2024 (11) TMI 161 - AT - Income Tax

Denial of Concessional tax rate on royalty income u/s 115BBF - Treating royalty income as taxable @ 10% of royalty at a special rate of 10% as against the normal rate charged by the CPC - HELD THAT - Since in the instant case, admittedly, the assessee has uploaded the Form No.3CFA before completion of the proceedings u/s 143(1) of the Act, therefore, we are of the considered opinion that the Addl/JCIT(A), Panchkula should not have rejected the appeal filed by the assessee and thereby directing the AO to tax the royalty income at normal rate. We, therefore, set aside the order of the Addl/JCIT(A), Panchkula and direct the Assessing Officer to tax the royalty income at special rate of 10% as against the normal rate adopted by the CPC. The grounds raised by the assessee are accordingly allowed.

Issues:
1. Disallowance of concessional tax rate on royalty income under section 115BBF.
2. Failure to file Form No.3CFA along with the return of income.
3. Justification of Addl/JCIT(A) in dismissing the appeal.
4. Comparison with a similar case before the Hon'ble High Court of Madras.

Analysis:
1. The case involved the disallowance of the concessional tax rate on royalty income under section 115BBF. The appellant, an individual, filed the return of income declaring total income, including royalty income, at a special rate of 10%. However, the CPC processed the return under section 143(1) and taxed the royalty income at a normal rate instead of the special rate claimed by the appellant.

2. The primary issue was the failure to file Form No.3CFA along with the return of income. The appellant contended that the relevant assessment year was not enabled on the system for filing the form initially. Subsequently, the form was filed before the completion of the assessment proceedings. The Addl/JCIT(A) dismissed the appeal, stating that the appellant did not file the form within the statutory limit, making them ineligible for the concessional tax rate.

3. The Addl/JCIT(A) justified the dismissal of the appeal by emphasizing that the Assessing Officer, JCIT(A), and CIT(A) lacked the authority to condone the delayed filing of Form No.3CFA. As the form was not filed within the statutory limit, the appellant was deemed ineligible for the concessional tax rate. The Addl/JCIT(A) upheld the CPC's decision to tax the royalty income at the normal rate.

4. The appellant cited a similar case before the Hon'ble High Court of Madras, where the court directed the Assessing Officer to consider the Foreign Tax Credit (FTC) claim despite the late filing of Form No.67. Drawing parallels, the Tribunal found merit in the appellant's argument that since Form No.3CFA was uploaded before the completion of the assessment proceedings, the Addl/JCIT(A) erred in dismissing the appeal. The Tribunal set aside the Addl/JCIT(A)'s order and directed the Assessing Officer to tax the royalty income at the special rate of 10%.

In conclusion, the Tribunal allowed the appeal, emphasizing the timely filing of Form No.3CFA before the completion of assessment proceedings as a crucial factor in determining the applicability of the concessional tax rate on royalty income. The decision highlighted the importance of procedural compliance and the impact on tax implications in such cases.

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