TMI Blog2007 (5) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant on 5th Sept., 2003 through a common challan issued by the AO for asst. yrs. 1997-98 and 1998-99) against the demand pending in the subject assessment year." Grounds in ITA No. 464/Del/2006: "1. The learned CIT(A)-XXIX ('CIT(A') has erred on facts of the case and in law, in upholding assumption of jurisdiction under s. 154 of the IT Act, 1961 ('Act') by the learned AO. 2. The CIT(A) erred on facts and in law, in upholding inclusion of Rs. 5 crores as income from vendor financing under s. 154 of the Act, in respect of appeal effect order dt. 28th July, 2005. 3. Based on facts and circumstances of the case and in law, the order passed by CIT(A) under s. 154 of the Act is bad in law and void ab initio. 4. The CIT(A) erred on facts and in law, in not directing the AO to adjust the sum of Rs. 3 crores (deposited by the appellant on 5th Sept., 2003 through a common challan issued by the AO for asst. yrs. 1997-98 and 1998-99) against the demand pending for the preceding assessment year i.e. asst. yr. 1997-98." 3. Rival contentions have been heard and record perused. Facts in brief are that M/s Nokia Corporation (formerly known as Nokia Networks OY) is a company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ]; (d) in, without prejudice, not concluding on application of 'attribution principle' while taxing interest income as 'commercial income' under art. 7 of the Agreement for Avoidance of Double Taxation between India and Finland [No. GSR 786(E)]; (e) in, without prejudice, applying a tax rate of 55 per cent on interest income from vendor financing and delayed payments." 5. Vide its order dt. 22nd June, 2005, the Tribunal confirmed the action of the learned CIT(A) with respect to these grounds, after having the following observations: "We have considered the facts and the rival contentions but we find no substance in the assessee's case. The findings of the CIT(A) have not been rebutted before us on the basis of any material or evidence. The existence of the clause in the agreement for charging interest @ 18 per cent per annum is not denied. All that is contended is that the clause was not activated but this contention is without substance because if the agreement is in force then it is in force with all its clauses which includes the charging of interest. It was for the assessee to show on the basis of any evidence or correspondence or subsequent agreement modifying the earl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmed the action of the AO. Aggrieved by the above order of the CIT(A), the assessee is in appeal before us. It was vehemently argued by the learned senior counsel that Hon'ble Tribunal in its order dt. 22nd June, 2005, reported in Motorola Inc. vs. Dy. CIT (2005) 96 TTJ (Del)(SB) 1 : (2005) 95 ITD 269 (Del)(SB) was pleased to hold that sale of hardware took place outside India and therefore, no income accrued to the assessee in India on the sale thereof. But since assessee's subsidiary Nokia India (P) Ltd. constituted a PE Hon'ble Tribunal held that only following activities of the assessee were carried on in India through the PE for which attribution is called for: (a) Network planning. (b) Negotiations in connection with sale of equipment. (c) The signing of the supply and installation contracts. 8. It was further contended that the fact that interest income forms an integral part of sale of equipment has become final and is no more in dispute. Since admittedly the income from sale of equipment is not liable to tax in India, interest on vendor financing, which as commercial income is a part thereof, cannot be separately taxed. To tax under the AADT it is either to be att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipts and thereafter it will be taxable in proportion of GP rate and 20 per cent attribution will apply as held by the Tribunal Special Bench reported at (2005) 96 TTJ (Del)(SB) 1 : (2005) 95 ITD 269 (Del)(SB). 10. On the other hand, learned Departmental Representative contended that once the decision has been rendered by the Tribunal, the assessee cannot contest the additions and findings of the Tribunal. during the course of giving appeal effect by the AO. With reference to the learned Authorised Representative's contention that findings recorded by the learned CIT(A) regarding nature of interest income and its taxability, to the effect that interest income was commercial income of the assessee and not income from advances of cash loans, has not been challenged by the Department before the Tribunal and the same has become final. therefore such income is liable to be taxed only on the basis of formula of attribution provided by the Tribunal, the learned Departmental Representative replied that once the decision has been rendered by the Tribunal on the grounds of appeal raised against the order of learned CIT(A), the assessee cannot contest the additions and the findings of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement for charging interest at 18 per cent per annum was not denied. The Tribunal further found that all that was contended was that the clause was not activated, but this contention was found to be without substance on the plea that agreement was in force with all its clauses which also included the clause of charging of interest. The Tribunal, further found that it was for the assessee to show on the basis of evidence or correspondence or even by subsequent modification in the agreement under which interest was chargeable, but the same has not been shown/done. As per Tribunal, the mere fact that no credit was taken in the account books for the interest, cannot stop the accrual thereof as the assessee's income. A further finding was recorded by the Tribunal that no evidence was filed even before the Bench to show that the financial position of the cell operators was bad and that there was an agreement between the parties not to charge interest or not to activate the clause providing for interest. After having all these observations, the Tribunal upheld the addition for both the years. From the record, we also found that as per the grounds of appeal taken by the assessee before the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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