TMI Blog2014 (2) TMI 674X X X X Extracts X X X X X X X X Extracts X X X X ..... Dy. Commissioner of Income Tax Versus M/s Toyo Engineering Corporation [2009 (12) TMI 852 - ITAT MUMBAI] Followed - the AO was right in applying tax rate of 48% as per the Act instead of 35% as claimed by the assessee invoking provisions of Article 24 of Indian Japan treaty – Decided against Assessee. Denial of exemption u/s 10(6A) of the Act – Held that:- The decision in Dy. Commissioner of Income Tax Versus M/s Toyo Engineering Corporation[2009 (12) TMI 852 - ITAT MUMBAI] Followed - The tax on income derived by the foreign company, if it is payable under the terms of the agreement by the Government or the Indian concern, the tax so paid cannot form part of total income - Section 10(6A) clearly lays down the tax paid or payable, under such circumstances is exempt u/s 10(6A) - Once an amount has been paid as tax to the Central Government on behalf of a foreign company, by the Indian concern in terms of an agreement covered in clause (a) and clause (b) of section 10(6A), such payment cannot be treated as income – Decided in favour of Assessee. Levy of Interest u/s 234D of the Act – Held that:- The decision in Commissioner of Income Tax Versus M/s. Indian Oil Corporation Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead office. The assessee is a non-resident company incorporated in Japan. The assessee specialises in various activities including undertaking work related to design, engineering, erection, equipment procurement, supervision and construction of chemical, fertilizer, petroleum, petrochemical and other plants. The assessee operates in India through project offices established in India after obtaining relevant approvals from RBI. During the financial year relevant to the assessment under consideration the assessee executed the project management contracts awarded by Mangalore Refinery and Petrochemicals Limited (MRPL). The assessee also executed the CCR-2 project management contract with MRPL and the offshore supply contract awarded by HPL and CFCL. Apart from the above the assessee has also executed offshore design contracts and with MRPL and CFCL. The assessee has not offered to tax the income earned under the offshore design contract and claimed that the said income is not chargeable to tax in India. Alternatively the assessee argued before the AO that the income earned under offshore design contracts was not attributable to the assessee's PE in India and hence, the same was not ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be carried out outside India would not make the entire income derived by the contractor to be taxable in India. He has further submitted that the Hon'ble Supreme Court has observed that the contract may be turnkey contract but the same by itself does not mean even for the purpose of taxability that the entire contract must be considered to be an integrated one so as to make the assessee to pay tax in India. The Ld. AR as further submitted that subsequent to the decision of Hon'ble Supreme Court in case of Ishikawajima-harima Heavy Industries Ltd. (supra) this Tribunal for the assessment year 2009-10 has considered an identical issue and decided the same in favour of the assessee in case of IHI Corporation v. ADIT reported 58 SOT 225.Therefore, this issue is covered in favour of the assessee by the above decision of this Tribunal. 7. On the other hand the Ld. DR has submitted that the revenue earned by the assessee under offshore design contract is nothing but Fees for Technical Services. He has further contended that this issue is factual and depend on the facts recorded in the contract itself. When the contract is for designing then the income constitute Fees for Technical Servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees are payable in respect of services utilised in a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India: Provided that nothing contained in this clause shall apply in relation to any income by way of fees for technical services payable in pursuance of an agreement made before the 1st day of April, 1976, and approved by the Central Government. Explanation 1. For the purposes of the foregoing proviso, an agreement made on or after the 1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date. Explanation 2.- For the purposes of this clause, "fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at other Contracting State independent personal services from a fixed base situated therein, and the right, property or contract in respect of which the royalties or fees for technical services are 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." 12. There is no dispute that if a non-resident has a Permanent Establishment and Fees for Technical Services arise through a Permanent Establishment situated in the other contracting State then the provisions of para 1 2 of Article 12 shall not apply and such income for Fees for Technical Services/royalty will fall under the provisions of Article 7 or Article 14 as case may be. In the case in hand the assessee has categorically stated that the Permanent Establishment has no role in earning the Fees for Technical Services/royalty in question. Having said so that the Permanent Establishment of the assessee has no role in earning of the income from Fees for Technical Services under offshore design contract then the exclusion clause under Article 12(5) of Indo-Japan treaty shall not be attracted and consequently the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Government or an Indian concern in pursuance of an agreement made by the foreign company with Government or the Indian concern after the 3l day of March, 1976 but before the 1st day of June, 2002 and (a) where the agreement relates to a matter included in the industrial policy, for the time being in force, of the Government of India such agreement is in accordance with that policy; and (b) in any other case, the agreement is approved by the Central Government, The tax on such income is payable, under the terms of the agreement, by Government or the Indian concern to the Central Government, the tax so paid. Explanation For the purposes of this clause (a) "fees for technical services" shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; (b) "foreign company" shall have the same meaning as in section 80B. (c) "royalty" shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;. 