TaxTMI 
TaxTMI 
2017 (12) TMI 1047
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....ng the amount of service tax deducted by the customers from the amounts payable to the Appellant in terms of the Finance Act, 1994, holding that the same is to be included in the taxable income of the Appellant for the relevant assessment year. 1.1 The Ld. CIT(A) has erred facts and in law in confirming the action of Ld. AO in failing to appreciate that the liability to deposit service tax applicable on the services rendered by the Appellant vests with the customers of the Appellant under the reverse charge mechanism in terms of section 66A of the Finance Act, 1994. 1.2 The Ld. CIT(A) has erred facts and in law in confirming the action of Ld. AO in failing to appreciate that the above amount did not accrue to the Appellant and, therefore, the same cannot form part of the income earned by the Appellant. 2. The learned Assessing Officer has erred facts and in law in levying Surcharge @ 2.5 percent, Education Cess @2% and Secondary and Higher Education Cess @ 1 percent under the Act without appreciating the fact that the assessee has offered its income to tax under Article 13 of Double Taxation Avoidance Agreement (DTAA) between India and France at 10 percen....
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....TAT has dealt with these grounds in para no. 4(4.1 to 4.3) of its order. The operative portion of the order of Hon'ble ITAT is reproduced below:- 4. We have considered the rival submissions of either side and perused the relevant materials on record, including the orders of the authorities below. The facts leading to the issue under consideration are that pursuant to section 66A being made available on the statute vide the 'Finance Act, 2006', w.e.f 18/04/2006, as per which specified services provided by a nonresident to a resident from outside India were brought within the sweep of levy of service tax by way of 'Reverse charge', as a fall out of which a statutory obligation in the present case was cast upon the customers to deposit service tax as regards the services received by them from the assessee company, as the customers were to be treated as the deemed service providers. The customers however declined to bear the financial burden and deducted an amount of Rs. 1,71,13,377/-(supra) towards 'Service tax' from the fee/Royalty payable by them to the assessee company, deposited the said amount with the government exchequer and remitted only the balance amount of fee/roya....
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....s income to the assessee company, nor was the same ever received by the latter, as a result whereof it can safely and inescapably be concluded that no part of the said amount did ever partake the color and character as that of 'Income' in the hands of the assessee company, pursuant whereto we are of the considered view that the authorities below had erred in including the said amount as income in the hands of the assessee company. The view taken by us stands fortified by the judicial pronouncements relied upon by the Ld. A.R. 4.2. We now advert to the judicial pronouncements relied upon by the Ld. D.R. to drive home his contention that the authorities below had rightly concluded that the amount of service tax was liable to be included in the income of the assessee company. The authorities below as well the Ld. D.R had placed heavy reliance on the judgment of the Hon'ble Apex Court so passed in the case of : Chowringhee Sales Bureau (P) Ltd. Vs. CIT (1973) 87 ITR 542 (SC). However, we are of the considered view that the judgment of the Hon'ble Apex Court so relied upon by the Ld. D.R is distinguishable on facts, and thus for the sake of clarity we have purposively reproduced the rel....
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.... the aforesaid case relied upon by the Ld. D.R, the issue before the Tribunal was that whether service tax collected by the assessee from its customers was liable to be included in the receipts in terms of Sec. 44BB of the 'Act', or not. Thus we are of the considered view that as the facts involved in the aforesaid order of the coordinate bench of the Tribunal are distinguishable as against the facts of the case before us, therefore the reliance placed on the same by the Ld. D.R is found to be misconceived. 4.3. We though find ourselves to be in agreement with the claim of the Ld. A.R that as the amount of Rs. 1,71,13,377/-(supra) reduced by the customers on account of service tax liability from the amount of fees/royalty, which otherwise but for the said reduction would had been payable to the assessee company, had been accepted as such in full and final discharge of the liability of the customers as regards the fees/royalty payable to the assessee company, and the assessee company had not retained with itself any right as regards recovery of any such amounts deducted by the customers qua the liability towards service tax as was so cast upon them, therefore the aforesaid amount of....
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....ge @ 2.5 percent, Education Cess @2% and Secondary and Higher Education Cess @ 1 percent under the Act without appreciating the fact that the assessee has offered its income to tax under Article 13 of Double Taxation Avoidance Agreement (DTAA) between India and France at 10 percent. 10. At the very outset, Ld. AR appearing on behalf of the assessee submitted that the above grounds raised by the assessee are fully covered by the order of Hon'ble ITAT in ITA No. 888/Mum/2016 for AY 2012-13 in the case of Capgemini SA Vrs. DCIT. The Hon'ble ITAT has dealt with this grounds in para no. 9 to 11 of its order. The operative portion of the order of Hon'ble ITAT is reproduced below:- As noted earlier, assessee is a foreign company which is a tax resident of France. The royalty income earned by the assessee is liable to be taxed in India @ io% in terms of Article 13 of DTAA between India and France. While calculating such liability, the Assessing Officer also charged surcharge and education cess in addition to tax @ 10%. The plea of the assessee before us is that the rate of tax of io% prescribed in Article 13 of the DTAA cannot be enhanced by including surcharge and education ce....