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2021 (2) TMI 265 - AT - Income TaxIncome accrued in India - Reimbursement of expenses as not income - assessee submitted that the reimbursement of expenses is not income - As argued sums from India are purely reimbursement of expenses towards activities performed by the appellant for group entities in India and hence, cannot be regarded as income taxable under the Act as well as the Double Taxation Avoidance Agreement between India and United Kingdom ( DTAA ) - non-applicability of section 44DA - alternative ground according to which income, if any, should be taxable u/s 44BB - HELD THAT - Provisions of section 44DA of the Act were applicable where the income was by way of royalty or fees for technical services, which was received from Government or Indian concern in pursuance to an agreement made by a non-resident or a foreign company with Government or Indian concern after 31.03.2003. Since the payment in the case of the assessee was neither received from the Government nor from the Indian concern, it was hold that the provisions of section 44DA of the Act were not applicable. Applying the said parity of reasoning, we also hold that the provisions of section 44DA of the Act were not applicable to the facts of the case and the income of the assessee is to be computed u/s 44BB of the Act. Respectfully following the decision of the Tribunal in assessee s own case 2019 (1) TMI 1851 - ITAT DELHI we hold that the provision of section 44DA of the Act is not applicable and income, if any, should be taxed u/s 44BB of the Act. Accordingly ground of appeal No. 1.1. by the assessee is dismissed whereas grounds of appeal No. 2 and 3 are decided in favour of the assessee. Non application of provisions of DTAA for interest income - HELD THAT - Since the issue has been decided against the assessee by the Hon ble Jurisdictional High Court in the case of B.J Services Co. Vs. ACIT 2015 (5) TMI 1036 - UTTARAKHAND HIGH COURT therefore, the ground of appeal No. 4 by the assessee is dismissed. Computation of tax on interest income - HELD THAT - An application dated 13th October, 2020 for rectification u/s 154 of the Act wherein it was stated that the interest income was taxed twice as per Act at 40% and as per DTAA at 15%. Further surcharge and cess has also been levied on the aggregate tax amount. Since the same is pending before the AO, therefore, as agreed by both sides we remit the matter back to the file of the AO with a direction to dispose of the application before him at the earliest by deciding the issue as per fact and law after giving due opportunity of being heard by the assessee. Ground No. 5 of the assessee is accordingly allowed for statistical purposes. Non granting credit of TDS - HELD THAT - An application u/s 154 dated 13th October, 2020 is also pending before the AO. Considering the totality of the facts of the case we restore the issue to the file of the AO with the direction to dispose of the 154 application pending before him and verify the TDS certificates and if the same is due to the assessee then grant TDS as applicable. Needless to say the AO shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee Levy of interest u/s 234B - HELD THAT - Respectfully following the decision of the Tribunal in assessee s own case in the immediately preceding assessment year we hold that in the instant case the provisions of section 234B of the Act are not applicable and so also the provisions u/s 209 (1)(d) of the Act. Ground of the assessee is accordingly allowed Levy of interest u/s 234C - HELD THAT - As per provisions of section 234C the interest on shortfall of advance tax is to be calculated on the returned income and not on the assessed income as held in various decisions. Further the rectification application filed by the assessee before the AO u/s 154 of the Act is still pending with him. Considering the totality of the facts of the case we restore this issue to the file of the AO with a direction to dispose of the said application at the earliest and decide the issue of levy of interest u/s 234C as per law. Needless to say the AO shall give due opportunity of being heard to the assessee. This ground raised by the assessee is accordingly allowed for statistical purposes.
Issues Involved:
1. Reimbursement of expenses as "not income." 2. Applicability of Section 44DA of the IT Act. 3. Taxability under Section 44BB of the IT Act. 4. Application of DTAA for interest income. 5. Erroneous computation of tax on interest income. 6. Short credit of tax deducted at source (TDS). 7. Levy of interest under Section 234B of the IT Act. 8. Levy of interest under Section 234C of the IT Act. 9. Initiation of penalty proceedings under Section 270A of the IT Act. 10. Initiation of penalty proceedings under Section 271B of the IT Act. 11. Violation of principles of natural justice. Detailed Analysis: Issue 1: Reimbursement of Expenses as "Not Income" The assessee argued that the reimbursement of expenses from BGEPIL should not be considered as income since these are cost-to-cost reimbursements without any profit element. The Tribunal, referencing previous years' rulings, held that the receipts from BGEPIL are pure reimbursements and cannot be treated as income. The Tribunal reiterated that the income should be assessed under Section 44BB of the IT Act, not as income under Section 44DA. Issue 2: Applicability of Section 44DA of the IT Act The Tribunal found that Section 44DA, which applies to income by way of royalty or fees for technical services received by a foreign company through a PE in India, is not applicable in this case. The Tribunal noted that the payments were neither received from the Government nor an Indian concern, thus, Section 44DA does not apply. The Tribunal upheld that the income should be computed under Section 44BB. Issue 3: Taxability under Section 44BB of the IT Act The Tribunal confirmed that the income from services rendered in connection with the extraction and production of mineral oil should be taxed under Section 44BB. This was based on consistent rulings from previous years where the Tribunal had applied Section 44BB for similar cases involving the assessee. Issue 4: Application of DTAA for Interest Income The assessee contended that interest on income tax refunds should be taxed according to the DTAA between India and the UK, which caps the tax at 15%. However, the Tribunal dismissed this ground, citing the decision of the High Court of Uttarakhand in the case of B.J. Services Co. Middle East Ltd. v. ACIT, which ruled against the assessee. Issue 5: Erroneous Computation of Tax on Interest Income The assessee argued that the interest income was taxed twice, once at 40% under the IT Act and again at 15% under the DTAA. The Tribunal remitted the matter back to the AO to rectify this issue as per the pending application under Section 154 of the IT Act. Issue 6: Short Credit of Tax Deducted at Source (TDS) The Tribunal directed the AO to verify the TDS certificates and grant credit for TDS to the extent of ?76,89,725, as claimed by the assessee, after disposing of the pending application under Section 154. Issue 7: Levy of Interest under Section 234B of the IT Act The Tribunal held that the provisions of Section 234B, which pertain to the payment of advance tax, are not applicable in this case. The assessee’s liability was due to the payer's failure to deduct tax at source. This decision was consistent with the Tribunal's ruling in the preceding assessment year. Issue 8: Levy of Interest under Section 234C of the IT Act The Tribunal noted that interest under Section 234C should be calculated on the returned income, not the assessed income. The Tribunal remitted the issue back to the AO to dispose of the pending Section 154 application and decide the matter as per law. Issues 9-11: Penalty Proceedings and Violation of Natural Justice The assessee did not press these grounds, and the Tribunal dismissed them as not pressed. Conclusion: The Tribunal partly allowed the appeal, holding that the receipts from BGEPIL are reimbursements not taxable as income and should be assessed under Section 44BB. The Tribunal dismissed the grounds related to the application of DTAA for interest income and remitted the issues of erroneous tax computation and short credit of TDS back to the AO for verification and rectification. The Tribunal also ruled that interest under Sections 234B and 234C should not be levied based on the facts of the case.
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