TaxTMI 
TaxTMI 
2023 (4) TMI 325
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....mount. Since the issues are common, the three appeals are disposed of by passing a consolidated order for which we take facts of assessment year 2012-13 as the lead case. Findings of this shall apply mutatis mutandis to the other two assessment years in appeal before us. 3. Assessee has also raised additional grounds in respect of issue relating to whether payment made by the assessee qualifies as royalty or not and claim of refund of Dividend Distribution Tax (DDT) and Education Cess on income tax and DDT. At the outset, we would like to first deal with the aspect of admission of additional grounds raised by the assessee before adverting on the grounds of appeal set out in the Memorandum of Appeal. 3.1. Additional grounds of appeal taken vide application dated 05.12.2022 are reproduced as under: "Ground 8.1: That, on the facts and in the circumstances of the case and in law, the subject payment being made by the Appellant to KOPT as a percentage of revenue earned by the Appellant does not qualify as 'royalty' as per the definition prescribed under Explanation (2) to clause (vi) of section 9(1) the Act. Ground 8.2: That, on the facts and in the circumstances of the ca....
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.... income and its audited financial statement and up to this stage of coming before the Tribunal, the claim of the assessee has been towards royalty paid/payable to KOPT. Adjudication of these additional grounds require discovery of new facts for which Ld. Counsel attempted to draw the attention of the bench to the license agreement entered between KOPT and the assessee, dated 29.01.2002, filed as additional evidence under Rule 29 of ITAT rules, for its admission also. Since these additional grounds do not pertain to assumption of jurisdiction as pure question of law and are merely peripheral arguments vis-à-vis ground no. 2 as set out in Memorandum of Appeal reproduced supra, we are not inclined to admit these grounds and hence, are not adjudicated upon. Additional ground nos. 8.1 to 8.3 are dismissed as not admitted. Since these additional grounds have been dismissed, we also reject the application for admission of additional evidence made under Rule 29 of ITAT Rules as stated above. However, additional ground nos. 8.4 and 8.5 essentially relate to the ground no. 2 as set out in Memorandum of Appeal, these are admitted for adjudication along with the said ground no. 2. 3.3.....
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.... to resident shareholders ought to be allowed as deduction. Ground 7.3: Without prejudice to Ground No. 6 above, that on the facts and in the circumstances of the case and in law, the Appellant prays that deduction of education cess on the DDT paid in respect of non-resident shareholders ought to be allowed as deduction." 3.4. On the issue relating to claim of refund of DDT in respect of payments made to non-resident shareholders, assessee has raised additional ground reproduced (supra) vide ground no. 6.1 to 6.5. In this respect, the factual position is that assessee had declared final dividend of Rs. 2.52 Cr. and paid corresponding DDT of Rs. 40,88,070/- @ 16.225% including surcharge of 5% and cess of 3% on the base rate of 15% as per section 115O of the Act. Additional grounds claim that while calculating the DDT liability in respect of non-resident shareholders, assessee has inadvertently considered the rate of tax as per section 115-O of the Act as against the rates prescribed in the relevant articles of the corresponding Double Tax Avoidance Agreement (DTAA) entered into between Govt. of India and respective countries of the non-resident shareholders. Assessee thus, claims....
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..... To this effect, we find that the issue relating to claim of refund of DDT in respect of payments made to non-resident shareholders has been dealt by the coordinate bench of ITAT, Kolkata in the case of Reckit Benkiser India Pvt. Ltd. (Supra), wherein it was set aside to the file of Ld. AO for factual verification in the light of an agreement and other relevant documents and the provisions of DTAA. Without any specific details furnished by the Ld. Counsel in respect of his submission relating to constitution of a Special Bench and without his pointing out as to how the present issue is pari materia referred to the Special Bench, we are unable to lay our hands on this submission. Be that as it may, in the light of decision of coordinate Bench of Kolkata in the case of Reckit Benkiser India Pvt. Ltd. (supra), we find it proper to remit the matter back to the file of Ld. AO for verification of the amount of dividend paid relating to DDT deposited by the assessee, relevant agreement and documents in respect of non-resident shareholding and the DTAAs of the respective countries of the non resident shareholders and thereafter consider granting of refund of the DDT so claimed by deciding....
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....e circumstances of the case and in law, the Learned CIT(A) has erred in not considering the curative amendment in section 40(a)(ia) of the Act as retrospective and not restricting the disallowance under section 40(a)(ia) of the Act to 30% of the expense. 3. Addition under section 14A of the Act (a) That, on the facts and circumstances of the case, and in law, the learned CIT(A) erred in directing the learned AO to compute disallowance under section 14A of the Act read with Rule 8D of the Rules, without appreciating the submission made by the Appellant that no expenditure has been incurred in earning the exempt income. 4. That, on the facts and in the circumstances of the case and law, the Learned AO be directed to grant interest under section 244A of the Act on refund determined. 5. The above grounds are independent and without prejudice to each other. The Appellant craves leave to add, amend, modify, after, withdraw or vary any grounds of appeal either before or at the time of hearing of appeal proceedings. " 4.1. From the perusal of above grounds, there are two following issues involved in the appeals before the Tribunal: (i) Disallowance u/s. 40(a)(ia) due to non-dedu....
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....ditor's report the assessee had paid royalty as per its own calculation based on the agreement. However, according to assessee, the computation of royalty by the independent auditor was very high. Therefore, a mutual settlement for this issue was attempted by the assessee with KOPT. But the said exercise failed, so the assessee invoked the arbitration clause and the matter is before the arbitrator. The amount for which the provision was made of Rs. 2,76,60,137/- which is the amount which the assessee needs to pay extra than what the assessee has paid to the KOPT. The Ld. CIT(A) has taken note of the fact that as per the agreement, the final royalty figure has to be computed by the independent auditor and according to the KOPT it is correct and final. So as per the agreement, the amount which the independent auditor has computed as the final royalty figure has crystallized and, therefore, is an allowable business expenditure. In case if the assessee is able to succeed in the arbitration proceedings then the assessee by virtue of the order gets any benefit in any subsequent assessment years by way of cessation or remission which has been allowed as a deduction in the present asse....
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....uly discharged its tax liability on receipt/receivable of royalty from the assessee as provided in the second proviso to section 40(a)(ia) stated above. To buttress its contention, Ld. Counsel placed reliance on the decision of CIT Vs. S.M. Anand [2020] 420 ITR 209 (Kar) which held that insertion of second proviso to section 40(a)(ia) of the Act is declaratory and curative in nature and is retrospective effect from 01.04.2005 being the date from which sub-clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004. Ld. Counsel also placed reliance on the decision of Hon'ble High Court of Punjab & Haryana in the case of PCIT Vs. Shivpal Singh Chaudhury [2018] 409 ITR 87 (P&H) wherein also similar view was taken by the Hon'ble Court. In view of the above submission, ld. Counsel submitted that the matter may please be remitted back to the file of the Ld. AO who would verify the factual position in respect of discharge of tax liability by the KOPT on the amount of royalty paid/payable by the assessee. The contentions made by the Ld. Counsel when confronted to the Ld. Sr. DR, he had no objection on setting it aside to the file of Ld. AO for the limited purpose of ....