2012 (12) TMI 1150 - AT - Income Tax

Interest received on income-tax refund - Fees for technical services - DTAA between India and Denmark - Held that - This issue has been decided by the Mumbai bench of the Tribunal in the case of Hapag Lloyd Container Linie GmbH v. ADIT (IT) 2010 (12) TMI 282 - ITAT, MUMBAI by holding interest on income tax refund falling under Article 11 of the DTAA between India and Germany (similar to Article 12 of India and Denmark DTAA under consideration) liable to tax. It has been held in that order that such interest cannot be considered as business income covered under Article 8 of DTAA between India and Germany (similar to Article 9(4) of DTAA between India and Denmark under consideration). In view of the afore-noted order passed by the Mumbai Bench of the Tribunal, we uphold the impugned order on this issue.

Summary

Issues:
1. Revenue's appeal against the treatment of payments as fees for technical services under DTAA.
2. Assessee's appeal against taxing interest on income-tax refund under DTAA.

Analysis:
1. The Revenue's appeal contested the direction of the CIT(A) regarding payments received from certain entities not being treated as fees for technical services under Article 13(4) of the DTAA. The assessee, a nonresident company in the shipping business, received amounts linked to global tracking system costs. The Assessing Officer deemed these amounts as Royalty/Fees for technical services. However, the CIT(A) ruled in favor of the assessee, considering the amount as profit derived from ship operations under Article 9(1) of the DTAA. The Tribunal upheld this decision, noting consistency with a previous ruling in the assessee's favor.

2. The assessee's appeal challenged the tax treatment of interest received on an income-tax refund under the DTAA. The assessee received interest under section 244A, treated as income from ship operations under Article 9(4)(a) of the India-Denmark DTAA. The Assessing Officer categorized this interest under Article 12(6) of the DTAA, a decision upheld by the CIT(A). The Tribunal referred to a previous Mumbai bench ruling, which held that such interest falls under Article 11 of the DTAA between India and Germany, making it taxable. The Tribunal concurred with this interpretation, upholding the assessment order on this issue.

In conclusion, both appeals were dismissed by the Tribunal based on the analysis and interpretation of the relevant provisions of the DTAA and previous judicial precedents. The judgment was pronounced on December 14, 2012, by the Tribunal in Mumbai.