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2016 (7) TMI 712 - ITAT MUMBAI

2016 (7) TMI 712 - ITAT MUMBAI - TMI - Guarantee commission receipt - taxability in India - Held that:- As decided in assessee;s own case for Assessment Year 2009-10 guarantee commission earned by the assessee from the two associate Indian concerns cannot be held to be taxable in India. - Decided in favour of assessee. - Surcharge and education cess is payable in addition to tax of 10% payable on royalty income - Held that:- Since clause (1) of Article 2 provides that the taxes governed woul .....

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hall be capped at 10%. The aforesaid plea of the assessee, in our view, is clearly in tune with the phraseology of the India-France DTAA and is fully supported by the precedents cited before us. As a consequence, we direct the Assessing Officer to re-compute the tax liability on royalty income accordingly. - Decided in favour of assessee. - ITA No. 888/MUM/2016 - Dated:- 13-7-2016 - Shri G. S. Pannu, Accountant Member And Shri Amarjit Singh, Judicial Member For the Assessee : Shri M.M. Golvala & .....

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: 1. The Assessing Officer/Dispute Resolution Panel erred in holding that guarantee commission received by the Appellant amounting to ₹ 33,40,347/- was liable to tax in India. 2. The Assessing Officer/Dispute Resolution Panel erred in holding that guarantee commission was liable to tax under section 9 of the Income Tax Act, 1961. 3. The Assessing Officer/Dispute Resolution Panel erred in holding that income on account of providing corporate guarantee was taxable in India under Article 23 o .....

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charge, education cess and secondary and higher education cess to the tax on the Royalty income charged as per the provisions of the DTAA between India and France. 7. The Assessing Officer erred in levying interest under section 234B of ₹ 10,18,290/-. 8. The Assessing Officer erred in levying interest under section 234C of ₹ 39,315/-. 3. Insofar as Ground of appeal nos. 1 to 4 are concerned, they relate to a single issue arising from the action of income-tax authorities in holding th .....

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n India, viz., Capgemini India Pvt. Ltd and Capgemini Business Services India Pvt. Ltd. In the return of income filed by the assessee for the assessment year under consideration it declared an income of ₹ 9,52,52,240/- on account of such royalty income. In the course of assessment proceedings, the Assessing Officer noticed that assessee had received guarantee commission of ₹ 33,40,347/- from the two associate Indian concerns in return for assessee having extended corporate guarantee .....

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and in any case, no service can be said to have been rendered in India. The plea of the assessee did not find favour even with the DRP and accordingly, the Assessing Officer held the guarantee commission of ₹ 33,40,347/- as taxable. 5. At the time of hearing, the learned representative for the assessee pointed out that an identical controversy was considered by the Mumbai Bench of the Tribunal in the assessee s own case for Assessment Year 2009-10 vide ITA No. 7198/Mum/2012 dated 28.3.2016 .....

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gemini India Pvt. Ltd. and Capgemini Business Services (India) Ltd. were sanctioned credit facilities by the Indian Branches of BNP Paribas, which credit facilities to the extent of USD 15 million4and 2 million respectively, were secured by the said corporate guarantee given by the assessee. The assessee has charged guarantee commission @ 0.5% per annum for the corporate guarantees given on behalf of its subsidiaries in India. The AO has taxed the same by holding it to be "Other Income" .....

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the assessee by making a compensatory payment. Accordingly the AO held that fees for guarantee arise in India. From the record we found that guarantee commission received by France company did not accrue in India nor it can be deemed to be accrued in India, therefore, not taxable in India under Income Tax Act. Furthermore, as per Article 23.3, income can be taxed in India, only if it arises in India. In the instant case, the income clearly arises in France because the guarantee has been given b .....

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therefore, following the aforesaid precedent, in the instant year also the guarantee commission of ₹ 33,40,347/- earned by the assessee from the two associate Indian concerns cannot be held to be taxable in India. As a consequence, on this aspect, the assessee succeeds. 7. Ground of appeal no. 5 is rendered infructuous in view of assessee having succeeded on Ground of appeal nos. 1 to 4. Thus, the same is dismissed as infructuous. 8. The controversy in Ground of appeal no. 6 arises from t .....

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ign company which is a tax resident of France. The royalty income earned by the assessee is liable to be taxed in India @ 10% in terms of Article 13 of DTAA between India and France. While calculating such liability, the Assessing Officer also charged surcharge and education cess in addition to tax @ 10%. The plea of the assessee before us is that the rate of tax of 10% prescribed in Article 13 of the DTAA cannot be enhanced by including surcharge and education cess. In this context, the learned .....

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, as were the India-UAE and India-Singapore treaties, considered by the Mumbai Bench and Kolkata Bench of the Tribunal respectively. It was, therefore, contended that surcharge and education cess could not be charged separately over and above the rate of 10% prescribed in Article 13 of the India-France DTAA. 10. On the other hand, the ld. CIT-DR appearing for the Revenue has not disputed the factual matrix brought out by the assessee, but defended the order of the authorities below. 11. We have .....

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