2022 (12) TMI 1278 - AT - Income Tax

Tribunal Rules in Favor of Assessing Officer for TDS Credit Dispute

Formula One World Championship Ltd. Versus DCIT, International Taxation, Noida

Formula One World Championship Ltd. Versus DCIT, International Taxation, Noida - TMI Issues Involved:1. Non-grant of tax credit for TDS deposited by JAL.2. Non-grant of refund of excess taxes paid by the assessee.Detailed Analysis:1. Non-grant of tax credit for TDS deposited by JAL:The assessee, a non-resident corporate entity and tax resident of the UK, entered into a Race Promotion Contract (RPC) with Jaypee Sports International Ltd. (now merged with Jaiprakash Associates Limited - JAL) to host the Indian Grand Prix. The RPC fee received by the assessee was initially treated as royalty by the Authority of Advance Ruling (AAR), which also held that JAL was obligated to deduct tax at source. This was challenged, and the Delhi High Court later ruled that the RPC fee was not royalty but that the assessee had a fixed place Permanent Establishment (PE) in India, thus requiring JAL to deduct tax at source. The Supreme Court upheld this decision.Despite the ruling, the Assessing Officer did not grant credit for the TDS deposited by JAL, reflected in Form 26AS of the assessee. The assessee argued that as per section 199 of the Act and Rule 37BA, the taxes deposited by JAL should be considered as TDS and credited to the assessee's account. The Departmental Representative contended that since JAL did not deduct tax at the time of payment, the subsequent deposit was penal and not eligible for credit. The Tribunal noted that the TDS credit claimed was not part of the income offered to tax and thus directed the Assessing Officer to verify the TDS credit and treat it as income partaking the character of RPC fee, taxing it accordingly.2. Non-grant of refund of excess taxes paid by the assessee:The assessee claimed that the taxes deposited by JAL were in addition to the taxes already paid by the assessee, and thus, there should not be double taxation on the same income. The Tribunal accepted the assessee's submission that the TDS credit should be treated as income and taxed in the same manner as the RPC fee. The Tribunal directed the Assessing Officer to verify the TDS credit and provide a reasonable opportunity for the assessee to be heard before making a decision.Conclusion:The Tribunal partly allowed the appeals, directing the Assessing Officer to verify the TDS credit and treat it as part of the RPC fee income, ensuring it is taxed in the same manner. The Tribunal emphasized that the mandate was solely for the taxation of the TDS credit and no other income items.