TMI Blog2020 (12) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... ipt as per the provisions of DTAA. Accordingly, we are of the view that the tax authorities are not justified in assessing the impugned income on accrual basis. Accordingly, we set aside the order passed by Ld. CIT(A) and direct the A.O. to delete the impugned addition. A.R submission that the impugned income has been offered to tax in the year relevant to the assessment year 2015-16 but no material was placed either before the A.O. or before us to substantiate the above said submission. In fact, the AO has specifically mentioned in the assessment order that the assessee has not proved its submissions - Since the Ld. A.R. also could not also exactly pinpoint with evidence that the impugned income was offered to tax in assessment year 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a company incorporated and operating in Germany. The assessing officer noticed from Form No. 3CEB that the assessee has received a sum of ₹ 90,21,347/- towards testing and inspection charges, which are in the nature of Fee for Technical Services . The A.O. noticed that the assessee has not offered the same as income. The A.O. also noticed that M/s. ABB India Limited, by whom the above said amount was payable, had created a provision in its books of accounts. Hence the AO proposed to assessee the above said amount as income of the assessee. 4. The Ld. A.R. submitted that the assessing officer has erroneously stated that the assessee has received the above said amount. He submitted that the assessee has not received the above said a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andard Triumph Motor Company Ltd. (supra) was related to a case where no Double Taxation Avoidance Agreement was available between India and the other country. In the instant case, Double Taxation Avoidance Treaty was entered by India with Federal Germany Republic as per notification dated 26.8.1985. Hence, the provisions of DTAA shall override the provisions of Income Tax Act, if it is beneficial to the assessee. The Ld. A.R. submitted that, as per the provisions of DTAA, the FTS income is taxable on receipt basis . The Ld. A.R. further submitted that the assessee is also following cash system of accounting and hence there was no occasion for the assessee to offer the impugned income on accrual basis. In support of this submission, the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that other State. The Mumbai Bench of Tribunal in the case of UHDE GMBH (supra) has examined the issue as to whether the royalties of FTS is taxable on receipt basis or accrual basis. For the sake of convenience we extract below the operative portion of the order:- 3. The AO, inter alia, relying on the Madras High Court decision in the case of CIT vs. Standard Triumph Co. Ltd. (1979) 119 ITR 573 (Mad), had held that the income by way of fees for technical services was liable to be taxed on accrual basis and not on receipt basis. When the matter was carried in Appeal, the CIT(A) relying on art. VIIIA of the Agreement for the Avoidance of Double Income-tax between India and the Federal Republic of Germany, held that the same was li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogether, there cannot be any doubt that what is taxable is payment received by a person of the other Contracting State. Though under S. 5(2)(b) of the IT Act, in the case of a non-resident, income which accrues or arises or deem to accrue or arises to him in India is taxable, in view of the specific provisions of Art. VIIIA, what could be taxed, is only a payment to him. This presupposes, that the liability to tax arises only on the non-resident receiving such payment. The same is not liable to be taxed on an accrual basis as has been laid down under S. 5 of the IT Act. The order of the CIT(A) which is to this effect, is not, therefore, open to any challenge. The reliance by the Revenue on the decision of the Madras High Court reported in ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 85 held that the assessment of royalty or any fees for technical services should be made in the year in which the amounts are received and not otherwise. Counsel for the Revenue relied upon the Special Bench decision of the Tribunal in the assessee's own case, which in our opinion, has no relevance to the facts of the present case, as it relates to the period prior to the issuance of Notification dated 26th August 1985. In this view of the matter the decision of the Income Tax Appellate Tribunal in holding that the royalty and fees for technical services should be taxed on receipt basis cannot be faulted. The Mumbai bench of Tribunal has followed the above said decision of Hon'ble Bombay High Court in the case of Johnson Johns ..... X X X X Extracts X X X X X X X X Extracts X X X X
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