O R D E R

Per Saktijit Dey, Vice President:

Captioned appeals of the assessee arise out of two separate orders of learned Commissioner of Income Tax (Appeals), Mumbai, pertaining to Assessment Years 2013-14 and 2014-15.

2. In addition to the main grounds, through letter dated 22.05.2023, the assessee under Rule 11 of the Income Tax (Appellate Tribunal) Rules 1963, had raised couple of additional grounds, which are identical in both the appeals. Specifically, referring to Ground No. 6 of the additional grounds in both the appeals, learned counsel appearing for the assessee submitted that the ground raised challenges the validity of the assessment order and being a purely legal and jurisdictional issue, should be admitted.

3. Learned Departmental Representative (DR) submitted, the assessee cannot be permitted to raise a fresh ground before the second Appellate Authority.

4. Having considered rival submissions and perused the materials on record, we are of the view that the issue raised in Additional Ground No. 6 is a purely legal and jurisdictional issue going to the root of the matter, as it affects the validity of the impugned assessment order. Further, the additional ground raised by the assessee can be decided purely based on the facts material available on record without requiring investigation into fresh facts. Therefore, we are inclined to admit Additional Ground No.6 for adjudication. Additional Ground No.6 which is in common in both appeals, reads as under:

“6. On the facts and circumstances of the case and in law, the draft assessment order dated March 9, 2016 passed by the learned assessing officer along with the computation sheet and notice of demand under section 156 of the Act is bad in law, as the same has been passed in violation of section 144C of the Act.”

5. Briefly, the facts relating to this ground are that the assessee is a non-resident corporate entity incorporated in the United States of America (USA), and is a tax resident of USA. As stated, assessee maintains and administers a centralized marketing fund for the purpose of undertaking advertising, marketing, promotional, and sales activities on behalf of the hotel owners/ franchises who have been licensed to operate various Marriott brands. For the assessment years under dispute, assessee had filed its returns of income in regular course under section 139(1) of the Act, offering NIL income and claiming refund of tax deducted at source (TDS). Aassessee's case for both the assessment years under dispute were selected for scrutiny. In course of assessment proceedings, the Assessing Officer noticed that in the relevant assessment years, the assessee had earned following receipts from India:

Assessment Year 2013-14:

(i) International Service Marketing Agreement and International Service Marketing Fee of Rs.6,54,54,573/-.

(ii) ISM Reimbursement of expenses of Rs.6,16,05,808/-.

Assessment Year 2014-15:

(i) International Service Marketing Agreement and International Service Marketing Fee of Rs.7,83,49,378/-.

(ii) ISM Reimbursement of expenses of Rs.6,52,66,928/-.

6. After calling upon the assessee to explain why the aforesaid receipts being in the nature of royalty, should not be brought to tax in India and verifying assessee’s submissions, ultimately, the AO concluded that the receipts are in the nature of royalty, both under the provisions of the Act, as also under the India-USA Double Taxation Avoidance Agreement (‘DTAA’). Accordingly, he framed a draft assessment order purportedly under Section 143(3) read with section 144C(1) of the Act for assessment year on 9.3.2016 and for Assessment Year 2014-15 on 29.12.2016. Along with the draft assessment orders, the Assessing Officer also issued notice of demand under section 156 of the Act along with computation sheets. Since the assessee did not raise any objections before learned DRP, the Assessing Officer passed final assessment orders under section 143(3) read with section 144C(3) of the Act.

7. Challenging the