Case Law Details
Ineos Commercial Vs CIT (ITAT Kolkata)
ITAT Kolkata held that AO failed to examine the agreement as composite agreement and hence non-examination of AO with that angle has caused prejudice to the interest of Revenue and hence CIT rightly set aside the assessment order by exercising powers under section 263 of the Income Tax Act.
Facts- The assessee entered into an agreement with Brahmaputra Cracker and Polymer Limited (BCPL) on 18.03.2009, vide which licence for manufacture of linear polyethylene in Assam and its sale across the world. Under this agreement, the assessee granted licence and the necessary knowhow including design, procurement, construction and operation of plant in Assam for the patentee by innovene process for manufacture of linear polyethylene to BCPL. Thus the assessee was actively helped BCPL in setting up the production process including training of its manpower, providing expert as well as supervision and commissioning services. The assessee has received fees under different categories enumerated in the agreement.
The fees amounting to Rs.3,99,39,056/- was not offered for tax by the assessee. The ld. CIT while examining the scope of the contract including the nature of receipt under different heads formed an opinion that it is a composite contract and this fee under the head “supervisory services’ (i.e. item (e) above), cannot be segregated at the instance of assessee. In the opinion of ld. CIT, this aspect was not examined by the ld. Assessing Officer constructively either in the assessment order or during the assessment proceeding. Therefore, ld. CIT set aside the assessment order and directed the ld. Assessing officer to reframe the assessment order after examining this issue and hearing the assessee.
Conclusion- Held that the theory of conditions enumerated in Article 13 of the DTAA between UK and India is totally misplaced. The enquiry at this angle is to be made if it is determinable that services provided by the assessee are stand alone services and not dependent upon the agreement. It is an unnecessary argument raised by the assessee before the ld. Assessing Officer for absolving from tax liability and this effort was not examined by the ld. Assessing Officer elaborately and diligently. If agreement is being perused, then, it would give a meaning that it is a composite agreement and different category of receipts cannot be segregated from it. Therefore, this concept of applicability of Article 13 is not at all applicable in the present case. The facts to that effect are not available precisely. Non-examination of the ld. Assessing Officer with that angle has caused prejudice to the interest of the Revenue. The ld. CIT has rightly set aside this order by exercising powers under section 263.
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