TMI Blog2015 (4) TMI 1254X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the grounds of appeal raised at S.Nos.2 to 8 are accordingly allowed. Levy of interest u/s.234B - Held that:- Tribunal in the assessee's own case for Assessment Year 2007-08, with which we do not find any reason to differ as it was on similar facts and issues, we hold that the assessee is not liable to be charged interest under Section 234B of the Act. Penalty u/s 271(1)(c) - Held that:- We find that since no penalty thereunder has been levied on the assessee in the impugned order of assessment for Assessment Year 2008-09, no cause of grievance arises therefrom in respect of the assessee, requiring our adjudication. In this factual matrix, this ground raised by the assessee is not maintainable - IT (T.P.) Appeal No. 1676 (Bang.) of 2012 - - - Dated:- 17-4-2015 - N.V. Vasudevan And Jason P. Boaz, JJ. Sharath Rao, CA for the Appellant. A.K. Ganesh Rao, CIT-III (DR) for the Respondent. ORDER Jason P. Boaz, This appeal by the assessee is directed against the final order of assessment for Assessment Year 2008-09 passed under Section 143(3) rws 144C of the Income Tax Act, 1961 (herein after referred to as 'the Act') vide order dt.26.10.2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.55% 56986126 Total 261,01,44,848 39,47,59,375 39,15,21,727 32,57,21,513 The Assessing Officer completed the draft order of assessment under Section 143(3) rws 144C of the Act vide order dt.20.12.2011 wherein the income of the assessee was determined at ₹ 261,01,44,848 as returned by the assessee. In the draft order of assessment, the Assessing Officer observed that the assessee is offering the royalty income to tax both under Section 115A of the Act as also as per Article 12 of the India-USA DTAA. The Assessing Officer did not accept the tax determined by the assessee @ 10.455 % based on agreements entered into on or after 1.6.2005, but determined the tax payable @ 15% for all agreements entered into by the assessee during the relevant period. This led to the raising of tax demand of ₹ 23,04,02,060; which was inclusive of interest charged under Section 234B of the Act. 3. Aggrieved by the draft order of assessment for Assessment Year 2008-09 dt.20.12.2011, the assessee filed its objections thereto before the DRP, B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the Appellate Tribunal in the case of appellant, for A.Y. 2007-08, on the same issue. Levy of interest under Section 234B of the Act. 9. The learned A.O. and the DRP have erred in law and on facts in holding that the appellant is required to pay advance tax under Section 209 of the Act. 10. The learned A.O. and the DRP have erred in law and on facts in not appreciating the fact that the entire income received by IBM WTC was liable to be subjected to withholding tax provisions of the Act and accordingly, there was no requirement for the appellant to pay advance tax. 11. The learned A.O. and the DRP have erred in law and on facts in levying interest under Section 234B and section 234C of the Act without any cause. 12. The learned A.O. and the DRP have erred on facts in holding a view that the appellant has failed to pay advance tax under the Act disregarding the various decisions on which reliance was placed upon by the appellant, including the decision of the Hon'ble Supreme Court in the case of CIT v. UWE Jarosch (SLP 27193/2010 and 2918/2011). 13. The learned A.O. and the DRP have erred in law and on facts in disregarding the orders passed by the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the computation of tax rates on royalty income as submitted by the assessee is to be accepted; and this finding is extracted hereunder :- '7.1 We have carefully perused and given due consideration to the detailed arguments made and written submissions filed by both the learned Authorised Representative and the learned Departmental Representative. It is a settled position that as per section 90(2), the provisions of the Act or the provisions of the Treaty, whichever is beneficial, apply to the assessee. Even the learned Departmental Representative has agreed that in view of section 90(2), the provision of the tax Treaty override the provisions of the Act except to the extent the latter are more beneficial to the assessee. The question for consideration is at what stage the provisions of the Act and the Treaty should be examined to ascertain the beneficial nature of the provisions. In the instant case, the assessee has compared the provisions of the Act and the Treaty in respect of income arriving from royalty on the basis of agreements entered into before 1.6.2005 and thereafter 1.6.2005. Revenue, on the other hand, has compared the provisions of the Act and Treaty on an agg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arate and independent. We are inclined to accept the argument of the learned Authorised Representative that royalty income in respect of the agreement entered into before 1.6.2005 are from one 'source' and royalty income in respect of agreements entered into on or after 1.6.2005 are from a different 'source'. The contracts or agreements being the source of income have been entered into on different dates and the statute recognizes such time differentiation and provides separate tax rates for each such stream. The learned CIT(A) was, therefore, not correct in comparing the tax on royalty income as per the Act and as per the Treaty on an aggregate basis. In view of the above, we are of the considered opinion that the taxability of royalty under sub-clauses (A), (A), (B), (BB) and (C) of section 115A(1)(b) are separate and independent. 