DCIT vs Bombardier Transportation Sweden AB: International Taxation Dispute for AY 2016-17

Case Summary: DCIT, Circle-1(1)(2), International Taxation, New Delhi vs Bombardier Transportation Sweden AB, New Delhi

Case Number: ITA 6077/DEL/2019
Appellant: DCIT, Circle-1(1)(2), International Taxation, New Delhi
Respondent: Bombardier Transportation Sweden AB, New Delhi
Assessment Year: 2016-17
Case Filed On: 17th July 2019
Order Type: Final Tribunal Order
Date of Order: 30th September 2019
Pronounced On: 30th September 2019

Introduction

The case of DCIT, Circle-1(1)(2), International Taxation, New Delhi vs Bombardier Transportation Sweden AB revolves around an international taxation dispute for the Assessment Year (AY) 2016-17. The Department of Income Tax filed the appeal before the Income Tax Appellate Tribunal (ITAT) Delhi, challenging the order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] concerning the assessment of Bombardier Transportation Sweden AB, a multinational corporation involved in the transportation industry.

Background of the Case

Bombardier Transportation Sweden AB, a global leader in transportation solutions, operates across various countries, including India. For AY 2016-17, the company filed its income tax returns, which were later scrutinized by the Assessing Officer (AO) under the International Taxation division. The AO raised certain issues related to the taxation of the company’s income, leading to adjustments and additions in the assessment order.

Dissatisfied with the assessment order, Bombardier Transportation Sweden AB filed an appeal with the CIT(A), challenging the adjustments made by the AO. The CIT(A), after reviewing the case, provided relief to the company by deleting or reducing the disputed adjustments. However, the DCIT, Circle-1(1)(2), International Taxation, New Delhi, decided to challenge the CIT(A)’s order by filing an appeal before the ITAT Delhi.

Grounds of Appeal

The primary grounds of the appeal revolved around the international taxation aspects of Bombardier Transportation Sweden AB’s income. The DCIT challenged the CIT(A)’s decision to provide relief to the company on the following grounds:

• The CIT(A) allegedly erred in deleting the additions made by the AO concerning the income attributable to the Indian operations of Bombardier Transportation Sweden AB.
• The CIT(A) allegedly misinterpreted the provisions of the Income Tax Act, 1961, and the Double Taxation Avoidance Agreement (DTAA) between India and Sweden.
• The CIT(A) failed to consider the full scope of income that should be taxed in India under the principles of international taxation.

Tribunal Proceedings

The case was heard by the Delhi Bench ‘E’ of the Income Tax Appellate Tribunal (ITAT), consisting of Judicial Member Shri H.S. Sidhu and Accountant Member Shri Prashant Maharishi. During the hearing, the Senior Departmental Representative (DR), Ms. Rakhi Vimal, represented the Revenue. The respondent, Bombardier Transportation Sweden AB, was represented by its legal counsel.

The hearing was centered on whether the CIT(A) had correctly interpreted the provisions of the Income Tax Act, 1961, and the DTAA in providing relief to the respondent. The tribunal examined the arguments presented by both parties and considered the relevant legal provisions.

CBDT Circular and Tribunal’s Decision

During the proceedings, the legal counsel for Bombardier Transportation Sweden AB brought to the tribunal’s attention the Central Board of Direct Taxes (CBDT) Circular No. 17/2019 dated 8th August 2019. This circular enhanced the monetary limits for filing appeals by the Department of Income Tax before various appellate forums, including the ITAT. According to the circular, the Department should not file an appeal if the tax effect involved is less than Rs. 50 lakhs.

Upon reviewing the case, the tribunal found that the tax effect in the present appeal was below the Rs. 50 lakhs threshold as specified in the CBDT circular. The tribunal noted that the CBDT’s instructions are binding on the tax authorities, and therefore, the appeal should not have been filed in the first place.

The tribunal also referred to the decision in Dinesh Madhavlal Patel [TS-469-ITAT-2019(Ahd)] 2019-TIOL-1556-ITAT-AHM, where it was held that the CBDT circular applies to all pending appeals as well. Following the precedent, the tribunal concluded that the present appeal by the DCIT, Circle-1(1)(2), International Taxation, New Delhi, was not maintainable due to the low tax effect.

Final Order and Conclusion

The ITAT Delhi, after considering the facts and legal precedents, dismissed the appeal filed by the DCIT, Circle-1(1)(2), International Taxation, New Delhi, as not maintainable. The tribunal held that since the tax effect in the case was below the monetary limit specified in the CBDT circular, the appeal could not be pursued further.

The case highlights the significance of the CBDT’s circular in managing tax litigation and reducing the burden on the judiciary by preventing the filing of appeals involving minor tax disputes. It also underscores the importance of following the established legal principles in the realm of international taxation.

Order Pronounced in Open Court: 30th September 2019

Judicial Member: Shri H.S. Sidhu
Accountant Member: Shri Prashant Maharishi

Assistant Registrar: ITAT, New Delhi

DCIT vs Bombardier Transportation Sweden AB: International Taxation Dispute for AY 2016-17