2012 (12) TMI 1161 - AT - Income Tax

Summary

Issues Involved:
1. Validity of assessments made u/s 143(3) read with section 148.
2. Accrual of income in the absence of RBI approval.
3. Taxability of fees for technical services under relevant tax treaties.

Summary:

1. Validity of Assessments Made u/s 143(3) Read with Section 148:
The preliminary issue challenging the validity of assessments made by the AO u/s 143(3) read with section 148 was raised in ground Nos. 1 to 4. However, these grounds were not pressed by the learned counsel for the assessee at the time of hearing before the Tribunal and were accordingly dismissed as not pressed.

2. Accrual of Income in the Absence of RBI Approval:
In ground No. 5, the addition made on account of fees for technical services was challenged on the basis that there being no approval received from RBI under the Excise Control Regulation Act to pay the impugned amount by BAH India to the overseas group entities, the said amounts did not partake the character of income and there was thus no accrual of income in the year under consideration. The Tribunal observed that the amounts payable by BAH India to the overseas group entities in Germany, Indonesia, and Panama (SE Asia) were debited by BAH India to the profit & loss account and were also claimed as expenses, but no RBI approval was obtained for remitting the said amounts in foreign exchange as required by relevant provisions of Foreign Exchange Regulation Act during the year under consideration. The Tribunal held that income on account of the amounts payable by BAH India to the overseas group entities could be said to have accrued to the said entities only on receipt of the required approval from RBI and there being no such approval received during the year under consideration, the same could not be taxed as income in that year. The Tribunal deleted the additions made on this count by the AO and confirmed by the learned CIT(Appeals) in the case of the said three entities.

3. Taxability of Fees for Technical Services Under Relevant Tax Treaties:
In ground No. 7, the assessee disputed the additions made by the AO and confirmed by the learned CIT(Appeals) on account of the amounts payable by BAH India on the ground that the same are not liable to tax in India under the relevant tax treaties which cover only the amounts paid. The Tribunal observed that the amounts in question payable by BAH India to the three overseas group entities in Germany, Singapore, and U.K. were not paid during the year under consideration. The Tribunal held that royalties and fees for technical services should be reckoned for taxation only when it is actually received by the assessee and not otherwise, as per the relevant provisions of the Double Taxation Avoidance Treaty between India and the three concerned States. The Tribunal allowed ground No. 7 of ITA No. 4502, 4506, and 4508/Mum/2003.

Conclusion:
The appeals being ITA Nos. 4502, 4503, 4504, 4506, and 4508/Mum/2003 were partly allowed, and ITA No. 4507/Mum/2003 was dismissed. The order was pronounced on the 21st day of Dec., 2012.