18.2 The undisputed fact is that the agreement in this case relates to a matter included in the Industrial Policy for the time being enforced by Government of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out finding for the assessment year 1999-2000, this issue is decided in favour of the assessee. ITA No. 3312/M/2005, A. Y.- 2001-02 21. The assessee has raised the following grounds: "Ground 1: The learned Commissioner of Income Tax (Appeals)-XXXI has erred in concluding that that the offshore design revenues earned by the Appellant are taxable in India. Ground 2: The learned Commissioner of Income Tax (Appeals)-XXXI has erred in concluding that assessees income from offshore and onshore supply contract are taxable at 48 percent Ground 3: The learned Commissioner of Income Tax (Appeals)-XXXI has erred in concluding that relief under section 10(6A) is not available to the assessee. Ground 4: The learned Commissioner of Income Tax (Appeals)-XXXI has erred in concluding that the interest under Section 234D are leviable on the assessee for matters relating to A.Y.2001-02." 22. Ground No. 1 to 3 are common to the Ground No. 1 to 3 for the assessment year 1999-2000. In view of our finding for the A.Y. 1999-2000 Ground No. 1 is set aside for limited purpose to the record of the AO, Ground No. 2 is decided against the assessee and Ground No. 3 is decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the previous year. In support the Counsel for the respondent relied upon the decision of the Supreme Court in Karimthuravi Tea Estate ltd.v. State of Kerala 60 ITF? 262, Maharajah of Pithapurm v. CIT 13 ITR 221 (PC) and CIT v. Scindia Steam Navigation Co. Ltd. 42 ITR 539. The aforesaid decisions are not relevant for our purpose particularly, in view of the fact that Explanation 2 to section 234D of the Act as introduced by the Finance Act,2012 being declaratory in nature would be retrospective. This amendment make it cleat that it shall apply assessment years even prior to 1/06/2003. (27) In view of the above, we hold that the decision of the Tribunal in ITO v. Ekta Promoters Pvt. Ltd. reported in 113 lTD 719 which has been followed in the impugned order by the Tribunal is not correct. One more aspect of the matter which must be borne in mind is that till such time as the assessment proceedings are completed in respect of any assessment year, the amendment made to the Act would be applicable even in case of pending proceedings. It is not the case of the respondent that the proceeding in regard to refund which has been granted under section-143(1) of the Act are concluded and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year 1999-2000 vide order dated 3.4.2012 and the summary of the finding is given in para 13 as under: "13. The summary of our conclusion on this ground is as under: A. Under the Act: (i) The receipts from project management contracts are in the nature of fees for technical services covered u/s 9(l)(vii). (ii) Income from such fees for technical services is required to be computed u/s 44D. B. As per section 90(2), the assessee is entitled to be governed by the provisions of the Act or DTAA whichever is more beneficial to him. in the present case the provisions of the DTAA are more beneficial and hence the assessee shall be entitled to the computation of its income from PMCs as per the DTAA. C. Under DTAA (i) The amount received by the assessee on account of PMC is chargeable as business profits under Article 7. (ii) Business profits are to be computed in terms of para 3 of Article 7 read with paras 7 and 8 of the Protocol." 28. In view of the order of this Tribunal in assessee's own case for the assessment year 1999-2000 this issue is remanded to the record of the Assessing Officer as per the terms of the said order. 29. Ground No. 2 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arding validity of reopening. At the time of hearing the Ld. AR of the assessee has stated that the assessee does not press Ground No. 1 in all three appeals for the assessment years 1996-97 to 1998-99 and the same may be dismissed as not pressed. The Ld. DR has not raised any objection if the Ground No. 1 of assessee's appeals is dismissed as not pressed. Accordingly the Ground No. 1 in the assessee's appeals for the assessment years 1996-97 to 1998-99 is dismissed being not pressed. 33. Ground No. 2 is regarding offshore design Revenue. This ground is common in all the three appeal of the assessee for the assessment year 1996-97 to 1998-99. In view of our finding on this issue for assessment year 1999-2000 this issue is remitted for limited purpose to the record of the AO. 34. Ground No. 3 is regarding levy of interest u/s 234D. We have heard the Ld. AR as well as the Ld. DR and considered the relevant material on record. This ground is common to the Ground No. 4 of assessee's appeal for the assessment year 2001-02. Accordingly, in view of our finding as well as decision of Hon'ble Jurisdiction High Court in case of Indian Oil Corpn. Ltd. (supra) this issue is decided against ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
