TaxTMI 
TaxTMI 
2015 (4) TMI 1254
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.... The Assessing Officer on observing that the international transactions reported by the assessee with its Associated Enterprises (AE) were in excess of Rs. 15 Crores, made a reference to the Transfer Pricing Officer (TPO) under Section 92CA of the Act for determination of the Arm's Length Price ('ALP') of these transactions. The TPO vide order under Section 92CA of the Act dt.31.10.2011 held that no adjustment is required under Section 92CA rws 92C of the Act to the ALP in respect of the international transactions entered into by the assessee with its AEs in the year under consideration. 2.2 The bifurcation of income declared and the tax liability thereon as per the provisions of the Income Tax Act, 1961 and the DTAA between India and USA and the taxes as admitted and submitted by the assessee entered hereunder :- Item Amount Received in Rs. Tax liability as per IT Act include surcharge and Education charge Tax rate as per DTAA and as per the agreement entered into on the specific date Tax liability as per DTAA Tax rate applied by assessee Tax liability calculated and admitted by assessee. Royalty ESW 1128992226 238386666 15% ....
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.... total income reported by the appellant, an amount of Rs. 1,481,152,822 was liable to tax at the rate of 10.5575 percent as per the provisions of section 115A of the Act. 3. The learned A.O. and the DRP have erred in law and on facts in interpreting the provisions of section 90 and section 115A of the Act, and the corresponding provisions of the relevant Agreement for Avoidance of Double Taxation (DTAA). 4. The learned A.O. and the DRP have erred in law and on facts in holding that the relief under section 90 of the Act is specific to each assessment year and not to each segment of source of income. 5. The learned A.O. and the DRP have erred in law and on facts in holding that the appellant can either take the benefit of the DTAA or the Act and cannot split the income into segments for availing both benefits. 6. The learned A.O. and the DRP have erred in law and on facts in disregarding the Circular issued by the CBDT (Circular 728 dated October 30, 1995) which allows an assessee to take into account the lower rates prescribed by the applicable DTA or the Act. 7. The learned A.O. and the DRP have erred in law and on facts in disregarding....
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....nds raised at S. Nos. 2 to 8 (supra). The learned Authorised Representative submitted that the identical issue of the application of rates of tax on royalty was up for consideration before a co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08 and that in its order in IBM World Trade Corpn. v. Dy. DIT, International Taxation [2012] 54 SOT 39/20 taxmann.com 728 (Bang.), the bench held that the computation of tax by the assessee in respect of royalty income is to be accepted. The learned Authorised Representative prayed that in view of this finding of the co-ordinate bench, the assessee's appeal on the issue of application of taxes in respect of royalty income ought to be accepted. 6.2 Per contra, the learned Departmental Representative supported the orders of the authorities below and prayed that their findings be upheld and the assessee's appeal be dismissed. 6.3.1 We have heard the rival submissions and perused and carefully considered the material on record; including the judicial pronouncement cited and placed reliance on by the assessee. We find that, as submitted by the assessee, the identical issue of the question of appl....
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....section 115A(1)(b), the rate of tax on royalty payments in connection with the agreements entered into before 1.6.2005 is 20% and the tax rates for agreements entered into on or after 1.6.2005 is 10%. These tax rates have been prescribed separately under sub-clause (A) and sub-clause (B). Therefore, depending on the nature of receipt viz. royalty or fees for technical services and the date of the agreement i.e. before 1.6.2005 or on or after 1.6.2005, the foreign company has to compute the tax separately under each of the sub-clauses (A), (AA), (B), (BB) and (C) of sections 115A(1)(b). Each of these sub-clauses are mutually exclusive and independent of each other and create or provide for a charge of income tax under section 4 of the Act. A foreign company has to, therefore, compute tax on its income under each of the above sub-clause separately and the tax so computed has to be aggregated as per the mandate of section 115A(1)(b) which provides that' the income tax payable shall be the aggregate of.' 7.4 The above expression which provides for the aggregation of tax computed under each of the sub-clauses (A), (AA), (B), (BB) and (C) indicate that the charge of tax provid....
