, without any profit margin.

6.2.2 On careful consideration of the above facts, it is seen that the appellant, being the ultimate holding company, maintains a centralized IT center for its group companies across the globe. Such a system enables the appellant to achieve uniformity, confidentiality and economies of scale. For providing such services, the Appellant has entered into an Agreement dated 1 June 2001 with various group companies. The terms of the Agreement (Clause 1.2 and 2.4) clearly provide that all direct and indirect costs for providing Corporate IT services would be charged from the group companies. Further, the Agreement provides for allocation key by which the total cost (direct and indirect) would be recovered from the group companies. Accordingly, the Agreement itself substantiates that only cost of providing Corporate IT services is recovered from the Indian group companies. The appellant submitted the copies of all invoices, which are duly linked with the Agreement which state that only cost are to be recovered from the group companies. From the invoice it is seen wherever there is extra charge on the basis of allocation key, the same is adjusted by way of reversal in the invoice to ensure the recovery is made only for actual cost.

6.3 It is further evident that the appellant company itself is not having its core activity in the nature of providing corporate IT services. The entire “Cargill group” is engaged in the business of International marketer, processor and distributor of agricultural food and industrial products. The company does not have its core strength in providing corporate IT related services, which is evident by the fact that no such corporate IT services have been provided to any outside entities. Thus, neither the company has the core strength nor is in possession of any secret processes or commercial and industrial information, which it could be held to be passing on to its group entities in India and worldwide. The group has decided to have a centralized corporate IT system to facilitate globalization, for cost effectiveness and synergy in the working of various group entities of the appellant company across the world. The Id. AO could not bring out any adverse evidence on record that may suggest that the appellant had passed on any commercial or industrial information or secret processes to the Indian group companies that may be treated as royalty. Further, it is also seen that the appellant company’s globalized corporate IT system facility is also developed by its vendors and in fact it is the appellant, which has received the services for setting up the globalized corporate IT system. Qua its group companies, the appellant has only facilitated use of the common facility in its own business interest, for which the proportionate direct and indirect cost have been recovered. The appellant is merely arranging Corporate IT services. The payments are received for such services and not for the right to use of equipment (hardware or software). The payer is using their services through leased line/internet/internet services providers. The appellant had categorically stated that no amount of profit was embedded in such payments. The Id. AO has not brought out any evidence on record that may question this averment of the appellant. Under the circumstances, the very basis of the Ld. AO of treating such payment as royalty in nature is held as misplaced.

6.3.2 Without prejudice, even if such services are to be treated as FIS, in view of the MOU to India-US treaty [Article 12(4)], in view of the fact that no technology was ‘made available’ to the appellant that can be independently made use of by the Indian group companies, in the absence of ‘make available’ provision of such processes/technology, such payment cannot be treated as FIS as well. In view of the above, I am of the considered view that such payment cannot be treated as royalty or FIS.

6.3.3 As I have already held that such payments were not in the nature of royalty or FIS, the natural corollary of the this observation is that such payment was in the nature of reimbursement of actual direct and indirect costs recovered by the appellant company from its group companies, which does not have any element of profit embedded therein. In view of the above, and following the settled law in the light of various judicial pronouncements cited by the appellant in its submissions, namely, the decision of Delhi High Court in the case of CIT vs Industrial Engineering Projects Pvt. Ltd. 202 ITR 1014 (Del.) and of ITAT Delhi in the case of ACIT vs Modicon Network (P) Ltd. (14 SOT 204) (ITAT Delhi) and CIT vs Fortis Healthcare (supra), CIT vs Siemens Aktiongeselishaft (supra), Clifford Chance vs DCIT (supra), such payment cannot be held as taxable under the domestic law as well. In view of this, the appellant gets relief on grounds no. 2 to 5.”

