+Ita 557/2024, Cm Nos.66924/2024 v. Rolland Enterprises Ltd

$~1,2,4&5 IN THE HIGH COURT OF DELHI AT NEW DELHI+ITA 556/2024 & CM No.66848/2024THE COMMISSIONER OF INCOME TAX - INTERNATIONALTAXATION -3.....AppellantThrough:Mr. Ruchir Bhatia, Mr. Anant Mann& Mr. Abhishek Anand, Advs.THE COMMISSIONER OF INCOME TAX - INTERNATIONALTAXATION -3.....AppellantThrough:Mr. Ruchir Bhatia, Mr. Anant Mann& Mr. Abhishek Anand, Advs.VersusROLLAND ENTERPRISES LTD......Respondent Through:Ms. Kavita Jha, Sr. Adv. with Mr.Vaibhav Kulkarni & Mr. HimanshuAggarwal, Advs.Vaibhav Kulkarni & Mr. HimanshuAggarwal, Advs. AND +ITA 557/2024, CM Nos.66924/2024 & 66925/2024THE COMMISSIONER OF INCOME TAX - INTERNATIONALTAXATION -3.....AppellantTHE COMMISSIONER OF INCOME TAX - INTERNATIONALTAXATION -3.....Appellant Through:Mr. Ruchir Bhatia, Mr. Anant Mann& Mr. Abhishek Anand, Advs.& Mr. Abhishek Anand, Advs. Versus ROLLAND ENTERPRISES LTD......Respondent Through:Ms. Kavita Jha, Sr. Adv. with Mr.Vaibhav Kulkarni & Mr. HimanshuVaibhav Kulkarni & Mr. Himanshu Aggarwal, Advs. AND +ITA 559/2024, CM Nos.67063/2024 & 67064/2024THE COMMISSIONER OF INCOME TAX - INTERNATIONALTAXATION -3.....AppellantTHE COMMISSIONER OF INCOME TAX - INTERNATIONALTAXATION -3.....Appellant Through:Mr. Ruchir Bhatia, Mr. Anant Mann & Mr. Abhishek Anand, Advs. Versus ROLLAND ENTERPRISES LTD......Respondent Through:Ms. Kavita Jha, Sr. Adv. with Mr.Vaibhav Kulkarni & Mr. HimanshuAggarwal, Advs.Vaibhav Kulkarni & Mr. HimanshuAggarwal, Advs. AND +ITA 560/2024, CM Nos.67221/2024 & 67222/2024THE COMMISSIONER OF INCOME TAX - INTERNATIONALTAXATION -3.....AppellantTHE COMMISSIONER OF INCOME TAX - INTERNATIONALTAXATION -3.....Appellant % Through:Mr. Ruchir Bhatia, Mr. Anant Mann& Mr. Abhishek Anand, Advs.VersusROLLAND ENTERPRISES LTD......RespondentThrough:Ms. Kavita Jha, Sr. Adv. with Mr.Vaibhav Kulkarni & Mr. HimanshuAggarwal, Advs. CORAM:HON'BLE MR. JUSTICE VIBHU BAKHRUHON'BLE MS. JUSTICE SWARANA KANTA SHARMAO R D E R 02.12.2024 1.The Revenue has filed the present appeals under Section 260A of theIncome Tax Act, 1961 (hereafter the Act) against the common order dated10.01.2024 (hereafter the impugned order) which was passed in ITA bearingNos.3349/Del/2015, 3350/Del/2015, 3351/Del/2015 & 3352/Del/2015 andincrossobjectionsbearingCo.Nos.353/Del/2015,354/Del/2015,355/Del/2015 & 356/Del/2015. 2.The Revenue has projected the following questions of law in thepresent appeals: “2.1Whether on the facts and in the circumstances of the case,the Ld. ITAT has erred in law in holding that assessment orderspassed are unsustainable for not passing the draft assessmentorder as per the provisions of Section 144C(1) of the Act whichis applicable to non-residents and the assessee in this case is aresident of India? 2.2Whether on the facts and in the circumstances of the case,the Ld. ITAT has erred by relying on facts in ignoring statementsof Sh. Ajay Kalsil Sh. Anil Aggarwal and the documents seizedwherein it was established that the control and management ofthe assessee company is situated wholly in India with Sh. AjayKalsi and Smt. Mala Kalsi, who have created different verticalsof corporate veil under them to avoid taxability in India?” 3.The context in which the aforesaid questions of law arise are brieflynarrated as under: 3.1Search and seizure operations were conducted by the InvestigationWing on 22.03.2012 in respect of group of entities (M/s Focus EnergyGroup). It is stated that during the search proceedings certain documentscontaining information pertaining to the Assessee, were found and seized.Notices under Section 153C of the Act were issued to the Assessee, andassessments for the assessment years (AYs) 2008-09, 2009-10, 2010-11 and2011-12 were completed under Section 153C/144 of the Act. 3.2The Assessee is an entity incorporated under the laws of the BritishVirgin Islands. It is the Assessee’s case that it owns certain equipmentrelated to exploration and development of oil fields, which were leased toM/s Focus Energy Limited. The said company paid lease rentals afterdeducting tax at source (TDS). 