ITAT Decision: Taxability of Supervision Charges under Income Tax Act

Voith Siemens Hydro Kraftwerkstechnik. Gmbh & Co. KG C/o Mahinder Puri & Co.. Versus Deputy Director of Income Tax. Circle 2(2). International Taxation. New Delhi.

Voith Siemens Hydro Kraftwerkstechnik. Gmbh & Co. KG C/o Mahinder Puri & Co.. Versus Deputy Director of Income Tax. Circle 2(2). International Taxation. ... Issues involved:
1. Applicability of section 44BBB of the Income Tax Act.
2. Chargeability of interest under section 234B of the Income Tax Act.
3. Initiation of penalty proceedings under section 271(1)(c) of the Income Tax Act.

Analysis:

Issue 1: Applicability of section 44BBB of the Income Tax Act
The appellant contested the order of the Assessing Officer, disputing the taxability of the amount receivable under the contract towards supervision of erection and commissioning under section 44BBB of the Income Tax Act, 1961. The appellant argued that the Assessing Officer erred in mechanically following previous years' orders without proper consideration. However, the ITAT upheld the findings that the business profits of the assessee from supervision charges were akin to "Fees for technical services" (FTS) and were taxable under the provisions of Article 7 of the Double Taxation Avoidance Agreement (DTAA) read with Section 44D and Section 115A of the Act. The ITAT relied on previous judgments and confirmed the taxability of the amount received by the assessee as business profits.

Issue 2: Chargeability of interest under section 234B of the Income Tax Act
The appellant raised a ground against the levy of interest under section 234B of the Income Tax Act. However, the ITAT, considering the applicability of Tax Deducted at Source (TDS) on the receipts of the assessee, concluded that interest under section 234B was not leviable as TDS had been correctly deducted on the payments made to the assessee. The ITAT referred to the decision of a Special Bench and deleted the interest levied under section 234B, thereby partly allowing the appellant's appeal on this ground.

Issue 3: Initiation of penalty proceedings under section 271(1)(c) of the Income Tax Act
The appellant's contention regarding the initiation of penalty proceedings under section 271(1)(c) of the Income Tax Act was dismissed as non-appealable. The ITAT held that since penalty proceedings were not appealable, ground no. 10 related to this issue was dismissed. The ITAT also dismissed ground nos. 1 and 8, which were general in nature and did not require adjudication, and ground nos. 5 and 6, which were not pressed by the appellant during the arguments.

In conclusion, the ITAT partly allowed the appeal of the assessee based on the detailed analysis and findings related to the issues of applicability of section 44BBB, chargeability of interest under section 234B, and initiation of penalty proceedings under section 271(1)(c) of the Income Tax Act. The judgment provided a comprehensive assessment of the appellant's contentions and upheld the taxability of the amount received by the assessee under the specified provisions of the Act and DTAA.