TMI Blog2013 (8) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... of Indo-Singapore DTAA wheres assessee claimed taxation of such interest @ 15% as per Article 11 of the DTAA - Held that:- The burden is on the assessee to prove that the amount of income was remitted to or received in Singapore. This burden can be discharged by showing a credit in the bank account maintained by the assessee in Singapore. Production of a copy of pay in slip showing deposit of refund voucher in a bank a/c in Singapore which is eventually credited to the bank account, or even a certificate from a Bank in Singapore in this regard, are the instances of sufficient compliance of the requisite condition. A bald submission not backed by any supporting evidence to prove the fulfillment of the requisite condition, cannot be a good reason for drawing an inference in favour of the assessee. It is more so because there is an unambiguous command of Article 24 which casts obligation on the assessee to prove this fact positively. Thus the authorities below were justified in refusing the benefit of Article-11 of the DTAA by taxing the interest on I.T. refund @ 20% as per section 115A. Claim of reimbursement of expenses - Held that:- As seen from the findings given by the CIT (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings, it was noticed that the assessee received total payment of Rs.27.49 crores from its activity of providing airline reservations in India, which was not offered for taxation. On being called upon to explain the reasons for this, the assessee stated that it did not have any permanent establishment (PE) in India and hence receipts could not be taxed as business income. The assessee stated that it had no business connection in India inasmuch as the travel agents in India were either raising a query or requesting for booking on the computer system. The travel agents used the equipment owned and provided by the NMC. The messages were transmitted through the MTNL Phone lines to Societe Internationale Telecommunications Aeronautiques (SITA) Network where these were transmitted through its net work. The assessee further claimed that the receipts in India for booking and other fees for airline tickets of Rs.27.49 crores were neither royalty nor fees for technical services and hence not chargeable to tax in India. The AO rejected such claim and held that the assessee has a PE in India in the shape of CRS and further held that the business profit were taxable in India on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the tribunal has been overruled or modified in any manner by the Hon'ble Bombay High Court. Respectfully following the precedent, we hold that 15% of the gross revenue should be taken as income accruing or arising to the assessee in India, subject to deduction of marketing fee paid to ADSIL at 25% of its gross receipts, thereby leaving no income chargeable to tax on this count. These grounds are, therefore, allowed. 8. Ground Nos. 13 and 14 of the appeal are on the applicability of Article-24 of the DTAA vis- -vis interest income. The factual matrix of theses grounds is that the assessee was granted refund by the Income-tax Department which included interest of Rs.88,660. The assessee offered such interest for taxation, but @ 15% as per Article-11 of the DTAA. The AO denied this claim by relying on Article 24 of the DTAA as in his opinion the assessee did not furnish any proof of remittance to Singapore. He therefore, charged such interest income to tax @ 20% in accordance with the mandate of section 115A of the Income-tax Act (hereinafter called 'the Act'). No relief was allowed in the first appeal. 9. We have heard the rival contentions and perused the relevant material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r conditions) that income from sources in a Contracting State shall be exempt from tax, or taxed at a reduced rate in that Contracting State and under the laws in force in the other Contracting State the said income is subject to tax by reference to the amount thereof which is remitted to or received in that other Contracting State and not by reference to the full amount thereof, then the exemption or reduction of tax to be allowed under this Agreement in the first-mentioned Contracting State shall apply to so much of the income as is remitted to or received in that other Contracting State. (2)** ** **" 13. Article 24 of the DTAA is an article which limits the relief granted by other relevant articles, including article 11 of the DTAA, subject to the fulfillment of the conditions enshrined therein. As per Para-1 of the Article 24, to the extent it is relevant for our purpose, where the DTAA provides that income from source in India shall be taxed at a reduced rate in India and shall also be taxed in Singapore, then the said income shall be taxed at the reduced rate prescribed in the DTAA provided the income is 'remitted to or received in' Singapore. The crucial wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, instead of depositing the refund voucher in some bank account in Singapore, may also deposit it in its bank account maintained in some other country, in which case again the requirement of Article 24 would be wanting. The crux is that the burden is on the assessee to prove that the amount of income was remitted to or received in Singapore. This burden can be discharged by showing a credit in the bank account maintained by the assessee in Singapore. Production of a copy of pay in slip showing deposit of refund voucher in a bank a/c in Singapore which is eventually credited to the bank account, or even a certificate from a Bank in Singapore in this regard, are the instances of sufficient compliance of the requisite condition. A bald submission not backed by any supporting evidence to prove the fulfillment of the requisite condition, cannot be a good reason for drawing an inference in favour of the assessee. It is more so because there is an unambiguous command of Article 24 which casts obligation on the assessee to prove this fact positively. In our considered opinion the authorities below were justified in refusing the benefit of Article-11 of the DTAA by taxing the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transfer pricing report in Form 3CEB of ADSIL which indicated as under: "The total amount paid/payable for services availed from third parties and paid to AE against back to back invoices is Rs.17297274/- as per the books of accounts. In some cases the AE has charged the company for amounts less than that charges by third parties". 17. In the backdrop of such facts, the ld. CIT(A) held that it could not be a case of pure reimbursement of expenses. He also observed that the assessee was engaged in the business of airline ticket booking through CRS and it had entered into agreement with various airlines for this purpose. These airlines were allowed to participate in the CRS for booking of tickets and the CRS could not succeed without being marketed. With a view to market the facility on CRS and to advertise the same to the customers, the assessee gave rights to the companies in different countries to market the CRS and increase its distribution network, for which ADSIL was incorporated in India as the assessee's wholly owned subsidiary. He held that ADSIL was not doing any other activity except the marketing of the assessee's products. Thereafter, the ld CIT (A) examined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Agreement between the assessee and ADSIL specifically provides that the assessee may from time to time offer ancillary services to ADSIL as specified in but not limited to Schedule B of the agreement and that the appellant reserves the right to charge for such services as provided in Schedule B upon 3 months' written notice to the ADSIL. Thus, it is evident that there is no mention of any reimbursement in the agreement. Further no material has been brought on record to demonstrate that the assessee gave such three months' notice to ADSIL, despite the fact that the ld. CIT(A) has returned a categorical finding against the assessee in this regard in para 5.15 of the impugned order. The alleged reimbursement of expenses represents the payments initially made by the assessee for the services in the nature of lease line, installation, service charges and other expenses which are required to be provided by the assessee to the end customers who subscribe to the CRS system. As such we are not inclined to accept the argument of the ld AR that this amount should be considered as reimbursement of expenses from ADSIL not warranting any inclusion in the total income of the assessee. 20. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be allowed deduction for the expenses towards Marketing fees paid to ADSIL at the rate of 25% of gross receipts. Without prejudice to his earlier arguments, the ld. AR argued that if the sum of Rs.1.72 crore is taken as business income, still there would be no income chargeable to tax in the hands of the assessee because the amount of marketing fees paid by the assessee to ADSIL at Rs.6.72 crore is sufficient to absorb the income element at the rate of 15% from the sum of Rs.1.72 crore. In this regard, the following calculation was placed on record as Option-1 Particulars Amount Particulars Amount Marketing fees paid to ADSIL 6,72,28,963 Gross Receipts 27,49,53,417 Reimbursement of expenses 1,72,97,274 29,22,50,691 15% of the above 4,38,37,604 Loss 2,33,91,359 6,72,28,963 6,72,28,963 23. The ld. DR strongly objected to this calculation by contending that the view of the tribunal that only 15% of receipts could be attributed to accrue/arise in India on the first issue cannot be applied to this issue because the nat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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