TaxTMI 
TaxTMI 
2025 (6) TMI 2140
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....(hereinafter referred to as 'the CIT(A)') dated 30/4/2019. 3. The Revenue in its appeal assailed the order of CIT(A) on following grounds:- "1. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) is right in deleting the addition of Rs. 25,35,96,279/- on account of disallowance of interest paid to ABN AMBRO Bank, Stockholm u/s 40(a)(i) of the I.T. Act, 1961. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is right in restricting the disallowance of roaming charges paid u/s 40(a)(ia) of the I.T. Act, 1961 upto the amount payable ignoring the fact that the expenditure is covered under chapter XVIIB of the I.T. Act, Income Tax Act, 1961 (hereinafter referred to as 'the Act')." 4. This is second round of litigation before the Tribunal for AY 2007-08. In the first round, the assessee was in appeal before the Tribunal in ITA No. 5636/Del/2011. The Tribunal vide order dated 11/3/2014 substantially decided appeal of the assessee but restored the issue of disallowance of interest paid to ABN Amro Bank, Stockholm, Sweeden (in short 'ABN Amro') u/s 40(a)(i) of the Income Tax Act, 1961 (here....
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....sessee narrating facts of the case submits, that this is a second round of litigation before the Tribunal. In the first round the Tribunal had restored the issue of disallowance of interest paid to ABN Amro u/s 40(a)(i) of the Act for limited purpose to consider assessee's plea of 'Bonafide' in not deducting TDS on interest payment. The assessee was incorporated on 07.07.1995 and since then is engaged in the business of telecommunication services, providing cellular, landline and broad band services. The assessee purchased telecom equipments from Swedish supplier, Ericsson. To fund purchase of the equipments, the assessee took advance term loan from ABN Amro. The assessee entered into four Facility Agreements with original lender (ABN Amro) for availing foreign currency term loans, which were guaranteed by Swedish Export Credit Guarantee Board (in short 'EKN'). The aforesaid loan facility was utilized by the assessee for the purpose of payment to Ericsson, Sweden, the supplier of telecom equipments. ABN Amro novated a portion of Facility Agreement-I and the entire Facility Agreement nos. II, III & IV. During the period relevant to assessment year under appeal, the assessee paid int....
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.... Residency Certificate. In response to the query raised by the Indian Tax Authorities, it was confirmed by the Swedish Tax Agency that the certificate was authentic and was made by the Swedish Tax Agency. The ld. Counsel vehemently defended findings of the CIT(A), in deleting the disallowance and prayed for dismissing appeal of the Revenue. The ld. Counsel to buttress his argument on the plea of 'bonafide' placed reliance on the decision rendered in the case CIT vs. Kotak Securities Ltd. 340 ITR 333 (Bom.) 6. Per contra, Shri Javed Akhtar representing the department strongly supporting the assessment order prayed for reversing findings of the CIT(A) on the issue. The ld. DR submits that the TRC issued by Swedish Tax Authorities only certify that ABN Amro Bank N.V, Stockholm, Sweden Branch is tax resident of Sweden and not the Bank. The worldwide income of the Bank is taxable in Netherlands, therefore, the assessee was under obligation to deduct tax at source at the time of payment of interest expenditure to ABN Amro Bank, Stockholm Branch. Further, the taxability of interest paid to ABN Amro was to be determined in light of India-Dutch DTAA and not Indo-Sweden DTAA. The CIT(A) h....
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....facts, as culled out from material before us, are as follows. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has paid a sum of Rs 87,83,92,587 as interest on borrowings to ABN Amro Bank, Stockholm branch (ABN-S, in short), but has not deducted any tax at source from the same. When Assessing Officer probed the matter further, he found that the assessee had acquired certain supplies of telecommunication equipment form Ericsson, a Sweden based company. This transaction involved large financing, and, as an export promotion measure by the Government of Sweden, export of equipment was facilitated by Swedish Export Credit Guarantee Board, i.e. Exportkreditnamnden (EKN, in short). ABN Amro Bank, Stockholm branch, was willing to enter into a contract for advancing this term loan, but EKN was to guarantee this loan, and the actual financing of the loan was to be done by certain other lenders. The assessee, for the purpose of arranging the borrowings to finance the purchase of equipment, entered into a multilateral agreements. The parties to these agreements were the assessee (the borrower), ABN Amro Bank Stockholm branch (the arranger) and the fi....
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....the ABN Amro Bank is a tax resident of the Netherlands and ABN Amro Bank's Stockholm branch is an integral part of the AB Amro Bank NV. ABN-S's taxability in Sweden is confined to the taxability of its profits in Sweden, whereas under Article 4(1) of Indo Swedish tax treaty, an enterprise can be treated as resident of Sweden only when, inter alia, such a person "under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature". Clearly, the mere fact that such profits of an enterprise are taxable in Sweden cannot lead to the conclusion that the enterprise is tax resident of Sweden. Elaborating upon the scope of expression 'liable to tax by the reason of domicile, residence, place of management or any other criterion of similar nature', a coordinate bench of this Tribunal, in the case of DCIT Vs General Electric Co plc [71 TTJ 973 (2001)] and speaking through one of us (i.e. the Accountant Member), has observed as follows: 16. Art. 4(1) of the Indo-Dutch DTAA clearly provides that "for the purpose of this Convention, the term 'resident of one of the states' means any person who, under....
