TMI Blog2014 (1) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... of the DTAA - The income would not be taxable in his hand in India and, therefore, no TDS would be deductible – Decided against Revenue. - ITA No. 2657/Del/2011 - - - Dated:- 31-12-2013 - Shri G. D. Agarwal And Shri A. T. Varkey,JJ. For the Appellant : Shri S. N. Bhatia, Sr. DR For the Respondent : M. K. Madan, CA ORDER Per A. T. Varkey, Judicial Member This is an appeal preferred by the Revenue against the order of the ld CIT(A), Faridabad, dated 14.03.2011, for the Assessment Year 2006-07. 2. The grounds raised by the Revenue are as follows:- "1. On the facts and in the circumstances of the case, the ld CIT(A) has erred on facts and in law in deleting the addition of Rs. 10,52,537/- made by Assessing Officer on account of interest liability under section 36(1)(iii) of the Income Tax Act, without taking into consideration the ratio of the decision in the case of Commissioner of Income-tax, Bangalore vs. LK Trust 297 ITR 53 where it has been held that where the interest is paid in respect of the amount borrowed for acquisition of asset, unless asset is acquired and put to use, deduction for the interest cannot be claimed. Allowing any such deduction will b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer with the help of proviso appended to section 36(1)(iii) of the Income Tax Act (hereinafter 'the Act'). 4. At the outset, the ld counsel for the assessee submitted that this very same issue was covered in favour of the assessee by the order of ITAT in assessee's own case for Assessment Year 2005-06. 5. We have considered the rival contentions and gone through the records carefully and we find that a similar addition made by the Assessing Officer in the assessee's own case was deleted by the ld CIT(A) for the Assessment Year 2005-06, whose order, has been upheld by the ITAT.The ground of appeal taken by the revenue for the Assessment Year 2005-06 and the conclusion recorded by the ITAT reads as under:- "14. In ground No.3, revenue has pleaded that Learned CIT(Appeals) has erred in deleting the addition of Rs.3,42,417. It has pleaded that ld. CIT (A) has erred in deleting the interest liability ofRs.3,42,417 which was added by the Assessing Officer with the help of proviso appended to Section 36 (1) (iii) of the IT Act. 15. The brief facts of the case are that SIDCUL had allotted industrial plot bearing No. 22, 23 and 24 to the assessee at Haridwar, It has made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investment made in the acquisition of the assets. Considering these aspects, we are of the view that proviso to section 36(1)(iii) is not applicable on the facts of the present case. Hence this ground of appeal is rejected." 6. Respectfully following the order of the Co-ordinating Bench, we dismiss ground Nos. 1 and 2 raised by the revenue and confirm the order of the ld CIT(A) in deleting the addition of Rs. 10,52,537/- 7. Apropos ground No. 3.In this ground of appeal the revenue has pleaded that ld CIT(A) has erred in deleting the addition of Rs. 11,00,293/-. This addition was made by the Assessing Officer on account of non-deduction of tax out of the payment so made by invoking provisions of section 40(1)(ia) of the Act on the ground that the assessee has failed to deduct TDS u/s 195 of the Act while making payment to the non- resident. The same issue was also before the ITAT in Assessment Year 2005-06. The ITAT in this respect has held as follows:- "18. Ground Nos. 4 and 5 are inter-connected with each other. In these grounds of appeal, revenue has pleaded that Learned CIT(Appeals) has erred in deleting the addition of Rs.21,83,917. This addition was made by the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord carefully. In order to resolve the controversy, it is salutary upon us to take note of Articles 13 and 15 of the DTAA between India and Republic of Italy notified on 25.4.1996. They reads as under: "Article 13-ROYALTIES AND FEES FOR TECHNICAL SERVICES 1. Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the recipient is the beneficial owner of the royalties, or fees for technical services, the tax so charged shall not exceed 20 per cent, of the gross amount of the royalties or fees for technical services. Article-15- INDEPENDENT PERSONAL SERVICES 1. Income derived by a resident of a Contracting State in respect of professional services or other independent activities of a similar character may be taxed in that State. Such income may also be taxed in the other Contracting State if such services are performed in that other State and if: (a) he is present in that other State for a period or p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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