TaxTMI 
TaxTMI 
2018 (9) TMI 2048
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.... ld.CIT(A) has decided the issues in favour of the assessee. He submitted that the first issue regarding chargeability of tax rate on royalty income was decided by following earlier Tribunal order in assessee's own case for AY 2007-08, 2008-09 and 2009-10. and for second issue, the ld.CIT(A) has followed the tribunal order for AYs 2003-04 and this issue is in respect of chargeability of interest u/ss. 234A, 234B and 234C of the IT Act. He submitted that the relevant tribunal orders are available in the paper book filed by the assessee at pages 210 to 223 for AYs. 2008-09, 224 to 227 for AY 2010-11. As against this, the ld. DR of the revenue supported the assessment order and he filed written submissions which are reproduced herein below: During the hearing Of the above appeals of the Department on 27.06.2018, when the undersigned made certain arguments, the Hon'ble Bench observed that the issue was covered by the earlier decisions of this Tribunal in the assessee's own case and directed the undersigned to make written submissions covering the arguments, if any, opposing the above decisions. Accordingly, the following submissions are made tor Kind consideration....
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....isions of the Act or Treaty whichever is beneficial in respect of each of these categories. 4. The Hon'ble I TAT in the Appellate order for A.Y. 2007-08, ruled against the Department and upheld the assessee's method of calculating tax liability on Royalty income. The crux of the arguments of the Revenue and the assessee has been summarised in para 7.1 of this order. In that order, the Hon'ble Bench agreed with the AR's submission that the application of provisions of the Act or Treaty may be chosen by the assessee separately in respect of each of the streams of Royalty income. At the opening of para 7.4, while referring to the words " aggregate of " , the Hon'ble Bench held that this 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 provided under the above sub-clauses are separate and independent, This conclusion is the one which the Department disputes with and the same was raised in the first two grounds in the appeals on hand and the present submissions are specifically in this regard 5. There is no ambiguity in so far as the legal provisi....
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....ent brought in section 209 by way of inserting proviso u/s.209(1 the reliance placed by the CIT(A) on the ITAT order in the assessee's own case for A.Y. 2003-04 is incorrect in so far as the decision of CIT(A) for A.Y. 2012-13 & 2013-14 is concerned. 4. We have considered rival submission and we find force in the submissions of the ld.AR of the assessee regarding first issue in respect of tax rate on royalty income. The ld. DR could not point out any difference in facts in the present years and earlier years. This issue was decided by the ld.CIT(A) as per relevant paragraph available at pages 6 to 12 of order for AY 2013-14. For ready reference, these paras. are reproduced herein below because the ld.CIT(A) has reproduced relevant paragraphs of the Tribunal order in assessee's own case for AY 2007-08, 2008-09 and 2009-10. These are as under: 5. From above paras reproduced from the order of the ld.CIT(A), it is seen that while deciding the first issue, being tax rate for royalty income, the ld.CIT(A) has followed the Tribunal order in assessee's own case for earlier years 2007-08, 2008-09 and 2009- 10. In para.7.8 of the Tribunal order reproduced by him, it is noted by the....
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....erence, the contents of this proviso to sub-section (1) to section 209 are reproduced herein below: "Provided that for computing liability for advance tax, income-tax calculated under clause (a) or clause (b) or clause (c) shall not, in each case, be reduced by the aforesaid amount of income-tax which would be deductible or collectible at source during the said financial year under any provision of this Act from any income, if the person responsible for deducting tax has paid or credited such income without deduction of tax or it has been received or debited by the person responsible for collecting tax without collection of such tax." 8. Before us, three years are involved i.e. AY 2011-12, 2012-13 and 2013-14. In AY 2011-12, this proviso is not applicable because the same is applicable from 1/4/2012 i.e. AY 2012-13. Therefore, insofar as AY 2011-12 is concerned, we find no reason to interfere with the order of the ld.CIT(A), but for AY 2012-13 and 2013-14, this proviso is applicable and since the ld.CIT(A) has not considered the amendment to section 209, we feel it proper to send the matter back to the file of the ld.CIT(A) for fresh decision in the light of this provis....
