TaxTMI 
TaxTMI 
2019 (2) TMI 626
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....nst the rate of tax at which the amount received by the assessee as Royalty, should be charged to tax. 3. Succinctly, the facts of the case, are that the assessee is a company located in Italy, having several other group concerns around the globe. During the year under consideration, it received Royalty and Technical Fee for the services rendered for SAP implementation and Fees for TP Consultancy rendered in India to its Associated Enterprise (AE), namely, Piaggio Vehicles Pvt. Ltd., Baramati, India, which was offered for tax. The dispute in the instant appeal is on the rate of tax on the Royalty on three wheelers amounting to Rs. 46,47,20,859/- received by the assessee from is Indian AE. The assessee offered such income to tax at 10.5060%....
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....pany), or a foreign company includes any income by way of royalty or fees for technical service ..... the income-tax payable shall be...." at the rate of 10% under sub-clause (AA), : "if such royalty is received in pursuance of an agreement made on or after 1st day of June, 2005". Sub-clause (A) provides that the income-tax shall be calculated on Royalty income at 20% where Royalty is received in pursuance of an agreement made after 31-05-1997 but before 01-06-2005. Whereas the case of the assessee is that it is covered under sub-clause (AA) of section 115A(1)(b), the Revenue has categorized the assessee as falling in sub-clause (A). 5. If the case really falls under sub-clause (A), then the rate of tax on Royalty income should be 20% plus....
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.... (SC) has held that the provisions of sections 4 and 5 are subject to the contrary provision, if any, in DTAA. Such provisions of a DTAA shall prevail over the Act and work as an exception to or modification of sections 4 and 5. Similar view has been taken by the Hon'ble Bombay High Court in CIT v. Siemens Aktiongesellschaft (2009) 310 ITR 320 (Bom.). In the light of the above discussion, it becomes vivid that if the provisions of the Treaty are more beneficial to the assessee vis-a-vis its counterpart in the Act, then the assessee shall be entitled to be ruled by the provisions of the Treaty. 6. Reverting to the present context, when we read the DTAA with Italy in conjunction with section 115A(1)(b)(A), it emerges that Royalty income in ....
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....) of section 115A(1)(b) of the Act. As such, the Royalty income of Rs. 46.47 crore earned by the assessee from its Indian AE is chargeable to tax at 10.5060%. The impugned order is vacated to this extent. 8. The assessee has raised an additional ground as per which an amount of Rs. 7,40,616/- out of total guarantee fee of Rs. 25,39,810/-, not approved by the Reserve Bank of India (RBI), should not be charged to tax in the hands of the assessee. 9. The factual matrix of this ground is that assessee stood guarantor for PVPL, its Indian entity and the guarantee fee was settled at Rs. 25,39,810/-. The Indian entity filed an application with the RBI seeking permission for the remittance of the aforesaid amount of guarantee fee to the assessee.....
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....pproval by the RBI in respect of this amount only for Rs. 17.99 lakh; and eventual receipt of lower sum of Rs. 17.99 lakh. In case, it is found that the assessee included guarantee fee of Rs. 25.39 lakhs in his total income and further the RBI did not accord approval for a sum of Rs. 7.40 lakh, which was not received also, then the said sum of Rs. 7.40 lakhs should be reduced from the total income of the assessee. Needless to say, the assessee will be accorded an opportunity of hearing in determining such issue. 11. Ground regarding charging of interest u/s 234B of the Act is consequential. A.Y. 2013-14 : 12. The only issue raised in this appeal is against the rate at which the royalty income of at Rs. 45,83,52,382/- earned by the asses....