2022 (6) TMI 180 - AT - Income Tax

Tribunal remits case for fresh tax assessment on Formula One driver receipts

M/s GSA Gestions Sportives Automobiles SA Versus DCIT, International Taxation, Noida

M/s GSA Gestions Sportives Automobiles SA Versus DCIT, International Taxation, Noida - TMI Issues Involved:1. Determination of total income.2. Issuance of final assessment order under Section 144.3. Applicability of Article 17 of the India-Switzerland DTAA.4. Nature of receipts derived from personal activities of athletes.5. Taxable income based on payments made to Formula FB Business Limited and Felipe Massa.6. Deductibility of payments made to Formula FB Business Limited and Felipe Massa.7. Levy of interest under Sections 234A, 234B, and 234C.8. Levy of interest under Section 234D.9. Initiation of penalty proceedings under Section 271(1)(c).Detailed Analysis:1. Determination of Total Income:The Assessing Officer (AO), based on the directions of the Dispute Resolution Panel (DRP), determined the total income of the appellant to be Rs. 3,25,43,000 for AY 2012-13. This was contested by the appellant.2. Issuance of Final Assessment Order under Section 144:The appellant argued that the AO erred in not issuing a final assessment order under Section 144 of the Income-tax Act, thereby rendering the assessment order null and void ab initio.3. Applicability of Article 17 of the India-Switzerland DTAA:The DRP noted that the appellant did not furnish any relevant reply to show cause why the provisions of Article 17 of the India-Switzerland Tax Treaty (DTAA) are not applicable. The DRP held that the receipts of the appellant are in the nature of income derived from the personal activities of athletes exercised in India and hence taxable under Article 17 of the DTAA.4. Nature of Receipts Derived from Personal Activities of Athletes:The AO and DRP held that the receipts from drivers participating in the Formula One Motor Championship are derived from the personal activities of entertainers/athletes exercised in India. The DRP referred to the OECD commentary, which considers a Formula One racing driver as an athlete.5. Taxable Income Based on Payments Made to Formula FB Business Limited and Felipe Massa:The AO added the payments made to Formula FB Business Limited and Felipe Massa to the appellant's income, estimating the total addition to be Rs. 3,25,43,000, taxable at 40% plus applicable surcharge and education cess.6. Deductibility of Payments Made to Formula FB Business Limited and Felipe Massa:The DRP and AO did not allow the payments made to Formula FB Business Limited and Felipe Massa as deductible expenses, despite the fact that tax was deducted and deposited into the Indian Government treasury.7. Levy of Interest under Sections 234A, 234B, and 234C:The AO proposed to levy interest under Sections 234A, 234B, and 234C of the Income-tax Act as per the law.8. Levy of Interest under Section 234D:The AO also proposed to levy interest under Section 234D of the Income-tax Act.9. Initiation of Penalty Proceedings under Section 271(1)(c):The AO initiated penalty proceedings under Section 271(1)(c) of the Income-tax Act, stating that the appellant concealed the true and correct particulars of its taxable income and furnished inaccurate particulars.Conclusion:The Tribunal considered the submissions and referred to the decisions of the Authority of Advance Rulings (AAR) in similar cases, which held that such receipts were not taxable in India. However, due to the lack of detailed factual examination, the Tribunal remitted the matter back to the AO for fresh consideration, including the duration of the drivers' stay in India and other relevant details. The Tribunal directed the AO to re-examine the issues in light of the observations and provide the appellant an opportunity to submit relevant information. The appeals for both AY 2012-13 and AY 2013-14 were allowed for statistical purposes.