7.5 As per the provisions of section 90(2) of the Act OR the provisions of the Treaty, whichever is beneficial, applies to the assessee. It is settled law that the provisions of a Treaty would override the provisions of the Income Tax Act, 1961 and this view has been held in the following cases and circulars. - Union of India v. Az ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cided the issue of taxability of income under the provisions of the Act. In respect of the second issue, the assessee submitted that the provisions of section 115JA do not apply to a foreign company. The Tribunal did not accept this contention. The assessee then submitted that assuming the provisions of section 115JA were applicable, it is not liable for MAT under the Treaty. The Tribunal found that the assessee sought to avail the benefit of the Treaty selectively in respect of taxability of book profit u/s. 115JA and held that once the assessee exercises an option to be taxed under the provisions of the Act, Treaty provisions cannot be invoked. The relevant observations of the Tribunal were as follows : Either an assessee is to be assessed to tax on the basis of the provisions of the tax Treaty or not. In our considered view, the assessment of income cannot be split into several segments and then the applicability of Treaty provisions, vis- -vis tax law provisions, cannot be separately considered for each segment. Liability for MAT under section 115JA is an integral part of assessee's assessment of income, and, once the assessee chooses to be assessed as per provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the provisions of the Act would prevail and as a result the loss of the foreign branch has to be set off in computing the taxable income in India. In the year of profit, relying on Article 7 of the India - Japan DTAA Treaty, the assessee submitted that the profits of the foreign branch would suffer tax only in that country and not in India. The Department objected to this selective Treaty application for different years. The Tribunal held that each year is different and hence the assessee is entitled to such applicability of the Act for one year and Treaty benefits for a different year. In the instant case, the issue in question is not with regard to taxability of royalty income at different rates under the Treaty and the Act. The above decision is not similar or applicable to the facts of the case on hand and is distinguishable both on facts and in law. 7.8 There is merit in the contention of the learned A.R. on the aspect of principle of consistency also. In the instant case, it is seen that the Assessing Officer has accepted the computation of tax based on different rates in the assessment orders passed u/s. 143(3) for Asst. Year 2006-07 whereas the very same off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of royalty income is to be accepted. In this view of the matter, the grounds of appeal raised at S. Nos.2,3,4 and 5 are accordingly allowed.' 6.3.2 Following the directions of this co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08 in IBM World Trade Corpn's case (supra), on identical facts and issues, we hold and direct that the computation of tax submitted by the assessee in respect of royalty income is to be accepted. In this view of the matter, the grounds of appeal raised at S.Nos.2 to 8 are accordingly allowed. 7. Levy of interest u/s.234B of the Act. 7.1 In the grounds raised at S.Nos.9 to 13, the assessee challenge the action of the authorities below in charging it interest under Section 234B of the Act, denying itself liable to such charge. The learned Authorised Representative relied on the orders of various co-ordinate benches of this Tribunal in the assessee's own case for the earlier Assessment Years 2003-04 to 2007-08 wherein it was held that the assessee is not liable to be charged interest under Section 234B of the Act. 7.2 Per contra, the learned Departmental Representative relied on the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s own case for Assessment Year 2007-08, with which we do not find any reason to differ as it was on similar facts and issues, we hold that the assessee is not liable to be charged interest under Section 234B of the Act. Consequently, the grounds raised at S.Nos.9 to 13 of the assessee's appeal are allowed. 8. Ground No.14 : In the course of appellate proceedings before us, the learned Authorised Representative submitted that, this ground, raised in respect of non-grant of credit claimed for TDS to the extent of ₹ 29,86,06,708, is not being pressed since the Assessing Officer has allowed credit for the same as per rectification order under Section 154 of the Act dt.17.12.2013 for Assessment Year 2008-09. In view of this ground not being pressed in this appeal, it is rendered infructuous and is accordingly dismissed. 9. Ground No.15 : In this ground, the assessee challenges the action of the authorities below in initiating penalty proceedings under Section 271(1)(c) of the Act by issue of notice under Section 274 rws 271 of the Act dt.26.10.2012. We find that since no penalty thereunder has been levied on the assessee in the impugned order of assessment for Assess ..... 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