2016 (3) TMI 1104 - AT - Income Tax

Tribunal directs reassessment for 2011-12, emphasizes consistency principle.

The Tribunal set aside the orders of the Revenue Authorities for the assessment year 2011-12 and directed the Assessing Officer to re-adjudicate the ... 'Royalty' and 'Fees for Technical Services' under Section 9(1)(vi) and 9(1)(vii) - Contract for Provision of Computing Services entered into between the Appellant and Standard Chartered Bank, India (‘SCB India') for the services - Held that:- The assessee company submitted that if the said payment are held to be income taxable in India and benefit of Section 115A of the Act is denied to the assessee, then the expenses incurred by the assessee company should be allowed if it is held to be royalty/ fee for technical services. Respectfully following the afore-stated orders of the co-ordinate Bench of the Mumbai-Tribunal in the assessee company’s own case for the assessment year 2009-10 we also set aside the orders of the Revenue Authorities in the instant appeal in for the assessment year 2011-12 and restore all the issues raised by the assessee company in the ground of appeal filed with the Tribunal to the file of the A.O. for de-novo determination of all the aforestated issues on merits in accordance with law and also keeping in view the direction given by the Tribunal hereinabove in the appeal for the assessment year 2009-10. Needless to say, the adequate and proper opportunity of hearing will be granted by the AO to the assessee company in accordance with the principles of natural justice in accordance with law .We order accordingly. Issues Involved:1. Classification of payment as 'Royalty' and 'Fees for Technical Services' under Section 9(1)(vi) and 9(1)(vii) of the Income Tax Act, 1961.2. Denial of benefit under Section 115A of the Income Tax Act.3. Taxation on gross receipts versus net receipts.4. Short credit of TDS.5. Levy of interest under Section 234B of the Income Tax Act.Issue-wise Detailed Analysis:1. Classification of Payment as 'Royalty' and 'Fees for Technical Services':The primary issue is whether the sum of Rs. 40,46,45,646 received by the assessee company from Standard Chartered Bank, India (SCB India) should be classified as 'Royalty' and 'Fees for Technical Services' under Section 9(1)(vi) and 9(1)(vii) of the Income Tax Act, 1961. The assessee argued that the payment was for data processing support services provided to SCB India and not for any royalty or technical services. The assessee emphasized that the software and hardware used were owned by SCB, and the data processing was done in Hong Kong. The AO and DRP, however, held that the payment constituted 'Royalty' and 'Fees for Technical Services' based on the retrospective amendments to Section 9 of the Act and the nature of the services provided under the Cocteau Agreement.2. Denial of Benefit under Section 115A:The assessee contended that the benefit of the rate prescribed under Section 115A of the Act should be applied. The AO and DRP denied this benefit, stating that SCB India, being a non-resident company, does not fall within the ambit of the term 'Indian concern' as per the provisions of Section 115A. The assessee argued that SCB India should be considered an Indian concern, relying on previous Tribunal decisions.3. Taxation on Gross Receipts versus Net Receipts:The assessee argued that the AO erred in taxing income on gross receipts instead of net receipts, i.e., after deducting the expenses attributable to gross receipts. The assessee requested that the AO be directed to compute the chargeable income by adopting net receipts.4. Short Credit of TDS:The assessee claimed that the AO erred in granting a short credit of TDS amounting to Rs. 4,33,02,870. The assessee requested that the AO be directed to grant credit for the TDS as per Section 199 of the Act read with Rule 37BA of the Income-tax Rules, 1962.5. Levy of Interest under Section 234B:The assessee contended that the AO erred in levying interest under Section 234B amounting to Rs. 5,83,38,488, arguing that the entire income was subject to tax deduction at source, and hence, the question of advance tax does not arise. The assessee requested the deletion of the interest levied under Section 234B.Tribunal's Decision:The Tribunal observed that similar issues were raised in the assessee's own case for the assessment year 2009-10, where the matter was set aside to the AO for de-novo determination in light of retrospective amendments to Section 9 of the Act. Following the principle of consistency, the Tribunal decided to set aside the orders of the Revenue Authorities for the assessment year 2011-12 and restore all issues to the file of the AO for fresh adjudication. The AO is directed to re-adjudicate the issues in accordance with law, providing adequate opportunity to the assessee. The appeal is allowed for statistical purposes.