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October 17, 2023

ITAT Chennai Conflict of Interest: Detailed Analysis and Conclusion

ITAT Chennai Conflict of Interest: Detailed Analysis and Conclusion

Fact and issue of the case

The appeal filed by the assessee in ITA No.1643/CHNY/2019 is directed against the order of the Commissioner of Income Tax IT(TP) No.101/CHNY/2018 (International Taxation), Chennai in No. CIT/IT/CHE/ 113(263)2018­19 dated 29.03.2019. The assessment was framed by the DCIT, International Taxation -1 & 1(2), Chennai for the assessment year 2014-15 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 07.12.2016. The appeal in IT(TP)A 101/CHNY/2018 is arising out of the order of the DCIT, International Taxation -1 (1), Chennai for the assessment year 2015-16 u/s.143(3) r.w.s. 144C(13) of the Act vide order dated 25.10.2018 pursuant to the directions of the Dispute Resolution Panel, Bengaluru dated 24.09.2018.

When these two appeals were called for hearing, the ld. CIT- DR, Dr. S. Palanikumar along with ld. Senior DR, Shri P. Sajit Kumar raised preliminary objection on “conflict of interest” in case these two appeals will be argued by Shri Dinesh Inbavadivu belonging to M/s. V. Ramachandran Advocates. The ld. CIT-DR referred to one letter F.No.CIT-DR/D/ITAT/RTIMatter/2023-24 dated 26.04.2023 whereby they have raised this issue in connection with RTI appeal before Central Information Commissioner(in short ‘CIC’) [appeal filed by Dr. S. Palanikumar] was fixed for hearing on 19.04.2023 at 1.15 p.m., in the premises of NIC Studio, District Informatics Officer, Collectorate, 62, Rajaji Salai, Chennai. The contention of the ld. CIT-DR is that since Shri Manoj Kumar Aggarwal, who is Accountant Member and also CPIO, Income Tax Appellate Tribunal (in short ‘ITAT’) RTI Cell, Chennai engaged one Shri Dinesh Inbavadivu, Advocate and one more Advocate Shri Arjun to represent him in the proceedings before CIC in regard to appeal filed by Dr. S. Palanikumar against the order of CPIO, ITAT, Chennai, there is ‘conflict of interest’. Shri Manoj Kumar Aggarwal, Accountant Member is the CPIO, ITAT, Chennai. The letter dated 26.04.2023 has specifically raised three issues.

Observation of the court

We noted that the issue in assessment year 2014-15 in the present appeal is as regards to the order of CIT, International Taxation invoking the provisions of section 263 of the Act and setting aside the assessment framed u/s.143(3) of the Act and concluding that the guarantee fee received by assessee accrues and arises in India and same would be covered under the ambit of provisions of section 5(2) and section 9(1) of the Act. The ld. counsel for the assessee drew our attention to para 4 of the order of CIT, International Taxation passed in No. CIT/IT/CHE/113 (263)/2018-19 dated 29.03.2019 u/s.263 of the Act setting aside the assessment order by holding that the guarantee fee is taxable in India, as in assessment year 2015-16, identical issue by Assessing Officer in his assessment order held that for the payments received on account of guarantee fee as taxable under the Income-tax Act. He observed in para 4 as under:-

The matter is considered. In view of the fact that DRP, Bengaluru has issued a categorical direction upholding the contention of the Assessing Officer that the impugned Guarantee fee is taxable in India and that the same is chargeable to tax at the rate of 40%, I hold that the assessment for A.Y.2014-15 on identical issue charging the amount at the rate of 10% is prejudicial to the interest of revenue. Accordingly, I deem it appropriate to set aside the assessment by virtue of powers vested in me vide section 263 of the Act with the direction to the Assessing Officer to revise the assessment in the light of the directions of the DRP, Bengaluru. As, we have already adjudicated the issue in assessment year 2015-­16 in IT(TP)101/CHNY/2018 in preceding paras and finding is given that the guarantee fee is not taxable in India in view of Article 23 of Indo-Korea DTAA, we quash the revision order passed by PCIT u/s.263 of the Act. The appeal of the assessee is allowed.

In the result, both the appeals filed by the assessee are allowed.

Order pronounced in the open court on 5th July, 2023 at Chennai.


In the result, appeal of the assessee is allowed and ruled in favour of the assessee

Read the full order from here


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