TMI Blog2015 (5) TMI 607X X X X Extracts X X X X X X X X Extracts X X X X ..... year has held that the total amount consisting Lumpsum Licence/Know-how Fees and also royalty was consideration for the transfer of IP rights simplicitor and also the service rendered by the employees of the second category - in so far as the question of royalty representing consideration for the transfer of IP rights simplicitor was concerned, the service PE representing the deputationists had no role to play either in creating or making it available to JCB India - That is how the Tribunal came to hold that the same was not effectively connected with the service PE of the assessee in India - the consideration for rendering of services by the employees of first category was chargeable to tax under Article 7 of the DTAA – thus, the matter is remitted back to the AO for determination of the amount of income in terms of Article 7 – So, respectfully following the aforesaid referred to order these issues are set aside and remitted back to the file of the AO for determining the income inconsonance with the direction given for the earlier years - Decided in favour of Assessee by way of remand. Liability of interest u/s 234B did not arise as the assessee had included the amount of roy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled to appreciate that: - intangible property in respect of which Royalty has been paid was wholly developed outside India: - No functions, assets or risks associated with such intangible property is undertaken or present in India: 5. Without prejudice to above grounds, under the facts and circumstances of the case, the Ld. DRP and Ld. AO has erred in not applying the desired computation mechanism for chargeability of Royalty income alleged to be covered under provisions of Article 7 of the DTAA between India and UL. The Ld. DRP and Ld. AO has failed to appreciate that: - Under Article7(1) read with Article 7(2) 7(3) of the DTAA between India and UK, the entire Royalty received from India cannot be subjected to tax in India since no functions, assets and risks are associated with the alleged PE in India: - Royalty income alleged to be considered as business income under Article 7 of the DTAA between India and UK can be taxed only to the extent of profits attributable to Indian operations. The Ld. DRP and Ld. AO thus grossly erred in determining the taxability applying arbitrary mechanism under Rule 10(iii) of the Income tax Rules, 1962 and ignoring the principl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions and perused the relevant material on record. It is observed that in the earlier years, JCBE licensed intellectual property rights for manufacture of excavators under the brand name 3DX to JCBI. However, by virtue of new Agreement entered on 17.12.07 w.e.f. 01.04.07 amongst the assessee, JCBE and JCBI, the intellectual property rights came to be sub-licensed to the assessee without interfering in any manner its actual exploitation by JCBI. All the terms and conditions for the use of such rights by JCBI under TTA and IPAA are same. The only difference that came into the hitherto arrangement was that whereas earlier JCBI was paying royalty directly to JCBE, now it is being routed through the assessee with the deduction of 0.05%. The question of a service PE of JCBE in India came up for consideration before the Tribunal for assessment years 2006-07 and 2007-08. Vide its order for the AY 2006-07, the tribunal categorized employees of JCBE on deputation to India on assignment basis in the first category and those doing stewardship activities and inspection and testing in the second category. JCBI has been held to be constituting a service PE of JCBE in India because of the employee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, not allowed. 5. So, respectfully following the aforesaid referred to order in assessee s own case for the assessment year 2008- 09, the issue agitated vide Ground Nos. 1 to 3 is decided against the assessee by holding that the services PE of the assessee is established in India. 6. Vide Ground Nos. 4 5 the issue relates to the royalty earned by the assessee and vide Ground No. 6 the issue relates to the earning of profit by the assessee at arm s length. As regard these issues the ld. Counsel for the assessee submitted that these are similar to the issues involved in the preceding year which had been decided by the ITAT in assessee s favour vide order dated 04.07.2014 in ITA No. 80/Del/2013 for the assessment year 2008-09. 7. In her rival submissions the ld. CIT DR although supported the order of the AO but could not controvert the aforesaid contention of the ld. Counsel for the assessee. 8. After considering the submissions of both the parties and material available on the record. It is noticed that identical issues having similar facts have been decided by the ITAT Delhi Bench D , New Delhi vide order dated 04.07.2014 in ITA No. 80/Del/2013 wherein relevant find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to order these issues are set aside and remitted back to the file of the AO for determining the income inconsonance with the direction given for the earlier years in the said order dated 04.07.2014. 10. The last issue vide Ground No. 8 relates to the charging of interest u/s 234A, 234B, 234C 234D. The ld. Counsel for the assessee submitted that the issue relating to charging of interest u/s 234B is decided in favour of the assessee vide order dated 04.07.2014 in ITA No. 80/Del/2013 for the assessment year 2008-09. 11. In her rival submissions the ld. CIT DR supported the order of the AO and submitted that the charging of interest u/s 234A, 234B, 234C and 234D of the Act is mandatory. 12. After considering the submissions of both the parties, it is noticed that the issue relating to charging of interest u/s 234B of the Act has already been decided in assessee s favour in the earlier years and the relevant findings have been given in para 6 of the order dated 04.07.2014 in ITA No. 80/Del/2013 (supra) which read as under: 6. The last ground of the assessee s appeal against the charging of interest u/s 234B is also decided in assessee s favour by following the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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