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....rticular and specific words, the general words will have restricted meaning which will be confined to the things of the same kind as specified. In other words, the general expression is to be read as 'comprehending only things of the same kind as that designated by preceding particular expressions, unless there is something to show that wider sense was intended. In the case before us, the principle of ejusdem generis have been incorporated in the text of the treaty provision itself, 'any other criterion' referred to in the treaty has to be restricted to the genus of three earlier expressions i.e. domicile, residence and place of effective management. The key question, therefore, is whether 'earning of dividends earned from the Netherlands' can be said to belong to the same genus to which 'domicile, residence and place of effective management' belong ? No. doubt, as observed by Dr. Klaus Vogel in his Commentary to the Double Taxation Conventions, the term 'other criterion of similar nature' makes clear that the enumerated criterion of domestic law which attracts tax liability are no more than examples for the rule, but Dr. Vogel has further stated that, "The term should be understoo....
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....lf, was not entirely in his own right but merely as a conduit for making onwards payments to identified original lenders in a transparent manner. As we take note of these facts, it is also important to bear in mind the fact that the liability under section 201(1) r.w.s. 195, which has been invoked in this case for non deduction of tax at source from payments to ABN-S - which is the bedrock of disallowance impugned in this appeal, is based on taxability of ABN Amro Bank @ 10% (before grossing up) under Article 11(2) of the Indo- Dutch tax treaty and by thus treating ABN Amro Bank as beneficial owner of the interest. It may be noted that under Article 11 of the Indo Dutch tax treaty, interest arising in one of the States and paid to a resident of the other State may be taxed in that other State. Article 11(2), however, provides that such interest may also be taxed in the State in which it arises and according to the laws of that State, but if the recipient is the beneficial owner of the interest, the tax so charged shall not exceed 10 per cent of the gross amount, amongst other, in the cases of the interest on loans made or guaranteed by a bank or other financial institution carrying....
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....dquartered in Netherlands, thus its effective place of management is Netherlands, ABN Amro, Stockholm, Sweden is only a Branch of the Bank. The Branch is a Permanent Establishment of the Bank and an integral part of ABN Amro Netherlands. Therefore, ABN Amro, Stockholm, Sweden fails the test of Resident set out in Article 4(3) of Indo-Sweden DTAA. The Swedish Tax Authorities vide letter dated 17.04.2008 has also clarified that ABN Amro Bank N.V is a Netherlands based bank and loan to the company in Indian is given by its Stockholm Branch. The Stockholm Branch of the bank is a permanent establishment, a Branch is liable to tax of its Branch profits. The Stockholm Branch is liable to Income Tax in Sweden within the meaning of the tax treaty of Article 7. It is not a resident as required by Article 4 of the Treaty. The Swedish Tax Agency fairly admitted that the information provided in certificate is not correct although the certificate was issued by Swedish Tax Agency. 12. The assessee has placed reliance on the decision rendered in the case of Kotak Securities Ltd.(supra) to support its plea of 'bonafide'. We find that the Hon'ble High Court accepted assessee's plea of 'bonafid....
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....or the assessee submits that the short issue in assessee's appeal is against confirming disallowance of roaming charges paid by the assessee to other telecom operators u/s. 40(a)(ia) of the Act. The ld. Counsel for the assessee submits that the issue has now been laid to rest by Hon'ble Jurisdictional High Court in the case of CIT vs. Tata Teleservices Ltd. in ITA No. 1417/2018 decided on 23.05.2022 and by Hon'ble Karnataka High Court in the case of CIT vs. Vodafone South Ltd. 72 taxmann.com 347. The Hon'ble High Courts have held that payment made by mobile service provider company to another mobile service provider company for utilization of roaming, mobile data and connectivity could not be termed as technical services, therefore, no TDS is deductable on such roaming charges. The Hon'ble Delhi Court in assessee's own case CIT vs. Bharti Cellular, 319 ITR 139 has held that payment for use of services of other telecom operators via interconnect/port access would not fall within the preview of payments as provided u/s. 194J of the Act, therefore, not liable for deduction of tax at source. To further buttress his arguments, the ld. Counsel for the assessee placed reliance on the deci....
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.... the payments made by the assessee to the MTN/other companies for the services provided through interconnect/port/access/toll were liable for tax deduction at source in view of the provisions of section 194J of the Act. (b) Whether the Id. ITAT erred in holding that the payment for use of services for MTN/other companies via the interconnect/port/access/toll by the assessee would not fall within the purview of payments as provided for under section 194) of the Act, so as to be eligible for tax deduction at source." The Hon'ble High Court after examining the technicalities and the expression, 'fee for technical services' as appearing in section 194J of the Act concluded that the interconnect charges/port access charges cannot be regarded as fee for technical services, hence, no TDS was required to be deducted under section 194J of the Act. Thus, both the above questions were answered against the Revenue and in favour of the assessee. 21. The Hon'ble Karnataka High Court had occasion to consider similar issue in the case of CIT vs. Vodafone South Ltd. (supra). The substantial question of law for consideration before the Hon'ble High Court were: "1. Whether, on....
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....rmed as technical services and, therefore, no TDS was deductible. We do not find that any error has been committed by the Tribunal in reaching to the aforesaid conclusion. Apart from the above, the questions are already-covered by the above referred decision of the Delhi High Court, which has been considered by the Tribunal in the impugned decision. 14. In view of the above, we do not find that any substantial question of law would arise for consideration." [Emphasized by us] 22. The Hon'ble Delhi High Court in the case of CIT vs. Tata Teleservices Ltd.(supra) again had an occasion to deal with a similar issue. In the said appeal by the Department, the substantial question of law for consideration before the Hon'ble High Court was:- "Whether the ITAT was correct in holding that no TDS under Section 194J of the Income Tax Act was required to be deducted by the assessee on payment of interconnect user charges as it could not be categorized as fee for technical services?" The Hon'ble High Court following the decision rendered in the case of CIT vs. Vodafone South Ltd. (supra) held that once the judgment rendered by Hon'ble Karnataka High Court in the case of....