TaxTMI 
TaxTMI 
2013 (12) TMI 1550
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.... the circumstances of the case and in the law, the authorities below were not justified in changing its opinion on tax rate while it applied its mind on deduction of TDS on interest on delayed income tax refund to assessee. 4. On the facts and in the circumstances of the case and in the law, the authorities below were not justified in relating interest to the permanent establishment in India. 5. On the facts and in the circumstances of the case and in the law, the authorities below were not justified in treating interest income effectively connected to permanent establishment in India. 6. On the facts and in the circumstances of the case and in the law, the authorities below were not justified in treating the interest earned on delayed payment in foreign currency which has no relation with permanent establishment in India and applying normal tax rate. 7. On the facts and in the circumstances of the case and in the law, the authorities below were not justified in not setting off the loss from project office first against interest income and then against the fee for technical services. 8. On the facts and in the circumstances of the case and in the law, the authorities....
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....ssessment order dt. 26th December 2006 passed under the provisions of Sec. 143(3) of the Act. Subsequently on 10.12.2008, the AO issued notice u/s. 154 of the Act to the assessee on the ground that the assessee was having Project office and was having a permanent establishment within the meaning of DTAA between India and Japan, therefore, the aforementioned interest income was liable to be taxed as per the normal provisions of the Income-tax Act in according with Article 11(6) of the Indo-Japan DTAA. The assessee did not reply to such notice issued by the AO. In absence of reply filed by the assessee, the AO taxed the said amount of Rs. 1,11,01,452/- @ 40% +surcharge @ 2.5%. This order u/s. 154 was passed by the AO on 28.1.2009. The aforementioned action of the AO was challenged in an appeal filed by the assessee before the Ld. CIT(A) which has been decided vide aforementioned impugned order dt. 19th August 2010. 4. The Ld. CIT(A) has held that there was a mistake in the order passed by the AO u/s. 143(3) of the Act whereby he directed to tax the aforementioned amount at the rate of 15% in accordance with DTAA between India and Japan. Subsequently, when he found that such inc....
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....y provisions. If there is less levy, then it is liable for rectification. Accordingly, we hold that AO was not wrong in exercising his right u/s. 154 of the Act. 9. Now coming to the merits of the issue, it has already been pointed out that the impugned interest has three components namely (1) interest from bank (2) interest on income tax refund and (3) interest for delayed payment on Foreign supply contract with PPN in foreign currency. All these issues were stated to be covered as under: i) Interest income from bank is covered in favour of the Revenue by the decision of the ITAT in assessee's own case which is dt. 28th August, 2013 in ITA No. 1087/M/2012 for assessment year 2007-08. The issue has been decided as under: "Ground no. 6 & 7 pertains to attribution of and taxability of interest on FDRs. The CIT(A) held that interest is directly connected with the income of the PE. Though the AR argued that the HO takes care of all types of expenses and risks, therefore, the rate applicable should be 20% & not 41.82% as applied by the AO. It is a fact that the interest income pertains to deposits made by the PE on behalf of its parent, i.e. the assessee. Since the cost i....
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....s ADIT in ITA No. 5198/M/2010 and 6998/M/2011 vide order dated 8.2.2012 has also considered and decided the identical issue by following the decision of Special Bench in case of Clough Engineering Ltd. (supra) in para 10 as under: "10. We have given a careful consideration to the rival submissions. We are of the view that in the light of the commentary of Klaus Vogel on the reason for use of the word "attributable" in the US conventions, they are in no way different from the expression "effectively connected". US Model convention deviates from OECD and UN Model Conventions (MCs) because the term "effectively connected" is a technical term of US domestic tax law and that it is defined in detail in I.R.C. Sec.864(c) whereas "attributable", though used in US domestic tax law as well, is not defined. If US MC were to refer to "effectively connected", the question would arise whether that term would be required by Article 3(2) MC to be interpreted on the US side in accordance with its definition under US tax law, Use of the term "attributable" avoids that problem and that is the reason the expression "Attributable" is used in US Model Conventions. Therefore the term appearing in US M....
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....if the matter is restored back to the AO. 10. On the other hand Ld. Departmental Representative relied upon the order passed by AO and Ld. CIT(A). 11. We have heard both the parties and their contentions have carefully been considered. The contention of the assessee is required to be examined on merits. This issue was raised by the assessee before the Ld. CIT(A). However, Ld. CIT(A) has not adjudicated the same. We consider it just and proper to restore this issue to the file of the AO with a direction to readjudicate this issue on merit after giving the assessee a reasonable opportunity of hearing. So far as it relates to consideration of ground No. 7 which is alternative contention, as we are restoring the main issue to the file of the AO, this issue is also restored back to the file of the AO for adjudication as per law after giving the assessee a reasonable opportunity of hearing. We direct accordingly. 12. In view of the abovementioned discussion, the appeal filed by the assessee is considered to be partly allowed for statistical purpose in the manner aforesaid. ITA No. 5697/M/2012-2009-10 13. At the outset , it was submitted by Ld. AR that Ground No. 1 is cover....
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....al income of the assessee. It was held that Section 44D provides for deduction from receipts in the nature of royalty and fee for technical services etc., which is chargeable @ 20% as per provisions of Section 115A(1)(b)(B) of the Income tax Act, if fee is charged pursuant to an agreement made after 31.5.1997 but before 1.6.2005. The amount in question is the amount of service tax collected by the assessee on which the Government has overriding right on the same, cannot be considered for levy of tax in the hands of the assessee. It is relevant to state that in the said case, ITAT also placed reliance on the decision of ITAT Hyderabad Bench in the case of ACIT vs. Louis Berger International Inc,(2010) 40 SOT 370(Hyd) and in the said case the decision of Hon'ble apex Court in the case of Chowringhee Sales Bureau (P) Ltd (supra) was also considered and distinguished. On behalf of the department, no contrary decision was brought to our notice". The CIT(A), in his order mentions that no details had been provided and therefore, the AO was correct to not give any credit. The DR also placed reliance on the orders of the revenue authorities. After hearing the arguments, we are of t....