2012 (11) TMI 1228 - HC - Income Tax

Income accrued to the assessee in India in respect of supply of equipment - business connection of the assessee in India - Duty is cast on the payer to pay tax at source on failure on the part of the payee no interest u/s. 234B - income of the assessee arising on account of Royalty and Fees for Technical Services is taxable on receipt basis and not on accrual basis

Summary

Issues:
1) Whether income accrued to the assessee in India in respect of supply of equipment due to business connection?
2) Can interest u/s. 234B be imposed on the payee assessee for failure to pay advance tax under section 195?
3) Is the income of the assessee from "Royalty and Fees for Technical Services" taxable on receipt basis or accrual basis?

Analysis:

Issue 1:
The first issue pertains to whether income accrued to the assessee in India in relation to the supply of equipment due to a business connection. The Court noted that this question had been previously addressed in a different case, where it was ruled against the revenue. The judgment cited was Director of Income Tax (International Taxation) v. M/s. Xelo Pty Limited. Consequently, the Court held that the first question could not be entertained.

Issue 2:
The second issue concerns the imposition of interest u/s. 234B on the payee assessee for failure to pay advance tax under section 195. The Court referred to the decision in the Assessee's own case, Tax Appeal No.124 of 2010, where similar questions were addressed and ruled against the revenue. Therefore, the Court concluded that the second question could not be entertained based on the previous judgment.

Issue 3:
The final issue revolves around whether the income of the assessee from "Royalty and Fees for Technical Services" should be taxed on a receipt basis or accrual basis. The Court did not delve into this matter separately as it was already resolved in the aforementioned case, Tax Appeal No.124 of 2010. Since the questions raised in the current case were similar to those addressed in the previous judgment, the Court held that the third question could not be entertained.

In conclusion, the appeal was disposed of accordingly, with no specific order as to costs. The judgment highlighted the importance of consistency in legal decisions and the precedence set by previous rulings in similar cases.