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2014 (12) TMI 128 - AT - Income TaxRate of tax on Royalty / License fee - 10% u/s 115A or higher rate @ 15% as per DTAA with United Kingdom - Whether New licence fee agreements is to be treated as extension of old licence fee agreements – Held that:- The assessee has received ₹ 6,20,94,207/- from M/s. GKN Driveline (India) Ltd and ₹ 87,97,966/- from M/s. GKN Sinter Metals Ltd. offered this income as royalty @ 10.56% as per section 115A of the Act - the rate of tax on licence fee income to be taxed @ 10% at the strength of the agreement - the assessee was having earlier agreement dated 12.07.2004 with M/s. GKN Sinter Metals Ltd. and it was renewed from 01.01.2007. The provisions of section 115A(1)(b)(AA) does not debar the assessee to enter into new agreements after change of situation in the provisions of section 115A(1)(b)(AA) as far as the reduced rate of royalty is concerned – the new agreements entered into on 29.05.2007 between the assessee and GKN Sinter Metals Ltd. and in the same year with GKN Driveline (India) Ltd. are independent agreements - The assessee can manage its affairs within the framework of statute - The Revenue authorities cannot sit into the business decisions of the assessee - By no stretch of imagination, the new agreement entered into in 2007 can be said to be the extension of old agreements entered into between the parties - Even if the assessee has managed its affairs as far as renewal of agreement is concerned, the Revenue authorities should not interfere with the same, unless it is proved beyond doubt that it is nothing but colourable devise. Even if the assessee had entered into new licence agreement with GKN Sinter Metals Ltd. and in the same year with GKN Driveline (India) Ltd. to take advantage of lower rate of tax of 10%, it cannot be denied to the assessee on the ground that it is nothing but extension of old agreement which is not correct otherwise - the new licence fee agreement entered into by the assessee with GKN Sinter Metals Ltd. and in the same year with GKN Driveline (India) Ltd. is nothing but a new and separate agreement - licence fee income should be taxed at 10% - Decided in favour of assessee.
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