2019 (9) TMI 1683

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....lant to Vishay Intertechnology Asia Pte Ltd., Singapore as "Royalty‟ in view of Explanation 2 and Explanation 6 to section 9(1)(vi) of the Act by disregarding the actual nature of payment i.e. reimbursement of expenses which was also accepted by the learned TPO; Disallowance of unabsorbed depreciation of Rs.53,07,389 3. erred in not granting the set-off of brought forward depreciation of Rs.53,07,389 against the taxable business income of the Appellant; Non-grant of valid brought forward credit of Minimum Alternate Tax ('MAT') paid in earlier years 4. erred in not granting the adjustment of valid brought forward MAT credit of Rs.1,27,15,701 against the tax demand of the current year; Erroneous levy of interest under section 234B and 234C of the Act 5. erred in levying interest under section 234B and 234C of the Act; Initiation of penalty proceedings under section 271(1)(c) of the Act 6. erred in initiating penalty proceedings under section 271(1)(c) of the Act. Any consequential relief, to which the Appellant may be entitled under the law in pursuance of the aforesaid grounds of appeal, or otherwise, may thus be granted. 3. The ground of appeal No.1 rai....

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....fficer held the payment made by assessee was towards royalty, which was defined in section 9 of the Income Tax Act as well as Article 12 of DTAA between India and Singapore. The Assessing Officer thus, held the assessee to be in default for non deduction of tax at source and applying the provisions of section 40(a)(i) of the Act, expenditure of Rs. 4.35 crores was disallowed. Further, disallowance was also made on account of set off of brought forward unabsorbed depreciation on the ground that from the assessment records it was clear that unabsorbed depreciation relating to earlier years has been wiped out. The assessee filed objections before the Dispute Resolution Panel (DRP). After the directions of DRP, the TP adjustment was reduced to Nil by Assessing Officer / TPO. As far as the disallowance made under section 40(a)(i) of the Act is concerned, the same was upheld at Rs. 4.35 crores. As far as last disallowance of unabsorbed depreciation is concerned, the DRP directed the Assessing Officer to verify, who in turn, disallowed sum of Rs. 53,07,389/-. 6. The assessee is in appeal vide ground of appeal No.2 against disallowance made under section 40(a)(i) of the Act. 7. The learn....

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....d Authorized Representative for the assessee pointed out that before applying the said provisions, first step was to state whether it was income in nature. Referring to order of DRP at pages 62 and 65, the learned Authorized Representative for the assessee pointed out that relying on various decisions, it held that the payment to be in the nature of equipment royalty. The learned Authorized Representative for the assessee pointed out that once it is case of reimbursement of expenses, then there is no merit in holding the assessee liable for non deduction of tax at source. In this regard, he placed reliance on the ratio laid down by the Hon'ble Supreme Court in DIT (IT) Vs. A.P. Moller Maersk A S (2017) 78 taxmann.com 287 (SC) and the Hon'ble Bombay High Court in CIT Vs. BNP Paribas SA in Income Tax Appeal No.1193 of 2015, judgment dated 22.03.2018. He further pointed out that Pune Bench of Tribunal in M/s. T-3 Energy Services India Pvt. Ltd. Vs. JCIT in ITA No.826/PUN/2015, relating to assessment year 2010-11, order dated 02.02.2018 had decided the said issue. He further relied on the decision of Pune Bench of Tribunal in the case of John Deere India Pvt. Ltd. (2019) 70 ITR (Tr....

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....ice. The authorities below had relied on the decision of the Hon‟ble High Court of Madras in the case of Verizone Communications Singapore Pte Ltd. Vs. DDIT (supra). However, we find that the issue raised in the present appeal is squarely covered by the order of Pune Bench of Tribunal in M/s. T-3 Energy Services India Pvt. Ltd. Vs. JCIT (supra), wherein it has been held that payment made for such lease line charges was not royalty under DTAA and hence, there was no obligation to deduct tax at source. The Tribunal in turn, had relied on the decision of the Hon‟ble High Court of Delhi in DIT Vs. (1) New Skies Satellite BV (2) Shin Satellite Public Co. Ltd. (supra). The Hon‟ble High Court of Delhi had decided the issue on the general principles relating to international transactions of DTAA vis-à-vis royalty and also the amendment in the Income Tax Act widening the scope of royalty." 11. Further, vide para 100 it was held that payment of leaseline charges is not equipment royalty. Vide para 101, it was further held that where it is case of reimbursement of expenses, there is no requirement to deduct tax at source. 12. Further, the Hon'ble Supreme Court ....