TaxTMI 
TaxTMI 
2015 (11) TMI 1191
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.... 3. erred in taxing the income from offshore services under Article 12 of the India-Japan DT AA ignoring the provisions of Article 12(5) read with Article 7 of the India-Japan DTAA; 4. without prejudice to the above, erred in taxing the income from offshore services at the rate of 10.5575 percent instead of the beneficial rate of 10 percent as per the India-Japan DTAA; Jurisdictional High Court order in Appellant's own case 5. should have appreciated that in view of the decision of the Hon'ble Income-tax Appellate Tribunal for AY 2003-04 which has been approved by the jurisdictional High Court (rejecting the appeal of the Income-tax Department and directing to follow the order passed by the Hon'ble Supreme Court), the income of the Appellant from offshore services ought not to be taxed in India; The assessee vide letter dated 2nd April, 2010, has filed additional ground which is as under :- "On the facts and in the circumstances of the case and in law, the learned AO: 6. Erred in taxing interest on income tax refund amounting to Rs. 13,12,899 at the rate of 42.224% instead of the beneficial rate of 10% as per the provisions of the India- Japan Double ....
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....t in assessee's own case, 288 ITR 0408. Thus, the assessee submitted that offshore supply should not be taxable in India as per the following reasons:- * Only such part of the income, as is attributable to the operations carried out in India can be taxed in India. * All activities in connection with the offshore supply are undertaken outside India, and therefore cannot be deemed to accrue or arise in the country. * Since both the transfer of property in goods as well as the payment, have been carried on outside the Indian soil, the transaction is not taxable in India. The contract provides for transfer of property outside India. 3. The AO after relying the retrospective amendment made to Section 9 of the IT Act, 1961 by the Finance Act, 2010, held that the income from offshore services is taxable in India and post the retrospective amendment, the decision of Hon'ble Supreme Court in assessee's own case is no longer applicable. Thus, the AO brought the income offshore services amounting to USD to tax @10.5575% under the Act. 4. Before the DRP, the assessee reiterated the submissions made before the AO. However, the DRP after relying various legal propositions alongwit....
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.... The test of residence, as applied in international law also, is that of the taxpayer and not that of the recipient of such services. (5) For section 9(1)(vii) to be applicable, it is necessary that the services not only be utilized within India, but also be rendered in India or have such a "live link" with India that the entire income from fees as envisaged in article 12 of the DTAA becomes taxable in India. (6) The terms "effectively connected" and "attributable to" are to be construed differently even if the offshore services and the permanent establishment were connected. M/s.IHI Corporation. (7) Section 9(1)(vii)(c) of the Act in this case would have no application as there is nothing to show that the income derived by a non-resident company irrespective of where rendered, was utilized in India. (8) Article 7 of the DTAA is applicable in this case, and it limits the tax on business profits to that arising from the operations of the permanent establishment. In this case, the entire services have been rendered outside India, and have nothing to do with the permanent establishment, and can thus not be attributable to the permanent esta....
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....hat apart from non-applicability of section 9(1) in the present case, Article 7 of the DTAA is also applicable and hence the income arising on account of offshore services would not be taxable. 6.7. In view of the foregoing discussion it is abundantly manifest that the Hon'ble Supreme court as well as the Hon'ble jurisdictional High Court have held in unequivocal terms in the assessee's own case for the earlier years that the income on account of offshore services is not chargeable to tax as per Article 7 of the DTAA. 7. Section 90(2) of the Act provides that where the Central Government has entered into an agreement with the Government of any country outside India or specified territory outside India, as the case may be, under sub-section (1) for granting relief of tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee. The Hon'ble Supreme Court in CIT VS. P.V.A.L. Kulandagan Chettiar (2004) 267 ITR 654 (SC) has held that the provisions of sections 4 and 5 are subject to the contrary provision, if ....