TMI Blog2009 (11) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... is to the effect that on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the AO in not excluding the amount of commission retained by Turner International India (P) Ltd. (TIIPL for short), an Indian company, thereby determining the total income of the assessee at 10 per cent of the gross receipts instead of actual amount received, while giving effect to MAP resolution. It is further mentioned that he erred in not appreciating that non-exclusion of the amount retained by TIIPL led to double taxation of the same amount, once in the hands of the TIIPL and then in the hands of the assessee company, thereby defeating the very purpose of MAP resolution agreed upon. It is also mentioned that he erred in holding that the order of the AO, giving effect to the MAP resolution, was an order under s. 154, without appreciating that such an order amounted to an order under s. 143(3) of the Act. Ground No. 2 is against charging of interest under s. 234B and ground No. 3 is against charging of interest under s. 234C. Ground Nos. 4 and 5 are general and residuary in nature, which were not argued before us by the learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losing part of the order, it was mentioned that the assessee has not maintained any India specific account. However, since it must have incurred expenses on transmission, programming, distribution etc., it would be reasonable to attribute 30 per cent as profit attributable to India. Thereafter, the profit of the assessee was worked out at Rs. 1,56,80,211 as under: "Advertising revenue from India (Net of US $ 12,99,318 agency commission) Less: India rep. commission US $ 1,95,000 Net advertising income US $ 11,04,318 or Rs. 5,22,67,370 Profit @ 30 per cent as discussed above Rs. 1,56,80,211" 2.4 The learned counsel stated the finding in the resolution and compared the computation of profit with the resolution of the competent authority of the USA. In this resolution dt. 5th June, 2007, it was mentioned that although he did not agree on technical merit that TW Group had PEs in India, a mutual agreement was arrived at with a view to avoid double taxation. As per the mutual agreement, the TW Group will report deemed ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and, thus, the AO was obliged to give effect to the resolution. 2.7 On the basis of aforesaid facts and submissions, it was argued that the issue regarding deduction of commission paid to TIIPL was never an issue before the AO and such commission was deducted by him from the gross revenue for the purpose of applying a ratio to arrive at the profit. The dispute under MAP proceedings was merely about the percentage to be applied to the net revenue. The resolution of the USA competent authority is quite clear in the matter that the percentage had to be applied to the net revenue, in as much as the exact computation of profit was made by him in the case of the assessee for the year under consideration in Annex. 1.1 of the resolution dt. 5th June, 2007. This was in pursuance of the resolution of Indian competent authority dt. 23rd April, 2007 in which the profit was deemed to be 10 per cent of the Revenue received from Indian sources. The assessee did not receive the gross amount from the Indian sources but only the net amount. The Indian competent authority did not in any manner object to the computation of income made by the USA competent authority. Therefore, it was urged that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was within its right to challenge the order of the AO, passed under s. 154 r/w s. 143(3), as per provision contained in s. 246A(1)(a). Thus, the appeal before the Tribunal against the order of the learned CIT(A) was competent as it was based upon a valid order passed by the first appellate authority. The dispute in the case of Kerala State Civil Supplies Corpn. Ltd. was in respect of recovery of interest paid under s. 244A, which could be done only by the Chief CIT or the CIT, as specifically provided in s. 244(2). An order under s. 244A cannot be challenged under s. 246A as no mention is made of that section in this section. 3. We have considered the facts of the case and submissions made before us. The Revenue has raised a preliminary objection that assessee's appeal before the Tribunal is incompetent as no appeal could have been filed before the learned CIT(A) in respect of order passed under s. 90. It may be mentioned that the Revenue has not filed any appeal against the order of the learned CIT(A). Therefore, the question is whether such a ground could be raised before us? We find that a respondent in an appeal before the Tribunal can support the order of the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly raised a contention about the jurisdiction of the officer to invoke powers under s. 154 of the Act to withdraw negligible interest originally granted to it under s. 244A(1) of the Act. Even in the first appellate order, namely, Exhibit P-2, produced by the petitioner, the petitioner is not seen to have raised any contention about the jurisdictional error in issuing Exhibit P-2. In fact Exhibit P-1 order issue by the AO granting interest to the petitioner for the full period without reference to s. 244A(2) of the Act which requires mandatory reference to the CIT or the Chief CIT for deciding the period for which the assessee is ineligible for interest is patently a wrong order which is liable to be rectified under s. 154 of the Act, which provides for rectification of mistakes apparent on the face of the record. Therefore, the officer rightly invoked the powers under s. 154 of the Act. However, when the officer committed a mistake in deciding the issue by himself instead of referring the issue to be decided by the Chief CIT or the CIT, in terms of s. 244A(2) of the Act, all that the Tribunal has done is to correct this mistake and direct the matter to be referred to the Chief CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, this resolution was adopted by the USA competent authority notwithstanding his objection regarding existence of PE in India. The USA competent authority also computed profit in Annex. 