2022 (5) TMI 161 - AT - Income Tax

Tribunal Upholds CIT(A) Order to Tax Receipts on Net Basis under Section 44DA for AY 2013-14

ACIT (International Taxation) Circle – 1 (2) (2) New Delhi Versus DHV BV Indian Branch Office

The Tribunal dismissed the Revenue's appeal and upheld the order of the CIT(A) to tax the receipts on a net basis under Section 44DA for Assessment Year ... Income accrued in India - Taxability of the receipts - gross basis or on net basis - Receipts in nature of ‘fee for technical services’ are to be taxed on net basis under section 44DA - Whether receipts were not ‘effectively connected’ with the PE of assessee in Indian and thus were liable to be taxed on gross basis @ 10% u/s 115A? - HELD THAT:- As decided in own case [2022 (2) TMI 697 - ITAT DELHI] assessee's receipts from the contracts in India are not effectively connected with PE in India. Accordingly,as directed the Assessing Officer to tax such receipts on net basis as per section 44DA of the Act. - Decided against Revenue. Issues:Taxability of receipts on gross vs. net basis under Section 44DA of the Income Tax Act for Assessment Year 2013-14.Analysis:The appeal filed by the Revenue was against the order of the Commissioner of Income Tax (Appeals)-42, New Delhi for Assessment Year 2013-14. The case involved the taxability of receipts by a non-resident company providing consulting services in India. The Assessing Officer (AO) had taxed the receipts on a gross basis, contrary to the assessee's contention for net basis taxation. The AO relied on past orders and rejected the CIT(A)'s direction for net basis taxation. The CIT(A) directed the AO to tax the income on a net basis under Section 44DA, following a precedent from the assessee's own case for A.Y. 2011-12.The Revenue raised grounds challenging the CIT(A)'s order, arguing that the receipts were not effectively connected with the Permanent Establishment (PE) in India and should be taxed on a gross basis. The issue was whether the income should be taxed on a gross or net basis. The Tribunal noted that a similar issue had been decided in favor of the assessee in a previous year's case. The Tribunal upheld the CIT(A)'s decision, stating that the income was effectively connected to a PE in India and should be taxed on a net basis. The Revenue failed to provide any distinguishing features or evidence to overturn the previous decision. Therefore, the Tribunal dismissed the Revenue's appeal and upheld the order of the CIT(A) regarding the taxability of the receipts.In conclusion, the Tribunal dismissed the Revenue's appeal and upheld the order of the CIT(A) to tax the receipts on a net basis under Section 44DA. The decision was based on the precedent set in the assessee's own case for a previous assessment year. The Tribunal found no reason to interfere with the CIT(A)'s order, as the facts were identical, and the Revenue failed to provide any new evidence or legal grounds to challenge the previous decision.