TaxTMI 
TaxTMI 
2014 (2) TMI 674
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.... 2. The learned Commissioner of Income Tax (Appeal) erred in not applying the provisions of Article 24 of the Agreement for Avoidance of Double Taxation between India-Japan and thereby erroneously confirming the tax rate applied by the assessing officer @ 48 percent for computing the Appellant's tax liability, instead of 35 percent as applicable to domestic companies. 3. The learned Commissioner of Income Tax (Appeal) erred in denying exemption under section 1 0(6A) of the Act to the appellant despite the fact that the contracts with MRPL are approved by the Central Government." 5. Ground No. 1 regarding the taxability of offshore design revenues earned by the assessee's head office. The assessee is a non-resident company incorporated in Japan. The assessee specialises in various activities including undertaking work related to design, engineering, erection, equipment procurement, supervision and construction of chemical, fertilizer, petroleum, petrochemical and other plants. The assessee operates in India through project offices established in India after obtaining relevant approvals from RBI. During the financial year relev....
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.... case of Bechtel 228 ITR 487.The CIT(A) did not agree with the contention of the assessee and confirm the action of the AO in treating the revenue received by the assessee under the offshore design contract as royalty/ Fees for Technical Services and taxable in India. 6. Before us the Ld. AR of the assessee has reiterated the contentions as raised before the authorities below and further contended that the issue is covered by the decision of Hon'ble Supreme Court in case of Ishikawajma-harima Heavy Industries Ltd. v. DIT 288 ITR 408.The Ld. AR has contended that the Hon'ble Supreme Court has dealt with an identical issue in the said decision and held that though the contract was executed in India but part thereof will have to be carried out outside India would not make the entire income derived by the contractor to be taxable in India. He has further submitted that the Hon'ble Supreme Court has observed that the contract may be turnkey contract but the same by itself does not mean even for the purpose of taxability that the entire contract must be considered to be an integrated one so as to make the assessee to pay tax in India. The Ld. AR as further submitted that subsequent to....
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....s for rendering the services and not sale of design. The taxability of Fees for Technical Services has to be examined as per the provisions of Act u/s 9(1)(vii) as well as the provisions of DTAA. In order to determine the taxability of Fees for Technical Services Section 9(1)(vii) contemplates the various condition as under: "(vii) income by way of fees for technical services payable by- (a) the Government; or (b) a person who is a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India; or (c) a person who is a non-resident, where the fees are payable in respect of services utilised in a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India: Provided that nothing contained in this clause shall apply in relation to any income by way of fees for technical services payable in pursuance of an agreemen....
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....ho is resident in India therefore, under the provisions of statute the income of Fees for Technical Services in question is taxable in India. 11. Turning to the taxability of such income under Indo-Japan DTAA we note that Article 12 deals with the income from royalty and Fees for Technical Services. The assessee has taken an alternative plea that since the assessee has a Permanent Establishment in India therefore, the Fees for Technical Services does not attract Article 12 in view of the exclusion clause as per para (5) of Article 12. At this stage we reproduce Article 12(5) as under: "5. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or fees for technical services, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties or fees for technical services arise, through a permanent establishment situated therein, or performs in that other Contracting State independent personal services from a fixed base situated therein, and the right, property or contract in respect of which the royalties or fees for technical services are paid is effectively connect....
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....pan treaty." 14. Since the issue has already been decided against the assessee therefore following the earlier order of this Tribunal we decide this issue against the assessee. 15. Ground No. 3 regarding exemption u/s 10(6A). We have heard the Ld. AR as well as Ld. DR and considered the relevant material on record. At the outset we note that this issue has been considered and decided by this Tribunal is assessee's own case in assessment year 1996-97 in ITA No. 4054/M/1999 vide order dated 24.12.2009 in para 18 to 18.2 as under: "18. Coming to ground No. 5 the sole argument of Mr. Narender Singh, learned DR, is that the assessee has filed loss return and hence he was not liable to pay any income-tax in India and under those circumstances the tax paid by MRPL could not be exempt u/s 10(6A). 18.1 We find that section 1 0(6A) reads a follows: "(6A) where in the case of a foreign company deriving income by way of royalty or fees for technical services received from Government or an Indian concern in pursuance of an agreement made by the foreign company with Government or the Indian concern after th....