1.1 of the resolution at 10 per cent of the net revenue, i.e., after deducting commission paid to TIIPL. There is no objection by the Indian competent authority in respect of this computation of profit. On the resolution of the dispute, the assessee gave his consent and also withdrew appeal pending against order under s. 143(3) passed by the AO on 27th March, 2006. Consequently, the AO passed an order under s. 154 r/w s. 143(3) on 26th July, 2007 to give effect to the resolution under s. 90 of the Act. This order was in substitution of the order passed on 27th March, 2006. Therefore, in our considered view, this is an order under s. 143(3) in which the income of the assessee has been computed by giving effect to resolution under s. 90. Such an order is amenable to appeal before the learned CIT(A) under s. 246A(1)(a). Consequently, we do not find any incompetence in the appeal filed by the assessee before us. 3.1 The second question before us is regarding the computation of income, namely, whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was left with no other alternative but to approach the appellate authority for appropriate relief in terms of s. 90 regarding treaty override, insofar as computation of income under s. 143(3) is concerned. 3.2 The argument of the learned Departmental Representative regarding correlative relief in USA taxable income is not relevant as the question is regarding computation of income as per the agreement. Similarly, the arguments of rival parties regarding double taxation or absence thereof are also not relevant, the reason being that the total income of the assessee has to be computed in accordance with the agreement. 3.3 Thus, ground No. 1 is allowed. 4. Ground Nos. 2 and 3 are against levy of interest under ss. 234B and 234C. The learned counsel relied on the order of the Tribunal in the case of Turner Broadcasting System Asia Pecific Inc., America Ors. in ITA Nos. 724, 728 and 733/Del/2008, dt. 13th March, 2009, a copy of which was placed before us. The finding in that order was that in the case of a non-resident company, all payments received from Indian sources were subject to TDS. Therefore, there is no liability to pay advance tax. In such a situation. there will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of s. 209. Therefore, it has to be found out whether any tax was deductible or collectible at source. In this connection, we may refer to the provisions contained in s. 195 of the Act, which mandate that any person responsible for paying to a non-resident any interest any other sum chargeable under the provision of this Act shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or any other mode, whichever is earlier, deduct income-tax thereon at the rates in force. It is an undisputed fact that the assessee is a non-resident person. It sources revenue from Indian advertisers through the Indian agent. The advertisers pay various amounts to the Indian agent. Thus, the agent steps into the shoes of the assessee for receipt of the amount in India and this is the point of time when the advertiser had to deduct tax at source. The tax has not been so deducted and consequently not paid to the credit of the Government. However, no fault can be found with the assessee in this regard. Sec. 209 speaks of tax deductible at source and not TDS. Therefore, what has to be deducted from tax on curren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the facts and ground in the case of Cable News Network, LP, LLP in ITA No. 632/Del/2008. The only difference is that there is no levy of interest under s. 234C of the Act. In view thereof, the order in that case is made applicable to this case also in respect of computation of total income and levy of interest under s. 234B. ITA Nos. 726 727/Del/2008-Turner Broadcasting System Asia Pacific Inc. In these appeals, the only question is regarding the computation of the total income. It was the submission of both the parties that the facts and grounds in this regard are similar to the facts and grounds in the case of Cable News Network, LP, LLP in ITA No. 632/Del/2008. In view thereof, the order in that case in respect of computation of total income is made applicable to these appeals also. ITA Nos. 729 732/Del/2008-Turner Entertainment Networks Asia Inc. These appeals involve questions regarding computation of income and levy of interest under s. 234B. It was the common position of both the parties that the facts and grounds are similar to the facts and grounds in the case of Cable News Network, LP, LLP in ITA No. 632/Del/2008. Therefore, the order in that appeal is ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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