2002 (11) TMI 263 - AT - Income Tax

Assessee's Appeal Dismissed on Assessment Validity; Tribunal Rules on Royalty Payments

The assessee's appeal grounds related to the validity of assessment were dismissed. The Tribunal found section 9(1)(i) not applicable due to no operations ... Deemed To Accrue Or Arise In India. Issues Involved:1. Validity of assessment.2. Applicability of section 9(1)(i).3. Applicability of section 9(1)(vi).4. Additional alternative ground for applicability of section 9(1)(vii).5. Computation of income.6. Chargeability of interest under sections 234A and 234B.Summary:1. Validity of Assessment:The assessee did not press the validity of the notice issued u/s 142(1) by the Assessing Officer and the consequential assessment. Accordingly, the related grounds of the assessee's appeal were dismissed as not pressed.2. Applicability of Section 9(1)(i):The revenue's appeal contested the CIT(A)'s finding that section 9(1)(i) was not attracted. The Tribunal examined the business operations and concluded that the assessee had a business connection in India. However, it was held that no part of the assessee's operations was carried out in India, and thus, the provisions of section 9(1)(i) were not applicable despite the business connection.3. Applicability of Section 9(1)(vi):The CIT(A) held that the provisions of section 9(1)(vi) were applicable, treating the payments received by the assessee as 'Royalty'. The Tribunal upheld this view, stating that the TV channels were using the process provided by the assessee for their business in India. The Tribunal also clarified that the term 'process' did not need to be 'secret' to fall under this section. The Tribunal directed the Assessing Officer to determine the income u/s 9(1)(vi)(c) after allowing a reasonable opportunity to the assessee.4. Additional Alternative Ground for Applicability of Section 9(1)(vii):The revenue raised an additional ground for the applicability of section 9(1)(vii), which was admitted by the Tribunal. However, the Tribunal did not find it expedient to deal with this issue in light of the decision on section 9(1)(vi).5. Computation of Income:The Tribunal set aside the computation of income made by the authorities below and directed the Assessing Officer to redo the computation de novo. The Tribunal emphasized the need to correctly apportion the gross receipts and expenses attributable to India. It also addressed the issue of depreciation on Asiasat-II, holding that only the proportionate depreciation attributable to Indian income should be allowed. The Tribunal further held that section 44C was not applicable as the assessee did not have any office in India.6. Chargeability of Interest under Sections 234A and 234B:The Tribunal upheld the levy of interest u/s 234A due to the failure to file the return within the prescribed time. Regarding interest u/s 234B, the Tribunal noted that the liability to pay advance tax arises only if the tax is not deductible at source. Since the tax was deductible u/s 195, the Tribunal directed the Assessing Officer to determine the interest liability u/s 234B based on the final computation of income.Conclusion:Both the appeals were disposed of accordingly, with directions for fresh computation of income and determination of interest liability by the Assessing Officer.