Consistency in year-wise tax treatment, DTAA royalty rates, and no section 234B interest for non-resident income subject to TDS.

Identical BBMB project receipts were held taxable on a 10% estimated basis because the same treatment had been accepted in earlier and later years and no distinguishing facts were shown. Royalty and fees for technical services were directed to be recomputed under the applicable DTAA rate after the treaty amendment notification, with the factual and legal position to be verified on remand. Interest under section 234B was deleted for the non-resident company because tax was deductible at source on its income and no advance tax obligation arose.

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Issues: (i) Whether receipts from the BBMB project were required to be taxed at 10% on an estimated basis in line with past and subsequent years; (ii) whether royalty and fees for technical services were taxable at 20% or were required to be computed at the DTAA rate after the amendment notification; (iii) whether interest under section 234B of the Income-tax Act, 1961 was leviable on a foreign company.

Issue (i): Whether receipts from the BBMB project were required to be taxed at 10% on an estimated basis in line with past and subsequent years.

Analysis: The receipts from the BBMB project had been assessed inconsistently across years. For an earlier year, the appellate authority had estimated profits at 10% of gross receipts, and the Revenue had not challenged that outcome. In later years also, the receipts from the same project were taxed at 10%. No distinguishing feature for the year under consideration was shown. In these circumstances, consistency in treatment of identical receipts required adoption of the same percentage.

Conclusion: The receipts from the BBMB project were held taxable at 10% of the receipts, in favour of the assessee.

Issue (ii): Whether royalty and fees for technical services were taxable at 20% or were required to be computed at the DTAA rate after the amendment notification.

Analysis: The receipts comprised royalty and fees for technical services. The assessee relied on the amendment to the India-Japan tax treaty brought in by Notification No. S.O. 1136(E) dated 19.7.2006, under which the tax on royalties and fees for technical services was capped at 10% of the gross amount. As the applicability of the amended treaty rate required verification of the factual and legal matrix, the matter was restored for fresh computation under the applicable treaty and law.

Conclusion: The issue was remitted to the Assessing Officer for recomputation under the applicable DTAA rate, in favour of the assessee.

Issue (iii): Whether interest under section 234B of the Income-tax Act, 1961 was leviable on a foreign company.

Analysis: The assessee was a non-resident company and the tax on its income was required to be deducted at source by the payers. In such a situation, there was no obligation on the assessee to pay advance tax, and interest under section 234B could not be levied. The binding Delhi High Court view on this point was applied, and no contrary binding authority or distinguishing facts were shown.

Conclusion: Interest under section 234B was deleted, in favour of the assessee.

Final Conclusion: The assessment was modified on the main disputed issues, with the BBMB receipts to be estimated at 10%, the treaty-rate issue sent back for fresh computation, and the interest levy under section 234B set aside.

Ratio Decidendi: Where identical receipts have consistently been assessed at an estimated percentage in earlier and later years without distinguishing facts, the same treatment should ordinarily be followed; and in the case of a non-resident whose income is subject to tax deduction at source, interest under section 234B is not leviable.

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