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2021 (11) TMI 996 - AT - Income TaxIncome tax liability of employees - Remission of income tax liability borne on behalf of the employees is to be added to the income under the head "Income from business or profession" u/s 41(1)(a) - assessee had computed its income in terms of Section 44BB - HELD THAT:-As established by the assessee that this liability of income tax born by the assessee on behalf of its employees was pertaining to which year and Whether the assessee has offered its income for that year applying the provisions of Section 44 BB of the act or not. If the liability pertains to the year for which the assessee has offered its income by applying the provisions of Section 44 BB of the act than once again this remission of liability cannot be taxed u/s 41 (1) of the act for the impugned assessment year i.e. assessment year 2011 – 12. It is also to be seen that assessee is setting of losses for previous year as evident from the assessment orders. Therefore, it is also possible that earlier years the assessee has not opted for presumptive income scheme u/s 44 BB of the act but has offered income based on its accounts. In such circumstances, remission of income tax liability if it pertains to those year for which the assessee is claiming set-off of losses by offering its income based on its regular income and expenditure accounts, would definitely be chargeable to tax in this year u/s 41 (1) of the act. These facts are not available on record; it is also not available with the assessee readily at the time of hearing. As it is not available before hand that for which assessment year, this remission of income tax liability pertains to and whether in that year how the income of the assessee has been offered i.e. whether u/s 44 BB of the act or at the actual income - we set aside this ground of appeal back to the file of the learned assessing officer with a direction to the assessee to show with evidence for which assessment year the income tax liability of employees was considered as an expenditure and how the income of the assessee was offered for that year. Chargeability of interest on income tax refund as business income and taxable at maximum marginal rate of tax by the AO and upheld by the learned CIT – A - HELD THAT:- No reason to deviate from the orders of the lower authorities wherein the decision of BJ Services Company Middle East limited [2007 (3) TMI 311 - ITAT DELHI-H] is followed and the assessee has a permanent establishment in India is not denied. In the result ground number 2 of the appeal of the assessee is dismissed. Income accrued in India - interest u/s 244A received and computed the tax thereon at the rate of 40% as applicable to foreign companies as business income - whether assessee has a permanent establishment in India or not? - HELD THAT:- Merely having a project office in India cannot result into a permanent establishment of the assessee in India. Therefore, it is now apparent that assessee does not have a permanent establishment in India. The honourable High Court in Director Of Income Tax versus Pride Foramer [2013 (12) TMI 606 - UTTARAKHAND HIGH COURT] after reading article 12 in case of India France Double Taxation Avoidance Agreement held that plain reading of the provisions of the Double Taxation Avoidance Agreement makes it absolutely clear that some articles (1) and (2) will apply interalia when the recipient of interest does not have a permanent establishment in the country where he has received the interest. Therefore, in the present case the assessee is entitled to take the benefit of article 12 of the Double Taxation Avoidance Agreement, as there is no permanent establishment in India. Therefore the interest received on income tax refund of the assessee is subject to taxation as per article 12 (2) of the Double Taxation Avoidance Agreement at the rate of 15% of the gross amount of interest as income. Accordingly reversing the orders of the lower authorities, we allow ground number 1 and 2 of the appeal of the assessee.
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