TMI Blog2016 (6) TMI 248X X X X Extracts X X X X X X X X Extracts X X X X ..... its sub-licensee and received sub-licensee fees from sub-licensee i.e. INPL, then such royalty income having been received by the assessee non-resident company on its own right as the beneficial owner of the same, such royalty income is to be subject to tax at concessional tax rate at 10%. Similarly, the interest income earned by the assessee was also received by it being its beneficial owner and which in turn, has been remitted though not in the instant year, is taxable at concessional rate of taxes. - Decided in favour of assessee. - ITA No.233/PN/2014 - - - Dated:- 15-4-2016 - MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM For the Appellant : Shri Rajendra Agiwal For the Respondent : Smt. Divya Bajpayee ORDER PER SUSHMA CHOWLA, JM: This appeal filed by the assessee is against the order of Dy. DIT(International Taxation -I), Pune, dated 21.11.2013 relating to assessment year 2010-11 passed under section 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 (in short the Act ). 2. The assessee has raised the following grounds of appeal:- 1. Non granting of benefits under the India Singapore Tax Treaty ( Treaty ) to the Appellant on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Imerys New Quest (India) Pvt. Ltd Royalty 48,88,234 10% Imerys Minerals (India) Pvt. Ltd. Interest 20,73,846 15% Total 69,62,080 5. During the course of assessment proceedings, the assessee was asked to submit the proof that it was the beneficial owner of interest and royalty and the said income was remitted to or received by the assessee in Singapore and offered as income in Singapore. The assessee was also show caused that in the absence of information, the benefit under DTAA between India and Singapore would not be allowed. The Assessing Officer further on the basis of records available noted that the beneficial owner of royalty was not the assessee, but was Imerys Minerals Ltd., UK. The assessee s claim that knowhow agreement between Imerys Minerals Ltd., UK and Imerys Singapore was on principal to principal basis and the assessee was not an agent of Imerys Minerals Ltd., UK, could not be supported with documentary evidence. The Assessing Officer further noted that the audited financia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the outset pointed out that the quantum of receipts of interest and royalty were not in dispute. He further stated that the assessee was resident of Singapore and was non-resident in India. The assessee for the year under consideration had received both interest and royalty from Indian companies and the royalty income was offered to tax @10% and the interest income was offered to tax @15%. However, the Assessing Officer denied the ben efit of lower rate of taxes holding that the provisions of DTAA between India-Singapore were not available to the assessee and taxed the interest and royalty @20% under the provisions of section 115A of the Act. The learned Authorized Representative for the assessee pointed out that the issue vide ground of appeal No.1 was against observation of Assessing Officer that the assessee was not the beneficial owner of interest and royalty income and hence, the provisions of DTAA were not applicable. Our attention was drawn to the assessment order, wherein the Assessing Officer has mentioned that the assessee was engaged in carrying on various activities, which was the indicator of the fact that the assessee was operational company. He further referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any and that it was registered in Singapore as per documents placed at page 4 of the Paper Book. Further, our attention was drawn to the pages 12 and 13 of the Paper Book, under which, the learned Authorized Representative for the assessee pointed out that looking into the quantum of assets and liabilities owned by Singapore company, it could not be said that the company was conduit. Our attention was also drawn to the revenue generated by the assessee during the year. The learned Authorized Representative for the assessee further referred to the agreement placed at pages 54 onwards and referred to the various terms of agreement and further referred to the invoices raised for charging royalty placed at pages 72 and 73 of the Paper Book and the remittance of royalty in the subsequent year as evidenced by the documents placed at pages 74 and 75 of the Paper Book. The learned Authorized Representative for the assessee also referred to the Certificate of Residency given by the Singapore authorities, which is placed at page 93 of the Paper Book. Our attention was also drawn to the agreement between UK company and Singapore company placed at page 113 of the Paper Book along with details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that it was the sub-licensee contract entered into between the assessee and India entities. However, the question to be seen was whether the assessee was receiving the income of its own right. The learned Authorized Representative for the assessee placed reliance on the ratio laid down by Authority for Advance Rulings, New Delhi reported (1997) 94 TAXMAN 171 (AAR-New Delhi). 