TMI Blog2012 (12) TMI 763X X X X Extracts X X X X X X X X Extracts X X X X ..... he earlier years. Reliance has also been placed on another decision of Hon'ble Bombay High Court in the case of Dorr-Oliver (India) Ltd. v. CIT [1998 (1) TMI 42 - BOMBAY HIGH COURT] wherein it was held that collaboration agreement being subject to Government approval, deduction of sum paid as compensation and fees under collaboration agreement was allowable only upto the date till the agreement enjoyed approval by Government of India and not for any subsequent year. Thus the judicial pronouncements discussed above clearly support the stand of the assessee that income on account of the amount payable by BAH India to the USA entity could be said to have accrued to the said entity only on receipt of the required approval from RBI and there being no such approval received during the year under consideration, the same could not be taxed as income in that year. The decision of the Hon'ble Supreme Court in the case of LIC v. Escorts Ltd. (1985 (12) TMI 289 - SUPREME COURT OF INDIA) thus was rendered in a different context and in a different set of facts and the same cannot support the stand of the Revenue in the present case - delete the additions made on this count by the AO - in fav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed objection in this regard, the AO overruled the same and passed order u/s 163 treating BAH India as an agent of the USA entity which was upheld by the learned CIT (Appeals). The AO, therefore, issued notice u/s 148 to BAH India as an agent of the USA entity in response to which return of income was filed by the assessee declaring total income of the said entity chargeable to tax in India for the year under consideration at Nil. In the assessment completed u/s 143(3) read with section 148 of the Act on BAH India as agent of the USA entity, the amounts payable by BAH India to the said entity was brought to tax in India by the AO as "fees for technical services". 3. Against the order passed by the AO u/s 143(3) read with section 148 of the Act, appeal was filed by BAH India before the learned CIT (Appeals) challenging the validity of the said assessment as well as disputing the addition made therein on merit. During the course of appellate proceedings before the learned CIT (Appeals), various contentions were raised on behalf of BAH India challenging the validity of assessment made by the AO u/s 143(3) read with section 148 on various grounds. The learned CIT (Appeals), however, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal services had not been paid by BAH India to the USA entity in the year under consideration, the same could not be taxed in that year. The learned CIT (Appeals) did not find merit in this contention also raised before him. According to him, the word "paid" used in the relevant Article of the treaty dealing with "fees for technical services" was not used to denote actual payment of the same but the same was used in the sense of incurring a liability. He, therefore, held that the amount payable by BAH India to the USA entity was chargeable to tax in India as "fees for technical services" in the year under consideration although the same was not actually paid in that year. Accordingly, the addition made by the AO on account of fees for technical services in the assessment completed u/s 143(3) read with section 148 of the Act was confirmed by the learned CIT (Appeals). Aggrieved by the order of the learned CIT (Appeals), the present appeal is preferred before the Tribunal. 5. In ground No. 1 to 4, the preliminary issue challenging validity of assessments made by the AO u/s 143(3) read with section 148 is raised. However, the same have not been pressed by the learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated to accrual of income and the decision rendered by the Hon'ble Supreme Court in altogether different context was wrongly relied upon by the learned CIT (Appeals). 8. The learned DR, on the other hand, submitted that in the case of assessee following mercantile system of accounting, once income is accrued, the same is taxable. He contended that the amount in question payable to USA entity was claimed by BAH India as deduction by passing necessary entries in the books of account which itself shows that there was accrual of income to the said entity. He submitted that in the case laws relied upon by the learned counsel for the assessee, the assessee had actually sought permission from the RBI whereas in the present case, no such permission has even been applied to the RBI. He contended that by not applying for the permission from RBI, the payment of tax in case of USA entity is being avoided. 9. In the rejoinder, the learned counsel for the assessee clarified that due to substantial losses suffered by BAH India, no payment has been made till date of the impugned amount to the USA entity and that is why no application has been made to RBI for getting the permission to make suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yable by BAH India to the USA entity could be said to have accrued to the said entity only on receipt of the required approval from RBI and there being no such approval received during the year under consideration, the same could not be taxed as income in that year. It is observed that the learned CIT (Appeals), however, has not accepted this stand relying on the decision of Hon'ble Supreme Court in the case of LIC of India v. Escorts Ltd. (supra) wherein it was held that permission granted by the RBI is to be construed to mean both permission granted previously or obtained subsequently. As rightly contended by the learned counsel for the assessee, the said decision, however, was not rendered by the Hon'ble Supreme Court in relation to income-tax proceedings and there was no issue of accrual of income involved in that case. Moreover, the said decision was rendered in the context of section 29 of Foreign Exchange Regulation Act under which permission of Reserve Bank of India in regard to the establishment of business in India was required to be obtained subsequently within a period of six months from the date of establishment of business in India and in these facts and circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a under the relevant tax treaty which covers only the amount paid. 15. The learned counsel for the assessee submitted that the amount in question payable by BAH India to the USA entity was not actually paid during the year under consideration. In this regard, he referred to the relevant provision of Article 12 of the treaties to point out that the term "Royalties" as used in Article 12 is defined to mean "Payments of any kind received as a consideration for .. .. .. .. .. .. .." and the term "fees for technical services" is defined to mean "Payments of any amount in consideration for". He contended that royalties and fees for technical services thus are liable to tax as per Article 12 of the relevant treaties only on payment basis and there being no payments made by BAH India of the impugned amount to the USA entity, the said amount was not liable to tax as royalties or fees for technical services in India during the year under consideration as per Article 12 of the relevant treaties. In support of this contention, he relied on the decision of Hon'ble Bombay High Court in the case of DIT (International Taxation) v. Siemens Aktiengesellschaft (I.T. Appeal No. 124 of 2010 dated 22n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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