2019 (4) TMI 2099 - AT - Income Tax

Rate of tax applicable to domestic companies and/or co-operative banks - Scope of provisions of Article 26 (Non-discrimination) of the India-France tax treaty - HELD THAT - The above issue is covered against the assessee by a series of orders passed by various Co-ordinate Benches in assessee s own case 2013 (8) TMI 1173 - ITAT MUMBAI a foreign company was 48% compared to 38% applied in case of domestic companies. The assessee had argued that it was discriminatory and not in accordance with law. Reference was made to non-discrimination clause in the Treaty as per which there should not be any discrimination between the domestic and the non-resident company. Tribunal however referred to the Explanation in the Section 90 inserted in the IT Act with retrospective effect from 01-04- 1962 as per which the higher tax rate in case of foreign company should not be regarded as violation of non-discrimination clause. The facts in the present appeal are identical and therefore respectfully following the decision of the Tribunal in the case of M/s BNP Paribas(supra) we dismiss this ground raised by the assessee Data processing fees paid by Indian Branch offices of the Appellant to its Singapore branch as income of the Appellant under Article 13 (Royalty and fees for technical services) of the India-France tax treaty - HELD THAT - The issue is about data processing fees paid by Indian Branch Office of the assessee to Singapore Branch to the tune under Article 13 of the India-France treaty. We find that while deciding the appeal for AY 2009-10 2016 (3) TMI 1355 - ITAT MUMBAI the Tribunal has decided the issue. Short credit of taxes given by the AO of tax deducted at source - HELD THAT - We direct the AO to verify the facts and grant credit of taxes deducted at source as per the provisions of the Act after giving reasonable opportunity of being heard the assessee.

Summary

Issues Involved:
1. Applicability of tax rate under India-France tax treaty for domestic companies and co-operative banks.
2. Tax treatment of data processing fees paid by Indian Branch offices to Singapore branch under the India-France tax treaty.
3. Levying surcharge and education cess on tax computed under the treaty.
4. Recomputation of deduction under section 44C of the Income Tax Act.
5. Short credit of taxes deducted at source.
6. Charging of interest.
7. Initiation of penalty under section 271(1)(c).

Analysis:

Issue 1:
The first ground of appeal raised by the assessee pertains to the applicability of tax rates under the India-France tax treaty for domestic companies and co-operative banks. The Tribunal upheld the order of the Ld. CIT(A) based on previous decisions in similar cases, where it was ruled that the higher tax rate for foreign companies does not violate the non-discrimination clause. The Tribunal cited relevant legal provisions and precedents to dismiss the appeal on this ground.

Issue 2:
The second ground of appeal concerns the tax treatment of data processing fees paid by Indian Branch offices to the Singapore branch under the India-France tax treaty. The Tribunal, following its own precedent and a Special Bench decision, ruled in favor of the assessee. It held that such payments cannot be taxed in India as they do not give rise to income taxable under domestic law or the relevant tax treaty. The Tribunal directed the Assessing Officer to delete the impugned disallowance, providing relief to the assessee.

Issue 3:
Regarding the third and fourth grounds of appeal, which involve levying surcharge, education cess, and re-computing deductions under section 44C of the Act, the Tribunal deemed them academic in light of the decision on the second ground. These grounds were allowed accordingly.

Issue 4:
The fifth ground of appeal relates to a short credit of taxes deducted at source. The Tribunal directed the Assessing Officer to verify the facts and grant credit of taxes deducted at source as per the provisions of the Act, after affording the assessee a reasonable opportunity to be heard.

Issue 5:
The sixth ground of appeal concerning the charging of interest was considered consequential, and no specific action was taken as it was linked to other issues addressed in the judgment.

Issue 6:
As the penalty under section 271(1)(c) had only been initiated, the seventh ground of appeal was deemed premature by the Tribunal.

In conclusion, the Tribunal partly allowed the appeal, providing relief to the assessee on certain grounds while deeming others as academic or premature. The judgment was pronounced on 22/04/2019.

This detailed analysis covers each issue raised in the judgment, outlining the Tribunal's reasoning and decisions on each ground of appeal presented by the assessee.