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....sment year 2007-08, 2008-09 & 2010-wherein the Hon'ble Tribunal has allowed the claim of the assessee.". Identical issue of application of tax rate was decided by the Hon'ble ITAT in appellant's own case accepting the computation of tax on royalty as submitted by the appellant. The relevant part of the order is reproduced below: "7.1 We have carefully perused and given due consideration to the detailed arguments made and written submissions filed by both the leamed Authorised Representative and the learned Departmental Representative. It is a settled position that as per section 90(2), the provisions of the Act or the provisions of the Treaty, whichever is beneficial, apply to the assessee. Even the learned Departmental Representative has agreed that in view of section 90(2), the provision of the tax Treaty override the provisions of the Act except Document 3 to the extent the latter are more beneficial to the assessee. The question for consideration is at what stage the provisions of the Act and the Treaty should be examined to ascertain the beneficial nature of the provisions. In the instant case, the assessee has compared the provision....
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....d (C) indicate that the charge of tax provided under the above sub-clauses are separate and independent. The arguments of the learned Authorised Representative support a proposition that the computation of tax under section 115A in Document 4 respect of royalty income based on the date of agreements is separate and independent. We are inclined to accept the argument of the learned Authorised Representative that royalty income in respect of the agreement entered into before 1.6.2005 are from one 'source' and royalty income in. respect of agreements entered into on or after 1.6.2005 are from a different 'source'. The contracts or agreements being the source of income have been entered into on different dates and the statute recognizes such time differentiation and provides separate tax rates for each such stream. The learned CIT(A) was, therefore, not correct in comparing the tax on royalty income as per the Act and as per the Treaty on an aggregate basis. In view of the above, we are of the considered opinion that the taxability of royalty under sub-clauses (A), (A), (B), (BB) and (C) of section 115A(1)(b) are separate and independent. ....
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....dia 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 applicability of section 115A to a foreign company. In respect of the first issue, it was submitted that the assessee does not want to invoke the Treaty provisions and the matter is to be adjudicated based on the provisions of the Act. The Tribunal accordingly decided the issue of taxability of income under the provisions of the Act. In respect of the second issue, the assessee submitted that the provisions of section 115JA do not apply to a foreign company. The Tribunal did not accept this contention. The assessee then submitted that assuming the provisions of section 115JA were applicable, it is not liable for MAT under the Treaty. The Tribunal found that the assessee sought to avail the benefit of the Treaty selectively in respect of taxability of book profit u/s. 115JA and held that once the assessee exercises an option to be taxed under the provisions of the Act, Treaty provisions cannot be invoked. The relevant observations of the Tribunal were as f....
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....ued 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 applicable in its case. The facts of the case and the ratio of the decision, in our considered opinion, has no similarity to the instant case of the assessee. In the referred Document 7 case, the issue pertained to set off of losses of foreign branch. In the year of loss, the assessee submitted that the provisions of the Act would prevail and as a result the loss of the foreign branch has to be set off in computing the taxable income in India. In the year of profit, relying on Article 7 of the India - Japan DTAA Treaty, the assessee submitted that the profits of the foreign branch would suffer tax only in that country and not in India. The Department objected to this selective Treaty application for different years. The Tribunal held that each year is different and hence the assessee is entitled to such applicability of the Act for one year and Tr....
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....d 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 provision in the taxing statute is capable of two reasonable interpretations, the view favourable to the assessee is to be preferred. In view of the facts and circumstances of the case, as discussed above, we are of the considered opinion that the computation of tax by the assessee in respect of royalty income is to be accepted. In this view of the matter, the grounds of appeal raised at S.Nos.2,3,4 and 5 are accordingly allowed. Following the decision of the Hon'ble Tribunal in appellant's own case on identical facts, the computation done by the appellant for the Royalty is accepted and these grounds are allowed. Document 9 60 FINDINGS: I have carefully considered the facts of the case, the Assessment ord....