2009 (11) TMI 84 - AT - Income Tax

Tribunal rules in favor of assessee in tax dispute, excludes commission, no interest liability

The Tribunal ruled in favor of the assessee in a tax dispute case. It directed that the profit should be computed at 10% of the net amount actually ... Right Of Respondent Issues Involved:1. Exclusion of commission retained by Turner International India (P) Ltd. (TIIPL) from gross receipts.2. Charging of interest under Section 234B.3. Charging of interest under Section 234C.Detailed Analysis:1. Exclusion of Commission Retained by TIIPL:The primary issue was whether the amount of commission retained by TIIPL should be excluded from the gross receipts for the purpose of determining the total income of the assessee at 10% of the gross receipts. The assessee argued that non-exclusion led to double taxation, once in the hands of TIIPL and then in the hands of the assessee, defeating the purpose of the Mutual Agreement Procedure (MAP) resolution.The CIT(A) upheld the AO's decision, stating that the competent authority determined the profit at 10% of the advertisement and subscription revenue received during the relevant year without specifying that it should be net revenue. Thus, the AO rightly rejected the claim for deduction of commission from advertisement revenue for computing the profit.The Tribunal, however, found that the MAP resolution clearly indicated that the profit should be calculated at 10% of the net revenue received from Indian sources. The USA competent authority had computed the profit after deducting the commission paid to TIIPL, and this computation was not objected to by the Indian competent authority. Therefore, the Tribunal directed that the profit should be computed at 10% of the net amount actually received by the assessee, allowing ground No. 1 in favor of the assessee.2. Charging of Interest under Section 234B:The assessee contested the levy of interest under Section 234B, arguing that as a non-resident company, all payments received from Indian sources were subject to TDS, and thus there was no liability to pay advance tax.The Tribunal referred to a previous order in the case of Turner Broadcasting System Asia Pacific Inc., where it was held that in the case of a non-resident company, there is no liability to pay advance tax due to the TDS on all receipts. Consequently, there would be no liability to pay interest under Section 234B. The Tribunal followed this precedent and allowed ground No. 2, ruling that the assessee was not liable to pay interest under Section 234B.3. Charging of Interest under Section 234C:Similarly, the assessee contested the levy of interest under Section 234C. The Tribunal again referred to the previous order in the case of Turner Broadcasting System Asia Pacific Inc., where it was held that due to the TDS on all receipts, there is no liability to pay advance tax, and thus no liability to pay interest under Section 234C. Following this precedent, the Tribunal allowed ground No. 3, ruling that the assessee was not liable to pay interest under Section 234C.Consolidated Appeals:The Tribunal noted that the facts and grounds in the other appeals (ITA Nos. 725, 726, 727, 729, 730, 731, and 732/Del/2008) were similar to those in ITA No. 632/Del/2008. Therefore, the order in ITA No. 632/Del/2008 was made applicable to these appeals as well. The Tribunal concluded by allowing all the appeals as discussed above.