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2015 (1) TMI 1018 - AT - Income TaxNon deduction of tax at source on IUC payments made to non resident telecom operators and capacity transfer payments made to Belgacom - according to the assessee the order is barred by limitation, because the proceedings u/s 201 of the Act for assessment year 2007-08 were initiated and completed beyond a reasonable period of time - Held that:- When we examine the facts, then it would reveal that the Assessing Officer had issued first notice on 6th of June, 2011. The financial year 2007-08 would end on 31.03.2008. Even if we take the limitation of 4 years then this would go up to 31.03.2012. Assessing Officer had called for details of payments with regard to IUC payments on 15.05.2012 and thereafter issued notices on 10.12.2012. Thus, it cannot be said that notice was not issued within a reasonable period. The learned CIT (A) has observed that for scrutinizing the return, notice u/s 143(2) was to be issued within six months from the end of financial year in which the return is furnished and for re-opening of an assessment u/s 147; time limit has been provided from 4 to 6 years from the end of the relevant assessment year as provided u/s 149. Thus the action of the Assessing Officer is within a reasonable time. Therefore, we do not see any reason to interfere in the findings of the CIT (A) on this issue. - Decided against assessee. Order of the Assessing Officer not held to be bad in law and void ab initio by CIT(A) - Held that:- Payments made (IUC and CTA) by the assessee to NTOs and Belgacom falls within the ambit of section 5 (2) of the Income Tax Act. Alternatively, he held that these are in the shape of royalties and it can also be construed as payment of fee for technical services. The learned CIT (A) has not decided the issue with regard to the nature of the payment being FTS because in the opinion of the CIT (A) once the payment contained the nature of the royalty payment, then there is no need to look into; whether the payments in the shape of FTS is involved in these payments or not. To our mind basically no specific finding is required on this issue at our end because, this is an argument, which indicates the alternative position of the law on a particular payment made by the assessee to the non resident. We will deal with the arguments of the learned representative while taking the issue; whether these payments can be termed as royalty payments or FTS. At this stage, no specific finding is required on this ground of appeal. - Decided against assessee. Payments “accrued or arise” in India - taxability need to be determined u/s 5(2)(b) OR u/s 9(1) - Held that:- The inference drawn by the learned Revenue authorities that income is deemed to be accrued or arisen in India or accrued or arisen or received in India merely on the basis that such payments was made from India is incorrect. However, to the extent that if income is deemed to accrue, arisen or receive in India u/s 9 is concerned, if (subject to our finding on these aspects), then it will become part of total income u/s 5(2). Thus, there is no inherent contradiction between both the sections, the only thing is that Revenue authorities in the present case have erred in drawing an inference that when payment is made from India, it would be construed that income has been received, accrued or arisen in India. To this extent, we differ with the conclusions drawn by the learned Revenue authorities below, but it is an academic issue in the present case, because ultimately, taxability would be dependent upon our finding given u/s 9(1)(vi) and 9(1)(vii) i.e. whether the payments involve royalty or FTS. Decided partly for statistical purposes. Characterization of IUC payment - whether the IUC payments made by the appellant to the NTOs qualify as royalty as defined in Explanation 2 to section 9(1)(vi) and whether the appellant was under an obligation to deduct tax at source thereon u/s 185 - India-UK DTAA - Held that:- Consideration paid by the assessee as IUC charges for alleged inter connect service falls within the ambit of process royalty and element of income was involved. Therefore, the assessee was bound to deduct the TDS on such payment. [see case of Verizone Singapore Pte Ltd - 2013 (11) TMI 1058 - MADRAS HIGH COURT] - Decided against assessee. Liability to deduct tds - Held that:- Once it is found that the amount is not exempt under Art. III of the DTAA and there is no specific provision for assessment of such a receipt in DTAA, the applications of treaty comes to an end. Thereafter, one has to refer to the provisions of the Income-tax Act to assess the receipt.We are of the view that enquiry contemplated u/s.195(1) does not contemplate a wider scope equivalent to the one available in the regular assessment proceedings. In the present case, payee has no concern about the withholding of taxes that is the reason they have not opted for applying the DTAA to these payments at the time when payments were made by the assessee. Thus the assessee failed to demonstrate with sufficient material as to how it harboured a belief that taxes are not to be deducted at source while making the payments. In the enquiry thereafter the Assessing Officer has demonstrated with a reasonable degree that payments involved an element of income u/s.9(1)(vi) Explanations (2), (5) and (6). - Decided against assessee. The next contention raised by the assessee is that liability to deduct tax has been put upon it by virtue of retrospective amendment, thus it was impossible for the assessee to deduct TDS at the time of payments is not acceptable as observed that by insertion of Explanation (5) and (6) scope of expression 'Royalty' has not been expanded. These Explanations do not create a different charging position upon the consideration paid by an assessee for use or right to use of any process. These are clarificatory in nature. The position to deduct TDS at the time when assessee made the payments was categorical and it was not persuaded to perform which is impossible to perform. - Decided against assessee.
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