2021 (6) TMI 328 - AT - Income Tax

Taxability of the receipt from the BBMB Project - AO has considered the entire receipts from the BBMB Project to be taxable @ 40% surcharge - HELD THAT - We find that in A.Y. 2006-07, AO had taxed the receipts from BBMB Projects in similar circumstances @ 40% but when the matter was carried before the CIT(A), CIT(A) directed the AO to tax the receipts from BBMB Project @ 10%. Before us, it is the submission of the Learned AR that the aforesaid order of CIT(A) has attained finality as the order of CIT(A) has not been challenged by the Revenue. The aforesaid contention of the Learned AR has not been controverted by the Revenue by placing any material on record. Thus in subsequent assessment years i.e. AY 2010-11, 2012-13, 2013-14 2014-15 the receipts from BBMB Project have been taxed by the Revenue @ 10% of the receipts. Before us, no distinguishing feature in the facts in the year under consideration and that of the earlier years and subsequent years has been pointed out by the Revenue nor has it placed any material to demonstrate the justification for taking a different view than in earlier and subsequent years. In such as situation in order to maintain the consistency, we hold that the receipts from BBMC Project to be taxed @ 10% of the receipt. We thus direct so. Taxation as royalty and fee for technical services @ 20% instead of 10% - HELD THAT - As AR has pointed to the amendment made in Article 12(2) of the DTAA between India and Japan by Notification No S.O. 1136(E) dtd 19.7.2006 w.r.e.f 28.6.2006. As per the aforesaid amendment, the tax charged shall not exceed 10% of the gross amount of royalties or fees for technical services. Considering the submission of the Learned AR, we restore the issue to the file of the AO and direct him to compute the taxes on the aforesaid income in accordance with the applicable DTAA and in accordance with law. Needless to state that AO shall grant adequate opportunity of hearing to the assessee. Thus the ground of the assessee is allowed. Charging interest u/s 234-B - HELD THAT - . It is an undisputed fact that assessee is a foreign company and it is the responsibility of payer to deduct entire tax at source on payments made to the Assessee. As n the case of GE Packaged Power Inc. 2015 (1) TMI 1168 - DELHI HIGH COURT has held that when the assessee was a non resident company, the entire tax was to be deducted at source on the payments made by payee to the assessee and therefore there was no question of payment of advance tax by the assessee and therefore it would not be permissible for the revenue to charge any interest u/s 234B from the assessee. Before us, Revenue has not pointed to any contrary binding decision in its support nor has pointed to any distinguishing facts in the present case and the case relied upon by Ld AR but however it is the contention of the Ld DR that the aforesaid order of the Delhi High Court has been challenged by the Revenue. The contention of the Ld DR of having challenged the aforesaid order of H ble Delhi High Court may be true but at the same time, the Revenue has not placed any material on record to demonstrate that the aforesaid order has been stayed by higher judicial forum. Thus we are of the view that AO was not justified in levying the interest u/s 234B. We therefore direct the deletion of interest. Thus ground of assessee is allowed.

Summary

Issues Involved:
1. Validity of the assessment order.
2. Assessment of income at a higher amount than returned.
3. Following previous year’s order without considering current facts.
4. Non-compliance with ITAT Delhi 'D' Bench decisions.
5. Taxation of fees received as "fee for technical services."
6. Alleged internal arrangement and adjustment of profits.
7. Non-allowance of expenditure from business income.
8. Application of presumptive taxation under section 44-BB.
9. Taxation of income received from specific companies at a higher rate.
10. Charging of interest under section 234-B.
11. Initiation of penalty proceedings under Sections 271(1)(c) and 271(1)(b).

Detailed Analysis:

1. Validity of the Assessment Order:
The assessee contended that the assessment order was bad in law and on facts. However, this ground was dismissed as it was general in nature and required no adjudication.

2. Assessment of Income at a Higher Amount:
The assessee argued that the ADIT erred in assessing the income at ?97,884,110/- against the returned income of ?16,151,304/-. This ground was dismissed as it was not pressed by the assessee.

3. Following Previous Year’s Order:
The assessee claimed that the ADIT erred in following the previous year's order without considering the provisions of law and facts of the case. This ground was dismissed as it was not pressed by the assessee.

4. Non-compliance with ITAT Delhi 'D' Bench Decisions:
The assessee contended that the ADIT did not follow the ITAT Delhi 'D' Bench decisions for AY 1980-81 to 1985-86. This ground was dismissed as it was not pressed by the assessee.

5. Taxation of Fees Received as "Fee for Technical Services":
The assessee argued that the ADIT erred in holding fees received from Sumitomo Corporation for providing installation supervisory engineers as taxable "fee for technical services" at 20%. This ground was dismissed as it was not pressed by the assessee.

6. Alleged Internal Arrangement and Adjustment of Profits:
The AO noted that the assessee received fees from BBMB for onshore services and suspected an internal arrangement to adjust profits. The AO taxed the entire receipts as business income at 40% plus surcharge and education cess. The DRP upheld the AO’s order. The ITAT found that in similar circumstances for AY 2006-07, the CIT(A) had estimated the profit at 10% of the gross receipts, and this order was accepted by the Revenue. The ITAT directed that the receipts from BBMB Project be taxed at 10% to maintain consistency.

7. Non-allowance of Expenditure from Business Income:
The assessee argued that the ADIT did not allow any expenditure from business income earned from the BBMB project. The ITAT directed that the receipts from BBMB Project be taxed at 10% of the total receipts, considering the consistent treatment in previous and subsequent years.

8. Application of Presumptive Taxation under Section 44-BB:
The assessee contended that the ADIT erred in not applying the provisions of section 44-BB for contracts with Sumitomo Corporation and BBMB. The ITAT directed that the receipts from BBMB Project be taxed at 10% of the total receipts under the provisions of section 44BBB.

9. Taxation of Income Received from Specific Companies at a Higher Rate:
The AO taxed royalty and fees for technical services received from Brakes India, Tata Motors Ltd., and Sumitomo Corporation at 20% instead of 10%. The ITAT restored the issue to the AO to compute the taxes as per the applicable DTAA between India and Japan, which prescribes a tax rate of 10% for such income.

10. Charging of Interest under Section 234-B:
The assessee argued that being a non-resident company, it was not liable for interest under section 234-B as the entire tax was to be deducted at source by the payers. The ITAT, relying on the Delhi High Court decision in GE Packaged Power Inc., directed the deletion of interest charged under section 234-B.

11. Initiation of Penalty Proceedings under Sections 271(1)(c) and 271(1)(b):
The assessee contended that the penalty proceedings under sections 271(1)(c) and 271(1)(b) were not attracted. These grounds were dismissed as they were general in nature and required no adjudication.

Conclusion:
The ITAT partly allowed the appeal, directing that the receipts from BBMB Project be taxed at 10% of the total receipts and remitting the issue of taxability of royalty and fees for technical services to the AO for computation as per the applicable DTAA. The interest charged under section 234-B was directed to be deleted.