7. In subsequent assessment years from 2010-11 to 2014-15, the Ld. CIT-(A) has followed his finding in assessment year 2009-10 and allowed the appeal in favour of the assessee. The finding of the learned CIT-(A) in assessment year 2010-11 is extracted as under:

“7.3 I respectfully concur with the findings of my predecessor. Keeping in view the above, in my considered view, the action of AO of treating such payment as royalty in nature is held as misplaced. Further, such payment cannot be treated as fee for included services as well in the absence of “make available” provision of such process/technology. The said payments were in the nature of reimbursement of actual direct and indirect costs recovered by the appellant company from its group companies without any element of profit in it. In view of the above, and following the settled law in the light of various judicial pronouncements cited by the appellant in its submissions, namely, the decision of Delhi High Court in the case of CIT vs Industrial Engineering Projects Pvt. Ltd. 202 ITR 1014 (Del.) and of ITAT Delhi in the case of ACIT vs Modicon Network (P) Ltd, (14 SOT 204) (ITAT Delhi) and CIT vs Fortis Healthcare (supra), CIT vs Siemens Aktiongeselishaft (supra), Clifford Chance vs DCIT (supra), such, payment cannot be held as taxable under the domestic law as well. In view of this the appellant gets relief on grounds no. 2 and 3. Accordingly, the appellant gets relief on Grounds No. 2 and 3.”

8. There is no dispute between the parties on the issue that the addition involved in assessment year 2009-10 to assessment year 2014- 15 is same as involved in assessment year 2002-03 to 2008-09 before us. The fact that no appeal has been filed against the order of the Ld. CIT-(A) in assessment year 2009-10 to 2014-15, is also not disputed by the Ld. CIT(DR). The issue before us is that following the Rule of Consistency, whether the Revenue should still object these grounds of the assessee. On this issue, we take guidance from the decision of the Hon’ble Supreme Court in the case of RADHASOAMI SATSANG vs. COMMISSIONER OF INCOME TAX reported in 193 ITR 321. The relevant finding of the Hon’ble Supreme Court is reproduced as under:

“9. We are aware of the fact that, strictly speaking, res judicata does not apply to IT proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year.

One these reasonings, in the absence of any material change justifying the Revenue to take a different view of the matter— and, if there was no change, it was in support of the assessee— we do not think the question should have been reopened and contrary to what had been decided by the CIT in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under ss. 11 and 12 of the IT Act of 1961.”

(Emphasis supplied by us)

9. We find that Hon’ble Supreme Court has clearly observed that once the parties have allowed the position to sustain by not challenging the order, it is not appropriate to allow the position to be changed in subsequent years. In our opinion same applies to the earlier years also. Since issue in dispute involved in grounds mentioned above in assessment year 2002-03 to assessment year 2008-09 is identical to issue decided by the Ld. CIT-(A) in assessment year 2009-10 to assessment year 2014-15, accordingly, the objections of the Revenue are rejected and we allow the grounds raised by the assessee as listed above.

10. Before us, the Ld. counsel further argued grounds in relation to not allowing the credit of tax deducted at source. These grounds have been raised as ground No. 4 in ITA No. 491/Del/2012 for assessment year 2002-03 and ground No. 4 in ITA No. 492/Del/2012 for assessment year 2003-04.

11. Before us, the learned counsel submitted that issue of verification of the credit of tax deducted at source may be restored to the file of the Assessing Officer.

12. The Ld. CIT(DR) also did not object to the submission of the Ld. counsel of the assessee on this issue.

13. We have heard the rival submission and perused the relevant material on record. As the matter of allowing credit for tax deducted at source, is a matter of verification by the Assessing Officer, we feel it appropriate to restore this issue to the file of the Assessing Officer. The assessee shall produce all the necessary evidences supporting its claim of tax deducted at source before the Assessing Officer and accordingly, the Assessing Officer shall decide the issue in dispute after verifying the claim in accordance with law. Thus, the relevant grounds of the appeals are accordingly allowed for statistical purposes.

14. No grounds, except the grounds adjudicated by us above, were pressed before us including grounds challenging the reassessment proceedings in assessment year 2002-03 to 2004-05. Accordingly, all the remaining grounds are dismissed as infructuous.

15. In the result, all the appeals of the assessee are allowed partly for statistical purposes.

The decision is pronounced in the open court on 19th Jan., 2018.