3.1Search and seizure operations were conducted by the InvestigationWing on 22.03.2012 in respect of group of entities (M/s Focus EnergyGroup). It is stated that during the search proceedings certain documentscontaining information pertaining to the Assessee, were found and seized.Notices under Section 153C of the Act were issued to the Assessee, andassessments for the assessment years (AYs) 2008-09, 2009-10, 2010-11 and2011-12 were completed under Section 153C/144 of the Act. 3.2The Assessee is an entity incorporated under the laws of the BritishVirgin Islands. It is the Assessee’s case that it owns certain equipmentrelated to exploration and development of oil fields, which were leased toM/s Focus Energy Limited. The said company paid lease rentals afterdeducting tax at source (TDS). 3.3Pursuant to the notice issued under Section 153C of the Act, theassessments were completed. It is the Assessee’s case that it is an “eligibleassessee” and the procedure as prescribed under the Act was not followed.In as much as, the draft assessment order was not issued as required underSection 144C(1) of the Act. 3.4The Assessing Officer (AO) held that the Assessee’s income waschargeable to tax under the Act, as its control and management is situated inIndia. The AO held that the Assessee was a resident of India under Section6(3) of the Act. And, passed assessment orders on 28.03.2014. 3.5Aggrieved by the assessment orders, the Assessee preferred appealsbefore the Commissioner of Income Tax (Appeals) [hereafter CIT(A)],which were allowed by the orders dated 27.02.2015. The learned CIT(A) found that the control and management of the affairs of the Assessee was inthe hands of its Board of Directors who were not the residents of India. Thelearned CIT(A) faulted the findings of the AO to treat the Assessee as aresident in terms of provision of Section 6(3)(ii) of the Act. 3.6The Revenue being aggrieved by the orders passed by the learnedCIT(A) preferred appeals in respect of the assessment orders in questionbefore the Income Tax Appellate Tribunal (hereafter ITAT). The Assesseealso filed cross objections on the ground that the procedure prescribed underSection 144C of the Act was not complied. 3.7Thecrossobjectionspreferred by the Assessee were allowed and accordingly, the appealspreferred by the Revenue were dismissed. 4.Concededly, the provisions of Section 144C(1) of the Act had notbeen complied with as no draft assessment order was framed. 5.According to the Assessee, it is an eligible assessee and therefore itwas necessary for the AO to pass a draft assessment order and not toproceed straightaway to pass a final assessment order. The said issue iscovered in favour of the Assessee by the decision of this Court in Pr.Commissioner of Income Tax-7 v. Sumitomo Corporation India (P) Ltd.:2024 SCC OnLine Del 6125. 6.The term “eligible assessee” is defined under Section 144C(15)(b) ofthe Act, which reads as under: “144C.Reference to dispute resolution panel. –********(15)For the purposes of this section,–(a)*********(b)“eligible assessee” means,–(i)any person in whose case the variation referredto in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and(ii)any non-resident not being a company, or anyforeign company.” 7.The first question projected by the Revenue proceeds on the basis thatthe Assessee is taxable as a resident of India. However, it is not disputedthat the Assessee is an eligible assessee under Section 144C of the Act.There is no dispute that the Assessee is incorporated under the laws ofBritish Virgin Islands. It is thus a foreign company. Since, the Assessee isan eligible assessee within a meaning of Clause (b) of Section 144C(15) ofthe Act, the AO was required to follow the procedure as prescribed underSection 144C of the Act. 8.We find no infirmity in the decision of the learned ITAT. Plainly, nosubstantial questions of law arise in the present appeals. The appeals are,accordingly, dismissed. VIBHU BAKHRU, J 7.The first question projected by the Revenue proceeds on the basis thatthe Assessee is taxable as a resident of India. However, it is not disputedthat the Assessee is an eligible assessee under Section 144C of the Act.There is no dispute that the Assessee is incorporated under the laws ofBritish Virgin Islands. It is thus a foreign company. Since, the Assessee isan eligible assessee within a meaning of Clause (b) of Section 144C(15) ofthe Act, the AO was required to follow the procedure as prescribed underSection 144C of the Act. 8.We find no infirmity in the decision of the learned ITAT. Plainly, nosubstantial questions of law arise in the present appeals. The appeals are,accordingly, dismissed. VIBHU BAKHRU, J SWARANA KANTA SHARMA, J DECEMBER 02, 2024‘gsr’Click here to check corrigendum, if any