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....earned Commissioner of Income Tax (Appeal) has erred in holding that offshore design revenues earned by the Appellants Head office in Japan are liable to Tax in India. 2. The learned Commissioner of Income tax (Appeals) erred in not applying the provisions of Article 24 of the agreement for avoidance of double taxation between India- Japan and thereby erroneously confirming the tax rate applied by the assessing officer @ 48 percent for computing the Appellants tax liability, instead of 35 percent as applicable to domestic companies. 3. The Learned Commissioner of Income tax (Appeals) erred in denying exemption under section 10(6A) of the Act to the appellant despite the fact the contract with MRPL are approved by the Central Government." 18. Ground No. 1 is common to ground no. 1 for the assessment year 1999-2000 in view of our finding for the assessment year 1999-2000, this issue set aside for limited propose to the record of the AO with similar directions. 19. Ground No. 2 is common for the assessment year 1999-2000. In view of our finding of ground No. 2 for the assessment year 1999-2000, we decide this issue against ....
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....provision of interest is not introduced with reference to any assessment year, it must be taken to apply only with effect from 1/06/2003. This submission of the respondent-assessee would require limiting the clear words of a declaratory amendment in an Explanation 2 to section 234D of the Act which specifically provides that it shall also apply to an assessment year commencing before 1/06/2003. The only qualifying criterion is that proceedings in respect of such assessment is completed after 1/06/2003. Once the Explanation is held to be retrospective in relation to the assessment years commencing before 1/6/2003 it would not be open to restrict the operation of section 234D of the Act only with effect from 1/6/2003. (26) A statute could be retrospective in operation being expressly stated or by necessary implication. The case of the revenue is that section 234D as introduced on 1st June, 2003 was retrospective in operation by necessary implication. However, as doubts were raised about its retrospectivity, the same was clarified by adding an explanation to section 234D by Finance Act, 2012. Under the Act what is brought to tax is not the income of the ass....
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....006 26. The Revenue has raised common grounds in these appeals. The grounds raised for the assessment year 1996-97 are as under: "1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the revenues from Project Management Contract are to be taxed on net income basis without appreciating that: i. The assessee is not at all in the business of construction and; ii. While computing income in accordance with Article 7(3) of the Tax Treaty between India and Japan, the limitation of the domestic tax law has to be observed". 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that no liability u/s 234B arise, ignoring the fact: (i) that since the tax deducted at source was not adequate to meet the entire tax liability, it was obligation on the part of the assessee to make the deficit good by making the payments towards the advance tax; (ii) that since the assessee failed to pay the advance tax, the Assessing Officer was right in ....
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....r of income-tax (International Taxation) v. NGC Network Asia LLC [(2009) 313 ITR 187 (Bom.)] in which it has been held that when the duty is cast on the payer to deduct tax at source, on failure of the payer to do so, no interest can be charged from the payee assessee u/s 234B. The same view has been reiterated in DIT (IT) v. Krupp UDHE GmbH[(2010) 38 DTR (Bom.) 251]. As the assessee before us is a non-resident, naturally any amount payable to it which is chargeable to tax under the Act, is otherwise liable for deduction of tax at source. In that view of the matter and respectfully following the above precedents, we hold that no interest can be charged u/s 234B and 234C of the Act. This ground is not allowed." 30. Following the earlier order of the Tribunal we decide this issue against the Revenue. ITA No. 3310/M/2005, 3311/M/2005 and 2552/M/2006 for A.Ys.1996-97,1997-98,1998-99 31. The assessee has raised the following common grounds. The Grounds raised in ITA No. 3310/M/2005 are as under: "Ground 1: The learned Commissioner of Income Tax (Appeals)-XXXI has erred in holding that re-assessment proceedings initiated by the DDIT under Section 148 ....