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2014 (2) TMI 674 - ITAT MUMBAITaxability of offshore design revenues – Fees for Technical Services - Revenue earned by the head office – Held that:- 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 provisions of Article 12 relating to Fees for Technical Services will be applicable - The authorities have not considered the relevant provisions of DTAA and particularly Article 12 of Indo-Japan treaty in the light of the terms and conditions of the contract in question to arrive at the finding that the income in question is taxable in India even under Indo-Japan DTAA – thus, the matter is remitted back to the AO for examining the provisions of Article 12 of Indo-Japan DTAA. Rate of Tax – Held that:- The decision in 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. [2012 (9) TMI 517 - BOMBAY HIGH COURT] followed - As there was no provision of interest on the grant of refund under Section 143(1) it became necessary to provide for the same by having a charging provision - This was done by section 234D in respect of all pending assessments in which refund was given - even if, a refund has already been granted the same would be subject to the provisions of section 234D - The refund which has been granted under section 143(1) of the Act is provisional, to be finally determined when final assessment order is passed under section 143(3) of the Act - Explanation-2 to section 234D of the Act makes it clear that it would be applicable to pending proceedings - Decided in favour of Assessee .
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