TMI Blog2017 (12) TMI 1047X X X X Extracts X X X X X X X X Extracts X X X X ..... % and Secondary and Higher Education Cess @ 1 percent - assessee has offered its income to tax under Article 13 of Double Taxation Avoidance Agreement (DTAA) between India and France at 10 percent - Held that:- We find that the Hon’ble ITAT in [2016 (7) TMI 712 - ITAT MUMBAI] has already decided this grounds in favour of assessee by holding that revenue cannot levy surcharge and education cess, which is also in the nature of surcharge, over and above the cap of 10% prescribed in article 13 as the tax rate for Royalty income. In any case the provision of article 13 of the India-France DTAA r.w.r 2 thereof would prevail over the provision of the domestic Income Tax law and thus the tax liability on royalty income shall be capped at 10%. Therefore, respectfully following the decision of the coordinate bench of Hon’ble ITAT and in order to maintain judicial discipline and consistency which are applicable mutatis mutandis in the case of the assessee. We accordingly gave similar directions to the AO as were given by Hon’ble ITAT to recompute the tax liability on royalty income accordingly. Thus this ground so raised by the assessee company is allowed - I.T.A. No. 4035 And 4036/Mum/2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 234B of the Act are not applicable to it. The Appellant craves leave to add, alter, modify or delete any grounds of appeal at or before the time of hearing. 4. The brief facts of the case are that the assessee company is incorporated in France and carries on the business of providing hotel related services to hotels across the world including India and earned income under the previously entered into agreements with Indian Hotels. The assessee has permitted the use of its trade mark LE MERIDIAN by the hotels. The consideration received by the assessee has been offered to tax as Royalty F.T.S. The return of income was filed on 25.09.10 declaring total income at ₹ 15,73,12,028/-. The return was processed as such u/s. 143(1) of the Act . Thereafter, the case of the assessee company was taken up for scrutiny proceedings and after serving serving notices and after seeking reply of the assessee, order of assessment u/s 143(3) r.w.s. 144C(3) of I.T. Act, 1961 thereby making additions of ₹ 1,13,00,467/- being the amount of service tax by holding that the same is to be included in the taxable income of the assessee and further surcharge, education ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the reduction of the aforesaid amount of the service tax from the fee/royalty received by it from the customers, and had further clearly averred that neither the aforesaid shortfall/deficit in the amount of fees/royalty remitted by the customers, was payable by the customers, nor the assessee company had retained with it any right/claim as regards recovery of any such amounts deducted by the customers qua the liability towards service tax as was so cast upon them. Thus it is in the backdrop of the aforesaid factual position, that we herein proceed to adjudicate as to whether the shortfall/deficit of the amount of fee/royalty of ₹ 1,71,13,377/-(supra), which as observed hereinabove is neither payable by the customers to the assessee company, nor the latter stands vested with any right to recover such amount from the said customers, can be construed as the income of the assessee company, or not. 4.1. We are persuaded to agree with the contention of the Ld. A.R that in light of the facts involved in the case of the present assessee company, the amount of ₹ 1,71,13,377/-(supra) reduced by the customers on account of service tax liability from the amount of fees/royalty, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llected amounts from the purchasers, which included sales tax, but did not pay the amount of sales tax to the actual owner of the goods auctioned, because the statutory liability for the payment of that sales tax was that of the assessee. However, the assessee on the other hand did not also deposit the amount of sales tax realized by it in the state exchequer, for the reason that as per the assessee the statutory provision creating that liability upon it was not valid. Thus it was in the backdrop of the said factual background, wherein the assessee auctioneer as a matter of fact collected the sales tax from the purchasers, but thereafter neither did part with the same in the favor of the sellers, nor deposited the same with the state exchequer, that the Hon ble Apex Court not going by the nomenclature adopted by the assessee as regards the said receipt , therein concluded that it was the nature and quality of receipt as would prove decisive, and held that the amount of Sales tax so collected by the assessee would form part of its trading or business receipt, though subject to a rider that the assessee would stand entitled to claim deduction of the amount, as and when the same is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated 25/07/2016(supra) placed before us, we therefore restore the issue to the file of the A.O for verifying the aforesaid claim of the assessee company, and on finding the same in order, delete the addition of ₹ 1,71,13,337/-(supra) made in the hands of the assessee company. In this regard it is further directed that the A.O in the course of verifying the aforesaid claim of the assessee company shall in all fairness afford an opportunity of being heard to the assessee company. Thus the Ground of appeal No. 1 so raised by the assessee company is allowed in light of our aforesaid observations and directions. 7. On the other hand, Ld DR appearing on behalf of revenue also admitted that the present grounds are covered by the order of Hon ble ITAT in assessee s own case. 8. We have heard the counsels for both the parties and also perused the orders passed by Ld. CIT(A) and Hon ble ITAT as mentioned above in assessee s own case. We find that the Hon ble ITAT has already decided these grounds in favour of assessee by holding that the additions on account of service tax cannot be treated to the income of the assessee company. Therefore, respectfully following the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Kolkata Bench of the Tribunal in the case of DIC Asia Pacific Pte. Ltd. vs. DIT (IT), 52 SOT 447 (Kolkata Trib). At the time of hearing, the learned representative also furnished copy of the DTAA between India and France to point out that the treaty is similarly worded qua the impugned aspect, 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 io% prescribed in Article 13 of the India-France DTAA. In the other hand, the id. 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. Capgemini SA ITA No. 888/Mum/2016 We have carefully considered the rival submissions. Article 2 of India-France DTAA provides a LVdefinition of taxes which are governed by such treaty and the same, inter-alia, prescribes that the expression income-tax would include any surcharge thereon. Clause (2) of Article 2 further prescribes that the treaty shall also apply to any identical or substantia ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
