TaxTMI 
TaxTMI 
TaxTMI 
2022 (2) TMI 1518
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....eals are identical, they were heard together and being adjudicated by a common order. 3. In ITA 4080/Del/2017, following grounds have been raised by the Revenue: "(i) Whether on the facts and in the circumstances of the case and in law, the CIT (A) has erred in holding that receipts on account of VAT & Service tax are not includible in gross revenue of the assessee for the purpose of computation of profits under the presumptive provisions of section 44BB of the I.T. Act, 1961. (ii) Whether the CIT (A) has erred in not appreciating the fact that section 44BB of the Act is a self-contained code providing for computation of profit at a fixed percentage of gross receipts of the assessee and all the deductions and exclusions....
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....count of service tax and VAT and treated them as part of the gross receipts. 5. The AO held that the receipts on account of service tax and VAT are in the nature of royalty/FTS u/s 9(1)(vi)/9(1)(vii). We have examined the issue of inclusion of service tax and VAT with reference to the provisions of Section 44BB in the light of the judgment of Hon'ble Delhi High Court in the case of Pr. CIT Vs. Mitchell Drilling International Pvt. Ltd. 380 ITR 130 which held as under: "that for the purposes of computing the presumptive income of the assessee for the purposes of Section 44BB the service tax collected by the assessee on the amount paid to it for rendering services was not to be included in the gross receipts in terms of Section 44B....
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....ly connected with the business carried on by the PE. Since the domestic law was equally applicable to the assessee, therefore, it cannot be said, that the indebtedness was connected with the PE of the assessee. It was argued that the assessee was entitled to the beneficial provision of or interpretation under the domestic law in view of the provision contained in section 90(2) of the Act. Therefore, the PE was not the creditor of the income-tax department. Accordingly, the indebtedness was not effectively connected with the PE. It was further mentioned that a debt claim in respect of which interest was paid will be effectively connected with the PE and will form part of its business assets, if the economic ownership of the debt-claim, was a....
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....on by any of the contending parties, it is clear that application of the provision can be made after ascertaining- (i) tax payable by the assessee under the DTAA, and (ii) tax payable by the assessee under the Act. If tax payable under the Act is lesser than the tax payable under the treaty, it can be concluded that the provisions of the Act are more beneficial to the assessee. However, if the tax payable by the assessee under the treaty is lesser than the tax payable under the Act, the assessee shall have the benefit of the DTAA. If we compute the income of the assessee under the head "other sources", the net income by way of interest received from the income-tax department shall amount to Rs. 30,00,862/-. This amount will be taxed at....
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....pretation. Therefore, some meaning has to be placed on the contents of this paragraph. 14. Interest income need not be necessarily business income in nature for establishing the effective connection with the PE because that would render provision contained in paragraph 4 of Article XI redundant. Thus, there may be cases where interest may be taxable under the Act under the residuary head and yet be effectively connected with the PE. The bank interest in this case is an example of effective connection between the PE and the income as the indebtedness is closely connected with the funds of the PE. 15. The relevant Article of Indo-Cyprus DTAA with regard to interest are as under: "1. Interest arising in a Contracting State and p....
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....ons of paragraphs 1 and 2 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply. 6. Interest shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the interest, whether he ....