Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2018 (12) TMI AT This

  • Login
  • Cases Cited
  • Referred In
  • Summary

Forgot password       New User/ Regiser

⇒ Register to get Live Demo



 

2018 (12) TMI 1321 - AT - Income Tax


Issues Involved:
1. Determination of Total Income.
2. Classification of Receipts as Royalty.
3. Adherence to Advance Ruling.
4. Existence of Permanent Establishment (PE).
5. Ad-hoc Profitability Rate.
6. Interest under Section 234B.
7. Credit for Tax Deducted at Source (TDS).
8. Initiation of Penalty Proceedings under Section 271(1)(c).

Issue-wise Detailed Analysis:

1. Determination of Total Income:
The assessee contested the Assessing Officer's (AO) determination of total income at ?19,18,27,475, asserting that the AO should consider the income as returned by the appellant.

2. Classification of Receipts as Royalty:
The primary dispute revolved around whether amounts receivable from Tata Communications Limited (TCL) were 'royalty' as defined under Section 9(1)(vi) of the Income Tax Act and Article 13(3) of the India-UK DTAA. The AO and DRP classified these receipts as royalty, while the assessee argued they were 'business profits' under Article 7 of the India-UK DTAA, not taxable in India due to the absence of a PE. The Tribunal, referencing its previous decision for Assessment Years 2000-01 to 2005-06, disagreed with the Revenue's stand, concluding that the nature of receipts was not royalty.

3. Adherence to Advance Ruling:
The assessee claimed that the AO partially adhered to an advance ruling determining the appellant's taxability, applying it to one customer but not to another. The Tribunal referenced its prior decisions, which supported the assessee's stance, indicating that the advance ruling should be uniformly applied.

4. Existence of Permanent Establishment (PE):
The AO concluded that the assessee had a PE in India through its Space Segment Monitoring System (SSMS) and liaison office (LO). The Tribunal noted that the LO was functioning under RBI's approval, limited to liaison activities without engaging in business or trading activities. The Tribunal found no evidence from the Revenue to prove that the LO's activities exceeded its permitted scope. Additionally, it was established that SSMS was not operational during the relevant period. The Tribunal concluded that neither the LO nor the SSMS constituted a PE in India.

5. Ad-hoc Profitability Rate:
The AO applied an ad-hoc profitability rate of 30%, which the assessee contested, citing minimal operational presence in India. Given the Tribunal's finding that there was no PE in India, this issue was rendered academic and dismissed as infructuous.

6. Interest under Section 234B:
The Tribunal noted that the charging of interest under Section 234B was consequential and did not require specific adjudication.

7. Credit for Tax Deducted at Source (TDS):
The assessee sought credit for TDS amounting to ?24,89,984. The Tribunal restored this matter to the AO for appropriate action as per the law.

8. Initiation of Penalty Proceedings under Section 271(1)(c):
The Tribunal considered the initiation of penalty proceedings premature and dismissed this ground.

Conclusion:
The Tribunal allowed the appeals for Assessment Years 2007-08 to 2012-13, concluding that the receipts from TCL were not royalty, the assessee did not have a PE in India, and directed the AO to allow TDS credit and dismiss penalty proceedings.

 

 

 

 

Quick Updates:Latest Updates