SUPER BRANDS LTD. (UK) vs. ACIT (INTERNATIONAL TAXATION)

SUPER BRANDS LTD. (UK) vs. ACIT (INTERNATIONAL TAXATION)

(2022) 66 CCH 0060 Delhi Tribunal

Appeals

—Assumption of jurisdiction under section 114C—

Issue arising for consideration is whether Assessing Officer erred in passing a draft assessment order without appreciating that there was no variation in income returned by appellant and, therefore impugned order passed by Assessing Officer is void ab initio and, therefore, is liable to be quashed

—Held, Assessing Officer assumed jurisdiction over assessee on filing of return by assessee and accordingly, statutory notices were issued and served upon assessee

—As per provisions of section 144C and 92B where assessee had entered into international transactions or it is a foreign company being an eligible assessee as defined in Section 144C in respect of his income/loss, Assessing Officer has made variation which is prejudicial to interest of such assessee, Assessing Officer is mandatorily required to pass proposed order of assessment, which is termed as 'Draft Assessment order'

—In Assessment Years 2007-08, 2010-11 to 2015-16 Assessing Officer has only re-characterized income which was shown as royalty income by assessee and was taxed as 'business income' by Assessing Officer without there being any variation in income returned by assessee

—Assessing Officer wrongly assumed jurisdiction u/s 144C when there is no variation in income returned by assessee

—View is supported by decision of co-ordinate Mumbai Bench in case of Mousmi SA Investment LLC in ITA No. 7076/MUM/2018 wherein it was held that in instant case, assessee herein is an eligible assessee

—However, there is no variation in income or loss returned, which is prejudicial to interests of assessee

—Hence second condition prescribed in sec.144C(1) was not satisfied

—Hence approach of AO in adopting procedure prescribed in sec.144C is not in accordance with mandate of law

—In light of above discussion, Assessing Officer wrongly assumed jurisdiction u/s 144C, and therefore, final assessment order framed in Assessment Years 2007-08 and 2010-11 to 2015-16 are barred by limitation and accordingly, impugned assessment orders are liable to be quashed as void ab initio

—Assessee’s ground allowed.

Conclusion

There is no variation in the income or loss returned, which is prejudicial to the interests of the assessee so the second condition prescribed in sec.144C(1) was not satisfied hence the approach of the AO in adopting the procedure prescribed in sec.144C is not in accordance with the mandate of law.