2015 (10) TMI 2810 - AT - Income Tax

Tax rate for royalty income - Determination of tax liability on income earned by way of Royalty earned by the assessee in India - India-USA DTAA - different rates for different payments - income arising out of agreements entered prior to 01.06.2005 were offered under the provisions of DTAA at the rate of 15% and income arising on account of agreements entered after 01.06.2005 were offered for taxas per the provisions of Section 115A of the Act at 10% - HELD THAT - We find that the issue raised by the Revenue in this appeal is squarely covered by the decision of the coordinate bench in IBM World Trade Corporation v. DDIT 2012 (5) TMI 58 - ITAT BANGALORE CIT (A) has reproduced this decision in its entirely in his order. Nothing has been brought before us by the Revenue to take a different view. Especially so since the decision relied on by the CIT (A) was that of the assessee itself for an earlier year on the same set of facts.- Decided against revenue.

Summary

Issues:
1. Application of different tax rates for royalty income received from agreements entered into before and after 1.6.2005.
2. Entitlement of the assessee to benefit from both DTAA and provisions of the Income Tax Act for different sources of income.
3. Liability of a non-resident assessee for advance tax payment and interest under the IT Act.

Issue 1: Application of different tax rates for royalty income:
The appeal by the Revenue challenged the CIT(A)'s decision allowing the assessee to adopt different tax rates under Section 115A(1)(b)(AA) of the Income Tax Act and Article 12 of the Indo-US DTAA for royalty income received from agreements entered into before and after 1.6.2005. The Revenue contended that applying different rates for different payments was impermissible. However, the CIT(A) relied on a previous decision in the assessee's favor for A.Y. 2007-08 and upheld the benefit of utilizing different tax provisions for distinct sources of income. The ITAT, in line with the decision of a coordinate bench in IBM World Trade Corporation v. DDI, affirmed the CIT(A)'s ruling, emphasizing that the Revenue failed to present any new evidence to warrant a different conclusion. Consequently, the Revenue's appeal was dismissed.

Issue 2: Entitlement to benefit from DTAA and IT Act provisions:
The Revenue further contended that the assessee could not avail benefits under both the DTAA and the Income Tax Act to minimize tax liability. The CIT(A) justified the assessee's approach based on the earlier decision in the assessee's favor for a different assessment year. The ITAT concurred with the CIT(A)'s reasoning, citing the lack of new arguments from the Revenue to challenge the prior decision. As a result, the Revenue's appeal on this issue was also dismissed.

Issue 3: Liability of non-resident assessee for advance tax and interest:
The Revenue raised concerns regarding the non-resident assessee's liability for advance tax payment and interest under the IT Act. The CIT(A) ruled in favor of the assessee, stating that being a non-resident, the assessee was not obligated to pay advance tax as the income was subject to TDS under section 195, thus exempting it from interest under section 234B. The Revenue's contentions were refuted by the CIT(A) and upheld by the ITAT, emphasizing that the provisions of section 209 on advance tax computation did not apply to cases covered under section 195. The ITAT dismissed the Revenue's appeal on this ground as well.

In conclusion, the ITAT upheld the CIT(A)'s decision in favor of the assessee on all grounds raised by the Revenue, leading to the dismissal of the appeal and affirming the applicability of different tax rates for royalty income and the entitlement of the assessee to benefit from both DTAA and Income Tax Act provisions for distinct sources of income.