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2013 (6) TMI 185 - AT - Income TaxIndia-Japan DTAA - taxability of a sum received from onshore activities to tax in India - assessee did not offer to tax income from offshore supply and offshore services by claiming that it did not accrue or arise in India - Held that:- As decided in assessee's own case [2007 (1) TMI 91 - SUPREME COURT] & [2013 (1) TMI 214 - BOMBAY HIGH COURT] that apart from non-applicability of section 9(1) in the present case, Article 7 of the DTAA is also applicable and hence the income arising on account of offshore services would not be taxable. Section 90(2) provides that where the Central Government has entered into an agreement with the Government of any country outside India or specified territory outside India, under sub-section (1) for granting relief of tax avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee. As decided in CIT v. P.V.A.L. Kulandagan Chettiar [2004 (5) TMI 8 - SUPREME Court] the provisions of sections 4 and 5 are subject to the contrary provision, if any, in DTA. The crux of the matter is that the provision of the Act or of the DTA, whichever is more beneficial to the assessee, shall apply. Thus overturning the impugned order on this issue by holding that the income from offshore services, albeit chargeable u/s 9(1)(vii) but exempt under the DTAA, cannot be charged to tax in the light of section 90(2) as discussed above. The impugned order is, therefore, set aside to this extent. Short granting of tax deducted at source - Held that:- AO is directed to examine this aspect of the matter and thereafter, decide it as per law after allowing a reasonable opportunity of being heard to the assessee. Interest u/s 234B and 234C - Held that:- The issue of charging of interest u/s 234B in the present case is no more res integra in view of the judgment of Director of Income-tax (International Taxation) v. NGC Network Asia LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT] wherein held that when the duty is cast on the payer to deduct tax at source, on failure of the payer to do so, no interest can be charged from the payee assessee u/s 234B. Also see DIT (IT) v. Krupp UDHE GmbH [2010 (3) TMI 287 - BOMBAY HIGH COURT]. As the assessee in this case is a non-resident, naturally any amount payable to it which is chargeable to tax under the Act, is otherwise liable for deduction of tax at source, thus no interest can be charged u/s 234B and 234C. In favour of assessee.
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