TMI Blog2023 (8) TMI 333X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt 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. Only difference is that it relates to royalty under India- Switzerland DTAA, and Article 12 of DTAA defines royalty and fees for technical services in the same manner and also the DTAA provisions of India-Germany and India-Switzerland are similar. Therefore, respectfully following the above judgment, we allow the appeal of the assessee. - Shri George George K., Vice President And Shri Laxmi Prasad Sahu, Accountant Member For the Appellant : Shri Chavali Narayan, CA For the Respondent : Shri Veera Raghavan, Jt.CIT(DR)(ITAT), Bengaluru ORDER PER LAXMI PRASAD SAHU, ACCOUNTANT MEMBER This appeal is filed by the assessee against the order dated 29.03.2019 of the CIT(Appeals)-12, Bengaluru for the AY 2014-15. 2. At the outset, it is noticed that the assessee was issued a defect notice dated 03.04.2023 by the registry stating that the appeal is time bared by 1,377 days. In this regard, the assessee has made submissions vide letter dated 11.07.2023 that the delay of 1,377 days has been compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the order, shall continue to exercise the jurisdiction of appeal. This principle is applicable even if the transfer is under section 127 for the same assessment year(s). Accordingly, the assessee was advised that the jurisdiction for filing of ITAT appeal is at Bangalore instead of Mumbai. Noting the above ruling, the assessee filed a letter dated 01.02.2023 withdrawing the Appeal filed at Mumbai. Pursuant to the hearing, the Mumbai Bench passed order dated 01.02.2023 dismissing the assessee s appeal as withdrawn and the order was served on 21.02.2023. 4. Under the above circumstances, the assessee has filed fresh appeal against the assessment order with the ITAT, Bangalore on 27.03.2023. The ld. AR submits that the filing of appeal before the Bangalore Tribunal was on account of the fact that the Appellant became aware of the fact that the appeal does not lie before the Mumbai Tribunal (the original forum) in view of the Apex Court decision in the case of PCIT v. ABC Papers Ltd (2022) 141 Taxmann.com 322 (SC). Hence, there was a reasonable cause for delay in filing of appeal before the Hon'ble Bangalore Tribunal. In this regard, reliance is placed on decisions rende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid amount twice once in AY 2014-15 and again in AY 2015-16. 7. The learned AO has erred in law and facts by levying interest under Section 234B of the Act amounting to INR 7,29,855. 8 The learned AO has erred in law and facts by initiating penalty proceeding under Section 271(1)(c) read with Section 274 of the Act. 7. Ground No. 1 was not pressed by the assessee and hence it is dismissed as not pressed. The ground No. 07 08 is consequential in nature. 8. Ground Nos. 2 to 6 relate to addition of Rs. 1,62,18,833. The brief facts of the case are that the erstwhile ABB Technology Ltd. is a company incorporated and operating in Switzerland (presently ABB Switzerland Ltd. since merged), filed return of income for AY 2014-15 on 29.11.2014 declaring total income of Rs. 184,07,46,733 as special income (royalty income). The case was selected for scrutiny with a reason International Transaction(s) in respect of intangible property (Form 3CEB) and Large International transaction(s) (Form 3CEB.) Statutory notices were served on the assessee. The case was referred to the TPO for determination of ALP of the international transactions u/s. 92CA of the Act after obtaining appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee and dismissed the assessee s appeal. Aggrieved, the asse is in appeal before the Tribunal. 11. The ld. AR reiterated the submissions made before the lower authorities and submitted that the assessee is consistently following cash system of accounting since AY 2011-12. The company is a tax resident of Switzerland and accordingly eligible to claim the benefit of DTAA provisions between India-Switzerland. Further as per the provisions of section 90(2) of the Act, the provisions of DTAA are applicable to the company to the extent it is more beneficial than the corresponding provisions of the Act. The license provided by the appellant is in the nature of royalty and the term royalty has been defined in the Indian Income-tax Act as well as the treaty provision. In view of the DTAA provisions, royalty is taxable in the year in which consideration is actually received. He also submitted that as per Form 26AS, ABB India Ltd. (Deductor/payer) has reported an amount of Rs. 184,07,46,733 on which tax has been deducted and the same amount has been offered by the assessee as for taxation in India on receipt basis in the impugned assessment year. He further submitted that the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also not applicable since the assessee is entitled to choose a beneficial provision as per the DTAA provisions. He therefore submitted that the decision of coordinate Bench in the case of M/s. ABB AG (supra) is squarely applicable to assessee s case. 14. We have considered the rival submissions and perused the material on record. The assessee is a NRI and has received royalty from ABB Technology Ltd. of Rs. 184,07,46,730 which has been offered to tax @ 10% and the same is reflected in Form 26AS. The assessee is offering income since AY 2011-12 on cash basis. From the Form 3CEB the AO found a difference of Rs. 1,62,18,833. The ld. AR assessee submitted this amount has not been received by the assessee. We note that similar issue has been decided by the coordinate Bench in M/s. ABB AG (supra) as follows:- 9. We heard Ld. D.R. and perused the record. There is no dispute with regard to the fact that India has entered into a Double Taxation Avoidance Treaty with Federal Germany Republic as per notification dated 26.8.1985. It is also settled proposition of law that the DTAA provisions shall override the Income tax provisions unless the provisions of Income tax Act is beneficial t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we read cl. 3, which defines the term royalties and cl. 4, as observed earlier, which defines the term fees for technical services together, 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 (1979) 119 ITR 573 (Mad) (supra), is of little help. The decision, no doubt, is an authority for the proposition that income accruing to a non-resident assessee is liable to tax even if the assessee is keeping its account on the cash basis in regard to its income. This decision has not taken into consideration the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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. The Ld. A.R. submitted before us that the assessee has received several payments and the impugned income would form part of any of those payments. Since the Ld. A.R. also could not also exactly pinpoint with evidence that the impugned income was offered to tax in assessment year 2015-16, he agreed that this fact may be verified by the assessing officer. Accordingly, we restore this issue to the file of A.O. for limited purpose of satisfying himself that the impugned amount has been offered to tax by the assessee in A.Y. 2015-16 or in any other assessment year. 15. The facts of the above decision on fees for technical services in M/s. ABB AG (supra) relating to India-Germany DTAA are similar to present case, the only difference is that it relates to royalty under India- Switzerland DTAA, and Article 12 of DTAA defines royalty and fees for technical services in the same manner and also the DTAA provisions of India-Germany and India-Switzerland are similar. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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