9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (1) TMI 212 - AT - Income TaxIncome deemed to accrue or arise in India - business PE in India - receipts of the assessee from Indian customers constitute royalty u/s 9(1)(iv) - assessee derived revenues from its airline customers in India - Whether non-resident entities have fixed place business PE in India? - whether there is any PE of the assessee in India or not? - HELD THAT - For the A.Y. 2014-15, the ld. DRP held that the assessee had PE in India the services provided by the assessee are software services covered under Explanation 2 to Section 9(1)(vi) of the Act. Having heard the arguments of both the parties who reiterated the similar arguments taken up before the authorities below, we decline to interfere with the reasoned order of the ld. CIT(A) resulting in dismissal of the appeal of the Revenue on the issue of PE in India. Royalty Receipt - AO taxed the entire receipts as income of the assessee to be taxed @ 40%, the ld. CIT(A) held that the gross income has to be taxed @ 10% in accordance with the provisions of Section 9(1)(vi) and Section 115A - HELD THAT - We have gone through the entire arguments given by the assessee and the judgments quoted by the assessee which have been duly incorporated in the order of the ld. CIT(A). We have also been made aware that the receipts of the assessee for the subsequent A.Ys. 2015-16, 2016,-17, 2017-18 have also been taxed @ 10% which has been the ratio followed by the ld. CIT(A) for the A.Y. 2013-14. In view of the settled position, we hereby affirm the decision of the ld. CIT(A). Appeal of revenue dismissed.
Issues Involved:
1. Existence of Permanent Establishment (PE) in India. 2. Taxability of receipts as "Royalty" under Section 9(1)(vi) of the Income Tax Act, 1961. 3. Applicability of Section 44DA and Rule 10(ii) of the Income Tax Rules. 4. Levy of interest under Sections 234A, 234B, and 234C of the Income Tax Act. Detailed Analysis: 1. Existence of Permanent Establishment (PE) in India: The revenue contended that the assessee, a non-resident entity, had a fixed place PE in India for the assessment year (A.Y.) 2013-14. The assessee argued that it did not have any office or place of business in India nor any employees based out of India. The CIT(A) concluded that the concept of PE is narrower than the concept of business connection under Section 9 of the Income Tax Act. The CIT(A) found that the assessee did not have a fixed place of business or a dependent agent in India, and thus, no PE was established. However, the CIT(A) noted that the assessee had a business connection in India through its clients (airlines) who used a login portal for services, thereby establishing a business connection but not a PE. The Tribunal affirmed the CIT(A)'s decision, dismissing the revenue's appeal on this issue. 2. Taxability of Receipts as "Royalty": The AO treated the entire receipts of Rs. 8.33 crores as taxable income at 40%, while the CIT(A) held that the gross income should be taxed at 10% under Section 9(1)(vi) and Section 115A of the Income Tax Act. The CIT(A) reasoned that the income of the assessee was in the nature of royalty under Section 9(1)(vi) as it involved the use of intellectual property and imparting information concerning commercial knowledge, experience, or skill. The Tribunal reviewed the arguments and judgments cited by the assessee, distinguishing them on the basis of the nature of services provided by the assessee, which involved specialized consultancy and advice through an electronic platform. The Tribunal upheld the CIT(A)'s decision to tax the receipts at 10%. 3. Applicability of Section 44DA and Rule 10(ii) of the Income Tax Rules: The CIT(A) held that since the assessee did not have a PE in India, the provisions of Section 44DA, which require a PE for taxing royalty on a net basis, were not applicable. Consequently, the income was to be taxed on a gross basis at 10% as per Section 115A. The Tribunal agreed with this reasoning, noting that the absence of a PE meant that the income could not be taxed under Section 44DA, and thus, no expenses could be allowed. The Tribunal also noted that the tax rate of 10% on gross receipts factors in the attribution of income, making Rule 10(ii) inapplicable. 4. Levy of Interest under Sections 234A, 234B, and 234C: The assessee contested the levy of interest under Sections 234A, 234B, and 234C. However, this issue was not separately addressed in detail in the judgment, implying that the Tribunal did not find merit in the assessee's contention on this point. The Tribunal's decision to affirm the CIT(A)'s order implicitly upheld the levy of interest as determined by the AO. Conclusion: The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision that the assessee did not have a PE in India and that the receipts were taxable as royalty at 10%. The assessee's appeal and cross-objection were also dismissed, thereby upholding the CIT(A)'s order in its entirety. The judgment reinforces the distinction between business connection and PE, and the specific tax treatment of royalty income under Indian tax law.
|
