INCOME TAX OFFICER Vs. LINKLATERS & PAINES
INCOME TAX APPELLATE TRIBUNAL
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B.R.Baskaran, Member (A) -
(1.) THESE cross appeals are directed against the order dated 29 -12 -2003 passed by Ld CIT(A) -XXXIII, Mumbai and they relate to the assessment year 1997 -98.
(2.) THE assessee herein is a partnership firm formed in United Kingdom and is engaged in the profession of practice of law. Its head office is located in U.K. and is having branches around the world. During the year under consideration, the assessee herein provided professional services to certain persons, whose operations extended to India. Since these persons had deducted tax at source from the payments made to the assessee herein, it filed its return of income declaring NIL income and thus claimed refund of tax of Rs. 43,21,218/ -. The assessee claimed before the AO that it does not have a permanent establishment in India as defined in Article 5 of the Double Taxation Avoidance Agreement entered between India and United Kingdom and accordingly claimed that no part of its income is chargeable to tax in India. Without prejudice to the above contention, the assessee also prepared a Profit and Loss account showing revenues which could be reasonably attributed to the work performed in India. However, while doing so, the assessee had computed the revenues by adopting fee rates estimated on the basis of amount that could have been paid to corresponding professionals working in India for availing similar kind of services. Thus, alternatively, the assessee seems to have contended that the profit declared in the above said profit and loss account is chargeable to tax in India. The assessing officer noticed that the total stay of its partners and staffs exceeded 90 days in India during the financial year 1.4.1996 to 31.3.1997. Hence, the AO held that the assessee is having Permanent Establishment in India. In the immediately preceding year, the AO had rejected the alternative contention of the assessee, i.e., the claim to assess the profit computed in the profit and loss account relating to Indian operations. Hence, in this year also, the AO rejected the said claim. Accordingly, the AO proceeded to assess the entire amount received from Indian clients, which is detailed as under in the assessment order: -
The AO assessed the entire amount of professional receipts as well as the reimbursement of expenses cited above as the income of the assessee. Further, the AO also noticed from the TDS certificates furnished by the assessee that it has received a sum of Rs. 2,21,199/ - from M/s. Serum Institute of India and the same was not included in the total receipts. Hence, the AO included the above said amount of Rs. 2,21,199/ - also in the total income of the assessee. The AO allowed a deduction 5% of the total receipts cited above under sec. 44C of the Act. Accordingly, the AO determined the total income of the assessee at Rs. 21,54,31,390/ -.
(3.) THE assessee challenged the assessment order by filing appeal before Ld CIT(A) and the first appellate authority allowed the appeal partly. While deciding the issues contested before him, the Ld CIT(A) followed the decision rendered by his predecessor in the assessee's own case in the earlier years. Aggrieved by the order passed by Ld CIT(A), both the parties have filed appeals before us on the issues decided against each of them by the first appellate authority.;
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