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....A and 15% rate as per Article 12 of the Treaty, the assessee computed tax @ 15% being the rate beneficial to it. Similarly between 10% tax rate as per section 115A and 15% tax rate as per Article 12 of the Treaty, the assessee has computed tax @ 10% which is beneficial to it. The assessee, in our view, is justified in computing the tax at a rate beneficial to it which is in accordance with the provisions of section 90(2) of the Act wherein the expression 'to the extent' reinforces the principle that the provisions of the Act or Treaty whichever is beneficial is applicable to the assessee. 7.6 The learned CIT(A) and the learned D.R. have both placed reliance on the decisions in the case of Dresdner Bank AG Case (supra) and Patni Computer Systems Ltd (supra) in support of the conclusion that the determination of tax by the assessee is not correct. In the case of Dresdner Bank AG Case (supra), the assessee was a non-resident banking company incorporated in Germany and operating in India through its branch office in Mumbai. The issues before the Tribunal were with regard to (i) computation of income chargeable to tax in India under regular provisions and (ii) the applicabili....
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....The assessee has invoked the benefit of the Treaty only in respect of royalty income arising from the agreements entered into on or before 1.6.2005. In respect of agreements entered into on or after 1.6.2005, the assessee has offered royalty income @ 10% as per the provision of section 115JA. The concerned contracts are different; the source of income is different and the provisions under which royalty income is taxable is different and the assessee was therefore justified in offering the royalty income arising under two different contracts at two rates - one under the IT. Act and one under the Treaty. In the instant case, it is not one of selective Treaty benefit as the case before the Mumbai Tribunal in the above referred case. The above decision is therefore, distinguishable from the instant case of the assessee. 7.7 In the case of Patni Computer Systems Ltd (supra), revenue argued that the losses of a foreign branch cannot be set off in computing the income of the assessee by virtue of Article 7 of the DTAA between India and Japan. The Tribunal held that the provisions of the Treaty cannot be thrust upon the assessee and the assessee be denied the Income Tax Act being applic....
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....s (192 ITR 165) observed that - "Regarding the past years, the assessee's claims for deduction were allowed in respect of the sums advanced during those years; this could be only on the assumption that those advances were not out of borrowed funds of the assessee. This finding during the previous years is the very basis of the deductions permitted during the past years, whether a specific finding was recorded or not. A departure from that finding in respect of the said amounts advanced during the previous year would result in a contradictory finding; it will not be equitable to permit the Revenue to take a different stand now in respect of the amounts which were the subject matter of previous years' assessments; consistency and definiteness of approach by the Revenue is necessary in the matter of recognizing the nature of an account maintained by the assessee so that the basis of a concluded assessment would not be ignored without actually reopening the assessment." 7.10 Even if the issue in the instant case is capable of two interpretations, the Hon'ble Apex Court in the case of CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 has held that where a provisio....
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....s of appeal raised at S.Nos.6 & 7 deal with the charging of interest u/s.234B of the Act. This issue stands covered in favour of the assessee by the decision of this Tribunal in the assessee's own case for the A. Y. 2003-04 to 2006-07 vide orders in ITA Nos.998, 999 & 1000/Bang/2009 and ITA No.39/Bang/dt. 13.10.2011. The assessee has also furnished a copy of the decision in the case of Texas Instruments Incorporated Vs. Dy. Director of Income Tax (International Taxation) (2011) 47 SOT 482 (Bangalore) Tribunal 482 (Bangalore) in support of its proposition that a foreign company is not liable for internet u/s. 234B. The learned CIT(A) has sought to distinguish the above decisions on the ground that the rate of tax for payment of advance tax and TDS being different, their ratio is not applicable. We have held that the computation of tax by the assessee at the rates specified in the Treaty and section 115A is correct. Hence, the reasons given by the CIT(A) in confirming the charging of interest u/s.234B are not correct and would not survive. In any case, we do not find any justifiable reason to deviate from the co-ordinate Bench decisions in the assessee's own case on similar f....