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2012 (5) TMI 58 - AT - Income TaxRoyalty income - assessee-company computed tax on royalty in respect of 'Marketing Royalty Agreement’ and royalty on sale of software to third parties @ 10.455% as per section 115A as against the rate of 15% as per Article 12 of the DTAA between India and USA – royalty towards ESW the tax was computed @ 15% as per Article 12 of the DTAA between India - USA as against the tax rate of 20% as per section 115A - Held that:- It is a settled position that as per section 90(2), the provisions of the Act or the provisions of the Treaty, whichever is beneficial, apply to the assessee - royalty income in respect of the agreement entered into before 1.6.2005 are from one 'source' and royalty income in respect of agreements entered into on or after 1.6.2005 are from a different 'source' , the contracts or agreements being the source of income have been entered into on different dates and the statute recognizes such time differentiation and provides separate tax rates for each such stream - the assessee is justified in comparing the rate of 10% and 20% (as per section 115A) separately and independently with the rate of 15% (as per Article 12 of the India-USA DTAA Treaty - where a provision in the taxing statute is capable of two reasonable interpretations, the view favorable to the assessee is to be preferred – in favour of assessee. Charging of interest u/s.234B – Revenue submitted that since the rate for advance tax at 15% is more than the TDS rate under section 115A @10%, the assessee is liable to be charged interest under section 234B Held that:- Foreign company is not liable for internet u/s. 234B - the computation of tax by the assessee at the rates specified in the Treaty and section 115A is correct - that the rate of tax for payment of advance tax and TDS being different, their ratio is not applicable - assessee is therefore not liable to be charged interest u/s. 234B – in favour of assessee.
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