10. We have heard the rival contentions and perused the record. The assessee before us is a company incorporated in Singapore and is tax resident of Singapore. The assessee was 100% subsidiary of the French company Mircals SA France and Imerys SA, France was its ultimate holding company. The assessee was engaged in various activities of marketing and sales services to the group and affiliated companies, in addition to the trading of paper and performance minerals and other related business activities including project work. The assessee entered into a Technology License Agreement with Imerys NewQuest (India) Pvt. Ltd. (INPL), which in turn, makes royalty payment to the assessee. Under the Technology Agreement , non-exclusive, nontransferable, non-assignable and revocable license was granted to INPL to us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l year . In the absence of these words, the assessee contended that this could not be read into Article 24(1) of DTAA. Where the royalty and interest income for financial year 2009-10 had been remitted in financial year 2010-11, the requirement of Article 24(1) of DTAA as per the assessee could be considered to have satisfied and the concessional tax rate in India should not be denied by application of limitation of relief provisions. 12. The know-how license agreement was entered into between Imerys Minerals Ltd., UK and the assessee. Under this agreement, Imerys Singapore could sub-license the know-how to other Imerys group companies i.e. sublicensees and receive royalty income from the said licensees. As per the agreement, Imerys, Singapore i.e. the assessee was liable to pay royalty @2% of the net sales of sub-licensee to Imerys Minerals Ltd., UK. On the other hand, the assessee received royalty income from sub-licensee @5% on net sales of sub-licensee. In this regard, the assessee had entered into an agreement with INPL and for the year under consideration had received ₹ 48,88,234/- as royalty. The case of the assessee before the authorities below was that it was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fees for technical services may also be taxed in the Contracting State in which they arise and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the royalties or fees for technical services, the tax so charged shall not exceed 10 percent. . ARTICLE 24 : LIMITATION OF RELIEF 1. Where this Agreement provides (with or without other conditions) that income from sources in a Contracting State shall be exempt from tax, or taxes 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. However, this limitation does not apply to income derived by the Government of a Contracting State or any person approved by the competent authority of that State for the purpose of this paragraph. The te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... products listed in Schedule A. Further the licensor wished to develop sub-licensing market in the Asia Pacific Region for this know-how and wished the licensee to act as sub-licensor in order to develop its market. The licensee on the other hand, wished to obtain the license of know-how, not to use the know-how itself, but in order to sublicense the know-how to third parties customers, subject to terms of the agreement. The licensor thus, agreed to permit the licensee to sub-license the know-how on the terms and conditions of this agreement. As per clause 2.1, the licensor granted to the licensee a non-exclusive, perpetual, irrevocable license, subject to terms and conditions of the agreement, to use the know-how for the purpose of having products manufactured and sold on its behalf by an authorized contractor or by sub-licensee in the territory and of selling the products by itself or its agents or distributors. The license granted by the licensor specifically includes the right to sub-license. By clause 4, it was further provided that the licensee shall not exploit the know-how, but shall be allowed to grant sub-license of the know-how to sub-licensee. Therefore, it was agreed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant would be acquiring expertise and technical know-how from third parties for which it was to pay royalties and technical fees, would be belonging to applicant. The assessee had earned royalty income from other countries also. Further, similar ratio has been laid down by Pune Bench of Tribunal in Shaan Marine Services Pvt. Ltd. Vs. Dy. Director of Income Tax (supra). 19. Another aspect of the issue is that the benefits available under the Treaty should be granted to the assessee based on valid TRC was the proposition approved by the Hon ble Supreme Court in Union of India Vs. Azadi Bachao Andolan (supra) and further the Hon ble Punjab Haryana High Court in Serco BPO Pvt. Ltd. Vs. AAR in Civil Writ Petition No.11037 of 2014 (O M), judgment dated 26.08.2015, where the assessee before us is tax resident of Singapore and the Singapore Tax Residency Certificate of the assess ee for 2010 is available at page 93 of Paper Book and the benefit of Treaty is also available to the assessee on this ground. 20. Further, with regard to interest income received by the assessee, since the amount was advanced by the assessee as ECB loan to IMPL, the interest income received by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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